What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-02 compared with 2023-08-03 · 130 added, 110 removed, 312 unchanged (43% of the section changed)

9 unchanged sentences

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

• Results of Operations — This section provides an analysis of our results of operations, including the results of our operating segment for the three and six months ended June 30, 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 and six months ended June 30, 2023 and 2022.

• 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, 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 and nine months ended September 30, 2023 and 2022.

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

6 unchanged sentences

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 June 30, 2023, we had a total of 1,725 Company stores in 27 states, of which 1,566 were Murphy branded and 159 were under the QuickChek brand.

At September 30, 2023, we had a total of 1,724 Company stores in 27 states, of which 1,568 were Murphy branded and 156 were under the QuickChek brand.

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

4 unchanged sentences

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

For Q2 2023, the QuickChek results covered the period April 1, 2023 to June 30, 2023, and the 2023 year-to-date period began

For Q3 2023, the QuickChek results cover the period July 1, 2023 to September 29, 2023, and the 2023 year-to-date period began

December 31, 2022.

For Q2 2022, the QuickChek results covered the period April 2, 2022 to July 1, 2022, and the 2022 year-to-date period began January 1, 2022.

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

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

2 unchanged sentences

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 as well as the price of crude oil, 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 that lower consumer purchasing power such as inflation, and competition in the local markets in which we operate.

While we generally expect our volume and gross margins to remain stable in a normalized environment, they can change rapidly due to many factors.

These factors include, but are not limited to, the price of refined products, geopolitical events that disrupt the global supply, demand, and prices of crude oil, 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, new or changing legislation around tobacco and e-cigarettes as well as fuel economy and vehicle emission standards, severe refinery mechanical failures for an extended period of time, cyber-attacks against the Company or our vendors, changing economic conditions that lower consumer purchasing power 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.

1 unchanged sentence

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 Q2 2023, crude oil prices continued to remain relatively stable ranging from $67 per barrel to $83 per barrel with the average price in Q2 2023 being $74 per barrel, compared to an average price of $109 per barrel in Q2 2022.

In Q3 2023, crude oil prices continued to be volatile and generally higher than the first six month of 2023, ranging from $70 per barrel to $94 per barrel with an average price in Q3 2023 of $82 per barrel, compared to a higher average price of $93 per barrel in Q3 2022.

Total fuel contribution (retail fuel margin plus product supply and wholesale ("PS&W") results including Renewable Identification Numbers ("RINs")) for Q3 2023 was 34.5 cents per gallon ("cpg"), compared to 37.6 cpg in Q3 2022.

Retail fuel margin dollars increased 4.3% in the current quarter while retail fuel volumes improved 2.3% when compared to Q2 of 2022.

Retail fuel margin dollars decreased 28.8% in the current quarter and retail fuel volumes were lower 2.5% when compared to Q3 of 2022, which benefited from a declining commodity price environment.

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 June 30, 2023, we had $1.3 billion of Senior Notes and a $392 million term loan outstanding.

As of September 30, 2023, we had $1.3 billion of Senior Notes and a $391 million term loan outstanding.

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

At June 30, 2023, we had additional available capacity under the committed $350 million cash flow revolving credit facility, with none drawn.

At September 30, 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.

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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.

As a result, operating results for the three and six months ended June 30, 2023, may not necessarily be indicative of the results that may be expected for the remainder of the year ending December 31, 2023.

As a result, operating results for the three and nine months ended September 30, 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

1 unchanged sentence

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

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 and six months ended June 30, 2023.

Results of Operations

Consolidated Results

For the three months ended June 30, 2023, the Company reported net income of $132.8 million, or $6.02 per diluted share, on revenue of $5.6 billion.

For the three months ended September 30, 2023, the Company reported net income of $167.7 million, or $7.69 per diluted share, on revenue of $5.8 billion.

Net income was $219.5 million for the same period in 2022, or $9.28 per diluted share, on $6.2 billion of revenue.

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

For the six months ended June 30, 2023, the Company reported net income of $239.1 million, or $10.82 per diluted share, on revenue of $10.7 billion.

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

For the nine months ended September 30, 2023, the Company reported net income of $406.8 million, or $18.47 per diluted share, on revenue of $16.5 billion.

Net income for the same period in 2022 was $555.2 million, or $22.76 per diluted share, on $18.1 billion of revenue.

The decrease in net income is primarily due to lower all-in fuel contributions, increases in store operating expenses, general and administrative expenses, interest expense and depreciation and amortization expense, partially offset by higher merchandise contribution and lower income tax expense.

Three Months Ended June 30, 2023 versus Three Months Ended June 30, 2022

The decrease in net income is primarily due to lower all-in fuel contribution, and increases in store operating expenses, general and administrative expenses, interest expense and depreciation and amortization expense, which were partially offset by higher merchandise contribution, lower payment fees, and lower income tax expense.

Three Months Ended September 30, 2023 versus Three Months Ended September 30, 2022

Revenues for Q3 2023 decreased $0.4 billion, or 6.4%, compared to the same quarter in 2022.

The decrease in revenues was due to 23.8% lower retail fuel sales prices, partially offset by increased fuel sales volumes of 2.3%, and an increase in merchandise sales prices and units.

The decrease in revenues was due to 7.1% lower retail fuel sales prices and 2.5% lower fuel sales volumes and was partially offset by an increase in merchandise sales prices and units.

Total cost of sales in Q3 2023 decreased $0.4 billion, or 6.4%, when compared to Q3 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.

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

Store and other operating expenses increased $11.1 million, or 4.4%, in Q3 2023 from Q3 2022, primarily due to higher employee related expenses, store maintenance costs, and inventory shrink costs, partially offset by lower payment fees.

Selling, general and administrative ("SG&A") expenses for Q3 2023 increased $7.6 million, or 14.5%, from Q3 2022.

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

Depreciation and amortization expense increased $3.1 million, or 5.7% from the same period of 2022, primarily due to higher depreciation on new larger store formats for Murphy USA stores.

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

Depreciation and amortization expense increased $3.1 million in Q3, or 5.7%, when compared to the same period of 2022, primarily due to higher cost for the new larger store formats for Murphy USA stores and raze-and-rebuild activity in the period.

The effective income tax rate was approximately 24.9% for Q3 of 2023 compared to approximately 24.5% in Q3 2022.

Six Months Ended June 30, 2023 versus Six Months Ended June 30, 2022

Year-to-date revenues for six months of 2023 decreased $1.2 billion, or 10.3%, compared to the same period in 2022.

The decrease in revenues was due to lower retail fuel sales prices and was partially offset by higher retail fuel sales volumes, increased merchandise sales, and higher RINs revenue.

Total cost of sales for six months 2023 decreased $1.1 billion, or 10.7%, compared to 2022.

Nine Months Ended September 30, 2023 versus Nine Months Ended September 30, 2022

Year-to-date revenues for nine months of 2023 decreased $1.6 billion, or 9.0%, compared to the same period in 2022.

The decrease in revenues was due to lower retail fuel sales and lower product supply and wholesale ("PS&W") revenues excluding RINs and was partially offset by higher retail fuel sales volumes, increased merchandise sales, and higher RINs revenue.

Year-to-date cost of sales decreased $1.5 billion, or 9.2%, compared to 2022.

In the current-year period, the lower costs were primarily due to lower wholesale fuel prices, partially offset by higher sales volumes, and higher merchandise costs.

Store and other operating expenses increased $20.1 million, or 4.2%, in the first six months of 2023, primarily due to higher employee related costs, increased store maintenance expenses and inventory shrink costs, partially offset by lower payment fees.

SG&A expenses for the first six months of 2023 increased $20.0 million, or 20.3%, compared to the first six months of 2022.

The increase in SG&A costs is primarily due to an increase in employee related costs, professional and technology services for business improvement initiatives, and employee incentive expenses.

Depreciation and amortization expense increased $4.1 million, or 3.7%, year-to-date from the same period of 2022 primarily due to higher depreciation related to the newer larger store formats of Murphy USA stores.

The effective income tax rate was approximately 24.0% for the six months ended June 30, 2023 versus 24.0% for the same period of 2022.

Store and other operating expenses increased $31.2 million, or 4.3%, in the first nine months of 2023, primarily due to higher employee related costs, increased store maintenance expenses and inventory shrink costs, partially offset by lower payment fees.

SG&A expenses for the first nine months of 2023 increased $27.6 million, or 18.3%, compared to the first nine months of 2022.

The increase in SG&A costs is primarily due to an increase in employee and incentive costs and professional and technology services for business improvement initiatives.

Depreciation and amortization expense increased $7.2 million, or 4.4%, year-to-date from the same period of 2022 primarily due to higher depreciation on the newer larger store formats of Murphy USA stores.

The effective income tax rate was approximately 24.4% for the nine months ended September 30, 2023 versus 24.2% for the same period of 2022.

Segment Results

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Millions of dollars) 2023 2022 2023 2022

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Net Income $ 167.7 $ 219.5 $ 406.8 $ 555.2

Three Months Ended June 30, 2023 versus Three Months Ended June 30, 2022

Marketing segment net income for the three months ended June 30, 2023 was lower compared to the same period in 2022 primarily due to:

Three Months Ended September 30, 2023 versus Three Months Ended September 30, 2022

Marketing segment net income for the three months ended September 30, 2023 was lower compared to the same period in 2022 primarily due to:

• Lower all-in fuel contribution

• Lower fuel sales volumes

• Higher store and other operating expenses

• Higher SG&A expenses

• Higher store operating expenses

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

• Higher fuel volume

• Higher merchandise contribution

• Lower payment fees

Six Months Ended June 30, 2023 versus Six Months Ended June 30, 2022

Marketing segment net income for the six months ended June 30, 2023 was lower compared to the same six-month period in 2022 primarily due to:

Nine Months Ended September 30, 2023 versus Nine Months Ended September 30, 2022

Marketing segment net income for the nine months ended September 30, 2023 was lower compared to the same nine-month period in 2022 primarily due to:

• Lower all-in fuel contribution

• Higher store operating expenses

• Higher store and other operating expenses

• Higher SG&A expenses

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

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

• Higher merchandise contribution

• Higher fuel volume

• Higher fuel sales volumes

• Lower payment fees

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

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

Marketing Segment 2023 2022 2023 2022

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Interest expense (2.2) (2.2) (6.7) (6.7)

Other nonoperating income (expense) 0.1 — 0.1 —

Total other income (expense) $ (2.1) $ (2.2) $ (6.6) $ (6.7)

(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 2023 2022

Income (loss) before income taxes $ 249.5 $ 313.6 $ 615.0 $ 798.0

1 unchanged sentence

Net income (loss) from operations $ 187.2 $ 236.8 $ 464.8 $ 605.0

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

June 30, Six Months Ended

Marketing Segment 2023 2022 2023 2022

Total tobacco sales revenue same store sales 1,2

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

Key Operating Metrics 2023 2022 2023 2022

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Total fuel contribution ($ Millions) $ 419.0 $ 468.1 $ 1,114.7 $ 1,260.7

Three Months Ended

September 30, Nine Months Ended

September 30,

Key Operating Metrics 2023 2022 2023 2022

Retail fuel volume - chain (Million gal) 1,214.9 1,245.6 3,595.4 3,545.2

10 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Millions of dollars) 2023 2022 2023 2022

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

Key Operating Metrics 2023 2022 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 June 30, 2023 versus Three Months Ended June 30, 2022

Three Months Ended September 30, 2023 versus Three Months Ended September 30, 2022

Net income in the Marketing segment for Q3 2023 decreased $49.6 million, to $187.2 million when compared to the Q3 2022 period.

The decrease was due to lower total all-in fuel contribution and increases in SG&A expenses and store operating expenses, partially offset by higher merchandise contribution and lower income tax expense.

The decrease was primarily due to lower total all-in fuel contribution and increases in store operating expenses and SG&A expenses partially offset by higher merchandise contribution and lower income tax expense.

Total revenues for the Marketing segment decreased $0.4 billion to $5.8 billion in Q3 2023 compared to $6.2 billion in Q3 2022.

The reduction in revenues was due to lower retail fuel prices that were partially offset by increases in the number of gallons sold and higher merchandise sales.

The reduction in revenues was due to lower fuel prices and slightly lower retail fuel volumes sold, partially offset by higher merchandise sales.

Revenues included excise taxes collected and remitted to government authorities of $582.1 million in Q3 2023 and $569.7 million in Q3 2022.

Retail fuel margin dollars increased 4.3% compared to the prior-year quarter on higher total fuel volumes of 2.3%, resulting in a retail fuel margin of 27.0 cpg for Q2 2023 compared to 26.5 cpg in Q2 2022.

Retail fuel margin dollars decreased 28.8% as a result of a retail fuel margin of 28.7 cpg for Q3 2023 compared to 39.3 cpg in Q3 2022, which had benefited from a declining commodity price environment.

In addition, Q3 2023 retail fuel volumes decreased 2.5%.

Total fuel sales volumes on a SSS basis decreased 4.7% to 241.7 thousand gallons per store in the 2023 period when compared to Q3 2022.

Total PS&W margin dollars, including RINs, decreased by $71.0 million from Q2 2022 results.

The quarter-over-quarter decrease reflects lower income mainly related to timing and inventory pricing adjustments.

The Q2 2023 quarter includes the sale of 56.6 million RINs at an average selling price of $1.49 per RIN while Q2 2022 had sales of 55.0 million RINs at an average price of $1.44 per RIN, resulting in an increase in RINs revenue of $4.8 million.

Total merchandise sales were $1.0 billion in both Q2 2023 and 2022.

Total PS&W margin dollars, including RINs, improved by $91.8 million from Q3 2022 results.

The quarter-over-quarter increase reflects a higher contribution from inventory pricing adjustments partially offset by weaker spot-to-rack spreads.

The Q3 2023 quarter included the sale of 58.0 million RINs at an average selling price of $1.41 per RIN while Q3 2022 had sales of 55.6 million RINs at an average price of $1.58 per RIN, resulting in a decrease in RINs revenue of $5.8 million.

Total merchandise sales were $1.1 billion in Q3 2023 and $1.0 billion in Q3 2022.

Total merchandise contribution in Q3 2023 improved 3.0% compared to Q3 2022 due to higher unit sales volumes and retail prices.

Total SSS merchandise contribution dollars grew 2.8%, which included an increase of 2.6% in tobacco products and a 2.9% increase in non-tobacco products.

Total SSS merchandise contribution dollars grew 1.2%, which included an increase of 3.1% in tobacco products and a 0.3% decrease in non-tobacco products.

Store and other operating expenses increased $11.0 million in Q3 2023 compared to Q3 2022, primarily due to employee related expenses, store maintenance costs, and inventory shrink costs partially offset by lower payment fees.

On an APSM basis, expenses applicable to store OPEX excluding payment fees and rent were higher by 5.8%, primarily due to increased employee related expenses, maintenance costs, and inventory shrink costs.

SG&A expenses increased $7.2 million in Q2 2023 compared to Q2 2022 due primarily to higher salaries and related benefits and professional and technology fees from business improvement initiatives, partially offset by lower employee incentive expenses.

Depreciation and amortization expense increased $2.4 million, or 4.7%, in Q2 2023 compared to Q2 2022 due to new larger store formats for Murphy USA stores.

Six Months Ended June 30, 2023 versus Six Months Ended June 30, 2022

Net income in the Marketing segment for the six months ended June 30, 2023 decreased $90.6 million compared to the six months ended June 30, 2022 period, due to lower all-in fuel contributions, increased store operating expenses, higher selling general and administrative costs and were partially offset by higher merchandise contributions and lower income tax expense.

Total revenues for the Marketing segment were approximately $10.7 billion for the six-month period ended June 30, 2023 compared to $11.9 billion for the same period ended June 30, 2022.

SG&A expenses increased $7.6 million in Q3 2023 compared to Q3 2022 due primarily to higher salaries and related benefits, professional and technology fees from business improvement initiatives, and employee incentive expenses.

Depreciation and amortization expense increased $2.9 million, or 5.8%, in Q3 2023 compared to Q3 2022 due to new larger store formats for Murphy USA stores and raze-and-rebuild activity in the quarter.

Nine Months Ended September 30, 2023 versus Nine Months Ended September 30, 2022

Net income in the Marketing segment for the nine months ended September 30, 2023 decreased $140.2 million compared to the nine months ended September 30, 2022 period, due to lower all-in fuel contributions, increased store operating expenses, higher selling general and administrative costs which were partially offset by higher merchandise contributions and lower income tax expense.

Total revenues for the Marketing segment were approximately $16.5 billion for the nine-month period ended September 30, 2023 compared to $18.1 billion for the same period ended September 30, 2022.

The decrease in revenues were due to a 13.8% decrease in retail fuel sales prices, decreased total PS&W revenues, including RINs, and was partially offset by a 1.4% increase in number of gallons sold and a 5.4% increase in merchandise sales.

Revenues included excise taxes collected and remitted to government authorities of $1.1 billion in the six months ended June 30, 2023 and 2022.

Retail fuel margin dollars increased 4.4% in the six-month period ended June 30, 2023 compared to the prior- year six months on fuel volumes which increased 3.5% combined with a relatively flat margin rate of 25.2 cpg when compared to 25.0 cpg in the same period of 2022.

Revenues included excise taxes collected and remitted to government authorities of $1.7 billion in the nine months ended September 30, 2023 and $1.6 billion in 2022.

Retail fuel margin dollars decreased 10.9% in the nine-month period ended September 30, 2023 compared to the prior-year nine months on a margin rate of 26.4 cpg which was 12.0% lower than the margin rate of 30.0 cpg in the same period of 2022, this decrease was partially offset by total fuel volumes which increased 1.4%.

Total fuel sales volumes on a SSS basis decreased 1.8% to 237.7 thousand gallons per store in 2023 compared to 2022.

Total PS&W margin dollars, including RINs, generated income of $96.3 million in the 2023 six-month period compared to income of $218.3 million in the first six months of 2022, a decrease of $122.0 million.

Total PS&W margin dollars, including RINs, generated income of $166.7 million in the 2023 nine-month period compared to income of $196.9 million in the first nine months of 2022, a decrease of $30.2 million.

The decrease was due to timing and inventory pricing adjustments, partially offset by higher RINs revenue.

The six months ended June 30, 2023 includes the sales of 128.6 million RINs at an average selling price of $1.55 per RIN while the prior-year period had sales of 123.5 million RINs at an average price of $1.26 per RIN, resulting in an increase in RIN revenue of $43.4 million.

Total merchandise sales increased 6.8% to $2.0 billion in the six months ended June 30, 2023 compared to $1.9 billion in the first six months of 2022 due to higher sales volumes and prices across the chain in most categories.

The nine months ended September 30, 2023 includes the sales of 186.6 million RINs at an average selling price of $1.51 per RIN while the prior-year period had sales of 179.1 million RINs at an average price of $1.36 per RIN, resulting in an increase in RIN revenue of $37.6 million.

Total merchandise sales increased 5.4% to $3.1 billion in the nine months ended September 30, 2023 compared to $2.9 billion in the first nine months of 2022 due to higher sales volumes and prices across the chain in most categories.

Year-to-date total merchandise contribution in 2023 increased 4.8% compared to the same period of

Total SSS merchandise contribution dollars grew 3.8% with an increase of 3.4% in tobacco products and 4.2% in non-tobacco products.

Total SSS merchandise margin grew 2.9% with an increase of 3.3% in tobacco products and 2.6% in non-tobacco products.

Store and other operating expenses increased $31.1 million in the current year compared to the same period of 2022, primarily due to employee related expenses, maintenance expenses and inventory shrink costs, partially offset by lower payment fees.

1 unchanged sentence

SG&A expenses increased $27.6 million in 2023 compared to 2022 due primarily to the increased salaries and benefits, professional and technology services for business improvement initiatives, and employee incentive expenses.

Depreciation and amortization expense increased $3.1 million, or 3.0%, in the first six months of 2023 due to new larger store formats for Murphy USA stores.

Depreciation and amortization expense increased $6.0 million, or 3.9%, in the first nine months of 2023 due to new larger store formats for Murphy USA stores combine with raze-and-rebuild activities.

Same store sales information compared to APSM metrics

Variance from prior year Variance from prior year

Three months ended Six months ended

June 30, 2023 June 30, 2023

Fuel gallons per month (1.8) % (0.6) % (0.3) % 0.8 %

Three months ended Nine months ended

September 30, 2023 September 30, 2023

Retail fuel volume per month (4.7) % (4.2) % (1.8) % (0.9) %

Merchandise sales 1.0 % 1.4 % 3.2 % 3.3 %

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Corporate and Other Assets

Three Months Ended June 30, 2023 versus Three Months Ended June 30, 2022

Three Months Ended September 30, 2023 versus Three Months Ended September 30, 2022

After-tax results for Corporate and other assets for Q3 2023 were a loss of $19.5 million compared to a loss of $17.3 million in Q3 2022.

The increase in loss was primarily due to higher interest expense partially offset by higher nonoperating income and investment income.

Six Months Ended June 30, 2023 versus Six Months Ended June 30, 2022

After-tax results for Corporate and other assets for the six months ended June 30, 2023 were a loss of $38.5 million compared to a loss of $32.5 million in the same period of 2022.

The higher costs were primarily due to higher interest expense which was partially offset by higher interest income and nonoperating income in 2023 compared to 2022.

The increase in loss was primarily due to higher interest expense and other nonoperating loss and was partially offset by higher investment income.

Nine Months Ended September 30, 2023 versus Nine Months Ended September 30, 2022

After-tax results for Corporate and other assets for the nine months ended September 30, 2023 were a loss of $58.0 million compared to a loss of $49.8 million in the same period of 2022.

The increase in loss was primarily due to higher interest and depreciation expense, a lower gain on sale of corporate assets, and was partially offset by higher investment and nonoperating income in 2023 compared to 2022.

Non-GAAP Measures

The following table sets forth the Company’s Adjusted EBITDA for the three and six months ended June 30, 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).

The following table sets forth the Company’s Adjusted EBITDA for the three and nine months ended September 30, 2023 and 2022.

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).

EBITDA and Adjusted EBITDA are not measures that are prepared in accordance with U.S.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Millions of dollars) 2023 2022 2023 2022

11 unchanged sentences

Significant Sources of Capital

As of June 30, 2023, we had $92.9 million of cash and cash equivalents and $20.4 million of marketable securities.

As of September 30, 2023, we had $124.8 million of cash and cash equivalents and $15.9 million of marketable securities.

Our cash management policy provides that cash balances in excess of a certain threshold may be 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 June 30, 2023, which can be utilized for working capital and other general corporate purposes, including supporting our operating model as described herein.

We have a committed cash flow revolving credit facility (the "revolving facility”) of $350 million, which was undrawn at September 30, 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 $320.9 million for the six months ended June 30, 2023, and $516.5 million for the same period of 2022, a decrease of $195.6 million.

Net cash provided by operating activities was $510.9 million for the nine months ended September 30, 2023, and $771.5 million for the same period of 2022, a decrease of $260.6 million.

The decrease for the current year is primarily related to the year-over-year changes in amounts from non-cash working capital of $116.0 million and the decrease in net income of $148.4 million compared to the same period in 2022.

For the current year, operating cash required by changes in non-cash operating working capital of $61.6 million was due to a decrease in accounts payable and accrued liabilities of $52.3 million which was related to the timing of payments and an increase in inventory of $30.7 million due to higher merchandise prices and volumes.

This was partially offset by a decrease in prepaid expenses of $11.3 million due primarily to the timing of payments for income taxes, software licenses, and maintenance agreements, and a decrease in accounts receivable of $10.1 million due to the timing of receipts combined with lower fuel prices.

For the current year, operating cash required by changes in non-cash operating working capital of $97.2 million was due to a decrease

in accounts payable and accrued liabilities of $49.7 million which was related to the timing of payments, an increase in accounts receivable of $63.8 million due to the timing of receipts, and an increase in inventory of $16.3 million due to higher merchandise prices and volumes.

The decline in net cash provided by operating activities was also partially offset by a decrease in prepaid expenses of $21.0 million due primarily to the timing of for software licenses and maintenance agreements, and an increase of $11.6 million in income taxes payable.

Investing Activities

For the six months ended June 30, 2023, cash required by investing activities was $142.3 million compared to $137.4 million in 2022.

The $4.9 million increase in investing cash requirements in 2023 compared to the prior year was primarily due to a decrease in the amount of proceeds from sales of corporate assets of $6.3 million, and was partially offset by net cash provided of $2.1 million from maturities of marketable securities net of new investments in marketable securities of which there were none in 2022.

For the nine months ended September 30, 2023, cash required by investing activities was $217.0 million compared to $215.2 million in 2022.

The $1.8 million increase in investing cash requirements in 2023 compared to the prior year was primarily due to an increase of $1.5 million in capital expenditures due to the timing of projects and a decrease in the amount of proceeds from sales of corporate assets of $6.2 million, partially offset by net cash provided of $6.7 million from maturities of marketable securities net of new investments in marketable securities of which there were none in 2022.

Financing Activities

Financing activities in the six months ended June 30, 2023 required cash of $146.2 million compared to cash required of $395.1 million in the six months ended June 30, 2022, a decrease of $248.9 million.

The first six months of 2023 included payments of $107.9 million for the repurchase of common shares, which was a decrease of $247.5 million from the repurchases of $355.4 million in the 2022 period.

Amounts related to share-based compensation required $3.2 million less in cash during 2023 than in 2022.

Dividend payments increased $1.7 million in 2023 versus amounts paid in the first six months of 2022.

During the six months ended June 30, 2023, the Company paid cash dividend payments of $0.75 per common share, for a total of $16.3 million, compared to the period ended June 30, 2022, in which dividends of $0.60 per share were paid for total cash dividend payments of $14.6 million.

Financing activities in the nine months ended September 30, 2023 required cash of $229.6 million compared to cash of $620.0 million in the nine months ended September 30, 2022, a decrease of $390.4 million.

The first nine months of 2023 included payments of $172.7 million for the repurchase of common shares, which was a decrease of $394.2 million compared to repurchases of $566.9 million in the 2022 period.

Amounts related to share-based compensation required $1.0 million more in cash during 2023 than in 2022.

Dividend payments increased $2.6 million in 2023 compared to amounts paid in the first nine months of 2022.

During 2023 there was $8.0 million borrowed and $19.6 million in repayments of debt versus $11.4 million in debt repaid in 2022.

During the nine months ended September 30, 2023, the Company paid cash dividend payments of $1.14 per common share, for a total of $24.7 million, compared to the period ended September 30, 2022, in which dividends of $0.92 per share were paid for total cash dividend payments of $22.1 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 26, 2023, the Board of Directors declared a quarterly cash dividend of $0.41 per common share, or $1.64 per share on an annualized basis.

The dividend is payable on December 1, 2023, to shareholders of record as of November 6, 2023.

Share Repurchase Program

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The authorization value excludes any excise tax that may be incurred.

During the six months ended June 30, 2023 a total of 382,992 shares were repurchased for $108.8 million, including excise tax under the 2021 program.

As of June 30, 2023, we had approximately $105.7 million remaining under the 2021 authorization.

During the nine months ended September 30, 2023 a total of 584,086 shares were repurchased for $174.1 million, including excise tax under the 2021 program.

As of September 30, 2023, we had approximately $41.0 million remaining under the 2021 authorization.

On May 2, 2023, we announced that our Board of Directors approved a new share repurchase authorization of up to $1.5 billion to begin upon completion of the current 2021 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.

The entirety of this authorization is available as of June 30, 2023.

Our long-term debt at June 30, 2023 and December 31, 2022 was as set forth below:

(Millions of dollars) June 30,

The entirety of this authorization is available as of September 30, 2023.

Our long-term debt at September 30, 2023 and December 31, 2022 was as set forth below:

(Millions of dollars) September 30,

2023 December 31,

5.625% senior notes due 2027 (net of unamortized discount of $1.4 at June 30, 2023 and $1.6 at December 31, 2022) $ 298.6 $ 298.4

4.75% senior notes due 2029 (net of unamortized discount of $3.9 at June 30, 2023 and $4.2 at December 31, 2022) 496.1 495.8

3.75% senior notes due 2031 (net of unamortized discount of $4.7 at June 30, 2023 and $5.1 at December 31, 2022) 495.3 494.9

Term loan due 2028 (effective interest rate of 6.94% at June 30, 2023 and 5.95% at December 31, 2022 and net of unamortized discount of $0.7 at June 30, 2023 and December 31, 2022, respectively) 391.3 393.3

5.625% senior notes due 2027 (net of unamortized discount of $1.3 at September 30, 2023 and $1.6 at December 31, 2022) $ 298.7 $ 298.4

4.75% senior notes due 2029 (net of unamortized discount of $3.7 at September 30, 2023 and $4.2 at December 31, 2022) 496.3 495.8

3.75% senior notes due 2031 (net of unamortized discount of $4.6 at September 30, 2023 and $5.1 at December 31, 2022) 495.4 494.9

Term loan due 2028 (effective interest rate of 7.22% at September 30, 2023 and 5.95% at December 31, 2022 and net of unamortized discount of $0.6 at September 30, 2023 and $0.7 at December 31, 2022) 390.4 393.3

Capitalized lease obligations, autos and equipment, due through 2026 2.9 2.3

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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.

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

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.

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

The outstanding balance of the term loan was $392 million at June 30, 2023 and $394 million at December 31, 2022.

The outstanding balance of the term loan was $391 million at September 30, 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 June 30, 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).

As of September 30, 2023, we had no outstanding borrowings under the Revolving Facility and had $6.2 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:

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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.

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 June 30, 2023, our total leverage ratio was 1.66 to 1.0 which meant our ability at that date to make restricted payments was not limited.

At September 30, 2023, our total leverage ratio was 1.75 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 $116.1 million or 4.50% of consolidated net tangible assets over the life of the credit agreement.

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

MOUSA is our primary operating subsidiary and generated the vast majority of our revenues for the three and six months ended June 30, 2023, and accounted for the vast majority of our total assets as of June 30, 2023.

MOUSA is our primary operating subsidiary and generated the vast majority of our revenues for the three and nine months ended September 30, 2023, and accounted for the vast majority of our total assets as of September 30, 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 six month periods ended June 30, 2023 and 2022:

The following table outlines our capital spending and investments by segment for the three and nine month periods ended September 30, 2023 and 2022:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Millions of dollars) 2023 2022 2023 2022

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

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

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 successfully expand our food and beverage offerings;

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis