# Murphy USA Inc. (MUSA) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Murphy USA Inc.'s 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1573516/000157351623000011/musa-20221231.htm
Accession: 0001573516-23-000011
Filing date: 2023-02-15
Report date: 2022-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/MUSA/
All MD&A years: /company/MUSA/mda/
Previous year: /company/MUSA/mda/fy2021/ (FY 2021)
Next year: /company/MUSA/mda/fy2023/ (FY 2023)

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. This section of this Form 10-K generally discusses 2022 and 2021 items and the year-to-year comparison between 2022 and 2021. Discussions of 2020 items and the year-to-year comparisons between 2021 and 2020 are not included in this Form 10-K and can be found in the Form 10-K for the year ended December 31, 2021 filed on February 17, 2022.

For purposes of this Management’s Discussion and Analysis, references to “Murphy USA”, the “Company”, “we”, 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 two years ended December 31, 2022.

•Capital Resources and Liquidity—this section provides a discussion of our financial condition and cash flows as of and for the two years ended December 31, 2022. 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

 On January 29, 2021, MUSA acquired 100% of Quick Chek Corporation ("QuickChek"), a privately held convenience store chain with a strong regional brand that consisted of 156 stores at the time of acquisition, located in New Jersey and New York, in an all-cash transaction. The acquisition expanded the MUSA network into the Northeast by adding high-performance stores that had an existing best-in-class food and beverage model and is consistent with the Company's stated strategic priorities of developing enhanced food and beverage capabilities. For additional information concerning the acquisition, see Note 6, "Business Acquisition" in the accompanying audited consolidated financial statements.

QuickChek uses a weekly retail calendar where each quarter has 13 weeks. Current year QuickChek results cover the period from January 1, 2022 to December 30, 2022 and in the prior year covered January 29, 2021 (the date of acquisition) to December 31, 2021. The difference in the timing of the period ends is immaterial to the overall consolidated results.

Our Business

The Company owns and operates a chain of retail stores that market gasoline and other merchandise under the brand names of Murphy USA®, Murphy Express, and QuickChek. Murphy USA® branded stores are almost all located in close proximity to Walmart stores, principally in the Southeast, Midwest and Southwest areas of the United States. Our standalone stores operate under the Murphy Express brand and market

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gasoline and other products. We also have a mix of convenience stores and retail gasoline stores located in New Jersey and New York that operate under the brand name of QuickChek®. At December 31, 2022, we had a total of 1,712 Company stores in 27 states, of which 1,151 were Murphy USA, 404 were Murphy Express and 157 were QuickChek. We also market to unbranded wholesale customers through a mixture of Company owned and third-party terminals.

Trends Affecting Our Business

Our operations are significantly impacted by the gross margins we receive on our fuel and merchandise sales. The fuel gross margins are commodity-based, change daily and are volatile. While we generally expect our total fuel and merchandise sales volumes to grow over time and the gross margins to remain strong in a normalized environment, these sales and gross margins can change rapidly due to many factors. These factors include, but are not limited to, the price of refined products, interruptions in our fuel and merchandise supply caused by severe weather or pandemics, the effects from pandemics such as travel restrictions and stay-at-home orders, severe refinery mechanical failures for an extended period of time, cyber-attacks against the Company or our vendors, changing economic conditions such as inflation, and competition in the local markets in which we operate.

The cost of our main fuel products, gasoline and diesel, is greatly impacted by the cost of crude oil in the United States. Historically, a rising price environment for crude oil increases the Company’s cost for wholesale fuel products purchased and increases the price of retail fuel sales. Rising prices tend to cause consumers to reduce discretionary fuel consumption, however our low-price model can serve as a hedge to draw in new customers which can offset the potential loss of discretionary volumes. When wholesale fuel costs rise, the Company is not able to pass these price increases immediately on to retail customers at the pump, which in turn can negatively impact the Company’s margins. In recent periods, however, we have noticed a structural change in the industry's breakeven costs that has driven marginal retailers to preserve margins which, in turn, has allowed the Company to adjust retail prices in a more timely manner. Crude oil prices in 2022 continued to be volatile during the year with prices ranging from $71 per barrel to $124 per barrel, with an average price of $95 per barrel, compared to prices in 2021 that ranged from $47 per barrel to $86 per barrel with an average of $68 per barrel. Total fuel contribution (retail fuel margin plus product supply and wholesale ("PS&W") results including Renewable Identification Numbers ("RINs")) was 34.3 cpg in 2022, compared to 26.3 cpg in 2021.

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 biodiesel to capture and subsequently sell Renewable Identification Numbers (“RINs”).  Under the Energy Policy Act of 2005, the Environmental Protection Agency ("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 prices received for ethanol RINs averaged $1.42 per RIN for the year 2022 compared to $1.31 in 2021. 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, 2022, we had $1.3 billion of Senior Notes and a $394 million term loan outstanding. We believe that we will generate sufficient cash from operations to fund our ongoing operating requirements and service our debt obligations. At December 31, 2022, we had additional available capacity under the committed $350 million cash flow revolving credit facility, with none drawn. We expect to use the credit facilities to provide us with available financing to meet any short-term ongoing cash needs in excess of internally generated cash flows. 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

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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 2023 to range from approximately $375 million to $425 million depending on how many new stores are completed.  We intend to fund our capital program in 2023 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 expand the food and beverage capabilities within our network. We have an active real estate development team that maintains a pipeline of desirable future store locations for development. The pace of this growth is continually monitored by our management, and these plans can be altered based on operating cash flows generated and the availability of debt facilities.

Seasonality

Our business has inherent seasonality due to the concentration of our retail stores 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. In 2020 and 2021, we saw disruptions to typical seasonal patterns due to the COVID-19 pandemic resulting in fuel volumes sold falling below our historical average. Beginning in 2021 a more normal seasonal pattern emerged and in 2022 fuel volumes approached and sometimes exceeded pre-pandemic levels.

Business Segments

Our business is organized into one operating segment which is Marketing.  The Marketing segment includes our retail marketing stores and product supply and wholesale assets. For operating segment information, see Note 23 “Business Segments” in the accompanying audited consolidated financial statements for the three-year period ended December 31, 2022. 

Results of Operations

Consolidated Results

For the year ended December 31, 2022, the Company reported net income of $672.9 million or $28.10 per diluted share on revenue of $23.4 billion.  Net income was $396.9 million for 2021 or $14.92 per diluted share on revenue of $17.4 billion. The consolidated financial results for 2022 include full year QuickChek results from January 1, 2022 to December 30, 2022 and for 2021 include QuickChek results from January 29, 2021 (date of acquisition) to December 31, 2021. The difference in timing of the period ends is immaterial to the overall consolidated results.

A summary of the Company’s earnings by business segment follows:

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["(millions of dollars)","2022","","2021","","2020"],["Marketing","$","740.9","","","$","472.8","","","$","442.2"],["Corporate and other assets","(68.0)","","","(75.9)","","","(56.1)"],["Net income","$","672.9","","","$","396.9","","","$","386.1"]]
[[/GREPCENT_TABLE]]

Net income for 2022 increased compared to 2021, primarily due to:

•Higher all-in fuel contribution;

•Higher retail fuel sales volumes;

•Higher merchandise contribution;

•Lower acquisition and integration related costs

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The items below partially offset the increase in earnings in the current period:

•Higher store and other operating expenses;

•Higher depreciation and amortization expense;

•Higher selling, general and administrative ("SG&A") expenses;

•Higher income tax expense

Financial Summary of 2022 Compared to 2021

Revenues for the year ended December 31, 2022 increased $6.1 billion, or 35.1%, compared to 2021.  The increase was due to higher average retail fuel prices which increased 86 cpg, or 31.0%, retail fuel volumes which increased 9.2%, merchandise sales which increased 6.1%, improved PS&W revenues including RINs, and the inclusion of QuickChek results for 12 months in 2022 compared to 11 months in 2021.

Cost of sales increased $5.5 billion, or 35.7%, compared to 2021, due to the higher average cost of fuel, which increased 42.9%, the increase of 9.2% in retail fuel volumes sold, and 5.4% higher merchandise cost of goods sold.

Store and other operating expenses increased $149.2 million, or 18.0%, in 2022 due primarily to higher payment fees (42% of the increase), higher employee related costs in part due to a non-recurring special bonus of $7.0 million, rent expense, increased store maintenance expenses and the inclusion of one additional month of QuickChek expense.  On an average per store month ("APSM") basis, store operating expenses excluding credit card fees and rent increased 10.0% in 2022 when compared to 2021. 

The Company incurred $1.5 million in integration costs for QuickChek in 2022 compared to acquisition and integration costs of $10.4 million in 2021. In 2021 these included transaction-specific costs to close the acquisition and costs related to integrating technology and systems.

Depreciation and amortization expense in 2022 increased $7.8 million due primarily to the increased number of Murphy branded stores with larger formats and an additional month of QuickChek depreciation in 2022.

Selling, general and administrative expenses for 2022 were higher by $38.9 million primarily due to a $25 million charitable pledge in Q4 2022, increased employee incentive expense, and the inclusion of an additional month of expense for QuickChek. 

Interest expense in 2022 increased by $2.9 million compared to 2021 due to an increase in interest rates on the term loan during the year.

The effective income tax expense rate in 2022 was 23.9% compared to 24.0% for 2021.

Segment Results

Marketing

Income before income taxes in the Marketing segment for 2022 increased $351.7 million, or 56.6%, from 2021 due primarily to higher all-in fuel margin, increased merchandise margins and was partially offset by higher store and other operating costs, selling, general and administrative costs, depreciation, and interest expense. QuickChek uses a weekly retail calendar where each quarter has 13 weeks. For 2022, the QuickChek results cover the period from January 1, 2022, to December 30, 2022 and for 2021 the QuickChek results cover the period from January 29, 2021 (the date of acquisition) to December 31, 2021. The difference in the timing of the period ends is immaterial to the overall consolidated results.

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 The tables below show the results for the Marketing segment for the three years ended December 31, 2022 along with certain key metrics for the segment.

[[GREPCENT_TABLE]]
[["(Millions of dollars, except revenue per store month (in thousands) and store counts)","Years Ended December 31,"],["Marketing Segment","2022","","2021","","2020"],["Operating revenues"],["Petroleum product sales","$","19,230.1","","","$","13,410.8","","","$","8,208.6"],["Merchandise sales","3,903.2","","","3,677.7","","","2,955.1"],["Other operating revenue","312.1","","","271.4","","","100.3"],["Total operating revenues","23,445.4","","","17,359.9","","","11,264.0"],["Operating expenses"],["Petroleum product cost of goods sold","17,910.1","","","12,535.5","","","7,325.7"],["Merchandise cost of goods sold","3,136.1","","","2,976.1","","","2,495.7"],["Store and other operating expenses","976.5","","","827.1","","","549.0"],["Depreciation and amortization","204.8","","","197.3","","","146.3"],["Selling, general and administrative","232.5","","","193.6","","","171.1"],["Accretion of asset retirement obligations","2.7","","","2.5","","","2.3"],["Total operating expenses","22,462.7","","","16,732.1","","","10,690.1"],["Gain (loss) on sale of assets","(0.7)","","","1.6","","","1.3"],["Income (loss) from operations","982.0","","","629.4","","","575.2"],["Other income (expense)"],["Interest expense","(9.0)","","","(8.1)","","","(0.1)"],["Total other income (expense)","(9.0)","","","(8.1)","","","(0.1)"],["Income (loss) before income taxes","973.0","","","621.3","","","575.1"],["Income tax expense (benefit)","232.1","","","148.5","","","132.9"],["Net Income (loss) from operations","$","740.9","","","$","472.8","","","$","442.2"],["Total tobacco sales revenue per same store sales1,2","$","123.3","","","$","120.2","","","$","120.6"],["Total non-tobacco sales revenue per same store sales1,2","69.7","","","48.6","","","45.5"],["Total merchandise sales revenue per same store sales1,2","$","193.0","","","$","168.8","","","$","166.1"],["12021 and 2020 amounts not revised for 2022 raze-and-rebuild activity (see SSS definition below)"],["2Includes store-level discounts for Murphy Drive Reward (\"MDR\") redemptions and excludes change in value of unredeemed MDR points"],["Store count at end of period","1,712","","","1,679","","","1,503"],["Total store months during the period","20,172","","","19,702","","","17,770"]]
[[/GREPCENT_TABLE]]

Average Per Store Month ("APSM") metric includes all stores open through the date of the calculation, including stores acquired during the period.

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

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(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 during the period it is out of service. Newly constructed stores do not enter the calculation until they are open for each full calendar year for the periods being compared (open by January 1, 2021 for the stores being compared in the 2022 versus 2021 comparison). Acquired stores are not included in the calculation of same stores for the first 12 months after the acquisition. When prior period SSS volumes or sales are presented, they have not been revised for current year activity for raze-and-rebuilds and asset dispositions.

Fuel

[[GREPCENT_TABLE]]
[["","Twelve Months Ended December 31,"],["Key Operating Metrics","2022","","2021","","2020"],["Total retail fuel contribution ($ Millions)","$","1,405.0","","","$","951.3","","","$","895.0"],["Total PS&W contribution ($ Millions)","(80.8)","","","(72.3)","","","(8.5)"],["RINs and other (included in Other operating revenues on Consolidated Income Statement) ($ Millions)","305.8","","","265.3","","","95.6"],["Total fuel contribution ($ Millions)","$","1,630.0","","","$","1,144.3","","","$","982.1"],["Retail fuel volume - chain (Million gal)","4,751.5","","","4,352.2","","","3,900.9"],["Retail fuel volume - per store (K gals APSM)1","244.6","","","229.4","","","219.5"],["Retail fuel volume - per store (K gal SSS)2","240.9","","","225.8","","","216.2"],["Total fuel contribution (including retail, PS&W and RINs) (cpg)","34.3","","","26.3","","","25.2"],["Retail fuel margin (cpg)","29.6","","","21.9","","","22.9"],["PS&W including RINs contribution (cpg)","4.7","","","4.4","","","2.3"],["1APSM metric includes all stores open through the date of calculation"],["22021 and 2020 amounts not revised for 2022 raze-and-rebuild activity"]]
[[/GREPCENT_TABLE]]

The reconciliation of the total fuel contribution to the Consolidated Income Statements is as follows:

[[GREPCENT_TABLE]]
[["","Twelve Months Ended December 31,"],["(Millions of dollars)","2022","","2021","","2020"],["Petroleum product sales","$","19,230.1","","","$","13,410.8","","","$","8,208.6"],["Less Petroleum product cost of goods sold","(17,910.1)","","","(12,535.5)","","","(7,325.7)"],["Plus RINs and other (included in Other Operating Revenues line)","310.0","","","269.0","","","99.2"],["Total fuel contribution","$","1,630.0","","","$","1,144.3","","","$","982.1"]]
[[/GREPCENT_TABLE]]

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Merchandise

[[GREPCENT_TABLE]]
[["","Twelve Months Ended December 31,"],["Key Operating Metrics","2022","","2021","","2020"],["Total merchandise contribution ($ Millions)","$","767.1","","","$","701.6","","","$","459.4"],["Total merchandise sales ($ Millions)","$","3,903.2","","","$","3,677.7","","","$","2,955.1"],["Total merchandise sales ($K SSS)1,2","$","193.0","","","$","168.8","","","$","166.1"],["Merchandise unit margin (%)","19.7","%","","19.1","%","","15.6","%"],["Tobacco contribution ($K SSS)1,2","$","17.7","","","$","16.7","","","$","16.5"],["Non-tobacco contribution ($K SSS)1,2","$","20.2","","","$","10.8","","","$","10.0"],["Total merchandise contribution ($K SSS)1,2","$","37.9","","","$","27.5","","","$","26.5"],["12021 and 2020 amounts not revised for 2022 raze-and-rebuild activity"],["2Includes store-level discounts for MDR redemptions and excludes change in value of unredeemed MDR points"]]
[[/GREPCENT_TABLE]]

Same store sales information compared to APSM metrics:

[[GREPCENT_TABLE]]
[["","","Variance from prior year periods"],["","","December 31, 2022","","December 31, 2021","","December 31, 2020"],["","","SSS1","","APSM2","","SSS1","","APSM2","","SSS1","","APSM2"],["Fuel gallons per month","","5.4","%","","6.6","%","","3.0","%","","4.5","%","","(12.3)","%","","(11.6)","%"],["Merchandise sales","","2.9","%","","3.7","%","","1.0","%","","12.2","%","","11.7","%","","11.8","%"],["Tobacco sales","","2.9","%","","2.3","%","","(0.4)","%","","(0.8)","%","","12.8","%","","12.4","%"],["Non tobacco sales","","3.1","%","","6.3","%","","4.5","%","","46.2","%","","8.7","%","","10.8","%"],["Merchandise margin","","5.1","%","","6.8","%","","3.5","%","","37.7","%","","9.6","%","","8.6","%"],["Tobacco margin","","5.5","%","","4.2","%","","2.3","%","","4.3","%","","14.9","%","","13.0","%"],["Non tobacco margin","","4.7","%","","9.6","%","","5.4","%","","89.2","%","","2.0","%","","4.2","%"],["1Includes store-level discounts for MDR redemptions and excludes change in value of unredeemed MDR points"],["2Includes all MDR activity"]]
[[/GREPCENT_TABLE]]

Financial Summary of 2022 Compared to 2021

The Marketing segment had total revenues of $23.4 billion in 2022 compared to $17.4 billion in 2021, an increase of $6.0 billion, due primarily to a higher average retail fuel sales price, increased retail fuel volumes sold, higher merchandise sales and the inclusion of QuickChek results for an additional month.  Revenue amounts included excise taxes collected and remitted to government authorities of $2.2 billion in 2022 and $2.0 billion in 2021.

Total fuel contribution for the year ended December 31, 2022 was $1.6 billion, an increase of $485.7 million, or 42.4% over 2021. This contribution improvement was due to higher retail fuel contribution, increased fuel volumes sold for the year, and an improved contribution from PS&W margin (including RINs). Retail fuel margin on a cpg basis increased 35.2% in 2022 to 29.6 cpg, compared to 21.9 cpg in the prior year. Fuel volumes increased 9.2%, primarily due to the return of pre-pandemic trends and to new customers seeking lower prices. Total fuel sales volumes on an SSS basis were 240,940 gallons per month in 2022, an increase

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from 225,792 gallons per month in the prior year. Total product supply and wholesale margin dollars before RINs decreased in the current year due to timing and price-related impacts and lower spot-to-rack margins. Additionally, there was an increase in the contribution from sales of RINs. During 2022, other operating income included $305.8 million from the sale of 215.6 million RINs at an average selling price of $1.42 per RIN compared to $265.3 million from the sale of 202.0 million RINs at an average price of $1.31 per RIN in 2021.

Merchandise sales were up 6.1% in 2022 to $3.9 billion due to higher sales across the chain in most categories and the inclusion of QuickChek results for an additional month in 2022. Total merchandise contribution in 2022 increased $65.5 million, or 9.3%, to $767.1 million compared to 2021. Merchandise unit margins increased to 19.7% in 2022 from 19.1% in 2021. On an SSS basis, total merchandise sales were up 2.9%, due to a 3.1% increase in non-tobacco sales and an increase of 2.9% in tobacco products.  Total margins on a SSS basis for 2022 were up 5.1%, tobacco margins were higher by 5.5%, and non-tobacco margins increased 4.7%, mainly from increased beverage and snack categories.

Store and other operating expenses increased $149.4 million in 2022 compared to 2021 levels, an increase of 18.1%. This increase in total dollars was due primarily to higher payment fees, employee related expenses (due in part to a $7.0 million non-recurring special bonus), maintenance expenses, and to the inclusion of QuickChek stores for an additional month. Excluding credit card fees and rent on an APSM basis, store and other operating expenses at the retail level were 10.0% higher in 2022 compared to 2021 levels.

Depreciation and amortization increased $7.5 million in 2022, an increase of 3.8%. This increase was due primarily to more stores with larger formats operating in the 2022 period and an additional month of depreciation for QuickChek assets.

Selling, general and administrative expenses ("SG&A") increased $38.9 million in 2022 compared to 2021, primarily due to a charitable pledge of $25.0 million, higher employee incentive expense, and an additional month of QuickChek expenses.

Corporate and Other Assets

Loss from continuing operations for Corporate and other assets in 2022 was $68.0 million, compared to a loss of $75.9 million in 2021. The $7.9 million improvement from the previous year was mainly due to $8.9 million less in acquisition and integration costs, a $2.9 increase in investment income, and was partially offset by $2.0 million in higher interest expense and an increase of $2.5 million in other nonoperating expenses.

Non-GAAP Measures

The following table sets forth the Company’s EBITDA and Adjusted EBITDA for the three years ended December 31, 2022.  EBITDA means net income (loss) plus net interest expense, plus income tax expense, depreciation and amortization, and Adjusted EBITDA adds back (i) other non-cash items (e.g., impairment of properties and accretion of asset retirement obligations) and (ii) other items that management does not consider to be meaningful in assessing our operating performance (e.g., (income) from discontinued operations, net settlement proceeds, (gain) loss on sale of assets, loss on early debt extinguishment, transaction and integration costs related to acquisitions, 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

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substitute for GAAP 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:

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["(Millions of dollars)","2022","","2021","","2020"],["Net income","$","672.9","","","$","396.9","","","$","386.1"],["Income tax expense (benefit)","210.9","","","125.0","","","123.0"],["Interest expense, net of interest income","82.3","","","82.3","","","50.2"],["Depreciation and amortization","220.4","","","212.6","","","161.0"],["EBITDA","1,186.5","","","816.8","","","720.3"],["Accretion of asset retirement obligations","2.7","","","2.5","","","2.3"],["(Gain) loss on sale of assets","(2.1)","","","(1.5)","","","(1.3)"],["Acquisition related costs","1.5","","","10.4","","","1.7"],["Other nonoperating (income) expense","2.3","","","(0.2)","","","(0.3)"],["Adjusted EBITDA","$","1,190.9","","","$","828.0","","","$","722.7"]]
[[/GREPCENT_TABLE]]

Capital Resources and Liquidity

Significant Sources of Capital

As of December 31, 2022, we had $60.5 million of cash and cash equivalents and total marketable securities of $22.3 million.  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 a committed cash flow revolving credit facility (the "revolving facility") of $350 million, which was undrawn at December 31, 2022, which can be utilized for working capital and other general corporate purposes, including supporting our operating model as described herein. Additional borrowing capacity under the revolving facility may be extended at our request and with the consent of the participating lenders.

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, 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 $994.7 million for the year ended December 31, 2022 and $737.4 million for the comparable period in 2021, an increase of $257.3 million, or 34.9%, mainly due to an increase in net income of $276.0 million in 2022, increased depreciation of $7.8 million, and increased deferred and noncurrent tax changes of $12.5 million, partially offset by a decrease in the amount of cash provided from changes in noncash working capital in 2022 of $38.0 million.  For the current year, cash provided by changes in noncash operating working capital of $44.8 million was due to an increase of $180.1 million in accounts payable and accrued liabilities, offset by increases of $84.7 million in accounts receivable, $26.9 million in inventories, and $23.7 million in prepaid expenses and other current assets. The changes in accounts receivable and accounts payable were due to timing of invoicing, billing, payments, and receipts and were further affected by increased fuel and merchandise inventory prices which affected inventories and accounts payable. See also Note 17 "Other financial information" in the accompanying audited consolidated financial statements for the three-year period ended December 31, 2022.

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Investing Activities

For the year ended December 31, 2022, cash required by investing activities was $319.3 million compared to cash required by investing activities of $914.2 million in 2021. The decrease in cash required by investing activities of $594.9 million compared to the previous year was primarily due to the $641.1 million cash purchase of QuickChek in 2021, an increase in cash from the sale of assets of $5.4 million and other investing activities which were lower by $1.2 million. These decreases were partially offset by higher capital expenditures which required cash of $305.3 million in 2022 compared to $274.7 million in 2021 primarily due to new store openings, and an investment in marketable securities of $22.2 million.

Financing Activities

Financing activities in the year ended December 31, 2022 required net cash of $871.3 million compared to net cash provided of $269.6 million in the year ended December 31, 2021. The $1.1 billion change in financing cash required was due to a decrease in net borrowings of $683.7 million, an increase of $451.4 million in share repurchases, an increase of $13.1 million in amounts related to share-based compensation, an increase of $2.6 million in cash dividends paid, partially offset by lower debt issuance costs of $9.9 million. Borrowings of debt in 2021 were related to the QuickChek acquisition and there were no net borrowings in 2022.

Dividends

The Company paid dividends of $1.27 per common share during 2022 for total payments of $29.9 million, compared to $1.04 per common share, or $27.3 million in 2021. As part of our capital allocation strategy, the Company's intention is to deliver targeted double-digit growth in the per share dividend over time.

Share Repurchase program

On December 1, 2021, our Board of Directors approved a share repurchase authorization of up to $1 billion that we began to utilize upon the completion of our 2020 $500 million share repurchase authorization. The 2021 authorization expires December 31, 2026, unless utilized in full before such time. 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.

    During the year 2022, we repurchased a total of 3,328,795 common shares for $806.4 million, at an average price of $242.24 per share. Repurchases in 2022 were made pursuant to our now completed 2020 authorization and our 2021 authorization. As of December 31, 2022, we had approximately $213.7 million remaining under our 2021 authorization.

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Debt

 Our long-term debt at December 31, 2022 and 2021 was as set forth below:

[[GREPCENT_TABLE]]
[["","","December 31,"],["(Millions of dollars)","","2022","","2021"],["5.625% senior notes due 2027 (net of unamortized discount of $1.6 at 2022 and $2.0 at 2021)","","$","298.4","","","$","298.0"],["4.75% senior notes due 2029 (net of unamortized discount of $4.2 at 2022 and $4.8 at 2021)","","495.8","","","495.2"],["3.75% senior notes due 2031 (net of unamortized discount of $5.1 at 2022 and $5.7 at 2021)","","494.9","","","494.3"],["Term loan due 2028 (effective interest rate of 5.95% at 2022 and 2.27% at 2021) net of unamortized discount of $0.7 at 2022 and $0.9 at 2021","","393.3","","","397.1"],["Capitalized lease obligations, vehicles, due through 2026","","2.3","","","2.7"],["Capitalized lease obligations, buildings, due through 2059","","131.3","","","138.9"],["Unamortized debt issuance costs","","(9.1)","","","(11.1)"],["Total long-term debt","","1,806.9","","","1,815.1"],["Less current maturities","","15.0","","","15.0"],["Total long-term debt, net of current","","$","1,791.9","","","$","1,800.1"]]
[[/GREPCENT_TABLE]]

Senior Notes

On April 25, 2017, Murphy Oil USA, Inc. ("MOUSA"), 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 the Company and by the Company's subsidiaries that guarantee our Credit Facilities (as defined below). The indenture governing the 2027 Senior Notes contains restrictive covenants that limit, among other things, the ability of the Company, MOUSA, 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, MOUSA 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 MOUSA's senior notes due 2023. The 2029 Senior Notes are fully and unconditionally guaranteed by Murphy USA, and are guaranteed by the Company and by the Company's 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.

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

     The Senior Notes and related guarantees rank equally with all of our and the guarantors’ existing and future senior unsecured indebtedness and effectively junior to our and the guarantors’ existing and future secured indebtedness (including indebtedness with respect to the Credit Facilities) to the extent of the value of the assets securing such indebtedness.  The Senior Notes are structurally subordinated to all of the existing and future third-party liabilities, including trade payables, of our existing and future subsidiaries that do not guarantee the notes.

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Revolving Credit Facility and Term Loan

On January 29, 2021, the Company entered into a new credit agreement that consists of both a cash flow revolving credit facility and a senior secured term loan and that replaced the Company’s prior ABL facility and term loan.

The credit agreement provides for a senior secured term loan in an aggregate principal amount of $400 million (the “Term Facility”) (which was borrowed in full on January 29, 2021) and revolving credit commitments in an aggregate amount equal to $350.0 million (the “Revolving Facility”, and together with the Term Facility, the “Credit Facilities”). The outstanding balance of the term loan was $394.0 million at December 31, 2022. The revolving facility expires January 2026 while the term loan is due January 2028 and requires quarterly principal payments of $1.0 million beginning July 1, 2021. As of December 31, 2022, we had none outstanding under the revolving facility while there were $4.7 million in outstanding letters of credit, which reduces the amount available to borrow.

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 rate of interest last quoted by The Wall Street Journal as the “Prime Rate”, (b) the greater of federal funds effective rate and the overnight bank funding rate determined by the Federal Reserve Bank of New York from time to time plus 0.50% per annum and (c) the one-month Adjusted LIBO Rate plus 1.00% per annum,

plus, (A) in the case of Adjusted LIBO Rate borrowings, (i) with respect to the Revolving Facility, spreads ranging from 1.75% to 2.25% per annum depending on a total debt to EBITDA ratio or (ii) with respect to the Term Facility, a spread of 1.75% per annum and (B) in the case of Alternate Base Rate borrowings (i) with respect to the Revolving Facility, spreads ranging from 0.75% to 1.25% per annum depending on a total debt to EBITDA ratio or (ii) with respect to the Term Facility, a spread of 1.75% per annum.

The Term Facility amortizes in quarterly installments starting with the first amortization payment being due on July 1, 2021 at a rate of 1.00% per annum. Murphy USA is also required to prepay the Term Facility with a portion of its excess cash flow, a portion of the net cash proceeds of certain asset sales, and casualty events (subject to certain reinvestment rights) and the net cash proceeds of issuances of indebtedness not permitted under the Credit Agreement. The Credit Agreement allows Murphy USA to prepay, in whole or in part, the Term Facility outstanding thereunder, together with any accrued and unpaid interest, with prior notice but without premium or penalty other than breakage and redeployment costs.

The credit agreement contains certain covenants that limit, among other things, the ability of the Company and certain of its subsidiaries to incur additional indebtedness or liens, to make certain investments, to enter into sale-leaseback transactions, to make certain restricted payments, to enter into consolidations, mergers or sales of material assets and other fundamental changes, to transact with affiliates, to enter into agreements restricting the ability of subsidiaries to incur liens or pay dividends, or to make certain accounting changes. The credit agreement also contains total leverage ratio and secured net leverage ratio financial maintenance covenants solely for the benefit of the revolving facility which are tested quarterly. Pursuant to the total leverage ratio financial maintenance covenant, the Company must maintain a total leverage ratio of not more than 5.0 to 1.0 with an ability in certain circumstances to temporarily increase that limit to 5.5 to 1.0 and a maximum secured net leverage ratio of not more than 3.75 to 1.0 with an ability in certain circumstances to temporarily increase that limit to 4.25 to 1.0. The Credit Agreement also contains customary events of default.

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Pursuant to the credit agreement's covenant limiting certain restricted payments, certain payments in respect of our equity interests, including dividends, when the total leverage ratio, calculated on a pro forma basis, is greater than 3.0 to 1.0, could be limited. At December 31, 2022, our total leverage ratio was 1.51 to 1.0 which meant our ability at that date to make restricted payments was not limited. If our total leverage ratio, on a pro forma basis, exceeds 3.0 to 1.0, any restricted payments made following that time until the ratio is once again, on a pro forma basis, below 3.0 to 1.0 would be limited by the covenant, which contains certain exceptions, including an ability to make restricted payments in cash in an aggregate amount not to exceed $100 million in any fiscal year and an additional ability to make restricted payments in an aggregate not to exceed the greater of $106.7 million, or 4.5% of consolidated net tangible assets over the life of the credit agreement.

Supplemental Guarantor Financial Information

The following is a description of the guarantees with respect to the Senior Notes and the Credit Facilities, for which MOUSA is primary obligor, and for which the Company and certain 100% owned subsidiaries provide full and unconditional guarantees on a joint and several basis. See "—Debt" above for additional information concerning the Company's outstanding indebtedness, all of which is guaranteed as described below. See also Note 10 "Long Term Debt" in the accompanying consolidated financial statements for the three years ended December 31, 2022.

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

All obligations under the Credit Facilities are guaranteed by the Company and the same subsidiary guarantors that guarantee the Senior Notes. All obligations under the Credit Facilities, including the guarantees of those obligations, are secured by certain assets of the Company, MOUSA, and the other guarantors.

The combined assets, liabilities and results of operations of MOUSA and the guarantors are not materially different from corresponding amounts presented in the consolidated financial statements included herein. MOUSA is our primary operating subsidiary and generated the vast majority of our revenues for the year ended December 31, 2022 and accounted for the vast majority of our total assets as of December 31, 2022. In the event MOUSA itself were unable to service the Company's consolidated debt obligations, our business and financial condition would be materially adversely impacted.

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Contractual Obligations

The following table summarizes our aggregate contractual fixed and variable obligations as of December 31, 2022.

[[GREPCENT_TABLE]]
[["(Millions of dollars)","","Total","","Less than 1 year","","1-3 years","","4-5 years","","More than 5 years"],["Debt obligations 1","","$","1,827.6","","","$","15.0","","","$","27.4","","","$","26.7","","","$","1,758.5"],["Operating lease obligations","","773.7","","","49.8","","","98.3","","","95.0","","","530.6"],["Purchase obligations 2","","497.0","","","339.1","","","132.6","","","13.5","","","11.8"],["Asset retirement obligations","","163.7","","","\u2014","","","\u2014","","","\u2014","","","163.7"],["Other long-term obligations, including interest on long-term debt","","544.0","","","83.7","","","164.7","","","151.0","","","144.6"],["Total","","$","3,806.0","","","$","487.6","","","$","423.0","","","$","286.2","","","$","2,609.2"],["1For additional information, see Note 10 \u201cLong-Term Debt\u201d in the accompanying audited consolidated financial statements."],["2Primarily includes ongoing new retail store construction in progress at December 31, 2022, commitments to purchase land, take-or-pay supply contracts and other services. See Note 19 \u201cCommitments\u201d in the audited consolidated financial statements for the year ended December 31, 2022."]]
[[/GREPCENT_TABLE]]

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 stores, which we refer to as sustaining capital.  We use sustaining capital in this business as needed to ensure reliability and continued performance of our stores.  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 category for the three years ended December 31, 2022:

[[GREPCENT_TABLE]]
[["","","Years Ended December 31,"],["(Millions of dollars)","","2022","","2021","","2020"],["Marketing:"],["Company stores","","$","245.7","","","$","221.2","","","$","175.9"],["Terminals","","\u2014","","","2.5","","","2.0"],["Sustaining capital","","33.4","","","21.8","","","22.9"],["Corporate and other assets","","26.7","","","32.0","","","26.3"],["Total","","$","305.8","","","$","277.5","","","$","227.1"]]
[[/GREPCENT_TABLE]]

We currently expect capital expenditures for the full year 2023 to range from approximately $375 million to $425 million, including $285 million to $315 million for retail growth, approximately $50 million to $60 million for maintenance capital, with the remaining funds earmarked for other corporate investments and other strategic initiatives. See Note 19 “Commitments” in the audited consolidated financial statements for the three years ended December 31, 2022 included in this Annual Report on Form 10-K.

Critical Accounting Policies

Goodwill and intangible assets

Goodwill represents the excess of the aggregate of the consideration transferred over the net assets acquired and liabilities assumed and is tested annually for impairment, or more frequently if there are indicators

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

Impairment of Long-Lived Assets

Individual retail stores 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 stores 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 stores for impairment, including individual store execution of operating plans and local market conditions.

When an evaluation is required, the projected future undiscounted cash flows to be generated from each retail store over its remaining economic life are compared to the carrying value of the long-lived assets of that store 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 store, we make assumptions about key variables such as sales volume, gross margins and expenses. Cash flows vary for each retail store year to year. Changes in market demographics, traffic patterns, competition and other factors impact the overall operations of certain of our individual retail store 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 store 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 stores 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

46

matters.  See Note 12 “Income Taxes” in the accompanying audited consolidated financial statements for the three-year period ended December 31, 2022 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 2022, 2021, or 2020. See also Note 11 “Asset Retirement Obligation” in the accompanying audited consolidated financial statements for the three-year period ended December 31, 2022.

Business combinations

We account for business combinations using the purchase method of accounting. The purchase price of an acquisition is measured as the aggregate of the fair value of the consideration transferred. The purchase price is allocated to the fair values of the tangible and intangible assets acquired and liabilities assumed at date of acquisition, with any excess recorded as goodwill. These fair value determinations require management to make estimates which are based on all available information, and may involve the use of assumptions with respect to the timing and amount of future revenues and expenses, the weighted average cost of capital, and royalty rates associated with the transaction and the assets or liabilities acquired. This judgment and determination affects the amount of consideration paid that is allocable to assets and liabilities acquired in the business purchase transaction. The purchase price allocation may be provisional during a measurement period of up to one year to provide reasonable time to obtain the information necessary to identify and measure the assets acquired and liabilities assumed. Any such measurement period adjustments are recognized in the period in which the adjustment amount is determined. Transaction costs associated with the acquisition are expensed as incurred.

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 our M&A activity, anticipated store openings, fuel margins, merchandise margins, sales of RINs, trends in our operations, dividends, and share repurchases. Such statements are based upon the current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties. Actual future results may differ materially from historical results or current expectations depending upon factors including, but not limited to: the Company's ability to realize projected synergies from the acquisition of QuickChek and successfully expand our food and beverage offerings; 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 our ability to control costs; geopolitical events, such as Russia's invasion of Ukraine, that impact the supply and demand and prices of crude oil; the impact of severe weather events, such as hurricanes, floods and earthquakes; the impact of a global health pandemic, and the government reaction in response thereof; the

47

impact of any systems failures, cybersecurity and/or security breaches of the company or its vendor partners, 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; reduced demand for our products due to the implementation of more stringent fuel economy and greenhouse gas reduction requirements, or increasingly widespread adoption of electric vehicle technology; future tobacco or e-cigarette legislation and any other efforts that make purchasing tobacco products more costly or difficult could hurt our revenues and impact gross margins; efficient and proper allocation of our capital resources, including the timing, declaration, amount and payment of any future dividends or levels of the company's share repurchases, or management of operating cash; the market price of the Company's stock prevailing from time to time, the nature of other investment opportunities presented to the Company from time to time, the Company's cash flows from operations, and general economic conditions; 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.