Murphy USA Inc. Reports Fourth Quarter 2020 Results
EL DORADO, Ark., Feb. 03, 2021 (GLOBE NEWSWIRE) — Murphy USA Inc. (NYSE: MUSA), a leading marketer of retail motor fuel products and convenience merchandise, today announced preliminary financial results for the three and twelve months ended December 31, 2020.
Key Highlights:Net income was $61.0 million, or $2.16 per diluted share, in Q4 2020 compared to net income of $47.6 million, or $1.54 per diluted share, in Q4 2019. This increase in net income was primarily due to higher total fuel and merchandise contributions. For the year 2020, net income was $386.1 million, or $13.08 per diluted share, compared to 2019 net income of $154.8 million, or $4.86 per diluted share.Total fuel contribution (retail fuel margin plus product supply and wholesale (“PS&W”) results including RINs) for Q4 2020 was 19.8 cpg compared to 17.1 cpg in Q4 2019. For the year, total fuel contribution was 25.2 cpg in 2020 compared to 16.1 cpg in 2019.Total retail gallons decreased 5.5% for the network during Q4 2020 and volumes on a same store sales (“SSS”) basis decreased 6.7%, while for the year, retail gallons decreased 10.8% to 3.9 billion gallons and decreased 12.3% on a SSS basis.Merchandise contribution dollars grew 9.7% during Q4 2020 to $115.4 million. For the full year, merchandise contribution dollars were up 9.5% to $459.4 million on average unit margins of 15.6%.During Q4 2020, 15 new stores opened and 20 raze-and-rebuild sites re-opened. For the year, 24 new stores were opened and 33 raze-and-rebuild locations re-opened while 10 stores were sold or closed. The year-end store count was 1,503.Paid the initial quarterly dividend, announced in October 2020, of $0.25 per share on December 1, 2020, for a total of approximately $7.0 million.Common shares repurchased during Q4 2020 were 1.3 million for $169.1 million at an average price of $128.17 per share. For the year, 3.3 million shares were repurchased for $399.6 million at an average of $119.70 per share.Announced the agreement to acquire Quick Chek Corporation (“QuickChek”), in an all-cash transaction for approximately $645 million before working capital adjustments and other items. The transaction closed on January 29, 2021.
“After an unprecedented year that showcased both the agility and resiliency of our business, we are excited to turn the page and continue executing against our strategic agenda in 2021,” said President and CEO Andrew Clyde. “The momentum of our existing network, complemented by the new and distinctive capabilities of QuickChek, highlight the potential of the combined business as we take the next steps to create long-term value for shareholders.”Consolidated ResultsNet income, Adjusted EBITDA and earnings per share in Q4 and full year 2020 were higher than the prior year levels due mainly to higher all-in fuel contribution and increased merchandise margins, partially offset by higher selling, general and administrative expenses (“SG&A”) in the current year. The increase in SG&A was primarily due to a charitable donation of $10.0 million in Q3 2020 and higher employee-related costs. Additionally, in the year 2019, a loss on early debt extinguishment of $14.8 million (pretax) was recorded.Fuel1Average Per Store Month (“APSM”) metric includes all stores open through the date of calculation
22019 amounts not revised for 2020 raze-and-rebuild activityTotal fuel contribution increased $17.7 million in Q4 2020, due primarily to higher contribution from PS&W including RINs and improved retail margins. For the full year 2020, total fuel contribution increased $277.5 million compared to the prior year, due primarily to robust retail margins, partially offset by lower PS&W margins including RINs and lower retail fuel volumes. Reflecting the impact of the pandemic on demand in 2020, fuel volumes on a SSS basis decreased 6.7% to 223,642 gallons in Q4 and 12.3% to 216,158 gallons for the full year.
MerchandiseTotal merchandise contribution for Q4 2020 and for the full year period increased 9.7% and 9.5%, respectively, primarily due to higher sales of tobacco and lottery across the chain as well as strong new store performance. Merchandise unit margins were down due to increased sales of lower margin tobacco products. Tobacco contribution and non-tobacco contribution improved for the quarter and full year 2020, attributable to higher unit volumes, primarily from tobacco and lottery.Other areasTotal station and other operating expenses increased $1.8 million for the current-year quarter, compared to the prior year period. As noted in our 2020 guidance, we have removed rent from station OPEX on an APSM basis for both periods presented. For Q4 2020, on an APSM basis, station operating expenses excluding credit card fees and rent increased 7.1%, while for the year they increased 2.5%. Without COVID-related operating expenses of $1.1 million in Q4 2020, station OPEX on an APSM basis would have increased 5.8% quarter-over-quarter. For the year 2020 COVID-related operating expenses were $4.2 million and without these costs OPEX on an APSM basis would have increased 1.4% year-over-year. SG&A was higher in the fourth quarter 2020 due primarily to employee wages and benefits and professional services. For the full year 2020, the increase in SG&A was due primarily to employee wages and benefits and a $10 million charitable contribution made in the third quarter.Station OpeningsMurphy USA opened 15 new retail locations in Q4 2020 and reopened 20 raze-and-rebuild locations, bringing the year end store count to 1,503, consisting of 1,151 Murphy USA sites and 352 Murphy Express sites. For the year, 24 new stores were opened, 10 stores were sold or closed, and 33 raze-and-rebuilds were completed.Financial ResourcesCash balances on December 31, 2020 totaled $163.6 million. Long-term debt consisted of approximately $297 million in carrying value of 5.625% senior notes due in 2027, $493 million in carrying value of 4.75% senior notes due in 2029 and $163 million of term debt not including the $50 million of current maturities as of December 31, 2020. As of December 31, 2020 the ABL was undrawn and had $215 million borrowing capacity available.At December 31, 2020, the Company had common shares outstanding of 27,248,613. During Q4 2020, approximately 1.3 million common shares were repurchased for $169.1 million, or an average price of $128.17 per share. During the year 2020, the Company purchased 3.3 million common shares for $399.6 million, or an average price of $119.70 per share. The repurchase plan authorized by the Board of Directors and announced in July 2019 was completed in November 2020, and a new authorization of $500 million announced October 28, 2020 is now in effect, and at December 31, 2020, $375 million was remaining available for purchase through December 2023.The Company paid its initial quarterly dividend of $0.25 per share, or $1.00 per share on an annualized basis, on December 1, 2020, for a total cash payment of approximately $7.0 million.QuickChek AcquisitionOn January 29, 2021, the Company completed its acquisition of QuickChek which was announced on December 14, 2020, for all-cash consideration of $645 million before adjustments for working capital and other items. In conjunction with the closing of the acquisition, the Company entered into a new credit agreement that provides for a new cash flow revolving facility with commitments of $350 million to replace the old ABL facility and a new term loan in a principal amount of $400 million to replace the old term loan that was paid off. Additional borrowing capacity under the revolving facility may be extended at our request and with the consent of the participating lenders. The Company also issued a new series of 3.750% senior unsecured notes due 2031 in an aggregate principal amount of $500 million. As a result of the above transactions, the existing ABL facility and term loan with $200 million remaining outstanding was repaid and retired.2020 Guidance Range, 2020 Actual Results, and 2021 Guidance RangeManagement’s annual guidance for 2021 reflects the Company’s economic and market environment assessment, business improvement initiatives and known potential headwinds. This guidance also includes planned QuickChek results for the 11 months of 2021 that will be consolidated into the Murphy USA results. Key 2021 guidance ranges include the following assumptions and are subject to the uncertainties noted below:Organic Growth:New store additions and raze-and-rebuild sites reflect continuation of a disciplined capital approach to the highest return opportunities and may be split between the Murphy USA, Murphy Express, or QuickChek brands
Fuel Contribution:Per store fuel volumes are expected to recover slightly from 2020 levels that were impacted by COVID-19 and the accretive impact of QuickChek fuel sites
Store Profitability:Merchandise contribution represents a range of outcomes based on management’s expectations around higher merchandise sales and the enhanced QuickChek brand capabilities along with positive incremental impact from the Coremark contract renewalStore operating expenses per site, before credit card fees and rent, will be reflected as an APSM dollars metric to better reflect the ongoing shift in format mix and higher costs for the larger format QuickChek stores with a greater food and beverage offeringCorporate Costs:SG&A costs reflect continued investments in IT related productivity enhancements and other corporate initiatives to help drive profitability, reduce costs where able, and improve the company’s long-term competitive position, subject to timing and allocation of resourcesThe effective tax rate in 2021 is expected to be in a range of 24% to 26%Capital Allocation:Capital expenditures reflect new store growth, raze-and-rebuild activity, store maintenance and improvements, land acquisition, and continued implementation of various corporate infrastructure projectsCapital expenditures do not reflect any acquisitions we may make pursuant to our updated capital allocation strategy announced on October 28, 2020The Company does not provide a projected range of all-in fuel margin, Adjusted EBITDA, or Net income. However, for modeling purposes only, if all-in fuel margin approximates 18.0 cpg, management would expect the business to generate net income of $200 million and Adjusted EBITDA of about $550 million using the midpoint of the provided guided ranges above.Earnings Call InformationThe Company will host a conference call on February 4, 2021 at 10:00 a.m. Central time to discuss fourth quarter 2020 results. The conference call number is 1 (833) 968-2218 and the passcode number is 6049229. 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). Approximately one hour after the conclusion of the conference, the webcast will be available for replay. Shortly thereafter, a transcript will be available.Source: Murphy USA Inc. (NYSE: MUSA)Forward-Looking StatementsCertain 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 our M&A activity, anticipated store openings, fuel margins, merchandise margins, sales of RINs, trends in our operations, dividends and share repurchases. 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: the Company’s ability to realize projected synergies from the acquisition of QuickChek and successfully expand our food and beverage offerings; 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 severe weather events, such as hurricanes, floods and earthquakes; the impact of a global health pandemic such as COVID-19, including the impact on the Company’s fuel volumes if the gradual recoveries experienced throughout 2020 stall or reverse as a result of any resurgence in COVID-19 infection rates and the government reaction in response thereof; 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 or e-cigarette legislation and any other efforts that make purchasing tobacco products more costly or difficult could hurt our revenues and impact gross margins; changes to the Company’s capital allocation, including the timing, declaration, amount and payment of any future dividends or levels of the Company’s share repurchases, or management of operating cash; the market price of the Company’s stock stock prevailing from time to time, the nature of other investment opportunities presented to the Company from time to time, the Company’s cash flows from operations, and general economic conditions; compliance with debt covenants; availability and cost of credit; and changes in interest rates. Our SEC reports, including our most recent Annual Report on our Form 10-K and Quarterly Reports on Form 10-Q, 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.
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NoteAverage Per Store Month (APSM) metric includes all stores open through the date of the calculation.Same store sales (SSS) metric includes aggregated individual store results for all stores open throughout both periods presented. For all periods presented, the store must have been open for the entire calendar year to be included in the comparison. Remodeled stores that remained open or were closed for just a very brief time (less than a month) during the period being compared remain in the same store sales calculation. If a store is replaced either at the same location (raze-and-rebuild) or relocated to a new location, it will be excluded from the calculation during the period it is out of service. Newly constructed sites do not enter the calculation until they are open for each full calendar year for the periods being compared (open by January 1, 2019 for the sites being compared in the 2020 versus 2019 comparison). When prior period same store sales volumes or sales are presented, they have not been revised for current year activity for raze-and-rebuilds and asset dispositions.
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Consolidated Balance Sheets
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Supplemental Disclosure Regarding Non-GAAP Financial InformationThe following table sets forth the Company’s EBITDA and Adjusted EBITDA for the three and twelve months ended December 31, 2020 and 2019. EBITDA means net income (loss) plus net interest expense, plus income tax expense, plus 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, net settlement proceeds, (gain ) loss on sale of assets, loss on early debt extinguishment, transaction costs related to acquisitions, and other non-operating (income) expense). EBITDA and Adjusted EBITDA are not measures that are prepared in accordance with U.S. generally accepted accounting principles (GAAP).We use Adjusted EBITDA in our operational and financial decision-making, believing that the 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. We believe that the presentation of Adjusted EBITDA provides useful information to investors because it allows understanding of a key measure that we evaluate internally when making operating and strategic decisions, preparing our annual plan, and evaluating our overall performance. However, non-GAAP measures are not a substitute for GAAP disclosures, and EBITDA 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:2021 Full Year Guidance – GAAP to non-GAAP ReconciliationAn itemized reconciliation between projected Net Income and Adjusted EBITDA for the full year 2021 is as follows:For purposes of this reconciliation, the midpoint of a range for each reconciling item was used, and therefore actual results for each of these reconciling items is expected to be higher or lower than the amounts shown above. The size of the ranges varies based on the individual reconciling item and assumptions made.The Company does not provide a projected range of all-in fuel margin, Adjusted EBITDA, or Net income. However, for modeling purposes only, if all-in fuel margin approximates 18.0 cpg, management would expect the business to generate net income of $200 million and Adjusted EBITDA of about $550 million using the midpoint of the provided guided ranges in this release.