not include $5.3 million and $4.8 million of combined operating expense and SG&A costs for the three months ended September 30, 2013 and 2012, respectively.
For the current quarter, merchandise revenues were $557 million compared to $548 million for the 2012 period, an increase of $9.2 million. Merchandise sales for the quarter ended September 30, 2013 were made at an average margin of 13.2% compared to 14.4% in the 2012 comparable period, a decrease of 1.2% in margin which was primarily due to increased pressure on margins for tobacco products due to competitive market dynamics along with timing of higher tobacco related rebates recorded in the prior year period. On an APSM basis, total merchandise sales were down 1.5% with tobacco products down 3.8%, mostly offset by an 8.5% increase in non-tobacco sales. Non-tobacco products showed a marked increase in both margin dollars and percentage of total sales as certain promotions with candy and beverages showed favorable results in the current year period. For the current quarter, non-tobacco margin dollars increased 8.7% primarily due to increased margins in the candy, beverage, alternative snack, and lottery/lotto categories. Third quarter 2013 marked the 54th successive increase in same quarter-on-same quarter growth in per-site non-tobacco product sales.
Station and other operating expenses were $135.3 million for the quarter ended September 30, 2013, compared to $134.6 million for the same period in 2012. On an APSM basis, these expenses declined 3.4% period over period. Credit card expenses were lower in the current period due in part to lower sales prices and a change in mix of payment types. Selling, general and administrative expenses in the current quarter were $46.1 million compared to $27.8 million in the same period of 2012. The 2013 quarter included $14.3 million of spin-related and other one-time, nonrecurring costs.
Also impacting net income for the three months ended September 30, 2013, was income generated by the sale of RINs of $31.8 million compared to $5.0 million in the 2012 period. During the current period, 42 million RINs were sold at an average selling price of $0.75 per RIN.
Further, the Company’s two ethanol manufacturing facilities generated net income in the just completed 2013 quarter of $4.5 million compared to net losses of $9.4 million in the same 2012 period. Gross margins improved significantly in the current quarter to 59 cpg compared to 16 cpg in the 2012 quarter due to a decrease in corn costs combined with increased prices for ethanol produced and sold. Prices for co-products such as dried distillers’ grains with solubles (DDGS) and wet distillers’ grains with solubles (WDGS) sold from our plants decreased significantly in the current period compared to the prior year quarter due to the drop in corn prices.
Capital expenditures for the quarter ended September 30, 2013, were $33.7 million compared to $30.2 million in 2012. Of the capital expenditures for the just completed quarter, $26.1 million were for retail growth with $5.4 million spent on retail maintenance items. The remaining balance of the capital expenditures was in our product supply, ethanol, and corporate areas. Free cash flow (this non-GAAP measure is described and reconciled to the corresponding GAAP measure in the Supplemental Disclosure section of this release) for the period was $158.4 million compared to $3.5 million in the prior year period. The large increase in the current year was due partly to the seasonal drawdown of inventory levels.
Nine-month results
For the nine month period ended September 30, 2013, the Company reported net income of $141.4 million or $3.02 per diluted share on $14.19 billion in revenues. Net income was $64.5 million ($1.38 per diluted share) for the same period ended September 30, 2012, on $14.66 billion in revenues. The improved results in the current year were primarily driven by higher retail fuel margins, increased values received from the sale of RINs compared to the prior year and improved earnings from the two ethanol facilities.
Adjusted EBITDA was $288.2 million for the nine month period ended September 30, 2013 compared to $167.9 million for the same period in 2012.
Total fuel volumes sold were 2.83 billion gallons in the 2013 period compared to 2.77 billion gallons in the comparable 2012 period, an increase of 2.5%. Average fuel volumes of 267,928 gallons per store month in the 2013 period compared to 270,067 gallons per store month in 2012, a decrease of 0.8%. On an APSM basis, fuel margin dollars have increased 10.6% in the 2013 period. Retail fuel margins (before credit card expenses) were 13.9 cpg in the 2013 period compared to 12.5 cpg in the 2012 period, an increase of 1.4 cpg. Total product supply and wholesale margin dollars excluding RINs were $26.3 million in the nine months ended September 30, 2013 period compared to $29.7 million in the same period of 2012. These product supply and wholesale margin dollars do not include $14.8 million and $14.1 million of combined operating expense and SG&A costs for the nine months ended September 30, 2013 and 2012, respectively.
For the current year, merchandise revenues were $1.63 billion compared to $1.61 billion for the 2012 period, an increase of $18 million, or 1.1%. For the year-to-date 2013 period, merchandise sales had a margin of 13.0% compared to 13.6% for the same nine month period in 2012. The primary reason for the decrease in merchandise margin for the current period is continued competitive pressure on margins for tobacco products. On an APSM basis, total merchandise sales were down 2.1% with tobacco products down 3.9%, partially offset by a 6.0% increase in non-tobacco sales. Total non-tobacco sales revenues increased 9.5% and related margin dollars increased 4.9% year over year. Categories showing the most improvement in the current year include beverages, candy, salty snacks, and lottery/lotto.
Station and other operating expenses were $406.4 million for the nine months ended September 30, 2013, compared to $391.6 million for the same period in 2012. On an APSM basis, these expenses were virtually flat period over period. Selling, general and administrative expenses in the current period were $108.8 million compared to $89.5 million in the same period of 2012. The 2013 nine month period included $14.3 million of spin-related and other one-time, nonrecurring costs.
Also impacting net income for the nine months ended September 30, 2013, was income generated by the sale of RINs of $74.8 million compared to $6.8 million in the 2012 period. During the current period, 118 million RINs were sold at an average selling price of $0.63 per RIN.
Further, the Company’s two ethanol manufacturing facilities generated net income in the just completed 2013 nine month period of $14.0 million compared to net losses of $15.3 million in the same 2012 period. Gross margins improved significantly in the current period to 59 cpg compared to 28 cpg in the 2012 period due to a decrease in corn costs combined with increased prices for ethanol produced and sold.
Capital expenditures for the year to date period ended September 30, 2013, were $129.0 million compared to $75.5 million in 2012. Of the capital expenditures for the 2013 period, $103.1 million were for retail growth with $15.5 million spent on retail maintenance items. The remaining balance of the capital expenditures was in our product supply, ethanol, and corporate areas. For the 9 months ended September 30, 2013, the Company’s free cash flow was $247.9 million compared to $53.1 million in the same period in 2012.
Station Openings
During the first nine months of 2013, Murphy USA opened 21 retail locations; six of these sites opened during Q3 2013. Also, during the same nine month period one location was closed due to the closing of the adjacent Walmart store. In October and early November, the Company has opened an additional eight sites. With the addition of these stores added in 2013, Murphy USA has 1,193 total locations in operation that includes 1,018 Murphy USA sites and 175 Murphy Express sites. We also have 22 sites currently under construction as of today that will add to our network in the near future. Of these in-process stores, most are our new 1,200 sq ft or larger format.
Cash Flow and Financial Resources
For the nine months ended September 30, 2013, cash flow provided by operating activities equaled $370.0 million. The increase in cash provided by operating activities over the 2012 period of $128.6 million was due to decreases in working capital and higher net income in the current period. Cash flows used in investing activities in the 2013 period were $315.2 million which consisted primarily of $122.1 million of capital expenditures for property additions (including $51.0 million for land purchases) and $198.2 million of cash invested in marketable securities while the comparable 2012 period used cash of $76.1 million, of which $75.5 million was capital expenditures for property additions. Cash flows used in financing activities were $47.8 million in the just ended year to date period compared to cash used in financing activities of $25.1 million in 2012.
At September 30, 2013, we had $262.5 million in cash equivalents and investments on hand and had no borrowings under our asset-based loan facility, which was put in place with an initial borrowing base limit of $450.0 million in mid-August 2013. Using September 30, 2013, information, the borrowing base has been recalculated at $338.0 million in October 2013. Total debt at September 30, 2013, of $642.4 million consisted primarily of the $500.0 million in senior unsecured notes due in 2023 and the $150.0 million term loan due in 2016. Since the end of the third quarter of 2013, management elected to repay $15.0 million of the term loan to reduce total long-term debt.
"We ended the quarter with one of the strongest balance sheets in the industry," said Mr. Clyde. "We look forward to closing the Hankinson transaction by year end and realizing significant additional value for our shareholders. We are well positioned and focused on our exciting organic growth opportunities.”
Earnings Call Information
The Company will host a conference call on November 7, 2013, at 10:00 a.m. Central time to discuss third quarter 2013 results. The conference call numbers are 1 (877) 291-1367 and the conference number is 84987542. A live audio webcast of the conference call and the earnings and investor related materials, including reconciliations of any non-GAAP financial measures to GAAP financial measures and any other applicable disclosures, will be available on that same day on the investor section of the Murphy USA website (http://ir.corporate.murphyusa.com). Online replays of the earnings call will be available through Murphy USA’s web site and a recording of the call will be available through November 11, 2013, by dialing 1 (855) 859-2056 and referencing conference number 84987542.
Forward Looking Statements
Certain statements in this news release contain or may suggest “forward-looking” information (as defined in the Private Securities Litigation Reform Act of 1995) that involve risk and uncertainties, including, but not limited to anticipated financial outlook for the fiscal year ending December 31, 2013, anticipated store openings, fuel margins, merchandise margins, and trends in our operations. Such statements are based upon the current beliefs and expectations of the company’s management and are subject to significant risks and uncertainties. Actual future results may differ materially from historical results or current expectations depending upon factors including, but not limited to: our ability to continue to maintain a good business relationship with Walmart; successful execution of our growth strategy, including our ability to realize the anticipated benefits from such growth initiatives, and the timely completion of construction associated with our newly planned stores which may be impacted by the financial health of third parties; our ability to effectively manage our inventory, disruptions in our supply chain and our ability to control costs; the impact of any systems failures, cybersecurity and/or security breaches, including any security breach that results in theft, transfer or unauthorized disclosure of customer, employee or company information or our compliance with information security and privacy laws and regulations in the event of such an incident; successful execution of our information technology strategy; future tobacco legislation and any other efforts that make purchasing tobacco products more costly or difficult could hurt our revenues and impact gross margins; efficient and proper allocation of our capital resources; compliance with debt covenants, availability and cost of credit, and changes in interest rates. Our SEC reports, including our Form 10 Registration Statement and our Form 10-Q for the three and nine months ended September 30, 2013, contain other information on these and other factors that could affect our financial results and cause actual results to differ materially from any forward-looking information we may provide. The company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events, new information or future circumstances.
I
Murphy USA Inc.
Consolidated and Combined Statements of Income and Comprehensive Income
(unaudited)
| | | | | | | | | |
| | | | | | | | | |
| | Three Months Ended | Nine Months Ended |
| | September 30, | September 30, |
(Thousands of dollars except per share amounts) | | 2013 | 2012 | 2013 | 2012 |
Revenues | | | | | | | | | |
Petroleum product sales (a) | | $ | 4,032,651 | $ | 4,234,876 | $ | 11,971,146 | $ | 12,572,305 |
Merchandise sales | | | 556,835 | | 547,648 | | 1,625,673 | | 1,607,525 |
Ethanol sales and other | | | 196,254 | | 183,465 | | 588,689 | | 478,115 |
Total revenues | | | 4,785,740 | | 4,965,989 | | 14,185,508 | | 14,657,945 |
Costs and operating expenses | | | | | | | | | |
Petroleum product cost of goods sold (a) | | | 3,903,042 | | 4,126,372 | | 11,549,760 | | 12,196,894 |
Merchandise cost of goods sold | | | 483,513 | | 468,736 | | 1,414,772 | | 1,388,818 |
Ethanol cost of goods sold | | | 132,215 | | 169,137 | | 417,660 | | 423,219 |
Station and other operating expenses | | | 135,317 | | 134,609 | | 406,375 | | 391,565 |
Depreciation and amortization | | | 19,387 | | 19,319 | | 58,502 | | 56,800 |
Selling, general and administrative | | | 46,133 | | 27,824 | | 108,790 | | 89,525 |
Accretion of asset retirement obligations | | | 274 | | 245 | | 821 | | 736 |
Total costs and operating expenses | | | 4,719,881 | | 4,946,242 | | 13,956,680 | | 14,547,557 |
Income from operations | | | 65,859 | | 19,747 | | 228,828 | | 110,388 |
Other income (expense) | | | | | | | | | |
Interest income | | | 354 | | 30 | | 1,088 | | 68 |
Interest expense | | | (4,715) | | (66) | | (4,926) | | (351) |
Gain on sale of assets | | | 5,972 | | 89 | | 5,980 | | 163 |
Other nonoperating income | | | 50 | | 1 | | 74 | | 22 |
Total other income (expense) | | | 1,661 | | 54 | | 2,216 | | (98) |
Income before income taxes | | | 67,520 | | 19,801 | | 231,044 | | 110,290 |
Income tax expense | | | 25,791 | | 8,800 | | 89,640 | | 45,780 |
Net Income and Comprehensive Income | | $ | 41,729 | $ | 11,001 | $ | 141,404 | $ | 64,510 |
| | | | | | | | | |
Earnings per share: | | | | | | | | | |
Basic | | | $ 0.89 | | $ 0.24 | | $ 3.03 | | $ 1.38 |
Diluted | | | $ 0.89 | | $ 0.24 | | $ 3.02 | | $ 1.38 |
| | | | | | | | | |
Weighted-average shares outstanding: | | | | | | | | | |
Basic | | | 46,743 | | 46,743 | | 46,743 | | 46,743 |
Diluted | | | 46,759 | | 46,743 | | 46,759 | | 46,743 |
| | | | | | | | | |
| | | | | | | | | |
Supplemental information: | | | | | | | | | |
(a) Includes excise taxes of: | | | $ 483,576 | | $ 497,379 | | $ 1,419,073 | | $ 1,431,148 |
Murphy USA Inc.
Segment Operating Results
(unaudited)
| | | | | | | | | | |
(thousands of dollars, except volume per store month and margins) | | | Three Months Ended September 30, | | | Nine Months Ended September 30, |
Marketing Segment | | | 2013 | | 2012 | | | 2013 | | 2012 |
| | | | | | | | | | |
Revenues | | | | | | | | | | |
Petroleum product sales | | $ | 4,032,651 | $ | 4,234,876 | | $ | 11,971,146 | $ | 12,572,305 |
Merchandise sales | | | 556,835 | | 547,648 | | | 1,625,673 | | 1,607,525 |
Other | | | 32,548 | | 5,661 | | | 76,990 | | 8,746 |
Total revenues | | $ | 4,622,034 | $ | 4,788,185 | | $ | 13,673,809 | $ | 14,188,576 |
| | | | | | | | | | |
Costs and operating expenses | | | | | | | | | | |
Petroleum products cost of goods sold | | | 3,903,042 | | 4,126,372 | | | 11,549,760 | | 12,196,895 |
Merchandise cost of goods sold | | | 483,513 | | 468,736 | | | 1,414,772 | | 1,388,818 |
Station and other operating expenses | | | 114,546 | | 115,056 | | | 344,280 | | 332,917 |
Depreciation and amortization | | | 17,267 | | 16,889 | | | 52,835 | | 49,529 |
Selling, general and administrative | | | 43,072 | | 26,527 | | | 102,318 | | 84,414 |
Accretion of asset retirement obligations | | | 274 | | 244 | | | 821 | | 736 |
Total costs and operating expenses | | $ | 4,561,714 | $ | 4,753,824 | | $ | 13,464,786 | $ | 14,053,309 |
| | | | | | | | | | |
Income from operations | | | 60,320 | | 34,361 | | | 209,023 | | 135,267 |
| | | | | | | | | | |
Other income (expense) | | | | | | | | | | |
Gain (loss) on sale of assets | | | 5,972 | | 88 | | | 5,980 | | 163 |
Other nonoperating income (loss) | | | 50 | | 1 | | | 74 | | 22 |
Total other income (expense) | | $ | 6,022 | $ | 89 | | $ | 6,054 | $ | 185 |
| | | | | | | | | | |
Income from continuing operations | | | | | | | | | | |
before income taxes | | | 66,342 | | 34,450 | | | 215,077 | | 135,452 |
Income tax expense | | | 25,420 | | 13,938 | | | 84,215 | | 54,309 |
Income from continuing operations | | $ | 40,922 | $ | 20,512 | | $ | 130,862 | $ | 81,143 |
| | | | | | | | | | |
| | | | | | | | | | |
Gallons sold per store month | | | 273,741 | | 279,505 | | | 267,928 | | 270,067 |
Fuel margin (cpg) | | | 14.8 | | 10.3 | | | 13.9 | | 12.5 |
Fuel margin $ per store month | | | $ 40,600 | | $ 28,683 | | | $ 37,302 | | $ 33,722 |
| | | | | | | | | | |
Total tobacco sales revenue per store month | | | $ 125,091 | | $ 130,036 | | | $ 123,274 | | $ 128,286 |
Total non-tobacco sales revenue per store month | | | $ 31,885 | | $ 29,388 | | | $ 30,443 | | $ 28,718 |
Total merchandise sales revenue per store month | | | $ 156,976 | | $ 159,424 | | | $ 153,717 | | $ 157,004 |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | Three Months Ended September 30, | | | Nine Months Ended September 30, |
| | | 2013 | | 2012 | | | 2013 | | 2012 |
Merchandise margin $ per store month | | | $ 20,670 | | $ 22,972 | | | $ 19,942 | | $ 21,361 |
Merchandise margin as a percentage of merchandise sales | | | 13.2% | | 14.4% | | | 13.0% | | 13.6% |
| | | | | | | | | | |
Store count at end of period | | | 1,185 | | 1,151 | | | 1,185 | | 1,151 |
Average retail sites open during the period (store months) | | | 1,182 | | 1,145 | | | 1,175 | | 1,138 |
| | | | | | | | | | |
(thousands of dollars, except production volume and margin) | | | Three Months Ended September 30, | | | Nine Months Ended September 30, |
Ethanol Segment | | | 2013 | | 2012 | | | 2013 | | 2012 |
| | | | | | | | | | |
Revenues | | | | | | | | | | |
Ethanol and related product sales | | $ | 163,706 | $ | 177,804 | | $ | 511,699 | $ | 469,370 |
Total revenues | | | 163,706 | | 177,804 | | | 511,699 | | 469,370 |
| | | | | | | | | | |
Costs and operating expenses | | | | | | | | | | |
Ethanol and related product cost of goods sold | | | 132,215 | | 169,137 | | | 417,660 | | 423,219 |
Operating expenses | | | 20,771 | | 19,553 | | | 62,096 | | 58,648 |
Depreciation and amortization | | | 1,279 | | 2,109 | | | 3,818 | | 6,196 |
Selling, general and administrative | | | 2,680 | | 1,433 | | | 6,595 | | 4,756 |
Total costs and operating expenses | | | 156,945 | | 192,232 | | | 490,169 | | 492,819 |
| | | | | | | | | | |
Income from continuing operations | | | | | | | | | | |
before income taxes | | | 6,761 | | (14,428) | | | 21,530 | | (23,449) |
Income tax expense | | | 2,308 | | (5,037) | | | 7,536 | | (8,163) |
Income from continuing operations | | $ | 4,453 | $ | (9,391) | | $ | 13,994 | $ | (15,286) |
| | | | | | | | | | |
Ethanol production - gallons (000) | | | 53,592 | | 55,585 | | | 160,363 | | 164,013 |
DDGS/WDGS production - tons (000) | | | 304 | | 304 | | | 914 | | 912 |
Gross margin per gallon of production (cpg) | | | 59.0 | | 16.0 | | | 59.0 | | 28.0 |
| | | | | | | | | | |
Murphy USA Inc.
Consolidated and Combined Balance Sheets
| | | | | | |
| | | | | | |
| | September 30, | | December 31, |
(Thousands of dollars) | | 2013 | | 2012 |
| | (unaudited) | | | |
Assets | | | | | | |
Current assets | | | | | | |
Cash and cash equivalents | | $ | 64,347 | | $ | 57,373 |
Marketable securities | | | 198,152 | | | - |
Accounts receivable—trade, less allowance for doubtful accounts | | | | | | |
of $4,548 in 2013 and $4,576 in 2012 | | | 225,736 | | | 529,023 |
Inventories, at lower of cost or market | | | 114,894 | | | 217,394 |
Prepaid expenses | | | 12,941 | | | 18,172 |
Total current assets | | | 616,070 | | | 821,962 |
Property, plant and equipment, at cost less accumulated depreciation and amortization of $656,604 in 2013 and $590,568 in 2012 | | | 1,248,632 | | | 1,169,960 |
Deferred charges and other assets | | | 7,307 | | | 543 |
Total assets | | $ | 1,872,009 | | $ | 1,992,465 |
| | | | | | |
Liabilities and Stockholders' Equity/Net Investment | | | | | | |
Current liabilities | | | | | | |
Current maturities of long-term debt | | $ | 48 | | $ | 46 |
Trade accounts payable and accrued liabilities | | | 459,246 | | | 705,487 |
Income taxes payable | | | 35,486 | | | 15,605 |
Deferred income taxes | | | 11,618 | | | 12,771 |
Total current liabilities | | | 506,398 | | | 733,909 |
Long-term debt | | | 642,449 | | | 1,124 |
Deferred income taxes | | | 123,958 | | | 129,825 |
Asset retirement obligations | | | 16,713 | | | 15,401 |
Deferred credits and other liabilities | | | 19,023 | | | 7,755 |
Total liabilities | | | 1,308,541 | | | 888,014 |
| | | | | | |
Stockholders' Equity/Net Investment | | | | | | |
Preferred Stock, par $0.01, (authorized 20,000,000 shares, | | | | | | |
none outstanding) | | | - | | | - |
Common Stock, par $0.01, (authorized 200,000,000 shares at | | | | | | |
September 30, 2013, 46,743,316 shares issued and | | | | | | |
outstanding at September 30, 2013) | | | 467 | | | - |
Additional paid in capital (APIC) | | | 549,054 | | | - |
Net investment by parent | | | - | | | 1,104,451 |
Retained earnings | | | 13,947 | | | - |
Total stockholders' equity/net investment | | | 563,468 | | | 1,104,451 |
Total liabilities and stockholders' equity/net investment | | $ | 1,872,009 | | $ | 1,992,465 |
Murphy USA Inc.
Consolidated and Combined Statement of Cash Flows
(unaudited)
| | | | | | |
| | | | | | |
| | Nine Months Ended |
| | September 30, |
(Thousands of dollars) | | 2013 | | 2012 |
Operating Activities | | | | | | |
Net income | | $ | 141,404 | | $ | 64,510 |
Adjustments to reconcile net income to net cash provided by operating activities | | | | | | |
Depreciation and amortization | | | 58,502 | | | 56,800 |
Amortization of deferred major repair costs | | | 813 | | | 510 |
Deferred and noncurrent income tax charges (credits) | | | (12,472) | | | (7,166) |
Accretion on discounted liabilities | | | 821 | | | 736 |
Pretax gains from sale of assets | | | (5,980) | | | (163) |
Net decrease in noncash operating working capital | | | 174,971 | | | 12,763 |
Other operating activities-net | | | 11,897 | | | 603 |
Net cash provided by operating activities | | | 369,956 | | | 128,593 |
Investing Activities | | | | | | |
Property additions | | | (122,071) | | | (75,469) |
Proceeds from sale of assets | | | 6,074 | | | 194 |
Expenditures for major repairs | | | (1,058) | | | (859) |
Net (purchases) maturities of marketable securities | | | (198,152) | | | - |
Other inventory activities-net | | | 52 | | | 50 |
Net cash required by investing activities | | | (315,155) | | | (76,084) |
Financing Activities | | | | | | |
Repayments of long-term debt | | | (34) | | | (31) |
Additions to long-term debt | | | 641,250 | | | - |
Cash dividend to former parent | | | (650,000) | | | - |
Debt issuance costs | | | (6,649) | | | - |
Net distributions to parent | | | (32,394) | | | (25,049) |
Net cash required by financing activities | | | (47,827) | | | (25,080) |
Net increase in cash and cash equivalents | | | 6,974 | | | 27,429 |
Cash and cash equivalents at January 1 | | | 57,373 | | | 36,887 |
Cash and cash equivalents at September 30 | | $ | 64,347 | | $ | 64,316 |
Operating Metrics
| | | | | | | | | |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, |
| | 2013 | | 2012 | | | 2013 | | 2012 |
| | | | | | | | | |
Marketing: | | | | | | | | | |
Fuel margin (cpg) | | 14.8 | | 10.3 | | | 13.9 | | 12.5 |
Gallons sold per store month | | 273,741 | | 279,505 | | | 267,928 | | 270,067 |
Fuel margin $ per store month | | $ 40,600 | | $ 28,683 | | | $ 37,302 | | $ 33,722 |
| | | | | | | | | |
Total tobacco sales revenue per store month | | $ 125,091 | | $ 130,036 | | | $ 123,274 | | $ 128,286 |
Total non-tobacco sales revenue per store month | | $ 31,885 | | $ 29,388 | | | $ 30,443 | | $ 28,718 |
Total merchandise sales revenue per store month | | $ 156,976 | | $ 159,424 | | | $ 153,717 | | $ 157,004 |
| | | | | | | | | |
Merchandise margin $ per store month | | $ 20,670 | | $ 22,972 | | | $ 19,942 | | $ 21,361 |
Merchandise margin as a percentage of merchandise sales | | 13.2% | | 14.4% | | | 13.0% | | 13.6% |
| | | | | | | | | |
Store count at end of period | | 1,185 | | 1,151 | | | 1,185 | | 1,151 |
Average retail sites open during the period (store months) | | 1,182 | | 1,145 | | | 1,175 | | 1,138 |
| | | | | | | | | |
Ethanol: | | | | | | | | | |
Ethanol production - gallons (000) | | 53,592 | | 55,585 | | | 160,363 | | 164,013 |
DDGS/WDGS production - tons (000) | | 304 | | 304 | | | 914 | | 912 |
Gross margin per gallon of production (cpg) | | 59.0 | | 16.0 | | | 59.0 | | 28.0 |
| | | | | | | | | |
Supplemental Disclosure Regarding Non-GAAP Financial Information
The following table sets forth the Company’s Adjusted EBITDA for the three months and nine months ended September 30, 2013 and 2012. EBITDA means net income (loss) plus or minus net interest expense, plus income tax expense, depreciation and amortization, and Adjusted EBITDA adds back (i) other non-cash items (e.g., impairment of properties and accretion of asset retirement obligations) and (ii) other items that management does not consider to be meaningful in assessing our operating performance (e.g., (income) from discontinued operations, gain (loss) on sale of assets and other non-operating expense (income)). EBITDA and Adjusted EBITDA are not measures that are prepared in accordance with U.S. generally accepted accounting principles (GAAP).
We use this Adjusted EBITDA in our operational and financial decision-making, believing that such measure is useful to eliminate certain items in order to focus on what we deem to be a more reliable indicator of ongoing operating performance and our ability to generate cash flow from operations. Adjusted EBITDA is also used by many of our investors, research analysts, investment bankers, and lenders to assess our operating performance. However, non-GAAP measures are not a substitute for GAAP disclosures, and Adjusted EBITDA may be prepared differently by us than by other companies using similarly titled non-GAAP measures.
The reconciliation of net income to EBITDA and Adjusted EBITDA is as follows:
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| | Three Months Ended September 30, | | Nine Months Ended September 30, |
(thousands of dollars) | | 2013 | | 2012 | | 2013 | | 2012 |
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Net income | $ | 41,729 | $ | 11,001 | $ | 141,404 | $ | 64,510 |
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Income taxes | | 25,791 | | 8,800 | | 89,640 | | 45,780 |
Accretion of asset retirement obligations | | 274 | | 245 | | 821 | | 736 |
Interest expense, net of interest income | | 4,361 | | 36 | | 3,838 | | 283 |
Depreciation and amortization | | 19,387 | | 19,319 | | 58,502 | | 56,800 |
EBITDA | | 91,542 | | 39,401 | | 294,205 | | 168,109 |
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Impairment of properties | | - | | - | | - | | - |
Gain on sale of assets | | (5,972) | | (89) | | (5,980) | | (163) |
Other nonoperating income | | (50) | | (1) | | (74) | | (22) |
Adjusted EBITDA | $ | 85,520 | $ | 39,311 | $ | 288,151 | $ | 167,924 |
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The Company also considers Free Cash Flow in the operation of its business. Free cash flow is defined as net cash provided by operating activities in a period minus payments for property and equipment made in that period. Free cash flow is also considered a non-GAAP financial measure. Management believes, however, that free cash flow, which measures our ability to generate additional cash from our business operations, is an important financial measure for us in evaluating the Company’s performance. Free cash flow should be considered in addition to, rather than as a substitute for consolidated net income as a measure of our performance and net cash provided by operating activities as a measure of our liquidity.
Numerous methods may exist to calculate a company’s free cash flow. As a result, the method used by our management to calculate our free cash flow may differ from the methods other companies use to
calculate their free cash flow. The following table provides a reconciliation of free cash flow, a non-GAAP financial measure, to net cash provided by operating activities, which we believe to be the GAAP financial measure most directly comparable to free cash flow:
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| | Three Months Ended September 30, | | Nine Months Ended September 30, |
(thousands of dollars) | | 2013 | | 2012 | | 2013 | | 2012 |
| | | | | | | | |
Net cash provided by operating activities | $ | 185,204 | $ | 33,697 | $ | 369,956 | $ | 128,593 |
Payments for property and equipment | | (26,761) | | (30,161) | | (122,071) | | (75,469) |
Free cash flow | $ | 158,443 | $ | 3,536 | $ | 247,885 | $ | 53,124 |
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