10-Q 1 musa-20220930.htm 10-Q musa-20220930
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
 
             (Mark one)        
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2022
 
OR

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _______________ to _______________
 
Commission File Number 001-35914

musa-20220930_g1.jpg
MURPHY USA INC.

(Exact name of registrant as specified in its charter)
Delaware46-2279221
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
200 Peach Street 
El Dorado,Arkansas71730-5836
(Address of principal executive offices)(Zip Code)
 
(870) 875-7600
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 Par ValueMUSANew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes No
Number of shares of Common Stock, $0.01 par value, outstanding at September 30, 2022 was 22,594,002.



 
MURPHY USA INC.
 
TABLE OF CONTENTS
 
 
 
 
 


1




ITEM 1.  FINANCIAL STATEMENTS
Murphy USA Inc.
Consolidated Balance Sheets
September 30,December 31,
(Millions of dollars, except share amounts)20222021
(unaudited)
Assets  
Current assets  
Cash and cash equivalents$192.7 $256.4 
Accounts receivable—trade, less allowance for doubtful accounts of $0.1 at 2022 and 2021
257.7 195.7 
Inventories, at lower of cost or market280.4 292.3 
Prepaid expenses and other current assets32.4 23.4 
Total current assets763.2 767.8 
Property, plant and equipment, at cost less accumulated depreciation and amortization of $1,506.7 and $1,373.4 at 2022 and 2021, respectively
2,437.2 2,378.4 
Operating lease right of use assets, net453.1 419.2 
Intangible assets, net of amortization140.4 140.7 
Goodwill328.0 328.0 
Other assets13.2 14.1 
Total assets$4,135.1 $4,048.2 
Liabilities and Stockholders' Equity  
Current liabilities  
Current maturities of long-term debt$15.2 $15.0 
Trade accounts payable and accrued liabilities725.0 660.3 
Income taxes payable15.3  
Total current liabilities755.5 675.3 
Long-term debt, including capitalized lease obligations1,794.0 1,800.1 
Deferred income taxes311.1 295.9 
Asset retirement obligations41.1 39.2 
Non current operating lease liabilities446.3 408.9 
Deferred credits and other liabilities21.1 21.6 
Total liabilities3,369.1 3,241.0 
Stockholders' Equity  
  Preferred Stock, par $0.01 (authorized 20,000,000 shares,
none outstanding)
  
  Common Stock, par $0.01 (authorized 200,000,000 shares,
46,767,164 shares issued at 2022 and 2021, respectively)
0.5 0.5 
Treasury stock (24,173,162 and 21,831,904 shares held at
2022 and 2021, respectively)(2,394.0)(1,839.3)
Additional paid in capital (APIC)514.9 534.8 
Retained earnings2,645.3 2,112.4 
Accumulated other comprehensive income (loss) (AOCI)(0.7)(1.2)
Total stockholders' equity766.0 807.2 
Total liabilities and stockholders' equity$4,135.1 $4,048.2 

See notes to consolidated financial statements.
2



Murphy USA Inc.
Consolidated Statements of Income
(unaudited)
 Three Months Ended
September 30,
Nine Months Ended
September 30,
(Millions of dollars, except share and per share amounts)2022202120222021
Operating Revenues  
Petroleum product sales (a)$5,078.6 $3,573.9 $14,917.3 $9,614.2 
Merchandise sales1,027.2 953.4 2,913.8 2,750.0 
Other operating revenues88.9 73.1 248.7 229.3 
Total operating revenues6,194.7 4,600.4 18,079.8 12,593.5 
Operating Expenses  
Petroleum product cost of goods sold (a)4,699.3 3,353.5 13,903.3 9,004.8 
Merchandise cost of goods sold821.5 766.1 2,335.7 2,229.8 
Store and other operating expenses254.5 221.1 729.4 607.1 
Depreciation and amortization54.4 53.2 164.5 157.5 
Selling, general and administrative52.4 47.2 150.8 140.0 
Accretion of asset retirement obligations0.6 0.6 2.0 1.9 
Acquisition and integration related costs0.4 0.7 1.4 9.7 
Total operating expenses5,883.1 4,442.4 17,287.1 12,150.8 
Gain (loss) on sale of assets0.3 0.3 2.2 0.4 
Income (loss) from operations311.9 158.3 794.9 443.1 
Other income (expense)  
Interest income1.4 0.1 1.8 0.1 
Interest expense(21.8)(20.5)(61.6)(62.2)
Other nonoperating income (expense)(0.8)(0.2)(2.7) 
Total other income (expense)(21.2)(20.6)(62.5)(62.1)
Income before income taxes290.7 137.7 732.4 381.0 
Income tax expense (benefit)71.2 33.7 177.2 92.9 
Net Income $219.5 $104.0 $555.2 $288.1 
Basic and Diluted Earnings Per Common Share  
Basic$9.46 $4.03 $23.17 $10.86 
Diluted$9.28 $3.98 $22.76 $10.72 
Weighted-Average Common Shares Outstanding (in thousands):  
Basic23,206 25,779 23,963 26,525 
Diluted23,650 26,153 24,398 26,883 
Supplemental information:  
(a) Includes excise taxes of:$569.7 $520.9 $1,638.4 $1,514.9 

See notes to consolidated financial statements.



3



Murphy USA Inc.
Consolidated Statements of Comprehensive Income (Loss)
(unaudited)
(Millions of dollars)Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Net income $219.5 $104.0 $555.2 $288.1 
Other comprehensive income (loss), net of tax
Interest rate swap:
Realized gain (loss)   (0.1)
Unrealized gain (loss)   0.1 
Reclassifications:
Realized gain reclassified to interest expense   0.1 
Amortization of unrealized (gain) loss to interest expense0.2 0.3 0.7 0.7 
0.2 0.3 0.7 0.8 
Deferred income tax (benefit) expense0.1 0.1 0.2 0.2 
Other comprehensive income (loss)0.1 0.2 0.5 0.6 
Comprehensive income $219.6 $104.2 $555.7 $288.7 

See notes to consolidated financial statements.
4



Murphy USA Inc.
Consolidated Statements of Cash Flows
(unaudited) 
 (Millions of dollars)
Nine Months Ended
September 30,
20222021
Operating Activities  
Net income $555.2 $288.1 
Adjustments to reconcile net income (loss) to net cash provided by (required by) operating activities 
Depreciation and amortization164.5 157.5 
Deferred and noncurrent income tax charges (credits)15.0 7.2 
Accretion of asset retirement obligations2.0 1.9 
(Gains) losses from sale of assets(2.2)(0.4)
Net (increase) decrease in noncash operating working capital18.8 112.2 
Other operating activities - net18.2 20.5 
Net cash provided by (required by) operating activities771.5 587.0 
Investing Activities  
Property additions(223.1)(211.6)
Payments for acquisition, net of cash acquired (641.1)
Proceeds from sale of assets8.5 1.0 
Other investing activities - net(0.6)(2.0)
Net cash provided by (required by) investing activities(215.2)(853.7)
Financing Activities  
Purchase of treasury stock(566.9)(231.5)
Dividends paid(22.1)(19.9)
Borrowings of debt 892.8 
Repayments of debt(11.4)(220.5)
Debt issuance costs (9.9)
Amounts related to share-based compensation(19.6)(6.6)
Net cash provided by (required by) financing activities(620.0)404.4 
Net increase (decrease) in cash, cash equivalents, and restricted cash(63.7)137.7 
Cash, cash equivalents, and restricted cash at beginning of period256.4 163.6 
Cash, cash equivalents, and restricted cash at end of period$192.7 $301.3 
 
See notes to consolidated financial statements.

5



Murphy USA Inc.
Consolidated Statements of Changes in Equity
(unaudited)


 Common Stock    
(Millions of dollars, except share amounts)SharesParTreasury StockAPICRetained EarningsAOCITotal
Balance as of December 31, 202046,767,164 $0.5 $(1,490.9)$533.3 $1,743.1 $(1.9)$784.1 
Net income— — — — 55.3 — 55.3 
Amortization of unrealized loss on interest rate hedge, net of tax— — — — — 0.2 0.2 
Cash dividends declared ($0.25 per share)
— — — — (6.8)— (6.8)
Dividend equivalent units accrued— — — 0.1 (0.1)—  
Purchase of treasury stock— — (50.0)— — — (50.0)
Issuance of treasury stock— — 5.6 (5.6)— —  
Amounts related to share-based compensation— — — (5.8)— — (5.8)
Share-based compensation expense— — — 3.6 — — 3.6 
Balance as of March 31, 202146,767,164 0.5 (1,535.3)525.6 1,791.5 (1.7)780.6 
Net income — — — — 128.8 — 128.8 
Amortization of unrealized loss on interest rate hedge, net of tax— — — — — 0.20.2 
Cash dividends declared ($0.25 per share)
(6.7)(6.7)
Purchase of treasury stock— — (148.3)— — — (148.3)
Issuance of treasury stock— — 0.5 (0.5)— —  
Amounts related to share-based compensation— — — (0.5)— — (0.5)
Share-based compensation expense— — — 3.8 — — 3.8 
Balance as of June 30, 202146,767,164 0.5 (1,683.1)528.4 1,913.6 (1.5)757.9 
Net income — — — — 104.0 — 104.0 
Amortization of unrealized loss on interest rate hedge, net of tax— — — — — 0.2 0.2 
Cash dividends declared ($0.25 per share)
— — — — (6.4)— (6.4)
Dividend equivalent units accrued— — — 0.2 (0.2)—  
Purchase of treasury stock— — (33.2)— — — (33.2)
Issuance of treasury stock— — 0.4 (0.4)— —  
Amounts related to share-based compensation— — — (0.3)— — (0.3)
Share-based compensation expense— — — 2.6 — — 2.6 
Balance as of September 30, 202146,767,164 $0.5 $(1,715.9)$530.5 $2,011.0 $(1.3)$824.8 


See notes to consolidated financial statements.









6



Murphy USA Inc.
Consolidated Statements of Changes in Equity
(unaudited)


 Common Stock    
(Millions of dollars, except share amounts)SharesParTreasury StockAPICRetained EarningsAOCITotal
Balance as of December 31, 202146,767,164 $0.5 $(1,839.3)$534.8 $2,112.4 $(1.2)$807.2 
Net income— — — — 152.4 — 152.4 
Amortization of unrealized loss on interest rate hedge, net of tax— — — — — 0.2 0.2 
Cash dividends declared ($0.29 per share)
— — — — (7.2)— (7.2)
Purchase of treasury stock— — (151.8)— — — (151.8)
Issuance of treasury stock— — 8.8 (8.8)— —  
Amounts related to share-based compensation— — — (12.2)— — (12.2)
Share-based compensation expense— — — 2.9 — — 2.9 
Balance as of March 31, 202246,767,164 0.5 (1,982.3)516.7 2,257.6 (1.0)791.5 
Net income— — — — 183.3 — 183.3 
Amortization of unrealized loss on interest rate hedge, net of tax— — — — — 0.2 0.2 
Cash dividends declared ($0.31 per share)
— — — — (7.4)— (7.4)
Dividend equivalent units accrued— — — 0.2 (0.2)—  
Purchase of treasury stock— — (203.6)— — — (203.6)
Issuance of treasury stock— — 2.5 (2.6)— — (0.1)
Amounts related to share-based compensation— — — (5.3)— — (5.3)
Share-based compensation expense— — — 4.1 — — 4.1 
Balance as of June 30, 202246,767,164 0.5 (2,183.4)513.1 2,433.3 (0.8)762.7 
Net income — — — — 219.5 — 219.5 
Amortization of unrealized loss on interest rate hedge, net of tax— — — — — 0.1 0.1 
Cash dividends declared ($0.32 per share)
— — — — (7.5)— (7.5)
Purchase of treasury stock— — (211.5)— — — (211.5)
Issuance of treasury stock— — 0.9 (0.8)— — 0.1 
Amounts related to share-based compensation— — — (2.1)— — (2.1)
Share-based compensation expense— — — 4.7 — — 4.7 
Balance as of September 30, 202246,767,164 $0.5 $(2,394.0)$514.9 $2,645.3 $(0.7)$766.0 
 
 
See notes to consolidated financial statements.



7


Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)



Note 1 — Description of Business and Basis of Presentation
 
Description of business — Murphy USA Inc. and its consolidated subsidiaries (“Murphy USA” or the “Company”) markets refined products through a network of retail gasoline stores and to unbranded wholesale customers. In addition, we operate non-fuel convenience stores in select markets. The Company owns and operates a chain of retail stores under the brand name of Murphy USA® which are almost all located in close proximity to Walmart stores, markets gasoline and other products at standalone stores under the Murphy Express brand, and also has a mix of convenience stores with and without retail gasoline that operate under the name of QuickChek®. At September 30, 2022, the Company had a total of 1,700 Company stores of which 1,151 were Murphy USA, 392 were Murphy Express and 157 were QuickChek. The Company also has certain product supply and wholesale assets, including product distribution terminals and pipeline positions.
 
Basis of Presentation — Murphy USA was incorporated in March 2013 and, in connection with its incorporation, Murphy USA issued 100 shares of common stock, par value $0.01 per share, to Murphy Oil Corporation (“Murphy Oil”) for $1.00. On August 30, 2013, Murphy USA was separated from Murphy Oil through the distribution of 100% of the common stock of Murphy USA to holders of Murphy Oil stock. On January 29, 2021, the Company acquired 100% of Quick Chek Corporation ("QuickChek"), a privately held convenience store chain. Murphy USA Inc., Murphy Oil USA, Inc. and certain of its subsidiaries operate on a calendar year basis, while the subsidiary QuickChek uses a weekly retail calendar where each quarter has 13 weeks. For the three month period ended September 30, 2022, the QuickChek results cover the period from July 2, 2022 to September 30, 2022 and year-to-date period began January 1, 2022. For the three month period ended September 30, 2021, the QuickChek results cover the period July 3, 2021 to October 1, 2021 and the year-to-date period covers January 29, 2021 (the date of acquisition) to October 1, 2021. The difference in timing of the period ends is immaterial to the overall consolidated results.
 
In preparing the financial statements of Murphy USA in conformity with accounting principles generally accepted in the United States, management has made a number of estimates and assumptions related to the reporting of assets, liabilities, revenues, expenses and the disclosure of contingent assets and liabilities. Actual results may differ from these estimates.

Interim Financial Information — The interim period financial information presented in these consolidated financial statements is unaudited and includes all known accruals and adjustments, in the opinion of management, necessary for a fair presentation of the consolidated financial position of Murphy USA and its results of operations and cash flows for the periods presented. All such adjustments are of a normal and recurring nature.
 
These interim consolidated financial statements should be read together with our audited financial statements for the years ended December 31, 2021, 2020 and 2019, included in our Annual Report on Form 10-K (File No. 001-35914), as filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934 on February 17, 2022.

Recently Issued Accounting Standards 

In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848): Scope". This standard extends certain of the optional expedients and exceptions in ASC 848 that apply to derivative contracts impacted by the discounting transition, including derivatives that do not reference LIBOR or other reference rates that are expected to be discontinued. The new standard applies to all entities and is in effect for a limited time, from March 12, 2020 through December 31, 2022. The Company has determined this standard has not had a material impact on the Company's consolidated financial statements.

8


Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


In August 2021, the FASB issued ASU 2021-08, "Accounting for Contract Assets and Contract Liabilities from Contracts with Customers," which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606. Under Topic 606, the acquirer applies the revenue model as if it had originated the contracts. This is a departure from the current requirement to measure contract assets and contract liabilities at fair value. This ASU is effective for the Company for the year beginning January 1, 2023, with early adoption permitted. The Company has determined this will not likely have a material impact on the Company's consolidated financial statements.

Note 2 — Revenues

Revenue Recognition

Revenue is recognized when obligations under the terms of a contract with our customers are satisfied; generally, this occurs with the transfer of control of our petroleum products, convenience merchandise, Renewable Identification Numbers ("RINs") and other assets to our third-party customers. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Excise and sales tax that we collect where we have determined we are the principal in the transaction have been recorded as revenue on a jurisdiction-by-jurisdiction basis.

The Company enters into buy/sell and similar arrangements when petroleum products are held at one location but are needed at a different location. The Company often pays or receives funds related to the buy/sell arrangements based on location or quality differences. The Company continues to account for these transactions as non-monetary exchanges under existing accounting guidance and typically reports these on a net basis in the Consolidated Statements of Income.

The following tables disaggregate our revenues by major source for the three and nine months ended September 30, 2022 and 2021, respectively:

Three Months Ended September 30, 2022Three Months Ended September 30, 2021
(Millions of dollars)MarketingCorporate and Other AssetsConsolidatedMarketingCorporate and Other AssetsConsolidated
Petroleum product sales (at retail) 1
$4,550.4 $ $4,550.4 $3,168.3 $ $3,168.3 
Petroleum product sales (at wholesale) 1
528.2  528.2 405.6  405.6 
Total petroleum product sales5,078.6  5,078.6 3,573.9  3,573.9 
Merchandise sales1,027.2  1,027.2 953.4  953.4 
Other operating revenues:
RINs87.6  87.6 71.5  71.5 
Other revenues 2
1.0 0.3 1.3 1.5 0.1 1.6 
Total revenues$6,194.4 $0.3 $6,194.7 $4,600.3 $0.1 $4,600.4 
9


Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021
(Millions of dollars)MarketingCorporate and Other AssetsConsolidatedMarketingCorporate and Other AssetsConsolidated
Petroleum product sales (at retail) 1
$13,361.7  $13,361.7 $8,615.6 $ $8,615.6 
Petroleum product sales (at wholesale) 1
1,555.6  1,555.6 998.6  998.6 
Total petroleum product sales14,917.3  14,917.3 9,614.2  9,614.2 
Merchandise sales2,913.8  2,913.8 2,750.0  2,750.0 
Other operating revenues:
RINs243.6  243.6 224.6  224.6 
Other revenues 2
4.7 0.4 5.1 4.5 0.2 4.7 
Total revenues$18,079.4 $0.4 $18,079.8 $12,593.3 $0.2 $12,593.5 


1 Includes excise and sales taxes that remain eligible for inclusion under Topic 606
2 Primarily includes collection allowance on excise and sales taxes and other miscellaneous items



Marketing segment

Petroleum product sales (at retail). For our retail store locations, the revenue related to petroleum product sales is recognized as the fuel is pumped to our customers. The transaction price at the pump typically includes some portion of sales or excise taxes as levied in the respective jurisdictions. Those taxes that are collected for remittance to governmental entities on a pass-through basis are not recognized as revenue and they are recorded to a liability account until they are paid. Our customers typically use a mixture of cash, checks, credit cards and debit cards to pay for our products as they are received. We have accounts receivable from the various credit/debit card providers at any point in time related to product sales made on credit cards and debit cards. These receivables are typically collected in two to seven days, depending on the terms with the particular credit/debit card providers. Payment fees retained by the credit/debit card providers are recorded as Store and other operating expenses.

Petroleum product sales (at wholesale). Our sales of petroleum products at wholesale are generally recorded as revenue when the deliveries have occurred and legal ownership of the product has transferred to the customer. Title transfer for bulk refined product sales typically occurs at pipeline custody points and upon trucks loading at product terminals. For bulk pipeline sales, we record receivables from customers that are generally collected within a week from custody transfer date. For our rack product sales, the majority of our customers' accounts are drafted by us within 10 days from product transfer.

Merchandise sales. For our retail store locations, the revenue related to merchandise sales is recognized as the customer completes their purchase at our locations. The transaction price typically includes some portion of sales tax as levied in the respective jurisdictions. Those taxes that are collected for remittance to governmental entities on a pass through basis are not recognized as revenue and they are recorded to a liability account until they are paid. As noted above, a mixture of payment types are used for these revenues and the same terms for credit/debit card receivables are realized.

10


Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


The most significant judgment with respect to merchandise sales revenue is determining whether we are the principal or agent for some categories of merchandise such as lottery tickets, lotto, newspapers and other small categories of merchandise. For scratch-off lottery tickets, we have determined we are the principal in the majority of the jurisdictions and therefore we record those sales on a gross basis. We have some categories of merchandise (such as lotto) where we are the agent and the revenues recorded for those transactions are our net commission only.

The Company offers loyalty programs through its Murphy USA, Murphy Express, and QuickChek branded retail locations. The customers earn rewards based on their spending or other promotional activities. These programs create a performance obligation which requires us to defer a portion of sales revenue to the loyalty program participants until they redeem their rewards. The rewards may be redeemed for free or discounted merchandise or cash discounts at all stores and on fuel purchases at Murphy USA and Murphy Express stores. Earned rewards expire after an account is inactive for a period of 90 days at Murphy USA and Murphy Express, while certain QuickChek rewards require use within the month. We recognize loyalty revenue when a customer redeems an earned reward. Deferred revenue associated with both rewards programs are included in Trade accounts payable and accrued liabilities in our Consolidated Balance Sheet. The deferred revenue balances at September 30, 2022 and December 31, 2021 were immaterial.

RINs sales. For the sale of RINs, we recognize revenue when the RIN is transferred to the counter-party and the sale is completed. Receivables from our counter-parties related to the RIN sales are typically collected within five days of the sale.

Other revenues. Items reported as other operating revenues include collection allowances for excise and sales tax and other miscellaneous items and are recognized as revenue when the transaction is completed.

Accounts receivable

Trade accounts receivable on the balance sheet represents both receivables related to contracts with customers and other trade receivables. At September 30, 2022 and December 31, 2021, we had $157.1 million and $111.8 million of receivables, respectively, related to contracts with customers recorded. All of the trade accounts receivable related to contracts with customers outstanding at the end of each period were collected during the succeeding quarter. These receivables were generally related to credit and debit card transactions along with short term bulk and wholesale sales to our customers, which have a very short settlement window.

Note 3 Inventories
 
Inventories consisted of the following:
(Millions of dollars)September 30,
2022
December 31,
2021
Petroleum products - FIFO basis$390.2 $339.8 
Store merchandise for resale - FIFO basis186.1 173.1 
Less LIFO reserve(303.7)(228.0)
Total petroleum products and store merchandise inventory272.6 284.9 
Materials and supplies7.8 7.4 
Total inventories$280.4 $292.3 
 
Murphy USA and Murphy Express branded petroleum products are valued using the last-in, first-out (LIFO) method and certain QuickChek store merchandise for resale is valued using the LIFO method. At September 30, 2022 and December 31, 2021, the replacement cost (market value) of LIFO inventories exceeded the LIFO carrying value for petroleum products by $303.2 million and $227.5 million, respectively and for store merchandise for resale was $0.5 million for both September 30, 2022 and December 31, 2021.


11


Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


Note 4 Business Acquisition

On January 29, 2021, Murphy USA completed the previously announced transaction to acquire 100% of QuickChek, a privately-held convenience store chain with a regional brand which consisted of 156 stores located in New Jersey and New York, in an all-cash transaction. The acquisition was made to expand the Company's network into the Northeast by adding stores that had an existing food and beverage model and is consistent with the Company's stated strategic priorities of developing enhanced food and beverage capabilities and accelerating its growth plans.

The excess of the purchase price over the fair value of the net, identifiable assets acquired was recorded as goodwill. The factors contributing to the recognition of goodwill are a mixture of direct and reverse synergies that are expected to be realized by both QuickChek and Murphy USA as a result of this acquisition. The direct synergies include additional margin capture on the retail fuel side from the tactical pricing decisions and improved benefits from increased scale on the product acquisition side combined with other cost savings in both merchandise and store operations. The reverse synergies reflect management's ability to leverage QuickChek's product pricing and operational capabilities related to food and beverage sales to Murphy branded stores. All fair values were final as of December 31, 2021.

The Company has determined that the trade name has an indefinite life, as there is no economic, contractual, or other factors that limit its useful life and expects to generate value as long as the trade name is utilized, and therefore is not subject to amortization. The fair value of intangible assets was based on widely-accepted valuation techniques, including discounted cash flows.

The following table summarizes the fair value of the consideration transferred at the date of the acquisition, as well as the calculation of goodwill based on the excess of consideration over the fair value of net assets acquired:

(Millions of dollars)
Cash paid to shareholders$641.9 
 Less cash and cash equivalents acquired0.8 
Fair value of consideration transferred, net of cash acquired$641.1 
Assets acquired:
Accounts receivable$8.0 
Inventories24.3 
Prepaid expenses and other current assets5.5 
Property and equipment447.1 
Right of use assets237.6 
Other assets5.4 
Identified intangible assets106.8 
Liabilities assumed:
Accounts payable and accrued expenses(68.4)
Deferred income tax liabilities(58.5)
Asset retirement obligation(1.2)
Current and long term debt, including finance lease obligations(148.5)
Deferred credits and other liabilities(7.4)
Operating lease liabilities(237.6)
Net assets acquired313.1 
Goodwill328.0 
Fair value of consideration transferred, net of cash and cash equivalents acquired$641.1 


12


Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


In connection with the acquisition, the Company recognized certain acquisition-related expenses which were expensed as incurred. These expenses, recognized within acquisition related costs in the consolidated statements of income, include amounts related to transaction and integration costs, including fees for advisory and professional services incurred as part of the acquisition and integration costs subsequent to the acquisition in the amount of $1.4 million and $9.7 million for the nine months ended September 30, 2022 and 2021, respectively.

Note 5 — Goodwill and Intangible Assets

The Company's goodwill is assigned to its Marketing segment and none of the goodwill is deductible for tax purposes.

(Millions of dollars)September 30,
2022
December 31,
2021
Goodwill balance, at beginning of period$328.0 $ 
QuickChek acquisition 328.0 
Goodwill balance, at end of period$328.0 $328.0 


In connection with the acquisition of QuickChek on January 29, 2021, we recorded the following amount of intangible assets.
January 29,
2021
Remaining Useful Life
(Millions of dollars)Carrying Value(in years)
Intangible assets subject to amortization:
Intangible lease liability$(9.1)13.6
Intangible assets not subject to amortization:
Trade name 115.4 n/a
Liquor licenses0.5 n/a
Total intangible assets acquired$106.8 

We amortize intangible assets subject to amortization on a straight-line basis based on the period for which the economic benefits of the asset or liability are expected to be realized. The intangible assets subject to amortization was in addition to the Company's existing intangible asset pipeline space, which is being amortized over a 40 year life.

13


Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


Intangible assets subject to amortization at September 30, 2022 and December 31, 2021 consisted of the following:

Remaining Useful Life (in years)September 30, 2022December 31, 2021
(Millions of dollars)CostNetCostNet
Intangible assets subject to amortization:
Pipeline space32.9$