What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-31 compared with 2024-08-01 · 141 added, 124 removed, 293 unchanged (47% of the section changed)

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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, 2024 and 2023.

• 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, 2024 and 2023.

• 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, 2024 and 2023.

• 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, 2024 and 2023.

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

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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 June 30, 2024, we had a total of 1,736 Company stores in 27 states, of which 1,582 were Murphy branded and 154 were under the QuickChek brand.

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 ® and comprises our Northeast region.

At September 30, 2024, we had a total of 1,740 Company stores in 27 states, of which 1,586 were Murphy branded and 154 were under the QuickChek brand.

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

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

For Q2 2024, the QuickChek results cover the period March 30, 2024 to June 28, 2024, and the 2024 year-to-date period began

December 30, 2023.

For Q2 2023, the QuickChek results cover the period April 1, 2023 to June 30, 2023, and the 2023 year-to-date period began December 31, 2022.

the QuickChek results cover the period June 29, 2024 to September 27, 2024, and the 2024 year-to-date period began December 30, 2023.

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.

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

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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, overall 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.

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 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 nicotine products 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 retail fuel prices.

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

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

In Q2 2024, crude oil prices were relatively stable with prices ranging from $74 per barrel to $88 per barrel with an average price of $82 per barrel in Q2 2024, compared to a average price of $74 per barrel in Q2 2023.

In Q3 2024, crude oil prices were more volatile than Q2 2024 with prices ranging from $67 per barrel to $85 per barrel with an average price of $76 per barrel in Q3 2024, compared to a average price of $82 per barrel in Q3 2023.

Total fuel contribution (retail fuel margin plus product supply and wholesale ("PS&W") results which include Renewable Identification Numbers ("RINs")) was 32.6 cents per gallon ("cpg") in Q3 2024, compared to 34.5 cpg in Q3 2023.

Retail fuel margin dollars increased 9.1% in the current quarter while retail fuel volumes decreased 0.6% when compared to Q2 2023.

Retail fuel margin dollars increased 13.5% in the current quarter and retail fuel volumes increased 2.0% when compared to Q3 2023.

Our revenues are impacted by the ability to leverage our diverse supply infrastructure in pursuit of obtaining the lowest cost of 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, 2024, we had $1.3 billion of Senior Notes and a $388 million term loan outstanding.

As of September 30, 2024, we had $1.3 billion of Senior Notes and a $387 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, 2024, we had additional available capacity under the committed $350 million cash flow revolving credit facility, with none drawn.

We had additional available capacity under the committed $350 million cash flow revolving credit facility, which had $41.0 million of outstanding borrowings as of September 30, 2024.

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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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 developments) for the full year 2024 to range from approximately $400 million to $450 million depending on how many new stores are completed.

The Company currently anticipates total capital expenditures (including land for future developments) for the full year 2024 to range from approximately $500 million to $525 million depending on how many new stores are

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

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.

We believe that our business will continue to grow in the future as 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.

In addition, the Company looks to expand additional capabilities such as food and beverage within our network.

We currently estimate our ongoing effective tax rate to be between 24% and 26% for the remainder of the year.

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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, 2024, may not necessarily be indicative of the results that may be expected for the remainder of the year ending December 31, 2024.

As a result, operating results for the three and nine months ended September 30, 2024, may not necessarily be indicative of the results that may be expected for the remainder of the year ending December 31, 2024.

Business Segment

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

For additional operating segment information, see Note 22 “Business Segments” in the audited combined financial statements for the year ended December 31, 2023 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, 2024.

Results of Operations

Consolidated Results

For the three months ended June 30, 2024, the Company reported net income of $144.8 million, or $6.92 per diluted share, on revenue of $5.5 billion.

For the three months ended September 30, 2024, the Company reported net income of $149.2 million, or $7.20 per diluted share, on revenue of $5.2 billion.

Net income was $167.7 million for the same period in 2023, or $7.69 per diluted share, on $5.8 billion of revenue.

The increase in net income was primarily due to higher total fuel contribution and higher overall merchandise contributions, which were partially offset by lower retail fuel sales volumes, increases in store operating expenses, and higher income tax expense.

For the six months ended June 30, 2024, the Company reported net income of $210.8 million, or $10.02 per diluted share, on revenue of $10.3 billion.

The decrease in net income was primarily due to lower total fuel contribution with increases in store operating expenses and depreciation and amortization expense, which were partially offset by higher retail fuel sales volumes, higher overall merchandise contributions and lower income tax expense.

For the nine months ended September 30, 2024, the Company reported net income of $360.0 million, or $17.17 per diluted share, on revenue of $15.5 billion.

Net income for the same period in 2023 was $406.8 million, or $18.47 per diluted share, on $16.5 billion of revenue.

The decrease in net income is primarily due to lower total fuel contribution combined with increases in store operating expenses, general and administrative expenses, and depreciation and amortization expense, which were partially offset by higher overall merchandise contributions, slightly higher fuel sales volumes, and lower income tax expense.

Three Months Ended June 30, 2024 versus Three Months Ended June 30, 2023

The decrease in net income is primarily due to lower total fuel contribution combined with increases in store operating expenses, depreciation and amortization expenses, and general and administrative expenses, which were partially offset by higher overall merchandise contributions, higher fuel sales volumes and lower income tax expense.

Three Months Ended September 30, 2024 versus Three Months Ended September 30, 2023

Revenues for Q3 2024 decreased $0.6 billion, or 9.6%, compared to the same quarter in 2023.

The decrease in revenues was due to 0.3% lower retail fuel sales prices, 0.6% lower fuel sales volumes and lower PS&W revenues, which were partially offset by a 3.0% increase in merchandise sales revenue.

The decrease in revenues was due to 10.9% lower retail fuel sales prices and lower PS&W revenues, which were partially offset by an increase of 2.0% in fuel sales volumes and a 2.5% increase in merchandise sales revenue.

Cost of sales in Q3 2024 decreased $0.5 billion, or 10.6%, when compared to Q3 2023.

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 $13.2 million, or 5.1%, in Q2 2024 from Q2 2023, primarily due to higher employee related expenses and maintenance costs at existing stores combined with increases from net new store operating expenses.

Selling, general and administrative ("SG&A") expenses for Q2 2024 decreased $0.3 million, or 0.5%, from Q2 2023.

The decrease in SG&A costs is primarily due to lower employee related costs incurred in Q2 2024.

Depreciation and amortization expense increased $1.5 million in Q2, or 2.6%, when compared to the same period of 2023, primarily due to the increased number of Murphy branded stores with larger formats and raze-and-rebuild activity in the period.

The effective income tax rate was approximately 25.1% for Q2 2024 compared to approximately 24.4% in Q2 2023.

Six Months Ended June 30, 2024 versus Six Months Ended June 30, 2023

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

Store and other operating expenses increased $10.5 million, or 4.0%, in Q3 2024 from Q3 2023, primarily due to higher employee related expenses and maintenance costs at existing stores combined with increases from net new store operating expenses, partially offset by a reduction in payment fees.

Selling, general and administrative ("SG&A") expenses for Q3 2024 were relatively flat when compared to Q3 2023.

Increases in the current-year quarter in wages, employee related costs and professional and technology services for business improvement initiatives were offset by a reduction in incentive costs in the current quarter.

Depreciation and amortization expense increased $5.3 million in Q3, or 9.2%, when compared to the same period of 2023, primarily due to the increased number of Murphy branded stores with larger formats and raze-and-rebuild activity in the quarter.

The effective income tax rate was approximately 24.9% for both Q3 2024 and Q3 2023.

Nine Months Ended September 30, 2024 versus Nine Months Ended September 30, 2023

Year-to-date revenues decreased $0.9 billion, or 5.6%, compared to the same period in 2023.

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

Year-to-date store and other operating expenses increased $27.0 million, or 5.5%, compared to the same period in 2023, primarily due to higher employee related expenses and maintenance costs at existing stores combined with increases in net new store operating expenses.

SG&A expenses for the first six months of 2024 increased $2.8 million, or 2.4%, compared to the first six months of 2023.

The increase in SG&A costs is primarily due to higher wages and employee related costs incurred in the period versus the same period of 2023.

Year-to-date store and other operating expenses increased $37.5 million, or 4.9%, compared to the same period in 2023, primarily due to higher employee related expenses and maintenance costs at existing stores combined with increases in net new store operating expenses, partially offset by slightly lower payment fees.

SG&A expenses for the first nine months of 2024 increased $2.8 million, or 1.6%, compared to the first nine months of 2023.

The increase in SG&A costs is primarily due to higher wages, employee related costs, and professional and technology services for business improvement initiatives, which were partially offset by a reduction in incentive cost, versus the same period of 2023.

Depreciation and amortization expense increased $9.1 million, or 5.3%, year-to-date from the same period of 2023 primarily due to the increased number of Murphy branded stores with larger formats and raze-and-rebuild activity during the period.

The effective income tax rate was approximately 23.4% for the six months ended June 30, 2024 versus approximately 24.0% for the same period of 2023.

The effective income tax rate was approximately 24.0% for the nine months ended September 30, 2024 versus approximately 24.4% for the same period of 2023.

Segment Results

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Millions of dollars) 2024 2023 2024 2023

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Net Income $ 149.2 $ 167.7 $ 360.0 $ 406.8

Three Months Ended June 30, 2024 versus Three Months Ended June 30, 2023

Marketing segment net income for the three months ended June 30, 2024 was higher compared to the same period in 2023 primarily due to:

• Higher total fuel contribution

• Higher merchandise contribution

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

• Lower fuel sales volumes

Three Months Ended September 30, 2024 versus Three Months Ended September 30, 2023

Marketing segment net income for the three months ended September 30, 2024 was lower compared to the same period in 2023 primarily due to:

• Lower total fuel contribution

• Higher store and other operating expenses

Six Months Ended June 30, 2024 versus Six Months Ended June 30, 2023

Marketing segment net income for the six months ended June 30, 2024 was lower compared to the same six-month period in 2023 primarily due to:

• Higher depreciation and amortization expenses

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

• Higher fuel sales volumes

• Higher merchandise contribution

• Lower income tax expense

Nine Months Ended September 30, 2024 versus Nine Months Ended September 30, 2023

Marketing segment net income for the nine months ended September 30, 2024 was lower compared to the same nine-month period in 2023 primarily due to:

• Lower total fuel contribution

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• 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 sales volumes

• Lower income tax expense

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

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

Marketing Segment 2024 2023 2024 2023

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Interest expense (2.0) (2.2) (6.2) (6.7)

Other nonoperating income (expense) — 0.1 — 0.1

Total other income (expense) (2.0) (2.1) (6.2) (6.6)

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

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

Marketing Segment 2024 2023 2024 2023

Total tobacco sales revenue same store sales 1,2

Total nicotine sales revenue same store sales 1,2

$ 135.8 $ 132.1 $ 132.3 $ 126.6

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

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

75.6 74.7 73.8 73.5

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

Key Operating Metrics 2024 2023 2024 2023

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Millions of dollars) 2024 2023 2024 2023

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

Key Operating Metrics 2024 2023 2024 2023

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Merchandise unit margin (%) 20.0 % 20.1 % 19.8 % 19.7 %

Tobacco contribution ($K SSS) 1,2

Nicotine contribution ($K SSS) 1,2

$ 19.8 $ 19.0 $ 19.4 $ 18.2

Non-tobacco contribution ($K SSS) 1,2

Non-nicotine contribution ($K SSS) 1,2

$ 22.9 $ 22.9 $ 21.8 $ 21.6

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Variance from prior year Variance from prior year

Three months ended Six months ended

June 30, 2024 June 30, 2024

Three months ended Nine months ended

September 30, 2024 September 30, 2024

Fuel gallons per month 0.5 % 1.1 % (0.6) % — %

Merchandise sales 1.6 % 2.0 % 2.6 % 2.8 %

Tobacco sales 5.9 % 5.5 % 6.3 % 5.5 %

Non-tobacco sales (1.5 %) (0.2 %) (1.9 %) (0.5 %)

Nicotine sales 3.3 % 3.1 % 5.2 % 4.6 %

Non-nicotine sales (1.4 %) 0.1 % (1.7 %) (0.3 %)

Merchandise margin 1.2 % 1.8 % 2.8 % 2.9 %

Tobacco margin 12.1 % 10.7 % 9.2 % 7.4 %

Non-tobacco margin (0.5 %) 0.6 % (0.9 %) 0.4 %

Nicotine margin 6.1 % 4.8 % 8.2 % 6.5 %

Non-nicotine margin (2.7 %) (0.6 %) (1.5 %) 0.1 %

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

2 Includes all MDR activity

Three Months Ended June 30, 2024 versus Three Months Ended June 30, 2023

Net income in the Marketing segment for Q2 2024 increased $12.1 million, to $163.8 million when compared to the Q2 2023 period.

The increase was primarily due to higher total fuel and merchandise contribution, which were partially offset by lower fuel sales volumes and increased store operating expenses.

Total fuel contribution for Q2 2024, was $390.3 million, an increase of $24.5 million or 6.7%, compared to Q2 2023.

This increase was due to higher retail fuel contribution, combined with lower contribution from PS&W margins, and was partially offset by slightly lower fuel volumes sold in the period when compared to Q2 of 2023.

Three Months Ended September 30, 2024 versus Three Months Ended September 30, 2023

Net income in the Marketing segment for Q3 2024 decreased $19.2 million, to $168.0 million when compared to the Q3 2023 period.

The decrease was primarily due to lower total fuel contribution combined with increases in store operating expenses and depreciation and amortization expenses, which were partially offset by higher fuel sales volumes, higher merchandise contributions and lower income tax expense.

Total fuel contribution for Q3 2024, was $404.2 million, a decrease of $14.8 million, or 3.5%, compared to Q3 2023.

This decrease was due to lower contribution from PS&W margins, which were partially offset by higher

retail fuel contribution and higher fuel volumes sold in the period when compared to Q3 of 2023.

Retail fuel margins on a cpg basis increased 11.2% in Q3 2024 to 31.9 cpg, compared to 28.7 cpg in the prior year period.

Total retail fuel volumes decreased 0.6%, while fuel sales volumes on an SSS basis decreased 1.3% to 244.3 thousand gallons per store in Q2 2024 when compared to Q2 2023.

Total product supply and wholesale contribution dollars, including RINs, decreased $6.0 million in Q2 2024 when compared to Q2 2023, primarily due to a regional supply imbalance that offset improved spot-to-rack spreads seen in other regions.

Total merchandise sales were $1.1 billion in Q2 2024 and $1.0 billion in Q2 2023.

Total retail fuel volumes increased 2.0%, and fuel sales volumes on an SSS basis increased 0.5% in Q3 2024 when compared to Q3 2023.

Total product supply and wholesale contribution dollars, including RINs, decreased $61.9 million in Q3 2024 when compared to Q3 2023, primarily due to negative impacts of timing and inventory pricing adjustments in a falling market.

Total merchandise sales were $26.8 million higher in Q3 2024 vs Q3 2023, coming in at $1.1 billion in both quarters.

Total merchandise contribution in Q3 2024 improved 2.4% compared to Q3 2023 primarily due to higher retail prices, up 7.8%, and net increased number of larger format stores.

Total SSS merchandise contribution dollars grew 5.0%, which included an increase of 12.1% in tobacco products and was partially offset by a 0.5% decrease in non-tobacco products.

Store and other operating expenses increased $13.0 million in Q2 2024 compared to Q2 2023, primarily due to higher employee related expenses and maintenance costs at existing stores combined with net new store operating expenses.

Total SSS merchandise contribution dollars grew 1.2%, which included an increase of 6.1% in nicotine products, partially offset by a 2.7% decrease in non-nicotine products.

Store and other operating expenses increased $10.6 million in Q3 2024 compared to Q3 2023, primarily due to higher employee related expenses and maintenance costs at existing stores combined with net new store operating expenses, partially offset by a reduction in payment fees.

On an APSM basis, expenses applicable to store OPEX excluding payment fees and rent were 4.0% higher, primarily attributable to increased employee related expenses and maintenance costs.

SG&A expenses decreased $0.3 million in Q2 2024 compared to Q2 2023, due primarily to lower employee incentive costs, partially offset by higher salaries and related benefits.

SG&A expenses in Q3 2024 were relatively flat when compared to Q3 2023, due primarily to reductions in employee incentive cost offsetting the increases in wages, employee related costs and professional and technology services for business improvement initiatives in the quarter.

Depreciation and amortization expense increased $5.2 million, or 9.8%, in Q3 2024 compared to Q3 2023 due to the increased number of larger format Murphy branded stores and raze-and-rebuild activity in the quarter.

Six Months Ended June 30, 2024 versus Six Months Ended June 30, 2023

Net income in the Marketing segment for the six months ended June 30, 2024 decreased $28.3 million compared to the six months ended June 30, 2023.

The decrease was primarily due to lower total fuel contributions, increased store operating expenses and higher SG&A expenses, which were partially offset by higher fuel sales volumes and higher merchandise contributions.

Total fuel contribution for the six-month period ended June 30, 2024, was $676.4 million, a decrease of $19.3 million or 2.8%, compared to the first six months of 2023.

This decrease was primarily due to lower contribution from PS&W margins, and was partially offset by higher retail fuel contribution and fuel volumes sold in the period when compared to the first six months of 2023.

Retail fuel margins on a cpg basis increased 2.4%, to 25.8 cpg, for the six-month period ended June 30, 2024, compared to 25.2 cpg in the same period of 2023.

Total retail fuel sales volumes increased 0.2%, while volumes on an SSS basis decreased 1.1% to 235.7 thousand gallons per store, in the six-month period ended June 30, 2024 when compared to the same six-month period of 2023.

Total product supply and wholesale contribution dollars, including RINs, decreased $35.1 million compared to the first six months of 2023, primarily due to timing of transactions, supply imbalances at the end of the period, and lower RIN sales volumes.

Total merchandise sales increased 3.3% to $2.1 billion in the six months ended June 30, 2024 compared to $2.0 billion in the first six months of 2023 due to higher retail prices across the chain in most categories and increased number of stores with larger formats.

Nine Months Ended September 30, 2024 versus Nine Months Ended September 30, 2023

Net income in the Marketing segment for the nine months ended September 30, 2024 decreased $47.5 million compared to the nine months ended September 30, 2023.

The decrease was primarily due to lower total fuel contributions, combined with increased store operating expenses, depreciation and amortization expenses, and SG&A expenses, which were partially offset by higher fuel sales volumes, higher overall merchandise contributions and lower income tax expense.

Total fuel contribution for the nine-month period ended September 30, 2024 was $1.1 billion, a decrease of $34.1 million, or 3.1%, compared to the first nine months of 2023.

Retail fuel margins on a cpg basis increased 5.7%, to 27.9 cpg, for the nine-month period ended September 30, 2024, compared to 26.4 cpg in the same period of 2023.

Total retail fuel sales volumes increased 0.8%, while volumes on an SSS basis decreased 0.6% in the nine-month period ended September 30, 2024 when compared to the same nine-month period of 2023.

Total product supply and wholesale contribution dollars, including RINs, decreased $97.0 million compared to the first nine months of 2023, primarily due to negative impacts of timing of transactions and regional supply imbalances.

Total merchandise sales increased 3.0% to $3.2 billion in the nine months ended September 30, 2024 compared to $3.1 billion in the first nine months of 2023 due to higher retail prices across the chain in most categories and increased number of stores with larger formats.

Year-to-date total merchandise contribution in 2024 increased 3.2% compared to the same period of 2023.

Total SSS merchandise contribution dollars improved 3.7% with an increase of 9.2% in tobacco products and was partially offset by a 0.9% decrease in non-tobacco products.

Store and other operating expenses increased $26.9 million in the current year compared to the same six-month period of 2023, primarily due to employee related expenses and maintenance expenses at existing stores combined with net new store operating expenses.

Total SSS merchandise contribution dollars improved 2.8% with an increase of 8.2% in nicotine products and was partially offset by a 1.5% decrease in non-nicotine products.

Store and other operating expenses increased $37.5 million in the current year compared to the same nine-month period of 2023, primarily due to employee related expenses and maintenance expenses at existing stores combined with net new store operating expenses.

On an APSM basis, expenses applicable to store OPEX excluding payment fees and rent increased 5.7%, primarily due to employee related expenses and maintenance costs.

SG&A expenses increased $2.8 million in 2024 compared to the same six-month period of 2023 due primarily to higher employee salaries and benefits costs incurred.

Depreciation and amortization expense increased $5.0 million, or 4.7%, in the first six months of 2024 due to new larger store formats for Murphy branded stores combined with raze-and-rebuild activities.

SG&A expenses increased $2.8 million in 2024 compared to the same nine-month period of 2023 due primarily to higher employee salaries and benefits costs incurred and professional and technology services for business improvement initiatives, partially offset by a reduction in employee incentive cost.

Depreciation and amortization expense increased $10.2 million, or 6.4%, in the first nine months of 2024 due to new larger store formats for Murphy branded stores combined with raze-and-rebuild activities.

Corporate and Other Assets

Three Months Ended June 30, 2024 versus Three Months Ended June 30, 2023

Three Months Ended September 30, 2024 versus Three Months Ended September 30, 2023

Loss from continuing operations for Corporate and other assets for Q3 2024 was $18.8 million, compared to a loss of $19.5 million in Q3 2023.

The increase in loss was primarily due to a reduction in investment income and higher interest expense but was offset by a reduction in depreciation expense.

Six Months Ended June 30, 2024 versus Six Months Ended June 30, 2023

Loss from continuing operations for Corporate and other assets was $38.5 million for both the six months ended June 30, 2024 and 2023, respectively.

The year-to-date loss for 2024, compared to the same period of 2023, had a reduction in investment income and an increase in interest expense but was offset by a reduction in depreciation expense.

The decrease in loss was primarily due to an increase in other nonoperating income which was partially offset by a reduction in investment income.

Nine Months Ended September 30, 2024 versus Nine Months Ended September 30, 2023

Loss from continuing operations for Corporate and other assets was $57.3 million for the nine months ended September 30, 2024, compared to a loss of $58.0 million in the same period of 2023.

The year-to-date loss for 2024, compared to the same period of 2023, had a reduction in depreciation expense combined with an increase in other nonoperating income but was partially offset by a reduction in investment income and an increase in interest expense.

Non-GAAP Measures

The following table sets forth the Company’s EBITDA and Adjusted EBITDA for the three and six months ended June 30, 2024 and 2023.

The following table sets forth the Company’s EBITDA and Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023.

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).

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Millions of dollars) 2024 2023 2024 2023

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Significant Sources of Capital

As of June 30, 2024, we had $79.8 million of cash and cash equivalents and total marketable securities of $7.5 million.

As of September 30, 2024, we had $52.5 million of cash and cash equivalents and total marketable securities of $1.5 million.

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, 2024, 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 can be utilized for working capital and other general corporate purposes, including supporting our operating model as described herein.

Additional borrowing capacity under the Revolving Facility may be extended at our request and with the consent of the participating lenders.

As of September 30, 2024, there was $41.0 million of outstanding borrowings under our Revolving Facility reported in Long-term debt in the Consolidated Balance Sheet.

The Revolving Facility was undrawn at December 31, 2023.

We believe our existing cash on hand and future borrowing capacity of our existing facilities 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 $396.8 million for the six months ended June 30, 2024 compared to $320.9 million for the same period of 2023, an increase of $75.9 million, or 23.7%.

The increase for the six months ended June 30, 2024 is mainly due to an increase in the amount of cash provided from changes in noncash working capital of $117.4 million and increased depreciation of $3.8 million, partially offset by a decrease in net income of $28.3 million and lower deferred and noncurrent tax changes of $15.9 million when compared to the same period in 2023.

For the six months ended June 30, 2024, operating cash provided by changes in non-cash operating working capital of $55.8 million was due to an increase in accounts payable and accrued liabilities of $80.9 million which was related to the timing of payments, a decrease in inventory of $25.4 million due to lower prices and volumes, an increase of $8.0 million in income taxes payable due in part to phase-out of federal bonus depreciation resulting in higher current tax expense, and was partially offset by an increase in accounts receivable of $51.9 million due to the timing of receipts and an increase in prepaid expenses of $6.6 million.

Net cash provided by operating activities was $598.9 million for the nine months ended September 30, 2024 compared to $510.9 million for the same period of 2023, an increase of $88.0 million, or 17.2%.

The increase for the nine months ended September 30, 2024 is mainly due to an increase in the amount of cash provided from changes in noncash working capital of $129.2 million and increased depreciation of $9.1 million, partially offset by a decrease in net income of $46.8 million and lower deferred and noncurrent tax changes of $4.1 million when compared to the same period in 2023.

For the nine months ended September 30, 2024, operating cash provided by changes in non-cash operating working capital of $32.0 million was due to a decrease in accounts receivable of $71.4 million due to the timing of receipts, an increase of $39.7 million in income taxes payable due in part to phase-out of federal bonus depreciation resulting in higher current tax expense and the timing of estimated tax payments, a decrease in inventory of $0.1 million, and was partially offset by a decrease in accounts payable and accrued liabilities of $75.3 million which was related to the timing of payments and an increase in prepaid expenses of $3.9 million.

Investing Activities

For the six months ended June 30, 2024, cash required by investing activities was $189.4 million compared to $142.3 million in 2023.

The $47.1 million increase in cash required by investing activities in 2024 compared to the prior year was primarily due to an increase of $49.0 million in capital expenditures due to the timing of projects partially offset by net cash received of $1.9 million from the amount of maturities of marketable securities.

For the nine months ended September 30, 2024, cash required by investing activities was $320.9 million compared to $217.0 million in 2023.

The $103.9 million increase in cash required by investing activities in the

current year period was primarily due to an increase of $106.5 million in capital expenditures due to the timing of projects partially offset by net cash received of $3.3 million from the amount of maturities of marketable securities.

Financing Activities

Financing activities in the six months ended June 30, 2024 required cash of $245.4 million compared to cash of $146.2 million in the six months ended June 30, 2023, an increase of $99.2 million.

The first six months of 2024 included payments of $192.5 million for the repurchase of common shares, which was an increase of $84.6 million compared to repurchases of $107.9 million in the 2023 period.

Financing activities in the nine months ended September 30, 2024 required cash of $343.3 million compared to cash of $229.6 million in the nine months ended September 30, 2023, an increase of $113.7 million.

The first nine months of 2024 included payments of $317.7 million for the repurchase of common shares, which was an increase of $145.0 million compared to repurchases of $172.7 million in the 2023 period.

Amounts related to share-based compensation required $7.2 million more in cash during 2024 than in 2023.

Dividend payments increased $1.6 million in 2024 compared to amounts paid in the first six months of 2023.

Net repayments of debt required $7.8 million in 2024 compared to $7.7 million in 2023.

During the six months ended June 30, 2024, the Company paid cash dividend payments of $0.86 per common share, for a total of $17.9 million, compared to the period ended June 30, 2023, in which dividends of $0.75 per common share were paid for total cash dividend payments of $16.3 million.

Dividend payments increased $2.4 million in 2024 compared to amounts paid in the first nine months of 2023.

Net borrowings of debt provided $29.3 million in 2024 compared to net repayments of debt requiring $11.6 million in 2023.

During the nine months ended September 30, 2024, the Company paid cash dividend payments of $1.31 per common share, for a total of $27.1 million, compared to the period ended September 30, 2023, in which dividends of $1.14 per common share were paid for total cash dividend payments of $24.7 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 24, 2024, the Board of Directors declared a quarterly cash dividend of $0.48 per common share, or $1.92 per share on an annualized basis.

The dividend is payable on December 2, 2024, to shareholders of record as of November 4, 2024.

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, 2024, a total of 454,454 shares were repurchased for $194.0 million, including excise tax under the 2023 program.

As of June 30, 2024, we had approximately $1.2 billion remaining under the 2023 authorization.

Our long-term debt at June 30, 2024 and December 31, 2023 was as set forth below:

(Millions of dollars) June 30,

During the nine months ended September 30, 2024, a total of 698,855 shares were repurchased for $320.4 million, including excise tax under the 2023 program.

As of September 30, 2024, we had approximately $1.1 billion remaining under the 2023 authorization.

Our long-term debt at September 30, 2024 and December 31, 2023 was as set forth below:

(Millions of dollars) September 30,

2024 December 31,

5.625% senior notes due 2027 (net of unamortized discount of $1.1 at June 30, 2024 and $1.3 at December 31, 2023) $ 298.9 $ 298.7

4.75% senior notes due 2029 (net of unamortized discount of $3.3 at June 30, 2024 and $3.6 at December 31, 2023) 496.7 496.4

3.75% senior notes due 2031 (net of unamortized discount of $4.1 at June 30, 2024 and $4.4 at December 31, 2023) 495.9 495.6

Term loan due 2028 (effective interest rate of 7.22% at June 30, 2024 and 7.23% at December 31, 2023) net of unamortized discount of $0.5 at June 30, 2024 and $0.6 at December 31, 2023 387.5 389.4

5.625% senior notes due 2027 (net of unamortized discount of $1.0 at September 30, 2024 and $1.3 at December 31, 2023)

$ 299.0 $ 298.7

4.75% senior notes due 2029 (net of unamortized discount of $3.1 at September 30, 2024 and $3.6 at December 31, 2023)

3.75% senior notes due 2031 (net of unamortized discount of $4.0 at September 30, 2024 and $4.4 at December 31, 2023)

Term loan due 2028 (effective interest rate of 7.09% at September 30, 2024 and 7.23% at December 31, 2023) net of unamortized discount of $0.5 at September 30, 2024 and $0.6 at December 31, 2023

Revolving credit facility, due 2026 (weighted average interest rate of 8.75% at September 30, 2024)

Capitalized lease obligations, autos and equipment, due through 2026 3.4 3.1

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The indenture governing the 2031 Senior Notes contains restrictive covenants that are essentially identical to the covenants for the 2027 and 2029 Senior Notes.

indebtedness (including indebtedness with respect to the Credit Facilities) to the extent of the value of the assets securing such indebtedness.

The Senior Notes and related guarantees rank equally with all of our and the guarantors’ existing and future senior unsecured indebtedness and effectively junior to our and the guarantors’ existing and future secured indebtedness (including indebtedness with respect to the Credit Facilities) to the extent of the value of the assets securing such indebtedness.

The Senior Notes are structurally subordinated to all of the existing and future third-party liabilities, including trade payables, of our existing and future subsidiaries that do not guarantee the notes.

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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 $388 million at June 30, 2024 and $390 million at December 31, 2023.

The outstanding balance of the term loan was $387 million at September 30, 2024 and $390 million at December 31, 2023.

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, 2024, 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).

As of September 30, 2024, we had $41.0 million of outstanding borrowings under the Revolving Facility and $6.2 million of 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 Credit Agreement allows Murphy USA to prepay, in whole or in part, the Term Facility outstanding thereunder, together with any accrued and unpaid interest, with prior notice but without premium or penalty other than breakage and redeployment costs.

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 Revolving Facility credit agreement also imposes total leverage ratio and secured net leverage ratio financial maintenance covenants which are tested quarterly.

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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, 2024, our total leverage ratio was 1.72 to 1.0 which meant our ability at that date to make restricted payments was not limited.

At September 30, 2024, our total leverage ratio was 1.79 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 the greater of $117.6 million or 4.5% of consolidated net tangible assets over the life of the credit agreement.

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

MOUSA is our primary operating subsidiary and generated the vast majority of our revenues for the three and six months ended June 30, 2024, and accounted for the vast majority of our total assets as of June 30, 2024.

MOUSA is our primary operating subsidiary and generated the vast majority of our revenues for the three and nine months ended September 30, 2024, and accounted for the vast majority of our total assets as of September 30, 2024.

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 in our Corporate and other assets segment which is primarily technology related.

The following table outlines our capital spending and investments by segment for the three and six month periods ended June 30, 2024 and 2023:

The following table outlines our capital spending and investments by segment for the three and nine month periods ended September 30, 2024 and 2023:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Millions of dollars) 2024 2023 2024 2023

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

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

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

our ability to successfully expand our food and beverage offerings;

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

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

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

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

our ability to successfully expand our food and beverage offerings;

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

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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