What changed in this filing

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Item 1. Business

2023-02-15 compared with 2022-02-17 · 70 added, 68 removed, 259 unchanged (35% of the section changed)

Murphy USA Inc.

("Murphy USA" or the "Company") was incorporated in Delaware on March 1, 2013 and holds, through its subsidiaries, the former U.S.

("Murphy USA", the "Company", "we", or "our") was incorporated in Delaware on March 1, 2013 and holds, through its subsidiaries, the former U.S.

retail marketing business of its former parent company, Murphy Oil Corporation (“Murphy Oil”), plus other assets and liabilities of Murphy Oil that supported the activities of the U.S.

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Our business consists primarily of the marketing of retail motor fuel products and convenience merchandise through a network of 1,712 (as of December 31, 2022) retail stores located in 27 states, of which, 1,151 were branded as Murphy USA, 404 were branded as Murphy Express, and 157 were branded as QuickChek stores.

The majority of our retail gasoline stores operate under the brand name of Murphy USA and are almost all located in close proximity to Walmart stores while gasoline and other products at standalone stores are marketed under the brand name of Murphy Express.

The Murphy branded stores are primarily located in the Southeast, Southwest, and Midwest areas of the United States.

The majority of our existing and new-to-industry ("NTI") retail gasoline stores operate under the brand names of Murphy USA and Murphy Express.

Plans are under development to transition all Murphy Express branded stores to the Murphy USA brand name.

These locations operate within close proximity to Walmart stores or within preferred markets across 25 states in the Southeast, Southwest, and Midwest areas of the United States.

We also operate a combination of convenience stores and convenience stores with retail gasoline under the brand name of QuickChek, which are located in New Jersey and New York.

In addition, we market to unbranded wholesale customers through a mixture of Company owned and third-party product distribution terminals and pipeline positions.

As an independent publicly traded company, we have low-price, high volume fuel retail outlets selling convenience merchandise through low-cost small store formats and kiosks, as well as larger format stores that have a broader range of merchandise and food and beverage offerings that are driven by key strategic relationships and experienced management.

In addition, we market fuel to unbranded wholesale customers through a mixture of Company owned and third-party product distribution terminals and pipeline positions.

We are an independent publicly traded company, with low-price, high volume fuel retail outlets selling convenience merchandise through low-cost small store formats and kiosks, as well as larger format stores that have a broader range of merchandise and food and beverage offerings which are driven by key strategic relationships and experienced management.

Our business is subject to various risks.

For a description of these risks, see “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report on Form 10-K.

Information about our operations, properties and business segments, including revenues by class of products and financial information by geographic area, are provided on pages 30 through 44 , F-13 , F-15 , and F-30 through F-31 of this Annual Report on Form 10-K.

Information about our operations, properties and business segments, including revenues by class of products and financial information by geographic area, are provided on pages 32 through #, F-12 , F-13 , F-15 , and F-3 8 through F-3 9 of this Annual Report on Form 10-K.

Our Competitive Strengths

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Strategic proximity to and complementary relationship with Walmart

Of our network of 1,679 retail gasoline stores (as of December 31, 2021), the majority are situated on prime locations located near Walmart stores.

Of our network of 1,712 retail stores (as of December 31, 2022), the majority are situated on prime locations located near Walmart stores.

We believe our proximity to Walmart stores generates significant traffic to our existing retail stores while our competitively priced gasoline and convenience offerings appeal to our shared customers.

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In combination with our high traffic locations, our competitive gasoline prices drive high fuel volumes and gross profit.

In addition, we believe we are an industry leader in per-store tobacco sales with our low-priced tobacco products and in total store sales per square foot as we also sell a growing assortment of single-serve/immediate consumption items.

We continue to provide value opportunities to our customers through our Murphy Drive Rewards loyalty program which rewards customers with discounted and free items based on purchases of qualifying fuel and merchandise.

In addition, we believe we are an industry leader in per-store tobacco sales with our low-priced tobacco products and in total store sales per square foot as we also sell a growing

assortment of single-serve/immediate consumption items.

We continue to provide value opportunities to our customers through our Murphy Drive Rewards and QuickChek Rewards loyalty programs which reward customers with discounted and free items based on purchases of qualifying fuel and merchandise, as applicable.

Low cost retail operating model

We operate our Murphy USA and Murphy Express retail gasoline stores with a strong emphasis on fuel sales complemented by a focused convenience offering that allows for a smaller store footprint than most of our competitors.

We build a mix of 1,400 square foot stores and new-to-industry ("NTI") 2,800 square foot stores which we believe have low capital expenditure, maintenance and utility requirements relative to our competitors.

We build a mix of raze-and-rebuild 1,400 square foot stores and NTI 2,800 square foot Murphy stores which we believe have low capital expenditure, maintenance and utility requirements relative to our competitors.

Many of our Murphy stores require only one or two associates to be present during business hours and 76% of our stores are located on Company-owned property and do not incur any rent expense.

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Distinctive fuel supply chain capabilities

We source fuel at very competitive industry benchmark prices due to the diversity of fuel options available to us in the bulk and rack product markets, our shipper status on major pipeline systems, and our access to numerous terminal locations.

In addition, we have a strong distribution system in which we analyze intraday supply options and direct third-party tanker trucks to the most favorably priced terminal to load products for our Murphy stores and QuickChek stores with gasoline, further reducing our fuel product costs.

We source fuel at competitive industry benchmark prices due to the diversity of fuel options available to us in the bulk and rack product markets, our shipper status on major pipeline systems, and our access to numerous terminal locations.

In addition, we have a strong distribution system in which we leverage our scale and ratability to deliver the most favorably priced products for our Murphy stores and QuickChek stores with gasoline, further reducing our fuel product costs.

By participating in the broader fuel supply chain, we believe our business model provides additional upside exposure to opportunities to enhance margins and volume, such as shifting non-contractual wholesale volumes to protect retail fuel supply during periods of constrained supply and elevated margins.

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We also believe our conservative financial structure further protects us from the inherently volatile fuel environment.

We expect that our strong cash position and availability under our credit facility will continue to provide us with a significant level of liquidity to help maintain a disciplined capital expenditure program focused on growing ratably through periods of both high and low fuel margins.

We have acquired through share repurchases approximately $1.9 billion of our common stock in a little more than eight years of operation.

In October 2020, our Board of Directors approved a $500 million share repurchase program.

As of December 31, 2021, we had approximately $20 million remaining in the program which was completed in January 2022.

In December 2021, our Board of Directors authorized a new share repurchase program of up to $1 billion to be executed by December 31, 2026, to begin upon completion of the 2020 authorization.

Additionally, in order to provide a consistent and meaningful return of capital to shareholders independent of share repurchases, we increased our quarterly dividend to $0.29 per share, or $1.16 per share on an annualized basis, to our shareholders beginning in December 2021.

We have 14,615 dedicated and hardworking employees as of December 31, 2021, that are actively engaged to serve the customer, whether it is the external retail consumer or their internal co-workers.

We expect that our strong cash position combined with availability under our credit facility will continue to provide us with a significant level of liquidity to help maintain a disciplined capital expenditure program focused on growing ratably through periods of both high and low fuel margins.

We have acquired through share repurchases approximately $2.7 billion of our common stock in a little more than nine years of operation.

During the year 2022, we repurchased a total of 3,328,795 common shares for $806.4 million, for an average price of $242.24 per share.

Repurchases in 2022 were made pursuant to our now completed $500 million 2020 authorization and our $1 billion 2021 authorization.

As of December 31, 2022, we had approximately $213.7 million remaining under our 2021 authorization.

Additionally, in order to provide a consistent and meaningful return of capital to shareholders independent of share repurchases, we raised our quarterly dividend three times during 2022 from $0.29 per share in Q1 2022 to $0.35 cents per share, or $1.40 per share on an annualized basis as of Q4 2022.

We have over 15,100 dedicated and hardworking employees as of December 31, 2022, that are actively engaged to serve the customer, whether it is the external retail consumer or their internal co-workers.

We believe our sustainable business model and organic growth opportunities support an employee value proposition that makes Murphy USA an attractive place to work.

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Grow organically

We intend for our independent growth plan to be a key driver of our organic growth over the next several years, which is demonstrated by the 370 standalone Murphy Express locations (as of December 31, 2021) we have

developed, the majority of which were developed after our 2013 spin-off from Murphy Oil Corporation.

We expect to build up to 45 NTI locations and up to 35 raze-and-rebuilds in 2022 and are targeting up to 55 NTI and up to 25 raze-and-rebuilds per year in future periods, focusing on high-return locations either in high traffic areas, near Walmart Supercenters, or by strategic infill in our core market areas complemented by our supply chain capabilities.

While we were previously focused on smaller lot sizes, we now expect to build more Murphy branded NTI stores that are 2,800 square feet or larger, as well as our NTI QuickChek branded locations in their existing footprint, which average between 5,000 to 7,000 square feet in size.

We intend for our independent growth plan to be a key driver of our organic growth over the next several years, which is demonstrated by the 404 standalone Murphy Express locations (as of December 31, 2022), the majority of which were developed after our 2013 spin-off from Murphy Oil Corporation.

We expect to build up to 45 NTI locations and up to 30 raze-and-rebuilds in 2023 and are targeting up to 55 NTI and up to 25 raze-and-rebuilds per year in future periods, focusing on high-return locations either in high traffic areas, near Walmart Supercenters as a complement to higher performing existing stores in smaller markets, or by strategic infill in our core market areas complemented by our supply chain capabilities.

While we were previously focused on smaller store size, we now expect to build more Murphy branded NTI stores that are 2,800 square feet or larger, as well as our NTI QuickChek branded locations in their existing footprint, which average between 5,000 to 7,000 square feet in size.

Our real estate development team works to maintain a multi-year pipeline of projects that supports continued ratable expansion in these high-return locations.

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We believe our strong financial position should allow us to profitably execute our low-cost, high volume retail strategy through periods of both high and low fuel margins while preserving the ability to re-invest in and grow our existing stores, brand image and supporting capabilities such as enhancing our food and beverage offerings.

Furthermore, in addition to our store-development capital and investments in new capabilities, we have diversified our shareholder distribution mechanism to provide consistent return of capital through quarterly cash dividends and meaningful share repurchase programs as we continue to focus on maximizing shareholder value.

Furthermore, in addition to our store-development capital and investments in new capabilities, we

have diversified our shareholder distribution mechanism to provide consistent return of capital through quarterly cash dividends and meaningful share repurchase programs as we continue to focus on maximizing shareholder value.

Industry Trends

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Below is a table that lists the states where we operate our stores at December 31, 2022 and the number of stores in each state.

All of our stores are company owned.

of stores State No.

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End of period 1,712 1,679 1,503

The following table present the numbers of our owned and leased stores at December 31, 2022:

Located on Owned land Located on Leased Property 3,5

Murphy USA 1,047 — 1,047

Leased from Walmart 1,2

Leased from others 2

Murphy Express 2

QuickChek 3,4,5

Stores with leased land — 44 44

Stores with leased land and buildings — 105 105

Total stores operated 1,294 418 1,712

1 This table excludes 3 locations that were disposed of in prior years but remain subleased from Walmart to the buyer

2 Leases for Murphy branded stores are operating leases

3 Operating leases have an average remaining term, including renewals of 25 years

4 Leases for QuickChek land are operating leases and Quick Chek store buildings are finance leases

5 Finance leases have an average remaining term, including renewals, of 20 years

Since 2007, we have purchased from Walmart the properties underlying many of our stores.

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The agreement permits Walmart to terminate it in its entirety, or only as to affected sites, at its option under customary circumstances (including in certain events of bankruptcy or insolvency), or if we improperly transfer the rights under the agreements to another party.

In addition, the master lease agreement prohibits us from selling a leased store or allowing a third party to operate a leased store without written consent from Walmart.

As of December 31, 2021, we own the sites of 1,047 of our Murphy USA stores and we lease and operate 99 Murphy USA sites from Walmart, and we also lease and sublease 3 other sites from Walmart.

We have 5 Murphy USA sites located near Walmart locations where we pay rent to other landowners.

As of December 31, 2021, we have 233 Murphy Express stores where we own the land and 137 locations where we rent the underlying land.

All leases for Murphy branded stores are operating leases.

As of December 31, 2021, we have 8 QuickChek stores of which we own the land and 150 QuickChek stores where we rent the underlying land and building.

QuickChek has both operating and finance type leases and at December 31, 2021, had 30 stores with finance leases, 40 stores with operating leases and 80 stores which had both a finance and an operating lease.

Of the operating leases, over half have an average remaining term, including renewals, of 25 years and of the finance leases, over half have an average remaining term, including renewals, of over 19 years.

In addition, the

master lease agreement prohibits us from selling a leased store or allowing a third party to operate a leased store without written consent from Walmart.

For more information about our operating leases, see Note 21 "Leases" to the accompanying audited consolidated financial statements for the three years ended December 31, 2022.

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Branded retail outlets:

Murphy USA® 1,151 1,151 1,161 1,160 1,158

1,151 1,151 1,151 1,161 1,160

Murphy Express 404 370 352 328 312

QuickChek® 158 — — — —

Total 1,679 1,503 1,489 1,472 1,446

As of December 31,

157 158 — — —

Total 1,712 1,679 1,503 1,489 1,472

Retail marketing:

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petroleum business is highly competitive, particularly with regard to accessing and marketing petroleum and other refined products.

We compete with other chains of retail fuel stores for fuel supply and in the retail sale of refined products to end consumers, primarily on the basis of price, but also on the basis of convenience and consumer appeal.

We compete with other chains of retail fuel stores for fuel supply and in the retail sale of refined products to end consumers, primarily on the basis of price, but also on convenience and consumer appeal.

In addition, we may also face competition from other retail fueling stores that adopt marketing strategies similar to ours by associating with non-traditional retailers, such as quick service restaurants, supermarkets, discount club stores and hypermarkets, particularly in the geographic areas in which we operate.

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Market Conditions and Seasonality

Market conditions in the oil and gas industry are cyclical and subject to global economic and political events and new and changing governmental regulations.

Our operating results are affected by price changes in crude oil, natural gas and refined products, as well as changes in competitive conditions in the markets we serve.

Pandemics such as COVID-19 may have adverse impacts on the business as travel restrictions and changed customer behavior may cause decreased store traffic and decreased demand for fuel and convenience store offerings.

Market conditions in the oil and gas industry are cyclical and subject to global economic and political events, such as Russia's invasion of Ukraine, that upset global supply and demand and impact the price of crude oil and to new and changing governmental regulations.

Our operating results are affected by price changes in crude oil, natural gas and refined products, pandemics that may lead to travel restrictions or changed customer behavior, and changes in competitive conditions in the markets we serve.

Oil prices, wholesale motor fuel costs, motor fuel sales volumes, motor fuel gross margins and merchandise sales can be subject to seasonal fluctuations.

For example, consumer demand for motor fuel typically increases during the summer driving season, and typically falls during the winter months.

Therefore, our revenues and/or sales volumes are typically higher in the second and third quarters of our fiscal year.

Consumer demand for motor fuel typically increases during the summer driving season, and typically falls during the winter months.

Travel, recreation and construction are typically higher in these months in the geographic areas in which we operate, increasing the demand for motor fuel and merchandise that we sell.

Therefore, our revenues and sales volumes are typically higher in the second and third quarters of our fiscal year.

A significant change in any of these factors, including a significant decrease in consumer demand (other than typical seasonal variations), could materially affect our motor fuel and merchandise volumes, motor fuel gross profit and overall customer traffic, which in turn could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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We sell gasoline primarily under the Murphy USA ® and Murphy Express brands, which we acquired from Murphy Oil.

We acquired ownership of the QuickChek® trademark and others as a result of the QuickChek acquisition.

ownership of the QuickChek ® trademark and others as a result of the QuickChek acquisition.

We are not aware of any facts which would negatively impact our continuing use of any of the above trade names, service marks or trademarks.

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Some of our current and former properties have been operated by third parties whose handling and management of hazardous materials were not under our control, and substantially all of them have or previously had motor fuel or petroleum product storage tanks.

Pursuant to certain environmental laws, we could be responsible for investigating and remediating contamination relating to such stores, including impacts attributable to prior site occupants or other third parties, and for implementing remedial measures to mitigate the risk of future contamination.

We may also have liability for contamination and violations of environmental laws under contractual arrangements with third parties, such as landlords and former owners of our sites, including at our sites in close proximity to Walmart stores.

Contamination has been identified at certain of our current and former terminals and retail fueling stores, and we are

continuing to conduct investigation and remediation activities in relation to such properties.

Pursuant to certain environmental laws and regulations, we could be responsible for investigating and remediating contamination relating to such stores, including impacts attributable to prior site occupants or other third parties, and for implementing remedial measures to mitigate the risk of future contamination.

We may also have liability for contamination and violations of environmental laws and regulations under contractual arrangements with third parties, such as landlords and former owners of our sites, including at our sites in close proximity to Walmart stores.

Contamination has been identified at certain of our current and former terminals and retail fueling stores, and we are continuing to conduct investigation and remediation activities in relation to such properties.

The discovery of additional contamination or the imposition of further investigation or remediation obligations at these or other properties could result in significant costs.

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We could also be held responsible for contamination relating to third-party sites to which we or our predecessors have sent hazardous materials for recycling or disposal.

We are currently identified as a potentially responsible party in connection with one such disposal site.

are currently identified as a potentially responsible party ("PRP") in connection with one such disposal site.

Any such contamination, leaks from storage tanks or other releases of regulated materials could result in claims against us by governmental authorities and other third parties for fines or penalties, natural resource damages, personal injury, and property damage.

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In 2016, the NHTSA finalized a rule imposing stricter penalties against those who exceed CAFE standards.

In 2019, the EPA and NHTSA jointly finalized part one of the Safer Affordable Fuel-Efficient ("SAFE") Vehicles Rule, which reduced the penalties for violations of CAFE standards and revoked California's authority to set its own fuel economy standards.

However, in December 2021, NHTSA published a final rule that repealed part one of the SAFE Vehicles Rule, meaning that California's ability to set its own standards will no longer be preempted by federal law.

In March 2020, EPA and NHTSA finalized part two of the SAFE Vehicles Rule, which amended and made less stringent the 2012 CAFE fuel economy and emissions standards for fleets of 2021-2026 model year cars and light duty trucks.

Subsequently, over the course of 2021 the agencies separately proposed, and the EPA finalized, standards that are more stringent than those in part two of the SAFE Vehicles Rule, with the proposed NHTSA CAFE standards addressing the 2024-2026 model years and the finalized EPA GHG standards addressing the 2023-2026 model years.

In December 2021, the EPA finalized standards for 2023-2026 model years that are more stringent than those in prior standards from 2020.

In March 2022 NHTSA finalized CAFE standards addressing the 2024-2026 model years that are more stringent than those in prior standards from 2020.

The EPA and NHTSA also regulate GHG emission and fuel efficiency standards for medium and heavy-duty vehicles and in August 2016, jointly finalized "Phase 2" vehicle and engine performance standards covering model years 2021 through 2027, which apply to semi-trucks, large pick-up trucks and vans, and all types and sizes of buses and work trucks.

In December 2022, the EPA finalized a rule that sets more stringent standards to reduce pollution from heavy duty vehicles and engines beginning with model year 2027;

this was the first rulemaking under the EPA's Clean Trucks Plan, which is an EPA regulatory initiative to reduce GHG emissions and other harmful air pollutants from heavy-duty trucks via various rulemakings.

These and any future increases in or changes to fuel economy standards or GHG emission reduction requirements could decrease demand for our products.

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Such a loss or imposition could have a material adverse effect on our business, liquidity and results of operations.

In many states, retailers of alcoholic beverages have been held responsible for damages caused by intoxicated individuals

who purchased alcoholic beverages from them.

In many states, retailers of alcoholic beverages have been held responsible for damages caused by intoxicated individuals who purchased alcoholic beverages from them.

While the potential exposure for damage claims as a seller of alcoholic beverages and tobacco products is substantial, we have adopted procedures intended to minimize such exposure.

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At Murphy USA, we know that the strength of our workforce is critical to our long-term success and we strive to build upon this through the foundation laid by our Principles.

As of December 31, 2021, Murphy USA had 14,615 employees, including 6,245 full-time employees and 8,370 part-time employees working at our stores, support centers, and corporate headquarters.

As of December 31, 2022, Murphy USA had over 15,100 employees, including 6,000 full-time employees, and 9,100 part-time employees working at our stores, support centers, and corporate headquarters.

Murphy USA is committed to the attraction, development, retention, and safety of our employees.

Our initiatives for fiscal year 2021 addressed, among other things, (i) Our Principles, (ii) Inclusion and Diversity, (iii) Talent Management, (iv) Total Rewards, (v) Our COVID-19 Response, and (vi) Workforce Safety.

Our initiatives for fiscal year 2022 addressed, among other things, (i) Our Principles, (ii) Inclusion and Diversity, (iii) Talent Management, (iv) Total Rewards, and (v) Workforce Safety.

Our Principles are the heart of our rich culture, creating the foundation of how we operate at Murphy USA.

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• We strive to lift up talent through differentiated and personalized development opportunities .

We employ thoughtful talent management strategies, including annual succession planning, bi-annual people reviews, promotion review committees, mid-year and annual performance reviews, and cohort performance review calibrations.

We employ thoughtful talent management strategies, including annual succession planning, semi-annual people reviews, promotion review committees, mid-year and annual performance reviews, and cohort performance review calibrations.

We are dedicated to helping our employees succeed professionally by offering a robust suite of learning and development opportunities.

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• We have individual development plans (IDPs) and an eLearning platform to support employee-driven development.

• We offer a formal stretch role and assignment process to support development at all levels.

• We have a mentorship process.

• Leadership development opportunities are available for all leaders.

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vacation, sick, parental, bereavement, and holidays.

At present, all QuickChek benefit plans continue to operate as they did prior to our acquisition.

We continue to evaluate QuickChek's benefit plans, and such evaluation could lead to consolidation with the Murphy USA plans in the future.

The benefits offered by QuickChek are very similar to the benefits listed above.

We value the health, well-being and safety of our employees, customers, and communities.

Our executive leadership team initiated a COVID-19 Crisis Response Team to address the critical safety, operational and business risks associated with the pandemic.

In March 2020, we launched a voluntary work-from-home plan available to virtually all home-office based employees and revised critical work practices to promote a safer work environment for employees and our customers.

We established a temporary Emergency Sick Pay program for store-level employees who were negatively impacted by COVID-19 and continued to support our employees throughout the COVID-19 pandemic by offering these programs through July 2021.

A thoughtful and well-planned approach has been taken to evaluate and execute benefits consolidation between Murphy USA and QuickChek, where appropriate.

At present, several QuickChek benefit programs and vendors have been consolidated with Murphy USA's, including medical, dental, vision, flexible spending, and retirement.

We continue to evaluate QuickChek's benefit plans, and such evaluation could lead to additional consolidation with the Murphy USA plans in the future.

We are committed to keeping our employees and customers safe through fostering and maintaining a strong safety culture and emphasizing the importance of our employees’ role in identifying, mitigating and communicating safety risks.

We have implemented a rapid response program to ensure safety events (i.e., slip and falls, medical emergencies, and vehicle accidents) are escalated quickly and responded to efficiently.

We have continued to build our rapid response program to ensure safety events (i.e., slip and falls, medical emergencies, and vehicle accidents) are escalated quickly and responded to efficiently.

Our headquarters of approximately 120,000 square feet is located at 200 Peach Street, El Dorado, Arkansas.

We also own and operate two other office buildings in El Dorado, Arkansas that house our store support center and technology services personnel, and we own and operate an office building and training center in

Whitehouse Station, New Jersey for our QuickChek store support personnel.

We have numerous owned and leased properties for our retail fueling stores as described under “Description of Our Business,” as well as wholly-owned product distribution terminals.

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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-K

Item 1. Business