MURPHY USA INC., 10-Q filed on 11/1/2018
Quarterly Report
v3.10.0.1
Document and Entity Information
9 Months Ended
Sep. 30, 2018
shares
Document And Entity Information [Abstract]  
Entity Registrant Name Murphy USA Inc.
Trading Symbol MUSA
Document Type 10-Q
Amendment Flag false
Document Period End Date Sep. 30, 2018
Entity Central Index Key 0001573516
Current Fiscal Year End Date --12-31
Entity Filer Category Large Accelerated Filer
Entity Emerging Growth Company false
Entity Small Business false
Document Fiscal Year Focus 2018
Document Fiscal Period Focus Q3
Entity Common Stock, Shares Outstanding 32,241,009
v3.10.0.1
Consolidated Balance Sheets - USD ($)
$ in Millions
Sep. 30, 2018
Dec. 31, 2017
Sep. 30, 2017
Dec. 31, 2016
Current assets        
Cash and cash equivalents $ 75.4 $ 170.0 $ 169.0 $ 153.8
Accounts receivable—trade, less allowance for doubtful accounts of $1.1 in 2018 and in 2017 231.2 225.2    
Inventories, at lower of cost or market 215.1 182.5    
Prepaid expenses and other current assets 19.6 36.5    
Total current assets 541.3 614.2    
Property, plant and equipment, at cost less accumulated depreciation and amortization of $944.4 in 2018 and $874.7 in 2017 1,741.9 1,679.5    
Other assets 42.4 37.3    
Total assets 2,325.6 2,331.0    
Current liabilities        
Current maturities of long-term debt 21.2 19.9    
Trade accounts payable and accrued liabilities 519.6 513.4    
Total current liabilities 540.8 533.3    
Long-term debt, including capitalized lease obligations 846.6 860.9    
Deferred income taxes 168.1 154.2    
Asset retirement obligations 30.0 28.2    
Deferred credits and other liabilities 11.2 16.0    
Total liabilities 1,596.7 1,592.6    
Stockholders' Equity        
Preferred Stock, par $0.01, (authorized 20,000,000 shares, none outstanding) 0.0 0.0    
Common Stock, par $0.01, (authorized 200,000,000 shares, 46,767,164 shares issued at 2018 and 2017, respectively) 0.5 0.5    
Treasury stock (14,526,155 and 12,675,630 shares held at 2018 and 2017, respectively) (941.6) (806.5)    
Additional paid in capital (APIC) 539.4 549.9    
Retained earnings 1,130.6 994.5    
Total stockholders' equity 728.9 738.4 $ 665.1 $ 697.1
Total liabilities and stockholders' equity $ 2,325.6 $ 2,331.0    
v3.10.0.1
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Millions
Sep. 30, 2018
Dec. 31, 2017
Mar. 31, 2013
Statement of Financial Position [Abstract]      
Allowance for doubtful accounts $ 1.1 $ 1.1  
Property, plant and equipment, accumulated depreciation and amortization $ 944.4 $ 874.7  
Preferred stock par value (in dollars per share) $ 0.01 $ 0.01  
Preferred stock shares authorized (in shares) 20,000,000 20,000,000  
Preferred stock shares outstanding (in shares) 0 0  
Common stock par value (in dollars per share) $ 0.01 $ 0.01 $ 0.01
Common stock shares authorized (in shares) 200,000,000 200,000,000  
Common stock shares issued (in shares) 46,767,164 46,767,164  
Treasury stock, shares held (in shares) 14,526,155 12,675,630  
v3.10.0.1
Consolidated Statements of Income - USD ($)
shares in Thousands, $ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Operating Revenues        
Total operating revenues $ 3,788.0 $ 3,236.3 $ 10,861.2 $ 9,447.0
Operating Expenses        
Depreciation and amortization 34.2 29.0 99.0 83.5
Selling, general and administrative 32.6 31.5 102.3 101.1
Accretion of asset retirement obligations 0.5 0.4 1.5 1.3
Total operating expenses 3,717.5 3,118.3 10,698.8 9,225.0
Net settlement proceeds 0.0 0.0 50.4 0.0
Gain (loss) on sale of assets (0.5) 0.0 (0.7) (3.4)
Income (loss) from operations 70.0 118.0 212.1 218.6
Other income (expense)        
Interest income 0.2 0.4 0.8 0.8
Interest expense (13.2) (12.7) (39.6) (33.8)
Other nonoperating income (expense) 0.0 3.0 0.1 3.2
Total other income (expense) (13.0) (9.3) (38.7) (29.8)
Income (loss) before income taxes 57.0 108.7 173.4 188.8
Income tax expense (benefit) 12.0 40.8 37.3 68.4
Net Income (Loss) $ 45.0 $ 67.9 $ 136.1 $ 120.4
Basic and Diluted Earnings Per Common Share        
Basic (in dollars per share) $ 1.40 $ 1.92 $ 4.15 $ 3.32
Diluted (in dollars per share) $ 1.38 $ 1.90 $ 4.11 $ 3.29
Weighted-Average Common Shares Outstanding:        
Basic (in shares) 32,213 35,423 32,815 36,253
Diluted (in shares) 32,536 35,745 33,142 36,579
Supplemental information:        
Excise taxes $ 464.1 $ 488.8 $ 1,364.8 $ 1,473.4
Merchandise        
Operating Revenues        
Total operating revenues 623.7 605.6 1,807.5 1,777.1
Operating Expenses        
Operating expenses 519.2 507.9 1,509.2 1,492.9
Other        
Operating Revenues        
Total operating revenues 12.8 49.8 70.9 119.0
Operating Expenses        
Operating expenses 139.7 130.4 401.9 384.6
Product        
Operating Revenues        
Total operating revenues [1] 3,151.5 2,580.9 8,982.8 7,550.9
Operating Expenses        
Operating expenses [1] $ 2,991.3 $ 2,419.1 $ 8,584.9 $ 7,161.6
[1] Three Months EndedSeptember 30, Nine Months EndedSeptember 30,(Millions of dollars, except per share amounts) 2018 2017 2018 2017(a) Includes excise taxes of: $464.1 $488.8 $1,364.8 $1,473.4
v3.10.0.1
Consolidated Statements of Cash Flows - USD ($)
$ in Millions
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Dec. 31, 2017
Operating Activities          
Net income (loss) $ 45.0 $ 67.9 $ 136.1 $ 120.4  
Adjustments to reconcile net income (loss) to net cash provided by operating activities          
Depreciation and amortization 34.2 29.0 99.0 83.5  
Deferred and noncurrent income tax charges (credits)     13.9 17.4  
Accretion of asset retirement obligations 0.5 0.4 1.5 1.3 $ 1.8
Pretax (gains) losses from sale of assets 0.5 0.0 0.7 3.4  
Net (increase) decrease in noncash operating working capital     (15.8) (58.3)  
Other operating activities - net     6.0 (1.4)  
Net cash provided by (required by) operating activities     241.4 166.3  
Investing Activities          
Property additions     (163.0) (201.5)  
Proceeds from sale of assets     1.2 0.7  
Other investing activities - net     (5.9) (4.6)  
Net cash provided by (required by) investing activities     (167.7) (205.4)  
Financing Activities          
Purchase of treasury stock     (144.4) (152.0)  
Borrowings of debt     0.0 338.8  
Repayments of debt     (15.9) (126.2)  
Debt issuance costs     0.0 (1.1)  
Amounts related to share-based compensation     (8.0) (5.2)  
Net cash provided by (required by) financing activities     (168.3) 54.3  
Net increase (decrease) in cash and cash equivalents     (94.6) 15.2  
Cash and cash equivalents at beginning of period     170.0 153.8 153.8
Restricted cash at beginning of period     0.0 0.0 0.0
Cash, cash equivalents, and restricted cash at beginning of period     170.0 153.8 153.8
Cash and cash equivalents at end of period 75.4 169.0 75.4 169.0 170.0
Restricted cash at end of period 0.0 0.0 0.0 0.0 0.0
Cash, cash equivalents, and restricted cash at end of period $ 75.4 $ 169.0 $ 75.4 $ 169.0 $ 170.0
v3.10.0.1
Consolidated Statements of Changes in Equity - USD ($)
$ in Millions
Total
Common Stock
Treasury Stock
APIC
Retained Earnings
Beginning balance at Dec. 31, 2016 $ 697.1 $ 0.5 $ (608.0) $ 555.3 $ 749.3
Balance (in shares) at Dec. 31, 2016   46,767,164      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income (loss) 120.4       120.4
Purchase of treasury stock (152.0)   (152.0)    
Issuance of treasury stock 0.1   7.0 (6.9)  
Amounts related to share-based compensation (5.2)     (5.2)  
Share-based compensation expense 4.7     4.7  
Ending balance at Sep. 30, 2017 665.1 $ 0.5 (753.0) 547.9 869.7
Balance (in shares) at Sep. 30, 2017   46,767,164      
Beginning balance at Dec. 31, 2017 738.4 $ 0.5 (806.5) 549.9 994.5
Balance (in shares) at Dec. 31, 2017   46,767,164      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income (loss) 136.1       136.1
Purchase of treasury stock (144.4)   (144.4)    
Issuance of treasury stock 0.0   9.3 (9.3)  
Amounts related to share-based compensation (8.0)     (8.0)  
Share-based compensation expense 6.8     6.8  
Ending balance at Sep. 30, 2018 $ 728.9 $ 0.5 $ (941.6) $ 539.4 $ 1,130.6
Balance (in shares) at Sep. 30, 2018   46,767,164      
v3.10.0.1
Description of Business and Basis of Presentation
9 Months Ended
Sep. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of Business and Basis of Presentation
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 September 30, 2018, Murphy USA had a total of 1,461 Company stations of which 1,160 were Murphy USA and 301 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, 2017, 2016 and 2015, 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 20, 2018.
 
Recently Issued Accounting Standards 

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (Topic 606) "Revenue from Contracts with Customers". Topic 606 supersedes the revenue recognition requirements Topic 605, "Revenue Recognition" (Topic 605), and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. We adopted Topic 606 as of January 1, 2018 using the modified retrospective transition method. See Note 2 "Revenues" for further details.

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 by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under current GAAP. ASU 2016-02 requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance asset. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach and early adoption is permitted. The Company will adopt ASU 2016-02 in the first quarter of 2019 and is in the process of implementing changes to its systems and processes in conjunction with its review of lease agreements. We have implemented a third-party software solution to assist with the accounting under the new standard and are nearing completion of our testing and optimization of the system. The Company is also finalizing procedures to validate the completeness of its inventory of arrangements that meet the new definition of an operating lease, in parallel to documenting internal policy decisions and permitted elections. Although we are in the process of evaluating the impact of adoption of the ASU on our consolidated financial statements, the Company currently believes the most significant change will be related to the recognition of right-of-use assets and lease liabilities on its balance sheet for real estate operating leases. Further, the Company is assessing if there are any embedded leases in arrangements with suppliers and customers that may result in right to use assets.

In November 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash". This ASU requires that a Statement of Cash Flows explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Restricted cash and restricted cash equivalents will be included with cash and cash equivalents when reconciling the beginning of period and end of period balances on the Statement of Cash Flows upon adoption of this standard. The standard was effective for the Company on January 1, 2018 and was applied retrospectively to the Statement of Cash Flows. Accordingly, the Consolidated Statement of Cash Flows presents a reconciliation of the changes in cash, cash equivalents and restricted cash. Restricted cash consists of funds held by third party intermediaries for like-kind property exchanges and is reported as a long-term asset in the Company's Balance Sheet.

In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract". This ASU aligns the accounting treatment for capitalizing implementation costs incurred by customers in cloud computing arrangements in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for the Company on January 1, 2020. Early adoption is permitted. The amendments in this update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is currently assessing the effect that this ASU will have on our financial position, results of operations, and disclosures but does not expect this update to have a material impact on the Company's consolidated financial statements.
v3.10.0.1
Revenues
9 Months Ended
Sep. 30, 2018
Revenue from Contract with Customer [Abstract]  
Revenues
Revenues

Adoption of ASC Topic 606, "Revenue from Contracts with Customers"

On January 1, 2018, we adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting policies under Topic 605.

There was no material impact to opening retained earnings as a result of adoption of Topic 606 that resulted in a cumulative effect adjustment.

Revenue Recognition

Revenue is recognized when obligations under the terms of a contract with our customers are satisfied; generally, this occurs with the transfer of control of our petroleum products, convenience merchandise, Renewable Identification Numbers ("RINs") and other assets to our third-party customers. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Excise and sales tax that we collect where we have determined we are the principal in the transaction have been recorded as revenue on a jurisdiction-by-jurisdiction basis.

The Company enters into buy/sell and similar arrangements when petroleum products are held at one location but are needed at a different location. The Company often pays or receives funds related to the buy/sell arrangements based on location or quality differences. The Company continues to account for these transactions as non-monetary exchanges under existing accounting guidance and typically reports these on a net basis in the Consolidated Income Statement.








The following tables disaggregates our revenue by major source for the three and nine months ended September 30, 2018 and 2017, respectively:


 
 
Three Months Ended September 30, 2018
 
Three Months Ended September 30, 2017
(Millions of dollars)
 
Marketing
Corporate and Other Assets
Consolidated
 
Marketing
Corporate and Other Assets
Consolidated
Petroleum product sales (at retail) 1
 
$
2,770.1

$

$
2,770.1

 
$
2,281.9

$

$
2,281.9

Petroleum product sales (at wholesale) 1
 
381.4


381.4

 
299.0


299.0

Total petroleum product sales
 
3,151.5


3,151.5

 
2,580.9


2,580.9

Merchandise sales
 
623.7


623.7

 
605.6


605.6

Other operating revenues:
 
 
 
 
 
 
 
 
RINs
 
11.6


11.6

 
48.7


48.7

Other revenues 2
 
1.2


1.2

 
1.1


1.1

Total revenues
 
$
3,788.0

$

$
3,788.0

 
$
3,236.3

$

$
3,236.3



 
 
Nine Months Ended September 30, 2018
 
Nine Months Ended September 30, 2017
(Millions of dollars)
 
Marketing
Corporate and Other Assets
Consolidated
 
Marketing
Corporate and Other Assets
Consolidated
Petroleum product sales (at retail) 1
 
$
7,910.6

$

$
7,910.6

 
$
6,684.0

$

$
6,684.0

Petroleum product sales (at wholesale) 1
 
1,072.2


1,072.2

 
866.9


866.9

Total petroleum product sales
 
8,982.8


8,982.8

 
7,550.9


7,550.9

Merchandise sales
 
1,807.5


1,807.5

 
1,777.1


1,777.1

Other operating revenues:
 
 
 
 
 
 
 
 
RINs
 
67.3


67.3

 
114.4


114.4

Other revenues 2
 
3.1

0.5

3.6

 
4.4

0.2

4.6

Total revenues
 
$
10,860.7

$
0.5

$
10,861.2

 
$
9,446.8

$
0.2

$
9,447.0

 
1 Includes excise and sales taxes that remain eligible for inclusion under Topic 606
2 Primarily includes collection allowance on excise and sales taxes and other miscellaneous items



The Company adopted ASC Topic 606 as of January 1, 2018 using the modified retrospective method. The impact of the excise and sales taxes collected and remitted to government authorities included in petroleum product sales that would have been recognized under previous revenue recognition guidance would have increased third quarter 2018 petroleum product sales (at retail) by $6.9 million and petroleum product sales (at wholesale) by $44.8 million for a total increase in petroleum product sales of $51.7 million. For the nine months ended September 30, 2018, petroleum product sales (at retail) would have increased by $18.9 million and petroleum product sales (at wholesale) by $124.9 million for a total increase in petroleum product sales of $143.8 million.



Marketing segment

Petroleum product sales (at retail). For our retail store locations, the revenue related to petroleum product sales is recognized as the fuel is pumped to our customers. The transaction price at the pump typically includes some portion of sales or excise taxes as levied in the respective jurisdictions. Those taxes that are collected for remittance to governmental entities on a pass through basis are not recognized as revenue and they are recorded to a liability account until they are paid. Our customers typically use a mixture of cash, checks, credit cards and debit cards to pay for our products as they are received. We have accounts receivable from the various credit/debit card providers at any point in time related to product sales made on credit cards and debit cards. These receivables are typically collected in two to seven days, depending on the terms with the particular credit/debit card providers. Payment fees retained by the credit/debit card providers are recorded as station and other operating expenses.

Petroleum product sales (at wholesale). Our sales of petroleum products at wholesale are generally recorded as revenue when the deliveries have occurred and legal ownership of the product has transferred to the customer. Title transfer for bulk refined product sales typically occurs at pipeline custody points and upon trucks loading at product terminals. For bulk pipeline sales, we record receivables from customers that are generally collected within a week from custody transfer date. For our rack product sales, the majority of our customers' accounts are drafted by us within 10 days from product transfer.

Merchandise sales. For our retail store locations, the revenue related to merchandise sales is recognized as the customer completes their purchase at our locations. The transaction price typically includes some portion of sales tax as levied in the respective jurisdictions. Those taxes that are collected for remittance to governmental entities on a pass through basis are not recognized as revenue and they are recorded to a liability account until they are paid. As noted above, a mixture of payment types are used for these revenues and the same terms for credit/debit card receivables are realized.

The most significant judgment with respect to merchandise sales revenue is determining whether we are the principal or agent for some categories of merchandise such as lottery tickets, lotto tickets, newspapers and other small categories of merchandise. For scratch-off lottery tickets, we have determined we are the principal in the majority of the jurisdictions and therefore we record those sales on a gross basis. We have some categories of merchandise (such as lotto tickets) where we are the agent and the revenues recorded for those transactions are our net commission only.

In June 2018 the Company initiated a loyalty pilot program through a limited number of its retail locations. The customers earn rewards based on their spending or other promotional activities. This program creates a performance obligation which requires us to defer a portion of sales revenue to the loyalty program participants until they redeem their rewards. The rewards may be redeemed for merchandise or cash discounts on fuel purchases. Due to the limited nature of the pilot program and the short amount of time the program has been in effect, the deferred revenues recorded in the three and nine months ended September 30, 2018 were immaterial.

RINs sales. For the sale of RINs, we recognize revenue when the RIN is transferred to the counter-party and the sale is completed. Receivables from our counter-parties related to the RIN sales are typically collected within five days of the sale.

Other revenues. Items reported as other operating revenues include collection allowances for excise and sales tax and other miscellaneous items and are recognized as revenue when the transaction is completed.

Accounts receivable

Trade accounts receivable on the balance sheet represents both receivables related to contracts with customers and other trade receivables. At September 30, 2018 and December 31, 2017, we had $171.2 million and $145.6 million of receivables, respectively, related to contracts with customers recorded. All of the trade accounts receivable related to contracts with customers outstanding at June 30, 2018 and December 31, 2017 were collected during the succeeding quarter. These receivables were generally related to credit and debit card transactions along with short term bulk and wholesale sales from our customers, which have a very short settlement window.
v3.10.0.1
Inventories
9 Months Ended
Sep. 30, 2018
Inventory Disclosure [Abstract]  
Inventories
Inventories
 
Inventories consisted of the following:
(Millions of dollars)
 
September 30,
2018
 
December 31,
2017
Finished products - First-In, First-Out ("FIFO") basis
 
$
319.8

 
$
231.9

Less: Last-In, First-Out ("LIFO") reserve - finished products
 
(208.6
)
 
(167.2
)
Finished products - LIFO basis
 
111.2

 
64.7

Store merchandise for resale
 
98.0

 
104.8

Materials and supplies
 
5.9

 
13.0

Total inventories
 
$
215.1

 
$
182.5


 
At September 30, 2018 and December 31, 2017, the replacement cost (market value) of LIFO inventories exceeded the LIFO carrying value by $208.6 million and $167.2 million, respectively.
v3.10.0.1
Long-Term Debt
9 Months Ended
Sep. 30, 2018
Debt Disclosure [Abstract]  
Long-Term Debt
Long-Term Debt
 
Long-term debt consisted of the following:
(Millions of dollars)
 
September 30,
2018
 
December 31,
2017
6.00% senior notes due 2023 (net of unamortized discount of $4.3 at September 30, 2018 and $5.0 at December 2017)
 
$
495.7

 
$
495.0

5.625% senior notes due 2027 (net of unamortized discount of $3.2 at September 30, 2018 and $3.5 at December 2017)
 
296.8

 
296.5

Term loan due 2020 (effective interest rate of 4.72% at September 30, 2018)
 
77.0

 
92.0

Capitalized lease obligations, vehicles, due through 2021
 
2.4

 
2.5

Less unamortized debt issuance costs
 
(4.1
)
 
(5.2
)
Total long-term debt
 
867.8

 
880.8

Less current maturities
 
21.2

 
19.9

Total long-term debt, net of current
 
$
846.6

 
$
860.9



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.
 
On April 25, 2017, Murphy Oil USA, Inc., issued $300 million of 5.625% Senior Notes due 2027 (the "2027 Senior Notes") under its existing shelf registration statement. The 2027 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 2027 Senior Notes contains restrictive covenants that are essentially identical to the covenants for the 2023 Senior Notes.
The 2023 and 2027 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 and 2027 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 with a current outstanding principal of $77 million. As of September 30, 2018, we have zero outstanding under our ABL facility.

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 a 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.
 
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 million (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 September 30, 2018, our fixed charge coverage ratio was 0.81; 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 September 30, 2018 was 0.19 to 1.0.         
 
The 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 September 30, 2018, our 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 credit agreement was less than 1.0 to 1.0. As of December 31, 2017, we had a shortfall of approximately $206.9 million of our net income and retained earnings subject to such restrictions before the fixed charge coverage ratio under our 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.
v3.10.0.1
Asset Retirement Obligations (ARO)
9 Months Ended
Sep. 30, 2018
Asset Retirement Obligation Disclosure [Abstract]  
Asset Retirement Obligations (ARO)
Asset Retirement Obligations (ARO)
The majority of the ARO recognized by the Company at September 30, 2018 and December 31, 2017 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.
 
(Millions of dollars)
 
September 30,
2018
 
December 31,
2017
Balance at beginning of period
 
$
28.2

 
$
26.2

Accretion expense
 
1.5

 
1.8

Settlements of liabilities
 
(0.3
)
 
(0.3
)
Liabilities incurred
 
0.6

 
0.5

Balance at end of period
 
$
30.0

 
$
28.2


 
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.
v3.10.0.1
Income Taxes
9 Months Ended
Sep. 30, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
 
The effective tax rate is calculated as the amount of income tax expense (benefit) divided by income before income tax expense (benefit). For the three and nine month periods ended September 30, 2018 and 2017, the Company’s approximate effective tax rates were as follows:
 
 
 
2018
 
2017
Three months ended September 30,
 
21.1%
 
37.5%
Nine months ended September 30,
 
21.5%
 
36.2%


The effective tax rate for the three and nine months ended September 30, 2018 was lower than prior periods primarily due to the benefits of Federal tax reform on 2018's tax provisions.

In addition, in the nine months ended September 30, 2018, the Company recognized a tax benefit of approximately $2.7 million related to the settlement of prior year state uncertain tax positions and approximately $2.8 million of excess tax benefits related to stock compensation for employees. For the nine months ended September 30, 2017, the Company recorded benefits from two discrete tax items, which were approximately $1.9 million of excess tax benefits related to stock compensation and a tax benefit of approximately $1.3 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 September 30, 2018, the earliest year remaining open for Federal examination is 2015 and for the states it ranges from 2013-2016.  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.
v3.10.0.1
Incentive Plans
9 Months Ended
Sep. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Incentive Plans
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 7, 2018, the Committee granted nonqualified stock options for 93,600 shares at an exercise price of $71.00 per share under the terms of the MUSA 2013 Plan.  The Black-Scholes valuation for these awards is $17.32 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 22,350 time-based restricted units granted at a grant date fair value of $71.00 along with 44,700 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 $87.60 per unit.  For the ROACE portion of the awards, the valuation will be based on the grant date fair value of $71.00 per unit and the number of awards will be periodically assessed to determine the probability of vesting. 
 
On March 27, 2018, the Committee also granted 43,905 time-based restricted stock units granted to certain employees with a grant date fair value of $72.88 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 2018, the Company issued 10,800 restricted stock units to its non-employee directors at a grant date fair value of $69.42 per share.  These shares vest in three years from the grant date. 
 
For the nine months ended September 30, 2018 and 2017, share-based compensation was $6.8 million and $4.7 million, respectively.  The income tax benefit realized for the tax deductions from options exercised for the nine months ended September 30, 2018 and 2017 was $2.1 million and $0.2 million, respectively.
v3.10.0.1
Financial Instruments and Risk Management
9 Months Ended
Sep. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Financial Instruments and Risk Management
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 September 30, 2018, all current derivative activity is immaterial.
 
At September 30, 2018 and December 31, 2017, cash deposits of $1.7 million and $2.7 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 September 30, 2018 or December 31, 2017, respectively.
v3.10.0.1
Earnings Per Share
9 Months Ended
Sep. 30, 2018
Earnings Per Share [Abstract]  
Earnings Per Share
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. 
 
Upon the completion of the most recent repurchase plan authorized by the Murphy USA Inc. Board of Directors in December 2017, the Company remains committed to share repurchases under quarterly allocations in line with its past practice, subject to market conditions and cash availability. There were no share repurchases during the third quarter of 2018 and for the nine months ended September 30, 2018, the Company acquired 1,994,632 shares of common stock for an average price of $72.39 per share including brokerage fees.
 
The following table provides a reconciliation of basic and diluted earnings per share computations for the three and nine months ended September 30, 2018 and 2017:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(Millions of dollars, except share amounts)
2018
 
2017
 
2018
 
2017
Earnings per common share:
 
 
 
 
 
 
 
Net income (loss) per share - basic
 
 
 
 
 
 
 
Net income (loss) attributable to common stockholders
$
45.0

 
$
67.9

 
$
136.1

 
$
120.4

 
 
 
 
 
 
 
 
Weighted average common shares outstanding (in thousands)
32,213

 
35,423

 
32,815

 
36,253

 
 
 
 
 
 
 
 
Earnings per common share
$
1.40

 
$
1.92

 
$
4.15

 
$
3.32

 
 
 
 
 
 
 
 
 
Earnings per common share - assuming dilution:
 
 
 
 
 
 
 
Net income (loss) per share - diluted
 
 
 
 
 
 
 
Net income (loss) attributable to common stockholders
$
45.0

 
$
67.9

 
$
136.1

 
$
120.4

 
 
 
 
 
 
 
 
Weighted average common shares outstanding (in thousands)
32,213

 
35,423

 
32,815

 
36,253

Common equivalent shares:
 
 
 
 
 
 
 
Dilutive share-based awards
323

 
322

 
327

 
326

Weighted average common shares outstanding - assuming dilution (in thousands)
32,536


35,745

 
33,142

 
36,579

 
 
 
 
 
 
 
 
Earnings per common share assuming dilution
$
1.38

 
$
1.90

 
$
4.11

 
$
3.29



We have excluded from the earnings-per-share calculation certain stock options and shares that are considered to be anti-dilutive under the treasury stock method. For the reported periods, the number of time-based restricted stock units, performance based units and non-qualified stock options that are excluded due to their anti-dilutive nature is immaterial.
v3.10.0.1
Other Financial Information
9 Months Ended
Sep. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Other Financial Information
Other Financial Information
  
CASH FLOW DISCLOSURES — Cash income taxes paid (collected), net of refunds, were $12.0 million and $29.3 million for the nine month periods ended September 30, 2018 and 2017, respectively. Interest paid, net of amounts capitalized, was $41.0 million and $32.4 million for the nine month periods ended September 30, 2018 and 2017, respectively.  











CHANGES IN WORKING CAPITAL:
 
Nine Months Ended
September 30,
(Millions of dollars)
2018
 
2017
Accounts receivable
$
(6.0
)
 
$
(8.9
)
Inventories
(32.6
)
 
(47.4
)
Prepaid expenses and other current assets
17.1

 
11.5

Accounts payable and accrued liabilities
5.7

 
(25.1
)
Income taxes payable

 
11.6

Net (increase) decrease in noncash operating working capital
$
(15.8
)
 
$
(58.3
)
v3.10.0.1
Assets and Liabilities Measured at Fair Value
9 Months Ended
Sep. 30, 2018
Fair Value Disclosures [Abstract]  
Assets and Liabilities Measure at Fair Value
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 was determined using NYMEX quoted values but was immaterial.
 
The following table presents the carrying amounts and estimated fair values of financial instruments held by the Company at September 30, 2018 and December 31, 2017. 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, Restricted cash, and 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 September 30, 2018
 
At December 31, 2017
 
 
Carrying
 
 
 
Carrying
 
 
(Millions of dollars)
 
Amount
 
Fair Value
 
Amount
 
Fair Value
Financial liabilities
 
 
 
 
 
 
 
 
Current and long-term debt
 
$
(867.8
)
 
$
(881.4
)
 
$
(880.8
)
 
$
(904.9
)
v3.10.0.1
Contingencies
9 Months Ended
Sep. 30, 2018
Commitments and Contingencies Disclosure [Abstract]  
Contingencies
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 September 30, 2018, 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 September 30, 2018. 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, general liability insurance with a self-insured retention of $3.0 million per occurrence, and auto liability insurance with a deductible of $0.3 million per occurrence. As of September 30, 2018, 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 $19.5 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 September 30, 2018, the Company had contingent liabilities of $16.1 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.
v3.10.0.1
Business Segment
9 Months Ended
Sep. 30, 2018
Segment Reporting [Abstract]  
Business Segment
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 ("PS&W") group. As the primary purpose of the PS&W 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 performed 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. Net settlement proceeds from litigation are included in Corporate and other assets operating income. The reportable segment was determined based on information reviewed by the Chief Operating Decision Maker (CODM).
 
 
 
 
 
Three Months Ended
 
 
 
 
September 30, 2018
 
September 30, 2017
 
 
Total Assets at
 
External
 
Income
 
External
 
Income
(Millions of dollars)
 
September 30,
 
Revenues
 
(Loss)
 
Revenues
 
(Loss)
Marketing
 
$
2,090.0

 
$
3,788.0

 
$
54.6

 
$
3,236.3

 
$
75.9

Corporate and other assets
 
235.6

 

 
(9.6
)
 

 
(8.0
)
Total
 
$
2,325.6

 
$
3,788.0

 
$
45.0

 
$
3,236.3

 
$
67.9



 
 
 
 
Nine Months Ended
 
 
 
 
September 30, 2018
 
September 30, 2017
 
 
 
 
External
 
Income
 
External
 
Income
(Millions of dollars)
 
 
 
Revenues
 
(Loss)
 
Revenues
 
(Loss)
Marketing
 
 
 
$
10,860.7

 
$
126.1

 
$
9,446.8

 
$
140.1

Corporate and other assets
 
 
 
0.5

 
10.0

 
0.2

 
(19.7
)
Total
 

 
$
10,861.2

 
$
136.1

 
$
9,447.0

 
$
120.4

v3.10.0.1
Guarantor Subsidiaries
9 Months Ended
Sep. 30, 2018
Guarantor Subsidiaries [Abstract]  
Guarantor Subsidiaries
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 and the 5.625% senior notes due 2027.  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

(Millions of dollars, except share amounts)
September 30, 2018
Assets
Parent Company
 
Issuer
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Current assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
74.7

 
$
0.7

 
$

 
$

 
$
75.4

Accounts receivable—trade, less allowance for doubtful accounts of $1.1 in 2018

 
231.2

 

 

 

 
231.2

Inventories, at lower of cost or market

 
215.1

 

 

 

 
215.1

Prepaid expenses and other current assets

 
19.6

 

 

 

 
19.6

Total current assets

 
540.6

 
0.7

 

 

 
541.3

Property, plant and equipment, at cost less accumulated depreciation and amortization of $944.4 in 2018

 
1,739.9

 
2.0

 

 

 
1,741.9

Investments in subsidiaries
2,359.5

 
144.8

 

 

 
(2,504.3
)
 

Other assets

 
42.4

 

 

 

 
42.4

Total assets
$
2,359.5

 
$
2,467.7

 
$
2.7

 
$

 
$
(2,504.3
)
 
$
2,325.6

Liabilities and Stockholders' Equity
 

 
 

 
 

 
 

 
 

 
 

Current liabilities
 

 
 

 
 

 
 

 
 

 
 

Current maturities of long-term debt
$

 
$
21.2

 
$

 
$

 
$

 
$
21.2

Inter-company accounts payable
973.6

 
(770.0
)
 
(49.3
)
 
(154.3
)
 

 

Trade accounts payable and accrued liabilities

 
519.6

 

 

 

 
519.6

Total current liabilities
973.6

 
(229.2
)
 
(49.3
)
 
(154.3
)
 

 
540.8

Long-term debt, including capitalized lease obligations

 
846.6

 

 

 

 
846.6

Deferred income taxes

 
168.1

 

 

 

 
168.1

Asset retirement obligations

 
30.0

 

 

 

 
30.0

Deferred credits and other liabilities

 
11.2

 

 

 

 
11.2

Total liabilities
973.6

 
826.7

 
(49.3
)
 
(154.3
)
 

 
1,596.7

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, 2018)
0.5

 

 
0.1

 

 
(0.1
)
 
0.5

Treasury Stock (14,526,155 shares held at September 30, 2018)
(941.6
)
 

 

 

 

 
(941.6
)
Additional paid in capital (APIC)
1,196.4

 
571.9

 
52.0

 
87.5

 
(1,368.4
)
 
539.4

Retained earnings
1,130.6

 
1,069.1

 
(0.1
)
 
66.8

 
(1,135.8
)
 
1,130.6

Total stockholders' equity
1,385.9

 
1,641.0

 
52.0

 
154.3

 
(2,504.3
)
 
728.9

Total liabilities and stockholders' equity
$
2,359.5

 
$
2,467.7

 
$
2.7

 
$

 
$
(2,504.3
)
 
$
2,325.6

 

CONSOLIDATING BALANCE SHEET
(Millions of dollars, except share amounts)
December 31, 2017
Assets
Parent Company
 
Issuer
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Current assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
169.9

 
$
0.1

 
$

 
$

 
$
170.0

Accounts receivable—trade, less allowance for doubtful accounts of $1.1 in 2017

 
225.2

 

 

 

 
225.2

Inventories, at lower of cost or market

 
182.5

 

 

 

 
182.5

Prepaid expenses and other current assets

 
36.5

 

 

 

 
36.5

Total current assets

 
614.1

 
0.1

 

 

 
614.2

Property, plant and equipment, at cost less accumulated depreciation and amortization of $874.7 in 2017

 
1,678.3

 
1.2

 

 

 
1,679.5

Investments in subsidiaries
2,223.4

 
144.9

 

 

 
(2,368.3
)
 

Other assets

 
37.3

 

 

 

 
37.3

Total assets
$
2,223.4

 
$
2,474.6

 
$
1.3

 
$

 
$
(2,368.3
)
 
$
2,331.0

Liabilities and Stockholders' Equity
 

 
 

 
 

 
 

 
 

 
 

Current liabilities
 

 
 

 
 

 
 

 
 

 
 

Current maturities of long-term debt
$

 
$
19.9

 
$

 
$

 
$

 
$
19.9

Inter-company accounts payable
829.2

 
(624.1
)
 
(50.8
)
 
(154.3
)
 

 

Trade accounts payable and accrued liabilities

 
513.4

 

 

 

 
513.4

Total current liabilities
829.2

 
(90.8
)
 
(50.8
)
 
(154.3
)
 

 
533.3

Long-term debt, including capitalized lease obligations

 
860.9

 

 

 

 
860.9

Deferred income taxes

 
154.2

 

 

 

 
154.2

Asset retirement obligations

 
28.2

 

 

 

 
28.2

Deferred credits and other liabilities

 
16.0

 

 

 

 
16.0

Total liabilities
829.2

 
968.5

 
(50.8
)
 
(154.3
)
 

 
1,592.6

Stockholders' Equity
 

 
 

 
 

 
 

 
 

 
 

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

 

 

 

 

 

Common Stock, par $0.01 (authorized 200,000,000 shares, 46,767,164 shares issued at December 31, 2017)
0.5

 

 
0.1

 

 
(0.1
)
 
0.5

Treasury Stock (12,675,630 shares held at December 31, 2017)
(806.5
)
 

 

 

 

 
(806.5
)
Additional paid in capital (APIC)
1,205.7

 
573.1

 
52.0

 
87.5

 
(1,368.4
)
 
549.9

Retained earnings
994.5

 
933.0

 

 
66.8

 
(999.8
)
 
994.5

Total stockholders' equity
1,394.2

 
1,506.1

 
52.1

 
154.3

 
(2,368.3
)
 
738.4

Total liabilities and stockholders' equity
$
2,223.4

 
$
2,474.6

 
$
1.3

 
$

 
$
(2,368.3
)
 
$
2,331.0


 

CONSOLIDATING INCOME STATEMENT

(Millions of dollars)
Three Months Ended September 30, 2018
Operating Revenues
Parent Company
 
Issuer
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Petroleum product sales
$

 
$
3,151.5

 
$

 
$

 
$

 
$
3,151.5

Merchandise sales

 
623.7

 

 

 

 
623.7

Other operating revenues

 
12.8

 

 

 

 
12.8

Total operating revenues

 
3,788.0

 

 

 

 
3,788.0

 
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
 

 
 

 
 

 
 

 
 

 
 

Petroleum product cost of goods sold

 
2,991.3

 

 

 

 
2,991.3

Merchandise cost of goods sold

 
519.2

 

 

 

 
519.2

Station and other operating expenses

 
139.7

 

 

 

 
139.7

Depreciation and amortization

 
34.2

 

 

 

 
34.2

Selling, general and administrative

 
32.6

 

 

 

 
32.6

Accretion of asset retirement obligations

 
0.5

 

 

 

 
0.5

Total operating expenses

 
3,717.5

 

 

 

 
3,717.5

 
 
 
 
 
 
 
 
 
 
 
 
Net settlement proceeds