<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 June 30, 1997
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 June 30, 1997, there were 72,575,527 shares of Common Stock, $1 par
value and 12,323,900 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 Operations
for the Six Months Ended June 30, 1997
and 1996 3
Condensed Consolidated Statements of Operations
for the Three Months Ended June 30, 1997
and 1996 4
Condensed Consolidated Balance Sheets at
June 30, 1997 and December 31, 1996 5
Condensed Consolidated Statements of Cash
Flows for the Six Months Ended June 30,
1997 and 1996 6
Notes to Condensed Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 4. Submission of Matters to a Vote of Security
Holders 23
Item 6. Exhibits and Reports on Form 8-K 24
SIGNATURE 26
<PAGE>
<PAGE> 3
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)
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months
Ended June 30
------------------
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
REVENUES
Sales and other operating revenue (including
consumer excise taxes) $5,310 $5,346
Interest income 4 8
Other income 23 21
------ ------
5,337 5,375
------ ------
COSTS AND EXPENSES
Cost of products sold and operating expenses 3,893 4,083
Selling, general and administrative expenses 267 285
Consumer excise taxes 753 787
Payroll, property and other taxes 41 45
Depreciation, depletion and amortization 130 132
Provision for write-down of assets and other
matters (Note 4) 32 85
Interest cost and debt expense 38 40
Interest capitalized (1) (1)
------ ------
5,153 5,456
------ ------
Income (loss) from continuing operations before
income tax expense (benefit) 184 (81)
Income tax expense (benefit) 61 (35)
------ ------
Income (loss) from continuing operations 123 (46)
Income from discontinued operations (Note 2) -- 38
------ ------
NET INCOME (LOSS) 123 (8)
Dividends on preference stock (22) (22)
------ ------
Net income (loss) attributable to common shareholders $ 101 $ (30)
====== ======
Earnings per share of common stock (Note 5):
Primary:
Income (loss) from continuing operations $1.38 $(.92)
Net income (loss) $1.38 $(.41)
Fully diluted:
Income (loss) from continuing operations $1.26 $(.92)
Net income (loss) $1.26 $(.41)
Cash dividends paid per share:
Preference stock* $1.80 $1.80
Common stock $.50 $.50
</TABLE>
- -------------
*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 OPERATIONS
Sun Company, Inc. and Subsidiaries
(Millions of Dollars Except Per Share Amounts)
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Three Months
Ended June 30
--------------------
1997 1996
------ -----
(UNAUDITED)
<S> <C> <C>
REVENUES
Sales and other operating revenue (including
consumer excise taxes) $2,577 $2,886
Interest income 2 4
Other income 14 13
------ ------
2,593 2,903
------ ------
COSTS AND EXPENSES
Cost of products sold and operating expenses 1,805 2,180
Selling, general and administrative expenses 140 151
Consumer excise taxes 392 419
Payroll, property and other taxes 17 23
Depreciation, depletion and amortization 64 66
Provision for write-down of assets and other
matters (Note 4) -- 85
Interest cost and debt expense 19 20
Interest capitalized (1) (1)
------ ------
2,436 2,943
------ ------
Income (loss) from continuing operations before
income tax expense (benefit) 157 (40)
Income tax expense (benefit) 52 (18)
------ ------
Income (loss) from continuing operations 105 (22)
Income from discontinued operations (Note 2) -- 19
------ ------
NET INCOME (LOSS) 105 (3)
Dividends on preference stock (11) (11)
------ ------
Net income (loss) attributable to common shareholders $ 94 $ (14)
====== ======
Earnings per share of common stock (Note 5):
Primary:
Income (loss) from continuing operations $1.29 $(.45)
Net income (loss) $1.29 $(.19)
Fully diluted:
Income (loss) from continuing operations $1.07 $(.45)
Net income (loss) $1.07 $(.19)
<PAGE>
Cash dividends paid per share:
Preference stock* $.90 $.90
Common stock $.25 $.25
</TABLE>
- -------------
*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
June 30 December 31
1997 1996
(Millions of Dollars) (UNAUDITED)
- --------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 50 $ 67
Accounts and notes receivable, net 673 864
Inventories:
Crude oil 187 157
Refined products 267 252
Materials, supplies and other 69 67
Deferred income taxes 120 128
------ ------
Total Current Assets 1,366 1,535
Investment in Real Estate Operations Held
for Sale (Note 3) 77 79
Investments and Long-Term Receivables 88 91
Properties, Plants and Equipment 5,856 5,829
Less Accumulated Depreciation, Depletion
and Amortization 2,848 2,785
------ ------
Properties, Plants and Equipment, net 3,008 3,044
Deferred Income Taxes -- 24
Deferred Charges and Other Assets 231 252
------ ------
Total Assets $4,770 $5,025
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 830 $1,081
Accrued liabilities 542 573
Current portion of long-term debt 58 54
Taxes payable 101 109
------ ------
Total Current Liabilities 1,531 1,817
Long-Term Debt 830 835
Retirement Benefit Liabilities 489 489
Deferred Income Taxes 34 --
Other Deferred Credits and Liabilities 402 446
Commitments and Contingent Liabilities (Note 6)
Shareholders' Equity (Note 7) 1,484 1,438
------ ------
Total Liabilities and Shareholders' Equity $4,770 $5,025
====== ======
</TABLE>
(See Accompanying Notes)
<PAGE>
<PAGE> 6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Sun Company, Inc. and Subsidiaries
(Millions of Dollars)
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months
Ended June 30
------------------
1997 1996
----- -----
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 123 $ (8)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Income from discontinued operations -- (38)
Provision for write-down of assets and other
matters 32 85
Depreciation, depletion and amortization 130 132
Deferred income tax expense (benefit) 62 (26)
Changes in working capital pertaining to
operating activities:
Accounts and notes receivable 191 (154)
Inventories (47) 57
Accounts payable and accrued liabilities (339) 63
Taxes payable (8) (1)
Other (20) (16)
----- -----
Net cash provided by continuing operating
activities 124 94
Net cash flows from discontinued operating
activities -- 52
----- -----
Net cash provided by operating activities 124 146
----- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (154) (104)
Proceeds from divestment of Suncor common stock -- 135
Proceeds from other divestments 92 7
Investing activities of discontinued operations -- (8)
Other 1 12
----- -----
Net cash provided by (used in) investing activities (61) 42
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments of short-term borrowings -- (54)
Repayments of long-term debt (1) (2)
Cash dividend payments (59) (60)
Purchases of preference stock for retirement (8) --
Purchases of common stock for treasury (13) (6)
Other 1 (13)
----- -----
Net cash used in financing activities (80) (135)
----- -----
Net increase (decrease) in cash and cash equivalents (17) 53
Cash and cash equivalents at beginning of period 67 11
----- -----
Cash and cash equivalents at end of period $ 50 $ 64
===== =====
</TABLE>
(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). Results for the three and six months ended June 30, 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 six
months ended June 30, 1996. The following is a summary of the results
of this business during that period (in millions of dollars):
Sales and other operating revenue $131
====
Income before income tax expense $ 54
Income tax expense 16
----
Income from discontinued operations $ 38
====
3. Investment in Real Estate Operations Held for Sale.
Sun has been pursuing the disposition of its investment in Radnor
Corporation ("Radnor"), its wholly owned real estate development
subsidiary, since October 1991. Radnor 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 six months
ended June 30, 1997 and 1996, respectively, has been included as a
single amount in other income in the condensed consolidated statements
of operations.
<PAGE>
<PAGE> 8
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):
<TABLE>
<CAPTION>
At At
June 30 December 31
1997 1996
-------- -----------
<S> <C> <C>
Inventories $ 80 $ 78
Properties, plants and equipment 57 119
Other assets 16 18
Debt (Note 6) (51) (109)
Other liabilities (25) (27)
---- -----
Investment in real estate operations
held for sale $ 77 $ 79
==== =====
</TABLE>
4. Write-downs of Assets and Other Matters.
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 170 were
terminated during the first six months of 1997. The employee
reductions are throughout the organization and include senior
management, support staff and operations personnel. As of June 30,
1997, the amount of actual termination benefits paid and charged
against the accrual totalled $8 million.
During the second quarter of 1996, Sun recorded an $85 million ($53
million after-tax) provision for write-down of assets and other
matters related to the Company's Philadelphia refinery reconfiguration
project, which was completed during the fourth quarter of 1996. This
reconfiguration continues the integration of the two adjacent but
separate facilities (Point Breeze and Girard Point) at the
Philadelphia, PA refinery. The provision is comprised principally of
the write-off of redundant processing units and also includes an
accrual for environmental remediation activities associated with the
reconfiguration.
<PAGE>
<PAGE> 9
5. Earnings Per Share.
The following table sets forth the computation of earnings per share
for the six-month and three-month periods ending June 30, 1997 and
1996 (in millions except per share amounts):
<TABLE>
<CAPTION>
Six Months Three Months
Ended Ended
June 30 June 30
-------------- --------------
1997 1996* 1997 1996*
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) attributable to
common shareholders:
Primary (after deduction of
dividends on preference stock) $101 $(30) $ 94 $(14)
==== ==== ==== ====
Fully diluted $123 $(30) $105 $(14)
==== ==== ==== ====
Weighted average number of shares
outstanding:
Primary 73.1 74.0 73.0 74.0
Fully diluted 98.0 74.0 97.9 74.0
Earnings per share of common stock:
Primary:
Income (loss) from continuing
operations $1.38 $(.92) $1.29 $(.45)
Income from discontinued operations -- .51 -- .26
----- ----- ----- -----
Net income (loss) $1.38 $(.41) $1.29 $(.19)
===== ===== ===== =====
Fully diluted:
Income (loss) from continuing
operations $1.26 $(.92) $1.07 $(.45)
Income from discontinued operations -- .51 -- .26
----- ----- ----- -----
Net income (loss) $1.26 $(.41) $1.07 $(.19)
===== ===== ===== =====
</TABLE>
- -------------
*Since the assumed redemption of preference shares would have resulted in
a smaller loss per share during the six and three months ended June 30,
1996, fully diluted amounts are equal to those reported on a primary basis
for these periods.
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 six and three months ended June 30, 1997 and
1996, the new standard would not have impacted Sun's earnings per
share for these periods.<PAGE>
<PAGE> 10
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 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 amounts paid by Sun under this agreement were
determined using the formula price, which was believed to have
approximated prices 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 had developed
by the latter part of 1996. 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 six months of 1997, actual MTBE purchase costs in
excess of current market prices were charged against the accrual.
Sun's MTBE purchases were based upon the formula price through May
1997 and the minimum price in June 1997.
The Company guarantees the $51 million of outstanding debt of Radnor,
which is due no later than February 2001 and is expected to be repaid
by the end of 1998 with proceeds from the disposal of its remaining
real estate portfolio (Note 3).
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
<PAGE>
<PAGE> 11
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 June 30, 1997, Sun had
been named as a PRP at 43 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):
<TABLE>
<CAPTION>
At At
June 30 December 31
1997 1996
-------- -----------
<S> <C> <C>
Accrued liabilities $ 68 $ 77
Other deferred credits and
liabilities 143 150
---- ----
$211 $227
==== ====
</TABLE>
Pretax charges against income for environmental remediation amounted
to $2 and $19 million for the six months ended June 30, 1997 and 1996,
respectively. This $17 million decrease was largely attributable to
the absence of an accrual for remediation activities associated with
the reconfiguration of the Philadelphia refinery, which was recorded
in the second quarter of 1996 (Note 4). Claims for recovery of
environmental liabilities that are probable of realization totalled $4
million at June 30, 1997 and are included in deferred charges and
other assets in the condensed consolidated balance sheets.
<PAGE>
<PAGE> 12
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 June 30, 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.
<TABLE>
<CAPTION>
At At
June 30 December 31
1997 1996
-------- -----------
(Millions of Dollars)
<S> <C> <C>
Cumulative preference stock - Series A,
no par value $ 739 $ 748
Common stock, par value $1 per share 130 130
Capital in excess of par value 1,320 1,316
Earnings employed in the business 1,348 1,284
------ ------
3,537 3,478
Less common stock held in treasury,
at cost 2,053 2,040
------ ------
Total $1,484 $1,438
====== ======
/TABLE
<PAGE>
<PAGE> 13
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS - SIX MONTHS
Earnings Profile of Sun Businesses (after tax)
- ----------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30
------------------
1997 1996 Variance
---- ---- --------
(Millions of Dollars)
<S> <C> <C> <C>
Sun Northeast Refining $ 41 $(24) $ 65
Sunoco Northeast Marketing 37 6 31
Sunoco Chemicals 41 18 23
Sun Lubricants (6) (1) (5)
Sunoco MidAmerica Marketing &
Refining 20 1 19
Sunoco Logistics 27 26 1
Sun Coal & Coke 18 15 3
Corporate expenses (10) (11) 1
Net financing expenses (24) (24) --
Real estate operations held
for sale -- 1 (1)
Sun International Production* -- 38 (38)
---- ---- ----
144 45 99
Special Item:
Provision for write-down of assets
and other matters (21) (53) 32
---- ---- ----
Consolidated net income (loss) $123 $ (8) $131
==== ==== ====
</TABLE>
- ----------------
*Sun completed the sale of its International Production business on
September 30, 1996.
<PAGE>
<PAGE> 14
Analysis of Earnings Profile of Sun Businesses
- ----------------------------------------------
In the six-month period ended June 30, 1997, Sun had net income of $123
million compared with a net loss of $8 million for the first half of 1996.
Primary earnings per share were $1.38 in the first six months of 1997
versus a $.41 loss per share in the first half of 1996. On a fully diluted
basis, which assumed the redemption of the preference shares for common
stock during the first half of 1997, Sun earned $1.26 per share in the
first six months of 1997 versus a $.41 loss per share in the year-ago
period (see Note 5 to the condensed consolidated financial statements).
Excluding the provisions for write-down of assets and other matters shown
separately in the Earnings Profile of Sun Businesses, Sun earned $144
million in the first six months of 1997 compared to income of $45 million
in the first six months of 1996.
Sun Northeast Refining -- The Sun Northeast Refining business earned $41
million in the first six months of 1997 compared to a loss of $24 million
in the first half of 1996. The improvement in operating results was due
primarily to a decline in operating expenses ($39 million) and higher
realized margins ($19 million) and sales volumes ($8 million) for wholesale
fuel products. Wholesale gasoline margins were adversely impacted in the
first half 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,
particularly for high-value gasoline and distillate products, in part due
to the successful turnaround and modernization of the 86,000 barrels-per-
day fluid catalytic cracking unit at the Marcus Hook refinery completed in
the latter part of 1996. Input to the crude units averaged 486,900 barrels
per day at the Company's Northeast refineries, or 101 percent of rated
capacity, in the first half of 1997 versus 441,000 barrels per day in the
first six months of 1996 with gasoline and distillate production averaging
over 416,000 barrels daily versus 367,000 barrels daily in the first half
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. The reconfiguration to date has resulted in a
substantial improvement in operating reliability and a reduction in the
cost structure at the Philadelphia refinery.
Sunoco Northeast Marketing -- The Sunoco Northeast Marketing business
earned $37 million in the current six-month period versus $6 million in the
first half of 1996. The increase in earnings was due to significantly
higher average retail gasoline margins ($23 million) and lower expenses
($11 million), partially offset by the impact of 5 percent lower retail
gasoline sales volumes ($5 million). Retail gasoline margins were
adversely impacted in the first half of 1996 by the Company's high purchase
cost of MTBE.
Sunoco Chemicals -- Sunoco Chemicals earned $41 million in the first half
of 1997 versus $18 million in the first six months of 1996. The increase
in earnings was primarily due to higher margins ($14 million) and sales
<PAGE>
<PAGE> 15
volumes ($12 million), reflecting record production levels, particularly of
higher-value petrochemicals.
Sun Lubricants -- The Sun Lubricants business recorded a loss of $6 million
in the 1997 first half, compared to a loss of $1 million in the first six
months of 1996. Lower margins, particularly for base oils, more than
offset income attributable to the Kendall/Amalie lubricants business
acquired by Sun in November 1996 and the impact of improved operations at
the Puerto Rico refinery as a result of the reconfiguration initiated in
the first quarter of 1997. This facility is now processing approximately
30,000 barrels per day of purchased intermediate feedstocks in lieu of
crude oil. Prior to the reconfiguration, the Puerto Rico refinery had a
crude oil processing capacity of 85,000 barrels per day. The changes made
in the first quarter have significantly reduced fuels production at this
refinery and are expected to reduce operating expenses by approximately $35
million pretax on an annualized basis while maintaining the lubricants
manufacturing capabilities of the facility.
Sunoco MidAmerica Marketing & Refining -- Sunoco MidAmerica Marketing &
Refining earned $20 million during the first half of 1997, compared to $1
million in the 1996 first half. The improved results were largely
attributable to higher wholesale fuel ($8 million) and chemical ($4
million) margins, lower refinery operating expenses ($3 million) and higher
wholesale fuel sales volumes ($5 million), reflecting significantly higher
refinery production. Partially offsetting these positive factors were
lower retail gasoline margins ($4 million).
Sunoco Logistics -- Sunoco Logistics earned $27 million in the first six
months of 1997 versus $26 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 $18 million in the first half of
1997 versus $15 million in the first half of 1996. The increase in
earnings was primarily due to higher margins for coke ($1 million) and
improved results from Sun's steam coal operations in Kentucky ($1 million).
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 $38 million in the 1996 first half.
Provision for Write-Down of Assets and Other Matters -- During the first
quarter of 1997, Sun established a $32 million pretax accrual ($21 million
after tax) for employee termination benefits 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.
During the second quarter of 1996, Sun recorded an $85 million ($53 million
after-tax) provision for write-down of assets and other matters related to
the Company's Philadelphia refinery reconfiguration project, which was
completed during the fourth quarter of 1996. This reconfiguration<PAGE>
<PAGE> 16
continues the integration of the two adjacent but separate facilities
(Point Breeze and Girard Point) at the Philadelphia, PA refinery. The
provision is comprised principally of the write-off of redundant processing
units and also includes an accrual for environmental remediation activities
associated with the reconfiguration.
Analysis of Consolidated Statements of Operations
- -------------------------------------------------
Sales and other operating revenue decreased $36 million, or 1 percent,
principally due to lower revenues from resales of purchased crude oil ($242
million) and lower consumer excise taxes ($34 million), partially offset by
higher refined product sales prices ($130 million) and volumes ($114
million). Cost of products sold and operating expenses decreased $190
million, or 5 percent, primarily due to lower resales of purchased crude
oil ($242 million) and lower refinery operating expenses ($69 million),
partially offset by higher crude oil and refined product costs ($136
million). Selling, general and administrative expenses decreased $18
million, or 6 percent, primarily due to lower expenses in Sun's refining
and marketing operations, despite the inclusion in the first half of 1997
of expenses attributable to the Kendall/Amalie lubricants business acquired
in November 1996. Consumer excise taxes decreased $34 million, or 4
percent, principally due to a decline in retail gasoline sales volumes.
Payroll, property and other taxes decreased $4 million, or 9 percent,
principally due to lower taxes in the Company's coal operations.
<PAGE>
<PAGE> 17
RESULTS OF OPERATIONS - THREE MONTHS
Earnings Profile of Sun Businesses (after tax)
- ----------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
June 30
------------------
1997 1996 Variance
---- ---- --------
(Millions of Dollars)
<S> <C> <C> <C>
Sun Northeast Refining $ 37 $ 4 $ 33
Sunoco Northeast Marketing 17 7 10
Sunoco Chemicals 22 11 11
Sun Lubricants 2 (3) 5
Sunoco MidAmerica Marketing &
Refining 20 5 15
Sunoco Logistics 15 15 --
Sun Coal & Coke 9 8 1
Corporate expenses (5) (6) 1
Net financing expenses (12) (11) (1)
Real estate operations held
for sale -- 1 (1)
Sun International Production* -- 19 (19)
---- ---- ----
105 50 55
Special Item:
Provision for write-down of assets
and other matters -- (53) 53
---- ---- ----
Consolidated net income (loss) $105 $ (3) $108
==== ==== ====
</TABLE>
- ----------------
*Sun completed the sale of its International Production business on
September 30, 1996.
<PAGE>
<PAGE> 18
Analysis of Earnings Profile of Sun Businesses
- ----------------------------------------------
In the three-month period ended June 30, 1997, Sun had net income of $105
million compared with a net loss of $3 million for the second quarter of
1995. Primary earnings per share were $1.29 in the second quarter of 1997
versus a $.19 loss per share in the second quarter of 1996. On a fully
diluted basis, Sun earned $1.07 per share in the second quarter of 1997
versus a $.19 loss per share in the year-ago period. There were no special
items recorded in the second quarter of 1997. Excluding the provision for
write-down of assets and other matters recorded in the second quarter of
1996, which is shown separately in the Earnings Profile of Sun Businesses,
Sun earned $50 million in the second quarter of 1996.
Sun Northeast Refining -- The Sun Northeast Refining business earned $37
million in the second quarter of 1997 versus $4 million in the second
quarter of 1996. The increase in earnings was due primarily to a decline
in operating expenses ($23 million) and higher realized margins ($10
million) and sales volumes ($2 million) for wholesale fuel products. The
increase in sales volumes reflects an increase of approximately 2.5 million
barrels of total fuels production at the Company's Northeast refineries
compared to the second quarter of 1996 with high-value gasoline and
distillate production averaging over 424,000 barrels daily versus 376,000
barrels daily in the second quarter of 1996.
Sunoco Northeast Marketing -- The Sunoco Northeast Marketing business
earned $17 million in the current quarter versus income of $7 million in
the second quarter of 1996. The increase in earnings was due to a decline
in marketing and administrative expenses ($10 million). The impact of
slightly higher gasoline margins in the second quarter of 1997 ($2 million)
was offset by 5 percent lower retail gasoline volumes during that period
($2 million).
Sunoco Chemicals -- Sunoco Chemicals earned $22 million in the second
quarter of 1997 versus $11 million in the second quarter of 1996. The
increase in earnings was due largely to higher margins ($5 million) and
sales volumes ($6 million) reflecting record production levels across most
of Sun's petrochemical products. Total petrochemical production for the
second quarter of 1997 was over 2.1 million barrels (23,200 barrels per
day) versus second quarter 1996 production of almost 1.8 million barrels
(19,500 barrels per day).
Sun Lubricants -- The Sun Lubricants business earned $2 million in the 1997
second quarter, compared to a loss of $3 million in the 1996 second
quarter. The improvement in operating results was largely due to higher
gasoline, distillate and specialty oil lubricant margins and income
attributable to the Kendall/Amalie lubricants business acquired by Sun in
November 1996. Also contributing to the improvement in operating results
was the impact of the reconfiguration changes made at the Puerto Rico
refinery in the first quarter of 1997, which resulted in lower feedstock
costs, lower expenses, and reduced fuels production at this facility.
Partially offsetting these positive factors were lower base oil margins.
Sunoco MidAmerica Marketing & Refining -- Sunoco MidAmerica Marketing &
Refining earned $20 million during the 1997 second quarter, compared to
earnings of $5 million in the 1996 second quarter. The improved results
were largely attributable to higher wholesale fuel ($7 million) and
<PAGE>
<PAGE> 19
chemical ($3 million) margins, lower refinery operating expenses ($3
million) and higher wholesale fuel sales volumes ($3 million), reflecting
significantly higher production. Input to the crude units at the Toledo
refinery averaged 138,100 barrels per day, or 110 percent of rated
capacity, in the current quarter versus 127,000 barrels per day in the
second quarter of 1996. Partially offsetting these positive factors were
lower retail gasoline margins ($3 million).
Sun Coal & Coke -- Sun Coal & Coke earned $9 million in the second quarter
of 1997 versus $8 million in the second quarter of 1996. The increase in
earnings reflects lower operating costs and improved yields from Sun's
cokemaking operations.
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 for the second quarter of 1996.
Provision for Write-Down of Assets and Other Matters -- For a discussion of
the $85 million ($53 million after-tax) provision for write-down of assets
and other matters recorded in the second quarter of 1996, see "Provision
for Write-Down of Assets and Other Matters" above under the six months
"Analysis of Earnings Profile of Sun Businesses."
Analysis of Consolidated Statements of Operations
- -------------------------------------------------
Sales and other operating revenue decreased $309 million, or 11 percent,
principally due to lower revenues from resales of purchased crude oil ($202
million), lower refined product sales prices ($97 million) and lower
consumer excise taxes ($27 million), partially offset by higher refined
product sales volumes ($19 million). Cost of products sold and operating
expenses decreased $375 million, or 17 percent, primarily due to lower
resales of purchased crude oil ($202 million), lower crude oil and refined
product costs ($118 million) and lower refinery operating expenses ($49
million). Selling, general and administrative expenses decreased $11
million, or 7 percent, primarily due to lower expenses in Sun's refining
and marketing operations despite the inclusion in the second quarter of
1997 of expenses attributable to the Kendall/Amalie lubricants business
acquired in November 1996. Consumer excise taxes decreased $27 million, or
6 percent, due to a decline in retail and wholesale gasoline sales volumes.
Payroll, property and other taxes decreased $6 million, or 26 percent, in
part due to lower taxes in the Company's coal operations.
<PAGE>
<PAGE> 20
FINANCIAL CONDITION
Cash and Working Capital
- ------------------------
At June 30, 1997, Sun had cash and cash equivalents of $50 million compared
to $67 million at December 31, 1996, and had a working capital deficit of
$165 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 June 30, 1997 by
approximately $515 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 ongoing operations.
Cash Flows and Financial Capacity
- ---------------------------------
In the first six months of 1997, Sun's net cash provided by operating
activities ("cash generation") was $124 million compared to $146 million in
the first six months of 1996. The $22 million decrease in cash generation
was largely due to an increase in working capital uses pertaining to
operating activities and a reduction in net cash flows from discontinued
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 June 30, 1997, the Consolidated Tangible Net
Worth was $1,393 million. The Company also has access to short-term
financing under non-committed money market facilities.
<PAGE>
<PAGE> 21
At June 30, 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):
<TABLE>
<CAPTION>
At At
June 30 December 31
1997 1996
-------- -----------
<S> <C> <C>
Current portion of long-term debt $ 58 $ 54
Long-term debt 830 835
---- ----
Total borrowings $888 $889
==== ====
</TABLE>
Sun's debt-to-capital ratio was 37.4 percent at June 30, 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.
SHARE REPURCHASES
During the second quarter of 1997, the Company repurchased 498,881 shares
of its common stock and 273,300 of its depositary shares on the open market
for approximately $21 million. These purchases completed a program begun
in the third quarter of 1995 to purchase $100 million of stock in the open
market or through privately negotiated transactions. On July 3, 1997, the
Company's Board of Directors approved a successor program authorizing the
repurchase of the Company's common stock and its depositary shares for an
aggregate cost not to exceed $150 million. These share repurchases shall
be made from time to time in the open market or through privately
negotiated transactions, subject to prevailing market conditions.
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.
<PAGE>
<PAGE> 22
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
protection of the environment including gasoline composition and
characteristics). Unpredictable or unknown factors not discussed herein
could also have material adverse effects on forward-looking statements.
<PAGE>
<PAGE> 23
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Sun Company, Inc. (R&M) paid $250,000 in civil fines and agreed to
undertake certain corrective actions pursuant to a Consent Order
entered on June 13, 1997 by the U.S. District Court in San Juan,
Puerto Rico. This agreement between Sun Company, Inc. (R&M) and the
United States Environmental Protection Agency, Region II (acting
through the United States Department of Justice) stems from several
alleged Clean Air Act violations that had 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.
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
June 30, 1997.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of the Company's shareholders was held on May 1,
1997. Proxies for the meeting were solicited pursuant to Section 14(a)
of the Securities Exchange Act of 1934 and there was no solicitation
in opposition to the Company's solicitations. At this meeting, the
shareholders were requested (1) to elect a Board of Directors; (2) to
act upon a proposal to adopt a new management incentive plan -- the
Sun Company, Inc. Long-Term Performance Enhancement Plan, and; (3) to
approve the appointment of independent auditors. The following action
was taken by the Company's shareholders with respect to each of the
above items:
1. Concerning the election of a Board of Directors of the Company,
there was a total of 70,340,323 votes cast. Each of the
following individuals continued his or her term of office as a
director of the Company and was re-elected to the Board of
Directors. The tabulation below sets forth the number of votes
cast for, against or withheld (abstentions) for each director.
There were no broker non-votes.<PAGE>
<PAGE> 24
Item 4. Submission of Matters to a Vote of Security Holders (Continued)
<TABLE>
<CAPTION>
Number
Number Number "WITHHELD"
NAME "FOR" "AGAINST" (ABSTENTIONS)
-------------- ---------- --------- ------------
<S> <C> <C> <C>
R. H. Campbell 67,983,348 2,355,404 1,571
R. E. Cartledge 68,570,560 1,767,964 1,799
R. E. Cawthorn 68,576,679 1,762,588 1,056
J. G. Drosdick 68,646,614 1,693,709 --
M. J. Evans 68,401,309 1,937,749 1,265
T. P. Gerrity 68,609,410 1,729,284 1,629
J. G. Kaiser 68,573,240 1,760,242 6,841
R. D. Kennedy 68,591,691 1,747,478 1,154
R. A. Pew 68,420,343 1,917,457 2,523
W. F. Pounds 68,452,908 1,886,266 1,149
A. B. Trowbridge 68,569,673 1,769,590 1,060
</TABLE>
2. Concerning the proposal to adopt the Sun Company, Inc. Long-Term
Performance Enhancement Plan, there was a total of 61,488,665
votes cast, with an aggregate of 56,623,757 votes cast in favor
of adoption, 4,864,908 against and 872,317 withheld
(abstentions). There were 23,091,046 broker non-votes.
3. Concerning the motion to appoint Ernst & Young LLP as the
Company's independent auditors, there was a total of 69,875,109
votes cast, with an aggregate of 69,349,527 votes cast in favor
of such appointment, 525,582 against and 464,957 withheld
(abstentions). There were no broker non-votes.
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 Six-Month Period Ended
June 30, 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 June 30, 1997. On July 8, 1997, a report on Form 8-K was filed
to disclose under Item 5 -- "Other Events" and Item 7 -- "Financial
Statements and Exhibits," an amendment to the shareholder rights
agreement between Sun Company, Inc. and First Chicago Trust Company of
New York dated as of February 1, 1996.
<PAGE>
<PAGE> 25
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 August 4, 1997
<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 Six-Month
Period Ended June 30, 1997.
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 Except Ratio)
- --------------------------------------------------------------------------
For the Six Months
Ended June 30, 1997
--------------------
(UNAUDITED)
<S> <C>
Fixed Charges:
Consolidated interest cost and debt expense $ 38
Interest cost and debt expense of real estate
operations held for sale 3
Interest allocable to rental expense(b) 16
----
Total $ 57
====
Earnings:
Consolidated income before income tax expense $184
Proportionate share of income tax expense
of 50 percent owned but not controlled
affiliated companies 2
Equity in income of less than 50 percent owned
affiliated companies (7)
Dividends received from less than 50 percent
owned affiliated companies 2
Fixed charges 57
Interest capitalized (1)
Amortization of previously capitalized interest 5
----
Total $242
====
Ratio of Earnings to Fixed Charges 4.25
====
</TABLE>
- ----------------
(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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 50
<SECURITIES> 0
<RECEIVABLES> 680
<ALLOWANCES> 7
<INVENTORY> 523
<CURRENT-ASSETS> 1,366
<PP&E> 5,856
<DEPRECIATION> 2,848
<TOTAL-ASSETS> 4,770
<CURRENT-LIABILITIES> 1,531
<BONDS> 830
<COMMON> 130
0
739
<OTHER-SE> 615
<TOTAL-LIABILITY-AND-EQUITY> 4,770
<SALES> 5,310
<TOTAL-REVENUES> 5,337
<CGS> 3,893
<TOTAL-COSTS> 3,893
<OTHER-EXPENSES> 1,220
<LOSS-PROVISION> 2
<INTEREST-EXPENSE> 38
<INCOME-PRETAX> 184
<INCOME-TAX> 61
<INCOME-CONTINUING> 123
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 123
<EPS-PRIMARY> 1.38
<EPS-DILUTED> 1.26
</TABLE>
