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1997
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
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
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 (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
TEN PENN CENTER 19103-1699
1801 MARKET STREET, PHILADELPHIA, PA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
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
------------------- ----------------------------
Depositary Shares, each share representing One- New York Stock Exchange
Half of a Share of Series A Cumulative
Preference Stock, no par value
Common Stock, $1 par value New York Stock Exchange
Philadelphia Stock
Exchange
Convertible Subordinated Debentures 6 3/4%, Due New York Stock Exchange
June 15, 2012
Sinking Fund Debentures 9 3/8%, Due June 1, New York Stock Exchange
2016
Notes 7.95%, Due December 15, 2001 New York Stock Exchange
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 January 30, 1998, the aggregate market value of voting stock held by
nonaffiliates was $3,574 million.
At January 30, 1998, there were 70,753,859 shares of Common Stock, $1 par
value and 12,043,130 shares of Cumulative Preference Stock--Series A, no par
value, outstanding.
Selected portions of the Sun Company, Inc. Annual Report to Shareholders for
the Fiscal Year Ended December 31, 1997 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, 1997, are incorporated by reference in Part III of this
Form 10-K.
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
Those statements in the Business and Properties discussion that are not
historical in nature should be deemed forward-looking statements that are
inherently uncertain. See "Forward-Looking Statements" in Management's
Discussion and Analysis of Financial Condition and Results of Operations in
the Company's 1997 Annual Report to Shareholders for a discussion of the
factors which could cause actual results to differ materially from those
projected in such statements.
GENERAL
Sun Company, Inc.* was incorporated in Pennsylvania in 1971. 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, and its telephone number is (215) 977-3000.
The Company, through its subsidiaries, is principally a petroleum refiner
and marketer with interests in cokemaking and coal 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 principally in the eastern half of the United
States. Sun's cokemaking and coal mining operations are conducted in Virginia,
Indiana and Kentucky. Sun also has an investment in real estate operations in
the United States which is subject to a plan of disposition.
The Company's operations are organized into seven business units plus a
holding company and a shared services organization. The accompanying
discussion of the Company's business and properties reflects this
organizational structure. For additional information regarding these business
units, see Management's Discussion and Analysis of Financial Condition and
Results of Operations in the Company's 1997 Annual Report to Shareholders.
Additional business segment information is presented in Note 18 to the
Consolidated Financial Statements in the Company's 1997 Annual Report to
Shareholders.
REFINING AND MARKETING
The Company's refining and marketing operations consist of the manufacturing
and marketing of fuels, lubricants and petrochemicals and the transportation
of crude oil and refined products. These operations are conducted principally
through Sun Company, Inc. (R&M), a wholly owned subsidiary of the Company, and
are classified into the following six business units: Sun Northeast Refining;
Sunoco Northeast Marketing; Sunoco Chemicals; Sun Lubricants; Sunoco
MidAmerica Marketing & Refining; and Sunoco Logistics.
Sun owns and operates five domestic refineries which are located in Marcus
Hook, PA, Philadelphia, PA, Toledo, OH, Tulsa, OK and Yabucoa, Puerto Rico.
The refineries in Marcus Hook, Philadelphia and Toledo produce principally
fuels and petrochemicals while the refineries in Tulsa and Puerto Rico
emphasize lubricants production with related fuels being sold in the wholesale
market.
- --------
*In this report, the terms "Company" and "Sun" are used interchangeably to mean
Sun Company, Inc. or collectively, 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 1997 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, 1997, 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.
1
The following table sets forth certain consolidated information concerning
Sun's refining and marketing operations (in thousands of barrels daily).
Additional information is set forth on page 60 in the Company's 1997 Annual
Report to Shareholders.
Products Manufactured
1997 1996
----- -----
Crude Unit Capacity............................................. 692.0* 777.0
===== =====
Input to Crude Units............................................ 696.0* 721.0
===== =====
Products Manufactured:
Gasoline....................................................... 348.8 339.7
Middle Distillates............................................. 224.8 206.5
Residual Fuel.................................................. 67.9 67.3
Petrochemicals................................................. 34.8 29.7
Lubricants..................................................... 22.0 21.2
Asphalt**...................................................... -- 16.2
Other.......................................................... 67.4 70.4
----- -----
765.7 751.0
===== =====
- --------
*Sun's crude unit capacity decreased 85 thousand barrels per day in the first
quarter of 1997 in connection with a project to reconfigure the Puerto Rico
refinery to process reduced crude oil instead of conventional crude oil.
Reduced crude oil, which amounted to approximately 30,000 barrels per day at
the Puerto Rico refinery, is excluded from the input to crude units in the
table above (see "Sun Lubricants" below). Effective January 1, 1998, Sun's
crude oil processing capacity increased 5 thousand barrels per day due to an
increase at the Toledo refinery.
**Sun ceased producing asphalt in December 1996.
Supply and Distribution
Sun's crude oil requirements during the 1995-97 period were met largely by
purchases from foreign national oil companies, independent exploration and
production companies, integrated oil companies, crude oil trading companies
and major international financial institutions. There is an ample supply of
crude oil available to meet worldwide refining needs, and Sun has been able to
supply its refineries with the proper mix and quality of crude oils without
disruption. Sun's refineries processed approximately 80 percent light sweet
crude oil during 1997. The Company believes that ample supplies of light sweet
crude oil will continue to be available. The following table sets forth the
net sources of crude oil for Sun's refineries (in percentages):
1997 1996
---- ----
Africa............................................................. 53 41
United States...................................................... 20 20
North Sea.......................................................... 16 21
Canada............................................................. 7 7
South and Central America.......................................... 2 7
Arabian Gulf....................................................... 1 4
Russia............................................................. 1 --
--- ---
100 100
=== ===
2
The following table sets forth summary information concerning the supply and
distribution of crude oil and refined products at Sun's refineries (in
thousands of barrels daily):
1997 1996
----- -----
Supply:
Crude oil purchases........................................... 701.7* 686.1
Crude oil inventory change.................................... .4 5.3
Refined product purchases (including feedstocks).............. 116.3 120.8
----- -----
818.4 812.2
===== =====
Distribution:
Refined product sales......................................... 809.6 794.8
Refined product inventory change.............................. (4.0) (2.8)
Internal consumption and other................................ 12.8 20.2
----- -----
818.4 812.2
===== =====
- --------
*Includes purchases of reduced crude oil.
Refined Product Sales
Sun sells fuels through retail and wholesale channels principally in the
Northeast and upper Midwest and sells petrochemicals and lubricants on a
worldwide basis. The following table sets forth Sun's consolidated refined
product sales (in thousands of barrels daily):
1997 1996
----- -----
Gasoline:
Wholesale....................................................... 170.2 167.0
Retail.......................................................... 201.8 205.7
Middle Distillates............................................... 248.8 219.9
Residual Fuel.................................................... 80.1 82.4
Petrochemicals................................................... 35.2 31.5
Lubricants....................................................... 25.1 23.9
Asphalt.......................................................... -- 18.3
Other............................................................ 48.4 46.1
----- -----
809.6 794.8
===== =====
As of December 31, 1997 and 1996, branded fuels sales were made through
3,789 and 3,806 retail gasoline outlets, respectively. Of these outlets, 376
were Company operated at December 31, 1997.
The following is a discussion of the six business units which comprise Sun's
refining and marketing operations.
SUN NORTHEAST REFINING
The Sun Northeast Refining business consists of the manufacture of petroleum
products, including gasoline, middle distillates (including jet fuel, heating
oil and diesel fuel), residual fuel oil and petrochemical feedstocks at Sun's
Marcus Hook and Philadelphia refineries and the sale of these products to
other Sun business units and to wholesale and industrial customers. (See
"Sunoco MidAmerica Marketing & Refining" and "Sun Lubricants" below, for a
discussion of operations at Sun's Toledo, Tulsa and Puerto Rico refineries.)
3
The following table sets forth information concerning operations at Sun's
Marcus Hook and Philadelphia refineries (in thousands of barrels daily):
1997 1996
--------------------------------- ---------------------------------
TOTAL TOTAL
MARCUS PHILADELPHIA, NORTHEAST MARCUS PHILADELPHIA, NORTHEAST
HOOK, PA PA REFINERIES HOOK, PA PA REFINERIES
-------- ------------- ---------- -------- ------------- ----------
Crude Unit Capacity..... 175.0 307.0 482.0 175.0 307.0 482.0
===== ===== ===== ===== ===== =====
Input to Crude Units.... 165.7 314.4 480.1 151.5 295.9 447.4
===== ===== ===== ===== ===== =====
Conversion Capacity*.... 86.0 105.0 191.0 86.0 105.0** 191.0
===== ===== ===== ===== ===== =====
Conversion Capacity Uti-
lized.................. 88.7 94.7 183.4 65.3 86.6** 151.9
===== ===== ===== ===== ===== =====
Products Manufactured:
Gasoline............... 88.4 154.1 242.5 83.6 147.6 231.2
Middle Distillates..... 65.3 103.6 168.9 54.3 85.0 139.3
Residual Fuel.......... 10.7 42.6 53.3 11.1 38.4 49.5
Petrochemical
Feedstocks***......... 18.7 5.4 24.1 11.9 7.0 18.9
Asphalt+............... -- -- -- -- 13.7 13.7
Other.................. 16.0 23.8 39.8 12.9 26.3 39.2
----- ----- ----- ----- ----- -----
199.1 329.5 528.6 173.8 318.0 491.8
===== ===== ===== ===== ===== =====
- --------
*Represents Sun's capacity to upgrade low-value petroleum products into
higher-value products through catalytic cracking and hydrocracking
processes.
**In December 1996, Sun mothballed a 28 thousand barrels-per-day hydrocracker
unit as part of the Philadelphia refinery reconfiguration. This unit, which
was utilized at approximately 23 thousand barrels-per-day during 1996, has
been excluded from the conversion capacity and utilization amounts in the
above table.
***Petrochemical feedstocks are utilized by the Sunoco Chemicals business to
produce petrochemicals at these facilities. (See "Sunoco Chemicals" below.)
+Sun ceased producing asphalt in December 1996.
During the fourth quarter of 1996, Sun reconfigured the Philadelphia
refinery to process only sweet crude oil and to cease asphalt production. With
this change, Sun's Philadelphia and Marcus Hook refineries now process
predominantly light sweet crude oils, which have been supplied from foreign
sources. Previously, the Point Breeze facility processed a substantial
quantity of heavy sour crude oil and purchased gas oils. The reconfiguration
continues the integration of the Point Breeze and Girard Point facilities at
the Philadelphia refinery and resulted in the elimination of approximately 125
positions (both employees and independent contractors) and the shutdown or
mothballing of redundant and/or unprofitable processing units. These units
consisted of a reformer, a sulfur plant, a hydrocracker, a hydrogen plant and
asphalt and alkylation units. The reconfiguration to date has resulted in a
substantial improvement in the efficiency, flexibility and reliability of the
Philadelphia refinery and in a reduction in its overall cost structure. Sun
continues to implement other infrastructure consolidation opportunities at
this facility.
The reconfiguration and extensive refinery maintenance turnarounds completed
during the 1996-97 period resulted in higher overall production for Sun
Northeast Refining in 1997. Record levels of high-value gasoline, middle
distillates and petrochemical feedstock production more than offset the
elimination of low-value asphalt production.
4
The following table sets forth information concerning the crude oil
purchased during 1997 for processing at the Marcus Hook and Philadelphia
refineries (in thousands of barrels daily):
TOTAL
MARCUS PHILADELPHIA, NORTHEAST
HOOK, PA PA REFINERIES
-------- ------------- ----------
Crude Type:
North Sea................................. 94.8 8.3 103.1
West African Light........................ 39.1 203.2 242.3
West African Heavy........................ 19.5 101.3 120.8
South American Light...................... 12.0 .9 12.9
----- ----- -----
165.4 313.7 479.1
===== ===== =====
Sun's Philadelphia and Marcus Hook refineries are connected by pipeline,
barge, truck and rail. The inter-refinery pipeline allows transfer of
unfinished stocks, including butanes, naphtha, distillate blendstocks and
gasoline blendstocks. Finished products are delivered to customers via Sun's
pipeline and terminal network, third-party pipelines and barges.
Total fuels products sold to third parties at wholesale by Sun Northeast
Refining in 1997 were 358.4 thousand barrels daily compared to 322.2 thousand
barrels daily in 1996. Sales to other Sun business units by Sun Northeast
Refining (primarily gasoline, middle distillates and chemical feedstocks)
totalled 182.9 thousand barrels daily in 1997 versus 188.3 thousand barrels
daily in 1996.
Environmental laws require Sun to make significant expenditures at its
refineries of both a capital and expense nature. During the 1995-97 period,
approximately $59 million was spent for environmental capital projects and
compliance activities at Sun's northeast refineries. In addition, the Company
continues to comply with the reformulated gasoline regulations set forth in
the Clean Air Act of 1990, as amended (the "Clean Air Act") and expects to
implement the next phases of these regulations in 1998 and 2000 with modest
capital investment.
SUNOCO NORTHEAST MARKETING
The Sunoco Northeast Marketing business consists of the retail sale of
gasoline and middle distillates and the operation of convenience stores in the
New England and Mid-Atlantic states. These activities are conducted in a 12-
state region from Maine through northern Virginia, with the highest
concentration of outlets in Connecticut, Massachusetts, New Jersey, New York,
Pennsylvania and Rhode Island. (See "MidAmerica Marketing & Refining" below
for a discussion of similar operations conducted in the midwestern U.S.)
5
The following table sets forth Sun's retail gasoline outlets in the New
England and Mid-Atlantic states at December 31, 1997 and 1996:
1997 1996*
----- -----
Direct outlets:
Company owned or leased:
Company-operated:
Traditional.................................................. 124 128
APlus(R) convenience stores.................................. 154 168
----- -----
278 296
Dealer-operated:
Traditional.................................................. 351 344
APlus(R) convenience stores.................................. 250 240
Ultra(R) Service Centers..................................... 239 249
----- -----
840 833
Total Company owned or leased**................................ 1,118 1,129
Dealer owned***................................................ 373 397
----- -----
Total direct outlets............................................ 1,491 1,526
Distributor outlets............................................. 1,330 1,354
----- -----
2,821 2,880
===== =====
- --------
*Reclassified to conform to the 1997 presentation.
**Gasoline throughput per Company owned or leased outlet averaged 98.7 and
103.1 thousands of gallons monthly during 1997 and 1996, respectively.
***Primarily traditional outlets.
Sunoco Northeast Marketing's portfolio of outlets is designed to provide
optimal profit potential in each of its marketing areas. These sites differ in
various ways including: product distribution to the outlets; site ownership
and operation; and types of products and services provided.
Direct outlets are sites at which fuel products are delivered directly to
the site. Investment in the property, through ownership or lease, may be held
by either the Company or an independent dealer. These sites may be traditional
locations that sell almost exclusively fuel products or may include APlus(R)
convenience stores or Ultra(R) Service Centers that provide state-of-the-art
automotive diagnosis and repair. Included among Sunoco Northeast Marketing's
outlets at December 31, 1997 were 55 outlets on limited access highways in
Pennsylvania, New Jersey, New York and Maryland. Of these outlets, 37 were
company-operated sites providing gasoline, diesel fuel and convenience store
merchandise.
Distributor outlets are sites in which the distributor takes delivery at a
terminal where Sunoco(R) products are available. Although these sites market
under the Sunoco(R) brand, Sun does not own or operate these retail locations.
Sun's APlus(R) convenience stores are located principally in Pennsylvania,
New York and Massachusetts. These stores supplement sales of fuel products
with a broad mix of high-margin merchandise such as groceries, health and
beauty aids, fast foods and beverages. Sunoco Northeast Marketing is also
adding to its one-stop shopping concept at selected sites by partnering with
various fast food chains. The following table sets forth information
concerning Sun's convenience store locations in the Northeast:
1997 1996
----- -----
Number of stores (Company operated and dealer operated).......... 404 408
Merchandise sales (M$/store/month)............................... $47.8 $44.9
Merchandise margin (% of sales).................................. 29.3% 27.4%
6
Sunoco Northeast Marketing offers four grades of gasoline at its retail
locations, consisting of the highest octane premium gasoline commercially
available in the United States (Ultra(R) 94) and 93, 89 and 87 octanes.
Branded fuels sales by Sunoco Northeast Marketing averaged 169.6 thousand
barrels daily in 1997 compared to 175.2 thousand barrels daily in 1996.
Premium gasoline accounted for approximately 24 percent of Sun's retail
gasoline sales in the Northeast in 1997.
In 1997, excluding environmental outlays, capital expenditures for branded
marketing activities in the Northeast totalled $43 million. Most of these
outlays were to upgrade and modernize the retail service station network.
These efforts are designed to improve appearances and to create a uniform look
easily recognizable by customers. Exterior improvements generally include the
installation of new price signs, lighting and canopies over the gasoline
dispensing areas. Sunoco Northeast Marketing also continued the expansion of
its pay-at-the-pump program in 1997 with the installation of CardMatic(R), its
credit card activated gasoline dispensing system, at 131 additional high-
volume service stations. This brings the total number of outlets offering this
convenience to 1,226, or 43 percent of total retail marketing outlets in the
Northeast. Environmental capital spending totalled $3 million during 1997,
largely for the ongoing underground storage tank replacement program and for
tank top upgrades. At December 31, 1997, the tank replacement program was
substantially complete.
SUNOCO CHEMICALS
The Sunoco Chemicals business consists of the manufacturing, distribution
and marketing of base commodity and intermediate petrochemicals. These
chemicals are comprised principally of olefins and their derivatives
(ethylene, ethylene oxide and propylene) and aromatics (benzene, cumene,
cyclohexane, toluene and xylenes). As a partner in a joint venture, Sunoco
Chemicals also produces MTBE which is utilized by Sun Northeast Refining in
manufacturing reformulated gasolines. Petrochemicals are manufactured by
Sunoco Chemicals at Sun's Marcus Hook and Philadelphia refineries, at an
ethylene/ethylene oxide facility in Brandenburg, Kentucky and at the joint
venture MTBE facility in Mont Belvieu, Texas. (See "Sunoco MidAmerica
Marketing & Refining" for a discussion of the petrochemicals produced at the
Toledo refinery.)
The following table sets forth information concerning petrochemicals
production by Sunoco Chemicals (in thousands of barrels daily):
PRODUCTION
CAPACITY AT -----------
DECEMBER 31, 1997* 1997 1996
----------------- ----- -----
Benzene**.................................... 1.5 .9 .6
Toluene...................................... 2.0 1.5 1.0
Xylene....................................... .5 .5 .5
Cumene....................................... 4.5 5.2 4.3
Cyclohexane.................................. 2.5 2.1 1.4
---- ----- -----
Total Aromatics............................ 11.0 10.2 7.8
Ethylene..................................... 1.7 1.2 1.1
Ethylene oxide............................... 1.8 1.7 1.4
Propylene:
Polymer-grade***............................ 10.5 10.6 5.3
Refinery-grade.............................. .5 .4 1.8
---- ----- -----
Total Olefins.............................. 14.5 13.9 9.6
Other........................................ -- -- 1.5+
---- ----- -----
Total Petrochemicals....................... 25.5 24.1 18.9
==== ===== =====
- --------
*Reflected on a calendar-day basis.
**Excludes benzene production utilized in the manufacture of cumene and
cyclohexane.
***Reflects an increase of 4,500 barrels daily in production capacity in the
fourth quarter of 1996 as a result of the expansion of the propylene unit at
the Marcus Hook refinery.
+Consists of refining by-products, principally carbon dioxide and sulfur. In
December 1996, Sun ceased producing these by-products in connection with the
reconfiguration of the Philadelphia refinery.
7
Sun's petrochemical products are distributed and sold on a worldwide basis.
Sales of petrochemicals to third parties by Sunoco Chemicals totalled 24.4
thousand barrels daily in 1997 versus 20.2 thousand barrels daily in 1996, a
21 percent increase. The record levels of both sales and production volumes in
1997 were largely a result of successful refinery maintenance turnarounds
completed in the 1996-97 period at the Philadelphia and Marcus Hook refineries
and the expansion of polymer-grade propylene production capacity at the Marcus
Hook refinery (see below).
Sales volumes during 1997 were distributed through the following channels:
. Benzene and Benzene Derivatives (including Cyclohexane and Cumene)--
Customers for these products are large manufacturers of fibers and
polymers who buy a significant percentage of their requirements from
Sunoco Chemicals under long-term contracts;
. Bulk Toluene and Xylenes--Buyers generally procure large volumes for
fibers, film and urethane products. These sales are made in both the
contract and spot markets and tend to be international in scope;
. Solvents--Customers and distributors take individually small volumes for
paints, coatings, solvents and a variety of specialty applications;
. Propylene--Sales are primarily made pursuant to a long-term contract to a
large customer who manufactures polypropylene; and
. Specialty Ethylene and Ethylene Oxide--Sales are primarily to
intermediate-size specialty chemical companies that make diverse products
such as surfactants, co-polymer resins and emulsions, and additives.
During the fourth quarter of 1996, Sunoco Chemicals completed a project to
expand its polymer-grade propylene production capacity and delivery systems at
the Marcus Hook refinery from 400 to 700 million pounds per year (6,000 to
10,500 barrels per day). Most of Sunoco Chemicals' polymer-grade propylene
production is sold pursuant to a long-term supply agreement with Epsilon
Products Co., a polypropylene manufacturer, which also completed a major
expansion of its production facilities in late 1996.
At the end of 1994, Sunoco Chemicals completed a project (the "Northeast
Aromatics and Cyclohexane Project"), which included the expansion of benzene
extraction capacity by 60 million gallons per year and construction of a 34-
million-gallon-per-year cyclohexane plant at the Marcus Hook refinery. During
the fourth quarter of 1996, Sunoco Chemicals installed a new hydrogen
purification unit at the cyclohexane plant to provide a consistent source of
high-quality hydrogen. This enhancement has enabled the plant to increase
cyclohexane production levels.
Benzene, extracted at Sun's Marcus Hook and Girard Point facilities, is
combined with refinery-grade propylene to produce cumene at Girard Point. The
cumene is then sold primarily to AlliedSignal Inc. pursuant to a long-term
contract. In 1996, Sunoco Chemicals began a project to expand its cumene
production capacity at Girard Point from 500 to 850 million pounds per year
(4,500 to 7,700 barrels per day). The expanded facility, which will utilize
new catalyst technology, is expected to be operational in mid-1998. A
significant portion of the incremental production from this facility will also
be sold to AlliedSignal Inc. under a long-term contract.
SUN LUBRICANTS
The Sun Lubricants business is comprised of the manufacturing, blending,
packaging and marketing of a broad line of paraffinic and aromatic lubricating
and specialty oils produced at the Tulsa and Puerto Rico refineries as well as
the related manufacturing and wholesale marketing of the fuels produced at
these facilities.
8
Base oils are sold to domestic and international customers who manufacture
their own finished transportation and industrial lubricants. Sun Lubricants
also upgrades a significant portion of its base oil production into specialty
oils at its blending and packaging facilities. Blending and packaging
operations are conducted principally at lube service centers located at the
Marcus Hook and Tulsa refineries.
Specialty oil production is comprised principally of transportation and
industrial lubricants. Sun Lubricants also produces other specialty lube
products such as horticultural and agricultural oils, aromatic and paraffinic
rubber oils, paper defoamer oils, asphalt recycling extracts, textile oils and
finished waxes. These finished products are marketed under the Sunoco(R),
Kendall(R) and Archer(R) brand labels directly by Sun or through distributors
to a wide variety of domestic and foreign customers.
The following table sets forth information concerning operations at Sun's
Tulsa and Puerto Rico refineries (in thousands of barrels daily):
1997 1996
-------------------- --------------------
TULSA PUERTO TULSA PUERTO
OK RICO* TOTAL OK RICO TOTAL
----- ------ ----- ----- ------ -----
Crude Unit Capacity................... 85.0 -- 85.0 85.0 85.0 170.0
==== ==== ===== ==== ==== =====
Input to Crude Units.................. 82.9 -- 82.9 85.0 63.1 148.1
==== ==== ===== ==== ==== =====
Base Oil Lubes Capacity............... 8.1 9.3 17.4 8.1 9.3 17.4
==== ==== ===== ==== ==== =====
Products Manufactured:
Lubricants:
Base Oils........................... 8.1 7.8 15.9 7.9 8.1 16.0
Waxes and Other Lubricants.......... 2.4 3.7 6.1 2.2 3.0 5.2
Gasoline............................. 17.0 .5 17.5 16.5 8.7 25.2
Middle Distillates................... 27.0 4.5 31.5 27.6 19.1 46.7
Residual Fuel........................ .1 11.0 11.1 -- 14.1 14.1
Other................................ 25.2** 5.4 30.6 28.5** 9.9 38.4
---- ---- ----- ---- ---- -----
79.8 32.9 112.7 82.7 62.9 145.6
==== ==== ===== ==== ==== =====
- --------
*The crude unit at the Puerto Rico refinery was shut down on March 6, 1997 in
connection with the project to reconfigure this refinery to process reduced
crude oil instead of conventional crude oil. During the 65-day period in 1997
when the crude unit was operational, input to the unit totalled 50.8 thousand
barrels daily. The crude inputs prior to March 6, 1997 and the approximately
30,000 barrels per day of reduced crude oil processed at this facility after
the reconfiguration are excluded from the 1997 amounts in the table above
(see below).
**Includes 20.7 and 23.2 thousand barrels daily in 1997 and 1996,
respectively, of "lubes-extracted" feedstocks which are transported to the
Toledo refinery for further processing or are sold to third parties.
In the first quarter of 1997, Sun Lubricants initiated the reconfiguration
of the Puerto Rico refinery to eliminate the processing of conventional crude
oil and to process, instead, approximately 30,000 barrels per day of reduced
crude oil. This change significantly reduced the amount of unprofitable fuels
produced at this refinery while fully maintaining the volume and quality of
lubricants production. As a result, the atmospheric crude tower, the gas oil
desulfurizer and the gasoline reformer were shut down and approximately 100
positions were eliminated. The streamlining of the Puerto Rico refining
operation has improved operating efficiency, lowered fixed costs and reduced
ongoing capital spending and working capital requirements. In 1998, Sun will
continue to focus on enhancing productivity at this facility.
9
In November 1996, Sun Lubricants acquired the Kendall lubricants blending,
packaging and marketing business. This acquisition has increased the amount of
base oil production upgraded into transportation lubricants at Sun facilities
and has enabled Sun Lubricants to increase its specialty oil lubricants sales.
Kendall sales, which totalled 2.9 thousand barrels per day in 1997, are made
primarily through supply contracts with more than 300 distributors in the
United States.
Sales of specialty oil lubricant products totalled 11.7 thousand barrels
daily in 1997 versus 9.3 thousand barrels daily in 1996 while sales of base
oils, waxes and other lubricants totalled 13.4 thousand barrels daily in 1997
versus 14.6 thousand barrels daily in 1996. The 26 percent increase in
specialty oil sales reflects the Kendall acquisition and an expansion in Sun
Lubricants' contract customer base and volumes. The 8 percent decrease in base
oil, waxes and other lubricant sales reflects planned reductions in contract
and spot base oil sales concurrent with the increased usage of produced base
oils in Sunoco(R) and Kendall(R) brand specialty oils. Fuels sold to third
parties from the Tulsa and Puerto Rico refineries totalled 93.2 thousand
barrels per day in 1997 compared to 124.3 thousand barrels per day in 1996.
The 25 percent decline in wholesale fuels sales reflects the Company's
strategy to significantly reduce fuels production at the Puerto Rico refinery.
The following table sets forth information concerning the feedstocks
purchased during 1997 for processing at the Tulsa and Puerto Rico refineries
(in thousands of barrels daily):
TULSA PUERTO
OK RICO TOTAL
----- ------ -----
Feedstock Type:
West Texas Intermediate.................................. 79.3 -- 79.3
Reduced Crude Oil........................................ -- 27.6 27.6
Other.................................................... -- 3.6 3.6
---- ---- -----
79.3 31.2 110.5
==== ==== =====
The lubricants manufacturing facilities at the Tulsa and Puerto Rico
refineries, as well as Sun's lube blending and packaging facilities, are ISO
certified indicating they have passed the International Standards
Organization's standards for quality management and oversight.
SUNOCO MIDAMERICA MARKETING & REFINING
The Sunoco MidAmerica Marketing & Refining ("Sunoco MidAmerica") business
consists of the retail sale of gasoline and middle distillates and the
operation of convenience stores in the Midwest as well as the manufacturing,
distribution and wholesale marketing of fuels and petrochemicals produced at
Sun's Toledo refinery.
Retail Marketing
Sunoco MidAmerica markets, through direct and distributor channels, five
grades of retail gasoline products under the Sunoco(R) brand ranging from
Ultra(R) 94 to an 86 octane grade of gasoline. These outlets are located in
Indiana, Kentucky, Michigan, Ohio and West Virginia with the strongest market
presence in Michigan and Ohio. Sunoco MidAmerica is also the sole supplier to
all 16 gasoline outlets on the Ohio turnpike.
10
The following table sets forth Sun's retail gasoline outlets in the Midwest
at December 31, 1997 and 1996:
1997 1996
---- ----
Direct outlets:
Company owned or leased:
Company-operated:
Traditional..................................................... 19 22
Sunoco Food Market(R) convenience stores........................ 79 88
--- ---
98 110
Dealer-operated:
Traditional..................................................... 77 57
Sunoco Food Market(R) convenience stores........................ 26 22
Ultra(R) Service Centers........................................ 15 48
--- ---
118 127
Total Company owned or leased..................................... 216 237
Dealer owned*..................................................... 126 138
--- ---
Total direct outlets............................................... 342 375
Distributor outlets................................................ 626 551
--- ---
968 926
=== ===
- --------
*Primarily traditional outlets.
Branded fuels sales averaged 54.1 thousand barrels daily in 1997 compared to
51.0 thousand barrels daily in 1996. Premium gasoline accounted for
approximately 22 percent of Sun's retail gasoline sales in the Midwest in
1997. As part of the strategy to increase the overall level of branded
gasoline sales, primarily through the distributor channel, in 1996 and 1997,
Sunoco MidAmerica entered into numerous supply agreements. These supply
agreements contributed to the increase in retail gasoline volumes sold by
Sunoco MidAmerica in 1997. Sales under these agreements are expected to
increase further in 1998, in part due to an expected increase in the number of
outlets rebranding to Sunoco(R) pursuant to these agreements. Sunoco
MidAmerica also expects to increase branded sales in 1998 by increasing the
volumes sold through its current direct outlets and by obtaining new direct
locations.
The following table sets forth information concerning Sun's convenience
stores in the Midwest:
1997 1996
----- -----
Number of stores (Company operated and dealer operated).......... 105 110
Merchandise sales (M$/store/month)............................... $43.0 $39.8
Merchandise margin (% of sales).................................. 30.6% 28.7%
11
Refining and Wholesale Marketing
The following table sets forth information concerning operations at Sun's
Toledo refinery (in thousands of barrels daily):
1997 1996
----- -----
Crude Unit Capacity............................................. 125.0* 125.0
===== =====
Input to Crude Units............................................ 133.0 125.5
===== =====
Conversion Capacity............................................. 86.0 86.0
===== =====
Conversion Capacity Utilized.................................... 83.1 77.4
===== =====
Products Manufactured:
Gasoline....................................................... 88.8 83.3
Middle Distillates............................................. 24.4 20.5
Residual Fuel.................................................. 3.5 3.7
Petrochemicals................................................. 10.7 10.8
Other.......................................................... 17.7 18.5
----- -----
145.1 136.8
===== =====
- --------
*Effective January 1, 1998, the rated capacity of the crude unit at the Toledo
refinery increased to 130 thousand barrels daily.
Fuels products sold at wholesale to third parties from Sun's Toledo refinery
in 1997 averaged 74.0 thousand barrels daily compared to 66.7 thousand barrels
daily in 1996. Sales of petrochemicals to third parties by Sunoco MidAmerica
totalled 10.8 thousand barrels daily in 1997 versus 11.3 thousand barrels
daily in 1996.
Sun's Toledo refinery is a relatively complex, high conversion refinery that
refines predominantly light, low-sulfur crude oil. The following table sets
forth information concerning the feedstocks purchased during 1997 for
processing at this facility (in thousands of barrels daily):
Crude Type:
West Texas Intermediate............................................... 59.1
Canadian.............................................................. 53.0
"Lubes-Extracted" Gasoil/Naphtha Intermediate Feedstock............... 20.3
-----
132.4
=====
In April 1996, a 25-day turnaround of certain components of the hydrocracker
unit was completed. Subsequent to the turnaround, Sunoco MidAmerica increased
its input to crude units to over 100 percent of rated capacity. In March 1997,
planned maintenance turnarounds at the refinery's hydrogen unit (16 days) and
vacuum tower (10 days) necessitated a temporary reduction of refinery
throughput. The 5 thousand barrels-per-day increase in crude unit capacity
noted above resulted from the elimination of various refinery throughput
bottlenecks at a minimal cost. In addition, ethanol blending, which was
introduced at Sunoco MidAmerica's terminals in 1996, continues to be employed
in order to reduce octane costs, simplify the product slate and enhance the
storage and transportation of gasoline products.
Chemicals
Sunoco MidAmerica chemical operations consist of the manufacturing of base
commodity and intermediate petrochemicals. These chemicals are comprised of
aromatics (including benzene, toluene and xylene), spirits, nonene and
tetramer. All of these products are sold under a marketing agreement
12
with Suncor Inc., through a joint venture partnership that is managed by
Sunoco Chemicals. Almost all of the nonene and tetramer production is sold
under a long-term contract and a significant portion of the aromatics and
spirits production is sold into the solvents channel and/or higher-end
derivative markets.
SUNOCO LOGISTICS
The Sunoco Logistics business consists of crude oil and refined product
pipeline operations; domestic lease crude oil acquisition and related trucking
operations; crude oil terminalling; and product terminalling and transport
operations. These operations are conducted primarily in the Northeast, Midwest
and South Central regions of the United States.
Pipeline operations are conducted through wholly-owned subsidiaries and
through other pipelines in which Sun has an ownership interest. The pipelines
are principally common carriers and, as such, are regulated by the Federal
Energy Regulatory Commission for interstate movements and by state regulatory
agencies for intrastate movements. The tariff rates charged, while regulated
by the governing agencies, are based upon competition from other pipelines or
alternate modes of transportation.
Sunoco Logistics crude oil pipeline operations, located primarily in the
South Central United States, transport crude oil produced in Oklahoma, Texas,
New Mexico and Louisiana to refiners (including Sun's Tulsa refinery) or to
local trade points. The refined product pipeline operations, located primarily
in the Northeast and Midwest, transport gasoline, jet fuel, diesel fuel, home
heating oil and other products for Sun's other businesses and for third-party
integrated petroleum companies, independent marketers and distributors.
At December 31, 1997, Sunoco Logistics had an equity interest in 5,120 miles
of crude oil pipelines and 4,552 miles of refined product pipelines. In 1997,
crude oil and refined product shipments, including Sun's share of shipments in
which it had an ownership interest, totalled 58.9 and 29.7 billion barrel
miles, respectively, as compared to 56.3 and 28.8 billion barrel miles in
1996.
Sunoco Logistics' crude oil pipeline operations in the South Central United
States are complemented by lease crude oil acquisition and related trucking
operations. Approximately 171 thousand barrels daily of crude oil were
purchased from third-party leases during 1997. This crude oil is delivered to
various pipelines either directly from the wellhead or utilizing Sunoco
Logistics' fleet of 85 trucks.
During 1997, Sun completed its withdrawal from marine shipping and tug/barge
operations with the sale of its remaining 2 ocean-going tankers and its fleet
of 15 coastal distribution tankers, tugs and barges. Third-party charters are
now utilized to satisfy the Company's marine transportation requirements. Sun
maintains an extensive vessel inspection review and evaluation program to
assure the vessels chartered into Sun service are of appropriate quality.
Product terminalling and transport operations include 39 terminals in the
Northeast and Midwest that support Sun's branded and wholesale marketing
operations, 120 trucks that transport gasoline and distillates and a railroad
fleet of 120 owned and 1,950 leased tank cars that primarily support the
Sunoco Chemicals and Sun Lubricants businesses.
Sun's Nederland, TX terminal provides approximately ten million barrels of
storage and provides terminalling throughput capacity exceeding one million
barrels per day. Its Gulf Coast location provides local and midwestern
refiners access to increasing volumes of foreign and offshore domestic crude
oil. The facility is also a key link in the distribution system for United
States Government purchases for and sales from the Strategic Petroleum Reserve
storage facilities.
13
SUN COKE
Sun Coke's business consists of blast furnace coke manufacturing at the
Company's facilities in Vansant, VA and East Chicago, IN and coal production
from mines in Virginia and Kentucky. Such operations are conducted by Sun Coal
Company and its affiliates.
Sun Coke produces high-quality coke at its 685 thousand ton-per-year
Vansant, VA cokemaking facility using its proprietary heat-recovery cokemaking
technology. This technology, which is environmentally and economically
superior to the chemical by-product technology currently used by other coke
producers, is currently being marketed outside North America through an
exclusive license with Raytheon Engineers and Constructors, Inc.
In 1997, Sun Coke completed construction of 35 coke ovens as the final part
of a program to replace all existing coke ovens in Vansant, VA, with 142 new
ovens. This program has resulted in an improvement in overall cost
efficiencies and an enhancement in coke quality. In 1995, Sun Coke transferred
an interest in the Vansant, VA cokemaking operations to a third party in
exchange for $95 million in cash. The transferee is entitled to a preferential
return from the cash flows of the cokemaking operations until certain
cumulative return targets have been met.
In November 1996, Sun Coke entered into an agreement to construct, own and
operate a $195 million cokemaking facility in East Chicago, IN, which will
produce coke for Inland Steel Company ("Inland") for use at Inland's Indiana
Harbor Works steel plant located adjacent to the new cokemaking facility. The
agreement requires Inland to buy 1.2 million tons of coke annually on a take-
or-pay basis for a period of 15 years commencing after the cokemaking
facility's scheduled first quarter 1998 start-up date. Additional production
of up to 150,000 tons per year will be sold either to Inland or to other steel
producers. The plant will utilize Sun Coke's proprietary heat-recovery
cokemaking technology. In early 1998, Sun transferred an interest in this
operation to a third party in exchange for $200 million in cash. The
transferee is entitled to a preferential return from the cash flows of this
cokemaking operation until certain cumulative return targets have been met.
Sun Coke's principal market for both metallurgical coal and coke is the
domestic steel industry. In 1997, 68 percent of Sun Coke's metallurgical coal
production was converted into coke at its Vansant, VA, cokemaking facility and
32 percent was sold in spot market transactions. During 1997, 89 percent of
Sun Coke's coke sales were made under a long-term contract with a domestic
steel producer which provides for delivery of Sun Coke's entire coke
production from the Vansant, VA cokemaking facility. Coke production totalled
664 thousand tons in 1997, compared to 648 thousand tons in 1996. In 1997,
approximately 91 percent of Sun Coke's bituminous steam coal was sold under
long-term contracts, with the remainder sold in spot market transactions. Sun
Coke's total coal production in 1997 was 3.3 million tons, compared to 4.4
million tons in 1996. Sun Coke's long-term coal and coke sales contracts
generally provide for the periodic adjustment of prices to reflect the
changing costs of labor, equipment and services.
At December 31, 1997, Sun Coke had 124 million tons of estimated coal
reserves classified as proven and probable compared to 132 million tons at
December 31, 1996. Of the reserves at December 31, 1997, 92 percent were
metallurgical coal located in Virginia and 8 percent were bituminous steam
coal located in Kentucky.
Additional information concerning Sun Coke's operations is set forth on page
60 in the Company's 1997 Annual Report to Shareholders.
REAL ESTATE
Sun's real estate business is conducted through Radnor Corporation and its
subsidiaries (collectively, "Radnor"). As of December 31, 1997, Radnor's
remaining portfolio of real estate was located in 6 states and consisted
principally of single-family home, condominium, residential land and business
park developments.
14
As a result of Sun's decision to sell its real estate business through a
program of controlled disposition, such operations have been classified as
operations held for sale in Sun's consolidated financial statements. Since
adoption of the disposition plan in October 1991, Radnor has divested 70
commercial properties, completed 28 housing and land developments and reduced
its total assets by $984 million. Proceeds from these divestments have enabled
Radnor to repay $852 million of related debt during this period, the final
$109 million of which was repaid in 1997. At December 31, 1997, Radnor's total
assets were $73 million. Divestment activities in 1997 included the sale of a
resort hotel located in Florida, a mixed-use development located in New
Jersey, two retail centers located in California and one in Arizona and four
commercial land parcels located in Arizona, Georgia, Pennsylvania and
Virginia. The disposition of Sun's real estate business is expected to be
substantially completed by the end of 1999.
For additional information regarding Sun's real estate operations held for
sale, see Note 2 to the Consolidated Financial Statements in the Company's
1997 Annual Report to Shareholders.
SUN INTERNATIONAL PRODUCTION
During 1996, Sun sold its international oil and gas production business.
Information concerning this sale is presented in Note 2 to the Consolidated
Financial Statements in the Company's 1997 Annual Report to Shareholders.
CANADA (SUNCOR)
During 1995, Sun completed the divestment of its remaining 55-percent
interest in Suncor Inc., a Canadian integrated oil company. Information
concerning this divestment is presented in Note 2 to the Consolidated
Financial Statements in the Company's 1997 Annual Report to Shareholders.
COMPETITION
The refining and marketing business is very competitive. Sun competes with
other domestic refiners and marketers in the northeastern United States and
U.S. Gulf coast, with foreign refiners who import products into the United
States and with producers and marketers in other industries supplying other
forms of energy and fuels to consumers. Several of Sun's principal competitors
are integrated multi-national oil companies that are larger and have
substantially greater resources than Sun. Because of their integrated
operations and larger capitalization, such major oil companies may have
greater flexibility than Sun in responding to volatile industry or market
conditions, such as shortages of feedstocks or intense price fluctuations.
Unlike certain of its competitors that have access to proprietary sources of
controlled crude oil production, Sun must obtain all of its feedstocks from
unaffiliated sources.
Most of the crude oils processed in Sun's refining system are light sweet
crude oils, which historically have been priced higher than alternative heavy
sour crude oils. However, management believes that any potential competitive
impact of Sun's inability to process significant quantities of less expensive
heavy sour crude oils will likely be mitigated by: the higher-value product
slate obtained from light sweet crude oils; the higher cost to process heavy
sour crude oils; and the continued availability of ample quantities of light
sweet crude oils. Sun believes that it is in a position to compete effectively
as a marketer of refined products because of its strong marketing presence in
its principal markets and its considerable distribution flexibility resulting
from the location of its northeast and midwest refineries and retail network
which are well integrated with its distribution system.
Coal mining and cokemaking operations are also highly competitive. Demand
for coke has fallen as domestic steelmaking capacity has declined and
steelmakers have switched to electric arc furnaces and coal injection
production methods. However, Sun anticipates that the supply of coke will
decrease at a faster rate than demand as the inability to meet increasingly
stringent environmental regulations
15
will lead steelmakers and other coke producers to close plants. Sun believes
it is well-positioned to compete with other merchant coke producers since
Sun's proprietary technology allows Sun to construct coke ovens that, compared
to conventional coke ovens, are more environmentally benign, are generally
less costly to build, and can be operated with fewer workers.
Sun does not consider one or a small group of competitors to be dominant in
the refining and marketing and coal and cokemaking industries. The
availability of a ready market for Sun's refined products, as well as its coal
and coke production, depends on numerous external factors, including: the
level of consumer demand; the extent of industry production of refined
products and coal and coke; the import levels of refined products and coal and
coke; the cost and availability of alternative fuels; the cost and proximity
of refineries, pipelines and other transportation facilities that support the
retail gasoline marketing infrastructure; and regulations by federal, state,
local and foreign authorities including those imposed by or resulting from
compliance with applicable environmental laws.
RESEARCH AND DEVELOPMENT
In recent years, Sun's research and development activities have focused on
applied research, process and product development, and engineering and
technical services related to fuels, lubricants and chemicals. Sun spent $5,
$6 and $5 million on research and development activities in 1997, 1996 and
1995, respectively. As of December 31, 1997, approximately 110 scientists,
engineers, technicians and support personnel participated in these activities.
Sun owns or has made application for numerous patents in the U.S.
EMPLOYEES
As of December 31, 1997, Sun had approximately 10,900 employees compared to
approximately 12,150 employees as of December 31, 1996. The decrease in 1997
is primarily attributable to the implementation of an employee termination
program and a decline in the number of individuals employed in company-
operated convenience stores and service stations. The employee terminations
were throughout the organization and included senior management, support staff
and operations personnel. Approximately 40 percent of Sun's employees are
employed in company-operated convenience stores and service stations. The
above amounts exclude employees of real estate operations held for sale
totalling 39 in 1997 and 337 in 1996. Approximately 25 percent of Sun's
employees were covered by 42 collective bargaining agreements as of December
31, 1997. The collective bargaining agreements have various terms and dates of
expiration. In management's opinion, Sun's relationship with its employees is
generally satisfactory.
ENVIRONMENTAL MATTERS
Sun is subject to numerous federal, state and local 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. The following table summarizes Sun's expenditures for environmental
projects and compliance activities (in millions of dollars):
1997 1996 1995
---- ---- ----
Pollution Abatement Capital*................................. $ 23 $ 29 $ 60
Remediation.................................................. 38 37 48
Operations, Maintenance and Administration................... 188 185 238
---- ---- ----
$249 $251 $346
==== ==== ====
- --------
*Capital expenditures for pollution abatement are expected to approximate $35
and $34 million in 1998 and 1999, respectively.
16
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 also requires refiners to market cleaner-burning
gasoline that reduces emissions of certain toxics and conventional pollutants.
The Company has implemented the first phase of the reformulated gasoline
regulations which requires an increase in the minimum quantity of oxygen for
certain non-attainment areas, a reduction in benzene content, and a reduction
in summertime Reid Vapor Pressure ("RVP"). Sun expects to implement the next
more stringent phases of these regulations in 1998 and 2000 with modest
capital investment.
The Comprehensive Environmental Response Compensation and Liability Act
("CERCLA") and the Solid Waste Disposal Act as amended by the Resource
Conservation and Recovery Act ("RCRA"), and related federal and 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 and at third-party or formerly-owned 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, 1997, Sun had been named as a
PRP at 44 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 various environmental laws, including RCRA, Sun has initiated
corrective remedial action at Sun's facilities, formerly-owned facilities and
third-party sites and could be required to undertake similar actions at
various other sites. 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. For a discussion of the accrued
liabilities and charges against income related to these activities, see Note
13 to the Consolidated Financial Statements in the Company's 1997 Annual
Report to Shareholders.
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 ultimate outcome of this
litigation, which may be protracted.
Total future costs for environmental remediation activities will depend
upon, among other things, the identification of any additional sites, the
determination of the extent of the contamination of each site, the timing and
nature of required remedial actions, the technology available and needed to
meet the various existing 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 level and
financial viability of other parties.
Management believes that the overall expenditures 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 provided by
operating activities. Although potentially significant with respect to results
of operations or cash flows for any one year, management believes that such
costs will not have a material impact on Sun's consolidated financial position
or, over an extended period of time, on Sun's cash flows or liquidity.
17
ITEM 3. LEGAL PROCEEDINGS
In December 1997, Sun Company, Inc. (R&M) agreed to make combined payments
of $500,000 to the City of Philadelphia and certain community environmental
projects, pursuant to a Consent Decree lodged in the United States District
Court for the Eastern District of Pennsylvania. This Consent Decree settles
allegations, made by the Community/Labor Refinery Tracking Committee under the
citizen suit provisions of the Clean Air Act, of violations of various
federal, state, and local clean air regulations.
In December 1997, Sun Company, Inc. (R&M) agreed to pay $100,000 in civil
fines and to undertake certain corrective actions pursuant to a Consent Order
entered by the United States District Court for the Northern District of
Oklahoma. This agreement between Sun Company, Inc. (R&M) and the United States
Environmental Protection Agency (acting through the United States Department
of Justice) stems from alleged violations of the Clean Air Act and the
Oklahoma State Implementation Program.
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 December 31, 1997.
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., 55 Mr. Aiken was elected to his present position in November
Executive Vice 1996. From May 1992 until November 1996, he was Senior Vice
President and Chief President and Chief Financial Officer.
Financial Officer
Robert H. Campbell, 60 Mr. Campbell was elected Chairman of the Board in May 1992
Chairman of the Board and Chief Executive Officer in September 1991. He also held
and Chief Executive the additional positions of President and Chief Operating
Officer Officer from February 1991 until November 1996. He has been
a Director since November 1988.
John G. Drosdick, 54 Mr. Drosdick was elected a Director and President and Chief
President and Chief Operating Officer in December 1996. He was President and
Operating Officer Chief Operating Officer of Ultramar Corporation (prior to
its merger with Diamond Shamrock, Inc. to become Ultramar
Diamond Shamrock Corporation) from June 1992 to August 1996.
Jack L. Foltz, 62 Mr. Foltz was elected to his present position in October
Vice President and 1992.
General Counsel
Deborah M. Fretz, 49 Ms. Fretz was elected Senior Vice President, Logistics in
Senior Vice President, August 1994. She assumed the additional position of Senior
Lubricants and Vice President, Lubricants in January 1997. In addition, she
Logistics has been President of Sun Pipe Line Company, a subsidiary,
since October 1991.
18
NAME, AGE AND
PRESENT POSITION
WITH SUN COMPANY,
INC. BUSINESS EXPERIENCE DURING PAST FIVE YEARS
- ----------------- ------------------------------------------
Thomas W. Hofmann, 46 Mr. Hofmann was elected to his present position in July
Comptroller 1995. From September 1994 to July 1995, he served as Direc-
tor, Performance Analysis, and from October 1991 to Septem-
ber 1994, Director, Tax Administration.
David E. Knoll, 54 Mr. Knoll was elected to his present position in August
Senior Vice President, 1994. He was Senior Vice President, Marketing and Logistics
Northeast Refining and from October 1992 to August 1994.
Chemicals
Robert W. Owens, 44 Mr. Owens was elected to his present position in February
Vice President and 1997. He was Vice President, Marketing and Services of
General Manager, Ultramar Diamond Shamrock Corporation from 1996 to 1997 and
Sunoco Northeast of Ultramar Corporation from 1994 to 1996. From 1989 to
Marketing 1994, he was Manager, East Coast Branded Marketing of
Amerada Hess Corporation.
Malcolm I. Ruddock, 55 Mr. Ruddock was elected to his present position in 1989.
Treasurer
David C. Shanks, 58 Mr. Shanks was elected to his present position in February
Vice President, Human 1997. Previously, he was a Corporate Vice President of Ar-
Resources, Public thur D. Little, Inc.
Affairs & Strategic
Planning
Sheldon L. Thompson, 59 Mr. Thompson was elected to his present position in October
Senior Vice President 1992.
and Chief
Administrative Officer
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated herein by reference to
the Quarterly Financial and Stock Market Information on page 61 of the
Company's 1997 Annual Report to Shareholders. The market exchanges on which
the Company's stock is traded are listed on the cover page of this Annual
Report on Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated herein by reference to
the Selected Financial Data on page 27 of the Company's 1997 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 28-40 in the Company's 1997 Annual Report to Shareholders.
19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following information in the Company's 1997 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 45-58; the Report of Independent Auditors on page 59; the Coal and
Cokemaking Data on page 60; and the Quarterly Financial and Stock Market
Information on page 61.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information on directors required by Items 401 and 405 of Regulation S-K
is incorporated herein by reference to the Company's definitive Proxy
Statement ("Proxy Statement") which will be filed with the Securities and
Exchange Commission ("SEC") within 120 days after December 31, 1997.
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 Item 402 of Regulation S-K is incorporated
herein by reference to the Company's Proxy Statement which will be filed with
the SEC within 120 days after December 31, 1997, except that the Report of the
Compensation Committee and the Stock Performance Graph contained in the Proxy
Statement are specifically excluded from incorporation by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 403 of Regulation S-K is incorporated
herein by reference to the Company's Proxy Statement which will be filed with
the SEC within 120 days after December 31, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 404 of Regulation S-K is incorporated
herein by reference to the Company's Proxy Statement which will be filed with
the SEC within 120 days after December 31, 1997.
20
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 1997 Annual Report to
Shareholders as described in Item 8 is incorporated herein by
reference.
2. Financial Statement Schedules:
Schedule II--Valuation Accounts is included on page 26 of this Form
10-K. Other schedules are omitted because the required information is
shown elsewhere in this report, is not required or is not applicable.
3. Exhibits:
3.(i) --Articles of Incorporation of Sun Company, Inc., as amended and
restated effective as of February 1, 1996 (incorporated by
reference to Exhibit 3.(i) of the Company's 1995 Form 10-K
filed March 7, 1996, File No. 1-6841).
3.(ii) --Sun Company, Inc. Bylaws, as amended and restated effective as
of February 1, 1996 (incorporated by reference to Exhibit
3.(ii) of the Company's 1995 Form 10-K filed March 7, 1996,
File No. 1-6841).
4.1 --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.
4.2 --Amendment to Rights Agreement dated as of July 3, 1997 between
Sun Company, Inc. and First Chicago Trust Company of New York
(incorporated by reference to Exhibit 4 of the Company's
Current Report on Form 8-K dated July 8, 1997, File No. 1-
6841).
4.3 --Rights Agreement between Sun Company, Inc. and First Chicago
Trust Company of New York dated as of February 1, 1996
(incorporated by reference to Exhibit 99(b) of the Company's
Current Report on Form 8-K dated February 2, 1996, File No. 1-
6841).
10.1* --Sun Company, Inc. Long-Term Performance Enhancement Plan, as
amended and restated effective as of December 3, 1997.
10.2* --Sun Company, Inc. Executive Long-Term Stock Investment Plan,
as amended and restated effective as of December 3, 1997.
10.3* --Sun Company, Inc. Long-Term Incentive Plan, as amended and
restated effective as of December 3, 1997.
10.4* --Sun Company, Inc. Directors' Deferred Compensation Plan, as
amended and restated effective as of October 2, 1997.
10.5* --Sun Company, Inc. Deferred Compensation Plan, as amended and
restated effective as of March 4, 1998.
21
10.6* --Amendment No. 1997-1 to the Sun Company, Inc. Pension
Restoration Plan, effective September 1, 1997. The Sun Company,
Inc. Pension Restoration Plan (prior to Amendment No. 1997-1) is
incorporated by reference to Exhibit 10.5 of the Company's 1995
Form 10-K filed March 7, 1996, File No. 1-6841.
10.7* --Amendment No. 1997-1 to the Sun Company, Inc. Savings
Restoration Plan, effective September 1, 1997. The Sun Company
Inc. Savings Restoration Plan (prior to Amendment No. 1997-1) is
incorporated by reference to Exhibit 10.7 of the Company's 1995
Form 10-K filed March 7, 1996, File No. 1-6841.
10.8* --Sun Company, Inc. Executive Incentive Plan, as amended and
restated effective March 4, 1998.
10.9* --Amendment No. 1997-1 to the Sun Company, Inc. Executive
Retirement Plan, effective September 1, 1997. The Sun Company,
Inc. Executive Retirement Plan (prior to Amendment No. 1997-1)
is incorporated by reference to Exhibit 10(d) of the Company's
Form SE filed March 13, 1992, File No. 1-6841.
10.10* --Sun Company, Inc. Special Executive Severance Plan, effective
as of September 4, 1997.
10.11* --Sun Company, Inc. Executive Involuntary Severance Plan, as
amended and restated effective as of September 4, 1997.
10.12* --Sun Company, Inc. Retainer Stock Plan for Outside Directors
(incorporated by reference to Exhibit 10.9 of the Company's 1995
Form 10-K filed March 7, 1996, File No. 1-6841).
10.13* --Amended Schedule to the Form of Indemnification Agreement,
individually entered into between Sun Company, Inc. and certain
officers and directors of the Company. The Form of
Indemnification Agreement is incorporated by reference to
Exhibit 10.15 of the Company's 1995 Form 10-K filed March 7,
1996, File No. 1-6841).
10.14* --Deposit Agreement for Series A Cumulative Preference Stock
(incorporated by reference to Exhibit 99(g)(4) of the Sun
Company, Inc. Schedule 13E-4 filed June 13, 1995, File No. 1-
6841).
10.15* --Trust Under Sun Company, Inc. Directors' Deferred Compensation
Plan dated as of February 1, 1996 (incorporated by reference to
Exhibit 10.12 of the Company's 1996 Form 10-K filed March 7,
1997, File No. 1-6841).
10.16* --Sun Company, Inc. Deferred Compensation and Benefits Trust
dated as of February 1, 1996 (incorporated by reference to
Exhibit 10.13 of the Company's Form 10-K filed March 7, 1997,
File No. 1-6841).
10.17* --Agreement of employment entered November 15, 1996 by and
between Sun Company, Inc. and John G. Drosdick (incorporated by
reference to Exhibit 10.14 of the Company's 1996 Form 10-K filed
March 7, 1997, File No. 1-6841).
10.18* --Amendment No. 1998-1 to the Sun Company, Inc. Executive
Retirement Plan, effective January 1, 1998.
10.19* --Amendment No. 1998-2 to the Sun Company, Inc. Executive
Retirement Plan, effective March 1, 1998.
12 --Statement re Sun Company, Inc. and Subsidiaries Computation of
Ratio of Earnings to Fixed Charges for the Year Ended December
31, 1997.
13 --Sun Company, Inc. 1997 Annual Report to Shareholders Financial
Section.
21 --Subsidiaries of Sun Company, Inc.
23.1 --Consent of Ernst & Young LLP.
22
23.2 --Consent of Coopers & Lybrand L.L.P.
23.3 --Report of Coopers & Lybrand L.L.P.
24.1 --Power of Attorney executed by certain officers and directors of
Sun Company, Inc.
24.2 --Certified copy of the resolution authorizing certain officers to
sign on behalf of Sun Company, Inc.
27 --Article 5 of Regulation S-X, Financial Data Schedule.
- --------
*These exhibits constitute the Executive Compensation Plans and Arrangements
of the Company.
(b) Reports on Form 8-K:
On October 15, 1997, a report on Form 8-K was filed to disclose under Item
5--"Other Events" and Item 7--"Financial Statements and Exhibits," a press
release issued by the Company on October 14, 1997 projecting an increase in
third quarter 1997 operating income and reporting the results of a previously
announced share repurchase program.
Note: Copies of each Exhibit to this Form 10-K are available upon request, at
$2 per copy.
23
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.
Executive Vice President and Chief Financial Officer
Date March 6, 1998
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 6, 1998:
SIGNATURES TITLES
Robert M. Aiken, Jr.* Executive Vice President and
--------------------- Chief Financial Officer
Robert M. Aiken, Jr. (Principal Financial
Officer)
Robert H. Campbell* Chairman of the Board, Chief
------------------- Executive Officer and Director
Robert H. Campbell (Principal Executive Officer)
Raymond E. Cartledge* Director
---------------------
Raymond E. Cartledge
Robert E. Cawthorn* Director
-------------------
Robert E. Cawthorn
John G. Drosdick* President, Chief Operating
----------------- Officer and Director
John G. Drosdick
Mary J. Evans* Director
--------------
Mary J. Evans
Thomas P. Gerrity* Director
------------------
Thomas P. Gerrity
Thomas W. Hofmann* Comptroller
------------------ (Principal Accounting
Thomas W. Hofmann Officer)
James G. Kaiser* Director
----------------
James G. Kaiser
24
SIGNATURES TITLES
Robert D. Kennedy* Director
------------------
Robert D. Kennedy
R. Anderson Pew* Director
----------------
R. Anderson Pew
William F. Pounds* Director
------------------
William F. Pounds
Alexander B. Trowbridge* Director
------------------------
Alexander B. Trowbridge
*By /s/Robert M. Aiken, Jr. Individually and as Attorney-in-Fact
-----------------------
Robert M. Aiken, Jr.
25
SUN COMPANY, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(MILLIONS OF DOLLARS)
ADDITIONS
-------------------
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER AT END
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
---------- ---------- -------- ---------- ---------
For the year ended
December 31, 1997:
Deducted from asset in
balance sheet--allowance
for doubtful accounts
and notes receivable.... $ 8 $ 6 $-- $ 8 $ 6
=== === === === ===
For the year ended
December 31, 1996:
Deducted from asset in
balance sheet--allowance
for doubtful accounts
and notes receivable.... $18 $ 8 $-- $18 $ 8
=== === === === ===
For the year ended
December 31, 1995:
Deducted from asset in
balance sheet--allowance
for doubtful accounts
and notes receivable.... $10 $ 8 $11(A) $11(B) $18
=== === === === ===
- --------
Notes:
(A) Represents the account balance, at June 30, 1995, of Sun's coal and
cokemaking operations which previously had been accounted for as an
investment held for sale. Effective June 30, 1995, this business became
one of Sun's ongoing business units and is no longer held for sale. (See
Note 2 to the Consolidated Financial Statements in the Company's 1997
Annual Report to Shareholders.)
(B) Includes a $4 million deduction attributable to the refining and marketing
operations of Suncor Inc., a Canadian integrated oil company, reflecting
the divestment of Suncor on June 8, 1995. (See Note 2 to the Consolidated
Financial Statements in the Company's 1997 Annual Report to Shareholders.)
26
EXHIBIT INDEX
Exhibit
Number Exhibit
- -------
3.(i) - Articles of Incorporation of Sun Company, Inc., as amended and
restated effective as of February 1, 1996 (incorporated by
reference to Exhibit 3.(i) of the Company's 1995 Form 10-K filed
March 7, 1996, File No. 1-6841).
3.(ii) - Sun Company, Inc. Bylaws, as amended and restated effective as of
February 1, 1996 (incorporated by reference to Exhibit 3.(ii) of
the Company's 1995 Form 10-K filed March 7, 1996, File No. 1-
6841).
4.1 - 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.
4.2 - Amendment to Rights Agreement dated as of July 3, 1997 between
Sun Company, Inc and First Chicago Trust Company of New York
(incorporated by reference to Exhibit 4 of the Company's Current
Report on Form 8-K dated July 8, 1997, File No. 1-6841).
4.3 - Rights Agreement between Sun Company, Inc. and First Chicago
Trust Company of New York dated as of February 1, 1996
(incorporated by reference to Exhibit 99(b) of the Company's
Current Report on Form 8-K dated February 2, 1996, File No. 1-
6841).
10.1* - Sun Company, Inc. Long-Term Performance Enhancement Plan, as
amended and restated effective as of December 3, 1997.
10.2* - Sun Company, Inc. Executive Long-Term Stock Investment Plan, as
amended and restated effective as of December 3, 1997.
10.3* - Sun Company, Inc. Long-Term Incentive Plan, as amended and
restated effective as of December 3, 1997.
10.4* - Sun Company, Inc. Directors' Deferred Compensation Plan, as
amended and restated effective as of October 2, 1997.
10.5* - Sun Company, Inc. Deferred Compensation Plan, as amended and
restated effective as of March 4, 1998.
2
Exhibit
Number Exhibit
- ------- -------
10.6* - Amendment No. 1997-1 to the Sun Company, Inc. Pension Restoration
Plan, effective September 1, 1997. The Sun Company, Inc. Pension
Restoration Plan (prior to Amendment No. 1997-1) is incorporated
by reference to Exhibit 10.5 of the Company's 1995 Form 10-K
filed March 7, 1996, File No. 1-6841.
10.7* - Amendment No. 1997-1 to the Sun Company, Inc. Savings Restoration
Plan, effective September 1, 1997. The Sun Company Inc. Savings
Restoration Plan (prior to Amendment No. 1997-1) is incorporated
by reference to Exhibit 10.7 of the Company's 1995 Form 10-K
filed March 7, 1996, File No. 1-6841.
10.8* - Sun Company, Inc. Executive Incentive Plan, as amended and
restated effective March 4, 1998.
10.9* - Amendment No. 1997-1 to the Sun Company, Inc. Executive
Retirement Plan, effective September 1, 1997. The Sun
Company, Inc. Executive Retirement Plan (prior to Amendment
No. 1997-1) is incorporated by reference to Exhibit 10(d) of
the Company's Form SE filed March 13, 1992, File No. 1-6841.
10.10* - Sun Company, Inc. Special Executive Severance Plan, effective as
of September 4, 1997.
10.11* - Sun Company, Inc. Executive Involuntary Severance Plan, as
amended and restated effective as of September 4, 1997.
10.12* - Sun Company, Inc. Retainer Stock Plan for Outside Directors
(incorporated by reference to Exhibit 10.9 of the Company's 1995
Form 10-K filed March 7, 1996, File No. 1-6841).
10.13* - Amended Schedule to the Form of Indemnification Agreement,
individually entered into between Sun Company, Inc. and certain
officers and directors of the Company. The Form of
Indemnification Agreement is incorporated by reference to Exhibit
10.15 of the Company's 1995 Form 10-K filed March 7, 1996, File
No. 1-6841).
10.14* - Deposit Agreement for Series A Cumulative Preference Stock
(incorporated by reference to Exhibit 99(g)(4) of the Sun
Company, Inc. Schedule 13E-4 filed June 13, 1995, File No. 1-
6841).
3
Exhibit
Number Exhibit
- ------- -------
10.15* - Trust Under Sun Company, Inc. Directors' Deferred Compensation
Plan dated as of February 1, 1996 (incorporated by reference to
Exhibit 10.12 of the Company's 1996 Form 10-K filed March 7,
1997, File No. 1-6841).
10.16* - Sun Company, Inc. Deferred Compensation and Benefits Trust dated
as of February 1, 1996 (incorporated by reference to Exhibit
10.13 of the Company's Form 10-K filed March 7, 1997, File No. 1-
6841).
10.17* - Agreement of employment entered November 15, 1996 by and between
Sun Company, Inc. and John G. Drosdick (incorporated by reference
to Exhibit 10.14 of the Company's 1996 Form 10-K filed March 7,
1997, File No. 1-6841).
10.18* - Amendment No. 1998-1 to the Sun Company, Inc. Executive
Retirement Plan, effective January 1, 1998.
10.19* - Amendment No. 1998-2 to the Sun Company, Inc. Executive
Retirement Plan, effective March 1, 1998.
12 - Statement re Sun Company, Inc. and Subsidiaries Computation of
Ratio of Earnings to Fixed Charges for the Year Ended December
31, 1997.
13 - Sun Company, Inc. 1997 Annual Report to Shareholders Financial
Section.
21 - Subsidiaries of Sun Company, Inc.
23.1 - Consent of Ernst & Young LLP.
23.2 - Consent of Coopers & Lybrand L.L.P.
23.3 - Report of Coopers & Lybrand L.L.P.
24.1 - Power of Attorney executed by certain officers and directors of
Sun Company, Inc.
24.2 - Certified copy of the resolution authorizing certain officers to
sign on behalf of Sun Company, Inc.
27 - Article 5 of Regulation S-X, Financial Data Schedule.
- ------------
*These exhibits constitute the Executive Compensation Plans and
Arrangements of the Company.