Murphy USA Inc. Reports Second Quarter 2017 Results
El Dorado, Arkansas, August 2, 2017 - Murphy USA Inc. (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: | Media/ Public Relations Contact: |
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 | Six Months Ended | ||||||||||||
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 | Six Months Ended | |||||||||||
(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 | Six Months Ended | |||||||||||||||
(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 | ||||||||
This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Murphy USA Inc. via GlobeNewswire
HUG#2125159
