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Murphy USA Inc (MUSA) Q3 2018 Earnings Conference Call Transcript


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Murphy USA Inc (NYSE: MUSA)
Q3 2018 Earnings Conference Call
Nov. 01, 2018 , 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. My name is Kim, and I will be your conference operator today. At this time, I would like to welcome everyone to the Murphy USA Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you. Christian Pikul, Senior Director of Investor Relations, you may begin your conference.

Christian Pikul -- Senior Director, Investor Relations

Hey. Thanks, Kim. Good morning, everyone, and thank you for joining us today. 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 give us an overview of the financial results and after some closing comments, 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 Murphy USA Forms 10-K, 10-Q, 8-K and other recent SEC 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 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'll turn the call over to Andrew.

R. Andrew Clyde -- President and Chief Executive Officer

Thank you, Christian. Good morning, and thank you all for joining our call. I'd like to start off by noting, this quarter is the fifth anniversary of our first earnings release in the third quarter of 2013. And as I review the results, it's really remarkable how much our business has improved since the spin. Detailing all our improvements would take too much time and put us well outside the scope of this call, but let me sum it up in three key points.

First, we took a strong cash flowing business and made it even better. We grew contribution margin per store from roughly 220,000 annually in 2013 to nearly 260,000 in 2018. We've added roughly $120 million of incremental merchandise margin, reduced the operating cost at this store level by 10%, all while continuing to make investments in our store or home office capabilities and our people. We grew fuel volumes by 100 million gallons a year, while sustaining through the highs and lows of fuel price and margin volatility.

Second, we started with a well-capitalized balance sheet at spin and have since optimized our capital structure to support our strategic objectives. We extracted significant value from non-core assets totaling $365 million. We added appropriate leverage to the business, supported by higher earnings and cash flow, and we made a bet on ourselves repurchasing nearly $1 billion of our own stock at prices that approximate a 30% return today.

Third, while past performance isn't always indicative of future results, our strategic mindset around improving the business and allocating capital sets us up nicely for the next five years. We are focused on winning the game we are playing. We are relentless around cost leadership. We are innovating and pursuing new opportunities to win with our customers, and we will remain patient and disciplined with our capital allocation strategy, as we pursue an equally reach opportunity set of objectives over the next five years. I would like to thank our team, our Board of Directors and our shareholders who have supported us on this exciting journey.

I will now address third quarter performance and keep my comments brief. Looking at fuel results, we had higher same-store volumes in 2018, owing largely to the timing and relative severity of hurricanes Harvey and Irma in 2017 versus 2018 events. However, these volumes were not accompanied by the same margins we saw in the year ago period.

Nevertheless, retail margins of $0.142 per gallon were actually fairly resilient, given the rising price environment witnessed through most of the second half of the year. While volumes show a 1% improvement over the prior year, these results do not meet our expectations. A year ago, we talked about various elements impacting feels volumes beyond competition and market externalities. We've made good progress on some of these like dispenser up-time. We've held our ground and other areas like carrier outages despite driver shortages, but we have not made the progress expected around fuel pricing execution where we believe the largest opportunity exists.

As a consequence, we've reorganized our fuel business with new leadership and pricing to address this long-standing priority and are developing a laser focus on sharpening our pricing tactics at the store level. As a result, we expect to see better results going forward as we do not believe we are fully optimizing the margin and volume opportunities within our markets.

Meanwhile, the merchandise business delivered exceptional results, gaining momentum sequentially from what was already a great second quarter performance. Merchandise sales were up on a same-store basis, driving higher margins and growing total contribution dollars. Average unit margins were 16.8%, a new record and a 70 basis point improvement over the prior year quarter. Results were exceptionally strong in the tobacco category where we are maximizing our participation in manufacturer programs to provide the best values to our customers.

Due to the strength in our merchandise business, our fuel breakeven for the quarter continues to improve, coming in at 53 basis points, a remarkable $0.005 improvement in the year-over-year results. Importantly, this improvement more than offsets the 35-basis-point increase in credit card fees, which are in an unavoidable outcome of the high price environment we have seen for most of the year. Strong merchandise results also helped to offset a slight uptick in site level operating expenses, excluding payment fees, which were up 2.8% for the quarter. Some of the increase we saw this quarter was attributable to timing around certain maintenance expenses as year-to-date per site costs are still just below prior year on a per store basis.

While the merchandising team and our store associates crushed it, these results still do not reflect the impact we expect from our Murphy Drive Rewards loyalty program. While it is too early to see a material impact on our financials, allow me to highlight some of the insights we are already seeing from the pilot program.

First, we believe the app and technology are providing a simple, frictionless interface that customers like and it is highly scalable. Customer in SKU level data is providing significant insights for how to engage unique customer segments and target offers. Our most loyal customers have embraced the program with great enthusiasm. We are seeing extra trips from this group.

From our lower share of wallet customers, we are also seeing an impact as early indications show us we're seeing about an extra gallon per month from this group. Across some of our largest merchandising categories, we are seeing more units sold per engaged customer and across all transactions, we are seeing a larger basket size. Based on this encouraging data, we expect to begin nationwide rollout in the first quarter of 2019.

We remain very encouraged by the high level of engagement our customers have shown for the program as we continue to evaluate the data from the pilot. We are seeing early indications of higher fuel usage and higher merchandise spin from active customers. Importantly, we are seeing this behavior pattern even before we begin to engage and communicate with our customers to deliver target value offers an effort now under way.

We are pleased that the technology works and connects us with our customers in a meaningful way. Our customers and equally our supplier partners are interested and engaged in the program, and we're very excited about the opportunities as we look into 2019 and plan a networkwide launch of the program.

On share buybacks, we had a 10b5-1 plan in place during the quarter -- third quarter. However, the stock price did not reach levels that -- that triggered repurchase activity. As a result, we did not repurchase any shares this past quarter, the share repurchases remain our preferred use of free cash flow and we will continue to be opportunistic in the market going forward.

And with that, I'll will turn it over to Mindy.

Malynda K. West -- Executive Vice President, Fuels, Treasurer and Chief Financial Officer

Thanks, Andrew. Hi, everyone. Revenue for the third quarter was $3.8 billion versus $3.2 billion in the third quarter of 2017. This was largely attributable to the higher retail gasoline prices and to a lesser extent higher merchandise sales. Average retail gasoline prices per gallon during the quarter was $2.61 versus $2.22 in 2017. Adjusted earnings before interest taxes, depreciation and amortization or EBITDA was $105.2 million in the third quarter versus $147.4 million in 2017. EBITDA for this quarter was lower primarily due to lower all-in fuel margins, which ran $0.162 per gallon versus $0.205 per gallon in the prior year.

Accordingly, both net income and earnings per share were also lower. Net income of $45 million generated diluted earnings per share of $1.38 in this quarter versus net income of $67.9 million and $1.90 of diluted earnings per share in the prior year period. The effective tax rate for the third quarter was 21.1% versus 37.5% in the prior year period, benefiting largely from the lower federal tax rate now in effect.

Total debt on the balance sheet as of September 30, 2018 was $867 million, broken out as follows, long-term debt of $847 million consisting of $495 million carrying value of our 6% notes due 2023, $296 million carrying value of our 5.625% notes due 2027 and $57 million remaining on our $200 million term loan, and in addition, we are carrying $20 million of expected amortization under that term loan in current liabilities on the balance sheet.

These figures resulted in adjusted leverage ratio that we report to our lenders of approximately 2.1 time. Our ABL facility remains in place with a $450 million cap subject to periodic borrowing base determinations which currently limit us to approximately $344 million of availability as of September 30th. And at the present time that facility is undrawn.

Cash and cash equivalents totaled $75.4 million at September 30th, resulting in a net debt of approximately $792 million. And then, lastly, there were 32.2 million commons shares outstanding at the end of the third quarter.

Looking at CapEx, capital expenditures for the quarter approximately $62 million bringing our year-to-date spend to $153 million. Given the ongoing construction at 27 stores, at this time, we do still expect our capital spending to remain within our guided range of $225 million to $275 million.

That concludes the financial update. So I will now turn it back over to Andrew.

R. Andrew Clyde -- President and Chief Executive Officer

Thank you, Mindy. I'd like to wrap up the call with a few comments on fourth quarter performance and then address guidance. We are seeing an encouraging start to the fourth quarter with continued strength in the merchandise business helped by several record jackpots in the Powerball and Mega Millions games, which are both traffic drivers and basket builders. In addition, the October fuel environment is solid, with volumes at 99% of prior year levels and close to $0.20 retail margins as we benefit from falling crude prices. As is our custom on this third quarter call, I will wrap up with some comments on where we expect to land relative to our annual guidance provided in February of this year.

Starting with organic growth, we will likely end the year with 1,474 stores, representing 28 new to industry locations in addition to 27 raze and rebuild locations. Looking at fuel contribution, annual and per store volume should come in at the midpoint of our guided range, with all-in fuel margins projected at $0.15 to $0.155 per gallon. Total fuel contribution dollars will approximate the midpoint of our range or about $625 million to $650 million.

Looking at the fuel breakeven metrics, merchandise margins will be at the high-end or just above our guided range. Merchandise sales will be within our guided range. Station OpEx, excluding credit cards on a per site basis should be closer to the good side of our guided range of flat to 2% increase.

From a corporate perspective, SG&A expense, tax expense and CapEx should all be within the guided range. Which brings us to EBITDA, assuming the favorable fuel margin environment we saw in October does not persist for year end, we're forecasting EBITDA closer to $380 million, which would be below our guided range of $390 million to $440 million. If, however, the environment remains favorable, we would expect to end up on the low end of the range.

This last point really underscores the challenges we face around investor guidance in an industry that can have a wide range of what I would call normal margins in any given 12-month period. Despite the margin challenges we faced in the first quarter this year, it's worth noting that retail margins held up reasonably well, given that the 2018 fuel environment has been largely characterized by higher trend in crude oil and product prices. I also want to emphasize the headwinds we faced in the payment fee category, which accompanied higher prices and explains a $15 million expected shortfall to the guidance range.

As we said in prior calls on a go-forward basis, we will refashion our guidance in a manner that endeavors to remove some of the noise around fuel margins, which needed to be viewed over a longer period than a single year and focus on the aspects of the business we can control. The point is the margin environment is not the yardstick by which we measure company's performance against our strategic goals. It obviously impacts financial performance, but you'll see our commitment to continuous improvement show up consistently in different areas of the company over time, putting us in a better position to win in any margin environment.

And with that, operator, we can open up the call to Q&A, please.

Questions and Answers:

Operator

(Operator Instructions) Your first question comes from Bonnie Herzog from West, sorry, Wells Fargo. Your line is open.

Bonnie Herzog -- Wells Fargo -- Analyst

Hi. Thank you. Good morning.

R. Andrew Clyde -- President and Chief Executive Officer

Good morning, Bonnie.

Bonnie Herzog -- Wells Fargo -- Analyst

Hi. So, I guess, my first question to you is, so it means (ph) that you just touched on in terms of keeping a lot of your guidance, but changing or lowering a little bit of it, given the volatility that, quite frankly, you always see. So, could you talk a little bit more for us about your total fuel contribution and the components? You touched on this, Andrew, but I think in the quarter, there was that 2 point coming from, I guess, you PS&W and RIN. And looking forward, do you still expect that to be in like a $0.02 to $0.03 band, I guess, because it was a little bit light the quarter and how should we think about that maybe in Q4 and going forward?

R. Andrew Clyde -- President and Chief Executive Officer

Absolutely, Bonnie. So our view of the margin ranges that are normal for this business over time hasn't changed. And frankly, we believe they're going to continue to get better with the improvement efforts that we've put in place. And if you go all the way back to the spin, we've guided to slightly higher margins every year and some of that's based on the improvement. So, the ranges we've provided in the past, both for the retail bit and the PS&W component net of RINs, we don't see those ranges changing on an all-in basis. We don't really see that changing.

The real point about guidance is, if we give, you guys $0.05, plus or minus, that's $0.01 overall and that's $40 million, right. If we give you a full plus or minus $0.01, that's an $80-plus million range. And frankly, that's too wider range to be constructive from EBITDA, and then, if we say, you know what we think we're going to be range bound by crude of this level this year and we try to tighten that, and then, crude prices do like they did this year and go up much higher, right. You're going to be outside of that. It shows up in the payment fees and then some of the other metrics.

And so, at some point in time, we're confident this business over the long run is going to generate margins at the ranges that we've provided in the past, and those numbers will continue to improve with improvement efforts. But trying to narrow in a tighter EBITDA range that's useful and then getting all the angst about missing it by $10 million when it's less than $0.005 plus or minus, I just don't think is as productive -- the conversations as we need to have.

Bonnie Herzog -- Wells Fargo -- Analyst

Okay. No. I agree. And trust me from our perspective, it's very challenging to say that at least. So, then, I guess, my second question would be more on the consumer. I'd love to hear from your perspective what you're seeing, just my broad coverage, we are hearing from a lot of companies that there is certainly some signs of strengthening across the consumer and just wanted to hear if you too are seeing that. And gas prices remain somewhat elevated, but wondering if you're seeing again any notable improvements also in your in-field -- to the in-store conversion, I should say, in terms of your rates there. That would be helpful.

R. Andrew Clyde -- President and Chief Executive Officer

Sure. Yeah. I think for the last two, three quarters now, we've seen a strengthening consumer. It's showing up in the numbers. We talked about tobacco and both cigarettes, smokeless, other tobacco products were all strong. We saw beverages really nice during the quarter, despite the price increases. General merchandise through our scan-based trading was another nice addition. Certainly, the lottery was falling and started the quarter off strong. So, that's really good.

In our view, higher fuel prices at these levels don't really impact consumer demand, but it shifts their price sensitivity. And so we are -- we were a benefit in 2007 and 2008 of higher prices, high volume, low price retailers are a beneficiary of that now. And we benefited that as much during very low price environments for some consumers on the margin aren't as price sensitive. And so I think you see some shifts in behavior on where people go, but we haven't seen a dial back from a demand standpoint. So, overall, we feel like the customers is healthy and we're seeing it in the transactions and margins across the products.

Bonnie Herzog -- Wells Fargo -- Analyst

And I guess, my final question, I wanted to circle back on something you mentioned earlier about the tobacco category for you or your business there. You mentioned some of the new contracts or retail programs you've, probably, signed with some of these manufacturers. So I'm just trying to think through from a timing perspective, will you be lapping those or when will you be lapping those, or do you foresee strength continuing, based on these new arrangements? And then maybe just in general trends with the tobacco category, given you've got a lot of exposure to it, especially considering the FDA's potential actions in terms of impacting the C-store channel you had there, really trying to get a handle on the new e-cig crisis or I guess epidemic in their words. Any thoughts there would be helpful? Thank you.

R. Andrew Clyde -- President and Chief Executive Officer

Yeah. Look, I think, from a unit standpoint, as you know, there are declines in cigarettes, there will continue to be. And so, with the systematic price increases and the margin realization that comes from that, continues to be a category that grows on a gross margin dollar basis. What we're able to deliver through the programs and we're able to participate through digital and other activities in a meaningful way, allows us to provide more value to the customer at these higher prices.

That translates into a differentiated share growth, which in turn positions us even more favorably with the manufacturers. So, as we lap, maybe a program they had the prior year, they look back on the results, they see our associates knocked it out of the park and then we're able to have more differentiated impact as a result of that. So, I don't see anything as we head into next year, that would say, hey, this is going to lap and stall, it's actually quite the opposite with our differentiated performance from that standpoint.

In terms of the FDA, it's too early to get a sense of what they're going to do. Altria absolutely made some very strategic decisions in how they're looking at it. We have an exemplary record as a company around age verification and so we really don't think that is going to impact us materially if the age changes to 21. The flavor elements of the vapor products represent a small subset of the total vapor products. So we don't see that. There's no evidence that says tobacco shops and vapor shops are any better at age verification or are dealing with any of the issues on the FDA. So I expect the industry will fight pretty hard any efforts to try to take products out of the convenience store channel. So still too early to tell on that front, but don't see a material impact at this point, based on what we would think the rational outcomes of that would be.

Bonnie Herzog -- Wells Fargo -- Analyst

Yes. I also agree. So, thank you very much.

R. Andrew Clyde -- President and Chief Executive Officer

You're welcome.

Operator

Your next question comes from Ben Bienvenu from Stephens. Your line is open.

Ben Bienvenu -- Stephens -- Analyst

Yeah. Thanks. Good morning.

R. Andrew Clyde -- President and Chief Executive Officer

Good morning, Ben.

Ben Bienvenu -- Stephens -- Analyst

I wanted to ask about the tobacco APSM contribution continues to be really strong. I know you had an easier compare at this quarter, but could you talk about what's driving that, how sustainable that might be? I know we had a pricing increase in the quarter, to what extent that that impact that result? And then, panning out more broadly, just total merchandise APSM contribution has been really strong and margins go up across the merchandise categories. So just any color you can provide there helpful as well?

R. Andrew Clyde -- President and Chief Executive Officer

Very good. Well, yeah, when I said the merchandise team crushed it, they'd try to use that as evidence of a little bit of color, but they're really doing a great job in terms of promotional effectiveness. We've got a set of initiatives around space management, visual merchandising, product assortment, et cetera, that's just going to continue to add merchandise margin contribution to the bottom-line. We're really positioned, even as the destination around lottery and the baskets associated with that are really strong.

The stores associates are the ones that crushed it on the tobacco, cigarette side. When we get the value-added promotional dollars from the manufacturers, they're the ones who have this incredible ability to up-sell at the store and to translate that into the bottom-line. And then, just success gets more opportunities from the manufacturers as we deliver on their programs. As Rob Chumley said at our Analyst Day, a couple of years ago, they're going to move away from paying for participation and paying for results, and when the stores

and the associates deliver results, you get paid for it. And that just allows us to give more value to customers on a differentiated basis, so gain share even in some declining categories.

Ben Bienvenu -- Stephens -- Analyst

Okay. Great. And then, on the buyback, you talked about the 10b5 program didn't have a price that triggered a purchase of shares. You guys have been really good at buying back your stock, historically, and superior where (ph) it opportunistically. I wonder how the improvements that you make in the cents per gallon breakeven of your business and presumably the long-term value unlock of your business influenced. Does price demarcations in your 10b5 program over time? Such that those price breakpoints move higher over time and how dynamic is that matrix, if you can offer any color on that?

R. Andrew Clyde -- President and Chief Executive Officer

Oh! Absolutely. Well, we have a very robust shareholder value model. And so when -- there's always going to be some arbitrage in terms of our outlook over the next three years to five years in terms of what we think this business can deliver and what the market thinks. And certainly with the short-term view around margins and volatility, that have been our mindset. It just further amplified as stock gets oversold if you have a weak margin environment as opposed to the point we're making with Bonnie over the long run this business is going to generate a level of margins that's going to support the underlying business.

And so, we do think about that, if you go back over time that demarcation has gone up. So fair share buybacks were in the 40s, then they were in the 50s, they were in the 60s. You're going to continue to see that. But if you're going to be a savvy buyer, you can't be in the market every day buying it every price. You pick and choose some points and we don't always get it right. But we'd like to think that we save tens of millions of dollars and share some analysis with our Board on how we've done that within the quarters in which we've done that and then over the longer period of time. And so we're going to continue to be opportunistic, but we're going to be strategic about it and what this business is going to be worth three years to five years from now is a heck of a lot more than it's worth today plus or minus $10 per share.

Ben Bienvenu -- Stephens -- Analyst

Yes. Makes a lot of sense. Thanks. Best of luck.

R. Andrew Clyde -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from John Royall from JP Morgan. Your line is open.

John Royall -- JP Morgan -- Analyst

Hi. Good morning. Thanks for taking my question. I was wondering if you could give a little more color on the new pricing strategy and the organization -- the reorganization you guys mentioned in the fuel business?

R. Andrew Clyde -- President and Chief Executive Officer

Absolutely. So I'm always going to be hesitant on a public call to get into pricing strategy, just given the nature of that. But what I would say is, we had a very clear vision around how we want to optimize store by store. We've implemented some new systems to be able to do that. But what we haven't really had is the leadership and focus and the ability to really just do the heavy lifting necessary to fully implement that vision and strategy. And so we've taken one of our best regional VPs, who used to run strategy, who has a background in this out of the field and he's now taken on that full-time role. We've added resources to the team. This is all under Mindy's great leadership overall and in fuels. And so, it's less about what we know we need to do. It's about just rolling up the sleeves and the heavy lifting of getting it done within the context of store-by-store optimization, playbooks, the systems that support that, et cetera.

John Royall -- JP Morgan -- Analyst

Makes sense. Thank you. And then, I had a question on 2019 CapEx. I know you'll give a formal guide at some point, but just thinking directionally, given your new stores and your raze/rebuilds, they're going to be about the same. Should we think about maybe a similar growth number and maybe a slightly higher maintenance number year-over-year or is there any puts and takes that I'm missing there?

R. Andrew Clyde -- President and Chief Executive Officer

Yeah. Do you want to cover that one, Mindy?

Malynda K. West -- Executive Vice President, Fuels, Treasurer and Chief Financial Officer

Sure. John, I would expect that our range will be very similar next year versus this year. We will be including a component for EMV certification, so installing new dispensers and kits in our network to be fully compliant with that regulation. But I would still expect even with that included that we would still have more or less the same range as we do this year of $225 million to $275 million.

John Royall -- JP Morgan -- Analyst

Great. Thank you.

R. Andrew Clyde -- President and Chief Executive Officer

Thanks, John.

Operator

(Operator Instructions) Your next question comes from Damian Witkowski from Gabelli & Company. Your line is open.

Damian Witkowski -- Gabelli & Company -- Analyst

Hi. Good morning, everyone.

R. Andrew Clyde -- President and Chief Executive Officer

Hi, Damian.

Damian Witkowski -- Gabelli & Company -- Analyst

We've talked about credit card fees and how they've gone up with the price of fuel per gallon. The loyalty program that you're testing currently, will that help you in any way to -- is there a debit card that's attached to the -- to your loyalty card that may help you in the future in terms of bringing those costs down?

R. Andrew Clyde -- President and Chief Executive Officer

Yeah. Absolutely, Damian. So that is not part of the sort of the minimal value proposition that we put into the pilot. But Rob and his team have a set of additional offers and enhancements to the program over time, and so having a lower cost payment option tied to the program is one aspect of that and we would like to see some improvement there.

I'd also say, Mindy and her team did a nice job this year also evaluating our payment fees, our costs, our -- the debit rails and the routing and everything that goes on. And so even despite the higher prices, we're going to see some improvements on that next year from those efforts. So it's just another area of our business that we've now focused on and found savings opportunities there. So there's two or three things we think we can do in a high price environment to offset some of those costs.

Damian Witkowski -- Gabelli & Company -- Analyst

Has utilization of credit cards climbed over time, is it actually -- is it moving up or is it pretty stable?

R. Andrew Clyde -- President and Chief Executive Officer

It's really been remarkably stable. Our mix of cash, debit and credit really hasn't changed the whole lot. And I think, part of that, if you just think about who are our customer base is, we've got a fair amount of unbanked customers with cash, et cetera. And so, we really haven't seen any --

Damian Witkowski -- Gabelli & Company -- Analyst

Yeah.

R. Andrew Clyde -- President and Chief Executive Officer

-- material change across our network.

Damian Witkowski -- Gabelli & Company -- Analyst

Yeah. Well, let's say, just had -- I mean do you -- I don't remember what the cash to credit breakdown is the --

Malynda K. West -- Executive Vice President, Fuels, Treasurer and Chief Financial Officer

Sure, Damian. So, the credit card breakout is roughly 40% debit usage is in the 30% range and then the rest of that is the cash component.

Damian Witkowski -- Gabelli & Company -- Analyst

Okay. All right. And then, for the quarter, what was your average RIN price as you realize, I don't know how many -- how many millions of RIN sold, but what was the average price?

Malynda K. West -- Executive Vice President, Fuels, Treasurer and Chief Financial Officer

We sold roughly $57 million RINs at an average price of $0.20.

Damian Witkowski -- Gabelli & Company -- Analyst

Okay.

Malynda K. West -- Executive Vice President, Fuels, Treasurer and Chief Financial Officer

So a marked difference from last --

Damian Witkowski -- Gabelli & Company -- Analyst

And --

Malynda K. West -- Executive Vice President, Fuels, Treasurer and Chief Financial Officer

-- when they were $0.83.

Damian Witkowski -- Gabelli & Company -- Analyst

Yeah. Yeah. Not long there (ph), they're below $0.10 now.

Malynda K. West -- Executive Vice President, Fuels, Treasurer and Chief Financial Officer

That is correct.

R. Andrew Clyde -- President and Chief Executive Officer

Exactly.

Damian Witkowski -- Gabelli & Company -- Analyst

No. (Multiple Speaker)

R. Andrew Clyde -- President and Chief Executive Officer

And here's an incredible thing. So when we presented our outlook for the kind of full year to the Board, when we looked at sort of our supply margin, it was up $80 million versus the prior year and RINs were down $80 million, right. We looked at a weekly --

Damian Witkowski -- Gabelli & Company -- Analyst

Okay.

R. Andrew Clyde -- President and Chief Executive Officer

-- outlook this last week on our supply margin in the Gulf Coast. It was a positive $0.03 RIN for back down to about $0.07, $0.08. And so we've been --

Damian Witkowski -- Gabelli & Company -- Analyst

Okay.

R. Andrew Clyde -- President and Chief Executive Officer

-- saying for a really long time, these things are going to offset each other and every time we turnaround, despite a little lag or maybe a little uncertainty in the politics for the regulatory environment or one of the other, they are largely doing that. So I would encourage people to just continue to look at that and not get over energized around $0.10 RINs. It's just as remarkable as we hit the kind of fifth year anniversary when I started with the company, RINs were at about $0.10 or $0.11. And our supply margin was $0.02 to $0.03 all-in and it's -- they've kind of remarkably of the same throughout that period.

Damian Witkowski -- Gabelli & Company -- Analyst

And remind me, is the SNAP program a big part of your business? The old FOOD Stamps?

R. Andrew Clyde -- President and Chief Executive Officer

It is not.

Damian Witkowski -- Gabelli & Company -- Analyst

No. It is not. Okay. All right. Thanks so much.

R. Andrew Clyde -- President and Chief Executive Officer

It is not. And part of the, Damian, if you think about our kiosk. We're not able to have the full selection of products there. Historically that would allow us to do that.

Damian Witkowski -- Gabelli & Company -- Analyst

Yeah. I mean, it is there -- I mean there is probably not a lot of that qualifies for SNAP purchases and --

Malynda K. West -- Executive Vice President, Fuels, Treasurer and Chief Financial Officer

We just -- we have a few hundred --

Damian Witkowski -- Gabelli & Company -- Analyst

-- they can buy cigarette with it?

Malynda K. West -- Executive Vice President, Fuels, Treasurer and Chief Financial Officer

We have a few hundred stores on the SNAP program, but that's all.

Damian Witkowski -- Gabelli & Company -- Analyst

Okay. Okay. Thanks.

Operator

Your next question comes from Carla Casella from JP Morgan. Your line is open.

Carla Casella -- JP Morgan -- Analyst

Hi. Just a couple of clarifications. First, on the store. You said -- I think you mentioned 27 stores are under construction right now. How many of those should open in the fourth quarter? Are you still expecting to get to 30 for the year? And is that still a good run rate to use going forward?

R. Andrew Clyde -- President and Chief Executive Officer

Yeah. So, we expect to have 28 new to industry locations for the full year, 27 raze and rebuilds and that those under construction, we'd expect all of those to be open, but you could have timing, permitting, weather, power, turn on issues, et cetera, that could impact that. But if they do, it's just a matter of days or weeks.

Carla Casella -- JP Morgan -- Analyst

Okay. Great. And then you mentioned the hurricanes and last year fourth quarter was a big hit from the hurricanes. This year, it sounds like it's a less of impact. Can you just clarify (ph) and give us some more color there?

R. Andrew Clyde -- President and Chief Executive Officer

Yeah. It was less of an impact from a volumetric basis. You also got to remember last year, I mean, Harvey took out the entire US Gulf Coast refinery complex. I mean it was down, right. Colonial Pipeline was down, right, delayed. And so, we did not have anything like that from a fuel supply outage standpoint that had those kind of ripple effects across the country. And so that that was something that really impacted demand. You went from negative margins to higher margins last year. So it was just a different type of environment.

I would say, the flooding from Florence was pretty severe and our stores associates did amazing things to help out customers and help out their teammates. The same with Hurricane Michael. We do have one store that is still down that was essentially leveled. That store along with another one. We're already on our 2019 raze and rebuild list, and so good high volume stores that will be back up serving those communities. And again, I think, our teams did remarkable things pre-staging generators. I think over 50% of our stores were the only ones or the first to open based on our preparedness and all the learnings that we put in place from the hurricanes last year. And so, really proud of what the team and our leadership has done to serve our customers and our associates on that front.

Carla Casella -- JP Morgan -- Analyst

Okay. Great. And on the gas pricing front, you mentioned, I think, did I hear correct, $2.61 a gallon in this quarter? Have you said where it's trending in the fourth quarter?

R. Andrew Clyde -- President and Chief Executive Officer

In terms of prices?

Carla Casella -- JP Morgan -- Analyst

Yeah.

Malynda K. West -- Executive Vice President, Fuels, Treasurer and Chief Financial Officer

In terms of overall price structure, it continues to fluctuate and we expect it to be volatile all during the quarter. Although, I will say, there's a lot of supply in our key marketing areas, which is exerting some pressure on us from a product supply and wholesale standpoint, even despite low RIN prices. There's a lot of incentive to discount product at the rack. But we don't really have a view on --

Carla Casella -- JP Morgan -- Analyst

Okay.

Malynda K. West -- Executive Vice President, Fuels, Treasurer and Chief Financial Officer

-- precisely what prices are going to do in the fourth quarter. We have a lot of room left till the end of the year.

Carla Casella -- JP Morgan -- Analyst

Okay. Great. Thank you.

Operator

There are no further questions at this time. I now turn the call back over to Andrew Clyde for closing remarks.

R. Andrew Clyde -- President and Chief Executive Officer

Great. Well, I think, we set a speed record for this call. Thank you for your questions. We'll look forward to the -- any follow-ups and look forward to talking to you again in February when we deliver full year results and provide our guidance for 2019. Thank you.

Operator

This concludes today's conference call. You may now disconnect.

Duration: 41 minutes

Call participants:

Christian Pikul -- Senior Director, Investor Relations

R. Andrew Clyde -- President and Chief Executive Officer

Malynda K. West -- Executive Vice President, Fuels, Treasurer and Chief Financial Officer

Bonnie Herzog -- Wells Fargo -- Analyst

Ben Bienvenu -- Stephens -- Analyst

John Royall -- JP Morgan -- Analyst

Damian Witkowski -- Gabelli & Company -- Analyst

Carla Casella -- JP Morgan -- Analyst

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This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

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This article appears in: Personal Finance , Stocks
Referenced Symbols: MUSA



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