What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-04 compared with 2022-10-27 · 113 added, 196 removed, 254 unchanged (55% of the section changed)

9 unchanged sentences

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

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

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

• Results of Operations —This section provides an analysis of our results of operations, including the results of our operating segment for the three months ended March 31, 2023 and 2022.

• Capital Resources and Liquidity —This section provides a discussion of our financial condition and cash flows as of and for the three months ended March 31, 2023 and 2022.

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

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Our Form 10-K contains a discussion of matters not included within this document, such as disclosures regarding critical accounting policies and estimates, and contractual obligations.

On January 29, 2021, MUSA acquired 100% of Quick Chek Corporation ("QuickChek"), a privately held convenience store chain with a strong regional brand consisting of 156 stores, at the time of acquisition, located in New Jersey and New York, in an all-cash transaction.

The acquisition expanded the MUSA network into the Northeast by adding high-performance stores that had an existing best-in-class food and beverage model and is consistent with the Company's stated strategic priorities of developing enhanced food and beverage capabilities.

For additional information concerning the acquisition, see Note 5 “Business Acquisition” in the audited combined financial statements for the year ended December 31, 2021 included with our Annual Report on Form 10-K, and Note 4, "Business Acquisition" in the accompanying unaudited consolidated financial statements.

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

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

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

The Company owns and operates a chain of retail stores markets gasoline and other products under the brand names of Murphy USA ® and Murphy Express most of which are located in close proximity to Walmart stores, principally in the Southeast, Midwest and Southwest areas of the United States.

We also have a mix of convenience stores and retail gasoline stores located in New Jersey and New York that operate under the brand name of QuickChek.

At March 31, 2023, we had a total of 1,720 Company stores in 27 states, of which 1,562 were Murphy branded and 158 were under the QuickChek brand.

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

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and its subsidiaries for all periods presented.

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

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

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

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

For Q1 2023, the QuickChek results cover the period from December 31, 2022 to March 31, 2023.

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

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

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

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

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

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

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

In addition, the U.S.

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

Should the recoveries experienced to-date stall or reverse as a result of a resurgence in COVID-19 infection rates or be impacted by inflationary pressures, it could impact demand and seasonal travel patterns which could reduce future sales volumes.

These factors include, but are not limited to, the price of refined products, interruptions in our fuel and merchandise supply chain caused by severe weather or pandemics, the effects from pandemics such as travel restrictions and stay-at-home orders imposed during a pandemic, severe refinery mechanical failures for an extended period of time, cyber-attacks against the Company or our vendors, changing economic conditions such as inflation, and competition in the local markets in which we operate.

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

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

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

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

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

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

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

In 2023, crude oil prices were relatively stable with prices ranging from $67 per barrel to $82 per barrel with the the average price in Q1 2023 of $76 per barrel, compared to an average price of $95 per barrel in Q1 2022.

Total fuel contribution (retail fuel margin plus product supply and wholesale ("PS&W") results including Renewable Identification Numbers ("RINs")) for Q1 2023 was 28.9 cents per gallon ("cpg"), compared to 34.0 cpg in Q1 2022.

Retail fuel margin dollars increased 85.1% in the current quarter and retail fuel volumes improved 13.2% when compared to Q3 of 2021.

Retail fuel margin dollars increased 4.4% in the current quarter while retail fuel volumes improved 4.9% when compared to Q1 of 2022.

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

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

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

As of March 31, 2023, we had $1.3 billion of Senior Notes and a $393 million term loan outstanding.

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

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

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

At March 31, 2023, we had additional available capacity under the committed $350 million cash flow revolving credit facility, with none drawn.

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

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

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

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

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

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

As a result, operating results for the three months ended March 31, 2023, may not necessarily be indicative of the results that may be expected for the remainder of the year ending December 31, 2023.

Business Segment

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

For additional operating segment information, see Note 22 “Business Segments” in the audited combined financial statements for the year ended December 31, 2021 included with our Annual Report on Form 10-K and Note 16 “Business Segments” in the accompanying unaudited consolidated financial statements for the three and nine months ended September 30, 2022.

For additional operating segment information, see Note 23 “Business Segments” in the audited combined financial statements for the year ended December 31, 2022 included with our Annual Report on Form 10-K and Note 16 “Business Segments” in the accompanying unaudited consolidated financial statements for the three months ended March 31, 2023.

Results of Operations

Consolidated Results

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

For the three months ended March 31, 2023, the Company reported net income of $106.3 million, or $4.80 per diluted share, on revenue of $5.1 billion.

Net income was $152.4 million for the same period in 2022, or $6.08 per diluted share, on $5.1 billion of revenue.

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

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

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

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

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

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

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

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

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

Total cost of sales in Q3 2022 increased $1.4 billion, or 34.0% when compared to Q3 2021.

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

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

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

The decrease in net income was primarily due to lower all-in fuel contribution, increases in general and administrative expenses, store operating expenses and payment fees, which were partially offset by higher overall merchandise contributions.

Three Months Ended March 31, 2023 versus Three Months Ended March 31, 2022

Revenues for Q1 2023 decreased $41.2 million, or 0.8%, compared to the same quarter in 2022.

The decrease in revenues was due to 8.2% lower retail fuel sales prices partially offset by increased fuel sales volumes of 4.9%, an increase in merchandise sales prices and higher RINs sales prices and volumes.

Total cost of sales in Q1 2023 decreased $12.8 million, or 0.3% when compared to Q1 2022.

In the current-year quarter, the decrease was primarily due to lower fuel cost partially offset by higher fuel volumes sold and higher merchandise costs.

Store and other operating expenses increased $15.6 million, or 7.0% in Q1 2023 from Q1 2022, due primarily to higher employee related expenses, store maintenance costs, and payment fees.

SG&A expenses for Q1 2023 increased $12.8 million, or 27.7%, from Q1 2022.

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

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

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

Year-to-date revenues for 2022 increased $5.5 billion, or 43.6%, compared to the same period in 2021.

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

Total cost of sales increased $5.0 billion, or 44.5% when compared to 2021.

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

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

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

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

Depreciation and amortization expense increased $7.0 million, or 4.4% year-to-date from the same period of 2021 primarily due to one additional month of QuickChek depreciation compared to the prior year period, combined with higher depreciation due to the newer larger store formats of Murphy USA stores.

Acquisition and integration related costs were $8.3 million less and interest expense was lower by $0.6 million compared to the same nine-month period in 2021.

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

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

Segment Results

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

Three Months Ended

September 30, Nine Months Ended

September 30,

(Millions of dollars) 2022 2021 2022 2021

Marketing $ 236.8 $ 121.1 $ 605.0 $ 347.1

Corporate and other assets (17.3) (17.1) (49.8) (59.0)

Net Income $ 219.5 $ 104.0 $ 555.2 $ 288.1

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

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

• Higher all-in fuel contribution and sales volumes

• Higher merchandise contribution

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

• Higher payment fees

The increase in SG&A costs is primarily due to higher professional and technology fees from business improvement initiatives, and increased employee incentive expenses.

The effective income tax rate was approximately 23.5% for Q1 of 2023 compared to approximately 24.0% in Q1 2022.

Three Months Ended March 31, 2023 versus Three Months Ended March 31, 2022

Net income for the three months ended March 31, 2023 was lower compared to the same period in 2022 primarily due to:

• Lower all-in fuel contribution

• Higher selling, general and administrative expenses

• Higher store operating expenses

• Higher general and administrative expense

• Higher income tax expense

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

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

• Higher all-in fuel contribution and sales volumes

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

• Higher merchandise contribution

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

• Higher store operating expense

• Higher payment fees

• Higher depreciation and amortization expense

• Higher SG&A expenses

• Higher income tax expense

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

September 30, Nine Months Ended

September 30,

Marketing Segment 2023 2022

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

75.1 48.7 69.5 49.0

Total merchandise sales revenue same store sales 1,2

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

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

Marketing Segment 2023 2022

Store count at end of period 1,720 1,686

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

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

the 2022 versus 2021 comparison).

Newly constructed stores do not enter the calculation until they are open for each full calendar year for the periods being compared (open by January 1, 2022 for the stores being compared in the 2023 versus 2022 comparison).

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

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

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

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

For Q1 2023, the QuickChek results cover the period from December 31, 2022 to March 31, 2023.

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

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

Three Months Ended

September 30, Nine Months Ended

September 30,

Key Operating Metrics 2023 2022

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

256.4 231.7 244.0 228.0

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

251.8 227.6 240.7 224.5

Total fuel contribution (including retail, PS&W and RINs) (cpg) 28.9 34.0

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(Millions of dollars) 2023 2022

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

Key Operating Metrics 2023 2022

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

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

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

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

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

The increased revenues were due to a 27.0% increase in retail fuel sales prices, a 13.2% increase in the number of gallons sold, and a 7.7% increase in merchandise sales.

Three Months Ended March 31, 2023 versus Three Months Ended March 31, 2022

Net income in the Marketing segment for Q1 2023 decreased $43.2 million, to $125.9 million;

compared to the Q1 2022 period.

The decrease was due to lower total all-in fuel contribution and increases in selling, general and administrative expenses, store operating expenses, and payment fees, partially offset by higher overall merchandise contribution.

Total revenues for the Marketing segment were effectively flat at approximately $5.1 billion in both Q1 2023 and 2022.

Decreases in retail fuel prices were offset by increases in the number of gallons sold and higher merchandise sales and sales of RINs.

Revenues included excise taxes collected and remitted to government authorities of $544.8 million in Q1 2023 and $514.1 million in Q1 2022.

Retail fuel margin dollars increased 85.1% compared to the prior-year quarter on a higher margin rate of 39.3 cpg for Q3 2022 when compared to 24.0 cpg in the same quarter of 2021, combined with a 13.2% increase in retail fuel volumes.

Retail fuel margin dollars increased 4.4% compared to the prior-year quarter on higher total fuel volumes of 4.9% and a relatively flat retail fuel margin of 23.2 cpg for Q1 2023 when compared 2022.

Total fuel sales volumes on a SSS basis increased 1.4% to 227.8 thousand gallons per store in the 2023 period when compared to Q1 2022.

Total PS&W margin dollars, including RINs, decreased by $51.0 million from Q1 2022 results.

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

The quarter-over-quarter decrease reflects lower timing and inventory pricing adjustments, higher RINs revenue, and an increase in negative spot-to-rack margins.

The Q1 2023 quarter includes the sale of 72.0 million RINs at an average selling price of $1.60 per RIN while Q1 2022 had sales of 68.5 million RINs at an average price of $1.12 per RIN for a total increase in RINs revenue of $38.7 million.

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

Total merchandise sales increased 8.3% to approximately $1.0 billion in Q1 2023 compared to $0.9 billion in Q1 2022 due to higher sales across the chain in most categories.

Total merchandise contribution in Q1 2023 improved 6.5% compared to Q1 2022 due to higher unit sales volumes and retail prices.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Total fuel sales volumes on a SSS basis increased 5.9% to 240.7 thousand gallons per store in 2022 compare to 2021.

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

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

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

Year-to-date total merchandise contribution in 2022 increased 11.1% compared to the same period of 2021.

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

Total SSS merchandise contribution dollars grew 5.8%.

On a SSS basis there was an increase of 2.2% in tobacco products sales and 2.8% in non-tobacco sales.

Store and other operating expenses increased $122.4 million in the current year compared to the same period of 2021, primarily due to an additional month of QuickChek results in 2022, along with higher payment fees, employee related expenses, and maintenance expenses.

On an APSM basis, expenses applicable to store OPEX excluding payment fees and rent increased 11.1%, primarily due to employee related expenses and maintenance costs.

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

This non-recurring special bonus program is completed.

Selling, general and administrative expenses increased $10.8 million in 2022 compared to 2021 due primarily to the increased professional fees, contract services, and the inclusion of QuickChek for an additional month in 2022.

Depreciation and amortization expense increased $7.0 million, or 4.8%, in the first nine months of 2022 due to the inclusion of QuickChek for an additional month in 2022, combined with new larger store formats for Murphy USA stores.

Total SSS merchandise

contribution dollars grew 5.0%, which included an increase of 4.2% in tobacco products and a 5.6% increase in non-tobacco products.

Store and other operating expenses increased $15.5 million in Q1 2023 compared to Q1 2022, primarily due to employee related expenses, store maintenance costs, inventory shrink, and payment fees.

On an APSM basis, expenses applicable to store OPEX excluding payment fees and rent were higher 5.4%, primarily due to increased employee related expenses, maintenance costs, and inventory shrink.

Selling, general, and administrative expenses increased $12.8 million in Q1 2023 compared to Q1 2022 due primarily to higher professional and technology fees from business improvement initiatives and increased employee incentive expenses.

Same store sales information compared to APSM metrics

Variance from prior year Variance from prior year

Three months ended Nine months ended

September 30, 2022 September 30, 2022

Variance from prior year

Three months ended

March 31, 2023

Fuel gallons per month 1.4 % 2.4 %

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Corporate and Other Assets

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

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

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

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

The year-over-year improvement was due primarily to $8.3 million in lower acquisition and integration related costs, combined with a gain on sale of corporate assets, higher interest income, and lower interest expense, partially offset by increased nonoperating expenses in 2022 compared to 2021.

Three Months Ended March 31, 2023 versus Three Months Ended March 31, 2022

After-tax results for Corporate and other assets for Q1 2023 were a loss of $19.6 million compared to a loss of $16.7 million in Q1 2022, the increase was primarily due to higher interest expense partially offset by higher nonoperating income and investment income.

Non-GAAP Measures

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

The following table sets forth the Company’s Adjusted EBITDA for the three months ended March 31, 2023 and 2022.

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

8 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(Millions of dollars) 2023 2022

1 unchanged sentence

Income tax expense (benefit) 32.7 48.0

Interest expense, net of interest income 20.4 20.4 59.8 62.1

Interest expense, net of investment income 24.1 19.6

Depreciation and amortization 56.4 55.4

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Significant Sources of Capital

As of September 30, 2022, we had $192.7 million of cash and cash equivalents.

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

As of March 31, 2023, we had $102.1 million of cash and cash equivalents and marketable securities of $17.9 million.

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

We have a committed cash flow revolving credit facility (the "revolving facility”) of $350 million, which was undrawn at March 31, 2023, which can be utilized for working capital and other general corporate purposes, including supporting our operating model as described herein.

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

Operating Activities

Net cash provided by operating activities was $771.5 million for the nine months ended September 30, 2022, an increase of $184.5 million compared to $587.0 million for the same period in 2021.

The increase for the current year is primarily related to the increase in year-over-year net income of $267.1 million partially offset by changes in noncash working capital of $93.4 million compared to the same period in 2021.

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

Net cash provided by operating activities was $149.7 million for the three months ended March 31, 2023, and was $339.2 million for the same period of 2022, a decrease of $189.5 million.

The decrease for the current year is primarily related to the year-over-year changes in amounts from non-cash working capital of $149.3 million and the decrease in net income of $46.1 million compared to the same period in 2022.

For the current year, operating cash required by changes in non-cash operating working capital of $30.4 million was due to a decrease in accounts payable and accrued liabilities of $85.9 million which was due to the timing of payments.

This was partially offset by a decrease in prepaid expenses of $20.4 million due primarily to changes in accrued income tax liabilities and the timing of income tax payments, a decrease in accounts receivable of $16.5 million due to the timing of receipts and lower fuel prices, a decrease in inventory of $15.5 million due to lower prices and volumes, and by increases in income taxes payable of $3.1 million due to accrued income taxes and timing of estimated tax payments.

Investing Activities

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

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

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

For the three months ended March 31, 2023, cash required by investing activities was $69.0 million compared to $64.4 million in 2022.

The increase in investing cash requirements of 2023 compared to the prior year was primarily due to payments for capital expenditures requiring $8.7 million more in 2023 versus 2022 as a result of

the timing of construction activity and payments, and was partially offset by the maturity of available-for-sale marketable securities of $4.5 million in the current year of which there were none in 2022.

Financing Activities

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

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

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

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

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

Financing activities in the three months ended March 31, 2023 required cash of $39.1 million compared to cash required of $175.0 million in the three months ended March 31, 2022.

The first three months of 2023 included payments of $13.7 million for the repurchase of common shares, which was a decrease of $138.1 million from the repurchases of $151.8 million in the 2022 period.

Dividend payments increased $0.9 million in 2023 versus amounts paid in the first three months of 2022.

Net repayments of debt required $3.8 million in both 2023 and 2022.

Amounts related to share-based compensation required $1.3 million more in cash during 2023 than in 2022.

During the nine months ended September 30, 2022, the Company has paid cash dividend payments of $0.92 per common share, for a total of $22.1 million, compared to the period ended September 30, 2021, in which dividends of $0.75 per share were paid for a total of cash dividend payments of $19.9 million.

During the three months ended March 31, 2023, the Company paid cash dividend payments of $0.37 per common share, for a total of $8.1 million, compared to the period ended March 31, 2022, in which dividends of $0.29 per share were paid for total cash dividend payments of $7.2 million.

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

On October 20, 2022 the Board of Directors declared a quarterly cash dividend of $0.35 per common share, or $1.40 per share on an annualized basis.

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

On May 4, 2023, the Board of Directors declared a quarterly cash dividend of $0.38 per common share, or $1.52 per share on an annualized basis.

The dividend is payable on June 1, 2023, to shareholders of record as of May 15, 2023.

Share Repurchase Program

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

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

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

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

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

(Millions of dollars) September 30,

On December 1, 2021, our Board of Directors approved a share repurchase authorization of up to $1 billion.

During the three months ended March 31, 2023 a total of 48.8 thousand shares were repurchased for $13.7 million under the 2021 program.

As of March 31, 2023, we had approximately $200.0 million remaining under the 2021 authorization.

It was announced on May 2, 2023, that the Company's Board of Directors recently authorized a new share repurchase authorization of up to $1.5 billion to begin upon completion of the current $1 billion authorization and to be executed by December 31, 2028.

The new authorization reaffirms the Company's commitment to supplement organic growth initiatives with shareholder distributions, including our dividend growth plan, to maximize value creation over time.

Our long-term debt at March 31, 2023 and December 31, 2022 was as set forth below:

(Millions of dollars) March 31,

2023 December 31,

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

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

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

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

5.625% senior notes due 2027 (net of unamortized discount of $1.5 at March 31, 2023 and $1.6 at December 31, 2022) $ 298.5 $ 298.4

4.75% senior notes due 2029 (net of unamortized discount of $4.0 at March 31, 2023 and $4.2 at December 31, 2022) 496.0 495.8

3.75% senior notes due 2031 (net of unamortized discount of $4.9 at March 31, 2023 and $5.1 at December 31, 2022) 495.1 494.9

Term loan due 2028 (effective interest rate of 6.45% at March 31, 2023 and 5.95% at December 31, 2022 and net of unamortized discount of $0.7 at March 31, 2023 and December 31, 2022, respectively) 392.3 393.3

Capitalized lease obligations, autos and equipment, due through 2026 2.0 2.3

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

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

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

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

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On 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 to fund the acquisition of QuickChek and for other general corporate purposes.

The net proceeds from the issuance of the 2031 Senior Notes were used to fund the acquisition of QuickChek and for other obligations related to that purpose.

The 2031 Senior Notes are fully and unconditionally guaranteed by Murphy USA, and are guaranteed by certain 100% owned subsidiaries that guarantee our Credit Facilities.

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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 that replaced the Company's prior ABL facility and term loan contained in the credit facility that was last renewed in 2019, respectively.

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

The outstanding balance of the term loan was $395 million at September 30, 2022 and $398 million at December 31, 2021.

The outstanding balance of the term loan was $393 million at March 31, 2023 and $394 million at December 31, 2022.

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

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

Interest payable on the Credit Facilities is based on either:

As of March 31, 2023, we had no outstanding borrowings under the Revolving Facility and had $4.7 million in outstanding letters of credit (which reduces the amount available to borrow under the Revolving Facility).

Interest payable on the Term Facility is based on either:

• the London interbank offered rate, adjusted for statutory reserve requirements (the “Adjusted LIBO Rate”);

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

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

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

plus, (A) in the case of Adjusted LIBO Rate borrowings, a spread of 1.75% per annum and (B) in the case of Alternate Base Rate borrowings, a spread of 0.75% per annum.

Interest payable on the Revolving Facility is based on either:

• the term secured overnight financing rate, plus a 0.10% credit spread adjustment for all interest periods (the "Adjusted SOFR Rate"), which is subject to a 0.0% floor;

plus, (A) in the case of Adjusted SOFR Rate borrowings, spreads ranging from 1.75% to 2.25% per annum depending on a total debt to EBITDA ratio and (B) in the case of Alternate Base Rate borrowings, spreads ranging from 0.75% to 1.25% per annum depending on a total debt to EBITDA ratio.

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

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The Revolving Facility also imposes total leverage ratio and secured net leverage ratio financial maintenance covenants 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 3.75 to 1.0 with an ability in certain circumstances to temporarily increase that limit to 4.25 to 1.0.

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 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 September 30, 2022, our total leverage ratio was 1.53 to 1.0 which meant our ability at that date to make restricted payments was not limited.

At March 31, 2023, our total leverage ratio was 1.58 to 1.0 which meant our ability at that date to make restricted payments was not limited.

If our total leverage ratio, on a pro forma basis, exceeds 3.0 to 1.0, any restricted payments made following that time until the ratio is once again, on a pro forma basis, below 3.0 to 1.0 would be limited by the covenant, which contains certain exceptions, including the ability to make restricted payments in cash in an aggregate amount not to exceed the greater of $110.5 million or 4.5% of consolidated net tangible assets over the life of the credit agreement.

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

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

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

MOUSA is our primary operating subsidiary and generated the vast majority of our revenues for the three months ended March 31, 2023, and accounted for the vast majority of our total assets as of March 31, 2023.

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

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

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

The following table outlines our capital spending and investments by segment for the three month periods ended March 31, 2023 and 2022:

Three Months Ended

September 30, Nine Months Ended

September 30,

(Millions of dollars) 2023 2022

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain statements or may suggest “forward-looking” information (as defined in the Private Securities Litigation Reform Act of 1995) that involve risk and uncertainties, including, but not limited to M&A activity, anticipated store openings, fuel margins, merchandise margins, sales of RINs, trends in our operations, dividends, and share repurchases.

This Quarterly Report on Form 10-Q contains certain statements or may suggest “forward-looking” information (as defined in the Private Securities Litigation Reform Act of 1995) that involve risk and uncertainties, including, but not limited to our M&A activity, anticipated store openings, fuel margins, merchandise margins, sales of RINs, trends in our operations, dividends, and share repurchases.

Such statements are based upon the current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties.

Actual future results may differ materially from historical results or current expectations depending upon factors including, but not limited to:

the Company's ability to realize projected synergies from the acquisition of QuickChek and successfully expand our food and beverage offerings;

The Company's ability to successfully expand our food and beverage offerings;

our ability to continue to maintain a good business relationship with Walmart;

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

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

geopolitical events, that impact the supply and demand and price of crude oil;

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

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

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

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

successful execution of our information technology strategy;

reduced demand for our products due to the implementation of more stringent fuel economy and greenhouse gas reduction requirements, or

increasingly widespread adoption of electric vehicle technology;

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

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

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

changes to the Company's capital allocation, including the timing, declaration, amount and payment of any future dividends or levels of the Company's share repurchases, or management of operating cash;

the market price of the Company's stock prevailing from time to time, the nature of other investment opportunities presented to the Company from time to time, the Company's cash flows from operations, and general economic conditions;

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and changes in interest rates.

Our SEC reports, including our most recent Annual Report on our Form 10-K and our Form 10-Q, contain other information on these and other factors that could affect our financial results and cause actual results to differ materially from any forward-looking information we may provide.

The Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events, new information or future circumstances.

Our SEC reports, including our most recent annual Report on Form 10-K and quarterly report on Form 10-Q, contain other information on these and other factors that could affect our financial results and cause actual results to differ materially from any forward-looking information we may provide.

The Company undertakes no obligation to

update or revise any forward-looking statements to reflect subsequent events, new information or future circumstances.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis