Murphy USA Inc. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual filing, not a standalone fourth-quarter report. Murphy USA operates a U.S. retail fuel and convenience business; at year-end it had 1,503 stores across 25 states and sold approximately 3.9 billion gallons of fuel during 2020.
Financial and operating results
| Metric | 2020 | 2019 |
|---|---|---|
| Total revenue | $11.264 billion | $14.035 billion |
| Net income | $386.1 million | $154.8 million |
| Diluted EPS | $13.08 | $4.86 |
| Operating cash flow | $563.7 million | $313.3 million |
| Capital expenditures (cash-flow statement) | $230.7 million | $204.8 million |
| Cash and cash equivalents at year-end | $163.6 million | $280.3 million |
| Total debt, including current maturities | $1.002 billion | $1.038 billion |
Fuel contribution, including retail fuel, product supply and wholesale, and RINs, was $982.1 million, or 25.2 cents per gallon, versus $704.6 million and 16.1 cents per gallon in 2019. Retail fuel margin rose to 22.9 cents per gallon from 13.8 cents. Merchandise sales increased to $2.955 billion from $2.620 billion, while merchandise unit margin declined to 15.6% from 16.0%. Adjusted EBITDA, a non-GAAP measure, was $722.7 million versus $422.6 million.
Year-end current assets were $625.2 million and current liabilities were $531.1 million. The company reported $325 million of ABL commitments, subject to borrowing-base limits; the borrowing base was approximately $214.7 million at year-end, and the ABL was undrawn. These year-end liquidity figures predate the January 2021 refinancing and acquisition financing.
Changes versus 2019
- Revenue fell 19.7%, mainly because lower fuel prices and pandemic-related travel restrictions reduced retail fuel volumes by 10.8%.
- Net income more than doubled, primarily reflecting higher fuel contribution and merchandise contribution, lower station expenses and lower interest expense. The comparison also benefited from the absence of 2019’s $14.8 million loss on early debt extinguishment.
- Merchandise sales grew 12.8%; total fuel contribution increased 39.4% despite lower gallons sold. RIN revenue was $95.5 million versus $34.8 million in 2019.
- Operating cash flow rose 79.9%. Cash used in financing increased substantially, including $399.6 million of share repurchases and $6.9 million of dividends paid.
Outlook, material events and risks
- Management estimated 2021 capital expenditures of approximately $325 million to $375 million, including $270 million to $325 million for retail growth. Its development plan targets up to 55 new-to-industry stores and up to 25 raze-and-rebuilds annually, subject to project availability and funding.
- The company began a quarterly dividend of $0.25 per share in December 2020 and said it expected to continue at that rate in the near term. A $500 million repurchase authorization had approximately $375 million remaining at year-end, through December 2023.
- On January 29, 2021, Murphy USA completed its $645 million cash acquisition of QuickChek, adding 157 stores in New Jersey and New York. It also entered a new $400 million term loan and $350 million revolving facility and issued $500 million of 3.75% notes due 2031. Acquisition results are not included in 2020 results.
- Management said COVID-19 continued to affect travel and fuel demand, with recovery timing uncertain. Key exposures include volatile fuel costs and margins, RIN pricing and regulation, competition, reliance on Walmart-related traffic and Core-Mark for more than 81% of merchandise, environmental obligations, and successful integration of QuickChek.
- The filing identifies ongoing environmental and other legal matters; management did not expect their resolution to materially adversely affect future net income, financial condition or liquidity based on information then available. The auditor issued unqualified opinions on the financial statements and internal control over financial reporting.
Important facts for investors to verify
- Whether elevated 2020 fuel contribution and RIN-related revenue are sustainable as fuel prices, volumes and RIN markets change.
- Post-acquisition debt, interest costs, liquidity and covenant headroom, compared with the year-end 2020 capital structure reported above.
- QuickChek integration progress, realized synergies, transaction and integration costs, and the acquired business’s contribution to results.
- Execution and returns on the 2021 growth capital program, as well as the effect of continued repurchases and dividends on cash and leverage.
- Fuel volume recovery after COVID-related disruption, and changes in merchandise margins, operating costs and customer traffic.