Murphy USA Inc. [MUSA] Filings

10-Q 1 musa-20230630.htm 10-Q musa-20230630

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 June 30, 2023

☐ 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

MURPHY USA INC.

(Exact name of registrant as specified in its charter)



Delaware		46-2279221
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

200 Peach Street
El Dorado,	Arkansas	71730-5836

(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 class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value	MUSA	New 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 June 30, 2023 was 21,453,014.



MURPHY USA INC.

TABLE OF CONTENTS



			Page
Part I – Financial Information


Item 1. Financial Statements (Unaudited)


	Consolidated Balance Sheets as of June 30, 2023 (unaudited) and December 31, 2022	2
	Consolidated Statements of Income for the three and six months ended June 30, 2023 and 2022 (unaudited)	3
	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2023 and 2022 (unaudited)	4
	Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (unaudited)	5
	Consolidated Statements of Changes in Equity for the three and six months ended June 30, 2023 and 2022 (unaudited)	6
	Notes to Consolidated Financial Statements (unaudited)	8
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	41
	Item 4. Controls and Procedures	42
Part II – Other Information
	Item 1. Legal Proceedings	43
	Item 1A. Risk Factors	43
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	43
	Item 5. Other Information	43
	Item 6. Exhibits	43
Signatures		44

ITEM 1. FINANCIAL STATEMENTS

Murphy USA Inc.

Consolidated Balance Sheets


	June 30,		December 31,
(Millions of dollars, except share amounts)	2023		2022
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	92.9	$	60.5
Marketable securities, current	13.0		17.9
Accounts receivable—trade, less allowance for doubtful accounts of $0.8 and $0.3 at 2023 and 2022, respectively	270.7		281.7
Inventories, at lower of cost or market	349.9		319.1
Prepaid expenses and other current assets	36.7		47.6

Total current assets	763.2		726.8
Marketable securities, non-current	7.4		4.4
Property, plant and equipment, at cost less accumulated depreciation and amortization of $1,656.3 and $1,553.1 at 2023 and 2022, respectively	2,500.7		2,459.3

Operating lease right of use assets, net	448.2		449.6
Intangible assets, net of amortization	140.2		140.4
Goodwill	328.0		328.0
Other assets	17.1		14.7

Total assets	$	4,204.8	$	4,123.2

Liabilities and Stockholders' Equity
Current liabilities
Current maturities of long-term debt	$	14.9	$	15.0
Trade accounts payable and accrued liabilities	800.4		839.2



Total current liabilities	815.3		854.2

Long-term debt, including capitalized lease obligations	1,787.3		1,791.9
Deferred income taxes	337.0		327.4
Asset retirement obligations	43.6		43.3
Non-current operating lease liabilities	445.3		444.2
Deferred credits and other liabilities	25.5		21.5
Total liabilities	3,454.0		3,482.5
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 2023 and 2022, respectively)	0.5		0.5
Treasury stock (25,314,150 and 25,017,324 shares held at 2023 and 2022, respectively)	(2,733.1)		(2,633.3)
Additional paid in capital (APIC)	505.8		518.9
Retained earnings	2,977.7		2,755.1
Accumulated other comprehensive income (loss) (AOCI)	(0.1)		(0.5)
Total stockholders' equity	750.8		640.7
Total liabilities and stockholders' equity	$	4,204.8	$	4,123.2

See notes to consolidated financial statements.

Murphy USA Inc.

Consolidated Statements of Income

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(Millions of dollars, except share and per share amounts)	2023		2022		2023		2022
Operating Revenues
Petroleum product sales1	$	4,450.6	$	5,690.3	$	8,444.8	$	9,838.7
Merchandise sales	1,049.0		994.6		2,015.2		1,886.6
Other operating revenues	85.8		81.8		202.6		159.8
Total operating revenues	5,585.4		6,766.7		10,662.6		11,885.1

Operating Expenses
Petroleum product cost of goods sold1	4,170.0		5,347.8		7,950.6		9,204.0
Merchandise cost of goods sold	842.2		797.9		1,621.3		1,514.2

Store and other operating expenses	256.7		252.2		495.0		474.9
Depreciation and amortization	57.8		54.7		114.2		110.1
Selling, general and administrative	59.4		52.2		118.4		98.4
Accretion of asset retirement obligations	0.7		0.7		1.5		1.4
Acquisition and integration related costs	—		0.8		—		1.0
Total operating expenses	5,386.8		6,506.3		10,301.0		11,404.0


Gain (loss) on sale of assets	0.1		1.9		(0.1)		1.9
Income (loss) from operations	198.7		262.3		361.5		483.0

Other income (expense)
Investment income	1.8		0.4		2.6		0.4
Interest expense	(25.0)		(20.2)		(49.9)		(39.8)

Other nonoperating income (expense)	0.2		(1.2)		0.5		(1.9)
Total other income (expense)	(23.0)		(21.0)		(46.8)		(41.3)
Income before income taxes	175.7		241.3		314.7		441.7
Income tax expense (benefit)	42.9		58.0		75.6		106.0


Net Income	$	132.8	$	183.3	$	239.1	$	335.7

Basic and Diluted Earnings Per Common Share
Basic	$	6.12	$	7.65	$	11.01	$	13.81
Diluted	$	6.02	$	7.53	$	10.82	$	13.59
Weighted-Average Common Shares Outstanding (in thousands):
Basic	21,686		23,952		21,712		24,302
Diluted	22,051		24,341		22,092		24,708
Supplemental information:
1Includes excise taxes of:	$	594.2	$	554.7	$	1,139.0	$	1,068.7

See notes to consolidated financial statements.

Murphy USA Inc.

Consolidated Statements of Comprehensive Income (Loss)

(unaudited)


(Millions of dollars)	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	132.8	$	183.3	$	239.1	$	335.7

Other comprehensive income (loss), net of tax
Interest rate swap:





Reclassifications:

Amortization of unrealized (gain) loss to interest expense	0.3		0.3		0.5		0.5
	0.3		0.3		0.5		0.5
Deferred income tax (benefit) expense	0.1		0.1		0.1		0.1
Other comprehensive income (loss)	0.2		0.2		0.4		0.4
Comprehensive income	$	133.0	$	183.5	$	239.5	$	336.1

See notes to consolidated financial statements.

Murphy USA Inc.

Consolidated Statements of Cash Flows

(unaudited)


(Millions of dollars)	Six Months Ended June 30,
	2023		2022
Operating Activities
Net income	$	239.1	$	335.7
Adjustments to reconcile net income (loss) to net cash provided by (required by) operating activities

Depreciation and amortization	114.2		110.1

Deferred and noncurrent income tax charges (benefits)	9.4		13.1
Accretion of asset retirement obligations	1.5		1.4

(Gains) losses from sale of assets	0.1		(1.9)
Net (increase) decrease in noncash operating working capital	(61.6)		47.8

Other operating activities - net	18.2		10.3


Net cash provided (required) by operating activities	320.9		516.5
Investing Activities
Property additions	(145.2)		(144.9)

Proceeds from sale of assets	1.8		8.1
Investment in marketable securities	(8.4)		—
Redemptions of marketable securities	10.5		—

Other investing activities - net	(1.0)		(0.6)



Net cash provided (required) by investing activities	(142.3)		(137.4)
Financing Activities
Purchase of treasury stock	(107.9)		(355.4)
Dividends paid	(16.3)		(14.6)
Borrowings of debt	8.0		—
Repayments of debt	(15.7)		(7.6)


Amounts related to share-based compensation	(14.3)		(17.5)
Net cash provided (required) by financing activities	(146.2)		(395.1)
Net increase (decrease) in cash, cash equivalents, and restricted cash	32.4		(16.0)
Cash, cash equivalents, and restricted cash at beginning of period	60.5		256.4


Cash, cash equivalents, and restricted cash at end of period	$	92.9	$	240.4

See notes to consolidated financial statements.

Murphy USA Inc.

Consolidated Statements of Changes in Equity

(unaudited)


	Common Stock
(Millions of dollars, except share amounts)	Shares	Par		Treasury Stock		APIC		Retained Earnings		AOCI		Total
Balance as of December 31, 2021	46,767,164	$	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, 2022	46,767,164	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, 2022	46,767,164	$	0.5	$	(2,183.4)	$	513.1	$	2,433.3	$	(0.8)	$	762.7

Murphy USA Inc.

Consolidated Statements of Changes in Equity

(unaudited)


	Common Stock
(Millions of dollars, except share amounts)	Shares	Par		Treasury Stock		APIC		Retained Earnings		AOCI		Total
Balance as of December 31, 2022	46,767,164	$	0.5	$	(2,633.3)	$	518.9	$	2,755.1	$	(0.5)	$	640.7

Net income	—	—		—		—		106.3		—		106.3
Amortization of unrealized loss on interest rate hedge, net of tax	—	—		—		—		—		0.2		0.2
Cash dividends declared ($0.37 per share)	—	—		—		—		(8.1)		—		(8.1)
Dividend equivalent units accrued	—	—		—		0.1		(0.1)		—		—
Purchase of treasury stock	—	—		(13.7)		—		—		—		(13.7)

Issuance of treasury stock	—	—		8.7		(8.7)		—		—		—
Amounts related to share-based compensation	—	—		—		(13.5)		—		—		(13.5)
Share-based compensation expense	—	—		—		4.9		—		—		4.9
Balance as of March 31, 2023	46,767,164	0.5		(2,638.3)		501.7		2,853.2		(0.3)		716.8
Net income	—	—		—		—		132.8		—		132.8
Amortization of unrealized loss on interest rate hedge, net of tax	—	—		—		—		—		0.2		0.2
Cash dividends declared ($0.38 per share)	—	—		—		—		(8.2)		—		(8.2)
Dividend equivalent units accrued	—	—		—		0.1		(0.1)		—		—
Purchase of treasury stock	—	—		(95.1)		—		—		—		(95.1)

Issuance of treasury stock	—	—		0.3		(0.4)		—		—		(0.1)
Amounts related to share-based compensation	—	—		—		(0.8)		—		—		(0.8)
Share-based compensation expense	—	—		—		5.2		—		—		5.2
Balance as of June 30, 2023	46,767,164	$	0.5	$	(2,733.1)	$	505.8	$	2,977.7	$	(0.1)	$	750.8

See notes to consolidated financial statements.

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”, "we", 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 names of Murphy USA® and Murphy Express, most of which are located in close proximity to Walmart stores, and also has a mix of convenience stores with and without retail gasoline that operate under the name of QuickChek®. At June 30, 2023, the Company had a total of 1,725 Company stores of which 1,566 were branded as Murphy and 159 were the QuickChek brand. 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. Murphy USA Inc., Murphy Oil USA, Inc. and certain of its subsidiaries operate on a calendar year basis, while the QuickChek subsidiary uses a weekly retail calendar where each quarter has 13 weeks. For the three month period ended June 30, 2023, the QuickChek results covered the period April 1, 2023 to June 30, 2023 and the 2023 year-to-date period began December 31, 2022. For the three month period ended June 30, 2022, the QuickChek results covered the period April 2, 2022 to July 1, 2022 and the 2022 year-to-date period began January 1, 2022. 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, 2022, 2021 and 2020, 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 15, 2023.

Recently Issued Accounting Standards—

In August 2021, the FASB issued ASU 2021-08, "Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 606)," 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 was effective for the Company for the year beginning January 1, 2023, with early adoption permitted. The Company has determined this did not 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

Murphy USA Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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 six months ended June 30, 2023 and 2022, respectively:


	Three Months Ended June 30, 2023						Three Months Ended June 30, 2022
(Millions of dollars)	Marketing		Corporate and Other Assets		Consolidated		Marketing		Corporate and Other Assets		Consolidated
Petroleum product sales (at retail) 1	$	3,972.8	$	—	$	3,972.8	$	5,082.9	$	—	$	5,082.9
Petroleum product sales (at wholesale) 1	477.8		—		477.8		607.4		—		607.4
Total petroleum product sales	4,450.6		—		4,450.6		5,690.3		—		5,690.3
Merchandise sales	1,049.0		—		1,049.0		994.6		—		994.6
Other operating revenues:
RINs	84.2		—		84.2		79.4		—		79.4
Other revenues 2	1.6		—		1.6		2.4		—		2.4
Total revenues	$	5,585.4	$	—	$	5,585.4	$	6,766.7	$	—	$	6,766.7


	Six Months Ended June 30, 2023						Six Months Ended June 30, 2022
(Millions of dollars)	Marketing		Corporate and Other Assets		Consolidated		Marketing		Corporate and Other Assets		Consolidated
Petroleum product sales (at retail) 1	$	7,558.9	—		$	7,558.9	$	8,811.3	$	—	$	8,811.3
Petroleum product sales (at wholesale) 1	885.9		—		885.9		1,027.4		—		1,027.4
Total petroleum product sales	8,444.8		—		8,444.8		9,838.7		—		9,838.7
Merchandise sales	2,015.2		—		2,015.2		1,886.6		—		1,886.6
Other operating revenues:
RINs	199.5		—		199.5		156.0		—		156.0
Other revenues 2	3.0		0.1		3.1		3.7		0.1		3.8
Total revenues	$	10,662.5	$	0.1	$	10,662.6	$	11,885.0	$	0.1	$	11,885.1

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

Murphy USA Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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 in the Consolidated Statements of Income.

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.

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 Sheets. The deferred revenue balances at June 30, 2023 and December 31, 2022 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 June 30, 2023 and December 31, 2022, we had $155.3 million and $164.1 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.

Murphy USA Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 3 — Inventories

Inventories consisted of the following:


(Millions of dollars)	June 30, 2023		December 31, 2022
Petroleum products - FIFO basis	$	385.7	$	367.0
Store merchandise for resale - FIFO basis	214.9		192.1
Less LIFO reserve	(262.9)		(250.7)
Total petroleum products and store merchandise inventory	337.7		308.4
Materials and supplies	12.2		10.7
Total inventories	$	349.9	$	319.1

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 June 30, 2023 and December 31, 2022, the replacement cost (market value) of LIFO inventories exceeded the LIFO carrying value for petroleum products by $261.1 million and $249.1 million, respectively and for store merchandise for resale by $1.8 million and $1.6 million for June 30, 2023 and December 31, 2022, respectively.

Note 4 — Marketable Securities

The Company invests a portion of its excess operational cash in marketable securities. The goal of the Company's investment policy, in order of priority, are as follows: (1) preservation of principal, (2) maintaining a high degree of liquidity to meet cash flow requirements, and (3) deliver competitive returns subject to prevailing market conditions and the Company's stated objectives related to safety and liquidity. Nothing in the policy is intended to indicate that management must invest excess operational cash; it merely allows it subject to specific limitations.

Securities are generally required to have a final maturity of 24 months or less with a weighted average maturity for the portfolio of no longer than 12 months and must have an active secondary market. Investments may include U.S. Treasury bills, notes and bonds, U.S. Agency securities, repurchase agreements, certificates of deposit, institutional, government money market funds that maintain a stable $1.00 net asset value, domestic and foreign commercial paper, municipal securities, domestic and foreign debt issued by corporations or financial institutions with the primary objective of minimizing the potential risk of principal loss. The Company determines the classification of its marketable securities based on its investment strategy at the time of purchase. All marketable securities in the periods presented have been classified as available-for-sale.

The carrying values of marketable securities and the balance sheet location at June 30, 2023 and December 31, 2022 consisted of the following:


	June 30, 2023
(Millions of dollars)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses	Estimated Fair Value
Available-for-sale securities:

Marketable securities current
U.S. Government Bonds	$	5.9	$	—	—	$	5.9
U.S. Corporate bonds	5.5		—		—	5.5
Non U.S. Corporate bonds	1.5		—		—	1.5
Investment income receivable	0.1		—		—	0.1
	13.0		—		—	13.0

Murphy USA Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)


	June 30, 2023
(Millions of dollars)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Marketable securities non-current
U.S. Corporate bonds	5.9		—		—		5.9
Non U.S. Corporate bonds	1.5		—		—		1.5
	7.4		—		—		7.4

Total marketable securities	$	20.4	$	—	$	—	$	20.4


	December 31, 2022
(Millions of dollars)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-sale securities:

Marketable securities current
U.S. Government Bonds	$	8.8	$	—	$	—	$	8.8
U.S. Corporate bonds	6.0		—		—		6.0
Non U.S. Corporate bonds	3.0		—		—		3.0
Investment income receivable	0.1		—		—		0.1
	17.9		—		—		17.9

Marketable securities non-current
U.S. Corporate bonds	4.4		—		—		4.4



Total marketable securities	$	22.3	$	—	$	—	$	22.3

The amortized cost basis and fair value of the Company's available-for-sale marketable securities at June 30, 2023, by contractual maturity, are as follows:


(Millions of dollars)	Amortized Cost		Fair Value
Less than 1 year	$	17.4	$	17.3
1 to 2 years	2.9		3.0

Total	$	20.3	$	20.3

There was no impairment on any available-for-sale marketable securities as of June 30, 2023 or December 31, 2022.

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)	June 30, 2023		December 31, 2022
Goodwill	$	328.0	$	328.0

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 includes pipeline space, which is being amortized over a 40-year life, and the intangible lease liability acquired from QuickChek which is being amortized over the remaining life of the underlying leases.

Murphy USA Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Intangible assets subject to amortization at June 30, 2023 and December 31, 2022 consisted of the following:


	Remaining Useful Life (in years)	June 30, 2023				December 31, 2022
(Millions of dollars)		Cost		Net		Cost		Net
Intangible assets subject to amortization:
Pipeline space	32.2	$	39.6	$	32.2	$	39.6	$	32.7
Intangible lease liability	10.9	(9.1)		(7.6)		(9.1)		(7.9)
Total intangible assets subject to amortization		30.5		24.6		30.5		24.8
Intangible assets not subject to amortization, indefinite lives:
Trade name		115.4		115.4		115.4		115.4
Liquor licenses		0.2		0.2		0.2		0.2
Total intangible assets not subject to amortization		115.6		115.6		115.6		115.6
Intangible assets, net of amortization		$	146.1	$	140.2	$	146.1	$	140.4

Note 6 — Long-Term Debt

Long-term debt consisted of the following:


(Millions of dollars)	June 30, 2023		December 31, 2022
5.625% senior notes due 2027 (net of unamortized discount of $1.4 at June 30, 2023 and $1.6 at December 31, 2022)	$	298.6	$	298.4
4.75% senior notes due 2029 (net of unamortized discount of $3.9 at June 30, 2023 and $4.2 at December 31, 2022)	496.1		495.8

3.75% senior notes due 2031 (net of unamortized discount of $4.7 at June 30, 2023 and $5.1 at December 31, 2022)	495.3		494.9
Term loan due 2028 (effective interest rate of 6.94% at June 30, 2023 and 5.95% at December 31, 2022 and net of unamortized discount of $0.7 at June 30, 2023 and December 31, 2022, respectively)	391.3		393.3
Capitalized lease obligations, autos and equipment, due through 2026	2.7		2.3
Capitalized lease obligations, buildings, due through 2059	126.4		131.3
Less unamortized debt issuance costs	(8.2)		(9.1)
Total long-term debt	1,802.2		1,806.9
Less current maturities	14.9		15.0
Total long-term debt, net of current	$	1,787.3	$	1,791.9

Senior Notes

On April 25, 2017, Murphy Oil USA, Inc., our primary operating subsidiary, issued $300 million of 5.625% Senior Notes due 2027 (the "2027 Senior Notes"). The 2027 Senior Notes are fully and unconditionally guaranteed by Murphy USA, and are guaranteed by certain 100% owned subsidiaries that guarantee our Credit Facilities, as defined herein. The indenture governing the 2027 Senior Notes contains restrictive covenants that limit, among other things, the ability of Murphy USA, Murphy Oil USA, Inc. and the restricted subsidiaries to incur additional indebtedness or liens, dispose of assets, make certain restricted payments or investments, enter into transactions with affiliates or merge with or into other entities.

Murphy USA Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

On September 13, 2019, Murphy Oil USA, Inc., 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 a prior note issuance. The 2029 Senior Notes are fully and unconditionally guaranteed by Murphy USA, and are guaranteed by certain 100% owned subsidiaries that guarantee our Credit Facilities. The indenture governing the 2029 Senior Notes contains restrictive covenants that are substantially similar to the covenants for the 2027 Senior Notes.

On January 29, 2021, Murphy Oil USA, Inc., issued $500 million of 3.75% Senior Notes due 2031 (the “2031 Senior Notes” and, together with the 2027 Senior Notes and the 2029 Senior Notes, the "Senior Notes"). The net proceeds from the issuance of the 2031 Senior Notes were used, in part, to fund the acquisition of QuickChek and other obligations related to that transaction. The 2031 Senior Notes are fully and unconditionally guaranteed by the Company and by the Company's subsidiaries that guarantee our Credit Facilities. The indenture governing the 2031 Senior Notes contains restrictive covenants that are substantially similar to the covenants for the 2027 and 2029 Senior Notes.

The Senior Notes and the 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 Senior Notes.

Revolving Credit 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 $392 million at June 30, 2023 and $394 million at December 31, 2022. The term loan is due January 2028, and we are required to make quarterly principal payments of $1 million, which began on July 1, 2021. As of June 30, 2023, we had no outstanding borrowings under the Revolving Facility and had $4.7 million in outstanding letters of credit (which reduces the amount available to borrow under the Revolving Facility).

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”);

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

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;

Murphy USA Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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 of 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. 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 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. The Credit Agreement also contains customary events of default.

Pursuant to the credit agreement's covenant limiting certain restricted payments, certain payments in respect of our equity interests, including dividends, when the total leverage ratio, calculated on a pro forma basis, is greater than 3.0 to 1.0 could be limited. At June 30, 2023, our total leverage ratio was 1.66 to 1.0 which meant our ability at that date to make restricted payments was not limited. 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 $112.2 million or 4.50% of consolidated net tangible assets over the life of the credit agreement.

All obligations under the credit agreement are guaranteed by Murphy USA and the subsidiary guarantors party thereto, and all obligations under the credit agreement, including the guarantees of those obligations, are secured by certain assets of Murphy USA, Murphy Oil USA, Inc. and the guarantors party to the guarantee and collateral agreement in respect thereof.

Note 7 — Asset Retirement Obligations (ARO)

The majority of the ARO recognized by the Company at June 30, 2023 and December 31, 2022 is related to the estimated costs to dismantle and abandon certain of its retail gasoline stores. The Company has not recorded an ARO for certain of its marketing assets because sufficient information is presently not available to estimate a range of potential settlement dates for the obligation. These assets are consistently being upgraded and are expected to be operational into the foreseeable future. In these cases, the obligation will be initially recognized in the period in which sufficient information exists to estimate the obligation.

Murphy USA Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

A reconciliation of the beginning and ending aggregate carrying amount of the ARO is shown in the following table.


(Millions of dollars)	June 30, 2023		December 31, 2022
Balance at beginning of period	$	43.3	$	39.2

Accretion expense	1.5		2.7
Settlements of liabilities	(2.3)		(2.3)
Liabilities incurred	1.1		3.7
Balance at end of period	$	43.6	$	43.3

The estimation of future ARO is based on a number of assumptions requiring professional judgment. The Company cannot predict the type of revisions to these assumptions that may be required in future periods due to the lack of availability of additional information.

Note 8 — Income Taxes

The effective tax rate is calculated as the amount of income tax expense (benefit) divided by income before income tax expense (benefit). For the three and six month periods ended June 30, 2023 and 2022, the Company’s approximate effective tax rates were as follows:


	2023	2022
Three months ended June 30,	24.4%	24.0%
Six months ended June 30,	24.0%	24.0%

In the six months ended June 30, 2023, the Company recognized approximately $2.3 million of excess tax benefits related to stock compensation for employees and $0.5 million in other discrete tax benefits. For the six months ended June 30, 2022, the Company recognized approximately $2.0 million of excess tax benefits related to stock compensation for employees and $0.4 million in other discrete tax benefits.

As of June 30, 2023, the earliest year remaining open for Federal audits and/or settlement is 2019 and for state audits and/or settlement is 2018. Although the Company believes that recorded liabilities for unsettled issues are adequate, additional gains or losses could occur in future periods from resolution of outstanding unsettled matters.

Note 9 — Incentive Plans

2013 Long-Term Incentive Plan

Effective August 30, 2013, certain of our employees began to participate in the Murphy USA 2013 Long-Term Incentive Plan which was subsequently amended and restated effective as of February 8, 2017 (the “MUSA 2013 Plan”). The MUSA 2013 Plan authorizes the Executive Compensation Committee of our Board of Directors (“the Committee”) to grant non-qualified or incentive stock options, stock appreciation rights, stock awards (including restricted stock and restricted stock unit awards), dividend equivalent units, cash awards, and performance awards to our employees. No more than 5.5 million shares of MUSA common stock may be delivered under the MUSA 2013 Plan and no more than 1 million shares of common stock may be awarded to any one employee, subject to adjustment for changes in capitalization. The maximum cash amount payable pursuant to any “performance-based” award to any participant in any calendar year is $5.0 million. On May 4, 2023, the 2023 Omnibus Incentive Compensation Plan (the "MUSA 2023 Plan") was approved by shareholders and became effective for all future grants for both employees and directors, as described later in the footnote.

Beginning with its initial quarterly dividend in December 2020, the Company issues dividend equivalent units ("DEU") on all outstanding, unvested equity awards (except stock options) in an amount commensurate with

Murphy USA Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

regular quarterly dividends paid on common stock. The terms of the DEU mirror the underlying awards and will only vest if the related award vests. DEUs issued are included with grants in each respective table as applicable.

STOCK OPTIONS – The Committee fixes the option price of each option granted at no less than fair market value (FMV) on the date of the grant and fixes the option term at no more than 7 years from such date. In February 2023, the Committee granted nonqualified stock options to certain employees of the Company. The Black-Scholes valuation for these awards was $88.53 per option.


Assumptions used to value awards:
Dividend yield	0.53		%
Expected volatility	33.1		%
Risk-free interest rate	3.8		%
Expected life (years)	4.9
Stock price at valuation date	$	263.48

Changes in options outstanding for Company employees during the period from December 31, 2022 to June 30, 2023 are presented in the following table:


2013 Plan — Options	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (Millions of Dollars)
Outstanding at December 31, 2022	313,950	$	112.06
Granted	38,100	$	263.48
Exercised	(12,400)	$	79.05

Outstanding at June 30, 2023	339,650	$	130.25	4.0	$	61.4

Exercisable at June 30, 2023	208,700	$	92.87	3.0	$	45.5

RESTRICTED STOCK UNITS (MUSA 2013 Plan) – The Committee has granted time-based restricted stock units (RSUs) as part of the compensation plan for its executives and certain other employees since its inception. The awards granted in the current year were under the MUSA 2013 Plan, are valued at the grant date fair value, and vest over three years.

Changes in restricted stock units outstanding for Company employees during the period from December 31, 2022 to June 30, 2023 are presented in the following table:


2013 Plan — Employee RSUs	Number of units	Weighted Average Grant Date Fair Value		Total Fair Value (Millions of Dollars)
Outstanding at December 31, 2022	149,366	$	125.51
Granted	34,436	$	258.07
Vested and issued	(47,461)	$	89.46	$	11.8
Forfeited	(1,249)	$	176.57
Outstanding at June 30, 2023	135,092	$	171.49	$	42.0

PERFORMANCE-BASED RESTRICTED STOCK UNITS (MUSA 2013 Plan) – In February 2023, the Committee awarded performance-based restricted stock units (performance units or PSU) to certain employees. Half of the performance units vest based on a three-year return on average capital employed ("ROACE") calculation and the other half vest based on a three-year total shareholder return ("TSR") calculation that compares MUSA to a group of 17 peer companies. The portion of the awards that vest based on TSR qualify as a market condition and must be valued using a Monte Carlo valuation model. For the TSR portion of the awards, the fair value was determined to be $330.18 per unit. For the ROACE portion of the awards, the valuation will be based on the grant date fair

Murphy USA Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

value of $263.48 per unit and the number of awards will be periodically assessed to determine the probability of vesting.

Changes in performance-based restricted stock units outstanding for Company employees during the period from December 31, 2022 to June 30, 2023 are presented in the following table:


2013 Plan — Employee PSUs	Number of Units	Weighted Average Grant Date Fair Value		Total Fair Value (Millions of Dollars)
Outstanding at December 31, 2022	106,001	$	160.03
Granted	62,158	$	293.84
Vested and issued	(72,799)	$	121.83	$	19.0

Outstanding at June 30, 2023	95,360	$	210.75	$	29.7

2013 Stock Plan for Non-employee Directors

Effective August 8, 2013, Murphy USA adopted the 2013 Murphy USA Stock Plan for Non-employee Directors (the “2013 Directors Plan”). The directors for Murphy USA are compensated with a mixture of cash payments and equity-based awards. Awards under the Directors Plan may be in the form of restricted stock, restricted stock units, stock options, or a combination thereof. An aggregate of 500,000 shares of common stock was reserved for issuance of grants under the Directors Plan. With approval of the 2023 Omnibus Plan, all future director grants will be granted under that plan.

RESTRICTED STOCK UNITS (2013 Directors Plan) – The Committee has also granted time based RSUs to the non-employee directors of the Company as part of their overall compensation package for being a member of the Board of Directors. Awards prior to 2023 vest at the end of three years and those granted in 2023 vest at the end of one year.

DEFERRED STOCK UNITS (2013 Directors Plan) — Effective January 1, 2023, non-employee directors can elect to receive their annual cash retainers in the form of Deferred Stock Units ("DSUs"). The DSUs are recognized at their fair value on the date of the grant. Director fees which are deferred into DSUs are calculated and expensed each quarter by taking fees earned during the quarter and dividing by the closing price of our common stock on the last trading day of the quarter. Each DSU represents the right to receive one share of common stock following the completion of a director's service. In addition, beginning with the 2023 annual equity grants to non-employee directors, these directors may elect to defer receipt of their vested RSUs until their service ends. These RSUs are included in the Director RSU table above, will vest in one year, and will thereafter become deferred stock units.

Changes in restricted stock units outstanding for Company non-employee directors during the period from December 31, 2022 to June 30, 2023 are presented in the following table:


2013 Plan — Director RSUs and DSUs	Number of Units	Weighted Average Grant Date Fair Value		Total Fair Value (Millions of Dollars)
Outstanding at December 31, 2022	26,923	$	132.38
Granted	6,555	$	259.49
Vested and issued	(9,880)	$	110.19	$	2.7


Outstanding at June 30, 2023, including DSUs	23,598	$	178.20	$	7.3

During the three-month period ended March 31, 2023, we granted 421 DSUs and recorded director expense of $0.1 million related to the grants under the 2013 Plan. No additional shares will be granted under the 2013 Plan. At June 30, 2023 there were 421 Director DSUs outstanding with an average grant date fair value of $258.05 under the 2013 Plan.

Murphy USA Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

2023 Omnibus Incentive Compensation Plan

On May 4, 2023, the MUSA 2023 Plan became effective upon the approval of the Company's stockholders. The MUSA 2023 Plan has been established to replace, on a prospective basis, the MUSA 2013 Plan and the 2013 Directors Plan, each of which expire on August 8, 2023. The MUSA 2023 Plan authorizes the Executive Compensation Committee of our Board of Directors (“the Committee”) to grant to non-employee directors, employees, and consultants of the Company, or any of its subsidiaries, stock options (incentive stock options ("ISOs") and nonqualified stock options ("NQSO")), stock appreciation rights ("SARs"), restricted stock, restricted stock units ("RSUs"), performance awards or other cash-based awards and other stock-based awards. The maximum number of shares available for issuance under the MUSA 2023 Plan shall not exceed in the aggregate 1,725,000 shares (subject to certain adjustments). As of June 30, 2023, other than the deferred stock units described below, no other grants have been made under the MUSA 2023 Plan.

DEFERRED STOCK UNITS — Non-employee directors can elect to receive their annual cash retainers in the form of DSUs. The DSUs are recognized at their fair value on the date of the grant. Director fees which are deferred into DSUs are calculated and expensed each quarter by taking fees earned during the quarter and dividing by the closing price of our common stock on the last trading day of the quarter. Each DSU represents the right to receive one share of common stock following the completion of a director's service.

Changes in restricted stock units outstanding for Company 2023 Plan during the period from December 31, 2022 to June 30, 2023 are presented in the following table:


2023 Plan — RSUs and Director DSUs	Number of Units	Weighted Average Grant Date Fair Value		Total Fair Value (Millions of Dollars)
Outstanding at December 31, 2022	—	$	—
Granted	366	$	311.11
Vested and issued	—	$	—	$	—


Outstanding at June 30, 2023, including DSUs	366	$	311.11	$	0.1

During the three-month period ended June 30, 2023, we granted 366 DSUs and recorded director expense of $0.1 million related to the grants. At June 30, 2023, there were 366 Director DSUs vested and outstanding with an average grant date fair value of $311.11 under the MUSA 2023 Plan.

Share-based compensation for the six months ended June 30, 2023 and 2022, was $10.1 million and $7.0 million, respectively. There were $0.3 million in income tax benefits realized for the tax deductions from options exercised for the six months ended June 30, 2023 and there were $0.5 million for the six months ended June 30, 2022.

Note 10 — Financial Instruments and Risk Management

DERIVATIVE INSTRUMENTS — The Company makes limited use of derivative instruments to manage certain risks related to commodity prices and interest rates. The use of derivative instruments for risk management is covered by operating policies and is closely monitored by the Company’s senior management. The Company does not hold any derivatives for speculative purposes and it does not use derivatives with leveraged or complex features. Derivative instruments are traded primarily with credit worthy major financial institutions or over national exchanges such as the New York Mercantile Exchange (“NYMEX”). For accounting purposes, the Company has not designated commodity derivative contracts as hedges, and therefore, it recognizes all gains and losses on these derivative contracts in its Consolidated Statements of Income. Certain interest rate derivative contracts were accounted for as hedges and gain or loss associated with recording the fair value of these contracts was deferred in AOCI until the anticipated transactions occur. As of June 30, 2023, all current commodity derivative activity is immaterial.

There were $1.0 million in cash deposits at June 30, 2023 and none at December 31, 2022 related to commodity derivative contracts reported in Prepaid expenses and other current assets in the Consolidated Balance Sheets.

Murphy USA Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

These cash deposits have not been used to increase the reported net assets or reduce the reported net liabilities on the derivative contracts at June 30, 2023 or December 31, 2022.

Interest Rate Risks

Under hedge accounting rules, the Company deferred the net charge or benefit associated with the interest rate swap entered into to manage the variability in interest payments for the variable-rate debt in association with $150.0 million of our outstanding term loan dated August 27, 2019 until the debt was repaid on January 29, 2021. At that time the hedge was de-designated and therefore hedge accounting is no longer applicable and mark-to-market gains and losses are recognized in the period in which the change occurs in the Consolidated Statements of Income in interest expense. The current loan balance subject to the hedge is $52.5 million. The Company is reclassifying the accumulated other comprehensive loss on the previous interest rate swap, $2.4 million as of the de-designation date, into interest expense using a straight-line approach over the remaining life of the originally designated hedging relationship. The amount of pre-tax gains in accumulated other comprehensive loss that was reclassified into interest expense was $0.3 million and $0.5 million for the three and six months ended June 30, 2023 and 2022, respectively. The remaining balance at June 30, 2023 was $0.2 million. Prior to the de-designation, changes in the fair values of the interest rate swaps were recorded as a component of other comprehensive loss.

Note 11 — Earnings Per Share

Basic earnings per common share is computed by dividing net income available to common stockholders by the weighted average of common shares outstanding during the period. Diluted earnings per common share adjusts basic earnings per common share for the effects of stock options and restricted stock in the periods where such items are dilutive.

On December 1, 2021, our Board of Directors approved a share repurchase authorization of up to $1 billion that expires December 31, 2026, and excludes excise tax. As of June 30, 2023, approximately $105.7 million remained under the 2021 authorization. In addition, on May 2, 2023, we announced that our Board of Directors authorized a new share repurchase authorization of up to $1.5 billion to begin upon completion of the current $1 billion authorization and to be executed by December 31, 2028. For the six months ended June 30, 2023, the Company repurchased 382,992 shares of common stock for an average price of $284.01 per share including brokerage fees and excise tax. For the six months ended June 30, 2022, 1,716,166 shares were repurchased for an average price of $207.10 per share.

The following tables provide a reconciliation of basic and diluted earnings per share computations for the three and six months ended June 30, 2023 and 2022:


	Three Months Ended June 30,				Six Months Ended June 30,
(Millions of dollars, except share and per share amounts)	2023		2022		2023		2022
Earnings per common share:
Net income per share - basic


Net income attributable to common stockholders	$	132.8	$	183.3	$	239.1	$	335.7

Weighted average common shares outstanding (in thousands)	21,686		23,952		21,712		24,302

Earnings per common share	$	6.12	$	7.65	$	11.01	$	13.81

Murphy USA Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)


	Three Months Ended March 31,				Six Months Ended June 30,
(Millions of dollars, except share and per share amounts)	2023		2022		2023		2022
Earnings per common share - assuming dilution:
Net income per share - diluted


Net income attributable to common stockholders	$	132.8	$	183.3	$	239.1	$	335.7