Tammy Taylor - Senior Manager, IR Andrew Clyde - President and CEO Mindy West - EVP and CFO.

Damian Witkowski - Gabelli and Company Esteban Gomez - JPMorgan Ben Bienvenu - Stephens Bryan Hunt - Wells Fargo Securities Simon Bizien - Janus Capital Carla Casella - JPMorgan.

Operator:.

Good morning, everyone, and thank you for joining us today. With me are Andrew Clyde, President and Chief Executive Officer; Mindy West, Executive Vice President and Chief Financial Officer; and Donnie Smith, Vice President and Controller. After a few opening remarks from Andrew, Mindy will provide an overview of the financial results.

Andrew will then give an operational update and we will open up the call to questions. Please keep in mind that some of the comments made during this call, including the Q&A portion, will be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

As such no assurances can be given that these events will occur or that the projections will be attained. A variety of factors exist that may cause actual results to differ. For a further discussion of risk factors, see Murphy USA's Form 10-K and other SEC filings. Murphy USA takes no duty to publicly update or revise any forward-looking statements.

During today's call we may also provide certain performance measures that do not conform to generally accepted accounting principles or GAAP. We have provided schedules to reconcile these non-GAAP measures with the reported results on a GAAP basis as part of our earnings press release, which can be found on the investors section of our website.

With that, I will turn the call over to Andrew..

Thank you, Tammy, and good morning, everyone. I would like to start today's call with a brief overview of the fuel market environment, which has been exceptionally volatile, and put it in perspective of a longer horizon. I will then highlight some key metrics that underpin our business model and then provide some updates on our long-term objectives.

The fuel market environment in the second quarter played out as anticipated in one of the scenarios given with our annual guidance in February. From the low in January to the high point in June, product prices rose $0.77 per gallon.

In a steeply rising market, retail margins are compressed as we replace our fuel daily on average at our sites and Street prices lag upwards. In that setting, our relative price to competitors is not quite as aggressive which impacts volume.

If you look back to Q4 of 2014, this quarter was essentially the equal and opposite effect to the steep declining market environment experienced in that period, in which we had exceptional margins and we grew per-store volume.

What is, frankly, attractive about how this 2015 scenario is playing out is that crude prices are now falling rapidly as we enter Q3 with strong tailwinds. Since we earn more margin dollars in a falling environment than we give up in a rising price environment, this bodes well overall when you look beyond the quarter just ended.

Over the course of a year this more volatile scenario would be better than the flat price scenario or the persistently slow rising price scenario we discussed back in February. So despite the current quarter, we are actually more encouraged about the full year in this scenario than we would be under either of the other two scenarios.

Of course, we still have a lot of time left in the year. This is why we stay focused on the long-term fundamentals, because we know we were going to face short-term, quarter-to-quarter commodity price volatility. Our business model is built to be resilient to this volatility and take advantage of it.

In the last quarter, we made our retail model even stronger, as highlighted in some key quarterly metrics. Same-store merchandise sales increased as tobacco sales decline moderated and non-tobacco sales grew over 6%.

Merchandise unit margins improved almost 100 basis points to 14.6% as both tobacco and non-tobacco margin dollars were up around 7% each. Per-site operating expenses, excluding credit card fees, were reduced 2.5% while credit card fees per site fell close to 17% in the lower price environment.

SG&A was lower in most categories, with the net increase largely reflecting our ASAP initiative, which is now confirming opportunities in line with our initial savings estimates. Store growth ramped up with 14 sites open since Q1 through today and another 39 are underway and we are at the halfway point of our 300-store refresh program for the year.

Our long-term focus is also evident in two other important areas, namely our non-core asset positions and our commitment to shareholder returns. Our Hereford ethanol plant once again achieved record yields and higher throughputs, completing the one-year track record we committed to build.

This consistent, strong performance has made this non-core asset more valuable than it was a year ago as we prepare to take it to market. We have also started the sales process on another non-core assets, the CAM crude oil pipeline, which was associated with the former Murphy Oil Meraux refinery.

After completing some required work and tests on the assets, we entered the market at the time when a number of the key refining and pipeline assets around CAM are changing ownership and new pipeline systems are being proposed that would link into CAM. It's relevance to potential strategic buyers is high.

In both cases we believe these assets are worth considerably more than they were at the time of the spin and we expect our ability to be patient while improving the assets will pay off to our shareholders.

We completed $150 million worth of the share repurchases during the quarter, bringing the total repurchases to $191 million out of the current $250 million program. With the prior $50 million program and the $150 million term loan repayment, we have returned to shareholders close to $400 million since our spin less than two years ago.

As noted in our earnings release, we did not repeat the Wal-Mart enhanced discount program during the period. As you know, Wal-Mart is in the midst of a major transformation of their supercenters and delivering on that initiative is one of their top priorities. As such, it was decided to not commence the seasonal program in the midst of that activity.

However, as supercenter traffic increases, we are a beneficiary of that. So both our companies are working on making our businesses stronger, which in turn helps each other.

We have a business model that is highly complementary to Wal-Mart and we have the balance sheet flexibility and capabilities to take on significant organic growth towards some common goals. We continue to have ongoing discussions with their senior management about future growth opportunities, but I do not have any details to share at this time.

I will now turn the call over to Mindy to review the financial results in more detail, and I will come back and provide some more color on operating results, including the market environment and its impact on retail fuel and product supply contributions.

Mindy?.

Thank you, Andrew, and good morning, everyone. Second-quarter income from continuing operations was $26.2 million, or $0.59 per diluted share, compared to $73.2 million, or $1.57 per diluted share, in the same period of 2014.

The decrease in earnings reflects lower retail fuel margins, lower product supply and wholesale contribution, and lower earnings from ethanol operation, partially offset by higher rents and improved merchandise margin. The 2014 period also contained a tax benefit of $6.8 million due to lower state income tax rates.

The effective tax rates for the three months ended June 30, 2015, was 36.2%, higher than the federal rate of 35%, primarily due to US state tax expense, which was partially offset by certain state refunds received. Total revenues were $3.5 billion in the second quarter, compared to $4.7 billion in the same quarter last year.

Average retail fuel prices for the second quarter 2015 were $2.42 per gallon, versus $3.47 per gallon last year. Adjusted EBITDA was $75.9 million for the second quarter of 2015, compared to last year's $137.2 million.

Net income from our marketing segment for 2015 decreased $38.2 million over the prior period related to a decrease in retail fuel margins along with lower wholesale margins, partially offset by higher total retail fuel volumes and increased merchandise margins.

After-tax results for corporate and other assets decreased in the recently completed quarter to a loss of $7.3 million compared to income of $1.6 million in the second quarter of 2014. This decrease was due primarily to lower income from Hereford in the current period.

In the second quarter of 2015, operating income from Hereford was $1.4 million compared to income of $8.8 million in the same quarter of 2014. The decline in the current quarter was due to lower crush spreads caused by lower ethanol prices, partially offset by record higher yields.

As of June 30 we have completed, as Andrew said, $191 million in shares under the current share repurchase program, including shares repurchased in late 2014. Our long-term debt totaled approximately $489.3 million, resulting primarily from senior unsecured notes.

Our asset-based loan, meanwhile, remains capped at its $450 million limit subject to periodic borrowing base determinations, which currently limits us to $297.5 million. At the present time that facility continues to be undrawn.

Cash and cash equivalents totaled $121.4 million at June 30, providing us with the net long-term debt position of $367.9 million. Capital expenditures for the quarter ended June 30 increased $29.6 million to $58.9 million from $29.3 million in 2014.

Current period capital expenditures include $48.2 million for retail growth and $7.3 million spent on retail maintenance items. That concludes an overview of financial results, so I will now turn it back to Andrew, who will discuss our operational performance..

Thanks, Mindy. Let's start with the fuel side of our business. The same-store fuel volume decline of 2% in Q2 was in the range we expected given the underlying fundamentals.

First, spot prices increased steadily throughout the quarter with a larger absolute increase of $0.33 per gallon this year versus a short, quick run-up last April with an accompanying fall off in May and flat prices in June. Second, we did not repeat the Wal-Mart enhanced discount program.

Third, we saw some underlying growth in macro fuel demand continuing the trend from last year in Q1. We believe demand in our markets grew about 1% to 1.5% last year and is trending a little higher in 2015. Last, we are also adding sites, as are most of our large-format competitors with good business levels.

So every time we open a store we take some share from existing competitors, and the same happens when they open a store near us. So overall, we grew total gallons by 2%. Year-to-date same-store volume is off 0.6%. So we were essentially giving back some of the volume gained in Q4 last year.

The difference being we gained the volume at $0.20-plus margins and we gave it back at significantly lower margins.

While we seek to maintain the everyday low price for fuel, in a rising price environment the lower volume, higher price competitors, who replenish their sites less often, tend to raise their prices more slowly so the street price differentials consumers see is less aggressive on average.

On the margin, some consumers won't drive as far out of their way to get that everyday low price when that differential narrows, but when differentials widen, like in Q4 last year, we gained some of those same consumers on the margin.

We accept that some sub-segment of consumers will behave this way and it would be suboptimal to try and keep that marginal consumer in an environment like Q2 this year. The product supply environment reflected a number of factors which offset each other.

We benefited from the rising price environment in terms of the inventory timing differences that hurt us in Q4 last year. However, separate and independent from that was a very long, unconstrained supply market that kept wholesale rack prices down relative to spot prices.

With high refining crack spreads and utilization, high product inventory levels, high RIN values, close ARBs between the major supply centers, and no real constraints on the pipeline systems, refiners were motivated to discount terminal rack prices to place their volume.

With most of our barrels purchased at spot prices versus local racks and our transfer price to retail based on a opus low rack price, this hurt the product supply contribution. Offsetting that, however, was very strong RIN volumes with an average price of $0.62 during the quarter.

One simple way to see the market structure impact of the difference in the comparable quarters is to look at the colonial pipeline premiums. This year line space traded a little over $0.01, whereas last Q2 line space traded around $0.045 on average, reflecting a much tighter open ARB market structure.

Our non-contractual wholesale business continued to be lighter in Q2 as there was plenty of gasoline available at local racks and agricultural demand for diesel was not as strong due to the wet planting season.

Overall, the product supply in wholesale segments of the value chain contributed positively towards the total fuel contribution, but nowhere near as strong as in the first half of last year.

I appreciate this part of the business is harder to track and estimate than the retail margins, so I hope this commentary helps and happy to address it further in the Q&A. Turning now to merchandise, we had a very strong quarter on all fronts.

The historical declines in tobacco sales were greatly moderated as we did a better job of optimizing prices at the store level and in passing through manufacturer price increases. And we continue to see uplift in non-tobacco from our promotional activity in larger small-format stores.

You should have noted that we introduced a same-store sales and margin metric in the release to accompany the average per-store month metric we have historically reported. We did this to better call out two fundamentals related to our site growth, which has increased in 2014 and 2015.

Our new 1,200 square foot stores do have a ramp-up period of about a year on tobacco sales, which brings the average per-store month results down. Same-store tobacco sales declined only 0.5%, whereas the decline was 2.1% on an average per-store month basis.

Tobacco margin dollars grew 6.8% on a same-store basis and 4.9% on an average per-store month basis. This highlights the strength in the underlying core base of stores. The newer stores also have more space allocated to non-tobacco and have more room and options to grow than the existing base, which has a higher mix of kiosk formats.

Same-store non-tobacco sales increased 6.1%, while the average per-store month metric increase was higher at 7.5%. Non-tobacco margin dollars grew 7.2% on a same-store basis and 8.6% on an average per-store month basis. Packaged beverages, general merchandise, and lottery really stood out this quarter in terms of sales and margin dollar growth.

As always, cost control remains a priority for us. Station operating expenses were further reduced, reflecting lower shrink, maintenance, and promotional expenses.

Our ASAP initiative continues to highlight and confirm cost savings in how we manage our store labor, inventory management, promotions, and back-office cost, while giving us better access to data and insights to drive top-line performance. Our SG&A costs were down $1 million to $2 million before the impact of our special project costs.

Growth continues on a steady pace. We still expect to open between 60 and 80 new stores this year. With 39 currently under construction, we are in the peak of our building cycle. The final count will largely be a function of planning and permitting approval timing.

Our 300-store refresh program is around the halfway point and we expect to continue this level of refresh for the next two to three years to catch up on deferred maintenance and create a sharper, cleaner look and image for our customers.

Our raise-and-rebuild programs are in progress, but we are focused on getting the remaining newbuilds through the closing process with Wal-Mart and local municipalities before pushing that forward. As noted in the introduction, we remain focused on the long-term and our commitments to our shareholders.

We are in a good place with our commitment to exit our non-core assets. We believe our strategy to be patient and get the highest value from the assets will be rewarded. We can use the cash generated for future organic growth or additional returns to our shareholders.

We are close to 80% of the way through our $250 share repurchase program and believe this demonstrates that our business model can achieve both a solid level of unit growth and deliver returns to our shareholders.

We believe the best way to deliver value to our shareholders is through an accelerated organic growth strategy with Wal-Mart, and I appreciate you are anxious to gain closure on that one way or the other. I would simply ask you to be patient and offer the following points to give you some comfort in the meantime.

The last 200 site deals took almost two years from start to finish. So it does take time. We are not spending that time idly. We are actively making our business stronger, which will serve us well in any scenario. We have a very strong balance sheet with a great deal of flexibility and optionality should we have the opportunity to accelerate our growth.

If we don't, we have already demonstrated that we are internally active and will make shareholder returns a priority. Our current strategy of modest new store growth with the improvement initiatives underway, combined with shareholder distributions, will deliver exceptional returns on equity.

That is our long-term focus and we believe that executing our strategy will greatly benefit our business and our investors in the long run. Let me close by thanking our incredible team of almost 9,500 employees who deliver our vision every day to our customers. Operator, at this time we will open the line for questions..

[Operator Instructions]. And our first question comes from the line of Damian Witkowski with Gabelli & Company. Your line is now open. .

Good morning. I know you spent a lot of time on this, but I just want to go back to the fuel volume same-store sales and just the drop off. I would've thought, with the per gallon price coming down the way it has year over year, you actually would had a positive impact on a year-over-year basis.

I know you tried to explain it, but I'm not sure I really followed it in terms of is it just a sequential increase in the month of May. I'm sorry, April..

So, Damien, the absolute price level is less important than the direction in which price is going. So the absolute price level being lower this year we think contributes to the macro demand trends, which we said were 1% to 1.5% last year and inching up a little bit this year.

What drives the month-to-month, quarter-to-quarter change is whether the market is rising or falling and how steeply the market is rising and falling.

So Q4 last year was an example of a falling market, but it was an exceptionally steeply falling market, and so we picked up even more volume in Q4 than we would have had in a normal falling price environment.

The first half of this year has been a rising market, but a more steeply rising market than we normally expect, and for the reasons articulated you have that equal and opposite effect where you shed off a little more volume in that period. Then, of course, whether you have an enhanced discount program factors into that as well..

Okay.

Then would it be fair to say that thus far in the third quarter you have had almost exactly what happened last year with crude, where it sort of peaked in June and started dropping off? Would it be -- I would assume it would be logical to think that both same-store sales volumes, as well as cents per gallon earned, should be on the rise?.

Correct. So we are seeing a falling price environment in July this year, and as a result of that, we have increased volume from that aspect. But you have to offset that as well with the fact that we are not repeating the Wal-Mart enhanced discount program in July either, and so those things will offset each other.

Then one of the things that also impacts the unit margin is the broader product supply market structure environment and where rack prices are and how that transfers over to the retail business.

But we are, as I said, seeing a much more favorable environment as we are ending Q3 and I would much rather have this rising market environment with the accompanying fall offs than the scenario we talked about at the beginning of the year, when prices were low, being a flat environment or a slowly rising environment throughout the year..

Okay. Then on RINs, the $0.62 surprised me because I thought it would be lower. I try to track these on a daily basis and I was coming in somewhere at $0.45.

So am I just tracking the wrong index or is it -- how did you get $0.62 -- how did you realize $0.62 per RIN?.

We sold them at $0.62 on average. I don't know what data you're looking at. I mean happy to follow-up on that and compare sources that you are looking at, but…..

What is it that you -- I mean I look at the VSIC [ph] prices from sort of the….

We will follow up with an email with a note on the best source for -- to get that..

All right, thank you..

Thank you. Our next question comes from the line of Matthew Boss with JPMorgan. Your line is now open..

Good morning, guys; this Esteban on for Matt. So your merchandise margin increases were pretty impressive in the quarter.

How much of the gain in the quarter was attributed to some promotions being shifted out of 1Q? And then do you think this level of gains is sustainable throughout the rest of the year?.

I would say it's not so much a shift in promotional activity. We did have manufacturer price increases on tobacco and so that was favorable. Some of the headwinds around the MLP programs and related ones that we had in the past have eased somewhat. I think we're doing a better job of optimizing our store-level pricing on tobacco.

We continue to see growth in e-cigs and in wafer [ph] and cigars and some of the other tobacco categories. And so I think that was all fundamental as opposed to promotional activity on the tobacco side. You can never predict when and the level of cigarette price increases to know when and to what extent those will repeat.

Beverages is probably our second biggest category outside of tobacco. CSD sales were up pretty consistent with the industry, but sports drinks, juice, bottled enhanced water, flavored water, teas, etc., our same-store and average per-site numbers were all outpacing the industry trend.

And I think a lot of that is just adding the new format sites where now we have more and more in the mix of base stores. We've got a wider mix of beverage items. We have done resets on our coolers to optimize the facings of CSDs as they are in decline, so we're adding more categories. We're adding the super coolers to the kiosk locations.

So we add more storage capacity and better chilling time and all of those factors. I would say a lot of that is, again, more fundamental and operational improvement than any quarter-on-quarter change in promotional activity. I could keep going through the categories, but I think the story would just keep repeating..

No, that's helpful. And then some competitors have begun to disclose monthly fuel margins just to try to mitigate some of the volatility around earnings projections.

Is that something you guys have considered at all?.

You know, we haven't. One thing that we -- I know you guys struggle with a little bit is the product supply component of that. And so I think if we were to ever go down the path of reporting the monthly margins, we would need to do it in a way that also considered how to incorporate that in.

And that would weigh into that decision, but we are not at a point in time where we are ready to do that..

Got it, got it. And then just two model clarification questions. How many shares were included in that $150 million repurchase? And then, I don't know if you mentioned this, but there are $5 million in non-operating expenses in the quarter.

Was that a one-time and what was that exactly?.

I will let Mindy tackle both of those..

As far as the share repurchase during the quarter, if you are talking about quarter-only, we purchased roughly 2.4 million shares. Our total to-date under the program is just slightly under 3 million shares.

And then with regard to other non-operating income, that charge reflected that you see there represents primarily the expensing of a legal settlement that we've reached in the second quarter..

Got it, okay. Thanks, guys..

Thank you. Our next question comes from the line of Ben Bienvenu with Stephens. Your line is now open. .

Thanks. Good morning, everyone. .

Good morning, Ben..

So touching back on RINs; not so much the price of the RIN, but the number of RINs that you sold was a little bit higher than I was anticipating. And in fact, it looks like it was as a percentage of your gallons higher than it has been in previous quarters. I'm just wondering maybe what drove that to be a little bit higher than expected..

So two things, one, our mix of proprietary barrels does shift a little bit from quarter to quarter, so a little higher mix of that will lead to higher RINs. We are growing our total gallons, so we have more gallons to blend, so more RINs there as well.

We start and end every month with a balance of RINs, and so in this period we probably sold off more of that starting balance. Also anticipating where our proposal might land and the market's reaction to that. So I think those three factors largely explain the variation in the number of RINs..

Okay, thanks. That's helpful. Maybe just looking at your entire footprint, were there any geographies that were stronger than others? I know a lot of retailers were impacted by flooding in Texas.

I'd be curious to hear what your exposure was to those markets that maybe were impacted by some unfavorable weather, or if there were any other markets that outperformed..

Yes, I would say our Southwest market actually performed well, which includes Texas, New Mexico, Colorado, Oklahoma, and Louisiana.

I think the Midwest market performed less well and I would say it's just a number of factors there, but maybe -- and I don't like to blame things on the weather and I think there's always bigger factors than that because those factors tend to work themselves out over time..

Sure. That's great, thanks. Then just lastly, I noticed in the 10-K your contract with McLane looks like it's up in September of 2015. We're getting close to that.

I don't know if that's something that you guys would announce publicly or if that's an ongoing discussion to either re-up that or look at going on with someone else, but I would be interested to hear your commentary there..

Ongoing discussions and when those discussions are concluded that would be a more appropriate time to elaborate further..

Okay, sounds good. Thanks and best of luck..

Thank you. Our next question comes from the line of Bryan Hunt with Wells Fargo Securities. Your line is now open. .

Thank you for your time. I was wondering if we could dig into the basket on the merchandise side a little bit more.

Is there any way you can segment what is going on with same-store sales in between basket size and traffic?.

Not right now. It's one of the things and we have alluded to in other calls some of the systems limitations that we brought over with us impact our ability to dive as deeply into that as we want. And is one of the benefits we're going to get from our ASAP initiative.

One of the initiatives is a new back-office accounting system that links into a new merchandising system and information management warehouse and the like. We are all excited for the day in the future when we will have much, much better insight to be able to do those sorts of comparisons much more easily..

Great. And then my next question is we've seen a lot of headlines regarding minimum wage inflation around the country.

Can you talk about what you are seeing on the wage front and the ability to hire employees as you grow your store base?.

Yes, so on an overall per-site basis, our labor operating costs are actually down year-over-year as we look at our ASAP initiative around site labor and implementing more standard operating practices at our sites and doing simple things like leaning out some of the inventory, which then reduces shrink and time to count, etc.

We're actually going to be able to take total hours down on our sites and so that is going to be a net benefit. I think given the turnover you have in the starting entry level, that's one of the things that protects us from some wage inflation.

If we had a minimum wage mandatory limit set, we would be impacted by that just like our competitors and you probably have compression then across the different cohorts from cashiers, assistant manager to store manager.

This is one of the reasons why we focus on cost control and are so hawkish on costs is because we know there's going to be inflation and regulatory changes and so we've got to try to stay two or three steps ahead of that in terms of making improvements to our business. So when and if those changes come about, it doesn't impact us as much.

With our smaller footprint, we just have fewer people, so we're going to be less impacted on average than a big box retailer that may have 20 to 30 people on their roster. That said, a Costco or a Kroger that has an unattended kiosk, doesn't have anyone out there, and so the most ruthless competitors may not be impacted by it at all.

So that's why we've got to stay so focused on cost control..

Two last questions. One, you've spent about $90 million year-to-date on CapEx to get your stores open. Sounds like you've got more under construction today than you did at the beginning of the year.

Can you give us an idea of what CapEx will look like by the time we get to the end of the calendar?.

The guidance that we have given that we gave back in the first quarter, we're not ready to update that quite yet, is $230 million to $270 million and that is comprised of roughly $130 million to $170 million on new site builds, also includes CapEx in the budget to land bank sites and our Refresh initiative and then spending in our terminals and also at Hereford.

So we will probably be in a position to be able to update that number and refine that range and hopefully narrow it when we do the next conference call..

And then lastly, a lot was written about this when we saw the initial oil decline and the fuel price decline, it provides elasticity, especially to the lower income consumer, to spend more money on merchandise.

Given we are getting kind of an oil price decline and fuel price decline 2.0, one, how much elasticity did you see in merchandise sales from the previous fuel price decline down to roughly, what did we see, $2.25 a gallon? Now there's talk of getting to $2 a gallon.

Do you believe, given that you are out in front of Wal-Mart and really catering to lower income consumers, that you are likely to get a greater elasticity affect? And that's it for me. Thanks..

Okay, so you're right. A lot has been written on it and I haven't compared the number of people that said, hey, it's driving higher spending to those that said people are saving more and paying off credit card debt, but we are more on the side of people saving, paying off debt, not necessarily flowing through.

They've got higher insurance costs for health and at the first half of the year, there's higher personal taxes that they are paying. So I think just start with the assertion that our consumers are getting this windfall, I think is a little bit still being debated. That said, there's a lot of factors that are going on with our stores.

We did see some upgrades to more premium and midgrade fuel. We saw some upgrades to more premium tobacco products, and so there's a benefit there. But if you think about cigarettes, as people are still hurt by the economy and cutting back, you see a shift from cartons to packs.

We sell five times as many cartons as our competitors, but our competitors sell more packs and when people start going from buying a carton to seven packs a week, they may start going to a more convenient location as a result of that.

So there's a lot of gives and takes in there, and so I'm not sure I believe that there's this great elasticity of the consumers, and it would be hard to pinpoint how much comes from that versus all the other pluses and minuses, changes in our promotional activity, and so forth..

I appreciate your time, thank you. .

Thank you. Our next question comes from the line of Simon Bizien with Janus Capital. Your line is now open..

Good morning, guys. So I just wanted to talk about the share repurchase program a little bit. Maybe you could walk me through kind of your methodology, your thought process on when and how you decided to execute that during the quarter.

It looks like at the end of Q1 you probably had some visibility into Q2, being probably lower than what you would've hoped for. Yet it seems like the average price per share was kind of low $60s. So maybe if you could just help me understand how you are thinking about that..

Well, not to go into specifics about what our tranches were, but due to the FIN restrictions we are executing through a 10b(5)-1 plan. Obviously we have to put those in during an open window period. So we did that shortly after earnings, and we took a hard look at where our shares were trading.

We also looked at what our fair value model that we have for what our stock price is and what it showed was that it was trading well below that. And so we put in some thoughtful parameters to try to capture shares at a lower price. And you are correct; we did end up with an average price of just a little over $62.

So granted it wasn't as cheaply as we could have done it, but again we were limited by the fact that we had to put those parameters in place shortly after the conference call last quarter..

Okay, great. Thanks. Andrew, I was just curious, I appreciate all the commentary on the Wal-Mart dialogue.

When did you start initial discussions on the next pipeline for store builds? And I guess how would you compare the health of this dialogue relative to the last one?.

I think, given that’s our strategy and partnership, I started that discussion with the first meeting I had with Wal-Mart when I joined in 2013. So it's an ongoing discussion of how we can work together, achieve common goals for our shared customer base. It's part of every conversation around that.

As I've mentioned before, the people that I met with in 2013 are no longer with the company, and so we've now been working with a new leadership team that is highly engaged in making their supercenters better, which we find exciting because we know that's going to make our business better as more traffic is driven to the supercenter.

And we are returning it in kind by refreshing our stores and making improvements that make our business more attractive to those customer bases. It's an ongoing discussion and, as I said, we just got to be patient and these things take some time to get sorted out. When we have news, and it's news that can be confirmed, we will, of course, share that..

Okay, thanks. One last one for me, so on Hereford, just kind of curious if you guys have an update on maybe the timing of that sale. I know we discussed some potential valuations in a few of the prior calls.

Has that number changed materially?.

Yes, so in terms of timing, we haven't started the sales process, but we have finalizing the information and updating the data room from when we had it out there, when we were selling Hankinson. Part of what we're doing is also just demonstrating how significant the improvement is on an EBITDA margin basis.

We had probably one of the best in the corn belt plants with Hankinson, and it's pretty impressive to see how much we have closed the gap from a non-ICM out of the corn plant like Hereford closing that gap to Hankinson. So we think we've got a pretty solid story to tell.

Given we're about to start the sales process, I'm not going to share aspiration valuations or whatever. There haven't been as many transactions in the last year as there were in some prior periods. So we will just see how the market plays that out. But it's a fundamental different and better asset than it was a year ago..

Thank you. Our next question comes from the line of Carla Casella with JPMorgan. Your line is now open..

Thanks for taking the question. Sorry if I missed this, I had to jump off for a minute. But in terms of -- you talked a bit about the gas prices and the sequential increase that you saw throughout the second quarter.

Did you mention what you are seeing third quarter to-date or your expectation for fourth quarter gas prices?.

We did highlight that we are seeing prices fall off, which is an attractive scenario for us, and so you see improved margins with that and you see positive volume impact from that.

The other point I made, Carla, though, was that because we're not repeating the Wal-Mart discount -- enhanced discount program there is the negative offset associated with that. So it's like any other comparable. We are seeing a falling market, but if we saw a falling market last year those things kind of comped and maybe no net change.

Then if you've got no repeat of a promotion or you time your promotion differently, you will have the impact of that as well. As to Q4, I wish could -- I was better at the guessing business. I couldn't have predicted Q4 last year and I don't know if things will -- if we go back up again in Q4 and rise sharply, or stay flat, or go down further.

But I think that's one of the things about this business. We are going to see that short-term volatility. You can't predict it. It's all about being able to be resilient to it, take advantage of it, and ensure that you've got a model that can be profitable in it over any sustained period versus just one quarter..

Okay, great.

And then just on RINs, did you give an outlook of how RINs are trending in the third quarter as well?.

No, we didn't. There's public prices on the RINs out there that we can get. We have finally gotten some suggested guidelines in the proposals. Those have been now updated, but I think until those are finalized we'll let the market determine what the RIN prices ultimately settle at..

Okay. Great, thank you..

Thank you. And our next question comes from the line of Jim Sae with AWH [ph]. Your line is now open. .

Good morning, Andrew. A lot of my questions have already been answered, but I had one as it related to the Wal-Mart promotion. Is there any way to quantify the effect that had for you in terms of fuel gallons, merch sales? Just tell me how important that is to Q2 and when that might come back..

In terms of impact, it varies depending on the season in which you've run it at. We've typically seen anywhere from a 2% to 4% volume change as a result of the program being turned on or turned off. There's a higher cost associated with it because we helped fund some of the enhanced discount as well.

In terms of merchandising impact, being able to correlate that increase in volume to increase in traffic and merchandise sale, it gets back into the point made earlier about there's a number of variables that are going on and so it's kind of in the remaining residual in terms of the impact there.

And clearly, as you saw, we drove same-store and average per-site month sales across all the major categories, with the exception of cigarettes, which had a much more moderated decline, and so a lot of factors that are driving our merchandise sales are independent of that marginal impact on the fuel.

In terms of timing, that's just part of the ongoing discussions. As I referenced before, they got some very important initiatives that they are completely focused on, and so it made sense to not do it during this period. But we are not ruling out doing it some other period and it may be a different type of program when it comes back..

Okay, thanks. On the RINs question, I know you said that there's still suggested guidelines in the proposals.

Do we have any sense of timing? I know it was delayed and late getting to these proposals, but is there any timeline that when that might be finalized?.

No, and I'm not going to guess on that given how many delays there were in just even getting the proposals out there. So once again, we will just -- we're a price-taker on that and we will just wait and see what comes out..

Got it, okay. And I know you said you are about to open your data [ph] room and you don't want to talk about a range of assets -- a range of prices for the ethanol asset.

How about the other non-core asset? Could you give us a ballpark of what that might be worth?.

No, because we're in the middle of the sales process there and so that would not be appropriate to do that. But as I said before, this was an asset that came with us as part of the downstream. It was associated with the Murphy Oil Meraux refinery that Valero now runs.

The key thing that’s happening there is we've had a refinery change hands, we've got a pipeline system that is about to change hands. People are looking for ways to get South Texas Eagle Ford crude into that market area.

And it went from an asset that had a very simple, sole purpose to one that has much more optionality and you've got some strategic buyers where it fits into their business. Again, we had to do some work on it and so forth, but we think being a patient seller, not needing the cash for our business, we will reward our shareholders on this one as well..

Okay. Lastly, and then I will get back out in the queue if there's anyone else.

Mindy, you give a price, was that the $62 price of the shares repurchased, was that just in the quarter or is that for the total under the $250 million authorization?.

That was for second quarter only. Looking at the entire authorization where we've so far purchased almost 3 million shares, that average price is $63.73, give or take..

Okay.

And the $50 million repurchase last year, what prices were those at?.

We purchased just a little over 1 million shares in that one at a price just over $48..

Okay, thanks very much..

Thank you. I'm showing no further questions at this time. I would like to turn the conference back over to Mr. Andrew Clyde for any closing comments..

Great. Well, as we said, it was a volatile quarter but it teed us up well for the next quarter. We view this as a long-term business and we've got a long-term strategy and focus. Appreciate your time today and any follow-on questions, you can direct to Tammy. Thank you very much..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a great day..