Murphy USA Inc. 10-K

Item 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures. Our management has evaluated, with the participation of our principal executive and financial officers, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15 under the Securities Exchange Act of 1934) as of the end of the period covered by this report, and has concluded that our disclosure controls and procedures were effective and appropriately allowed for timely decisions regarding required disclosures as of December 31, 2022. Internal Control over Financial Reporting The SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules that generally require every company that files reports with the SEC to evaluate its effectiveness of internal controls over financial reporting. Management has conducted an evaluation of the effectiveness of the Company's internal control over financial reporting based on the criteria set forth in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the results of this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2022. Management’s report is included on page F-1 of this Annual Report on Form 10-K. KPMG LLP, an independent registered public accounting firm, has made an independent assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022 and their report is included on page F-4 of this Annual Report on Form 10-K. There were no changes in the Company’s internal controls over financial reporting that occurred during the fourth quarter of 2022 that have affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Item 9B. OTHER INFORMATION None Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None 49 Part III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Certain information regarding executive officers of the Company is included under the caption “Executive Officers of the Registrant” in Part I of this Annual Report on Form 10-K. Other information required by this item is incorporated by reference to the Registrant’s definitive Proxy Statement for the Annual Meeting of Stockholders on May 4, 2023 under the captions “Election of Directors” and “Committees”. Murphy USA has adopted a Code of Business Conduct and Ethics, which can be found under the Corporate Governance tab at http://ir.corporate.murphyusa.com . Stockholders may also obtain free of charge a copy of the Code of Business Conduct and Ethics by writing to the Company’s Secretary at P.O. Box 7300, El Dorado, AR 71730-5836. Any future amendments to or waivers of the Company’s Code of Business Conduct and Ethics will be posted on the Company’s Internet Web site. Item 11. EXECUTIVE COMPENSATION Information required by this item is incorporated by reference to Murphy USA’s definitive Proxy Statement for the Annual Meeting of Stockholders on May 4, 2023 under the captions “Compensation Discussion and Analysis” and “Compensation of Directors” and in various compensation schedules. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information required by this item is incorporated by reference to Murphy USA’s definitive Proxy Statement for the Annual Meeting of Stockholders on May 4, 2023 under the captions “Security Ownership of Certain Beneficial Owners,” “Security Ownership of Management,” and “Equity Compensation Plan Information.” Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Information required by this item is incorporated by reference to Murphy USA’s definitive Proxy Statement for the Annual Meeting of Stockholders on May 4, 2023 under the caption “Review, Approval or Ratification of Transactions with Related Persons.” Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Information required by this item is incorporated by reference to Murphy USA’s definitive Proxy Statement for the Annual Meeting of Stockholders on May 4, 2023 under the caption “Audit Committee Report.” 50 Part IV Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a) 1. Financial Statements – The consolidated financial statements of Murphy USA Inc. and consolidated subsidiaries are located or begin on the pages of this Annual Report on Form 10-K as indicated below. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page No. Report of Management - Financial Statements 1 Report of Management - Internal Controls 1 Report of Independent Registered Public Accounting Firm (PCAOB ID 185 ) 2 Report of Independent Registered Public Accounting Firm 4 Consolidated Balance Sheets 6 Consolidated Income Statements 7 Consolidated Statements of Comprehensive Income 8 Consolidated Statements of Cash Flows 9 Consolidated Statements of Changes in Equity 10 Notes to Consolidated Financial Statements 11 Note 1 - Description of Business and Basis of Presentation 11 Note 2 - Significant Accounting Policies 11 Note 3 - Revenues 15 Note 4 - Inventories 16 Note 5 - Marketable Securities 17 Note 6 - Business Acquisition 18 Note 7 - Property, Plant and Equipment 19 Note 8 - Goodwill and Intangibles 19 Note 9 - Accounts Payable and Accrued Liabilities 21 Note 10 - Long-Term Debt 21 Note 1 1 - Asset Retirement Obligation (ARO) 23 Note 1 2 - Income Taxes 24 Note 1 3 - Incentive Plans 25 Note 1 4 - Employee and Retiree Benefits 28 Note 15 - Financial Instruments and Risk Management 29 Note 16 - Earnings Per Share 29 Note 17 - Other Financial Information 30 Note 18 - Assets and Liabilities Measured at Fair Value 31 Note 19 - Commitments 33 Note 20 - Contingencies 33 Note 21 - Leases 35 Note 22 - Recent Accounting and Reporting Rules 37 Note 23 - Business Segments 38 51 2. Financial Statement Schedules Schedule II – Valuation Accounts and Reserves 40 All other financial statement schedules are omitted because they are either not applicable or the required information is included in the consolidated financial statements or notes thereto. 3. Exhibits – The following is an index of exhibits that are hereby filed as indicated by asterisk (*), that are considered furnished rather than filed, or that are incorporated by reference. Exhibits other than those listed have been omitted since they either are not required or are not applicable. Exhibit Number Description 2.1 Separation and Distribution Agreement, dated August 30, 2013, between Murphy Oil Corporation and Murphy USA Inc. (incorporated by reference to Murphy USA’s Current Report on Form 8-K filed September 5, 2013) 2.2 Agreement and Plan of Merger by and amount Quick Chek Corporation, Murphy USA NJ, Inc., Murphy USA Inc. and Fortis Advisors LLC, a Shareholder Representative, dated December 12, 2020 (incorporated by reference to Exhibit 2.1 to Murphy USA's Current Report on Form 8-K filed February 1, 2021) 2.3 Amendment to Agreement and Plan of Merger, dated as of January 29, 2021, by and among Murphy USA Inc., Quick Chek Corporation, Murphy USA NJ, Inc. and Fortis Advisors LLC (incorporated by reference to Exhibit 2.2 to Murphy USA's Current Report on Form 8-K filed February 1, 2021) 3.1 Murphy USA Inc. Amended and Restated Certificate of Incorporation (incorporated by reference to Murphy USA’s Quarterly Report on Form 10-Q filed November 8, 2013) 3.2 Murphy USA Inc. Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 Murphy USA’s Current Report on Form 8-K filed March 18, 20 2 2 ) 4.1 Indenture (including form of notes) dated as of April 25, 2017 among Murphy Oil USA, Inc., Murphy USA Inc., as a guarantor, the other guarantors party thereto and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to Murphy USA's Current Report on Form 8-K filed April 25, 2017) 4.2 Indenture dated as of September 13, 2019 among Murphy Oil USA, Inc., Murphy USA Inc., as a guarantor, the other guarantor party thereto and UMB Bank, N.A., as trustee (incorporated by reference to Exhibit 4.1 to Murphy USA's Current Report on Form 8-K filed September 13, 2019) 4.3 Indenture dated as of January 29, 2021, by and among Murphy Oil USA, Inc., Murphy USA Inc., as a guarantor, the other guarantors party thereto and UMB Bank, N.A., as trustee (incorporated by reference to Exhibit 4.1 to Murphy USA's Current Report on Form 8-K filed February 1, 2021) 4.4* Description of Registrant's Securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 10.1 Tax Matters Agreement, dated August 30, 2013, between Murphy Oil Corporation and Murphy USA Inc. (incorporated by reference to Murphy USA’s Current Report on Form 8-K filed September 5, 2013) 10.2 Severance Protection Agreement dated as of August 20, 2013 between Murphy USA and R. Andrew Clyde, (incorporated by reference to Murphy USA’s Current Report on Form 8-K filed August 22, 2013)† 10.3 Murphy USA Inc. 2013 Long-Term Incentive Plan, as amended and restated effective as of February 9, 2017)† (incorporated by reference to Murphy USA Inc's Annual Report on Form 10-K filed February 22, 2017) 10.4 Murphy USA Inc. 2013 Stock Plan for Non-Employee Directors (incorporated by reference to Murphy USA’s Registration Statement on Form S-8 (File No. 333-191131) filed September 12, 2013)† 52 10.5 Murphy USA Inc. Supplemental Executive Retirement Plan, as amended and restated, on October 1, 2018 and effective January 1, 2019 (incorporated by reference to Exhibit 10.11 to Murphy USA's Annual Report on Form 10-K filed February 19, 2019) † 10.6 Form of Murphy USA 2013 Long-Term Incentive Plan Option Grant Agreement (incorporated by reference to Exhibit 10.10 to Murphy USA Inc's Annual Report on Form 10-K filed February 19, 2021)† 10.7 Form of Murphy USA 2013 Long-Term Incentive Plan RSU Agreement (incorporated by reference to Exhibit 10.11 to Murphy USA Inc's Annual Report on Form 10-K filed February 19, 2021)† 10.8 Form of Murphy USA 2013 Long-Term Incentive Plan Performance Share Agreement (incorporated by reference to Exhibit 10.12 to Murphy USA Inc's Annual Report on Form 10-K filed on February 19 2021)† 10.9 Form of Murphy USA 2013 Non-Employee Director Award (incorporated by reference to Exhibit 10.13 to Murphy USA Inc's Annual Report on Form 10-K file February 19, 2021)† 10.10 Murphy USA Inc. 2019 Annual Incentive Plan, as amended and restated, on February 7, 2019 and effective as of January 1, 2019 (incorporated by reference to Exhibit 10.20 to Murphy USA's Annual Report on Form 10-K filed February 19, 2019)† 10.11 Credit Agreement, dated as of January 29, 2021, by and among Murphy USA Inc., Murphy Oil USA, Inc., Royal Bank of Canada, as term administrative agent, JPMorgan Chase Bank, N.A., as revolving administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to Murphy USA's Current Report on Form 8-K as filed February 1, 2021) 10.12* Form of Murphy USA 2013 Long-Term Incentive Plan Option Agreement (February 2023 grants) 10.13* Form of Murphy USA 2013 Long-Term Incentive Plan RSU Agreement (February 2023 grants) 10.14* Form of Murphy USA 2013 Long-Term Incentive Plan Performance Stock Unit Agreement (February 2023 grants) 10.15* Form of Murphy USA 2013 Non-Employee Director Equity Grant (February 2023 grants) 10.16* Form of Murphy USA 2013 Non-Employee Director Cash Deferral Equity Grant (February 2023 grants) 21* List of Subsidiaries of Murphy USA 22* List of Subsidiary Guarantors and Issuers of Guaranteed Debt 23.1* Consent of KPMG LLP, Independent Registered Public Accounting Firm 31.1* Certification required by Rule 13a-14(a) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Principal Executive Officer 31.2* Certification required by Rule 13a-14(a) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Principal Financial Officer 32.1* Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Principal Executive Officer 32.2* Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Principal Financial Officer 101. INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL documents 101. SCH* Inline XBRL Taxonomy Extension Schema Document 101. CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101. DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101. LAB* Inline XBRL Taxonomy Extension Labels Linkbase Document 53 101. PRE* Inline XBRL Taxonomy Extension Presentation Linkbase 104 Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document * Filed herewith † Management contract or compensatory plan or arrangement Item 16. Form 10-K Summary None 54 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MURPHY USA, Inc. By: /s/ R. Andrew Clyde Date: February 15, 2023 R. Andrew Clyde, President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on February 15, 2023 by the following persons on behalf of the registrant and in the capacities indicated. /s/ R. Madison Murphy /s/ David B. Miller R. Madison Murphy, Chairman and Director David B. Miller, Director /s/ R. Andrew Clyde /s/ Jeanne L. Phillips R. Andrew Clyde, President and Chief Jeanne L. Phillips, Director Executive Officer and Director (Principal Executive Officer) /s/ Claiborne P. Deming /s/ Jack T. Taylor Claiborne P. Deming, Director Jack T. Taylor, Director /s/ David L. Goebel /s/ Rosemary Turner David L. Goebel, Director Rosemary Turner, Director /s/ Fred L. Holliger /s/ Mindy K. West Fred L. Holliger, Director Mindy K. West, Executive Vice President, Fuels, Treasurer, and Chief Financial Officer (Principal Financial Officer) /s/ James W. Keyes /s/ Donald R. Smith, Jr. James W. Keyes, Director Donald R. Smith, Jr. Vice President and Controller (Principal Accounting Officer) /s/ Diane N. Landen Diane N. Landen, Director 55 REPORT OF MANAGEMENT- CONSOLIDATED FINANCIAL STATEMENTS The management of Murphy USA Inc. is responsible for the preparation and integrity of the accompanying consolidated financial statements and other financial data. The statements were prepared in conformity with U.S. generally accepted accounting principles appropriate in the circumstances and include some amounts based on informed estimates and judgments, with consideration given to materiality. An independent, registered public accounting firm, KPMG LLP, has audited the Company’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board and provides an objective, independent opinion about the Company’s consolidated financial statements. The Audit Committee of the Board of Directors appoints the independent registered public accounting firm; ratification of the appointment is solicited annually from the shareholders. KPMG LLP’s opinion covering the Company’s consolidated financial statements can be found on page F-2. The Board of Directors appoints an Audit Committee annually to implement and to support the Board’s oversight function of the Company’s financial reporting, accounting policies, internal controls and independent registered public accounting firm. This Committee is composed solely of directors who are not employees of the Company. The Committee meets routinely with representatives of management, the Company’s internal audit team and the independent registered public accounting firm to review and discuss the adequacy and effectiveness of the Company’s internal controls, the quality and clarity of its financial reporting, the scope and results of independent and internal audits, and to fulfill other responsibilities included in the Committee’s Charter. The independent registered public accounting firm and the Company’s internal audit team have unrestricted access to the Committee, without management presence, to discuss audit findings and other financial matters. REPORT OF MANAGEMENT – INTERNAL CONTROL OVER FINANCIAL REPORTING Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). The Company’s internal controls have been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with U.S. generally accepted accounting principles. All internal control systems have inherent limitations, and therefore, can provide only reasonable assurance with respect to the reliability of financial reporting and preparation of consolidated financial statements. Management has conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on the results of this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2022. KPMG LLP has performed an audit of the Company’s internal control over financial reporting and their opinion thereon can be found on page F-4 . F-1 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Murphy USA Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Murphy USA Inc. and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated income statements, statements of comprehensive income, statements of cash flows, and statements of changes in equity for each of the years in the three‑year period ended December 31, 2022, and the related notes and financial statement schedule II (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 15, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Assessment of impairment triggering events related to property, plant and equipment As discussed in Note 2 to the consolidated financial statements, the Company assesses its property, plant and equipment for potential impairment whenever events or changes in circumstances indicate that the carrying value of the asset or asset group may not be recoverable. The property, plant and equipment balance, at cost less accumulated depreciation, as of December 31, 2022 was $2,459.3 million. Some retail sites may generate negative cash flow or experience events that indicate carrying values might not be recovered, indicating a higher risk that these retail sites might be impaired. This requires the F-2 Company to consider profitability and retail site specific factors when evaluating its retail sites for impairment in order to determine whether or not an impairment triggering event has occurred. We identified the assessment of impairment triggering events related to property, plant and equipment as a critical audit matter. The determination of the asset group level, the evaluation of retail site profitability, and the assessment of retail site specific factors involved challenging auditor judgment, as changes to those factors could have a significant impact on the Company’s assessment of an impairment triggering event. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s triggering events assessment process over property, plant and equipment, including controls related to the identification of impairment triggers. We evaluated the asset group level at which the Company’s analysis was performed. We assessed the Company’s methodology of identifying retail site specific factors to be considered in the triggering events analysis, including length of the time period used by the Company to evaluate retail site profitability to identify triggering events. We also compared the historical cash flows by asset group to the general ledger information to assess the reliability of the information used. /s/ KPMG LLP We have served as the Company’s auditor since 2013. Dallas, Texas February 15, 2023 F-3 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Murphy USA Inc.: Opinion on Internal Control Over Financial Reporting We have audited Murphy USA Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated income statements, statements of comprehensive income, statements of cash flows, and statements of changes in equity for each of the years in the three-year period ended December 31, 2022, and the related notes and financial statement schedule II (collectively, the consolidated financial statements), and our report dated February 15, 2023 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management – Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. F-4 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Dallas, Texas February 15, 2023 F-5 Murphy USA Inc. Consolidated Balance Sheets December 31, (Millions of dollars, except share amounts) 2022 2021 Assets Current assets Cash and cash equivalents $ 60.5 $ 256.4 Marketable securities, current 17.9 — Accounts receivable—trade, less allowance for doubtful accounts of $ 0.3 in 2022 and $ 0.1 in 2021, respectively 281.7 195.7 Inventories, at lower of cost or market 319.1 292.3 Prepaid expenses and other current assets 47.6 23.4 Total current assets 726.8 767.8 Marketable securities, non-current 4.4 — Property, plant and equipment, at cost less accumulated depreciation and amortization of $ 1,553.1 in 2022 and $ 1,373.4 in 2021, respectively 2,459.3 2,378.4 Operating lease right of use assets, net 449.6 419.2 Intangible assets, net of amortization 140.4 140.7 Goodwill 328.0 328.0 Other assets 14.7 14.1 Total assets $ 4,123.2 $ 4,048.2 Liabilities and Stockholders' Equity Current liabilities Current maturities of long-term debt $ 15.0 $ 15.0 Trade accounts payable and accrued liabilities 839.2 660.3 Total current liabilities 854.2 675.3 Long-term debt, including capitalized lease obligations 1,791.9 1,800.1 Deferred income taxes 327.4 295.9 Asset retirement obligations 43.3 39.2 Non-current operating lease liabilities 444.2 408.9 Deferred credits and other liabilities 21.5 21.6 Total liabilities 3,482.5 3,241.0 Stockholders' Equity Preferred Stock, par $ 0.01 , (authorized 20,000,000 shares, none outstanding) — — Common Stock, par $ 0.01 , (authorized 200,000,000 shares, 46,767,164 shares issued at December 31, 2022 and 2021, respectively) 0.5 0.5 Treasury stock ( 25,017,324 and 21,831,904 shares held at December 31, 2022 and 2021, respectively) ( 2,633.3 ) ( 1,839.3 ) Additional paid in capital (APIC) 518.9 534.8 Retained earnings 2,755.1 2,112.4 Accumulated other comprehensive income (AOCI) ( 0.5 ) ( 1.2 ) Total stockholders' equity 640.7 807.2 Total liabilities and stockholders' equity $ 4,123.2 $ 4,048.2 See accompanying notes to consolidated financial statements. F-6 Murphy USA Inc. Consolidated Income Statements Years Ended December 31, (Millions of dollars except per share amounts) 2022 2021 2020 Operating Revenues Petroleum product sales 1 $ 19,230.1 $ 13,410.8 $ 8,208.6 Merchandise sales 3,903.2 3,677.7 2,955.1 Other operating revenues 312.8 272.0 100.6 Total operating revenues 23,446.1 17,360.5 11,264.3 Operating Expenses Petroleum product cost of goods sold 1 17,910.1 12,535.5 7,325.7 Merchandise cost of goods sold 3,136.1 2,976.1 2,495.7 Store and other operating expenses 976.5 827.3 549.1 Depreciation and amortization 220.4 212.6 161.0 Selling, general and administrative 232.5 193.6 171.1 Accretion of asset retirement obligations 2.7 2.5 2.3 Acquisition related costs 1.5 10.4 1.7 Total operating expenses 22,479.8 16,758.0 10,706.6 Gain (loss) on sale of assets 2.1 1.5 1.3 Income (loss) from operations 968.4 604.0 559.0 Other income (expense) Investment income 3.0 0.1 1.0 Interest expense ( 85.3 ) ( 82.4 ) ( 51.2 ) Other nonoperating income (expense) ( 2.3 ) 0.2 0.3 Total other income (expense) ( 84.6 ) ( 82.1 ) ( 49.9 ) Income before income taxes 883.8 521.9 509.1 Income tax expense (benefit) 210.9 125.0 123.0 Net Income $ 672.9 $ 396.9 $ 386.1 Basic and Diluted Earnings Per Common Share: Basic $ 28.63 $ 15.14 $ 13.25 Diluted $ 28.10 $ 14.92 $ 13.08 Weighted-average shares outstanding (in thousands): Basic 23,506 26,210 29,132 Diluted 23,950 26,604 29,526 Supplemental information: 1 Includes excise taxes of: $ 2,180.2 $ 2,041.7 $ 1,760.0 See accompanying notes to consolidated financial statements. F-7 Murphy USA Inc. Consolidated Statements of Comprehensive Income Years Ended December 31, (Millions of dollars) 2022 2021 2020 Net income $ 672.9 $ 396.9 $ 386.1 Other comprehensive income (loss), net of tax Interest rate swap: Realized gain (loss) — ( 0.1 ) ( 0.9 ) Unrealized gain (loss) — 0.1 ( 3.4 ) Reclassified to interest expense (interest rate swap): Realized (gain) loss reclassified to interest expense — 0.1 0.9 Amortization of unrealized gain to interest expense 0.9 0.9 — 0.9 1.0 ( 3.4 ) Deferred income tax expense (benefit) 0.2 0.3 ( 0.8 ) Other comprehensive income (loss) 0.7 0.7 ( 2.6 ) Comprehensive income $ 673.6 $ 397.6 $ 383.5 See accompanying notes to consolidated financial statements. F-8 Murphy USA Inc. Consolidated Statements of Cash Flows Years Ended December 31, (Millions of dollars) 2022 2021 2020 Operating Activities Net income $ 672.9 $ 396.9 $ 386.1 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 220.4 212.6 161.0 Deferred and noncurrent income tax charges (benefits) 31.5 19.0 2.5 Accretion of asset retirement obligations 2.7 2.5 2.3 Amortization of discount on marketable securities ( 0.1 ) — — Pretax (gains) losses from sale of assets ( 2.1 ) ( 1.5 ) ( 1.3 ) Net (increases) decrease in noncash operating working capital 44.8 82.8 ( 13.1 ) Other operating activities - net 24.6 25.1 26.2 Net cash provided (required) by operating activities 994.7 737.4 563.7 Investing Activities Property additions ( 305.3 ) ( 274.7 ) ( 230.7 ) Payments for acquisition, net of cash acquired — ( 641.1 ) — Proceeds from sale of assets 8.8 3.4 8.1 Investment in marketable securities ( 22.2 ) — — Other investing activities - net ( 0.6 ) ( 1.8 ) ( 1.7 ) Net cash provided (required) by investing activities ( 319.3 ) ( 914.2 ) ( 224.3 ) Financing Activities Purchase of treasury stock ( 806.4 ) ( 355.0 ) ( 399.6 ) Dividends paid ( 29.9 ) ( 27.3 ) ( 6.9 ) Repayments of debt ( 20.2 ) ( 224.3 ) ( 38.9 ) Borrowings of debt 5.0 892.8 — Debt issuance costs — ( 9.9 ) — Amounts related to share-based compensation ( 19.8 ) ( 6.7 ) ( 10.7 ) Net cash provided (required) by financing activities ( 871.3 ) 269.6 ( 456.1 ) Net change in cash, cash equivalents, and restricted cash ( 195.9 ) 92.8 ( 116.7 ) Cash, cash equivalents, and restricted cash at January 1 256.4 163.6 280.3 Cash, cash equivalents, and restricted cash at December 31 $ 60.5 $ 256.4 $ 163.6 See accompanying notes to consolidated financial statements. F-9 Murphy USA Inc. Consolidated Statements of Changes in Equity Common Stock (Millions of dollars, except share amounts) Shares Par Treasury Stock APIC Retained Earnings AOCI Total Balance as of December 31, 2019 46,767,164 $ 0.5 $ ( 1,099.8 ) $ 538.7 $ 1,362.9 $ 0.7 $ 803.0 Net income — — — — 386.1 — 386.1 Cumulative effect of a change in accounting principle — — — — 1.1 — 1.1 Loss on interest rate hedge, net of tax — — — — — ( 2.6 ) ( 2.6 ) Cash dividends declared, ($ 0.25 per share) — — — — ( 6.9 ) — ( 6.9 ) Dividend equivalent units accrued — — — 0.1 ( 0.1 ) — — Purchase of treasury stock — — ( 399.6 ) — — — ( 399.6 ) Issuance of treasury stock — — 8.5 ( 9.0 ) — — ( 0.5 ) Amounts related to share-based compensation — — — ( 10.7 ) — — ( 10.7 ) Share-based compensation expense — — — 14.2 — — 14.2 Balance as of December 31, 2020 46,767,164 0.5 ( 1,490.9 ) 533.3 1,743.1 ( 1.9 ) 784.1 Net income — — — — 396.9 — 396.9 Gain on interest rate hedge, net of tax — — — — — 0.7 0.7 Cash dividends declared, ($ 1.04 per share) — — — — ( 27.3 ) — ( 27.3 ) Dividend equivalent units accrued — — — 0.3 ( 0.3 ) — — Purchase of treasury stock — — ( 355.0 ) — — — ( 355.0 ) Issuance of treasury stock — — 6.6 ( 6.5 ) — — 0.1 Amounts related to share-based compensation — — — ( 6.7 ) — — ( 6.7 ) Share-based compensation expense — — — 14.4 — — 14.4 Balance as of December 31, 2021 46,767,164 0.5 ( 1,839.3 ) 534.8 2,112.4 ( 1.2 ) 807.2 Net income — — — — 672.9 — 672.9 Gain on interest rate hedge, net of tax — — — — — 0.7 0.7 Cash dividends declared, ($ 1.27 per share) — — — — ( 29.9 ) — ( 29.9 ) Dividend equivalent units accrued — — — 0.3 ( 0.3 ) — — Purchase of treasury stock — — ( 806.4 ) — — — ( 806.4 ) Issuance of treasury stock — — 12.4 ( 12.4 ) — — — Amounts related to share-based compensation — — — ( 19.8 ) — — ( 19.8 ) Share-based compensation expense — — — 16.0 — — 16.0 Balance as of December 31, 2022 46,767,164 $ 0.5 $ ( 2,633.3 ) $ 518.9 $ 2,755.1 $ ( 0.5 ) $ 640.7 See accompanying notes to consolidated financial statements. F-10 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 — Description of Business and Basis of Presentation The business of Murphy USA Inc. and its subsidiaries (“Murphy USA”, "we", or the “Company”) primarily consists of the U.S. retail marketing business that was separated from its former parent company, Murphy Oil Corporation (“Murphy Oil”), plus other assets, liabilities and operating expenses of Murphy Oil that were associated with supporting the activities of the U.S. retail marketing operations. Murphy USA was incorporated in March 2013. The separation was approved by the Murphy Oil board of directors on August 7, 2013, and was completed on August 30, 2013 through the distribution of 100 % of the outstanding capital stock of Murphy USA to holders of Murphy Oil common stock on the record date of August 21, 2013. Following the separation, Murphy USA is an independent, publicly traded company, and Murphy Oil retains no ownership interest in Murphy USA. On January 29, 2021, MUSA acquired 100 % of Quick Chek Corporation ("QuickChek"), a privately held convenience store chain with a strong regional brand that consisted of 156 stores at the time of acquisition, located in New Jersey and New York, in an all-cash transaction. For additional information concerning the acquisition, see Note 6, "Business Acquisition". Murphy USA markets refined products through a network of retail gasoline stores and unbranded wholesale customers and in addition, we operate non-fuel convenience stores in select markets. 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, markets gasoline and other products at standalone stores under the Murphy Express brand, and also has a mix of convenience stores and convenience stores with retail gasoline that operate under the name of QuickChek ® . At December 31, 2022, Murphy USA 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. The Company also has certain product supply and wholesale assets, including product distribution terminals and pipeline positions. Note 2 – Significant Accounting Policies PRINCIPLES OF CONSOLIDATION – These consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and include the accounts of Murphy USA Inc. and its subsidiaries for all periods presented. All significant intercompany accounts and transactions within the consolidated financial statements have been eliminated. REVENUE RECOGNITION – Revenue is recognized when obligations under the terms of a contract with our customers are satisfied; generally, this occurs with the transfer of control of our petroleum products, convenience merchandise, Renewable Identification Numbers ("RINs") and other assets to our third-party customers. Revenue is measured as the amounts of consideration we expect to receive in exchange for transferring goods or providing services. Excise and sales tax that we collect where we have determined we are the principal in the transaction have been recorded as revenue on a jurisdiction-by-jurisdiction basis. The Company enters into buy/sell and similar arrangements when petroleum products are held at one location but are needed at a different location. The Company often pays or receives funds related to the buy/sell arrangement based on location or quality differences. The Company accounts for such transactions as non-monetary exchanges under existing accounting guidance and typically reports these on a net basis in its Consolidated Income Statements. See Note 3 "Revenues" for additional information. SHIPPING AND HANDLING COSTS – Costs incurred for the shipping and handling of motor fuel are included in Petroleum product cost of goods sold in the Consolidated Income Statements. Costs incurred for the shipping and handling of convenience store merchandise are included in Merchandise cost of goods sold in the Consolidated Income Statements. TAXES COLLECTED FROM CUSTOMERS AND REMITTED TO GOVERNMENT AUTHORITIES – Excise and other taxes collected on sales of refined products and remitted to governmental agencies are included in operating revenues and operating expenses in the Consolidated Income Statements. Excise taxes on F-11 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS petroleum products collected and remitted were $ 2.2 billion in 2022, $ 2.0 billion in 2021, and $ 1.8 billion in 2020. CASH EQUIVALENTS – Short-term investments, which include government securities, money market funds and other instruments with government securities as collateral, that have a maturity of three months or less from the date of purchase are classified as cash equivalents. MARKETABLE SECURITIES – The Company considers highly liquid treasury notes, corporate debt securities, and other funds with original maturities of more than three months to be marketable securities. Securities with less than one year to maturity are included in short-term marketable securities, and all other securities are classified as long-term marketable securities. Marketable securities are classified as held-to-maturity when the Company has both the positive intent and ability to hold the securities to maturity and are carried at amortized cost. Marketable securities are classified as available-for-sale when the Company does not have the intent to hold securities to maturity to allow flexibility in response to liquidity needs and are carried at fair value. The Company records securities at fair value on its consolidated balance sheets, with unrealized gains and losses reported as a component of accumulated other comprehensive income (loss). See Note 5 "Marketable Securities" and Note 18 "Assets and Liabilities Measured at Fair Value" for additional information on our policy and the fair value measurement of the Company's marketable securities. ACCOUNTS RECEIVABLE – The Company’s accounts receivable are recorded at the invoiced amount and do not bear interest. The accounts receivable primarily consists of amounts owed to the Company from credit card companies and by customers for wholesale sales of refined petroleum products. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses on these receivables. The Company reviews this allowance for adequacy at least quarterly and bases its assessment on a combination of current information about its customers and historical write-off experience. Any trade accounts receivable balances written off are charged against the allowance for doubtful accounts. The Company has not experienced any significant credit-related losses in the past three years. INVENTORIES – Inventories of petroleum products located at Murphy branded stores are valued at the lower of cost, generally applied on a last-in, first-out (“LIFO”) basis, or market, while petroleum products located at QuickChek branded stores are valued at weighted average cost. Any increments to LIFO inventory volumes are valued based on the first purchase price for these volumes during the year. Merchandise inventories held for resale at Murphy branded stores are carried at average cost. Certain merchandise inventories at QuickChek stores are on a LIFO basis while all other items are valued on average cost. Materials and supplies are valued at the lower of average cost or net realizable value. VENDOR ALLOWANCES AND REBATES – Murphy USA receives payments for vendor allowances, volume rebates and other related payments from various suppliers of its convenience store merchandise. Vendor allowances for price markdowns are credited to merchandise cost of goods sold during the period the related markdown is recognized. Volume rebates of merchandise are recorded as reductions to merchandise cost of goods sold when the merchandise qualifying for the rebate is sold. Slotting and stocking allowances received from a vendor are recorded as a reduction to cost of sales over the period covered by the agreement. BUSINESS COMBINATIONS – The Company accounts for business combinations under 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, with any excess recorded as goodwill. These fair value determinations require judgment and may involve the use of significant estimates and assumptions. 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. PROPERTY, PLANT AND EQUIPMENT – Additions to property, plant and equipment, including renewals and betterments, are capitalized and recorded at cost. Certain marketing facilities are primarily depreciated using the composite straight-line method with depreciable lives ranging from 16 to 25 years. Gasoline stores, F-12 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS improvements to gasoline stores and other assets are depreciated over 3 to 50 years by individual unit on the straight-line method. The Company capitalizes interest costs as a component of construction in progress on individually significant projects based on the weighted average interest rates incurred on its long-term borrowings. Total interest cost capitalized was $ 1.1 million in 2022, $ 2.1 million in 2021 and $ 1.4 million in 2020. The Company has undertaken like-kind exchange ("LKE") transactions under the Federal tax code in an effort to acquire and sell real property in a tax efficient manner. The Company generally enters into forward transactions, in which property is sold and the proceeds are reinvested by acquiring similar property; and reverse transactions, in which property is acquired and similar property is subsequently sold. A qualified LKE intermediary is used to facilitate these LKE transactions. Proceeds from forward LKE transactions are held by the intermediary and are classified as restricted cash on the Company's balance sheet because the funds must be reinvested in similar properties. If the acquisition of suitable LKE properties is not completed within 180 days of the sale of the Company-owned property, the proceeds are distributed to the Company by the intermediary and are reclassified as available cash and applicable income taxes are determined. An exchange accommodation titleholder, a type of variable interest entity, is used to facilitate reverse like-kind exchanges. The acquired assets are held by the exchange accommodation titleholder until the exchange transactions are complete. If the Company determines that it is the primary beneficiary of the exchange accommodation titleholder, the replacements assets held by the exchange accommodation titleholder are consolidated and recorded in Property, Plant and Equipment on the Consolidated Balance Sheets. The unspent proceeds that are held in trust with the intermediary are recorded as noncurrent assets in the Consolidated Balance Sheet as the cash was restricted for the acquisition of similar properties. At December 31, 2022 and 2021, the Company had no open LKE transactions with an intermediary. 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. 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. The Company revises the estimated remaining useful life of these assets when events or changes in circumstances warrant a revision. If the Company revises the useful life, the unamortized balance is amortized over the useful life on a prospective basis. IMPAIRMENT OF ASSETS – Long-lived assets, which include property and equipment and finite-lived assets, are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Indefinite-lived intangible assets are tested annually. A long-lived asset is not recoverable if its carrying amount exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition. If a long-lived asset is not recoverable, an impairment loss is recognized for the amount by which the carrying amount of the long-lived asset exceeds its fair value, with fair value determined based on discounted estimated net cash flows or other appropriate methods. ASSET RETIREMENT OBLIGATIONS – The Company records a liability for asset retirement obligations (“ARO”) equal to the fair value of the estimated cost to retire an asset. The ARO liability is initially recorded in the period in which the obligation meets the definition of a liability, which is generally when the asset is placed in service. The ARO liability is estimated using existing regulatory requirements and anticipated future inflation rates. When the liability is initially recorded, the Company increases the carrying amount of the related long-lived asset by an amount equal to the original liability. The liability is increased over time to reflect the change in its present value, and the capitalized cost is depreciated over the useful life of the related long-lived asset. The Company reevaluates the adequacy of its recorded ARO liability at least annually. Actual costs of asset retirements such as dismantling service stores and site restoration are charged against the related liability. Any difference between costs incurred upon settlement of an asset retirement obligation and the recorded liability is recognized as a gain or loss in the Company’s Consolidated Income Statements. ENVIRONMENTAL LIABILITIES – A liability for environmental matters is established when it is probable that an environmental obligation exists and the cost can be reasonably estimated. If there is a range of reasonably estimated costs, the most likely amount will be recorded, or if no amount is most likely, the minimum of the F-13 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS range is used. Related expenditures are charged against the liability. Environmental remediation liabilities have not been discounted for the time value of future expected payments. Environmental expenditures that have future economic benefit are capitalized. INCOME TAXES – The Company accounts for income taxes using the asset and liability method. Under this method, income taxes are provided for amounts currently payable and for amounts deferred as tax assets and liabilities based on differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Deferred income taxes are measured using the enacted tax rates that are assumed will be in effect when the differences reverse. The Company routinely assesses the realizability of deferred tax assets based on available positive and negative evidence including assumptions of future taxable income, tax planning strategies and other pertinent factors. A deferred tax asset valuation allowance is recorded when evidence indicates that it is more likely than not that all or a portion of these deferred tax assets will not be realized in a future period. The accounting principles for income tax uncertainties permit recognition of income tax benefits only when they are more likely than not to be realized. The Company has elected to classify any interest expense and penalties related to the underpayment of income taxes in Income tax expense in the Consolidated Income Statements. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES – The fair value of a derivative instrument is recognized as an asset or liability in the Company’s Consolidated Balance Sheets. Upon entering into a derivative contract, the Company may designate the derivative as either a fair value hedge or a cash flow hedge, or decide that the contract is not a hedge, and therefore, recognize changes in the fair value of the contract in earnings. The Company documents the relationship between the derivative instrument designated as a hedge and the hedged items as well as its objective for risk management and strategy for use of the hedging instrument to manage the risk. Derivative instruments designated as fair value or cash flow hedges are linked to specific assets and liabilities or to specific firm commitments or forecasted transactions. The Company assesses at inception and on an ongoing basis whether a derivative instrument accounted for as a hedge is highly effective in offsetting changes in the fair value or cash flows of the hedged item. A derivative that is not a highly effective hedge does not qualify for hedge accounting. The change in the fair value of a qualifying fair value hedge is recorded in earnings along with the gain or loss on the hedged item. The effective portion of the change in the fair value of a qualifying cash flow hedge is recorded in Accumulated other comprehensive income (AOCI) in the consolidated Balance Sheets until the hedged item is recognized currently in earnings. If a derivative instrument no longer qualifies as a cash flow hedge and the underlying forecasted transaction is no longer probable of occurring, hedge accounting is discontinued and the gain or loss recorded in Accumulated other comprehensive income is recognized immediately in earnings. If a hedge is de-designated, hedge accounting will no longer apply and from that time the gain and losses will be recognized in earnings and any accumulated amounts in other comprehensive income will be amortized to earnings over the remaining life of the underlying instrument. See Note 15 "Financial Instruments and Risk Management" and Note 18 "Assets and Liabilities Measured at Fair Value" for further information about the Company’s derivatives. STOCK-BASED COMPENSATION – The fair value of awarded stock options, restricted stock, restricted stock units and performance stock units is determined based on a combination of management assumptions for awards issued. The Company uses the Black-Scholes option pricing model for computing the fair value of stock options. The primary assumptions made by management included the expected life of the stock option award and the expected volatility of the Company’s common stock prices. The Company uses both historical data and current information to support its assumptions. Stock option expense is recognized on a straight-line basis over the requisite service period of three years . The Company uses a Monte Carlo valuation model to determine the fair value of performance-based stock units that are based on performance compared against a peer group and the related expense is recognized over the three-year requisite service period. Management estimates the number of all awards that will not vest and adjusts its compensation expense accordingly. Differences between estimated and actual vested amounts are accounted for as an adjustment to expense when known. See Note 13 "Incentive Plans" for a discussion of the basis of allocation of such costs. USE OF ESTIMATES – In preparing the financial statements of the Company in conformity with U.S. GAAP, management has made a number of estimates and assumptions related to the reporting of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. Actual results may differ from F-14 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS the estimates. On an ongoing basis, we review our estimates based on currently available information. Changes in facts and circumstances may result in revised estimates. Note 3 – Revenues Revenue Recognition The following table disaggregates our revenue by major source for the years ended December 31, 2022, 2021, and 2020. Years Ended December 31, (Millions of dollars) 2022 2021 2020 Marketing Segment Petroleum product sales (at retail) 1 $ 17,198.9 $ 12,022.7 $ 7,444.6 Petroleum product sales (at wholesale) 1 2,031.2 1,388.1 764.0 Total petroleum product sales 19,230.1 13,410.8 8,208.6 Merchandise sales 3,903.2 3,677.7 2,955.1 Other operating revenues: RINs 305.8 265.3 95.5 Other revenues 2 6.3 6.1 4.8 Total marketing segment revenues 23,445.4 17,359.9 11,264.0 Corporate and Other Assets 0.7 0.6 0.3 Total revenues $ 23,446.1 $ 17,360.5 $ 11,264.3 1 Includes excise and sales taxes that remain eligible for inclusion under Topic 606 2 Primarily includes collection allowance on excise and sales taxes and other miscellaneous items Marketing segment Petroleum product sales (at retail). For our retail store locations, the revenue related to petroleum product sales is recognized as the fuel is pumped to our customers. The transaction price at the pump typically includes some portion of sales or excise taxes as levied in the respective jurisdictions. Those taxes that are collected for remittance to governmental entities on a pass through basis are not recognized as revenue and they are recorded to a liability account until they are paid. Our customers typically use a mixture of cash, checks, credit cards and debit cards to pay for our products as they are received. We have accounts receivable from the various credit/debit card providers at any point in time related to product sales made on credit cards and debit cards. These receivables are typically collected in two to seven days , depending on the terms with the particular credit/debit card providers. Payment fees retained by the credit/debit card providers are recorded as store and other operating expenses. Petroleum product sales (at wholesale). Our sales of petroleum products at wholesale are generally recorded as revenue when the deliveries have occurred and legal ownership of the product has transferred to the customer. Title transfer for bulk refined product sales typically occurs at pipeline custody points and upon trucks loading at product terminals. For bulk pipeline sales, we record receivables from customers that are generally collected within a week from custody transfer date. For our rack product sales, the majority of our customers' accounts are drafted by us within 10 days from product transfer. Merchandise sales. For our retail store locations, the revenue related to merchandise sales is recognized as the customer completes their purchase at our locations. The transaction price typically includes some portion of sales tax as levied in the respective jurisdictions. Those taxes that are collected for remittance to governmental entities on a pass through basis are not recognized as revenue and they are recorded to a liability account until they are paid. As noted above, a mixture of payment types are used for these revenues and the same terms for credit/debit card receivables are realized. F-15 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The most significant judgment with respect to merchandise sales revenue is determining whether we are the principal or agent for some categories of merchandise such as lottery tickets, lotto tickets, newspapers and other small categories of merchandise. For scratch-off lottery tickets, we have determined we are the principal in the majority of the jurisdictions and therefore we record those sales on a gross basis. We have some categories of merchandise (such as lotto tickets) where we are the agent and the revenues recorded for those transactions are our net commission only. The Company offers loyalty programs through its Murphy USA, Murphy Express, and QuickChek branded retail locations. The customers earn rewards based on their spending or other promotional activities. These programs create a performance obligation which requires us to defer a portion of sales revenue to the loyalty program participants until they redeem their rewards. The rewards may be redeemed for free or discounted merchandise or cash discounts at all stores and on fuel purchases at Murphy USA and Murphy Express stores. Earned rewards expire after an account is inactive for a period of 90 days at Murphy USA and Murphy Express, while certain QuickChek rewards require use within the month. We recognize loyalty revenue when a customer redeems an earned reward. Deferred revenue associated with both rewards programs are included in Trade accounts payable and accrued liabilities in our Consolidated Balance Sheet. The deferred revenue balances at December 31, 2022 and 2021 were immaterial. RINs sales. For the sale of RINs, we recognize revenue when the RIN is transferred to the counter-party and the sale is completed. Receivables from our counter-parties related to the RIN sales are typically collected within five days of the sale. Other revenues. Items reported as other operating revenues include collection allowances for excise and sales tax and other miscellaneous items and are recognized as revenue when the transaction is completed. Accounts receivable Trade accounts receivable on the balance sheet represents both receivables related to contracts with customers and other trade receivables. At December 31, 2022 and December 31, 2021, we had $ 164.1 million and $ 111.8 million of receivables, respectively, related to contracts with customers recorded. All of the trade accounts receivable related to contracts with customers outstanding at the end of each period were collected during the succeeding quarter. These receivables were generally related to credit and debit card transactions along with short term bulk and wholesale sales from our customers, which have a very short settlement window. Note 4 — Inventories Inventories consisted of the following: December 31, (Millions of dollars) 2022 2021 Petroleum products - FIFO basis $ 367.0 $ 339.8 Store merchandise for resale - FIFO basis 192.1 173.1 Less LIFO reserve ( 250.7 ) ( 228.0 ) Total petroleum products and store merchandise inventory 308.4 284.9 Materials and supplies 10.7 7.4 Total inventories $ 319.1 $ 292.3 Murphy USA and Murphy Express branded petroleum products are valued using the last-in, first-out (LIFO) method and certain QuickChek store merchandise for resale is valued using the LIFO method. At December 31, 2022 and 2021, the replacement cost (market value) of LIFO inventories exceeded the LIFO carrying value for petroleum products by $ 249.1 million and $ 227.5 million, respectively, and store merchandise for resale by $ 1.6 million and $ 0.5 million, respectively. F-16 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 5 — Marketable Securities The Company invests a portion of its excess operational cash in marketable securities. The goal of the Company's investment policy, in order of priority, are as follows: (1) preservation of principal, (2) maintaining a high degree of liquidity to meet cash flow requirements, and (3) deliver competitive returns subject to prevailing market conditions and the Company's stated objectives related to safety and liquidity. Nothing in the policy is intended to indicate that management must invest excess operational cash; it merely allows it subject to specific limitations. Securities are generally required to have a final maturity of 24 months or less with a weighted average maturity for the portfolio of no longer than 12 months and must have an active secondary market. Investments may include U.S. Treasury bills, notes and bond, U.S. Agency securities, repurchase agreements, certificates of deposit, institutional, government money market funds that maintain a stable $ 1.00 net asset value, domestic and foreign commercial paper, municipal securities, domestic and foreign debt issued by corporations or financial institutions with the primary objective of minimizing the potential risk of principal loss. The Company determines the classification of its marketable securities based on its investment strategy at the time of purchase. All marketable securities in the periods presented have been classified as available-for-sale. The carrying values of marketable securities within cash and cash equivalents and marketable securities consist of the following: December 31, 2022 (Millions of dollars) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Available-for-sale debt securities: Marketable securities current Cash and cash equivalents $ — $ — $ — $ — U S Govt Bonds 8.8 — — 8.8 Corporate bonds 6.0 — — 6.0 Non U S Corporate bonds 3.0 — — 3.0 Investment income receivable 0.1 — — 0.1 17.9 — — 17.9 Marketable securities non-current Corporate bonds 4.4 — — 4.4 Total Marketable Securities $ 22.3 $ — $ — $ 22.3 The amortized cost basis and fair value of the Company's available-for-sale marketable securities at December 31, 2022, by contractual maturity, are as follows: (Millions of dollars) Amortized Cost Fair Value Less than 1 year $ 19.3 $ 19.3 1 to 2 years 3.0 3.0 Total $ 22.3 $ 22.3 There was no impairment on any available-for-sale marketable securities as of December 31, 2022, while there were none at December 31, 2021. F-17 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 6 — Business Acquisition On January 29, 2021, MUSA acquired 100 % of QuickChek, a privately-held convenience store chain with a regional brand which consisted of 156 stores located in New Jersey and New York, in an all-cash transaction. The acquisition was made to expand the MUSA network into the Northeast by adding stores that had an existing food and beverage model and is consistent with the Company's stated strategic priorities of developing enhanced food and beverage capabilities and accelerating its growth plans. The excess of the purchase price over the estimated fair value of the net, identifiable assets acquired was recorded as goodwill. The factors contributing to the recognition of goodwill are a mixture of direct and reverse synergies that are expected to be realized as a result of this acquisition. The direct synergies include additional margin capture on the retail fuel side from the tactical pricing decisions and improved benefits from increased scale on the product acquisition side combined with other cost savings in both merchandise and store operations. The reverse synergies reflect management's ability to leverage QuickChek's product pricing and operational capabilities related to food and beverage sales to Murphy branded stores. All fair values were final as of December 31, 2021. The Company has determined that the trade name has an indefinite life, as there is no economic, contractual, or other factors that limit its useful life and expects to generate value as long as the trade name is utilized, and therefore is not subject to amortization. The fair value of intangible assets was based on widely-accepted valuation techniques, including discounted cash flows. The following table summarizes the fair value of the consideration transferred at the date of the acquisition, as well as the calculation of goodwill based on the excess of consideration over the fair value of net assets acquired: (Millions of dollars) January 29, 2021 Cash paid to shareholders $ 641.9 Less: cash and cash equivalents acquired 0.8 Fair value of consideration transferred, net of cash acquired $ 641.1 Assets acquired: Accounts receivable $ 8.0 Inventories 24.3 Prepaid expenses and other current assets 5.5 Property and equipment 447.1 Right of use assets 237.6 Other assets 5.4 Identified intangible assets 106.8 Liabilities assumed: Accounts payable and accrued expenses ( 68.4 ) Deferred income tax liabilities ( 58.5 ) Asset retirement obligation ( 1.2 ) Current and long term debt, including finance lease obligations ( 148.5 ) Deferred credits and other liabilities ( 7.4 ) Operating lease liabilities ( 237.6 ) Net assets acquired 313.1 F-18 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars) January 29, 2021 Goodwill 328.0 Fair value of consideration transferred, net of cash and cash equivalents acquired $ 641.1 In connection with the acquisition, the Company recognized certain acquisition-related expenses which were expensed as incurred. These expenses, recognized within acquisition related costs in the consolidated statements of operations, include amounts related to transaction and integration costs, including fees for advisory and professional services incurred as part of the acquisition and integration costs subsequent to the acquisition in the amount of $ 1.5 million, $ 10.4 million, and $ 1.7 million for the years ended December 31, 2022, 2021, and 2020, respectively. Note 7 – Property, Plant and Equipment December 31, 2022 December 31, 2021 (Millions of dollars) Estimated Useful Life Cost Net Cost Net Land $ 645.2 $ 645.2 $ 639.4 $ 639.4 Real estate finance lease 1 to 40 years 147.7 122.2 147.1 134.3 Pipeline and terminal facilities 16 to 25 years 83.7 42.5 83.2 44.5 Retail gasoline stores 3 to 50 years 2,897.7 1,536.4 2,657.8 1,451.1 Buildings 20 to 45 years 71.0 47.2 70.7 49.7 Other 3 to 20 years 167.1 65.8 153.6 59.4 $ 4,012.4 $ 2,459.3 $ 3,751.8 $ 2,378.4 Depreciation expense of $ 219.4 million, $ 211.6 million and $ 160.0 million was recorded for the years ended December 31, 2022, 2021 and 2020, respectively. Note 8 – Goodwill and Intangible Assets The Company's goodwill resides in its Marketing segment and no ne of the goodwill is deductible for tax purposes. December 31, (Millions of dollars) 2022 2021 Goodwill balance, at beginning of period $ 328.0 $ — QuickChek acquisition — 328.0 Goodwill balance, at end of period $ 328.0 $ 328.0 F-19 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In connection with our acquisition of QuickChek on January 29, 2021, we recorded the following amounts of intangible assets. Remaining Useful Life January 29, 2021 (Millions of dollars) (in years) Carrying Value Intangible assets subject to amortization: Intangible lease liability 13.6 $ ( 9.1 ) Intangible assets not subject to amortization: Trade name n/a 115.4 Liquor licenses n/a 0.5 Total intangible assets $ 106.8 We amortize intangible assets subject to amortization on a straight-line or accelerated basis based on the period for which the economic benefits of the asset or liability are expected to be realized. The intangible assets subject to amortization was in addition to the Company's existing intangible asset pipeline space, which is being amortized over a 40 -year life. Intangible assets at December 31, 2022 and 2021 consisted of the following: Remaining Useful Life (in years) December 31, 2022 December 31, 2021 (Millions of dollars) Cost Net Cost Net Intangible assets subject to amortization: Pipeline space 32.7 $ 39.6 $ 32.7 $ 39.6 $ 33.7 Intangible lease liability 11.4 ( 9.1 ) ( 7.9 ) ( 9.1 ) ( 8.6 ) Total intangible assets subject to amortization 30.5 24.8 30.5 25.1 Intangible assets not subject to amortization, indefinite lives: Trade name 115.4 115.4 115.4 115.4 Liquor licenses 0.2 0.2 0.2 0.2 Total intangible assets not subject to amortization 115.6 115.6 115.6 115.6 Intangible assets, net of amortization $ 146.1 $ 140.4 $ 146.1 $ 140.7 F-20 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 9 – Accounts Payable and Accrued Liabilities Trade accounts payable and accrued liabilities consisted of the following: December 31, (Millions of dollars) 2022 2021 Trade accounts payable $ 547.6 $ 392.5 Excise taxes/withholdings payable 93.2 93.6 Accrued insurance obligations 51.8 46.2 Accrued taxes other than income 44.6 41.4 Accrued compensation and benefits 46.6 36.5 Current operating lease liabilities 20.5 18.1 Other 34.9 32.0 Accounts payable and accrued liabilities $ 839.2 $ 660.3 Note 10 — Long-Term Debt Long-term debt consisted of the following: December 31, (Millions of dollars) 2022 2021 5.625 % senior notes due 2027 (net of unamortized discount of $ 1.6 at 2022 and $ 2.0 at 2021) $ 298.4 $ 298.0 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 $ 5.1 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 Capitalized lease obligations, buildings, due through 2059 131.3 138.9 Unamortized debt issuance costs ( 9.1 ) ( 11.1 ) Total long-term debt 1,806.9 1,815.1 Less current maturities 15.0 15.0 Total long-term debt, net of current $ 1,791.9 $ 1,800.1 Senior Notes 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") under its existing shelf registration statement. 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. The indenture governing the 2027 Senior Notes contains restrictive covenants that limit, among other things, the ability of Murphy USA, Murphy Oil USA, Inc. and the restricted subsidiaries to incur additional indebtedness or liens, dispose of assets, make certain restricted payments or investments, enter into transactions with affiliates or merge with or into other entities. On September 13, 2019, Murphy Oil USA, Inc., issued $ 500 million of 4.75 % Senior Notes due 2029 (the “2029 Senior Notes”). The net proceeds from the issuance of the 2029 Senior Notes were used to fund, in part, the tender offer and redemption of the prior notes issuance. The 2029 Senior Notes are fully and unconditionally guaranteed by Murphy USA, and are guaranteed by certain 100% owned subsidiaries that guarantee our credit F-21 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS facilities. The indenture governing the 2029 Senior Notes contains restrictive covenants that are essentially identical to the covenants for the 2027 Senior Notes. On January 29, 2021, Murphy Oil USA, Inc. issued $ 500 million of 3.75 % Senior Notes due 2031 (the "2031 Senior Notes" and, together with the 2027 Senior Notes and the 2029 Senior Notes, the "Senior Notes"). The net proceeds from the issuance of the 2031 Senior Notes were used, in part, to fund the acquisition of QuickChek and other obligations related to that transaction. The 2031 Senior Notes are fully and unconditionally guaranteed by the Company and by the Company's subsidiaries that guarantee our Credit Facilities. The indenture governing the 2031 Senior Notes contains restrictive covenants that are essentially identical to the covenants for the 2027 and 2029 Senior Notes. The Senior Notes and related guarantees rank equally with all of our and the guarantors’ existing and future senior unsecured indebtedness and effectively junior to our and the guarantors’ existing and future secured indebtedness (including indebtedness with respect to the Credit Facilities) to the extent of the value of the assets securing such indebtedness. The Senior Notes are structurally subordinated to all of the existing and future third-party liabilities, including trade payables, of our existing and future subsidiaries that do not guarantee the notes. Revolving Credit Facility and Term Loan On January 29, 2021, the Company entered into a new credit agreement that consists of both a cash flow revolving credit facility and a senior secured term loan and that replaced the Company’s prior ABL facility and term loan. The credit agreement provides for a senior secured term loan in an aggregate principal amount of $ 400.0 million (the “Term Facility”) (which was borrowed in full on January 29, 2021) and revolving credit commitments in an aggregate amount equal to $ 350.0 million (the “Revolving Facility”, and together with the Term Facility, the “Credit Facilities”). The outstanding balance of the term loan was $ 394.0 million at December 31, 2022. 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. Interest payable on the Credit Facilities is based on either: • the London interbank offered rate, adjusted for statutory reserve requirements (the “Adjusted LIBO Rate”); or • 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 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. 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. Murphy USA is also required to prepay the Term Facility with a portion of its excess cash flow, a portion of the net cash proceeds of certain asset sales and casualty events (subject to certain reinvestment rights) and the net cash proceeds of issuances of indebtedness not permitted under the Credit Agreement. The Credit Agreement allows Murphy USA to prepay, in whole or in part, the Term Facility outstanding thereunder, together with any accrued and unpaid interest, with prior notice but without premium or penalty other than breakage and redeployment costs. F-22 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The credit agreement contains certain covenants that limit, among other things, the ability of the Company and certain of its subsidiaries to incur additional indebtedness or liens, to make certain investments, to enter into sale-leaseback transactions, to make certain restricted payments, to enter into consolidations, mergers or sales of material assets and other fundamental changes, to transact with affiliates, to enter into agreements restricting the ability of subsidiaries to incur liens or pay dividends, or to make certain accounting changes. The credit agreement also contains total leverage ratio and secured net leverage ratio financial maintenance covenants solely for the benefit of the revolving facility which are tested quarterly. Pursuant to the total leverage ratio financial maintenance covenant, the Company must maintain a total leverage ratio of not more than 5.0 to 1.0 with an ability in certain circumstances to temporarily increase that limit to 5.5 to 1.0 and a maximum secured net leverage ratio of not more than 3.75 to 1.0 with an ability in certain circumstances to temporarily increase that limit to 4.25 to 1.0. The Credit Agreement also contains customary events of default. 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 December 31, 2022, our total leverage ratio was 1.5 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 an ability to make restricted payments in an aggregate not to exceed the greater of $ 106.7 million or 4.5 % of consolidated net tangible assets over the life of the credit agreement. All obligations under the credit agreement are guaranteed by Murphy USA and the subsidiary guarantors party thereto, and all obligations under the credit agreement, including the guarantees of those obligations, are secured by certain assets of Murphy USA, Murphy Oil USA, Inc. and the guarantors party thereto. Note 11 — Asset Retirement Obligations (ARO) The majority of the ARO recognized by the Company at December 31, 2022 and 2021 is related to the estimated costs to dismantle and abandon certain of its retail gasoline stores. The Company has not recorded an ARO for certain of its marketing assets because sufficient information is presently not available to estimate a range of potential settlement dates for the obligation. These assets are consistently being upgraded and are expected to be operational into the foreseeable future. In these cases, the obligation will be initially recognized in the period in which sufficient information exists to estimate the obligation. A reconciliation of the beginning and ending aggregate carrying amount of the ARO is shown in the following table: December 31, (Millions of dollars) 2022 2021 Balance at beginning of period $ 39.2 $ 35.1 Addition for acquisition — 1.2 Accretion expense 2.7 2.5 Settlement of liabilities ( 2.3 ) ( 1.0 ) Liabilities incurred 3.7 1.4 Balance at end of period $ 43.3 $ 39.2 The estimation of future ARO is based on a number of assumptions requiring professional judgment. The Company cannot predict the type of revisions to these assumptions that may be required in future periods due to the lack of availability of additional information. F-23 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 12 — Income Taxes The components of income before income taxes for each of the three years ended December 31, 2022 and income tax expense (benefit) attributable thereto were as follows: Years Ended December 31, (Millions of dollars) 2022 2021 2020 Income (loss) before income taxes $ 883.8 $ 521.9 $ 509.1 Income tax expense (benefit) Federal - Current $ 143.5 $ 86.2 $ 96.0 Federal - Deferred 33.0 14.4 4.7 State - Current and deferred 34.4 24.4 22.3 Total $ 210.9 $ 125.0 $ 123.0 The following table reconciles income taxes based on the U.S. statutory tax rate to the Company’s income tax expense (benefit). Years Ended December 31, (Millions of dollars) 2022 2021 2020 Income tax expense based on the U.S. statutory tax rate $ 185.6 $ 109.6 $ 106.9 State income taxes, net of federal benefit 28.0 19.2 17.5 Federal credits ( 2.9 ) ( 2.2 ) ( 1.9 ) Other, net 0.2 ( 1.6 ) 0.5 Total $ 210.9 $ 125.0 $ 123.0 An analysis of the Company’s deferred tax assets and deferred tax liabilities at December 31, 2022 and 2021 showing the tax effects of significant temporary differences is as follows: December 31, (Millions of dollars) 2022 2021 Deferred tax assets Property costs and asset retirement obligations $ 5.9 $ 5.2 Net operating loss — 6.3 Employee benefits 10.7 8.6 Operating leases liability 97.6 89.7 Other deferred tax assets 13.6 11.8 Total gross deferred tax assets 127.8 121.6 Deferred tax liabilities Accumulated depreciation and amortization ( 316.0 ) ( 285.4 ) State deferred taxes ( 30.5 ) ( 31.7 ) Operating leases right of use assets ( 94.4 ) ( 88.0 ) Other deferred tax liabilities ( 14.3 ) ( 12.4 ) Total gross deferred tax liabilities ( 455.2 ) ( 417.5 ) Net deferred tax liabilities $ ( 327.4 ) $ ( 295.9 ) In management’s judgment, the deferred tax assets in the preceding table will more likely than not be realized as reductions of future taxable income or utilized by available tax planning strategies. As of December 31, 2022, the earliest year remaining open for Federal audits and/or settlement is 2019 and for state audits and/or settlement is 2018. Although the Company believes that recorded liabilities for unsettled issues are adequate, additional gains or losses could occur in future periods from resolution of outstanding unsettled matters. F-24 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The FASB’s rules for accounting for income tax uncertainties clarify the criteria for recognizing uncertain income tax benefits and require additional disclosures about uncertain tax positions. Under U.S. GAAP the financial statement recognition of the benefit for a tax position is dependent upon the benefit being more likely than not to be sustainable upon audit by the applicable taxing authority. If this threshold is met, the tax benefit is then measured and recognized at the largest amount that is greater than 50 percent likely of being realized upon ultimate settlement. Liabilities associated with uncertain income tax positions are included in Deferred Credits and Other Liabilities in the Consolidated Balance Sheets. A reconciliation of the beginning and ending amount of the consolidated liability for unrecognized income tax benefits during the year ended December 31, 2022 and 2021 is shown in the following table: Year Ended December 31, (Millions of dollars) 2022 2021 Balance at January 1 $ 0.5 $ 0.4 Additions for tax positions related to prior years 0.2 0.3 Expiration of statutes of limitation ( 0.1 ) ( 0.2 ) Balance at December 31 $ 0.6 $ 0.5 All additions or reductions to the above liability affect the Company’s effective tax rate in the respective period of change. The Company accounts for any applicable interest and penalties on uncertain tax positions as a component of income tax expense. Income tax expense for the years ended December 31, 2022, 2021 and 2020 included immaterial amounts of interest and penalties, associated with uncertain tax positions. Of these amounts shown in the table, $ 0.5 million and $ 0.4 million represent the amount of unrecognized tax benefits that, if recognized, would impact our effective tax rate for the years ended December 31, 2022 and 2021, respectively. During the next twelve months, the Company does not expect a material change to the liability for uncertain taxes. Although existing liabilities could be reduced by settlement with taxing authorities or lapse due to statute of limitations, the Company believes that the changes in its unrecognized tax benefits due to these events will not have a material impact on the Consolidated Income Statement during 2023. Total excess tax benefits for equity compensation recognized in the twelve months ended December 31, 2022, 2021 and 2020 were $ 2.9 million, $ 4.9 million, and $ 2.2 million, respectively. Note 13 — Incentive Plans 2013 Long-Term Incentive Plan Effective August 30, 2013, certain of our employees began to participate in the Murphy USA 2013 Long-Term Incentive Plan, which was subsequently amended and restated effective as of February 8, 2017 (the “MUSA 2013 Plan”). The MUSA 2013 Plan authorizes the Executive Compensation Committee of our Board of Directors (“the Committee”) to grant non-qualified or incentive stock options, stock appreciation rights, stock awards (including restricted stock and restricted stock unit awards), dividend equivalent units, cash awards, and performance awards to our employees. No more than 5.5 million shares of common stock may be delivered under the MUSA 2013 Plan and no more than 1 million shares of common stock may be awarded to any one employee, subject to adjustment for changes in capitalization. The maximum cash amount payable pursuant to any “performance-based” award to any participant in any calendar year is $ 5.0 million. During the period from August 30, 2013 to December 31, 2022, the Company granted a total of 2,805,086 awards from the MUSA 2013 Plan which leaves 2,694,914 remaining shares to be granted in future years (after consideration of the amendments made to the MUSA 2013 Plan in February 2014 by the Board of Directors). At present, the Company expects to issue all shares that vest out of existing treasury shares rather than issuing new common shares. F-25 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2013 Stock Plan for Non-employee Directors Effective August 8, 2013, Murphy USA adopted the 2013 Murphy USA Stock Plan for Non-employee Directors (the “Directors Plan”). The directors for Murphy USA are compensated with a mixture of cash payments and equity-based awards. Awards under the Directors Plan may be in the form of restricted stock, restricted stock units, dividend equivalent units, stock options, or a combination thereof. An aggregate of 500,000 shares of common stock shall be available for issuance of grants under the Directors Plan. Since 2013, 150,673 time-based restricted stock units have been granted under the terms of the Directors Plan which leaves 349,327 shares available to be granted in the future. Amounts recognized in the financial statements by the Company with respect to all share-based plans are shown in the following table: Years Ended December 31, (Millions of dollars) 2022 2021 2020 Compensation charged against income before income tax benefit $ 16.0 $ 14.4 $ 14.3 Related income tax benefit recognized in income $ 3.4 $ 3.0 $ 3.0 As of December 31, 2022, there was $ 24.0 million in compensation costs to be expensed over approximately the next 1.8 years related to unvested share-based compensation arrangements granted by the Company. Employees who have stock options are required to net settle their options in shares, after applicable statutory withholding taxes are considered, upon each stock option exercise. Therefore, no cash is received upon exercise. Total income tax benefits realized from tax deductions related to stock option exercises under share-based payment arrangements were $ 1.0 million, $ 0.3 million, and $ 0.7 million for the years ended December 31, 2022, 2021, and 2020, respectively. The Company issues dividend equivalent units ("DEU") on all outstanding, unvested equity awards (except stock options) in an amount commensurate with regular quarterly dividends paid on common stock. The terms of the DEU mirror the underlying awards and will only vest if the related award vests. DEU's issued are included with grants in each respective table as applicable. STOCK OPTIONS (MUSA 2013 Plan) – The Committee fixes the option price of each option granted at no less than fair market value (FMV) on the date of the grant and fixes the option term at no more than 7 years from such date. Most of the nonqualified stock options granted to certain employees by the Committee were granted in February 2022. Following are the assumptions used by the Company to value the original awards: Years Ended December 31, 2022 2021 2020 Fair value per option grant $ 51.46 $ 32.00 $ 28.28 Assumptions Dividend yield 0.6 % 0.8 % — % Expected volatility 32.2 % 32.3 % 28.1 % Risk-free interest rate 1.8 % 0.4 % 1.5 % Expected life (years) 4.7 4.6 4.7 Stock price at valuation date $ 181.18 $ 126.00 $ 106.72 F-26 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Changes in options outstanding for Company employees during the period from December 31, 2021 to December 31, 2022 are presented in the following table: Options Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (Millions of Dollars) Outstanding at December 31, 2021 366,100 90.44 Granted 55,150 181.80 Exercised ( 98,200 ) 69.95 Forfeited ( 9,100 ) 119.43 Outstanding at December 31, 2022 313,950 $ 112.06 4.1 $ 52.6 Exercisable at December 31, 2022 150,450 $ 80.68 2.8 $ 29.9 Additional information about stock options outstanding at December 31, 2022 is shown below: Options Outstanding Options Exercisable Range of Exercise Prices per Option No. of Options Avg. Life Remaining in Years No. of Options Avg. Life Remaining in Years $ 60.00 to $ 89.99 120,500 2.6 118,700 2.6 $ 90.00 to $ 119.99 63,800 4.0 31,750 3.8 $ 120.00 to $ 149.99 74,500 5.1 — — $ 180.00 to $ 209.99 55,150 6.1 — — 313,950 4.1 150,450 2.8 RESTRICTED STOCK UNITS (MUSA 2013 Plan) – The Committee has granted time based restricted stock units (RSUs) as part of the compensation plan for its executives and certain other employees since its inception. The awards granted in the current year were under the MUSA 2013 Plan, are valued at the grant date fair value, and vest over three years . Changes in restricted stock units outstanding for Company employees during the period from December 31, 2021 to December 31, 2022 are presented in the following table: Employee RSUs Number of units Weighted Average Grant Date Fair Value Total Fair Value (Millions of Dollars) Outstanding at December 31, 2021 175,627 $ 95.93 Granted 42,258 $ 186.55 Vested and issued ( 60,070 ) $ 80.10 $ 11.6 Forfeited ( 8,449 ) $ 138.83 Outstanding at December 31, 2022 149,366 $ 125.51 $ 41.8 PERFORMANCE-BASED RESTRICTED STOCK UNITS (MUSA 2013 Plan) – In February 2022, the Committee awarded performance-based restricted stock units (performance units) to certain employees. Half of the performance units vest based on a three-year return on average capital employed (ROACE) calculation and the other half vest based on a three-year total shareholder return (TSR) calculation that compares MUSA to a group of 18 peer companies. The portion of the awards that vest based on TSR qualify as a market condition and must be valued using a Monte Carlo valuation model. For the TSR portion of the awards, the fair value was determined to be $ 259.17 per unit. For the ROACE portion of the awards, the valuation was based on the grant F-27 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS date fair value of $ 181.18 per unit and the number of awards will be periodically assessed to determine the probability of vesting. Changes in performance-based restricted stock units outstanding for Company employees during the period from December 31, 2021 to December 31, 2022 are presented in the following table: Employee PSU's Number of Units Weighted Average Grant Date Fair Value Total Fair Value (Millions of Dollars) Outstanding at December 31, 2021 127,638 $ 117.59 Granted 78,949 $ 217.81 Vested and issued ( 94,226 ) $ 87.62 $ 17.1 Forfeited ( 6,360 ) $ 133.98 Outstanding at December 31, 2022 106,001 $ 160.03 $ 29.6 RESTRICTED STOCK UNITS (Directors Plan) – The Committee has also granted time based RSUs to the non-employee directors of the Company as part of their overall compensation package for being a member of the Board of Directors. These awards typically vest at the end of three years . Changes in restricted stock units outstanding for Company non-employee directors during the period from December 31, 2021 to December 31, 2022 are presented in the following table: Director RSU's Number of Units Weighted Average Grant Date Fair Value Total Fair Value (Millions of Dollars) Outstanding at December 31, 2021 30,664 $ 100.23 Granted 7,994 $ 172.88 Vested and issued ( 11,735 ) $ 75.96 $ 2.1 Outstanding at December 31, 2022 26,923 $ 132.38 $ 7.5 Note 14 — Employee and Retiree Benefit Plans THRIFT PLAN – Most full-time employees of the Company may participate in defined contribution savings plans by contributing up to a specified percentage of their base pay. The Company matches contributions for Murphy USA eligible employees at 100 % of each employee’s contribution with a maximum match of 6 %. In addition, the Company makes profit sharing contributions on an annual basis for Murphy USA employees. Eligible employees receive a stated percentage of their base and incentive pay of 5 %, 7 %, or 9 % determined on a formula that is based on a combination of age and years of service. The Company maintained the thrift plan of QuickChek on acquisition, and matches 100 % of the first 3 % and 50 % of the next 2 % contributed by eligible employees. The Company’s combined expenses related to these plans were $ 17.3 million in 2022, $ 16.9 million in 2021 and $ 15.3 million in 2020. PROFIT SHARING PLAN – Eligible part-time employees of Murphy USA may participate in the Company’s noncontributory profit sharing plan. Each year, the Company may make a discretionary employer contribution in an amount determined and authorized at the discretion of the Board of Directors. Eligible employees receive an allocation based on their compensation earned for the year the contribution is allocated. The Company’s expenses related to this plan were $ 1.6 million in 2022, $ 1.1 million in 2021 and $ 1.8 million in 2020. SUPPLEMENTAL EXECUTIVE RETIREMENT – The Company provides a Supplemental Executive Retirement Plan ('SERP'), a nonqualified deferred compensation plan for Murphy USA employees, to eligible executives and certain members of management. The SERP plan is intended to restore qualified defined contribution plan benefits restricted under the Internal Revenue Code of 1986 to certain highly-compensated individuals. The liability balances, net of associated assets, were $ 5.5 million and $ 4.7 million, at December 31, 2022 and 2021, respectfully. F-28 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 15 — Financial Instruments and Risk Management DERIVATIVE INSTRUMENTS — The Company makes limited use of derivative instruments to manage certain risks related to commodity prices and interest rates. The use of derivative instruments for risk management is covered by operating policies and is closely monitored by the Company’s senior management. The Company does not hold any derivatives for speculative purposes and it does not use derivatives with leveraged or complex features. Derivative instruments are traded primarily with creditworthy major financial institutions or over national exchanges such as the New York Mercantile Exchange (“NYMEX”). For accounting purposes, the Company has not designated commodity derivative contracts as hedges, and therefore, it recognizes all gains and losses on these derivative contracts in its Consolidated Statement of Income. Certain interest rate derivative contracts were accounted for as hedges and gain or loss associated with recording the fair value of these contracts was deferred in AOCI until the anticipated transactions occur. As of December 31, 2022, all current commodity derivative activity is immaterial. Cash deposits were none at December 31, 2022 and at December 31, 2021 the cash deposit was $ 0.6 million related to commodity derivative contracts and were reported in Prepaid expenses and other current assets in the Consolidated Balance Sheets. These cash deposits have not been used to reduce the reported net liabilities on the derivative contracts at December 31, 2022 and 2021. Interest Rate Risks Under hedge accounting rules, the Company deferred the net charge or benefit associated with the interest rate swap entered into to manage the variability in interest payments for the variable-rate debt in association with $ 150.0 million of our outstanding term loan dated August 27, 2019 until the debt was repaid on January 29, 2021. At that time the hedge was de-designated and therefore hedge accounting is no longer applicable and mark-to-market gains and losses are recognized in the period in which the change occurs in the Consolidated Statement of income in interest expense. The current loan balance subject to the hedge is $ 67.5 million. The Company is reclassifying the accumulated other comprehensive loss on the previous interest rate swap, $ 2.4 million as of the de-designation date, into interest expense using a straight-line approach over the remaining life of the originally designated hedging relationship. The amount of pre-tax gains in accumulated other comprehensive loss that was reclassified into interest expense was $ 0.9 million for the twelve months ended December 31, 2022 and 2021, leaving a balance of $ 0.6 million at December 31, 2022. Prior to the de-designation, changes in the fair values of the interest rate swaps were recorded as a component of other comprehensive loss. Note 16 – Earnings Per Share Basic earnings per common share is computed by dividing net income available to common stockholders by the weighted average of common shares outstanding during the period. Diluted earnings per common share adjusts basic earnings per common share for the effects of stock options and restricted stock in the periods where such items are dilutive. On December 1, 2021, the Board of Directors approved a share repurchase authorization of up to $ 1 billion to begin upon completion of the $ 500 million authorization made in October 2020, and is to be executed by December 31, 2026. During the year 2022, the total number of share repurchases were 3,328,795 common shares for $ 806.4 million, at an average price of $ 242.24 per share. The 2022 shares repurchased included 3,226,379 common shares for $ 786.3 million, at an average price of $ 243.72 per share under the 2021 $ 1 billion authorization, leaving approximately $ 213.7 million remaining available, as of December 31, 2022, and included 102,416 common shares repurchased for $ 20.0 million, at an average price of $ 195.45 per share which completed the October 2020 $ 500 million authorization. Purchases in 2021 and 2020 under the October 2020 authorization were 2,398,477 common shares for $ 355.0 million, at an average price of $ 148.00 per share and 969,654 common shares for $ 125.0 million, at an average price of $ 128.91 per share, respectively. F-29 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table provides a reconciliation of basic and diluted earnings per share computations for the years ended December 31, 2022, 2021, and 2020. Years ended December 31, (Millions of dollars except per share amounts) 2022 2021 2020 Earnings per common share: Net income per share - basic Net income attributable to common stockholders $ 672.9 $ 396.9 $ 386.1 Weighted average common shares outstanding (in thousands) 23,506 26,210 29,132 Earnings per common share $ 28.63 $ 15.14 $ 13.25 Earnings per common share - assuming dilution: Net income per share - diluted Net income attributable to common stockholders $ 672.9 $ 396.9 $ 386.1 Weighted average common shares outstanding (in thousands) 23,506 26,210 29,132 Common equivalent shares: Share-based awards 444 394 394 Weighted average common shares outstanding - assuming dilution (in thousands) 23,950 26,604 29,526 Earnings per common share assuming dilution $ 28.10 $ 14.92 $ 13.08 We have excluded from the earnings-per-share calculation certain stock options and shares that are considered to be anti-dilutive under the treasury stock method and are reported in the table below. Years ended December 31, Potentially dilutive shares excluded from the calculation as their inclusion would be anti-dilutive 2022 2021 2020 Stock options — 80,500 75,600 Restricted share units — 1,562 20,137 Total anti-dilutive shares — 82,062 95,737 Note 17 — Other Financial Information CASH FLOW DISCLOSURES — Cash income taxes paid (collected), net of refunds, were $ 199.7 million, $ 120.4 million and $ 96.5 million for the three years ended December 31, 2022, 2021 and 2020, respectively. Interest paid, net of amounts capitalized, was $ 81.6 million, $ 70.8 million and $ 49.1 million for the years ended December 31, 2022, 2021 and 2020, respectively. F-30 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CHANGES IN WORKING CAPITAL - Years ended December 31, (Millions of dollars) 2022 2021 2020 Accounts receivable $ ( 84.7 ) $ ( 18.9 ) $ 4.9 Inventories ( 26.9 ) 11.1 ( 51.7 ) Prepaid expenses and other current assets ( 23.7 ) ( 3.6 ) 16.6 Accounts payable and accrued liabilities 180.1 102.9 8.3 Income taxes payable — ( 8.7 ) 8.8 Net decrease (increase) in noncash operating working capital $ 44.8 $ 82.8 $ ( 13.1 ) Note 18 — Assets and Liabilities Measured at Fair Value The Company carries certain assets and liabilities at fair value in its Consolidated Balance Sheets. The fair value hierarchy is based on the quality of inputs used to measure fair value, with Level 1 being the highest quality and Level 3 being the lowest quality. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included within Level 1. Level 3 inputs are unobservable inputs which reflect assumptions about pricing by market participants. The Company's available-for-sale marketable securities consist of high quality, investment grade securities from diverse issuers. We value these securities at the closing price in the principal active markets as of the last business day of the reporting period. The fair values of the Company's marketable securities by asset class are described in Note 5 "Marketable Securities" in these consolidated financial statements for the period ended December 31, 2022. We value the deferred compensation plan assets, which consist of money market and mutual funds, based on quoted prices in active markets at the measurement date. For additional information on deferred compensation plans see also Note 14 "Employee and Retirement Benefit Plans" in these consolidated financial statements for the period ended December 31, 2022. At the balance sheet date, the fair value of commodity derivatives contracts was determined using NYMEX quoted values and the value of the Interest rate swap derivative was derived by using level 3 inputs. The carrying value of the Company’s Cash and cash equivalents, Accounts receivable-trade, Trade accounts payable, and accrued liabilities approximates fair value. See also Note 15 "Financial Instruments and Risk Management" in these consolidated financial statements for the period ended December 31, 2022, for more information. Financial assets and liabilities measured at fair value on a recurring basis The following table presents the Company's financial assets and liabilities measured at fair value on a recurring basis, as of December 31, 2022 and 2021: December 31, 2022 (Millions of dollars) Level 1 Level 2 Level 3 Fair Value Financial assets Marketable securities, current U S Govt Bonds $ — $ 8.8 $ — $ 8.8 Corporate bonds — 6.1 — 6.1 Non U S Govt Bonds — 3.0 — 3.0 Accounts receivable - trade Interest rate swap derivative — — 1.3 1.3 F-31 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 (Millions of dollars) Level 1 Level 2 Level 3 Fair Value Marketable securities, noncurrent Corporate bonds — 4.4 — 4.4 Other assets Deferred compensation plan assets 9.5 — — 9.5 Financial liabilities Deferred credits and other liabilities Deferred compensation plan liabilities ( 14.7 ) — — ( 14.7 ) $ ( 5.2 ) $ 22.3 $ 1.3 $ 18.4 December 31, 2021 (Millions of dollars) Level 1 Level 2 Level 3 Fair Value Financial assets Prepaid expenses and other current assets Fuel derivative $ — $ — $ 0.6 $ 0.6 Other assets Deferred compensation plan assets 10.2 — — 10.2 Financial liabilities Trade accounts payable and accrued liabilities Interest rate swap derivative — — ( 0.7 ) ( 0.7 ) Deferred credits and other liabilities Deferred compensation plan liabilities ( 13.9 ) — — ( 13.9 ) $ ( 3.7 ) $ — $ ( 0.1 ) $ ( 3.8 ) Fair value of financial instruments not recognized at fair value The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. The table below excludes Cash and cash equivalents, Accounts receivable-trade, and Trade accounts payable and accrued liabilities, all of which had fair values approximating carrying amounts. The fair value of Current and Long-term debt was estimated based on rates offered to the Company at that time for debt of the same maturities. The Company has off-balance sheet exposures relating to certain financial guarantees and letters of credit. The fair value of these, which represents fees associated with obtaining the instruments, was nominal. The following table presents the carrying amounts and estimated fair values of financial instruments held by the Company at December 31, 2022 and 2021. December 31, 2022 December 31, 2021 Carrying Carrying (Millions of dollars) Amount Fair Value Amount Fair Value Financial liabilities Current and long-term debt, excluding finance leases $ ( 1,673.3 ) $ ( 1,643.0 ) $ ( 1,673.5 ) $ ( 1,709.5 ) F-32 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 19 – Commitments The Company leases land, gasoline stores, and other facilities under operating leases. During the next five years, expected future rental payments under all operating leases are approximately $ 49.9 million in 2023, $ 49.6 million in 2024, $ 48.6 million in 2025, $ 47.9 million in 2026, and $ 47.1 million in 2027. Rental expense for noncancellable operating leases, including contingent payments when applicable, was $ 57.6 million in 2022, $ 48.7 million in 2021 and $ 24.9 million in 2020. Commitments for capital expenditures were approximately $ 365.9 million at December 31, 2022, including $ 310.8 million approved for potential construction of future stores (including land) at year-end, along with $ 7.6 million for improvements of existing stores, to be financed with our operating cash flow and/or incurrence of indebtedness. The Company has certain take-or-pay contracts primarily to supply terminals with a noncancellable remaining term of 7.8 years. At December 31, 2022, our minimum annual payments under our take-or-pay contracts are estimated to be $ 8.4 million in 2023 and $ 6.9 million in 2024, $ 6.9 million in 2025, $ 6.9 million in 2026, and $ 4.3 million in 2027. Note 20 — Contingencies The Company’s operations and earnings have been and may be affected by various forms of governmental action. Examples of such governmental action include, but are by no means limited to: tax increases and retroactive tax claims; import and export controls; price controls; allocation of supplies of crude oil and petroleum products and other goods; laws and regulations intended for the promotion of safety and the protection and/or remediation of the environment; governmental support for other forms of energy; and laws and regulations affecting the Company’s relationships with employees, suppliers, customers, stockholders and others. Because governmental actions are often motivated by political considerations, may be taken without full consideration of their consequences, and may be taken in response to actions of other governments, it is not practical to attempt to predict the likelihood of such actions, the form the actions may take or the effect such actions may have on the Company. ENVIRONMENTAL MATTERS AND LEGAL MATTERS — Murphy USA is subject to numerous federal, state and local laws, regulations and permit requirements dealing with the environment. Violation of such environmental laws, regulations and permits can result in the imposition of significant civil and criminal penalties, injunctions, and other sanctions. A discharge of hazardous substances into the environment could, to the extent such event is not adequately insured, subject the Company to substantial expense, including the cost to comply with applicable laws and regulations, claims by neighboring landowners, governmental authorities and other third parties for any personal injury, property damage and other losses that might result. The Company currently owns or leases, and has in the past owned or leased, properties at which hazardous substances have been or are being handled. In connection with these activities, hazardous substances may have been disposed of or released on or under the properties owned or leased by the Company or on or under other locations where they have been taken for disposal. In addition, many of these properties have been operated by third parties whose management of hazardous substances was not under the Company’s control. Under existing laws, the Company could be required to remediate contaminated property (including contaminated groundwater) or to perform remedial actions to prevent future contamination. Certain of these contaminated properties are in various stages of negotiation, investigation, and/or cleanup, and the Company is investigating the extent of any related liability and the availability of applicable defenses. With the sale of the U.S. refineries in 2011, Murphy Oil retained certain liabilities related to environmental matters. Murphy Oil also obtained insurance covering certain levels of environmental exposures. With respect to the previously owned refinery properties, Murphy Oil retained those liabilities in the Separation and Distribution agreement that was entered into related to the separation on August 30, 2013. With respect to any remaining potential liabilities, based on information currently available to the Company, the Company believes costs related to these F-33 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS properties will not have a material adverse effect on Murphy USA’s net income, financial position or liquidity in a future period. While it is possible that certain environmental expenditures could be recovered by the Company from other sources, primarily environmental funds maintained by certain states, no assurance can be given that future recoveries from these other sources will occur. As such, the Company has not recorded a benefit for likely recoveries at December 31, 2022, however certain jurisdictions provide reimbursement for these expenses which have been considered in recording the net exposure. The U.S. EPA currently considers the Company a PRP at one Superfund site. As to the site, the potential total cost to all parties to perform necessary remedial work at this site may be substantial. However, based on current negotiations and available information, the Company believes that it is a de minimis party as to ultimate responsibility at the Superfund site. Accordingly, the Company has not recorded a liability for remedial costs at the Superfund site at December 31, 2022. The Company could be required to bear a pro rata share of costs attributable to nonparticipating PRPs or could be assigned additional responsibility for remediation at this site or other Superfund sites. Based on information currently available to the Company, the Company believes that its share of the ultimate costs to clean-up this site will be immaterial and will not have a material adverse effect on its net income, financial position or liquidity in a future period. Based on information currently available to the Company, the amount of future remediation costs to be incurred to address known contamination sites is not expected to have a material adverse effect on the Company’s future net income, cash flows or liquidity. However, there is the possibility that additional environmental expenditures could be required to address contamination, including as a result of discovering additional contamination or the imposition of new or revised requirements applicable to known contamination, and such additional expenditures could be material. Murphy USA is engaged in a number of other legal proceedings, all of which the Company considers routine and incidental to its business. Currently, the City of Charleston, South Carolina and the state of Delaware have filed lawsuits against energy companies, including the Company. These lawsuits allege damages as a result of climate change and the plaintiffs are seeking unspecified damages and abatement under various tort theories. At this early stage, the ultimate outcome of these matters remain uncertain, and neither the likelihood of an unfavorable outcome nor the ultimate liability, if any, can be determined. Based on information currently available to the Company, the ultimate resolution of those other legal matters is not expected to have a material adverse effect on the Company’s net income, financial condition or liquidity in a future period. INSURANCE — The Company maintains insurance coverage at levels that are customary and consistent with industry standards for companies of similar size. Murphy USA maintains statutory workers compensation insurance with a deductible of $ 1.0 million per occurrence, general liability insurance with a deductible of $ 3.0 million per occurrence, and auto liability insurance with a deductible of $ 0.3 million per occurrence. As of December 31, 2022, there were a number of outstanding claims that are of a routine nature. The estimated incurred but unpaid liabilities relating to these claims are included in Trade account payables and accrued liabilities on the Consolidated Balance Sheets. While the ultimate outcome of these claims cannot presently be determined, management believes that the accrued liability of $ 44.6 million will be sufficient to cover the related liability and that the ultimate disposition of these claims will have no material effect on the Company’s financial position and results of operations. The Company has obtained insurance coverage as appropriate for the business in which it is engaged, but may incur losses that are not covered by insurance or reserves, in whole or in part, and such losses could adversely affect our results of operations and financial position. TAX MATTERS — Murphy USA is subject to extensive tax liabilities imposed by multiple jurisdictions, including income taxes, indirect taxes (excise/duty, sales/use and gross receipts taxes), payroll taxes, franchise taxes, withholding taxes and ad valorem taxes. New tax laws and regulations and changes in existing tax laws and regulations are continuously being enacted or proposed that could result in increased expenditures for tax liabilities in the future. Many of these liabilities are subject to periodic audits by the respective taxing authority. Subsequent changes to our tax liabilities because of these audits may subject us to interest and penalties. F-34 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OTHER MATTERS — In the normal course of its business, the Company is required under certain contracts with various governmental authorities and others to provide financial guarantees or letters of credit that may be drawn upon if the Company fails to perform under those contracts. At December 31, 2022, the Company had contingent liabilities of $ 9.8 million on outstanding letters of credit. The Company has not accrued a liability in its balance sheet related to these financial guarantees and letters of credit because it is believed that the likelihood of having these drawn is remote. Note 21 — Leases The Company determines if an arrangement is a lease or contains a lease at inception. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. The Company's leases have remaining lease terms of approximately 1 year to 38 years, which may include the option to extend the lease when it is reasonably certain the Company will exercise the option. Most leases include one or more options to renew, with renewal terms that can extend the lease term from 5 to 20 years or more. The exercise of lease renewal options is at the Company's sole discretion. Due to the uncertainties of future markets, economic factors, technology changes, demographic shifts and behavior, environmental regulatory requirements and other information that impacts decisions as to store location, management has determined that it was not reasonably certain to exercise contract options and they are not included in the lease term. Additionally, short-term leases and leases with variable lease costs are immaterial. The Company reviews all options to extend, terminate, or otherwise modify its lease agreements to determine if changes are required to the right of use assets and liabilities. As the implicit interest rate is not readily determinable in most of the Company's lease agreements, the Company uses its estimated secured incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Lessor — We have various arrangements for certain spaces for food service and vending equipment under which we are the lessor. These leases meet the criteria for operating lease classification. Lease income associated with these leases is immaterial. We also have certain areas where we sublease building and land space to others. This lease income is immaterial. Lessee —We lease land for 435 stores, one terminal, and various equipment. Our lease agreements do not contain any material residual value guarantees and approximately 102 sites leased from Walmart contain restrictive covenants, though the restrictions are deemed to have an immaterial impact. F-35 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Leases are reflected in the following balance sheet accounts: (Millions of dollars) Classification December 31, 2022 December 31, 2021 Assets Operating (Right-of-use) Operating lease right of use assets, net $ 449.6 $ 419.2 Finance Property, plant, and equipment, at cost, less accumulated depreciation of $ 30.5 in 2022 and $ 16.7 in 2021 124.6 137.3 Total leased assets $ 574.2 $ 556.5 Liabilities Current Operating Trade accounts payable and accrued liabilities $ 20.5 $ 18.1 Finance Current maturities of long-term debt 11.0 11.0 Noncurrent Operating Non-current operating lease liabilities 444.2 408.9 Finance Long-term debt, including capitalized lease obligations 122.6 130.6 Total lease liabilities $ 598.3 $ 568.6 Lease Cost: Year Ended December 31, (Millions of dollars) Classification 2022 2021 2020 Operating lease cost Store and other operating expenses $ 52.2 $ 43.1 $ 16.6 Finance lease cost Amortization of leased assets Depreciation & amortization expense 15.9 14.8 1.3 Interest on lease liabilities Interest expense 9.1 8.2 0.1 Net lease costs $ 77.2 $ 66.1 $ 18.0 Cash Flow Information: Year Ended December 31, (Millions of dollars) 2022 2021 2020 Cash paid for amounts included in the measurement of liabilities Operating cash flows required by operating leases $ 45.6 $ 38.8 $ 15.5 Operating cash flows required by finance leases $ 9.1 $ 8.2 $ 0.1 Financing cash flows required by finance leases $ 11.2 $ 9.8 $ 1.4 F-36 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Maturity of Lease Liabilities: (Millions of dollars) Operating leases Finance leases 2023 $ 49.9 $ 19.4 2024 49.6 17.8 2025 48.6 16.7 2026 47.9 15.8 2027 47.1 15.5 After 2027 530.6 122.0 Total lease payments 773.7 207.2 less: interest 309.0 73.6 Present value of lease liabilities $ 464.7 $ 133.6 Lease Term and Discount Rate: Year Ended December 31, 2022 Weighted average remaining lease term In Years Finance leases 13.0 Operating leases 15.8 Weighted average discount rate Finance leases 6.7 % Operating leases 6.5 % Note 22 — Recent Accounting and Reporting Rules In August 2021, the FASB issued ASU 2021-08, "Accounting for Contract Assets and Contract Liabilities from Contracts with Customers," which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606. Under Topic 606, the acquirer applies the revenue model as if it had originated the contracts. This is a departure from the current requirement to measure contract assets and contract liabilities at fair value. This ASU is effective for the Company for the year beginning January 1, 2023, with early adoption permitted. The Company has determined this will not have a material impact on the Company's consolidated financial statements. In December 2022, the FASB issued ASU 2022-06, "Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848." The amendments in this Update defer the sunset date of Topic 848 from December 31, 2022, to December 31, 2024. These amendments apply to all entities and are effective upon issuance of the Update. The Company has determined this standard has not had a material impact on the Company's consolidated financial statements. F-37 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 23 — Business Segments Our operations include the sale of retail motor fuel products and convenience merchandise along with the wholesale and bulk sale capabilities of our product supply and wholesale group. As the primary purpose of the product supply and wholesale group is to support our retail operations and provide fuel for their daily operation, the bulk and wholesale fuel sales are secondary to the support functions played by these groups. As such, they are all treated as one segment for reporting purposes as they sell the same products and have similar economic characteristics. This Marketing segment contains essentially all of the revenue generating activities of the Company. Results not included in the reportable segment include Corporate and Other Assets. The reportable segment was determined based on information reviewed by the Chief Operating Decision Maker. Segment Information Corporate and Other Assets (Millions of dollars) Marketing Consolidated Year ended December 31, 2022 Segment income (loss) $ 740.9 $ ( 68.0 ) $ 672.9 Revenues from external customers $ 23,445.4 $ 0.7 $ 23,446.1 Interest income $ — $ 3.0 $ 3.0 Interest expense $ ( 9.0 ) $ ( 76.3 ) $ ( 85.3 ) Income tax expense (benefit) $ 232.1 $ ( 21.2 ) $ 210.9 Significant noncash charges (credits) Depreciation and amortization $ 204.8 $ 15.6 $ 220.4 Accretion of asset retirement obligations $ 2.7 $ — $ 2.7 Deferred and noncurrent income taxes (benefits) $ 35.0 $ ( 3.5 ) $ 31.5 Additions to property, plant and equipment $ 279.1 $ 26.7 $ 305.8 Total assets at year-end $ 3,794.0 $ 329.2 $ 4,123.2 Segment Information Corporate and Other Assets (Millions of dollars) Marketing Consolidated Year ended December 31, 2021 Segment income (loss) $ 472.8 $ ( 75.9 ) $ 396.9 Revenues from external customers $ 17,359.9 $ 0.6 $ 17,360.5 Interest income $ — $ 0.1 $ 0.1 Interest expense $ ( 8.1 ) $ ( 74.3 ) $ ( 82.4 ) Income tax expense (benefit) $ 148.5 $ ( 23.5 ) $ 125.0 Significant noncash charges (credits) Depreciation and amortization $ 197.3 $ 15.3 $ 212.6 Accretion of asset retirement obligations $ 2.5 $ — $ 2.5 Deferred and noncurrent income taxes (benefits) $ 22.6 $ ( 3.6 ) $ 19.0 Additions to property, plant and equipment $ 245.5 $ 32.0 $ 277.5 Total assets at year-end $ 3,569.4 $ 478.8 $ 4,048.2 F-38 Murphy USA Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Segment Information Corporate and Other Assets (Millions of dollars) Marketing Consolidated Year ended December 31, 2020 Segment income (loss) $ 442.2 $ ( 56.1 ) $ 386.1 Revenues from external customers $ 11,264.0 $ 0.3 $ 11,264.3 Interest income $ — $ 1.0 $ 1.0 Interest expense $ ( 0.1 ) $ ( 51.1 ) $ ( 51.2 ) Loss on early debt extinguishment $ — $ — $ — Income tax expense (benefit) $ 132.9 $ ( 9.9 ) $ 123.0 Significant noncash charges (credits) Depreciation and amortization $ 146.3 $ 14.7 $ 161.0 Accretion of asset retirement obligations $ 2.3 $ — $ 2.3 Debt extinguishment costs $ — $ — $ — Deferred and noncurrent income taxes (benefits) $ 2.8 $ ( 0.3 ) $ 2.5 Additions to property, plant and equipment $ 200.8 $ 26.3 $ 227.1 Total assets at year-end $ 2,418.2 $ 267.5 $ 2,685.7 F-39 SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS Murphy USA Inc. Valuation Accounts and Reserves (Millions of dollars) Balance at January 1, Charged (Credited) to Expense Deductions Balance at December 31, 2022 Deducted from assets accounts Allowance for doubtful accounts $ 0.1 0.2 — $ 0.3 2021 Deducted from assets accounts Allowance for doubtful accounts $ 0.1 — — $ 0.1 2020 Deducted from assets accounts Allowance for doubtful accounts $ 1.2 — ( 1.1 ) $ 0.1 F-40