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Item 7. Management’s Discussion and Analysis

2024-02-16 compared with 2023-02-15 · 119 added, 118 removed, 331 unchanged (42% of the section changed)

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Discussions of 2021 items and the year-to-year comparisons between 2022 and 2021 are not included in this Form 10-K and can be found in the Form 10-K for the year ended December 31, 2022, filed on February 15, 2023.

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

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

and its subsidiaries on a consolidated basis.

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Executive Overview

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

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 6, "Business Acquisition" in the accompanying audited consolidated financial statements.

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

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

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

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

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

Our standalone stores operate under the Murphy Express brand and market

gasoline and other products.

The Company owns and operates a chain of retail stores that market gasoline and other merchandise 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 December 31, 2022, we had a total of 1,712 Company stores in 27 states, of which 1,151 were Murphy USA, 404 were Murphy Express and 157 were QuickChek.

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

At December 31, 2023, we had a total of 1,733 Company stores in 27 states, of which 1,577 were Murphy branded and 156 were QuickChek brand.

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

Basis of Presentation

Murphy USA was incorporated in March 2013, and until the separation from Murphy Oil Corporation was completed on August 30, 2013, it had not commenced operations and had no material assets, liabilities or commitments.

The financial information presented in this Management's Discussion and Analysis is derived from the consolidated financial statements of Murphy USA Inc.

and its subsidiaries for all periods presented.

Our QuickChek subsidiaries use a weekly retail calendar where each quarter typically has 13 weeks.

For 2023, the QuickChek results cover the period December 31, 2022 to December 29, 2023.

For 2022, the QuickChek results cover the period January 1, 2022 to December 30, 2022.

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

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

Trends Affecting Our Business

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

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

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

While we generally expect our volumes 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, overall demand, and prices of crude oil, interruptions in our fuel and merchandise supply caused by severe weather or pandemics, the effects from pandemics such as travel restrictions and stay-at-home orders 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 fuel products, gasoline and diesel, is greatly impacted by the cost of crude oil in the United States.

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

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

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

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

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 serve as a hedge to draw new customers which can offset the potential loss of discretionary volumes.

Crude oil prices in 2023 continued to be volatile during the year with prices ranging from $67 per barrel to $94 per barrel, with an average price of $78 per barrel, compared to prices in 2022 that ranged from $71 per barrel to $124 per barrel with an average of $95 per barrel.

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

Total fuel contribution (retail fuel margin plus product supply and wholesale ("PS&W") results which include Renewable Identification Numbers ("RINs")) was 31.4 cpg in 2023, compared to 34.3 cpg in 2022.

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

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

for example, activities such as blending bulk fuel with renewable fuels (ethanol and biodiesel) to capture and subsequently sell RINs.

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

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

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

RINs in excess of the set quota can then be sold in a market for RINs at then-prevailing prices.

The market price for RINs fluctuates based on a variety of factors, including but not limited to governmental and regulatory action.

There are other market related factors that can impact the net benefit we receive for RINs on a company-wide basis either favorably or unfavorably.

The Renewable Fuel Standard ("RFS") program continues to be unpredictable and prices received for ethanol RINs averaged $1.42 per RIN for the year 2022 compared to $1.31 in 2021.

Our business model does not depend on our ability to generate revenues from RINs.

On June 21, 2023, EPA announced a final rule to establish biofuel volume requirements and associated percentage standards for cellulosic biofuel, biomass-based diesel, advanced biofuel, and total renewable fuel for 2023–2025.

The rule includes steady growth of biofuels for use in the United States' fuel supply for 2023, 2024, and 2025, however the projected growth of Renewable Diesel production could outstrip the statutory mandated biofuel blending requirements.

As a result, the amount of renewable credits available could outpace the demand, resulting in lower prices.

Litigation and potentially changing political regimes could impact the RFS program as well as the successful completion or abandonment of planned renewable fuel production expansion.

There are other market related factors that can offset the revenue received for RINs on a company-wide basis either favorably or unfavorably.

The Renewable Fuel Standard ("RFS") program continues to be unpredictable and prices received by us for ethanol RINs averaged $1.35 per RIN for the year 2023 compared to $1.42 per RIN in 2022 but exited the year around $0.80 per RIN.

Our business model does not depend on our ability to generate revenues from RINs, and we have historically observed that changes in revenue are typically coupled with offsetting changes in cost of goods that minimizes the majority of any revenue movement.

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

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

There can be no assurances, however, that we will generate sufficient cash from operations or be able to draw on the credit facilities, obtain commitments for our incremental facility and/or

obtain and draw upon other credit facilities.

There can be no assurances, however, that we will generate sufficient cash from operations or be able to draw on the credit facilities, obtain commitments for our incremental facility, or obtain

and draw upon other credit facilities.

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

The Company currently anticipates total capital expenditures (including land for future development) for the full year 2024 to range from approximately $400 million to $450 million depending on how many new stores are completed.

We intend to fund our capital program in 2023 primarily using operating cash flow, but will supplement funding where necessary using borrowings under available credit facilities.

We believe that our business will continue to grow in the future as we expand the food and beverage capabilities within our network.

We have an active real estate development team that maintains a pipeline of desirable future store locations for development.

We intend to fund our capital program in 2024 primarily using operating cash flow but will supplement funding where necessary through borrowings under our revolving credit facility.

We believe that our business will continue to grow in the future as we expand additional capabilities such as food and beverage within our network.

We maintain a pipeline of desirable future store locations for development.

The pace of this growth is continually monitored by our management, and these plans can be altered based on operating cash flows generated and the availability of debt facilities.

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

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

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

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

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.

Business Segments

Our business is organized into one operating segment which is Marketing.

The Company has one operating segment which is Marketing.

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

For operating segment information, see Note 22 “Business Segments” in the accompanying audited consolidated financial statements for the three-year period ended December 31, 2023.

Our QuickChek subsidiaries use a weekly retail calendar where each quarter has 13 weeks.

For 2023, the QuickChek results cover the period December 31, 2022 to December 29, 2023 and for 2022, the QuickChek results cover the period January 1, 2022 to December 30, 2022 and for 2021 covered the period January 29, 2021 (date of acquisition) to December 31, 2021.

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

Results of Operations

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Net income was $672.9 million for 2022, or $28.10 per diluted share, on revenue of $23.4 billion.

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

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

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

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Net income $ 556.8 $ 672.9 $ 396.9

Net income for 2022 increased compared to 2021, primarily due to:

• Higher all-in fuel contribution;

• Higher retail fuel sales volumes;

• Higher merchandise contribution;

• Lower acquisition and integration related costs

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

• Higher store and other operating expenses;

Net income for 2023 decreased compared to 2022, primarily due to:

• Lower all-in fuel contribution;

• Higher store operating expenses, excluding payment fees;

• Higher interest expense;

• Higher depreciation and amortization expense;

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

• Higher income tax expense

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

• Higher merchandise contribution;

• Lower income tax expense;

• Lower payment fees

Financial Summary of 2023 Compared to 2022

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

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

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

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

Revenues for the year ended December 31, 2023 decreased $1.9 billion, or 8.2%, compared to 2022.

The decrease was due to lower average retail fuel prices which decreased 45 cpg, or 12.3%, lower PS&W revenues, which were partially offset by a 1.1% increase in retail fuel volumes sold and a 4.8% increase in merchandise sales revenues.

Cost of sales decreased $1.8 billion, or 8.7%, compared to 2022, due to the lower average cost of fuel, which decreased 11.1%, and was partially offset by the 1.1% increase in retail fuel volumes sold and a 4.8% increase in merchandise cost of goods sold.

Store and other operating expenses increased $38.3 million, or 3.9%, in 2023 due primarily to higher employee related costs, increased store maintenance expenses, higher inventory shrink, and were partially offset by lower payment fees.

On an average per store month ("APSM") basis, store operating expenses excluding credit card fees and rent increased 4.7% in 2023 when compared to 2022.

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

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

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

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

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

Depreciation and amortization expense in 2023 increased $8.3 million due primarily to the increased number of Murphy branded stores with larger formats.

Selling, general and administrative expenses for 2023 were higher by $8.0 million primarily due to increased employee related and incentive expenses, and expenses associated with professional and technology services for business improvement initiatives, which were partially offset by lower charitable contributions.

Interest expense in 2023 increased by $13.2 million compared to 2022 due to an increase in variable interest rates on the term loan during the year.

The effective income tax expense rate in 2023 was 24.2% compared to 23.9% for 2022.

Segment Results

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

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

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

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

Income before income taxes in the Marketing segment for 2023 decreased $139.1 million, or 14.3%, from 2022 due primarily to lower all-in fuel contribution, higher store and other operating costs, increased selling, general and administrative costs, and depreciation, partially offset by higher merchandise contribution.

The tables below show the results for the Marketing segment for the three years ended December 31, 2023, along with certain key metrics for the segment.

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Total operating revenues 21,528.9 23,445.4 17,359.9

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

Marketing Segment 2023 2022 2021

Operating expenses

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Interest expense (8.9) (9.0) (8.1)

Other nonoperating income 0.2 — —

Total other income (expense) (8.7) (9.0) (8.1)

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

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

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

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

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

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237.8 240.9 225.8

Total fuel contribution (including retail, PS&W

and RINs) (cpg) 34.3 26.3 25.2

Total fuel contribution (cpg) 31.4 34.3 26.3

Retail fuel margin (cpg) 27.6 29.6 21.9

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Financial Summary of 2023 Compared to 2022

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

The Marketing segment had total revenues of $21.5 billion in 2023 compared to $23.4 billion in 2022, a decrease of $1.9 billion, due primarily to a lower average retail fuel sales price, partially offset by increased retail fuel volumes sold and higher merchandise sales.

Revenue amounts included excise taxes collected and remitted to government authorities of $2.3 billion in 2023 and $2.2 billion in 2022.

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

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

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

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

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

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

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

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

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

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

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

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

Total fuel contribution for the year ended December 31, 2023, was $1.5 billion, a decrease of $0.1 billion or 7.5%, compared to 2022.

This reduction was due to lower retail fuel contribution, combined with lower contribution from PS&W margin, and was partially offset by slightly higher fuel volumes sold for the year.

Retail fuel margin on a cpg basis decreased 6.8% in 2023 to 27.6 cpg, compared to 29.6 cpg in the prior year.

Total retail fuel volumes increased 1.1%, while fuel sales on an SSS basis decreased 1.8%.

Total product supply and wholesale contribution dollars decreased $41.3 million in the current year due to lower unbranded margins combined with timing and price-related impacts.

During 2023, other operating revenue included the sale of 242.7 million RINs compared to the sale of 215.6 million in 2022.

Merchandise sales were up 4.8% in 2023 to $4.1 billion due to higher sales volumes and prices.

Total merchandise contribution in 2023 increased $36.3 million, or 4.7%, to $803.4 million compared to $767.1 million in 2022.

Merchandise unit margins were flat at 19.7% in both 2023 and 2022.

On an SSS basis, total merchandise sales were up 2.7%, due to a 1.4% increase in non-tobacco sales and an increase of 3.5% in tobacco products.

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

Total margins on a SSS basis for 2023 improved 3.0%, tobacco margins were higher by 4.3%, and non-tobacco margins increased 1.9%, mainly from increased beverage and snack categories.

Store and other operating expenses increased $38.1 million in 2023 compared to 2022 levels, an increase of 3.9%.

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

This increase in total dollars was due primarily to employee related expenses, maintenance expenses, inventory shrink, and licenses and permits, and was partially offset by lower payment fees.

Excluding credit card fees and rent on an APSM basis, store and other operating expenses at the retail level were 4.7% higher in 2023 compared to 2022 levels.

Depreciation and amortization increased $7.1 million in 2023, an increase of 3.5%.

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

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

This increase was due primarily to more stores with larger formats operating in the 2023 period.

Selling, general and administrative expenses ("SG&A") increased $8.0 million in 2023 compared to 2022, primarily due to higher employee related and incentive expenses and expenses associated with professional and technology fees from business improvement initiatives, which were partially offset by lower charitable contributions in the current year.

Corporate and Other Assets

Loss from continuing operations for Corporate and other assets in 2023 was $74.1 million, compared to a loss of $68.0 million in 2022.

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

The $6.1 million increase from the previous year was mainly due to $13.7 million more in interest expense, $2.8 million less in gain on the sale of assets, and was partially offset by $4.2 million less in income tax benefits, a $3.9 million increase in investment income and a $2.2 million decrease in other nonoperating expenses.

Non-GAAP Measures

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We believe that the presentation of Adjusted EBITDA provides useful information to investors because it allows understanding of a key measure that we evaluate internally when making operating and strategic decisions, preparing our annual plan and evaluating our overall performance.

However, non-GAAP measures are not a

substitute for GAAP disclosures, and EBITDA and Adjusted EBITDA may be prepared differently by us than by other companies using similarly titled non-GAAP measures.

However, non-GAAP measures are not a substitute for GAAP disclosures, and EBITDA and Adjusted EBITDA may be prepared differently by us than by other companies using similarly titled non-GAAP measures.

The reconciliation of net income to EBITDA and Adjusted EBITDA is as follows:

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Income tax expense (benefit) 177.6 210.9 125.0

Interest expense, net of interest income 82.3 82.3 50.2

Interest expense, net of investment income 91.6 82.3 82.3

Depreciation and amortization 228.7 220.4 212.6

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(Gain) loss on sale of assets 0.8 (2.1) (1.5)

Acquisition related costs 1.5 10.4 1.7

Acquisition and integration related costs — 1.5 10.4

Other nonoperating (income) expense — 2.3 (0.2)

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Operating Activities

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

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

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

Net cash provided by operating activities was $784.0 million for the year ended December 31, 2023 and was $994.7 million in 2022, a decrease of $210.7 million, or 21.2% The decrease was mainly due to a decrease in net income of $116.1 million in 2023, a decrease in the amount of cash provided from changes in noncash working capital in 2023 of $86.9 million, and lower deferred and noncurrent tax changes of $29.5 million, partially offset by increased depreciation of $8.3 million and an increase of $10.6 million in cash provided by other operating activities.

For the current year, operating cash required by changes in non-cash operating working capital of $42.1 million was due to an increase of $56.3 million in accounts receivable due to the timing of receipts, an increase of $22.1 million in inventories due to higher prices and volumes, a decrease of $12.0 million in accounts payable and accrued liabilities which was due to the timing of payments, and was partially offset by a decrease of $25.2 million in prepaid expenses and other current assets, of which $22.2 million was related to prepaid income taxes as well as an increase of $23.1 million in income taxes payable, due to the timing of payments.

See also Note 16 "Other Financial Information" in the accompanying audited consolidated financial statements for the three-year period ended December 31, 2023.

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For the year ended December 31, 2023, cash required by investing activities was $323.6 million compared to cash required by investing activities of $319.3 million in 2022.

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

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

The increase in cash required by investing activities of $4.3 million compared to the previous year was primarily due to the increase in capital expenditures of $30.3 million, lower proceeds from the sale of assets of $6.4 million, and cash required for other investing activities which were higher by $1.0 million.

The increase in cash required by investing activities was partially offset by the change in redemptions of marketable securities net of new investments of $33.4 million.

Financing Activities

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

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

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

Financing activities in the year ended December 31, 2023 required net cash of $403.1 million compared to net cash required of $871.3 million in 2022.

The $468.2 million decrease in financing cash required was due to a decrease of $473.2 million in share repurchases, which was partially offset by an increase of $3.5 million in cash dividends paid, and an increase of $1.3 million in amounts related to share-based compensation.

During 2023 there were net repayments of borrowings of $15.4 million compared to net repayments of $15.2 million in 2022.

The Company paid dividends of $1.55 per common share during 2023 for total payments of $33.4 million, compared to $1.27 per common share, or $29.9 million in 2022.

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

On February 15, 2024, the Board of Directors declared a quarterly cash dividend of $0.42 per common share, or $1.68 per share on an annualized basis.

The dividend is payable on March 7, 2024, to shareholders of record as of February 26, 2024.

Share Repurchase Program

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

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

The 2021 authorization was completed in October 2023.

On May 2, 2023, the Board of Directors approved a new share repurchase authorization of up to $1.5 billion to be executed by December 31, 2028.

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

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

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

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

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

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

During the year 2023, we repurchased a total of 1,026,300 common shares for $336.2 million, at an average price of $327.55 per share, including any excise tax.

Repurchases in 2023 were made pursuant to both the now completed 2021 authorization and our 2023 authorization.

As of December 31, 2023, we had approximately $1.4 billion remaining under our 2023 authorization.

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

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Term loan due 2028 (effective interest rate of 7.23% at 2023 and 5.95% at 2022) net of unamortized discount of $0.6 at 2023 and $0.7 at 2022 389.4 393.3

Capitalized lease obligations, vehicles, due through 2026 2.3 2.7

Capitalized lease obligations, autos and equipment, due through 2027 3.1 2.3

Capitalized lease obligations, buildings, due through 2059 123.6 131.3

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

("MOUSA"), our primary operating subsidiary, issued $300 million of 5.625% Senior Notes due 2027 (the "2027 Senior Notes") under its existing shelf registration statement.

("MOUSA"), our primary operating subsidiary, issued $300 million of 5.625% Senior Notes due 2027 (the "2027 Senior Notes") under its existing shelf registration

The 2027 Senior Notes are fully and unconditionally guaranteed by the Company and by the Company's subsidiaries that guarantee our Credit Facilities (as defined below).

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On September 13, 2019, MOUSA issued $500 million of 4.75% Senior Notes due 2029 (the “2029 Senior Notes”).

The net proceeds from the issuance of the 2029 Senior Notes were used to fund, in part, the tender offer and redemption of MOUSA's senior notes due 2023.

The 2029 Senior Notes are fully and unconditionally guaranteed by Murphy USA, and are guaranteed by the Company and by the Company's subsidiaries that guarantee our Credit Facilities.

The net proceeds from the issuance of the 2029 Senior Notes were used to fund, in part, the tender offer and redemption of a prior note issuance.

The 2029 Senior Notes are fully and unconditionally guaranteed by the Company and by the Company's 100% owned subsidiaries that guarantee our Credit Facilities.

The indenture governing the 2029 Senior Notes contains restrictive covenants that are essentially identical to the covenants for the 2027 Senior Notes.

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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 and that replaced the Company’s prior ABL facility and term loan.

Our credit agreement consists of both a cash flow revolving credit facility and a senior secured term loan.

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 $390 million at December 31, 2023.

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

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

Interest payable on the Credit Facilities is based on either:

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

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

plus, (A) in the case of Adjusted LIBO Rate borrowings, (i) with respect to the Revolving Facility, spreads ranging from 1.75% to 2.25% per annum depending on a total debt to EBITDA ratio or (ii) with respect to the Term Facility, a spread of 1.75% per annum and (B) in the case of Alternate Base Rate borrowings (i) with respect to the Revolving Facility, spreads ranging from 0.75% to 1.25% per annum depending on a total debt to EBITDA ratio or (ii) with respect to the Term Facility, a spread of 1.75% per annum.

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

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 December 31, 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:

• the term overnight financing rate, plus the applicable Alternative Reference Rate Committee ("ARRC") recommended credit spread adjustment (the “Adjusted Term SOFR Rate”);

plus, (A) in the case of Adjusted Term SOFR 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 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, a spread of 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, which commenced on July 1, 2021, at a rate of 1.00% per annum.

Murphy USA is also required to prepay the Term Facility with a portion of its excess cash flow, a portion of the net cash proceeds of certain asset sales and casualty events (subject to certain reinvestment rights) and the net cash proceeds of issuances of indebtedness not permitted under the Credit Agreement.

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The credit agreement contains certain covenants that limit, among other things, the ability of the Company and certain of its subsidiaries to incur additional indebtedness or liens, to make certain investments, to enter into sale-leaseback transactions, to make certain restricted payments, to enter into consolidations, mergers or sales of material assets and other fundamental changes, to transact with affiliates, to enter into agreements restricting the ability of subsidiaries to incur liens or pay dividends, or to make certain accounting changes.

The credit agreement also contains total leverage ratio and secured net leverage ratio financial maintenance covenants solely for the benefit of the revolving facility which are tested quarterly.

The Revolving Facility credit agreement also impose 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 not more than 3.75 to 1.0 with an ability in certain circumstances to temporarily increase that limit to 4.25 to 1.0.

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At December 31, 2023, our total leverage ratio was 1.68 to 1.0 which meant our ability at that date to make restricted payments was not limited.

If our total leverage ratio, on a pro forma basis, exceeds 3.0 to 1.0, any restricted payments made following that time until the ratio is once again, on a pro forma basis, below 3.0 to 1.0 would be limited by the covenant, which contains certain exceptions, including an ability to make restricted payments in cash in an aggregate amount not to exceed $100 million in any fiscal year and an additional ability to make restricted payments in an aggregate not to exceed the greater of $106.7 million, or 4.5% of consolidated net tangible assets over the life of the credit agreement.

If our total leverage ratio, on a pro forma basis, exceeds 3.0 to 1.0, any restricted payments made following that time until the ratio is once again, on a pro forma basis, below 3.0 to 1.0 would be limited by the covenant, which contains certain exceptions, including an ability to make restricted payments in cash in an aggregate amount not to exceed the greater of $115.6 million, or 4.5% of consolidated net tangible assets over the life of the credit agreement.

Supplemental Guarantor Financial Information

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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 year ended December 31, 2022 and accounted for the vast majority of our total assets as of December 31, 2022.

is our primary operating subsidiary and generated the vast majority of our revenues for the year ended December 31, 2023 and accounted for the vast majority of our total assets as of December 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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Asset retirement obligations 164.2 — — — 164.2

Other long-term obligations, including interest on long-term debt 544.0 83.7 164.7 151.0 144.6

Other long-term obligations, including interest on

long-term debt 460.9 81.4 160.3 131.7 87.5

Total $ 3,828.5 $ 504.2 $ 587.5 $ 941.1 $ 1,795.7

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Goodwill and intangible assets

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

of impairment.

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

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

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

See Note 11 “Income Taxes” in the accompanying audited consolidated financial statements for the three-year period ended December 31, 2023 for a further discussion of our tax liabilities.

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

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

This judgment and determination affect the amount of consideration paid that is allocable to assets and liabilities acquired in the

business purchase transaction.

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

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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K 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.

This Annual Report on Form 10-K 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 and associated capital expenditures, 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.

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

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

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

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

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

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

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;

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

What changed 10-K

Item 7. Management’s Discussion and Analysis