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Item 7. Management’s Discussion and Analysis

2023-02-15 compared with 2022-02-17 · 108 added, 116 removed, 341 unchanged (40% of the section changed)

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Discussions of 2020 items and the year-to-year comparisons between 2021 and 2020 are not included in this Form 10-K and can be found in the Form 10-K for the year ended December 31, 2021 filed on February 17, 2022.

For purposes of this Management’s Discussion and Analysis, references to “Murphy USA”, the “Company”, “we”, “us” and “our” refer to Murphy USA Inc.

For purposes of this Management’s Discussion and Analysis, references to “Murphy USA”, the “Company”, “we”, and “our” refer to Murphy USA Inc.

and its subsidiaries on a consolidated basis.

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

QuickChek results cover the period from January 29, 2021 (the date of acquisition) to December 31, 2021.

The Company owns and operates a chain of retail stores under the brand name of Murphy USA ® which are almost all located in close proximity to Walmart stores, principally in the Southeast, Midwest and Southwest areas of the United States.

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.

Current year QuickChek results cover the period from January 1, 2022 to December 30, 2022 and in the prior year covered January 29, 2021 (the date of acquisition) to December 31, 2021.

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

The Company owns and operates a chain of retail stores that market gasoline and other merchandise under the brand names of Murphy USA ® , Murphy Express, and QuickChek.

Murphy USA ® branded stores are almost all located in close proximity to Walmart stores, principally in the Southeast, Midwest and Southwest areas of the United States.

Our standalone stores operate under the Murphy Express brand and market

gasoline and other products.

We also 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 December 31, 2022, we had a total of 1,712 Company stores in 27 states, of which 1,151 were Murphy USA, 404 were Murphy Express and 157 were QuickChek.

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Trends Affecting Our Business

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

These gross margins are commodity-based, change daily and are volatile.

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,

sales and gross margins can change rapidly due to many factors.

These factors include, but are not limited to, the price of refined products, interruptions in our fuel and merchandise supply 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, and competition in the local markets in which we operate.

The COVID-19 pandemic continued to impact gasoline demand and cause disruptions to supply chains throughout 2021 and into early 2022.

If the incremental recoveries experienced throughout 2021 stall or reverse due to a resurgence in COVID-19 infection rates, and should related government intervention reoccur, this could cause volume declines.

However, incrementally higher fuel margins related to volume decline may help mitigate any adverse financial impact.

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

Generally, rising prices for crude oil increase the Company’s cost for wholesale fuel products purchased.

When wholesale fuel costs rise, the Company is not always able to immediately pass these price increases on to its retail customers at the pump, which in turn could negatively impact the Company’s sales margin.

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

Crude oil prices in 2021 continued to be volatile during the year with prices ranging from $47 per barrel to $86 per barrel, with an average price in 2021 of $68 per barrel which compares to 2020 when prices ranged from negative territory to $63 per barrel with an average of $39 per barrel.

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

The fuel gross margins are commodity-based, change daily and are volatile.

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, interruptions in our fuel and merchandise supply caused by severe weather or pandemics, the effects from pandemics such as travel restrictions and stay-at-home orders, severe refinery mechanical failures for an extended period of time, cyber-attacks against the Company or our vendors, changing economic conditions such as inflation, and competition in the local markets in which we operate.

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

Historically, a rising price environment for crude oil increases the Company’s cost for wholesale fuel products purchased and increases the price of retail fuel sales.

Rising prices tend to cause consumers to reduce discretionary fuel consumption, however our low-price model can serve as a hedge to draw in new customers which can offset the potential loss of discretionary volumes.

When wholesale fuel costs rise, the Company is not able to pass these price increases immediately on to retail customers at the pump, which in turn can negatively impact the Company’s margins.

In recent periods, however, we have noticed a structural change in the industry's breakeven costs that has driven marginal retailers to preserve margins which, in turn, has allowed the Company to adjust retail prices in a more timely manner.

Crude oil prices in 2022 continued to be volatile during the year with prices ranging from $71 per barrel to $124 per barrel, with an average price of $95 per barrel, compared to prices in 2021 that ranged from $47 per barrel to $86 per barrel with an average of $68 per barrel.

Total fuel contribution (retail fuel margin plus product supply and wholesale ("PS&W") results including Renewable Identification Numbers ("RINs")) was 34.3 cpg in 2022, compared to 26.3 cpg in 2021.

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

for example, activities such as blending bulk fuel with ethanol and bio-diesel to capture and subsequently sell Renewable Identification Numbers (“RINs”).

Under the Energy Policy Act of 2005, the EPA is authorized to set annual quotas establishing the percentage of motor fuels consumed in the United States that must be attributable to renewable fuels.

for example, activities such as blending bulk fuel with ethanol and biodiesel to capture and subsequently sell Renewable Identification Numbers (“RINs”).

Under the Energy Policy Act of 2005, the Environmental Protection Agency ("EPA") is authorized to set annual quotas establishing the percentage of motor fuels consumed in the United States that must be attributable to renewable fuels.

Obligated parties are required to demonstrate that they have met any applicable quotas by submitting a certain amount of RINs to the EPA.

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

As of December 31, 2021, we had $1.3 billion of Senior Notes and a $398 million of term loan outstanding.

As of December 31, 2022, we had $1.3 billion of Senior Notes and a $394 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.

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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.

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.

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

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Our business has inherent seasonality due to the concentration of our retail stores in certain geographic areas, as well as customer behaviors during different seasons.

In general, sales volumes and operating incomes

are highest in the second and third quarters during the summer activity months and lowest during the winter months.

Beginning in the latter half of March 2020 through the remainder of the year, we saw disruptions to typical seasonal patterns due to the COVID-19 pandemic, resulting in fuel volumes sold falling below our historical average.

As we moved into 2021, we saw seasonal patterns return to a more normal seasonal pattern which held through the entirety of 2021.

At the present time, we cannot forecast how the pandemic will continue to influence travel behavior into 2022.

In general, sales volumes and operating incomes are highest in the second and third quarters during the summer activity months and lowest during the winter months.

In 2020 and 2021, we saw disruptions to typical seasonal patterns due to the COVID-19 pandemic resulting in fuel volumes sold falling below our historical average.

Beginning in 2021 a more normal seasonal pattern emerged and in 2022 fuel volumes approached and sometimes exceeded pre-pandemic levels.

Business Segments

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Net income was $396.9 million for 2021 or $14.92 per diluted share on revenue of $17.4 billion.

The consolidated financial results include QuickChek from January 29, 2021 (date of acquisition).

The consolidated financial results for 2022 include full year QuickChek results from January 1, 2022 to December 30, 2022 and for 2021 include QuickChek results from January 29, 2021 (date of acquisition) to December 31, 2021.

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

A summary of the Company’s earnings by business segment follows:

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• Higher merchandise contribution;

• Lower acquisition and integration related costs

The items below partially offset the increase in earnings in the current period:

• Higher store and other operating expenses, payment fees and rent;

• Higher store and other operating expenses;

• Higher depreciation and amortization expense;

• Higher selling, general and administrative ("SG&A") expenses;

• Acquisition related costs;

• Higher interest expense

• Higher income tax expense

Financial Summary of 2022 Compared to 2021

Revenues for the year ended December 31, 2022 increased $6.1 billion, or 35.1%, compared to 2021.

The increase was due to higher average retail fuel prices which increased 86 cpg, retail fuel volumes which increased 11.6%, merchandise sales which increased 24.5%, improved PS&W revenues including RINs, and as a result of the consolidation of QuickChek results since acquisition.

Cost of sales increased $5.7 billion, or 57.9%, compared to 2020, due to the higher average cost of fuel which increased 71.1%, the increase in retail fuel volumes sold of 11.6%, and 19.2% higher merchandise costs which were primarily as a result of the consolidation of QuickChek since acquisition.

Store and other operating expenses increased $278.2 million, or 50.7%, in 2021 due primarily to the inclusion of QuickChek stores which have higher store operating costs due to their larger format stores with an enhanced food and beverage offering, combined with higher payment fees and rent expense.

The increase was due to higher average retail fuel prices which increased 86 cpg, or 31.0%, retail fuel volumes which increased 9.2%, merchandise sales which increased 6.1%, improved PS&W revenues including RINs, and the inclusion of QuickChek results for 12 months in 2022 compared to 11 months in 2021.

Cost of sales increased $5.5 billion, or 35.7%, compared to 2021, due to the higher average cost of fuel, which increased 42.9%, the increase of 9.2% in retail fuel volumes sold, and 5.4% higher merchandise cost of goods sold.

Store and other operating expenses increased $149.2 million, or 18.0%, in 2022 due primarily to higher payment fees (42% of the increase), higher employee related costs in part due to a non-recurring special bonus of $7.0 million, rent expense, increased store maintenance expenses and the inclusion of one additional month of QuickChek expense.

On an average per store month ("APSM") basis, store operating expenses excluding credit card fees and rent increased 10.0% in 2022 when compared to 2021.

The Company incurred $10.4 million in QuickChek acquisition and integration related costs in 2021 compared to $1.7 million in 2020.

These included transaction-specific costs to close the acquisition and costs related to integrating technology and systems.

Depreciation and amortization expense in 2021 increased $51.6 million due primarily to the inclusion of QuickChek since its acquisition and more Murphy branded stores in place with the larger format.

Selling, general and administrative expenses for 2021 were higher by $22.5 million.

The increase was mainly due to the inclusion of QuickChek since its acquisition and higher professional fees.

Interest expense in 2021 increased by $31.2 million compared to 2020 due to additional borrowings associated with the acquisition of QuickChek.

The Company incurred $1.5 million in integration costs for QuickChek in 2022 compared to acquisition and integration costs of $10.4 million in 2021.

In 2021 these included transaction-specific costs to close the acquisition and costs related to integrating technology and systems.

Depreciation and amortization expense in 2022 increased $7.8 million due primarily to the increased number of Murphy branded stores with larger formats and an additional month of QuickChek depreciation in 2022.

Selling, general and administrative expenses for 2022 were higher by $38.9 million primarily due to a $25 million charitable pledge in Q4 2022, increased employee incentive expense, and the inclusion of an additional month of expense for QuickChek.

Interest expense in 2022 increased by $2.9 million compared to 2021 due to an increase in interest rates on the term loan during the year.

The effective income tax expense rate in 2022 was 23.9% compared to 24.0% for 2021.

Segment Results

Income before income taxes in the Marketing segment for 2021 increased $46.2 million, or 8.0%, from 2020 due primarily to the inclusion of QuickChek results, higher all-in fuel margin, increased merchandise margins, partially offset by higher store and other operating costs, increased general and administrative costs, depreciation and interest expense.

Income before income taxes in the Marketing segment for 2022 increased $351.7 million, or 56.6%, from 2021 due primarily to higher all-in fuel margin, increased merchandise margins and was partially offset by higher store and other operating costs, selling, general and administrative costs, depreciation, and interest expense.

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

For 2022, the QuickChek results cover the period from January 1, 2022, to December 30, 2022 and for 2021 the QuickChek results cover the period from January 29, 2021 (the date of acquisition) to December 31, 2021.

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

The tables below show the results for the Marketing segment for the three years ended December 31, 2022 along with certain key metrics for the segment.

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Merchandise sales 3,903.2 3,677.7 2,955.1

Other 271.4 100.3 40.4

Other operating revenue 312.1 271.4 100.3

Total operating revenues 23,445.4 17,359.9 11,264.0

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Gain (loss) on sale of assets (0.7) 1.6 1.3

Income from operations 629.4 575.2 281.4

Income (loss) from operations 982.0 629.4 575.2

Other income (expense)

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Total other income (expense) (9.0) (8.1) (0.1)

Income before income taxes 621.3 575.1 281.3

Income (loss) before income taxes 973.0 621.3 575.1

Income tax expense (benefit) 232.1 148.5 132.9

Income $ 472.8 $ 442.2 $ 215.0

(Millions of dollars, except revenue per store month (in thousands) and store counts) Years Ended December 31,

Marketing Segment 2021 2020 2019

Net Income (loss) from operations $ 740.9 $ 472.8 $ 442.2

Total tobacco sales revenue per same store sales 1,2

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For all periods presented, the store must have been open for the entire calendar year to be included in the comparison.

Remodeled stores that remained open or were closed for just a very brief time (less than a month) during the period being compared remain in the same store sales calculation.

Remodeled stores that remained open or were closed for just a very brief time

(less than a month) during the period being compared remain in the same store sales calculation.

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.

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Total PS&W contribution ($ Millions) (80.8) (72.3) (8.5)

RINs and other (included in Other operating revenues on Consolidated Income Statement) ($ Millions) 265.3 95.6 34.8

RINs and other (included in Other operating revenues on Consolidated Income Statement)

($ Millions) 305.8 265.3 95.6

Total fuel contribution ($ Millions) $ 1,630.0 $ 1,144.3 $ 982.1

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240.9 225.8 216.2

Total fuel contribution (including retail, PS&W and RINs) (cpg) 26.3 25.2 16.1

Total fuel contribution (including retail, PS&W

and RINs) (cpg) 34.3 26.3 25.2

Retail fuel margin (cpg) 29.6 21.9 22.9

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Financial Summary of 2022 Compared to 2021

The Marketing segment had total revenues of $17.4 billion in 2021 compared to approximately $11.3 billion in 2020, an increase of $6.1 billion, due primarily to a higher average retail fuel price, increased volumes sold, higher merchandise sales and the inclusion of QuickChek results.

The Marketing segment had total revenues of $23.4 billion in 2022 compared to $17.4 billion in 2021, an increase of $6.0 billion, due primarily to a higher average retail fuel sales price, increased retail fuel volumes sold, higher merchandise sales and the inclusion of QuickChek results for an additional month.

Revenue amounts included excise taxes collected and remitted to government authorities of $2.2 billion in 2022 and $2.0 billion in 2021.

Total fuel contribution for the year ended December 31, 2022 was $1.6 billion, an increase of $485.7 million, or 42.4% over 2021.

This contribution improvement was due to higher retail fuel contribution, increased fuel volumes for the year, and to improved contribution from PS&W margin (including RINs).

Retail fuel margin on a cpg basis decreased in 2021 to 21.9 cpg, compared to 22.9 cpg in the prior year, and was offset by increased fuel volumes which increased 11.6%, primarily due to the acquisition of QuickChek and the decrease in travel restrictions imposed by the COVID-19 pandemic in 2020.

Total fuel sales volumes on an SSS basis were 225,792 gallons per month in 2021, an increase from 216,158 gallons per month in the prior year.

Total product supply and wholesale margin dollars before RINs decreased in the current year due to negative spot-to-rack margins partially offset by timing and inventory price adjustments.

This decline was offset by an increase in the contribution from sales of RINs.

During 2021, operating income included $265.3 million from the sale of 202.0 million RINs at an average selling price of $1.31 per RIN compared to $95.5 million from the sale of 233.9 million RINs at an average price of $0.41 per RIN in 2020.

Merchandise sales were up 24.5% in 2021 to $3.7 billion due to higher sales across the chain in most categories and the inclusion of QuickChek results.

This contribution improvement was due to higher retail fuel contribution, increased fuel volumes sold for the year, and an improved contribution from PS&W margin (including RINs).

Retail fuel margin on a cpg basis increased 35.2% in 2022 to 29.6 cpg, compared to 21.9 cpg in the prior year.

Fuel volumes increased 9.2%, primarily due to the return of pre-pandemic trends and to new customers seeking lower prices.

Total fuel sales volumes on an SSS basis were 240,940 gallons per month in 2022, an increase

from 225,792 gallons per month in the prior year.

Total product supply and wholesale margin dollars before RINs decreased in the current year due to timing and price-related impacts and lower spot-to-rack margins.

Additionally, there was an increase in the contribution from sales of RINs.

During 2022, other operating income included $305.8 million from the sale of 215.6 million RINs at an average selling price of $1.42 per RIN compared to $265.3 million from the sale of 202.0 million RINs at an average price of $1.31 per RIN in 2021.

Merchandise sales were up 6.1% in 2022 to $3.9 billion due to higher sales across the chain in most categories and the inclusion of QuickChek results for an additional month in 2022.

Total merchandise contribution in 2022 increased $65.5 million, or 9.3%, to $767.1 million compared to 2021.

Merchandise unit margins increased to 19.7% in 2022 from 19.1% in 2021.

On an SSS basis, total merchandise sales were up 1.0%, due to a 4.5% increase in non-tobacco sales, while tobacco products decreased 0.4%.

Total margins on a SSS basis for 2021 were up 3.5% with tobacco margins higher by 2.3%, and there was an overall increase of 5.4% in non-tobacco margins, mainly from increased beverage, snack, and lottery categories.

On an SSS basis, total merchandise sales were up 2.9%, due to a 3.1% increase in non-tobacco sales and an increase of 2.9% in tobacco products.

Total margins on a SSS basis for 2022 were up 5.1%, tobacco margins were higher by 5.5%, and non-tobacco margins increased 4.7%, mainly from increased beverage and snack categories.

Store and other operating expenses increased $149.4 million in 2022 compared to 2021 levels, an increase of 18.1%.

This increase in total dollars was due mainly to the inclusion of QuickChek stores which have higher store operating costs due to its larger format stores having an enhanced food and beverage offering.

Murphy branded store operating expenses also increased as well as associated payment fees in 2021.

Excluding credit card fees and rent on an APSM basis, store and other operating expenses at the retail level were higher in 2021 by 36.1% compared to 2020 levels.

This increase in total dollars was due primarily to higher payment fees, employee related expenses (due in part to a $7.0 million non-recurring special bonus), maintenance expenses, and to the inclusion of QuickChek stores for an additional month.

Excluding credit card fees and rent on an APSM basis, store and other operating expenses at the retail level were 10.0% higher in 2022 compared to 2021 levels.

Depreciation and amortization increased $7.5 million in 2022, an increase of 3.8%.

This increase was due primarily to the inclusion of QuickChek stores and to more stores operating in the 2021 period.

Selling, general and administrative expenses ("SG&A") increased $22.5 million in 2021 compared to 2020.

The increased SG&A costs were primarily due to the inclusion of QuickChek results in the current year.

This increase was due primarily to more stores with larger formats operating in the 2022 period and an additional month of depreciation for QuickChek assets.

Selling, general and administrative expenses ("SG&A") increased $38.9 million in 2022 compared to 2021, primarily due to a charitable pledge of $25.0 million, higher employee incentive expense, and an additional month of QuickChek expenses.

Corporate and Other Assets

Income from continuing operations for Corporate and other assets in 2021 was a loss of $75.9 million, compared to a loss of $56.1 million in 2020.

Net interest expense allocated to Corporate was higher in the current year by $23.1 million primarily due to the additional borrowings related to the QuickChek acquisition.

Acquisition related costs were $10.4 million in 2021 compared to $1.7 million in 2020.

Loss from continuing operations for Corporate and other assets in 2022 was $68.0 million, compared to a loss of $75.9 million in 2021.

The $7.9 million improvement from the previous year was mainly due to $8.9 million less in acquisition and integration costs, a $2.9 increase in investment income, and was partially offset by $2.0 million in higher interest expense and an increase of $2.5 million in other nonoperating expenses.

Non-GAAP Measures

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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 to EBITDA and Adjusted EBITDA is as follows:

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EBITDA 1,186.5 816.8 720.3

Net settlement proceeds — — (0.1)

Accretion of asset retirement obligations 2.7 2.5 2.3

(Gain) loss on sale of assets (2.1) (1.5) (1.3)

Loss on early debt extinguishment — — 14.8

Acquisition related costs 1.5 10.4 1.7

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Significant Sources of Capital

As of December 31, 2021, we had $256.4 million of cash and cash equivalents.

As of December 31, 2022, we had $60.5 million of cash and cash equivalents and total marketable securities of $22.3 million.

Our cash management policy provides that cash balances in excess of a certain threshold are reinvested in certain types of low-risk investments.

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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, dividend payments, repayment of debt maturities and other amounts that may ultimately be paid in connection with contingencies.

QuickChek Acquisition

On January 29, 2021, the Company completed its acquisition of QuickChek for an all-cash consideration of $641.1 million.

In conjunction with the closing of the acquisition, the Company entered into a credit agreement that provides for a cash flow revolving facility with commitments of $350 million and a term loan in a principal amount of $400 million.

The Company also issued a new series of 3.750% senior unsecured notes due 2031 in an aggregate principal amount of $500 million.

As a result of the above transactions, the ABL facility existing at December 31, 2020 was terminated and the previous term loan with $200 million remaining balance outstanding at January 29, 2021 was repaid and retired.

Operating Activities

Net cash provided by operating activities was $737.4 million for the year ended December 31, 2021 and $563.7 million for the comparable period in 2020, an increase of 30.8%, mainly due to an increase in net income of $10.8 million in 2021, increased depreciation of $51.6 million, increased deferred and noncurrent tax changes of $16.5 million, and the amount of cash provided from changes in noncash working capital in 2021 increasing by $95.9 million.

The impact of QuickChek on the year-over-year changes in working capital was a cash requirement of approximately $7.6 million.

For the current year, cash provided by changes in noncash operating working capital of $82.8 million was due to a decrease of $11.1 million in inventories, an increase of $102.9 million in accounts payable and accrued liabilities, offset by increases of $18.9 million in accounts receivable and of $3.6 million in prepaid expenses and other current assets, and a decrease of $8.7 million in income taxes payable.

The changes in accounts receivable and accounts payable were due to timing of invoicing, billing, payments, and receipts and the acquisition and consolidation of QuickChek.

Net cash provided by operating activities was $994.7 million for the year ended December 31, 2022 and $737.4 million for the comparable period in 2021, an increase of $257.3 million, or 34.9%, mainly due to an increase in net income of $276.0 million in 2022, increased depreciation of $7.8 million, and increased deferred and noncurrent tax changes of $12.5 million, partially offset by a decrease in the amount of cash provided from changes in noncash working capital in 2022 of $38.0 million.

For the current year, cash provided by changes in noncash operating working capital of $44.8 million was due to an increase of $180.1 million in accounts payable and accrued liabilities, offset by increases of $84.7 million in accounts receivable, $26.9 million in inventories, and $23.7 million in prepaid expenses and other current assets.

The changes in accounts receivable and accounts payable were due to timing of invoicing, billing, payments, and receipts and were further affected by increased fuel and merchandise inventory prices which affected inventories and accounts payable.

See also Note 17 "Other financial information" in the accompanying audited consolidated financial statements for the three-year period ended December 31, 2022.

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For the year ended December 31, 2022, cash required by investing activities was $319.3 million compared to cash required by investing activities of $914.2 million in 2021.

The investing cash increase of $689.9 million in 2021 was due primarily to the $641.1 million cash purchase of QuickChek and capital expenditures which required cash of $274.7 million in 2021 compared to $230.7 million in 2020 due primarily to more new store openings.

Cash provided by investing activities in 2021 were $3.4 million, primarily from the sale of a store and were $8.1 million in 2020 primarily from proceeds of the sale of Minnesota assets.

The decrease in cash required by investing activities of $594.9 million compared to the previous year was primarily due to the $641.1 million cash purchase of QuickChek in 2021, an increase in cash from the sale of assets of $5.4 million and other investing activities which were lower by $1.2 million.

These decreases were partially offset by higher capital expenditures which required cash of $305.3 million in 2022 compared to $274.7 million in 2021 primarily due to new store openings, and an investment in marketable securities of $22.2 million.

Financing Activities

Financing activities in the year ended December 31, 2021 provided net cash of $269.6 million compared to net cash required of $456.1 million in the year ended December 31, 2020.

The increase in financing cash provided was due to net borrowings of debt in 2021 of $668.5 million compared to net debt repayments of $38.9 million in 2020, a decrease of $44.6 million of share repurchases in 2021, and $4.0 million less in amounts related to share based compensation, and was partially offset by an increase of $20.4 million in dividend payments, and $9.9 million in debt issuance costs with no payments for debt issuance costs in 2020.

The Company paid dividends of $1.04 per common share during 2021 for total payments of $27.3 million, compared to $6.9 million in 2020, the first year for a dividend payment.

In October 2021, the Board of Directors approved an increase in the quarterly dividend to $0.29 per common share, $1.16 per share on an annualized basis, beginning on December 1, 2021.

Financing activities in the year ended December 31, 2022 required net cash of $871.3 million compared to net cash provided of $269.6 million in the year ended December 31, 2021.

The $1.1 billion change in financing cash required was due to a decrease in net borrowings of $683.7 million, an increase of $451.4 million in share repurchases, an increase of $13.1 million in amounts related to share-based compensation, an increase of $2.6 million in cash dividends paid, partially offset by lower debt issuance costs of $9.9 million.

Borrowings of debt in 2021 were related to the QuickChek acquisition and there were no net borrowings in 2022.

The Company paid dividends of $1.27 per common share during 2022 for total payments of $29.9 million, compared to $1.04 per common share, or $27.3 million in 2021.

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

Share Repurchase program

On July 24, 2019, our Board of Directors approved an up to $400 million share repurchase program to be executed over the two-year period ending July 2021.

This repurchase plan was completed in November 2020, and a new authorization of $500 million, went into effect in October 2020.

On December 1, 2021, our Board of Directors approved a new share repurchase authorization of up to $1 billion to begin upon completion of the current $500 million authorization, and is to be executed by December 31, 2026.

On December 1, 2021, our Board of Directors approved a share repurchase authorization of up to $1 billion that we began to utilize upon the completion of our 2020 $500 million share repurchase authorization.

The 2021 authorization expires December 31, 2026, unless utilized in full before such time.

Purchases may be effected in the open market, through privately negotiated transactions, through one or more accelerated stock repurchase programs, through a combination of the foregoing or in any other manner in the discretion of management.

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We may use cash from operations as well as draws under our credit facilities to effect purchases.

During the year 2021, total purchases made under the October 2020 authorization were 2,398,477 common shares for $355.0 million, for an average price of $148.00 per share, leaving approximately $20.0 million remaining available, as of December 31, 2021, to be completed before the new 2021 authorization begins.

Purchases in 2020 under the October 2020 authorization were 969,654 common shares for $125.0 million, for an average price of $128.91 per share.

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

Repurchases in 2022 were made pursuant to our now completed 2020 authorization and our 2021 authorization.

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

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

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4.75% senior notes due 2029 (net of unamortized discount of $4.2 at 2022 and $4.8 at 2021) 495.8 495.2

3.75% senior notes due 2031 (net of unamortized discount of $5.7 at 2021 and none at 2020) 494.3 —

Term loan due 2023 (effective interest rate of 2.67% at 2020) — 212.5

Term loan due 2028 (effective interest rate of 2.27% at 2021) net of unamortized discount of $0.9 at 2021 397.1 —

3.75% senior notes due 2031 (net of unamortized discount of $5.1 at 2022 and $5.7 at 2021) 494.9 494.3

Term loan due 2028 (effective interest rate of 5.95% at 2022 and 2.27% at 2021) net of unamortized discount of $0.7 at 2022 and $0.9 at 2021 393.3 397.1

Capitalized lease obligations, vehicles, due through 2026 2.3 2.7

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Total long-term debt, net of current $ 1,791.9 $ 1,800.1

On January 29, 2021, the Company completed its acquisition of QuickChek for an all-cash consideration of $641.1 million.

In conjunction with the closing of the acquisition, the Company entered in a credit agreement that provides for a cash flow revolving facility with commitments of $350 million and a term loan in a principal amount of $400 million.

The Company also issued a new series of 3.750% senior unsecured notes due 2031 in an aggregate principal amount of $500 million.

As a result of the above transactions, the ABL facility existing at December 31, 2020, was terminated and the term loan with $200 million remaining balance outstanding at January 29, 2021 was repaid and retired.

For more detail on debt outstanding at December 31, 2021, see Note 9 "Long-Term Debt" in the audited consolidated financial statements for the three years ended December 31, 2021 included in this Annual Report on Form 10-K.

On April 25, 2017, Murphy Oil USA, Inc.

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The outstanding balance of the term loan was $394.0 million at December 31, 2022.

The term loan is due January 2028 and requires quarterly principal payments of $1 million beginning July 1, 2021.

The revolving facility expires January 2026 while the term loan is due January 2028 and requires quarterly principal payments of $1.0 million beginning July 1, 2021.

As of December 31, 2022, we had none outstanding under the revolving facility while there were $4.7 million in outstanding letters of credit, which reduces the amount available to borrow.

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The following table outlines our capital spending and investments by category for the three years ended December 31, 2022:

Years Ended December 31,

(Millions of dollars) 2022 2021 2020

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Critical Accounting Policies

Business combinations

We account for business combinations using the purchase method of accounting.

The purchase price of an acquisition is measured as the aggregate of the fair value of the consideration transferred.

The purchase price is allocated to the fair values of the tangible and intangible assets acquired and liabilities assumed at date of acquisition, with any excess recorded as goodwill.

These fair value determinations require management to make estimates which are based on all available information, and may involve the use of assumptions with respect to the timing and amount of future revenues and expenses, the weighted average cost of capital, and royalty rates associated with the transaction and the assets or liabilities acquired.

This judgment and determination affects the amount of consideration paid that is allocable to assets and liabilities acquired in the business purchase transaction.

The purchase price allocation may be provisional during a measurement period of up to one year to provide reasonable time to obtain the information necessary to identify and measure the assets acquired and liabilities assumed.

Any such measurement period adjustments are recognized in the period in which the adjustment amount is determined.

Transaction costs associated with the acquisition are expensed as incurred.

Goodwill and intangible assets

Goodwill represents the excess of the aggregate of the consideration transferred over the net assets acquired and liabilities assumed and is tested annually for impairment, or more frequently if there are indicators of impairment.

of impairment.

Acquired finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives and are reviewed for impairment when events or circumstances indicate that the asset group to which the intangible assets belong might be impaired.

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Individual retail stores are reviewed for impairment periodically or whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable.

Our primary indicator that operating store assets may not be recoverable is consistent negative cash flow over a twenty-four month period for those retail

stores that have been open in the same location for a sufficient period to allow for meaningful analysis of ongoing results.

Our primary indicator that operating store assets may not be recoverable is consistent negative cash flow over a twenty-four month period for those retail stores that have been open in the same location for a sufficient period to allow for meaningful analysis of ongoing results.

We also monitor other factors when evaluating retail stores for impairment, including individual store execution of operating plans and local market conditions.

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The Company is occasionally challenged by taxing authorities over the amount and/or timing of recognition of revenues and deductions in its various income tax returns.

Although the Company believes it has adequate accruals for matters not resolved with various taxing authorities, gains or losses could occur in future years from changes in estimates or resolution of outstanding matters.

See Note 12 “Income Taxes” in the accompanying audited consolidated financial statements for the three-year period ended December 31, 2022 for a further discussion of our tax liabilities.

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See also Note 11 “Asset Retirement Obligation” in the accompanying audited consolidated financial statements for the three-year period ended December 31, 2022.

Business combinations

We account for business combinations using the purchase method of accounting.

The purchase price of an acquisition is measured as the aggregate of the fair value of the consideration transferred.

The purchase price is allocated to the fair values of the tangible and intangible assets acquired and liabilities assumed at date of acquisition, with any excess recorded as goodwill.

This judgment and determination affects the amount of consideration paid that is allocable to assets and liabilities acquired in the business purchase transaction.

Any such measurement period adjustments are recognized in the period in which the adjustment amount is determined.

Transaction costs associated with the acquisition are expensed as incurred.

FORWARD-LOOKING STATEMENTS

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our ability to effectively manage our inventory, manage disruptions in our supply chain and our ability to control costs;

geopolitical events, such as Russia's invasion of Ukraine, that impact the supply and demand and prices of crude oil;

the impact of severe weather events, such as hurricanes, floods and earthquakes;

the impact of a global health pandemic, such as COVID-19 and the government reaction in response thereof;

the impact of any systems failures, cybersecurity and/or security breaches of the company or its vendor partners, including any security breach that results in theft, transfer or unauthorized disclosure of customer, employee or company information or our compliance with information security and privacy laws and regulations in the event of such an incident;

the impact of a global health pandemic, and the government reaction in response thereof;

impact of any systems failures, cybersecurity and/or security breaches of the company or its vendor partners, including any security breach that results in theft, transfer or unauthorized disclosure of customer, employee or company information or our compliance with information security and privacy laws and regulations in the event of such an incident;

successful execution of our information technology strategy;

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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 7. Management’s Discussion and Analysis