Murphy USA Inc., a leading marketer of retail motor fuel products and convenience merchandise, announced preliminary financial results for the three months and twelve months ended December 31, 2022.
Key Highlights:
- Net income was $117.7 million, or $5.21 per diluted share, in Q4 2022 compared to net income of $108.8 million, or $4.23 per diluted share, in Q4 2021. For the year 2022, net income was $672.9 million, or $28.10 per diluted share, compared to 2021 net income of $396.9 million, or $14.92 per diluted share. The Q4 and full year 2022 amounts are reduced by a $25 million pledge (pre-tax) to the Murphy USA Charitable Foundation.
- Total fuel contribution (retail fuel margin plus product supply and wholesale ("PS&W") results including RINs) for Q4 2022 was 30.6 cpg, compared to 27.5 cpg in Q4 2021. For the year 2022, total fuel contribution was 34.3 cpg, compared to 26.3 cpg in 2021.
- Total retail gallons increased 7.8% to 1.2 billion gallons in Q4 2022 compared to 1.1 billion gallons in Q4 2021, while volumes on a same store sales ("SSS") basis increased 4.0%. For the year 2022, total retail gallons increased 9.2% to 4.8 billion gallons and increased 5.4% on a SSS basis.
- Merchandise contribution dollars for Q4 2022 increased 4.2% to $189.0 million on average unit margins of 19.1%, compared to the prior-year quarter contribution dollars of $181.4 million on unit margins of 19.6%. For the full year 2022, merchandise contribution dollars increased 9.3% to $767.1 million and average unit margins were 19.7% in 2022 compared to 19.1% in 2021.
- During Q4 2022, the Company repurchased approximately 0.8 million common shares for $239.5 million at an average price of $283.05 per share. For the year 2022, the Company repurchased 3.3 million shares for a total of $806.4 million at an average of $242.24 per share.
“Performance in 2022 demonstrates how far we have come in the nearly ten years since we first reported results as a public company in 2013," said President and CEO Andrew Clyde. “We have invested in critical areas of the business to ensure our ongoing success, including assembling an engaged and experienced leadership team that has helped drive cultural and operational change. We have consistently executed against our clear and coherent strategy to grow the network, improve store performance, enhance differentiated capabilities, and optimize our cost structure to sustain and grow our competitive advantage in the market. We have allocated capital in a focused and disciplined manner, resulting in significant store growth and more than 50% reduction in outstanding shares since our spin. Looking out over the next decade, we continue to see an equally attractive opportunity set of growth and capability building investments to further improve the business. With an attractive free cash flow profile, a healthy balance sheet, and strong momentum heading into 2023, we expect to continue our track record of value creation for long-term investors.”
Consolidated Results
Net income and Adjusted EBITDA for Q4 2022 and the year 2022 were higher versus the prior-year periods, due primarily to improved contribution margins from both fuel and merchandise, partially offset by higher general and administrative expenses, store operating expenses, and payment fees. General and administrative expenses were higher primarily due to a $25 million charitable pledge made in Q4 2022. All amounts reported for the year-to-date 2021 period include the consolidated results of our wholly-owned subsidiary, Quick Chek Corporation ("QuickChek") from January 29, 2021 (the date of acquisition).
Total fuel contribution dollars of $369.3 million increased $61.9 million, or 20.1%, in Q4 2022 compared to Q4 2021 and increased $485.7 million, or 42.4%, for the year 2022 due to favorable margins and higher retail volumes sold during the current year. Retail fuel contribution dollars increased $55.9 million, or 19.6%, to $341.2 million compared to the prior-year quarter and increased $453.7 million, or 47.7%, for the year, due to higher retail fuel margins and volumes. The increases were driven by 28.3 cpg retail fuel margins in Q4 2022, an 11.0% improvement over Q4 of 2021, and 29.6 cpg retail fuel margins for the full year 2022, or a 35.2% increase, supported primarily by a declining commodity price environment. PS&W margins (including RINs) increased $6.0 million when compared to Q4 2021 and increased $32.0 million for the year, due to improved spot-to-rack margins and higher RIN sales, partially offset by timing and price-related impacts in a falling market.
Merchandise
Total merchandise contribution increased $7.6 million, or 4.2%, to $189.0 million in Q4 2022 compared to the prior-year quarter and increased 9.3% to $767.1 million for the full year 2022. Increases for the fourth quarter and year of 2022 are due primarily to higher unit sales volumes and retail prices. Total tobacco contribution dollars increased 4.3% and non-tobacco contribution dollars increased 5.1% compared to the prior-year quarter. Food and beverage contribution, a subset of non-tobacco, decreased 6.1%, on higher cost of goods sold, while sales dollars were 2.0% higher in the current period compared to Q4 2021. For the full year 2022, tobacco contribution dollars increased 6.7% and non-tobacco contribution dollars increased 12.2% compared to prior year. For the full year, food and beverage contribution increased 9.3% on 15.7% higher sales dollars.
Other Areas
Total store and other operating expenses were $26.9 million higher in Q4 2022 versus Q4 2021 and $149.2 million higher than the year 2021, mainly due to higher payment fees, employee related expenses, and store maintenance costs. Store OPEX excluding payment fees and rent on an APSM basis were 7.0% higher versus Q4 2021, primarily attributable to increased employee-related expenses and maintenance costs. Total SG&A costs for Q4 2022 were $28.1 million higher than Q4 2021 primarily due to an unconditional charitable pledge of $25.0 million. For the year 2022, these costs were $38.9 million higher, due mainly to the Q4 pledge and increased employee incentive expense.
Store Openings
In January 2023, the Company completed and opened 2 of the 17 stores that were under construction at December 31, 2022.
Cash balances as of December 31, 2022 totaled $60.5 million, and the Company also had total marketable securities of $22.3 million. Long-term debt consisted of approximately $297.9 million in carrying value of 5.625% senior notes due in 2027, $495.0 million in carrying value of 4.75% senior notes due in 2029, $493.8 million in carrying value of 3.75% senior notes due in 2031, and $382.6 million of term debt. In addition, the Company has approximately $122.6 million in long-term capital leases. The revolving cash flow facility was undrawn as of December 31, 2022.
At December 31, 2022, the Company had common shares outstanding of 21,749,840. Common shares repurchased during the quarter were approximately 0.8 million shares for $239.5 million, which were purchased under the 2021 share repurchase plan. Common shares repurchased during the twelve months ended December 31, 2022 were 3.3 million shares for a total of approximately $806.4 million, $20.0 million of which were under the 2020 plan, which is now terminated. As of December 31, 2022, approximately $213.7 million remained available under the $1 billion 2021 plan, to be executed by December 31, 2026.
The effective income tax rate for Q4 2022 was 22.3% compared to 22.8% in Q4 2021. For the year 2022, the effective income tax rate was 23.9% compared to 24.0% in 2021.
The Company paid a quarterly cash dividend on December 1, 2022 of $0.35 per share, or $1.40 per share on an annualized basis, a 9.4% increase from the previous quarter for a total cash payment of $7.8 million. Total cash dividends paid in 2022 were $29.9 million compared to $27.3 million in 2021, an increase of 9.5%.
2022 Guidance Range, 2022 Actual Results, and 2023 Guidance Range
Management's annual guidance for 2023 reflects the Company's economic and market environment assessment, business improvement initiatives and known potential headwinds. Key 2023 guidance ranges include the following assumptions and are subject to the uncertainties noted below:
Organic Growth:
- New store additions and investments in raze-and-rebuild sites reflect continuation of a disciplined capital approach that prioritizes the highest return projects across competing opportunity sets
- With 17 projects in flight at YE 2022, which is a higher number than in recent years, the 2023 build class is off to an excellent start and there is a high level of confidence that 2023 unit growth will continue to accelerate
Fuel Contribution:
The company's low-price offer strongly resonated with customers in 2022 enabling market shares gains which we expect to sustain in 2023
Store Profitability:
- Material growth in merchandise contribution is based on new store growth, ongoing merchandising and promotional initiatives, and customer traffic comparable to 2022
- Growth in store operating expenses per site, before credit card fees and rent, is expected to decelerate in 2023 as we lap a full year of QuickChek and inflation pressures begin to subside
Corporate Costs:
- SG&A costs reflect continued investments in IT related productivity enhancements in addition to new initiatives that will improve the company's long-term competitive position from a digital asset and customer experience lens
- The effective tax rate in 2023 is expected to be in a range of 24% to 26% and is consistent with historical performance
Capital Allocation:
- Capital expenditures reflect new store growth, raze-and-rebuild activity, store maintenance and improvements, land acquisition, corporate infrastructure projects and new investments in loyalty and digital technologies
- The Company does not provide a projected range of all-in fuel margin, Adjusted EBITDA, or Net Income. However, for modeling purposes only, using all-in fuel margins of between 26.0 cpg and 30.0 cpg, combined with the mid-point of the official guided ranges above, management would expect the business to generate net income between $350 million and $488 million, respectively, which would translate to expected Adjusted EBITDA of between $800 million and $1 billion. A reconciliation of the Adjusted EBITDA non-GAAP measure to Net Income is provided as the final page of this release.
