Murphy USA Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing, not a standalone fourth-quarter report; the supplied filing text does not provide a complete set of Q4-only results.
Business context
Murphy USA operates a U.S. retail fuel and convenience business, plus fuel supply and wholesale operations. At year-end it had 1,712 stores in 27 states: 1,151 Murphy USA, 404 Murphy Express and 157 QuickChek. The company reported one segment, Marketing. It sold approximately 4.8 billion gallons of retail fuel during 2022.
Financial and operating results
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $23.446 billion | $17.361 billion |
| Operating income | $968.4 million | $604.0 million |
| Net income | $672.9 million | $396.9 million |
| Diluted EPS | $28.10 | $14.92 |
| Operating cash flow | $994.7 million | $737.4 million |
| Capital expenditures | $305.3 million | $274.7 million |
- Revenue rose 35.1%, while net income increased about 69.5%. Management attributed earnings growth primarily to higher fuel contribution and volumes, higher merchandise contribution, and lower QuickChek acquisition and integration costs.
- Total fuel contribution was $1.630 billion, up 42.4%; retail fuel margin increased to 29.6 cents per gallon from 21.9 cents. Retail fuel volumes increased 9.2% to 4.752 billion gallons.
- Merchandise sales were $3.903 billion, up 6.1%; merchandise contribution rose 9.3% to $767.1 million. Merchandise unit margin improved to 19.7% from 19.1%.
- RIN sales contributed $305.8 million, versus $265.3 million in 2021. The company says its business model is not dependent on RIN revenue, but RIN values and rules remain uncertain.
- Adjusted EBITDA, a non-GAAP measure, was $1.191 billion versus $828.0 million. Net margin was approximately 2.9% of reported revenue, calculated from the stated figures; reported revenue includes substantial fuel-related sales and excise taxes.
- Cash and cash equivalents were $60.5 million, and marketable securities totaled $22.3 million. The $350 million revolving facility was undrawn, with $4.7 million of letters of credit reducing availability. Current assets of $726.8 million were below current liabilities of $854.2 million.
- Long-term debt, including capitalized lease obligations, was $1.807 billion, compared with $1.815 billion a year earlier. The term loan balance was $394 million; the reported total leverage ratio was 1.51x. Operating cash flow less property additions was approximately $689.4 million.
Material changes and capital allocation
- Average retail fuel prices increased 86 cents per gallon year over year; crude oil averaged $95 per barrel versus $68 in 2021. Higher selling prices were a major driver of revenue growth, alongside higher volumes and the additional month of QuickChek results.
- Store and other operating expenses increased about 18%, reflecting higher payment fees, employee costs, rent and maintenance. The company recorded a non-recurring $7 million employee bonus. SG&A increased by $38.9 million, including a $25 million charitable pledge in Q4 2022.
- The company repurchased 3.33 million shares for $806.4 million at an average $242.24 per share; approximately $213.7 million remained under its authorization at year-end. Dividends paid were $1.27 per share for 2022; the quarterly dividend reached $0.35 per share in Q4.
- Cash fell from $256.4 million to $60.5 million, principally amid share repurchases, capital spending and other financing outflows. Financing activities used $871.3 million in 2022.
Outlook, risks and contingencies
- For 2023, management expected capital expenditures of approximately $375 million to $425 million, including $285 million to $315 million for retail growth and $50 million to $60 million for maintenance. It planned up to 45 new-to-industry stores and up to 30 raze-and-rebuilds. These are plans, not guaranteed outcomes.
- Key stated risks include volatile fuel costs and margins, supply-chain interruptions, competition, dependence on Walmart-related traffic and rights, and reliance on Core-Mark for over 74% of merchandise purchases. Inflation, labor costs, higher interest rates, fuel-efficiency standards, electric-vehicle adoption, tobacco regulation, cybersecurity and severe weather may also affect results.
- Environmental investigations and remediation continue at certain sites; the company said currently known costs were not expected to materially affect results, while additional contamination or obligations could be material. It is identified as a potentially responsible party at one Superfund site and recorded no liability, judging its expected share immaterial.
- Climate-related lawsuits brought by the City of Charleston and the state of Delaware seek unspecified damages and abatement; outcomes and potential liability were undetermined. Other routine legal matters were not expected by management to have a material adverse effect.
- Debt covenants restrict certain actions, including dividends and repurchases in specified circumstances. Management cited adequate liquidity but cautioned that future operating cash flow and credit availability cannot be assured. The company also disclosed LIBOR transition exposure and expected to address its LIBOR-based contracts before June 30, 2023.
- KPMG issued unqualified opinions on the financial statements and internal control over financial reporting. The auditor identified impairment-trigger assessment for property and equipment as a critical audit matter; no material weakness was reported.
Important facts for investors to verify
- Review fuel margin and volume trends excluding the unusually favorable 2022 commodity environment, and assess how sustainable the 29.6-cent-per-gallon retail margin is.
- Track RIN revenue, regulatory developments and the sensitivity of earnings to changes in RIN prices.
- Compare planned store openings and $375–$425 million of 2023 capital spending with actual execution, returns and funding needs.
- Assess liquidity after buybacks and dividends, including available revolver capacity, debt maturities, interest-rate exposure and covenant headroom.
- Evaluate the $25 million charitable pledge, special bonus and other unusual or non-recurring items when comparing underlying operating costs.
- Monitor Core-Mark supply concentration, Walmart-related agreements and traffic dependence, environmental remediation, and the unresolved climate litigation.