10-Q 1 musa-20210930.htm 10-Q musa-20210930
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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, 2021
 
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-20210930_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, 2021 was 25,633,198.

















 
MURPHY USA INC.
 
TABLE OF CONTENTS

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ITEM 1.  FINANCIAL STATEMENTS
Murphy USA Inc.
Consolidated Balance Sheets
September 30,December 31,
(Millions of dollars, except share amounts)20212020
(unaudited)
Assets  
Current assets  
Cash and cash equivalents$301.3 $163.6 
Accounts receivable—trade, less allowance for doubtful accounts of $0.1 at 2021 and 2020
208.4 168.8 
Inventories289.3 279.1 
Prepaid expenses and other current assets27.6 13.7 
Total current assets826.6 625.2 
Property, plant and equipment, at cost less accumulated depreciation and amortization of $1,321.3 at 2021 and $1,191.4 at 2020
2,371.3 1,867.6 
Operating lease right of use assets, net*412.8 147.7 
Intangible assets, net of amortization*141.1 34.6 
Goodwill329.1  
Other assets*13.4 10.6 
Total assets$4,094.3 $2,685.7 
Liabilities and Stockholders' Equity  
Current liabilities  
Current maturities of long-term debt$14.8 $51.2 
Trade accounts payable and accrued liabilities695.5 471.1 
Income taxes payable8.6 8.8 
Total current liabilities718.9 531.1 
Long-term debt, including capitalized lease obligations1,799.3 951.2 
Deferred income taxes285.1 218.4 
Asset retirement obligations38.1 35.1 
Non current operating lease liabilities*401.9 142.5 
Deferred credits and other liabilities*26.2 23.3 
Total liabilities3,269.5 1,901.6 
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 2021 and 2020, respectively)
0.5 0.5 
Treasury stock (21,133,966 and 19,518,551 shares held at
2021 and 2020, respectively)(1,715.9)(1,490.9)
Additional paid in capital (APIC)530.5 533.3 
Retained earnings2,011.0 1,743.1 
Accumulated other comprehensive income (loss) (AOCI)(1.3)(1.9)
Total stockholders' equity824.8 784.1 
Total liabilities and stockholders' equity$4,094.3 $2,685.7 
*Prior year amounts have been reclassified to conform with current period presentation

See notes to consolidated financial statements.
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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)2021202020212020
Operating Revenues  
Petroleum product sales (a)$3,573.9 $2,056.0 $9,614.2 $6,125.1 
Merchandise sales953.4 756.8 2,750.0 2,211.4 
Other operating revenues73.1 26.2 229.3 66.9 
Total operating revenues4,600.4 2,839.0 12,593.5 8,403.4 
Operating Expenses  
Petroleum product cost of goods sold (a)3,353.5 1,862.2 9,004.8 5,409.8 
Merchandise cost of goods sold766.1 638.7 2,229.8 1,867.4 
Store and other operating expenses221.1 142.9 607.1 409.8 
Depreciation and amortization53.2 40.6 157.5 119.5 
Selling, general and administrative47.2 53.7 140.0 130.0 
Accretion of asset retirement obligations0.6 0.6 1.9 1.7 
Acquisition related costs0.7  9.7  
Total operating expenses4,442.4 2,738.7 12,150.8 7,938.2 
Gain (loss) on sale of assets0.3  0.4 1.4 
Income (loss) from operations158.3 100.3 443.1 466.6 
Other income (expense)  
Interest income0.1  0.1 1.0 
Interest expense(20.5)(12.4)(62.2)(38.7)
Other nonoperating income (expense)(0.2)0.2  (0.5)
Total other income (expense)(20.6)(12.2)(62.1)(38.2)
Income (loss) before income taxes137.7 88.1 381.0 428.4 
Income tax expense (benefit)33.7 21.2 92.9 103.3 
Net Income $104.0 $66.9 $288.1 $325.1 
Basic and Diluted Earnings Per Common Share  
Basic$4.03 $2.30 $10.86 $11.00 
Diluted$3.98 $2.27 $10.72 $10.88 
Weighted-Average Common Shares Outstanding (in thousands):  
Basic25,779 29,111 26,525 29,546 
Diluted26,153 29,499 26,883 29,887 
Supplemental information:  
(a) Includes excise taxes of:$520.9 $447.0 $1,514.9 $1,300.7 

See notes to consolidated financial statements.



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Murphy USA Inc.
Consolidated Statements of Comprehensive Income (Loss)
(unaudited)
(Millions of dollars)Three Months Ended
September 30,
Nine Months Ended
September 30,
2021202020212020
Net income $104.0 $66.9 $288.1 $325.1 
Other comprehensive income (loss), net of tax
Interest rate swap:
Realized gain (loss) (0.4)(0.1)(0.5)
Unrealized gain (loss) 0.5 0.1 (3.7)
Reclassifications:
Realized gain reclassified to interest expense 0.4 0.1 0.5 
Amortization of unrealized gain to interest expense0.3  0.7  
0.3 0.5 0.8 (3.7)
Deferred income tax (benefit) expense0.1 0.1 0.2 (0.9)
Other comprehensive income (loss)0.2 0.4 0.6 (2.8)
Comprehensive income $104.2 $67.3 $288.7 $322.3 



See notes to consolidated financial statements.
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Murphy USA Inc.
Consolidated Statements of Cash Flows
(unaudited) 
 (Millions of dollars)
Nine Months Ended
September 30,
20212020
Operating Activities  
Net income $288.1 $325.1 
Adjustments to reconcile net income (loss) to net cash provided by (required by) operating activities 
Depreciation and amortization157.5 119.5 
Deferred and noncurrent income tax charges (credits)7.2 1.7 
Accretion of asset retirement obligations1.9 1.7 
Pretax (gains) losses from sale of assets(0.4)(1.4)
Net (increase) decrease in noncash operating working capital112.2 (2.2)
Other operating activities - net20.5 23.4 
Net cash provided by (required by) operating activities587.0 467.8 
Investing Activities  
Property additions(211.6)(169.4)
Payments for acquisition, net of cash acquired(641.1) 
Proceeds from sale of assets1.0 7.7 
Other investing activities - net(2.0)(1.6)
Net cash provided by (required by) investing activities(853.7)(163.3)
Financing Activities  
Purchase of treasury stock(231.5)(230.5)
Dividends paid(19.9) 
Borrowings of debt892.8  
Repayments of debt(220.5)(26.1)
Debt issuance costs(9.9) 
Amounts related to share-based compensation(6.6)(10.7)
Net cash provided by (required by) financing activities404.4 (267.3)
Net increase (decrease) in cash, cash equivalents, and restricted cash137.7 37.2 
Cash, cash equivalents, and restricted cash at beginning of period163.6 280.3 
Cash, cash equivalents, and restricted cash at end of period$301.3 $317.5 
 
See notes to consolidated financial statements.

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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, 201946,767,164 $0.5 $(1,099.8)$538.7 $1,362.9 $0.7 $803.0 
Cumulative effect of a change in accounting principle— — — — 1.1 — 1.1 
Net income (loss)— — — — 89.3 — 89.3 
Loss on interest rate hedge, net of tax— — — — — (2.7)(2.7)
Purchase of treasury stock— — (140.6)— — — (140.6)
Issuance of treasury stock— — 5.2 (5.7)— — (0.5)
Amounts related to share-based compensation— — — (5.6)— — (5.6)
Share-based compensation expense— — — 2.8 — — 2.8 
Balance as of March 31, 202046,767,164 0.5 (1,235.2)530.2 1,453.3 (2.0)746.8 
Net income (loss)— — — — 168.9 — 168.9 
Loss on interest rate hedge, net of tax— — — — — (0.5)(0.5)
Share-based compensation expense— — — 2.8 — — 2.8 
Balance as of June 30, 202046,767,164 $0.5 $(1,235.2)$533.0 $1,622.2 $(2.5)$918.0 
Net income (loss)— — — — 66.9 — 66.9 
Loss on interest rate hedge, net of tax— — — — — 0.4 0.4 
Purchase of treasury stock— — (89.9)— — — (89.9)
Issuance of treasury stock— — 3.3 (3.3)— —  
Amounts related to share-based compensation— — — (5.1)— — (5.1)
Share-based compensation expense— — — 5.4 — — 5.4 
Balance as of September 30, 202046,767,164 $0.5 $(1,321.8)$530.0 $1,689.1 $(2.1)$895.7 

























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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 (loss)— — — — 55.3 — 55.3 
Gain 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 (loss)— — — — 128.8 — 128.8 
Gain on interest rate hedge, net of tax— — — — — 0.2 0.2 
Cash dividends declared ($0.25 per share)
— — — — (6.7)— (6.7)
Dividend equivalent units accrued— — —   —  
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 (loss)— — — — 104.0 — 104.0 
Gain 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.
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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, it operates non-fuel convenience stores in select markets in the Northeast. Murphy USA operates a chain of owned retail stores under the brand name of Murphy USA® which are almost all located in close proximity to Walmart stores in 25 states, markets gasoline and other products at standalone stores under the Murphy Express brand, and Quick Chek Corporation ("QuickChek") has convenience stores located in New Jersey and New York. At September 30, 2021, the Company had a total of 1,669 Company stores of which 1,151 were Murphy USA, 360 were Murphy Express and 158 were QuickChek.
 
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, 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 and its historical fiscal year end was the Friday nearest to October 31. For the three month period ended September 30, 2021, the QuickChek results cover the period from July 3, 2021 to October 1, 2021. For the year-to-date period, the QuickChek results cover the period from January 29, 2021 (the date of acquisition) to October 1, 2021. The difference in timing of the month 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.

Accounting policies related to the acquisition of QuickChek

Business combinations — The purchase price of an acquisition is measured as the aggregate of the fair value of the consideration transferred. The purchase price is allocated to the fair values of the tangible and intangible assets acquired and liabilities assumed, with any excess recorded as goodwill. These fair value determinations require judgment and may involve the use of significant estimates and assumptions. The purchase price allocation may be provisional during a measurement period of up to one year to provide reasonable time to obtain the information necessary to identify and measure the assets acquired and liabilities assumed. Any such measurement period adjustments are recognized in the period in which the adjustment amount is determined. Transaction costs associated with the acquisition are expensed as incurred.

Goodwill and intangible assets — Goodwill represents the excess of the aggregate of the consideration transferred over the net assets acquired and liabilities assumed and is tested annually for impairment, or more frequently if there are indicators of impairment. Acquired finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives, and are reviewed for impairment when events or circumstances indicate that the asset group to which the intangible assets belong might be impaired. The Company revises the estimated remaining useful life of these assets when events or changes in circumstances warrant a revision. If the Company revises the useful life, the unamortized balance is amortized over the useful life on a prospective basis. Indefinite-lived intangibles are tested annually for impairment, or more often if indicators warrant.

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, 2020, 2019 and 2018, 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 19, 2021.
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Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)




Recently Issued Accounting Standards 

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting". This standard included optional guidance for a limited period of time to help ease the burden in accounting for the effects of reference rate reform. The new standard is effective for all entities through December 31, 2022. The Company does not expect the adoption of this standard to 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, 2021 and 2020, respectively:


Three Months Ended September 30, 2021Three Months Ended September 30, 2020
(Millions of dollars)MarketingCorporate and Other AssetsConsolidatedMarketingCorporate and Other AssetsConsolidated
Petroleum product sales (at retail) 1
$3,168.3 $ $3,168.3 $1,867.8 $ $1,867.8 
Petroleum product sales (at wholesale) 405.6  405.6 188.2  188.2 
Total petroleum product sales3,573.9  3,573.9 2,056.0  2,056.0 
Merchandise sales953.4  953.4 756.8  756.8 
Other operating revenues:
RINs71.5  71.5 25.2  25.2 
Other revenues 2
1.5 0.1 1.6 1.1 (0.1)1.0 
Total revenues$4,600.3 $0.1 $4,600.4 $2,839.1 $(0.1)$2,839.0 
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Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)



Nine Months Ended September 30, 2021Nine Months Ended September 30, 2020
(Millions of dollars)MarketingCorporate and Other AssetsConsolidatedMarketingCorporate and Other AssetsConsolidated
Petroleum product sales (at retail) 1
$8,615.6  $8,615.6 $5,558.8 $ $5,558.8 
Petroleum product sales (at wholesale)998.6  998.6 566.3  566.3 
Total petroleum product sales9,614.2  9,614.2 6,125.1  6,125.1 
Merchandise sales2,750.0  2,750.0 2,211.4  2,211.4 
Other operating revenues:
RINs224.6  224.6 63.3  63.3 
Other revenues 2
4.5 0.2 4.7 3.6  3.6 
Total revenues$12,593.3 $0.2 $12,593.5 $8,403.4 $ $8,403.4 


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 only 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, 2021 and December 31, 2020 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, 2021 and December 31, 2020, we had $125.5 million and $88.3 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,
2021
December 31,
2020
Petroleum products - First-In, First-Out ("FIFO") basis$335.6 $223.0 
Less: Last-In, First-Out ("LIFO") reserve - petroleum products(232.7)(101.3)
Petroleum products - LIFO basis102.9 121.7 
Store merchandise for resale178.1 152.0 
Materials and supplies8.3 5.4 
Total inventories$289.3 $279.1 
 
At September 30, 2021 and December 31, 2020, the replacement cost (market value) of LIFO inventories exceeded the LIFO carrying value by $232.7 million and $101.3 million, respectively. The QuickChek subsidiary values its general merchandise inventory utilizing the LIFO method and values the inventory of gasoline and certain other merchandise items using the FIFO method. The QuickChek LIFO reserve balance for the current year was immaterial.

11


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



Note 4 Business Acquisition

On January 29, 2021, MUSA completed the previously announced transaction to acquire 100% of QuickChek, a privately-held convenience store chain with a regional brand consisting of 156 stores located in New Jersey and New York, in an all-cash transaction. The acquisition was made to expand the MUSA 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 preliminary estimated 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's existing store footprint.

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 preliminary fair value of the consideration transferred at the date of the acquisition, as well as the calculation of preliminary goodwill based on the excess of consideration over the provisional 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 
Inventories25.1 
Prepaid expenses and other current assets5.6 
Property and equipment443.0 
Right of use assets241.0 
Other assets5.4 
Identified intangible assets106.8 
Liabilities assumed:
Accounts payable and accrued expenses(68.5)
Deferred income tax liabilities(59.5)
Asset retirement obligation(1.2)
Current and long term debt, including finance lease obligations(145.3)
Deferred credits and other liabilities(7.4)
Operating lease liabilities(241.0)
Net assets acquired312.0 
Goodwill329.1 
Fair value of consideration transferred, net of cash and cash equivalents acquired$641.1 


12


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



Due to the timing of the acquisition, the allocation of the purchase price to assets acquired and liabilities assumed is preliminary pending finalization of management's analysis and is expected to be completed prior to December 31, 2021.

The Company has not disclosed pro forma information of the combined business as the transaction is not material to revenue or net earnings.

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 operations, 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 $9.7 million for the nine months ended September 30, 2021.

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)
Goodwill balance, January 1, 2021$ 
QuickChek acquisition329.1 
Goodwill balance, September 30, 2021
$329.1 

We amortize intangible assets subject to amortization on a straight-line or accelerated basis based on the period for which the economic benefits of the asset or liability are expected to be realized. In connection with our acquisition of QuickChek on January 29, 2021, we recorded the following amounts of intangible assets, in addition to the Company's existing intangible asset pipeline space, which is being amortized over a 40 year life.
January 29,
2021
Remaining Useful Life
(Millions of dollars)Carrying Value(in years)
Intangible assets subject to amortization:
Intangible lease liability$(9.1)15.5
Intangible assets not subject to amortization:
Trade name 115.4 n/a
Liquor licenses0.5 n/a
Total intangible assets acquired$106.8 


Intangible assets subject to amortization at September 30, 2021 and December 31, 2020 consisted of the following:

Remaining Useful Life (in years)September 30, 2021December 31, 2020
(Millions of dollars)CostNetCostNet
Pipeline space33.9$39.6 $33.9 $39.6 $34.6 
Intangible lease liability14.8(9.1)(8.7)  
Total intangible assets subject to amortization$30.5 $25.2 $39.6 $34.6 


13


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



Note 6 Long-Term Debt
 
Long-term debt consisted of the following: