SUN INCOME UP SHARPLY IN FIRST QUARTER
RADNOR, Pa., April 22 /PRNewswire/ -- Sun Company, Inc. (NYSE: SUN) today reported first quarter 1993 net income of $40 million ($.37 per share), versus a net loss of $282 million ($2.66 per share) in the year- ago quarter. Operating income was $35 million ($.32 per share) in the current quarter, up dramatically from an operating loss of $20 million ($.19 per share) in the 1992 first quarter. It also marked the fifth straight quarter of improvement in operating income for Sun. Sun Chairman and CEO Robert H. Campbell attributed the $55 million increase in operating income to: -- elimination of losses from international exploration; -- increased income from international production; -- improved margins on "bottom of the barrel" products; -- lower expenses, and -- higher earnings at Suncor, Sun's 68-percent-owned Canadian subsidiary. "We are definitely seeing the benefits of our recent restructuring," Campbell said, "especially the impact of withdrawing from international exploration activities and the reconfiguration of our Tulsa and Puerto Rico refineries to emphasize lubricants production." Sun announced in October 1992 that it would focus on its value-added businesses -- branded gasoline marketing in the Northeast, lubricants, chemicals, and logistics. Campbell confirmed the company's continuing confidence in that strategy, while acknowledging that gasoline margins remain weak. He also noted that activities during the quarter in pursuit of the strategy included the acquisition of 23 gasoline outlets in Massachusetts, the purchase of a 126-mile crude oil pipeline in Ohio and Michigan, and an agreement to sell the company's Cordero Mining Company in Wyoming to Kennecott Corp. for $120.5 million. FIRST QUARTER INCOME BY SEGMENT Fuels Sun's domestic fuels business reduced its loss from $28 million in the 1992 first quarter to $12 million in the first quarter of 1993. The majority of the improvement was in wholesale fuels, which reduced its loss from $43 million in the 1992 first quarter to $31 million in the current quarter. Income from branded marketing operations increased from $15 million in the year-ago quarter to $19 million in the first quarter of 1993. Wholesale margins on residual fuel and asphalt improved, and distillate fuel margins rose late in the quarter due to unseasonably cold weather in the Northeastern United States. However, wholesale gasoline margins were down somewhat from the year-ago quarter. Retail gasoline margins improved, but sales volumes were lower, largely due to Sun's decision to withdraw from branded gasoline marketing in Oklahoma, Missouri, and Iowa. This volume decline was partially offset by increases from Sun's winning the contract to operate the 13 high-volume service stations on the New Jersey Turnpike. Lubricants Results from Sun's lubricants business increased by $4 million over the 1992 first quarter. Income from sales of lubricants was $19 million in the current quarter, unchanged from a year ago. However, losses from related fuels operations were reduced from $17 million in the 1992 period to $13 million in the 1993 first quarter, due largely to improved margins on residual fuel at Puerto Rico, partially offset by deteriorating fuels margins at Tulsa. Chemicals Chemicals income fell from $9 million in the 1992 first quarter to $7 million in the 1993 first quarter. The decline was caused by weak market conditions. Logistics Logistics income of $10 million was unchanged from the 1992 quarter. Suncor Suncor, Sun's 68-percent-owned, fully integrated Canadian subsidiary, earned $6 million during the current quarter versus a loss of $1 million from the 1992 first quarter. The increase was primarily due to higher income from Suncor's Oil Sands Group, which benefitted from a four percent increase in synthetic crude oil prices and a decline in depreciation expense. Oil sands production averaged 57,000 barrels a day for the first quarter of 1993 -- a decline of 9 percent from the year-ago period -- due to a partial freeze-up of the plant in late December. However, the adverse impact of the decline was largely offset by a reduction in operating costs. Campbell said the Oil Sands Group expects to meet its 1993 production target of 59,000 barrels per day despite the freeze-up and a planned second-quarter maintenance turnaround that will shut the plant down for approximately one month. He also said that Suncor is making significant progress in implementing the fundamental changes to its oil sands business announced last fall. "Phasing in of the new truck-and-shovel mining system is approximately six months ahead of schedule," he said. "It should be up and running by the end of this year." He said Suncor has also signed an agreement with Canadian Utilities Limited to work towards jointly developing and operating a new utilities plant for the oil sands operation. International Exploration and Production Income from Sun's international exploration and production business was $25 million for the first quarter of 1993, up sharply from break even during the 1992 first quarter. The elimination of exploration-related costs accounted for $15 million of the increase. Income from production activities increased by $10 million versus the 1992 first quarter. Gains from lower depreciation expense, lower costs and operating expenses, and a lower effective tax rate were partially offset by lower crude oil production volumes and a decline in natural gas prices due largely to the weakening of the British pound. The production declines were the result of operating problems at the Glamis production facility in the British North Sea and planned maintenance activities on the Balmoral platform, also in the North Sea. Foreign exchange gains contributed $4 million after-tax to production income in both the 1993 and 1992 first quarters. Corporate and Other Net financing expenses were $5 million lower, primarily due to the $3 million after-tax gain on the sale of an equity investment and increased capitalized interest during the first quarter of 1993. There were no significant changes within Corporate administrative expenses. Sun's coal operations are now carried as a discontinued operation. Campbell noted that, during the quarter, Sun made progress toward its
strategic decision of exiting the coal business by signing an agreement to sell Cordero Mining Co. to Kennecott Corporation for $120.5 million. Cordero Mining operates the seventh largest coal mine in the United States, located in the Powder River Basin of Wyoming. The sale is expected to close in the second quarter of 1993.
Sun's first quarter 1993 net income includes a $5 million tax benefit related to the adoption of Statement of Financial Accounting Standards No. 109, which changes the method of accounting for deferred income taxes. The 1992 first quarter results include an after-tax charge of $261 million resulting from the adoption of a new accounting standard (SFAS No. 106), which changes the method of accounting for postretirement health care and life insurance benefits. Campbell said Sun has made changes to its retiree medical benefits that will cap the company's contribution at twice the current amount. He said the changes are expected to reduce the accumulated postretirement benefit obligation by approximately $100 million and reduce postretirement expense by approximately $20 million on an annualized basis, beginning in the second quarter. The first quarter 1992 results also include an $8 million after-tax loss from a secondary offering of four million shares of Suncor common stock. Revenues Revenues were $2.3 billion for the 1993 first quarter, vs $2.4 billion a year ago. SUN COMPANY, INC. 1993 First Quarter Financial Summary First Quarter 1993 1992 Revenues $2,304,000,000 $2,434,000,000 Income (Loss) from Continuing Operations before Cumulative Effect of Change in Accounting Principle $35,000,000 $(28,000,000) Net Income (Loss) $40,000,000 $(282,000,000) Income (Loss) per Share of Common Stock from Continuing Operations before Cumulative Effect of Change in Accounting Principle $.32 $(.26) Net Income (Loss) per Share of Common Stock $.37 $(2.66) Weighted Average Number of Common Shares Outstanding (In Thousands) 106,443 106,114 SUN COMPANY, INC. Earnings Profile of Sun Businesses (after tax) (Millions of Dollars) Three Months Ended March 31 1993 1992(A) Variance FUELS Wholesale Fuels $(31) $(43) $ 12 Branded Marketing 19 15 4 LUBRICANTS Lubes 19 19 -- Related Fuels (13) (17) 4 CHEMICALS 7 9 (2) LOGISTICS 10 10 -- INTERNATIONAL EXPLORATION AND PRODUCTION Exploration -- (15) 15 Production 25 15 10 CANADA (SUNCOR) Exploration and Production 1 (1) 2 Oil Sands 6 1 5 Refining and Marketing 3 2 1 Corporate Expenses(B) (3) (2) (1) Net Financing Expenses (1) (1) -- Total Canada (Suncor) 6 (1) 7 CORPORATE Corporate Expenses (4) (4) -- Net Financing Expenses (3) (8) 5 Total 35 (20) 55 LOSS ON SALE OF SUNCOR STOCK -- (8) 8 INCOME FROM DISCONTINUED COAL OPERATIONS -- 7 (7) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE(C) 5 (261) 266 CONSOLIDATED NET INCOME (LOSS) $40 $(282) $322 NET INCOME (LOSS) PER SHARE OF COMMON STOCK $.37 $(2.66) (A) Restated to conform to 1993 presentation. (B) Includes consolidation adjustments. (C)Includes impact of the cumulative effect of a change in the method of accounting for income taxes in 1993 and a change in the method of accounting for postretirement health care and life insurance benefits in 1992. SUN COMPANY, INC. Earnings Profile of Sun Businesses (after tax) (Millions of Dollars) 1992(A) 1993 1st 2nd 3rd 4th Total 1st FUELS Wholesale Fuels $ (43) $ (1) $ (15) $(32)$ (91) (31) Branded Marketing 15 5 26 30 76 19 LUBRICANTS Lubes 19 19 16 9 63 19 Related Fuels (17) (15) (12) (10) (54) (13) CHEMICALS 9 11 8 0 28 7 LOGISTICS 10 12 16 9 47 10 INTERNATIONAL EXPLORATION AND PRODUCTION Exploration (15) (11) (15) 0 (41) -- Production 15 1 4 30 50 25 CANADA (SUNCOR) Exploration and Production (1) 1 1 6 7 1 Oil Sands 1 (7) 6 9 9 6 Refining and Marketing 2 1 1 (2) 2 3 Corporate Expenses (2) (2) (3) (3) (10) (3) Net Financing Expenses (1) (1) (1) -- (3) (1) Total Canada (Suncor) (1) (8) 4 10 5 6 CORPORATE Corporate Expenses (4) (5) (7) (3) (19) (4) Net Financing Expenses (8) (8) (8) (10) (34) (3) Total (20) 0 17 33 30 35 LOSS ON SALE OF SUNCOR STOCK (8) -- -- -- (8) -- IRANIAN LITIGATION SETTLEMENT -- -- 117 -- 117 -- PROVISION FOR WRITE- DOWN OF ASSETS -- -- (456) -- (456) -- AND OTHER MATTERS INCOME FROM DISCONTINUED COAL OPERATIONS 7 6 2 4 19 -- CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (261) -- -- -- 261) 5 CONSOLIDATED NET INCOME (LOSS) $(282) $ 6 $(320) $ 37 $(559) $ 40 NET INCOME (LOSS) PER SHARE OF COMMON STOCK $(2.66) $.06 $(3.01) $.35$(5.26) $.37 (A) Restated to conform to 1993 presentation. SUN COMPANY, INC. Quarterly Financial and Operating Statistics (Preliminary) For the Quarter Ended March 31 1993 1992 REFINING AND MARKETING Input to Crude Units (Thousand Barrels Daily) 483.8 513.4 Refining Input as Percent of Rated Capacity 81 86 Sales of Refined Products (Thousand Barrels Daily): Gasoline 277.0 304.4 Middle Distillates 178.9 179.4 Residual Fuel 42.6 59.5 Petrochemicals 27.8 28.1 Lubricants 16.4 17.8 Asphalt 14.7 12.1 Propane 11.6 14.5 Other 21.2 25.7 Total 590.2 641.5 INTERNATIONAL EXPLORATION AND PRODUCTION Net Production of Crude Oil and Condensate (Thousand Barrels Daily) 36.4 47.0 Average Price (Per Barrel) $16.71 $17.16 Natural Gas-North Sea (Million Cubic Feet Daily) 76 70 Average Price (Per Thousand Cubic Feet) $2.61 $3.71 Exploration Expenses (Millions of Dollars) --- $17(A) (A) Reflects exploration expenses prior to the Company's decision to withdraw from oil and gas exploration activities outside of Canada, effective September 30, 1992. SUN COMPANY, INC. Quarterly Financial and Operating Statistics (Preliminary) continued For the Quarter Ended March 31 1993 1992 CANADA (SUNCOR) Net Production of Crude Oil and Condensate (Thousand Barrels Daily) 9.7 9.9 Average Price (Per Barrel) $16.23 $15.61 Natural Gas
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|Date:||Apr 22, 1993|
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