MURPHY USA INC.
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("Management's Discussion and Analysis" or "MD&A") is the Company's
analysis of its financial performance and of significant trends that may affect
future performance. It should be read in conjunction with the consolidated
financial statements and notes included in this Quarterly Report on Form 10-Q.
The MD&A contains forward-looking statements and the Company does not undertake
to update, revise or correct any of the forward-looking information unless
required to do so under the federal securities laws. Readers are cautioned that
such forward-looking statements should be read in conjunction with the Company's
disclosures under "Forward-Looking Statements" and "Risk Factors" included
elsewhere in this Quarterly Report on Form 10-Q.
For purposes of this Management's Discussion and Analysis, references to "
Management's Discussion and Analysis is organized as follows:
•Executive Overview-This section provides an overview of our business and the results of operations and financial condition for the periods presented. It includes information on the basis of presentation with respect to the amounts presented in the Management's Discussion and Analysis and a discussion of the trends affecting our business. •Results of Operations-This section provides an analysis of our results of operations, including the results of our operating segment for the three months endedMarch 31, 2022 and 2021. •Capital Resources and Liquidity-This section provides a discussion of our financial condition and cash flows as of and for the three months endedMarch 31, 2022 and 2021. It also includes a discussion of our capital structure and available sources of liquidity.
•Critical Accounting Policies-This section describes the accounting policies and estimates that we consider most important for our business and that require significant judgment.
Executive Overview
The following MD&A is intended to help the reader understand our results of operations and financial condition. This section is provided to supplement, and should be read in conjunction with, our consolidated financial statements and the accompanying notes to these financial statements contained elsewhere in this Quarterly Report on Form 10-Q, this MD&A section and the consolidated financial statements in our Annual Report on Form 10-K. Our Form 10-K contains a discussion of matters not included within this document, such as disclosures regarding critical accounting policies and estimates, and contractual obligations. OnJanuary 29, 2021 , MUSA acquired 100% ofQuick Chek Corporation ("QuickChek"), a privately held convenience store chain with a strong regional brand consisting of 156 stores, at the time of acquisition, located inNew Jersey andNew York , in an all-cash transaction. The acquisition expanded the MUSA network into the Northeast by adding high-performance stores that had an existing best-in-class food and beverage model and is consistent with the Company's stated strategic priorities of developing enhanced food and beverage capabilities. For additional information concerning the acquisition, see Note 5 "Business Acquisition" in the audited combined financial statements for the year endedDecember 31, 2021 included with our Annual Report on Form 10-K, and Note 4, "Business Acquisition" in the accompanying unaudited consolidated financial statements.
Our Business
The Company owns and operates a chain of retail stores under the brand name of Murphy USA® which are almost all located in close proximity to Walmart stores, principally in the Southeast, Midwest and Southwest areas ofthe United States . We also market gasoline and other products at standalone stores under the Murphy Express brand and have a mix of convenience stores and retail gasoline stores located inNew Jersey andNew York that operate under the brand name ofQuickChek . AtMarch 31, 2022 , we had a total of 1,686 Company stores in 27 states, of which 1,151 wereMurphy USA , 376 were Murphy Express and 159 wereQuickChek . We also market to unbranded wholesale customers through a mixture of Company owned and third-party terminals. Basis of PresentationMurphy USA was incorporated inMarch 2013 , and until the separation from Murphy Oil Corporation was completed onAugust 30, 2013 , it had not commenced operations and had no material assets, liabilities or commitments. The financial information presented in this Management's Discussion and Analysis is derived from the consolidated financial statements ofMurphy USA Inc. and its subsidiaries for all periods presented.QuickChek uses a weekly retail calendar where each quarter has 13 weeks. For Q1 2022, theQuickChek results cover the period fromJanuary 1, 2022 toApril 1, 2022 . For the prior year period, theQuickChek results cover the period fromJanuary 29, 2021 (the date of acquisition) toApril 2, 2021 . The difference in the timing of the period ends is immaterial to the overall consolidated results.
Trends Affecting Our Business
Our operations are significantly impacted by the gross margins we receive on our fuel and merchandise sales. While we generally expect our total fuel and merchandise sales volumes to grow over time and the gross margins we realize on those sales to remain strong in a normalized environment, these gross margins can change rapidly due to many factors. These factors include, but are not limited to, the price of refined products, geopolitical events, such asRussia's invasion ofUkraine , that upsets global supply and demand and price of crude oil, interruptions in our fuel and merchandise supply chain caused by severe weather or pandemics such as COVID-19, travel restrictions and stay-at-home orders imposed during a pandemic, severe refinery mechanical failures for an extended period of time, cyber-attacks against the Company or our vendors, and competition in the local markets in which we operate. The COVID-19 pandemic continued to influence gasoline demand in the first quarter of 2022 but demand has grown as the pandemic pressures lessened, COVID-19 vaccines became more readily available, and government intervention decreased. If the recoveries experienced to-date stall or reverse as a result of a resurgence in COVID-19 infection rates and related government intervention, our volumes could decline. The cost of our main sales products, gasoline and diesel, are greatly impacted by the cost of crude oil inthe United States . Rising prices for crude oil increase the Company's cost for wholesale fuel products purchased thus increasing the price of retail fuel sales. Also, rising prices tend to cause our customers to reduce discretionary fuel consumption, which may reduce our fuel sales volumes. Crude oil prices continued the volatile trend in 2022 with prices ranging from$76 per barrel to$124 per barrel, with an average price in Q1 2022 of approximately$95 per barrel, compare to an average price of$58 per barrel in Q1 2021. Total fuel contribution (retail fuel margin plus product supply and wholesale ("PS&W") results including Renewable Identification Numbers ("RINs")) for Q1 2022 was34.0 cents per gallon ("cpg"), compared to 22.5 cpg in Q1 2021. Retail fuel margin dollars increased 61.6% in the current quarter and retail fuel volumes improved 7.8%. Our revenues are impacted by the ability to leverage our diverse supply infrastructure in pursuit of obtaining the lowest cost fuel supply available; for example, activities such as blending bulk fuel with ethanol and bio-diesel to capture and subsequently sell RINs. Under the Energy Policy Act of 2005, theEnvironmental Protection Agency ("EPA ") is authorized to set annual quotas establishing the percentage of motor fuels consumed inthe United States that must be attributable to renewable fuels. Obligated parties are required to demonstrate that they have met any applicable quotas by submitting a certain amount of RINs to theEPA . RINs in excess of the set quota can be sold in a market for RINs at then-prevailing prices. The market price for RINs fluctuates based on a variety of factors, including but not limited to governmental and regulatory action. There are other market related factors that can impact the net benefit we receive from RINs on a company-wide basis either favorably or unfavorably. The Renewable Fuel Standard ("RFS") program continues to be unpredictable and prices received for ethanol RINs averaged$1.12 in Q1 2022 compared to$1.06 in Q1 2021. Our business model does not depend on our ability to generate revenues from RINs. Revenue from the sales of RINs is included in "Other operating revenues" in the Consolidated Statements of Income. As ofMarch 31, 2022 , we have$1.3 billion of Senior Notes and a$397 million term loan outstanding. We believe that we will generate sufficient cash from operations to fund our ongoing operating requirements and service our debt obligations. AtMarch 31, 2022 , we have additional available capacity under the committed$350 million cash flow revolving credit facility, which currently remains undrawn. We expect to use the credit facilities to provide us with available financing to meet any short-term ongoing cash needs in excess of internally generated cash flows. To the extent necessary, we will borrow under these facilities to fund our ongoing operating requirements. There can be no assurances, however, that we will generate sufficient cash from operations or be able to draw on the credit facilities, obtain commitments for our incremental facility and/or obtain and draw upon other credit facilities. For additional information see Significant Sources of Capital in the Capital Resources and Liquidity section. The Company currently anticipates total capital expenditures (including land for future developments) for the full year 2022 to range from approximately$350 million to$400 million depending on how many new stores are completed. We intend to fund the remainder of our capital program in 2022 primarily using operating cash flow but will supplement funding where necessary using borrowings available under cash flow revolving credit facilities. We believe that our business will continue to grow in the future as we expand the food and beverage capabilities within our network. We maintain a pipeline of desirable future store locations for development. The pace of this growth is continually monitored by our management, and these plans can be altered based on operating cash flows generated and the availability of debt facilities.
We currently estimate our ongoing effective tax rate to be between 23% and 26% for the remainder of the year.
Seasonality
Our business has inherent seasonality due to the concentration of our retail stores in certain geographic areas, as well as customer activity and behaviors during different seasons. In general, sales volumes and operating incomes are typically highest in the second and third quarters during the summer-activity months and lowest during the winter months. In 2020 and 2021 we saw disruptions to typical seasonal patterns due to the COVID-19 pandemic. In early 2022, a more normal seasonal pattern has emerged and fuel volumes have approached pre-pandemic levels. As a result, operating results for the three months endedMarch 31, 2022 may not be necessarily indicative of the results that may be expected for the remainder of the year endingDecember 31, 2022 .
Business Segment
The Company has one operating segment which is Marketing. The Marketing segment includes our retail marketing stores and product supply and wholesale assets. For additional operating segment information, see Note 22 "Business Segments" in the audited combined financial statements for the year endedDecember 31, 2021 included with our Annual Report on Form 10-K and Note 16 "Business Segments" in the accompanying unaudited consolidated financial statements for the three months endedMarch 31, 2022 . Results of Operations Consolidated Results For the three months endedMarch 31, 2022 , the Company reported net income of$152.4 million , or$6.08 per diluted share, on revenue of$5.1 billion . Net income was$55.3 million for the same period in 2021, or$2.01 per diluted share, on$3.5 billion of revenue. The increase in net income was primarily due to higher all-in fuel and merchandise contribution, a decrease in acquisition and integration related expenses and interest expense and was partially offset by increases in store operating expenses, payment fees, depreciation expense, and general and administrative expenses. The consolidated financial results for Q1 2022 includeQuickChek fromJanuary 1, 2022 throughApril 1, 2022 , and for the prior year period covered the period fromJanuary 29, 2021 (the date of acquisition) toApril 2, 2021 . The difference in the timing of the period ends is immaterial to the overall consolidated results.
Three Months Ended
Revenues for Q1 2022 increased$1.6 billion , or 44.7%, compared to the same quarter in 2021. The increase in revenues was due to higher fuel sales prices and retail fuel sales volumes, increased merchandise sales, and the inclusion ofQuickChek results for three months in 2022 compared to two months in 2021. Total cost of Q1 2022 sales increased$1.4 billion , or 44.7% when compared to Q1 2021. In the current-year quarter, the higher costs were primarily due to higher wholesale fuel prices and fuel sales volumes, higher merchandise costs, and the inclusion ofQuickChek results for three months compared to two months. Store and other operating expenses increased$45.6 million , or 25.7%, from Q1 2022 to Q1 2021, due primarily to increased payment fees, higher employee related costs, maintenance costs and the inclusion of an additional month ofQuickChek expenses compared to the prior year period. 26 -------------------------------------------------------------------------------- SG&A expenses for Q1 2022 increased$1.9 million , or 4.3%, from Q1 2021. The increase in SG&A costs is primarily due to higher professional fees and outsourced services and one additional month ofQuickChek expenses compared to the prior year period. Depreciation and amortization expense increased$4.4 million , or 8.6%, from Q1 2021 primarily due to the additions of new larger store formats of the MUSA stores and the inclusion ofQuickChek stores for three months of 2022 versus two months in 2021.
Acquisition and integration related costs were lower by
The effective income tax rate was approximately 24.0% for Q1 2022 versus 24.6% for the same period of 2021.
Segment Results
A summary of the Company's earnings by business segment follows:
Three Months Ended
March 31,
(Millions of dollars) 2022 2021
Marketing $ 169.1 $ 80.4
Corporate and other assets (16.7) (25.1)
Net Income $ 152.4 $ 55.3 Three Months Ended
Net income for the three months ended
•Higher all-in fuel contribution •Higher retail fuel sales volumes •Higher merchandise contribution •Lower acquisition and transaction related expenses •Lower interest expense
The items below partially offset the increase in net income in the current period:
•Higher store operating expense
•Higher payment fees
•Higher depreciation and amortization expense
•Higher general and administrative expense
•Higher income tax expense
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(Millions of dollars, except revenue per store Three Months Ended
month (in thousands) and store counts) March 31,
Marketing Segment 2022 2021
Operating Revenues
Petroleum product sales $ 4,148.4 $ 2,635.8
Merchandise sales 892.0 833.2
Other operating revenues 77.9 68.1
Total operating revenues 5,118.3 3,537.1
Operating expenses
Petroleum products cost of goods sold 3,856.2 2,476.1
Merchandise cost of goods sold 716.3 684.8
Store and other operating expenses 222.7 177.1
Depreciation and amortization 51.7 46.9
Selling, general and administrative 46.2 44.3
Accretion of asset retirement obligations 0.7 0.6
Total operating expenses 4,893.8 3,429.8
Gain (loss) on sale of assets - 0.1
Income (loss) from operations 224.5 107.4
Other income (expense)
Interest expense (2.2) (1.5)
Total other income (expense) (2.2) (1.5)
Income (loss) before income taxes 222.3 105.9
Income tax expense (benefit) 53.2 25.5
Income (loss) from operations $ 169.1 $ 80.4
Total tobacco sales revenue same store sales1,2 $ 113.9 $ 114.9
Total non-tobacco sales revenue same store
sales1,2 59.3 46.4
Total merchandise sales revenue same store
sales1,2 $ 173.2 $ 161.3
12021 amounts not revised for 2022
raze-and-rebuild activity
2Includes store-level discounts for MDR redemptions and excludes change in value of
unredeemed MDR points
Store count at end of period 1,686 1,660
Total store months during the period 5,031 4,833
Average Per Store Month (APSM) metric includes all stores open through the date of the calculation, including stores acquired during the period.
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 stores do not enter the calculation until they are open for each full calendar year for the periods being compared (open byJanuary 1, 2021 for the stores being compared in the 2022 versus 2021 comparison). Acquired stores are not included in the calculation of same stores for the first 28 -------------------------------------------------------------------------------- 12 months after the acquisition. When prior period same store sales volumes or sales are presented, they have not been revised for current year activity for raze-and-rebuilds, asset acquisitions and asset dispositions.QuickChek uses a weekly retail calendar where each quarter has 13 weeks. For the Q1 2022 period, the QuickChek results cover the period from January 1, 2022 toApril 1, 2022 . For the prior year period, theQuickChek results cover the period fromJanuary 29, 2021 (the date of acquisition) toApril 2, 2021 . The difference in the timing of the month ends is immaterial to the overall consolidated results. Fuel Three Months Ended March 31, Key Operating Metrics 2022 2021 Total retail fuel contribution ($ Millions)$ 253.6 $ 156.9 Total PS&W contribution ($ Millions) 39.6 3.7
RINs and other (included in Other operating revenues on Consolidated Income Statement) ($ Millions)
76.6 66.7
Total fuel contribution ($ Millions) $ 369.8 $ 227.3
Retail fuel volume - chain (Million gal) 1,088.3 1,009.1
Retail fuel volume - per store (K gal APSM)1 224.9 215.1
Retail fuel volume - per store (K gal SSS)2 222.8 212.9
Total fuel contribution (including retail, PS&W and RINs) (cpg)
34.0 22.5
Retail fuel margin (cpg) 23.3 15.5
PS&W including RINs contribution (cpg) 10.7 7.0
1APSM metric includes all stores open through the
date of calculation
22021 amounts not revised for 2022 raze-and-rebuild activity
The reconciliation of the components of total fuel contribution to the Consolidated Income Statements is as follows:
Three Months Ended
March 31,
(Millions of dollars) 2022 2021
Petroleum product sales $ 4,148.4 $ 2,635.8
Less Petroleum product cost of goods sold (3,856.2) (2,476.1)
Plus RINs and other (included in Other Operating
Revenues line) 77.6 67.6
Total fuel contribution $ 369.8 $ 227.3
Merchandise
Three Months Ended
March 31,
Key Operating Metrics 2022 2021
Total merchandise contribution ($ Millions) $ 175.7 $ 148.4
Total merchandise sales ($ Millions) $ 892.0 $ 833.2
Total merchandise sales ($K SSS)1,2 $ 173.2 $ 161.3
Merchandise unit margin (%) 19.7 % 17.8 %
Tobacco contribution ($K SSS)1,2 $ 16.9 $ 15.6
Non-tobacco contribution ($K SSS)1,2 $ 16.0 $ 9.8
Total merchandise contribution ($K SSS)1,2 $ 32.9 $ 25.4
12021 amounts not revised for 2022
raze-and-rebuild activity
2Includes store-level discounts for MDR redemptions and excludes change in value of
unredeemed MDR points
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Three Months Ended
Net income in the Marketing segment for Q1 2022 increased$88.7 million compared to the Q1 2021 period, due to higher all-in fuel contribution and increased fuel sales volume and higher merchandise contributions, combined with the inclusion ofQuickChek results for three months in the current period versus two months in 2021. This was partially offset by increases in store operating expense, depreciation and amortization expense, and selling, general and administrative expenses. Total revenues for the Marketing segment were approximately$5.1 billion in Q1 2022 compared to$3.5 billion in Q1 2021. The increased revenues were due to a 44.9% increase in retail fuel sales prices, a 7.8% increase in the number of gallons sold, and a 7.1% increase in merchandise sales. Revenues included excise taxes collected and remitted to government authorities of$514.1 million in Q1 2022 and$469.6 million in Q1 2021. Retail fuel margin dollars increased 61.6% compared to the prior year quarter on a higher margin rate of 23.3 cpg for Q1 2022 when compared to 15.5 cpg in the same quarter of 2021, combined with a 7.8% increase in retail fuel volumes. Total fuel sales volumes on a SSS basis increased 3.8% to 222.8 thousand gallons per store in the 2022 period when compared to Q1 2021. Total PS&W margin dollars, including RINs, increased by$45.8 million from Q1 2021 results. The quarter-over-quarter increase is primarily due to typical timing and price-related impacts of the product supply chain. The 2022 quarter includes the sale of 69 million RINs at an average selling price of$1.12 per RIN while the prior-year quarter had sales of 63 million RINs at an average price of$1.06 per RIN. Total merchandise sales increased 7.1% to$892.0 million in Q1 2022 compared to$833.2 million in Q1 2021 due to higher sales across the chain in most categories and the inclusion ofQuickChek results for three months in Q1 2022 versus two months in the prior year. Quarterly total merchandise contribution in Q1 2022 improved 18.4% compared to Q1 2021. Food and beverage contribution, a subset of non-tobacco contribution was 14.6% of total merchandise contribution Q1 2022, up from 11.5% in Q1 2021 as the enterprise benefited fromQuickChek's food and beverage activity. Total SSS merchandise contribution dollars grew 5.6%, which included an increase of 7.8% in tobacco products and a 3.4% increase in non-tobacco products. Store and other operating expenses increased$45.6 million in the current period compared to Q1 2021, primarily due to the inclusion ofQuickChek for an additional month in 2022, along with higher employee related expenses, payment fees, rent and store maintenance costs. On an APSM basis, expenses applicable to store OPEX excluding payment fees and rent increased 16.5%, primarily due to increased employee related expenses and maintenance costs. Depreciation and amortization expense increased$4.8 million , or 10.2% in Q1 2022 when compared to the prior year quarter due primarily to the inclusion ofQuickChek for an additional month in 2022 combined with the new larger store formats of MUSA stores. Selling, general, and administrative expenses increased$1.9 million in Q1 2022 compared to Q1 2021 due primarily to higher professional fees and outsourced services and one additional month ofQuickChek expenses. 30 --------------------------------------------------------------------------------
Same store sales information compared to APSM metrics
Variance from prior year
Three months ended
March 31, 2022
SSS1 APSM2
Fuel gallons per month 3.8 % 4.6 %
Merchandise sales 0.1 % 2.9 %
Tobacco sales 0.2 % (0.6 %)
Non-tobacco sales (0.2 %) 9.5 %
Merchandise margin 5.6 % 13.8 %
Tobacco margin 7.8 % 7.9 %
Non-tobacco margin 3.4 % 19.5 %
1Includes store-level discounts for MDR redemptions and excludes change in value of
unredeemed MDR points
2Includes all MDR activity
Corporate and Other Assets
Three Months Ended
After-tax results for Corporate and other assets for Q1 2022 were a loss of$16.7 million compared to a loss of$25.1 million in Q1 2021, due primarily to lower acquisition and integration related costs and lower interest expense related to expenses and debt incurred inJanuary 2021 to finance theQuickChek acquisition. Non-GAAP Measures The following table sets forth the Company's Adjusted EBITDA for the three months endedMarch 31, 2022 and 2021. EBITDA means net income (loss) plus net interest expense, plus income tax expense, 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 and integration costs related to acquisition, and other non-operating (income) expense). EBITDA and Adjusted EBITDA are not measures that are prepared in accordance withU.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. 31 -------------------------------------------------------------------------------- The reconciliation of net income (loss) to EBITDA and Adjusted EBITDA is as follows: Three Months Ended March 31, (Millions of dollars) 2022 2021 Net income$ 152.4 $ 55.3 Income tax expense (benefit) 48.0 18.0 Interest expense, net of interest income 19.6 21.3 Depreciation and amortization 55.4 51.0 EBITDA
275.4 145.6
Accretion of asset retirement obligations 0.7 0.6 (Gain) loss on sale of assets
- (0.2)
Acquisition and integration related costs 0.2 8.8 Other nonoperating (income) expense 0.7 - Adjusted EBITDA$ 277.0 $ 154.8
Capital Resources and Liquidity
Significant Sources of Capital
As of
We believe our short-term and long-term liquidity is adequate to fund not only our operations, but also our anticipated near-term and long-term funding requirements, including capital spending programs, execution of announced share repurchase programs, potential dividend payments, repayment of debt maturities and other amounts that may ultimately be paid in connection with contingencies.
Operating Activities
Net cash provided by operating activities was$339.2 million for the three months endedMarch 31, 2022 , an increase of$109.4 million compared to$229.8 million for the same period in 2021. The increase for the current year is primarily related to the increase in net income of$97.1 million , and changes in noncash working capital of$10.9 million compared to the same period in 2021. The year-over-year increased non-cash operating working capital changes of$10.9 million consist of benefits related to an increase in accounts payable and accrued liabilities of$45.2 million primarily due to higher wholesale fuel prices and related freight costs and timing of payments, increased income taxes payable of$20.6 million resulted from higher pretax income, and a decrease in inventory of$5.9 million primarily due to lower inventory on hand which was partially offset by higher wholesale prices. These benefits were partially offset by increased accounts receivables of$59.3 million due to the timing of receipts and increased prices for retail and bulk sales, and a small increase in prepaid expenses and other current assets of$1.5 million .
Investing Activities
For the three months endedMarch 31, 2022 , cash required by investing activities was$64.4 million compared to$696.3 million in 2021. The decrease in investing cash requirements in the current period was primarily due to the cash payments of$642.1 million for the acquisition ofQuickChek in 2021 which was partially offset by the timing of capital expenditures that required$10.4 million more in 2022 over 2021. 32 --------------------------------------------------------------------------------
Financing Activities
Financing activities in the three months endedMarch 31, 2022 required cash of$175.0 million compared to cash provided of$607.0 million in the three months endedMarch 31, 2021 . The first three months of 2022 included payments of$151.8 million for the repurchase of common shares, which was an increase of$101.8 million from the repurchases of$50.0 million in the prior-year period, and dividend payments of$7.2 million in 2022 versus payments of$6.8 million in the first three months of 2021. Borrowings of debt related to theQuickChek acquisition in 2021 provided$892.8 million compared to no borrowings in the same period of 2022. Repayments of debt required$3.8 million in 2022 compared to net repayments of$214.4 million in 2021 that were related to theQuickChek acquisition. Debt issuance costs related to theQuickChek transaction required cash of$8.8 million in 2021 and there were no such costs in 2022. Amounts related to share-based compensation required$6.4 million more in cash during 2022 than in 2021. Dividends The Company paid a dividend of$0.29 per Common share inMarch 2022 for a total cash payment of$7.2 million and paid a dividend of$0.25 per share inMarch 2021 for a total cash payment of$6.8 million . As a part of our capital allocation strategy, the Company's intention is to deliver targeted double-digit growth in the per share dividend over time.
On
Share Repurchase Program
During the three months ended
Debt
Our long-term debt atMarch 31, 2022 andDecember 31, 2021 was as set forth below: March 31, December 31, (Millions of dollars) 2022 2021
5.625% senior notes due 2027 (net of unamortized discount
of
$
298.1
495.3 495.2
3.75% senior notes due 2031 (net of unamortized discount
of
494.5 494.3
Term loan due 2028 (effective interest rate of 2.27% at
396.2 397.1
Capitalized lease obligations, autos and equipment, due through 2025
2.3 2.7
Capitalized lease obligations, buildings, due through 2059
136.6 138.9
Less unamortized debt issuance costs (10.7) (11.1)
Total notes payable, net 1,812.3 1,815.1
Less current maturities 14.9 15.0
Total long-term debt, net of current $ 1,797.4 $ 1,800.1
33
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Senior Notes
OnApril 25, 2017 ,Murphy Oil USA, Inc. , our primary operating subsidiary, issued$300 million of 5.625% Senior Notes due 2027 (the "2027 Senior Notes"). The 2027 Senior Notes are fully and unconditionally guaranteed byMurphy USA , and are guaranteed by certain 100% owned subsidiaries that guarantee our Credit Facilities, as defined herein. The indenture governing the 2027 Senior Notes contains restrictive covenants that limit, among other things, the ability ofMurphy USA ,Murphy Oil USA, Inc. and the restricted subsidiaries to incur additional indebtedness or liens, dispose of assets, make certain restricted payments or investments, enter into transactions with affiliates or merge with or into other entities. OnSeptember 13, 2019 ,Murphy Oil USA, Inc. , issued$500 million of 4.75% Senior Notes due 2029 (the "2029 Senior Notes"). The net proceeds from the issuance of the 2029 Senior Notes were used to fund, in part, the tender offer and redemption of the$500 million aggregate principal amount of its senior notes due 2023. The 2029 Senior Notes are fully and unconditionally guaranteed byMurphy USA , and are guaranteed by certain 100% owned subsidiaries that guarantee our Credit Facilities. The indenture governing the 2029 Senior Notes contains restrictive covenants that are substantially similar to the covenants for the 2027 Senior Notes. OnJanuary 29, 2021 ,Murphy Oil USA, Inc. , issued$500 million of 3.75% Senior Notes due 2031 (the "2031 Senior Notes" and, together with the 2027 Senior Notes and the 2029 Senior Notes, the "Senior Notes"). The net proceeds from the issuance of the 2031 Senior Notes were used to fund the acquisition ofQuickChek and for other general corporate purposes. The 2031 Senior Notes are fully and unconditionally guaranteed byMurphy USA , and are guaranteed by certain 100% owned subsidiaries that guarantee our Credit Facilities. The indenture governing the 2031 Senior Notes contains restrictive covenants that are substantially similar to the covenants for the 2027 and 2029 Senior Notes. The Senior Notes and the guarantees rank equally with all of our and the guarantors' existing and future senior unsecured indebtedness and effectively junior to our and the guarantors' existing and future secured indebtedness (including indebtedness with respect to the Credit Facilities) to the extent of the value of the assets securing such indebtedness. The Senior Notes are structurally subordinated to all of the existing and future third-party liabilities, including trade payables, of our existing and future subsidiaries that do not guarantee the Senior Notes.
Revolving Credit Facility and Term Loan
OnJanuary 29, 2021 , the Company entered into a new credit agreement that consists of both a cash flow revolving credit facility and a senior secured term loan that replaced the Company's prior ABL facility and term loan contained in the credit facility that was last renewed in 2019, respectively. The credit agreement provides for a senior secured term loan in an aggregate principal amount of$400 million (the "Term Facility") (which was borrowed in full onJanuary 29, 2021 ) and revolving credit commitments in an aggregate amount equal to$350 million (the "Revolving Facility", and together with the Term Facility, the "Credit Facilities"). The outstanding balance of the term loan was$397 million atMarch 31, 2022 and$398 million atDecember 31, 2021 . The term loan is dueJanuary 2028 and we are required to make quarterly principal payments of$1 million , which began onJuly 1, 2021 . As ofMarch 31, 2022 , we had no outstanding borrowings under the revolving facility while there were$4.1 million in outstanding letters of credit, which reduces the amount available to borrow.
Interest payable on the Credit Facilities is based on either:
•the
or •the Alternate Base Rate, which is defined as the highest of (a) the rate of interest last quoted by The Wall Street Journal as the "Prime Rate", (b) the greater of the federal funds effective rate and the overnight bank funding rate determined by theFederal Reserve Bank of New York from time to time plus 0.50% per annum and (c) the one-month Adjusted LIBO Rate plus 1.00% per annum, plus, (A) in the case of Adjusted LIBO Rate borrowings, (i) with respect to the Revolving Facility, spreads ranging from 1.75% to 2.25% per annum depending on a total debt to EBITDA ratio or (ii) with respect to the Term Facility, a spread of 1.75% per annum and (B) in the case of Alternate Base Rate borrowings (i) with 34 --------------------------------------------------------------------------------
respect to the Revolving Facility, spreads ranging from 0.75% to 1.25% per annum depending on a total debt to EBITDA ratio or (ii) with respect to the Term Facility, a spread of 1.75% per annum.
The Term Facility amortizes in quarterly installments starting with the first amortization payment being due onJuly 1, 2021 at a rate of 1.00% per annum.Murphy USA is also required to prepay the Term Facility with a portion of its excess cash flow, a portion of the net cash proceeds of certain asset sales, casualty events (subject to certain reinvestment rights) and net cash proceeds of issuances of indebtedness not permitted under the credit agreement. The Credit Agreement allowsMurphy USA to prepay, in whole or in part, the Term Facility outstanding thereunder, together with any accrued and unpaid interest, with prior notice but without premium or penalty other than breakage and redeployment costs. The credit agreement contains certain covenants that limit, among other things, the ability of the Company and certain of its subsidiaries to incur additional indebtedness or liens, to make certain investments, to enter into sale-leaseback transactions, to make certain restricted payments, to enter into consolidations, mergers or sales of material assets and other fundamental changes, to transact with affiliates, to enter into agreements restricting the ability of subsidiaries to incur liens or pay dividends, or to make certain accounting changes. The Revolving Facility also imposes total leverage ratio and secured net leverage ratio financial maintenance covenants which are tested quarterly. Pursuant to the total leverage ratio financial maintenance covenant, the Company must maintain a total leverage ratio of not more than 5.0 to 1.0 with an ability in certain circumstances to temporarily increase that limit to 5.5 to 1.0 and a maximum secured net leverage ratio of 3.75 to 1.0 with an ability in certain circumstances to temporarily increase that limit to 4.25 to 1.0. The credit agreement also contains customary events of default. Pursuant to the credit agreement's covenant limiting certain restricted payments, certain payments in respect of our equity interests, including dividends, when the total leverage ratio, calculated on a pro forma basis, is greater than 3.0 to 1.0 could be limited. AtMarch 31, 2022 , our total leverage ratio was 1.90 to 1.0 which meant our ability at that date to make restricted payments was not limited. If our total leverage ratio, on a pro forma basis, exceeds 3.0 to 1.0, any restricted payments made following that time until the ratio is once again, on a pro forma basis, below 3.0 to 1.0 would be limited by the covenant, which contains certain exceptions, including the ability to make restricted payments in cash in an aggregate amount not to exceed the greater of$112.3 million or 4.5% of consolidated net tangible assets over the life of the credit agreement. All obligations under the credit agreement are guaranteed byMurphy USA and the subsidiary guarantors party thereto, and all obligations under the credit agreement, including the guarantees of those obligations, are secured by certain assets ofMurphy USA ,Murphy Oil USA, Inc. and the guarantors party to the guarantee and collateral agreement in respect thereof.
Supplemental Guarantor Financial Information
The following is a description of the guarantees with respect to the Senior Notes and the Credit Facilities, for which MOUSA is primary obligor, and for which the Company and certain 100% owned subsidiaries provide full and unconditional guarantees on a joint and several basis. See "-Debt" above for additional information concerning the Company's outstanding indebtedness, all of which is guaranteed as described below. See also Note 6 "Long Term Debt" in the accompanying consolidated financial statements. The Senior Notes and related guarantees rank equally with all of our and the guarantors' existing and future senior unsecured indebtedness and effectively junior to our and the guarantors' existing and future secured indebtedness (including indebtedness with respect to the Credit Facilities) to the extent of the value of the assets securing such indebtedness. The Senior Notes and related guarantees are structurally subordinated to all of the existing and future third-party liabilities, including trade payables, of our existing and future subsidiaries that do not guarantee the notes. All obligations under the Credit Facilities are guaranteed by the Company and the same subsidiary guarantors that guarantee the Senior Notes. All obligations under the Credit Facilities, including the guarantees of those obligations, are secured by certain assets of the Company, MOUSA, and the other guarantors. The combined assets, liabilities and results of operations of MOUSA and the guarantors are not materially different from corresponding amounts presented in the consolidated financial statements included herein. MOUSA is our primary operating subsidiary and generated the vast majority of our revenues for the three months endedMarch 31, 2022 , and accounted for the vast majority of our total assets as ofMarch 31, 2022 . In the event MOUSA itself were 35 --------------------------------------------------------------------------------
unable to service the Company's consolidated debt obligations, our business and financial condition would be materially adversely impacted.
Capital Spending
Capital spending and investments in our Marketing segment relate primarily to the acquisition of land and the construction of new Company stores. Marketing capital is also deployed to improve our existing stores as needed to ensure reliability and continued performance, which we refer to as sustaining capital. We also invest capital in our Corporate and other assets segment.
The following table outlines our capital spending and investments by segment for
the three month periods ended
Three Months Ended
March 31,
(Millions of dollars) 2022 2021
Marketing:
Company stores $ 52.0 $ 48.3
Terminals - 0.4
Sustaining capital 5.3 3.4
Corporate and other assets 11.8 3.8
Total $ 69.1 $ 55.9
We currently expect capital expenditures for the full year 2022 to range from
approximately $350 million to $400 million , including $300 million to
$325 million for retail growth, and $30 million to $40 million for maintenance
capital, with the remaining funds earmarked for other corporate investments and
other strategic initiatives. See Note 18 "Commitments" in the
audited consolidated financial statements for the year ended December 31, 2021
included in our Annual Report on Form 10-K for more information.
Critical Accounting Policies
There has been no material update to our critical accounting policies since our Annual Report on Form 10-K for the year endedDecember 31, 2021 . For more information, see "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies" in the Form 10-K. FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains certain statements 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 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 ofQuickChek 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; geopolitical events, such asRussia's invasion ofUkraine , that impact the supply and demand and prices of crude oil; the impact of severe weather events, such as hurricanes, floods and earthquakes; the impact of a global health pandemic, such as COVID-19 and the government reaction in response thereof: the impact of any systems failures, cybersecurity and/or security breaches of the company or its vendor partners, 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; reduced demand for our products due to the implementation of more stringent fuel economy and greenhouse gas reduction requirements, or increasingly widespread adoption of electric vehicle technology; future tobacco or e-cigarette legislation and any 36
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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, 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 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. OurSEC reports, including our most recent Annual Report on our Form 10-K and our 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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