Murphy USA Reports Third Quarter 2016 Results

El Dorado, Arkansas, November 2, 2016 - Murphy USA Inc. 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

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.

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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 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 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)

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	)