Murphy USA Inc. Reports Second Quarter 2016 Results

El Dorado, Arkansas, August 3, 2016 - 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, 2016. 

Key Highlights:

• Net income was $46.3 million, or $1.17 per diluted share in Q2 2016
   
• Retail fuel contribution grew 22.5% as higher unit margins of 10.8 cpg offset a 1.3% decline in same store fuel gallons; total gallons grew 2.2% to 1.03 billion gallons for the network
   
• Product supply and wholesale (PS&W) contribution, including RIN income, was $61.2 million in Q2, or a combined 5.9 cpg on a retail gallon equivalent basis
   
• Merchandise contribution dollars grew 10.8% year over year to $92.7 million at average unit margins of 15.7%, which is a second consecutive quarterly record
   
• Common shares repurchased totaled 244,000 for $17 million at an average price of roughly $70.00 per share under the previously announced program of up to $500 million
   
• 15 stores opened during the quarter, including seven raze and rebuilds, with construction in progress at 40 new sites and three raze and rebuilds, most of which will be placed into service during the third quarter

"Second quarter results showcased the benefits of our differentiated fuel-driven business model," said President and CEO Andrew Clyde.  "We continue to demonstrate tangible progress among the core elements of our formula for value creation as we accelerate new store additions, generate record merchandise margins, and diligently focus on cost control initiatives, all of which result in strong improvement to our fuel breakeven metric,"  Clyde went on to say.  "On top of strong organic earnings growth and other corporate initiatives, we continue to allocate capital in a manner consistent with maximizing shareholder returns through high-quality organic growth opportunities and share repurchases," Mr. Clyde concluded.

Consolidated Results

Key Operating Metrics	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Net income ($ Millions)	$46.3		$26.2		$132.2		$49.1
Earnings per share (diluted)	$1.17		$0.59		$3.26		$1.09
Net income from continuing operations ($ Millions)	$46.3		$24.8		$132.2		$48.3
EPS from continuing operations (diluted)	$1.17		$0.56		$3.26		$1.07
Adjusted EBITDA ($ Millions)	$108.6		$73.6		$191.6		$137.1

Income from continuing operations, Adjusted EBITDA and earnings per share improved significantly in the Q2 2016 period due to higher retail fuel margins, higher network fuel volumes, increased merchandise margins, and higher RIN sales.

Fuel

Key Operating Metrics	Three Months Ended  June 30,				Six Months Ended  June 30,
	2016		2015		2016		2015
Retail fuel volume - chain (Million gal)	1,033.3		1,011.4		2,040.5		1,974.2
Retail fuel volume - per site (K gal APSM)	258.6		265.2		255.3		259.4
Retail fuel margin (cpg excl credit card fees)	10.8		9.0		11.0		9.5
Total retail fuel contribution ($ Millions)	$112.0		$91.4		$224.0		$187.3
Retail fuel contribution ($K APSM)	$28.0		$24.0		$28.0		$24.6
PS&W contribution ($ Millions excl RINs)	$17.4		$14.4		$8.2		$13.4
RIN sales ($ Millions)	$43.9		$36.2		$82.6		$73.8

Total retail fuel contribution dollars increased 22.5% in Q2 2016 due to higher volumes from new stores and stronger margins.  Total network retail gallons sold in the quarter increased 2.2%, while same store gallons declined by 1.3%.  Per store volumes declined 2.5% on an APSM basis, reflecting the impact of the high number of new stores opened in Q4 2015 that are still ramping up operations which include a higher mix of Midwest locations that historically perform below the chain average.  In addition, high volume stores closed for raze and rebuild also impacted the APSM metric.

Product Supply & Wholesale margins totaled $17.4 million in the second quarter, reflecting an upward trend in product prices, creating positive timing and inventory variances.  Results were also positively impacted due to periods of tighter market conditions driven by pipeline maintenance and high demand.

In the current quarter, 57.0 million RINs were sold at an average price of $0.77 per RIN, or $43.9 million.  For the prior year quarter, RINs added $36.2 million to income as 58.4 million RINs were sold at an average price of $0.62 per RIN.  On a combined basis, PS&W and RINs effectively contributed an additional 5.9 cpg to the retail fuel margin (e.g. dividing by retail gallons sold) in Q2 2016 compared to 5.0 cpg in Q2 2015.

Merchandise

	Three Months Ended				Six Months Ended
	June 30,				June 30,
Key Operating Metrics	2016		2015		2016		2015
Total merchandise sales ($ Millions)	$589.5		$572.2		$1,151.2		$1,096.3
Total merchandise contribution ($ Millions)	$92.7		$83.6		$178.6		$157.2
Total merchandise sales ($K APSM)	$147.5		$150.0		$144.0		$144.1
Merchandise unit margin (%)	15.7%		14.6%		15.5%		14.3%
Tobacco contribution ($K APSM)	$13.7		$12.9		$13.3		$12.3
Non-tobacco contribution ($K APSM)	$9.5		$9.0		$9.1		$8.4
Total merchandise contribution ($K APSM)	$23.2		$21.9		$22.4		$20.7

Total merchandise sales increased 3.0% in Q2, driven primarily by new store additions and partially offset by a 1.7% decrease in APSM sales. Due to the aforementioned higher mix of new stores in the Midwest region, same store sales were down only 0.1% year-over-year.  Total margin contribution, however, increased 10.8% for the quarter, attributable to new store additions, Core-Mark supply contract benefits, as well as per store improvements from pricing and promotional effectiveness.  As a result, total unit margins were up by 110 basis points from 14.6% in the prior period, setting a second consecutive quarterly record of 15.7%.

Tobacco contribution margin per store was up 5.9% to $13,651 due primarily to the Core-Mark supply advantage, price increases, and to a lesser extent, higher rebates, while sales were down 3.6% on an APSM basis, concentrated in a few states with large tax/minimum markup changes.

Non-tobacco sales were up 9.7% versus the prior period, generating 5.6% growth in non-tobacco contribution per store of $9,536, driven by a robust lotto/lottery category, snacks and beverages.  The overall product mix continues to benefit from larger store formats, refresh initiatives, super-cooler installations and promotional activity.

Other areas

Key Operating Metrics	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Total station and other operating expense ($ Millions)	$125.1		$122.4		$241.9		$236.9
Station OPEX excl credit card fees ($K APSM)	$21.8		$21.9		$21.3		$21.6
Total SG&A cost ($ Millions)	$32.3		$32.9		$63.8		$64.0

Total station and other operating expenses increased $2.8 million for the quarter, reflecting new store additions.  However, on a per store basis, operating expenses excluding credit card fees declined 0.9% with labor costs down 2.8%, offset by accelerated maintenance refresh costs. 

Station Openings

Murphy USA opened eight retail locations in Q2 2016 (not including seven raze and rebuilds), bringing the quarter end store count to 1,344, consisting of 1,118 Murphy USA sites and 226 Murphy Express sites.  A total of 40 stores are currently under construction along with three kiosks undergoing a raze and rebuild which will return to operation as 1,200 sq foot stores during third quarter.

Cash Flow and Financial Resources

Key Metrics  (Millions except average shares)	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Cash flow from continuing operations	$91.7		$34.9		$168.6		$65.1
Capital expenditures	($69.3)		($56.3)		($116.6)		($87.9)
Free cash flow (non-GAAP)	$22.4		($21.4)		$52.0		($22.8)
Cash and cash equivalents	$254.2		$120.5		$254.2		$120.5
Long-term debt	$648.3		$489.3		$648.3		$489.3
Average shares outstanding (K diluted)	39,720		44,409		40,505		45,218

Cash balances on June 30, 2016 totaled $254.2 million, not including restricted cash of $53.9 million related to unspent sales proceeds from the CAM pipeline held by a third party trustee in order for the Company to effect like-kind exchange transactions to defer tax gains.  This amount is included in non-current assets on the balance sheet as of June 30, 2016. 

Long-term debt consisted of approximately $488 million in carrying value of 6% senior notes due in 2023, and $190 million of term debt less $30 million of expected amortization, which is reflected in Current Liabilities.  The Company's asset-based loan facility remains undrawn with a borrowing base of $183.1 million as of July 2016.

Approximately 244,000 shares were repurchased during the current quarter for $17 million. At June 30, 2016, the Company had common shares outstanding of 39,163,458.

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Earnings Call Information

The Company will host a conference call on August 4, 2016, at 10:00 a.m. Central time to discuss second quarter 2016 results.  The conference call number is 1 (877) 291-1367 and the conference number is 44236696. 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 5, 2016, by dialing 1(855) 859-2056 and referencing conference number 44236696.  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 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		2016			2015				2016			2015
Revenues
Petroleum product sales		$	2,371,735		$	2,858,910			$	4,260,019		$	5,216,989
Merchandise sales		589,457			572,164				1,151,194			1,096,301
Other operating revenues		44,558			36,911				84,595			75,199
Total revenues		3,005,750			3,467,985				5,495,808			6,388,489
Costs and operating expenses
Petroleum products cost of goods sold		2,242,936			2,750,602				4,026,065			5,011,688
Merchandise cost of goods sold		496,801			488,540				972,603			939,093
Station and other operating expenses		125,145			122,377				241,919			236,911
Depreciation and amortization		22,118			19,975				44,033			39,878
Selling, general and administrative		32,319			32,885				63,822			63,979
Accretion of asset retirement obligations		412			379				825			757
Total costs and operating expenses		2,919,731			3,414,758				5,349,267			6,292,306
Income from operations		86,019			53,227				146,541			96,183
Other income
Interest expense		(12		)	(5		)		(21		)	(7		)
Gain (loss) on sale of assets		(489		)	(23		)		88,976			(19		)
Other nonoperating income		13			146				41			225
Total other income		(488		)	118				88,996			199
Income from continuing operations
before income taxes		85,531			53,345				235,537			96,382
Income tax expense		32,089			19,877				89,670			38,159
Income from continuing operations		$	53,442		$	33,468			$	145,867		$	58,223
Total tobacco sales revenue per store month		$	110,309		$	114,470			$	108,173		$	110,575
Total non-tobacco sales revenue per store month		37,203			35,528				35,874			33,488
Total merchandise sales revenue per store month		$	147,512		$	149,998			$	144,047		$	144,063
Store count at end of period		1,344			1,277				1,344			1,277
Total store months during the period		3,996			3,814				7,992			7,610

Same store sales information (compared to APSM metrics)

	Variance from prior year quarter
	SSS		APSM
	Three months ended
	June 30, 2016
Fuel gallons per month	(1.3	)%	(2.5	)%
Merchandise sales	(0.1	)%	(1.7	)%
Tobacco sales	(1.4	)%	(3.6	)%
Non tobacco sales	4.3	%	4.7	%
Merchandise margin	7.0	%	5.8	%
Tobacco margin	8.5	%	5.9	%
Non tobacco margin	4.9	%	5.6	%

Murphy USA Inc.
Consolidated Balance Sheets

(Thousands of dollars)		June 30, 2016				December 31, 2015
		(unaudited)
Assets
Current assets
Cash and cash equivalents		$	254,210			$	102,335
Accounts receivable-trade, less allowance for doubtful accounts of $1,988 in 2016 and $1,963 in 2015		148,211				136,253
Inventories, at lower of cost or market		152,494				155,906
Prepaid expenses and other current assets		17,066				41,173
Total current assets		571,981				435,667
Property, plant and equipment, at cost less accumulated depreciation and amortization of $732,114 in 2016 and $724,486 in 2015		1,430,816				1,369,318
Restricted cash		53,853				68,571
Other assets		27,196				12,685
Total assets		$	2,083,846			$	1,886,241
Liabilities and Stockholders' Equity
Current liabilities
Current maturities of long-term debt		$	30,372			$	222
Trade accounts payable and accrued liabilities		401,141				390,341
Income taxes payable		24,184				-
Deferred income taxes		-				1,729
Total current liabilities		455,697				392,292
Long-term debt, including capitalized lease obligations		648,266				490,160
Deferred income taxes		177,570				161,236
Asset retirement obligations		25,012				24,345
Deferred credits and other liabilities		19,389				25,918
Total liabilities		1,325,934				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 (7,603,706 and 5,088,434 shares held at
June 30, 2016 and December 31, 2015, respectively)		(454,496		)		(294,139		)
Additional paid in capital (APIC)		551,977				558,182
Retained earnings		659,963				527,779
Total stockholders' equity		757,912				792,290
Total liabilities and stockholders' equity		$	2,083,846			$	1,886,241

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

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, 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 June 30,								Six Months Ended June 30,
(Thousands of dollars)		2016				2015				2016				2015
Net income		$	46,310			$	26,191			$	132,184			$	49,123
Income taxes		27,788				13,976				81,259				31,387
Interest expense, net of interest income		9,960				8,314				19,268				14,770
Depreciation and amortization		23,685				21,215				47,171				42,318
EBITDA		$	107,743			$	69,696			$	279,882			$	137,598
(Income) loss from discontinued operations, net of tax		-				(1,371		)		-				(786		)
Accretion of asset retirement obligations		412				379				825				757
(Gain) loss on sale of assets		490				23				(88,975		)		19
Other nonoperating (income) expense		(85		)		4,854				(118		)		(510		)
Adjusted EBITDA		$	108,560			$	73,581			$	191,614			$	137,078

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 June 30,							Six Months Ended June 30,
(Thousands of dollars)		2016				2015			2016				2015
Net cash provided by continuing operations		$	91,688			$	34,936		$	168,602			$	65,063
Payments for property and equipment		(69,286		)		(56,273		)	(116,569		)		(87,895		)
Free cash flow		$	22,402			$	(21,337	)	$	52,033			$	(22,832	)

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