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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-6841
SUN COMPANY, INC.
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(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1743282
- --------------------------------------------- -------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
TEN PENN CENTER, 1801 MARKET STREET, PHILADELPHIA, PA 19103-1699
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(Address of principal executive offices)
(Zip Code)
(215) 977-3000
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
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At March 31, 1997, there were 72,991,478 shares of Common Stock, $1 par
value and 12,460,550 shares of Cumulative Preference Stock--Series A, no
par value, outstanding.
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SUN COMPANY, INC.
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INDEX
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations
for the Three Months Ended March 31, 1997
and 1996 3
Condensed Consolidated Balance Sheets at
March 31, 1997 and December 31, 1996 4
Condensed Consolidated Statements of Cash
Flows for the Three Months Ended March 31,
1997 and 1996 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURE 19
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Sun Company, Inc. and Subsidiaries
(Millions of Dollars Except Per Share Amounts)
- --------------------------------------------------------------------------
For the Three Months
Ended March 31
--------------------
1997 1996*
------ ------
(UNAUDITED)
REVENUES
Sales and other operating revenue (including
consumer excise taxes) $2,733 $2,460
Interest income 2 4
Other income 9 8
------ ------
2,744 2,472
------ ------
COSTS AND EXPENSES
Cost of products sold and operating expenses 2,088 1,903
Selling, general and administrative expenses 127 134
Consumer excise taxes 361 368
Payroll, property and other taxes 24 22
Depreciation, depletion and amortization 66 66
Provision for employee terminations (Note 4) 32 --
Interest cost and debt expense 19 20
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2,717 2,513
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Income (loss) from continuing operations
before income tax expense (benefit) 27 (41)
Income tax expense (benefit) 9 (17)
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Income (loss) from continuing operations 18 (24)
Income from discontinued operations (Note 2) -- 19
------ ------
NET INCOME (LOSS) 18 (5)
Dividends on preference stock (11) (11)
------ ------
Net income (loss) attributable to common
shareholders $ 7 $ (16)
====== ======
Earnings per share of common stock:**
Income (loss) from continuing operations $.10 $(.47)
Income from discontinued operations -- .25
---- -----
Net income (loss) $.10 $(.22)
==== =====
Cash dividends paid per share:
Preference stock*** $.90 $.90
Common stock $.25 $.25<PAGE>
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*Restated to present International Production operations as discontinued
operations (Note 2).
**Represents both primary and fully diluted earnings per share (Note 5).
Based on the weighted average number of common shares outstanding (in
millions) of 73.0 in 1997 and 73.9 in 1996.
***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 preference stock.
(See Accompanying Notes)
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CONDENSED CONSOLIDATED BALANCE SHEETS
Sun Company, Inc. and Subsidiaries
At At
March 31 December 31
1997 1996
(Millions of Dollars) (UNAUDITED)
- --------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents $ 27 $ 67
Accounts and notes receivable, net 720 864
Inventories:
Crude oil 166 157
Refined products 195 252
Materials, supplies and other 69 67
Deferred income taxes 124 128
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Total Current Assets 1,301 1,535
Investment in Real Estate Operations Held
for Sale (Note 3) 62 79
Investments and Long-Term Receivables 85 91
Properties, Plants and Equipment 5,791 5,829
Less Accumulated Depreciation, Depletion
and Amortization 2,821 2,785
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Properties, Plants and Equipment, net 2,970 3,044
Deferred Income Taxes 19 24
Deferred Charges and Other Assets 246 252
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Total Assets $4,683 $5,025
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 799 $1,081
Accrued liabilities 563 573
Current portion of long-term debt 58 54
Taxes payable 95 109
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Total Current Liabilities 1,515 1,817
Long-Term Debt 830 835
Retirement Benefit Liabilities 486 489
Deferred Credits and Other Liabilities 425 446
Commitments and Contingent Liabilities (Note 6)
Shareholders' Equity (Note 7) 1,427 1,438
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Total Liabilities and Shareholders' Equity $4,683 $5,025
====== ======
(See Accompanying Notes)
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Sun Company, Inc. and Subsidiaries
(Millions of Dollars)
- -------------------------------------------------------------------------
For the Three Months
Ended March 31
--------------------
1997 1996
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(UNAUDITED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 18 $ (5)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Income from discontinued operations -- (19)
Provision for employee terminations 32 --
Depreciation, depletion and amortization 66 66
Deferred income tax expense (benefit) 9 (4)
Changes in working capital pertaining to
operating activities:
Accounts and notes receivable 144 (84)
Inventories 46 32
Accounts payable and accrued liabilities (332) 71
Taxes payable (14) (12)
Other 1 (4)
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Net cash provided by (used in) continuing
operating activities (30) 41
Net cash flows from discontinued operating activities -- 12
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Net cash provided by (used in) operating activities (30) 53
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (59) (37)
Proceeds from divestments 73 1
Investing activities of discontinued operations -- (6)
Other 8 (1)
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Net cash provided by (used in) investing activities 22 (43)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from short-term borrowings -- 41
Repayments of long-term debt (1) (1)
Cash dividend payments (29) (30)
Purchases of common stock for treasury -- (6)
Other (2) (18)
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Net cash used in financing activities (32) (14)
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Net decrease in cash and cash equivalents (40) (4)
Cash and cash equivalents at beginning of period 67 11
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Cash and cash equivalents at end of period $ 27 $ 7
===== ====
(See Accompanying Notes)<PAGE>
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
1. General.
The accompanying condensed consolidated financial statements are
presented in accordance with the requirements of Form 10-Q and
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 provision for employee terminations (Note 4). Results
for the three months ended March 31, 1997 are not necessarily
indicative of results for the full year 1997.
2. Discontinued Operations.
On September 30, 1996, Sun completed the sale of its international oil
and gas production business for $278 million in cash. The sale of
this business represents the completion of 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., a 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 its sale, the international oil and gas production
business has been classified as a discontinued operation for the three
months ended March 31, 1996. The following is a summary of the
results of this business during that period (in millions of dollars):
Sales and other operating revenue $72
===
Income before income tax expense $28
Income tax expense 9
---
Income from discontinued operations $19
===
3. Investment in Real Estate Operations Held for Sale.
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 from real estate
operations, which was breakeven and $1 million for the three months
ended March 31, 1997 and 1996, respectively, has been included as a
single amount in other income in the condensed consolidated statements
of operations.
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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 (in millions of dollars):
At At
March 31 December 31
1997 1996
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Inventories $ 83 $ 78
Properties, plants and equipment 97 119
Other assets 19 18
Debt (Note 6) (109) (109)
Other liabilities (28) (27)
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Investment in real estate operations
held for sale $ 62 $ 79
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4. Employee Terminations.
During the first quarter of 1997, Sun established a $32 million pretax
accrual ($21 million after tax) for employee terminations and related
costs. The termination benefits are for approximately 320 employees
to be involuntarily terminated, of which approximately 50 were
terminated during the first three months of 1997. The employee
reductions are throughout the organization and include senior
management, support staff and operations personnel. As of March 31,
1997, the amount of actual termination benefits paid and charged
against the accrual totalled less than $1 million.
5. Earnings Per Share.
Primary earnings per share was computed by dividing earnings (losses),
after deducting dividends on preference stock, by the weighted average
number of common shares outstanding. Fully diluted earnings per share
generally is determined by dividing earnings (losses) by the weighted
average number of shares outstanding assuming redemption of the
preference shares for common stock utilizing a ratio of two shares of
common stock for each outstanding preference share. However, since
the assumed redemption of preference shares would have resulted in
either an increase in earnings per share or a reduction in the loss
per share, fully diluted per share amounts are equal to those reported
on a primary basis.
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128") was issued, which is required to
be adopted in the fourth quarter of 1997. Under SFAS No. 128, the
dilutive effect of stock options will be excluded from the primary
earnings per share calculation. Since Sun's stock options did not
have a dilutive effect on its primary or fully diluted earnings per
share amounts for the three months ended March 31, 1997 and 1996, the
new standard would not have impacted Sun's earnings per share for
these periods.
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6. Commitments and Contingent Liabilities.
A wholly owned subsidiary of the Company is 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. The facility was completed during 1995.
In order to obtain a secure supply of oxygenates for the manufacture
of reformulated gasoline, 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 contract market (the
"contract 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 applicable formula or contract 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 were
believed to have approximated those of other MTBE long-term sales
agreements in the marketplace. However, management believes that the
contract market changed in the latter part of 1996 as feedstock-plus-
fixed-priced contracts expired and were replaced by spot-market-price-
based contracts, which have been more favorable to the purchaser.
Management also believes that the spot market for MTBE is now
developed.
During the fourth quarter of 1996, spot market prices for MTBE were
less than the prices paid by Sun under the off-take agreement with
BEF. At that time, the Company expected this adverse relationship to
continue into the future. Accordingly, a $130 million accrual ($85
million after tax) was established at December 31, 1996 for the
estimated losses expected to be realized with respect to this
agreement. During the first quarter of 1997, actual MTBE purchase
costs in excess of current market prices were charged against the
accrual.
The Company guarantees the $109 million of outstanding debt of Radnor
Corporation, its real estate operation held for sale. Such debt,
which is due no later than February 2001, is expected to be
substantially repaid by the end of 1998 with proceeds from the
disposal of the Company's remaining real estate portfolio (Note 3).
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Sun is subject to numerous federal, state and local 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
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 March 31, 1997, Sun
had been named as a PRP at 45 sites identified or potentially
identifiable as "Superfund" sites under CERCLA. Sun has reviewed the
nature and extent of its involvement at each site and other relevant
circumstances and, based upon the other parties involved or Sun's
negligible participation therein, believes that its potential
liability associated with such sites will not be significant. Under
RCRA and related state laws, corrective remedial action has been
initiated at some of Sun's facilities and will be required to be
undertaken by 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 where an assessment has
indicated that cleanup costs are probable and reasonably estimable.
The accrued liability for environmental remediation is classified in
the condensed consolidated balance sheets as follows (in millions of
dollars):
At At
March 31 December 31
1997 1996
-------- -----------
Accrued liabilities $ 66 $ 77
Deferred credits and other
liabilities 151 150
---- ----
$217 $227
==== ====
Pretax charges against income for environmental remediation amounted
to $1 million for the three months ended March 31, 1996. There were
no charges against income for environmental remediation during the
first quarter of 1997. Claims for recovery of environmental
liabilities that are probable of realization, which totalled $4
million at March 31, 1997, are included in deferred charges and other
assets in the condensed consolidated balance sheets.
<PAGE>
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On October 4, 1996, Sun filed a complaint in Los Angeles County
Superior Court, Jalisco Corporation, Inc., et al. v. Argonaut
Insurance Company, et al. (Case No. BC 158441), naming more than 45
insurance companies as defendants and seeking recovery under numerous
insurance policies for certain environmental expenditures of Sun,
including its predecessor companies and subsidiaries, arising from the
ownership and operation of its business and properties. The Company
cannot quantify the outcome of this litigation, which may be
protracted.
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
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 flows from operating activities. Although
the ultimate impact of these matters could have a significant impact
on results of operations or cash flows for any future quarter or year,
management believes that any additional liabilities which may arise
pertaining to such matters would not be material in relation to the
consolidated financial position of Sun at March 31, 1997.
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 flows or liquidity.
7. Shareholders' Equity.
At At
March 31 December 31
1997 1996
-------- -----------
(Millions of Dollars)
Cumulative preference stock - Series A,
no par value $ 748 $ 748
Common stock, par value $1 per share 130 130
Capital in excess of par value 1,316 1,316
Earnings employed in the business 1,273 1,284
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3,467 3,478
Less common stock held in treasury,
at cost 2,040 2,040
------ ------
Total $1,427 $1,438
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Earnings Profile of Sun Businesses (after tax)
- ----------------------------------------------
Three Months Ended
March 31
------------------
1997 1996 Variance
---- ---- --------
(Millions of Dollars)
Sun Northeast Refining $ 4 $(28) $ 32
Sunoco Northeast Marketing 20 (1) 21
Sunoco Chemicals 19 7 12
Sun Lubricants (8) 2 (10)
Sunoco MidAmerica Marketing &
Refining -- (4) 4
Sunoco Logistics 12 11 1
Sun Coal & Coke 9 7 2
Corporate expenses (5) (5) --
Net financing expenses (12) (13) 1
Sun International Production* -- 19 (19)
---- ---- ----
39 (5) 44
Special Item:
Provision for employee terminations (21) -- (21)
---- ---- ----
Consolidated net income (loss) $ 18 $ (5) $ 23
==== ==== ====
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*Sun completed the sale of its International Production business on
September 30, 1996.
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Analysis of Earnings Profile of Sun Businesses
- ----------------------------------------------
In the three-month period ended March 31, 1997, Sun had net income of $18
million, or $.10 per share of common stock, compared with a net loss of $5
million, or $.22 per share, for the first quarter of 1996. Excluding the
$21 million after-tax provision for employee termination benefits shown
separately in the Earnings Profile of Sun Businesses, Sun had income of $39
million in the first quarter of 1997 compared to a loss of $5 million in
the first quarter of 1996.
Sun Northeast Refining -- The Sun Northeast Refining business had income of
$4 million in the first quarter of 1997 versus a loss of $28 million in the
first quarter of 1996. The increase in earnings was due primarily to a
decline in operating expenses ($15 million) and higher realized wholesale
fuels product margins ($9 million) and sales volumes ($6 million).
Wholesale gasoline margins were adversely impacted in the first quarter of
1996 by the Company's high purchase cost of MTBE (a component of
reformulated gasoline) relating to an existing off-take agreement (see Note
6 to the condensed consolidated financial statements). The increase in
sales volumes reflects a significant improvement in production levels
compared to the first quarter of 1996 when production was adversely
impacted by a high level of maintenance activity. Input to the crude units
averaged over 479,000 barrels per day, or nearly 100 percent of rated
capacity, in the current quarter versus 418,000 barrels per day in the
first quarter of 1996. Total production increased almost 5 million barrels
compared to the first quarter of 1996 with gasoline and distillate
production averaging over 408,000 barrels daily versus 358,000 barrels
daily in the first quarter of 1996.
During the fourth quarter of 1996, Sun reconfigured its Philadelphia
refinery to process only light, sweet crude oil and to cease asphalt
production. Several redundant and/or unprofitable units were shut down as
part of a continuing process to integrate the Point Breeze and Girard Point
segments of the refinery. At that time, the Company indicated that if
sufficient improvements were not realized at these facilities, it would
consider shutting down additional units during 1997. The reconfiguration
to date has resulted in a substantial improvement in operating reliability
and a reduction in the cost structure at the Philadelphia refinery to more
competitive levels. As a result, in April 1997, the Company announced that
it will continue to operate its Philadelphia refinery at current production
levels and that a planned maintenance turnaround of the 40,000-barrel-per-
day fluid catalytic cracking unit at Point Breeze will proceed as scheduled
during the 1997 fourth quarter.
Sunoco Northeast Marketing -- The Sunoco Northeast Marketing business
earned $20 million in the current quarter versus a loss of $1 million in
the first quarter of 1996. The increase in operating results was due to
significantly higher average retail gasoline margins ($20 million). Crude
oil and wholesale gasoline prices trended downward during most of the first
quarter of 1997 which allowed retail gasoline margins to recover from weak
1996 levels. The weak margins experienced by Sun in the first quarter of
1996 were due in part to the Company's high purchase cost of MTBE. A
decline in expenses in the first quarter of 1997 was essentially offset by
the impact of 6 percent lower retail gasoline sales volumes during that
period.
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Sunoco Chemicals -- Sunoco Chemicals earned $19 million in the first
quarter of 1997 versus $7 million in the first quarter of 1996. The
increase in earnings was due largely to higher margins ($9 million),
particularly for propylene, ethylene and benzene-based chemicals, and
higher sales volumes ($6 million), reflecting record production levels.
Total chemicals production for the quarter was 2.0 million barrels (22,700
barrels per day) versus first quarter 1996 production of 1.6 million
barrels (18,000 barrels per day). The first quarter 1997 production slate
includes the upgrading of an additional 4,000 barrels per day of refinery-
grade propylene into polymer-grade propylene, principally as a result of
the fourth quarter 1996 completion of a new propylene splitter at the
Marcus Hook refinery. Polymer-grade propylene production averaged almost
10,000 barrels per day during the first quarter of 1997, which was slightly
higher than the rated capacity of the unit.
Sun Lubricants -- The Sun Lubricants business recorded a loss of $8 million
in the 1997 first quarter, compared to income of $2 million in the 1996
first quarter. The decline in operating results was primarily due to lower
margins, particularly for base oils and distillate fuels, partially offset
by income attributable to the Kendall/Amalie lubricants business acquired
by Sun in November 1996.
In March 1997, Sun completed the reconfiguration of its Puerto Rico
refinery and is now processing approximately 30,000 barrels per day of
purchased intermediate feedstocks in lieu of crude oil at this facility.
Prior to the reconfiguration, the Puerto Rico refinery had a crude oil
processing capacity of 85,000 barrels per day. This change has
significantly reduced the amount of fuels production at this refinery and
is expected to reduce operating expenses by approximately $35 million on an
annualized basis while maintaining the lubricants manufacturing
capabilities of the facility.
Sunoco MidAmerica Marketing & Refining -- Results from Sunoco MidAmerica
Marketing & Refining were breakeven during the current quarter, compared to
a loss of $4 million in the 1996 first quarter. The improvement in
operating results was largely due to higher wholesale fuel sales volumes
($2 million) and higher margins for petrochemicals ($2 million),
particularly xylene. Slightly lower retail gasoline margins ($1 million)
partially offset these positive factors.
Sunoco Logistics -- Sunoco Logistics earned $12 million in the first
quarter of 1997 versus $11 million in the year-ago period. The increase in
earnings was primarily due to higher throughput at the Nederland, Texas,
crude oil terminal.
Sun Coal & Coke -- Sun Coal & Coke earned $9 million in the first quarter
of 1997 versus $7 million in the first quarter of 1996. The increase in
earnings was largely due to improved results from Sun's steam coal
operations in Kentucky.
Sun International Production -- In the third quarter of 1996, Sun completed
the sale of its International Production business. Operating income for
this business unit totalled $19 million in the 1996 first quarter.
<PAGE>
<PAGE> 14
Provision for Employee Terminations -- During the first quarter of 1997,
Sun established a $32 million pretax accrual ($21 million after tax) for
employee terminations and related costs. The termination benefits are for
approximately 320 employees to be involuntarily terminated throughout 1997.
The employee reductions are throughout the organization and include senior
management, support staff and operations personnel. This complement
reduction is expected to provide approximately $25 million of annualized
pretax expense savings.
Analysis of Consolidated Statements of Operations
- -------------------------------------------------
Sales and other operating revenue increased $273 million, or 11 percent,
principally due to higher refined product sales prices ($227 million) and
volumes ($95 million), partially offset by lower revenues from resales of
purchased crude oil ($40 million). Cost of products sold and operating
expenses increased $185 million, or 10 percent, primarily due to higher
crude oil and refined product costs ($254 million) principally as a result
of higher crude oil prices, partially offset by lower resales of purchased
crude oil ($40 million) and lower refinery operating expenses ($20
million). Selling, general and administrative expenses decreased $7
million, or 5 percent, primarily due to lower expenses in Sun's refining
and marketing operations despite the inclusion in the first quarter of 1997
of expenses attributable to the Kendall/Amalie lubricants business acquired
in November 1996. Consumer excise taxes decreased $7 million, or 2
percent, principally due to a decline in retail gasoline sales volumes.
For a discussion of the provision for employee terminations, see Note 4 to
the condensed consolidated financial statements. Interest cost and debt
expense decreased $1 million, or 5 percent, due to lower average
borrowings.
FINANCIAL CONDITION
Cash and Working Capital
- ------------------------
At March 31, 1997, Sun had cash and cash equivalents of $27 million
compared to $67 million at December 31, 1996, and had a working capital
deficit of $214 million compared to a working capital deficit of $282
million at December 31, 1996. 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 sheets.
The current replacement cost of all such inventories exceeds the carrying
value at March 31, 1997 by approximately $580 million. Inventories valued
at LIFO, which consist of crude oil and refined products, are readily
marketable at their current replacement values. Management believes that
the current levels of Sun's cash and working capital provide adequate
support for its ongoing operations.
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<PAGE> 15
Cash Flows and Financial Capacity
- ---------------------------------
In the first quarter of 1997, Sun's net cash used in operating activities
was $30 million compared to $53 million of net cash provided by operating
activities ("cash generation") in the first quarter of 1996. This $83
million decrease in cash generation was primarily due to an increase in
working capital uses pertaining to operating activities partially offset by
an increase in income before special items.
Management believes that future cash generation will be sufficient to
satisfy Sun's capital requirements and to pay the current level of cash
dividends on common and preference 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.
The Company has access to $600 million of short-term financing in the form
of borrowings from commercial banks under a revolving credit agreement or
commercial paper issued by Sun supported by this agreement. Under the
terms of the revolving credit agreement, Sun is required, among other
things, to maintain Consolidated Tangible Net Worth (as defined) of at
least $1,100 million. At March 31, 1997, the Consolidated Tangible Net
Worth was $1,335 million. The Company also has access to short-term
financing under non-committed money market facilities.
At March 31, 1997 and December 31, 1996, there were no amounts outstanding
related to the above short-term borrowing arrangements. The following
table sets forth amounts outstanding related to Sun's other borrowings as
of these dates (in millions of dollars):
At At
March 31 December 31
1997 1996
-------- -----------
Current portion of long-term debt $ 58 $ 54
Long-term debt 830 835
---- ----
Total borrowings $888 $889
==== ====
Sun's debt-to-capital ratio was 38.4 percent at March 31, 1997 compared to
38.2 percent at December 31, 1996. Management believes there is sufficient
borrowing capacity available to provide for Sun's future cash requirements.
In addition, the Company has the option of issuing additional common or
preference stock as a means of increasing its equity base; however, there
are no current plans to do so. No commitments have been made with respect
to any investment opportunity which would require the use of a significant
portion of Sun's unused financial capacity.
<PAGE>
<PAGE> 16
FORWARD-LOOKING STATEMENTS
Those statements in the foregoing report that are not historical in nature
should be deemed forward-looking statements within the meaning of, and
intended to be covered by, the safe harbor provisions of Section 21E of the
Securities Exchange Act of 1934. Although Sun believes that the
assumptions underlying these statements are reasonable, investors are
cautioned that such forward-looking statements are inherently uncertain and
necessarily involve risks that may affect Sun's business prospects and
performance, causing actual results to differ materially from those
discussed in the foregoing report.
Such risks and uncertainties include, by way of example and not of
limitation: changes in industry-wide refining margins, changes in crude oil
and other raw material costs, and world and regional events that could
significantly increase volatility in the marketplace. Sun's crude oil
supply could be affected by factors beyond its control, such as embargoes,
the continued discovery and production of light sweet crude oil, or
military conflicts between (or internal instability in) one or more
oil-producing countries. Sun's business is also affected by the continued
availability of debt and equity financing, changes in labor relations,
general economic conditions (including recessionary trends, inflation and
interest rates), market supply and demand for Sun's products, the
reliability and efficiency of Sun's operating facilities, the level of
operating expenses and hazards common to operating facilities (including
equipment malfunction; plant construction/repair delays, explosions, fires,
oil spills and severe weather effects), actions taken by competitors,
(including both pricing and expansion and retirement of refinery capacity
in response to market conditions), and civil, criminal, regulatory or
administrative actions, claims or proceedings (including domestic and
international political, legislative, regulatory and legal actions, such as
restrictions on production, restrictions on imports and exports, price
controls, tax increases and retroactive tax claims, expropriation of
property and cancellation of contract rights and regulations dealing with
gasoline composition and characteristics). Unpredictable or unknown
factors not discussed herein could also have material adverse effects on
forward-looking statements.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
On March 4, 1997, the City of Philadelphia Department of Public Health, Air
Management Services, presented Sun Company, Inc. (R&M) with a civil penalty
demand in excess of $100,000 for past violations over a period from January
1, 1994 to the present relating to excess sulfur dioxide emissions from the
Sulfur Recovery Unit at the Point Breeze facility of Sun's Philadelphia
refinery.
<PAGE>
<PAGE> 17
On February 3, 1997, the United States Department of Justice, acting on
behalf of the United States Environmental Protection Agency (the "EPA"),
filed an action in the United States District Court for the Northern
District of Oklahoma seeking civil penalties for alleged violations of the
Clean Air Act and the Oklahoma State Implementation Program. A settlement
in principle has been reached with the EPA whereby Sun Company, Inc. (R&M)
expects to pay civil fines in excess of $100,000; however, the formal
negotiated settlement document will be subject to a period of public
comment.
Sun Company, Inc. (R&M) has also reached a settlement in principle to pay
civil fines in excess of $100,000 pursuant to a Consent Order being
executed by the United States Environmental Protection Agency, Region II,
acting through the United States Department of Justice. This agreement
stems from several alleged Clean Air Act violations that have been the
subject of two Notices of Violation and two Compliance Orders during the
preceding four years at Sun Company, Inc. (R&M)'s Yabucoa, Puerto Rico
refinery. Upon final execution, the Consent Order will be lodged with the
U.S. District Court in San Juan, Puerto Rico for public comment and
entering.
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 would not be material in relation to the
consolidated financial position of Sun at March 31, 1997.
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
10.1 - Termination Agreement and General Release and Waiver between
John G. Driscoll and Sun Company, Inc.
11 - Statements re Sun Company, Inc. and Subsidiaries Computation
of Per Share Earnings for the Three-Month Periods Ended
March 31, 1997 and 1996.
12 - Statement re Sun Company, Inc. and Subsidiaries Computation
of Ratio of Earnings to Fixed Charges for the Three-Month
Period Ended March 31, 1997.
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 March 31, 1997.
<PAGE>
<PAGE> 18
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> 19
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 May 8, 1997
<PAGE>
<PAGE> 1
EXHIBIT INDEX
Exhibit
Number Exhibit
- ------- -----------------------------------------
10.1 Termination Agreement and General Release and Waiver between
John G. Driscoll and Sun Company, Inc.
11 Statements re Sun Company, Inc. and Subsidiaries Computation
of Per Share Earnings for the Three-Month Periods Ended
March 31, 1997 and 1996.
12 Statement re Sun Company, Inc. and Subsidiaries Computation
of Ratio of Earnings to Fixed Charges for the Three-Month
Period Ended March 31, 1997.
27 Article 5 of Regulation S-X, Financial Data Schedule.
<PAGE>
<PAGE> 1 EXHIBIT 10.1
TERMINATION AGREEMENT
AND
GENERAL RELEASE AND WAIVER
--------------------------
This Termination Agreement and General Release and Waiver
("Agreement") is made and entered into this 24th day of March, 1997,
between J. Greg Driscoll (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 June 30, 1997; 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 July 1, 1997, 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 July 1, 1997, 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 SCIRP. Exhibit A delineates your total retirement
benefits.
3. Effective July 1, 1997, you (or your beneficiary in the event of
your death) will begin to receive severance payments of $5,418
per month for 138 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 eligible to exercise stock options for up to five (5)
years after retirement under the terms and conditions of the Sun
Company, Inc. Long-Term Incentive Plan and Executive Long-Term
Stock Investment Plan.
5. Upon Retirement, you will be entitled to medical insurance in
accordance with the Company's retiree medical program.
6. Upon retirement, you will be eligible to participate in the
Company's retiree death benefits program.
<PAGE>
<PAGE> 2
7. You may continue to utilize the financial counseling program
until July 1, 1997. (Your account balance available for use
through July 1, 1997 is $9,500.) Any balance remaining at
termination will be paid to you in a single lump sum.
8. You will be provided individual executive career transition
assistance through either Millard Consulting or Manchester
Partners, or through a mutually acceptable vendor at a cost not
to exceed $18,000.
9. Any unused vacation remaining at the time of your retirement,
will be paid to you in a single lump sum at termination.
10. You will be entitled to maintain your Company paid parking pass
and Pyramid Club membership through June 30, 1997.
11. You will be provided access to the Company's voicemail system
until July 1, 1997.
12. Nothing contained in this Agreement or in the Full and Final
General Release shall limit or affect your continuing protection
under the Indemnification Agreement by and between you and the
Company, dated as of February 1, 1996 ("Indemnification
Agreement"), which Indemnification Agreement shall continue in
full force and effect in accordance with its terms, and includes
indemnification with respect to two pending civil actions styled
Daniel Wien v. Sun Company, Inc. et. al., Civil Action Law No.
323, Court of Common Pleas, Philadelphia County, and Daniel Wien
v. Sun Company, Inc. et. al., Civil Action No. 95-CV-7646, United
States District Court for the Eastern District of Pennsylvania.
13. 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 and
A.3, 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
<PAGE>
<PAGE> 3
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.
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 or Exhibit C. 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
or on your behalf in connection with your employment termination.
8. This Agreement will be construed in accordance with the laws of
the Commonwealth of Pennsylvania.
<PAGE>
<PAGE> 4
9. You agree that you will execute the document attached to this
Agreement as Exhibit C, entitled Full and Final General Release,
at the time this Agreement is signed. The parties agree that in
the event said release is not executed at said time, this
Agreement shall be null and void and of no binding effect on
either party. In addition, you agree that at retirement, upon
the Company's request, you will execute another such release in
the same form with only the date changed.
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.
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.
s/Laurie C. Roberts s/J. Greg Driscoll
- ----------------------- -----------------------
Witness J. Greg Driscoll
s/James Nocito s/Robert H. Campbell
- ----------------------- -----------------------
Witness Robert H. Campbell
Chief Executive Officer
Sun Company, Inc.
<PAGE>
<PAGE> 5
EXHIBIT A
J. GREG DRISCOLL
ESTIMATED RETIREMENT BENEFITS*
- -----------------------------
SUN EXECUTIVE RETIREMENT PLAN (SERP) plus 5 Years Added to Age
Monthly $11,076
Lump Sum $1,856,000
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 $1,050
Lump Sum $167,000
* Projected benefits as of 7/1/97 and based upon February, 1997
PBGC factor. Actual retirement benefit for July 1, 1997
retirement will be calculated on or about June 15, 1997. At that
time the PBGC factor for July, 1997 retirements will be known.
<PAGE>
<PAGE> 6
EXHIBIT B
J. GREG DRISCOLL
SEVERANCE PAY
- -------------
$5,135 Base salary per week
x 52
--------
$267,020 Annualized salary
x 1.40 Guideline bonus of 40%
--------
$373,828 Base salary plus Bonus (1xTCC)
x 2
--------
$747,656 2xTCC
138 divided by # Months to Age 62
--------
= $5,418* Per month for 138**months to Age 62 for a total
payment stream of $747,684
*Alternatively, a lump sum payment may be elected based upon the
discount factor in effect for July, 1997 retirements. To
illustrate, using 120% of the February, 1997 PBGC rate of 4.75%
results in a discount factor of 5.7% and a lump sum amount of
$547,515.
**Based upon a July 1, 1997 retirement.
<PAGE>
<PAGE> 7
EXHIBIT C
COMMONWEALTH OF PENNSYLVANIA
COUNTY OF PHILADELPHIA
FULL AND FINAL GENERAL RELEASE
FOR AND IN CONSIDERATION of the SUM OF ONE DOLLAR AND OTHER VALUABLE
CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged,
J. Greg Driscoll ("Mr. Driscoll") for himself, his attorneys, his heirs,
executors, administrators, successors, and assigns, does hereby fully,
finally and forever release and discharge Sun Company, Inc., and its
related or subsidiary companies, their predecessors, successors, assigns,
partners, officers, directors, agents, representatives, attorneys, and
employees (collectively, the "Company"), of and from all claims, demands,
actions, causes of action, suits, damages, losses, expenses, and
controversies of any and every nature whatsoever arising from the beginning
of time until the date of this Release including, but not limited to, those
claims arising from or relating in any way to Mr. Driscoll's employment and
the termination of his employment with the Company, and any claims arising
under any federal, state, or local laws prohibiting employment
discrimination, or claims growing out of any legal restrictions on the
Company's right to terminate its employees, including, but not limited to,
the Age Discrimination in Employment Act, the Fair Labor Standards Act,
excepting only claims under applicable Workers' Compensation and
Unemployment Statutes. Also included in this release are any claims
arising under federal, state, or local laws prohibiting retaliatory
discharge or other unfavorable retaliatory employment treatment. This Full
and Final Release shall not release either Mr. Driscoll or the Company from
their respective obligations to each other under the Termination Agreement
and General Release and Waiver.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
26th day of March, 1997.
s/J. Greg Driscoll
---------------------
J. Greg Driscoll
This 26th day of March, 1997, appeared before me J. Greg Driscoll, to
me personally known, and executed the foregoing document under oath as his
free act and deed.
s/ Judith Ann Fritsch
----------------------
Notary Public
<PAGE>
<PAGE> 1 EXHIBIT 11
STATEMENTS RE COMPUTATION OF PER SHARE EARNINGS
Sun Company, Inc. and Subsidiaries
(In Millions Except Per Share Amounts)
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Three Months
Ended March 31
--------------------
1997 1996
------- -------
(UNAUDITED)
<S> <C> <C>
Income (loss) from continuing operations (1) $ 18.0 $(24.0)
Less: Dividends on preference stock (11.0) (11.0)
------ ------
Income (loss) from continuing operations
attributable to common stock (2) 7.0 (35.0)
Income from discontinued operations (3)(a) -- 19.0
------ ------
Net income (loss) attributable to common stock (4) $ 7.0 $(16.0)
====== ======
Weighted average number of shares
of common stock and common stock
equivalents outstanding (5) 73.0 73.9
==== ====
Earnings per share of common stock:
Income (loss) from continuing operations (2)/(5) $.10 $(.47)
Income from discontinued operations (3)/(5) -- .25
---- -----
Net income (loss) (4)/(5) $.10 $(.22)
==== =====
Weighted average number of shares of common
stock and common stock equivalents out-
standing on a fully diluted basis (6) 73.0 74.0
==== ====
Earnings per share of common stock
on a fully diluted basis (b):
Income (loss) from continuing operations (2)/(6) $.10 $(.47)
Income from discontinued operations (3)/(6) -- .25
---- -----
Net income (loss) (4)/(6) $.10 $(.22)
==== =====
</TABLE>
- ----------------
(a) Reflects income from discontinued international oil and gas production
operations. (See Note 2 to the condensed consolidated financial
statements.)
(b) Fully diluted earnings per share generally is determined by dividing
earnings (losses) by the weighted average number of shares outstanding
assuming redemption of the preference shares for common stock utilizing
a ratio of two shares of common stock for each outstanding preference
share. However, redemption was not assumed since it would have
resulted in either an increase in earnings per share or a reduction in
the loss per share.
<PAGE>
<PAGE> 1
EXHIBIT 12
STATEMENT RE COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES(a)
Sun Company, Inc. and Subsidiaries
(Millions of Dollars Except Ratio)
- --------------------------------------------------------------------------
For the Three Months
Ended March 31, 1997
--------------------
(UNAUDITED)
Fixed Charges:
Consolidated interest cost and debt expense $19
Interest cost and debt expense of real estate
operations held for sale 1
Interest allocable to rental expense(b) 8
---
Total $28
===
Earnings:
Consolidated income before income tax expense $27
Proportionate share of income tax expense of
50 percent owned but not controlled
affiliated companies 1
Equity in income of less than 50 percent owned
affiliated companies (3)
Dividends received from less than 50 percent
owned affiliated companies 1
Fixed charges 28
Interest capitalized --
Amortization of previously capitalized interest 2
---
Total $56
===
Ratio of Earnings to Fixed Charges 2.00
====
- ----------------
(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 for Radnor
Corporation, the Company's wholly owned real estate development
subsidiary, which is accounted for as an investment held for sale.
(See Note 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.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 27
<SECURITIES> 0
<RECEIVABLES> 728
<ALLOWANCES> 8
<INVENTORY> 430
<CURRENT-ASSETS> 1,301
<PP&E> 5,791
<DEPRECIATION> 2,821
<TOTAL-ASSETS> 4,683
<CURRENT-LIABILITIES> 1,515
<BONDS> 830
<COMMON> 130
0
748
<OTHER-SE> 549
<TOTAL-LIABILITY-AND-EQUITY> 4,683
<SALES> 2,733
<TOTAL-REVENUES> 2,744
<CGS> 2,088
<TOTAL-COSTS> 2,088
<OTHER-EXPENSES> 609
<LOSS-PROVISION> 1
<INTEREST-EXPENSE> 19
<INCOME-PRETAX> 27
<INCOME-TAX> 9
<INCOME-CONTINUING> 18
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
