Document



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 June 30, 2016
 
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
(I.R.S. Employer
incorporation or organization)
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, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  þ Accelerated filer __ Non-accelerated filer __ Smaller reporting company __
 
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 June 30, 2016 was 39,163,458.



1




 
MURPHY USA INC.
 
TABLE OF CONTENTS
 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 

1





ITEM 1.  FINANCIAL STATEMENTS
Murphy USA Inc.
Consolidated Balance Sheets
 
June 30,
 
December 31,
(Thousands of dollars)
2016
 
2015
 
(unaudited)
 
 
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
254,210

 
$
102,335

Accounts receivable—trade, less allowance for doubtful accounts of $1,988 in 2016 and $1,963 in 2015
148,211

 
136,253

Inventories, at lower of cost or market
152,494

 
155,906

Prepaid expenses and other current assets
17,066

 
41,173

Total current assets
571,981

 
435,667

Property, plant and equipment, at cost less accumulated depreciation and amortization of $732,114 in 2016 and $724,486 in 2015
1,430,816

 
1,369,318

Restricted cash
53,853

 
68,571

Other assets
27,196

 
12,685

Total assets
$
2,083,846

 
$
1,886,241

Liabilities and Stockholders' Equity
 

 
 

Current liabilities
 

 
 

Current maturities of long-term debt
$
30,372

 
$
222

Trade accounts payable and accrued liabilities
401,141

 
390,341

Income taxes payable
24,184

 

Deferred income taxes

 
1,729

Total current liabilities
455,697

 
392,292

 
 
 
 
Long-term debt, including capitalized lease obligations
648,266

 
490,160

Deferred income taxes
177,570

 
161,236

Asset retirement obligations
25,012

 
24,345

Deferred credits and other liabilities
19,389

 
25,918

Total liabilities
1,325,934

 
1,093,951

Stockholders' Equity
 

 
 

  Preferred Stock, par $0.01 (authorized 20,000,000 shares,
 
 
 
none outstanding)

 

  Common Stock, par $0.01 (authorized 200,000,000 shares,
 
 
 
46,767,164 and 46,767,164 shares issued at
 
 
 
2016 and 2015, respectively)
468

 
468

Treasury stock (7,603,706 and 5,088,434 shares held at
 
 
 
June 30, 2016 and December 31, 2015, respectively)
(454,496
)
 
(294,139
)
Additional paid in capital (APIC)
551,977

 
558,182

Retained earnings
659,963

 
527,779

Total stockholders' equity
757,912

 
792,290

Total liabilities and stockholders' equity
$
2,083,846

 
$
1,886,241

See notes to consolidated financial statements.

2





Murphy USA Inc.
Consolidated Statements of Income
(unaudited)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
(Thousands of dollars except per share amounts)
2016
 
2015
 
2016
 
2015
Revenues
 
 
 
 
 
 
 
Petroleum product sales (a)
$
2,371,735

 
$
2,858,910

 
$
4,260,019

 
$
5,216,989

Merchandise sales
589,457

 
572,164

 
1,151,194

 
1,096,301

Other operating revenues
44,570

 
36,912

 
84,811

 
75,460

Total revenues
3,005,762

 
3,467,986

 
5,496,024

 
6,388,750

Costs and Operating Expenses
 

 
 

 
 

 
 

Petroleum product cost of goods sold (a)
2,242,936

 
2,750,602

 
4,026,065

 
5,011,688

Merchandise cost of goods sold
496,801

 
488,540

 
972,603

 
939,093

Station and other operating expenses
125,145

 
122,377

 
241,919

 
236,912

Depreciation and amortization
23,685

 
21,215

 
47,171

 
42,318

Selling, general and administrative
32,320

 
32,886

 
63,823

 
63,979

Accretion of asset retirement obligations
412

 
379

 
825

 
757

Total costs and operating expenses
2,921,299

 
3,415,999

 
5,352,406

 
6,294,747

Income from operations
84,463

 
51,987

 
143,618

 
94,003

Other income (expense)
 

 
 

 
 

 
 

Interest income
250

 
15

 
330

 
1,888

Interest expense
(10,210
)
 
(8,329
)
 
(19,598
)
 
(16,658
)
Gain (loss) on sale of assets
(490
)
 
(23
)
 
88,975

 
(19
)
Other nonoperating income (expense)
85

 
(4,854
)
 
118

 
510

Total other income (expense)
(10,365
)
 
(13,191
)
 
69,825

 
(14,279
)
Income before income taxes
74,098

 
38,796

 
213,443

 
79,724

Income tax expense
27,788

 
13,976

 
81,259

 
31,387

Income from continuing operations
46,310

 
24,820

 
132,184

 
48,337

Income (loss) from discontinued operations, net of taxes

 
1,371

 

 
786

Net Income
$
46,310

 
$
26,191

 
$
132,184

 
$
49,123

Earnings per share - basic:
 
 
 
 
 
 
 
Income from continuing operations
$
1.18

 
$
0.56

 
$
3.29

 
$
1.07

Income (loss) from discontinued operations

 
0.03

 

 
0.02

Net Income - basic
$
1.18

 
$
0.59

 
$
3.29

 
$
1.09

Earnings per share - diluted:
 
 
 
 
 
 
 
Income from continuing operations
$
1.17

 
$
0.56

 
$
3.26

 
$
1.07

Income (loss) from discontinued operations

 
0.03

 

 
0.02

Net Income - diluted
$
1.17

 
$
0.59

 
$
3.26

 
$
1.09

Weighted-average shares outstanding (in thousands):
 
 
 
 
 
 
 
Basic
39,360

 
44,078

 
40,134

 
44,851

Diluted
39,720

 
44,409

 
40,505

 
45,218

Supplemental information:
 
 
 
 
 
 
 
(a) Includes excise taxes of:
$
487,923

 
$
483,470

 
$
960,533

 
$
946,444

 
 
See notes to consolidated financial statements.


3




Murphy USA Inc.
Consolidated Statements of Cash Flows
(unaudited)
 
 (Thousands of dollars)
Six Months Ended
June 30,
 
2016
 
2015
Operating Activities
 
 
 
Net income
$
132,184

 
$
49,123

Adjustments to reconcile net income to net cash provided by operating activities
 

 
 
(Income) loss from discontinued operations, net of taxes

 
(786
)
Depreciation and amortization
47,171

 
42,318

Deferred and noncurrent income tax charges (credits)
14,605

 
(9,468
)
Accretion of asset retirement obligations
825

 
757

Pretax (gains) losses from sale of assets
(88,975
)
 
19

Net (increase) decrease in noncash operating working capital
57,427

 
(24,910
)
Other operating activities - net
5,365

 
8,010

Net cash provided by continuing operations
168,602

 
65,063

Net cash provided by discontinued operations

 
12,753

Net cash provided by operating activities
168,602

 
77,816

Investing Activities
 

 
 

Property additions
(116,569
)
 
(87,895
)
Proceeds from sale of assets
86,298

 
91

Changes in restricted cash
13,429



Other investing activities - net
(15,138
)
 

Investing activities of discontinued operations
 

 
 

Other

 
(3,762
)
Net cash required by investing activities
(31,980
)
 
(91,566
)
Financing Activities
 

 
 

Purchase of treasury stock
(167,105
)
 
(189,834
)
Borrowings of debt
200,000

 

Repayments of debt
(10,165
)
 
(46
)
Debt issuance costs
(3,240
)
 

Amounts related to share-based compensation
(4,237
)
 
(3,030
)
Net cash provided by (required by) financing activities
15,253

 
(192,910
)
Net increase (decrease) in cash and cash equivalents
151,875

 
(206,660
)
Cash and cash equivalents at January 1
102,335

 
328,105

Cash and cash equivalents at June 30
254,210

 
121,445

Less: Cash and cash equivalents held for sale

 
976

Cash and cash equivalents of continuing operations at June 30
$
254,210

 
$
120,469

 



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, 2014
46,767,164
 
$468
 
$(51,073)
 
$557,871
 
$351,439
 
$858,705
Net income
 
 
 
 
49,123
 
49,123
Purchase of treasury stock
 
 
(189,834)
 
 
 
(189,834)
Issuance of common stock
 
 
 
 
 
Issuance of treasury stock
 
 
5,517
 
(5,517)
 
 
Amounts related to share-based compensation
 
 
 
(3,030)
 
 
(3,030)
Share-based compensation expense
 
 
 
4,353
 
 
4,353
Balance as of June 30, 2015
46,767,164
 
$468
 
$(235,390)
 
$553,677
 
$400,562
 
$719,317
 
 
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
 
 
 
 
132,184
 
132,184
Purchase of treasury stock
 
 
(167,105)
 
 
 
(167,105)
Issuance of common stock
 
 
 
 
 
Issuance of treasury stock
 
 
6,748
 
(6,748)
 
 
Amounts related to share-based compensation
 
 
 
(4,237)
 
 
(4,237)
Share-based compensation expense
 
 
 
4,780
 
 
4,780
Balance as of June 30, 2016
46,767,164
 
$468
 
$(454,496)
 
$551,977
 
$659,963
 
$757,912
 
 
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 24 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 June 30, 2016, Murphy USA had a total of 1,344 Company stations.
 
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” or “Parent”) 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, 2015, 2014 and 2013, 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 26, 2016.
 
Recently Issued Accounting Standards In November 2015, the FASB issued ASU No. 2015-17, "Balance Sheet Classification of Deferred Taxes," which amended existing accounting guidance related to the presentation of deferred tax liabilities and assets. The amended guidance requires that all deferred tax liabilities and assets be classified as noncurrent on the balance sheet. This guidance is effective for reporting periods beginning after December 15, 2016; however, early adoption is permitted at the beginning of a fiscal year. The Company adopted ASU No. 2015-17 during the quarter ended March 31, 2016 and has applied this guidance prospectively to its deferred tax liabilities and assets. For the period ended December 31, 2015, current deferred tax liabilities of $1.7 million remain classified as current in the accompanying balance sheet.

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. We are evaluating the impact ASU 2016-02 will have on our consolidated financial statements.
On March 30, 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 stock based compensation, including adjustments to how excess tax benefits and a company’s payments for tax withholdings should be classified. The standard is effective for fiscal periods beginning after December 15, 2016, with early adoption permitted. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements and currently expect to adopt the standard effective January 1, 2017.





6

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 2 – Discontinued Operations
 
In September 2015, the Company determined that it had met held for sale criteria for its Hereford, Texas ethanol production facility. On September 25, 2015, the Company signed a letter of intent to sell this subsidiary for a gain and the transaction closed on November 12, 2015.

The financial results of our Hereford plant for the three and six months ended June 30, 2015 are presented as income from discontinued operations, net of income taxes on our condensed consolidated statement of income. The results of the Hereford ethanol plant were previously included along with "Corporate" as a reconciling item within our segment footnote prior to third quarter 2015. The following table presents financial results of the Hereford business:

 
Three Months Ended June 30,
 
Six Months Ended June 30,
(Thousands of dollars)
2015
 
2015
Revenues
 
 
 
Ethanol sales
$
49,235

 
$
90,986

Total revenues
49,235

 
90,986

Costs and operating expenses
 
 
 
Ethanol cost of goods sold
38,440

 
73,020

Station and other operating expenses
8,095

 
15,735

Depreciation and amortization
102

 
177

Selling, general and administrative expenses
364

 
726

Total costs and operating expenses
47,001

 
89,658

Income (loss) from operations
2,234

 
1,328

Other income (expense)
 
 
 
Gain (loss) on sale of assets

 

Other nonoperating income (expense)

 

Total other income (expense)

 

Income (loss) before income taxes
2,234

 
1,328

Income tax expense (benefit)
863

 
542

Net income (loss)
$
1,371

 
$
786



The following table presents cash flow of the Hereford ethanol plant:

 
Three Months Ended June 30,
 
Six Months Ended June 30,
(Thousands of dollars)
2015
 
2015
Net cash provided by discontinued operating activities
8,462

 
12,753

Net cash used in discontinued investing activities
(2,807
)
 
(3,762
)



7

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




Note 3 — Inventories
 
Inventories consisted of the following:
(Thousands of dollars)
 
June 30,
2016
 
December 31,
2015
Finished products - FIFO basis
 
$
197,407

 
$
159,774

Less LIFO reserve - finished products
 
(140,417
)
 
(102,849
)
Finished products - LIFO basis
 
56,990

 
56,925

Store merchandise for resale
 
92,222

 
94,925

Materials and supplies
 
3,282

 
4,056

Total inventories
 
$
152,494

 
$
155,906

 
At June 30, 2016 and December 31, 2015, the replacement cost (market value) of last-in, first-out (LIFO) inventories exceeded the LIFO carrying value by $140,417,000 and $102,849,000, respectively.
 

Note 4 — Long-Term Debt
 
Long-term debt consisted of the following:
(Thousands of dollars)
 
June 30,
2016
 
December 31,
2015
6% senior notes due 2023 (net of unamortized discount of $6,259 at June 2016 and $6,692 at December 2015)
 
$
493,741

 
$
493,308

Term loan due 2020 (effective rate of 3.41% at June 30, 2016)
 
190,000

 

Less unamortized debt issuance costs
 
(6,046
)
 
(3,526
)
Total notes payable, net
 
677,695

 
489,782

Capitalized lease obligations, vehicles, due through 2019
 
943

 
600

Less current maturities
 
(30,372
)
 
(222
)
Total long-term debt
 
$
648,266

 
$
490,160


Senior Notes
 
On August 14, 2013, Murphy Oil USA, Inc., our primary operating subsidiary, issued 6.00% Senior Notes due 2023 (the “Senior Notes”) in an aggregate principal amount of $500 million. The 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 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 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 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.
 
We used the net proceeds of the Senior Notes, together with borrowings under the credit facilities, to finance a cash dividend of $650 million from Murphy Oil USA, Inc. to Murphy Oil paid in connection with the separation.
 
On June 17, 2014, we closed an exchange offer for our Senior Notes to make them eligible for public resale, as required by a registration rights agreement entered into in connection with the issuance of the Senior Notes.  All of the Senior Notes were tendered for exchange. 
 

8

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




Credit Facilities

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.  

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.
  
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 are 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. We made the first payment on the term loan for $10 million on June 30, 2016. 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 a minimum 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

9

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


4.5 to 1.0 at any time when the term loans are outstanding.  As of June 30, 2016, our fixed charge coverage ratio was 0.70; however, we had no debt outstanding under the ABL facility at that date so the fixed charge coverage ratio currently has no impact on our operations or liquidity.         
 
After giving effect to the applicable restrictions on certain payments, which could include dividends, under the credit agreement (which restrictions are only applicable when availability under the credit agreement does not exceed the greater of 25% of the lesser of the revolving commitments and the borrowing base and $100 million (and if availability under the credit agreement does not exceed the greater of 40% of the lesser of the revolving commitments and the borrowing base and $100 million, then our fixed charge coverage ratio must be at least 1.0 to 1.0)) and the indenture, and subject to compliance with applicable law.  As of December 31, 2015, the Company had a shortfall of approximately $245.7 million of its net income and retained earnings subject to such restrictions before the fixed charge coverage ratio 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.
 
 
Note 5 — Asset Retirement Obligations (ARO)
The majority of the ARO recognized by the Company at June 30, 2016 and December 31, 2015 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)
 
June 30,
2016
 
December 31,
2015
Balance at beginning of period
 
$
24,345

 
$
22,245

Accretion expense
 
825

 
1,521

Liabilities incurred
 
6

 
579

Settlement of liabilities
 
$
(164
)
 
$

Balance at end of period
 
$
25,012

 
$
24,345

 
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 6— Income Taxes
 
The effective tax rate is calculated as the amount of income tax expense divided by income before income tax expense. For the three and six month periods ended June 30, 2016 and 2015, the Company’s effective tax rates were as follows:
 
 
 
2016
 
2015
Three months ended June 30,
 
37.5
%
 
36.0
%
Six months ended June 30,
 
38.1
%
 
39.4
%
 
The effective tax rate for the three and six months ended June 30, 2016 was higher than the U.S. Federal tax rate of 35% primarily due to U.S. state tax expense while the effective rates for the prior year periods were higher than the statutory rate primarily due to certain discrete items that impacted income taxes in the period in addition to U.S. state tax expense.         
 

10

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The Company was included in Murphy Oil’s tax returns for the periods prior to the separation in multiple jurisdictions that remain subject to audit by taxing authorities. These audits often take years to complete and settle. As of June 30, 2016, the earliest year remaining open for Federal audit and/or settlement is 2012 and for the states it ranges from 2008-2011.  Although the Company believes that recorded liabilities for unsettled issues are adequate, additional gains or losses could occur in future periods from resolution of outstanding unsettled matters.
 
 
Note 7 — 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 12, 2014 (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 10, 2016, the Committee granted nonqualified stock options for 96,500 shares at an exercise price of $59.11 per share under the terms of the MUSA 2013 Plan.  The Black-Scholes valuation for these awards is $16.08 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 26,650 time-based restricted units granted at a grant date fair value of $59.11 along with 53,300 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 $82.94 per unit.  For the ROACE portion of the awards, the valuation will be based on the grant date fair value of $59.11 per unit and the number of awards will be periodically assessed to determine the probability of vesting. 
 
On February 10, 2016, the Committee also granted 45,475 time-based restricted stock units granted to certain employees with a grant date fair value of $59.11 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 2016, the Company issued 19,900 restricted stock units to its non-employee directors at a weighted average grant date fair value of $59.14 per share.  These shares vest in three years from the grant date. 
 
For the six months ended June 30, 2016 and 2015, share based compensation was $4.8 million and $4.4 million, respectively.  The income tax benefit realized for the tax deductions from options exercised for the six months ended June 30, 2016 was $1.4 million
 
Note 8— 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 June 30, 2016, all current derivative activity is immaterial.


11

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 
At June 30, 2016 and December 31, 2015, cash deposits of $2.0 million and $1.6 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 June 30, 2016 or December 31, 2015, respectively.

Note 9 – 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 apart from Walmart rather than continue to acquire land 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 the two capital programs through December 31, 2017. For the first six months ended June 30, 2016, the Company has acquired 2,631,608 shares of common stock for an average price of $63.50 per share including brokerage fees. 
 
The following table provides a reconciliation of basic and diluted earnings per share computations for the three and six months ended June 30, 2016 and 2015 (in thousands, except per share amounts):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
Earnings per common share:
 
 
 
 
 
 
 
Net income (loss) per share - basic
 
 
 
 
 
 
 
Income from continuing operations
$
46,310

 
$
24,820

 
$
132,184

 
$
48,337

Income (loss) from discontinued operations

 
1,371

 

 
786

Net income attributable to common stockholders
$
46,310

 
$
26,191

 
$
132,184

 
$
49,123

 
 
 
 
 
 
 
 
Weighted average common shares outstanding (in thousands)
39,360

 
44,078

 
40,134

 
44,851

Earnings per share:
 
 
 
 
 
 
 
Continuing operations
$
1.18

 
$
0.56

 
$
3.29

 
$
1.07

Discontinued operations

 
0.03

 

 
0.02

Total earnings per share
$
1.18

 
$
0.59

 
$
3.29

 
$
1.09

 
 
 
 
 
 
 
 
 

12

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Earnings per common share - assuming dilution:
 
 
 
 
 
 
 
Net income (loss) per share - diluted
 
 
 
 
 
 
 
Income from continuing operations
$
46,310

 
$
24,820

 
$
132,184

 
$
48,337

Income (loss) from discontinued operations

 
1,371

 

 
786

Net income attributable to common stockholders
$
46,310

 
$
26,191

 
$
132,184

 
$
49,123

Weighted average common shares outstanding (in thousands)
39,360

 
44,078

 
40,134

 
44,851

Common equivalent shares:
 
 
 
 
 
 
 
Dilutive options
360

 
331

 
371

 
367

Weighted average common shares outstanding - assuming dilution (in thousands)
39,720


44,409

 
40,505

 
45,218

 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Continuing operations
$
1.17

 
$
0.56

 
$
3.26

 
$
1.07

Discontinued operations

 
0.03

 

 
0.02

Earnings per share - assuming dilution
$
1.17

 
$
0.59

 
$
3.26

 
$
1.09

 
Note 10 — Other Financial Information
 
OTHER OPERATING REVENUES – Other operating revenues in the Consolidated Statements of Income include the following items: 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(Thousands of dollars)
2016
 
2015
 
2016
 
2015
Renewable Identification Numbers (RINs) sales
$
43,868

 
$
36,248

 
$
82,643

 
$
73,847

Other
702

 
664

 
2,168

 
1,613

Other operating revenues
$
44,570

 
$
36,912

 
$
84,811

 
$
75,460

 
CASH FLOW DISCLOSURES — Cash income taxes paid (collected), net of refunds, were $15,064,000 and $59,098,000 for the six month periods ended June 30, 2016 and 2015, respectively. Interest paid was $18,140,000 and $15,869,000 for the six month periods ended June 30, 2016 and 2015, respectively.  
 
Six Months Ended June 30,
(Thousands of dollars)
2016
 
2015
Accounts receivable
$
(11,921
)
 
$
(32,463
)
Inventories
3,412

 
(36,386
)
Prepaid expenses and other current assets
23,978

 
(11,859
)
Accounts payable and accrued liabilities
17,955

 
67,207

Income taxes payable
24,003

 
(20,046
)
Current deferred income tax liabilities

 
8,637

Net decrease (increase) in noncash operating working capital
$
57,427

 
$
(24,910
)


13

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 11 — 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 June 30, 2016 and December 31, 2015. 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 June 30, 2016
 
At December 31, 2015
 
 
Carrying
 
 
 
Carrying
 
 
(Thousands of dollars)
 
Amount
 
Fair Value
 
Amount
 
Fair Value
Financial liabilities
 
 
 
 
 
 
 
 
Current and long-term debt
 
$
(678,638
)
 
$
(698,245
)
 
$
(490,382
)
 
$
(511,916
)
 
Note 12 — 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

14

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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 June 30, 2016, 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 June 30, 2016. 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.
 
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 and other insurance programs for general and auto liability. As of June 30, 2016, 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 $18.8 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 June 30, 2016, the Company had contingent liabilities of $17.8 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.
 

15

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 13 — 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 and Discontinued Operations. The reportable segment was determined based on information reviewed by the Chief Operating Decision Maker (CODM).
 
 
 
 
 
 
 
Three Months Ended
 
 
 
 
June 30, 2016
 
June 30, 2015
 
 
Total Assets at
 
External
 
Income
 
External
 
Income
(Thousands of dollars)
 
June 30,
 
Revenues
 
(Loss)
 
Revenues
 
(Loss)
Marketing
 
$
1,791,859

 
$
3,005,750

 
$
53,442

 
$
3,467,985

 
$
33,468

Corporate and other assets
 
291,987

 
12

 
(7,132
)
 
1

 
(8,648
)
Total continuing operations
 
2,083,846

 
3,005,762

 
46,310

 
3,467,986

 
24,820

Discontinued operations
 

 

 

 

 
1,371

Total
 
$
2,083,846

 
$
3,005,762

 
$
46,310

 
$
3,467,986

 
$
26,191

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
 
 
 
 
June 30, 2016
 
June 30, 2015
 
 
 
 
External
 
Income
 
External
 
Income
(Thousands of dollars)
 
 
 
Revenues
 
(Loss)
 
Revenues
 
(Loss)
Marketing
 
 
 
$
5,495,808

 
$
145,867

 
$
6,388,489

 
$
58,223

Corporate and other assets
 
 
 
216

 
(13,683
)
 
261

 
(9,886
)
Total operating segment
 
 
 
5,496,024

 
132,184

 
6,388,750

 
48,337

Discontinued operations
 
 
 

 

 

 
786

Total
 
 
 
$
5,496,024

 
$
132,184

 
$
6,388,750

 
$
49,123

 
 
 
Note 14 – 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):
 
 

16

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


CONSOLIDATING BALANCE SHEET
(unaudited)
(Thousands of dollars)
June 30, 2016
Assets
Parent Company
 
Issuer
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Current assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
254,210

 
$

 
$

 
$

 
$
254,210

Accounts receivable—trade, less allowance for doubtful accounts of $1,988 in 2016

 
148,211

 

 

 

 
148,211

Inventories, at lower of cost or market

 
152,494

 

 

 

 
152,494

Prepaid expenses and other current assets

 
17,066

 

 

 

 
17,066

Total current assets

 
571,981

 

 

 

 
571,981

Property, plant and equipment, at cost less accumulated depreciation and amortization of $732,114 in 2016

 
1,430,816

 

 

 

 
1,430,816

Restricted cash

 
53,853

 

 

 

 
53,853

Investments in subsidiaries
1,888,801

 
144,920

 

 

 
(2,033,721
)
 

Other assets

 
27,196

 

 

 

 
27,196

Total assets
$
1,888,801

 
$
2,228,766

 
$

 
$

 
$
(2,033,721
)
 
$
2,083,846

Liabilities and Stockholders' Equity
 

 
 

 
 

 
 

 
 

 
 

Current liabilities
 

 
 

 
 

 
 

 
 

 
 

Current maturities of long-term debt
$

 
$
30,372

 
$

 
$

 
$

 
$
30,372

Inter-company accounts payable
467,148

 
(260,735
)
 
(52,075
)
 
(154,338
)
 

 

Trade accounts payable and accrued liabilities

 
401,141

 

 

 

 
401,141

Income taxes payable

 
24,170

 
14

 

 

 
24,184

Deferred income taxes

 

 

 

 

 

Total current liabilities
467,148

 
194,948

 
(52,061
)
 
(154,338
)
 

 
455,697

Long-term debt, including capitalized lease obligations

 
648,266

 

 

 

 
648,266

Deferred income taxes

 
177,570

 

 

 


 
177,570

Asset retirement obligations

 
25,012

 

 

 

 
25,012

Deferred credits and other liabilities

 
19,389

 

 

 

 
19,389

Total liabilities
467,148

 
1,065,185

 
(52,061
)
 
(154,338
)
 

 
1,325,934

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 June 30, 2016)
468

 
1

 
60

 

 
(61
)
 
468

Treasury Stock (7,603,706 shares held at June 30, 2016)
(454,496
)
 

 

 

 

 
(454,496
)
Additional paid in capital (APIC)
1,215,718

 
565,096

 
52,004

 
87,543

 
(1,368,384
)
 
551,977

Retained earnings
659,963

 
598,484

 
(3
)
 
66,795

 
(665,276
)
 
659,963

Total stockholders' equity
1,421,653

 
1,163,581

 
52,061

 
154,338

 
(2,033,721
)
 
757,912

Total liabilities and stockholders' equity
$
1,888,801

 
$
2,228,766

 
$

 
$

 
$
(2,033,721
)
 
$
2,083,846

 

17

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


CONSOLIDATING BALANCE SHEET
(Thousands of dollars)
December 31, 2015
Assets
Parent Company
 
Issuer
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Current assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
102,335

 
$

 
$

 
$

 
$
102,335

Accounts receivable—trade, less allowance for doubtful accounts of $1,963 in 2015

 
136,253

 

 

 

 
136,253

Inventories, at lower of cost or market

 
155,906

 

 

 

 
155,906

Prepaid expenses and other current assets

 
41,173

 

 

 

 
41,173

Total current assets

 
435,667

 

 

 

 
435,667

Property, plant and equipment, at cost less accumulated depreciation and amortization of $724,486 in 2015

 
1,369,318

 

 

 

 
1,369,318

Restricted cash

 
68,571

 

 

 

 
68,571

Investments in subsidiaries
1,756,617

 
144,921

 

 

 
(1,901,538
)
 

Other assets

 
12,685

 

 

 

 
12,685

Total assets
$
1,756,617

 
$
2,031,162

 
$

 
$

 
$
(1,901,538
)
 
$
1,886,241

Liabilities and Stockholders' Equity
 

 
 

 
 

 
 

 
 

 
 

Current liabilities
 

 
 

 
 

 
 

 
 

 
 

Current maturities of long-term debt
$

 
$
222

 
$

 
$

 
$

 
$
222

Inter-company accounts payable
300,044

 
(93,644
)
 
(52,062
)
 
(154,338
)
 

 

Trade accounts payable and accrued liabilities

 
390,341

 

 

 

 
390,341

Income taxes payable

 

 

 

 

 

Deferred income taxes

 
1,729

 

 

 

 
1,729

Total current liabilities
300,044

 
298,648

 
(52,062
)
 
(154,338
)
 

 
392,292

Long-term debt, including capitalized lease obligations

 
490,160

 

 

 

 
490,160

Deferred income taxes

 
161,236

 

 

 

 
161,236

Asset retirement obligations

 
24,345

 

 

 

 
24,345

Deferred credits and other liabilities

 
25,918

 

 

 

 
25,918

Total liabilities
300,044

 
1,000,307

 
(52,062
)
 
(154,338
)
 

 
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 shares issued  at December 31, 2015)
468

 
1

 
60

 

 
(61
)
 
468

Treasury Stock (5,088,434 shares held  at December 31, 2015)
(294,139
)
 

 

 

 

 
(294,139
)
Additional paid in capital (APIC)
1,222,465

 
564,554

 
52,004

 
87,543

 
(1,368,384
)
 
558,182

Retained earnings
527,779

 
466,300

 
(2
)
 
66,795

 
(533,093
)
 
527,779

Total stockholders' equity
1,456,573

 
1,030,855

 
52,062

 
154,338

 
(1,901,538
)
 
792,290

Total liabilities and stockholders' equity
$
1,756,617

 
$
2,031,162

 
$

 
$

 
$
(1,901,538
)
 
$
1,886,241

 

18

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


CONSOLIDATING INCOME STATEMENT
(unaudited)
(Thousands of dollars)
Three Months Ended June 30, 2016
Revenues
Parent Company
 
Issuer
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Petroleum product sales
$

 
$
2,371,735

 
$

 
$

 
$

 
$
2,371,735

Merchandise sales

 
589,457

 

 

 

 
589,457

Other operating revenues

 
44,570

 

 

 

 
44,570

Total revenues
$

 
$
3,005,762

 
$

 
$

 
$

 
$
3,005,762

Costs and Operating Expenses
 

 
 

 
 

 
 

 
 

 
 

Petroleum product cost of goods sold

 
2,242,936

 

 

 

 
2,242,936

Merchandise cost of goods sold

 
496,801

 

 

 

 
496,801

Station and other operating expenses

 
125,145

 

 

 

 
125,145

Depreciation and amortization

 
23,685

 

 

 

 
23,685

Selling, general and administrative

 
32,320

 

 

 

 
32,320

Accretion of asset retirement obligations

 
412

 

 

 

 
412

Total costs and operating expenses

 
2,921,299

 

 

 

 
2,921,299

Income (loss) from operations
$

 
$
84,463

 
$

 
$

 
$

 
$
84,463

Other income (expense)
 

 
 

 
 

 
 

 
 

 
 

Interest income

 
250

 

 

 

 
250

Interest expense

 
(10,210
)
 

 

 

 
(10,210
)
Gain on sale of assets

 
(490
)
 

 

 

 
(490
)
Other nonoperating income

 
85

 

 

 

 
85

Total other income (expense)
$

 
$
(10,365
)
 
$

 
$

 
$

 
$
(10,365
)
Income (loss) from continuing operations before income taxes

 
74,098

 

 

 

 
74,098

Income tax expense

 
27,788

 

 

 

 
27,788

Income (loss) from continuing operations

 
46,310

 

 

 

 
46,310

Income from discontinued operations, net of taxes

 

 

 

 

 

Equity earnings in affiliates, net of tax
46,310

 

 

 

 
(46,310
)
 

Net Income (Loss)
$
46,310

 
$
46,310

 
$

 
$

 
$
(46,310
)
 
$
46,310

 

19

Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


CONSOLIDATING INCOME STATEMENT
(unaudited)
(Thousands of dollars)
Three Months Ended June 30, 2015
Revenues
Parent Company
 
Issuer
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Petroleum product sales
$

 
$
2,898,225

 
$

 
$

 
$
(39,315
)
 
$
2,858,910

Merchandise sales

 
572,164