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Form 8-K Murphy USA Inc. For: Nov 02

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November 2, 2016 5:04 PM EDT


 
 
 
 
 
 
 
 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
FORM 8-K
 
 
 
 
 
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
 
Date of report (Date of earliest event reported):  November 2, 2016
 
 
 
MURPHY USA INC.
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
Delaware
 
001-35914
 
46-2279221
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
 
 
 
 
 
 
 
200 Peach Street, El Dorado, Arkansas
 
71730-5836
 
 
 
 
 
 
 
Registrant’s telephone number, including area code 870-875-7600
 
 
 
 
 
 
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
 
 
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
[   ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
[   ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
[   ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
 
[   ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))






Item 2.02.   Results of Operations and Financial Condition
 
On November 2, 2016, Murphy USA Inc. issued a news release announcing its earnings for the three and nine months ended September 30, 2016. The full text of this news release is attached hereto as Exhibit 99.1.
 
The information in this Item 2.02 and Item 9.01, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to liabilities of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such filing.


 
Item 9.01.  Financial Statements and Exhibits
 
(d) Exhibits
 
99.1       News release issued by Murphy USA Inc., dated November 2, 2016, announcing earnings for the three and nine months ended September 30, 2016






Signature
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
 
MURPHY USA INC.
 
 
Date:  November 2, 2016
By:  /s/  Donald R. Smith, Jr.
 
Donald R. Smith, Jr.
 
Vice President and Controller





Exhibit Index
 
  



 
 
 
 
 
 
Exhibit No.  
 
Description
99.1
 
News release issued by Murphy USA Inc., dated November 2, 2016, announcing earnings for the three and nine months ended September 30, 2016
 





Exhibit 99.1



Murphy USA Inc. Reports Third Quarter 2016 Results

El Dorado, Arkansas, November 2, 2016 – Murphy USA Inc. (NYSE: MUSA), a leading marketer of retail motor fuel products and convenience merchandise, today announced financial results for the three and nine months ended September 30, 2016.
Key Highlights:
•
Net income was $45.5 million, or $1.16 per diluted share in Q3 2016

•
Total retail gallons grew 1.2% to 1.09 billion gallons for the network in Q3 2016 while volumes on an APSM basis declined 3.9% versus prior year quarter and retail fuel margins declined from 18.1 cpg to 13.7 cpg

•
Product supply and wholesale (PS&W) contribution, including RIN income, was $19.0 million in Q3 2016, adding 1.75 cpg on a retail gallon equivalent basis versus a loss of 0.22 cpg in the 2015 period

•
Merchandise contribution dollars grew 10.8% year over year, or 5.2% APSM, to $95.7 million at average unit margins of 16.0%, which is a third consecutive quarterly record

•
21 stores opened during the quarter, including three raze and rebuilds, with ten more stores opened since quarter end and construction in progress at 28 new sites, most of which will be placed into service during the fourth quarter

•
Common shares repurchased totaled 607,000 for $45 million at an average price of approximately $74 per share under the previously announced program of up to $500 million bringing our year-to-date repurchases to $212 million.


“Our business performed well during a challenging third quarter,” said President and CEO Andrew Clyde.  “We continue to see record levels of merchandise margins in conjunction with lower store operating expenses, resulting in continued improvement to our fuel breakeven metric.  However, atypical seasonal weakness in the fuels business was attributable primarily to a rising crude and wholesale price environment as well as market disruption created by the September Colonial pipeline shutdown, which challenged both volume and margins. Volatility will always play a role in the markets where we operate and will remain impactful to our bottom line results, but the initiatives we have taken to improve our core business against this backdrop of uncertainty help to mitigate short-term earnings variability and ultimately drive superior long-term performance. Strong year-to-date results support our annual guidance and year-on-year EPS growth," Clyde concluded. 





Consolidated Results
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
Key Operating Metrics
2016
 
2015
 
2016
 
2015
Net income ($ Millions)

$45.5

 

$60.5

 

$177.7

 

$109.7

Earnings per share (diluted)

$1.16

 

$1.41

 

$4.44

 

$2.47

Net income from continuing operations ($ Millions)

$45.5

 

$60.0

 

$177.7

 

$108.4

EPS from continuing operations (diluted)

$1.16

 

$1.40

 

$4.44

 

$2.44

Adjusted EBITDA ($ Millions)

$105.3

 

$128.5

 

$296.9

 

$265.5

Income from continuing operations, Adjusted EBITDA and earnings per share declined in the Q3 2016 period due primarily to weaker retail fuel margins which were partially offset by increased merchandise margins, and higher net contribution from PS&W plus RIN sales.
Fuel
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
Key Operating Metrics
2016
 
2015
 
2016
 
2015
Retail fuel volume - chain (Million gal)
1,088.2

 
1,075.4

 
3,128.7

 
3,049.6

Retail fuel volume - per site (K gal APSM)
268.3

 
279.1

 
259.7

 
266.0

Retail fuel margin (cpg excl credit card fees)
13.7

 
18.1

 
11.9

 
12.5

Total retail fuel contribution ($ Millions)

$149.1

 

$195.0

 

$373.1

 

$382.3

Retail fuel contribution ($K APSM)

$36.8

 

$50.6

 

$31.0

 

$33.4

PS&W contribution ($ Millions excl RINs)

($29.0
)
 

($22.4
)
 

($20.8
)
 

($9.0
)
RIN sales ($ Millions)

$48.0

 

$20.0

 

$130.7

 

$93.9

Total retail fuel contribution dollars decreased 23.5% in Q3 2016 due to lower retail volumes per store and softer margins caused by upwardly trending wholesale prices during the quarter, coinciding with the Colonial pipeline disruption in September. Total network retail gallons sold in the quarter increased 1.2%, while same store gallons declined by 3.1%. Per store volumes declined 3.9% on an APSM basis, continuing to reflect the impact from a higher mix of new Midwest locations that historically perform below the chain average. On a YTD basis, APSM and SSS volumes are down 2.4% and 1.5%, respectively. In total, the lower year-to-date retail fuel contribution is more than offset by higher year-to-date net PS&W plus RIN contribution.
Product Supply & Wholesale generated a loss of $29.0 million excluding RINs in the third quarter, largely caused by a negative spot-to-rack differential, which is a direct reflection of higher RIN prices embedded in refined product spot prices. In the current quarter, 54.0 million RINs were sold at an average price of $0.89 per RIN, or $48.0 million. On a combined basis, PS&W and RINs effectively contributed an additional 1.75 cpg to the retail fuel margin (e.g. dividing by retail gallons sold) in Q3 2016.


Merchandise
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
Key Operating Metrics
2016
 
2015
 
2016
 
2015
Total merchandise sales ($ Millions)

$599.0

 

$591.6

 

$1,750.2

 

$1,687.9

Total merchandise contribution ($ Millions)

$95.7

 

$86.4

 

$274.3

 

$243.6

Total merchandise sales ($K APSM)

$147.7

 

$153.5

 

$145.3

 

$147.2

Merchandise unit margin (%)
16.0
%
 
14.6
%
 
15.7
%
 
14.4
%
Tobacco contribution ($K APSM)

$13.7

 

$12.9

 

$13.4

 

$12.5

Non-tobacco contribution ($K APSM)

$9.9

 

$9.5

 

$9.4

 

$8.8

Total merchandise contribution ($K APSM)

$23.6

 

$22.4

 

$22.8

 

$21.3

Total merchandise sales increased 1.2% in Q3, driven primarily by new store additions and partially offset by a 3.8% decrease in APSM sales. Same store sales were down 2.6% year-over-year reflecting a decline in cigarette sales and volume. Total margin contribution, however, increased 10.8% for the quarter, attributable to new store additions, higher tobacco margins, and strategic initiatives at the store level. As a result, total unit margins were up 140 basis points from 14.6% in the prior period, setting a third consecutive quarterly record of 16.0%.
Tobacco contribution margin per store was up 6.4% due primarily to the Core-Mark transition, higher rebates, and to a lesser extent, price increases. Total tobacco sales were up 0.8% on a network basis, but down 4.3% on an APSM basis due to the continued nationwide decline in unit volumes, customer transitions from cartons to packs, and one-time impacts from large tax/minimum markup changes in certain states.
While non-tobacco sales on an APSM basis were down 2.4% versus the prior period, non-tobacco contribution per store increased 3.7%, driven primarily by improvements in the beverages and lotto/lottery categories. The overall product mix continues to benefit from larger store formats, refresh initiatives, super-cooler installations and promotional activity.
Other areas
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
Key Operating Metrics
2016
 
2015
 
2016
 
2015
Total station and other operating expense ($ Millions)

$128.0

 

$121.6

 

$369.9

 

$358.5

Station OPEX excl credit card fees ($K APSM)

$22.2

 

$22.7

 

$21.6

 

$22.0

Total SG&A cost ($ Millions)

$30.7

 

$33.0

 

$94.5

 

$97.0

Total station and other operating expenses increased $6.4 million for the quarter, reflecting new store additions. On a per store basis, operating expenses excluding credit card fees declined 1.9% with labor costs down 5.0%, partially offset by accelerated maintenance refresh costs and higher environmental costs.


  
Station Openings
Murphy USA opened 21 retail locations in Q3 2016 (not including three raze and rebuilds), bringing the quarter end store count to 1,364, consisting of 1,134 Murphy USA sites and 230 Murphy Express sites. A total of 28 stores are currently under construction and ten stores have opened since quarter end.
Cash Flow and Financial Resources
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
Key Metrics (Millions except average shares)
2016
 
2015
 
2016
 
2015
Cash flow from continuing operations

$41.2

 

$72.8

 

$209.8

 

$137.9

Capital expenditures

($82.3
)
 

($63.6
)
 

($198.9
)
 

($151.5
)
Free cash flow (non-GAAP)

($41.1
)
 

$9.2

 

$10.9

 

($13.6
)
Cash and cash equivalents

$206.7

 

$65.3

 

$206.7

 

$65.3

Long-term debt

$638.9

 

$489.7

 

$638.9

 

$489.7

Average shares outstanding, thousands (diluted)
39,174

 
42,760

 
39,989

 
44,389

Cash balances on September 30, 2016 totaled $206.7 million. As of that date, there were no longer restricted cash balances to obtain new properties as the like-kind exchange program had ended.
Long-term debt consisted of approximately $489 million in carrying value of 6% senior notes due in 2023, and $190 million of term debt less $40 million of expected amortization, which is reflected in Current Liabilities. The Company's asset-based loan facility remains undrawn with a borrowing base of $192.0 million as of October 2016.
Approximately 607,000 shares were repurchased during the current quarter for $45 million bringing the year-to-date total to $212 million of treasury stock acquisitions. At September 30, 2016, the Company had common shares outstanding of 38,599,541.

* * * * *
Earnings Call Information
The Company will host a conference call on November 3, 2016, at 10:00 a.m. Central time to discuss third quarter 2016 results. The conference call number is 1 (877) 291-1367 and the conference number is 92470652. 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 November 4, 2016, by dialing 1(855) 859-2056 and referencing conference number 92470652. 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, 2015 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
Cell 870-677-0278
Media/ Public Relations Contact:
Jerianne Thomas (870) 875-7770
Director, Corporate Communications
Cell - 870-866-6321




Murphy USA Inc.
Consolidated Statements of Income
(Unaudited)
 
 
 
 
 
 
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
(Thousands of dollars except per share amounts)
 
2016
2015
2016
2015
Revenues
 
 
 
 
 
Petroleum product sales (a)
 
$
2,394,951

$
2,770,169

$
6,654,970

$
7,987,158

Merchandise sales
 
598,968

591,584

1,750,162

1,687,885

Other operating revenues
 
48,819

20,754

133,630

96,214

Total revenues
 
3,042,738

3,382,507

8,538,762

9,771,257

Costs and Operating Expenses
 
 
 
 
 
Petroleum product cost of goods sold (a)
 
2,275,487

2,594,273

6,301,552

7,605,961

Merchandise cost of goods sold
 
503,266

505,200

1,475,869

1,444,293

Station and other operating expenses
 
127,991

121,551

369,910

358,463

Depreciation and amortization
 
25,576

21,695

72,747

64,013

Selling, general and administrative
 
30,726

33,016

94,549

96,995

Accretion of asset retirement obligations
 
411

380

1,236

1,137

Total costs and operating expenses
 
2,963,457

3,276,115

8,315,863

9,570,862

Income from operations
 
79,281

106,392

222,899

200,395

Other income (expense)
 
 
 
 
 
Interest income
 
144

20

474

1,908

Interest expense
 
(10,182
)
(8,382
)
(29,780
)
(25,040
)
Gain (loss) on sale of assets
 
(335
)
(4,072
)
88,640

(4,091
)
Other nonoperating income (expense)
 
2,848

106

2,966

616

Total other income (expense)
 
(7,525
)
(12,328
)
62,300

(26,607
)
Income before income taxes
 
71,756

94,064

285,199

173,788

Income tax expense
 
26,265

34,043

107,524

65,430

Income from continuing operations
 
45,491

60,021

177,675

108,358

Income (loss) from discontinued operations, net of taxes
 
—

510

—

1,296

Net Income
 
$
45,491

$
60,531

$
177,675

$
109,654

Earnings per share - basic:
 
 
 
 
 
Income from continuing operations
 
$
1.17

$
1.41

$
4.47

$
2.46

Income (loss) from discontinued operations
 
—

0.01

—

0.03

Net Income - basic
 
$
1.17

$
1.42

$
4.47

$
2.49

Earnings per share - diluted:
 
 
 
 
 
Income from continuing operations
 
$
1.16

$
1.40

$
4.44

$
2.44

Income (loss) from discontinued operations
 
—

0.01

—

0.03

Net Income - diluted
 
$
1.16

$
1.41

$
4.44

$
2.47

Weighted-average shares outstanding (in thousands):
 
 
 
 
 
Basic
 
38,896

42,437

39,719

44,038

Diluted
 
39,174

42,760

39,989

44,389

Supplemental information:
 
 
 
 
 
(a) Includes excise taxes of:
 
$
505,814

$
513,427

$
1,466,347

$
1,459,871





Murphy USA Inc.
Segment Operating Results
(Unaudited)

 
 
 
 
 
 
 
(Thousands of dollars, except volume per store month, margins and store counts)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Marketing Segment
 
2016
2015
 
2016
2015
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
Petroleum product sales
 
$
2,394,951

$
2,770,169

 
$
6,654,970

$
7,987,158

Merchandise sales
 
598,968

591,584

 
1,750,162

1,687,885

Other operating revenues
 
48,808

20,747

 
133,403

95,946

Total revenues
 
3,042,727

3,382,500

 
8,538,535

9,770,989

 
 
 
 
 
 
 
Costs and operating expenses
 
 
 
 
 
 
Petroleum products cost of goods sold
 
2,275,487

2,594,273

 
6,301,552

7,605,961

Merchandise cost of goods sold
 
503,266

505,200

 
1,475,869

1,444,293

Station and other operating expenses
 
127,991

121,552

 
369,910

358,463

Depreciation and amortization
 
23,939

20,366

 
67,972

60,244

Selling, general and administrative
 
30,727

33,016

 
94,549

96,995

Accretion of asset retirement obligations
 
411

380

 
1,236

1,137

Total costs and operating expenses
 
2,961,821

3,274,787

 
8,311,088

9,567,093

 
 
 
 
 
 
 
Income from operations
 
80,906

107,713

 
227,447

203,896

 
 
 
 
 
 
 
Other income
 
 
 
 
 
 
Interest expense
 
(14
)
(6
)
 
(35
)
(13
)
Gain (loss) on sale of assets
 
(336
)
(4,072
)
 
88,640

(4,091
)
Other nonoperating income
 
2,730

107

 
2,771

332

Total other income
 
2,380

(3,971
)
 
91,376

(3,772
)
 
 
 
 
 
 
 
Income from continuing operations
 
 
 
 
 
 
before income taxes
 
83,286

103,742

 
318,823

200,124

Income tax expense
 
30,531

37,957

 
120,201

76,116

Income from continuing operations
 
$
52,755

$
65,785

 
$
198,622

$
124,008

 
 
 
 
 
 
 
Total tobacco sales revenue per store month
 
$
111,898

$
116,886

 
$
109,427

$
112,696

Total non-tobacco sales revenue per store month
 
35,763

36,642

 
35,837

34,548

Total merchandise sales revenue per store month
 
$
147,661

$
153,528

 
$
145,264

$
147,244

 
 
 
 
 
 
 
Store count at end of period
 
1,364

1,291

 
1,364

1,291

Total store months during the period
 
4,056

3,853

 
12,048

11,463





 
 
 
 
 
 
 
 
 
 
 

Same store sales information (compared to APSM metrics)
 
Variance from prior year quarter
 
Three months ended
 
September 30, 2016
 
SSS
APSM
Fuel gallons per month
(3.1
)%
(3.9
)%
 
 
 
Merchandise sales
(2.6
)%
(3.8
)%
Tobacco sales
(2.3
)%
(4.3
)%
Non tobacco sales
(3.7
)%
(2.4
)%
 
 
 
Merchandise margin
6.3
 %
5.2
 %
Tobacco margin
8.9
 %
6.4
 %
Non tobacco margin
2.7
 %
3.7
 %
 
 
 
 
 
 
 
Variance from prior year
 
Nine months ended
 
September 30, 2016
 
SSS
APSM
Fuel gallons per month
(1.5
)%
(2.4
)%
 
 
 
Merchandise sales
0.3
 %
(1.3
)%
Tobacco sales
(0.6
)%
(2.9
)%
Non tobacco sales
3.2
 %
3.7
 %
 
 
 
Merchandise margin
8.6
 %
7.1
 %
Tobacco margin
10.3
 %
7.5
 %
Non tobacco margin
6.1
 %
6.6
 %
 
 
 
 
 
 
Note

Average Per Store Month (APSM) metric includes all stores open through the date of the calculation.

Same Store Sales (SSS) metric includes aggregated individual store results for all stores open throughout both periods presented. For all periods presented, the store must have been open for the entire calendar year to be included in the comparison. Remodeled stores that remained open or were closed for just a very brief time (less than a month) during the period being compared remain in the same store sales calculation. If a store is replaced either at the same location (raze and rebuild) or relocated to a new location, it will typically be excluded from the calculation during the period it is out of service. New constructed sites do not enter the calculation until they are open for each full calendar year for the periods being compared (open by January 1, 2015 for the sites being compared in the 2016 versus 2015 calculations).




Murphy USA Inc.
Consolidated Balance Sheets


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Thousands of dollars)
 
September 30, 2016
 
December 31, 2015
 
 
(unaudited)
 
 
Assets
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
206,692

 
$
102,335

Accounts receivable—trade, less allowance for doubtful accounts of $1,988 in 2016 and $1,963 in 2015
 
139,692

 
136,253

Inventories, at lower of cost or market
 
152,542

 
155,906

Prepaid expenses and other current assets
 
29,153

 
41,173

Total current assets
 
528,079

 
435,667

Property, plant and equipment, at cost less accumulated depreciation and amortization of $756,305 in 2016 and $724,486 in 2015
 
1,488,261

 
1,369,318

Restricted cash
 
—

 
68,571

Other assets
 
40,489

 
12,685

Total assets
 
$
2,056,829

 
$
1,886,241

Liabilities and Stockholders' Equity
 
 
 
 
Current liabilities
 
 
 
 
Current maturities of long-term debt
 
$
40,471

 
$
222

Trade accounts payable and accrued liabilities
 
376,897

 
390,341

Deferred income taxes
 
—

 
1,729

Total current liabilities
 
417,368

 
392,292

 
 
 
 
 
Long-term debt, including capitalized lease obligations
 
638,911

 
490,160

Deferred income taxes
 
200,601

 
161,236

Asset retirement obligations
 
25,637

 
24,345

Deferred credits and other liabilities
 
15,125

 
25,918

Total liabilities
 
1,297,642

 
1,093,951

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
 
 
 
 
2016 and 2015, respectively)
 
468

 
468

Treasury stock (8,167,623 and 5,088,434 shares held at
 
 
 
 
September 30, 2016 and December 31, 2015, respectively)
 
(497,111
)
 
(294,139
)
Additional paid in capital (APIC)
 
550,376

 
558,182

Retained earnings
 
705,454

 
527,779

Total stockholders' equity
 
759,187

 
792,290

Total liabilities and stockholders' equity
 
$
2,056,829

 
$
1,886,241



Murphy USA Inc.
Consolidated Statement of Cash Flows
(Unaudited)
 
 
 
 
 
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
(Thousands of dollars)
2016
2015
2016
2015
Operating Activities
 
 
 
 
Net income
$
45,491

$
60,531

$
177,675

$
109,654

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
 
(Income) loss from discontinued operations, net of taxes
—

(510
)
—

(1,296
)
Depreciation and amortization
25,576

21,695

72,747

64,013

Deferred and noncurrent income tax charges (credits)
23,031

(2,472
)
37,636

(11,939
)
Accretion of asset retirement obligations
411

380

1,236

1,137

Pretax (gains) losses from sale of assets
335

4,072

(88,640
)
4,091

Net (increase) decrease in noncash operating working capital
(52,045
)
(8,284
)
5,382

(33,194
)
Other operating activities - net
(1,573
)
(2,582
)
3,792

5,428

Net cash provided by continuing operations
41,226

72,830

209,828

137,894

Net cash provided by discontinued operations
—

(1,804
)
—

10,948

Net cash provided by operating activities
41,226

71,026

209,828

148,842

Investing Activities
 
 
 
 
Property additions
(82,342
)
(63,626
)
(198,911
)
(151,521
)
Proceeds from sale of assets
(1,297
)
634

85,001

725

Changes in restricted cash
55,142

—

68,571

—

Other investing activities - net
(13,750
)
(2,889
)
(28,888
)
(2,889
)
Investing activities of discontinued operations
 
 
 
 
Other
—

(1,183
)
—

(4,945
)
Net cash required by investing activities
(42,247
)
(67,064
)
(74,227
)
(158,630
)
Financing Activities
 
 
 
 
Purchase of treasury stock
(45,223
)
(58,861
)
(212,328
)
(248,695
)
Borrowings of debt
—

—

200,000

—

Repayments of debt
(116
)
(43
)
(10,281
)
(89
)
Debt issuance costs
—

(58
)
(3,240
)
(58
)
Amounts related to share-based compensation
(1,158
)
(6
)
(5,395
)
(3,036
)
Net cash required by financing activities
(46,497
)
(58,968
)
(31,244
)
(251,878
)
Net increase (decrease) in cash and cash equivalents
(47,518
)
(55,006
)
104,357

(261,666
)
Cash and cash equivalents at beginning of period
254,210

121,445

102,335

328,105

Cash and cash equivalents at end of period
206,692

66,439

206,692

66,439

Less: Cash and cash equivalents held for sale
—

1,137

—

1,137

Cash and cash equivalents of continuing operations at end of period
$
206,692

$
65,302

$
206,692

$
65,302



Supplemental Disclosure Regarding Non-GAAP Financial Information
The following table sets forth the Company’s Adjusted EBITDA for the three and nine months ended September 30, 2016 and 2015. 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 this Adjusted EBITDA in our operational and financial decision-making, believing that such 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. 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
September 30,
 
Nine Months Ended
September 30,
(Thousands of dollars)
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
Net income
 
$
45,491

 
$
60,531

 
$
177,675

 
$
109,654

 
 
 
 
 
 
 
 
 
Income taxes
 
26,265

 
34,043

 
107,524

 
65,430

Interest expense, net of interest income
 
10,038

 
8,362

 
29,306

 
23,132

Depreciation and amortization
 
25,576

 
21,695

 
72,747

 
64,013

EBITDA
 
$
107,370

 
$
124,631

 
$
387,252

 
$
262,229

 
 
 
 
 
 
 
 
 
(Income) loss from discontinued operations, net of tax
 
—

 
(510
)
 
—

 
(1,296
)
Accretion of asset retirement obligations
 
411

 
380

 
1,236

 
1,137

(Gain) loss on sale of assets
 
335

 
4,072

 
(88,640
)
 
4,091

Other nonoperating (income) expense
 
(2,848
)
 
(106
)
 
(2,966
)
 
(616
)
Adjusted EBITDA
 
$
105,268

 
$
128,467

 
$
296,882

 
$
265,545

 
 
 
 
 
 
 
 
 

The Company also considers Free Cash Flow in the operation of its business. Free cash flow is defined as net cash provided by operating activities in a period minus payments for property and equipment made in that period. Free cash flow is also considered a non-GAAP financial measure. Management believes, however, that free cash flow, which measures our ability to generate additional cash from our business operations, is an important financial measure for us in evaluating the Company’s performance. Free cash


flow should be considered in addition to, rather than as a substitute for consolidated net income as a measure of our performance and net cash provided by operating activities as a measure of our liquidity.
Numerous methods may exist to calculate a company’s free cash flow. As a result, the method used by our management to calculate our free cash flow may differ from the methods other companies use to calculate their free cash flow. The following table provides a reconciliation of free cash flow, a non-GAAP financial measure, to net cash provided by operating activities, which we believe to be the GAAP financial measure most directly comparable to free cash flow:
 

 
 
 
 
 
 
 
 
 
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
(Thousands of dollars)
 
2016
 
2015
2016
 
2015
 
 
 
 
 
 
 
 
Net cash provided by continuing operations
 
$
41,226

 
$
72,830

$
209,828

 
$
137,894

Payments for property and equipment
 
(82,342
)
 
(63,626
)
(198,911
)
 
(151,521
)
Free cash flow
 
$
(41,116
)
 
$
9,204

$
10,917

 
$
(13,627
)
 
 
 
 
 
 
 
 



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