Murphy USA Inc. (MUSA) Q4 2014 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Murphy Oil USA Fourth Quarter 2014 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now introduce for today's conference Tammy Taylor, Senior Manager of Investor Relations and Corporate Communications. You may begin.

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 Donald 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 guidance and we will open the call for 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 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 Investor section of our website. With that, I will turn the call over to Andrew.

Thanks, Tammy, and good morning, everyone. Murphy USA completed 2014 and the fourth quarter with exceptional results, and we made significant accomplishments against our strategic goals. Retail fuel margins expanded to $0.246 per gallon for the fourth quarter and averaged $0.158 for the year, levels not seen since 2008. Total merchandise gross margin dollars grew 11.4% for the quarter, leading to annual growth of $19.8 million. 24 stores were added in the quarter bringing our total for the full year up to 60 new stores. Our Hereford ethanol plant contributed a record $20 million of operating income for the year and $4 million in the quarter. We ended the year with $328 million in cash, providing plenty of capacity to complete the previously announced $250 million share repurchase program by December 2015. All of these accomplishments resulted in the exceptional quarter and full year financial results. While these results reflect outsized fuel margins in the quarter, we are most proud of the strong underlying performance and growth in our business, which has been sustained throughout 2014, independent of the fuel market environment. Mindy will now review our financial results, and I will then provide some details on operational performance and end with our 2015 guidance.

Thank you, Andrew, and good morning. Fourth quarter income from continuing operations was $98.3 million or $2.13 per diluted share compared to $29.5 million or $0.63 per diluted share in the same period in 2013. For the full year 2014, income from continuing operations was $243.1 million or $5.24 per diluted share compared to $156.3 million and $3.34 per diluted share in 2013. Net income for the fourth quarter was also $98.3 million, as there were no discontinued operations in the current quarter compared to net income of $93.6 million or $2 per diluted share for the fourth quarter in 2013, which included $64.2 million of income from discontinued operations. Income from discontinued operations for the year ended 2014 contains the final adjustments to working capital from the sale of the Hankinson plant, resulting in an after-tax gain of $0.8 million. Net income for the year ended December 31, 2014, was $243.9 million or $5.26 per diluted share compared to net income of $235 million or $5.02 per diluted share for the same period in 2013. The improvements for the quarter and the year were due to significantly higher retail fuel margins and higher retail fuel volumes along with higher merchandise margin dollars and better results from the Hereford ethanol plant, partially offset by lower product supply and wholesale gross margins. The fourth quarter includes an after-tax benefit of $6 million from the settlement of an outstanding legal case and $9.8 million in benefits related to tax contingencies and other matters. Adjustments earlier in the year included an after-tax benefit of $10.9 million from a LIFO decrement in the period and a state tax benefit of $6.8 million while 2013 had no comparable adjustments. Our effective tax rate was lower than normal in the current quarter and year due to the adjustments noted above. However, we currently estimate that our ongoing effective tax rate will be approximately 38.5% for 2015. Average retail fuel prices for the fourth quarter of 2014 were $2.67 per gallon, generating revenues of $3.61 billion versus $3.11 per gallon and revenues of $4.19 billion last year. For the year, average retail fuel prices were $3.15 per gallon versus $3.32 per gallon in 2013, which contributed to the decrease in revenue from $18.1 billion in 2013 to $17.2 billion for the year 2014. Adjusted EBITDA was $165.7 million for the fourth quarter compared to $78.2 million for the same period in 2013 and $474.9 million for the year ended December 31, 2014, compared to $340.1 million for 2013. Net income for the marketing segment for the fourth quarter of 2014 increased to $94.4 million from $33.2 million for the same period in 2013 due to the previously mentioned higher retail fuel volumes, significantly higher margins and also higher merchandise gross margin dollars. For the full year 2014, net income was $242.4 million compared to $164 million the prior year. Fourth quarter 2014 after-tax net income from continuing operations for the corporate section was $3.9 million compared to a negative $3.7 million in the fourth quarter of 2013. Full year 2014 after-tax net income from continuing operations for corporate was $0.6 million versus a negative $7.6 million for the full year 2013. At year-end, our long-term debt totaled approximately $492.4 million, resulting from the senior unsecured notes. Our asset-based loan meanwhile remained capped at $450 million limit, subject to periodic borrowing base determinations, which currently limits us to $174 million. At the present time, that facility continues to be undrawn. Cash and cash equivalents totaled $328.1 million at year-end, providing us with a net long-term debt position of $164.3 million. For the fourth quarter, we incurred $54.2 million in capital expenditures, of which $39.8 million was spent for retail growth, $9.6 million for retail maintenance and the remaining amount for ethanol and for corporate. Fourth quarter for 2013, we spent $42.9 million, including $38.1 million for retail growth, $2.8 million for sustaining capital, and 2014 capital expenditures totaled $138.9 million compared to $172 million in 2013. Of those capital expenditures for the full year, $112.9 million were for retail growth, $18.3 million spent on retail maintenance items. This 2013 period contain $41.8 million in expenditures related with down payment on land to be acquired from Walmart as part of the December 2012 agreement. Our CapEx range for 2015 is $230 million to $270 million with $180 million to $220 million being spent on retail growth and another $26 million on site maintenance and the remainder for Hereford, our terminals and for corporate projects. That concludes an overview of our financial results. So I will now turn it back to Andrew who will discuss our operational performance.

Thanks, Mindy. Total fuel contribution was truly remarkable, reflecting a steep decline in crude and product prices. Our volume remained strong as we sold just over $1 billion in retail gallons this quarter, up 7.5% from last year. On an average per site basis, we sold 277,000 gallons in Q4, up 2.7%. For the full year, total volume increased 4.8% to 4 billion gallons and per site volumes increased 0.7% to 270,000 gallons. Retail margins more than doubled to $0.246 per gallon in the quarter, topping up the full year average to $0.158 per gallon versus $0.13 in 2013. Combined, retail fuel gross margin totaled $630 million for the year, an increase of 27% or $135 million. Product supply and wholesale margin dollars, excluding RINs, totaled negative $46 million for the quarter -- for the fourth quarter compared to income of $28 million in 2013. On an annual basis, we ended 2014 with $13.5 million margin dollars compared to $54 million last year. While the fundamental spot direct transfer price and our discretionary wholesale margin were positive for the quarter, the sharp decline in both product prices created a negative financial impact as both purchases are booked to inventory when physically received, which creates a negative lag effect. This effect moves in the other direction when product prices rise with the same magnitude. Even with this impact, the combined increase in fuel gross margin between retail and product supply and wholesale totaled over $103 million for the year. On top of this, we generated $93 million in contribution from RINs for the year, totaling 195 million RINs at an average price of $0.48. We sold 54 million RINs in the current quarter at an average price of $0.49. Our fuel team did a remarkable job of managing through the market environment and leveraging our fuel supply chain to optimize our total fuel contribution. Turning to merchandise. Our nontobacco categories continue to perform very well, showing increases in both margin dollars and sales. Total merchandise sales were $549 million for the quarter, up almost 3%. For the full year, merchandise sales were $2.16 billion, just up from last year. EBIT margins expanded to 14% in 2014 from 13.1% in 2013. Tobacco sales totaled $429 million in the fourth quarter, up 1% and averaged $114,000 per site, down 3.6%. Tobacco margin dollars grew 12.3% for the quarter to $49 million as unit margins expanded to 11.4% from 10.3%. On a yearly basis, tobacco sales were down 2.3% in total or 6% per site, while margin dollars grew to almost $8 million in total or 0.5% per site. While we continue to see the decline in overall cigarette units, improved pricing and execution on cigarettes, along with strong growth in smokeless and e-vapor products more than offset the headwinds for the full year. Nontobacco sales totaled $120.9 million for the quarter, up 10.7% and totaled $473 million for the year, up 9.6%. Per site sales were up 5.8% for the quarter and 5.4% for the full year. Gross margin dollars were up 9.8% for the quarter and up 11.1% for the year. In our larger formats, annual sales of dispensed beverage increased 17.8% and margins grew by 31.1%, while beer and wine sales grew for the year 8.2% and margins grew 22%. General merchandise grew 9.5% in sales and 13.7% in margins. These categories highlight the ongoing improvements in execution by our merchandising team and sales associates in our larger format stores. Across all our formats, packaged beverage sales grew 7.4% and margins grew 12.8% for the year. Similarly, salty snack sales and margins grew 13.1% and 13.3% respectively, while candy sales and margins grew 6.7% and 12.1%. These categories highlight the value of our unique promotions and the innovation with our fantastic supplier partners. We have another full year -- full calendar of great promotions for this year. We also continue to work hard to manage operating cost. Total site operating cost averaged $31,000 per site month in the fourth quarter compared to $30,000 last year. Excluding payment fees, operating cost per site increased 4.4% for the quarter due to higher maintenance expenses as we accelerated upgrades and repairs on our site to invest in our brand. However, for the full year, site operating expenses increased only 0.9% year-over-year, achieving our goal of beating inflation. We also improved on our existing top quartile safety record at our sites. Excellent performance continued at our Hereford ethanol plant. Our improvement projects at Hereford have resulted in higher annual throughput rates, higher yields and a reduction in direct cost. November and December yields were each 2.84 gallons per bushel, resulting in an annual yield improvement of 3%. The plant generated a record $20.1 million in net income for 2014 and $4.1 million for the quarter. We are very pleased with Hereford's ongoing performance and it is establishing a solid track record that will position it well for a future sale. Organic growth from new store builds continue to ramp up. We exited 2014 with 1,263 stores, adding 60 new locations in a year, hitting the middle of our guidance range. Of these, 43 stores were 1,200 square foot or larger format. We have opened 2 new stores since year-end and another 6 are under construction. In summary, we are extremely pleased with the overall performance for the quarter and for the full year. We would now like to provide some guidance for 2015. As in the past, we will give annual guidance and not be providing quarter-by-quarter numbers. We will seek to provide a sense of how the current quarter is performing during our earnings calls covering the just-ended quarter, where we have good insights to add some additional transparency and seek to avoid surprises. Our approach reflects the volatility in our business and the fact that major swings in commodity prices can occur sooner or later or not at all in one year versus another. Starting with retail fuel performance. We expect to grow total annual fuel gallons by 3% to 8% and look to sell between 4.1 billion and 4.3 billion retail gallons based on our new site additions, expected level of promotions and other key assumptions. This translates to a range of 267,000 to 273,000 gallons per site month. As we have discussed on almost every call, the volatility of spot crude and product prices are major factor in our retail fuel margins. While we continue to expect our long run margin to average $0.12 to $0.13 per gallon, there are years like 2008 and 2014, where we performed well outside that range. History has also shown that in a year following a steep decline in crude and product prices, retail margins are typically compressed when prices rebound. We can't predict the level or nature of what the rebound will look like, but we believe it is a question of when, not if. Therefore, our guidance for retail margins for 2015 extends the lower end of our range to $0.09 per gallon to be conservative, giving a range of $0.09 to $0.13 per gallon. We expect our product line wholesale activities to contribute an additional $0.01 to $0.15 to gallon or $40 million to $60 million in additional gross margin dollars. If prices recover fully, we would also expect product supply and wholesale to be positively impacted by the reverse of the lag effect in both product purchases we experienced in 2014. For RINs, we've also -- we have also have a wide range of guidance from $0.10 to $0.15 per RIN. While RIN prices averaged $0.40 -- $0.48 in 2014, we will remain reasonably conservative in our planning as it is difficult to determine the EPA's timing on standards, which is needed to have additional clarity. We're targeting to grow total merchandise sales to $2.25 billion to $2.3 billion, an increase of 4% to 6% over last year, while growing total merchandise gross margin to $315 million to $325 million, an increase of 4% to 8%. We plan to hold store operating cost under the rate of inflation. Total SG&A costs are expected to run around $120 million to $125 million. These figures include initiatives to refresh our sites and to improve our business systems and processes, which will pay off in future years. We expect to ramp up station building activity to between 60 and 80 sites in 2015, the majority being Murphy USA stores of the 1,200 square foot format. We project to spend $230 million to $270 million in capital, of which $180 million to $220 million would be for retail growth, including raised rebuild sites, a site refresh program and land purchases for future year growth. Approximately $26 million will be spent for sustaining retail projects. The remainder will be spent at the terminal Hereford and at corporate for maintenance and for margin or cost improvement projects. When you take all of this guidance together, there are 2 key points I hope you take away. First, despite the more bearish but realistic view of fuel margins in 2015, if you look across any period of time, the highs and lows offset each other and the business is sustaining a long run margin of $0.12 to $0.13 per gallon. Second, independent of what fuel margins do in the short run, our business is getting stronger every quarter, as we grow new sites, improve our merchandise mix, sustain our cost leadership position and strengthen our capabilities and our fuel supply chain. This strategy provides the foundation for reinvesting in our business and long-term shareholder growth. This concludes my prepared remarks. In closing, I would like to thank our entire team of almost 9,500 employees who helped make 2014 a huge success. We are reporting 2 weeks earlier this year, and I want to especially thank our finance and accounting team for making that happen. At this point, we would like to open up the discussion for questions.

[Operator Instructions] Our first question comes from Damian Witkowski of Gabelli & Company.

Congratulations on your first successful year as an independent company.

Thanks, Damian.

So just leading off from your guidance on cents per gallon for 2015. I assume that in the first quarter thus far, and I'm not sure how much you can talk about it, you're doing a lot better than what you're guiding to for the full year.

Yes. So January, if you just look at the industry data on rack-to-retail margins, it was strong, up until about the last day of the year and then prices have increased almost $0.20 per gallon. And so we saw the trend that we saw in Q4 continue into January, but we saw -- certainly saw an increase at the end of the month and now in February.

Okay. And in terms of the consumer obviously is paying a lot less at the pump. What are you seeing from them? Are they coming in? Obviously, your packaged beverages have done well throughout the year. It looks like it might have accelerated in the fourth quarter. But are they spending some of that incremental money that they're saving at the pump within -- inside the store?

Damian, we think there is some of that but there's a lot of factors going on. Our volume was up 2.7% for the quarter, but we typically see at least a 2% increase when you have a steady down period like that and we get more competitive on volume. We saw our basket size increase year-over-year, but we also had price increases on cigarettes and beverages and candy and a number of other items. We have much better weather this year than last year. So I think there is just a number of factors that are all contributing to the underlying performance. We do see some improvements. It's really hard to attribute and isolate that. I suspect our good friends across the parking lot and other large retailers are getting a lot of the benefit though.

Oh, good. But historically, would you say that, that will be the case eventually, that you have a sustainable lower price per gallon at the pump? Eventually, it translates to better trends, inside your store as well as Walmart's?

I think on the margin, we would see that, but that consumer is taking that money and spending in a lot of different areas. So we got our fair share of it. That would be a relatively small piece of the consumers' wallet, if you think of how they would save that, say extra $20. That -- it will go a long, long ways further across the retail sector.

And I know it's probably hard to tell, but I mean do you think you're getting -- cigarette units were down, but do you think you're getting any benefit from CVS pulling out of your markets?

If you think about the customer that comes to us versus CVS, they seek us out as a destination for low-price tobacco. So our prices were much lower than CVS. They would seek out CVS for convenience or part of another basket of goods, so I suspect higher-price retailers that have more convenient locations are probably getting the benefit from CVS.

Our next question comes from the line of Matthew Boss of JPMorgan. Esteban Gomez - JP Morgan Chase & Co, Research Division: This is Esteban on for Matt. So you saw a nice one-time cash inflow this quarter from the higher retail margin. And so how does this play into your overall capital allocation plan? Can we potentially expect you to accelerate store growth past that 60 per year? And what would you be looking for to make that decision?

So if you think about sort of the outsize margins in Q4 for the year and then you take our guidance of the low end and 2015 together, you could take a $0.16 and a $0.09 divided by 2, you get $0.125. And so when you think about overall average earnings over the 2-year basis, it's going to be consistent with the long run outlook we have for the business. So as such, we wouldn't expect to do anything different from that standpoint. Our site growth is largely a function of the timing of when we build our sites and the pipeline for those, which is pretty well laid out for the year. If we can do more than the 60 to 80 that we've outlined, we would certainly like to do that and get the benefit of those sales earlier. But a lot of that is just the timing issue with closing additional carve out locations, et cetera. So I think we've maintained the same capital allocation strategy as before because when you look over the 2-year period, we'll likely end up in kind of a more consistent environment irregardless of what happened in Q4. Esteban Gomez - JP Morgan Chase & Co, Research Division: Got it. And can you just maybe walk us through the rationale for not repurchasing any stock in on that $250 million authorization?

We did purchase a small amount of stock because what happened was at the end of last quarter, we set parameters that we thought were reasonable and we were locked in on those parameters by virtue of needing to utilize the 10b5-1 plan because we're still under the 2-year window post the spend. So then post-out, we experienced a 15% one up in our share price, which quite frankly we didn't anticipate that, that was going to happen, but we were locked in. So we will revisit those parameters in each open window. We are committed to executing the entire $250 million repurchase and fortunately, we have the rest of the year to do that and high cash balances to help us execute that.

Our next question comes from the line of John Lawrence of Stephens.

It's actually Ben on for John. So you talked a bit about strong performance of the new stores, the 1,200 square foot stores. Can you quantify, of the more than 100 basis point improvement in merchandise margin, how much of that came from the new stores?

Yes. I don't have that broken out here, Ben. We can get back on that. But if you look at some of those categories we highlighted, they're certainly contributing on that side. But the improvement across beverages happened at all the stores. The candy and snacks happened across all the stores. We're selling the smokeless and e-vapor products across all the stores. So we saw really good performance across the network, but we can break out sort of the new formats versus the other one. We'll have a lot more of that at the Analyst Day for you also.

Okay, great. Following up on consumer spending trends and the theme of stores, have you noticed anything in your Texas stores, how are those performing, giving lower crude prices? And maybe too early to tell, but have you seen anything in that specific marketplace?

Nothing relatively distinct from the other markets. You got a couple of things going on. You got the lower crude prices but you're also starting to see layoffs and rig count drops and stuff in various South Texas markets as well. And so we're not overly exposed to any one part of Texas. At the same time, in those markets, now you're seeing labor becoming more available and so we're paying higher for store labor in the Permian Basin. We expect to see benefits there. So all things considered, there's a lot of different things going on. Nothing remarkable about Texas versus the other markets for us.

Great. Last question from me. Really impressed with the merchandise performance in the quarter. I suspect that you had continued success with vendor partnerships. Could you touch on plans for FY '15? And what you're most excited about on that side?

Yes, absolutely. We started in 2013 with our fuel-related merchandise programs, the "buy 3, get $0.10 off" programs. In 2014, we executed a full calendar year of those. What I think we're excited about in 2015 is the ability to mix and match some items in months so that we can drive the number of activations up. So you got more offers that more people would be willing to do, and I think we're going to have a couple of guest appearances this year of some real strong premium products that we won't let the cat out of the bag now, but we think are going to really help move the needle also. So we've got a great merchandise team. They do a lot of innovation. We got super supplier partners that recognize our ability to differentially grow these categories through our formats, and we have probably the best sales associates in terms of upselling out in the field. And it's really that level of combined execution that's making the difference.

Our next question comes from the line of Carla Casella of JPMorgan. Carla Casella - JP Morgan Chase & Co, Research Division: I'm wondering if you can talk -- you talked about some successful promotions and timing of promotions in the go good calendar for this year. Would you say the cadence of them has changed at all, given that last year kind of this time, we were having either even worse weather across a lot of the country? Does it change the way you look at the promotions for Q1 or going into the driving season in Q2?

No. I mean, we do the promotion analytics to really understand is there a better timing to do them or not, but you can imagine the beverage promotions, there's 3 or 4 or 5 major players that want to participate in this. And if it worked well in July and August last year, they're going to want to try to do it again in July and August this year. So that really hasn't changed a lot. I think what you'll see that's different is having additional items so instead of just having one item being part of the gas discount program, we might have 2 or 3 items that when combined together will drive higher activations. Carla Casella - JP Morgan Chase & Co, Research Division: Okay, great. And then on the -- on gas prices, as we see prices have been coming down and would you say the time frame that you pass through the decrease in prices or as we look forward, the increase in prices, has that changed at all because of competitive environment? Or is there a good rule of thumb to say how long it takes till you fully pass through the changes in gas costs?

Yes, I mean, I've looked at just over the history of time and across markets and it's usually pretty consistent, and we haven't seen any difference in the kind of competitive environment this time around either. So I wouldn't expect it to change this time versus other periods of sharp declines or periods of less market declines.

[Operator Instructions] Our next question comes from the line of Ben Brownlow of Raymond James. Benjamin Brownlow - Raymond James & Associates, Inc., Research Division: Just wondering -- I guess to rephrase earlier question on the price sensitivity of the consumer, does that sensitivity change at all as prices become starting thresholds below $2? And recent studies -- industry studies don't indicate that but just wanted to get your view on that.

Yes, I've looked at that before as well, Ben. You see a very distinct shift in consumer behavior when prices get above $4 a gallon as their fuel spend becomes a larger portion of their kind of the household spending. We don't see the same effect when prices get really low. That money either goes into other retail purchases or into savings or paying off credit card debt. And you listen to the other earnings calls of retailers and the like, you're seeing them acknowledging that and higher savings rates and so forth. We may see a higher level of vacation season driving this year as people consider whether they drive versus they fly, but it's too early to tell on that basis. Benjamin Brownlow - Raymond James & Associates, Inc., Research Division: So the importance of the price leadership strategy doesn't change as prices get to this point?

No. I think being low price, the consumer that will go out of the way to find the lowest price stations still behave that way. I think typically, when prices are high and people become more frugal and they try lower-priced gas stations, they realize it's the same gasoline, from the same refineries, and it works the same in their car and they can get it for less, they actually carry on that behavior when prices are lower because they just realize it's additional value even though the total price is lower. On the margin, you might lose a fill up based on the consumer that most often shops for price but sometimes shops on convenience because it just doesn't impact their pocket book as much. We haven't seen that in our volume for Q4 December or January to date. Benjamin Brownlow - Raymond James & Associates, Inc., Research Division: And the volume growth that you saw in fourth quarter on a per-store basis, was that mostly an increase in transaction count or was that larger fill ups per transaction?

It's going to be just higher transactions for the volume. When we do the fuel discount program, we do get a little bit higher fill rate, but we've been doing a pretty consistent calendar now. And so it largely just reflects getting more fuel transactions and when prices go down or margins expand, that's typically when we're able to capture some volume share in the market. Then that 2.7% level is kind of within the range of what we would've expected in this type of down market. Benjamin Brownlow - Raymond James & Associates, Inc., Research Division: And that fuel promotion strategy was apples-to-apples year-over-year?

Yes, sir. Yes, we had a Walmart discount program in 2012 in the fourth quarter, but both 2013 and '14 were in the summer months. Benjamin Brownlow - Raymond James & Associates, Inc., Research Division: And one last question from me. On the wholesale segment, you guys have been very clear in the past about that inverse relationship with retail fuel margins, but I was still a little surprised given the fall of spot versus rack prices. And you touched on this in your commentary about the dynamic there, but can you just go back over that, please?

Sure. So there's probably 3 components, and we don't break them out. But we have a discretionary wholesale business, and it makes money in the spot-to-rack market. And it had a very, very good year. We have a transfer to retail, which is our spot price to OPIS low transfer price, and that was positive. In most quarters, if you think about the normal rise and fall, the beginning price and the ending price for the quarter isn't usually -- is significantly different as it was in the fourth quarter. And effectively, what happens is when we're buying product on a bulk basis, on a ratable basis, it will be the last trading cycle of the month gets booked into the next period because we haven't taken physical delivery of the inventory. And so if you think about a period of 4 or 5 successive down months of the magnitude that we have, that inventory and how it is priced in the system creates a lag effect by the sheer magnitude of the down. So on a lot of quarters, if you look back, maybe the price goes up and then comes down and we have that nice effect, but the ending levels aren't that different. This time, they were drastically different. And so that's what was really driving that, and it was a such market impact versus prior quarters. That same effect will benefit us when prices fully recover. If it they recover sharply, you will see it in a shorter time period. If it takes a full year to recover, you'll see it over a gradual period. And you will see that kind of independent of how our wholesale business performs over the transfer to retail. Is that helpful? Benjamin Brownlow - Raymond James & Associates, Inc., Research Division: Yes, that's very helpful.

And our next question comes from Andy Summers of Janus.

First, I would -- I'd ask, it sounds like you guys are still committed to selling Hereford. Can you give us maybe an update on the timing around that? And given the improvements that you've seen in that business, maybe an update on what you think the value of that could be?

Sure. From a timing standpoint, we said we wanted to establish a 1 year track record of sustained higher performance, and I would say by the end of Q1, we will have a track record that we're really proud of. We also announced that we're making a Cornell [ph] investment in the plant to improve the total margin. It's one of the first things any new buyer would do and because of the short payout, we elected to go ahead and do that. We will be tying that in at the end of Q1 when we do our March turnaround. And so we're going to want to see some run time with that so that we've got some track record associated with the additional contribution from that. I think with those 2 things combined, we'd be in a position to take the next obvious steps. In terms of valuation, we've seen a range of transactions for ethanol plants that are away from the corn markets, and there is a recent comp in Georgia that was about $100 million transaction. So you can get your list of comparable ethanol plants, but people are buying ethanol plants away from the corn and they pay good money for the good plants.

Okay, great. And then my next question is just curious to get your view on your balance sheet. It looks like you're kind of under-levered relative to the stability of the business, but I think there've been some debt covenant issues in the past. Can you just give us an update on your view of your balance sheet and sort of what the limitations are to maybe carrying a structurally higher level of debt?

Well, Andy, we could add some more debt, the question is would that be prudent given our business model? Because we have to protect our competitive advantages, which means we need to act in a certain way. Because we're appealing to a low-priced customer, it's important that we have a low-cost operation, and so fixed charges like interest expense raises or cash breakeven erodes that competitive advantage. We are also are a fuel-driven company versus a merchant model, and there's generally more volatility in that, which means that we need to have modest leverage to be able to sustain periods, like Andrew said, when prices rise dramatically, we could have a $0.09 margin. And so we need to be robust enough to weather that. And then we also have a grow-first model, so we want to have the ability and also the willingness to be able to support very ratable growth. So we want to be able to grow regardless of what margins are in any particular year, and so adding a lot of leverage to that would also erode that advantage for us as well. So while we could at the present time add some debt, I think we just don't see that it's prudent, and we have high cash balances also which we're going to attempt to get rid of with the share repurchase that we're going to execute on this year.

Okay. And is it fair to say that any Hereford proceeds would go to buybacks as well?

It goes into growth and then shareholder distribution. So we'd like to be able to continue to do both, but there's still a lot of growth in front of us. So I think this year will be a great year to prove the resilience of our business model and our low-cost operation, as Mindy mentioned. I think it will also be a great year to demonstrate we can continue to grow irregardless of what the fuel margin environment looks like. And if we have some one-time cash proceeds like that, we're going to have a high-class problem either to apply more growth or return it to our shareholders.

I'm showing no further questions at this time. I'd like to hand the call back over to Mr. Andrew Clyde for any closing remarks.

Right. Well thank you, everyone, for joining, and we look forward to next quarter.