Murphy USA Inc. 1
Meeting Andrew Clyde - CEO May 2018 Murphy USA Inc. 1 Cautionary - - PowerPoint PPT Presentation
Meeting Andrew Clyde - CEO May 2018 Murphy USA Inc. 1 Cautionary - - PowerPoint PPT Presentation
MUSA Annual Shareholder Meeting Andrew Clyde - CEO May 2018 Murphy USA Inc. 1 Cautionary Statement This presentation contains forward-looking statements. These statements, which express managements current views concerning future events or
Murphy USA Inc. 2
Cautionary Statement
This presentation contains forward-looking statements. These statements, which express management’s current views concerning future events or results, are subject to inherent risks and uncertainties. Factors that could cause actual results to differ materially from those expressed or implied in our forward-looking statements include, but are not limited to, the volatility and level of crude oil and gasoline prices, the pace and success of our expansion plan, our relationship with Walmart, political and regulatory uncertainty, uncontrollable natural hazards, and adverse market conditions or tax consequences, among other things. For further discussion of risk factors, see “Risk Factors” in the Murphy USA registration statement on our latest form 10-K. Murphy USA undertakes no duty to publicly update or revise any forward-looking statements. The Murphy USA financial information in this presentation is derived from the audited and unaudited consolidated financial statements of Murphy USA, Inc. from the years ended December 31, 2013 through
- 2017. Please reference our most recent 10-K, 10-Q, and 8-K filings for the latest information.
If this presentation contains non-GAAP financial measures, we have provided a reconciliation of such non- GAAP financial measures to the most directly comparable measures prepared in accordance with U.S. GAAP in the Appendix to this presentation. Christian Pikul, CFA Senior Director, Investor Relations Office: 870-875-7683 Christian.pikul@murphyusa.com
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The convenience store industry and players continue to evolve
Notable Firms Objectives
- Customer
Acquisition
- Product
Introduction
- Customer
Acceptance
- Proof of
Concept
- Buc-ee’s
- Walmart
Neighborhood Markets
- Customer
Retention
- Product
Expansion
- QuikTrip
- Wawa
- Customer
Attrition
- Product
Competition
- 7-Eleven
- EZ Mart
- New Strategy
Implementation
- Product
Extinction
- The Pantry
- Getty
- Amazon Go
- Filld, WeFuel
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3. EXPANSION
- 2. EMERGENCE
4. CONSOLIDATION
- 1. / 5.
EQUILIBRIUM
- Firms with the same format compete
- A new format emerges
- Concentrates first on the most
switchable customers
- New format enjoys extraordinary profits
- Others seek to imitate and/or expand to new markets
Conceptual Framework of Retail Format Evolution
- New format moves up market
- New-format players compete among
themselves
- New format dominates
Retail format evolution occurs in a predictable manner
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7-Eleven
Winners and losers by format emerge
Hypermarkets
Supermarkets and mass merchants with small-box forecourts Strength: Low fuel prices and integrated loyalty programs/ promotions tied to in-store purchases
Big-Box C-Stores
Large stores with comprehensive offerings including food offer Strength: Destination for merchandise offer supported by low fuel prices
Kroger Safeway Costco Murphy USA CST Couche-Tard (Circle K) QuikTrip Wawa Sheetz Sunoco
Stand-alone public peer
Consolidation Model
Franchises with distinctive C-store brand and capabilities Strength: Store uplift from franchise and scale advantages that support acquisition premiums Susser (Stripes) The Pantry Walmart 784 C-Stores EG GPM Empire Speedway Casey’s
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MUSA has transitioned to the maturity phase since spin
Metrics Focus
- First stores in
front of Walmart
- Positioned as
low-cost fuels retailer
- Pilot
Economics
- Market
Launch
- Rapid Growth
- f >100 stores
per year
- Expansion
strategy
- Kiosk
evolution
- Unit
Growth
- Volume
per Store
- Operating
discipline
- Format
evolution
- Contribution
- ptimization
- Customer
loyalty
- EBITDA per
Store
- NTI ROIC
- EPS growth
- Portfolio/G&A
rationalization
- Margin
maximization
- Cash
generation
- Total
Shareholder Return
- ROACE
- Acquire Capabilities
for new format entry?
- Expand into
Adjacencies?
- Harvest Terminal
Value?
- M&A Accretion
Potential
- Free Cash
Flow Dividend 1996 2007 2018 1999
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Investor sentiment has shifted accordingly
12/31/2013 12/31/2017 14% 32% 48% 6% 14% 18% 14% 54% Investor Praise
- Consistent Strategy for Long-term
Value Creation with Tangible Proof Points
- Disciplined Capital Allocation
- Credible Management Team
Investor Concerns
- Competitive Impact on Fuel Volume /
Merch Traffic
- Margin Volatility and Stability of PS&W
+ RINs Contribution
- Future Value Estimation? How to
Maximize Terminal Value? Growth GARP Value Blend Percent of Outstanding MUSA Shares Owned by Investor Type
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Lifecycle stage informs capital allocation decisions
Growth
- Quality versus quantity of
stores important to investors
- Returns drive capital
allocation
- Internal investments in
productivity can generate strong returns given the force multiplier of a large network Earnings Growth
- Organic growth through
new stores
- Improvements to the core
business: – Lower cost structure – Margin optimization
- Scaling corporate costs to
leverage growth capital
- Share repurchase
leverages EPS potential Shareholder Distributions
- Competition for capital
balances growth and repurchase opportunities
- Volatility makes
commitment to meaningful dividend difficult at this stage of lifecycle
- Internal efficiency
improvements will drive greater future shareholder distribution potential
Capital Allocation
MUSA Capital Allocation Focus
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Raze and Rebuild Program
- 32 sites completed through 2017 with goal of up to 25
stores in 2018
- Kiosks replaced with 1,200 sq ft stores along with more
dispensers and increased fuel offer
- Given the premium locations, we estimate per site
unlevered IRR’s between 15% and 35%
Mature firms must continue to reinvest in their assets
After 6 months
+10%
Baseline (Prior FY) 443,338 403,184
APSM Fuel Gallons*
After 6 months $159,350 $188,011
+18%
Baseline (Prior FY)
APSM Merchandise Sales $*
* 2016 & 2017 Raze & Rebuild Class Average
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Murphy Drive Rewards is a customer appreciation program that:
- Engages and motivates current
customers
- Attracts new customers
- Incentivizes all customers
to buy more fuel and more merchandise
And innovate to grow customers
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While remaining disciplined with capital allocation
$139 $216 $264 $274 $52 $248 $323 $206 $587 2014 $480 2016 2015 $191 $464 2017
Capital Allocation ($MM)
2014 - 2017 48%
Retail Maintenance Capital
8%
Corporate Capital
5%
Retail Growth Capital
39%
Share Repurchases
Capital Allocation
2014 - 2017
Share Repurchases Capital Expenditures
$829 4-Year Total $1,722 $893
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MUSA has become distinctive for increasing its productivity
EPS Growth Organic Growth Fuel Contribution Fuel Breakeven Shares Outstanding
5% unit growth
- 67 new sites; 10 R&R
- 300 refresh; 180 super
coolers
2016 Proof Point Corporate Costs
* +
- /
MUSA Value Creation Drivers 2017 Proof Point
3% unit growth
- 45 new sites; 21 R&R
- 300 refresh; 244 super
coolers 5% contribution $ growth
- +1.7% volume growth
- 15.4 cpg total margin
- 3.8 cpg from PS&W/RINs
Reduced to 1.3 cpg from 2.3
- +120 bps merchandise
- +11.2% merch contrib $
- -4.1% site opex* APSM
Repurchased 4.9M shares
- $323 million of capital
- 11% of shares outstanding
SG&A per store down 10%
- $6.6 million decline in
total SG&A
- Tax-efficient non-core
asset sale
*Site Opex excludes credit card fees **SG&A per-store excludes stock-based compensation; 2017 proof points exclude $10mm charitable contribution
4.7% contribution $ growth
- -1.3% volume growth
- 16.4 cpg total margin
- 2.4 cpg from PS&W/RINs
Reduced to 1.2 cpg from 1.3
- +50 bps merchandise
- +4.7% merch contrib $
- -2.6% site opex* APSM
SG&A per store up 3%
- $8.5 million increase in
total SG&A**
- Investing in people and
capabilities Repurchased 3.0M shares
- $206 million of capital
- 8% of shares outstanding
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The business is resilient, but not immune, to headwinds
Tobacco
- Managing decline curve
in cigarettes
- Taxes accelerating
decline in volumes Non-Tobacco
- Managing decline curve
in CSD’s
- Consumer spending
- Beneficiary of tax
reform (25% v 38%)
- Higher FCF to deploy
- Industry unlikely to
compete away benefits Labor Costs
- FLSA
- Minimum Wage
Increases
- Lower unemployment
rate
- Wage inflation
Refined Products & RINs
- Product flow patterns
shift across value chain
- Regulatory and political
uncertainty with RFS Tax Reform
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Macro industry fuel trends are favorable near-term
Mileposts
2025 CAFE Short-Term Long-Term EV VMT Autonomous
- VMT highly correlated
with GDP
- Tax reform boosting GDP
growth
- Production ability and
adoption rates volatile
- Dependent on tax
subsidy
- OEMs fear being left
behind if India and China leapfrog US
- Trump says current
CAFÉ targets too aggressive
- Consumers and
manufacturers abandoning sedans for less efficient SUVs
- Innovators are agnostic
between EV and ICE
- Safety issues could
impede pace of consumer adoption
2027 Fuel Demand (2017 Estimate) (Light Duty, Indexed to 2016) 1.70% 99.3% 99.8% 103.1% 1.45% 96.6% 97.2% 100.3% 1.20% 94.0% 94.6% 97.6% 49.7 44.5 37.0
1 2 3 2027 CAFE Standard VMT Growth (%/year)
MUSA States
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- Murphy USA is uniquely positioned as a
low-cost fuel and convenience retailer
- Our strategy to compete has five coherent
elements: – Grow Organically – Diversify Merchandise Mix – Sustain Cost Leadership Position – Create Advantage from Market Volatility – Invest for the Long-Term
- Our business model is resilient to, and takes
advantage of, volatile market conditions
- Our independent growth plan combines
efficient unit-growth and shareholder-friendly capital allocations
- Murphy USA has a proven track record of
execution since our 2013 spin-off
- We believe we have a very bright future ahead
Murphy USA continues its proven and differentiated strategy
MUSA Relative Stock Performance
Indexed From Spinoff to April 27, 2018
Murphy USA Inc. S&P 500 Index S&P 400 Midcap Index
120 140 100 200 220 160 180
Q3, 2013
Spin
Q3, 2017 Q4, 2015 Q4, 2017 Q4, 2016 Q3, 2015 Q1, 2016 Q3, 2016 Q1, 2018 Q2, 2017 Q2, 2016 Q2, 2018 Q1, 2015 Q2, 2014 Q4, 2013 Q3, 2014 Q2, 2015 Q4, 2014 Q1, 2014 Q1, 2017
170 179 165
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Through our formula, we continue to build a bright future
Corporate Costs
* + − /
MUSA Formula for EPS Growth
Commitment to Share Repurchase Modest Organic Unit Growth Sustained Operational Improvements High EBITDA and FCF per Store Disciplined Capital Allocation
MUSA Value Creation Drivers Shares Outstanding Fuel Breakeven Fuel Contribution Organic Growth EPS Growth