Murphy USA Inc.

prevent any background noise after the speaker's remarks there will be a question and answer session if you would like to ask a question during this time simply press star followed by the number one on your telephone keypad if you would like to withdraw your question again press star one thank you christian pico vice president of investor relations you may begin your conference

Great. Thank you, Cheryl, and good morning, everybody. Thanks for joining us. With me, as usual, are Andrew Clyde, President and Chief Executive Officer, Mindy 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 results. We will review our 2022 guidance, and then we will open up the call to Q&A. Please keep in mind that some of the comments made during this call, including the Q&A portion, will be considered forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. As such, no assurances can be given that these events will occur or that the projections will be attained. A variety of factors exist that may cause actual results to differ. For further discussion of risk factors, please see the latest MurphyUSA Forms 10-K, 10-Q, 8-K, and other recent SEC filings. MurphyUSA 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 generally accepted accounting principles or GAAP. We have provided schedules to reconcile these non-GAAP measures with the 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 will turn the call over to Andrew.

Thank you, Christian. Good morning and welcome to everyone joining us today. 2021 was a record year for Merck USA, and our advantaged, everyday low-price business model continues to position us to win in this environment. Our performance is a direct reflection of intentional decisions to lean into our low-priced positions to benefit customers and drive volume to our stores to capture higher structural margins, which led to a record fuel contribution of $1.1 billion and over $700 million of merchandise contributions. This was particularly evident in the month of December, where Murphy volumes, excluding QuickCheck, were slightly ahead of 2019 and nearly twice the retail margin. We believe December and fourth quarter results are noteworthy as we transition from COVID and COVID recovery to a period of inflationary higher prices, which increasingly supports our ability to take share through our low price model and competitive pricing tactics. Our bottom of the market price position in fuel, tobacco, and other categories remains central to our driving long-term value. First and foremost, the Murphy USA brand has been built on value. As stewards of our brand and reputation, we seek to responsibly over-deliver on our value proposition to customers and challenge our highly engaged store managers and associates to over-deliver versus customer expectations. Second, value conscious customers remain an underserved and growing demand segment in the marketplace. In our real estate positions, especially in front of Walmart, best position us to serve that customer. With rising inflation further pressuring disposable income across most demographics, a lower price fuel and merchandise offer will help attract that incremental customer who is seeking value. And last, in an environment where other retailers are facing increased cost pressure, our low-price model serves us as a highly efficient, low-cost method to acquire new customers and reward the loyalty of existing customers. Cost inflation was certainly evident across the supply chain and across the range of markets we operate in, where we are taking appropriate actions with our workforce to ensure we remain competitive in hiring new associates and keeping our stores well-staffed. We've expanded our sick pay and enhanced commission programs to keep store associates engaged in serving the customer and driving sales. While we are carrying some of these costs with us into 2022, we remain as vigilant as ever in our cost discipline mindset, which is critical in supporting our everyday low-price model. As we've said before, our low-cost model becomes further advantaged during periods of wage inflation as more labor-intensive formats are forced to pass through proportionally higher costs through the fuel margin, where we are well-positioned to disproportionately benefit from our lower costs and higher volumes. Versus many competitors, our company-owned real estate model is also a big advantage for us in a period of inflation. Because we do not pay cash rent in most of our locations, we are not subject to inflation adjustments on our occupancy cost. As a result of these trends, the company is generating strong operating cash flows, enabling our capital allocation strategy that prioritizes both new store growth and return of capital to shareholders. Additionally, our balance sheet is well positioned, given the earnings power of the business in the current environment, and creates incremental optionality around how to best deploy free cash flow. We remain committed to accelerating new store growth, and the team is working hard to push through the pipeline through permitting and supply chain challenges, and deliver up to 45 new stores and 35 raise and rebuilds in 2022. We have committed to increasing the dividend, not just in 22, but in the years to come, and to returning excess capital to shareholders through opportunistic share repurchases, which continue to be our highest return use of excess free cash flow. We will remain flexible in our capital allocation strategy, effectively utilizing the most accretive levers, which we are confident will continue generating shareholder value going forward. This call also marks the first anniversary of our QuickCheck acquisition, and I'm very proud to report our synergy capture is ahead of schedule and our view of the long-term potential continues to increase. As we have begun to incorporate Murphy's scale and thoughtful approach to business transformation, our excitement regarding the future potentials for both the Murphy and QuickCheck brands continues to grow. Moreover, our confidence that we made the right acquisition with QuickCheck has been validated through our due diligence of other M&A opportunities, none of which had the same quality of assets, the existing earnings power, or the future potential we see in QuickCheck. From a synergy perspective, we are tracking ahead of our internal schedule targeting $28 million of synergies over a three-year timeframe. Having achieved over 8 million of synergies in 2021, most of which is embedded in our record $1.1 billion of total fuel contribution dollars. The fuel synergies have come primarily from implementing the same principles we leveraged in our retail pricing excellence initiative within the Murphy Network, better understanding store-by-store demand elasticity and quick-check footprint and optimizing pricing tactics accordingly. Secondarily, we've been able to secure more favorable terms in renegotiating supply contracts while leveraging inventory management technology with our fuel carriers. Additionally, through leveraging scale with back office processing and the elimination of quick check executive and advisory board costs, we have achieved $2 million of G&A synergies. As we communicated early on in our integration messaging, our assessment of both direct and reverse merchandise and food and beverage synergy remained back-end weighted, but the opportunity set is growing. We have undertaken some important strategic work to better understand market dynamics, consumer preferences, and demand segments. This work helps to inform what we can and should do with the Murphy brand and, as importantly, what we shouldn't do. as well as identifying the greatest opportunities that exist within the QuickCheck brand. This body of work will help align our offer to customers within categories where we have the right to win while leveraging the distinctive strengths of each brand. These efforts will also inform our future NPI strategy and continue to generate in-store productivity improvements. I'll now hand it over to Mindy to review some financial items, after which I will review our 2022 guidance. Mindy?