Q3 2019 Earnings Call
Welcome to the Murphy USA Inc. third quarter earnings call.
As time, all participants are in listen only mode. After the speakers presentation. There will be a question and answer session to ask a question during the session you'll need to press star one on your telephone if you require any further assistance. Please press star zero I'd now like to turn the call over to your speaker today Senior director of Investor Relations.
Christian Pikul. Please go ahead Sir.
Great. Thank you good morning, everyone. Thanks for joining us today with me as usual, our Mr., Andrew Clod, President and Chief Executive Officer, Many West Executive Vice President and Chief Financial Officer, and Donnie Smith, Vice President and controller.
After some opening comments from Andrew Mindy will provide an overview of the financial result, Andrew will close with a little discussion on our guidance and then we'll open up the cold culinary.
Please keep in mind that some of the comments made during this call, including the Q and a portion will be considered forward looking statements as defined in the private Securities Litigation Reform Act of 1995 assets no assurances can be given that these events will occur or did the projections will be attained.
All righty of factors and just that may cause actual results to differ for further discussion of risk factors. Please see the latest Murphy USA forms 10-K, 10-Q, 8-K, and other recent FCC filings Murphy USA takes no duty to publicly update or revise any forward looking statements. During today's call. We may also provide certain performance measures that do not conform to gen.
Really accepted accounting principles were gap.
Provided scheduled to reconcile these non-GAAP measures would reported results on a GAAP basis as part of our earnings press release, which can be found on the investor section of our website with that I'll turn it over to Andrew Thanks, Christian Good morning, and thank you everyone for joining us today.
For your say delivered in my view one of its best quarters since our 2013 spin as we demonstrated continued progress toward our longer term goal of maximizing shareholder value through productivity improvements high performing new store growth and balanced capital allocation.
Q3 was rewarding and fulfilling both financially and strategically financially with third quarter adjusted EBITDA of $159 million. The company fired on all cylinders in October results suggest the strength will continue into the fourth quarter strategically the results are underpinned by the hard work of our teams.
Investments, we've been making in our business to build capabilities that position Murphy USA for success over the long term.
Well these capability building investments will continue to generate benefits over time, the impact was very evident in the third quarter as we once again so.
So strong year over year comps in fuel when merchandise.
Q3 fuel volumes grew 2.7% year over year on same store basis, and 3.6% on an average per store month basis, representing the fifth straight quarter of same store growth.
Total fuel contribution dollars showed a 31% increased to $225.6 million as we successfully achieved both volume and unit margin growth through our retail pricing excellence tactics, well the fourth quarter will be a difficult comp from a margin perspective, given the roughly 75 cents per gallon fall off in Q4.
Our last year, we continue to see year over year volume improvements in October at good margins.
Merchandise improvements were just as impressive as total contribution dollars grew 6.4% to just over $111 million with strength in both tobacco and non tobacco categories. We continue to take share in all tobacco categories with higher unit volumes driving increases in both sales and margin dollars, which.
Were up 10.3% and 11.3% respectively.
Total margin dollars were up 3.1% and non tobacco categories with strength in general merchandise snacks and beer.
Murphy drop rewards enrollment continues to climb reaching 2.6 million enrolled members at the end of the third quarter with another 8 million participants who can still access value on certain tobacco programs and we said in prior calls customers continue engage with the program and we're seeing early signs of behavior changes, including.
Trips more gallons purchased and higher merchandise sales.
As projected in our last call operating expenses on a per store base has moderated significantly from the 7.6% increase we saw in the second quarter two a more normal 1.7% increase this quarter, we continue to see benefits from various maintenance initiatives and prophecies, resulting in less frequent dispatches in.
Lower cost per dispatch on average.
As a result, a higher fuel volumes and higher merchandise contribution partially offset by higher operating expenses, we improved our fuel breakeven metric 35 basis points 2.18 cents per gallon the lowest quarter on record in a significant milestone on our way to our zero breakeven go we.
Added five new stores in the third quarter, bringing the annual totaled a seven and the network totaled 1400 79 stores. We currently have seven stores down for raze and rebuild that will return of 1400 square foot stores prior to year end.
If you look at the same store figures, which include all stores in service as at December 31st 2017 versus the average per store month figures on page eight of our earnings press release, you will see that the newer class of stores built in 2018 in 2019 are providing higher gallons and merchandise.
Sales, meaning they are accretive to the network averages.
This reflects the benefits from improving our site selection capabilities in as a positive early indicator of the strength of our 2800 square foot format, which will represent the bulk of our new stores going forward.
As a management team, we're more confident than ever of our ability and potential to improve profitability and drive shareholder value. As a result, we've continued to invest in ourselves as we see the benefits of the new capabilities. We are building for the future.
To facilitate these investments we flex the balance sheet and stepped up our repurchase activity deploying $109 million in the third quarter, reducing the share count by roughly 1.2 million shares many will share more on this in our highly successful debt restructurings.
As you can see on the income statement and balance sheet every part of the business strengthen in the quarter.
What made the quarter, even more fulfilling was that it didn't result from some of them or externality like a hurricane or an oil shock highlighting the earnings power in cash generation ability of our business. This quarter also set the thought well to finished 2019 in good shape and I'll provide an update on our 2019 guidance after Mindy takes us.
Through the quarterly financial review and with that I'll turn it over to Mindy. Thank you Andrew and good morning, everyone.
Revenue for the third quarter was 3.7 billion versus 3.8 billion in a year ago period. The slight revenue decline is attributable to lower retail gasoline prices, partially offset by higher fuel gallons sold and higher merchandise sales.
Average retail gasoline prices per gallon during the quarter where $2.38.
Versus $2.61 in 2018.
Adjusted earnings before interest taxes, depreciation and amortization or EBITDA was 158.7 million versus 105.2 million and 28 team.
Adjusted EBITDA for the third quarter was higher than a year ago period.
Early due to higher fuel and merchandise contribution partially offset by higher total operating expenses and higher S. DNA.
The effective tax rate for the quarter was 24.2% versus 21.1% in a year ago quarter and as stated in a press release, the lower right in the year ago quarter was due to a discrete tax item related to excess tax benefits from share based payment.
During the quarter, we did take advantage of favorable market conditions and executed several transactions to further strengthen our balance sheet.
First we called our 500 million, 6% coupon notes due 2023, and Ray issued 500 million of new notes with a 4.75% coupon do 2029.
Additionally, we renewed our ABL facility for five years and lowered the facility capacity, that's 325 million, which is advantageous to us as we rarely asbestos line and dropping the facility size allows us to lower our overall fees.
We also took the opportunity to renew and top up our term loan extending the maturity from March of 2020 to August of 2023.
Given our improved financial performance and strength of our balance sheet, we felt comfortable increasing the term loan facility from 200 million to 250 million.
The current time 200 million is drawn on that facility.
In connection with the term loan we also implemented a library heads by entering into an interest rate swap on 150 million of principal over four years.
This transaction effectively locks and I write lower than the current LIBOR rate and also locks and and all in costs lower than our high yield issuances.
The boundary issuance did result in a loss on early debt extinguishment of 14.8 million, but will result in annual interest savings of six and a quarter million.
Additionally, bundling the term loan and maybe all transactions resulted and transaction fees savings, while also locking in more favorable rate, while we lengthen our maturities.
The intent behind these transaction is to add appropriate leveraged to the balance sheet increased covenant flexibility and minimize interest expense in order to provide adequate liquidity for general corporate purposes purposes, including share repurchase.
As a result of these transactions total debt on the balance sheet as of September . The Thirtyth was 988 million and was broken out as follows long term debt of 966.4 million, primarily consisting of 493 million carrying value of our 4.75% notes due 2020.
Nine 296 million carrying value of five in five eight notes due 2027, and 180 million remaining on our 200 million dollar term loan and in addition, we're carrying 20 million of expected amortization under that term loan and current liabilities on the balance sheet.
These figures result in an adjusted leverage ratio, which we report to our lenders of approximately 2.1 time.
Our new Abbey all facility is in place with a 325 million dollar cap subject to periodic borrowing base determinations, which currently limit us to approximately 258 million as of September 30.
At the present time not facility as Undrawn.
Cash and cash equivalents totaled 248 million as of September thirtyth, resulting in net debt of approximately 740 million and there were 30.8 million common shares outstanding at the end of the second quarter.
Capital expenditures for the quarter, where approximately 69 million about 45 million of watch west for retail gross the remaining 24 million consisted of maintenance general corporate and strategic initiatives, including our SMB program, where we expect to spend about 50 million this year.
Our year to date capital spend as roughly 159 million.
Just saying that we will still execute a total capital budget between 225, and 275 million for the full year and we are likely to end up closer to the midpoint of that range.
That concludes the financial update so I'll now turn it back over to Andrew. Thanks, Mindy as is our custom on this call I'd like to wrap up with a quick update on where we expect to end the year relative to our guidance as announced in January .
Starting with organic growth, we look to close out 2019, with 15, new stores and likely 27, raze and rebuilds, putting us within our guided range a total store projects for the year.
From fuel volume perspective, we have averaged a little over 250000 gallons per store month through the third quarter, putting us on track to exceed or guided range of 240 to 245000 gallons per month.
Merchandise contribution dollars totaled $314 million through the third quarter, putting us on track to exceed our guided range of $410 million to $415 million.
Due to a spike in second quarter as we implemented some new maintenance transformation initiatives and other cost retail station Opex, excluding credit cards for the full year will come in closer to a 3% increase above the guided ranges zero to 2% increase.
They will likely be toward the lower end of the guided range of $145 million to $150 million. We believe that effective tax rate will also be toward the lower end of the guided range of 24% to 26% and our capital spend will also come in between the low end the midpoint of our guided range of $225 million to $275 million.
Yes.
We specifically did not provide guidance around anticipated fuel margins or any financial metrics, including net income or adjusted EBITDA.
However, when we first discussed our 2019 guidance in January of this year, we said that at a 16 cents per gallon Olin fuel margin in the midpoint of all other guided metrics, we would expect to generate about $405 million of EBITDA.
Given that we are performing better than our guided range in several key categories. It would be prudent to conclude that a fuel margins maintain current levels around 16 cents per gallon through year end, there would be a better than average chance that adjusted EBITDA would come in above $405 million.
A key takeaway from 2019 is that we don't need a major natural geopolitical or macro event to generate a 16 cents per gallon fuel margin and the associated level of financial performance from the business and certainly while anything can happen in the next two months to change the current trend long term investors only need to look at our.
Rolling 12 month EBITDA to gain comfort about the earnings of this business.
I will remind everyone. The intent of revising our guidance this year and excluding a fuel margin forecast was to refocus investor conversations on elements that are more important for long term value creation than short term margin focus and we believe we have had better discussions with investors were.
Well so going forward, we expect to continue this practice.
The success of our business is not dependent on consistently higher and higher and higher fuel margins, rather our ability to continue to generate sustainable top and bottom line productivity gains across our operations, increasing contribution dollars from both fuel and merchandise and to build economically viable hyper.
Forming stores that are accretive to our network average.
Given our belief that we can do those things we have the confidence to continue to invest in both growth initiatives and share repurchases to create future value for our shareholders today and in the years to come in on that note. Operator, I think we can open up the call to Q Anite.
At this time I'd like to remind everyone in order to ask a question. Please press star followed by the number one on your Touchtone keypad again, if you'd like to ask a question Press Star then one on your Touchtone keypad, we'll pause for a moment, what we compile the key when a roster.
And your first question comes from the line event revenue from Stephens Go ahead. Please your line is open.
Thanks, Good morning, everyone.
Hi.
Kind of a multipart question.
One if you can elaborate at all give us an update on MTR and its contribution.
Quarter.
In particular.
I think that we saw in tobacco in the quarter was MDR contributed to that.
And along the same lines I know, there's been a lot of head around headlines around Dave.
What degree did that play into the results in the quarter and kind of frame up the exposure that you guys have in that business.
Sure. So on on MDR I would say it benefits in a number ways certainly on the tobacco side.
We had begun a well over a year ago to participate in manufacturer loyalty programs by which having a unique identifier number allowed us to gain those benefits and that was a really strong contributor and so MDR builds on top of that program with that same number and if you think about.
Those 8 million participants that aren't fully enrolled members.
You could argue that that is that program continuing.
Without having to give them additional MDR related benefits, meaning earning on the tobacco.
Burning on on fuel I.
I think the real upside in tobacco categories is gaining that sticking this from those.
Participants with those members when those programs roll off as they do from time to time, because they're not going for the full.
12 months and then the demonstrated ability we've shown ourselves and manufacturers that we can target very discreet customer behaviors and focus marketing dollars only owned behaviors that we want to change the not overly award other changes and there's a lot more upside.
Come from that as we learn how to do that better and better and with scale and more.
Automation.
So I hope that addresses the question on that front I think on the fuel side.
There's.
Clearly benefits there.
We talk about our path to purchase and so with higher fuels volume some of that attributed MDR a lot of it attributed to our retail pricing excellence initiatives as well that then supports more.
Customer's going to the pump and then going into the store as well.
As it relates to to vapor, we certainly havent seen any headwinds yet from the announcements that have come out in fact as part of some of our mitigating efforts around one of the brands in particular, we introduced a third manufacturer.
Product line that had a lot of promotional dollars associated with that.
And it sold through very well, but it was an end to.
The increases that we were already seeing so this is something we're watching very very closely we're a big supporter of the tobacco 21, we have already had.
Well above industry average in terms of AIDS compliance and a further raise the bar on what we do in terms of compliance in our stores. So we want to be one of those responsible.
Retailers with respect to this product.
Category.
Okay and then.
Maybe a question for you I know in the past, we've talked about kind of trying to honing in on achieving this.
Optimal balance between.
Fuel gross profit on the cents per gallon line and gallons.
Where do you think you are in that journey.
What does threeq to say about kind of how you manage that balance.
That's a great question, Ben and we have been evolving our feels pricing capabilities for I guess really a year now so the last four quarters every single successive quarter, we have dunmore and learned more about what we're doing which is allowing us to price every store optimally I think what we.
Saw and the first six months of the year, we were certainly emphasizing volumes because quite frankly, we have been giving up volumes.
For the past several years and we needed to make a stand and take that back I think what you saw on a third quarter is a continued emphasis on volume, but also tried to do it in a very smart way. So that we can also optimize the margin impact at the store as well because obviously at the kind of volumes that were generating if we can just make a.
One to two cents improvement in a quarter and the margin that we're getting it makes a meaningful impact to the result, so I would say that were not all the way where we want to be yet we realize that this is a marathon and not a sprint and so we are working to really create an enduring capability and feels pricing that we can apply consistently.
Across the network. So I would say, yes, optimistically, where maybe just halfway there. So I think that we have still not yet uncovered all that we can do and then there's also things that we can do not just with regular unleaded diesel and other products that we sell to continue to refine those capabilities too so.
The improvement is certainly not over from my point of view.
We have been I'd add one other thing as well I mean people use the word you know strategic pricing and price optimization very very.
Loosely.
Our pricing strategy has and continues to be we are going to be the everyday low price retailer.
In the eyes of our consumers and others.
Have abandoned.
That position for higher margins or were they recognize that are making different trade offs associated with that theres no lack of clarity into what our consumer facing strategy is but the price optimization is very.
Critical in terms of store by store in every type of environment, what is the right price point and differential to achieve that in the eyes of.
The customers that then optimize the volume and the margin, we're getting and I think what we're able to fine is that we're able to get both volume and margin doing that effectively across every store in the marketplace and my hats off to Mindy and luster train and the team that have put.
This magnificent capability in place.
Okay, Great Thats, great detail, congrats and best of luck.
Your next question comes from the line of Bobby Griffin with Raymond James Go ahead. Please your line is open.
Good morning body. Thank you for taking my questions and congrats on a great quarter.
Thanks, Bobby and I first I just wanted to go back to the commentary around tobacco and the strong comps for the quarter do you have a sense of what the industry did from a dollar spaces in the tobacco category over Threeq, you can get a sense of how much market share.
You guys were able to take in the quarter and then secondly on top of that what was the biggest driver of of the strong comp was it MDR traditional combustible tobacco cigarettes can you maybe help.
Parse out some of the drivers of the comp itself.
So I think certainly on the cigarette side I think are.
You have numbers suggest the industry is down in that six to seven.
Percent range on on volume and Thats kind of in the trend for the last.
Couple of quarters so.
It's definitely a share gain on our side.
Look we really started arresting.
This trend of declines on our side back when we introduced.
The we call that are quick cat program in.
2017.
Towards the end today that year, and we saw started seeing a reversal in so being able to participate in those programs get the since off.
Per pack important.
We are critical and we started gaining back share at that point and I.
I think our timing and.
Tactics, we've chosen about what months to be and Thats been a big part of that.
MDR allows you to just do that within the App and as I mentioned for the 8 million participants are largely.
Doing that but they're also building up points that one day, they could burn MDR creates additional stickiness.
For those customers doing that as well as they're getting targeted AD. So I think that say.
An important into that program, especially.
When it rolls off Weve like our fuel pricing, we have enhanced tobacco pricing capabilities as well and we do this on a store by store basis and the teams gotten really smart about when their price increases where we invest in what states and as you probably all know there's.
Certain states that have state minimum prices, where you think about the tactics differently in those states versus states that don't have the same.
Regulations or certain.
Brands.
Within our portfolio of products that we've made specific choices around investing in with our manufacturing partners and those have been really significant.
And certainly don't underestimate, 3% fuel volume growth driving traffic to the store for five quarters.
As as well as we mentioned on the vapor side, we did introduce a third manufacturer and it was in addition, so we had significant sales and margin contribution from that.
On top of the continued growth we saw.
In the existing vapor products that we had so you know really Bobby I'd say, it's no one thing it's a combination of all of those things.
Playing together, we're certainly watching some of the.
Legislation that's been introduced.
In the house this being discussed that has in locations for vaping products menthol bands on.
Cigarettes et cetera, as we lay out our 2020 plan.
Knowing that we've got levers to offset that and parts of our business as well so paying a lot of attention to the current environment.
I appreciate that detail and then on the.
Get margin side of things are you starting to see the the drag from India are starting to dissipate a little bit I believe as a 40 basis point drag in Twoq you is it a little less than Threeq you.
It's about the same.
And I think as we continue to get smarter and more efficient in terms of how we.
Reward customers will be able to do that theres transactional points and there is non transactional points and so as we think about year one in terms of.
Promoting MDR and getting customers to sign up and go through full enrollment.
Et cetera, there's.
I would say, probably a higher level and non transactional points.
In there and so we'll be able to find ways to continue to optimize that while maintaining the benefits and in the fun of the program that we've got for our customers.
Okay, and then enter this lastly, more kind of a high level question, but on the tobacco category sounds like as we roll through some of these entry level sell lens and NDR. Some of the work you guys have been doing participating and more them manufacturer programs when we get into more of a steady cadence of that business with down 6%.
Volumes and then price increases what is a normal comp look like is it a low single digit comping environment, because you're taking market share is it a flattish comping environment any anything to help us frame up that once we're in a more normalized state.
Yes, I think is too early to tell to be honest with you in there just too much noise out there in terms of what the.
Regulatory legislative environment is on this.
This particular category in the sub categories.
We continue to see innovation, especially around.
The the safer side of the continuum of risk as the manufacturers.
Just.
Describe it.
We've been a big part of the Ikonos rollout.
In Atlanta, and we will know more about an icon customer.
Buying the small cigarette components, the refills than any other retailer.
Out there and what they were buying before what else are buying in addition to on a longitudinal basis and so I think we're going to continue to see innovation in those products and I believe we're going to continue to see.
You know more support and marketing towards retailers that can provide the level of insights that help the manufacturers navigate through the current environment as well I think were.
Certainly differentiated if not uniquely positioned to help on that front.
Okay I appreciate all the details best of luck in the fourth quarter.
Thank you.
Yes.
Your next question comes from the line of Christopher Mandeville from Jefferies. Go ahead. Please your line is open.
Hey, good morning.
Andrew I apologize for the confusion am I am here, but.
Everything you've stated thus far this morning would suggest that MDR has been pretty notable contributor to the overall performance as a business model, but yet in the press release itself.
You introduced a comment stating specifically that same store sales metric that do not reflect the loyalty program.
I guess I'm, just hoping it some clarity there on high square those two.
Yes, so sorry for the confusion on that so.
Here's the way I would describe the discount you have a discount a deferral the discount to customers is reflected in all the numbers. The totals the same store sales the average per store month of $6 million.
This quarter. It was like 40 basis points for merged in 0.3 cents per gallon.
For fuel the deferral.
Shows up in the totals and is not in the same store in average per store month.
Metrics and that deferral number has been fairly.
Constant in total as members are now, earning and burning points at similar rates, which is a sign of effective program. So from an accounting standpoint, those were the various elections and accounting treatment that we chose to take so the discount is absolutely in the numbers its reducing contribution margin for both fuel and.
Merchandise and is supporting higher.
Sales volumes and total sales and ultimately total contribution dollars.
From that and I guess, one other point, you'll have the deferrals fairly constant we will make adjustments to it from time to time up or down based on the kind of actual Ariel.
Valuations that are done when we look at the value the points breakage.
It's that ROE.
So I hope that cleared up some confusion, we'll we'll do a better job.
Clarifying our footnotes in the future so sorry about that.
No Thats currently fine I appreciate that color there.
And then just kind of building off of that in terms of MDR I think in the past.
Correct me, if I'm wrong here, but you may have referenced that.
At the very lease to contributed maybe 2% two gallons. So I guess I'm still trying to.
Same up how much it's contributed to the in store dynamics.
Yes, and look we are.
Working.
Now with a longer better dataset and so I would expect.
You know kind of the beginning of the year, we give our 2020 guidance, we'll have much better insights.
From an attribution.
Standpoint on both fuel and merge.
I still believe the fuel volume improvements are in that 1% to 2%.
Range, knowing that the retail pricing excellence.
Tactics in initiatives.
Our supporting that as well and then we have new stores that are coming in at higher levels, and raze and rebuilds coming back online.
On the merchandise side.
At some point is if our customers entering their phone number the distinction between is it MDR or was it.
The former program.
Becomes frankly less relevant.
And so I think thats part of that ongoing trend.
That we see that supporting.
The tobacco numbers that we have and will be able to continue to do that.
What's incredibly valuable also is the data and insights that we can get so if you can imagine a world where you've got longitudinal data across members and products the ability to do consumer surveys that then you can attach to specific member behaviors.
Link that to category specific vendor specific SK use specific financial performance, you've got a wealth of insights to work with your manufacturing consumer package goods partners.
On how to steer the customers to create the most value for them for us and them and so significant value coming from that but I'd say look this is a and to a lot of the things that we're already doing.
On the tobacco side, we're certainly seeing a lot of stickiness on that front.
And we'll have a lot deeper insights on that at our next call given the body of work we've got going on.
Okay, and then just the last one for me.
I'd hate to nitpick, because there is alternate strong overall, but.
The non tobacco comps they did slow just touch on the two year basis, the margin comp contribution actually turned slightly negative and then on a percentage basis. It appears as though we're still seeing some pretty notable pressure in the category. So can you just provide some additional color there and what's going on is is that just a strategic to say.
On your part.
Maybe push greater value and help to drive.
A larger basket overall or greater traffic in general or is that some type of competitive or cost pressure.
Yeah, I'd say that apply to categories that really stand out on the non tobacco side.
Candy as one of those where we've just I'll be honest with you. We haven't had the same amount of promotional.
Intensity.
On that given at some point you can only ask your store associates to focus the customer on.
So many things and having them focus on MDR.
Was the top priority and they knocked it out of the park over 90% of MDR members say they learned about the program through their engagement with the sales associates, we've been doing some campaigns to drive participants to members without.
Paying any additional points to do that but just running contest with our store managers and associates because they can see when a customer comes in who's a participant they got a thousand points lets encourage and have become a member and they've been able to move that.
In October we decided hey, let's go back and put some emphasis behind candy, we said, we'd have a contest to sell over a million candy bars, we blew that number out of the water and so I think it's getting back to focusing on that given there's really only so many things you can put.
Level of intense focus on and so I would expect in Q4 that number to improve.
The other category and only represents the stores that have the ability to sell dispense beverages, but we have been investing in that to grow that category.
Lot of our customers will raze and rebuild of store, where we've got to get them in the store they need to see that we've got a much larger center store selection dispense beverages coffee IC.
Et cetera, and so we did make some.
Promotional investments in those categories. So I think those two things explain.
A big chunk of it.
And we should see some improvements in those.
Perfect I appreciate the color and best of luck in the rest of year.
Thank you.
And again as a reminder, if you'd like to ask a question. Please press Star then one on your Touchtone Keypad. Your next question comes on line of John Royale from JP. Morgan Go ahead. Please your line is open.
Hey, good morning, guys. Thanks for taking my question really impressive quarter.
Thank you so on the fuel margin.
Previously talked about a 14 to 16 long term range.
If you mentioned this quarter you didnt have any big external event that drove the 20 cents plus margin.
Be it in kind of a seasonally strong quarter, but I'm. Just wondering if you think that long term ranges structurally higher at this point given the initiatives you guys.
Yeah, well I guess the first thing is we're not providing that long kind of term range, but if you think about.
What we see.
In the environment with higher.
Credit card fees certainly this year, if you look at the fuel breakeven requirement of the second third and fourth cortile retailers from the NAC surveys their costs going up specifically if you look at some of the comments made by some of the grocery and cost club a retailers.
Around this theres certainly.
A lot of.
Of kind of anecdotal evidence that would suggest there's going to be future upside.
Our pressure.
To move to move to move margins.
In that kind of environment, So look as an everyday low price retailer where price takers in the marketplace and will defend that.
Position, but certainly if too.
Those factors.
We're able to capture more margin maintain that position and maintain or grow volume.
We're going to do that and so I look back to say what are the structural factors.
That underpin that and there's a lot more structural factors Cushing.
Towards higher margins.
Than than lower margins.
Okay. Thank you and then.
On the buyback just thinking about the front loading of the 400 million dollar program.
During the quarter was a big number of it seems relatively in line with the net cash you took out from that refinancing.
So I guess my question is if you put aside how the equation might change from the move in the stock today.
Always to slow the pace at the three Q.
Would you be drawing down cash.
Okay.
Im sorry can you repeat the last part of the question it kind of broke up.
Yeah, sorry, just to cut off headset so.
The last part was.
If you put aside the fact that the stock is up.
80% plus today was with the idea always to.
Slow the pace after three two of the buyback or would you be potentially drawing down cash to have maintained fan base.
So we're not going to provide guidance on the timing of any share repurchase I think over the course of the year, we've talked about what do we have to do to maintain a 14%.
Compounded annual return on our share price to maintain what we've done in our first five years and we talked about what we need to do that for the next five years and affordable.
To do that.
You know even at this this level that looks attractive over the long run we're going to be.
As savvy as we can and try not to get to cater to smart.
About our buybacks, but certainly.
Wanted to get out in front of the 400 million dollar.
Program.
Board authorized.
And.
We will come back in February and report on what we did in Q4.
But balance sheet capacity on the balance sheet allows us to do as much as we want whenever.
We want to to do that that's not a limiting factor.
Great. Thank you.
Your next question comes from the line of Carla Casella with JP. Morgan go ahead. Please your line is open.
Hi, Thanks for taking the question. This is our Clark on for Carla I was wondering if you could give some more color on the sequencing from month to month of gas prices and fuel margin.
Uh huh.
Yes, I would just say look I'm not going to get into every single month, but.
Fuel prices and gas margins work inversely so prices go down.
Our margins are wider and when prices go up or margins are smaller and so if you track since the beginning of time.
Fuel prices, you'll see that pretty good correlation.
With with margins so.
I don't really know what else to the say this is a good quarter in the sense, but.
We had kind of more.
Seasonally normal.
You know.
Downside movements and prices than upside Lucky typically seen Q Warner Q2.
Got it. Thank you and then do you see any impacts of the storms on you more competitors.
And what particular region we've.
We've got a lot of storms all over the all over the place right such as Texas.
Yes, I mean look not nothing abnormal and we have a network of almost 1500 stores.
We had of flooding in a couple of stores and they're back up and running pretty quickly, but it's too small and number two.
To really move the needle it really didn't affect the supply environment, so unless you're going to have something like a.
Harvey or a michael or an arm or something like that.
It's really going to get lost in all the other things that are going on and also Sarah as we saw similar to last year with the peak of Hurricane season, we didn't really see any storm switching and looked at major damage on infrastructure. So that that would have been the case, what you would've seen a more meaningful.
Detriment to our result, we just saw the normal pre buying and then the slowdown during the storm and then it gets back to normal pretty quick.
And with that there are no more questions I'd like to turn it back over to Anderson for for some final comments.
Great well. Thank you for joining todays call as I said this was a very rewarding in fulfilling quarter for us and really want to thank our our team.
This has been a investments that they've been working hard on.
For the last two to three years to really.
Position Murphy USA for the long term, so well done to the team and thank you all for joining.
Ladies and gentlemen, this does conclude today's conference call. We do thank you for your participation you may now disconnect.
For.