Market Overview

Murphy USA Inc. Reports Second Quarter 2018 Results

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EL DORADO, Ark., Aug. 01, 2018 (GLOBE NEWSWIRE) -- Murphy USA Inc. (NYSE:MUSA), a leading marketer of retail motor fuel products and convenience merchandise, today announced financial results for the three and six months ended June 30, 2018.

Key Highlights:

  • Net income was $51.8 million, or $1.58 per diluted share in Q2 2018 compared to a net income of $55.5 million, or $1.51 per diluted share, in Q2 2017
     
  • Total fuel contribution (retail fuel margin plus product supply and wholesale ("PS&W") results including RINs) for Q2 2018 was 16.7 cpg compared to 18.1 cpg in Q2 2017
     
  • Total retail gallons increased 1.6% to 1.1 billion gallons for the network during Q2 2018 while volumes on a same store sales ("SSS") basis declined 1.5% versus prior year quarter
     
  • Merchandise contribution dollars grew 4.6% during the current year quarter to $102.3 million on average unit margins of 16.6%, a new quarterly record, versus 16.1% average unit margins in the prior year quarter
     
  • Six new stores opened and nine raze-and-rebuild sites re-opened in the second quarter and construction is ongoing as of today at 37 locations, including 17 raze-and-rebuild sites
     
  • Repurchased 1.1 million common shares during the second quarter for approximately $72.7 million at an average price of $68.22 per share
     
  • Effective income tax rate of 25.0% in Q2 2018, a 13.2% lower effective rate than Q2 2017 due to Federal tax reform favorably impacting 2018

"Second quarter financial results showed improvement across all major parts of the business," said President and CEO Andrew Clyde.  "Customer traffic was solid as retail fuel volumes moderated year-over-year declines, PS&W activities continued to deliver strong results reducing fuel margin volatility, merchandising efforts exhibited robust comps against prior year results, and store-level operations demonstrated further cost saving improvements.  We increased our competitive advantage, reducing our fuel break-even requirement by 42 basis points per gallon, with line of sight to additional top and bottom line improvements, further demonstrating tangible proof of our ongoing commitment towards operational excellence."  Clyde concluded, "We continued to allocate capital in a disciplined manner repurchasing an additional 1.1 million shares, further leveraging the future earnings potential of the business for the benefit of long-term investors."

Consolidated Results

    Three Months Ended
June 30,
  Six Months Ended
June 30,
Key Operating Metrics   2018   2017   2018   2017
Net income (loss)  ($ Millions)   $ 51.8     $ 55.5     $ 91.1     $ 52.5  
Earnings per share (diluted)   $ 1.58     $ 1.51     $ 2.72     $ 1.42  
Adjusted EBITDA ($ Millions)   $ 112.7     $ 129.2     $ 157.7     $ 159.5  

Net income and Adjusted EBITDA in Q2 2018 were lower than prior year levels due primarily to lower retail fuel margins that were partially offset by improved PS&W contribution and a lower effective income tax rate.  Earnings per share improved with fewer shares outstanding.

Fuel

    Three Months Ended
June 30,
  Six Months Ended
June 30,
Key Operating Metrics   2018   2017   2018   2017
Total fuel contribution ($ Millions)   $ 180.1     $ 191.9     $ 294.8     $ 294.5  
Total fuel contribution (including retail, PS&W and RINs) (cpg)   16.7     18.1     14.2     14.2  
Total retail fuel contribution ($ Millions)   $ 140.3     $ 176.0     $ 224.1     $ 278.1  
Retail fuel volume - chain (Million gal)   1,076.4     1,059.5     2,079.3     2,072.9  
Retail fuel volume - per site (K gal SSS)   249.1     252.8     240.8     247.5  
Retail fuel margin (cpg excl credit card fees)   13.0     16.6     10.8     13.4  
PS&W including RINs contribution (cpg)   3.7     1.5     3.4     0.8  

Total fuel contribution dollars decreased 6.1% in Q2 2018 due primarily to lower year-over-year retail margin, partially offset by higher contribution from PS&W including RINs.  Total retail fuel contribution decreased 20.3% during the quarter in part due to a less favorable retail margin environment partially offset by the 1.6% increase in total retail gallons sold due to new store growth since Q2 2017. PS&W contribution including RINs demonstrated strong improvement year-over-year despite lower RIN's pricing, achieving 3.7 cpg of retail-equivalent margin.

Merchandise

    Three Months Ended
June 30,
  Six Months Ended
June 30,
Key Operating Metrics   2018   2017   2018   2017
Total merchandise contribution ($ Millions)   $ 102.3     $ 97.8     $ 193.8     $ 186.6  
Total merchandise sales ($ Millions)   $ 616.1     $ 605.7     $ 1,183.8     $ 1,171.5  
Total merchandise sales ($K SSS)   $ 143.5     $ 145.0     $ 138.0     $ 140.3  
Merchandise unit margin (%)   16.6 %   16.1 %   16.4 %   15.9 %
Tobacco contribution ($K SSS)   $ 13.9     $ 13.6     $ 13.4     $ 13.1  
Non-tobacco contribution ($K SSS)   $ 10.0     $ 9.8     $ 9.2     $ 9.2  
Total merchandise contribution ($K SSS)   $ 23.9     $ 23.4     $ 22.6     $ 22.3  

Total merchandise contribution increased 4.6% to $102.3 million in the second quarter 2018, while average unit margins increased to 16.6% from 16.1%, a new quarterly record. In addition, merchandise contribution exceeded $100 million in a quarter for the first time.  On a SSS basis, total merchandise contribution improved 2.0%, largely due to more effective promotions, driving both tobacco and non-tobacco margin contribution higher in the current quarter.

Other Areas

    Three Months Ended
June 30,
  Six Months Ended
June 30,
Key Operating Metrics   2018   2017   2018   2017
Total station and other operating expense ($ Millions)   $ 134.8     $ 129.4     $ 262.2     $ 254.2  
Station OPEX excluding credit card fees ($K APSM)   $ 20.7     $ 21.2     $ 20.4     $ 20.8  
Total SG&A cost ($ Millions)   $ 35.2     $ 31.4     $ 69.7     $ 69.6  

Total station and other operating expenses increased 4.2% for the current year quarter, reflecting new store additions and slightly higher payment fees due to higher retail fuel prices and merchandise sales.  However, on a per store basis, operating expenses excluding payment fees declined 2.5% from ongoing improvement initiatives.  Total SG&A costs were higher by $3.8 million in the second quarter of the current year primarily due to higher salaries, associated benefits, and incentive award expenses.

Station Openings

Murphy USA opened six new retail locations in Q2 2018 and re-opened nine raze-and-rebuilds, bringing the quarter end store count to 1,454, consisting of 1,159 Murphy USA sites and 295 Murphy Express sites.  A total of 37 stores are currently under construction, which includes 17 kiosks undergoing raze-and-rebuild which will return to operation as 1200 sq. ft. stores.  At this time, the full year build plan is already under construction totaling 54 new and raze-and-rebuild sites.

Financial Resources

    As of June 30,
Key Financial Metrics   2018   2017
Cash and cash equivalents ($ Millions)   $ 71.9     $ 197.1  
Long-term debt ($ Millions)   $ 850.8     $ 869.1  

Cash balances as of June 30, 2018 totaled $71.9 million. Long-term debt consisted of approximately $494 million in carrying value of 6% senior notes due in 2023, $296 million in carrying value of 5.625% senior notes due in 2027 and $80 million of term debt less $20 million of current maturities, which is reflected in current liabilities.  The ABL facility remains undrawn with a borrowing capacity of $310 million as of June 30, 2018.

    Three Months Ended
June 30,
  Six Months Ended
June 30,
Key Financial Metric   2018   2017   2018   2017
Average shares outstanding (diluted) (in thousands)   32,842     36,861     33,448     37,018  

Common shares repurchased during the current quarter were approximately 1.1 million for $72.7 million.  At June 30, 2018, the Company had common shares outstanding of 32,175,669.  The effective tax rate for Q2 2018 was 25.0% due primarily to the lower Federal tax rate in effect for 2018.

Earnings Call Information

The Company will host a conference call on August 2, 2018 at 10:00 a.m. Central time to discuss second quarter 2018 results.  The conference call number is 1 (844) 613-1037 and the conference number is 4684214. 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).  Approximately one hour after the conclusion of the conference, the webcast will be available for replay.  Shortly thereafter, a transcript will be available.

Source:  Murphy USA Inc. (NYSE:MUSA)

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 severe weather events, such as hurricanes, floods and earthquakes; 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, 2017 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

Sr. Director,  Investor Relations

christian.pikul@murphyusa.com


Murphy USA Inc.

Consolidated Statements of Income
(Unaudited)

                 
    Three Months Ended
June 30,
  Six Months Ended
June 30,
(Millions of dollars, except per share amounts)   2018   2017   2018   2017
Operating Revenues                
Petroleum product sales (a)   $ 3,193.7     $ 2,567.8     $ 5,831.3     $ 4,970.0  
Merchandise sales   616.1     605.7     1,183.8     1,171.5  
Other operating revenues   19.2     37.6     58.1     69.2  
Total operating revenues   3,829.0     3,211.1     7,073.2     6,210.7  
                 
Operating Expenses                
Petroleum product cost of goods sold (a)   3,032.5     2,413.2     5,593.6     4,742.5  
Merchandise cost of goods sold   513.8     507.9     990.0     984.9  
Station and other operating expenses   134.8     129.4     262.2     254.2  
Depreciation and amortization   33.0     27.5     64.8     54.5  
Selling, general and administrative   35.2     31.4     69.7     69.6  
Accretion of asset retirement obligations   0.5     0.5     1.0     0.9  
Total operating expenses   3,749.8     3,109.9     6,981.3     6,106.6  
                 
Net settlement proceeds   3.4         50.4      
Gain (loss) on sale of assets   (0.5 )   0.1     (0.2 )   (3.4 )
Income (loss) from operations   82.1     101.3     142.1     100.7  
                 
Other income (expense)                
Interest income   0.3     0.4     0.6     0.4  
Interest expense   (13.4 )   (11.8 )   (26.4 )   (21.2 )
Other nonoperating income (expense)   0.1         0.1     0.2  
Total other income (expense)   (13.0 )   (11.4 )   (25.7 )   (20.6 )
Income (loss) before income taxes   69.1     89.9     116.4     80.1  
Income tax expense (benefit)   17.3     34.4     25.3     27.6  
Net Income (Loss)   $ 51.8     $ 55.5     $ 91.1     $ 52.5  
                 
Basic and Diluted Earnings Per Common Share                
Basic   $ 1.59     $ 1.52     $ 2.75     $ 1.43  
Diluted   $ 1.58     $ 1.51     $ 2.72     $ 1.42  
Weighted-average Common shares outstanding (in thousands):                
Basic   32,550     36,525     33,121     36,700  
Diluted   32,842     36,861     33,448     37,018  
Supplemental information:                
(a) Includes excise taxes of:   $ 466.3     $ 504.6     $ 900.7     $ 984.7  


Murphy USA Inc.

Segment Operating Results
(Unaudited)

                 
(Millions of dollars, except revenue per store month (in thousands) and store counts)   Three Months Ended
June 30,
  Six Months Ended
June 30,
Marketing Segment   2018   2017   2018   2017
                 
Operating Revenues                
Petroleum product sales   $ 3,193.7     $ 2,567.8     $ 5,831.3     $ 4,970.0  
Merchandise sales   616.1     605.7     1,183.8     1,171.5  
Other operating revenues   19.1     37.6     57.6     69.0  
Total operating revenues   3,828.9     3,211.1     7,072.7     6,210.5  
                 
Operating expenses                
Petroleum products cost of goods sold   3,032.5     2,413.2     5,593.6     4,742.5  
Merchandise cost of goods sold   513.8     507.9     990.0     984.9  
Station and other operating expenses   134.8     129.4     262.2     254.2  
Depreciation and amortization   30.7     25.9     60.9     51.3  
Selling, general and administrative   35.2     31.4     69.7     69.6  
Accretion of asset retirement obligations   0.5     0.5     1.0     0.9  
Total operating expenses   3,747.5     3,108.3     6,977.4     6,103.4  
                 
Gain (loss) on sale of assets   (0.5 )   0.1     (0.2 )   (3.4 )
Income from operations   80.9     102.9     95.1     103.7  
                 
Other income (expense)                
Other nonoperating income (expense)           0.1     0.2  
Total other income (expense)           0.1     0.2  
                 
Income from continuing operations                
before income taxes   80.9     102.9     95.2     103.9  
Income tax expense   20.1     39.2     23.7     39.6  
Income (loss) from continuing operations   $ 60.8     $ 63.7     $ 71.5     $ 64.3  
                 
Total tobacco sales revenue per store month   $ 101.6     $ 105.8     $ 97.9     $ 103.0  
Total non-tobacco sales revenue per store month   40.9     39.0     39.0     37.3  
Total merchandise sales revenue per store month   $ 142.5     $ 144.8     $ 136.9     $ 140.3  
                 
Store count at end of period   1,454     1,411     1,454     1,411  
Total store months during the period   4,323     4,182     8,647     8,351  

Same store sales information (compared to APSM metrics)

  Variance from prior year quarter
  Three months ended   Six months ended
  June 30, 2018   June 30, 2018
  SSS   APSM   SSS   APSM
Fuel gallons per month (1.5 )%   (1.7 )%   (2.7 )%   (3.1 )%
               
Merchandise sales (1.0 )%   (1.6 )%   (1.6 )%   (2.4 )%
Tobacco sales (2.9 )%   (4.0 )%   (3.6 )%   (4.9 )%
Non tobacco sales 4.1 %   4.9 %   3.9 %   4.5 %
               
Merchandise margin 2.0 %   1.3 %   1.3 %   0.3 %
Tobacco margin 1.9 %   0.2 %   1.7 %   (0.3 )%
Non tobacco margin 2.2 %   2.8 %   0.7 %   1.3 %

Notes

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 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, 2017 for the sites being compared in the 2018 versus 2017 compared). 

The Company adopted ASC Topic 606 as of January 1, 2018, using the modified retrospective method.  The impact of the excise taxes collected and remitted to government authorities included in petroleum product sales that would have been recognized under previous revenue recognition guidance would have increased second quarter and six months 2018 petroleum revenues and cost of goods sold by $51.2 million and $92.1 million, respectively.

Murphy USA Inc.
Consolidated Balance Sheets

         
(Millions of dollars, except share amounts)   June 30, 2018   December 31, 2017
    (unaudited)    
Assets        
Current assets        
Cash and cash equivalents   $ 71.9     $ 170.0  
Accounts receivable—trade, less allowance for doubtful accounts of $1.1 in 2018 and in 2017   230.5     225.2  
Inventories, at lower of cost or market   205.1     182.5  
Prepaid expenses and other current assets   29.0     36.5  
Total current assets   536.5     614.2  
Property, plant and equipment, at cost less accumulated depreciation and amortization of $927.4 in 2018 and $874.7 in 2017   1,714.6     1,679.5  
Other assets   41.7     37.3  
Total assets   $ 2,292.8     $ 2,331.0  
Liabilities and Stockholders' Equity        
Current liabilities        
Current maturities of long-term debt   $ 21.1     $ 19.9  
Trade accounts payable and accrued liabilities   529.1     513.4  
Total current liabilities   550.2     533.3  
         
Long-term debt, including capitalized lease obligations   850.8     860.9  
Deferred income taxes   165.7     154.2  
Asset retirement obligations   29.6     28.2  
Deferred credits and other liabilities   10.2     16.0  
Total liabilities   1,606.5     1,592.6  
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 shares issued at 2018 and 2017, respectively)   0.5     0.5  
Treasury stock (14,591,495 and 12,675,630 shares held at        
2018 and 2017, respectively)   (945.9 )   (806.5 )
Additional paid in capital (APIC)   546.1     549.9  
Retained earnings   1,085.6     994.5  
Total stockholders' equity   686.3     738.4  
Total liabilities and stockholders' equity   $ 2,292.8     $ 2,331.0  


Murphy USA Inc.

Consolidated Statement of Cash Flows
(Unaudited)

                 
    Three Months Ended
June 30,
  Six Months Ended
June 30,
(Millions of dollars)   2018   2017   2018   2017
Operating Activities                
Net income (loss)   $ 51.8     $ 55.5     $ 91.1     $ 52.5  
Adjustments to reconcile net income (loss) to net cash provided by operating activities                
Depreciation and amortization   33.0     27.5     64.8     54.5  
Deferred and noncurrent income tax charges (credits)   10.3     7.4     11.4     13.0  
Accretion of asset retirement obligations   0.5     0.5     1.0     0.9  
Pretax (gains) losses from sale of assets   0.5     (0.1 )   0.2     3.4  
Net (increase) decrease in noncash operating working capital   (40.6 )   (4.3 )   (4.6 )   (84.7 )
Other operating activities - net   3.4     (0.2 )   2.4     0.8  
Net cash provided by (required by) operating activities   58.9     86.3     166.3     40.4  
Investing Activities                
Property additions   (53.6 )   (68.3 )   (102.3 )   (134.2 )
Proceeds from sale of assets   0.1     0.2     1.2     0.7  
Other investing activities - net   (0.2 )   (4.1 )   (4.9 )   (4.1 )
Net cash provided by (required by) investing activities   (53.7 )   (72.2 )   (106.0 )   (137.6 )
Financing Activities                
Purchase of treasury stock   (72.7 )   (48.9 )   (144.4 )   (66.3 )
Borrowings of debt       296.3         338.8  
Repayments of debt   (5.3 )   (99.7 )   (10.6 )   (125.9 )
Debt issuance costs       (0.9 )       (0.9 )
Amounts related to share-based compensation   (0.5 )   (0.1 )   (3.4 )   (5.2 )
Net cash provided by (required by) financing activities   (78.5 )   146.7     (158.4 )   140.5  
Net increase (decrease) in cash and cash equivalents   (73.3 )   160.8     (98.1 )   43.3  
Cash and cash equivalents at beginning of period   145.2     36.3     170.0     153.8  
Cash and cash equivalents at end of period   $ 71.9     $ 197.1     $ 71.9     $ 197.1  
                 
Reconciliation of Cash, Cash Equivalents and Restricted Cash                
Cash and cash equivalents at beginning of period   $ 144.1     36.3     170.0     153.8  
Restricted cash at beginning of period   1.1              
Cash, cash equivalents, and restricted cash at beginning of period   $ 145.2     $ 36.3     $ 170.0     $ 153.8  
                 
Cash and cash equivalents at end of period   $ 71.9     $ 197.1     $ 71.9     $ 197.1  
Restricted cash at end of period                
Cash, cash equivalents, and restricted cash at end of period   $ 71.9     $ 197.1     $ 71.9     $ 197.1  

Supplemental Disclosure Regarding Non-GAAP Financial Information

The following table sets forth the Company's EBITDA and Adjusted EBITDA for the three months ended June 30, 2018 and 2017.  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, net settlement proceeds, 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 EBITDA 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,
(Millions of dollars)   2018   2017   2018   2017
                 
Net income (loss)   $ 51.8     $ 55.5     $ 91.1     $ 52.5  
                 
Income taxes (benefit)   17.3     34.4     25.3     27.6  
Interest expense, net of interest income   13.1     11.4     25.8     20.8  
Depreciation and amortization   33.0     27.5     64.8     54.5  
EBITDA   $ 115.2     $ 128.8     $ 207.0     $ 155.4  
                 
Net settlement proceeds   (3.4 )       (50.4 )    
Accretion of asset retirement obligations   0.5     0.5     1.0     0.9  
(Gain) loss on sale of assets   0.5     (0.1 )   0.2     3.4  
Other nonoperating (income) expense   (0.1 )       (0.1 )   (0.2 )
Adjusted EBITDA   $ 112.7     $ 129.2     $ 157.7     $ 159.5  
                 

 

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