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NAVIGATING UNCERTAINTY
2019 Annual Report and 2020 Proxy Statement
FINANCIAL
HIGHLIGHTS
FUEL METRICS
Total retail gallons sold (in billions)
Retail fuel gallons sold (per store month)
Total fuel contribution (cents per gallon)
MERCHANDISE METRICS
2015
2016
2017
2018
2019
4.124
267,910
14.9
4.195
259,059
15.4
4.141
245,307
16.4
4.232
244,033
16.2
4.374
248,258
16.1
Total merchandise sales ($ billions)
Total merchandise margin dollars (per store month)
Merchandise unit margins (%)
Non-tobacco margin dollars (per store month)
Total non-tobacco unit margins (%)
$ 2.274
$ 21,274
14.4%
$ 8,742
25.1%
$ 2.339
$ 22,484
15.6%
$ 9,163
25.7%
$ 2.373
$ 22,585
$ 2.423
$ 23,086
$ 2.620
$ 23,798
16.1%
16.5%
16.0%
$ 9,288
$ 9,615
$ 9,753
24.7%
24.4%
23.4%
FINANCIAL METRICS ($ MILLIONS)
Net income from continuing operations
Adjusted EBITDA
Cash and cash equivalents
Capital spending
Long-term debt
Market capitalization
Ending share price ($ per share)
$ 137.6
$ 342.9
$ 102.3
$ 215.6
$ 490.2
$ 2,531.6
$ 60.74
$ 221.5
$ 400.1
$ 153.8
$ 263.9
$ 629.6
$ 2,270.5
$ 61.47
$ 245.3
$ 405.9
$ 170.0
$ 273.7
$ 860.9
$ 2,739.6
$ 80.36
$ 213.6
$ 411.8
$ 184.5
$ 193.8
$ 842.1
$ 2,472.5
$ 76.64
$ 154.8
$ 422.6
$ 280.3
$ 214.6
$ 999.3
$ 3,563.8
$ 117.00
Murphy USA Stock Performance
Murphy USA Stock Performance
From December 31, 2014 to December 31, 2019
From December 31, 2014 to December 31, 2019
Based on Ending Price of Each Period
Based on Ending Price of Each Period
MURPHY USA INC.
MURPHY USA INC.
S&P 500 INDEX
S&P 500 INDEX
S&P 400 MIDCAP INDEX
S&P 400 MIDCAP INDEX
200
200
170
157
143
170
157
143
)
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2
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150
100
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50
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1
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1
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1
0
2
/
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2
1
200
200
150
150
100
100
50
50
Total Shareholder Return, Annualized
Total Shareholder Return, Annualized
From December 31, 2016 to December 31, 2019
From December 31, 2016 to December 31, 2019
Based on 10-Day Average Price at End of Each Period
Based on 10-Day Average Price at End of Each Period
22.4%
22.4%
14.8%
14.8%
.
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A
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H
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M
.
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5
P
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8.9%
8.9%
X
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4
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25
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20
20
15
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10
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8
8
6
6
4
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2
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0
A N N U A L R E P O R T 2 0 1 9
P A G E 1
Letter To Shareholders - Navigating Uncertainty
As I write this letter to our shareholders and other stake holders
who depend and count on Murphy USA, our communities across
26 states are facing unprecedented uncertainty as a pandemic
spreads across the globe. In turn, the actions and reactions of
governments and market forces compound the level and nature
of uncertainties across all communities. At Murphy USA, we aim
to do our part to work with all our stakeholders and partners
to navigate through this difficult period and emerge better and
stronger on the other side.
As a leader surrounded by a strong and diverse management
team and Board of Directors, it is virtually impossible to
predict exactly how this pandemic plays out between now and
the time this letter goes to print, let alone weeks and months
from now when readers look back for lessons to be gleaned.
This certainly will not be the last time we face challenges like
this as leaders, a company or a global community. However,
it is precisely in these times that the companies that come out
better and stronger are the ones who have built the resilience
to weather the current and unpredictable future environment,
the agility to respond to unanticipated shifts and the boldness
to focus on long-term strategies to create value through
confidence in their core capabilities.
Since our spin in 2013, we have built our company around five
principles that support the agility, resilience and boldness of
our business model which gives us confidence in our short
and long-term outlook:
• A competitive business model, low-priced value
proposition and supporting low cost structure built
to endure and succeed in any environment;
• The long-standing belief that our customers are
the core of our business and when we win with them,
all of our stakeholders win;
• A high-performing organization with the agility to
respond and create competitive advantage from shifts
in market volatility, regulations and macro factors;
• A strong and flexible balance sheet supported by the
credibility we have earned through delivering results
so we can continue to invest and reinvest in our
priorities in any economic setting;
• A balanced and disciplined capital allocation strategy to
make the right trade-offs in the short term with an
unwavering focus on long-term value creation.
Our results since the spin reflect these principles and our 2019
results further demonstrate our commitment to them.
five years through a commitment to maintaining our low-price
position in the markets we serve. As a result, strong customer
traffic supported record merchandise sales and contribution
margin. Further, the March 2019 launch of our new loyalty
program, Murphy Drive Rewards, was met with significant
enthusiasm as membership reached nearly 3 million by year-
end, allowing us to more closely connect with our customers
and provide them greater value. Coupled with a relentless
focus on store and home office cost controls, we drove our
fuel-breakeven metric to a new record-low of 0.67 cents per
gallon, which makes our business more competitive and agile
to win over the long term.
With a strengthened balance sheet, we maintained a
disciplined return-focused capital allocation program in 2019,
which funded organic growth and empowered meaningful
share repurchase. In September of 2019, we re-financed
our long-term debt, reducing future interest expense and
extending the average maturity profile of our 10-year notes.
The strength in our balance sheet and a resilient business
model have provided us the flexibility to re-imagine our new
store format, which now favors a larger 2,800 square foot
profile with an expanded merchandise offering that will help
drive higher new store returns going forward. With up to
50 new stores scheduled in 2021 and beyond, coupled with
ongoing productivity improvements to our existing stores,
we have created a long runway for sustainable shareholder
growth in the years ahead.
As we exit the first quarter of 2020, we continue to witness
extreme market volatility, new government policies and
regulations, and other challenges. The principles that
guided us successfully in 2019 and since our 2013 spin
continue to enhance our value proposition to our customers,
address the current and unforeseen needs of our 9,900+
employees, support our local communities and strengthen
partnerships with the firms we count on and who count on
us. As shareholders, this formula has served us well and we
believe our company is well positioned to become even better
and stronger through the adversity we will work through in
2020. We commit to continuously set our potential higher,
raising the bar on performance and growing the value of
Murphy USA for the long term.
Thank you for your continued support of Murphy USA.
In 2019, we successfully reinforced our value proposition to
customers, growing same-store volumes for the first time in
R. Andrew Clyde
President and Chief Executive Officer
Visit one of
our more than
1,489
locations in
26 states
Murphy USA Markets
A N N U A L R E P O R T 2 0 1 9
P A G E 3
1.
STRATEGY
GROW ORGANICALLY
Growth of Murphy Retail Sites
Murphy USA and Murphy Express Loca(cid:31)ons
MURPHY EXPRESS
MURPHY USA
1,401
249
1,335
224
1,446
288
1,472
1,489
312
328
Murphy USA Markets
Murphy USA added 17 new sites in
2019, including 1 Murphy USA and
16 Murphy Express branded stores,
representing a pivotal change in
our organic growth program as we
evolve to primarily 2,800 square foot
stores. We are increasingly building
these assets in our most attractive
markets, as the larger store format
can achieve higher returns further
away from the Walmart parking lot.
Scaling these cost-efficient sites at a
modest pace reflects our return-driven
strategy and disciplined approach to
capital allocation. With a multi-year
development pipeline in place, we
expect to construct up to 50 stores
annually beginning in 2021.
1200
1500
1,111
1,152
1,158
1,160
1,161
2015
2016
2017
2018
2019
900
We complemented our new-to-industry
store growth in 2019 with 27 Raze and
Rebuilds. This program, which replaces
a high-performing kiosk with a 1,400
square foot store, boosts per site
600
store metrics, further diversifies our
merchandise mix and creates a better
customer experience for the long term.
300
0
WITH A MULTI-YEAR DEVELOPMENT PIPELINE IN PLACE, WE EXPECT TO
CONSTRUCT UP TO 50 STORES ANNUALLY BEGINNING IN 2021.
1500
1200
900
600
300
0
A N N U A L R E P O R T 2 0 1 9
P A G E 5
2.
STRATEGY
DIVERSIFY
MERCHANDISE MIX
2019 was an exceptional year as we grew our
merchandise contribution dollars to an all-time high
of $419 million. The tobacco category materially
outperformed, as we grew units, sales, and margins
on both an absolute and per store basis, versus
broad-based declines across the industry. We expect
our leadership in this category to result in continued
outperformance in 2020.
2019 also marked a very important milestone for
the company: the national roll-out of our Murphy
Drive Rewards (MDR) loyalty program. Customers
enthusiastically embraced the program, as we signed
up nearly 3 million members by year-end. Customers
earned reward points and redeemed discounts on
purchases. While these points represented a headwind
to merchandise unit margin percentage, the program
contributed to material sales growth and higher
gross margin dollars. As we continue to improve the
capabilities of the program, we expect MDR to continue
to drive value across our merchandise categories.
Merchandise Margin
$K Average Per Site Month
NON-TOBACCO
TOBACCO
$21.3
$22.5
$22.6
$23.1
$23.8*
8.8
9.2
9.3
9.6
9.8
12.5
13.3
13.3
13.5
14.4
2015
2016
2017
2018
2019
*2019 total reflects impact of MDR discounts and deferrals
Merchandise Unit Margin %
16.5%
16.1%
16.0%
15.6%
14.4%
2015
2016
2017
2018
2019
Merchandise Sales (in millions)
Merchandise GM (in millions)
2015
2,274
327
2016
2,339
364
2017
2,373
381
2018
2,423
400
2019
2,620
419
Year-over-Year
Change
8.1%
4.7%
100
80
60
40
20
0
25
20
15
10
5
0
P A G E 6
N A V I G A T I N G U N C E R T A I N T Y
3.
STRATEGY
Site Opera(cid:22)ng Expenses Versus Industry Average
Site Opera(cid:22)ng Expenses,* $k average per site month
Site Opera(cid:22)ng Expenses Versus Industry Average
Site Opera(cid:22)ng Expenses,* $k average per site month
SUSTAIN COST LEADERSHIP
MURPHY USA
NACS AVG**
MURPHY USA
NACS AVG**
2015
2016
2017
$22.4
$22.4
2015
$42.5
Site Opera(cid:22)ng Expenses Versus Industry Average
Site Opera(cid:22)ng Expenses,* $k average per site month
$45.4
$21.4
$21.4
$42.5
2016
$45.4
MURPHY USA
2017
NACS AVG**
$20.8
$20.8
2018
2015
2018
2019
2016
2019
$21.0
$22.4
$21.0
$21.4
$21.4
$21.4
$44.9
$44.9
$42.5
$49.0
$49.0
$45.4
*Site Opera(cid:22)ng Expense excludes SG&A, Field Admin cost and payment fees.
**2019 NACS Site Opera(cid:22)ng Expense data not yet available.
*Site Opera(cid:22)ng Expense excludes SG&A, Field Admin cost and payment fees.
**2019 NACS Site Opera(cid:22)ng Expense data not yet available.
$44.9
2017
$20.8
2018
2019
$21.0
$21.4
$49.0
*Site Opera(cid:22)ng Expense excludes SG&A, Field Admin cost and payment fees.
**2019 NACS Site Opera(cid:22)ng Expense data not yet available.
Fuel Breakeven*
Fuel Breakeven*
Coverage Ra(cid:22)o*
Coverage Ra(cid:22)o*
2.28
2.28
105%
95%
95%
109% 110% 111%
109% 110% 111%
105%
1.34
Fuel Breakeven*
1.19
1.34
1.19
2.28
0.82
0.82
0.67
0.67
Coverage Ra(cid:22)o*
105%
109% 110% 111%
95%
We prioritize cost leadership in an
industry that is increasingly exposed to
cost inflation from both economic and
regulatory pressures. This ruthless
focus on cost discipline has become
a part of our culture and is apparent
in our financial results. We once again
achieved our long-term goal of beating
inflation, limiting 2019 site-level
operating expense growth to 2.0%, and
lowered our fuel breakeven requirement
to increase long-term competitiveness.
0
10
0
30
20
20
10
Our fuel breakeven metric improved
15 basis points in 2019 to a record
0.67 cents per gallon. We continue
to drive efficiencies in our business,
highlighted this year by our upgraded
maintenance management system that
led to lower dispatch activity and lower
costs per dispatch. Through continued
cost-discipline and merchandise margin
growth we will continue to drive our
fuel breakeven metric lower over time.
20
10
0
WE ONCE AGAIN
120
120
ACHIEVED OUR
100
100
LONG-TERM GOAL OF
80
80
60
60
BEATING INFLATION,
40
40
120
LIMITING 2019 SITE-LEVEL
20
100
20
2015
2016
2015
1.34
2016
2017
2018
2017
1.19
2019
2018
2019
2015
2016
2015
2017
2016
2018
2017
2019
2018
2019
*Cents Per Gallon {(Opera(cid:22)ng expense
*Cents Per Gallon {(Opera(cid:22)ng expense
*Merchandise Margin/Site Opera(cid:22)ng Expense
*Merchandise Margin/Site Opera(cid:22)ng Expense
excluding payment fees and rent - Merchandise
excluding payment fees and rent - Merchandise
Margin)/Fuel Volume}
Margin)/Fuel Volume}
0.67
0.82
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
*Cents Per Gallon {(Opera(cid:22)ng expense
excluding payment fees and rent - Merchandise
Margin)/Fuel Volume}
*Merchandise Margin/Site Opera(cid:22)ng Expense
0
0
80
OPERATING EXPENSE
60
GROWTH TO 2.0%
40
20
0
40
30
50
40
50
30
40
50
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
3.5
3.0
2.5
2.0
1.5
1.0
3.5
0.5
3.0
0.0
2.5
2.0
1.5
1.0
0.5
0.0
P A G E 8
N A V I G A T I N G U N C E R T A I N T Y
4.
STRATEGY
CREATE ADVANTAGE FROM
MARKET VOLATILITY
20
20
20
15
15
15
10
10
10
Our distinctive business model and supply chain advantage
continues to deliver remarkably consistent margins over time.
This has created a more stable foundation as investors evaluate
the long-term potential of our fuel business. Consistent margin
strength also leads to more resilient earnings during periods
of volatility and uncertainty, better positioning Murphy USA to
thrive in a variety of economic conditions.
5
5
5
0
0
0
The PS&W segment (including RINs) continues to generate
margins in-line with our long-term expectations of 2-3 cents
per gallon. In addition to ensuring ratable supply for our retail
fuel operations, this segment helps reduce the volatility of all-in
fuel margins over time, helping to support a higher valuation.
We remain actively engaged in building our supply capabilities
that will increase margin capture for both PS&W and retail and
create additional value for long-term shareholders.
800000
800000
800000
700000
700000
700000
600000
600000
600000
DISTINCTIVE BUSINESS MODEL
500000
500000
500000
AND SUPPLY CHAIN ADVANTAGE
400000
400000
400000
300000
300000
300000
200000
200000
200000
CONTINUES TO DELIVER
REMARKABLY CONSISTENT
100000
100000
100000
MARGINS OVER TIME
0
0
0
Total Fuel Margin
Total Fuel Margin
(cents per gallon)*
Total Fuel Margin
(cents per gallon)*
(cents per gallon)*
PRODUCT SUPPLY AND WHOLESALE + RINS**
PRODUCT SUPPLY AND WHOLESALE + RINS**
RETAIL
PRODUCT SUPPLY AND WHOLESALE + RINS**
RETAIL
FUEL BREAKEVEN
RETAIL
FUEL BREAKEVEN
FUEL BREAKEVEN
14.9
14.9
14.9
2.4
2.4
2.4
12.5
12.5
12.5
2.28
2.28
2.28
15.4
15.4
15.4
3.8
3.8
3.8
11.6
11.6
11.6
1.34
1.34
1.34
16.4
16.4
16.4
2.4
2.4
2.4
14.0
14.0
14.0
1.19
1.19
1.19
16.2
16.2
1.5
16.2
1.5
1.5
16.1
16.1
16.1
2.3
2.3
2.3
14.7
14.7
14.7
13.8
13.8
13.8
0.82
0.82
0.82
0.67
0.67
0.67
2016
2016
2016
2015
2015
2015
2019
2019
2019
*Cents per gallon based on retail volumes, before corporate overhead
*Cents per gallon based on retail volumes, before corporate overhead
*Cents per gallon based on retail volumes, before corporate overhead
**Excludes contribu(cid:31)on from CAM pipeline divested during 2016
**Excludes contribu(cid:31)on from CAM pipeline divested during 2016
**Excludes contribu(cid:31)on from CAM pipeline divested during 2016
2017
2017
2017
2018
2018
2018
Total Fuel Contribu(cid:31)on
Total Fuel Contribu(cid:31)on
(in millions)
Total Fuel Contribu(cid:31)on
(in millions)
(in millions)
PRODUCT SUPPLY AND WHOLESALE + RINS*
PRODUCT SUPPLY AND WHOLESALE + RINS*
RETAIL
PRODUCT SUPPLY AND WHOLESALE + RINS*
RETAIL
RETAIL
$686
$686
62
$686
62
62
$705
$705
$705
99
99
99
$678
$678
$678
97
97
97
$616
$616
$616
101
101
101
$647
$647
$647
161
161
161
515
515
515
486
486
486
581
581
581
624
624
624
606
606
606
2015
2015
2015
2016
2016
2016
2017
2017
2017
2018
2018
2018
2019
2019
2019
*Excludes contribu(cid:31)on from CAM pipeline divested during 2016
*Excludes contribu(cid:31)on from CAM pipeline divested during 2016
*Excludes contribu(cid:31)on from CAM pipeline divested during 2016
A N N U A L R E P O R T 2 0 1 9
P A G E 11
5.
INVEST FOR
THE LONG TERM
STRATEGY
Annual Capital Expenditures
(in millions)
Annual Capital Expenditures
(in millions)
250
CORPORATE AND OTHER ASSETS
MARKETING MAINTENANCE
CORPORATE AND OTHER ASSETS
MARKETING GROWTH
MARKETING MAINTENANCE
MARKETING GROWTH
$264
38
49
40
200
$274
25
38
25
$264
$274
40
$216
150
13
$216
28
13
Investing for the long-term means balancing short-
term opportunities against sustainable long-term
improvements that will make the business more
competitive over time. For instance, we invested
in data security through EMV compliance while
$215
intentionally slowing organic growth in 2019. Our
$215
49
disciplined capital allocation policies help drive both
61
our investment returns and our shareholder returns.
61
We refinanced our balance sheet to appropriately
20
leverage the increased earnings potential of our
20
business, which not only lowered our interest rate
but also provided increased flexibility in our debt
covenants to accelerate our pace of share repurchase.
185
28
100
25
$194
25
34
$194
201
135
134
175
50
34
0
175
135
201
185
In 2019, we spent approximately $166 million on
134
share repurchase and have now bought back 35%
of outstanding shares since spin. Share repurchase
remains our preferred use of free cash flow as we
2019
2016
continue to optimize the business.
2016
2015
2017
2018
2017
2018
2019
2015
Earnings Per Share
Income from Con(cid:31)nuing Opera(cid:31)ons—Diluted
Earnings Per Share
Income from Con(cid:31)nuing Opera(cid:31)ons—Diluted
4
5
3
Annual Capital Expenditures
(in millions)
CORPORATE AND OTHER ASSETS
MARKETING MAINTENANCE
MARKETING GROWTH
$264
25
38
$274
40
49
$216
13
28
$194
25
34
$215
61
20
175
201
185
135
134
2015
2016
2017
2018
2019
Earnings Per Share
Income from Con(cid:31)nuing Opera(cid:31)ons—Diluted
Total Shares Outstanding
Fiscal Year End Since Spinoff
Total Shares Outstanding
(in millions)
Fiscal Year End Since Spinoff
(in millions)
$5.59
$6.78
$6.48
2
1
0
$3.14
$3.14
$6.78
$6.78
$6.48
$6.48
$5.59
$5.59
$4.86
$4.86
41.7
$3.14
41.7
36.9
36.9
34.1
34.1
32.3
32.3
$4.86
30.5
30.5
2015
2016
2017
2018
2019
2015
2015
2016
2016
2017
2017
2018
2018
2019
2019
2015
2015
2016
2016
2017
2017
2018
2018
2019
2019
250
250
200
200
150
150
100
100
50
50
0
0
5
5
4
4
3
3
2
2
1
1
0
0
We are dedicated to improving the quality of life where we live and work by supporting the
causes that make these areas thrive. Our programs are designed to strengthen our communities
while empowering our employees to be a part of our philanthropic endeavors.
In 2019, we contributed over
$1.5MILLION
to help make a positive impact
in the communities we serve
across the country.
The Murphy USA Employee
Disaster Relief Foundation
assists our team members
experiencing significant
financial hardship resulting
from a catastrophic event
such as a natural disaster.
Grants are funded by
employee contributions and
matched by Murphy USA.
$70
THOUSAND
given to employees in need in 2019.
Giving back is important to our
employees, and we could not be
more proud of their commitment
to serve others. Through our Gift
Matching program, Murphy USA
matches employee donations to
qualifying nonprofits across the
country, amplifying the impact to
causes they care about the most.
In 2019, we gave more than
$780
THOUSAND
through our Gift Matching Program.
With a focus on our hometown
of El Dorado, AR, our corporate
sponsorships make a direct impact
on numerous community needs.
In 2019, we contributed over
$660
THOUSAND
to support local community initiatives.
FORM 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
For the fiscal year ended December 31, 2019
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
(State or other jurisdiction of incorporation or organization)
46-2279221
(I.R.S. Employer Identification No.
200 Peach Street
El Dorado, Arkansas
(Address of principal executive offices)
71730-5836
(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
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
Yes
No
No
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
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which
the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most
recently completed second fiscal quarter (as of June 28, 2019), based on the closing price on that date of $84.03 was $2,686,319,000.
Number of shares of Common Stock, $0.01 par value, outstanding at January 31, 2020 was 30,460,112.
Portions of the Registrant’s definitive Proxy Statement relating to the Annual Meeting of Stockholders on May 7, 2020 will be incorporated
Documents incorporated by reference:
by reference in Part III herein.
MURPHY USA INC.
TABLE OF CONTENTS – 2019 Form 10-K
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Supplemental Information. Information About our Executive Officers
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchase of Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
PART III
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Item 15. Exhibits, Financial Statement Schedules
PART IV
Item 16. Form 10-K Summary
Signatures
Page
2
10
21
21
21
21
22
23
26
27
41
42
42
42
42
43
43
43
43
43
44
46
47
1
Item 1. BUSINESS
Part I
Murphy USA Inc. ("Murphy USA" or the "Company") was incorporated in Delaware on March 1, 2013 and
holds, through its subsidiaries, the former U.S. retail marketing business of its former parent company, Murphy Oil
Corporation (“Murphy Oil”), plus other assets and liabilities of Murphy Oil that supported the activities of the U.S.
retail marketing operations.
Our business consists primarily of the marketing of retail motor fuel products and convenience merchandise
through a large chain of 1,489 (as of December 31, 2019) retail stores operated by us, almost all of which are in
close proximity to Walmart stores. Our retail stores are located in 26 states, primarily in the Southeast, Southwest
and Midwest United States. Of these stores, 1,161 are branded Murphy USA and 328 are standalone Murphy
Express locations (as of December 31, 2019). The majority of our Murphy USA locations participate in a cents-off
per gallon purchased discount program for fuel with Walmart when using specific payment methods.
Our business also includes certain product supply and wholesale assets, including product distribution
terminals and pipeline positions. As an independent publicly traded company, we are a low-price, high volume fuel
retailer selling convenience merchandise through low cost small store formats and kiosks with key strategic
relationships and experienced management.
Our business is subject to various risks. For a description of these risks, see “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in
this Annual Report on Form 10-K.
Information about our operations, properties and business segments, including revenues by class of
products and financial information by geographic area, are provided on pages 27 through 41, F-13, F-15, and F-31
through F-32 of this Annual Report on Form 10-K.
Our Competitive Strengths
Our business foundation is built around five reinforcing strengths which we believe provide us a competitive
advantage over our peers. These strengths support our Company vision which is to “Deliver every day the quickest,
most friendly service and a low price value proposition to our growing customer base for the products and markets
we serve.”
Strategic proximity to and complementary relationship with Walmart
Of our network of 1,489 retail gasoline stores (as of December 31, 2019), the majority are situated on prime
locations located near Walmart stores. We believe our proximity to Walmart stores generates significant traffic to
our existing retail stores while our competitively priced gasoline and convenience offerings appeal to our shared
customers. We continue to collaborate with Walmart on a fuel discount program which we believe enhances the
customer value proposition as well as the competitive position of both Murphy USA and Walmart. We have an
active real estate development team that purchases and leases land from third parties near Walmart Supercenters
and other high traffic locations that support our low-cost, high-volume model.
Winning proposition with value-conscious consumers
Our competitively priced fuel is a compelling offering for value-conscious consumers. Despite a flat long-
term outlook in overall gasoline demand (increasing vehicle miles traveled in a normal economy essentially
offsetting increased fuel efficiency), we believe value-conscious consumers that prefer convenience and service are
a growing demand segment. In combination with our high traffic locations, our competitive gasoline prices drive high
fuel volumes and gross profit. In addition, we believe we are an industry leader in per-site tobacco sales with our
low-priced tobacco products and in total store sales per square foot as we also sell a growing assortment of single-
serve/immediate consumption items. We continue to provide value opportunities to our customers including our
Murphy Drive Rewards loyalty program, which rolled out chain-wide in 2019, and which rewards customers with
discounted and free items based on purchases of qualifying fuel and merchandise.
2
Low cost retail operating model
We operate our retail gasoline stores with a strong emphasis on fuel sales complemented by a focused
convenience offering that allows for a smaller store footprint than most of our competitors. We build a mix of
1,200-1,400 square foot stores and new-to-industry ("NTI") 2,800 square foot stores which we believe have low
capital expenditure, maintenance and utility requirements relative to our competitors. In the past, we have also
developed standardized 208 square feet kiosks with external supercoolers when the available land or economics
did not support the small store format. In addition, many of our stores require only one or two associates to be
present during business hours and 86% of our stores are located on Company-owned property and do not incur any
rent expense. The combination of a focused convenience offering and standardized smaller footprint stores allows
us to achieve lower overhead costs and on-site costs compared to competitors with a much larger store format.
According to the 2018 National Association of Convenience Stores’ State of the Industry Survey, we operate at
approximately 37% of the average monthly operating costs for top quartile performing stores in the industry. In
addition, we operate among the highest industry safety standards and had a Total Recordable Incident Rate (TRIR)
and Days Away from Work (DAW) rate that was substantially lower than the industry averages in 2018 using the
most current published data by the Bureau of Labor Statistics. Our low cost operating model translates into a low
cash fuel breakeven requirement that allows us to weather extended periods of low fuel margins and which has
improved by more than 3 cpg since our spinoff in 2013.
Distinctive fuel supply chain capabilities
We source fuel at very competitive industry benchmark prices due to the diversity of fuel options available
to us in the bulk and rack product markets, our shipper status on major pipeline systems, and our access to
numerous terminal locations. In addition, we have a strong distribution system in which we analyze intra-day supply
options and direct third-party tanker trucks to the most favorably priced terminal to load products for each Murphy
site, further reducing our fuel product costs. By participating in the broader fuel supply chain, we believe our
business model provides additional upside exposure to opportunities to enhance margins and volume, such as
shifting non-contractual wholesale volumes to protect retail fuel supply during periods of constrained supply and
elevated margins. These activities demonstrate our belief that participating in the broader fuel supply chain
provides us with added flexibility to ensure reliable low-cost fuel supply in various market conditions especially
during periods of significant price volatility. It would take substantial time and investment, both in expertise and
assets, for a competitor to replicate our existing position, and we believe this continues to be a significant barrier to
any attempt to emulate our business model.
Resilient financial profile and engaged team
Our predominantly fee-simple asset base, ability to generate attractive gross margins through our low-price,
high volume strategy, and our low overhead costs should help us endure prolonged periods of unfavorable
commodity price movements and compressed fuel margins. We also believe our conservative financial structure
further protects us from the inherently volatile fuel environment. We expect that our strong cash position and
availability under our credit facility will continue to provide us with a significant level of liquidity to help maintain a
disciplined capital expenditure program focused on growing ratably through periods of both high and low fuel
margins. In addition, we have acquired through share repurchase over $1.1 billion of our common stock in a little
more than six years of operation. In July 2019 the Board of Directors approved an up to $400 million share
repurchase program. After repurchases made in 2019, we have approximately $275 million remaining to complete
the program by July 2021. We also have more than 9,900 hardworking employees that are actively engaged to
serve the customer, whether it is the external retail consumer or their internal co-workers. We believe our
sustainable business model and stable organic growth opportunities support an employee value proposition that
makes Murphy USA an attractive place to work.
Our Business Strategy
Our business strategy reflects a set of coherent choices that leverage our differentiated strengths and
capabilities.
Grow organically
We intend for our independent growth plan to be a key driver of our organic growth over the next several
years. We expect to build up to 30 NTI locations and up to 25 raze-and-rebuilds per year, targeting high-return
locations either near Walmart Supercenters, other high traffic areas or by strategic infill in our core market areas
complemented by our supply chain capabilities. While we were previously focused on smaller lot sizes, we now
3
expect to build more NTI stores that are 2,800 square feet. Our real estate development team works to maintain a
multi-year pipeline of projects that supports ratable expansion.
Diversify merchandise mix
We plan to continuously evaluate our remaining kiosk strategy in an effort to maximize our site economics
and return on investment. Complementary to that strategy, we are continually refining, and increasingly
constructing, our 1,200-1,400 square foot and 2,800 square foot design to create a foundation for increasing higher-
margin non-tobacco sales and diversifying our merchandise offerings. For example, we continue to tailor our
product offerings to complement the retail selection within Walmart stores, such as offering products in a variety of
quantities and sizes which are more convenience-oriented. We expect to further expand merchandise revenue and
margins through our primary supplier relationship with Core-Mark Holding Company, Inc. ("Core-Mark"), in addition
to optimizing our promotional planning, merchandise assortment, and pricing effectiveness, in order to help boost
overall site returns.
Sustain cost leadership position
We believe that sustaining our low cost position is a strategic advantage as a retailer of commodity
products. We are undertaking several initiatives for the purpose of increasing efficiency which should allow us to
continue to beat inflation on per-site operating costs to help sustain low site level costs. We also believe that
through our planned growth and efficiency initiatives, we can achieve reductions in overhead costs to support an
overall improvement in site returns and keep costs properly scaled as we grow organically. In order to do this
successfully, we will focus on the continued development of our employees and foster an operating culture aligned
with business performance, including cost leadership.
Create advantage from market volatility
We plan to continue to focus our product supply and wholesale efforts on activities that enhance our ability
to be a low-price retail fuel leader and our ability to take advantage of fuel price volatility. We will continue to invest
in capabilities and asset positions that support our supply chain strategy. Our distinctive business model and
supply chain advantage allows us to deliver consistent margins over time, helping the business to better withstand
periods of volatility and uncertainty.
Invest for the long term
We maintain a portfolio of predominantly fee-simple assets and utilize what we believe to be an appropriate
debt structure that will allow us to be resilient during times of fuel price and margin volatility. We believe our strong
financial position should allow us to profitably execute our low-cost, high volume retail strategy through periods of
both high and low fuel margins while preserving the ability to re-invest in and grow our existing sites, brand image
and supporting capabilities. Furthermore, in addition to our site development capital and capability building
investments we will continue to consider all alternatives for returning excess earnings or capital with a focus on
maximizing shareholder value.
Industry Trends
We operate within the large, growing, competitive and highly fragmented U.S. retail fuel and convenience
store industry. Several key industry trends and characteristics, include:
• Sensitivity to gas prices among cost conscious consumers, and increasing customer demand for low-priced
fuel;
• Highly fragmented nature of the industry providing larger chain operators like Murphy USA with significant
scale advantage;
• Significantly increased fuel capacity in the marketplace by the addition of new-to-industry retail fuel and
convenience stores, and
• High levels of consumer traffic around supermarkets and large format hypermarkets, supporting
complementary demand at nearby and cross-promoted retail fuel stores.
Corporate Information
Murphy USA was incorporated in Delaware on March 1, 2013 and our business consists of U.S. retail
marketing operations. Our headquarters are located at 200 Peach Street, El Dorado, Arkansas 71730 and our
general telephone number is (870) 875-7600. Our Internet website is www.murphyusa.com. Our website and the
4
information contained on that site, or connected to that site, are not incorporated by reference into this Annual
Report on Form 10-K. Shares of Murphy USA common stock are traded on the NYSE under the ticker symbol
“MUSA”.
Description of Our Business
We market fueling products through a network of Company retail stores and unbranded wholesale
customers. During 2019, the Company sold approximately 4.4 billion gallons of motor fuel through our retail outlets.
Below is a table that lists the states where we operate Company-owned stores at December 31, 2019 and the
number of stores in each state.
State
Alabama
Arkansas
Colorado
Florida
Georgia
Iowa
Illinois
Indiana
Kansas
No. of stores
81
69
22
128
99
22
44
39
7
State
Kentucky
Louisiana
Michigan
Minnesota
Missouri
Mississippi
Nebraska
Nevada
New Mexico
No. of stores
48
79
27
9
50
55
5
4
17
State
North Carolina
Ohio
Oklahoma
South Carolina
Tennessee
Texas
Utah
Virginia
Total
No. of stores
89
44
55
60
93
315
5
23
1,489
The following table provides a history of our Company-owned station count during the three-year period
ended December 31, 2019:
Start of period
New construction
Closed
End of period
2019
2018
2017
Years Ended December 31,
1,472
17
—
1,489
1,446
26
—
1,472
1,401
45
—
1,446
Since 2007, we have purchased from Walmart the properties underlying 1,053 of our Company stores.
Each of our owned properties that were purchased from Walmart are also subject to Easements and Covenants
with Restrictions Affecting Land (“ECRs”), which impose customary restrictions on the use of such properties, which
Walmart has the right to enforce. In addition, pursuant to the ECRs, certain transfers involving these properties are
subject to Walmart’s right of first refusal or right of first offer. Also, pursuant to the ECRs, we are prohibited from
transferring such properties to a competitor of Walmart.
For risks related to our agreements with Walmart, including the ECRs, see “Risk Factors—Risks Relating to
Our Business—Walmart retains certain rights in its agreements with us, which may adversely impact our ability to
conduct our business.”
For the remaining stores located on or adjacent to Walmart property that are not owned, we have a master
lease agreement that allows us to rent land from Walmart. The master lease agreement contains general terms
applicable to all rental sites on Walmart property in the United States. The term of the leases is ten years at each
station, with us holding four successive five-year extension options at each site. Approximately half of the leased
sites have over 15 years of term remaining, including renewals, should the Company decide to exercise the renewal
options. The agreement permits Walmart to terminate it in its entirety, or only as to affected sites, at its option under
customary circumstances (including in certain events of bankruptcy or insolvency), or if we improperly transfer the
rights under the agreements to another party. In addition, the master lease agreement prohibits us from selling a
leased station or allowing a third party to operate a leased station without written consent from Walmart. As of
December 31, 2019, we are currently leasing 102 sites from Walmart. We also have six Murphy USA sites located
near Walmart locations where we pay rent to other landowners. For more information about our operating leases,
see Note 18 "Leases" to the accompanying audited consolidated financial statements for the three years ended
December 31, 2019.
5
As of December 31, 2019, we have 221 Murphy Express sites where we own the land and 107 locations
where we rent the underlying land.
We have numerous sources for our retail fuel supply, including nearly all of the major and large oil
companies operating in the U.S. We purchase fuel from oil companies, independent refiners, and other marketers
at rates that fluctuate with market prices and generally are reset daily, and we sell fuel to our customers at prices
that we establish daily. All fuel is delivered by the truckload as needed to replenish supply at our Company stores.
Our inventories of fuel on site turn approximately once daily. By establishing motor fuel supply relationships with
several alternate suppliers for most locations, we believe we are able to effectively create competition for our
purchases among various fuel suppliers. We also believe that purchasing arrangements with multiple fuel suppliers
may help us avoid product outages during times of motor fuel supply disruptions. At some locations, however, there
are limited suppliers for fuel in that market and we may have only one supplier. Our refined products are distributed
through a few product distribution terminals that are wholly-owned and operated by us and from numerous
terminals owned by others. About half of our wholly-owned terminals are supplied by marine transportation and the
rest are supplied by pipeline. We also receive products at terminals owned by others either in exchange for
deliveries from our terminals or by outright purchase.
In addition to the motor fuel sold at our Company stores, our stores carry a broad selection of snacks,
beverages, tobacco products and non-food merchandise. In 2019, we purchased more than 81% of our
merchandise from a single vendor, Core-Mark, with whom we began a five year supply agreement in late January
2016.
A statistical summary of key operating and financial indicators for each of the five years ended
December 31, 2019 are reported below.
Branded retail outlets:
Murphy USA®
Murphy Express
Total
Retail marketing:
Total fuel contribution (including retail, PS&W
and RINS) (cpg)1
Gallons sold per store month (in thousands)
Merchandise sales revenue per store month
Merchandise margin as a percentage of
merchandise sales
1 Represents net sales prices for fuel less purchased cost of fuel.
$
As of December 31,
2019
2018
2017
2016
2015
1,161
328
1,489
1,160
312
1,472
1,158
288
1,446
1,152
249
1,401
1,111
224
1,335
16.1
248.3
148.7
16.2
244.0
139.7
16.4
245.3
140.5
15.4
259.1
144.4
$
14.9
267.9
147.7
$
$
$
16.0%
16.5%
16.1%
15.6%
14.4%
Our business is organized into one reporting segment (Marketing). The Marketing segment includes our
retail marketing sites and product supply and wholesale assets. For operating segment information, see Note 20
“Business Segments” in the accompanying audited consolidated financial statements for the three-year period
ended December 31, 2019.
Competition
The U.S. petroleum business is highly competitive, particularly with regard to accessing and marketing
petroleum and other refined products. We compete with other chains of retail fuel stores for fuel supply and in the
retail sale of refined products to end consumers, primarily on the basis of price, but also on the basis of
convenience and consumer appeal. In addition, we may also face competition from other retail fueling stores that
adopt marketing strategies similar to ours by associating with non-traditional retailers, such as supermarkets,
discount club stores and hypermarkets, particularly in the geographic areas in which we operate. We expect that
our industry will continue to trend toward this model, resulting in increased competition to us over time. Moreover,
because we do not produce or refine any of the petroleum or other refined products that we market, we compete
with retail gasoline companies that have ongoing supply relationships with affiliates or former affiliates that
manufacture refined products. We also compete with integrated companies that have their own production and/or
6
refining operations that are at times able to offset losses from marketing operations with profits from producing or
refining operations, and may be better positioned to withstand periods of depressed retail margins or supply
shortages. In addition, we compete with other retail and wholesale gasoline marketing companies that have more
extensive retail outlets and greater brand name recognition. Some of our competitors have been in existence longer
than we have and have greater financial, marketing and other resources than we do. As a result, these competitors
may have a greater ability to bear the economic risks inherent in all phases of our business and may be able to
respond better to changes in the economy and new opportunities within the industry.
In addition, the retail gasoline industry in the United States is highly competitive due to ease of entry and
constant change in the number and type of retailers offering similar products and services. With respect to
merchandise, our retail sites compete with other convenience store chains, independently owned convenience
stores, supermarkets, drugstores, discount clubs, gasoline service stations, mass merchants, fast food operations
and other similar retail outlets. Non-traditional retailers, including supermarkets, discount club stores and mass
merchants, now compete directly with retail gasoline sites. These non-traditional gasoline retailers have obtained a
significant share of the gasoline market, and their market share is expected to grow, and these retailers may use
promotional pricing or discounts, both at the fuel pump and in the convenience store, to encourage in-store
merchandise sales and gasoline sales. In addition, some large retailers and supermarkets are adjusting their store
layouts and product prices in an attempt to appeal to convenience store customers. Major competitive factors
include: location, ease of access, product and service selection, gasoline brands, pricing, customer service, store
appearance, cleanliness and safety.
Market Conditions and Seasonality
Market conditions in the oil and gas industry are cyclical and subject to global economic and political events
and new and changing governmental regulations. Our operating results are affected by price changes in crude oil,
natural gas and refined products, as well as changes in competitive conditions in the markets we serve.
Oil prices, wholesale motor fuel costs, motor fuel sales volumes, motor fuel gross margins and
merchandise sales can be subject to seasonal fluctuations. For example, consumer demand for motor fuel typically
increases during the summer driving season, and typically falls during the winter months. Therefore, our revenues
and/or sales volumes are typically higher in the second and third quarters of our fiscal year. Travel, recreation and
construction are typically higher in these months in the geographic areas in which we operate, increasing the
demand for motor fuel and merchandise that we sell. A significant change in any of these factors, including a
significant decrease in consumer demand (other than typical seasonal variations), could materially affect our motor
fuel and merchandise volumes, motor fuel gross profit and overall customer traffic, which in turn could have a
material adverse effect on our business, financial condition, results of operations and cash flows.
Trademarks
We sell gasoline primarily under the Murphy USA® and Murphy Express brands, which are trademarks of
Murphy Oil. The Trademark License Agreement that we entered into with Murphy Oil in connection with the
Separation contained a trademark license granting us the right to continue to use such Murphy Oil-owned
trademarks throughout the term of that agreement subject to the terms and conditions therein.
In the highly competitive business in which we operate, our trade names, service marks and trademarks
are important to distinguish our products and services from those of our competitors. We are not aware of any facts
which would negatively impact our continuing use of any of the above trade names, service marks or trademarks.
Technology Systems
All of our Company stores use a standard hardware and software platform for point-of-sale (“POS”) that
facilitates item level scanning of merchandise for sales and inventory, and the secure acceptance of all major
payment methods – cash, check, credit, debit, fleet and mobile. Our standard approach to large scale and
geographically dispersed deployments reduces total technology cost of ownership for the POS and inherently
makes the system easier to use, support, and replace. This POS technology strategy reflects close alignment with
our growth plan.
We use a combination of software as a service, commercial off the shelf software, and custom software
applications developed using modern industry standard tools and methodologies to manage and run our business.
For our financial systems, we use enterprise class systems which provide significant flexibility in managing
corporate and store operations, as well as scalability for growth.
7
We invest in disaster recovery, system backups, redundancy, firewall, remote access security and virus and
spam protection to ensure a high level of system security and availability. We have systems, business policies and
processes around access controls, password expirations and file retention to ensure a high level of control within
our technology network.
Environmental
We are subject to numerous federal, state and local environmental laws, regulations and permit
requirements. Such environmental requirements have historically been subject to frequent change and tended to
become more stringent over time. While we strive to comply with these environmental requirements, any violation of
such requirements can result in litigation, increased costs or the imposition of significant civil and criminal penalties,
injunctions or other sanctions. Compliance with these environmental requirements affects our overall cost of
business, including capital costs to construct, maintain and upgrade equipment and facilities, and ongoing operating
expenditures. We maintain sophisticated leak detection and remote monitoring systems for underground storage
tanks at the vast majority of our retail fueling stores and install up-to-date tank, piping, and monitoring systems at
our new stores. We operate above ground bulk petroleum tanks at our terminal locations and have upgraded
product lines and conduct annual monitoring to help mitigate the risk of potential soil and groundwater
contamination. We allocate a portion of our capital expenditure program to comply with environmental laws and
regulations, and such capital expenditures are projected to be approximately $3 million in 2020.
We could be subject to joint and several as well as strict liability for environmental contamination. Some of
our current and former properties have been operated by third-parties whose handling and management of
hazardous materials were not under our control, and substantially all of them have or previously had motor fuel or
petroleum product storage tanks. Pursuant to certain environmental laws, we could be responsible for remediating
contamination relating to such sites, including impacts attributable to prior site occupants or other third parties, and
for implementing remedial measures to mitigate the risk of future contamination. We may also have liability for
contamination and violations of environmental laws under contractual arrangements with third parties, such as
landlords and former owners of our sites, including at our sites in close proximity to Walmart stores. Contamination
has been identified at certain of our current and former terminals and retail fueling stores, and we are continuing to
conduct investigation and remediation activities in relation to such properties. The discovery of additional
contamination or the imposition of further remediation obligations at these or other properties could result in
significant costs. In some cases, we may be eligible to receive money from state “leaking petroleum storage tank”
trust funds to help fund remediation. However, receipt of such payments is subject to stringent eligibility
requirements and other limitations that can significantly reduce the availability of such trust fund payments and may
delay or increase the duration of associated cleanups. We could also be held responsible for contamination relating
to third-party sites to which we or our predecessors have sent hazardous materials for recycling or disposal. We are
currently identified as a potentially responsible party in connection with one such disposal site. Any such
contamination, leaks from storage tanks or other releases of regulated materials could result in claims against us by
governmental authorities and other third parties for fines or penalties, natural resource damages, personal injury
and property damage. From time to time, we are subject to legal and administrative proceedings governing the
remediation of contamination or spills from current and past operations, including from our terminal operations and
leaking petroleum storage tanks.
Consumer demand for our products may be adversely impacted by fuel economy standards as well as
greenhouse gas (“GHG”) vehicle emission reduction measures. In 2010, the U.S. Environmental Protection Agency
(“EPA”) and the U.S. Department of Transportation’s National Highway Traffic Safety Administration (“NHTSA”)
finalized standards raising the required Corporate Average Fuel Economy of the nation’s passenger fleet to
approximately 35 miles per gallon by the 2016 model year and imposing the first-ever federal GHG emissions
standards on cars and light trucks. Further regulations require increases in fuel economy beginning with the 2017
through 2021 model year vehicles. NHTSA also published non-binding inaugural standards for model year 2022
through 2025 cars and trucks increasing fuel economy to the equivalent of 54.5 miles per gallon by 2025. The EPA
and NHTSA also regulate GHG and fuel efficiency standards for medium and heavy-duty vehicles and in August
2016, jointly finalized "Phase 2" vehicle and engine performance standards covering model years 2021 through
2027, which apply to semi-trucks, large pick-up trucks and vans, and all types and sizes of buses and work trucks.
These and any future increases in fuel economy standards or GHG emission reduction requirements could
decrease demand for our products. In August 2018, NHTSA and EPA proposed to amend certain of these existing
fuel economy standards for passenger cars and light trucks and establish new standards, covering model years
2021 through 2026. It is unclear if these proposals called the Safer Affordable Fuel Efficient ("SAFE") Vehicles,
which would require less stringent fuel economy standards than the existing standards, will be finalized in their
current form or at all.
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Air emissions from our facilities are also subject to regulation. For example, certain of our fueling stores
may be required to install and maintain vapor recovery systems to control emissions of volatile organic compounds
to the air during the vehicle fueling process. Recently proposed changes to requirements concerning ambient air
quality standards for ground-level ozone may require additional equipment upgrades and operating controls that
could increase our capital and operating expenses. Any future environmental regulatory changes may result in
increased compliance costs.
Our business is also subject to increasingly stringent laws and regulations governing the content and
characteristics of fuel. For example, the gasoline we sell generally must meet increasingly rigorous sulfur and
benzene standards. In addition, renewable fuel standards generally require refiners and gasoline blenders to meet
certain volume quotas or obtain representative trading credits for renewable fuels that are established as a
percentage of their finished product production. Such fuel requirements and renewable fuel standards may
adversely affect our wholesale fuel purchase costs.
Sale of Regulated Products
In certain areas where our retail sites are located, state or local laws limit the hours of operation for the sale
of alcoholic beverages and restrict the sale of alcoholic beverages and tobacco products to persons younger than a
certain age. State and local regulatory agencies have the authority to approve, revoke, suspend or deny
applications for and renewals of permits and licenses relating to the sale of alcoholic beverages, as well as to issue
fines to convenience stores for the improper sale of alcoholic beverages and tobacco products. Failure to comply
with these laws may result in the loss of necessary licenses and the imposition of fines and penalties on us. Such a
loss or imposition could have a material adverse effect on our business, liquidity and results of operations. In many
states, retailers of alcoholic beverages have been held responsible for damages caused by intoxicated individuals
who purchased alcoholic beverages from them. While the potential exposure for damage claims as a seller of
alcoholic beverages and tobacco products is substantial, we have adopted procedures intended to minimize such
exposure.
We also adhere to the rules governing lottery sales as determined by state lottery commissions in each
state in which we make such sales.
Safety
We are subject to the requirements of the federal Occupational Safety and Health Act (“OSHA”) and
comparable state statutes that regulate the protection of the health and safety of workers. In addition, the OSHA
hazard communication standard requires that certain information be maintained about hazardous materials used or
produced in our operations and that this information be provided to employees, state and local government
authorities and citizens.
Other Regulatory Matters
Our retail sites are also subject to regulation by federal agencies and to licensing and regulations by state
and local health, sanitation, fire and other departments relating to the development and operation of retail sites,
including regulations relating to zoning and building requirements and the preparation and sale of food. Difficulties
in obtaining or failures to obtain the required licenses or approvals could delay or prevent the development of a new
retail site in a particular area.
Our operations are also subject to federal and state laws governing such matters as wage rates, overtime
and citizenship requirements. At the federal and state levels, there are proposals under consideration from time to
time to increase minimum wage rates and periods of protected leaves. We monitor such changes to ensure our
continued compliance with these ever changing regulations.
Employees
At December 31, 2019, we had approximately 9,900 employees, including 4,600 full-time employees and
5,300 part-time employees.
Properties
Our headquarters of approximately 120,000 square feet is located at 200 Peach Street, El Dorado,
Arkansas. We also own and operate two other office buildings in El Dorado, Arkansas that house our store support
9
center and technology services personnel. We have numerous owned and leased properties for our retail fueling
stores as described under “—Description of Our Business,” as well as wholly-owned product distribution terminals.
Website access to SEC Reports
Interested parties may obtain the Company’s public disclosures filed with the Securities and Exchange
Commission (SEC), including Form 10-K, Form 10-Q, Form 8-K and other documents, by accessing the Investor
Relations section of Murphy USA Inc.’s website at ir.corporate.murphyusa.com.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any
amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange
Act of 1934 are available on our website, free of charge, as soon as reasonably practicable after such reports are
filed with, or furnished to, the SEC. Alternatively, you may access these reports at the SEC’s website at http://
www.sec.gov.
Item 1A. RISK FACTORS
You should carefully consider each of the following risks and all of the other information contained in this
Annual Report on Form 10-K.
Our business, prospects, financial condition, results of operations or cash flows could be materially and
adversely affected by any of these risks, and, as a result, the trading price of our common stock could decline.
Risks Relating to our Company
Our operations present hazards and risks, which may not be fully covered by insurance, if insured. If
a significant accident or event occurs for which we are not adequately insured, our operations and financial
results could be adversely affected.
The scope and nature of our operations present a variety of operational hazards and risks, including
explosions, fires, toxic emissions, and natural catastrophes that must be managed through continual oversight and
control. These and other risks are present throughout our operations. As protection against these hazards and
risks, we maintain insurance against many, but not all, potential losses or liabilities arising from such risks.
Uninsured losses and liabilities arising from operating risks could reduce the funds available to us for capital and
investment spending and could have a material adverse effect on our financial condition, results of operations and
cash flows.
We have debt obligations that could restrict our business and adversely impact our financial
condition, results of operations or cash flows; our leverage could increase the overall cost of debt funding
and decrease the overall debt capacity and commercial credit available to us in the future.
We currently have $300 million of 5.625% Senior Notes due 2027 (the"2027 Senior Notes"), $500 million of
4.75% Senior Notes due 2029 (the "2029 Senior Notes", and together with the 2027 Senior Notes, the "Senior
Notes") and a term loan with a remaining balance of $250 million as of December 31, 2019. We also have undrawn
capacity of up to $325 million on our credit facility, subject to the borrowing base limitation of $238 million as of
December 31, 2019. This outstanding debt could have significant consequences to our future operations, including:
• making it more difficult for us to meet our payment and other obligations under our outstanding debt;
•
•
•
resulting in an event of default if we fail to comply with the financial and other restrictive covenants
contained in our debt agreements, which event of default could result in all of our debt becoming
immediately due and payable;
reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and
other general corporate purposes, and limiting our ability to obtain additional financing for these purposes;
limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our
business, the industry in which we operate and the general economy; and
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•
placing us at a competitive disadvantage compared to our competitors that have less debt or are less
leveraged.
Any of the above-listed factors could have an adverse effect on our business, financial condition and results
of operations.
In addition, our credit facilities and the indenture that governs the Senior Notes include restrictive covenants
that, subject to certain exceptions and qualifications, restrict or limit our ability and the ability of our restricted
subsidiaries to, among other things, incur additional indebtedness, pay dividends, make certain investments, sell
certain assets and enter into certain strategic transactions, including mergers and acquisitions. These covenants
and restrictions could affect our ability to operate our business, and may limit our ability to react to market
conditions or take advantage of potential business opportunities as they arise.
Our leverage may increase the overall cost of debt funding and decrease the overall debt capacity and
commercial credit available to us. Our leverage could increase with additional borrowings on our shelf registration
statement. We have below investment-grade ratings from Moody’s and S&P based on our current capital structure.
Our credit ratings could be lowered or withdrawn entirely by a ratings agency if, in its judgment, the circumstances
warrant. If our existing ratings are lowered, or otherwise we do not obtain an investment grade rating in the future,
or if we do and a rating agency were to downgrade us again to below investment grade, our borrowing costs would
increase and our funding sources could decrease. Actual or anticipated changes or downgrades in our ratings,
including any announcement that our ratings are under review for a downgrade, could adversely affect our
business, cash flows, financial condition and operating results.
Discontinuation, reform or replacement of LIBOR may adversely affect our variable rate debt.
Borrowings under our credit facilities are at variable rates of interest, primarily based on London Interbank
Offered Rate ("LIBOR"). LIBOR tends to fluctuate based on general interest rates, rates set by the U.S. Federal
Reserve Board and other central banks, the supply of and demand for credit in the London interbank market, and
general economic conditions. In July 2017, the Financial Conduct Authority in the U.K. announced a desire to
phase out LIBOR as a benchmark by the end of 2021. Financial industry working groups are developing
replacement rates and methodologies to transition existing agreements that depend on LIBOR as a reference rate;
however, we can provide no assurance that market-accepted rates and transition methodologies will be available
and finalized at the time of LIBOR cessation. If clear market standards and transition methodologies have not been
developed by the time LIBOR becomes unavailable, we may have difficulty reaching agreement on acceptable
replacement rates under our credit facilities. If we are unable to negotiate replacement rates on favorable terms, it
could have a material adverse effect on our earnings and cash flows.
Our ability to meet our payment obligations under the Senior Notes and our other debt depends on
our ability to generate significant cash flow in the future.
Our ability to meet our payment and other obligations under our debt instruments, including the Senior
Notes, depends on our ability to generate significant cash flow in the future. This, to some extent, is subject to
general economic, financial, competitive, legislative and regulatory factors as well as other factors that are beyond
our control. We cannot provide assurance that our business will generate cash flow from operations, or that future
borrowings will be available to us under our credit agreement or any future credit facilities or otherwise, in an
amount sufficient to enable us to meet our payment obligations under the Senior Notes and our other debt and to
fund other liquidity needs. If we are not able to generate sufficient cash flow to service our debt obligations, we may
need to refinance or restructure our debt, including the Senior Notes, sell assets, reduce or delay capital
investments, or seek to raise additional capital. If we are unable to implement one or more of these alternatives, we
may not be able to meet our payment obligations under the Senior Notes and our other debt.
Despite our current indebtedness levels, we may be able to incur substantially more debt. This could
exacerbate further the risks associated with our leverage.
We and our subsidiaries may incur substantial additional indebtedness, including secured indebtedness, in
the future, subject to the terms of the indentures governing the Senior Notes and our credit agreement that limit our
ability to do so. Such additional indebtedness may include additional notes, which will also be guaranteed by the
guarantors, to the extent permitted by the indentures and our credit agreement. Although the indentures limit our
ability and the ability of our subsidiaries to create liens securing indebtedness, there are significant exceptions to
these limitations that will allow us and our subsidiaries to secure significant amounts of indebtedness without
equally and ratably securing the notes. If we or our subsidiaries incur secured indebtedness and such secured
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indebtedness is either accelerated or becomes subject to a bankruptcy, liquidation or reorganization, our and our
subsidiaries' assets would be used to satisfy obligations with respect to the indebtedness secured thereby before
any payment could be made on the notes that are not similarly secured. In addition, the indentures governing the
Senior Notes will not prevent us or our subsidiaries from incurring other liabilities that do not constitute
indebtedness. If new debt or other liabilities are added to our current debt levels, the related risks that we now face
could intensify.
In connection with our Separation from Murphy Oil, Murphy Oil has agreed to indemnify us for certain
liabilities and we have agreed to indemnify Murphy Oil for certain liabilities. If we are required to act under
these indemnities to Murphy Oil, we may need to divert cash to meet those obligations and our financial
results could be negatively impacted. The Murphy Oil indemnity may not be sufficient to insure us against
the full amount of liabilities for which it will be allocated responsibility, and Murphy Oil may not be able to
satisfy its indemnification obligations to us in the future.
Pursuant to the Separation and Distribution Agreement ("the Separation") and certain other agreements
with Murphy Oil, Murphy Oil has agreed to indemnify us for certain liabilities, and we have agreed to indemnify
Murphy Oil for certain liabilities. Indemnities that we may be required to provide Murphy Oil are not subject to any
cap, may be significant and could negatively impact our business, particularly indemnities relating to our actions
that could impact the tax-free nature of the distribution. Third parties could also seek to hold us responsible for any
of the liabilities that Murphy Oil has agreed to retain, and under certain circumstances, we may be subject to
continuing contingent liabilities of Murphy Oil following the Separation. Further, Murphy Oil may not be able to fully
satisfy its indemnification obligations. Moreover, even if we ultimately succeed in recovering from Murphy Oil any
amounts for which we are held liable, we may be temporarily required to bear these losses ourselves. Each of these
risks could negatively affect our business, results of operations and financial condition.
Risks Relating to Our Business
Volatility in the global prices of oil and petroleum products and general economic conditions that are
largely out of our control, as well as seasonal variations in fuel pricing, can significantly affect our
operating results.
Our net income is significantly affected by changes in the margins on retail and wholesale gasoline
marketing operations. Oil and domestic wholesale gasoline markets are volatile. General political conditions, acts of
war or terrorism, instability in oil producing regions, particularly in the Middle East and South America, and the value
of U.S. dollars relative to other foreign currencies, particularly those of oil producing nations, could significantly
affect oil supplies and wholesale gasoline costs. In addition, the supply of gasoline and our wholesale purchase
costs could be adversely affected in the event of a shortage, which could result from, among other things, lack of
capacity at oil refineries, sustained increase in global demand or the fact that our gasoline contracts do not
guarantee an uninterrupted, unlimited supply of gasoline. Our wholesale purchase costs could also be adversely
affected by increasingly stringent regulations regarding the content and characteristics of fuel products, including
International Maritime Organization ("IMO") 2020 requirements. Significant increases and volatility in wholesale
gasoline costs could result in lower gasoline gross margins per gallon. This volatility makes it extremely difficult to
predict the effect that future wholesale cost fluctuations will have on our operating results and financial condition in
future periods.
Except in limited cases, we typically do not seek to hedge any significant portion of our exposure to the
effects of changing prices of commodities. Dramatic increases in oil prices reduce retail gasoline gross margins,
because wholesale gasoline costs typically increase faster than retailers are able to pass them along to customers.
We purchase refined products, particularly gasoline, needed to supply our retail stores. Therefore, our most
significant costs are subject to volatility of prices for these commodities. Our ability to successfully manage
operating costs is important because we have little or no influence on the sales prices or regional and worldwide
consumer demand for oil and gasoline. Furthermore, oil prices, wholesale motor fuel costs, motor fuel sales
volumes, motor fuel gross margins and merchandise sales can be subject to seasonal fluctuations. For example,
consumer demand for motor fuel typically increases during the summer driving season, and typically falls during the
winter months. Travel, recreation and construction are typically higher in these months in the geographic areas in
which we operate, increasing the demand for motor fuel and merchandise that we sell. Therefore, our revenues
and/or sales volumes are typically higher in the second and third quarters of our fiscal year. A significant change in
any of these factors, including a significant decrease in consumer demand (other than typical seasonal variations),
could materially affect our motor fuel and merchandise volumes, motor fuel gross profit and overall customer traffic,
which in turn could have a material adverse effect on our business, financial condition, results of operations and
cash flows.
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Further, recessionary economic conditions, higher interest rates, higher gasoline and other energy costs,
inflation, increases in commodity prices, higher levels of unemployment, higher consumer debt levels, higher tax
rates and other changes in tax laws or other economic factors may affect consumer spending or buying habits, and
could adversely affect the demand for products we sell at our retail sites. Unfavorable economic conditions, higher
gasoline prices and unemployment levels can affect consumer confidence, spending patterns and vehicle miles
driven. These factors can lead to sales declines in both gasoline and general merchandise, and in turn have an
adverse impact on our business, financial condition, results of operations and cash flows.
Walmart continues to be a key relationship with regard to our Murphy USA network.
At December 31, 2019, our 1,489 Company stores were almost all located in close proximity to Walmart
Supercenter stores. Therefore, our relationship with Walmart, the continued goodwill of Walmart and the integrity of
Walmart’s brand name in the retail marketplace are all important drivers for our business. Any deterioration in our
relationship with Walmart could have an adverse effect on operations of the stores that are branded Murphy USA
and participate in a discount. In addition, our competitive posture could be weakened by negative changes at
Walmart. Many of our Company stores benefit from customer traffic generated by Walmart retail stores, and if the
customer traffic through these host stores decreases due to the economy or for any other reason, our sales could
be materially and adversely affected.
The current level of revenue that is generated from RINs may not be sustainable.
Murphy USA's business is impacted by its ability to generate revenues from capturing and subsequently
selling Renewable Identification Numbers ("RINs"), a practice enabled through the blending of petroleum-based
fuels with renewable fuels. RIN prices also have an impact on our cost of goods sold for petroleum products, which
can be positive or negative depending on the movement of RIN prices. The market price for RINs fluctuates based
on a variety of factors, including but not limited to governmental and regulatory action and market dynamics. In
2019, RIN prices were fairly stable within a small range, in part due to a lack of changes to the Renewable Fuel
Standard program and to the rules regulating the RINs market itself. Although a decline in RIN prices could have a
material impact on the Company's revenues, Murphy USA's business model is not dependent on its ability to
generate revenues from the sale of RINs.
Independent refiners have filed suit to pursue a fundamental change to the Renewable Fuel Standard
program, the regulatory means by which the federal government requires the introduction of an increasing amount
of renewable fuel into the fuel supply. Specifically, the independent refiners seek a shift of the burden for
compliance—the point of obligation, as it is known—from refiners to blenders. This litigation is ongoing. As it is,
refiners are obligated to obtain—either by blending biofuels into petroleum-based fuels or through purchase on the
open market--and then retire with the federal government RINs to satisfy their individual obligations. If this burden
were to be shifted, Murphy USA would potentially have to utilize the RINs that it obtains through its blending
activities to satisfy a new obligation and would therefore be unable to sell those RINs to third parties. This could
have a significant impact on the Company's current business model, unless it were able to pass along these costs
to consumers or other parties.
We are exposed to risks associated with the interruption of supply and increased costs as a result of
our reliance on third-party supply and transportation of refined products.
We utilize key product supply and wholesale assets, including our pipeline positions and product
distribution terminals, to supply our retail fueling stores. Much of our competitive advantage arises out of these
proprietary arrangements which, if disrupted, could materially and adversely affect us. In addition to our own
operational risks discussed above, we could experience interruptions of supply or increases in costs to deliver
refined products to market if the ability of the pipelines or vessels to transport petroleum or refined products is
disrupted because of weather events, accidents, governmental regulations or third-party actions. Furthermore, at
some of our locations there are very few suppliers for fuel in that market.
Changes in credit card expenses could reduce our profitability, especially on gasoline.
A significant portion of our retail sales involve payment using credit cards. We are assessed credit card fees
as a percentage of transaction amounts and not as a fixed dollar amount or percentage of our gross margins.
Higher gasoline prices result in higher credit card expenses, and an increase in credit card use or an increase in
credit card fees would have a similar effect. Therefore, credit card fees charged on gasoline purchases that are
more expensive as a result of higher gasoline prices are not necessarily accompanied by higher gross margins. In
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fact, such fees may cause lower profitability. Lower income on gasoline sales caused by higher credit card fees may
decrease our overall profitability and could have a material adverse effect on our business, financial condition,
results of operations and cash flows.
Walmart retains certain rights in its agreements with us, which may adversely impact our ability to
conduct our business.
Our owned properties that were purchased from Walmart are subject to Easements with Covenants and
Restrictions Affecting Land (the “ECRs”) between us and Walmart. The ECRs impose customary restrictions on the
use of our properties, which Walmart has the right to enforce. The ECRs also provide that if we propose to sell a
fueling station property or any portion thereof (other than in connection with the sale of all or substantially all of our
properties that were purchased from Walmart or in connection with a bona fide financing), Walmart has a right of
first refusal to purchase such property or portion thereof on similar terms. Subject to certain exceptions (including a
merger in which we participate, the transfer of any of our securities or a change in control of us), if we market for
sale to a third party all or substantially all of our properties that were purchased from Walmart, or if we receive an
unsolicited offer to purchase such properties that we intend to accept, we are required to notify Walmart. Walmart
then has the right, within 90 days of receipt of such notice, to make an offer to purchase such properties. If Walmart
makes such an offer, for a period of one year we will generally only be permitted to accept third-party offers where
the net consideration to us would be greater than that offered by Walmart.
The ECRs also prohibit us from transferring all or substantially all of our fueling station properties that were
purchased from Walmart to a “competitor” of Walmart, as reasonably determined by Walmart. The term “competitor”
is generally defined in the ECRs as an entity that owns, operates or controls grocery stores or supermarkets,
wholesale club operations similar to that of a Sam’s Club, discount department stores or other discount retailers
similar to any of the various Walmart store prototypes or pharmacy or drug stores.
Similarly, some of our leased properties are subject to certain rights retained by Walmart. Our master lease
agreement states that if Murphy Oil USA, Inc. is acquired or becomes party to any merger or consolidation that
results in a material change in the management of the stores, Walmart will have the option to purchase the stores at
fair market value. The master lease also prohibits us from selling all or any portion of a station without first offering
to sell all or such portion to Walmart on the same terms and conditions. These provisions may restrict our ability to
conduct our business on the terms and in the manner we consider most favorable and may adversely affect our
future growth.
An inability to maintain a multi-year new store project pipeline may cause our Company's growth to
slow in 2021 and beyond.
While we have a high confidence level that our growth of up to 30 new stores and up to 25 raze-and-rebuild
stores is secure due to our existing pipeline of land closures, the future development relies on the continued growth
of our project pipeline. We have a very active Asset Development group that works to focus on our key target areas
to locate suitable traffic count locations for this future growth. If the Asset Development group is unable to locate
suitable locations or is unable to close the purchase of those locations in a timely fashion, the Company could find
that it does not have sufficient land to fulfill its pipeline.
We currently have one primary supplier for over 81% of our merchandise. A disruption in supply
could have a material effect on our business.
In 2019, over 81% of our merchandise, including most tobacco products and grocery items, was purchased
from a single wholesale grocer, Core-Mark. We began a five year supply contract with Core-Mark in late January
2016. If Core-Mark is unable to fulfill its obligations under our contract, alternative suppliers that we could use in
the event of a disruption may not be immediately available. A disruption in supply could have a material effect on
our business, financial condition, results of operations and cash flows.
We may be unable to protect or maintain our rights in the trademarks we use in our business.
We expect to use the Murphy USA® and Murphy Express trademarks under the Trademark License
Agreement that we entered into with Murphy Oil, which will continue to own those trademarks. Murphy Oil’s actions
and our actions to protect our rights in those trademarks may not be adequate to prevent others from using similar
marks or otherwise violating our rights in those trademarks. Furthermore, our right to use those trademarks is
14
limited to the marketing business and can be terminated by Murphy Oil upon the occurrence of certain events, such
as our uncured material breach, insolvency or change of control.
Capital financing may not always be available to fund our activities.
We usually must spend and risk a significant amount of capital to fund our activities. Although most capital
needs are funded from operating cash flow, the timing of cash flows from operations and capital funding needs may
not always coincide, and the levels of cash flow may not fully cover capital funding requirements.
From time to time, we may need to supplement our cash generated from operations with proceeds from
financing activities. We have entered into a credit facility to provide us with available financing for working capital
and other general corporate purposes. This credit facility is intended to meet any ongoing cash needs in excess of
internally generated cash flows. Uncertainty and illiquidity in financial markets may materially impact the ability of
the participating financial institutions to fund their commitments to us under our credit facility. Accordingly, we may
not be able to obtain the full amount of the funds available under our credit facility to satisfy our cash requirements,
and our failure to do so could have a material adverse effect on our operations and financial position. Further, since
the credit facility is secured by receivables and inventories, low commodity prices can limit the borrowing base to an
amount substantially less than its ceiling as the resulting collateral for the loan is required to be valued at then
current pricing on a monthly basis.
We could be adversely affected if we are not able to attract and retain highly qualified senior
personnel.
We are dependent on our ability to attract and retain highly qualified senior personnel. If, for any reason, we
are not able to attract and retain qualified senior personnel, our business, financial condition, results of operations
and cash flows could be adversely affected.
Risks Relating to Our Industry
We operate in a highly competitive industry, which could adversely affect us in many ways, including
our profitability, our ability to grow, and our ability to manage our businesses.
We operate in the oil and gas industry and experience intense competition from other independent retail
and wholesale gasoline marketing companies. The U.S. marketing petroleum business is highly competitive,
particularly with regard to accessing and marketing petroleum and other refined products. We compete with other
chains of retail fuel stores for fuel supply and in the retail sale of refined products to end consumers, primarily on
the basis of price, but also on the basis of convenience and consumer appeal. In addition, we may also face
competition from other retail fueling stores that adopt marketing strategies similar to ours by associating with non-
traditional retailers, such as supermarkets, discount club stores and hypermarkets, particularly in the geographic
areas in which we operate. We expect that our industry will continue to trend toward this model, resulting in
increased competition to us over time. Moreover, because we do not produce or refine any of the petroleum or other
refined products that we market, we compete with retail gasoline companies that have ongoing supply relationships
with affiliates or former affiliates that manufacture refined products. We also compete with integrated companies
that have their own production and/or refining operations that are at times able to offset losses from marketing
operations with profits from producing or refining operations, and may be better positioned to withstand periods of
depressed retail margins or supply shortages. In addition, we compete with other retail and wholesale gasoline
marketing companies that have more extensive retail outlets and greater brand name recognition. Some of our
competitors have been in existence longer than we have and have greater financial, marketing and other resources
than we do. As a result, these competitors may have a greater ability to bear the economic risks inherent in all
phases of our business and may be able to respond better to changes in the economy and new opportunities within
the industry. Such competition could adversely affect us, including our profitability, our ability to grow and our ability
to manage our business.
In addition, the retail gasoline industry in the United States is highly competitive due to ease of entry and
constant change in the number and type of retailers offering similar products and services. With respect to
merchandise, our retail sites compete with other convenience store chains, independently owned convenience
stores, supermarkets, drugstores, discount clubs, gasoline service stations, mass merchants, fast food operations
and other similar retail outlets. Non-traditional retailers, including supermarkets, discount club stores and mass
merchants, now compete directly with retail gasoline sites. These non-traditional gasoline retailers have obtained a
significant share of the gasoline market, and their market share is expected to grow, and these retailers may use
promotional pricing or discounts, both at the fuel pump and in the convenience store, to encourage in-store
15
merchandise sales and gasoline sales. In addition, some large retailers and supermarkets are adjusting their store
layouts and product prices in an attempt to appeal to convenience store customers. Major competitive factors
include: location, ease of access, product and service selection, gasoline brands, pricing, customer service, store
appearance, cleanliness and safety. Competition from these retailers may reduce our market share and our
revenues, and the resulting impact on our business and results of operations could be materially adverse.
Changes in consumer behavior and travel as a result of changing economic conditions, the
development of alternative energy technologies or otherwise could affect our business.
In the retail gasoline industry, customer traffic is generally driven by consumer preferences and spending
trends, growth rates for commercial truck traffic and trends in travel and weather. Changes in economic conditions
generally, or in the regions in which we operate, could adversely affect consumer spending patterns and travel in
our markets. In particular, weakening economic conditions may result in decreases in miles driven and discretionary
consumer spending and travel, which affect spending on gasoline and convenience items. In addition, changes in
the types of products and services demanded by consumers may adversely affect our merchandise sales and gross
margin. Additionally, negative publicity or perception surrounding gasoline suppliers could adversely affect their
reputation and brand image, which may negatively affect our gasoline sales and gross margin. Our success
depends on our ability to anticipate and respond in a timely manner to changing consumer demands and
preferences while continuing to sell products and services that remain relevant to the consumer and thus will
positively impact overall retail gross margin.
Similarly, advanced technology, improved fuel efficiency and increased use of “green” automobiles (e.g.,
those automobiles that do not use gasoline or that are powered by hybrid engines) would reduce demand for
gasoline. Developments regarding climate change and the effects of greenhouse gas emissions on climate change
and the environment may lead to increased use of “green” automobiles. Other market and social initiatives such as
public and private initiatives that aim to subsidize the development of non-fossil fuel energy sources may reduce the
competitiveness of gasoline. Consequently, attitudes toward gasoline and its relationship to the environment may
significantly affect our sales and ability to market our products. Reduced consumer demand for gasoline could have
a material adverse effect on our business, financial condition, results of operations and cash flows.
Our operations and earnings have been and will continue to be affected by worldwide political
developments.
Many governments, including those that are members of the Organization of Petroleum Exporting Countries
(“OPEC”), unilaterally intervene at times in the orderly market of petroleum and natural gas produced in their
countries through such actions as setting prices, determining rates of production, and controlling who may buy and
sell the production. In addition, prices and availability of petroleum, natural gas and refined products could be
influenced by political unrest and by various governmental policies to restrict or increase petroleum usage and
supply. Other governmental actions that could affect our operations and earnings include tax changes, royalty
increases and regulations concerning: currency fluctuations, protection and remediation of the environment,
concerns over the possibility of global warming being affected by human activity including the production and use of
hydrocarbon energy, restraints and controls on imports and exports, safety, and relationships between employers
and employees. As a retail gasoline marketing company, we are significantly affected by these factors. Because
these and other factors are subject to changes caused by governmental and political considerations and are often
made in response to changing internal and worldwide economic conditions and to actions of other governments or
specific events, it is not practical to attempt to predict the effects of such factors on our future operations and
earnings.
Our business is subject to operational hazards and risks normally associated with the marketing of
petroleum products.
We operate in many different locations around the United States. The occurrence of an event, including but
not limited to acts of nature such as hurricanes, floods, earthquakes and other forms of severe weather, and
mechanical equipment failures, industrial accidents, fires, explosions, acts of war and intentional terrorist attacks
could result in damage to our facilities, and the resulting interruption and loss of associated revenues;
environmental pollution or contamination; and personal injury, including death, for which we could be deemed to be
liable, and which could subject us to substantial fines and/or claims for punitive damages.
We store gasoline in storage tanks at our retail sites. Our operations are subject to significant hazards and
risks inherent in storing gasoline. These hazards and risks include, but are not limited to, fires, explosions, spills,
16
discharges and other releases, any of which could result in distribution difficulties and disruptions, environmental
pollution, governmentally imposed fines or cleanup obligations, personal injury or wrongful death claims and other
damage to our properties and the properties of others. Any such event could have a material adverse effect on our
business, financial condition, results of operations and cash flows.
Certain of our assets such as gasoline terminals and certain retail fueling stores lie near the U.S. coastline
and are vulnerable to hurricane and tropical storm damages, which may result in shutdowns. The U.S. hurricane
season runs from June through November, but the most severe storm activities usually occur in late summer, such
as with Hurricanes Katrina and Rita in 2005 and Hurricanes Harvey and Irma in 2017. Moreover, it should be noted
that scientists have predicted that increasing concentrations of greenhouse gases in the earth's atmosphere may
produce climate changes that have significant physical effects, such as increased frequency and severity of storms,
droughts, and floods and other climatic events. If such effects were to occur, our operations could be adversely
affected. Although we maintain insurance for certain of these risks as described below, due to policy deductibles
and possible coverage limits, weather-related risks are not fully insured.
We are subject to various environmental laws, regulations and permit requirements, which could
expose us to significant expenditures, liabilities or obligations and reduce product demand.
We are subject to stringent federal, state and local environmental laws and regulations governing, among
other things, the generation, storage, handling, use and transportation of petroleum products and hazardous
materials; the emission and discharge of such substances into the environment; the content and characteristics of
fuel products; the process safety of our facilities; and human health and safety. Pursuant to such environmental
laws and regulations, we are also required to obtain permits from governmental authorities for certain of our
operations. While we strive to abide by these requirements, we cannot assure you that we have been or will be at
all times in compliance with such laws, regulations and permits. If we violate or fail to comply with these
requirements, we could be subject to litigation, costs, fines or other sanctions. Environmental requirements, and the
enforcement and interpretation thereof, change frequently and have generally become more stringent over time.
Compliance with existing and future environmental laws, regulations and permits may require significant
expenditures. In addition, to the extent fuel content and characteristic standards increase our wholesale purchase
costs, we may be adversely affected if we are unable to recover such costs in our pricing.
We could be subject to joint and several as well as strict liability for environmental contamination, without
regard to fault or the legality of our conduct. In particular, we could be liable for contamination relating to properties
that we own, lease or operate or that we or our predecessors previously owned, leased or operated. Substantially
all of these properties have or in the past had storage tanks to store motor fuel or petroleum products. Leaks from
such tanks may impact soil or groundwater and could result in substantial costs. We could also be held responsible
for contamination relating to third-party sites to which we or our predecessors have sent regulated materials. In
addition to potentially significant investigation and remediation costs, any such contamination, leaks from storage
tanks or other releases of regulated materials can give rise to claims from governmental authorities and other third
parties for fines or penalties, natural resource damages, personal injury and property damage.
Our business is also affected by fuel economy standards and GHG vehicle emission reduction measures.
As such fuel economy and GHG reduction requirements become more stringent over time, demand for our products
may be adversely affected. In addition, some of our facilities are subject to GHG regulation. We are currently
required to report annual GHG emissions from certain of our operations, and additional GHG emission-related
requirements that may affect our business have been finalized or are in various phases of discussion or
implementation. Any existing or future GHG emission requirements could result in increased operating costs and
additional compliance expenses.
Our expenditures, liabilities and obligations relating to environmental matters could have a material adverse
effect on our business, product demand, reputation, results of operations and financial condition.
Future tobacco legislation, campaigns to discourage smoking, increases in tobacco taxes and
wholesale cost increases of tobacco products could have a material adverse impact on our retail operating
revenues and gross margin.
Sales of tobacco products have historically accounted for an important portion of our total sales of
convenience store merchandise. Significant increases in wholesale cigarette costs and tax increases on tobacco
products, as well as future legislation and national and local campaigns to discourage smoking in the United States,
may have an adverse effect on the demand for tobacco products, and therefore reduce our revenues and profits.
17
Also, increasing regulations, including those for e-cigarettes and vapor products could offset some of the recent
gains we have experienced from selling these products. In late 2019, the U.S. Government raised the minimum
age to purchase tobacco products to 21 and prohibited the sale of cartridge-based e-cigarette products that are not
tobacco or menthol flavored. If laws or regulations around menthol flavors or flavored cigars change in the future, it
could have a further negative impact on our results. These factors could materially and adversely affect our retail
price of cigarettes, tobacco unit volume and sales, merchandise gross margin and overall customer traffic. Reduced
sales of tobacco products or smaller gross margins on the sales we make could have a material adverse effect on
our business, financial condition, results of operations and cash flows.
Currently, major cigarette manufacturers offer substantial rebates to retailers. We include these rebates as
a component of our gross margin. In the event these rebates are no longer offered, or decreased, our profit from
cigarette sales will decrease accordingly. In addition, reduced retail display allowances on cigarettes offered by
cigarette manufacturers would negatively affect gross margins. These factors could materially affect our retail price
of cigarettes, cigarette unit volume and revenues, merchandise gross margin and overall customer traffic, which
could in turn have a material adverse effect on our business, financial condition, results of operations and cash
flows.
Our retail operations are subject to extensive government laws and regulations, and the cost of
compliance with such laws and regulations can be material.
Our retail operations are subject to extensive local, state and federal governmental laws and regulations
relating to, among other things, the sale of alcohol, tobacco, lottery and lotto, employment conditions, including
minimum wage requirements, and public accessibility requirements. The cost of compliance with these laws and
regulations can have a material adverse effect on our business, financial condition, results of operations and cash
flows. In addition, failure to comply with local, state and federal laws and regulations to which our operations are
subject may result in penalties and costs that could adversely affect our business, financial condition, results of
operations and cash flows.
In certain areas where our retail sites are located, state or local laws limit the retail sites’ hours of operation
or sale of alcoholic beverages, tobacco products, possible inhalants and lottery tickets, in particular to minors.
Failure to comply with these laws could adversely affect our revenues and results of operations because these state
and local regulatory agencies have the power to revoke, suspend or deny applications for and renewals of permits
and licenses relating to the sale of these products or to seek other remedies, such as the imposition of fines or
other penalties.
Regulations related to wages also affect our business. Any appreciable increase in the statutory minimum
wage or changes in overtime rules would result in an increase in our labor costs and such cost increase, or the
penalties for failing to comply with such statutory minimums, could adversely affect our business, financial
condition, results of operations and cash flows.
Any changes in the laws or regulations described above that are adverse to us and our properties could
affect our operating and financial performance. In addition, new regulations are proposed from time to time which, if
adopted, could have a material adverse effect on our business, financial condition, results of operations and cash
flows.
Future consumer or other litigation could adversely affect our business, financial condition, results of
operations and cash flows.
Our retail operations are characterized by a high volume of customer traffic and by transactions involving a
wide array of product selections. These operations carry a higher exposure to consumer litigation risk when
compared to the operations of companies operating in many other industries. Consequently, we have been, and
may in the future be from time to time, involved in lawsuits seeking cash settlements for alleged personal injuries,
property damages and other business-related matters, as well as energy content, off-specification gasoline,
products liability and other legal actions in the ordinary course of our business. While these actions are generally
routine in nature and incidental to the operation of our business, if our assessment of any action or actions should
prove inaccurate, our business, financial condition, results of operations and cash flows could be adversely
affected. For more information about our legal matters, see Note 17 “Contingencies” to the consolidated historical
financial statements for the three years ended December 31, 2019 included in this Annual Report on Form 10-K.
Further, adverse publicity about consumer or other litigation may negatively affect us, regardless of whether the
allegations are true, by discouraging customers from purchasing gasoline or merchandise at our retail sites.
18
We rely on our technology systems and network infrastructure to manage numerous aspects of our
business, and a disruption of these systems could adversely affect our business.
We depend on our technology systems and network infrastructure to manage numerous aspects of our
business and provide analytical information to management. These systems are an essential component of our
business and growth strategies, and a serious disruption to them could significantly limit our ability to manage and
operate our business efficiently. These systems are vulnerable to, among other things, damage and interruption
from power loss or natural disasters, computer system and network failures, loss of telecommunications services,
physical and electronic loss of data, security breaches and computer viruses, which could result in a loss of
sensitive business information, systems interruption or the disruption of our business operations. To protect against
unauthorized access or attacks, we have implemented infrastructure protection technologies and disaster recovery
plans, but there can be no assurance that a technology systems breach or systems failure, which may occur and go
undetected, will not have a material adverse effect on our financial condition or results of operations. In addition,
there is a deadline of October 1, 2020 to install Europay, Mastercard, and Visa ("EMV") chip readers at automated
fuel pumps and we expect to be in compliance on or before this date. The failure to migrate to chip readers would
cause the Company to be financially responsible for any fraud and counterfeit chargebacks occurring at the point of
sale.
Our business and our reputation could be adversely affected by the failure to protect sensitive
customer, employee or vendor data or to comply with applicable regulations relating to data security and
privacy.
In the normal course of our business as a gasoline and merchandise retailer, we obtain large amounts of
personal data, including credit and debit card information from our customers. We also engage third-party vendors
that provide technology, systems, and services to facilitate our collection, retention, processing and transmission of
this information. While we have invested significant amounts in the protection of our technology systems and
maintain what we believe are adequate security controls over individually identifiable customer, employee and
vendor data provided to us, a breakdown or a breach in our systems that results in the unauthorized release of
individually identifiable customer or other sensitive data could nonetheless occur and have a material adverse effect
on our reputation, operating results and financial condition. Such a breakdown or breach could also materially
increase the costs we incur to protect against such risks. Also, a material failure on our part, or the part of our
vendors, to comply with regulations relating to our obligation to protect such sensitive data or the privacy rights of
our customers, employees and others could subject us to fines or other regulatory sanctions and potentially to
lawsuits and adversely affect our brand name.
Compliance with and changes in tax laws could adversely affect our performance.
We are subject to extensive tax liabilities imposed by multiple jurisdictions, including income taxes, indirect
taxes (excise/duty, sales/use and gross receipts taxes), payroll taxes, franchise taxes, withholding taxes and ad
valorem taxes. Tax laws and regulations are dynamic and subject to change as new laws are passed and new
interpretations of existing laws are issued and applied. This activity could result in increased expenditures for tax
liabilities in the future. Many of these liabilities are subject to periodic audits by the respective taxing authority.
Subsequent changes to our tax liabilities as a result of these audits may subject us to interest and penalties.
Risks Relating to Our Common Stock
The price of our common stock may fluctuate significantly and if securities or industry analysts
publish unfavorable research reports about our business or if they downgrade their rating on our common
stock, the price of our common stock could decline.
The price at which our common stock trades may fluctuate significantly. The trading price of our common
stock could be subject to wide fluctuations in response to a number of factors, including, but not limited to:
•
•
fluctuations in quarterly or annual results of operations, especially if they differ from our previously
announced guidance or forecasts made by analysts;
announcements by us of anticipated future revenues or operating results, or by others concerning us, our
competitors, our customers, or our industry;
•
our ability to execute our business plan;
19
•
•
•
competitive environment;
regulatory developments; and
changes in overall stock market conditions, including the stock prices of our competitors.
Provisions in our Certificate of Incorporation and Bylaws and certain provisions of Delaware law
could delay or prevent a change in control of us.
The existence of some provisions of our Certificate of Incorporation and Bylaws and Delaware law could
discourage, delay or prevent a change in control of us that a stockholder may consider favorable. These include
provisions:
•
•
•
•
•
•
providing for a classified board of directors;
providing that our directors may be removed by our stockholders only for cause;
establishing supermajority vote requirements for our shareholders to amend certain provisions of our
Certificate of Incorporation and our Bylaws;
authorizing a large number of shares of stock that are not yet issued, which would allow our board of
directors to issue shares to persons friendly to current management, thereby protecting the continuity of our
management, or which could be used to dilute the stock ownership of persons seeking to obtain control of
us;
prohibiting stockholders from calling special meetings of stockholders or taking action by written consent;
and
establishing advance notice requirements for nominations of candidates for election to our board of
directors or for proposing matters that can be acted on by stockholders at the annual stockholder meetings.
In addition, we are subject to Section 203 of the Delaware General Corporation Law, which may have an
anti-takeover effect with respect to transactions not approved in advance by our board of directors, including
discouraging takeover attempts that could have resulted in a premium over the market price for shares of our
common stock.
These provisions apply even if a takeover offer may be considered beneficial by some stockholders and
could delay or prevent an acquisition that our board of directors determines is not in our and our stockholders’ best
interests.
We may issue preferred stock with terms that could dilute the voting power or reduce the value of our
common stock.
Our Certificate of Incorporation authorizes us to issue, without the approval of our stockholders, one or
more classes or series of preferred stock having such designations, powers, preferences and relative, participating,
optional and other rights, and such qualifications, limitations or restrictions as our board of directors generally may
determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the
value of our common stock. For example, we could grant holders of preferred stock the right to elect some number
of our directors in all events or on the happening of specified events or the right to veto specified transactions.
Similarly, the repurchase or redemption rights or dividend, distribution or liquidation preferences we could assign to
holders of preferred stock could affect the residual value of the common stock.
Our Bylaws designate a state or federal court located within the State of Delaware as the sole and
exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders,
which could limit our stockholders’ ability to obtain a preferred judicial forum for disputes with us or our
directors, officers or other employees.
Our Bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and
exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of
breach of a fiduciary duty owed by any director, officer or other employee to us or our stockholders, (iii) any action
asserting a claim arising pursuant to any provision of Delaware General Corporation Law, our Certificate of
Incorporation (including any certificate of designations for any class or series of our preferred stock) or our Bylaws,
20
in each case, as amended from time to time, or (iv) any action asserting a claim governed by the internal affairs
doctrine shall be a state or federal court located within the State of Delaware, in all cases subject to the court’s
having personal jurisdiction over the indispensable parties named as defendants. Any person or entity purchasing
or otherwise acquiring any interest in shares of our capital stock is deemed to have received notice of and
consented to the foregoing provision. This forum selection provision may limit a stockholder’s ability to bring a claim
in a judicial forum that it finds favorable or cost-effective for disputes with us or our directors, officers or other
employees, which may discourage such lawsuits against us and our directors, officers and employees.
We may not achieve the intended benefits of having an exclusive forum provision if it is found to be
unenforceable.
We have included an exclusive forum provision in our Bylaws as described above. However, the
enforceability of similar exclusive jurisdiction provisions in other companies’ bylaws or certificates of incorporation
has been challenged in legal proceedings, and it is possible that, in connection with any action, a court could find
the exclusive jurisdiction provision contained in our Bylaws to be inapplicable or unenforceable in such action.
Although in June 2013 the Delaware Court of Chancery upheld the statutory and contractual validity of exclusive
forum-selection bylaw provisions, and in 2015 the Delaware General Corporation Law was amended to permit
forum-selection provisions applicable to "integral corporate claims", the validity of forum-selection provisions
continues to be tested with litigation. Furthermore, the Delaware Court of Chancery emphasized that such
provisions may not be enforceable under circumstances where they are found to operate in an unreasonable or
unlawful manner or in a manner inconsistent with a board’s fiduciary duties. Also, it is uncertain whether non-
Delaware courts consistently will enforce such exclusive forum-selection bylaw provisions. If a court were to find our
choice of forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of
actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions
and we may not obtain the benefits of limiting jurisdiction to the courts selected.
Item 1B. UNRESOLVED STAFF COMMENTS
The Company had no unresolved comments from the staff of the U.S. Securities and Exchange
Commission as of December 31, 2019.
Item 2. PROPERTIES
Descriptions of the Company’s properties are included in Item 1 of this Annual Report on Form 10-K
beginning on page 2.
Item 3. LEGAL PROCEEDINGS
Murphy USA and its subsidiaries are engaged in a number of legal proceedings, all of which Murphy USA
considers incidental to its business. See Note 17 “Contingencies” in the accompanying consolidated financial
statements for the three years ended December 31, 2019. Based on information currently available to the
Company, the ultimate resolution of matters referred to in this item is not expected to have a material adverse effect
on the Company’s net income, financial condition or liquidity in a future period.
SUPPLEMENTAL INFORMATION; Information About our Executive Officers
The age at January 1, 2020, present corporate office and length of service in office of each of the
Company’s executive officers, as of December 31, 2019, are reported in the following listing. Executive officers are
elected annually but may be removed from office at any time by the Board of Directors.
R. Andrew Clyde – Age 56; President and Chief Executive Officer, Director and Member of the Executive
Committee since August 2013. Mr. Clyde has led Murphy USA's successful value-creation strategy since its spin-
off in 2013. Mr. Clyde served Booz & Company (and prior to August 2008, Booz Allen Hamilton) in its global energy
practice. He joined the firm in 1993, was elected vice president in 2000 and held leadership roles as North
American Energy Practice Leader and Dallas office Managing Partner and served on the firm’s Board Nominating
Committee. Mr. Clyde received a master’s degree in Management with Distinction from the Kellogg Graduate
School of Management at Northwestern University. He received a BBA in Accounting and a minor in Geology from
Southern Methodist University.
21
Mindy K. West – Age 50; Executive Vice President, Fuels, Chief Financial Officer, and Treasurer since
August 2013. Ms. West joined Murphy Oil in 1996 and has held positions in Accounting, Employee Benefits,
Planning and Investor Relations. In 2007, she was promoted to Vice President & Treasurer for Murphy Oil. She
holds a bachelor’s degree in Finance from the University of Arkansas and a bachelor’s degree in Accounting from
Southern Arkansas University. She is a Certified Public Accountant and a Certified Treasury Professional.
John A. Moore – Age 52; Senior Vice President and General Counsel since August 2013. Mr. Moore joined
Murphy Oil in 1995 as Associate Attorney in the Law Department. He was promoted to Attorney in 1998 and Senior
Attorney in 2005. He was promoted to Manager, Law and assumed the role of Corporate Secretary for Murphy Oil
in 2011. Mr. Moore holds a bachelor’s degree in Philosophy from Ouachita Baptist University and a Law degree
from the University of Arkansas.
Robert J. Chumley – Age 55; Senior Vice President, Merchandising and Marketing since September 2016.
Mr. Chumley joined the Company from 7-Eleven Inc., where he served as Senior Product Director, Vice President of
Merchandising and Senior Vice President of Innovation. His previous experience includes Sales and Marketing
leadership roles with Procter and Gamble, Coca-Cola, Kellogg's and Gillette. Mr. Chumley graduated from the
Royal Military College of Canada with a Bachelors of Engineering degree. After graduation he served as a
commissioned officer in the Royal Canadian Navy. Mr. Chumley also holds an MBA from Dalhousie University.
Renee M. Bacon – Age 50; Senior Vice President, Sales and Operations since February 2019. Ms. Bacon
joined Murphy USA in 2016 as Regional Vice president, Sales and Operations. In 2018, she was promoted to
National Vice President, Sales and Operations and in 2019 was promoted to Senior Vice President, Sales and
Operations. She holds a Bachelor of Business Administration from the University of Texas--Austin. Ms. Bacon also
holds a Master of Business Administration from the University of Houston and a Doctorate of Jurisprudence from
the University of Tennessee.
Terry P. Hatten – Age 53; Senior Vice President, Human Resources since June 2018. Mr. Hatten joined the
Company from Commercials Metal Company where he served as Chief Human Resources Officer. His previous
experience includes Human Resources leadership roles at General Nutrition Centers (GNC), Dean Foods, and
Pepsi Bottling Group. He graduated with a bachelor of arts degree from Gannon University. Mr. Hatten also holds
a master's degree in industrial and labor relations from Indiana University of Pennsylvania.
Item 4. MINE SAFETY DISCLOSURES
Not applicable
22
Part II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
The Company’s common stock is traded on the New York Stock Exchange using “MUSA” as the trading
symbol. There were 1,878 stockholders of record as of December 31, 2019.
The declaration and amount of any dividends to holders of our common stock will be at the discretion of our
board of directors and will depend upon many factors, including our financial condition, earnings, cash flows, capital
requirements of our business, covenants associated with our debt obligations, legal requirements, regulatory
constraints, industry practice and other factors the board of directors deems relevant.
We are a holding company and have no direct operations. As a result, we will be able to pay dividends on
our common stock only from available cash on hand and distributions received from our subsidiaries. There can be
no assurance we will continue to pay any dividend even if we commence the payment of dividends. We did not
declare any cash dividends on our common stock for the two years ended December 31, 2019.
The indenture governing the Senior Notes and the credit agreement governing our credit facilities and term
loan contain restrictive covenants that limit, among other things, the ability of Murphy USA and the restricted
subsidiaries to make certain restricted payments, which as defined under both agreements, include the declaration
or payment of any dividends of any sort in respect of its capital stock and repurchase of shares of our common
stock. See “Management's Discussion and Analysis of Financial Condition and Operating Results—Capital
Resources and Liquidity—Debt” and Note 7 “Long-Term Debt” to the accompanying audited consolidated financial
statements for the three years ended December 31, 2019.
On July 24, 2019, the Board of Directors approved an up to $400 million share repurchase program to be
executed over the two-year period ending July 2021. Prior to the July authorization, the Company had continued to
conduct repurchases under quarterly allocations in line with recent past practice. During 2019, total purchases
were made of 1,898,023 common shares for $165.8 million,or $87.35 per share, of which 1,393,626 common
shares for $125.0 million were made under the July 2019 authorization, leaving approximately $275.0 million
available until July 2021.
Below is detail of the company's purchases of its own equity securities during the fourth quarter of 2019.
Issuer Purchases of Equity Securities
Total Number
of Shares
Purchased
Average
Price Paid
Per Share
Total Number
of Shares
Approximate
Dollar Value of
Purchased as
Shares That May
Part of Publicly
Yet Be Purchased
Announced Plans
Under the Plans
or Programs
or Programs 1
October 1, 2019 to
October 31, 2019
November 1, 2019 to
November 30, 2019
December 1, 2019 to
December 31, 2019
Three Months Ended
December 31, 2019
277,670
$
22,622
—
300,292
$
87.26
106.76
—
88.73
277,670
$
277,405,657
22,622
274,990,571
—
274,990,571
300,292
$
274,990,571
1Terms of the repurchase plan authorized by the Murphy USA Inc. Board of Directors and announced on July 31, 2019 include authorization for
the Company to acquire up to $400 million of its common shares by July 31, 2021. Upon completing the existing repurchase program, the
company may elect to repurchase additional shares utilizing existing available cash balances if prices are favorable in management's opinion.
23
Equity Compensation Plan Information
The table below contains information about securities authorized for issuance under equity compensation
plans. The features of these plans are discussed further in Note 10 “Incentive Plans” to our audited consolidated
financial statements.
Plan category
Equity compensation
plans approved by
security holders
Equity compensation
plans not approved by
security holders
Total
Number of securities to be
issued upon exercise of
outstanding options, warrants
and rights (1)
(a)
Weighted-average exercise
price of outstanding
options, warrants and
rights
(b)
Number of securities remaining
available for future issuance under
equity compensation plans (excluding
securities reflected in column (a)) (2)
(c)
756,022
—
756,022
$68.52
—
$68.52
3,536,559
—
3,536,559
(1) Amounts in this column include outstanding restricted stock units.
(2) Number of shares available for issuance includes 3,160,188 available shares under the 2013 Long-Term Incentive Plan as of December 31,
2019 plus 376,371 available shares under the 2013 Stock Plan for Non-Employee Directors as of December 31, 2019. Assumes each
restricted stock unit is equivalent to one share and each performance unit is equal to two shares.
24
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The following graph presents a comparison of cumulative total shareholder returns (including the
reinvestment of dividends) as if a $100 investment was made on December 31, 2014, the Standard and Poor’s 500
Stock Index Fund (S&P 500 Index) and the S&P 400 Midcap Index. This performance information is “furnished” by
the Company and is not considered as “filed” with this Annual Report on Form 10-K and is not incorporated into any
document that incorporates this Annual Report on Form 10-K by reference.
Murphy USA Inc.
Comparison of Cumulative Shareholder Returns
Shareholder Return Performance Table
Murphy USA Inc.
S&P 500 Index
S&P 400 Midcap
Index
December 31, 2014
December 31, 2015
December 31, 2016
December 31, 2017
December 31, 2018
December 31, 2019
$
$
$
$
$
$
100
99
109
130
122
157
$
$
$
$
$
$
100
96
114
131
115
143
100
88
89
117
111
170
$
$
$
$
$
$
25
Item 6. SELECTED FINANCIAL DATA
(Millions of dollars, except per share data)
2019
2018
2017
2016
2015
Results of Operations for the Year
Net sales and other operating revenues
Net cash provided by operating activities
Income from continuing operations
Net income (loss)
Per Common Share - diluted
Income (loss) from continuing operations
Income (loss) from discontinued
operations
Net income (loss)
Capital Expenditures for the Year
Marketing
Corporate and other
Subtotal
Discontinued operations
Total capital expenditures
Financial condition at December 31
Current ratio
Working capital
Net property, plant and equipment
Total assets
Long-term debt
Stockholders' equity
Long-term debt - percent of capital
employed 1
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
14,034.6
313.3
154.8
154.8
4.86
$
$
$
$
$
14,362.9
398.7
213.6
213.6
6.48
$
$
$
$
$
12,826.6
283.6
245.3
245.3
6.78
$
$
$
$
$
11,594.6
337.4
221.5
221.5
5.59
$
$
$
$
$
— $
— $
— $
— $
4.86
$
6.48
$
6.78
$
5.59
$
155.5
59.1
214.6
—
214.6
1.41
205.8
1,807.3
2,687.2
999.3
803.0
$
$
$
$
$
$
$
$
169.2
24.6
193.8
—
193.8
1.19
92.0
1,748.2
2,360.8
842.1
807.3
$
$
$
$
$
$
$
$
234.0
39.7
273.7
—
273.7
1.15
80.9
1,679.5
2,331.0
860.9
738.4
$
$
$
$
$
$
$
$
239.1
24.8
263.9
—
263.9
1.00
1.0
1,532.7
2,088.7
629.6
697.1
$
$
$
$
$
$
$
$
12,699.4
215.8
137.6
176.3
3.14
0.88
4.02
202.4
9.5
211.9
3.7
215.6
1.11
43.4
1,369.3
1,886.2
490.2
792.3
55.4%
51.1%
53.8%
47.5%
38.2%
Notes:
1 Calculated as Long-Term Debt on the Balance Sheet divided by the sum of Long-Term Debt plus Stockholders' Equity.
26
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
Management’s Discussion and Analysis of Results of Operations and Financial Condition (“Management’s
Discussion and Analysis”) is the Company’s analysis of its financial performance and of significant trends that may
affect future performance. It should be read in conjunction with the consolidated financial statements and notes
included in this Annual Report on Form 10-K. It contains forward-looking statements including, without limitation,
statements relating to the Company’s plans, strategies, objectives, expectations and intentions. The words
“anticipate,” “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,”
“should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target”
and similar expressions identify forward-looking statements. The Company does not undertake to update, revise or
correct any of the forward-looking information unless required to do so under the federal securities laws. Readers
are cautioned that such forward-looking statements should be read in conjunction with the Company’s disclosures
under “Forward-Looking Statements” and “Risk Factors” included elsewhere in this Annual Report on Form 10-K.
For purposes of this Management’s Discussion and Analysis, references to “Murphy USA”, the “Company”,
“we”, “us” and “our” refer to Murphy USA Inc. and its subsidiaries on a consolidated basis.
Management’s Discussion and Analysis is organized as follows:
• Executive Overview—this section provides an overview of our business and the results of operations and
financial condition for the periods presented. It includes information on the basis of presentation with
respect to the amounts presented in the Management’s Discussion and Analysis and a discussion of the
trends affecting our business.
• Results of Operations—this section provides an analysis of our results of operations, including the results of
our business segments for the three years ended December 31, 2019.
• Capital Resources and Liquidity—this section provides a discussion of our financial condition and cash
flows as of and for the three years ended December 31, 2019. It also includes a discussion of our capital
structure and available sources of liquidity.
• Critical Accounting Policies—this section describes the accounting policies and estimates that we consider
most important for our business and that require significant judgment.
Executive Overview
Our Business and Separation from Murphy Oil
Our business consists primarily of the U.S. retail marketing business that was separated from Murphy Oil,
our former parent company, plus other assets, liabilities and operating expenses of Murphy Oil that are associated
with supporting the activities of the U.S. retail marketing operations. We market refined products through a network
of retail gasoline stores and unbranded wholesale customers. Our owned retail stores are primarily all located near
Walmart stores and use the brand name Murphy USA®. We also market gasoline and other products at stand alone
stores under the Murphy Express brand. At December 31, 2019, we had a total of 1,489 Company stores in 26
states, principally in the Southeast, Southwest and Midwest United States.
Basis of Presentation
Murphy USA was incorporated in March 2013 in contemplation of the Separation, and until the Separation
was completed on August 30, 2013, it had not commenced operations and had no material assets, liabilities or
commitments. Accordingly, the financial information presented in this Management’s Discussion and Analysis and
the accompanying consolidated financial statements reflect the historical results of operations, financial position and
cash flows of Murphy USA.
27
Trends Affecting Our Business
Our operations are significantly impacted by the gross margins we receive on our fuel sales. These gross
margins are commodity-based, change daily and are volatile. While we expect our total fuel sales volumes to grow
over time and the gross margins we realize on those sales to remain strong, these gross margins can change
rapidly due to many factors. These factors include, but are not limited to, the price of refined products, interruptions
in supply caused by severe weather, severe refinery mechanical failures for an extended period of time, and
competition in the local markets in which we operate.
The cost of our main sales products, gasoline and diesel, is greatly impacted by the cost of crude oil in the
United States. Generally, rising prices for crude oil increase the Company’s cost for wholesale fuel products
purchased. When wholesale fuel costs rise, the Company is not always able to immediately pass these price
increases on to its retail customers at the pump, which in turn squeezes the Company’s sales margin. Also, rising
prices tend to cause our customers to reduce discretionary fuel consumption, which tends to reduce our fuel sales
volumes. Crude oil prices in 2019 started the year in the $47 per barrel range and climbed to approximately $66 per
barrel in April and ended December at approximately $61 per barrel. Margins in 2019 remain near our recent
historical average of 13.7 cents per gallon ("cpg") even with volatility in the price environment.
In addition, our revenues are impacted by our ability to leverage our diverse supply infrastructure in pursuit
of obtaining the lowest cost of fuel supply available; for example, activities such as blending bulk fuel with ethanol
and bio-diesel to capture and subsequently sell Renewable Identification Numbers (“RINs”). Under the Energy
Policy Act of 2005, the EPA is authorized to set annual quotas establishing the percentage of motor fuels consumed
in the United States that must be attributable to renewable fuels. Obligated parties are required to demonstrate that
they have met any applicable quotas by submitting a certain amount of RINs to the EPA. RINs in excess of the set
quota can then be sold in a market for RINs at then-prevailing prices. The market price for RINs fluctuates based
on a variety of factors, including but not limited to governmental and regulatory action. There are other market
related factors that can impact the net benefit we receive for RINs on a company-wide basis either favorably or
unfavorably. The Renewable Fuel Standard ("RFS") program continues to be unpredictable and average ethanol
RIN prices were $0.18 in January 2019 and moved to an average high of $0.22 in July before settling back to $0.12
in December. Our business model does not depend on our ability to generate revenues from RINs. Revenue from
the sales of RINs is included in “Other operating revenues” in the Consolidated Income Statements.
As of December 31, 2019, we have $800 million of Senior Notes and $250 million of term loan outstanding.
We believe that we will generate sufficient cash from operations to fund our ongoing operating requirements. At
December 31, 2019, we have additional available capacity under the committed $325 million credit facilities (subject
to the borrowing base), together with capacity under a $150 million incremental uncommitted facility. We expect to
use the credit facilities to provide us with available financing intended to meet any ongoing cash needs in excess of
internally generated cash flows. To the extent necessary, we will borrow under these facilities to fund our ongoing
operating requirements.There can be no assurances, however, that we will generate sufficient cash from operations
or be able to draw on the credit facilities, obtain commitments for our incremental facility and/or obtain and draw
upon other credit facilities. For additional information see Significant Sources of Capital in the Capital Resources
and Liquidity section.
The Company currently anticipates total capital expenditures (including land for future development) for the
full year 2020 to range from approximately $225 million to $275 million depending on how many new sites are
completed. We intend to fund our capital program in 2020 primarily using operating cash flow, but will supplement
funding where necessary using borrowings under available credit facilities.
We believe that our business will continue to grow in the future as we expect to build additional locations
chosen by our real estate development team that have the characteristics we look for in a strong site. The pace of
this growth is continually monitored by our management, and these plans can be altered based on operating cash
flows generated and the availability of debt facilities.
Seasonality
Our business has inherent seasonality due to the concentration of our retail sites in certain geographic
areas, as well as customer behaviors during different seasons. In general, sales volumes and operating incomes
are highest in the second and third quarters during the summer activity months and lowest during the winter
months.
28
Business Segments
Our business is organized into one operating segment which is Marketing. The Marketing segment
includes our retail marketing sites and product supply and wholesale assets. For operating segment information,
see Note 20 “Business Segments” in the accompanying audited consolidated financial statements for the three-year
period ended December 31, 2019.
Results of Operations
Consolidated Results
For the year ended December 31, 2019, the Company reported net income of $154.8 million or $4.86 per
diluted share on revenue of $14.0 billion. Net income was $213.6 million for 2018 or $6.48 per diluted share on
revenue of $14.4 billion.
A summary of the Company’s earnings by business segment follows:
(millions of dollars)
Marketing
Corporate and other assets
Net income
Year ended December 31,
2019
2018
2017
$
$
215.0 $
(60.2)
154.8 $
214.2 $
(0.6)
213.6 $
295.3
(50.0)
245.3
Net income for 2019 decreased compared to 2018, primarily due to:
Lower settlement proceeds from Deepwater Horizon spill recorded in Corporate and other assets;
•
• Higher station and other operating expenses;
• Higher general and administrative expenses;
• Higher depreciation;
•
Loss on early debt extinguishment
The items below partially offset the decrease in earnings in the current period:
• Higher all-in fuel contribution;
• Higher merchandise contribution
Net income for 2018 decreased compared to 2017 primarily due to:
• No recognition of deferred tax benefits related to the passage of the Tax Cuts and Jobs Act in 2017;
• Higher station and other operating expenses;
• Higher depreciation expense
The items below partially offset the decrease in earnings of 2018 from 2017:
• Higher total fuel contribution due to improved retail fuel margins combined with higher product supply and
wholesale margins, excluding RINs;
• Net settlement proceeds from Deepwater Horizon oil spill recorded in Corporate and other assets;
• Higher merchandise contribution
2019 versus 2018
Revenues for the year ended December 31, 2019 decreased $0.3 billion, or 2.3%, compared to 2018. The
decrease was primarily due to a decrease in retail fuel prices of 14 cpg for the 2019 full year which was partially
offset by an increase in retail fuel sales volumes of 3.4% due primarily to an increase in the number of stores and
improved pricing tactics. Merchandise sales were also higher year-over-year by 8.1%.
Cost of sales decreased $0.4 billion, or 2.8%, compared to 2018. This decrease was due to retail fuel sold
at a lower average cost which was partially offset by higher volumes and increased merchandise cost of goods
sold.
29
Station and other operating expenses increased $18.0 million, or 3.3% in 2019 due primarily to the addition
of 17 new stores, along with 27 larger stores under our raze-and-rebuild program. On an average per store month
(APSM) basis, the station operating expenses applicable to the retail marketing business increased 2.0% in
2019. The largest area of increase was in employee related expenses.
Selling, general and administrative expenses for 2019 were higher by $8.4 million. The increase was
mainly due to higher professional fees, employee benefit costs, and increased technology service costs.
Net settlement proceeds for 2019 were $0.1 million (before tax), which represented the final remaining net
settlement of damages incurred in connection with the 2010 Deepwater Horizon oil spill, compared to $50.4 million
in 2018.
Interest expense in 2019 increased by $2.0 million compared to 2018 due primarily to additional term loan
borrowings in 2019 and the accelerated write-off of associated debt issuance costs on the modification of the
revolver combined with a lower amount of capitalized interest.
During 2019, the company recorded a $14.8 million loss on early debt extinguishment related to the call
and redemption of our 2023 Senior Notes.
Depreciation expense in 2019 increased $18.0 million due primarily to more stores in operation during 2019
when compared to 2018, combined with accelerated depreciation on raze-and-rebuilds.
Income tax expense is lower in 2019 by $12.7 million due primarily to lower pretax income. The effective
income tax expense rate in 2019 was 23.5% compared to 22.0% for 2018 due to fewer discrete state income tax
benefits and lower excess tax benefits from equity compensation.
2018 versus 2017
Revenues for the year ended December 31, 2018 increased $1.5 billion, or 12.0%, compared to 2017. The
improvement was primarily due to an increase in retail fuel prices of 29 cpg for the full year, in addition, total retail
volumes increased 2.2% due primarily to an increase in the number of stores.
Cost of sales increased $1.5 billion, or 12.8%, compared to 2017. This increase was due to higher volumes
of retail fuel sold at a higher average cost, higher wholesale costs, higher merchandise costs and increased store
count.
Station and other operating expenses increased $26.4 million, or 5.1% in 2018 due primarily to the addition
of 26 new stores, along with 27 larger stores under our raze-and-rebuild program. On an average per store month
("APSM") basis, the station operating expenses applicable to the retail marketing business increased 0.7% in 2018.
The largest area of increase was in maintenance expense.
Selling, general and administrative expenses for 2018 were lower by $5.0 million. The decrease was
mainly due to lower charitable donation expenses in 2018, partially offset by higher labor and employee benefit
costs.
Net settlement proceeds for 2018 were $50.4 million (before tax), which represented the net settlement of
damages incurred in connection with the 2010 Deepwater Horizon oil spill.
Net interest expense in 2018 increased by $6.2 million compared to 2017 due primarily to expense for the
full year 2018 for the 2027 Senior Notes which were issued early in the second quarter of 2017 combined with a
lower amount of capitalized interest.
Income tax expense was higher in 2018 by $65.5 million due to the benefit recognized in 2017 related to
the enactment of the Tax Cuts and Jobs Act which resulted in the existing net deferred tax liabilities being revalued
to lower Corporate tax rates. The effective rate in 2018 was 22.0% compared to a tax benefit of 2.2% for 2017.
Segment Results
Marketing
Income before income taxes in the Marketing segment for 2019 decreased $2.4 million, or 0.8%, from 2018 due
to increased station and other operating costs, general and administrative costs, and depreciation, partially offset
by improved all-in fuel and merchandise contribution.
30
The tables below show the results for the Marketing segment for the three years ended December 31, 2019
along with certain key metrics for the segment.
(Millions of dollars, except revenue per store month (in thousands)
and store counts)
Marketing Segment
Years Ended December 31,
2019
2018
2017
Operating revenues
Petroleum product sales
Merchandise sales
Other
Total operating revenues
Operating expenses
Petroleum product cost of goods sold
Merchandise cost of goods sold
Station and other operating expenses
Depreciation and amortization
Selling, general and administrative
Accretion of asset retirement obligations
Total operating expenses
Gain (loss) on sale of assets
Income from operations
Other income (expense)
Interest expense
Other nonoperating income
Total other income (expense)
Income before income taxes
Income tax expense (benefit)
Income
Total tobacco sales revenue per same store sales1,2
Total non-tobacco sales revenue per same store
sales1,2
Total merchandise sales revenue per same store
sales1,2
$
$
$
$
$
$
$
11,373.8 $
2,620.1
40.4
14,034.3 $
11,858.4 $
2,423.0
80.9
14,362.3 $
10,707.4
2,200.7
559.3
138.9
144.6
2.1
13,753.0 $
0.1
281.4
(0.1)
—
(0.1) $
281.3
66.3
11,251.1
2,022.5
541.3
124.5
136.2
2.0
14,077.6 $
(1.1)
283.6
(0.1)
0.2
0.1 $
283.7
69.5
215.0 $
214.2 $
107.3 $
101.2 $
41.0
39.1
148.3 $
140.3 $
10,287.9
2,372.6
165.7
12,826.2
9,773.2
1,991.4
514.9
110.5
141.2
1.8
12,533.0
(3.9)
289.3
(0.1)
3.2
3.1
292.4
(2.9)
295.3
105.5
37.1
142.6
12018 and 2017 amounts not revised for subsequent raze-and-rebuild activity
2Includes site-level discounts for MDR redemptions and excludes change in value of unredeemed MDR points
Store count at end of period
Total store months during the period
1,489
17,621
1,472
17,343
1,446
16,880
APSM metric includes all stores open through the date of the calculation.
Same store sales ("SSS") metric includes aggregated individual store results for all stores open throughout both
periods presented. For all periods presented, the store must have been open for the entire calendar year to be
included in the comparison. Remodeled stores that remained open or were closed for just a very brief time (less
than a month) during the period being compared remain in the same store sales calculation. If a store is replaced
either at the same location (raze-and-rebuild) or relocated to a new location, it will be excluded from the calculation
31
during the period it is out of service. Newly constructed sites do not enter the calculation until they are open for
each full calendar year for the periods being compared (open by January 1, 2018 for the sites being compared in
the 2019 versus 2018 comparison). When prior period same store sales volumes or sales are presented, they have
not been revised for current year activity for raze-and-rebuilds and asset dispositions.
Fuel
Key Operating Metrics
2019
2018
2017
Twelve Months Ended December 31,
$
$
Total retail fuel contribution ($ Millions)
Total PS&W contribution ($Millions)
RINs and other (included in Other operating revenues
on Consolidated Income Statement) ($ Millions)
Total fuel contribution ($ Millions)
Retail fuel volume - chain (Million gal)
Retail fuel volume - per site (K gals APSM)1
Retail fuel volume - per site (K gal SSS)2
Total fuel contribution (including retail, PS&W and
RINS) (cpg)
Retail fuel margin (cpg)
PS&W including RINs contribution (cpg)
605.8 $
64.0
34.8
704.6 $
4,374.5
248.3
243.8
16.1
13.8
2.3
624.2 $
(13.8)
75.2
685.6 $
4,232.2
244.0
242.6
16.2
14.7
1.5
581.0
(63.6)
160.3
677.7
4,140.9
245.3
245.3
16.4
14.0
2.4
1APSM metric includes all stores open through the date of calculation
22018 and 2017 amounts not revised for subsequent raze-and-rebuild activity (SSS definition on page 31)
The reconciliation of the total fuel contribution to the Consolidated Income Statements is as follows:
(Millions of dollars)
Petroleum product sales
Less Petroleum product cost of goods sold
Plus RINs and other (included in Other Operating
Revenues line)
Total fuel contribution
Merchandise
Key Operating Metrics
Total merchandise contribution ($ Millions)
Total merchandise sales ($ Millions)
Total merchandise sales ($K SSS)1,2
Merchandise unit margin (%)
Tobacco contribution ($K SSS)1,2
Non-tobacco contribution ($K SSS)1,2
Total merchandise contribution ($K SSS)1,2
$
$
$
$
$
$
$
$
Twelve Months Ended December 31,
2019
2018
2017
11,373.8 $
(10,707.4)
11,858.4 $
(11,251.1)
10,287.9
(9,773.2)
38.2
704.6 $
78.3
685.6 $
163.0
677.7
Twelve Months Ended December 31,
2019
2018
2017
419.4
2,620.1
148.3
16.0%
14.6
9.6
24.2
$
$
$
$
$
$
400.4
2,423.0
140.3
16.5%
13.7
9.6
23.3
$
$
$
$
$
$
381.2
2,372.7
142.6
16.1%
13.7
9.2
22.9
12018 and 2017 amounts not revised for subsequent raze-and-rebuild activity (SSS definition on page 31)
2Includes site-level discounts for MDR redemptions and excludes change in value of unredeemed MDR points
32
2019 versus 2018
Total fuel volumes for the year ended December 31, 2019 were up 3.4%. Retail fuel volumes in 2019 on a
SSS basis were higher by 1.2% compared to 2018. The increase in retail volumes on an SSS basis was primarily
attributable to improved pricing tactics.
The Marketing segment had total revenues of $14.0 billion in 2019 compared to approximately $14.4
billion in 2018, a decrease of $0.4 billion. Revenue amounts included excise taxes collected and remitted to
government authorities of $1.9 billion in 2019 and $1.8 billion in 2018.
Total fuel sales volumes on an SSS basis were 243,818 gallons per month in 2019, increased from 242,562
gallons per month in the prior year. Retail fuel margin decreased in 2019 to 13.8 cpg, compared to 14.7 cpg in the
prior year. The lower fuel margins in the current year were attributed to a rising fuel price environment which
typically compresses retail margins. Total product supply and wholesale margin dollars before RINs increased in the
current year, which is typical in a rising price environment due to timing and inventory price adjustments, partially
offset by a decline in the contribution from RINs sales. During 2019, operating income included $34.8 million from
the sale of 197 million RINs at an average selling price of $0.18 per RIN compared to 2018's $75.2 million for the
sale of 227 million RINs at an average price of $0.33 per RIN.
Merchandise sales were up 8.1% in 2019 to $2.6 billion. Merchandise unit margins decreased 50 basis
points, to 16.0% in 2019 from 16.5% in 2018. On a SSS basis, total merchandise sales were up 6.5% with tobacco
products up 7.7%, along with a 3.5% increase in non-tobacco sales. Total margins on a SSS basis for 2019 were
up 4.5% with tobacco margins higher 8.2%, partially offset by a 0.6% decrease in non-tobacco margins that were
negatively impacted by the allocation of certain immaterial costs that were previously included in operating
expense.
Station and other operating expenses increased $18.0 million in 2019 compared to 2018 levels, an
increase of 3.3%. This increase in total dollars was due mainly to increased store count. Excluding credit card fees
on an APSM basis, station and other operating expenses at the retail level were higher in 2019 by 2.0% compared
to 2018 levels. This increase was due primarily to higher employee related expenses.
Depreciation and amortization increased $14.4 million in 2019, an increase of 11.5%. This increase was
caused by more stores operating in the 2019 period combined with accelerated depreciation on raze-and-rebuild
sites.
Selling, general and administrative expenses ("SG&A") increased $8.4 million in 2019 compared to 2018.
The increased SG&A costs were primarily due to higher professional fees, employee benefits and other technology
service expenses.
2018 versus 2017
Total fuel volumes for the year ended December 31, 2018 were up 2.2%. Retail fuel volumes in 2018 on an
SSS basis were lower by 0.6% compared to 2017. The decline in retail volumes on an SSS basis was related to
restrained retail demand and ongoing competitive pressures.
The Marketing segment had total revenues of $14.4 billion in 2018 compared to approximately $12.8
billion in 2017, an increase of $1.6 billion. Revenue amounts included excise taxes collected and remitted to
government authorities of $1.8 billion in 2018 and $2.0 billion in 2017. The Company adopted ASC Topic 606 as of
January 1, 2018 using the modified retrospective method. The impact of the excise and sales taxes collected and
remitted to government authorities included in petroleum product sales that would have been recognized under
previous revenue recognition guidance would have increased 2018 petroleum product sales (at retail) by
$25.4 million and petroleum product sales (at wholesale) by $171.2 million for a total increase in petroleum product
sales of $196.5 million.
Total fuel sales volumes on an SSS basis were 242,562 gallons per month in 2018, down 0.6%
from 245,289 gallons per month in the prior year. Retail fuel margin increased in 2018 to 14.7 cpg, compared to
14.0 cpg in the prior year. The higher fuel margins in the period were attributed to more price volatility in 2018
compared to 2017. Total product supply and wholesale margin dollars excluding RINs increased in the current year
but was offset by a decline in the contribution of RINs sales. During 2018, operating income included $75.2 million
from the sale of 227 million RINs at an average selling price of $0.33 per RIN compared to $160.3 million for the
sale of 224 million RINS at an average price of $0.72 per RIN in 2017.
33
Merchandise sales were up 2.1% in 2018 to $2.4 billion. Merchandise unit margins increased 40 basis
points, to 16.5% in 2018 from 16.1% in 2017. This improvement in margin was primarily caused by optimizing
promotional programs and manufacturer price increases in tobacco along with new products at better margins. On a
SSS basis, total merchandise sales were down 0.2% with tobacco products down 1.6%, partially offset by a 3.8%
increase in non-tobacco sales. Total margins on an SSS basis for 2018 were up 2.9% with tobacco margins higher
3.1%, combined with a 2.6% increase in non-tobacco margin.
Station and other operating expenses increased $26.4 million in 2018 compared to 2017 levels, an
increase of 5.1%. This increase in total dollars was due mainly to increased store count. Excluding credit card fees,
on an APSM basis, station and other operating expenses at the retail level were higher in 2018 by 1.1% compared
to 2017 levels. This increase was due primarily to higher maintenance related expenses.
Depreciation and amortization increased $14.0 million in 2018, an increase of 12.7%. This increase was
caused by more stores operating in the 2018 period compared to the prior year.
Selling, general and administrative expenses decreased $5.0 million in 2018 compared to 2017. The lower
SG&A costs in 2018 were primarily due to decreased donations expense in 2018 partially offset by higher incentive
awards expense.
Corporate and other assets
2019 versus 2018
Income from continuing operations for Corporate and other assets in 2019 was a loss of $60.2 million,
compared to a loss of $0.6 million in 2018. The 2018 results included the recognition of net settlement proceeds of
approximately $50.4 million (pretax) from the 2010 Deepwater Horizon oil spill compared to $0.1 million (pretax) in
2019. Net interest expense was higher in the current year by $2.0 million primarily due to the additional borrowings
on the term loan, early amortization of associated debt issuance costs due to the call of the 2023 Senior Notes in
September 2019, and was partially offset by lower interest rates on the $500 million Senior Notes issued on
September 13, 2019 combined with lower capitalized interest. The Company incurred a $14.8 million loss on early
debt extinguishment during 2019 related to the 2023 Senior Notes. Depreciation and amortization expense for
2019 was $3.8 million more than in the prior year.
2018 versus 2017
Income from continuing operations for Corporate and other assets in 2018 was a loss of $0.6 million
compared to a loss of $50.0 million in 2017. The 2018 improvement was due to recording net settlement proceeds
of approximately $50.4 million (pretax) from the 2020 Deepwater Horizon oil spill. The 2018 year included net
interest expense of $52.9 million compared to interest expense in 2017 of $46.7 million. The increase in net
interest expense in 2018 was primarily due to the new 2027 Senior Notes of $300 million that were issued in early
2017. Depreciation and amortization expense for 2018 was $3.1 million more than in 2017.
Non-GAAP Measures
The following table sets forth the Company’s EBITDA and Adjusted EBITDA for the three years ended
December 31, 2019. EBITDA means net income (loss) plus net interest expense, plus income tax expense,
depreciation and amortization, and Adjusted EBITDA adds back (i) other non-cash items (e.g., impairment of
properties and accretion of asset retirement obligations) and (ii) other items that management does not consider to
be meaningful in assessing our operating performance (e.g., (income) from discontinued operations, net settlement
proceeds, gain (loss) on sale of assets, loss on early debt extinguishment and other non-operating (income)
expense). EBITDA and Adjusted EBITDA are not measures that are prepared in accordance with U.S. generally
accepted accounting principles (GAAP).
We use Adjusted EBITDA in our operational and financial decision-making, believing that the measure is
useful to eliminate certain items in order to focus on what we deem to be an indicator of ongoing operating
performance and our ability to generate cash flow from operations. Adjusted EBITDA is also used by many of our
investors, research analysts, investment bankers, and lenders to assess our operating performance. We believe
that the presentation of Adjusted EBITDA provides useful information to investors because it allows understanding
of a key measure that we evaluate internally when making operating and strategic decisions, preparing our annual
plan and evaluating our overall performance. However, non-GAAP measures are not a substitute for GAAP
34
disclosures, and EBITDA and Adjusted EBITDA may be prepared differently by us than by other companies using
similarly titled non-GAAP measures.
The reconciliation of net income to EBITDA and Adjusted EBITDA is as follows:
(Millions of dollars)
Net income
Income tax expense (benefit)
Interest expense, net of interest income
Depreciation and amortization
EBITDA
Net settlement proceeds
Accretion of asset retirement obligations
(Gain) loss on sale of assets
Loss on early debt extinguishment
Other nonoperating (income) expense
Adjusted EBITDA
Capital Resources and Liquidity
Significant sources of capital
Years Ended December 31,
2019
2018
2017
$
154.8 $
213.6 $
245.3
47.6
51.7
152.2
406.3
(0.1)
2.1
(0.1)
14.8
$
(0.4)
422.6 $
60.3
51.4
134.0
459.3
(50.4)
2.0
1.1
—
(0.2)
411.8 $
(5.2)
45.4
116.9
402.4
—
1.8
3.9
—
(2.2)
405.9
As of December 31, 2019, we had $280.3 million of cash and cash equivalents. Our cash management
policy provides that cash balances in excess of a certain threshold are reinvested in certain types of low-risk
investments.
We have borrowing capacity under a committed $325 million asset based loan facility (the "ABL facility")
(subject to the borrowing base) and a $250 million term loan, as well as a $150 million incremental uncommitted
facility. At December 31, 2019, we had $325 million of borrowing capacity that we could utilize for working
capital and other general corporate purposes under our existing facility, including to support our operating model as
described herein. Our borrowing base limit for the facility is approximately $238 million based on December 31,
2019 balance sheet information. See “Debt – Credit Facilities” for the calculation of our borrowing base.
We also have a shelf registration on file with the SEC for an indeterminate amount of debt and equity
securities for future issuance, subject to our internal limitations on the amount of debt to be issued under this shelf
registration statement.
We believe our short-term and long-term liquidity is adequate to fund not only our operations, but also our
anticipated near-term and long-term funding requirements, including capital spending programs, execution of
announced share repurchase programs, potential dividend payments, repayment of debt maturities and other
amounts that may ultimately be paid in connection with contingencies.
Operating Activities
Net cash provided by operating activities was $313.3 million for the year ended December 31, 2019 and
$398.7 million for the comparable period in 2018, a decrease of 21.4%, primarily because of changes in net income,
and changes in noncash working capital. Net income decreased $58.8 million in 2019 compared to 2018 and the
amount of cash generated from working capital in the 2019 period decreased by $51.0 million. Partially offsetting
these decreases were benefits from non-cash depreciation and amortization and loss on early debt extinguishment.
Net cash provided by operating activities was $283.6 million in 2017. The primary reason for changes in the
amounts between 2018 and 2017 related to lower net income, offset by changes in deferred income taxes and
changes in noncash working capital and depreciation expense.
35
Investing Activities
For the year ended December 31, 2019, cash required by investing activities was $203.1 million compared
to cash required by investing activities of $209.1 million in 2018. The investing cash decrease of $6.0 million in
2019 was due to lower other investing activities in the current year. Capital expenditures in 2019 required cash of
$204.8 million compared to $204.3 million in 2018.
In 2018, cash required by investing activities was $209.1 million while 2017 required cash from investing
activities of $262.1 million due primarily to lower capital expenditures in 2018.
Financing Activities
Financing activities in the year ended December 31, 2019 required net cash of $14.4 million compared to a
net cash required of $175.1 million in the year ended December 31, 2018. The decrease in financing cash
requirements was due to new debt issuances which were partially offset by repayments of debt, debt
extinguishment costs, debt issuance costs and increased amounts spent on share repurchases in 2019.
Net cash required by financing activities in 2017 was $5.3 million. In 2017, the differences were due to the
amount of stock repurchases and debt issuances compared to 2018.
Share Repurchase program
On July 24, 2019, the Board of Directors approved an up to $400 million share repurchase program to be
executed over the two-year period ending July 2021. Purchases may be effected in the open market, through
privately negotiated transactions, through one or more accelerated stock repurchase programs, through a
combination of the foregoing or in any other manner in the discretion of management. Purchases will be made
subject to available cash, market conditions and compliance with our financing arrangements at any time during the
period of authorization. We may use cash from operations as well as draws under our credit facilities to effect
purchases.
Prior to the July authorization, the Company had continued to conduct share repurchases under quarterly
allocations in line with our past practice. During the year 2019, a total of 1,898,023 shares were repurchased for
$165.8 million, of which 1,393,626 shares for $125.0 million were made under the new plan, leaving available
approximately $275.0 million to be completed by July 2021.
Debt
Our long-term debt at December 31, 2019 and 2018 was as set forth below:
(Millions of dollars)
6.00% senior notes due 2023 (net of unamortized discount of
$4.1 at 2018)
5.625% senior notes due 2027 (net of unamortized discount of
$2.7 at 2019 and $3.1 at 2018)
4.75 % senior notes due 2029 (net of unamortized discount of
$6.1 at 2019)
Term loan due 2020 (effective interest rate of 5.0% at 2018 )
Term loan due 2023 (effective interest rate of 4.3% at 2019)
Capitalized lease obligations, vehicles, due through 2022
Unamortized debt issuance costs
Total long-term debt
Less current maturities
December 31,
2019
2018
$
— $
297.3
493.9
—
250.0
2.4
(5.5)
1,038.1
38.8
Total long-term debt, net of current
$
999.3 $
495.9
296.9
—
72.0
—
2.3
(3.8)
863.3
21.2
842.1
36
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") under its existing shelf registration statement. 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. 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.
On September 13, 2019, Murphy Oil USA, Inc., consummated a partial tender offer on its 6.00% $500 million Senior
Notes due 2023 (the “2023 Senior Notes”). Following the completion of the tender offer, Murphy Oil USA, Inc.
called the remaining 2023 Senior Notes and satisfied and discharged the indenture governing the 2023 Senior
Notes. We paid a total of $514.5 million which included a call premium and all applicable accrued and unpaid
interest. The call premium and unamortized debt discount and issuance costs were reported as loss on early debt
extinguishment in the consolidated income statements for the period ended September 30, 2019.
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 the 2023 Senior Notes. 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 essentially identical to the
covenants for the 2027 Senior Notes.
The 2027 and 2029 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 2027 and 2029 Senior Notes are structurally subordinated to all of the existing
and future third-party liabilities, including trade payables, of our existing and future subsidiaries that do not
guarantee the notes.
Credit Facilities and Term Loan
In August 2019, we amended and extended our existing credit agreement. The effective date of the agreement was
extended to August, 2024. The credit agreement provides for a committed $325 million asset-based loan
(ABL) facility (with availability subject to the borrowing base described below) and a $200 million term loan facility
with an additional $50 million available until December 31, 2019. It also provides for a $150 million uncommitted
incremental facility. On August 27, 2019, Murphy Oil USA, Inc. borrowed $200 million under the term loan facility
that has a four-year term and prepaid the remaining balance of the prior term loan of $57 million. On December 31,
2019, we borrowed the additional $50 million term loan, and at December 31, 2019 had an outstanding balance of
$250 million. The term loan is due August 2023 and requires quarterly principal payments of $12.5 million
beginning April 1, 2020. As of December 31, 2019, we had zero outstanding under our ABL facility.
The borrowing base is, at any time of determination, the amount (net of reserves) equal to the sum of:
•
•
•
•
•
•
100% of eligible cash at such time, plus
90% of eligible credit card receivables at such time, plus
90% of eligible investment grade accounts, plus
85% of eligible other accounts, plus
80% of eligible product supply/wholesale refined products inventory at such time, plus
75% of eligible retail refined products inventory at such time, plus
the lesser of (i) 70% of the average cost of eligible retail merchandise inventory at such time and (ii) 85% of
the net orderly liquidation value of eligible retail merchandise inventory at such time.
The ABL facility includes a $100 million sublimit for the issuance of letters of credit. Letters of credit issued
under the ABL facility reduce availability under the ABL facility.
37
Interest payable on the credit facilities is based on either:
•
•
the London interbank offered rate, adjusted for statutory reserve requirements (the “Adjusted LIBO
Rate”); or
the Alternate Base Rate, which is defined as the highest of (a) the prime rate, (b) the federal funds
effective rate from time to time plus 0.50% per annum and (c) the one-month Adjusted LIBO Rate
plus 1.00% per annum,
plus, (A) in the case Adjusted LIBO Rate borrowings, (i) with respect to the ABL facility, spreads ranging
from 1.50% to 2.00% per annum depending on a total debt to EBITDA ratio under the ABL facility or (ii) with respect
to the term facility, spreads ranging from 2.50% to 2.75% per annum depending on a total debt to EBITDA ratio and
(B) in the case of Alternate Base Rate borrowings, (i) with respect to the ABL facility, spreads ranging from 0.50% to
1.00% per annum depending on a total debt to EBITDA ratio under the ABL facility or (ii) with respect to the term
facility, spreads ranging from 1.50% to 1.75% per annum depending on a total debt to EBITDA ratio.
The interest rate period with respect to the Adjusted LIBO Rate interest rate option can be set at one-, two-,
three-, or six-months as selected by us in accordance with the terms of the credit agreement.
The credit agreement contains certain covenants that limit, among other things, the ability of us and our
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. In addition, the credit
agreement requires us to maintain a minimum fixed charge coverage ratio of a minimum of 1.0 to 1.0 when
availability for at least three consecutive business days is less than the greater of (a) 17.5% of the lesser of the
aggregate ABL facility commitments and the borrowing base and (b) $70,000,000 (including as of the most recent
fiscal quarter end on the first date when availability is less than such amount) as well as a maximum secured debt
to EBITDA ratio of 4.5 to 1.0 at any time when term facility commitments or term loans thereunder are outstanding.
As of December 31, 2019, our fixed charge coverage ratio was 0.93 however, we had more than $100 million of
availability under the ABL facility at that date so the fixed charge coverage rate currently has no impact on our
operations or liquidity. Our secured debt to EBITDA ratio as of December 31, 2019 was 0.58 to 1.0.
The credit agreement contains restrictions on certain payments, including dividends, when availability under
the credit agreement is less than or equal to the greater of $100 million and 25% of the lesser of the revolving
commitments and the borrowing base and our fixed charge coverage ratio is less than 1.0 to 1.0 (unless availability
under the credit agreement is greater than $100.0 million and 40% of the lesser of the revolving commitments and
the borrowing base). As of December 31, 2019, our ability to make restricted payments was not limited as our
availability under the borrowing base was more than $100 million, while our fixed charge coverage ratio under our
credit agreement was less than 1.0 to 1.0. As of December 31, 2019, the Company had a shortfall of approximately
$30.6 million of our net income and retained earnings subject to such restrictions before the fixed charge coverage
ratio would exceed 1.0 to 1.0.
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 thereto.
38
Contractual Obligations
The following table summarizes our aggregate contractual fixed and variable obligations as of
December 31, 2019.
(Millions of dollars)
Total
Less than 1
year
1-3 years
4-5 years
More than 5
years
$
101.2 $
1,052.6 $
216.8
287.4
160.5
Debt obligations 1
Operating lease obligations
Purchase obligations 2
Asset retirement obligations
Other long-term obligations,
including interest on long-term debt
Total
1For additional information, see Note 7 “Long-Term Debt” in the accompanying audited consolidated financial statements.
2Primarily includes ongoing new retail station construction in progress at December 31, 2019, commitments to purchase land, take-or-pay supply
contracts and other services. See Note 16 “Commitments” in the audited consolidated financial statements for the year ended December 31,
2019.
38.9 $
14.9
223.3
—
800.0
148.9
—
160.5
413.1
2,130.4 $
158.3
1,267.7
25.1
0.4
—
27.9
63.7
—
346.0 $
292.4 $
224.3 $
112.5 $
99.6
68.9
86.3
$
Capital Spending
Capital spending and investments in our Marketing segment relate primarily to the acquisition of land and
the construction of new Company stores. Our Marketing capital is also deployed to improve our existing sites, which
we refer to as sustaining capital. We use sustaining capital in this business as needed to ensure reliability and
continued performance of our sites. We also invest in our Corporate and other assets segment which is
primarily technology related.
The following table outlines our capital spending and investments by segment for the three years ended
December 31, 2019:
(Millions of dollars)
Marketing:
Company stores
Terminals
Sustaining capital
Corporate and other assets
Total
2019
2018
2017
$
$
130.5 $
3.6
21.4
59.1
214.6 $
134.1 $
0.6
34.5
24.6
193.8 $
182.9
2.2
48.9
39.7
273.7
We currently expect capital expenditures for the full year 2020 to range from approximately $225 million to
$275 million, including $170-$200 million for retail growth, approximately $15 to $20 million for maintenance capital,
with the remaining funds earmarked for other corporate investments, including EMV compliance and other strategic
initiatives. See Note 16 “Commitments” in the audited consolidated financial statements for the three years ended
December 31, 2019 included in this Annual Report on Form 10-K.
Critical Accounting Policies
Impairment of Long-Lived Assets
Individual retail sites are reviewed for impairment periodically or whenever events or circumstances indicate
that the carrying amount of an asset may not be recoverable. Our primary indicator that operating store assets may
not be recoverable is consistent negative cash flow over a twenty-four month period for those retail sites that have
been open in the same location for a sufficient period to allow for meaningful analysis of ongoing results. We also
monitor other factors when evaluating retail sites for impairment, including individual site execution of operating
plans and local market conditions.
39
When an evaluation is required, the projected future undiscounted cash flows to be generated from each
retail site over its remaining economic life are compared to the carrying value of the long-lived assets of that site to
determine if a write-down of the carrying value to fair value is required. When determining future cash flows
associated with an individual retail site, we make assumptions about key variables such as sales volume, gross
margins and expenses. Cash flows vary for each retail site year to year. Changes in market demographics, traffic
patterns, competition and other factors impact the overall operations of certain of our individual retail site locations.
Similar changes may occur in the future that will require us to record impairment charges. We have not made any
material change in the methodology used to estimate future cash flows of retail site locations during the past three
years.
Our impairment evaluations are based on assumptions we deem to be reasonable. If the actual results of
our retail sites are not consistent with the estimates and judgments we have made in estimating future cash flows
and determining fair values, our actual impairment losses could vary positively or negatively from our estimated
impairment losses. Providing sensitivity analysis if other assumptions were used in performing the impairment
evaluations is not practical due to the significant number of assumptions involved in the estimates.
Tax Matters
We are subject to extensive tax liabilities imposed by multiple jurisdictions, including income taxes, indirect
taxes (excise/duty, sales/use, and gross receipts taxes), payroll taxes, franchise taxes, withholding taxes and ad
valorem taxes. New tax laws and regulations and changes in existing tax laws and regulations are continuously
being enacted or proposed that could result in increased expenditures for tax liabilities that cannot be predicted at
this time. In addition, we have received claims from various jurisdictions related to certain tax matters. Tax liabilities
include potential assessments of penalty and interest amounts.
We record tax liabilities based on our assessment of existing tax laws and regulations. A contingent loss
related to a transactional tax claim is recorded if the loss is both probable and estimable. The recording of our tax
liabilities requires significant judgments and estimates. Actual tax liabilities can vary from our estimates for a variety
of reasons, including different interpretations of tax laws and regulations and different assessments of the amount
of tax due. In addition, in determining our income tax provision, we must assess the likelihood that our deferred tax
assets will be recovered through future taxable income. Significant judgment is required in estimating the amount of
valuation allowance, if any, that should be recorded against those deferred income tax assets. If our actual results
of operations differ from such estimates or our estimates of future taxable income change, the valuation allowance
may need to be revised. However, an estimate of the sensitivity to earnings that would result from changes in the
assumptions and estimates used in determining our tax liabilities is not practicable due to the number of
assumptions and tax laws involved, the various potential interpretations of the tax laws, and the wide range of
possible outcomes. The Company is occasionally challenged by taxing authorities over the amount and/or timing of
recognition of revenues and deductions in its various income tax returns. Although the Company believes it has
adequate accruals for matters not resolved with various taxing authorities, gains or losses could occur in future
years from changes in estimates or resolution of outstanding matters. See Note 9 “Income Taxes” in the
accompanying audited consolidated financial statements for the three-year period ended December 31, 2019 for a
further discussion of our tax liabilities.
Asset Retirement Obligations
We operate above ground and underground storage tanks at our facilities. We recognize the estimated
future cost to remove these underground storage tanks (“USTs”) over their estimated useful lives. We record a
discounted liability for the fair value of an asset retirement obligation with a corresponding increase to the carrying
value of the related long-lived asset at the time a UST is installed. We depreciate the amount added to cost of the
property and recognize accretion expense in connection with the discounted liability over the remaining life of the
UST.
We have not made any material changes in the methodology used to estimate future costs for removal of a
UST during the past three years. We base our estimates of such future costs on our prior experience with removal
and normal and customary costs we expect to incur associated with UST removal. We compare our cost estimates
with our actual removal cost experience, if any, on an annual basis, and if the actual costs we experience exceed
our original estimates, we will recognize an additional liability for estimated future costs to remove the USTs.
Because these estimates are subjective and are currently based on historical costs with adjustments for estimated
future changes in the associated costs, the dollar amount of these obligations could change as more information is
obtained. There were no material changes in our asset retirement obligation estimates during 2019, 2018, or 2017.
40
See also Note 8 “Asset Retirement Obligation” in the accompanying audited consolidated financial statements for
the three-year period ended December 31, 2019.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains certain statements or may suggest “forward-looking” information
(as defined in the Private Securities Litigation Reform Act of 1995) that involve risk and uncertainties, including, but
not limited to anticipated store openings, fuel margins, merchandise margins, sales of RINs and trends in our
operations. Such statements are based upon the current beliefs and expectations of the Company’s management
and are subject to significant risks and uncertainties. Actual future results may differ materially from historical results
or current expectations depending upon factors including, but not limited to: our ability to continue to maintain a
good business relationship with Walmart; successful execution of our growth strategy, including our ability to realize
the anticipated benefits from such growth initiatives, and the timely completion of construction associated with our
newly planned stores which may be impacted by the financial health of third parties; our ability to effectively
manage our inventory, manage disruptions in our supply chain and control costs; the impact of severe weather
events, such as hurricanes, floods and earthquakes; the impact of any systems failures, cybersecurity and/or
security breaches, including any security breach that results in theft, transfer or unauthorized disclosure of
customer, employee or company information or our compliance with information security and privacy laws and
regulations in the event of such an incident; successful execution of our information technology strategy; future
tobacco or e-cigarette legislation and any other efforts that make purchasing tobacco products more costly or
difficult which may hurt our revenues and impact gross margins; efficient and proper allocation of our capital
resources; compliance with debt covenants; availability and cost of credit; and changes in interest rates. The
Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent
events, new information or future circumstances.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Commodity Price Risk
We are exposed to market risks related to the volatility in the price of crude oil and refined products
(primarily gasoline and diesel) used in our operations. These fluctuations can affect our revenues and purchases,
as well as the cost of operating, investing and financing activities. We make limited use of derivative instruments to
manage certain risks related to commodity prices. The use of derivative instruments for risk management is
covered by operating policies and is closely monitored by our middle-office function and the Company’s senior
management.
As described in Note 12 “Financial Instruments and Risk Management” in the accompanying audited
consolidated financial statements, there were short-term commodity derivative contracts in place at December 31,
2019 to hedge the purchase price of refined products. A 10% increase or decrease in the respective benchmark
price of the commodities underlying these derivative contracts would have been immaterial to the Company.
Changes in the fair value of these derivative contracts generally offset the changes in the value for an equivalent
volume of these products.
Interest Rate Risk
We have exposure to interest rate risks related to volatility of our floating rate term loan of $250 million and
to our ABL facility which currently is undrawn. Both of these loans are tied to LIBOR interest rates which can move
in either direction and cause fluctuations in our interest expense recognized in any period and in our cash flows
related to interest payments made. We make limited use of interest rate swaps to hedge a portion of our exposure
to these rate movements. The acquisition of any interest rate derivatives is undertaken by senior management
when appropriate with delegated authority from the appropriate Board level committee.
As described in Note 12 “Financial Instruments and Risk Management” in the accompanying audited
consolidated financial statements, we currently have an interest rate swap that hedges exposure to one-month
LIBOR for $150 million of our outstanding term loan amount at December 31, 2019. A 10% increase or decrease in
the underlying interest rate would have an immaterial impact on the financial statements of the Company at
December 31, 2019.
41
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item appears on Pages F-1 through F-45, which follow the exhibit index of the
Annual Report on Form 10-K.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
Our management has evaluated, with the participation of our principal executive and financial officers, the
effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15 under the Securities Exchange
Act of 1934) as of the end of the period covered by this report, and has concluded that our disclosure controls and
procedures were effective and appropriately allowed for timely decisions regarding required disclosures as of
December 31, 2019.
Internal Control over Financial Reporting
The SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules that generally
require every company that files reports with the SEC to evaluate its effectiveness of internal controls over financial
reporting.
Management has conducted an evaluation of the effectiveness of the Company's internal control over
financial reporting based on the criteria set forth in Internal Control-Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on the results of this evaluation,
management concluded that the Company’s internal control over financial reporting was effective as of
December 31, 2019. Management’s report is included on page F-1 of this Annual Report on Form 10-K. KPMG
LLP, an independent registered public accounting firm, has made an independent assessment of the effectiveness
of the Company’s internal control over financial reporting as of December 31, 2019 and their report is included on
page F-4 of this Annual Report on Form 10-K.
There were no changes in the Company’s internal controls over financial reporting that occurred during the
fourth quarter of 2019 that have affected, or are reasonably likely to materially affect, the Company’s internal control
over financial reporting.
Item 9B. OTHER INFORMATION
None
42
Part III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Certain information regarding executive officers of the Company is included under the caption “Executive
Officers of the Registrant” in Part I of this Annual Report on Form 10-K. Other information required by this item is
incorporated by reference to the Registrant’s definitive Proxy Statement for the Annual Meeting of Stockholders on
May 7, 2020 under the captions “Election of Directors” and “Committees”.
Murphy USA has adopted a Code of Business Conduct and Ethics, which can be found under the
Corporate Governance tab at http://ir.corporate.murphyusa.com. Stockholders may also obtain free of charge a
copy of the Code of Business Conduct and Ethics by writing to the Company’s Secretary at P.O. Box 7300, El
Dorado, AR 71730-5836. Any future amendments to or waivers of the Company’s Code of Business Conduct and
Ethics will be posted on the Company’s Internet Web site.
Item 11. EXECUTIVE COMPENSATION
Information required by this item is incorporated by reference to Murphy USA’s definitive Proxy Statement
for the Annual Meeting of Stockholders on May 7, 2020 under the captions “Compensation Discussion and
Analysis” and “Compensation of Directors” and in various compensation schedules.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Information required by this item is incorporated by reference to Murphy USA’s definitive Proxy Statement
for the Annual Meeting of Stockholders on May 7, 2020 under the captions “Security Ownership of Certain
Beneficial Owners,” “Security Ownership of Management,” and “Equity Compensation Plan Information.”
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information required by this item is incorporated by reference to Murphy USA’s definitive Proxy Statement
for the Annual Meeting of Stockholders on May 7, 2020 under the caption “Review, Approval or Ratification of
Transactions with Related Persons.”
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Information required by this item is incorporated by reference to Murphy USA’s definitive Proxy Statement
for the Annual Meeting of Stockholders on May 7, 2020 under the caption “Audit Committee Report.”
43
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Part IV
(a) 1. Financial Statements – The consolidated financial statements of Murphy USA Inc. and consolidated
subsidiaries are located or begin on the pages of this Annual Report on Form 10-K as indicated below.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Management - Financial Statements
Report of Management - Internal Controls
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Income Statements
Consolidated Statements of Comprehensive Income
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Equity
Notes to Consolidated Financial Statements
Note 1 - Description of Business and Basis of Presentation
Note 2 - Significant Accounting Policies
Note 3 - Revenues
Note 4 - Inventories
Note 5 - Property, Plant and Equipment
Note 6 - Accounts Payable and Accrued Liabilities
Note 7 - Long-Term Debt
Note 8 - Asset Retirement Obligation (ARO)
Note 9 - Income Taxes
Note 10 - Incentive Plans
Note 11 - Employee and Retiree Benefits
Note 12 - Financial Instruments and Risk Management
Note 13 - Earnings Per Share
Note 14 - Other Financial Information
Note 15 - Assets and Liabilities Measured at Fair Value
Note 16 - Commitments
Note 17 - Contingencies
Note 18 - Leases
Note 19 - Recent Accounting and Reporting Rules
Note 20 - Business Segments
Note 21 - Guarantor Subsidiaries
Supplemental Quarterly Information (Unaudited)
2. Financial Statement Schedules
Schedule II – Valuation Accounts and Reserves
Page No.
F-1
F-1
F-2
F-4
F-5
F-6
F-7
F-8
F-9
F-10
F-10
F-10
F-13
F-14
F-15
F-15
F-15
F-17
F-18
F-20
F-23
F-23
F-23
F-24
F-25
F-25
F-26
F-27
F-30
F-31
F-33
F-44
F-45
All other financial statement schedules are omitted because they are either not applicable or the required
information is included in the consolidated financial statements or notes thereto.
44
3. Exhibits – The following is an index of exhibits that are hereby filed as indicated by asterisk (*), that are
considered furnished rather than filed, or that are incorporated by reference. Exhibits other than those listed have
been omitted since they either are not required or are not
applicable.
Exhibit
Number
2.1
3.1
3.2
4.1
4.2
4.3
4.4*
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Description
Separation and Distribution Agreement, dated August 30, 2013, between Murphy Oil Corporation and
Murphy USA Inc. (incorporated by reference to Murphy USA’s Current Report on Form 8-K filed
September 5, 2013)
Murphy USA Inc. Amended and Restated Certificate of Incorporation (incorporated by reference to
Murphy USA’s Quarterly Report on Form 10-Q filed November 8, 2013)
Murphy USA Inc. Amended and Restated Bylaws (incorporated by reference to Murphy USA’s
Quarterly Report on Form 10-Q filed November 8, 2013)
Registration Rights Agreement, dated August 14, 2013, among Murphy Oil USA, Inc., Murphy USA
Inc., certain subsidiaries of Murphy USA Inc. and J.P. Morgan Securities LLC, as representative of the
initial purchasers named therein (incorporated by reference to Murphy USA’s Current Report on Form
8-K filed August 16, 2013)
Indenture (including form of notes) dated as of April 25, 2017 among Murphy Oil USA, Inc., Murphy
USA Inc., as a guarantor, the other guarantors party thereto and U.S. Bank National Association, as
trustee (incorporated by reference to Exhibit 4.1 to Murphy USA's Current Report on Form 8-K filed
April 25, 2017)
Indenture dated as of September 13, 2019 among Murphy Oil USA, Inc., Murphy USA Inc., as a
guarantor, the other guarantor party thereto and UMB Bank, N.A., as trustee (incorporated by
reference to Exhibit 4.1 to Murphy USA's Current Report on Form 8-K filed September 13, 2019)
Description of Registrant's Securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934
Tax Matters Agreement, dated August 30, 2013, between Murphy Oil Corporation and Murphy USA
Inc. (incorporated by reference to Murphy USA’s Current Report on Form 8-K filed September 5,
2013)
Trademark License Agreement, dated August 30, 2013, between Murphy Oil Corporation and Murphy
USA Inc. (incorporated by reference to Murphy USA’s Current Report on Form 8-K filed September 5,
2013)
Hangar Rental Agreement, dated August 30, 2013, between Murphy Oil Corporation and Murphy USA
Inc. (incorporated by reference to Murphy USA’s current report on Form 8-K filed September 5, 2013)
Aircraft Maintenance Labor Pooling Agreement, dated August 30, 2013, between Murphy Oil
Corporation and Murphy USA Inc. (incorporated by reference to Murphy USA’s Current Report on
Form 8-K filed September 5, 2013)
Airplane Interchange Agreement, dated August 30, 2013, between Murphy Oil Corporation and
Murphy USA Inc. (incorporated by reference to Murphy USA’s Current Report on Form 8-K filed
September 5, 2013)
Credit Agreement, dated August 30, 2013, among Murphy USA Inc., Murphy Oil USA, Inc., the
Borrowing Subsidiaries, the Lenders party thereto and JPMorgan Chase Bank, N.A. (incorporated by
reference to Murphy USA’s Current Report on Form 8-K filed September 5, 2013)
Severance Protection Agreement dated as of August 20, 2013 between Murphy USA and R. Andrew
Clyde, (incorporated by reference to Murphy USA’s Current Report on Form 8-K filed August 22,
2013)†
Murphy USA Inc. 2013 Long-Term Incentive Plan, as amended and restated effective as of February
9, 2017)† (incorporated by reference to Murphy USA Inc's Annual Report on Form 10-K filed February
22, 2017)
Form of Murphy USA Inc. 2013 Annual Incentive Plan, as amended and restated effective as of
February 12, 2014)†
10.10
Murphy USA Inc. 2013 Stock Plan for Non-Employee Directors (incorporated by reference to Murphy
USA’s Registration Statement on Form S-8 (File No. 333-191131) filed September 12, 2013)†
45
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
21*
23.1*
31.1*
31.2*
32.1*
32.2*
101. INS
101. SCH*
101. CAL*
101. DEF*
101. LAB*
101. PRE*
104
Murphy USA Inc. Supplemental Executive Retirement Plan, as amended and restated, on October 1,
2018 and effective January 1, 2019 (incorporated by reference to Exhibit 10.11 to Murphy USA's
Annual Report on Form 10-K filed February 19, 2019) †
Form of Murphy USA 2013 Long-Term Incentive Plan Option Grant Agreement (incorporated by
reference to Murphy USA’s Quarterly Report on Form 10-Q filed November 8, 2013) †
Form of Murphy USA 2013 Long-Term Incentive Plan RSU Agreement (incorporated by reference to
Murphy USA’s Quarterly Report on Form 10-Q filed November 8, 2013)†
Form of Murphy USA 2013 Long-Term Incentive Plan Performance Share Agreement (incorporated
by reference to Murphy USA’s Quarterly Report on Form 10-Q filed November 8, 2013)†
Form of Murphy USA 2013 Non-Employee Director Award (incorporated by reference to Murphy
USA’s Quarterly Report on Form 10-Q filed November 8, 2013) †
Third Amendment, dated as of September 2, 2014, to the Credit Agreement, dated as of August 30,
2013, among Murphy Oil USA, Inc. as borrower, Murphy USA Inc. and certain subsidiaries, and JP
Morgan Chase Bank, N.A. as administrative agent and the other lenders party thereto (incorporated
by reference to Murphy USA’s Quarterly Report on Form 10-Q filed November 6, 2014)
Amended and Restated Credit Agreement, dated as of March 10, 2016 among Murphy Oil USA, Inc.,
as the borrower, Murphy USA Inc., certain subsidiaries of Murphy Oil USA, Inc., as borrowing
subsidiaries, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto
(incorporated by reference to Exhibit 10.1 to Form 8-K as filed on March 16, 2016)
Amended and Restated Credit Agreement, dated as of August 27, 2019, among Murphy Oil USA,
Inc.as borrower, Murphy USA Inc., certain subsidiaries of Murphy Oil USA, Inc. as borrowing
subsidiaries, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto
(incorporated by reference to Exhibit 10.1 to Murphy USA's Current Report on Form 8-K as filed
August 29, 2019)
Murphy USA Inc. 2019 Annual Incentive Plan, as amended and restated, on February 7, 2019 and
effective as of January 1, 2019 (incorporated by reference to Exhibit 10.20 to Murphy USA's Annual
Report on Form 10-K filed February 19, 2019)†
List of Subsidiaries of Murphy USA
Consent of KPMG LLP, Independent Registered Public Accounting Firm
Certification required by Rule 13a-14(a) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of
Principal Executive Officer
Certification required by Rule 13a-14(a) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of
Principal Financial Officer
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 of Principal Executive Officer
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 of Principal Financial Officer
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File
because its XBRL tags are embedded within the Inline XBRL documents
Inline XBRL Taxonomy Extension Schema Document
Inline XBRL Taxonomy Extension Calculation Linkbase Document
Inline XBRL Taxonomy Extension Definition Linkbase Document
Inline XBRL Taxonomy Extension Labels Linkbase Document
Inline XBRL Taxonomy Extension Presentation Linkbase
Cover Page Interactive Data File - the cover page interactive data file does not appear in the
Interactive Data file because its XBRL tags are embedded within the Inline XBRL document
* Filed herewith
† Management contract or compensatory plan or arrangement
Item 16. Form 10-K Summary
None
46
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
MURPHY USA INC.
By:
/s/ R. Andrew Clyde
Date:
February 18, 2020
R. Andrew Clyde, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on
February 18, 2020 by the following persons on behalf of the registrant and in the capacities indicated.
/s/ R. Madison Murphy
R. Madison Murphy, Chairman and Director
/s/ David B. Miller
David B. Miller, Director
/s/ R. Andrew Clyde
R. Andrew Clyde, President and Chief
Executive Officer and Director
(Principal Executive Officer)
/s/ Jeanne L. Phillips
Jeanne L. Phillips, Director
/s/ Claiborne P. Deming
Claiborne P. Deming, Director
/s/ Jack T. Taylor
Jack T. Taylor, Director
/s/ Mindy K. West
Mindy K. West, Executive Vice President,
Treasurer, and Chief Financial Officer
(Principal Financial Officer)
/s/ Donald R. Smith, Jr.
Donald R. Smith, Jr.
Vice President and Controller
(Principal Accounting Officer)
/s/ Fred L. Holliger
Fred L. Holliger, Director
/s/ James W. Keyes
James W. Keyes, Director
/s/ Diane N. Landen
Diane N. Landen, Director
47
REPORT OF MANAGEMENT- CONSOLIDATED FINANCIAL STATEMENTS
The management of Murphy USA Inc. is responsible for the preparation and integrity of the accompanying
consolidated financial statements and other financial data. The statements were prepared in conformity with U.S.
generally accepted accounting principles appropriate in the circumstances and include some amounts based on
informed estimates and judgments, with consideration given to materiality.
An independent, registered public accounting firm, KPMG LLP, has audited the Company’s consolidated financial
statements in accordance with the standards of the Public Company Accounting Oversight Board and provides an
objective, independent opinion about the Company’s consolidated financial statements. The Audit Committee of the
Board of Directors appoints the independent registered public accounting firm; ratification of the appointment is
solicited annually from the shareholders. KPMG LLP’s opinion covering the Company’s consolidated financial
statements can be found on page F-2.
The Board of Directors appoints an Audit Committee annually to implement and to support the Board’s oversight
function of the Company’s financial reporting, accounting policies, internal controls and independent registered
public accounting firm. This Committee is composed solely of directors who are not employees of the
Company. The Committee meets routinely with representatives of management, the Company’s internal audit team
and the independent registered public accounting firm to review and discuss the adequacy and effectiveness of the
Company’s internal controls, the quality and clarity of its financial reporting, the scope and results of independent
and internal audits, and to fulfill other responsibilities included in the Committee’s Charter. The independent
registered public accounting firm and the Company’s internal audit team have unrestricted access to the
Committee, without management presence, to discuss audit findings and other financial matters.
REPORT OF MANAGEMENT – INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as
such term is defined in Exchange Act Rules 13a-15(f). The Company’s internal controls have been designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated
financial statements in accordance with U.S. generally accepted accounting principles. All internal control systems
have inherent limitations, and therefore, can provide only reasonable assurance with respect to the reliability of
financial reporting and preparation of consolidated financial statements.
Management has conducted an evaluation of the effectiveness of the Company’s internal control over financial
reporting based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission in 2013. Based on the results of this evaluation,
management concluded that the Company’s internal control over financial reporting was effective as of
December 31, 2019.
KPMG LLP has performed an audit of the Company’s internal control over financial reporting and their opinion
thereon can be found on page F-4.
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
Murphy USA Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Murphy USA Inc. and subsidiaries (the
Company) as of December 31, 2019 and 2018, the related consolidated income statements, statements of
comprehensive income, statements of cash flows, and statements of changes in equity for each of the years in the
three year period ended December 31, 2019, and the related notes and financial statement Schedule II (collectively,
the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its
operations and its cash flows for each of the years in the three year period ended December 31, 2019, in conformity
with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based
on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission, and our report dated February 18, 2020 expressed an unqualified
opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these consolidated financial statements based on our audits. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free
of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the
risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating
the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our
opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1)
relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our
especially challenging, subjective, or complex judgment. The communication of a critical audit matter does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Assessment of impairment triggering events related to property, plant and equipment
As discussed in Note 2 to the consolidated financial statements, the Company assesses its property, plant and
equipment for potential impairment whenever events or changes in circumstances indicate that the carrying value of
the asset or asset group may not be recoverable. The property, plant and equipment balance, at cost less
accumulated depreciation, as of December 31, 2019 was $1,807.3 million. Some retail sites may generate negative
cash flow or experience events that indicate its carrying value might not be recovered, indicating a higher risk that
these retail sites might be impaired. This requires the Company to consider profitability and retail site specific
factors when evaluating its retail sites for impairment in order to determine whether or not an impairment triggering
event has occurred.
F-2
We identified the assessment of impairment triggering events related to property, plant and equipment as a critical
audit matter. The determination of the asset group level, the evaluation of retail site profitability, and the assessment
of retail site specific factors involved challenging auditor judgment, as changes to those factors could have a
significant impact on the Company’s assessment of an impairment triggering event.
The primary procedures we performed to address this critical audit matter included the following. We tested certain
internal controls over the Company’s triggering events assessment process over property, plant and equipment,
including controls related to the identification of impairment triggers. We evaluated the asset group level at which
the Company’s analysis was performed. We assessed the Company’s methodology of identifying retail site specific
factors to be considered in the triggering events analysis, including the length of the time period used by the
Company to evaluate retail site profitability to identify triggering events. We also compared the historical cash flows
by asset group to the general ledger information to assess the reliability of the information used.
/s/ KPMG LLP
We have served as the Company’s auditor since 2013.
Shreveport, Louisiana
February 18, 2020
F-3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
Murphy USA Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Murphy USA Inc. and subsidiaries' (the Company) internal control over financial reporting as of
December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in
all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the
related consolidated income statements, statements of comprehensive income, statements of cash flows, and
statements of changes in equity for each of the years in the three-year period ended December 31, 2019, and the
related notes and financial statement Schedule II (collectively, the consolidated financial statements), and our report
dated February 18, 2020 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report
of Management - Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audit also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
/s/ KPMG LLP
Shreveport, Louisiana
February 18, 2020
F-4
Murphy USA Inc.
Consolidated Balance Sheets
(Millions of dollars, except share amounts)
Assets
Current assets
Cash and cash equivalents
Accounts receivable—trade, less allowance for doubtful accounts of
$1.2 in 2019 and $1.1 in 2018
Inventories, at lower of cost or market
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, at cost less accumulated depreciation
and amortization of $1,079.2 in 2019 and $974.2 in 2018
Other assets
Total assets
Liabilities and Stockholders' Equity
Current liabilities
Current maturities of long-term debt
Trade accounts payable and accrued liabilities
Total current liabilities
Long-term debt, including capitalized lease obligations
Deferred income taxes
Asset retirement obligations
Deferred credits and other liabilities
Total liabilities
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 December 31, 2019 and 2018, respectively)
Treasury stock (16,307,048 and 14,505,681 shares held at
December 31, 2019 and 2018, respectively)
Additional paid in capital (APIC)
Retained earnings
Accumulated other comprehensive income (AOCI)
Total stockholders' equity
Total liabilities and stockholders' equity
See accompanying notes to consolidated financial statements.
December 31,
2019
2018
$
280.3 $
172.9
227.6
30.0
710.8
1,807.3
169.1
184.5
138.8
221.5
25.3
570.1
1,748.2
42.5
$
$
2,687.2 $
2,360.8
38.8 $
466.2
505.0
999.3
216.7
32.8
130.4
21.2
456.9
478.1
842.1
192.2
30.7
10.4
1,884.2
1,553.5
—
0.5
(1,099.8)
538.7
1,362.9
0.7
803.0
2,687.2 $
$
—
0.5
(940.3)
539.0
1,208.1
—
807.3
2,360.8
F-5
Murphy USA Inc.
Consolidated Income Statements
(Millions of dollars except per share amounts)
2019
2018
2017
Years Ended December 31,
$
11,373.8 $
11,858.4 $
2,620.1
40.7
14,034.6
10,707.4
2,200.7
559.3
152.2
144.6
2.1
13,766.3
0.1
0.1
268.5
3.2
(54.9)
(14.8)
0.4
(66.1)
202.4
47.6
2,423.0
81.5
14,362.9
11,251.1
2,022.5
541.3
134.0
136.2
2.0
14,087.1
50.4
(1.1)
325.1
1.5
(52.9)
—
0.2
(51.2)
273.9
60.3
154.8 $
213.6 $
4.90 $
4.86 $
6.54 $
6.48 $
10,287.9
2,372.7
166.0
12,826.6
9,773.2
1,991.4
514.9
116.9
141.2
1.8
12,539.4
—
(3.9)
283.3
1.3
(46.7)
—
2.2
(43.2)
240.1
(5.2)
245.3
6.85
6.78
31,594
31,858
32,674
32,983
35,816
36,156
1,933.3 $
1,838.9 $
1,973.1
Operating Revenues
Petroleum product sales 1
Merchandise sales
Other operating revenues
Total operating revenues
Operating Expenses
Petroleum product cost of goods sold 1
Merchandise cost of goods sold
Station and other operating expenses
Depreciation and amortization
Selling, general and administrative
Accretion of asset retirement obligations
Total operating expenses
Net settlement proceeds
Gain (loss) on sale of assets
Income from operations
Other income (expense)
Interest income
Interest expense
Loss on early debt extinguishment
Other nonoperating income (expense)
Total other income (expense)
Income before income taxes
Income tax expense (benefit)
Net Income
Basic and Diluted Earnings Per Common Share:
Basic
Diluted
Weighted-average shares outstanding (in thousands):
Basic
Diluted
Supplemental information:
1 Includes excise taxes of:
$
$
$
$
See accompanying notes to consolidated financial statements.
F-6
Murphy USA Inc.
Consolidated Statements of Comprehensive Income
Years Ended December 31,
2019
2018
2017
$
154.8 $
213.6 $
245.3
(0.1)
0.2
1.0
(0.2)
0.9
0.2
0.7
155.5 $
—
—
—
—
—
—
—
213.6 $
—
—
—
—
—
—
—
245.3
(Millions of dollars)
Net income (loss)
Other comprehensive income (loss), net of tax
Interest rate swap:
Initial fair value
Realized gain (loss)
Unrealized gain (loss)
Reclassified to interest expense
Deferred income tax expense
Other comprehensive income (loss)
Comprehensive income (loss)
$
See accompanying notes to consolidated financial statements.
F-7
Murphy USA Inc.
Consolidated Statements of Cash Flows
Years Ended December 31,
2019
2018
2017
$
154.8 $
213.6 $
245.3
(Millions of dollars)
Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization
Deferred and noncurrent income tax charges (benefits)
Loss on early debt extinguishment
Accretion of asset retirement obligations
Pretax (gains) losses from sale of assets
Net decrease (increase) in noncash operating working
capital
Other operating activities - net
Net cash provided by operating activities
Investing Activities
Property additions
Proceeds from sale of assets
Other investing activities - net
Net cash required by investing activities
Financing Activities
Purchase of treasury stock
Repayments of debt
Borrowings of debt
Early debt extinguishment costs
Debt issuance costs
Amounts related to share-based compensation
Net cash required by financing activities
Net change in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at January 1
152.2
23.7
14.8
2.1
(0.1)
(48.7)
14.5
313.3
(204.8)
2.5
(0.8)
(203.1)
(165.8)
(573.4)
743.8
(10.4)
(4.1)
(4.5)
(14.4)
95.8
184.5
134.0
37.9
—
2.0
1.1
2.3
7.8
398.7
(204.3)
1.2
(6.0)
(209.1)
(144.4)
(21.3)
—
—
—
(9.4)
(175.1)
14.5
170.0
116.9
(50.4)
—
1.8
3.9
(36.9)
3.0
283.6
(258.3)
0.9
(4.7)
(262.1)
(206.0)
(131.4)
338.8
—
(1.1)
(5.6)
(5.3)
16.2
153.8
170.0
Cash, cash equivalents, and restricted cash at December 31
$
280.3 $
184.5 $
Reconciliation of Cash, Cash Equivalents and Restricted
Cash
Cash and Cash equivalents at beginning of period
Restricted cash at beginning of period
Cash, cash equivalents, and restricted cash at beginning of
period
Cash and cash equivalents at end of period
Restricted cash at end of period
Cash, cash equivalents, and restricted cash at end of period
See accompanying notes to consolidated financial statements.
$
$
$
$
184.5 $
—
170.0 $
—
153.8
—
184.5 $
170.0 $
153.8
280.3 $
—
280.3 $
184.5 $
—
184.5 $
170.0
—
170.0
F-8
Murphy USA Inc.
Consolidated Statements of Changes in Equity
Common Stock
Shares
Par
Treasury
Stock
APIC
Retained
Earnings
AOCI
Total
46,767,164
$
0.5
$ (608.0) $ 555.3
$ 749.2
$
— $
245.3
—
—
—
—
—
994.5
213.6
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(206.0)
—
7.5
—
—
—
—
—
(7.4)
(5.6)
7.6
46,767,164
0.5
(806.5)
549.9
—
—
—
—
—
—
46,767,164
—
—
—
—
—
—
—
—
—
—
—
—
—
0.5
—
—
—
—
—
—
—
—
(144.4)
—
10.6
—
—
—
—
—
(10.6)
(9.4)
9.1
(940.3)
539.0
1,208.1
—
—
(165.8)
—
6.3
—
—
—
—
—
—
(6.3)
(4.5)
10.5
154.8
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
0.7
—
—
—
—
—
697.0
245.3
(206.0)
—
0.1
(5.6)
7.6
738.4
213.6
(144.4)
—
—
(9.4)
9.1
807.3
154.8
0.7
(165.8)
—
—
(4.5)
10.5
46,767,164
$
0.5
$ (1,099.8) $ 538.7
$1,362.9
$
0.7
$
803.0
(Millions of dollars, except share
amounts)
Balance as of December 31,
2016
Net income
Purchase of treasury stock
Issuance of common stock
Issuance of treasury stock
Amounts related to share-
based compensation
Share-based compensation
expense
Balance as of December 31,
2017
Net income
Purchase of treasury stock
Issuance of common stock
Issuance of treasury stock
Amounts related to share-
based compensation
Share-based compensation
expense
Balance as of December 31,
2018
Net income
Gain on interest rate hedge,
net of tax
Purchase of treasury stock
Issuance of common stock
Issuance of treasury stock
Amounts related to share-
based compensation
Share-based compensation
expense
Balance as of December 31,
2019
See accompanying notes to consolidated financial statements.
F-9
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Description of Business and Basis of Presentation
The business of Murphy USA Inc. and its subsidiaries (“Murphy USA” or the “Company”) primarily consists of the
U.S. retail marketing business that was separated from its former parent company, Murphy Oil Corporation
(“Murphy Oil”), plus other assets, liabilities and operating expenses of Murphy Oil that were associated with
supporting the activities of the U.S. retail marketing operations. Murphy USA was incorporated in March 2013. The
separation was approved by the Murphy Oil board of directors on August 7, 2013, and was completed on August
30, 2013 through the distribution of 100% of the outstanding capital stock of Murphy USA to holders of Murphy Oil
common stock on the record date of August 21, 2013. Following the separation, Murphy USA is an independent,
publicly traded company, and Murphy Oil retains no ownership interest in Murphy USA.
Murphy USA markets refined products through a network of retail gasoline stores and unbranded wholesale
customers. Murphy USA’s owned retail stores are almost all located in close proximity to Walmart stores in 26
states and use the brand name Murphy USA®. Murphy USA also markets gasoline and other products at
standalone stores under the Murphy Express brand. At December 31, 2019, Murphy USA had a total of 1,489
Company stores. The Company also has certain product supply and wholesale assets, including product
distribution terminals and pipeline positions.
Note 2 – Significant Accounting Policies
PRINCIPLES OF CONSOLIDATION – These consolidated financial statements were prepared in accordance with
U.S. generally accepted accounting principles (“U.S. GAAP”) and include the accounts of Murphy USA Inc. and its
subsidiaries for all periods presented. All significant intercompany accounts and transactions within the
consolidated financial statements have been eliminated.
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 amounts 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 arrangement
based on location or quality differences. The Company accounts for such transactions on a net basis in its
Consolidated Income Statements. See Note 3 "Revenues" for additional information.
SHIPPING AND HANDLING COSTS – Costs incurred for the shipping and handling of motor fuel are included in
Petroleum product cost of goods sold in the Consolidated Income Statements. Costs incurred for the shipping and
handling of convenience store merchandise are included in Merchandise cost of goods sold in the Consolidated
Income Statements.
TAXES COLLECTED FROM CUSTOMERS AND REMITTED TO GOVERNMENT AUTHORITIES – Excise and
other taxes collected on sales of refined products and remitted to governmental agencies are included in operating
revenues and operating expenses in the Consolidated Income Statements. Excise taxes on petroleum products
collected and remitted were $1.9 billion in 2019, $1.8 billion in 2018, and $2.0 billion in 2017.
CASH EQUIVALENTS – Short-term investments, which include government securities, money market funds and
other instruments with government securities as collateral, that have a maturity of three months or less from the
date of purchase are classified as cash equivalents.
ACCOUNTS RECEIVABLE – The Company’s accounts receivable are recorded at the invoiced amount and do not
bear interest. The accounts receivable primarily consists of amounts owed to the Company from credit card
companies and by customers for wholesale sales of refined petroleum products. The allowance for doubtful
accounts is the Company’s best estimate of the amount of probable credit losses on these receivables. The
Company reviews this allowance for adequacy at least quarterly and bases its assessment on a combination of
current information about its customers and historical write-off experience. Any trade accounts receivable balances
F-10
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
written off are charged against the allowance for doubtful accounts. The Company has not experienced any
significant credit-related losses in the past three years.
INVENTORIES – Inventories of most finished products are valued at the lower of cost, generally applied on a last-
in, first-out (“LIFO”) basis, or market. Any increments to LIFO inventory volumes are valued based on the first
purchase price for these volumes during the year. Merchandise inventories held for resale are carried at average
cost. Materials and supplies are valued at the lower of average cost or estimated value.
VENDOR ALLOWANCES AND REBATES – Murphy USA receives payments for vendor allowances, volume
rebates and other related payments from various suppliers of its convenience store merchandise. Vendor
allowances for price markdowns are credited to merchandise cost of goods sold during the period the related
markdown is recognized. Volume rebates of merchandise are recorded as reductions to merchandise cost of goods
sold when the merchandise qualifying for the rebate is sold. Slotting and stocking allowances received from a
vendor are recorded as a reduction to cost of sales over the period covered by the agreement.
PROPERTY, PLANT AND EQUIPMENT – Additions to property, plant and equipment, including renewals and
betterments, are capitalized and recorded at cost. Certain marketing facilities are primarily depreciated using the
composite straight-line method with depreciable lives ranging from 16 to 25 years. Gasoline stations, improvements
to gasoline stations and other assets are depreciated over 3 to 50 years by individual unit on the straight-line
method. The Company capitalizes interest costs as a component of construction in progress on individually
significant projects based on the weighted average interest rates incurred on its long-term borrowings. Total
interest cost capitalized in 2019 was $1.4 million, $2.2 million in 2018 and $3.8 million in 2017.
The Company has undertaken like-kind exchange ("LKE") transactions under the Federal tax code in an effort to
acquire and sell real and personal property in a tax efficient manner. The Company generally enters into forward
transactions, in which property is sold and the proceeds are reinvested by acquiring similar property; and reverse
transactions, in which property is acquired and similar property is subsequently sold. A qualified LKE intermediary
is used to facilitate these LKE transactions. Proceeds from forward LKE transactions are held by the intermediary
and are classified as restricted cash on the Company's balance sheet because the funds must be reinvested in
similar properties. If the acquisition of suitable LKE properties is not completed within 180 days of the sale of the
Company-owned property, the proceeds are distributed to the Company by the intermediary and are reclassified as
available cash and applicable income taxes are determined. An exchange accommodation titleholder, a type of
variable interest entity, is used to facilitate reverse like-kind exchanges. The acquired assets are held by the
exchange accommodation titleholder until the exchange transactions are complete. If the Company determines that
it is the primary beneficiary of the exchange accommodation titleholder, the replacements assets held by the
exchange accommodation titleholder are consolidated and recorded in Property, Plant and Equipment on the
Consolidated Balance Sheets. The unspent proceeds that are held in trust with the intermediary are recorded as
noncurrent assets in the Consolidated Balance Sheet as the cash was restricted for the acquisition of property,
plant and equipment. At December 31, 2019 and December 31, 2018, the Company had no open LKE
transactions with an intermediary.
IMPAIRMENT OF ASSETS – Long-lived assets, which include property and equipment and finite-lived intangible
assets, are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount
of the asset may not be recoverable. A long-lived asset is not recoverable if its carrying amount exceeds the sum of
the undiscounted cash flows expected to result from its use and eventual disposition. If a long-lived asset is not
recoverable, an impairment loss is recognized for the amount by which the carrying amount of the long-lived asset
exceeds its fair value, with fair value determined based on discounted estimated net cash flows or other appropriate
methods.
ASSET RETIREMENT OBLIGATIONS – The Company records a liability for asset retirement obligations (“ARO”)
equal to the fair value of the estimated cost to retire an asset. The ARO liability is initially recorded in the period in
which the obligation meets the definition of a liability, which is generally when the asset is placed in service. The
ARO liability is estimated using existing regulatory requirements and anticipated future inflation rates. When the
liability is initially recorded, the Company increases the carrying amount of the related long-lived asset by an
amount equal to the original liability. The liability is increased over time to reflect the change in its present value,
and the capitalized cost is depreciated over the useful life of the related long-lived asset. The Company reevaluates
the adequacy of its recorded ARO liability at least annually. Actual costs of asset retirements such as dismantling
service stations and site restoration are charged against the related liability. Any difference between costs incurred
F-11
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
upon settlement of an asset retirement obligation and the recorded liability is recognized as a gain or loss in the
Company’s Consolidated Income Statements.
ENVIRONMENTAL LIABILITIES – A liability for environmental matters is established when it is probable that an
environmental obligation exists and the cost can be reasonably estimated. If there is a range of reasonably
estimated costs, the most likely amount will be recorded, or if no amount is most likely, the minimum of the range is
used. Related expenditures are charged against the liability. Environmental remediation liabilities have not been
discounted for the time value of future expected payments. Environmental expenditures that have future economic
benefit are capitalized.
INCOME TAXES – The Company accounts for income taxes using the asset and liability method. Under this
method, income taxes are provided for amounts currently payable and for amounts deferred as tax assets and
liabilities based on differences between the financial statement carrying amounts and the tax bases of existing
assets and liabilities. Deferred income taxes are measured using the enacted tax rates that are assumed will be in
effect when the differences reverse. The Company routinely assesses the realizability of deferred tax assets based
on available positive and negative evidence including assumptions of future taxable income, tax planning strategies
and other pertinent factors. A deferred tax asset valuation allowance is recorded when evidence indicates that it is
more likely than not that all or a portion of these deferred tax assets will not be realized in a future period. The
accounting principles for income tax uncertainties permit recognition of income tax benefits only when they are
more likely than not to be realized.
The Company has elected to classify any interest expense and penalties related to the underpayment of income
taxes in Income tax expense in the Consolidated Income Statements.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES – The fair value of a derivative instrument is recognized
as an asset or liability in the Company’s Consolidated Balance Sheets. Upon entering into a derivative contract, the
Company may designate the derivative as either a fair value hedge or a cash flow hedge, or decide that the
contract is not a hedge, and therefore, recognize changes in the fair value of the contract in earnings. The
Company documents the relationship between the derivative instrument designated as a hedge and the hedged
items as well as its objective for risk management and strategy for use of the hedging instrument to manage the
risk. Derivative instruments designated as fair value or cash flow hedges are linked to specific assets and liabilities
or to specific firm commitments or forecasted transactions. The Company assesses at inception and on an ongoing
basis whether a derivative instrument accounted for as a hedge is highly effective in offsetting changes in the fair
value or cash flows of the hedged item. A derivative that is not a highly effective hedge does not qualify for hedge
accounting. The change in the fair value of a qualifying fair value hedge is recorded in earnings along with the gain
or loss on the hedged item. The effective portion of the change in the fair value of a qualifying cash flow hedge is
recorded in Accumulated other comprehensive income (AOCI) in the consolidated Balance Sheets until the hedged
item is recognized currently in earnings. If a derivative instrument no longer qualifies as a cash flow hedge and the
underlying forecasted transaction is no longer probable of occurring, hedge accounting is discontinued and the gain
or loss recorded in Accumulated other comprehensive income is recognized immediately in earnings. See Note 12
and Note 15 for further information about the Company’s derivatives.
STOCK-BASED COMPENSATION – The fair value of awarded stock options, restricted stock, restricted stock units
and performance stock units is determined based on a combination of management assumptions for awards
issued. The Company uses the Black-Scholes option pricing model for computing the fair value of stock options.
The primary assumptions made by management included the expected life of the stock option award and the
expected volatility of the Company’s common stock prices. The Company uses both historical data and current
information to support its assumptions. Stock option expense is recognized on a straight-line basis over the
requisite service period of three years. The Company uses a Monte Carlo valuation model to determine the fair
value of performance-based stock units that are based on performance compared against a peer group and the
related expense is recognized over the three-year requisite service period. Management estimates the number of
all award that will not vest and adjusts its compensation expense accordingly. Differences between estimated and
actual vested amounts are accounted for as an adjustment to expense when known. See Note 10 for a discussion
of the basis of allocation of such costs.
USE OF ESTIMATES – In preparing the financial statements of the Company in conformity with U.S. GAAP,
management has made a number of estimates and assumptions related to the reporting of assets, liabilities,
revenues, and expenses and the disclosure of contingent assets and liabilities. Actual results may differ from the
estimates. On an ongoing basis, we review our estimates based on currently available information. Changes in
facts and circumstances may result in revised estimates.
F-12
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 – Revenues
Revenue Recognition
The following table disaggregates our revenue by major source for the years ended December 31, 2019, 2018, and
2017.
(Millions of dollars)
Marketing Segment
Petroleum product sales (at retail) 1
Petroleum product sales (at wholesale) 1
Total petroleum product sales
Merchandise sales
Other operating revenues:
RINs
Other revenues 2
Total marketing segment revenues
Corporate and Other Assets
Total revenues
Years Ended December 31,
2019
2018
2017
$
10,184.0 $
10,459.2 $
1,399.2
11,858.4
2,423.0
75.2
5.7
9,041.5
1,246.4
10,287.9
2,372.6
160.3
5.4
1,189.8
11,373.8
2,620.1
34.8
5.6
14,034.3
0.3
14,362.3 $
12,826.2
0.6 $
0.4
$
14,034.6 $
14,362.9 $
12,826.6
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
The Company adopted ASC Topic 606, "Revenue from Contracts with Customers" as of January 1, 2018 using the
modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results
for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are
not adjusted and continue to be reported in accordance with our historical accounting policies under Topic 605. The
impact of the excise and sales taxes collected and remitted to government authorities included in petroleum product
sales that would have been recognized under previous revenue recognition guidance would have increased
petroleum product sales (at retail) by $26.3 million in 2019 and $25.4 million in 2018, petroleum product sales (at
wholesale) by $165.6 million in 2019 and $171.2 million in 2018, for a total increase in petroleum product sales of
$191.9 million and $196.5 million in 2019 and 2018, respectively.
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 station 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
F-13
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 tickets, 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 tickets) where we are the agent and the revenues recorded for those transactions are
our net commission only.
In June 2018 the Company initiated a loyalty pilot program through a limited number of its retail locations and was
rolled out chain-wide in March 2019. The customers earn rewards based on their spending or other promotional
activities. This program creates 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 on fuel purchases. Earned rewards expire after an account is inactive
for a period of 90 days. We recognize loyalty revenue when a customer redeems an earned reward. Deferred
revenue associated with Murphy Rewards is included in Trade accounts payable and accrued liabilities in our
Consolidated Balance Sheet. The deferred revenues recorded in 2019 and 2018 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 December 31, 2019 and December 31, 2018, we had $96.0 million and $79.4
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 from our customers, which have a very short settlement window.
Note 4 — Inventories
Inventories consisted of the following:
(Millions of dollars)
Finished products - FIFO basis
Less LIFO reserve - finished products
Finished products - LIFO basis
Store merchandise for resale
Materials and supplies
Total inventories
December 31,
2019
2018
259.2 $
(160.8)
98.4
123.0
6.2
227.6 $
219.4
(115.5)
103.9
107.2
10.4
221.5
$
$
At December 31, 2019 and 2018, the replacement cost (market value) of last-in, first-out (LIFO) inventories
exceeded the LIFO carrying value by $160.8 million and $115.5 million, respectively.
F-14
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 – Property, Plant and Equipment
(Millions of dollars)
Land
Pipeline and terminal facilities
Retail gasoline stations
Buildings
Other
Estimated Useful
Life
Cost
Net
Cost
Net
December 31, 2019
December 31, 2018
$
598.6 $
598.6 $
591.9 $
16 to 25 years
3 to 50 years
20 to 45 years
3 to 20 years
77.5
2,034.4
60.5
115.5
43.7
1,073.6
44.9
46.5
73.1
1,890.6
55.0
111.8
591.9
41.6
1,018.5
41.8
54.4
$
2,886.5 $
1,807.3 $
2,722.4 $
1,748.2
Depreciation expense of $151.2 million, $132.5 million and $115.0 million was recorded for the years ended
December 31, 2019, 2018 and 2017, respectively.
Note 6 – Accounts Payable and Accrued Liabilities
Trade accounts payable and accrued liabilities consisted of the following:
(Millions of dollars)
Trade accounts payable
Excise taxes/withholdings payable
Accrued insurance obligations
Accrued taxes other than income
Other
Accounts payable and accrued liabilities
Note 7 — Long-Term Debt
Long-term debt consisted of the following:
December 31,
2019
2018
280.8 $
86.2
24.4
25.6
49.2
466.2 $
$
$
(Millions of dollars)
6.00% senior notes due 2023 (net of unamortized discount of $4.1 at
2018)
5.625% senior notes due 2027 (net of unamortized discount of $2.7
at 2019 and $3.1 at 2018)
4.75 % senior notes due 2029 (net of unamortized discount of $6.1
at 2019)
Term loan due 2020 (effective interest rate of 5.0% at 2018 )
Term loan due 2023 (effective interest rate of 4.3% at 2019)
Capitalized lease obligations, vehicles, due through 2022
Unamortized debt issuance costs
Total long-term debt
Less current maturities
Total long-term debt, net of current
Senior Notes
December 31,
2019
2018
$
— $
297.3
493.9
—
250.0
2.4
(5.5)
1,038.1
38.8
$
999.3 $
274.9
89.7
21.8
26.6
43.9
456.9
495.9
296.9
—
72.0
—
2.3
(3.8)
863.3
21.2
842.1
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") under its existing shelf registration statement. The 2027 Senior Notes
F-15
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 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.
On September 13, 2019, Murphy Oil USA, Inc., consummated a partial tender offer on its 6.00% $500 million Senior
Notes due 2023 (the “2023 Senior Notes”). Following the completion of the tender offer, Murphy Oil USA, Inc.
called the remaining 2023 Senior Notes and satisfied and discharged the indenture governing the 2023 Senior
Notes. We paid a total of $514.5 million which included a call premium and all applicable accrued and unpaid
interest. The call premium and unamortized debt discount and issuance costs were reported as Loss on early debt
extinguishment in the consolidated income statements for the period ended September 30, 2019.
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 the 2023 Senior Notes. 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 essentially identical to the
covenants for the 2027 Senior Notes.
The 2027 and 2029 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 2027 and 2029 Senior Notes are structurally subordinated to all of the existing
and future third-party liabilities, including trade payables, of our existing and future subsidiaries that do not
guarantee the notes.
Credit Facilities and Term Loan
In August 2019, we amended and extended our existing credit agreement. The effective date of the agreement was
extended to August, 2024. The credit agreement provides for a committed $325 million asset-based loan
(ABL) facility (with availability subject to the borrowing base described below) and a $200 million term loan facility
with an additional $50 million available until December 31, 2019. It also provides for a $150 million uncommitted
incremental facility. On August 27, 2019, Murphy Oil USA, Inc. borrowed $200 million under the term loan facility
that has a four-year term and prepaid the remaining balance of the prior term loan of $57 million. On December 31,
2019, we borrowed the additional $50 million term loan, and at December 31, 2019 had an outstanding balance of
$250 million. The term loan is due August 2023 and requires quarterly principal payments of $12.5 million
beginning April 1, 2020. As of December 31, 2019, we had zero outstanding under our ABL facility.
The borrowing base is expected, at any time of determination, to be an amount (net of reserves) equal to the sum
of:
•
•
•
•
•
•
100% of eligible cash at such time, plus
90% of eligible credit card receivables at such time, plus
90% of eligible investment grade accounts, plus
85% of eligible other accounts, plus
80% of eligible product supply/wholesale refined products inventory at such time, plus
75% of eligible retail refined products inventory at such time, plus
the lesser of (i) 70% of the average cost of eligible retail merchandise inventory at such time and (ii) 85% of the net
orderly liquidation value of eligible retail merchandise inventory at such time.
The ABL facility includes a $100 million sublimit for the issuance of letters of credit. Letters of credit issued under
the ABL facility reduce availability under the ABL facility.
Interest payable on the credit facilities is based on either:
•
the London interbank offered rate, adjusted for statutory reserve requirements (the “Adjusted LIBO Rate”);
or
F-16
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
•
the Alternate Base Rate, which is defined as the highest of (a) the prime rate, (b) the federal funds effective
rate from time to time plus 0.50% per annum and (c) the one-month Adjusted LIBO Rate plus 1.00% per
annum,
plus, (A) in the case Adjusted LIBO Rate borrowings, (i) with respect to the ABL facility, spreads ranging from 1.50%
to 2.00% per annum depending on a total debt to EBITDA ratio under the ABL facility or (ii) with respect to the term
facility, spreads ranging from 2.50% to 2.75% per annum depending on a total debt to EBITDA ratio and (B) in the
case of Alternate Base Rate borrowings, (i) with respect to the ABL facility, spreads ranging from 0.50% to 1.00%
per annum depending on a total debt to EBITDA ratio under the ABL facility or (ii) with respect to the term facility,
spreads ranging from 1.50% to 1.75% per annum depending on a total debt to EBITDA ratio.
The interest rate period with respect to the Adjusted LIBO Rate interest rate option can be set at one-, two-, three-,
or six-months as selected by us in accordance with the terms of the credit agreement.
The credit agreement contains certain covenants that limit, among other things, the ability of us and our 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. In addition, the credit agreement requires us to
maintain a minimum fixed charge coverage ratio of a minimum of 1.0 to 1.0 when availability for at least three
consecutive business days is less than the greater of (a) 17.5% of the lesser of the aggregate ABL facility
commitments and the borrowing base and (b) $70,000,000 (including as of the most recent fiscal quarter end on the
first date when availability is less than such amount) as well as a maximum secured debt to EBITDA ratio of 4.5 to
1.0 at any time when term facility commitments or term loans thereunder are outstanding. As of December 31,
2019, our fixed charge coverage ratio was 0.93 however, we had more than $100 million of availability under the
ABL facility at that date so the fixed charge coverage rate currently has no impact on our operations or liquidity. Our
secured debt to EBITDA ratio as of December 31, 2019 was 0.58 to 1.0.
The credit agreement contains restrictions on certain payments, including dividends, when availability under the
credit agreement is less than or equal to the greater of $100 million and 25% of the lesser of the revolving
commitments and the borrowing base and our fixed charge coverage ratio is less than 1.0 to 1.0 (unless availability
under the credit agreement is greater than $100 million and 40% of the lesser of the revolving commitments and the
borrowing base). As of December 31, 2019, our ability to make restricted payments was not limited as our
availability under the borrowing base was more than $100 million, while our fixed charge coverage ratio under our
credit agreement was less than 1.0 to 1.0. As of December 31, 2019, the Company had a shortfall of approximately
$30.6 million of our net income and retained earnings subject to such restrictions before the fixed charge coverage
ratio would exceed 1.0 to 1.0.
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 thereto.
Note 8 — Asset Retirement Obligations (ARO)
The majority of the ARO recognized by the Company at December 31, 2019 and 2018 related to the estimated
costs to dismantle and abandon certain of its retail gasoline stations. 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.
F-17
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the beginning and ending aggregate carrying amount of the ARO is shown in the following table.
(Millions of dollars)
Balance at beginning of period
Accretion expense
Settlement of liabilities
Liabilities incurred
Balance at end of period
December 31,
2019
2018
$
$
30.7 $
2.1
(0.4)
0.4
32.8 $
28.2
2.0
(0.3)
0.8
30.7
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 9 — Income Taxes
The components of income before income taxes for each of the three years ended December 31, 2019 and income
tax expense (benefit) attributable thereto were as follows:
(Millions of dollars)
Income (loss) before income taxes
Income tax expense (benefit)
Federal - Current
Federal - Deferred
State - Current and deferred
Total
Years Ended December 31,
2018
2017
2019
202.4 $
273.9 $
240.1
15.6
21.7
10.3
47.6 $
18.4
31.0
10.9
60.3 $
39.2
(50.7)
6.3
(5.2)
$
$
$
The following table reconciles income taxes based on the U.S. statutory tax rate to the Company’s income tax
expense (benefit).
(Millions of dollars)
Income tax expense based on the U.S. statutory tax rate
State income taxes, net of federal benefit
Effect of U.S. tax law change
Federal credits
Other, net
Total
Years Ended December 31,
2018
2017
2019
$
$
42.5 $
8.6
—
(2.3)
(1.2)
47.6 $
57.5 $
8.3
—
(2.0)
(3.5)
60.3 $
84.0
3.0
(88.9)
(1.0)
(2.3)
(5.2)
F-18
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
An analysis of the Company’s deferred tax assets and deferred tax liabilities at December 31, 2019 and 2018
showing the tax effects of significant temporary differences is as follows:
(Millions of dollars)
Deferred tax assets
Property costs and asset retirement obligations
Employee benefits
Operating leases liability
Other deferred tax assets
Total gross deferred tax assets
Deferred tax liabilities
Accumulated depreciation and amortization
State deferred taxes
Operating leases right of use assets
Other deferred tax liabilities
Total gross deferred tax liabilities
Net deferred tax liabilities
December 31,
2019
2018
3.7 $
6.1
25.0
2.1
36.9
(191.2)
(27.9)
(24.8)
(9.7)
(253.6)
(216.7) $
3.3
6.3
—
2.6
12.2
(171.6)
(25.9)
—
(6.9)
(204.4)
(192.2)
$
$
In management’s judgment, the net deferred tax assets in the preceding table will more likely than not be realized
as reductions of future taxable income or by utilizing available tax planning strategies.
In December 2017, the Tax Cuts and Jobs Act ("the Act") was enacted, which made major changes to the Federal
income tax system for corporations and individuals. Two key corporate provisions of the Act that impacted the
Company in 2017 were the reduction of the Federal corporate income tax rate from 35% to 21% and the increase
of Federal bonus depreciation from 50% to 100% on certain qualifying assets retroactive to September 27, 2017.
As a result, the Company calculated the impact of the Act in its year-end income tax provision in accordance with its
understanding of the Act and guidance available as of the date of the filing and as a result recorded $88.9 million as
a tax benefit in the fourth quarter of 2017, the period in which the legislation was enacted. The provisional amount
related primarily to the remeasurement of certain deferred tax assets and liabilities based on the rates of which they
are expected to reverse in the future.
In conjunction with the effectiveness of the Act, the SEC issued Staff Accounting Bulletin No. 118 ("SAB 118") to
address the implications of U.S. GAAP in situations where the registrant does not have the necessary information
available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for
certain income tax effects of the Act. In accordance with SAB 118, the Company made its best estimate and
recorded provisional amounts related to certain equity and fixed asset temporary differences based on available
information as of December 31, 2017. These amounts were finalized in the fourth quarter of 2018 and with
immaterial adjustments being recorded as a component of tax expense.
As of December 31, 2019, the earliest year remaining open for Federal audit and/or settlement is 2016 and for the
states it ranges from 2014-2018. 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.
The FASB’s rules for accounting for income tax uncertainties clarify the criteria for recognizing uncertain income tax
benefits and require additional disclosures about uncertain tax positions. Under U.S. GAAP the financial statement
recognition of the benefit for a tax position is dependent upon the benefit being more likely than not to be
sustainable upon audit by the applicable taxing authority. If this threshold is met, the tax benefit is then measured
and recognized at the largest amount that is greater than 50 percent likely of being realized upon ultimate
settlement. Liabilities associated with uncertain income tax positions are included in Deferred Credits and Other
Liabilities in the Consolidated Balance Sheets.
F-19
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the beginning and ending amount of the consolidated liability for unrecognized income tax
benefits during the year ended December 31, 2019 and 2018 is shown in the following table.
(Millions of dollars)
Balance at January 1
Additions for tax positions related to prior years
Additions for tax positions related to current year
Settlements with taxing authorities
Expiration of statutes of limitation
Balance at December 31
Year Ended December 31,
2019
2018
0.7 $
0.5
—
(0.6)
—
0.6 $
4.4
—
0.2
(3.9)
—
0.7
$
$
All additions or reductions to the above liability affect the Company’s effective tax rate in the respective period of
change. The Company accounts for any applicable interest and penalties on uncertain tax positions as a
component of income tax expense. Income tax expense for the years ended December 31, 2019, 2018 and 2017
included interest and penalties of none, $(1.6) million, and $0.4 million, respectively, associated with uncertain tax
positions.
During the next twelve months, the Company currently expects to add immaterial amounts to the liability for
uncertain taxes for 2020 events. Although existing liabilities could be reduced by settlement with taxing authorities
or lapse due to statute of limitations, the Company believes that the changes in its unrecognized tax benefits due to
these events will not have a material impact on the Consolidated Income Statement during 2020.
Total excess tax benefits recognized in the twelve months ended December 31, 2019, 2018 and 2017 were
$0.1 million, $2.5 million, and $2.2 million respectively.
Note 10 — 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), cash awards, and performance awards to our employees. No
more than 5.5 million shares of 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.
During the period from August 30, 2013 to December 31, 2019, the Company granted a total of 2,339,812 awards
from the MUSA 2013 Plan which leaves 3,160,188 remaining shares to be granted in future years (after
consideration of the amendments made to the MUSA 2013 Plan in February 2014 by the Board of Directors). At
present, the Company expects to issue all shares that vest out of existing treasury shares rather than issuing new
common shares.
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
“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 shall be available for issuance
of grants under the Directors Plan. Since 2013, 123,629 time-based restricted stock units have been granted under
the terms of the Directors Plan which leaves 376,371 shares available to be granted in the future.
F-20
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Amounts recognized in the financial statements by the Company with respect to all share-based plans are shown in
the following table.
(Millions of dollars)
Compensation charged against income before income
tax benefit
Related income tax benefit recognized in income
$
$
Years Ended December 31,
2019
2018
2017
10.5 $
2.2 $
9.2 $
1.9 $
7.5
2.6
As of December 31, 2019, there was $14.1 million in compensation costs to be expensed over approximately the
next 1.8 years related to unvested share-based compensation arrangements granted by the Company. Employees
who have stock options are required to net settle their options in shares, after applicable statutory withholding taxes
are considered, upon each stock option exercise. Therefore, no cash is received upon exercise. Total income tax
benefits realized from tax deductions related to stock option exercises under share-based payment arrangements
were $0.1 million, $2.1 million, and $0.6 million for the years ended December 31, 2019, 2018, and 2017,
respectively.
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 2019, the Committee granted nonqualified stock options to certain employees of the Company.
Following are the assumptions used by the Company to value the original awards:
Fair value per option grant
Assumptions
Dividend yield
Expected volatility
Risk-free interest rate
Expected life (years)
Stock price at valuation date
2019
Years Ended December 31,
2018
2017
20.48
$
17.32
$
15.45
—
26.8%
2.5%
4.5
—
27.0%
2.43%
3.9
76.15
$
71.00
$
—
26%
1.65%
4.2
65.75
$
$
Changes in options outstanding for Company employees during the period from December 31, 2018 to December
31, 2019 are presented in the following table:
Options
Number of Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
(Years)
Aggregate
Intrinsic Value
(Millions of
Dollars)
Outstanding at December 31, 2018
Granted
Exercised
Forfeited
Outstanding at December 31, 2019
310,362
99,400
(12,662)
(4,800)
392,300 $
65.71
76.15
56.63
76.15
68.52
4.3 $
Exercisable at December 31, 2019
174,300 $
64.00
3.0 $
19.0
9.2
F-21
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Additional information about stock options outstanding at December 31, 2019 is shown below:
Range of Exercise Prices per
Option
$39.46 to $49.99
$50.00 to $59.99
$60.00 to $69.99
$70.00 to $79.99
Options Outstanding
Options Exercisable
No. of Options
3,900
71,000
90,550
226,850
392,300
Avg. Life
Remaining in
Years
1.1
3.1
4.1
4.8
4.3
No. of Options
3,900
71,000
43,550
55,850
174,300
Avg. Life
Remaining in
Years
1.1
3.1
4.1
2.1
3.0
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 3 years.
Changes in restricted stock units outstanding for Company employees during the period from December 31, 2018
to December 31, 2019 are presented in the following table:
Employee RSUs
Outstanding at December 31, 2018
Granted
Vested and issued
Forfeited
Outstanding at December 31, 2019
Number of units
Weighted Average Grant
Date Fair Value
Total Fair Value
(Millions of Dollars)
193,478
74,118
$
$
(54,313) $
(14,368) $
198,915
$
64.02
80.85
60.41 $
73.63
70.58 $
4.2
23.3
PERFORMANCE-BASED RESTRICTED STOCK UNITS (MUSA 2013 Plan) – In February 2019, the Committee
awarded performance-based restricted stock units (performance units) to certain employees. Half of the
performance units vest based on a 3-year return on average capital employed (ROACE) calculation and the other
half vest based on a 3-year total shareholder return (TSR) calculation that compares MUSA to a group of 19 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
$100.65 per unit. For the ROACE portion of the awards, the valuation was based on the grant date fair value of
$76.15 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, 2018 to December 31, 2019 are presented in the following table:
Employee PSU's
Outstanding at December 31, 2018
Granted
Vested and issued
Forfeited
Outstanding at December 31, 2019
Number of Units
Weighted Average
Grant Date Fair Value
Total Fair Value
(Millions of Dollars)
124,412
81,513
$
$
(72,125) $
(2,600) $
131,200
$
76.58
88.40
73.55 $
88.40
82.98 $
5.5
15.4
RESTRICTED STOCK UNITS (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. These awards typically vest at the end of three years.
F-22
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Changes in restricted stock units outstanding for Company non-employee directors during the period from
December 31, 2018 to December 31, 2019 are presented in the following table:
Director RSU's
Outstanding at December 31, 2018
Granted
Vested and issued
Forfeited
Number of Units
Weighted Average
Grant Date Fair Value
Total Fair Value
(Millions of Dollars)
41,017 $
13,086 $
(20,496) $
—
64.27
76.63
61.65 $
1.6
3.9
Outstanding at December 31, 2019
33,607 $
70.68 $
Note 11 — Employee and Retiree Benefit Plans
THRIFT PLAN – Most full-time employees of the Company may participate in defined contribution savings plans by
contributing up to a specified percentage of their base pay. The Company matches contributions at 100% of each
employee’s contribution with a maximum match of 6%. In addition, the Company makes profit sharing contributions
on an annual basis. Eligible employees receive a stated percentage of their base and incentive pay of 5%, 7%, or
9% determined on a formula that is based on a combination of age and years of service. The Company’s combined
expenses related for this plan were $12.9 million in 2019, $9.7 million in 2018 and $12.1 million in 2017.
PROFIT SHARING PLAN – Eligible part-time employees may participate in the Company’s noncontributory profit
sharing plan. Each year, the Company may make a discretionary employer contribution in an amount determined
and authorized at the discretion of the Board of Directors. Eligible employees receive an allocation based on their
compensation earned for the year the contribution is allocated. The Company’s expenses related to this plan were
$1.5 million in 2019, $(0.8) million in 2018 and $2.2 million in 2017.
Note 12 — 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 creditworthy 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 Statement 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 December 31, 2019, all current commodity derivative activity is immaterial.
At December 31, 2019 and 2018 cash deposits of $1.0 million related to commodity derivative contracts were
reported in Prepaid expenses and other current assets in the Consolidated Balance Sheets. These cash deposits
have not been used to reduce the reported net liabilities on the derivative contracts at December 31, 2019 and
2018.
Interest Rate Risks
Under hedge accounting rules, the Company deferred the net 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 million of our
outstanding term loan dated August 27, 2019. The effective date of the hedge was September 27, 2019, and under
the swap the Company pays fixed rate interest and receives one month LIBOR to hedge the floating interest rate of
the outstanding debt. During the year ended December 31, 2019, $0.2 million of realized gain on the interest rate
swaps was credited to interest expense in the Consolidated Statements of Income. The remaining benefit pre-tax
deferred on these contracts at December 31, 2019 was $0.9 million, which is recorded, net of income taxes, of
$0.2 million, in AOCI in the Consolidated Balance Sheets.
F-23
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13 – 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 August 30, 2013, 46,743,316 shares of our common stock were distributed to the shareholders of Murphy Oil in
connection with the separation. For comparative purposes, we have assumed this amount to be outstanding as of
the beginning of each prior period prior to the separation presented in the calculation of weighted average shares
outstanding.
On July 24, 2019, the Board of Directors approved an up to $400 million share repurchase program to be executed
over the two-year period ending July 2021. Prior to the July authorization, the Company had continued to conduct
repurchases under quarterly allocations in line with recent past practice. During 2019, total purchases were made
of 1,898,023 common shares for $165.8 million,or $87.35 per share, of which 1,393,626 common shares for $125.0
million were made under the July 2019 authorization, leaving approximately $275.0 million available until July 2021.
Previous authorizations for common share repurchases include May 2014, in which 1,040,636 common shares
were acquired for an average price (including brokerage fees) of $48.07 per share, October 2014, in which
4,169,349 common shares were repurchased for an average price of $59.96 per share, January 2016, in which
7,489,388 common shares for an average price of $66.76 per share, and after completion of the 2016 program, an
additional 379,054 common shares at an average price of $77.20 were repurchased in 2017. During 2018 the
Company acquired 1,994,632 common shares at an average price of $72.39.
The following table provides a reconciliation of basic and diluted earnings per share computations for the years
ended December 31, 2019, 2018 and 2017 (in millions, except per share amounts):
(Millions of dollars except per share amounts)
2019
2018
2017
Years ended December 31,
Earnings per common share:
Net income per share - basic
Net income attributable to common stockholders
Weighted average common shares outstanding (in
thousands)
Earnings per common share
Earnings per common share - assuming dilution:
Net income per share - diluted
Net income attributable to common stockholders
Weighted average common shares outstanding (in
thousands)
Common equivalent shares:
Share-based awards
Weighted average common shares outstanding - assuming
dilution (in thousands)
$
$
$
154.8 $
213.6 $
245.3
31,594
32,674
4.90 $
6.54 $
35,816
6.85
154.8 $
213.6 $
245.3
31,594
32,674
35,816
264
309
340
31,858
32,983
36,156
Earnings per common share assuming dilution
$
4.86 $
6.48 $
6.78
We have excluded from the earnings-per-share calculation certain stock options and shares that are considered to
be anti-dilutive under the treasury stock method. For the reported periods, the number of time-based restrictive
stock units, performance based units and non-qualified stock options that are excluded due to their anti-dilutive
nature is immaterial.
F-24
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14 — Other Financial Information
CASH FLOW DISCLOSURES — Cash income taxes paid (collected), net of refunds, were $26.9 million, $17.4
million and $51.7 million for the three years ended December 31, 2019, 2018 and 2017, respectively. Interest paid,
net of amounts capitalized, was $56.6 million, $50.4 million and $41.5 million for the years ended December 31,
2019, 2018 and 2017, respectively.
CHANGES IN WORKING CAPITAL -
(Millions of dollars)
Accounts receivable
Inventories
Prepaid expenses and other current assets
Accounts payable and accrued liabilities
Income taxes payable
$
Net decrease (increase) in noncash operating working capital
$
Note 15 — Assets and Liabilities Measured at Fair Value
2019
2018
2017
(33.4) $
(6.1)
(3.3)
(5.9)
—
(48.7) $
86.6 $
(39.0)
11.4
(56.7)
—
2.3 $
(41.7)
(16.3)
(5.2)
26.9
(0.6)
(36.9)
The Company carries certain assets and liabilities at fair value in its Consolidated Balance Sheets. The fair value
hierarchy is based on the quality of inputs used to measure fair value, with Level 1 being the highest quality and
Level 3 being the lowest quality. Level 1 inputs are quoted prices in active markets for identical assets or liabilities.
Level 2 inputs are observable inputs other than quoted prices included within Level 1. Level 3 inputs are
unobservable inputs which reflect assumptions about pricing by market participants.
At the balance sheet date, the fair value of commodity derivatives contracts was determined using NYMEX quoted
values but were immaterial. The carrying value of the Company’s Cash and cash equivalents, Accounts receivable-
trade, Trade accounts payable, interest rate swap contracts and accrued liabilities approximates fair value.
The following table presents the carrying amounts and estimated fair values of financial instruments held by the
Company at December 31, 2019 and 2018. The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing parties. The table excludes Cash and cash
equivalents, Accounts receivable-trade, and Trade accounts payable and accrued liabilities, all of which had fair
values approximating carrying amounts. The fair value of Current and Long-term debt was estimated based on
rates offered to the Company at that time for debt of the same maturities. The Company has off-balance sheet
exposures relating to certain financial guarantees and letters of credit. The fair value of these, which represents
fees associated with obtaining the instruments, was nominal.
(Millions of dollars)
Financial liabilities
December 31, 2019
December 31, 2018
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Current and long-term debt
$
(1,038.1) $
(1,069.4) $
(863.3) $
(866.7)
Note 16 – Commitments
The Company leases land, gasoline stations, and other facilities under operating leases. During the next five years,
expected future rental payments under all operating leases are approximately $14.9 million in 2020, $14.3 million in
2021, $13.5 million in 2022, $13.0 million in 2023, and $12.2 million in 2024. Rental expense for noncancelable
operating leases, including contingent payments when applicable, was $21.6 million in 2019, $15.2 million in 2018
and $14.0 million in 2017.
F-25
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Commitments for capital expenditures were approximately $246.9 million at December 31, 2019, including $202.9
million approved for potential construction of future Murphy USA and Murphy Express gasoline stations (including
land) at year-end, along with $39.2 million for improvements of existing stations, to be financed with our operating
cash flow and/or incurrence of indebtedness.
The Company has certain take-or-pay contracts primarily to supply our terminals with a noncancelable remaining
term of 1.7 years. At December 31, 2019, our minimum annual payments under our take-or-pay contracts are
estimated to be $7.9 million in 2020 and $4.9 million in 2021.
Note 17 — Contingencies
The Company’s operations and earnings have been and may be affected by various forms of governmental action.
Examples of such governmental action include, but are by no means limited to: tax increases and retroactive tax
claims; import and export controls; price controls; allocation of supplies of crude oil and petroleum products and
other goods; laws and regulations intended for the promotion of safety and the protection and/or remediation of the
environment; governmental support for other forms of energy; and laws and regulations affecting the Company’s
relationships with employees, suppliers, customers, stockholders and others. Because governmental actions are
often motivated by political considerations, may be taken without full consideration of their consequences, and may
be taken in response to actions of other governments, it is not practical to attempt to predict the likelihood of such
actions, the form the actions may take or the effect such actions may have on the Company.
ENVIRONMENTAL MATTERS AND LEGAL MATTERS — Murphy USA is subject to numerous federal, state and
local laws and regulations dealing with the environment. Violation of such environmental laws, regulations and
permits can result in the imposition of significant civil and criminal penalties, injunctions and other sanctions. A
discharge of hazardous substances into the environment could, to the extent such event is not insured, subject the
Company to substantial expense, including both the cost to comply with applicable regulations and claims by
neighboring landowners and other third parties for any personal injury, property damage and other losses that might
result.
The Company currently owns or leases, and has in the past owned or leased, properties at which hazardous
substances have been or are being handled. Although the Company believes it has used operating and disposal
practices that were standard in the industry at the time, hazardous substances may have been disposed of or
released on or under the properties owned or leased by the Company or on or under other locations where they
have been taken for disposal. In addition, many of these properties have been operated by third parties whose
management of hazardous substances was not under the Company’s control. Under existing laws, the Company
could be required to remediate contaminated property (including contaminated groundwater) or to perform remedial
actions to prevent future contamination. Certain of these contaminated properties are in various stages of
negotiation, investigation, and/or cleanup, and the Company is investigating the extent of any related liability and
the availability of applicable defenses. With the sale of the U.S. refineries in 2011, Murphy Oil retained certain
liabilities related to environmental matters. Murphy Oil also obtained insurance covering certain levels of
environmental exposures. With respect to the previously owned refinery properties, Murphy Oil retained those
liabilities in the Separation and Distribution agreement that was entered into related to the separation on August 30,
2013. With respect to any remaining potential liabilities, the Company believes costs related to these sites will not
have a material adverse effect on Murphy USA’s net income, financial position or liquidity in a future period.
Certain environmental expenditures are likely to be recovered by the Company from other sources, primarily
environmental funds maintained by certain states. Since no assurance can be given that future recoveries from
other sources will occur, the Company has not recorded a benefit for likely recoveries at December 31, 2019,
however certain jurisdictions provide reimbursement for these expenses which have been considered in recording
the net exposure. The U.S. Environmental Protection Agency (EPA) currently considers the Company a Potentially
Responsible Party (PRP) at one Superfund site. As to the site, the potential total cost to all parties to perform
necessary remedial work at this site may be substantial. However, based on current negotiations and available
information, the Company believes that it is a de minimis party as to ultimate responsibility at the Superfund site.
Accordingly, the Company has not recorded a liability for remedial costs at the Superfund site at December 31,
2019. The Company could be required to bear a pro rata share of costs attributable to nonparticipating PRPs or
could be assigned additional responsibility for remediation at this site or other Superfund sites. The Company
believes that its share of the ultimate costs to clean-up this site will be immaterial and will not have a material
adverse effect on its net income, financial position or liquidity in a future period.
F-26
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Based on information currently available to the Company, the amount of future remediation costs to be incurred to
address known contamination sites is not expected to have a material adverse effect on the Company’s future net
income, cash flows or liquidity. However, there is the possibility that additional environmental expenditures could be
required to address contamination, including as a result of discovering additional contamination or the imposition of
new or revised requirements applicable to known contamination.
Murphy USA is engaged in a number of other legal proceedings, all of which the Company considers routine and
incidental to its business. Based on information currently available to the Company, the ultimate resolution of those
other legal matters is not expected to have a material adverse effect on the Company’s net income, financial
condition or liquidity in a future period.
INSURANCE — The Company maintains insurance coverage at levels that are customary and consistent with
industry standards for companies of similar size. Murphy USA maintains statutory workers compensation insurance
with a deductible of $1.0 million per occurrence, general liability insurance with a deductible of $3.0 million per
occurrence, and auto liability insurance with a deductible of $0.3 million per occurrence. As of December 31, 2019,
there were a number of outstanding claims that are of a routine nature. The estimated incurred but unpaid liabilities
relating to these claims are included in Trade account payables and accrued liabilities on the Consolidated Balance
Sheets. While the ultimate outcome of these claims cannot presently be determined, management believes that the
accrued liability of $21.8 million will be sufficient to cover the related liability and that the ultimate disposition of
these claims will have no material effect on the Company’s financial position and results of operations.
The Company has obtained insurance coverage as appropriate for the business in which it is engaged, but may
incur losses that are not covered by insurance or reserves, in whole or in part, and such losses could adversely
affect our results of operations and financial position.
TAX MATTERS — Murphy USA is subject to extensive tax liabilities imposed by multiple jurisdictions, including
income taxes, indirect taxes (excise/duty, sales/use and gross receipts taxes), payroll taxes, franchise taxes,
withholding taxes and ad valorem taxes. New tax laws and regulations and changes in existing tax laws and
regulations are continuously being enacted or proposed that could result in increased expenditures for tax liabilities
in the future. Many of these liabilities are subject to periodic audits by the respective taxing authority. Subsequent
changes to our tax liabilities because of these audits may subject us to interest and penalties.
OTHER MATTERS — In the normal course of its business, the Company is required under certain contracts with
various governmental authorities and others to provide financial guarantees or letters of credit that may be drawn
upon if the Company fails to perform under those contracts. At December 31, 2019, the Company had contingent
liabilities of $17.0 million on outstanding letters of credit. The Company has not accrued a liability in its balance
sheet related to these financial guarantees and letters of credit because it is believed that the likelihood of having
these drawn is remote.
Note 18 — Leases
In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)" (“ASU 2016-02”). ASU 2016-02
amended the existing accounting standards for lease accounting by recognizing lease assets and lease liabilities on
the balance sheet for those leases classified as operating leases under current GAAP. ASU 2016-02 requires that a
lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing
its right to use the underlying asset for the lease term on the balance sheet. We adopted ASU 2016-02 as of
January 1, 2019, using the modified retrospective approach. In addition, we elected the package of practical
expedients permitted under the transition guidance within the new standard, which among other things, allowed us
to carry forward the historical lease classification. We also elected the practical expedient related to land
easements, allowing us to carry forward our accounting treatment for land easements on existing agreements. In
addition, we elected the hindsight practical expedient to determine the lease term for existing leases. Our election
of the hindsight practical expedient resulted in the shortening of lease terms for certain existing leases and the
useful lives of corresponding leasehold improvements. In our application of hindsight, we evaluated the
performance of the leased stores and the associated markets in relation to our overall real estate strategies, which
resulted in the determination that renewal options would not be reasonably certain in determining the expected
lease term. Adoption of the new standard resulted in the recording of additional net lease assets and lease
liabilities of approximately $110.4 million and $110.7 million, respectively. The standard did not materially impact
our consolidated net earnings and had no impact on cash flows.
F-27
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company determines if an arrangement is a lease or contains a lease at inception. Operating lease right-of-
use assets and liabilities are recognized at commencement date based on the present value of lease payments
over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we
recognize lease expense for these leases on a straight-line basis over the lease term. The Company's leases have
remaining lease terms of approximately 1 year to 20 years, which may include the option to extend the lease when
it is reasonably certain the Company will exercise the option. Most leases include one or more options to renew,
with renewal terms that can extend the lease term from five to 20 years or more. The exercise of lease renewal
options is at the Company's sole discretion. Due to the uncertainties of future markets, economic factors,
technology changes, demographic shifts and behavior, environmental regulatory requirements and other
information that impacts decisions as to station location, management has determined that it was not reasonably
certain to exercise contract options and they are not included in the lease term. Additionally, short-term leases and
leases with variable lease costs are immaterial. The Company reviews all options to extend, terminate, or
otherwise modify its lease agreements to determine if changes are required to the right of use assets and liabilities.
As the implicit interest rate is not readily determinable in most of the Company's lease agreements, the Company
uses its estimated secured incremental borrowing rate based on the information available at commencement date
in determining the present value of lease payments.
Lessor — We have various arrangements for certain spaces for food service and vending equipment under which
we are the lessor. These leases meet the criteria for operating lease classification. Lease income associated with
these leases is immaterial.
Lessee —We lease land for 215 stations, one terminal, a hangar and various equipment. Our lease agreements do
not contain any material residual value guarantees and approximately 102 sites leased from Walmart contain
restrictive covenants, though the restrictions are deemed to have an immaterial impact.
Leases are reflected in the following balance sheet accounts:
(Millions of dollars)
Assets
Classification
Operating (Right-of-use)
Other Assets
Finance
Total leased assets
Liabilities
Current
Operating
Finance
Noncurrent
Operating
Finance
Total lease liabilities
Property, plant, and equipment, at cost, less
accumulated depreciation of $2.2 in 2019 and
$1.8 in 2018
Trade accounts payable and accrued liabilities
Current maturities of long-term debt
Deferred credits and other liabilities
Long-term debt, including capitalized lease
obligations
December 31,
2019
December 31,
2018
$
$
$
$
124.2
$
3.0
127.2
$
$
6.8
1.2
118.5
1.2
127.7
$
—
2.9
2.9
—
1.2
—
1.1
2.3
F-28
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lease Cost:
(Millions of dollars)
Operating lease cost
Finance lease cost
Amortization of leased assets
Interest on lease liabilities
Net lease costs
Classification
Station and other operating expenses
Depreciation & amortization expense
Interest expense
Cash flow information:
(Millions of dollars)
Cash paid for amounts included in the measurement of liabilities
Operating cash flows required by operating leases
Operating cash flows required by finance leases
Financing cash flows required by finance leases
Maturity of Lease Liabilities:
Year Ended
December 31,
2019
$
$
14.5
1.2
0.1
15.8
Year Ended
December 31,
2019
$
$
$
13.8
0.1
1.4
(Millions of dollars)
Operating leases
Finance leases
2020
2021
2022
2023
2024
After 2024
Total lease payments
less: interest
Present value of lease liabilities
$
14.9
$
14.3
13.5
13.0
12.2
148.9
216.8
91.5
125.3
$
$
1.3
0.9
0.3
—
—
—
2.5
0.1
2.4
F-29
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company adopted ASU 2016-02 on January 1, 2019, and as required, the following disclosure is provided for
periods prior to adoption. Future annual minimum lease payments and capital lease commitments as of December
31, 2018 were as follows:
(Millions of dollars)
Operating leases
Capital leases
2019
2020
2021
2022
2023
After 2023
Total lease payments
less: interest
$
13.7
$
13.3
12.5
11.7
11.1
122.6
184.9
—
Present value of minimum payments
$
184.9
$
1.5
1.1
0.6
0.1
—
—
3.3
0.2
3.1
Lease Term and Discount Rate:
Weighted average remaining lease term (years)
Finance leases
Operating leases
Weighted average discount rate
Finance leases
Operating leases
Year Ended December 31,
2019
2.0
15.6
4.8%
6.0%
Note 19 — Recent Accounting and Reporting Rules
In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic
350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a
Service Contract". This ASU aligns the accounting treatment for capitalizing implementation costs incurred by
customers in cloud computing arrangements in a hosting arrangement that is a service contract with the
requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This
guidance is effective for the Company on January 1, 2020. Early adoption is permitted. The amendments in this
update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of
adoption. The Company has assessed the effect that this ASU will have on our financial position, results of
operations, and disclosures and this update will not have a material impact on the Company's consolidated financial
statements.
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments." ASU 2016-13 was subsequently modified by ASU 2018-19, ASU
2019-04, ASU 2019-05, and ASU 2019-11. This ASU changes the way entities recognize impairment of many
financial assets by requiring immediate recognition of estimated credit losses expected to occur over their
remaining life, which will result in timelier recognition of losses. ASU 2016-13 and the associated modifications will
be effective for the Company on January 1, 2020. The Company has assessed the effect that this ASU will have on
our financial position, results of operations, and disclosures and this update will not have a material impact on the
Company's consolidated financial statements.
F-30
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for
Income Taxes," which removes certain exceptions for: recognizing deferred taxes on investments, performing
intraperiod allocation and calculating income taxes for interim periods. The ASU also adds guidance to reduce
complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of
a consolidated group. This ASU if effective for the Company for the year beginning January 1, 2021, and early
adoption is permitted. The Company is currently assessing the effect that this ASU will have on our financial
position, results of operations, and disclosures but does not expect this update to have a material impact on the
Company's consolidated financial statements.
Note 20 — Business Segments
Our operations include the sale of retail motor fuel products and convenience merchandise along with the
wholesale and bulk sale capabilities of our product supply and wholesale group. As the primary purpose of the
product supply and wholesale group is to support our retail operations and provide fuel for their daily operation, the
bulk and wholesale fuel sales are secondary to the support functions played by these groups. As such, they are all
treated as one segment for reporting purposes as they sell the same products. This Marketing segment contains
essentially all of the revenue generating activities of the Company. Results not included in the reportable segment
include Corporate and Other Assets. The reportable segment was determined based on information reviewed by
the Chief Operating Decision Maker.
Segment Information
(Millions of dollars)
Year ended December 31, 2019
Segment income (loss)
Revenues from external customers
Interest income
Interest expense
Loss on early debt extinguishment
Income tax expense (benefit)
Significant noncash charges (credits)
Depreciation and amortization
Accretion of asset retirement obligations
Debt extinguishment costs
Deferred and noncurrent income taxes (benefits)
Additions to property, plant and equipment
Marketing
Corporate and
Other Assets
Consolidated
$
215.0
14,034.3
—
(0.1)
—
66.3
138.9
2.1
—
32.9
155.5
(60.2) $
0.3
3.2
(54.8)
(14.8)
(18.7)
13.3
—
4.4
(9.2)
59.1
154.8
14,034.6
3.2
(54.9)
(14.8)
47.6
152.2
2.1
4.4
23.7
214.6
Total assets at year-end
$
2,304.7
382.5
$
2,687.2
Segment Information
(Millions of dollars)
Year ended December 31, 2018
Segment income (loss)
Revenues from external customers
Interest income
Interest expense
Income tax expense (benefit)
Significant noncash charges (credits)
Depreciation and amortization
Accretion of asset retirement obligations
Deferred and noncurrent income taxes (benefits)
Additions to property, plant and equipment
Total assets at year-end
Corporate and
Marketing
Other Assets
Consolidated
214.2
14,362.3
—
(0.1)
69.5
124.5
2.0
39.0
169.2
2,012.0
$
$
F-31
(0.6) $
0.6
1.5
(52.8)
(9.2)
9.5
—
(1.1)
24.6
348.8
$
213.6
14,362.9
1.5
(52.9)
60.3
134.0
2.0
37.9
193.8
2,360.8
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Segment Information
(Millions of dollars)
Year ended December 31, 2017
Segment income (loss)
Revenues from external customers
Interest income
Interest expense
Income tax expense (benefit)
Significant noncash charges (credits)
Depreciation and amortization
Accretion of asset retirement obligations
Deferred and noncurrent income taxes (benefits)
Additions to property, plant and equipment
Total assets at year-end
Corporate and
Marketing
Other Assets
Consolidated
$
$
295.3
12,826.2
—
(0.1)
(2.9)
110.5
1.8
(61.3)
234.0
2,023.4
(50.0) $
0.4
1.3
(46.6)
(2.3)
6.4
—
10.9
39.7
307.6
$
245.3
12,826.6
1.3
(46.7)
(5.2)
116.9
1.8
(50.4)
273.7
2,331.0
F-32
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 21 – Guarantor Subsidiaries
Certain of the Company’s 100% owned, domestic subsidiaries (the “Guarantor Subsidiaries”) fully and
unconditionally guarantee, on a joint and several basis, certain of the outstanding indebtedness of the Company,
including the 5.625% senior notes due 2027 and the 4.75% senior notes due 2029. The following consolidating
schedules present financial information on a consolidated basis in conformity with the SEC’s Regulation S-X Rule
3-10(d):
CONSOLIDATING BALANCE SHEET
(Millions of dollars)
Assets
Current assets
Parent
Company
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Consolidated
December 31, 2019
Cash and cash equivalents
$
— $
279.4
$
0.9
$
— $
— $
280.3
Accounts receivable—trade, less
allowance for doubtful accounts of $1.2 in
2019
Inventories, at lower of cost or market
Prepaid expenses and other current
assets
Total current assets
Property, plant and equipment, at cost less
accumulated depreciation and amortization of
$1,079.2 in 2019
Investments in subsidiaries
Other assets
Total assets
Liabilities and Stockholders' Equity
Current liabilities
—
—
—
—
—
2,591.8
—
173.0
227.6
29.6
709.6
1,799.1
143.9
169.1
(0.1)
—
0.4
1.2
8.2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(2,735.7)
—
172.9
227.6
30.0
710.8
1,807.3
—
169.1
$
2,591.8
$
2,821.7
$
9.4
$
— $
(2,735.7) $
2,687.2
Current maturities of long-term debt
$
— $
38.8
$
— $
— $
— $
Inter-company accounts payable
Trade accounts payable and accrued
liabilities
Total current liabilities
Long-term debt, including capitalized lease
obligations
Deferred income taxes
Asset retirement obligations
Deferred credits and other liabilities
Total liabilities
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 December 31, 2019)
Treasury stock (16,307,048 shares held at
December 31, 2019)
Additional paid in capital (APIC)
Retained earnings
Accumulated other comprehensive income
(AOCI)
Total stockholders' equity
(0.1)
—
(0.1)
—
—
—
—
196.1
466.2
701.1
999.3
216.7
32.8
130.4
(41.7)
(154.3)
—
(41.7)
—
(154.3)
—
—
—
—
—
—
—
—
(0.1)
2,080.3
(41.7)
(154.3)
—
0.5
(1,099.8)
1,188.8
2,502.4
—
2,591.9
—
—
—
578.8
161.9
0.7
741.4
—
0.1
—
52.0
(1.0)
—
51.1
—
—
—
87.5
66.8
—
154.3
38.8
—
466.2
505.0
999.3
216.7
32.8
130.4
1,884.2
—
0.5
—
—
—
—
—
—
—
—
—
(0.1)
—
(1,099.8)
(1,368.4)
(1,367.2)
—
(2,735.7)
538.7
1,362.9
0.7
803.0
Total liabilities and stockholders' equity $
2,591.8
$
2,821.7
$
9.4
$
— $
(2,735.7) $
2,687.2
F-33
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING BALANCE SHEET
(Millions of dollars)
Assets
Current assets
Parent
Company
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Consolidated
December 31, 2018
Cash and cash equivalents
$
— $
184.0
$
0.5
$
— $
— $
184.5
Accounts receivable—trade, less
allowance for doubtful accounts of $1.1 in
2018
Inventories, at lower of cost or market
Prepaid expenses and other current
assets
Total current assets
Property, plant and equipment, at cost less
accumulated depreciation and amortization of
$974.2 in 2018
Investments in subsidiaries
Other assets
Total assets
Liabilities and Stockholders' Equity
Current liabilities
—
—
—
—
—
2,437.0
—
138.8
221.5
25.1
569.4
1,745.9
144.4
42.5
—
—
0.2
0.7
2.3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(2,581.4)
—
138.8
221.5
25.3
570.1
1,748.2
—
42.5
$
2,437.0
$
2,502.2
$
3.0
$
— $
(2,581.4) $
2,360.8
Current maturities of long-term debt
$
— $
21.2
$
— $
— $
— $
Inter-company accounts payable
Trade accounts payable and accrued
liabilities
Total current liabilities
Long-term debt, including capitalized lease
obligations
Deferred income taxes
Asset retirement obligations
Deferred credits and other liabilities
Total liabilities
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 December 31, 2018)
Treasury stock (14,505,681 shares held at
December 31, 2018)
Additional paid in capital (APIC)
Retained earnings
Accumulated other comprehensive income
(AOCI)
Total stockholders' equity
(0.1)
—
(0.1)
—
—
—
—
203.0
456.9
681.1
842.1
192.2
30.7
10.4
(48.6)
(154.3)
—
(48.6)
—
(154.3)
—
—
—
—
—
—
—
—
(0.1)
1,756.5
(48.6)
(154.3)
—
0.5
(940.3)
1,195.1
2,181.8
—
2,437.1
—
—
—
572.8
172.9
—
745.7
—
0.1
—
52.0
(0.5)
—
51.6
—
—
—
87.5
66.8
—
154.3
—
—
—
—
—
—
—
—
—
(0.1)
—
(1,368.4)
(1,212.9)
—
(2,581.4)
21.2
—
456.9
478.1
842.1
192.2
30.7
10.4
1,553.5
—
0.5
(940.3)
539.0
1,208.1
—
807.3
Total liabilities and stockholders' equity $
2,437.0
$
2,502.2
$
3.0
$
— $
(2,581.4) $
2,360.8
F-34
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING INCOME STATEMENT AND COMPREHENSIVE INCOME
(Millions of dollars)
Operating Revenues
Year ended December 31, 2019
Parent
Company
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Consolidated
Petroleum product sales
$
— $
11,373.8
$
— $
— $
— $
11,373.8
Merchandise sales
Other operating revenues
Total operating revenues
Operating expenses
Petroleum product cost of goods sold
Merchandise cost of goods sold
Station and other operating expenses
Depreciation and amortization
Selling, general and administrative
Accretion of asset retirement obligations
Total operating expenses
Net settlement proceeds
Gain (loss) on sale of assets
Income from operations
Other income (expense)
Interest income
Interest expense
Loss on early debt extinguishment
Other nonoperating income/expense
Total other income (expense)
Income before income taxes
Income tax expense (benefit)
Income (loss)
Equity earnings in affiliates, net of tax
Net income (loss)
Other comprehensive income
Comprehensive income (loss)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
165.8
165.8
165.8
—
165.8
154.8
320.6
—
320.6
$
$
2,620.1
40.7
14,034.6
10,707.4
2,200.7
559.3
152.1
144.6
2.1
13,766.2
0.1
0.1
—
—
—
—
—
—
0.1
—
—
0.1
—
—
268.6
(0.1)
3.2
(54.9)
(14.8)
(164.8)
(231.3)
37.3
47.8
(10.5)
(0.5)
—
—
—
(0.6)
(0.6)
(0.7)
(0.2)
(0.5)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(154.3)
$
$
(11.0) $
(0.5) $
— $
(154.3) $
0.7
—
—
—
(10.3) $
(0.5) $
— $
(154.3) $
2,620.1
40.7
14,034.6
10,707.4
2,200.7
559.3
152.2
144.6
2.1
13,766.3
0.1
0.1
268.5
3.2
(54.9)
(14.8)
0.4
(66.1)
202.4
47.6
154.8
—
154.8
0.7
155.5
F-35
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING INCOME STATEMENT AND COMPREHENSIVE INCOME
(Millions of dollars)
Operating Revenues
Year ended December 31, 2018
Parent
Company
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Consolidated
Petroleum product sales
$
— $
11,858.4
$
— $
— $
— $
11,858.4
Merchandise sales
Ethanol sales and other
Total operating revenues
Operating Expenses
Petroleum product cost of goods sold
Merchandise cost of goods sold
Station and other operating expenses
Depreciation and amortization
Selling, general and administrative
Accretion of asset retirement obligations
Total operating expenses
Net settlement proceeds
Gain (loss) on sale of assets
Income from operations
Other income (expense)
Interest income
Interest expense
Other nonoperating income
Total other income (expense)
Income before income taxes
Income tax expense (benefit)
Income
Equity earnings in affiliates, net of tax
Net income (loss)
Other comprehensive income
Comprehensive income (loss)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
973.7
973.7
973.7
—
973.7
213.6
2,423.0
81.5
14,362.9
11,251.1
2,022.5
541.3
134.0
136.2
2.0
14,087.1
50.4
(1.1)
325.1
1.5
(52.9)
(972.9)
(1,024.3)
(699.2)
60.4
(759.6)
(0.5)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(0.6)
(0.6)
(0.6)
(0.1)
(0.5)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(213.1)
2,423.0
81.5
14,362.9
11,251.1
2,022.5
541.3
134.0
136.2
2.0
14,087.1
50.4
(1.1)
325.1
1.5
(52.9)
0.2
(51.2)
273.9
60.3
213.6
—
$ 1,187.3
—
$ 1,187.3
$
$
(760.1) $
(0.5) $
— $
(213.1) $
213.6
—
—
—
—
—
(760.1) $
(0.5) $
— $
(213.1) $
213.6
F-36
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING INCOME STATEMENT AND COMPREHENSIVE INCOME
(Millions of dollars)
Operating Revenues
Year ended December 31, 2017
Parent
Company
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Consolidated
Petroleum product sales
$
— $
10,287.9
$
— $
— $
— $
10,287.9
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(245.3)
$
$
— $
—
— $
— $
(245.3) $
—
—
— $
(245.3) $
2,372.7
166.0
12,826.6
9,773.2
1,991.4
514.9
116.9
141.2
1.8
12,539.4
(3.9)
283.3
1.3
(46.7)
2.2
(43.2)
240.1
(5.2)
245.3
—
245.3
—
245.3
Merchandise sales
Ethanol sales and other
Total operating revenues
Operating expenses
Petroleum product cost of goods sold
Merchandise cost of goods sold
Station and other operating expenses
Depreciation and amortization
Selling, general and administrative
Accretion of asset retirement
obligations
Total operating expenses
Gain (loss) on sale of assets
Income from operations
Other income (expense)
Interest income
Interest expense
Other nonoperating income
Total other income (expense)
Income before income taxes
Income tax expense (benefit)
Income
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Equity earnings in affiliates, net of tax
Net income (loss)
Other comprehensive income
Comprehensive income (loss)
245.3
245.3
—
245.3
$
$
$
$
2,372.7
166.0
12,826.6
9,773.2
1,991.4
514.9
116.9
141.2
1.8
12,539.4
(3.9)
283.3
1.3
(46.7)
2.2
(43.2)
240.1
(5.2)
245.3
—
245.3
—
245.3
F-37
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING STATEMENT OF CASH FLOWS
(Millions of dollars)
Operating Activities
Net income (loss)
Year ended December 31, 2019
Parent
Company
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Consolidated
$
320.6
$
(11.0) $
(0.5) $
— $
(154.3) $
154.8
Adjustments to reconcile net income (loss) to net
cash provided by operating activities
Depreciation and amortization
Deferred and noncurrent income tax
charges (benefits)
Accretion of asset retirement obligations
(Gain) loss from sale of assets
Net decrease (increase) in noncash
operating working capital
Equity in earnings
Loss on early debt extinguishment
Other operating activities - net
—
—
—
—
—
(154.8)
—
—
152.1
23.7
2.1
(0.1)
(48.6)
0.5
14.8
14.5
Net cash provided by (required by)
operating activities
165.8
148.0
Investing Activities
Property additions
Proceeds from sale of assets
Other investing activities - net
Net cash provided by (required by)
investing activities
Financing Activities
Purchase of treasury stock
Repayments of debt
Borrowings of debt
Early debt extinguishment costs
Debt issuance costs
Amounts related to share-based compensation
Net distributions to parent
—
—
—
—
(165.8)
—
—
—
—
—
—
(198.8)
2.5
(0.8)
(197.1)
—
(573.4)
743.8
(10.4)
(4.1)
(4.5)
(6.9)
Net cash provided by (required by)
financing activities
(165.8)
144.5
—
—
95.4
184.0
Net change in cash, cash equivalents, and
restricted cash
Cash, cash equivalents, and restricted cash at
January 1
Cash, cash equivalents, and restricted cash at
December 31
Reconciliation of Cash, Cash Equivalents
and Restricted Cash
Cash and Cash equivalents at beginning of
period
Restricted cash at beginning of period
Cash, cash equivalents, and restricted cash at
beginning of period
Cash and cash equivalents at end of period
Restricted cash at end of period
Cash, cash equivalents, and restricted cash at
end of period
0.1
—
—
—
(0.1)
—
—
—
(0.5)
(6.0)
—
—
(6.0)
—
—
—
—
—
—
6.9
6.9
0.4
0.5
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
154.3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
152.2
23.7
2.1
(0.1)
(48.7)
—
14.8
14.5
313.3
(204.8)
2.5
(0.8)
(203.1)
(165.8)
(573.4)
743.8
(10.4)
(4.1)
(4.5)
—
(14.4)
95.8
184.5
$
— $
279.4
$
0.9
$
— $
— $
280.3
$
$
$
$
— $
184.0
$
0.5
$
— $
— $
184.5
—
—
—
—
—
—
— $
184.0
$
0.5
$
— $
— $
184.5
— $
279.4
$
0.9
$
— $
— $
280.3
—
—
—
—
—
—
— $
279.4
$
0.9
$
— $
— $
280.3
F-38
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING STATEMENT OF CASH FLOWS
(Millions of dollars)
Operating Activities
Net income (loss)
Year ended December 31, 2018
Parent
Company
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Consolidated
$
1,187.3
$
(760.1) $
(0.5) $
— $
(213.1) $
213.6
Adjustments to reconcile net income (loss) to net
cash provided by operating activities
Depreciation and amortization
Deferred and noncurrent income tax charges
(credits)
Accretion of asset retirement obligations
(Gains) loss from sale of assets
Net decrease (increase) in noncash
operating working capital
Equity in earnings
Other operating activities - net
—
—
—
—
—
(213.6)
—
134.0
37.9
2.0
1.1
2.4
0.5
7.8
Net cash provided by (required by)
operating activities
973.7
(574.4)
Investing Activities
Property additions
Proceeds from sale of assets
Other investing activities - net
Net cash provided by (required by)
investing activities
Financing Activities
—
—
—
—
Purchase of treasury stock
(144.4)
Repayments of debt
Borrowings of debt
Debt issuance costs
Amounts related to share-based compensation
—
—
—
—
Net distributions to parent
(829.3)
(203.1)
1.2
(6.0)
(207.9)
—
(21.3)
—
—
(9.4)
827.1
Net cash provided by (required by)
financing activities
(973.7)
796.4
Net change in cash, cash equivalents, and
restricted cash
Cash, cash equivalents, and restricted cash at
January 1
Cash, cash equivalents, and restricted cash at
December 31
Reconciliation of Cash, Cash Equivalents and
Restricted Cash
—
—
14.1
169.9
—
—
—
—
(0.1)
—
—
(0.6)
(1.2)
—
—
(1.2)
—
—
—
—
—
2.2
2.2
0.4
0.1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
213.1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
134.0
37.9
2.0
1.1
2.3
—
7.8
398.7
(204.3)
1.2
(6.0)
(209.1)
(144.4)
(21.3)
—
—
(9.4)
—
(175.1)
14.5
170.0
$
— $
184.0
$
0.5
$
— $
— $
184.5
Cash and cash equivalents at beginning of period $
— $
169.9
$
0.1
$
— $
— $
170.0
Restricted cash at beginning of period
—
—
—
—
—
—
Cash, cash equivalents and restricted cash at
beginning of period
Cash and cash equivalents at end of period
Restricted cash at end of period
Cash, cash equivalents and restricted cash at end
of period
$
$
$
— $
169.9
$
0.1
$
— $
— $
170.0
— $
184.0
$
0.5
$
— $
— $
184.5
—
—
—
—
—
—
— $
184.0
$
0.5
$
— $
— $
184.5
F-39
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING STATEMENT OF CASH FLOWS
(Millions of dollars)
Year ended December 31, 2017
Parent
Company
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Consolidated
$
245.3
$
245.3
$
— $
— $
(245.3) $
245.3
Operating Activities
Net income (loss)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities
Depreciation and amortization
Deferred and noncurrent income tax charges
(credits)
Accretion of asset retirement obligations
(Gains) loss from sale of assets
Net decrease (increase) in noncash
operating working capital
—
—
—
—
—
Equity in earnings
(245.3)
Other operating activities - net
Net cash provided by (required by)
operating activities
Investing Activities
Property additions
Proceeds from sale of assets
Other investing activities - net
Net cash provided by (required by)
investing activities
Financing Activities
—
—
—
—
—
—
Purchase of treasury stock
(206.0)
Repayments of debt
Borrowings of debt
Debt issuance costs
Amounts related to share-based compensation
—
—
—
—
116.9
(50.4)
1.8
3.9
(36.9)
—
3.0
283.6
(257.1)
0.9
(4.7)
(260.9)
—
(131.4)
338.8
(1.1)
(5.6)
Net distributions to parent
206.0
(207.3)
Net cash provided by (required by)
financing activities
Net change in cash, cash equivalents, and
restricted cash
Cash, cash equivalents and restricted cash at
January 1
Cash, cash equivalents and restricted cash at
December 31
Reconciliation of Cash, Cash Equivalents and
Restricted Cash
—
—
—
(6.6)
16.1
153.8
—
—
—
—
—
—
—
—
(1.2)
—
—
(1.2)
—
—
—
—
—
1.3
1.3
0.1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
245.3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
116.9
(50.4)
1.8
3.9
(36.9)
—
3.0
283.6
(258.3)
0.9
(4.7)
(262.1)
(206.0)
(131.4)
338.8
(1.1)
(5.6)
—
(5.3)
16.2
153.8
$
— $
169.9
$
0.1
$
— $
— $
170.0
Cash and cash equivalents at beginning of period $
— $
153.8
$
— $
— $
— $
153.8
Restricted cash at beginning of period
—
—
—
—
—
—
Cash, cash equivalents and restricted cash at
beginning of period
Cash and cash equivalents at end of period
$
$
— $
153.8
— $
169.9
$
$
— $
— $
— $
153.8
0.1
$
— $
— $
— $
170.0
—
Restricted cash at end of period
—
—
—
—
Cash, cash equivalents and restricted cash at end
of period
$
— $
169.9
$
0.1
$
— $
— $
170.0
F-40
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING STATEMENT OF CHANGES IN EQUITY
(Millions of dollars)
Year ended December 31, 2019
Statement of Stockholders' Equity
Common Stock
Balance as of December 31, 2018
Issuance of common stock
Balance as of December 31, 2019
Treasury Stock
Balance as of December 31, 2018
Issuance of treasury stock
Purchase of treasury stock
Parent
Company
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Consolidated
$
$
$
0.5
—
0.5
$
$
— $
—
— $
0.1
—
0.1
$
$
— $
(0.1) $
—
—
— $
(0.1) $
0.5
—
0.5
(940.3) $
— $
— $
— $
— $
(940.3)
6.3
(165.8)
—
—
—
—
—
—
—
—
6.3
(165.8)
Balance as of December 31, 2019
$ (1,099.8) $
— $
— $
— $
— $
(1,099.8)
APIC
Balance as of December 31, 2018
$
1,195.1
$
572.8
$
52.0
$
87.5
$
(1,368.4) $
539.0
Issuance of treasury stock
Amounts related to share-based compensation
Share-based compensation expense
(6.3)
—
—
—
(4.5)
10.5
—
—
—
—
—
—
—
—
—
(6.3)
(4.5)
10.5
Balance as of December 31, 2019
$
1,188.8
$
578.8
$
52.0
$
87.5
$
(1,368.4) $
538.7
Retained Earnings
Balance as of December 31, 2018
Net income
Balance as of December 31, 2019
AOCI
Balance as of December 31, 2018
Other comprehensive income
Balance as of December 31, 2019
$
$
$
$
2,181.8
320.6
2,502.4
$
$
172.9
(11.0)
161.9
$
$
— $
—
— $
— $
0.7
0.7
$
(0.5) $
(0.5)
(1.0) $
— $
—
— $
66.8
—
66.8
$
$
(1,212.9) $
(154.3)
(1,367.2) $
1,208.1
154.8
1,362.9
— $
—
— $
— $
—
— $
—
0.7
0.7
F-41
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING STATEMENTS OF CHANGES IN EQUITY
(Millions of dollars)
Year ended December 31, 2018
10.6
(144.4)
(940.3)
549.9
(10.6)
(9.4)
9.1
Statement of Stockholders' Equity
Common Stock
Balance as of December 31, 2017
Issuance of common stock
Balance as of December 31, 2018
Treasury Stock
Balance as of December 31, 2017
Issuance of treasury stock
Purchase of treasury stock
Parent
Company
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Consolidated
$
$
$
0.5
—
0.5
$
$
— $
—
— $
0.1
—
0.1
$
$
— $
(0.1) $
—
—
— $
(0.1) $
0.5
—
0.5
(806.5) $
— $
— $
— $
— $
(806.5)
10.6
(144.4)
—
—
—
—
—
—
—
—
Balance as of December 31, 2018
$
(940.3) $
— $
— $
— $
— $
APIC
Balance as of December 31, 2017
$
1,205.7
$
573.1
$
52.0
$
87.5
$
(1,368.4) $
Issuance of treasury stock
Amounts related to share-based compensation
Share-based compensation expense
(10.6)
—
—
—
(9.4)
9.1
—
—
—
—
—
—
—
—
—
Balance as of December 31, 2018
$
1,195.1
$
572.8
$
52.0
$
87.5
$
(1,368.4) $
539.0
Retained Earnings
Balance as of December 31, 2017
Net income
Balance as of December 31, 2018
AOCI
Balance as of December 31, 2017
Other comprehensive income
Balance as of December 31, 2018
$
994.5
1,187.3
$
2,181.8
$
$
933.0
(760.1)
172.9
$
$
$
$
— $
—
— $
— $
—
— $
— $
(0.5)
(0.5) $
— $
—
— $
66.8
—
66.8
$
$
(999.8) $
(213.1)
994.5
213.6
(1,212.9) $
1,208.1
— $
—
— $
— $
—
— $
—
—
—
F-42
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Millions of dollars)
Year ended December 31, 2017
Statement of Stockholders' Equity
Common Stock
Balance as of December 31, 2016
Issuance of common stock
Balance as of December 31, 2017
Treasury Stock
Balance as of December 31, 2016
Issuance of treasury stock
Purchase of treasury stock
Parent
Company
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Consolidated
$
$
$
0.5
—
0.5
$
$
— $
—
— $
0.1
—
0.1
$
$
— $
(0.1) $
—
—
— $
(0.1) $
0.5
—
0.5
(608.0) $
— $
— $
— $
— $
(608.0)
7.5
(206.0)
—
—
—
—
—
—
—
—
7.5
(206.0)
(806.5)
Balance as of December 31, 2017
$
(806.5) $
— $
— $
— $
— $
APIC
Balance as of December 31, 2016
$
1,213.1
$
571.1
$
52.0
$
87.5
$
(1,368.4) $
555.3
Issuance of treasury stock
Amounts related to share-based compensation
Share-based compensation expense
(7.4)
—
—
—
(5.6)
7.6
—
—
—
—
—
—
—
—
—
(7.4)
(5.6)
7.6
Balance as of December 31, 2017
$
1,205.7
$
573.1
$
52.0
$
87.5
$
(1,368.4) $
549.9
Retained Earnings
Balance as of December 31, 2016
Net income
Balance as of December 31, 2017
AOCI
Balance as of December 31, 2016
Other comprehensive income
Balance as of December 31, 2017
$
$
$
$
749.2
245.3
994.5
$
$
687.7
245.3
933.0
$
$
— $
—
— $
— $
—
— $
— $
—
— $
— $
—
— $
66.8
—
66.8
$
$
(754.5) $
(245.3)
(999.8) $
749.2
245.3
994.5
— $
—
— $
— $
—
— $
—
—
—
F-43
Murphy USA Inc.
Supplemental Quarterly Information (Unaudited)
(Millions of dollars except per share amounts)
Year Ended December 31, 2019
Sales and other operating revenues
Income (loss) from continuing operations before
income taxes
Income (loss) from continuing operations
Net income (loss)
Income (loss) from continuing operations (per
Common share)
Basic
Diluted
Net income (loss) (per Common share)
Basic
Diluted
Year Ended December 31, 2018
Sales and other operating revenues
Income (loss) from continuing operations before
income taxes
Income (loss) from continuing operations
Net income (loss)
Income (loss) from continuing operations (per
Common share)
Basic
Diluted
Net income (loss) (per Common share)
Basic
Diluted
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Year
$ 3,116.4 $ 3,800.4 $ 3,657.6 $ 3,460.2 $ 14,034.6
$
$
$
$
$
$
$
5.9 $
5.3 $
5.3 $
43.3 $
32.7 $
32.7 $
91.3 $
69.2 $
69.2 $
61.9 $
47.6 $
47.6 $
202.4
154.8
154.8
0.16 $
0.16 $
1.02 $
1.01 $
2.20 $
2.18 $
1.56 $
1.54 $
0.16 $
0.16 $
1.02 $
1.01 $
2.20 $
2.18 $
1.56 $
1.54 $
4.90
4.86
4.90
4.86
$ 3,244.2 $ 3,829.0 $
3,788 $ 3,501.7 $ 14,362.9
$
$
$
$
$
$
$
47.3 $
39.3 $
39.3 $
69.1 $
51.8 $
51.8 $
57.0 $
45.0 $
45.0 $
100.5 $
77.5 $
77.5 $
273.9
213.6
213.6
1.17 $
1.16 $
1.59 $
1.58 $
1.40 $
1.38 $
2.40 $
2.38 $
1.17 $
1.16 $
1.59 $
1.58 $
1.40 $
1.38 $
2.40 $
2.38 $
6.54
6.48
6.54
6.48
F-44
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
Murphy USA Inc.
Valuation Accounts and Reserves
(Millions of dollars)
2019
Deducted from assets accounts
Allowance for doubtful accounts
2018
Deducted from assets accounts
Allowance for doubtful accounts
2017
Deducted from assets accounts
Allowance for doubtful accounts
$
$
$
Balance at
January 1,
Charged
(Credited) to
Expense
Deductions
Balance at
December 31,
1.1
0.1
1.2
1.1
0.5
(0.5)
1.1
1.9
(0.8)
—
1.1
F-45
OUR BOARD OF DIRECTORS
R. Andrew Clyde, Director
R. Andrew Clyde, as CEO, successfully led the spin-off of
Murphy USA and established it as a standalone company.
He has led the development and execution of Murphy USA’s
strategy for the past seven years. At Booz & Company,
Mr. Clyde spent 20 years working with downstream
energy and retail clients on strategy, organization and
performance improvement engagements.
Executive Committee
Claiborne P. Deming, Director
Claiborne P. Deming is the current Chairman of the Board
of Murphy Oil Corporation. Having previously served as
President and Chief Executive Officer at Murphy Oil
Corporation, Mr. Deming provides valuable insight into
the Company’s challenges, opportunities and operations
with over 40 years experience in the oil and gas industry.
Executive Committee and
Executive Compensation Committee
Fred L. Holliger, Director
Fred L. Holliger served as Chairman and CEO of Giant
Industries, a NYSE listed petroleum refining and retail
convenience store company. He later consulted with
Western Refining Company, a NYSE listed crude oil
refiner and marketer.
Executive Compensation Committee and
Nominating and Governance Committee
Diane N. Landen, Director
Diane N. Landen is Owner and President of Vantage
Communications, Chairman and Executive Vice President
of Noalmark Broadcasting Corporation, and a Partner at
Munoco Company.
Audit Committee and Nominating and
Governance Committee
Hon. Jeanne L. Phillips, Director
Ambassador Jeanne L. Phillips is Senior Vice President,
Corporate Engagement & International Relations of Hunt
Consolidated, Inc. where she has been employed since
2004. Prior to joining Hunt, she served President George
W. Bush as the U.S. Permanent Representative to the
Organization for Economic Cooperation and Development
(OECD) with rank of ambassador in Paris from 2001 until
the summer of 2003.
Audit Committee and Nominating and
Governance Committee
R. Madison Murphy, Chairman
R. Madison Murphy serves on the Board of Directors for
Murphy Oil Corporation, where he served as Chairman of
the Board from 1994 to 2002. He was previously on the
Board of Directors of Deltic Timber Corporation and
BancorpSouth (a NYSE bank holding company).
Executive Committee and ex-officio of all Committees
Thomas M. Gattle, Jr., Director*
Thomas M. Gattle, Jr. is Chairman of the Board, President,
and Chief Executive Officer of TerralRiver Service, a private
company operating fertilizer terminals, boats and barges.
His many years of experience as a successful company
owner and executive officer provides valuable insight for
our Board on both financial and operational matters.
Audit Committee and Nominating and
Governance Committee
James W. Keyes, Director
James W. Keyes is Chairman of Wild Oats LLC.
Previously, he served as Chairman and CEO of Blockbuster
and prior to that, Chief Executive Officer of 7-Eleven, the
nation’s largest convenience store chain.
Executive Committee and
Executive Compensation Committee
David B. Miller, Director
David B. Miller is Co-Founder and Managing Partner of
EnCap Investments LP, a leading provider of private
equity capital to the oil and gas industry. He previously
served as President of PMC Reserve Acquisition Company,
and as Co-Chief Executive Officer of MAZE Exploration,
a Denver-based oil and gas company he co-founded.
Executive Compensation Committee and
Nominating and Governance Committee
Jack T. Taylor, Director
Jack T. Taylor is a Director of Genesis Energy LP and
Sempra Energy, a NYSE listed Fortune 500 energy
services company. Mr. Taylor served as Executive Vice
Chair of U.S. Operations at KPMG and has over
35 years of experience as a public accountant.
Audit Committee
*Thomas M. Gattle, Jr. retired effective August 22, 2019.
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Murphy USA Inc.
200 East Peach Street
El Dorado, AR 71730-5836
corporate.murphyusa.com
NAVIGATING UNCERTAINTY
2019 Annual Report and 2020 Proxy Statement