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EX-32.2 - EXHIBIT 32.2 CFO CERTIFICATION - Murphy USA Inc.ex-322_03312017.htm
EX-32.1 - EXHIBIT 32.1 CEO CERTIFICATION - Murphy USA Inc.ex-321_03312017.htm
EX-31.2 - EXHIBIT 31.2 CFO CERTIFICATION - Murphy USA Inc.ex-312_03312017.htm
EX-31.1 - EXHIBIT 31.1 CEO CERTIFICATION - Murphy USA Inc.ex-311_03312017.htm
EX-12 - EXHIBIT 12 RATIO OF EARNINGS TO FC - Murphy USA Inc.ex-12_03312017.htm



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
 
(Mark one)        
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2017
 
OR

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _______________ to _______________
 
Commission File Number 001-35914
 MURPHY USA INC.
(Exact name of registrant as specified in its charter)
 
 
Delaware
46-2279221
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
200 Peach Street
 
El Dorado, Arkansas
71730-5836
(Address of principal executive offices)
(Zip Code)
 
(870) 875-7600
(Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  þ Yes __ No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   þ  Yes __ No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  þ Accelerated filer __ Non-accelerated filer __ Smaller reporting company __ Emerging growth company __

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. __
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
  __Yes þ No


Number of shares of Common Stock, $0.01 par value, outstanding at March 31, 2017 was 36,775,640.



1




 
MURPHY USA INC.
 
TABLE OF CONTENTS
 
 
 
 


1





ITEM 1.  FINANCIAL STATEMENTS
Murphy USA Inc.
Consolidated Balance Sheets
 
March 31,
 
December 31,
(Thousands of dollars)
2017
 
2016
 
(unaudited)
 
 
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
36,256

 
$
153,813

Accounts receivable—trade, less allowance for doubtful accounts of $1,891 in 2017 and $1,891 in 2016
156,453

 
183,519

Inventories, at lower of cost or market
166,476

 
153,351

Prepaid expenses and other current assets
37,761

 
24,871

Total current assets
396,946

 
515,554

Property, plant and equipment, at cost less accumulated depreciation and amortization of $792,912 in 2017 and $780,426 in 2016
1,565,160

 
1,532,655

Other assets
40,630

 
40,531

Total assets
$
2,002,736

 
$
2,088,740

Liabilities and Stockholders' Equity
 

 
 

Current liabilities
 

 
 

Current maturities of long-term debt
$
67,210

 
$
40,596

Trade accounts payable and accrued liabilities
387,641

 
473,370

Income taxes payable

 
594

Total current liabilities
454,851

 
514,560

 
 
 
 
Long-term debt, including capitalized lease obligations
620,206

 
629,622

Deferred income taxes
210,268

 
204,656

Asset retirement obligations
26,283

 
26,200

Deferred credits and other liabilities
18,360

 
16,626

Total liabilities
1,329,968

 
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 (9,991,524 and 9,831,196 shares held at
 
 
 
March 31, 2017 and December 31, 2016, respectively)
(618,722
)
 
(608,001
)
Additional paid in capital (APIC)
544,777

 
555,338

Retained earnings
746,245

 
749,271

Total stockholders' equity
672,768

 
697,076

Total liabilities and stockholders' equity
$
2,002,736

 
$
2,088,740

See notes to consolidated financial statements.

2




Murphy USA Inc.
Consolidated Statements of Income
(unaudited)
 
 
Three Months Ended
March 31,
(Thousands of dollars except per share amounts)
 
2017
 
2016
Revenues
 
 
 
 
Petroleum product sales (a)
 
$
2,402,254

 
$
1,888,284

Merchandise sales
 
565,790

 
561,737

Other operating revenues
 
31,574

 
40,241

Total revenues
 
2,999,618

 
2,490,262

Costs and Operating Expenses
 
 

 
 

Petroleum product cost of goods sold (a)
 
2,329,333

 
1,783,129

Merchandise cost of goods sold
 
476,961

 
475,802

Station and other operating expenses
 
124,744

 
116,774

Depreciation and amortization
 
27,012

 
23,486

Selling, general and administrative
 
38,246

 
31,503

Accretion of asset retirement obligations
 
442

 
413

Total costs and operating expenses
 
2,996,738

 
2,431,107

Income from operations
 
2,880

 
59,155

Other income (expense)
 
 

 
 

Interest income
 
47

 
80

Interest expense
 
(9,498
)
 
(9,388
)
Gain (loss) on sale of assets
 
(3,498
)
 
89,465

Other nonoperating income (expense)
 
232

 
33

Total other income (expense)
 
(12,717
)
 
80,190

Income (loss) before income taxes
 
(9,837
)
 
139,345

Income tax expense (benefit)
 
(6,811
)
 
53,471

Net Income (Loss)
 
$
(3,026
)
 
$
85,874

Basic and Diluted Earnings Per Common Share
 
 
 
 
Basic
 
$
(0.08
)
 
$
2.10

Diluted
 
$
(0.08
)
 
$
2.08

Weighted-Average Common Shares Outstanding (in thousands):
 
 
 
 
Basic
 
36,880

 
40,909

Diluted
 
36,880

 
41,255

Supplemental information:
 
 
 
 
(a) Includes excise taxes of:
 
$
480,068

 
$
472,610

See notes to consolidated financial statements.


3




Murphy USA Inc.
Consolidated Statements of Cash Flows
(unaudited)
 
 (Thousands of dollars)
Three Months Ended
March 31,
 
2017
 
2016
Operating Activities
 
 
 
Net income (loss)
$
(3,026
)
 
$
85,874

Adjustments to reconcile net income (loss) to net cash provided by operating activities
 

 
 
Depreciation and amortization
27,012

 
23,486

Deferred and noncurrent income tax charges (credits)
5,612

 
28,855

Accretion of asset retirement obligations
442

 
413

Pretax (gains) losses from sale of assets
3,498

 
(89,465
)
Net (increase) decrease in noncash operating working capital
(80,399
)
 
24,847

Other operating activities - net
914

 
2,904

Net cash provided by (required by) operating activities
(45,947
)
 
76,914

Investing Activities
 

 
 

Property additions
(65,897
)
 
(47,283
)
Proceeds from sale of assets
455

 
86,011

Changes in restricted cash


(63,650
)
Other investing activities - net

 
(1,300
)
Net cash required by investing activities
(65,442
)
 
(26,222
)
Financing Activities
 

 
 

Purchase of treasury stock
(17,411
)
 
(150,010
)
Borrowings of debt
42,500

 
200,000

Repayments of debt
(26,178
)
 
(73
)
Debt issuance costs

 
(3,114
)
Amounts related to share-based compensation
(5,079
)
 
(4,129
)
Net cash provided by (required by) financing activities
(6,168
)
 
42,674

Net increase (decrease) in cash and cash equivalents
(117,557
)
 
93,366

Cash and cash equivalents at January 1
153,813

 
102,335

Cash and cash equivalents at March 31
$
36,256

 
$
195,701

 



See notes to consolidated financial statements.


4




Murphy USA Inc.
Consolidated Statements of Changes in Equity
(unaudited)
 
 
 
Common Stock
 
 
 
 
 
 
 
 
(Thousands of dollars, except share amounts)
Shares
 
Par
 
Treasury Stock
 
APIC
 
Retained Earnings
 
Total
Balance as of December 31, 2015
46,767,164

 
$
468

 
$
(294,139
)
 
$
558,182

 
$
527,779

 
$
792,290

Net income

 

 

 

 
85,874

 
85,874

Purchase of treasury stock

 

 
(150,010
)
 

 

 
(150,010
)
Issuance of common stock

 

 

 

 

 

Issuance of treasury stock

 

 
6,091

 
(6,091
)
 

 

Amounts related to share-based compensation

 

 

 
(4,129
)
 

 
(4,129
)
Share-based compensation expense

 

 

 
1,589

 

 
1,589

Balance as of March 31, 2016
46,767,164

 
$
468

 
$
(438,058
)
 
$
549,551

 
$
613,653

 
$
725,614


 
 
Common Stock
 
 
 
 
 
 
 
 
(Thousands of dollars, except share amounts)
Shares
 
Par
 
Treasury Stock
 
APIC
 
Retained Earnings
 
Total
Balance as of December 31, 2016
46,767,164

 
$
468

 
$
(608,001
)
 
$
555,338

 
$
749,271

 
$
697,076

Net income (loss)

 

 

 

 
(3,026
)
 
(3,026
)
Purchase of treasury stock

 

 
(17,411
)
 

 

 
(17,411
)
Issuance of common stock

 

 

 

 

 

Issuance of treasury stock

 

 
6,690

 
(6,690
)
 

 

Amounts related to share-based compensation

 

 

 
(5,079
)
 

 
(5,079
)
Share-based compensation expense

 

 

 
1,208

 

 
1,208

Balance as of March 31, 2017
46,767,164

 
$
468

 
$
(618,722
)
 
$
544,777

 
$
746,245

 
$
672,768

 
 
See notes to consolidated financial statements.


5

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 
Note 1 — Description of Business and Basis of Presentation
 
Description of business — Murphy USA Inc. (“Murphy USA” or the “Company”) markets refined products through a network of retail gasoline stations and to unbranded wholesale customers. Murphy USA’s owned retail stations are almost all located in close proximity to Walmart stores in 26 states and use the brand name Murphy USA®. Murphy USA also markets gasoline and other products at standalone stations under the Murphy Express brand. At March 31, 2017, Murphy USA had a total of 1,406 Company stations of which 1,152 were Murphy USA and 254 were Murphy Express.
 
Basis of Presentation — Murphy USA was incorporated in March 2013 and, in connection with its incorporation, Murphy USA issued 100 shares of common stock, par value $0.01 per share, to Murphy Oil Corporation (“Murphy Oil”) for $1.00. On August 30, 2013, Murphy USA was separated from Murphy Oil through the distribution of 100% of the common stock of Murphy USA to holders of Murphy Oil stock. 
 
In preparing the financial statements of Murphy USA in conformity with accounting principles generally accepted in the United States, management has made a number of estimates and assumptions related to the reporting of assets, liabilities, revenues, expenses and the disclosure of contingent assets and liabilities. Actual results may differ from these estimates.
 
Interim Financial Information — The interim period financial information presented in these consolidated financial statements is unaudited and includes all known accruals and adjustments, in the opinion of management, necessary for a fair presentation of the consolidated financial position of Murphy USA and its results of operations and cash flows for the periods presented. All such adjustments are of a normal and recurring nature.
 
These interim consolidated financial statements should be read together with our audited financial statements for the years ended December 31, 2016, 2015 and 2014, included in our Annual Report on Form 10-K (File No. 001-35914), as filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934 on February 22, 2017.
 
Recently Issued Accounting Standards 

In May 2014, the FASB issued ASU No. 2014-09 "Revenue from Contracts with Customers," which supersedes the revenue recognition requirements in the Accounting Standards Codification ("Codification") Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. The core principle of the new ASU No. 2014-09 is for companies to recognize revenue from the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The Company will adopt ASU No. 2014-09 beginning January 1, 2018. The Company is currently determining the overall impacts that the ASU will have on its various revenue streams and consolidated financial statements and will update existing controls and processes to comply with the guidance. While we had anticipated completing our review of existing revenue streams by the end of March 2017, this work remains ongoing. We currently expect to complete this review during the second quarter of 2017.

One key area under consideration is the recognition of excise and other taxes collected on sales of refined products and remitted to governmental agencies which are currently included in both revenues and cost of petroleum products sold in the income statement.  Under ASU 2014-09, the Company can either analyze each individual tax on a jurisdiction-by-jurisdiction basis to determine if it continues to meet the stated criteria for gross reporting or it could avail itself of the practical expedient to report all of these taxes on a net basis.  While the Company is still considering these options, if a determination is made to elect net reporting the impact would be a reduction of revenues and a corresponding reduction of cost of goods sold with no impact to net income.  For Q1 2017 and Q1 2016, the amounts reported as excise and other taxes collected were $480.1 million and $472.6 million, respectively.  For the three years ended December 31, 2016, 2015 and 2014, the amounts were $1.96 billion, $1.97 billion, and $1.93 billion, respectively. 


6

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)" (“ASU 2016-02”). ASU 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets. Lessor accounting will remain similar to lessor accounting under previous GAAP, while aligning with the FASB’s new revenue recognition guidance. ASU 2016-02 is effective for the Company beginning January 1, 2019. Early adoption of ASU 2016-02 is permitted. The standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. While this ASU will have impact on our internal processes and controls and result in a change to our accounting, we are still in the evaluation and information gathering stage of implementing the guidance and can not yet estimate the potential impact.
In March 2016, the FASB issued ASU No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting", which amends the current stock compensation guidance. The amendments simplify the accounting for the taxes related to share-based payments, including adjustments to how excess tax benefits and a company’s payments for tax withholdings should be classified among other changes. The standard was effective for the Company on January 1, 2017.
The primary impact of adoption was the recognition of $1.8 million of excess tax benefits in the provision for income taxes rather than paid-in-capital for the current period. Additional amendments to the accounting for income taxes and minimum statutory withholding tax requirements had no impact to retained earnings as of January 1, 2017, where the cumulative effect of these changes is required to be recorded. The Company elected to continue to estimate forfeitures expected to occur to determine the amount of compensation cost to be recognized in each period.
The Company elected to apply the presentation requirements for cash flows related to excess tax benefits prospectively as of January 1, 2017. The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact to any of the periods presented on the consolidated statement of cash flows, as such cash flows have historically been presented as a financing activity.

Note 2 — Inventories
 
Inventories consisted of the following:
(Thousands of dollars)
 
March 31,
2017
 
December 31,
2016
Finished products - FIFO basis
 
$
208,323

 
$
207,903

Less LIFO reserve - finished products
 
(143,363
)
 
(153,319
)
Finished products - LIFO basis
 
64,960

 
54,584

Store merchandise for resale
 
97,697

 
95,649

Materials and supplies
 
3,819

 
3,118

Total inventories
 
$
166,476

 
$
153,351

 
At March 31, 2017 and December 31, 2016, the replacement cost (market value) of last-in, first-out (LIFO) inventories exceeded the LIFO carrying value by $143.4 million and $153.3 million, respectively.
 
















7

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 3 — Long-Term Debt
 
Long-term debt consisted of the following:
(Thousands of dollars)
 
March 31,
2017
 
December 31,
2016
6% senior notes due 2023 (net of unamortized discount of $5,609 at March 31, 2017 and $5,826 at December 2016)
 
$
494,391

 
$
494,174

Asset-based loan facility (ABL) due 2021 (effective rate of 5.06% at March 31, 2017)
 
26,500

 

Term loan due 2020 (effective rate of 3.59% at March 31, 2017)
 
170,000

 
180,000

Capitalized lease obligations, vehicles, due through 2020
 
1,613

 
1,451

Less unamortized debt issuance costs
 
(5,088
)
 
(5,407
)
Total long-term debt
 
687,416

 
670,218

Less current maturities
 
67,210

 
40,596

Total long-term debt, net of current
 
$
620,206

 
$
629,622


Senior Notes
 
On August 14, 2013, Murphy Oil USA, Inc., our primary operating subsidiary, issued 6.00% Senior Notes due 2023 (the “2023 Senior Notes”) in an aggregate principal amount of $500 million. The 2023 Senior Notes are fully and unconditionally guaranteed by Murphy USA, and are guaranteed by certain 100% owned subsidiaries that guarantee our credit facilities. The indenture governing the 2023 Senior Notes contains restrictive covenants that limit, among other things, the ability of Murphy USA, Murphy Oil USA, Inc. and the restricted subsidiaries to incur additional indebtedness or liens, dispose of assets, make certain restricted payments or investments, enter into transactions with affiliates or merge with or into other entities.
 
The 2023 Senior Notes and the guarantees rank equally with all of our and the guarantors’ existing and future senior unsecured indebtedness and effectively junior to our and the guarantors’ existing and future secured indebtedness (including indebtedness with respect to the credit facilities) to the extent of the value of the assets securing such indebtedness.  The 2023 Senior Notes are structurally subordinated to all of the existing and future third-party liabilities, including trade payables, of our existing and future subsidiaries that do not guarantee the notes.
 
Credit Facilities and Term Loan

In March 2016, we amended and extended our existing credit agreement.  The credit agreement provides for a committed $450 million asset-based loan (ABL) facility (with availability subject to the borrowing base described below) and a $200 million term loan facility.  It also provides for a $150 million uncommitted incremental facility. On March 10, 2016, Murphy Oil USA, Inc. borrowed $200 million under the term loan facility that has a four-year term. As of March 31, 2017, we have $26.5 million outstanding under our ABL facility which is included in our Current maturities of long-term debt on the Balance Sheet.  

The borrowing base is, at any time of determination, the amount (net of reserves) equal to the sum of:
 
•      100% of eligible cash at such time, plus
•      90% of eligible credit card receivables at such time, plus
•      90% of eligible investment grade accounts, plus
•      85% of eligible other accounts, plus
•      80% of eligible product supply/wholesale refined products inventory at such time, plus
•      75% of eligible retail refined products inventory at such time, plus
 
the lesser of (i) 70% of the average cost of eligible retail merchandise inventory at such time and (ii) 85% of the net orderly liquidation value of eligible retail merchandise inventory at such time.
 
The ABL facility includes a $200 million sublimit for the issuance of letters of credit. Letters of credit issued under the ABL facility reduce availability under the ABL facility.

8

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

  
Interest payable on the credit facilities is based on either:
 
the London interbank offered rate, adjusted for statutory reserve requirements (the “Adjusted LIBO Rate”); or
the Alternate Base Rate, which is defined as the highest of (a) the prime rate, (b) the federal funds effective rate from time to time plus 0.50% per annum and (c) the one-month Adjusted LIBO Rate plus 1.00% per annum,
 
plus, (A) in the case of Adjusted LIBO Rate borrowings, (i) with respect to the ABL facility, spreads ranging from 1.50% to 2.00% per annum depending on a total debt to EBITDA ratio under the ABL facility or (ii) with respect to the term loan facility, spreads ranging from 2.50% to 2.75% per annum depending on a total debt to EBITDA ratio and (B) in the case of Alternate Base Rate borrowings, (i) with respect to the ABL facility, spreads ranging from 0.50% to 1.00% per annum depending on total debt to EBITDA ratio or (ii) with respect to the term loan facility, spreads ranging from 1.50% to 1.75% per annum depending on a total debt to EBITDA ratio.
 
The interest rate period with respect to the Adjusted LIBO Rate interest rate option can be set at onetwothree, or six months as selected by us in accordance with the terms of the credit agreement.
 
We were obligated to make quarterly amortization payments on the outstanding principal amount of the term loan facility beginning on July 1, 2016 equal to 5% of the aggregate principal amount of term loans made on March 10, 2016, with the remaining balance payable on the scheduled maturity date of the term loan facility. Borrowings under the credit facilities are prepayable at our option without premium or penalty. We are also required to prepay the term loan facility with the net cash proceeds of certain asset sales or casualty events, subject to certain exceptions. The credit agreement also includes certain customary mandatory prepayment provisions with respect to the ABL facility.
 
The credit agreement contains certain covenants that limit, among other things, the ability of us and our subsidiaries to incur additional indebtedness or liens, to make certain investments, to enter into sale-leaseback transactions, to make certain restricted payments, to enter into consolidations, mergers or sales of material assets and other fundamental changes, to transact with affiliates, to enter into agreements restricting the ability of subsidiaries to incur liens or pay dividends, or to make certain accounting changes. In addition, the credit agreement requires us to maintain a minimum fixed charge coverage ratio of 1.0 to 1.0 when availability for at least three consecutive business days is less than the greater of (a) 17.5% of the lesser of the aggregate ABL facility commitments and the borrowing base and (b) $70,000,000 (including as of the most recent fiscal quarter end on the first date when availability is less than such amount), as well as a maximum secured total debt to EBITDA ratio of 4.5 to 1.0 at any time when term facility commitments or term loans are outstanding.  As of March 31, 2017, our fixed charge coverage ratio was 0.57; however, we had more than $100 million of availability under the ABL facility at that date so the fixed charge coverage ratio currently has no impact on our operations or liquidity. Our secured debt to EBITDA ratio as of March 31, 2017 was 0.55 to 1.0.         
 
The Senior Credit Agreement contains restrictions on certain payments, including dividends, when availability under the credit agreement is less than or equal to the greater of $100 million and 25% of the lesser of the revolving commitments and the borrowing base and our fixed charge coverage ratio is less than 1.0 to 1.0 (unless availability under the credit agreement is greater than $100 million and 40% of the lesser of the revolving commitments and the borrowing base). As of March 31, 2017, the Company's ability to make restricted payments was not limited as our availability under the borrowing base was more than $100 million, while our fixed charge coverage ratio under our Senior Credit Agreement was less than 1.0 to 1.0. As of December 31, 2016, we had a shortfall of approximately $304.1 million of our net income and retained earnings subject to such restrictions before the fixed charge coverage ratio under our Senior Credit Agreement would exceed 1.0 to 1.0.
 
All obligations under the credit agreement are guaranteed by Murphy USA and the subsidiary guarantors party thereto, and all obligations under the credit agreement, including the guarantees of those obligations, are secured by certain assets of Murphy USA, Murphy Oil USA, Inc. and the guarantors party thereto.
 
 

9

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4 — Asset Retirement Obligations (ARO)
The majority of the ARO recognized by the Company at March 31, 2017 and December 31, 2016 related to the estimated costs to dismantle and abandon certain of its retail gasoline stations. The Company has not recorded an ARO for certain of its marketing assets because sufficient information is presently not available to estimate a range of potential settlement dates for the obligation. These assets are consistently being upgraded and are expected to be operational into the foreseeable future. In these cases, the obligation will be initially recognized in the period in which sufficient information exists to estimate the obligation.
A reconciliation of the beginning and ending aggregate carrying amount of the ARO is shown in the following table.
 
(Thousands of dollars)
 
March 31,
2017
 
December 31,
2016
Balance at beginning of period
 
$
26,200

 
$
24,345

Accretion expense
 
442

 
1,650

Liabilities incurred
 
42

 
379

Settlement of liabilities
 
$
(401
)
 
$
(174
)
Balance at end of period
 
$
26,283

 
$
26,200

 
The estimation of future ARO is based on a number of assumptions requiring professional judgment. The Company cannot predict the type of revisions to these assumptions that may be required in future periods due to the lack of availability of additional information.
 

Note 5— Income Taxes
 
The effective tax rate is calculated as the amount of income tax expense (benefit) divided by income (loss) before income tax expense (benefit). For the three month periods ended March 31, 2017 and 2016, the Company’s effective tax rates were as follows:
 
 
 
2017
 
2016
Three months ended March 31,
 
(69.2)%
 
38.4%
 
The effective tax rate for the three months ended March 31, 2017 was higher than the U.S. Federal tax rate of 35% primarily due to state taxes and two discrete tax benefits recorded in the quarter. As noted below, the first relates to the adoption of ASU 2016-09, which resulted in approximately $1.8 million of excess tax benefits being recorded during the quarter. Second, the Company recognized a tax benefit of approximately $1.5 million related to the settlement of prior year state uncertain tax positions.
 
The Company was included in Murphy Oil’s tax returns for the periods prior to the separation. The statute of several jurisdictions remains subject to audit by taxing authorities. As of March 31, 2017, the earliest year remaining open for Federal examination is 2012 and for the states it ranges from 2009-2012.  In addition to the pre-separation returns being open under statute, the federal and state tax returns post separation are also open under statute for examination. Although the Company believes that recorded liabilities for uncertain tax positions are adequate, additional gains or losses could occur in future periods from resolution of outstanding unsettled matters.

We adopted ASU 2016-09 on January 1, 2017, which requires the excess tax benefits or deficiencies to be reflected in the Consolidated Statements of Income as a component of the provision for income taxes whereas they previously were recognized in paid-in-capital. Total excess tax benefits recognized in the first quarter of 2017 was $1.8 million.

  

10

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6 — Incentive Plans
2013 Long-Term Incentive Plan
Effective August 30, 2013, certain of our employees participate in the Murphy USA 2013 Long-Term Incentive Plan which was subsequently amended and restated effective as of February 8, 2017 (the “MUSA 2013 Plan”). The MUSA 2013 Plan authorizes the Executive Compensation Committee of our Board of Directors (“the Committee”) to grant non-qualified or incentive stock options, stock appreciation rights, stock awards (including restricted stock and restricted stock unit awards), cash awards, and performance awards to our employees. No more than 5.5 million shares of MUSA common stock may be delivered under the MUSA 2013 Plan and no more than 1 million shares of common stock may be awarded to any one employee, subject to adjustment for changes in capitalization. The maximum cash amount payable pursuant to any “performance-based” award to any participant in any calendar year is $5 million.
 
On February 8, 2017, the Committee granted nonqualified stock options for 114,800 shares at an exercise price of $65.75 per share under the terms of the MUSA 2013 Plan.  The Black-Scholes valuation for these awards is $15.45 per option.  The Committee also awarded time-based restricted stock units and performance-based restricted stock units (performance units) to certain employees on the same date.  There were 29,075 time-based restricted units granted at an average grant date fair value of $65.41 along with 53,800 performance units.  Half of the performance units vest based on a 3-year return on average capital employed (ROACE) calculation and the other half vest based on a 3-year total shareholder return (TSR) calculation that compares MUSA to a group of 16 peer companies.  The portion of the awards that vest based on TSR qualify as a market condition and must be valued using a Monte Carlo valuation model.  For the TSR portion of the awards, the fair value was determined to be $94.51 per unit.  For the ROACE portion of the awards, the valuation will be based on the grant date fair value of $65.75 per unit and the number of awards will be periodically assessed to determine the probability of vesting. 
 
On February 8, 2017, the Committee also granted 50,075 time-based restricted stock units granted to certain employees with a grant date fair value of $65.75 per unit. 
 
2013 Stock Plan for Non-employee Directors
 
Effective August 8, 2013, Murphy USA adopted the 2013 Murphy USA Stock Plan for Non-employee Directors (the “Directors Plan”).  The directors for Murphy USA are compensated with a mixture of cash payments and equity-based awards.  Awards under the Directors Plan may be in the form of restricted stock, restricted stock units, stock options, or a combination thereof.  An aggregate of 500,000 shares of common stock shall be available for issuance of grants under the Directors Plan. 
 
During the first quarter of 2017, the Company issued 15,948 restricted stock units to its non-employee directors at a weighted average grant date fair value of $66.01 per share.  These shares vest in three years from the grant date. 
 
For the three months ended March 31, 2017 and 2016, share based compensation was $1.2 million and $1.6 million, respectively.  The income tax benefit realized for the tax deductions from options exercised for the three months ended March 31, 2017 and 2016 was $0.1 million and $0.5 million, respectively. 

Adoption of ASU 2016-09

On January 1, 2017, the Company adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amended the current stock compensation guidance. As part of the adoption of this standard, the Company determined to leave its policy related to accounting for forfeitures based on estimates rather than changing to actual forfeitures. See Note 1 "Description of Business and Basis of Presentation" for information regarding the impact of adopting this standard for the Company.
 
Note 7— Financial Instruments and Risk Management
 
DERIVATIVE INSTRUMENTS — The Company makes limited use of derivative instruments to manage certain risks related to commodity prices. The use of derivative instruments for risk management is covered by operating policies and is closely monitored by the Company’s senior management. The Company does not hold any derivatives for speculative purposes and it does not use derivatives with leveraged or complex features. Derivative instruments are traded primarily with creditworthy major financial institutions or over national exchanges such as the New York Mercantile Exchange (“NYMEX”). As of March 31, 2017, all current derivative activity is immaterial.

11

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 
At March 31, 2017 and December 31, 2016, cash deposits of $2.9 million and $1.8 million related to commodity derivative contracts were reported in Prepaid expenses and other current assets in the Consolidated Balance Sheets, respectively. These cash deposits have not been used to increase the reported net assets or reduce the reported net liabilities on the derivative contracts at March 31, 2017 or December 31, 2016, respectively.


Note 8 – Earnings Per Share
 
Basic earnings per common share is computed by dividing net income available to common stockholders by the weighted average of common shares outstanding during the period.  Diluted earnings per common share adjusts basic earnings per common share for the effects of stock options and restricted stock in the periods where such items are dilutive. 
 
On January 25, 2016, the Company announced that it would proceed with an independent growth plan in which we will concentrate on acquiring land from third parties rather than acquiring land directly from Walmart. In conjunction with this announcement, the Board of Directors approved a strategic allocation of capital for the Company to pursue new additional growth opportunities and to undertake a share repurchase program of the Company's common stock. The Board authorized up to $500 million in total for this activity through December 31, 2017. For the first three months ended March 31, 2017, the Company acquired 268,490 shares of common stock for an average price of $64.85 per share including brokerage fees.  The Company has remaining authority of $159.3 million under our current program.
 
The following table provides a reconciliation of basic and diluted earnings per share computations for the three months ended March 31, 2017 and 2016 (in thousands, except per share amounts):
 
 
Three Months Ended March 31,
 
 
2017
 
2016
Earnings per common share:
 
 
 
 
Net income (loss) per share - basic
 
 
 
 
Net income (loss) attributable to common stockholders
 
$
(3,026
)
 
$
85,874

 
 
 
 
 
Weighted average common shares outstanding (in thousands)
 
36,880

 
40,909

 
 
 
 
 
Earnings per common share
 
$
(0.08
)
 
$
2.10

 
 
 
 
 
 
Earnings per common share - assuming dilution:
 
 
 
 
Net income (loss) per share - diluted
 
 
 
 
Net income (loss) attributable to common stockholders
 
$
(3,026
)
 
$
85,874

 
 
 
 
 
Weighted average common shares outstanding (in thousands)
 
36,880

 
40,909

Common equivalent shares:
 
 
 
 
Dilutive options
 

 
346

Weighted average common shares outstanding - assuming dilution (in thousands) 1
 
36,880

 
41,255

 
 
 
 
 
Earnings per common share assuming dilution
 
$
(0.08
)
 
$
2.08


1 For the period ended March 31, 2017, weighted average shares for basic earnings per share is also used for calculating diluted earnings per share because dilutive shares and dilutive earnings per share are not applicable when a loss from continuing operations is reported.



12

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9 — Other Financial Information
 
OTHER OPERATING REVENUES – Other operating revenues in the Consolidated Statements of Income include the following items: 
 
 
Three Months Ended March 31,
(Thousands of dollars)
 
2017
 
2016
Renewable Identification Numbers (RINs) sales
 
$
29,027

 
$
38,775

Other
 
2,547

 
1,466

Other operating revenues
 
$
31,574

 
$
40,241

 
CASH FLOW DISCLOSURES — Cash income taxes paid, net of refunds, were $(0.3) million and $(16.3) million for the three month periods ended March 31, 2017 and 2016, respectively. Interest paid, net of amounts capitalized, was $16.5 million and $16.1 million for the three month periods ended March 31, 2017 and 2016, respectively.  
 
Three Months Ended March 31,
(Thousands of dollars)
2017
 
2016
Accounts receivable
$
27,099

 
$
8,147

Inventories
(13,144
)
 
456

Prepaid expenses and other current assets
(12,891
)
 
29,853

Accounts payable and accrued liabilities
(80,869
)
 
(26,315
)
Income taxes payable
(594
)
 
12,706

Current deferred income tax liabilities

 

Net decrease (increase) in noncash operating working capital
$
(80,399
)
 
$
24,847



Note 10 — Assets and Liabilities Measured at Fair Value
 
The Company carries certain assets and liabilities at fair value in its Consolidated Balance Sheets. The fair value hierarchy is based on the quality of inputs used to measure fair value, with Level 1 being the highest quality and Level 3 being the lowest quality. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included within Level 1. Level 3 inputs are unobservable inputs which reflect assumptions about pricing by market participants.

At the balance sheet date the fair value of derivative contracts were determined using NYMEX quoted values but were immaterial.
 
The following table presents the carrying amounts and estimated fair values of financial instruments held by the Company at March 31, 2017 and December 31, 2016. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. The table excludes Cash and cash equivalents, Accounts receivable-trade, Trade accounts payable and accrued liabilities, all of which had fair values approximating carrying amounts. The fair value of Current and Long-term debt was estimated based on rates offered to the Company at that time for debt of the same maturities. The Company has off-balance sheet exposures relating to certain financial guarantees and letters of credit. The fair value of these, which represents fees associated with obtaining the instruments, was nominal.  
 
 
At March 31, 2017
 
At December 31, 2016
 
 
Carrying
 
 
 
Carrying
 
 
(Thousands of dollars)
 
Amount
 
Fair Value
 
Amount
 
Fair Value
Financial liabilities
 
 
 
 
 
 
 
 
Current and long-term debt
 
$
(687,416
)
 
$
(704,966
)
 
$
(670,218
)
 
$
(690,114
)
 




13

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11 — Contingencies 
 
The Company’s operations and earnings have been and may be affected by various forms of governmental action. Examples of such governmental action include, but are by no means limited to: tax increases and retroactive tax claims; import and export controls; price controls; allocation of supplies of crude oil and petroleum products and other goods; laws and regulations intended for the promotion of safety and the protection and/or remediation of the environment; governmental support for other forms of energy; and laws and regulations affecting the Company’s relationships with employees, suppliers, customers, stockholders and others. Because governmental actions are often motivated by political considerations, may be taken without full consideration of their consequences, and may be taken in response to actions of other governments, it is not practical to attempt to predict the likelihood of such actions, the form the actions may take or the effect such actions may have on the Company.
 
ENVIRONMENTAL MATTERS AND LEGAL MATTERS — Murphy USA is subject to numerous federal, state and local laws and regulations dealing with the environment. Violation of such environmental laws, regulations and permits can result in the imposition of significant civil and criminal penalties, injunctions and other sanctions. A discharge of hazardous substances into the environment could, to the extent such event is not insured, subject the Company to substantial expense, including both the cost to comply with applicable regulations and claims by neighboring landowners and other third parties for any personal injury, property damage and other losses that might result.
 
The Company currently owns or leases, and has in the past owned or leased, properties at which hazardous substances have been or are being handled. Although the Company believes it has used operating and disposal practices that were standard in the industry at the time, hazardous substances may have been disposed of or released on or under the properties owned or leased by the Company or on or under other locations where they have been taken for disposal. In addition, many of these properties have been operated by third parties whose management of hazardous substances was not under the Company’s control. Under existing laws the Company could be required to remediate contaminated property (including contaminated groundwater) or to perform remedial actions to prevent future contamination. Certain of these contaminated properties are in various stages of negotiation, investigation, and/or cleanup, and the Company is investigating the extent of any related liability and the availability of applicable defenses. With the sale of the U.S. refineries in 2011, Murphy Oil retained certain liabilities related to environmental matters. Murphy Oil also obtained insurance covering certain levels of environmental exposures. The Company believes costs related to these sites will not have a material adverse effect on Murphy USA’s net income, financial condition or liquidity in a future period.

Certain environmental expenditures are likely to be recovered by the Company from other sources, primarily environmental funds maintained by certain states. Since no assurance can be given that future recoveries from other sources will occur, the Company has not recorded a benefit for likely recoveries at March 31, 2017, however certain jurisdictions provide reimbursement for these expenses which have been considered in recording the net exposure.
 
The U.S. Environmental Protection Agency (EPA) currently considers the Company a Potentially Responsible Party (PRP) at one Superfund site. The potential total cost to all parties to perform necessary remedial work at this site may be substantial. However, based on current negotiations and available information, the Company believes that it is a de minimis party as to ultimate responsibility at the Superfund site. Accordingly, the Company has not recorded a liability for remedial costs at the Superfund site at March 31, 2017. The Company could be required to bear a pro rata share of costs attributable to nonparticipating PRPs or could be assigned additional responsibility for remediation at this site or other Superfund sites. The Company believes that its share of the ultimate costs to clean-up this site will be immaterial and will not have a material adverse effect on its net income, financial condition or liquidity in a future period.
 
Based on information currently available to the Company, the amount of future remediation costs to be incurred to address known contamination sites is not expected to have a material adverse effect on the Company’s future net income, cash flows or liquidity. However, there is the possibility that additional environmental expenditures could be required to address contamination, including as a result of discovering additional contamination or the imposition of new or revised requirements applicable to known contamination.
 

14

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other than as noted above, Murphy USA is engaged in a number of other legal proceedings, all of which the Company considers routine and incidental to its business. Based on information currently available to the Company, the ultimate resolution of those other legal matters is not expected to have a material adverse effect on the Company’s net income, financial condition or liquidity in a future period.
 
INSURANCE — The Company maintains insurance coverage at levels that are customary and consistent with industry standards for companies of similar size. Murphy USA maintains statutory workers compensation insurance with a deductible of $1.0 million per occurrence, general liability insurance with a deductible of $3.0 million per occurrence, and auto liability insurance with a deductible of $0.3 million per occurrence. As of March 31, 2017, there were a number of outstanding claims that are of a routine nature. The estimated incurred but unpaid liabilities relating to these claims are included in Trade account payables and accrued liabilities on the Consolidated Balance Sheets. While the ultimate outcome of these claims cannot presently be determined, management believes that the accrued liability of $20.6 million will be sufficient to cover the related liability for all insurance claims and that the ultimate disposition of these claims will have no material effect on the Company’s financial position and results of operations.
 
The Company has obtained insurance coverage as appropriate for the business in which it is engaged, but may incur losses that are not covered by insurance or reserves, in whole or in part, and such losses could adversely affect our results of operations and financial position.
 
TAX MATTERS — Murphy USA is subject to extensive tax liabilities imposed by multiple jurisdictions, including income taxes, indirect taxes (excise/duty, sales/use and gross receipts taxes), payroll taxes, franchise taxes, withholding taxes and ad valorem taxes. New tax laws and regulations and changes in existing tax laws and regulations are continuously being enacted or proposed that could result in increased expenditures for tax liabilities in the future. Many of these liabilities are subject to periodic audits by the respective taxing authority. Subsequent changes to our tax liabilities because of these audits may subject us to interest and penalties.

OTHER MATTERS — In the normal course of its business, the Company is required under certain contracts with various governmental authorities and others to provide financial guarantees or letters of credit that may be drawn upon if the Company fails to perform under those contracts. At March 31, 2017, the Company had contingent liabilities of $16.9 million on outstanding letters of credit. The Company has not accrued a liability in its balance sheet related to these financial guarantees and letters of credit because it is believed that the likelihood of having these drawn is remote.
 
Note 12 — Business Segment
 
The Company's operations have one operating segment which is Marketing.  The operations include the sale of retail motor fuel products and convenience merchandise along with the wholesale and bulk sale capabilities of our product supply and wholesale group. As the primary purpose of the product supply and wholesale group is to support our retail operations and provide fuel for their daily operation, the bulk and wholesale fuel sales are secondary to the support functions played by these groups. As such, they are all treated as one segment for reporting purposes as they sell the same products. This Marketing segment contains essentially all of the revenue generating functions of the Company. Results not included in the reportable segment include Corporate and Other Assets. The reportable segment was determined based on information reviewed by the Chief Operating Decision Maker (CODM).
 
 
 
 
 
Three Months Ended
 
 
 
 
March 31, 2017
 
March 31, 2016
 
 
Total Assets at
 
External
 
Income
 
External
 
Income
(Thousands of dollars)
 
March 31,
 
Revenues
 
(Loss)
 
Revenues
 
(Loss)
Marketing
 
$
1,876,982

 
$
2,999,405

 
$
600

 
$
2,490,058

 
$
92,425

Corporate and other assets
 
125,754

 
213

 
(3,626
)
 
204

 
(6,551
)
Total
 
$
2,002,736

 
$
2,999,618

 
$
(3,026
)
 
$
2,490,262

 
$
85,874

 
 
 
 
 
 
 
 
 
 
 
 


15

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 13 – Guarantor Subsidiaries
Certain of the Company’s 100% owned, domestic subsidiaries (the “Guarantor Subsidiaries”) fully and unconditionally guarantee, on a joint and several basis, certain of the outstanding indebtedness of the Company, including the 6.00% senior notes due 2023.  The following consolidating schedules present financial information on a consolidated basis in conformity with the SEC’s Regulation S-X Rule 3-10(d):
 
 
CONSOLIDATING BALANCE SHEET
(unaudited)
(Thousands of dollars)
March 31, 2017
Assets
Parent Company
 
Issuer
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Current assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
36,256

 
$

 
$

 
$

 
$
36,256

Accounts receivable—trade, less allowance for doubtful accounts of $1,891 in 2017

 
156,453

 

 

 

 
156,453

Inventories, at lower of cost or market

 
166,476

 

 

 

 
166,476

Prepaid expenses and other current assets

 
37,761

 

 

 

 
37,761

Total current assets

 
396,946

 

 

 

 
396,946

Property, plant and equipment, at cost less accumulated depreciation and amortization of $792,912 in 2017

 
1,565,160

 

 
807

 
(807
)
 
1,565,160

Investments in subsidiaries
1,975,084

 
144,916

 

 

 
(2,120,000
)
 

Other assets

 
40,630

 

 

 

 
40,630

Total assets
$
1,975,084

 
$
2,147,652

 
$

 
$
807

 
$
(2,120,807
)
 
$
2,002,736

Liabilities and Stockholders' Equity
 

 
 

 
 

 
 

 
 

 
 

Current liabilities
 

 
 

 
 

 
 

 
 

 
 

Current maturities of long-term debt
$

 
$
67,210

 
$

 
$

 
$

 
$
67,210

Inter-company accounts payable
640,727

 
(435,136
)
 
(52,060
)
 
(153,531
)
 

 

Trade accounts payable and accrued liabilities

 
388,448

 

 

 
(807
)
 
387,641

Total current liabilities
640,727

 
20,522

 
(52,060
)
 
(153,531
)
 
(807
)
 
454,851

Long-term debt, including capitalized lease obligations

 
620,206

 

 

 

 
620,206

Deferred income taxes

 
210,268

 

 

 


 
210,268

Asset retirement obligations

 
26,283

 

 

 

 
26,283

Deferred credits and other liabilities

 
18,360

 

 

 

 
18,360

Total liabilities
640,727

 
895,639

 
(52,060
)
 
(153,531
)
 
(807
)
 
1,329,968

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 March 31, 2017)
468

 
1

 
60

 

 
(61
)
 
468

Treasury Stock (9,991,524 shares held at March 31, 2017)
(618,722
)
 

 

 

 

 
(618,722
)
Additional paid in capital (APIC)
1,206,366

 
567,246

 
52,004

 
87,543

 
(1,368,382
)
 
544,777

Retained earnings
746,245

 
684,766

 
(4
)
 
66,795

 
(751,557
)
 
746,245

Total stockholders' equity
1,334,357

 
1,252,013

 
52,060

 
154,338

 
(2,120,000
)
 
672,768

Total liabilities and stockholders' equity
$
1,975,084

 
$
2,147,652

 
$

 
$
807

 
$
(2,120,807
)
 
$
2,002,736

 

16

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATING BALANCE SHEET
(Thousands of dollars)
December 31, 2016
Assets
Parent Company
 
Issuer
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Current assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
153,813

 
$

 
$

 
$

 
$
153,813

Accounts receivable—trade, less allowance for doubtful accounts of $1,891 in 2016

 
183,519

 

 

 

 
183,519

Inventories, at lower of cost or market

 
153,351

 

 

 

 
153,351

Prepaid expenses and other current assets

 
24,871

 

 

 

 
24,871

Total current assets

 
515,554

 

 

 

 
515,554

Property, plant and equipment, at cost less accumulated depreciation and amortization of $780,426 in 2016

 
1,532,655

 

 

 

 
1,532,655

Investments in subsidiaries
1,978,110

 
144,917

 

 

 
(2,123,027
)
 

Other assets

 
40,531

 

 

 

 
40,531

Total assets
$
1,978,110

 
$
2,233,657

 
$

 
$

 
$
(2,123,027
)
 
$
2,088,740

Liabilities and Stockholders' Equity
 

 
 

 
 

 
 

 
 

 
 

Current liabilities
 

 
 

 
 

 
 

 
 

 
 

Current maturities of long-term debt
$

 
$
40,596

 
$

 
$

 
$

 
$
40,596

Inter-company accounts payable
623,316

 
(416,914
)
 
(52,064
)
 
(154,338
)
 

 

Trade accounts payable and accrued liabilities

 
473,370

 

 

 

 
473,370

Income taxes payable

 
591

 
3

 

 

 
594

Total current liabilities
623,316

 
97,643

 
(52,061
)
 
(154,338
)
 

 
514,560

Long-term debt, including capitalized lease obligations

 
629,622

 

 

 

 
629,622

Deferred income taxes

 
204,656

 

 

 

 
204,656

Asset retirement obligations

 
26,200

 

 

 

 
26,200

Deferred credits and other liabilities

 
16,626

 

 

 

 
16,626

Total liabilities
623,316

 
974,747

 
(52,061
)
 
(154,338
)
 

 
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 shares issued at December 31, 2016)
468

 
1

 
60

 

 
(61
)
 
468

Treasury Stock (9,831,196 shares held at December 31, 2016)
(608,001
)
 

 

 

 

 
(608,001
)
Additional paid in capital (APIC)
1,213,056

 
571,117

 
52,004

 
87,543

 
(1,368,382
)
 
555,338

Retained earnings
749,271

 
687,792

 
(3
)
 
66,795

 
(754,584
)
 
749,271

Total stockholders' equity
1,354,794

 
1,258,910

 
52,061

 
154,338

 
(2,123,027
)
 
697,076

Total liabilities and stockholders' equity
$
1,978,110

 
$
2,233,657

 
$

 
$

 
$
(2,123,027
)
 
$
2,088,740

 

17

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATING INCOME STATEMENT
(unaudited)
(Thousands of dollars)
Three Months Ended March 31, 2017
Revenues
Parent Company
 
Issuer
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Petroleum product sales
$

 
$
2,402,254

 
$

 
$

 
$

 
$
2,402,254

Merchandise sales

 
565,790

 

 

 

 
565,790

Other operating revenues

 
31,574

 

 

 

 
31,574

Total revenues
$

 
$
2,999,618

 
$

 
$

 
$

 
$
2,999,618

Costs and Operating Expenses
 

 
 

 
 

 
 

 
 

 
 

Petroleum product cost of goods sold

 
2,329,333

 

 

 

 
2,329,333

Merchandise cost of goods sold

 
476,961

 

 

 

 
476,961

Station and other operating expenses

 
124,744

 

 

 

 
124,744

Depreciation and amortization

 
27,012

 

 

 

 
27,012

Selling, general and administrative

 
38,245

 
1

 

 

 
38,246

Accretion of asset retirement obligations

 
442

 

 

 

 
442

Total costs and operating expenses

 
2,996,737

 
1

 

 

 
2,996,738

Income (loss) from operations
$

 
$
2,881

 
$
(1
)
 
$

 
$

 
$
2,880

Other income (expense)
 

 
 

 
 

 
 

 
 

 
 

Interest income

 
47

 

 

 

 
47

Interest expense

 
(9,498
)
 

 

 

 
(9,498
)
Gain (loss) on sale of assets

 
(3,498
)
 

 

 

 
(3,498
)
Other nonoperating income

 
232

 

 

 

 
232

Total other income (expense)
$

 
$
(12,717
)
 
$

 
$

 
$

 
$
(12,717
)
Income (loss) before income taxes

 
(9,836
)
 
(1
)
 

 

 
(9,837
)
Income tax expense (benefit)

 
(6,811
)
 

 

 

 
(6,811
)
Income (loss)

 
(3,025
)
 
(1
)
 

 

 
(3,026
)
Equity earnings in affiliates, net of tax
(3,026
)
 
(1
)
 

 

 
3,027

 

Net Income (Loss)
$
(3,026
)
 
$
(3,026
)
 
$
(1
)
 
$

 
$
3,027

 
$
(3,026
)
 

18

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATING INCOME STATEMENT
(unaudited)
(Thousands of dollars)
Three Months Ended March 31, 2016
Revenues
Parent Company
 
Issuer
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Petroleum product sales
$

 
$
1,888,284

 
$

 
$

 
$

 
$
1,888,284

Merchandise sales

 
561,737

 

 

 

 
561,737

Other operating revenues

 
40,241

 

 

 

 
40,241

Total revenues
$

 
$
2,490,262

 
$

 
$

 
$

 
$
2,490,262

Costs and Operating Expenses
 

 
 

 
 

 
 

 
 

 
 

Petroleum product cost of goods sold

 
1,783,129

 

 

 

 
1,783,129

Merchandise cost of goods sold

 
475,802

 

 

 

 
475,802

Station and other operating expenses

 
116,774

 

 

 

 
116,774

Depreciation and amortization

 
23,486

 

 

 

 
23,486

Selling, general and administrative

 
31,502

 
1

 

 

 
31,503

Accretion of asset retirement obligations

 
413

 

 

 

 
413

Total costs and operating expenses

 
2,431,106

 
1

 

 

 
2,431,107

Income (loss) from operations
$

 
$
59,156

 
$
(1
)
 
$

 
$

 
$
59,155

Other income (expense)
 

 
 

 
 

 
 

 
 

 
 

Interest income

 
80

 

 

 

 
80

Interest expense

 
(9,388
)
 

 

 

 
(9,388
)
Gain (loss) on sale of assets

 
89,465

 

 

 

 
89,465

Other nonoperating income

 
33

 

 

 

 
33

Total other income (expense)
$

 
$
80,190

 
$

 
$

 
$

 
$
80,190

Income (loss) before income taxes

 
139,346

 
(1
)
 

 

 
139,345

Income tax expense (benefit)

 
53,471

 

 

 

 
53,471

Income (loss)

 
85,875

 
(1
)
 

 

 
85,874

Equity earnings in affiliates, net of tax
85,874

 
(1
)
 

 

 
(85,873
)
 

Net Income (Loss)
$
85,874

 
$
85,874

 
$
(1
)
 
$

 
$
(85,873
)
 
$
85,874

 

 
 

 



















19

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATING STATEMENT OF CASH FLOW
(unaudited)
(Thousands of dollars)
Three Months Ended March 31, 2017
Operating Activities
Parent Company
 
Issuer
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net income (loss)
$
(3,026
)
 
$
(3,026
)
 
$
(1
)
 
$

 
$
3,027

 
$
(3,026
)
Adjustments to reconcile net income (loss) to net cash provided by (required by) operating activities
 

 
 

 
 

 
 

 
 

 
 

Depreciation and amortization

 
27,012

 

 

 

 
27,012

Deferred and noncurrent income tax charges (credits)

 
5,612

 

 

 

 
5,612

Accretion of asset retirement obligations

 
442

 

 

 

 
442

Pretax (gains) losses from sale of assets

 
3,498

 

 

 

 
3,498

Net (increase) decrease in noncash operating working capital

 
(80,399
)
 

 

 

 
(80,399
)
Equity in earnings of affiliates
3,026

 
1

 

 

 
(3,027
)
 

Other operating activities - net

 
914

 

 


 

 
914

Net cash provided by (required by) operating activities

 
(45,946
)
 
(1
)
 

 

 
(45,947
)
Investing Activities