News Release

Murphy USA Inc. Reports Second Quarter 2017 Results

El Dorado, Arkansas, August 2, 2017 - Murphy USA Inc. (NYSE: MUSA), a leading marketer of retail motor fuel products and convenience merchandise, today announced financial results for the three and six months ended June 30, 2017.

Key Highlights:

  • Net income was $55.6 million, or $1.51 per diluted share in Q2 2017 compared to net income of $46.3 million, or $1.17 per diluted share, in Q2 2016
     
  • Total fuel contribution (retail fuel margin plus product supply and wholesale ("PS&W") results including RINS) for Q2 2017 was 18.1 cpg compared to 16.8 cpg in Q2 2016
     
  • Total retail gallons grew 2.5% to 1.06 billion gallons for the network during Q2 2017 while volumes on an average per store month ("APSM") basis declined 2.0% versus prior year quarter and retail fuel margins averaged 16.6 cpg versus 10.8 cpg
     
  • Merchandise contribution dollars grew 5.5% during the quarter to $97.7 million, achieving a record unit margin of 16.1%
     
  • Five new stores opened during the quarter, 12 raze-and-rebuild sites reopened, with new and raze-and-rebuild construction in progress at 26 locations as of today and seven sites opened since quarter end
     
  • Common shares repurchased during the second quarter were approximately 726,000 for $49 million at an average price of $67 per share under the February 2016 program authorizing up to $500 million in repurchases, leaving $110 million of authority remaining.  YTD 2017 common share repurchases total 994,000 shares for $66 million at an average price of $67 per share.

"Our strong results in the second quarter demonstrate the substantial earnings power of our low cost, high volume business model during periods of favorable retail fuel margins," said President and CEO Andrew Clyde.  "Meanwhile, our merchandise profits are accelerating while per-store operating costs continue to decline, creating further upside operating leverage while reducing the Company's earnings volatility during periods of challenging fuel margins. Midstream conditions improved during the second quarter as the RIN market returned to an equilibrium status after regulatory clarity emerged, although PS&W contribution remains pressured by an oversupplied market and depressed rack prices." Clyde concluded, "With our debt issuance, 29% earnings per share growth, and further execution on our improvement initiatives during the quarter, we continue to optimize and improve operating and financial leverage for the benefit of shareholders."

Consolidated Results

  Three Months Ended   Six Months Ended
  Jun 30, Jun 30,
Key Operating Metrics 2017   2016   2017   2016
Net income ($ Millions) $55.6   $46.3   $52.5   $132.2
Earnings per share (diluted) $1.51   $1.17   $1.42   $3.26
Adjusted EBITDA ($ Millions) $129.1   $108.6   $159.5   $191.6

Net income, adjusted EBITDA and earnings per share all improved Q2 2017 versus Q2 2016 period due to higher total fuel margins, higher network fuel volumes, and increased merchandise margins. Adjusted EBITDA generated in the first half of 2017 was below the first half of 2016 due primarily to lower total fuel margins, while net income and earnings per share declines over the period were also driven by the $56 million gain recognized from the CAM pipeline sale during Q1 2016.

Fuel

  Three Months Ended  Jun 30,   Six Months Ended  Jun 30,
Key Operating Metrics 2017   2016   2017   2016
Total retail fuel contribution ($ Millions) $176.0   $112.0   $278.1   $224.0
Total fuel contribution (retail, PS&W and RINs) (cpg) 18.1   16.8   14.2   15.4
Retail fuel volume - chain (Million gal) 1,059.5   1,033.3   2,072.9   2,040.5
Retail fuel volume - per site (K gal APSM) 253.3   258.6   248.2   255.3
Retail fuel margin (cpg excl credit card fees) 16.6   10.8   13.4   11.0
PS&W plus RINs contribution (cpg) 1.5   5.9   0.8   4.5

Total fuel contribution dollars increased 10.8% in Q2 2017 due primarily to higher retail margins, offset by lower year-over-year contribution from PS&W plus RINs.

Total retail fuel contribution increased 57.2% during the quarter as falling product prices created a more favorable market structure and margin environment versus the consistently rising wholesale prices of Q2 2016. Also, total network retail gallons sold in the quarter increased 2.5% due to new store growth, offsetting APSM retail volume declines of 2.0%.  Product Supply & Wholesale contribution, along with fundamental midstream conditions, improved sequentially during the current quarter.

Merchandise

  Three Months Ended   Six Months Ended
Jun 30, Jun 30,
Key Operating Metrics 2017   2016   2017   2016
Total merchandise sales ($ Millions) $605.7   $589.5   $1,171.5   $1,151.2
Total merchandise contribution ($ Millions) $97.7   $92.7   $186.6   $178.6
Total merchandise sales ($K APSM) $144.8   $147.5   $140.3   $144.0
Merchandise unit margin (%) 16.1%   15.7%   15.9%   15.5%
Tobacco contribution ($K APSM) $13.6   $13.7   $13.2   $13.3
Non-tobacco contribution ($K APSM) $9.8   $9.5   $9.2   $9.1
Total merchandise contribution ($K APSM) $23.4   $23.2   $22.3   $22.4

Total merchandise sales increased 2.8% to $605.7 million in the second quarter 2017 from $589.5 million in second quarter 2016, with margins increasing to 16.1% versus 15.7%, respectively. On a per-store-month basis, merchandise contribution increased 0.8% driven by a 2.3% increase in non-tobacco APSM contribution, offset by a 0.3% decline in tobacco APSM contribution. Non-tobacco APSM sales and contribution benefited from promotion innovation, while the tobacco-related decline was driven by lower volumes.

Other areas

  Three Months Ended   Six Months Ended
  Jun 30, Jun 30,
Key Operating Metrics 2017   2016   2017   2016
Total station and other operating expense ($ Millions) $129.4   $125.1   $254.2   $241.9
Station OPEX excluding credit card fees ($K APSM) $21.2   $21.8   $20.8   $21.3
Total SG&A cost ($ Millions) $31.3   $32.3   $69.6   $63.8

Total station and other operating expenses increased $4.3 million for the quarter, reflecting new store additions and slightly higher payment fees.  However, on a per store basis, operating expenses excluding payment fees declined 2.4%. SG&A declined $1.0 million to $31.3 million in the quarter due to timing of spending for enterprise wide initiatives.

Station Openings

Murphy USA opened five retail locations in Q2 2017 (not including twelve raze and rebuilds), bringing the quarter end store count to 1,411, consisting of 1,154 Murphy USA sites and 257 Murphy Express sites.  A total of 24 stores are currently under construction along with 2 kiosks undergoing a raze and rebuild which will return to operation as 1,200 sq. foot stores before year end.  Seven stores have opened since the end of second quarter 2017.

Financial Resources

  As of June 30,
Key Metrics 2017   2016
Cash and cash equivalents ($ Millions) $197.1   $254.2
Long-term debt ($ Millions) $869.1   $648.3
               
  Three Months Ended   Six Months Ended
  June 30,   June 30,
Key Metrics 2017   2016   2017   2016
Average shares outstanding (diluted) (in thousands) 36,861   39,720   37,018   40,505

Cash balances on June 30, 2017 totaled $197.1 million.  Long-term debt consisted of approximately $491 million in carrying value of 6% senior notes due in 2023, $295 million in carrying value of 5.625% senior notes due in 2027 and $97 million of term debt less $15 million of current maturities, which is reflected in current liabilities.  Remaining undrawn borrowing capacity under the ABL was $208 million as of June 30, 2017.

Common shares repurchased during the current quarter were approximately 726,000 for $49 million. There is approximately $110 million remaining under the previously authorized program of up to $500 million as of quarter end.  At June 30, 2017, the Company had common shares outstanding of 36,051,935. 

*     *     *     *     *
Earnings Call Information

The Company will host a conference call on August 3, 2017, at 10:00 a.m. Central time to discuss second quarter 2017 results.  The conference call number is 1 (877) 291-1367 and the conference number is 45734993. A live audio webcast of the conference call and the earnings and investor related materials, including reconciliations of any non-GAAP financial measures to GAAP financial measures and any other applicable disclosures, will be available on that same day on the investor section of the Murphy USA website (http://ir.corporate.murphyusa.com).  Online replays of the earnings call will be available through Murphy USA's web site and a recording of the call will be available through August 4, 2017, by dialing 1(855) 859-2056 and referencing conference number 45734993.  In addition, a transcript of the event will be made available on the website shortly following the conference call.

Forward-Looking Statements

Certain statements in this news release contain or may suggest "forward-looking" information (as defined in the Private Securities Litigation Reform Act of 1995) that involve risk and uncertainties, including, but not limited to anticipated store openings, fuel margins, merchandise margins, sales of RINs and trends in our operations. Such statements are based upon the current beliefs and expectations of the company's management and are subject to significant risks and uncertainties. Actual future results may differ materially from historical results or current expectations depending upon factors including, but not limited to: our ability to continue to maintain a good business relationship with Walmart; successful execution of our growth strategy, including our ability to realize the anticipated benefits from such growth initiatives, and the timely completion of construction associated with our newly planned stores which may be impacted by the financial health of third parties; our ability to effectively manage our inventory, disruptions in our supply chain and our ability to control costs; the impact of any systems failures, cybersecurity and/or security breaches, including any security breach that results in theft, transfer or unauthorized disclosure of customer, employee or company information or our compliance with information security and privacy laws and regulations in the event of such an incident; successful execution of our information technology strategy; future tobacco or e-cigarette legislation and any other efforts that make purchasing tobacco products more costly or difficult could hurt our revenues and impact gross margins; efficient and proper allocation of our capital resources; compliance with debt covenants; availability and cost of credit; and changes in interest rates. Our SEC report, including our Annual Report on our Form 10-K for the year ended December 31, 2016 contains other information on these and other factors that could affect our financial results and cause actual results to differ materially from any forward-looking information we may provide. The company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events, new information or future circumstances.

Investor Contact:

Christian Pikul (870) 875-7683

Director,  Investor Relations

christian.pikul@murphyusa.com

Cell  870-677-0278
Media/ Public Relations Contact:

Jerianne Thomas (870) 875-7770

Director, Corporate Communications

jerianne.thomas@murphyusa.com

Cell  870-866-6321

Murphy USA Inc.
Consolidated Statements of Income
(Unaudited)




Murphy USA Inc.
Segment Operating Results
(Unaudited)

             
(Thousands of dollars, except volume per store month, margins and store counts)   Three Months Ended
June 30,
  Six Months Ended
June 30,
Marketing Segment   2017 2016   2017 2016
             
Operating Revenues            
Petroleum product sales   $ 2,567,719   $ 2,371,735     $ 4,969,973   $ 4,260,019  
Merchandise sales   605,698   589,457     1,171,488   1,151,194  
Other operating revenues   37,621   44,558     68,983   84,595  
Total operating revenues   3,211,038   3,005,750     6,210,444   5,495,808  
             
Operating expenses            
Petroleum products cost of goods sold   2,413,176   2,242,936     4,742,508   4,026,065  
Merchandise cost of goods sold   507,979   496,801     984,940   972,603  
Station and other operating expenses   129,433   125,145     254,177   241,919  
Depreciation and amortization   25,888   22,118     51,308   44,033  
Selling, general and administrative   31,346   32,319     69,593   63,822  
Accretion of asset retirement obligations   446   412     888   825  
Total operating expenses   3,108,268   2,919,731     6,103,414   5,349,267  
             
Gain (loss) on sale of assets   129   (489 )   (3,368 ) 88,976  
Income from operations   102,899   85,530     103,662   235,517  
             
Other income            
Interest expense   (20 ) (12 )   (39 ) (21 )
Other nonoperating income   4   13     230   41  
Total other income   (16 ) 1     191   20  
             
Income from continuing operations            
before income taxes   102,883   85,531     103,853   235,537  
Income tax expense   39,169   32,089     39,539   89,670  
Income from continuing operations   $ 63,714   $ 53,442     $ 64,314   $ 145,867  
             
Total tobacco sales revenue per store month   $ 105,840   $ 110,309     $ 102,958   $ 108,173  
Total non-tobacco sales revenue per store month   38,981   37,203     37,317   35,874  
Total merchandise sales revenue per store month   $ 144,821   $ 147,512     $ 140,275   $ 144,047  
             
Store count at end of period   1,411   1,344     1,411   1,344  
Total store months during the period   4,182   3,996     8,351   7,992  

                     

Same store sales information (compared to APSM metrics)

  Variance from prior year quarter
  Three months ended
  June 30, 2017
  SSS APSM
Fuel gallons per month (1.6 )% (2.0 )%
     
Merchandise sales (0.4 )% (1.8 )%
Tobacco sales (1.6 )% (4.1 )%
Non tobacco sales 3.0 % 4.8 %
     
Merchandise margin 1.9 % 0.8 %
Tobacco margin 2.6 % (0.3 )%
Non tobacco margin 0.9 % 2.3 %

  Variance from prior year quarter
  Six months ended
  June 30, 2017
  SSS APSM
Fuel gallons per month (2.3 )% (2.8 )%
     
Merchandise sales (1.0 )% (2.6 )%
Tobacco sales (2.2 )% (4.8 )%
Non tobacco sales 2.6 % 4.0 %
     
Merchandise margin 1.1 % - %
Tobacco margin 2.0 % (0.8 )%
Non tobacco margin (0.2 )% 1.0 %


Murphy USA Inc.
Consolidated Balance Sheets

         
         
         
(Thousands of dollars)   June 30, 2017   December 31, 2016
    (unaudited)    
Assets        
Current assets        
Cash and cash equivalents   $ 197,095     $ 153,813  
Accounts receivable-trade, less allowance for doubtful accounts of $1,921 in 2017 and $1,891 in 2016   164,372     183,519  
Inventories, at lower of cost or market   179,044     153,351  
Prepaid expenses and other current assets   25,233     24,871  
Total current assets   565,744     515,554  
Property, plant and equipment, at cost less accumulated depreciation and amortization of $818,409 in 2017 and $780,426 in 2016   1,613,234     1,532,655  
Other assets   44,208     40,531  
Total assets   $ 2,223,186     $ 2,088,740  
Liabilities and Stockholders' Equity        
Current liabilities        
Current maturities of long-term debt   $ 14,958     $ 40,596  
Trade accounts payable and accrued liabilities   394,303     473,370  
Income taxes payable   -     594  
Total current liabilities   409,261     514,560  
         
Long-term debt, including capitalized lease obligations   869,086     629,622  
Deferred income taxes   217,670     204,656  
Asset retirement obligations   26,978     26,200  
Deferred credits and other liabilities   19,550     16,626  
Total liabilities   1,542,545     1,391,664  
Stockholders' Equity        
Preferred Stock, par $0.01 (authorized 20,000,000 shares,        
none outstanding)   -     -  
Common Stock, par $0.01 (authorized 200,000,000 shares,        
46,767,164 and 46,767,164 shares issued at        
2017 and 2016, respectively)   468     468  
Treasury stock (10,715,229 and 9,831,196 shares held at        
June 30, 2017 and December 31, 2016, respectively)   (667,522 )   (608,001 )
Additional paid in capital (APIC)   545,887     555,338  
Retained earnings   801,808     749,271  
Total stockholders' equity   680,641     697,076  
Total liabilities and stockholders' equity   $ 2,223,186     $ 2,088,740  


Murphy USA Inc.
Consolidated Statement of Cash Flows
(Unaudited)

         
  Three Months Ended
June 30,
Six Months Ended
June 30,
(Thousands of dollars) 2017 2016 2017 2016
Operating Activities        
Net income $ 55,563   $ 46,310   $ 52,537   $ 132,184  
Adjustments to reconcile net income to net cash provided by operating activities        
Depreciation and amortization 27,513   23,685   54,525   47,171  
Deferred and noncurrent income tax charges (credits) 7,402   (14,250 ) 13,014   14,605  
Accretion of asset retirement obligations 446   412   888   825  
Pretax (gains) losses from sale of assets (130 ) 490   3,368   (88,975 )
Net (increase) decrease in noncash operating working capital (4,319 ) 32,580   (84,718 ) 57,427  
Other operating activities - net (86 ) 2,461   828   5,365  
Net cash provided by operating activities 86,389   91,688   40,442   168,602  
Investing Activities        
Property additions (68,253 ) (69,286 ) (134,150 ) (116,569 )
Proceeds from sale of assets 260   287   715   86,298  
Changes in restricted cash -   77,079   -   13,429  
Other investing activities - net (4,143 ) (13,838 ) (4,143 ) (15,138 )
Net cash required by investing activities (72,136 ) (5,758 ) (137,578 ) (31,980 )
Financing Activities        
Purchase of treasury stock (48,926 ) (17,095 ) (66,337 ) (167,105 )
Borrowings of debt 296,250   -   338,750   200,000  
Repayments of debt (99,723 ) (10,092 ) (125,901 ) (10,165 )
Debt issuance costs (935 ) (126 ) (935 ) (3,240 )
Amounts related to share-based compensation (80 ) (108 ) (5,159 ) (4,237 )
Net cash provided by (required by) financing activities 146,586   (27,421 ) 140,418   15,253  
Net increase (decrease) in cash and cash equivalents 160,839   58,509   43,282   151,875  
Cash and cash equivalents at beginning of period 36,256   195,701   153,813   102,335  
Cash and cash equivalents at end of period 197,095   254,210   197,095   254,210  


Supplemental Disclosure Regarding Non-GAAP Financial Information

The following table sets forth the Company's Adjusted EBITDA for the three and six months ended June 30, 2017 and 2016.  EBITDA means net income (loss) plus net interest expense, plus income tax expense, depreciation and amortization, and Adjusted EBITDA adds back (i) other non-cash items (e.g., impairment of properties and accretion of asset retirement obligations) and (ii) other items that management does not consider to be meaningful in assessing our operating performance (e.g., (income) from discontinued operations, gain (loss) on sale of assets and other non-operating expense (income)).  EBITDA and Adjusted EBITDA are not measures that are prepared in accordance with U.S. generally accepted accounting principles (GAAP).

We use Adjusted EBITDA in our operational and financial decision-making, believing that the measure is useful to eliminate certain items in order to focus on what we deem to be a more reliable indicator of ongoing operating performance and our ability to generate cash flow from operations.  Adjusted EBITDA is also used by many of our investors, research analysts, investment bankers, and lenders to assess our operating performance.  We believe that the presentation of Adjusted EBITDA provides useful information to investors because it allows understanding of a key measure that we evaluate internally when making operating and strategic decisions, preparing our annual plan, and evaluating our overall performance.  However, non-GAAP measures are not a substitute for GAAP disclosures, and Adjusted EBITDA may be prepared differently by us than by other companies using similarly titled non-GAAP measures.

The reconciliation of net income to EBITDA and Adjusted EBITDA is as follows:

                 
    Three Months Ended
June 30,
  Six Months Ended
June 30,
(Thousands of dollars)   2017   2016   2017   2016
                 
Net income   $ 55,563     $ 46,310     $ 52,537     $ 132,184  
                 
Income taxes   34,411     27,788     27,600     81,259  
Interest expense, net of interest income   11,326     9,960     20,777     19,268  
Depreciation and amortization   27,513     23,685     54,525     47,171  
EBITDA   $ 128,813     $ 107,743     $ 155,439     $ 279,882  
                 
Accretion of asset retirement obligations   446     412     888     825  
(Gain) loss on sale of assets   (130 )   490     3,368     (88,975 )
Other nonoperating (income) expense   (3 )   (85 )   (235 )   (118 )
Adjusted EBITDA   $ 129,126     $ 108,560     $ 159,460     $ 191,614