What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-10-27 compared with 2022-07-28 · 138 added, 125 removed, 312 unchanged (46% of the section changed)

9 unchanged sentences

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 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.

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

At September 30, 2022, we had a total of 1,700 Company stores in 27 states, of which 1,151 were Murphy USA, 392 were Murphy Express and 157 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 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.

For Q3 2022, the QuickChek results cover the period from July 2, 2022 to September 30, 2022 and the year-to-date period is from January 1, 2022 to September 30, 2022.

For Q3 2021 the QuickChek results cover the period from July 3, 2021 to October 1, 2021 and the 2021 year-to-date period covers January 29, 2021 (the date of acquisition) to October 1, 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 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.

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.

While we generally expect our total fuel and merchandise sales volumes to grow over time and the gross margins 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 that upset 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.

In addition, the U.S.

economy has continued to experience inflationary pressures throughout the year, thus lowering consumer purchasing power.

Should the recoveries experienced to-date stall or reverse as a result of a resurgence in COVID-19 infection rates or be impacted by inflationary pressures, 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.

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.

Rising prices tend to cause consumers to reduce discretionary fuel consumption but our low-price model serves as a draw to new customers to offset the potential loss of discretionary volumes.

In 2022, crude oil prices continued the volatile trend causing prices to range from $76 per barrel to $124 per barrel.

The average price in Q3 2022 was approximately $93 per barrel, compared to an average price of $71 per barrel in Q3 2021, with prices during the current quarter trending slightly downward.

Total fuel contribution (retail fuel margin plus product supply and wholesale ("PS&W") results including Renewable Identification Numbers ("RINs")) for Q3 2022 was 37.6 cents per gallon ("cpg"), compared to 26.6 cpg in Q3 2021.

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

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

As of September 30, 2022, we have $1.3 billion of Senior Notes and a $395 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 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.

At September 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

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

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.

There can be no assurances, however, that we will generate sufficient cash from operations or be able to draw on the credit facilities, 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 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.

As a result, operating results for the three and nine months ended September 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 and six months ended June 30, 2022.

Results of Operations

Consolidated Results

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.

For the three months ended September 30, 2022, the Company reported net income of $219.5 million, or $9.28 per diluted share, on revenue of $6.2 billion.

Net income was $104.0 million for the same period in 2021, or $3.98 per diluted share, on $4.6 billion of revenue.

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

For the nine months ended September 30, 2022, the Company reported net income of $555.2 million, or $22.76 per diluted share, on revenue of $18.1 billion.

Net income for the same period in 2021 was $288.1 million, or $10.72 per diluted share, on $12.6 billion in revenue.

The consolidated financial results for the year-to-date period include QuickChek from January 1, 2022 to September 30, 2022, and for the prior year year-to-date period covered the period from January 29, 2021 (the date of acquisition) to October 1, 2021.

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

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

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

Revenues for Q3 2022 increased $1.6 billion, or 34.7%, compared to the same quarter in 2021.

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.

The increase in revenues was due to 27.0% higher retail fuel sales prices and 13.2% higher fuel sales volumes, combined with an increase in merchandise sales prices and higher RINs sales prices and volumes.

Total cost of sales in Q3 2022 increased $1.4 billion, or 34.0% when compared to Q3 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.

Store and other operating expenses increased $33.4 million, or 15.1%, in Q3 2022 from Q3 2021, due primarily to increased payment fees which represented one-half of the increase and higher employee related costs which included a non-recurring special bonus paid over the 100 days of summer.

During the quarter this special incentive program was completed and approximately $4.0 million was paid to our employee base.

SG&A expenses for Q3 2022 increased $5.2 million, or 11.0%, from Q3 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

The increase in SG&A costs is primarily due to higher employee incentive expenses, professional fees and technology expenses, partially offset by lower salaries and benefits.

The effective income tax rate was approximately 24.5% for Q3 of 2022 and 2021.

Nine Months Ended September 30, 2022 versus Nine Months Ended September 30, 2021

Year-to-date revenues for 2022 increased $5.5 billion, or 43.6%, 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.

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

Total cost of sales increased $5.0 billion, or 44.5% 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.

Store and other operating expenses increased $122.3 million, or 20.1%, in the first nine months of 2022, primarily due to increased payment fees (44% of the increase), higher employee related costs including the non-recurring special bonus of $7.0 million paid over the 100 days of summer, increased store maintenance expenses and the inclusion of one additional month for QuickChek compared to the prior-year period.

SG&A expenses for the first nine months of 2022 increased $10.8 million, or 7.7%, compared to the first nine months of 2021.

The increase in SG&A costs is primarily due to an increase in employee incentive expense, professional fees, technology services and to the inclusion of QuickChek for one additional month in 2022, partially offset by lower employee benefits.

Depreciation and amortization expense increased $7.0 million, or 4.4% 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 higher depreciation due to the newer larger store formats of Murphy USA stores.

Acquisition and integration related costs were $8.3 million less and interest expense was lower by $0.6 million compared to the same nine-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.

The effective income tax rate was approximately 24.2% for the nine months ended September 30, 2022 versus 24.4% for the same period of 2021.

Segment Results

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Millions of dollars) 2022 2021 2022 2021

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Net Income $ 219.5 $ 104.0 $ 555.2 $ 288.1

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:

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

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

• Higher all-in fuel contribution and sales volumes

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• 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

Nine Months Ended September 30, 2022 versus Nine Months Ended September 30, 2021

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

• Higher all-in fuel contribution and sales volumes

• Higher merchandise contribution

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

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

• Higher store operating expense

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

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

Marketing Segment 2022 2021 2022 2021

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Income tax expense (benefit) 76.8 39.2 193.0 111.3

Income (loss) from operations $ 199.1 $ 145.6 $ 368.2 $ 226.0

Net income (loss) from operations $ 236.8 $ 121.1 $ 605.0 $ 347.1

Total tobacco sales revenue same store sales 1,2

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If a store is replaced either at the same location (raze-and-rebuild) or relocated to a new location, it will be excluded from the calculation during the period it is out of service.

Newly constructed stores do not enter the calculation until they are open for each full calendar year for the periods being compared (open by January 1, 2021 for the stores being compared in the 2022 versus 2021 comparison).

Acquired stores are not included in the calculation of same stores for the first

12 months after the acquisition.

Newly constructed stores do not enter the calculation until they are open for each full calendar year for the periods being compared (open by January 1, 2021 for the stores being compared in

the 2022 versus 2021 comparison).

Acquired stores are not included in the calculation of same stores for the first 12 months after the acquisition.

When prior period same store sales volumes or sales are presented, they have not been revised for current year activity for raze-and-rebuilds, asset acquisitions and asset dispositions.

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

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.

For Q3 2022, the QuickChek results cover the period from July 2, 2022 to September 30, 2022 and the year-to-date period is from January 1, 2022 to September 30, 2022.

For Q3 2021 the QuickChek results cover the period from July 3, 2021 to October 1, 2021 and the 2021 year-to-date period covers January 29, 2021 (the date of acquisition) to October 1, 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

September 30, Nine Months Ended

September 30,

Key Operating Metrics 2022 2021 2022 2021

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Total PS&W contribution ($ Millions) (109.0) (43.0) (46.7) (53.7)

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

RINs (included in Other operating revenues on Consolidated Statements of Income) ($ Millions) 87.6 71.5 243.6 224.5

Total fuel contribution ($ Millions) $ 468.1 $ 292.9 $ 1,260.7 $ 836.8

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Millions of dollars) 2022 2021 2022 2021

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

Key Operating Metrics 2022 2021 2022 2021

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

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.

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

Net income in the Marketing segment for Q3 2022 increased $115.7 million, to $236.8 million compared to the Q3 2021 period, due to higher retail fuel and merchandise contributions which was partially offset by lower contribution from PS&W (including RINs).

Additionally, the higher retail margins were partially offset by increases in payment fees and other store operating expenses, selling, general and administrative expenses and income tax expense.

Total revenues for the Marketing segment were approximately $6.2 billion in Q3 2022 compared to $4.6 billion in Q3 2021.

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Total fuel sales volumes on a SSS basis increased 9.0% to 251.8 thousand gallons per store in the 2022 period when compared to Q3 2021.

Total PS&W margin dollars, including RINs, increased by $30.2 million from Q2 2021 results.

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 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.

Total PS&W margin dollars, including RINs, decreased by $49.9 million from Q3 2021 results.

The quarter-over-quarter decrease is primarily due to timing and price-related impacts in a falling market partially offset by improved spot-to-rack margins and higher RIN sales.

The Q3 2022 quarter includes the sale of 55.6 million RINs at an average selling price of $1.58 per RIN while Q3 2021 had sales of 50.9 million RINs at an average price of $1.40 per RIN for a total increase in RINs revenue of $16.1 million.

Total merchandise sales increased 7.7% to $1.0 billion in Q3 2022 compared to $953.4 million in Q3 2021 due to higher sales across the chain in most categories.

Total merchandise contribution in Q3 2022 improved 9.8% compared to Q3 2021 due to higher unit sales volumes and retail prices.

Food and beverage contribution, a subset of non-tobacco contribution increased 3.9% in Q3 2022, as sales increased 9.4% when compared to Q3 2021.

Total SSS merchandise contribution dollars grew 7.5%, which included an increase of 5.8% in tobacco products and a 8.9% increase in non-tobacco products.

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.

Store and other operating expenses increased $33.5 million in the Q3 2022 compared to Q3 2021, primarily due to higher payment fees, which represented one-half of the increase, employee related expenses, rent and store maintenance costs.

On an APSM basis, expenses applicable to store OPEX excluding payment fees and rent increased 6.4%, primarily due to increased employee related expenses and maintenance costs.

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.

Employee costs in the Q3 2022 include approximately $4.0 million for a non-recurring special bonus paid to our employee base over the 100 days of summer.

This non-recurring special bonus program was completed during the quarter.

Selling, general, and administrative expenses increased $5.2 million in Q3 2022 compared to Q3 2021 due primarily to higher employee incentive expenses and professional fees, partially offset by salaries and benefits.

Nine Months Ended September 30, 2022 versus Nine Months Ended September 30, 2021

Net income in the Marketing segment for the nine months ended September 30, 2022 increased $257.9 million compared to the nine months ended September 30, 2021 period, due to improved all-in fuel and merchandise contributions, and the inclusion of QuickChek results for nine months in 2022 versus eight months in 2021.

These retail margin improvements were partially offset by higher payment fees, increased store operating expenses, higher general and administrative costs, increased depreciation and amortization expense, and higher interest and income tax expense.

Total revenues for the Marketing segment were approximately $18.1 billion for the nine-month period ended September 30, 2022 compared to $12.6 billion for the same period ended September 30, 2021.

The increased revenues were due to a 41.5% increase in retail fuel sales prices combined with a 9.7% higher number of gallons sold, improved PS&W revenues, including RINs, and a 6.0% increase in merchandise sales.

Revenues included excise taxes collected and remitted to government authorities of $1.6 billion in the nine months ended September 30, 2022 and $1.5 billion in the nine months ended September 30, 2021.

Retail fuel margin dollars increased 59.7% in the nine-month period ended September 30, 2022 compared to the prior year nine months on a higher retail margin rate of 30.0 cpg when compared to 20.6 cpg in the same period of 2021.

Total fuel sales volumes on a SSS basis increased 5.9% to 240.7 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.

Total PS&W margin dollars, including RINs, generated income of $196.9 million in the 2022 nine-month period compared to income of $170.8 million in the first nine months of 2021.

The nine months ended September 30, 2022 includes the sales of 179.1 million RINs at an average selling price of $1.36 per RIN while the prior-year period had sales of 167.7 million RINs at an average price of $1.34 per RIN for a total increase in RIN revenue of $19.1 million.

Total merchandise sales increased 6.0% to $2.9 billion in the nine months ended September 30, 2022 compared to $2.8 billion in the first nine months of 2021 due to higher sales volumes and prices across the chain in most categories and the inclusion of QuickChek results for one additional month in 2022.

Year-to-date total merchandise contribution in 2022 increased 11.1% 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.

Food and beverage contribution increased 15.2% in 2022 compared to 2021 and sales revenues increased 21.1% over the same period mainly due to the inclusion of QuickChek results for one additional month in 2022.

Total SSS merchandise contribution dollars grew 5.8%.

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On an APSM basis, expenses applicable to store OPEX excluding payment fees and rent increased 11.1%, 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.

Employee costs in 2022 include a non-recurring special bonus of $7.0 million paid to our employee base over the 100 days of summer.

This non-recurring special bonus program is completed.

Selling, general and administrative expenses increased $10.8 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.

Depreciation and amortization expense increased $7.0 million, or 4.8%, in the first nine 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.

Same store sales information compared to APSM metrics

Variance from prior year Variance from prior year

Three months ended Six months ended

June 30, 2022 June 30, 2022

Three months ended Nine months ended

September 30, 2022 September 30, 2022

Fuel gallons per month 9.0 % 10.7 % 5.9 % 7.0 %

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Corporate and Other Assets

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.

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

After-tax results for Corporate and other assets for Q3 2022 were a loss of $17.3 million compared to a loss of $17.1 million in Q3 2021, the slight increase was primarily due to higher employee incentive expense and professional fees, partially offset by lower wages and benefits.

Nine Months Ended September 30, 2022 versus Nine Months Ended September 30, 2021

After-tax results for Corporate and other assets for the nine months ended September 30, 2022 were a loss of $49.8 million compared to a loss of $59.0 million in the same period of 2021.

The year-over-year improvement was due primarily to $8.3 million in lower acquisition and integration related costs, combined with a gain on sale of corporate assets, higher interest income, and lower 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 and six months ended June 30, 2022 and 2021.

The following table sets forth the Company’s Adjusted EBITDA for the three and nine months ended September 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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We believe that the presentation of Adjusted EBITDA provides useful information to investors because it allows understanding of a key measure that we evaluate internally when making operating and strategic decisions, preparing our annual plan, and evaluating our overall performance.

However, non-GAAP measures are not a substitute for GAAP disclosures, and EBITDA and Adjusted EBITDA may be prepared differently by us than by other companies using similarly titled non-GAAP measures.

However, non-GAAP measures are not a substitute for GAAP

disclosures, and EBITDA and Adjusted EBITDA may be prepared differently by us than by other companies using similarly titled non-GAAP measures.

The reconciliation of net income (loss) to EBITDA and Adjusted EBITDA is as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Millions of dollars) 2022 2021 2022 2021

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Significant Sources of Capital

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.

As of September 30, 2022, we had $192.7 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 September 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 $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.

Net cash provided by operating activities was $771.5 million for the nine months ended September 30, 2022, an increase of $184.5 million compared to $587.0 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 $267.1 million partially offset by changes in noncash working capital of $93.4 million compared to the same period in 2021.

The year-over-year decrease in non-cash operating working capital changes consisted primarily to a decrease in accounts payable and accrued liabilities of $76.6 million related to timing of payments, increased accounts receivables of $28.7 million due to the timing of receipts and increased fuel prices, and an increase in inventory of $3.2 million due to price increases partially offset by increases in income taxes payable of $15.6 million due to timing of tax payments.

Investing Activities

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.

For the nine months ended September 30, 2022, cash required by investing activities was $215.2 million compared to $853.7 million in 2021.

The decrease in investing cash requirements of 2022 compared to the prior year was primarily due to the cash payments of $641.1 million for the acquisition of QuickChek in 2021.

Capital expenditures required $11.5 million more in 2022 versus 2021 and was partially offset by additional benefits from the sale of assets of $7.5 million and lower other investing activities of $1.4 million in 2022 compared to 2021.

Financing Activities

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.

Financing activities in the nine months ended September 30, 2022 required cash of $620.0 million compared to cash provided of $404.4 million in the nine months ended September 30, 2021.

The first nine months of 2022 included payments of $566.9 million for the repurchase of common shares, which was an increase of $335.4 million from the repurchases of $231.5 million in the 2021 period and dividend payments of $22.1 million in 2022 versus dividends of $19.9 million in the first nine 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.

Repayments of debt required $7.6 million in 2022 compared to net repayments of $216.9 million in 2021 that were related to the QuickChek acquisition.

Repayments of debt required $11.4 million in 2022 compared to repayments of $220.5 million in 2021 that were related to the QuickChek acquisition.

Debt issuance costs related to the QuickChek transaction required cash of $9.9 million in 2021 and there were no such costs in 2022.

Amounts related to share-based compensation required $13.0 million more in cash during 2022 than in 2021.

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.

During the nine months ended September 30, 2022, the Company has paid cash dividend payments of $0.92 per common share, for a total of $22.1 million, compared to the period ended September 30, 2021, in which dividends of $0.75 per share were paid for a total of cash dividend payments of $19.9 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 October 20, 2022 the Board of Directors declared a quarterly cash dividend of $0.35 per common share, or $1.40 per share on an annualized basis.

The dividend is payable on December 1, 2022, to shareholders of record as of November 8, 2022.

Share Repurchase Program

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,

During the nine months ended September 30, 2022 a total of 2,482,804 shares were repurchased for $566.9 million.

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

At September 30, 2022, the 2021 program had approximately $453.1 million remaining to be executed by December 31, 2026.

Share repurchases made during the nine months ended September 30, 2021 were 1,699,043 shares for $231.5 million.

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

(Millions of dollars) September 30,

2022 December 31,

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

5.625% senior notes due 2027 (net of unamortized discount of $1.7 at September 30, 2022 and $2.0 at December 2021) $ 298.3 $ 298.0

4.75% senior notes due 2029 (net of unamortized discount of $4.4 at September 30, 2022 and $4.8 at December 31, 2021) 495.6 495.2

3.75% senior notes due 2031 (net of unamortized discount of $5.2 at September 30, 2022 and $5.7 at December 31, 2021) 494.8 494.3

Term loan due 2028 (effective interest rate of 4.34% at September 30, 2022 and 2.27% at December 31, 2021 and net of unamortized discount of $0.7 at September 30, 2022 and $0.9 at December 31, 2021) 394.3 397.1

Capitalized lease obligations, autos and equipment, due through 2026 2.6 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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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 $396 million at June 30, 2022 and $398 million at December 31, 2021.

The outstanding balance of the term loan was $395 million at September 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 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.

As of September 30, 2022, we had no outstanding borrowings under the Revolving Facility and had $4.7 million in outstanding letters of credit (which reduces the amount available to borrow under the Revolving Facility).

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,

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.

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 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.

At September 30, 2022, our total leverage ratio was 1.53 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 $114.5 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 and six months ended June 30, 2022, and accounted for the vast majority of our total assets as of June 30, 2022.

MOUSA is our primary operating subsidiary and generated the vast majority of our revenues for the three and nine months ended

September 30, 2022, and accounted for the vast majority of our total assets as of September 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.

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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 and six month periods ended June 30, 2022 and 2021:

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Millions of dollars) 2022 2021 2022 2021

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successful execution of our information technology strategy;

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;

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;

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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