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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
--------------- ---------------
Commission file number 1-6841
SUN COMPANY, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1743282
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
Ten Penn Center
1801 Market Street, Philadelphia, PA 19103-1699
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 977-3000
Securities registered pursuant to Section 12(b) of the Act:
Name of each
Title of each class exchange on which registered
------------------- ----------------------------
Common Stock, $1 par value New York Stock Exchange
Philadelphia Stock Exchange
Alberta Stock Exchange
Basel Stock Exchange
Geneva Stock Exchange
Zurich Stock Exchange
Dusseldorf Stock Exchange
Frankfurt Stock Exchange
London Stock Exchange
Convertible Subordinated New York Stock Exchange
Debentures 6 3/4%,
Due June 15, 2012
Sinking Fund Debentures 9 3/8%, New York Stock Exchange
Due June 1, 2016
Notes 7.95%, New York Stock Exchange
Due December 15, 2001
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Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendments of this Form 10-K. /X/
At February 28, 1994, the aggregate market value of voting stock held
by nonaffiliates was $2,676 million.
At February 28, 1994, there were 106,714,811 shares of Common Stock,
$1 par value, outstanding.
Selected portions of the Sun Company, Inc. Annual Report to
Shareholders for the Fiscal Year Ended December 31, 1993 are incorporated
by reference in Parts I, II and IV of this Form 10-K.
Selected portions of the Sun Company, Inc. definitive Proxy Statement,
which will be filed with the Securities and Exchange Commission within 120
days after December 31, 1993, are incorporated by reference in Part III of
this Form 10-K.
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PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
GENERAL
Sun Company, Inc.* was incorporated in Pennsylvania in 1971 and it or
its predecessors have been active in the petroleum industry since 1886.
Its principal executive offices are located at 1801 Market Street,
Philadelphia, PA 19103-1699. Its telephone number is (215) 977-3000.
The Company, through its subsidiaries, is principally a petroleum
refiner and marketer with interests in oil and gas exploration and
production and oil sands mining.
Sun's petroleum refining and marketing operations include the
manufacturing and marketing of a full range of petroleum products,
including fuels, lubricants and petrochemicals, and the transportation of
crude oil and refined products. These operations are conducted in the
United States and Canada. Sun's oil and gas exploration and production
operations consist of exploration for and development, production and
marketing of crude oil and condensate, natural gas and natural gas liquids.
Exploration activities are conducted in Canada while development,
production and marketing activities are conducted primarily in Canada and
the United Kingdom sector of the North Sea. Oil sands mining operations,
which consist of production of synthetic crude oil by mining oil sands and
upgrading the bitumen extracted from the oil sands, are conducted in
western Canada.
Sun also has interests in coal, real estate and leasing operations in
the United States. Each of these businesses is subject to a plan of
disposition which management is actively pursuing.
During October 1992, the Company announced a new strategic plan for
Sun (the "Strategic Plan"). The Strategic Plan focuses on growth in
branded gasoline marketing (primarily in the northeastern United States),
lubricants, chemicals and logistics and international oil and gas
production activities (primarily in the U.K. North Sea).
For information regarding certain initiatives implemented as part of
Sun's Strategic Plan, see Management's Discussion and Analysis of Financial
Condition and Results of Operations - Strategic Actions, and Note 2 to the
Consolidated Financial Statements in the Company's 1993 Annual Report to
Shareholders. Additional business segment and geographic information is
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*As used in this report, the term "Company" means Sun Company, Inc., and
the term "Sun" means Sun Company, Inc. and its subsidiaries. The use of
these terms is for convenience of discussion and is not intended to be a
precise description of corporate relationships. References in this Annual
Report on Form 10-K to material in the Company's 1993 Annual Report to
Shareholders and in the Company's definitive Proxy Statement, which will
be filed with the Securities and Exchange Commission within 120 days after
December 31, 1993, mean that such material is incorporated herein by
reference; other material in those documents is not deemed to be filed as
part of this Annual Report on Form 10-K.
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presented in Note 19 to the Consolidated Financial Statements in the
Company's 1993 Annual Report to Shareholders.
DOMESTIC REFINING AND MARKETING
The Company's domestic refining and marketing operations consist of
the manufacturing and marketing of fuels, lubricants and chemicals and the
transportation of crude oil and refined products. These operations are
managed by Sun Company, Inc. (R&M), a wholly owned subsidiary of the
Company, and are classified in the following business lines: Fuels,
Lubricants, Chemicals and Logistics.
Sun owns and operates five domestic refineries which had a total crude
unit processing capacity of 600 thousand barrels daily as of December 31,
1993. Sun's refineries in Marcus Hook, PA, Philadelphia, PA and Toledo, OH
produce fuels and chemicals while its refineries in Tulsa, OK and Yabucoa,
Puerto Rico emphasize lubricants production with fuels as a by-product.
Elements of supply and distribution of crude oil, feedstocks and refined
products that are common to the operations of all five refineries are
discussed below under the heading "Supply and Distribution."
FUELS
Sun's Fuels business consists primarily of the manufacture and sale of
petroleum products, including gasoline, distillates, jet fuel, residual
fuel oil and asphalt to retail, wholesale, commercial and industrial
customers and to the United States government for defense fuel supply.
This business includes the sale of fuels (gasoline and middle distillates)
under Sun's SUNOCO(R) and ATLANTIC(R) brands.
During 1993, Sun announced that it would convert its existing
ATLANTIC(R) outlets to SUNOCO(R) and convert its SUNOCO FOOD MARKET(R)
convenience stores to APLUS(R). This strategy is expected to be fully
implemented by year-end 1995 and is intended to capitalize on the
recognition and reputation of the SUNOCO(R) and APLUS(R) brand names (see
"Branded Fuels Marketing" below).
Fuels Refining
The refining operations of Sun's Fuels business are conducted at its
Marcus Hook, Philadelphia and Toledo refineries ("Fuels Refineries"). The
Company continues to operate its Tulsa, OK and Yabucoa, Puerto Rico
refineries to emphasize lubricants production. Accordingly, the related
wholesale fuels operations of these two lubricants refineries are included
in the Lubricants business and operating results (see "Lubricants" below).
During 1993, the Company reviewed various strategic options regarding
its Toledo refinery including a possible reconfiguration or joint venture
operation. The Company did not execute any of these options. Operating
improvements at the refinery along with better market conditions in the
Midwest, contributed to improved financial results at this facility in
1993.
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Sun's Marcus Hook and Toledo refineries run a relatively light, low-
sulfur crude slate. The refinery in Philadelphia is able to process
heavier, higher sulfur crudes and is a major producer of asphalt in Sun's
northeastern United States marketing area.
Sun's Marcus Hook and Philadelphia refineries are currently
interconnected by barge, truck and rail. Feedstocks currently being
transferred between these refineries include reformate, naphtha, light
cycle oil and butanes. Feedstock integration between the two facilities
will be enhanced by the construction of an inter-refinery pipeline
scheduled to be completed by early 1995. This pipeline will provide
opportunities for additional manufacturing synergies and cost efficiencies
from product movements between the two refineries. See "Logistics" below
for a further discussion of this project.
Environmental laws require Sun to make significant expenditures at its
refineries, of both a capital and expense nature. A $100 million project
to significantly upgrade the sewer system and close an unlined impoundment
was begun in 1992 at Sun's Marcus Hook refinery and is targeted for
completion during 1994. Additionally, significant alterations in the
composition of gasoline sold in most of Sun's northeastern U.S. branded
marketing area are required under the Clean Air Act of 1990, as amended
(the "Clean Air Act"), to reduce the maximum allowable benzene content,
reduce summertime Reid Vapor Pressure ("RVP") and increase the minimum
oxygenate content. These requirements, which are currently being phased
in, significantly impact operations at Sun's three Fuels Refineries, and to
a lesser extent at Sun's Tulsa and Puerto Rico refineries which generate
fuels and intermediate feedstocks as by-products of their lubricants
production. While the Clean Air Act covers all motor fuels, the major
impact of this legislation will be in the production of motor gasolines
which must meet strict reformulated fuels guidelines. It is expected that
all refiners will not be willing or able to make the significant capital
expenditures necessary to produce cleaner-burning reformulated fuels and
that a rationalization of U.S. refining capacity will occur.
In anticipation of additional requirements becoming effective in 1995,
the Company has undertaken various initiatives to compete effectively in
this environment. First, while Sun's Toledo and Marcus Hook refineries
already have substantial benzene extraction capacity, the Company is
currently in the process of further expanding such capacity at its Marcus
Hook refinery to permit it to extract benzene from gasoline streams from
Sun's Philadelphia refinery or from third parties (see "Chemicals" below).
Secondly, the Company has secured the majority of its required supply of
oxygenates through a 100 percent methyl tertiary butyl ether ("MTBE") off-
take agreement with Belvieu Environmental Fuels ("BEF"), a joint venture in
which Sun is a one-third partner, formed to construct, own and operate an
MTBE production facility. This off-take agreement will supplement Sun's
existing oxygenated gasoline production at its three Fuels Refineries. BEF
is expected to begin production in mid-1994 (see "Chemicals" below).
Thirdly, Sun's Toledo, Philadelphia and Yabucoa, Puerto Rico refineries
have the ability, without additional capital investment, to produce low-
sulfur diesel that meets the sulfur reduction requirements for on-road
diesel. Finally, as a result of the reconfiguration of Sun's Tulsa
refinery in 1992, the capital investment needed to comply with the Clean
Air Act has been significantly reduced (see "Lubricants" below). While
there is considerable uncertainty concerning the impact on Sun's future
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profitability of the implementation of the amendments to the Clean Air Act,
Sun's management believes that the Company is well positioned to meet the
new air toxics and reformulated fuels requirements under present
regulations as they are phased in over the next few years.
Sun has an alternative fuels research and testing program focusing on
methanol/gasoline mixtures, liquefied petroleum gas and compressed natural
gas. The results of this program are expected to assist Sun in meeting the
demand for such fuels in the future and in meeting environmental regulatory
requirements.
The Fuels business tends to be seasonal in nature, in that refining
margins often begin to increase in the second quarter and decrease in the
fourth quarter of the year, reflecting increased demand for gasoline and
other refined products during the summer driving season.
Wholesale Fuels Marketing
Sun sells gasoline, distillates, jet fuel, residual fuel oil and
asphalt to wholesale, commercial and industrial customers and to the United
States government for defense fuel supply. Total third-party fuels
products sold at wholesale from Sun's Fuels Refineries in 1993 were 219.6
thousand barrels daily compared to 234.1 thousand barrels daily in 1992.
For a discussion of wholesale fuels marketing at Sun's Tulsa and Puerto
Rico lubricants refineries, see "Lubricants" below.
Branded Fuels Marketing
Sun's U.S. branded fuels marketing operations consist of the sale of
gasoline and middle distillates. Sun markets a full slate of retail
gasoline products, including high-octane premium gasolines represented by
Sunoco's ULTRA(R) 94 and Atlantic's OPTIMA(R) 93 grades, as well as a
choice of several lower octane gasolines. Domestic branded fuels sales
averaged 245.0 thousand barrels daily in 1993 compared to 255.7 thousand
barrels daily in 1992. Sun's branded fuels marketing business also
consists of the ownership and operation of the SUNOCO FOOD MARKET(R) and
APLUS(R) convenience stores.
In May 1993, Sun announced that its ATLANTIC(R) stations would be
converted to SUNOCO(R) and its SUNOCO FOOD MARKET(R) stores to APLUS(R)
throughout the Sun marketing area. Some ATLANTIC(R) locations will be
converted to ULTRA SERVICE CENTER(SM) stations. This strategy focuses
Sun's market presence and capitalizes on the individual strengths of the
SUNOCO(R), APLUS(R) and ULTRA SERVICE CENTER(SM) operations. The
conversion program, which will impact approximately 500 sites, commenced in
June 1993 and is expected to be completed by year-end 1995. At year-end
1993, 31 ATLANTIC(R) stations had been converted to SUNOCO(R), while 62
SUNOCO FOOD MARKET(R) stores had been converted to APLUS(R). Concurrently,
Sun began an image upgrade program which is expected to be completed in
1995 and will involve approximately 240 sites.
Sun sells fuels (principally gasoline) through 4,442 SUNOCO(R) and
ATLANTIC(R) service stations and convenience stores. Virtually all of
these stations are independently operated. The SUNOCO(R) outlets are
located largely within an 18-state area in the Northeast and northern
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Midwest, with the greatest concentration in Connecticut, New Jersey, New
York, Massachusetts, Pennsylvania, Rhode Island, Ohio and Michigan. The
ATLANTIC(R) outlets are located principally in New York and Pennsylvania.
In 1993, Sun acquired 23 gasoline retail locations principally in western
Massachusetts, and secured a twelve-year lease for 21 high-volume gas
stations on the Pennsylvania turnpike. Sun is also the sole service
station operator on all thirteen plazas on the New Jersey turnpike and
supplies 16 outlets on the New York Thruway. During 1993, Sun completed
its previously announced withdrawal from branded marketing in Oklahoma,
Missouri and Iowa and sold the gasoline marketing assets and operations of
its marketing subsidiary in North Carolina. Sun is continuing to
rationalize its retail gasoline outlets. This rationalization will result
in a modest decline in the number of outlets, but an increase in average
site throughput.
Sun's convenience stores are designed for high-volume sales of
gasoline and a broad range of other goods and services. Convenience stores
offer a second source of revenue. The number of convenience stores at
year-end 1993 totalled 543. In addition, the number of Sunoco ULTRA
SERVICE CENTER(SM) stations which provide total guaranteed car service, now
totals 380.
In 1993, excluding environmental capital outlays, Sun invested
approximately $85 million in support of its branded outlets and
distribution systems as part of ongoing efforts to upgrade all of its
facilities. During 1993, Sun installed CARDMATIC(SM), its state-of-the-art
credit card activated gasoline dispensing system, at approximately 100
high-volume service stations, bringing the total number of outlets offering
this system to 156. In connection with the brand conversion program, Sun
is accelerating the timing of certain environmental capital expenditures,
such as underground storage tank replacements and tank top upgrades so as
to minimize station downtime.
Sun also owns and operates 38 terminals located in the Northeast and
Midwest portions of the United States that primarily support its branded
marketing system. During 1993, Sun continued to streamline its proprietary
distribution systems by realigning accounts to optimize deliveries and by
consolidating terminal operations. Streamlining efforts have improved both
the productivity and cost effectiveness of these systems.
LUBRICANTS
Sun's Lubricants business is comprised of the manufacturing and
marketing of paraffinic lubricants and fuels by-products. Lubricants are
manufactured at the Tulsa and Puerto Rico refineries and marketed under the
SUNOCO(R) brand label, as well as formulated and packaged for sale by other
branded marketers under their labels.
Sun produces and markets a complete line of automotive and industrial
lubricants, waxes and aromatic extracts. These lubricants are marketed
directly to end-users and, through distributors, to a wide variety of
domestic and foreign customers. Sun has lube service centers located in
the Marcus Hook and Tulsa refineries. These centers, supplied with base
oils from the Puerto Rico and Tulsa refineries, blend and package
lubricants for sale by Sun and for sale by other branded marketers under
their labels.
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Base lube oils manufactured by Sun are also sold to domestic or
international third parties who manufacture their own finished automotive
and industrial lubricants. In addition, Sun sells a line of specialty lube
products such as horticultural and agricultural oils, aromatic and
paraffinic rubber oils, paper defoamers, asphalt recycling extracts, ink
oils, textile oils and finished waxes. Sun's horticultural spray oil,
SUNSPRAY(R) ULTRA-FINE(R) Horticultural Spray Oil, is expected to be
available to retail customers in the spring of 1994.
Sales of lubricant products totalled 16.9 thousand barrels daily in
1993 versus 17.4 thousand barrels daily in 1992. Total fuels by-products
sold to third parties from the Tulsa and Puerto Rico refineries were 85.3
thousand barrels daily in 1993 compared to 109.7 thousand barrels daily in
1992.
Sun's Tulsa refinery runs a light, low-sulfur crude slate while the
Puerto Rico refinery is able to process heavier, higher sulfur crudes. As
of December 31, 1993, these two lubricants refineries had a paraffinic
lubricant manufacturing capacity of 16.3 thousand barrels daily and a total
crude unit processing capacity of 170.0 thousand barrels daily.
In late 1992, Sun reconfigured the Tulsa refinery to place a greater
emphasis on the production of lubricants. As a result, fuels production
capacity was reduced from 77 thousand barrels daily to 45 thousand barrels
daily at this facility. Lubricants production at the Tulsa refinery now
also results in approximately 32 thousand barrels daily of "lubes
extracted" feedstock. These intermediate streams are transported to the
Toledo refinery for further processing or are sold to third parties.
Benefits attributable to this reconfiguration include a reduction in the
capital investment needed at the Tulsa refinery in order to comply with the
Clean Air Act, lower refinery operating expenses and a reduction in the
impact of fuels margins on the Tulsa refinery's profitability.
In the first quarter of 1993, Sun also completed the modification of
its Puerto Rico refinery to provide greater feedstock processing
flexibility. This modification has allowed the refinery to optimize
feedstock selection between crude oil and intermediate feedstocks depending
upon their relative profitability. The use of alternative feedstocks can
result in the production of reduced levels of high-sulfur residual fuels
and other wholesale fuels products when warranted by market conditions. In
addition, during the third quarter of 1993, Sun modernized its Puerto Rico
refinery's crude fractionalization facilities which has enabled an
additional upgrading of product yields.
CHEMICALS
Sun's Chemicals business consists of the manufacturing, distribution
and marketing of base and intermediate commodity petrochemicals, primarily
light olefins (ethylene and propylene) and aromatics (benzene, toluene and
xylenes). Petrochemicals are manufactured at Sun's Marcus Hook,
Philadelphia and Toledo refineries and at an ethylene and ethylene oxide
facility at Brandenburg, Kentucky that was purchased from the Olin
Corporation in 1992.
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Sun's petrochemical products are distributed and sold on a worldwide
basis. The majority of these sales are to manufacturers of intermediate
products that are used in the production of rubber, plastics, detergents,
agricultural chemicals and fibers. Significant volumes are also marketed
to the solvents and fuels industries. During 1993, approximately 45
percent of Sun's petrochemical sales volumes were aromatics-related,
another 44 percent were olefin-related and the balance was composed of
other products such as carbon dioxide and sulfur. Overall, approximately
10 percent of Sun's petrochemical sales were made to customers outside the
United States during 1993.
The ongoing development of Sun's Chemicals business continued during
1993. A joint venture marketing arrangement with Suncor that commenced in
1992 completed its first full year of operation. Also, in 1993, the first
full year of operation of the Brandenburg ethylene/ethylene oxide facility
was completed. Olin continues to operate the unit and purchase the
ethylene oxide it needs for its derivative businesses under a long-term
arrangement with Sun. This acquisition has doubled Sun's ethylene oxide
production capacity to over 200 million pounds per year, providing
feedstock supply synergies between the Marcus Hook and Brandenburg
facilities and a stable source of product for Sun's customers. In
addition, during 1992, Sun became a one-third partner in Belvieu
Environmental Fuels ("BEF"), a joint venture formed for the purpose of
constructing, owning and operating an MTBE facility in Mont Belvieu, TX.
The plant, which has a designed capacity of 12,600 barrels daily, is
presently under construction and is expected to begin production in mid-
1994. Sun has contracted to off-take all of the MTBE production from the
BEF facility. MTBE from BEF will provide the majority of Sun's oxygenate
supply as part of its overall effort to meet the Clean Air Act's
reformulated fuel requirements. For additional information concerning
Sun's participation in this joint venture, see Note 14 to the consolidated
financial statements.
The Chemicals business is also in the process of expanding its benzene
extraction capacity by 60 million gallons per year and constructing a 34-
million gallon per year cyclohexane plant at its Marcus Hook refinery.
These projects will enable Sun to enhance its existing benzene extraction
capability to help comply with mandated 1995 reformulated fuel requirements
for gasoline by permitting Sun to extract benzene from gasoline streams
from its Philadelphia refinery or from third parties. Benzene will be sold
or further upgraded into cyclohexane, the majority of which will be sold to
a major chemical purchaser under a contract to meet 100 percent of its
requirements. These projects are expected to be completed and operational
by the fourth quarter of 1994.
LOGISTICS
Sun's Logistics business consists of pipeline transportation of crude
oil and refined petroleum products to fifteen states in the eastern half of
the United States and petroleum terminalling operations in Nederland, TX.
These operations are conducted by Sun Pipe Line Company, Mid-Continent Pipe
Line Company, Sun Pipeline Services Co., Atlantic Pipeline Corp., and Sun
Oil Line Company of Michigan, all of which are wholly owned subsidiaries of
Sun. In addition, Sun owns equity interests in the Mid-Valley Pipeline
Company (55.3%), West Texas Gulf Pipe Line Company (17.3%), Inland
Corporation (10%) and Explorer Pipeline Company (9.4%) systems.
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The pipelines are principally common carriers and, as such, are
regulated by the Federal Energy Regulatory Commission for interstate
movements and by local regulatory agencies for intrastate movements. The
tariff rates charged, while regulated by the governing regulatory body, are
based upon competition from other pipelines or alternate modes of
transportation.
Sun's crude oil systems, concentrated in the Midwest, transport crude
oil gathered in Oklahoma, Texas and Louisiana (as well as foreign crude oil
from the Gulf Coast and Canada) to refiners or to local trade points. The
refined product systems, primarily in the Northeast, transport gasoline,
jet fuel, diesel fuel, home heating oil and other products to customers
ranging from Sun's Fuels businesses to integrated petroleum companies,
independent marketers and distributors. In February 1993, Sun acquired a
126-mile crude oil pipeline operating from Marysville, MI to Toledo, OH.
This pipeline provides midwestern refineries, including Sun's Toledo
refinery, access to Canadian crude oil. In particular, this pipeline system
provides Sun's Toledo refinery access to Suncor's synthetic crude oil. In
December 1993, Sun sold a 300-mile refined products pipeline system
operating from Duncan, OK to Drumright, OK and Fort Smith, AR. At December
31, 1993, Sun had an equity interest in 5,579 miles of crude oil pipelines
and 4,303 miles of refined product pipelines in the United States. In
1993, crude oil and refined product shipments in the United States,
including Sun's share of shipments in which it had an ownership interest,
totalled 50.4 and 30.7 billions of barrel miles, respectively, as compared
to 48.7 and 28.8 billions of barrel miles in 1992.
In 1993, Sun finalized the right of way work on its 19-mile inter-
refinery pipeline project which will connect Sun's Marcus Hook and
Philadelphia refineries. This project is expected to be completed by early
1995. It will provide synergies in making reformulated gasoline by
enabling gasoline component streams from the Philadelphia refinery to move
via pipeline to the Marcus Hook refinery for benzene extraction.
Sun's Nederland, TX terminal provides in excess of ten million barrels
of storage and provides terminalling capacity exceeding one million barrels
per day of throughput. Its Gulf Coast location provides local and
midwestern refiners access to foreign crude oil. The facility is also a
key link in the distribution system for United States government purchases
and sales of crude oil for the Strategic Petroleum Reserve storage
facilities in Texas and Louisiana.
SUPPLY AND DISTRIBUTION
A critical element of Sun's success is its ability to obtain the
proper mix and quality of crude oil, feedstocks and refined products using
both North American and worldwide markets. Sun's crude oil requirements
during 1993 were met largely through purchases from various foreign
national oil companies and traders. Crude oil supplied from foreign
sources represented 75 percent of Sun's domestic crude oil requirements in
1993. Despite periodic market disturbances, there is an ample supply of
crude oil available to meet worldwide refining needs, and Sun has been able
to readily supply its refineries with the proper mix and quality of crude
oils without disruption. The Marcus Hook, Philadelphia and Puerto Rico
refineries process foreign crude oils, while Sun's Tulsa refinery processes
domestic crude oil. The Toledo refinery runs domestic, Canadian and
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foreign crudes. Supplies of feedstocks and refined products also have been
sufficient to meet Sun's needs. Sun's refined product prices are generally
determined by both worldwide and regional supply and demand, as well as by
crude oil prices. The Company continually assesses the market forces
affecting supply and demand in the geographic areas in which it operates.
Feedstock supply and refined product transportation systems include:
four ocean-going tankers, a fleet of coastal distribution tankers, tugs and
barges, and a crude oil trucking operation. Sun supplements its own fleet
with charters that accounted for the majority of its marine transportation
requirements during 1993. Sun has implemented an extensive vessel
inspection review and evaluation program to assure appropriate quality of
the vessels chartered into Sun service. The crude oil trucking operation
supports Sun's crude oil acquisitions and pipeline operations throughout
the southwestern United States, primarily in Oklahoma and Texas.
Sun's supply and distribution operations have emphasized prevention of
oil spills. In support of this effort, in 1991, Sun joined the Marine
Preservation Association ("MPA"), a petroleum industry consortium formed to
fund regional response centers to handle oil spills on United States
waters. Sun funded the consortium with $5 million during 1993 and expects
to fund an additional $13 million by 1995. In addition to the MPA, Sun is
an active member of several local cooperatives formed to respond to oil
spills in specific geographic locations.
For data on refinery input, products manufactured, refined product
sales, the number of gasoline outlets, throughput per direct outlet, supply
and distribution, net sources of crude oil, inventories and petroleum
transportation operations in the United States for the five-year period
ended December 31, 1993, see pages 63 through 66 in the Company's 1993
Annual Report to Shareholders.
INTERNATIONAL EXPLORATION AND PRODUCTION
Sun's exploration and production operations outside North America are
conducted through Sun Oil Britain Limited and its affiliates. In October
1992, Sun announced that it was withdrawing from exploration activities
outside of Canada and focusing its international production and development
activities primarily in the United Kingdom sector of the North Sea. The
withdrawal from exploration activities internationally has enabled Sun to
enhance its operating profits in the near term, to reduce significantly its
investment risk profile, and to position itself to make investments in
currently producing properties and near-term development projects in the
future if financially attractive opportunities are identified.
As part of this plan, during 1993, Sun completed essentially all of
its remaining exploration commitments, closed all exploration offices and
completed the disposition of certain exploration properties located
principally in the U.K. North Sea. At December 31, 1993, Sun retained
exploration interests in only eight licenses in three countries: five in
the United Kingdom sector of the North Sea; one in Thailand; and two in
Algeria.
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Sun's international production strategy focuses on the production of
existing proved reserves and on the acquisition of currently producing or
near-term development assets principally in the U.K. North Sea. This
strategy is intended to enable the business to sustain near-term
performance while providing sustainable growth in the future as development
projects mature.
During 1993, Sun's net production outside North America averaged 27.2
thousand barrels daily of crude oil and condensate and 56 million cubic
feet daily of natural gas compared to 1992 production of 42.1 thousand
barrels daily of crude oil and condensate and 46 million cubic feet daily
of natural gas. The decrease in crude oil production volumes was largely
due to the April 1993 sale of producing properties located in Dubai.
Results of operations from these properties were not significant.
In Colombia, additional appraisal of the currently producing
Purificacion field continues. One appraisal well was drilled during 1993
and an additional well is planned in early 1994. An early production
system was implemented at this field during the second quarter of 1993,
resulting in crude oil production of 4 thousand gross barrels daily during
the remainder of 1993. Installation of full production facilities should
enable production to increase to 6 thousand gross barrels daily in 1994.
Sun has a 13.3 percent interest in this field.
During 1993, Sun also acquired additional oil producing interests in
the Balmoral and Stirling fields in the U.K. North Sea increasing its
ownership interest in these fields from 52 and 37 percent to 59 and 55
percent, respectively. Sun added an estimated 2 million equivalent barrels
of proved reserves through this acquisition. In addition, during 1993, Sun
decided to retain its 5 percent interest in the Magnus field, which
previously had been targeted for divestment, as a result of favorable
changes in certain U.K. tax laws.
Sun's crude oil and natural gas production levels are not generally
affected by fluctuations in the prices received from these products. The
volumes produced are required to fulfill contractual agreements which
specify certain production levels independent of the prices received.
Sun sells its crude oil production in the worldwide crude oil market
where prices are affected by a wide variety of economic and political
factors. Sun's natural gas production, which consists of production from
the North Sea, is sold primarily to the British Gas Corporation. These
sales are seasonal in nature and are made pursuant to long-term contracts
which include annual price escalation clauses.
Outside North America, Sun had an estimated 31 million barrels of
proved reserves of crude oil, condensate and recoverable natural gas
liquids and an estimated 109 billion cubic feet of proved reserves of
natural gas as of December 31, 1993 compared to an estimated 77 million
barrels of crude oil, condensate and recoverable natural gas liquids and an
estimated 104 billion cubic feet of proved reserves of natural gas as of
December 31, 1992. The decrease in proved reserves of crude oil,
condensate and natural gas liquids was primarily attributable to the April
1993 sale of producing properties located in Dubai which contained
approximately 39 million barrels of crude oil reserves at the date of
disposition.
13
Additional information concerning Sun's International Exploration and
Production business is set forth on pages 67 through 74 in the Company's
1993 Annual Report to Shareholders.
CANADA (SUNCOR)
Suncor Inc. ("Suncor") is Sun's 55 percent owned, vertically
integrated Canadian petroleum subsidiary. Its operations consist of the
exploration, production and marketing of conventional crude oil and natural
gas, the production and marketing of synthetic crude oil from oil sands,
and petroleum refining and marketing.
EXPLORATION AND PRODUCTION
Suncor's conventional crude oil and natural gas exploration and
production activities are concentrated in western Canada, with increasing
emphasis on natural gas. During 1993, Suncor participated in the drilling
of 19 net exploratory wells of which 2 discovered crude oil, 8 discovered
natural gas and 9 were dry. Suncor's net production averaged 9.3 thousand
barrels daily of conventional crude oil and condensate and 116 million
cubic feet daily of natural gas in both 1993 and 1992.
During 1993, Suncor divested of properties that were identified in
1992 as not being part of its core operation. Such properties accounted
for approximately 6 and 12 percent, respectively, of Suncor's crude oil and
natural gas production volumes during 1992.
In 1993, Suncor's major development programs were located in the
central Alberta areas of Simonette and Medicine River and in Blueberry in
British Columbia. Development activities added proved producing reserves
of 74 billion net cubic feet of natural gas and 4 million net barrels of
crude oil and natural gas liquids during 1993.
Prices for Canadian crude oil generally reflect the worldwide crude
oil market and thus, are affected by a wide variety of economic and
political factors. There are currently no significant crude oil or natural
gas pricing or marketing restrictions in Canada. Regulatory authorities
have instructed the major pipelines and local distribution companies to
provide natural gas transportation on a nondiscriminatory basis.
Significant volumes of natural gas are now sold directly by producers into
a variety of North American markets.
As of December 31, 1993, Suncor had an estimated 34 million barrels of
proved reserves of crude oil, condensate and recoverable natural gas
liquids and an estimated 492 billion cubic feet of proved reserves of
natural gas, compared to an estimated 34 million barrels of proved reserves
of crude oil, condensate and recoverable natural gas liquids and an
estimated 475 billion cubic feet of proved reserves of natural gas as of
December 31, 1992.
Additional information concerning Suncor's exploration and production
business is set forth on pages 67 through 74 in the Company's 1993 Annual
Report to Shareholders.
14
OIL SANDS
Suncor produces synthetic crude oil by mining the Athabasca oil sands
and upgrading the extracted bitumen at its plant located near Fort McMurray
in northeastern Alberta. Since the commencement of operations in 1967, the
oil sands had been mined with large bucketwheel excavator systems and moved
to the extraction plant by conveyor systems. During 1993, as part of its
strategic initiatives announced in 1992, Suncor converted its method of
mining the oil sands to a more flexible and efficient truck-and-shovel
method.
Synthetic crude oil produced for shipment averaged 60.5 thousand
barrels daily in 1993, 58.5 thousand in 1992 and 60.6 thousand in 1991.
Suncor's average per barrel cost of production, which includes such
variable costs as royalties, was $13.99 in 1993, $17.95 in 1992 and $17.22
in 1991. During 1993, several new initiatives were undertaken to increase
production levels and to secure new markets which have enabled Suncor to
diversify its product mix. During a planned maintenance shutdown, upgrader
modifications were completed and production capability was increased to
68,000 barrels daily from 60,000 barrels daily. Intermediate products,
which require only partial upgrading and contain a higher sulfur content
than the plant's light, sweet blend, will be marketed on an ongoing basis.
This gives the plant flexibility to maintain production levels while
conducting partial maintenance shutdowns. Suncor continues efforts to
maintain consistently high levels of production. Equipment breakdowns and
failures at the oil sands operation from time to time cause partial or
complete loss of production due to the interdependence of the plant's
component systems. Severe climatic conditions such as extreme cold can
also cause reduced production. Under Sun's business interruption insurance
coverage, Suncor would bear at least the first $75 million of any loss
arising from a future insured incident at the oil sands operation.
Suncor's current operations are carried out on two leases covering a
total of seven thousand acres. As of December 31, 1993, these leases had
remaining reserves of 231 million barrels of proven synthetic crude oil.
A major portion of Suncor's synthetic crude oil production is used in
its refining operations at Sarnia, Ontario, and during 1993, totalled 41
percent. The remainder is either sold pursuant to a long-term contract to
an existing customer, or sold to others under year-to-year contracts or on
a spot basis.
In order to comply with new environmental emission standards, a joint
venture was formed in 1993 to evaluate the construction of a new utilities
plant that would meet the new standards. However, after further commercial
evaluation, it was decided that this option would not be pursued. Subject
to approval by Suncor's board of directors, management is planning instead
to equip its existing steam and electricity generating facilities in 1994
with sulfur recovery equipment and limestone scrubbing technology. The
scrubbing technology, to be utilized within the existing facility, will
allow Suncor to comply with the new standards. The technology will be added
to Suncor's existing boilers and is expected to cost approximately $155 to
$175 million over the next three years.
15
Site reclamation costs at the oil sands plant are estimated based upon
the reclamation plan submitted to the Province of Alberta. This plan
includes tailings ponds reclamation and all surface reclamation and
remediation at the site. The major component of the plan relates to the
tailings ponds. The current plan includes moving the fine tailings and
water in the four active ponds to a fifth pond designed for this purpose.
The aim of this fifth "wet pond" alternative is to reduce the volume of
solids and treat the water through biological means. Suncor is conducting
further testing on the "wet pond" and other alternatives to ensure that the
most cost-effective and environmentally acceptable reclamation plan is
followed. The viability and cost of other alternatives, which could be
more expensive, are being researched and evaluated on an ongoing basis.
Suncor is required to submit an update of its development and
reclamation plan with the Alberta government every five years, which can
result in changes to factors such as security requirements, the nature of
the plan itself and the timing of the work. The next plan is to be
submitted in 1994 for approval in 1995. With respect to the fine tailings
management component of the plan, in 1994 Suncor will make application for
a three-year extension to the plan to allow all parties to further study
and evaluate management options.
For data on oil sands proven reserves, synthetic crude oil production,
average price and net minable acreage for the five-year period ended
December 31, 1993, see page 75 in the Company's 1993 Annual Report to
Shareholders.
REFINING AND MARKETING
Suncor owns and operates one refinery which is located at Sarnia,
Ontario. This refinery had an economic crude unit processing capacity of
70 thousand barrels daily as of December 31, 1993. An alkylation unit,
capable of processing 6 thousand barrels daily, complements a petrochemical
plant for flexibility in gasoline, octane and chemical production.
Suncor's refining operation uses both synthetic and conventional crude
oil. In 1993, 69 percent of the crude oil processed at the Sarnia refinery
was synthetic crude oil compared with 65 percent in 1992. Of the synthetic
crude oil processed, 55 percent was from Suncor's oil sands plant
production in 1993 compared with 54 percent in 1992, with the balance
purchased from another producer under month-to-month contracts at market
prices. Conventional crude oil processed in Canadian refining operations
comes mainly from the production of Suncor and others in western Canada,
supplemented from time to time with crude oil from the United States which
is purchased or obtained in exchange for Canadian crude oil. Suncor
generally acquires its conventional crude oil on the Canadian spot market
or under contracts terminable on short notice.
Suncor's self-sufficiency ratio (net production of crude oil,
condensate and synthetic crude oil related to net input to crude units) was
105 percent in 1993 compared to 98 percent in 1992.
16
Suncor markets an extensive line of fuels and a variety of commodity
petrochemicals. Gasoline, distillates, jet fuel, residual fuel oil,
propane and asphalt are generally marketed under the SUNOCO(R) brand to
retail, commercial and industrial customers primarily in Ontario and
Quebec; however, Suncor also supplies these products to independent
marketers. In addition, Suncor markets toluene, mixed xylenes and
orthoxylenes in Canada, the United States and Europe through a
petrochemicals marketing partnership with Sun's aromatics-based chemicals
business at the Toledo refinery. Suncor's refined product sales volumes
were 81.9 thousand barrels daily in 1993 compared to 83.0 thousand barrels
daily in 1992.
During 1993, Suncor closed 46 low-volume retail locations as part of a
continuing strategy to increase average site throughput of its retail
network. This action was undertaken partly in recognition of the
industry's overcapacity in the Canadian downstream marketplace. Canadian
retail sales of gasoline, primarily under the SUNOCO(R) brand, are made
through 606 retail gasoline outlets, 351 of which are operated by
independent dealers. In 1993, Suncor announced a number of strategic
initiatives in its refining and marketing business designed to rationalize
and upgrade its service station portfolio and lower overhead costs while
maintaining retail volumes and market share. While the total number of
Suncor's retail sites will decrease as a result of this initiative,
management believes that total gasoline volumes sold will remain at current
levels due to exclusive supply agreements with joint venture partners and
higher overall retail network throughput.
Suncor owns and operates petroleum transportation and terminalling
assets in support of its refining and marketing activities. Such assets
include storage facilities and bulk distribution plants in Ontario and
Quebec and a 55-percent interest in a refined product pipeline between
Sarnia and Toronto. Suncor's petroleum transportation and terminalling
assets are sufficient for its current and foreseeable needs.
For data on Suncor's refinery input, products manufactured, refined
product sales, the number of gasoline outlets, throughput per outlet,
supply and distribution, net sources of crude oil, inventories and
petroleum transportation operations in Canada for the five-year period
ended December 31, 1993, see pages 63 through 66 in the Company's 1993
Annual Report to Shareholders.
COAL
Sun's coal mining and coke manufacturing operations are conducted by
Sun Coal Company and its affiliates. In January 1993, Sun decided to sell
its coal and cokemaking assets. In connection with this decision, Sun
completed the sale of both its western U.S. bituminous and subbituminous
coal operations during 1993. Sun continues to actively pursue the sale of
its eastern U.S. coal and cokemaking operations. As a result of the
decision to sell the coal business, Sun's coal mining and cokemaking
operations have been classified as operations held for sale in Sun's
consolidated financial statements.
17
Sun had 251 million tons of estimated coal reserves classified as
proven and probable at December 31, 1993 compared to 701 million tons at
December 31, 1992. Of the reserves at December 31, 1993, 47 percent were
metallurgical coal located in Virginia and 53 percent were bituminous steam
coal located in Kentucky. Sun's total coal production in 1993 was 12.9
million tons compared to 22.7 million tons in 1992.
In 1993, 44 percent of Sun's metallurgical coal production was
converted into coke at Sun facilities, 47 percent was sold under contract
to two customers and 9 percent was sold in spot transactions. Sun's
principal market for both metallurgical coal and coke is the domestic steel
industry. During 1993, 96 percent of Sun's coke sales were made under a
long-term contract to a single customer with the remainder sold in spot
transactions. Approximately 61 percent of Sun's bituminous steam coal
sales was under long-term contracts, with the remainder sold in spot
transactions. Sun's bituminous coal and coke sales contracts generally
provide for the periodic adjustment of price to reflect the changing costs
of labor, equipment and services.
Sun owns the Jewell/Thompson non-recovery cokemaking technology and
its related patents. The Jewell/Thompson technology produces high quality
coke and is environmentally superior to the by-product technology currently
used by most coke producers. Sun utilizes the Jewell/Thompson technology
in all of its cokemaking facilities.
Sun is subject to various environmental and other regulations setting
forth coke oven emission standards, and mining and reclamation standards
for all aspects of surface mining, as well as certain aspects of deep
mining. During 1993, 16 percent of Sun's bituminous coal production came
from surface mines.
Further information on Sun's proven and probable coal reserves, proven
reserves, production, sales, average price and net acreage is set forth on
page 75 in the Company's 1993 Annual Report to Shareholders.
LEASING
Sun's leasing and secured lending portfolio is managed through Helios
Capital Corporation and its subsidiaries (collectively "HCC") and consists
of investments in leases and secured loans involving approximately 20
businesses throughout the United States in a broad spectrum of industries
and equipment, including aircraft, railroad rolling stock, and various
other transportation and manufacturing equipment.
Sun has ceased making new investments in leases and secured loans, and
since 1990, has been liquidating the remaining HCC portfolio in an orderly
manner through scheduled cash recoveries of investments and through
divestment opportunities as they arise. The cash generated from
liquidating this portfolio will be used largely to satisfy HCC's financing
obligations. During 1993, HCC's portfolio was reduced by $58 million. HCC
had investments in leveraged, direct financing and sales-type leases and
secured loans at December 31, 1993 of $107 million, of which 75 percent
were leases and 25 percent were secured loans.
18
REAL ESTATE
Sun's real estate business is conducted through Radnor Corporation and
its subsidiaries (collectively "Radnor"). Radnor has a diversified
portfolio of real estate properties which were developed for investment or
immediate sale. Real estate developed for investment consists primarily of
office buildings, shopping centers and hotels. Projects developed for
immediate sale include single-family homes, condominiums, residential land
and business parks. The real estate portfolio is geographically
diversified as well, with projects in 14 states as of December 31, 1993.
In October 1991, the Company adopted a plan, which management is
actively pursuing, to dispose of its real estate operations through a
program of controlled disposition. As a result of the decision to sell the
real estate business, Sun's real estate operations have been classified as
operations held for sale in Sun's consolidated financial statements.
Since adoption of the disposition plan in October 1991, Radnor
divested 25 commercial properties and completed 13 housing and land
developments and reduced its total assets and debt by $476 and $438
million, respectively. Divestment activities in 1993 included Radnor's
sale of four office projects located in North Carolina, Georgia and
Arizona. This divestment, which had originally included a contract for the
sale of three Pennsylvania properties, closed in December 1993. The
Pennsylvania properties continue to be marketed for sale, along with
Radnor's remaining portfolio.
The following table sets forth Radnor's real estate portfolio by
property type and percent of total portfolio book value as of December 31,
1993:
Percent of
Property Type Portfolio
------------- ----------
Real Estate Held for Investment:
Office Buildings............................ 42
Shopping Centers............................ 20
Hotels...................................... 8
Other....................................... 4
Projects Developed for Immediate Sale......... 26
---
100
===
For additional information regarding Sun's real estate operations held
for sale, see Note 2 in the Consolidated Financial Statements in the
Company's 1993 Annual Report to Shareholders.
COMPETITION
Refining and marketing has generally become more competitive as demand
for gasoline, the primary refined product manufactured and sold in the
United States, has been relatively weak, while conversion capacity has been
expanding. The northeastern United States, Sun's principal geographic area
for branded fuels marketing, has been especially affected by the
recessionary U.S. economy and as a result, the market has experienced a
downturn in demand, heightening competition among marketers of petroleum
19
products. However, Sun believes that it is in a position to compete
effectively in the northeastern U.S. This region is a net gasoline
importing market, and marketers like Sun, whose refining operations are
located here, are impacted to a lesser extent by the costs of
transportation into this market.
Oil and gas exploration and production and coal mining operations are
also highly competitive. Many energy companies, as well as medium to small
size independent concerns are bidders for desirable exploration acreage and
oil, gas and coal properties, as well as the equipment and labor required
to operate such properties. Sun essentially completed its withdrawal from
oil and gas exploration activities outside of Canada during 1993 and is
actively pursuing the sale of its coal operations.
The availability of a ready market for Sun's refined products, as well
as its oil and gas and coal production, depends on numerous external
factors. Among other things, these factors include: the level of consumer
demand; the extent of industry production of oil and gas and coal, and
manufacture of refined products; the import levels of foreign refined
products; the cost and availability of alternative fuels; the cost and
proximity of refineries, pipelines and other transportation facilities that
support the retail gasoline marketing infrastructure; regulation by state,
federal, local and foreign authorities including those imposed by or
resulting from compliance with applicable environmental laws.
In addition, Sun's leasing business and real estate operations held
for sale operate in fragmented markets in which there are numerous
participants resulting in highly competitive environments.
RESEARCH AND DEVELOPMENT
In recent years, Sun's research and development activities have
focused on applied research, process and product development, and
engineering and technical services related to fuels, lubricants and
chemicals. Sun spent $9, $12 and $15 million on research and development
activities in 1993, 1992 and 1991, respectively. As of December 31, 1993,
approximately 150 scientists, engineers, technicians and support personnel
were employed in these activities. Sun owns or has made application for
numerous patents in the U.S. and abroad.
EMPLOYEES
As of December 31, 1993, Sun had approximately 14,500 employees
compared to approximately 14,200 employees as of December 31, 1992. The
above amounts exclude employees from real estate operations held for sale
totalling 487 in 1993 and 732 in 1992 and also excludes employees from coal
operations held for sale totalling 1,318 in 1993 and 1,719 in 1992.
Approximately 29 percent of Sun's employees were covered by 46 collective
bargaining agreements as of December 31, 1993. The collective bargaining
agreements have various terms and dates of expiration. In management's
opinion, Sun's relationship with its employees is generally satisfactory.
20
ENVIRONMENTAL MATTERS
As the first Fortune 500(R) Company to endorse the Coalition for
Environmentally Responsible Economies ("CERES") principles, Sun has
continued to focus on environmental requirements and practices. Sun is
subject to numerous federal, state, local and foreign laws which regulate
the discharge of materials into, or otherwise relate to the protection of,
the environment. These laws have required, and are expected to continue to
require, Sun to make significant expenditures of both a capital and expense
nature. As these laws evolve, it is expected that they will continue to
have a significant impact on the conduct of Sun's operations.
Sun has funded its environmental expenditures through cash generated
by operating activities. The following table summarizes Sun's expenditures
for environmental projects and compliance activities (in millions of
dollars):
1993 1992
---- ----
Pollution abatement capital*................. $123 $ 75
Remediation and reclamation.................. 53 48
Operations, maintenance
and administration......................... 108 116
---- ----
$284 $239
==== ====
- -----------
*Capital expenditures for pollution abatement are expected to approximate
$192 and $209 million in 1994 and 1995, respectively.
Certain environmental laws subject Sun to possible obligations to
remove or mitigate the effects on the environment of the disposal or
release of certain wastes and petroleum substances. Included are
remediation at Sun's refineries, service stations, terminals and pipeline
and truck transportation facilities, and third-party or formerly owned
sites at which contaminants generated by Sun may be located. Several of
the more significant federal laws applicable to the Company's operations
include the Clean Air Act, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") and the Solid Waste Disposal Act,
as amended by the Resource Conservation and Recovery Act ("RCRA").
Additionally, various state and local governments have adopted or are
considering the adoption of similar laws and regulations.
The Clean Air Act establishes stringent criteria for regulating air
toxics at operating facilities by mandating major reductions in allowable
emissions and establishing a more comprehensive list of substances deemed
to be air toxics. The Clean Air Act requires refiners to market cleaner-
burning gasoline that reduces emissions of certain toxics and conventional
pollutants. Compliance with Clean Air Act requirements necessitates
significant alterations to the composition of gasoline sold in most of
Sun's northeastern U.S. branded marketing area by reducing the maximum
allowable benzene content, reducing summertime RVP and increasing the
minimum oxygenate content. It is expected that all refiners will not be
willing or able to make the significant capital expenditures necessary to
21
produce cleaner-burning reformulated fuels and that a rationalization of
U.S. refining capacity will occur. Despite uncertainties regarding the
impact on the future profitability of Sun's domestic petroleum businesses
of the Clean Air Act, as amended by additional regulations, management of
Sun believes these businesses are well positioned to meet the air toxics
and reformulated fuel requirements under present regulations as they are
phased in over the next few years.
Two other federal laws, CERCLA and RCRA, and related state laws
subject the Company to the potential obligation to remove or mitigate the
environmental effects of the disposal or release of certain pollutants at
various sites. Under CERCLA, Sun is subject to potential joint and several
liability for the costs of remediation at sites at which it has been
identified as a "potentially responsible party" ("PRP"). As of December
31, 1993, Sun had been named as a PRP at 40 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 its
facilities and will be required to be undertaken by the Company at various
of its other facilities. The cost of such remedial actions could be
significant but is expected to be incurred over an extended period of time.
Sun establishes accruals related to environmental remediation
activities for work at identified sites, including those under CERCLA and
RCRA and related state laws, where an assessment has indicated that cleanup
costs are probable and reasonably estimable. Such accruals are based on
currently available facts, estimated timing of remedial actions and related
inflation assumptions, existing technology and presently enacted laws and
regulations. Sun's international production and Canadian operations are
subject to less demanding environmental regulatory requirements than its
U.S. operations and these less stringent requirements are considered in
determining the accruals for those locations. Sun's accruals reflect the
Company's philosophy of aggressively managing remediation costs to ensure
the most cost-effective method of protecting the health, safety and
environment of affected communities. Sun's accrued liability for
environmental remediation was $259 and $258 million at December 31, 1993
and 1992, respectively. Sun also accrues estimated dismantlement,
restoration, reclamation and abandonment costs at its oil and gas
exploration and production and oil sands mining operations through a charge
against income primarily on a units of production basis. The accrued
liability for these activities, which are conducted primarily by Suncor,
Sun's 55 percent owned subsidiary, totalled $119 and $118 million at
December 31, 1993 and 1992, respectively. Pretax charges against income
for environmental remediation and reclamation totalled $45, $62 and $159
million for 1993, 1992 and 1991, respectively. Claims for recovery of
environmental liabilities that are probable of realization totalled $17
million at December 31, 1993 and are included in deferred charges and other
assets in the consolidated balance sheet.
Total future costs for environmental remediation activities will
depend upon, among other things, the identification of additional sites,
the determination of the extent of the contamination of each site, the
timing and nature of required remedial actions, the technology available
22
and needed to meet the various existing requirements, the nature and extent
of future environmental laws, inflation rates and the determination of
Sun's liability at multi-party sites, if any, in light of the number,
participation level and financial viability of other parties.
Management believes that the overall costs for environmental
activities are likely to be significant but are expected to be incurred
over an extended period of time and to be funded from Sun's net cash flow
from operating activities. Although potentially significant with respect
to results of operations, cash flow or liquidity for any one quarter or
year, management believes that such costs, including those required by
CERCLA and RCRA, will not have a material impact on Sun's consolidated
financial position or, over an extended period of time, on Sun's cash flow
or liquidity.
OTHER
Sun's financial condition and business operations are affected from
time to time by domestic and foreign political developments and laws and
regulations which relate to such matters as production, taxes, property,
product specifications, imports, pricing and environmental controls. Sun
makes no representations as to future events and developments which could
affect its operations and financial condition. Furthermore, Sun's
businesses and financial condition could be effected by, among other
things, the state of the U.S. economy, competition, future price changes or
controls, material and labor costs, legislation, labor conditions, new
regulations, tariffs, embargoes, armed conflicts, foreign exchange
restrictions and changes in exchange rates.
ITEM 3. LEGAL PROCEEDINGS
In April 1993, Sun Company, Inc. (R&M) ("Sun (R&M)"), a wholly owned
subsidiary of the Company, was advised by the Department of Justice,
Environmental Enforcement Division ("DOJ") and the United States
Environmental Protection Agency ("EPA") that they contemplated the filing
of a lawsuit against Sun, seeking civil penalties and certain remedial
action regarding certain alleged violations of federal and state air
emissions regulations at its Philadelphia refinery. Sun (R&M) has
participated in discussions with the DOJ and EPA in an effort to review and
settle these allegations. A settlement in principle has been reached, and
it is anticipated that any negotiated settlement will involve the payment
of a civil fine in excess of $100,000 and an additional obligation to
undertake certain remedial activities at the facility.
Sun and several other energy companies have been negotiating with the
New York Department of Environmental Compliance ("NY DEC") regarding the
terms of certain environmental remediation which the NY DEC is requiring to
be conducted at certain facilities owned by Sun and other energy companies
in Syracuse, NY. The companies and the NY DEC are discussing the
provisions of the draft consent agreement. However, should these
negotiations prove unsuccessful, the NY DEC has indicated that it will
issue administrative action against Sun and the other energy companies to
seek to compel environmental remediation at the facilities, and to seek
civil penalties in excess of $100,000.
23
On March 17, 1992, Region III of the EPA issued a Compliance Order to
Sun (R&M) as a result of Sun (R&M)'s inability to meet the deadline for
implementing required marine vapor controls pertaining to the loading of
benzene at its refinery in Marcus Hook, Pennsylvania. The deadline was
missed primarily because of the need to resolve several related matters
with the U.S. Coast Guard. Although a civil settlement in principle was
reached with EPA whereby Sun (R&M) expects to make a payment in excess of
$100,000, the negotiated consent decree has not yet been signed by the
government, pending the resolution of certain issues involving the testing
and monitoring procedures related to Sun's vapor recovery system.
On July 7, 1992, the EPA issued a Complaint and Compliance Order to
Cordero Mining Co. ("Cordero"), then a wholly owned subsidiary of the
Company, alleging violations of the Resource Conservation and Recovery Act
with regard to the handling and disposal of spent solvents. The EPA had
sought a civil penalty in excess of $100,000 from Cordero. On June 4,
1993, the Company completed the divestment of all of the common stock of
Cordero.
Many other legal and administrative proceedings are pending against
Sun. Although the ultimate outcome of these proceedings cannot be
ascertained at this time, it is reasonably possible that some of them could
be resolved unfavorably to Sun. Management of Sun believes that any
liabilities which may arise from such proceedings, including those
discussed above, would not be material in relation to the consolidated
financial position of Sun at December 31, 1993.
24
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF SUN COMPANY, INC.
NAME, AGE AND PRESENT
POSITION WITH
SUN COMPANY, INC.
----------------------
BUSINESS EXPERIENCE DURING
PAST FIVE YEARS
--------------------------
Robert M. Aiken, Jr., 51
Senior Vice President
and Chief Financial
Officer
Mr. Aiken was named to his present
position in May 1992. From September
1990 until May 1992, he held the
position of Senior Vice President,
Finance, and from April 1979 to
September 1990, he was Comptroller.
Robert H. Campbell, 56
Chairman of the Board,
Chief Executive Officer
and President
Mr. Campbell was elected Chairman of the
Board in May 1992, Chief Executive
Officer in September 1991 and President
and Chief Operating Officer in February
1991. From November 1988 to February
1991, he was Executive Vice President.
He has been a Director since November
1988.
Richard L. Cartlidge, 39
Comptroller
Mr. Cartlidge has been in his present
position since October 1991. From July
1989 to October 1991, he was Controller
of Sun's domestic refining and marketing
subsidiary, and from 1988 to July 1989,
Manager, Corporate Financial Analysis.
Jack L. Foltz, 58
Vice President
and General Counsel
Mr. Foltz has been in his present
position since October 1992, and from
December 1991 to October 1992, he was
Assistant General Counsel, Refining and
Marketing. From December 1989 to
December 1991, he was Vice President and
General Counsel, Sun Refining and
Marketing Company. From 1985 to
December 1989, he was Assistant General
Counsel, Sun Company, Inc.
25
NAME, AGE AND PRESENT
POSITION WITH
SUN COMPANY, INC.
----------------------
BUSINESS EXPERIENCE DURING
PAST FIVE YEARS
--------------------------
David E. Knoll, 50
Senior Vice President
Marketing and Logistics
Mr. Knoll has been in his present
position since October 1992 and from
October 1991 to October 1992, he was
Group Vice President, Refining and
Marketing. From November 1988 to
October 1991, he was President, Sun
Refining and Marketing Company.
Harwood S. Roe, Jr., 49
Senior Vice President
Operations
Mr. Roe has been in his present position
since October 1992. From 1991 to
October 1992, he was Vice President,
Operations and from 1988 to 1991, he was
Vice President, Refining of Sun's
domestic refining and marketing
subsidiary.
Malcolm I. Ruddock, 51
Treasurer
Mr. Ruddock has been in his present
position since July 1989. He was
Director, Finance from November 1988 to
July 1989.
Sheldon L. Thompson, 55
Senior Vice President
and Chief Administrative
Officer
Mr. Thompson has been in his present
position since October 1992. Prior to
assuming this position, he served in
various capacities within Sun's domestic
refining and marketing subsidiary: from
1991 to October 1992, he was its Vice
President for Chemicals, Lubricants and
Technology; from 1989 to 1991, Vice
President for Chemicals and Technology;
and from 1988 to 1989, Vice President
for Chemicals.
Robert H. Writz, Jr., 51
Senior Vice President
Other Businesses
Mr. Writz has been in his present
position since October 1992. From
October 1991 to October 1992, he was
Group Vice President, Additional
Businesses. From February 1991 to
October 1991, he was Vice President,
Business Development. From 1987 to
February 1991, he was Executive Vice
President, Resources Group, of Suncor
Inc., a subsidiary.
26
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market for Sun Company, Inc. Stock and Related Security Holder Matters
on page 77 of the Company's 1993 Annual Report to Shareholders is
incorporated herein by reference. The market exchanges on which the
Company's stock is traded are listed on the cover page of this Annual
Report on Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated herein by
reference to the Selected Financial Data on page 25 of the Company's 1993
Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is incorporated herein by
reference to pages 26-40 in the Company's 1993 Annual Report to
Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following information in the Company's 1993 Annual Report to
Shareholders is incorporated herein by reference: the Consolidated
Financial Statements on pages 41-44; the Notes to Consolidated Financial
Statements on pages 45-61; the Report of Independent Accountants on page
62; and Supplemental Financial and Operating Information on pages 67-73
(excluding the sections on Exploration Expenses, Revenues Per Unit of Oil
and Gas Production and Average Net Oil and Gas Production) and 75-76.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information on directors required by this Item is incorporated
herein by reference to the Company's definitive Proxy Statement which will
be filed with the Securities and Exchange Commission ("SEC") within 120
days after December 31, 1993.
Information concerning the Company's executive officers appears in
Part I of this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by
reference to the Company's definitive Proxy Statement which will be filed
with the SEC within 120 days after December 31, 1993.
27
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by
reference to the Company's definitive Proxy Statement which will be filed
with the SEC within 120 days after December 31, 1993.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by
reference to the Company's definitive Proxy Statement which will be filed
with the SEC within 120 days after December 31, 1993.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
1. Consolidated Financial Statements:
The information appearing in the Company's 1993 Annual
Report to Shareholders as described in Item 8 is incorporated
herein by reference.
2. Financial Statement Schedules:
Page
----
Report of Independent Accountants.................. 33
Schedule V - Properties, Plants and Equipment..... 34
Schedule VI - Accumulated Depreciation, Depletion
and Amortization of Properties,
Plants and Equipment................. 35
Schedule VIII - Valuation Accounts................. 37
Schedule IX - Short-Term Borrowings................ 38
Schedule X - Supplementary Income Statement
Information.......................... 39
Other schedules are omitted because the required information
is shown elsewhere in this report, is not required or is not
applicable.
28
3. Exhibits:
3.(i) - Articles of Incorporation of Sun Company, Inc., as
restated and amended.
3.(ii) - Sun Company, Inc. Bylaws, as amended July 5, 1990
(incorporated by reference to Exhibit 3(b) of the
Form SE filed March 15, 1991).
4 - Instruments defining the rights of security holders
of long-term debt of the Company and its subsidiaries
are not being filed since the total amount of
securities authorized under each such instrument does
not exceed 10 percent of the total assets of the
Company and its subsidiaries on a consolidated basis.
The Company will provide the SEC a copy of any
instruments defining the rights of holders of long-
term debt of the Company and its subsidiaries upon
request.
10.1* - Long-Term Incentive Plan, as amended (incorporated by
reference to Exhibit 10(c) of the Form SE filed
March 15, 1989).
10.2* - Executive Retirement Plan, as amended September 6,
1991 (incorporated by reference to Exhibit 10(d) of
the Form SE filed March 13, 1992).
10.3* - Directors' Deferred Compensation Plan as amended and
restated, effective September 5, 1991 (incorporated
by reference to Exhibit 10.5 of the Form SE filed
March 11, 1993).
10.4* - Deferred Compensation Plan (incorporated by reference
to Exhibit 10(e) of the Form SE filed March 20, 1986,
File No. 1-6841).
10.5* - Pension Restoration Plan as amended and restated
effective January 1, 1991 and amended September 6,
1991 (incorporated by reference to Exhibit 10(g) of
the Form SE filed March 13, 1992).
10.6* - Special Executive Severance Plan (incorporated by
reference to Exhibit 10(g) of the Form SE filed
March 20, 1986, File No. 1-6841).
10.7* - Executive Incentive Plan, as amended and restated,
effective January 1, 1992 and revised November 5,
1992 (incorporated by reference to Exhibit 10.9 of
the Form SE filed March 11, 1993).
10.8* - Sun Company, Inc. Savings Restoration Plan
(incorporated by reference to Exhibit 10(j) of the
Company's Annual Report on Form 10-K, as amended, for
the fiscal year ended December 31, 1987, File No.
1-6841).
29
10.9* - Sun Company, Inc. Savings Restoration Plan II,
effective April 6, 1989 (incorporated by reference to
Exhibit 10(k) of the Company's Annual Report on
Form 10-K, as amended, for the fiscal year ended
December 31, 1989).
10.10* - Sun Company, Inc. Non-Employee Directors Retirement
Plan (incorporated by reference to Exhibit 10(k) of
the Company's Annual Report on Form 10-K, as amended,
for the fiscal year ended December 31, 1988, File No.
1-6841).
10.11* - Sun Company, Inc. Deferred Compensation and Benefits
Trust (incorporated by reference to Exhibit 10(l) of
the Form SE filed March 15, 1989).
10.12* - Sun Company, Inc. Retainer Stock Plan for Outside
Directors, as amended and restated effective April 1,
1992 (incorporated by reference to Exhibit 10.14 of
the Form SE filed March 11, 1993).
10.13* - Sun Company, Inc. Executive Long-Term Stock
Investment Plan, as amended November 1, 1993.
10.14* - Memorandum of Agreement between Alexander B.
Trowbridge and Sun Company, Inc. (incorporated by
reference to Exhibit 10.16 of the Form SE filed
March 11, 1993).
11 - Statements re Sun Company, Inc. and Subsidiaries
Computation of Per Share Earnings for the Years Ended
December 31, 1993, 1992 and 1991.
12 - Statement re Sun Company, Inc. and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges for
the Year Ended December 31, 1993.
13 - Sun Company, Inc. 1993 Annual Report to Shareholders
Financial Section.
21 - Subsidiaries of Sun Company, Inc.
23 - Consent of Independent Accountants.
24.1 - Power of Attorney executed by certain officers and
directors of Sun Company, Inc.
24.2 - Certified copy of the resolution authorizing certain
officers to sign on behalf of Sun Company, Inc.
- -----------
*These exhibits constitute the Executive Compensation Plans and
Arrangements of the Company.
30
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the
quarter ended December 1993.
A report on Form 8-K dated February 24, 1994 was filed to
disclose under Item 5, "Other Events," that Sun has signed a letter of
intent with Chevron U.S.A. Products Co. to purchase Chevron's 177,000-
barrel-a-day Philadelphia refinery plus Chevron's one-third interest
in a petroleum pipeline connecting the refinery to the New York
Harbor, for approximately $170 million, including inventory.
Note: Copies of each Exhibit to this Form 10-K are available upon
request, at $2 per copy.
31
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
SUN COMPANY, INC.
By s/ROBERT M. AIKEN, JR.
Robert M. Aiken, Jr.
Senior Vice President and Chief Financial Officer
Date March 3, 1994
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY OR ON BEHALF OF THE FOLLOWING PERSONS
ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED ON MARCH 3,
1994:
Signatures Titles
---------- ------
ROBERT M. AIKEN, JR.* Senior Vice President and Chief
--------------------- Financial Officer
Robert M. Aiken, Jr. (Principal Financial Officer)
ROBERT H. CAMPBELL* Chairman of the Board, Chief Executive
------------------- Officer, President and Director
Robert H. Campbell (Principal Executive Officer)
RAYMOND E. CARTLEDGE* Director
---------------------
Raymond E. Cartledge
RICHARD L. CARTLIDGE* Comptroller
--------------------- (Principal Accounting Officer)
Richard L. Cartlidge
ROBERT E. CAWTHORN* Director
-------------------
Robert E. Cawthorn
MARY J. EVANS* Director
--------------
Mary J. Evans
THOMAS P. GERRITY* Director
------------------
Thomas P. Gerrity
JAMES G. KAISER* Director
----------------
James G. Kaiser
THOMAS W. LANGFITT* Director
-------------------
Thomas W. Langfitt
32
R. ANDERSON PEW* Director
----------------
R. Anderson Pew
ALBERT E. PISCOPO* Director
------------------
Albert E. Piscopo
WILLIAM F. POUNDS* Director
------------------
William F. Pounds
B. RAY THOMPSON, JR.* Director
---------------------
B. Ray Thompson, Jr.
ALEXANDER B. TROWBRIDGE* Director
------------------------
Alexander B. Trowbridge
*By s/ROBERT M. AIKEN, JR. Individually and as Attorney-in-Fact
----------------------
Robert M. Aiken, Jr.
33
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors, Sun Company, Inc.:
Our report on the consolidated financial statements of Sun Company,
Inc. and its subsidiaries has been incorporated by reference in this
Form 10-K from page 62 of the Sun Company, Inc. 1993 Annual Report to
Shareholders. In connection with our audits of such financial statements,
we have also audited the related financial statement schedules listed in
the index on page 27 of this Form 10-K.
In our opinion, the financial statement schedules referred to above,
when considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information required
to be included therein.
Coopers & Lybrand
2400 Eleven Penn Center
Philadelphia, PA 19103
February 15, 1994
34
SUN COMPANY, INC. AND SUBSIDIARIES
SCHEDULE V--PROPERTIES, PLANTS AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(MILLIONS OF DOLLARS)
OTHER BALANCE
CHANGES AT
BALANCE AT ADDI- RETIRE- ADD END
BEGINNING TIONS MENTS (DEDUCT) OF
CLASSIFICATION OF PERIOD AT COST OR SALES (A) PERIOD
-------------- --------- ------- -------- ------- -------
For the year ended
December 31, 1993:
Refining and marketing...... $5,112 $381 $204 $ (24) $5,265
Exploration and production.. 1,683 120 283(B) (42) 1,478
Oil sands mining............ 965 111 11 (65) 1,000
Corporate................... 20 -- 10 -- 10
------ ---- ---- ----- ------
$7,780 $612 $508 $(131) $7,753
====== ==== ==== ===== ======
For the year ended
December 31, 1992:
Refining and marketing...... $5,002 $275 $ 83 $ (82) $5,112
Exploration and production.. 1,658 175 87(B) (63) 1,683
Oil sands mining............ 1,027 80 11 (131) 965
Corporate................... 35 -- 11 (4) 20
------ ---- ---- ----- ------
$7,722 $530 $192 $(280) $7,780
====== ==== ==== ===== ======
For the year ended
December 31, 1991:
Refining and marketing...... $4,765 $323 $ 79 $ (7) $5,002
Exploration and production.. 1,533 202 81(B) 4 1,658
Oil sands mining............ 983 89 18 (27) 1,027
Corporate................... 29 1 6 11 35
------ ---- ---- ----- ------
$7,310 $615 $184 $ (19) $7,722
====== ==== ==== ===== ======
Notes:
(A) Includes foreign currency translation adjustments and intersegment
transfers. In 1992, also includes $(8) million in refining and
marketing, $(10) million in oil sands mining and $(3) million in
corporate attributable to a provision for write-down of assets and
other matters. (See Note 2 to the Consolidated Financial Statements
in the Company's 1993 Annual Report to Shareholders.)
(B) Includes dry hole costs.
35
SUN COMPANY, INC. AND SUBSIDIARIES
SCHEDULE VI--ACCUMULATED DEPRECIATION,
DEPLETION AND AMORTIZATION OF
PROPERTIES, PLANTS AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(MILLIONS OF DOLLARS)
ADDITIONS
CHARGED OTHER BALANCE
TO COSTS RETIRE- CHANGES AT
BALANCE AT AND MENTS ADD END
BEGINNING EXPENSES OR (DEDUCT) OF
CLASSIFICATION OF PERIOD (A)(B) SALES (C) PERIOD
-------------- ---------- --------- ------- -------- -------
For the year ended
December 31, 1993:
Refining and marketing...... $2,344 $237 $168 $(10) $2,403
Exploration and production.. 1,199 89 254 (15) 1,019
Oil sands mining............ 487 32 5 (20) 494
Corporate................... 11 1 6 -- 6
------ ---- ---- ---- ------
$4,041 $359 $433 $(45) $3,922
====== ==== ==== ==== ======
For the year ended
December 31, 1992:
Refining and marketing...... $2,130 $245 $ 60 $ 29 $2,344
Exploration and production.. 834 105 52 312 1,199
Oil sands mining............ 436 37 10 24 487
Corporate................... 22 2 10 (3) 11
------ ---- ---- ---- ------
$3,422 $389 $132 $362 $4,041
====== ==== ==== ==== ======
For the year ended
December 31, 1991:
Refining and marketing...... $1,943 $237 $ 56 $ 6 $2,130
Exploration and production.. 706 152 21 (3) 834
Oil sands mining............ 408 40 13 1 436
Corporate................... 25 9 6 (6) 22
------ ---- ---- ---- ------
$3,082 $438 $ 96 $ (2) $3,422
====== ==== ==== ==== ======
36
SUN COMPANY, INC. AND SUBSIDIARIES
SCHEDULE VI--ACCUMULATED DEPRECIATION,
DEPLETION AND AMORTIZATION OF
PROPERTIES, PLANTS AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991--(CONTINUED)
(MILLIONS OF DOLLARS)
Notes: YEARS ENDED DECEMBER 31
-----------------------
1993 1992 1991
---- ---- ----
(A) Depreciation, depletion and amortization.....$354 $385 $433
Leasehold impairment......................... 5 4 5
---- ---- ----
Total additions............................ 359 389 438
Dry hole costs............................... 9 30 48
---- ---- ----
Amounts shown in the consolidated
statements of cash flows as depreciation,
depletion and amortization and dry hole
costs and leasehold impairment...........$368 $419 $486
==== ==== ====
(B) A summary of the principal annual rates utilized in computing the
annual provision for depreciation, depletion and amortization is not
considered practicable because of the varying types of property and
the rates applied thereto.
(C) Includes foreign currency translation adjustments and intersegment
transfers. In 1992, also includes $59 million in refining and
marketing, $350 million in exploration and production and $67 million
in oil sands mining attributable to a provision for write-down of
assets and other matters. (See Note 2 to the Consolidated Financial
Statements in the Company's 1993 Annual Report to Shareholders.)
37
SUN COMPANY, INC. AND SUBSIDIARIES
SCHEDULE VIII--VALUATION ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(MILLIONS OF DOLLARS)
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND DEDUC- AT END
OF PERIOD EXPENSES TIONS OF PERIOD
---------- ---------- ------ ---------
For the year ended
December 31, 1993:
Deducted from asset in
balance sheet--allowance
for doubtful accounts and
notes receivable.......... $11 $ 2 $ 2 $11
=== === === ===
For the year ended
December 31, 1992:
Deducted from asset in
balance sheet--allowance
for doubtful accounts and
notes receivable.......... $12 $ 7 $ 8 $11
=== === === ===
For the year ended
December 31, 1991:
Deducted from asset in
balance sheet--allowance
for doubtful accounts and
notes receivable.......... $11 $14 $13 $12
=== === === ===
38
SUN COMPANY, INC. AND SUBSIDIARIES
SCHEDULE IX--SHORT-TERM BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(DOLLARS IN MILLIONS)
MAXIMUM AVERAGE WEIGHTED
AMOUNT AMOUNT AVERAGE
WEIGHTED OUT- OUT- INTEREST
BALANCE AVERAGE STANDING STANDING RATE
AT END INTEREST DURING DURING DURING
OF PERIOD RATE PERIOD PERIOD(A) PERIOD(B)
--------- -------- ------- --------- ---------
For the year ended
December 31, 1993:
Commercial paper.... $ 50 3.6% $308 $127 3.5%
Amounts due to
banks and others.. 60 3.5% $ 65 15 3.4%
---- ----
$110 3.5% $142 3.5%
==== ====
For the year ended
December 31, 1992:
Commercial paper.... $215 3.7% $307 $173 4.1%
==== ====
For the year ended
December 31, 1991:
Commercial paper.... $143 5.2% $340 $211 6.2%
Amounts due to
banks and others.. -- N/A $ 17 1 12.4%
---- ----
$143 5.2% $212 6.3%
==== ====
Notes:
(A) Determined from daily balances.
(B) Represents the ratio of actual interest to average amounts
outstanding.
39
SUN COMPANY, INC. AND SUBSIDIARIES
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(MILLIONS OF DOLLARS)
1993 1992 1991
---- ---- ----
Maintenance and repairs........................ $223 $295 $335
==== ==== ====
40
APPENDIX
The Company's Management's Discussion and Analysis of Financial
Condition and Results of Operations included in its 1993 Annual Report to
Shareholders contains three bar charts concerning Sun's: (1) improvement in
income before special items (page 26); (2) capitalization (page 37); and
(3) capital expenditures (page 37). Descriptions of these bar charts have
been provided within Exhibit 13.