Murphy USA Inc. reports first quarter 2020 results

Key Highlights:

• Net income was $89.3 million, or $2.92 per diluted share, in Q1 2020 compared to net income of $5.3 million, or $0.16 per diluted share, in Q1 2019
• Total fuel contribution (retail fuel margin plus product supply and wholesale (“PS&W”) results including  RINs) for Q1 2020 was 22.5 cpg compared to 12.3 cpg in Q1 2019
• Total retail gallons increased 1.2% in Q1 2020 compared to Q1 2019, while volumes on a same store sales (“SSS”) basis decreased 1.0%
• Merchandise contribution dollars grew 10.3% to $107.5 million compared to the prior-year quarter, on average unit margins of 15.6% in the current quarter
• Common shares repurchased during the first quarter of 2020 were approximately 1.4 million for $140.6 million at an average price of $103.17 per share

“Despite exceptional first quarter performance, our business faces unprecedented risks and unknown challenges stemming from COVID-19 as the resiliency of our economy, our public health system, and our citizens are put to the test,” said President and CEO Andrew Clyde.  “In times of crisis, companies with robust business models will successfully navigate through the uncertainty and we believe Murphy USA is well-positioned to continue serving our customers, our employees, and our shareholders in this environment.  While near-term demand remains uncertain, our customers continue to rely on us for their core fuel and merchandise needs and we remain committed to serving them.  We have a strong balance sheet, a resilient and agile business model, and the levers to pull to preserve liquidity if needed.  As such, the long-term view of our value creation potential remains unchanged, despite the transitory demand impacts we are seeing currently.  Lastly, I want to thank all our store employees, who have risen to the occasion and stood on the front-line during this crisis, continuing to provide clean, safe, and friendly service to our customers, despite the difficult environment.  I am proud to see the Murphy USA spirit is as resilient as our business.”

Consolidated Results

Net income, Adjusted EBITDA, and diluted EPS in Q1 2020 were greater than Q1 2019 levels primarily due to higher all-in fuel contribution, higher total retail fuel volumes combined with higher merchandise contribution, partially offset by higher operating expenses and SG&A costs.

Fuel

Total fuel contribution dollars increased 84.9%, or $108.8 million, in the first quarter of 2020.  Retail fuel margins of 26.9 cpg were 220.2% higher than the first quarter 2019, which increased total retail contribution dollars by $195.4 million to $283.0 million.  Retail fuel volumes moderated toward the end of the quarter due to stay at home restrictions in many areas of operation.  Partially offsetting the retail improvement were lower PS&W contributions which decreased $92.9 million when compared to Q1 2019 due to lower-trending prices causing negative timing and inventory adjustments.  Increased volumes and prices for RINs sold in Q1 2020 compared to Q1 2019 contributed $6.3 million to the total fuel contribution improvement.

Merchandise

Total merchandise contribution increased 10.3% to $107.5 million in the first quarter 2020, due to higher sales across the chain. Though non-tobacco contribution on a SSS basis for the current quarter was flat, this category was negatively impacted compared to Q1 2019 due to the allocation of certain costs that were previously included in operating expense.  Total merchandise contribution dollars per store on a SSS basis increased 9.7%.

Other Areas

Total station and other operating expenses, excluding payment fees and rent, increased 0.6% on an APSM metric and was primarily attributable to higher employee-related expenses.  As noted in our 2020 guidance, we have removed rent from this metric for both periods presented.  Total SG&A costs were $4.6 million higher in Q1 2020 when compared to 2019, primarily due to increased employee-related expenses and professional fees from business improvement initiatives.

Station Openings

Murphy USA opened two new retail locations in Q1 2020, bringing the store count to 1,491, consisting of 1,161 Murphy USA sites and 330 Murphy Express sites.  A total of 15 stores are currently under construction and include 5 new retail locations and 10 kiosks undergoing raze-and-rebuild that will return to operation as 1400 sq. ft. stores.

Financial Resources

Cash balances as of March 31, 2020 totaled $200.3 million. Long-term debt consisted of approximately $493 million in carrying value of 4.75% senior notes due in 2029, $297 million in carrying value of 5.625% senior notes due in 2027 and $250 million of term debt less $50 million of current maturities, which is reflected in current liabilities.  The asset-based revolving facility (the “ABL”) was undrawn and had a borrowing capacity of $91 million as of March 31, 2020.  We believe that our existing liquidity is sufficient for our near term needs and we do not currently expect to seek government aid from Federal programs established by the CARES Act.

Common shares repurchased during the current quarter were approximately 1.4 million for $140.6 million under the $400 million share repurchase program approved by the Board of Directors in July 2019, with approximately $134.4 million remaining in the plan at March 31, 2020.   At March 31, 2020, the Company had common shares outstanding of 29,177,638.  The effective income tax rate for Q1 2020 was 23.9% compared to 10.9% in Q1 2019.  The higher rate in Q1 2020 was due to similar discrete tax items having a smaller impact on higher pretax income.

2020 Guidance Update

“As the COVID-19 pandemic impacts all sectors of the global economy, beginning in mid-March we have seen a reduction in customer count that has impacted our business,” said Mr. Clyde.  “Most notably, fuel volumes have declined below our previously issued 2020 guidance range of 250,000 to 255,000 average gallons per store month.  For this reason, we are withdrawing our 2020 retail fuel volume guidance.  The commodity environment for crude oil and refined gasoline and distillates remains volatile and while the current retail fuel margin is significantly higher than our 5 year historical averages, we cannot forecast when that margin environment will decline.  Therefore, we are unable to provide any updated assumptions for modeling purposes for net income or Adjusted EBITDA for the remainder of 2020 at this time.  Our other 2020 guidance metrics regarding organic growth, fuel breakeven, corporate costs and capital allocation remain unchanged.”

Earnings Call Information

The Company will host a conference call on April 17, 2020 at 10:00 a.m. Central Time to discuss first quarter 2020 results.  The conference call number is 1 (844) 613-1037 and the conference number is 8568912. 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 Statements

Certain statements in this news release contain or may suggest “forward-looking” information (as defined in the Private Securities Litigation Reform Act of 1995) that involve risk and uncertainties, including, but not limited to anticipated store openings, fuel margins, merchandise margins, sales of RINs and trends in our operations. Such statements are based upon the current beliefs and expectations of the company’s management and are subject to significant risks and uncertainties. Actual future results may differ materially from historical results or current expectations depending upon factors including, but not limited to: our ability to continue to maintain a good business relationship with Walmart; successful execution of our growth strategy, including our ability to realize the anticipated benefits from such growth initiatives, and the timely completion of construction associated with our newly planned stores which may be impacted by the financial health of third parties; our ability to effectively manage our inventory, disruptions in our supply chain and our ability to control costs; the impact of severe weather events, such as hurricanes, floods and earthquakes; the impact of a global health pandemic, such as COVID-19; 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; efficient and proper allocation of our capital resources; compliance with debt covenants; availability and cost of credit; and changes in interest rates. Our SEC reports, including our most recent annual Report on Form 10-K, 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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