What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-07-28 compared with 2022-05-05 · 146 added, 91 removed, 291 unchanged (45% of the section changed)

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It includes information on the basis of presentation with respect to the amounts presented in the Management’s Discussion and Analysis and a discussion of the trends affecting our business.

• Results of Operations —This section provides an analysis of our results of operations, including the results of our operating segment for the three months ended March 31, 2022 and 2021.

• Capital Resources and Liquidity —This section provides a discussion of our financial condition and cash flows as of and for the three months ended March 31, 2022 and 2021.

• Results of Operations —This section provides an analysis of our results of operations, including the results of our operating segment for the three and six months ended June 30, 2022 and 2021.

• Capital Resources and Liquidity —This section provides a discussion of our financial condition and cash flows as of and for the three and six months ended June 30, 2022 and 2021.

It also includes a discussion of our capital structure and available sources of liquidity.

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We also market gasoline and other products at standalone stores under the Murphy Express brand and have a mix of convenience stores and retail gasoline stores located in New Jersey and New York that operate under the brand name of QuickChek.

At March 31, 2022, we had a total of 1,686 Company stores in 27 states, of which 1,151 were Murphy USA, 376 were Murphy Express and 159 were QuickChek.

At June 30, 2022, we had a total of 1,695 Company stores in 27 states, of which 1,151 were Murphy USA, 385 were Murphy Express and 159 were QuickChek.

We also market to unbranded wholesale customers through a mixture of Company owned and third-party terminals.

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QuickChek uses a weekly retail calendar where each quarter has 13 weeks.

For Q1 2022, the QuickChek results cover the period from January 1, 2022 to April 1, 2022.

For the prior year period, the QuickChek results cover the period from January 29, 2021 (the date of acquisition) to April 2, 2021.

For Q2 2022, the QuickChek results cover the period from April 2, 2022 to July 1, 2022 and the year-to-date period is from January 1, 2022 to July 1, 2022.

For the prior year period, the QuickChek results cover the period from April 3, 2021 to July 2, 2021 and the year-to-date period began on January 29, 2021 (the date of acquisition) to July 2, 2021.

The difference in the timing of the period ends is immaterial to the overall consolidated results.

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Our operations are significantly impacted by the gross margins we receive on our fuel and merchandise sales.

While we generally expect our total fuel and merchandise sales volumes to grow over time and the gross margins we realize on those sales to remain strong in a normalized environment, these gross margins can change rapidly due to many factors.

While we generally expect our total fuel and merchandise sales volumes to grow over time and the gross margins we realize on those sales to remain strong in a normalized environment, these sales and gross margins can change rapidly due to many factors.

These factors include, but are not limited to, the price of refined products, geopolitical events, such as Russia's invasion of Ukraine, that upsets global supply and demand and price of crude oil, interruptions in our fuel and merchandise supply chain caused by severe weather or pandemics such as COVID-19, travel restrictions and stay-at-home orders imposed during a pandemic, severe refinery mechanical failures for an extended period of time, cyber-attacks against the Company or our vendors, and competition in the local markets in which we operate.

The COVID-19 pandemic continued to influence gasoline demand in the first quarter of 2022 but demand has grown as the pandemic pressures lessened, COVID-19 vaccines became more readily available, and government intervention decreased.

If the recoveries experienced to-date stall or reverse as a result of a resurgence in COVID-19 infection rates and related government intervention, our volumes could decline.

As concerns around the COVID-19 pandemic continued to lessen due to vaccines being more readily available and generally lower infection rates in 2022, gasoline demand has continued to increase into the second quarter.

Should the recoveries experienced to-date stall or reverse as a result of a resurgence in COVID-19 infection rates, our volumes could decline.

Additionally, the U.S.

economy began experiencing inflationary pressures that have increased into Q2 2022, thus lowering consumer purchasing power.

If this trend continues or increases, it could impact demand and seasonal travel patterns which could reduce future sales volumes.

The cost of our main sales products, gasoline and diesel, are greatly impacted by the cost of crude oil in the United States.

Rising prices for crude oil increase the Company’s cost for wholesale fuel products purchased thus increasing the price of retail fuel sales.

Also, rising prices tend to cause our customers to reduce discretionary fuel consumption, which may reduce our fuel sales volumes.

Crude oil prices continued the volatile trend in 2022 with prices ranging from $76 per barrel to $124 per barrel, with an average price in Q1 2022 of approximately $95 per barrel, compare to an average price of $58 per barrel in Q1 2021.

In addition, rising prices tend to cause our customers to reduce discretionary fuel consumption, which may reduce our fuel sales volumes.

Crude oil prices continued the volatile trend in 2022 causing prices to range from $76 per barrel to $124 per barrel, with an average price in Q2 2022 of approximately $109 per barrel, compared to an average price of $66 per barrel in Q2 2021.

Total fuel contribution (retail fuel margin plus product supply and wholesale ("PS&W") results including Renewable Identification Numbers ("RINs")) for Q2 2022 was 34.9 cents per gallon ("cpg"), compared to 28.2 cpg in Q2 2021.

Retail fuel margin dollars increased 61.6% in the current quarter and retail fuel volumes improved 7.8%.

Retail fuel margin dollars increased 31.1% in the current quarter and retail fuel volumes improved 7.8% when compared to Q2 of 2021.

Our revenues are impacted by the ability to leverage our diverse supply infrastructure in pursuit of obtaining the lowest cost fuel supply available;

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Revenue from the sales of RINs is included in “Other operating revenues” in the Consolidated Statements of Income.

As of March 31, 2022, we have $1.3 billion of Senior Notes and a $397 million term loan outstanding.

As of June 30, 2022, we have $1.3 billion of Senior Notes and a $396 million term loan outstanding.

We believe that we will generate sufficient cash from operations to fund our ongoing operating requirements and service our debt obligations.

At March 31, 2022, we have additional available capacity under the committed $350 million cash flow revolving credit facility, which currently remains undrawn.

At June 30, 2022, we have additional available capacity under the committed $350 million cash flow revolving credit facility, which currently remains undrawn.

We expect to use the credit facilities to provide us with available financing to meet any short-term ongoing cash needs in excess of internally generated cash flows.

To the extent necessary, we will borrow under these facilities to fund our ongoing operating requirements.

There can be no assurances, however, that we will generate sufficient cash from operations or be able to draw on the credit facilities, obtain commitments for our incremental facility and/or obtain and draw upon other credit facilities.

be no assurances, however, that we will generate sufficient cash from operations or be able to draw on the credit facilities, obtain commitments for our incremental facility and/or obtain and draw upon other credit facilities.

For additional information see Significant Sources of Capital in the Capital Resources and Liquidity section.

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In 2020 and 2021, we saw disruptions to typical seasonal patterns due to the COVID-19 pandemic.

In early 2022, a more normal seasonal pattern has emerged and fuel volumes have approached pre-pandemic levels.

As a result, operating results for the three months ended March 31, 2022 may not be necessarily indicative of the results that may be expected for the remainder of the year ending December 31, 2022.

In 2022, a more normal seasonal pattern has emerged and fuel volumes have approached and sometimes exceeded pre-pandemic levels.

As a result, operating results for the three and six months ended June 30, 2022 may not be necessarily indicative of the results that may be expected for the remainder of the year ending December 31, 2022.

Business Segment

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The Marketing segment includes our retail marketing stores and product supply and wholesale assets.

For additional operating segment information, see Note 22 “Business Segments” in the audited combined financial statements for the year ended December 31, 2021 included with our Annual Report on Form 10-K and Note 16 “Business Segments” in the accompanying unaudited consolidated financial statements for the three months ended March 31, 2022.

Results of Operations

Consolidated Results

For the three months ended March 31, 2022, the Company reported net income of $152.4 million, or $6.08 per diluted share, on revenue of $5.1 billion.

For the three months ended June 30, 2022, the Company reported net income of $183.3 million, or $7.53 per diluted share, on revenue of $6.8 billion.

Net income was $128.8 million for the same period in 2021, or $4.79 per diluted share, on $4.5 billion of revenue.

The increase in net income was primarily due to higher all-in fuel and merchandise contribution, a decrease in acquisition and integration related expenses and interest expense and was partially offset by increases in store operating expenses, payment fees, depreciation expense, and general and administrative expenses.

The consolidated financial results for Q1 2022 include QuickChek from January 1, 2022 through April 1, 2022, and for the prior year period covered the period from January 29, 2021 (the date of acquisition) to April 2, 2021.

The increase in net income was primarily due to higher all-in fuel and merchandise contributions and was partially offset by increases in store operating expenses, payment fees, general and administrative expenses and income tax expense.

For the six-month period ended June 30, 2022, the Company reported net income of $335.7 million, or $13.59 per diluted share, on revenue of $11.9 billion.

Net income was $184.1 million for the same period in 2021, or $6.73 per diluted share, on $8.0 billion in revenue.

The increase in net income is primarily due to higher all-in fuel and merchandise contributions and lower acquisition related costs, partially offset by increases in payment fees, store operating expenses, general and administrative expenses, and income tax expense.

The consolidated financial results for the year-to-date period include QuickChek from January 1, 2022 to July 1, 2022, and for the prior year year-to-date period covered the period from January 29, 2021 (the date of acquisition) to July 2, 2021.

The difference in the timing of the period ends is immaterial to the overall consolidated results.

Three Months Ended March 31, 2022 versus Three Months Ended March 31, 2021

Three Months Ended June 30, 2022 versus Three Months Ended June 30, 2021

Revenues for Q2 2022 increased $2.3 billion, or 51.9%, compared to the same quarter in 2021.

The increase in revenues was due to higher fuel sales prices and retail fuel sales volumes, increased merchandise sales, and the inclusion of QuickChek results for three months in 2022 compared to two months in 2021.

Total cost of Q1 2022 sales increased $1.4 billion, or 44.7% when compared to Q1 2021.

In the current-year quarter, the higher costs were primarily due to higher wholesale fuel prices and fuel sales volumes, higher merchandise costs, and the inclusion of QuickChek results for three months compared to two months.

Store and other operating expenses increased $45.6 million, or 25.7%, from Q1 2022 to Q1 2021, due primarily to increased payment fees, higher employee related costs, maintenance costs and the inclusion of an additional month of QuickChek expenses compared to the prior year period.

The increase in revenues was due to higher retail fuel sales prices and fuel sales volumes, increased merchandise sales prices and improved results from PS&W, partially offset by lower RINs revenues.

Total cost of sales in Q2 2022 increased $2.2 billion, or 55.4% when compared to Q2 2021.

In the current-year quarter, the higher costs were primarily due to higher wholesale fuel prices and fuel volumes sold combined with higher merchandise costs.

Store and other operating expenses increased $43.3 million, or 20.7%, in Q2 2022 from Q2 2021, due primarily to increased payment fees which represented one-half of the increase, higher employee related costs which included a non-recurring special bonus of approximately $3.0 million to our employee base, and increased store maintenance costs.

SG&A expenses for Q2 2022 increased $3.7 million, or 7.6%, from Q2 2021.

The increase in SG&A costs is primarily due to higher professional fees and outsourced services and one additional month of QuickChek expenses compared to the prior year period.

Depreciation and amortization expense increased $4.4 million, or 8.6%, from Q1 2021 primarily due to the additions of new larger store formats of the MUSA stores and the inclusion of QuickChek stores for three months of 2022 versus two months in 2021.

Acquisition and integration related costs were lower by $8.6 million and interest expense was lower by $1.7 million compared to Q1 2021.

The period-over-period reduction is primarily related to the acquisition of QuickChek in January 2021.

The increase in SG&A costs is primarily due to higher professional fees, contract services and employee incentive expense.

The effective income tax rate was approximately 24.0% for Q2 2022 versus 24.2% for the same period of 2021.

Six Months Ended June 30, 2022 versus Six Months Ended June 30, 2021

Year-to-date revenues for 2022 increased $3.9 billion, or 48.7%, compared to the same period in 2021.

The increase in revenues was due to higher retail fuel sales prices, higher retail fuel sales volumes, increased merchandise sales, improved PS&W revenues including RINs, and the inclusion of QuickChek sales results for six months in 2022 compared to five months in 2021.

Total cost of sales increased $3.6 billion, or 50.6% when compared to 2021.

In the current-year period, the higher costs were primarily due to higher wholesale fuel prices combined with higher sales volumes, higher merchandise costs and the inclusion of one additional month of QuickChek results.

Store and other operating expenses increased $88.9 million, or 23.0%, in the first six months of 2022, primarily due to increased payment fees (42% of the increase), higher employee related costs, increased store maintenance expenses and the inclusion of an additional month for QuickChek compared to the prior-year period.

SG&A expenses for the first six months of 2022 increased $5.6 million, or 6.0%, compared to the first six months of 2021.

The increase in SG&A costs is primarily due to an increase in professional fees, contract services, and to the inclusion of QuickChek for an additional month in 2022.

Depreciation and amortization expense increased $5.8 million, or 5.6% year-to-date from the same period of 2021 primarily due to one additional month of QuickChek depreciation compared to the prior year period, combined with the newer larger store formats of Murphy USA stores.

Acquisition and integration related costs were lower by $8.0 million and interest expense was lower by $1.9 million compared to the same six-month period in 2021.

The period-over-period reduction is primarily related to the costs of the acquisition of QuickChek in January 2021.

The effective income tax rate was approximately 24.0% for the six months ended June 30, 2022 versus 24.3% for the same period of 2021.

Segment Results

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Three Months Ended

June 30, Six Months Ended

(Millions of dollars) 2022 2021 2022 2021

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Net Income $ 183.3 $ 128.8 $ 335.7 $ 184.1

Three Months Ended March 31, 2022 versus Three Months Ended March 31, 2021

Net income for the three months ended March 31, 2022 increased compared to the same period in 2021 primarily due to:

• Higher all-in fuel contribution

• Higher retail fuel sales volumes

Three Months Ended June 30, 2022 versus Three Months Ended June 30, 2021

Net income for the three months ended June 30, 2022 increased compared to the same period in 2021 primarily due to:

• Higher all-in fuel contribution and sales volumes

• Higher merchandise contribution

• Lower acquisition and transaction related expenses

• Lower interest expense

The items below partially offset the increase in net income in the current period:

• Higher payment fees

• Higher store operating expenses

• Higher general and administrative expense

• Higher income tax expense

Six Months Ended June 30, 2022 versus Six Months Ended June 30, 2021

Net income for the six months ended June 30, 2022 increased compared to the same six-month period in 2021 primarily due to:

• Higher retail fuel contribution and sales volumes

• Higher fuel contribution from PS&W, including RINs

• Higher merchandise contribution

The items below partially offset the increase in net income in the six-month period:

• Higher store operating expense

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• Higher depreciation and amortization expense

• Higher general and administrative expense

• Higher SG&A expenses

• Higher income tax expense

(Millions of dollars, except revenue per store month (in thousands) and store counts) Three Months Ended

June 30, Six Months Ended

Marketing Segment 2022 2021 2022 2021

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Total non-tobacco sales revenue same store sales 1,2

73.6 51.4 66.7 49.0

Total merchandise sales revenue same store sales 1,2

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QuickChek uses a weekly retail calendar where each quarter has 13 weeks.

For the Q1 2022 period, the QuickChek results cover the period from January 1, 2022 to April 1, 2022.

For the prior year period, the QuickChek results cover the period from January 29, 2021 (the date of acquisition) to April 2, 2021.

The difference in the timing of the month ends is immaterial to the overall consolidated results.

For Q2 2022, the QuickChek results cover the period from April 2, 2022 to July 1, 2022 and the year-to-date period is from January 1, 2022 to July 1, 2022.

For the prior year period, the QuickChek results cover the period from April 3, 2021 to July 2, 2021 and the year-to-date period began on January 29, 2021 (the date of acquisition) to July 2, 2021.

The difference in the timing of the period ends is immaterial to the overall consolidated results.

Three Months Ended

June 30, Six Months Ended

Key Operating Metrics 2022 2021 2022 2021

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Total PS&W contribution ($ Millions) 22.8 (14.4) 62.3 (10.7)

RINs and other (included in Other operating revenues on Consolidated Income Statement) ($ Millions) 76.6 66.7

RINs and other (included in Other operating revenues on Consolidated Statements of Income) ($ Millions) 79.3 86.3 156.0 153.1

Total fuel contribution ($ Millions) $ 422.9 $ 316.6 $ 792.6 $ 543.9

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Retail fuel volume - per store (K gal APSM) 1

250.7 237.0 237.8 225.9

Retail fuel volume - per store (K gal SSS) 2

247.9 233.2 235.3 222.9

Total fuel contribution (including retail, PS&W and RINs) (cpg) 34.9 28.2 34.5 25.5

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2 2021 amounts not revised for 2022 raze-and-rebuild activity

The reconciliation of the components of total fuel contribution to the Consolidated Income Statements is as follows:

The reconciliation of the components of total fuel contribution to the Consolidated Statements of Income is as follows:

Three Months Ended

June 30, Six Months Ended

(Millions of dollars) 2022 2021 2022 2021

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Three Months Ended

June 30, Six Months Ended

Key Operating Metrics 2022 2021 2022 2021

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Non-tobacco contribution ($K SSS) 1,2

$ 21.6 $ 11.0 $ 18.9 $ 10.4

Total merchandise contribution ($K SSS) 1,2

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2 Includes store-level discounts for MDR redemptions and excludes change in value of unredeemed MDR points

Three Months Ended March 31, 2022 versus Three Months Ended March 31, 2021

Net income in the Marketing segment for Q1 2022 increased $88.7 million compared to the Q1 2021 period, due to higher all-in fuel contribution and increased fuel sales volume and higher merchandise contributions, combined with the inclusion of QuickChek results for three months in the current period versus two months in 2021.

This was partially offset by increases in store operating expense, depreciation and amortization expense, and selling, general and administrative expenses.

Three Months Ended June 30, 2022 versus Three Months Ended June 30, 2021

Net income in the Marketing segment for Q2 2022 increased $53.5 million, to $199.1 million compared to the Q2 2021 period, due to higher retail fuel contribution and sales volume, higher merchandise contributions, and improved PS&W revenues.

This was partially offset by increases in payment fees and other store operating expenses, depreciation and amortization, selling, general and administrative expenses and income tax expense.

Total revenues for the Marketing segment were approximately $6.8 billion in Q2 2022 compared to $4.5 billion in Q2 2021.

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The quarter-over-quarter increase is primarily due to typical timing and price-related impacts of the product supply chain.

The 2022 quarter includes the sale of 69 million RINs at an average selling price of $1.12 per RIN while the prior-year quarter had sales of 63 million RINs at an average price of $1.06 per RIN.

Total merchandise sales increased 7.1% to $892.0 million in Q1 2022 compared to $833.2 million in Q1 2021 due to higher sales across the chain in most categories and the inclusion of QuickChek results for three months in Q1 2022 versus two months in the prior year.

Quarterly total merchandise contribution in Q1 2022 improved 18.4% compared to Q1 2021.

Food and beverage contribution, a subset of non-tobacco contribution was 14.6% of total merchandise contribution Q1 2022, up from 11.5% in Q1 2021 as the enterprise benefited from QuickChek's food and beverage activity.

The 2022 quarter includes the sale of 55 million RINs at an average selling price of $1.44 per RIN while Q2 2021 had sales of 54 million RINs at an average price of $1.60 per RIN for a total decrease in RINs revenue of $7.0 million.

Total merchandise sales increased 3.2% to $994.6 million in Q2 2022 compared to $963.4 million in Q2 2021 due to higher sales across the chain in most categories.

Quarterly total merchandise contribution in Q2 2022 improved 6.6% compared to Q2 2021 due to higher unit sales volumes and retail prices.

Food and beverage contribution, a subset of non-tobacco contribution increased 5.0% in Q2 2022, as sales increased 10.5% when compared to Q2 2021.

Total SSS merchandise contribution dollars grew 4.1%, which included an increase of 3.1% in tobacco products and a 4.9% increase in non-tobacco products.

Store and other operating expenses increased $45.6 million in the current period compared to Q1 2021, primarily due to the inclusion of QuickChek for an additional month in 2022, along with higher employee related expenses, payment fees, rent and store maintenance costs.

Store and other operating expenses increased $43.3 million in the Q2 2022 compared to Q2 2021, primarily due to higher payment fees, employee related expenses, rent and store maintenance costs.

On an APSM basis, expenses applicable to store OPEX excluding payment fees and rent increased 11.4%, primarily due to increased employee related expenses and maintenance costs.

Depreciation and amortization expense increased $4.8 million, or 10.2% in Q1 2022 when compared to the prior year quarter due primarily to the inclusion of QuickChek for an additional month in 2022 combined with the new larger store formats of MUSA stores.

Selling, general, and administrative expenses increased $1.9 million in Q1 2022 compared to Q1 2021 due primarily to higher professional fees and outsourced services and one additional month of QuickChek expenses.

Employee costs in the current quarter include approximately $3.0 million for a non-recurring special bonus to our employee base.

Selling, general, and administrative expenses increased $3.7 million in Q2 2022 compared to Q2 2021 due primarily to higher professional fees, contracted services, and employee incentive expenses.

Six Months Ended June 30, 2022 versus Six Months Ended June 30, 2021

Net income in the Marketing segment for the six months ended June 30, 2022 increased $142.2 million compared to the six months ended June 30, 2021 period, due to improved all-in fuel and merchandise contributions, the inclusion of QuickChek results for six months in 2022 and five months in 2021, and lower interest expense.

These were partially offset by higher payment fees, increased store operating expenses, higher general and administrative costs, and increased depreciation and amortization expense.

Total revenues for the Marketing segment were approximately $11.9 billion for the six-month period ended June 30, 2022 compared to $8.0 billion for the same period ended June 30, 2021.

The increased revenues were due to a 50.0% increase in retail fuel sales prices combined with a 7.8% higher number of gallons sold, improved PS&W revenues, including RINs, and a 5.0% increase in merchandise sales due to increased sales volumes and retail prices.

Revenues included excise taxes collected and remitted to government authorities of $1.1 billion in the six months ended June 30, 2022 and $1.0 billion in the six months ended June 30, 2021.

Retail fuel margin dollars increased 43.0% in the six-month period ended June 30, 2022 compared to the prior year six months on a higher margin rate of 25.0 cpg when compared to 18.8 cpg in the same period of 2021.

Total fuel sales volumes on a SSS basis increased 4.4% to 235.3 thousand gallons per store in 2022 compare to 2021.

Total PS&W margin dollars, including RINs, were a gain of $218.3 million in the 2022 six month period compared to income of $142.4 million in the first six months of 2021.

The six months ended June 30, 2022 includes the sales of 123.5 million RINs at an average selling price of $1.26 per RIN while the prior-year period had sales of 116.8 million RINs at an average price of $1.31 per RIN for a total increase in RIN revenue of $2.9 million.

Total merchandise sales increased 5.0% to $1.9 billion in the six months ended June 30, 2022 compared to $1.8 billion in the first six months of 2021 due to higher sales volumes and prices across the chain in most categories and the inclusion of QuickChek results for an additional month in 2022.

Year-to-date total merchandise contribution in 2022 increased 11.9% compared to the same period of 2021.

Food and beverage contribution increased 22.0% in 2022 compared to 2021 and sales revenues increased 28.5% over the same period mainly due to the inclusion of QuickChek results for an additional month in 2022.

Total SSS merchandise contribution dollars grew 4.8%.

On a SSS basis there was an increase of 0.9% in tobacco products sales and 0.7% in non-tobacco sales.

Store and other operating expenses increased $88.9 million in the current year compared to the same period of 2021, primarily due to an additional month of QuickChek results in 2022, along with higher payment fees, employee related expenses, and maintenance expenses.

On an APSM basis, expenses applicable to store OPEX excluding payment fees and rent increased 14.0%, primarily due to employee related expenses and maintenance costs.

Depreciation and amortization expense increased $6.1 million, or 6.3%, in the first six months of 2022 due to the inclusion of QuickChek for an additional month in 2022, combined with new larger store formats for Murphy USA stores.

Selling, general and administrative expenses increased $5.6 million in 2022 compared to 2021 due primarily to the increased professional fees, contract services, and the inclusion of QuickChek for an additional month in 2022.

Same store sales information compared to APSM metrics

Variance from prior year

Three months ended

March 31, 2022

Variance from prior year Variance from prior year

Three months ended Six months ended

June 30, 2022 June 30, 2022

Fuel gallons per month 4.8 % 5.8 % 4.4 % 5.3 %

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Corporate and Other Assets

Three Months Ended March 31, 2022 versus Three Months Ended March 31, 2021

After-tax results for Corporate and other assets for Q1 2022 were a loss of $16.7 million compared to a loss of $25.1 million in Q1 2021, due primarily to lower acquisition and integration related costs and lower interest expense related to expenses and debt incurred in January 2021 to finance the QuickChek acquisition.

Three Months Ended June 30, 2022 versus Three Months Ended June 30, 2021

After-tax results for Corporate and other assets for Q2 2022 were a loss of $15.8 million compared to a loss of $16.8 million in Q2 2021.

The current period improvement was due primarily to gain on sale of corporate assets, partially offset by increased integration related costs and other nonoperating expenses.

Six Months Ended June 30, 2022 versus Six Months Ended June 30, 2021

After-tax results for Corporate and other assets for the six months ended June 30, 2022 were a loss of $32.5 million compared to a loss of $41.9 million in the same period of 2021.

The year-over-year improvement was due primarily to lower acquisition and integration related costs, gain on sale of corporate assets, and interest expense, partially offset by increased nonoperating expenses in 2022 compared to 2021.

Non-GAAP Measures

The following table sets forth the Company’s Adjusted EBITDA for the three months ended March 31, 2022 and 2021.

The following table sets forth the Company’s Adjusted EBITDA for the three and six months ended June 30, 2022 and 2021.

EBITDA means net income (loss) plus net interest expense, plus income tax expense, depreciation and amortization, and Adjusted EBITDA adds back (i) other non-cash items (e.g., impairment of properties and accretion of asset retirement obligations) and (ii) other items that management does not consider to be meaningful in assessing our operating performance (e.g., (income) from discontinued operations, net settlement proceeds, (gain) loss on sale of assets, loss on early debt extinguishment, transaction and integration costs related to acquisition, and other non-operating (income) expense).

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Three Months Ended

June 30, Six Months Ended

(Millions of dollars) 2022 2021 2022 2021

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Significant Sources of Capital

As of March 31, 2022, we had $356.2 million of cash and cash equivalents.

We have a committed cash flow revolving credit facility (the "revolving facility”) of $350 million, which was undrawn at March 31, 2022 which can be utilized for working capital and other general corporate purposes, including supporting our operating model as described herein.

As of June 30, 2022, we had $240.4 million of cash and cash equivalents.

We have a committed cash flow revolving credit facility (the "revolving facility”) of $350 million, which was undrawn at June 30, 2022 which can be utilized for working capital and other general corporate purposes, including supporting our operating model as described herein.

We believe our short-term and long-term liquidity is adequate to fund not only our operations, but also our anticipated near-term and long-term funding requirements, including capital spending programs, execution of announced share repurchase programs, potential dividend payments, repayment of debt maturities and other amounts that may ultimately be paid in connection with contingencies.

Operating Activities

Net cash provided by operating activities was $339.2 million for the three months ended March 31, 2022, an increase of $109.4 million compared to $229.8 million for the same period in 2021.

The increase for the current year is primarily related to the increase in net income of $97.1 million, and changes in noncash working capital of $10.9 million compared to the same period in 2021.

The year-over-year increased non-cash operating working capital changes of $10.9 million consist of benefits related to an increase in accounts payable and accrued liabilities of $45.2 million primarily due to higher wholesale fuel prices and related freight costs and timing of payments, increased income taxes payable of $20.6 million resulted from higher pretax income, and a decrease in inventory of $5.9 million primarily due to lower inventory on hand which was partially offset by higher wholesale prices.

These benefits were partially offset by increased accounts receivables of $59.3 million due to the timing of receipts and increased prices for retail and bulk sales, and a small increase in prepaid expenses and other current assets of $1.5 million.

Net cash provided by operating activities was $516.5 million for the six months ended June 30, 2022, an increase of $185.7 million compared to $330.8 million for the same period in 2021.

The increase for the current year is primarily related to the increase in year-over-year net income of $151.6 million and changes in noncash working capital of $30.5 million compared to the same period in 2021.

The year-over-year increased non-cash operating working capital changes consisted of benefits related primarily to an increase in accounts payable and accrued liabilities of $65.5 million which was primarily related to higher wholesale fuel prices and related freight costs and timing of payments.

These benefits were partially offset by increased accounts receivables of $16.5 million due to the timing of receipts and increased prices for retail and bulk sales, an increase in inventory of $13.5 million due to price increases, a decrease in other current liabilities of $3.7 million, and decreases in income taxes payable of $2.0 million due to timing of tax payments.

Investing Activities

For the three months ended March 31, 2022, cash required by investing activities was $64.4 million compared to $696.3 million in 2021.

The decrease in investing cash requirements in the current period was primarily due to the cash payments of $642.1 million for the acquisition of QuickChek in 2021 which was partially offset by the timing of capital expenditures that required $10.4 million more in 2022 over 2021.

For the six months ended June 30, 2022, cash required by investing activities was $137.4 million compared to $778.3 million in 2021.

The decrease in investing cash requirements in the current period was primarily due to the cash payments of $641.1 million for the acquisition of QuickChek in 2021 and capital expenditures required $8.1 million more in 2022 versus 2021.

Partially offsetting cash requirements were increased benefits from the sale of assets of $7.3 million in 2022 over 2021.

Financing Activities

Financing activities in the three months ended March 31, 2022 required cash of $175.0 million compared to cash provided of $607.0 million in the three months ended March 31, 2021.

The first three months of 2022 included payments of $151.8 million for the repurchase of common shares, which was an increase of $101.8 million from the repurchases of $50.0 million in the prior-year period, and dividend payments of $7.2 million in 2022 versus payments of $6.8 million in the first three months of 2021.

Financing activities in the six months ended June 30, 2022 required cash of $395.1 million compared to cash provided of $448.9 million in the six months ended June 30, 2021.

The first six months of 2022 included payments of $355.4 million for the repurchase of common shares, which was an increase of $157.1 million from the repurchases of $198.3 million in the 2021 period and dividend payments of $14.6 million in 2022 versus payments of $13.5 million in the first six months of 2021.

Borrowings of debt related to the QuickChek acquisition in 2021 provided $892.8 million compared to no borrowings in the same period of 2022.

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Amounts related to share-based compensation required $11.2 million more in cash during 2022 than in 2021.

The Company paid a dividend of $0.29 per Common share in March 2022 for a total cash payment of $7.2 million and paid a dividend of $0.25 per share in March 2021 for a total cash payment of $6.8 million.

As of June 30, 2022 the Company has paid dividends of $0.60 per common share for total cash dividend payments of $14.6 million in 2022 compared to the period ended June 30, 2021, in which dividends of $0.50 per share were paid for a total of cash dividend payments of $13.5 million.

As a part of our capital allocation strategy, the Company's intention is to deliver targeted double-digit growth in the per share dividend over time.

On May 5, 2022 the Board of Directors declared a quarterly cash dividend of $0.31 per common share, or $1.24 per share on an annualized basis.

The dividend is payable on June 1, 2022, to shareholders of record as of May 17, 2022.

Share Repurchase Program

During the three months ended March 31, 2022 a total of 836,953 shares were repurchased for $151.8 million.

The $500 million share repurchase program approved by the Board of Directors in November 2020 was completed in Q1 2022 and the December 2021 authorization of up to $1 billion had approximately $868.2 million remaining at March 31, 2022, to be executed by December 31, 2026.

Our long-term debt at March 31, 2022 and December 31, 2021 was as set forth below:

(Millions of dollars) March 31,

During the six months ended June 30, 2022 a total of 1,716,166 shares were repurchased for $355.4 million.

The $500 million share repurchase program approved by the Board of Directors in November 2020 was completed in Q1 2022 and the shares are now being repurchased under the program authorized in December 2021 of up to $1 billion.

At June 30, 2022, the 2021 program had approximately $664.6 million remaining to be executed by December 31, 2026.

Share repurchases made during the six months ended June 30, 2021 were 1,483,758 shares for $198.3 million.

Our long-term debt at June 30, 2022 and December 31, 2021 was as set forth below:

(Millions of dollars) June 30,

2022 December 31,

5.625% senior notes due 2027 (net of unamortized discount of $1.9 at March 31, 2022 and $2.0 at December 2021) $ 298.1 $ 298.0

4.75% senior notes due 2029 (net of unamortized discount of $4.7 at March 31, 2022 and $4.8 at December 31, 2021) 495.3 495.2

3.75% senior notes due 2031 (net of unamortized discount of $5.5 at March 31, 2022 and $5.7 at December 31, 2021) 494.5 494.3

Term loan due 2028 (effective interest rate of 2.27% at March 31, 2022 and December 31, 2021 and net of unamortized discount of $0.8 at March 31, 2022 and $0.9 at December 31, 2021) 396.2 397.1

5.625% senior notes due 2027 (net of unamortized discount of $1.8 at June 30, 2022 and $2.0 at December 2021) $ 298.2 $ 298.0

4.75% senior notes due 2029 (net of unamortized discount of $4.5 at June 30, 2022 and $4.8 at December 31, 2021) 495.5 495.2

3.75% senior notes due 2031 (net of unamortized discount of $5.4 at June 30, 2022 and $5.7 at December 31, 2021) 494.6 494.3

Term loan due 2028 (effective interest rate of 2.84% at June 30, 2022 and December 31, 2021 and net of unamortized discount of $0.8 at June 30, 2022 and $0.9 at December 31, 2021) 395.2 397.1

Capitalized lease obligations, autos and equipment, due through 2026 2.2 2.7

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On April 25, 2017, Murphy Oil USA, Inc., our primary operating subsidiary, issued $300 million of 5.625% Senior Notes due 2027 (the "2027 Senior Notes").

The 2027 Senior Notes are fully and unconditionally guaranteed by Murphy USA, and are guaranteed by certain 100% owned subsidiaries that guarantee our Credit Facilities, as defined herein.

The 2027 Senior Notes are fully and unconditionally guaranteed by

Murphy USA, and are guaranteed by certain 100% owned subsidiaries that guarantee our Credit Facilities, as defined herein.

The indenture governing the 2027 Senior Notes contains restrictive covenants that limit, among other things, the ability of Murphy USA, Murphy Oil USA, Inc.

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On September 13, 2019, Murphy Oil USA, Inc., issued $500 million of 4.75% Senior Notes due 2029 (the “2029 Senior Notes”).

The net proceeds from the issuance of the 2029 Senior Notes were used to fund, in part, the tender offer and redemption of the $500 million aggregate principal amount of its senior notes due 2023.

The net proceeds from the issuance of the 2029 Senior Notes were used to fund, in part, the tender offer and redemption of a prior note issuance.

The 2029 Senior Notes are fully and unconditionally guaranteed by Murphy USA, and are guaranteed by certain 100% owned subsidiaries that guarantee our Credit Facilities.

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The credit agreement provides for a senior secured term loan in an aggregate principal amount of $400 million (the "Term Facility") (which was borrowed in full on January 29, 2021) and revolving credit commitments in an aggregate amount equal to $350 million (the "Revolving Facility", and together with the Term Facility, the "Credit Facilities").

The outstanding balance of the term loan was $397 million at March 31, 2022 and $398 million at December 31, 2021.

The outstanding balance of the term loan was $396 million at June 30, 2022 and $398 million at December 31, 2021.

The term loan is due January 2028 and we are required to make quarterly principal payments of $1 million, which began on July 1, 2021.

As of March 31, 2022, we had no outstanding borrowings under the revolving facility while there were $4.1 million in outstanding letters of credit, which reduces the amount available to borrow.

As of June 30, 2022, we had no outstanding borrowings under the revolving facility while there were $4.7 million in outstanding letters of credit, which reduces the amount available to borrow.

Interest payable on the Credit Facilities is based on either:

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• the Alternate Base Rate, which is defined as the highest of (a) the rate of interest last quoted by The Wall Street Journal as the "Prime Rate", (b) the greater of the federal funds effective rate and the overnight bank funding rate determined by the Federal Reserve Bank of New York from time to time plus 0.50% per annum and (c) the one-month Adjusted LIBO Rate plus 1.00% per annum,

respect to the Revolving Facility, spreads ranging from 0.75% to 1.25% per annum depending on a total debt to EBITDA ratio or (ii) with respect to the Term Facility, a spread of 1.75% per annum.

plus, (A) in the case of Adjusted LIBO Rate borrowings, (i) with respect to the Revolving Facility, spreads ranging from 1.75% to 2.25% per annum depending on a total debt to EBITDA ratio or (ii) with respect to the Term Facility, a spread of 1.75% per annum and (B) in the case of Alternate Base Rate borrowings (i) with respect to the Revolving Facility, spreads ranging from 0.75% to 1.25% per annum depending on a total debt to EBITDA ratio or (ii) with respect to the Term Facility, a spread of 1.75% per annum.

The Term Facility amortizes in quarterly installments starting with the first amortization payment being due on July 1, 2021 at a rate of 1.00% per annum.

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Pursuant to the credit agreement's covenant limiting certain restricted payments, certain payments in respect of our equity interests, including dividends, when the total leverage ratio, calculated on a pro forma basis, is greater than 3.0 to 1.0 could be limited.

At March 31, 2022, our total leverage ratio was 1.90 to 1.0 which meant our ability at that date to make restricted payments was not limited.

At June 30, 2022, our total leverage ratio was 1.76 to 1.0 which meant our ability at that date to make restricted payments was not limited.

If our total leverage ratio, on a pro forma basis, exceeds 3.0 to 1.0, any restricted payments made following that time until the ratio is once again, on a pro forma basis, below 3.0 to 1.0 would be limited by the covenant, which contains certain exceptions, including the ability to make restricted payments in cash in an aggregate amount not to exceed the greater of $111.2 million or 4.5% of consolidated net tangible assets over the life of the credit agreement.

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The combined assets, liabilities and results of operations of MOUSA and the guarantors are not materially different from corresponding amounts presented in the consolidated financial statements included herein.

MOUSA is our primary operating subsidiary and generated the vast majority of our revenues for the three months ended March 31, 2022, and accounted for the vast majority of our total assets as of March 31, 2022.

In the event MOUSA itself were

unable to service the Company's consolidated debt obligations, our business and financial condition would be materially adversely impacted.

MOUSA is our primary operating subsidiary and generated the vast majority of our revenues for the three and six months ended June 30, 2022, and accounted for the vast majority of our total assets as of June 30, 2022.

In the event MOUSA itself were unable to service the Company's consolidated debt obligations, our business and financial condition would be materially adversely impacted.

Capital Spending

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We also invest capital in our Corporate and other assets segment.

The following table outlines our capital spending and investments by segment for the three month periods ended March 31, 2022 and 2021:

The following table outlines our capital spending and investments by segment for the three and six month periods ended June 30, 2022 and 2021:

Three Months Ended

June 30, Six Months Ended

(Millions of dollars) 2022 2021 2022 2021

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reduced demand for our products due to the implementation of more stringent fuel economy and greenhouse gas reduction requirements, or increasingly widespread adoption of electric vehicle technology;

future tobacco or e-cigarette legislation and any

other efforts that make purchasing tobacco products more costly or difficult could hurt our revenues and impact gross margins;

future tobacco or e-cigarette legislation and any other efforts that make purchasing tobacco products more costly or difficult could hurt our revenues and impact gross margins;

efficient and proper allocation of our capital resources, including the timing, declaration, amount and payment of any future dividends or levels of the company's share repurchases, or management of operating cash;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis