MURPHY USA INC., 10-Q filed on 10/31/2019
Quarterly Report
v3.19.3
Cover Page
9 Months Ended
Sep. 30, 2019
shares
Cover page.  
Document Type 10-Q
Document Quarterly Report true
Document Period End Date Sep. 30, 2019
Document Transition Report false
Entity File Number 001-35914
Entity Registrant Name MURPHY USA INC.
Entity Incorporation, State or Country Code DE
Entity Tax Identification Number 46-2279221
Entity Address, Address Line One 200 Peach Street
Entity Address, City or Town El Dorado,
Entity Address, State or Province AR
Entity Address, Postal Zip Code 71730-5836
City Area Code 870
Local Phone Number 875-7600
Title of 12(b) Security Common Stock, $0.01 Par Value
Trading Symbol MUSA
Security Exchange Name NYSE
Entity Current Reporting Status Yes
Entity Interactive Data Current Yes
Entity Filer Category Large Accelerated Filer
Entity Small Business false
Entity Emerging Growth Company false
Entity Shell Company false
Entity Common Stock, Shares Outstanding 30,759,651
Amendment Flag false
Entity Central Index Key 0001573516
Current Fiscal Year End Date --12-31
Document Fiscal Year Focus 2019
Document Fiscal Period Focus Q3
v3.19.3
Consolidated Balance Sheets - USD ($)
$ in Millions
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2017
Current assets                
Cash and cash equivalents $ 247.7     $ 184.5 $ 75.4     $ 170.0
Accounts receivable—trade, less allowance for doubtful accounts of $1.2 in 2019 and $1.1 in 2018 164.3     138.8        
Inventories, at lower of cost or market 233.8     221.5        
Prepaid expenses and other current assets 19.1     25.3        
Total current assets 664.9     570.1        
Property, plant and equipment, at cost less accumulated depreciation and amortization of $1,074.8 in 2019 and $974.2 in 2018 1,789.3     1,748.2        
Other assets 162.5     42.5        
Total assets 2,616.7     2,360.8        
Current liabilities                
Current maturities of long-term debt 21.3     21.2        
Trade accounts payable and accrued liabilities 495.6     456.9        
Total current liabilities 516.9     478.1        
Long-term debt, including capitalized lease obligations 966.4     842.1        
Deferred income taxes 199.0     192.2        
Asset retirement obligations 32.3     30.7        
Deferred credits and other liabilities 123.1     10.4        
Total liabilities 1,837.7     1,553.5        
Stockholders' Equity                
Preferred Stock, par $0.01, (authorized 20,000,000 shares, none outstanding) 0.0     0.0        
Common Stock, par $0.01, (authorized 200,000,000 shares, 46,767,164 shares issued at 2019 and 2018, respectively) 0.5     0.5        
Treasury stock (14,769,973 and 14,505,681 shares held at 2019 and 2018, respectively) (1,073.2)     (940.3)        
Additional paid in capital (APIC) 536.4     539.0        
Retained earnings 1,315.3     1,208.1        
Total stockholders' equity 779.0 $ 816.3 $ 797.8 807.3 $ 728.9 $ 686.3 $ 705.3 $ 738.4
Total liabilities and stockholders' equity $ 2,616.7     $ 2,360.8        
v3.19.3
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Millions
Sep. 30, 2019
Dec. 31, 2018
Mar. 31, 2013
Statement of Financial Position [Abstract]      
Allowance for doubtful accounts $ 1.2 $ 1.1  
Property, plant and equipment, accumulated depreciation and amortization $ 1,074.8 $ 974.2  
Preferred stock par value (in dollars per share) $ 0.01 $ 0.01  
Preferred stock shares authorized (in shares) 20,000,000 20,000,000  
Preferred stock shares outstanding (in shares) 0 0  
Common stock par value (in dollars per share) $ 0.01 $ 0.01 $ 0.01
Common stock shares authorized (in shares) 200,000,000 200,000,000  
Common stock shares issued (in shares) 46,767,164 46,767,164  
Treasury stock, shares held (in shares) 16,007,513 14,505,681  
v3.19.3
Consolidated Statements of Income - USD ($)
shares in Thousands, $ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Operating Revenues        
Total operating revenues $ 3,657.6 $ 3,788.0 $ 10,574.4 $ 10,861.2
Operating Expenses        
Depreciation and amortization 37.6 34.2 113.8 99.0
Selling, general and administrative 36.0 32.6 105.7 102.3
Accretion of asset retirement obligations 0.6 0.5 1.6 1.5
Total operating expenses 3,537.1 3,717.5 10,379.6 10,698.8
Net settlement proceeds 0.0 0.0 0.1 50.4
Gain (loss) on sale of assets 0.2 (0.5) 0.1 (0.7)
Income (loss) from operations 120.7 70.0 195.0 212.1
Other income (expense)        
Interest income 0.8 0.2 2.4 0.8
Interest expense (15.3) (13.2) (42.1) (39.6)
Loss on early debt extinguishment (14.8) 0.0 (14.8) 0.0
Other nonoperating income (expense) (0.1) 0.0 0.0 0.1
Total other income (expense) (29.4) (13.0) (54.5) (38.7)
Income (loss) before income taxes 91.3 57.0 140.5 173.4
Income tax expense (benefit) 22.1 12.0 33.3 37.3
Net Income (Loss) $ 69.2 $ 45.0 $ 107.2 $ 136.1
Basic and Diluted Earnings Per Common Share        
Basic (in dollars per share) $ 2.20 $ 1.40 $ 3.35 $ 4.15
Diluted (in dollars per share) $ 2.18 $ 1.38 $ 3.33 $ 4.11
Weighted-Average Common Shares Outstanding:        
Basic (in shares) 31,447 32,213 31,961 32,815
Diluted (in shares) 31,704 32,536 32,189 33,142
Supplemental information:        
Excise taxes $ 498.9 $ 464.1 $ 1,452.5 $ 1,364.8
Product        
Operating Revenues        
Total operating revenues [1] 2,965.5 3,151.5 8,595.0 8,982.8
Operating Expenses        
Operating expenses [1] 2,749.6 2,991.3 8,104.8 8,584.9
Merchandise sales        
Operating Revenues        
Total operating revenues 681.1 623.7 1,946.1 1,807.5
Operating Expenses        
Operating expenses 569.9 519.2 1,631.9 1,509.2
Other operating revenues        
Operating Revenues        
Total operating revenues 11.0 12.8 33.3 70.9
Operating Expenses        
Operating expenses $ 143.4 $ 139.7 $ 421.8 $ 401.9
[1] Includes excise taxes of $498.9 for the three months ended June 30, 2019, $464.1 for the three months ended June 30, 2018, $1,452.5 for the six months ended June 30, 2019 and $1,364.8 for the six months ended June 30, 2018.
v3.19.3
Consolidated Statements of Cash Flows - USD ($)
$ in Millions
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Sep. 30, 2019
Sep. 30, 2018
Dec. 31, 2018
Sep. 30, 2019
Dec. 31, 2018
Sep. 30, 2018
Dec. 31, 2017
Operating Activities                          
Net income (loss) $ 69.2 $ 32.7 $ 5.3 $ 45.0 $ 51.8 $ 39.3 $ 107.2 $ 136.1          
Adjustments to reconcile net income (loss) to net cash provided by (required by) operating activities                          
Depreciation and amortization 37.6     34.2     113.8 99.0          
Deferred and noncurrent income tax charges (credits)             6.9 13.9          
Accretion of asset retirement obligations 0.6     0.5     1.6 1.5 $ 2.0        
Pretax (gains) losses from sale of assets (0.2)     0.5     (0.1) 0.7          
Net (increase) decrease in noncash operating working capital             (3.7) (15.8)          
Loss on early debt extinguishment 14.8     0.0     14.8 0.0          
Other operating activities - net             11.1 6.0          
Net cash provided by (required by) operating activities             251.6 241.4          
Investing Activities                          
Property additions             (153.7) (163.0)          
Proceeds from sale of assets             2.4 1.2          
Other investing activities - net             (0.7) (5.9)          
Net cash provided by (required by) investing activities             (152.0) (167.7)          
Financing Activities                          
Purchase of treasury stock             (139.1) (144.4)          
Borrowings of debt             693.7 0.0          
Repayments of debt             (573.1) (15.9)          
Debt issuance costs             (3.1) 0.0          
Early debt extinguishment costs             (10.4) 0.0          
Amounts related to share-based compensation             (4.4) (8.0)          
Net cash provided by (required by) financing activities             (36.4) (168.3)          
Net increase (decrease) in cash, cash equivalents, and restricted cash             63.2 (94.6)          
Cash, cash equivalents, and restricted cash at beginning of period     184.5     170.0 184.5 170.0 170.0        
Cash, cash equivalents, and restricted cash at end of period 247.7     75.4     247.7 75.4 184.5        
Reconciliation of Cash, Cash Equivalents and Restricted Cash                          
Cash and cash equivalents                   $ 247.7 $ 184.5 $ 75.4 $ 170.0
Restricted cash                   0.0 0.0 0.0 0.0
Cash, cash equivalents, and restricted cash $ 247.7   $ 184.5 $ 75.4   $ 170.0 $ 184.5 $ 75.4 $ 184.5 $ 247.7 $ 184.5 $ 75.4 $ 170.0
v3.19.3
Consolidated Statements of Changes in Equity - USD ($)
$ in Millions
Total
Common Stock
Treasury Stock
APIC
Retained Earnings
Balance (in shares) at Dec. 31, 2017   46,767,164      
Beginning balance at Dec. 31, 2017 $ 738.4 $ 0.5 $ (806.5) $ 549.9 $ 994.5
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income (loss) 39.3       39.3
Purchase of treasury stock (71.7)   (71.7)    
Issuance of treasury stock 0.0   4.4 (4.4)  
Amounts related to share-based compensation (2.9)     (2.9)  
Share-based compensation expense 2.2     2.2  
Balance (in shares) at Mar. 31, 2018   46,767,164      
Ending balance at Mar. 31, 2018 705.3 $ 0.5 (873.8) 544.8 1,033.8
Balance (in shares) at Dec. 31, 2017   46,767,164      
Beginning balance at Dec. 31, 2017 738.4 $ 0.5 (806.5) 549.9 994.5
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income (loss) 136.1        
Balance (in shares) at Sep. 30, 2018   46,767,164      
Ending balance at Sep. 30, 2018 728.9 $ 0.5 (941.6) 539.4 1,130.6
Balance (in shares) at Mar. 31, 2018   46,767,164      
Beginning balance at Mar. 31, 2018 705.3 $ 0.5 (873.8) 544.8 1,033.8
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income (loss) 51.8       51.8
Purchase of treasury stock (72.7)   (72.7)    
Issuance of treasury stock 0.0   0.6 (0.6)  
Amounts related to share-based compensation (0.5)     (0.5)  
Share-based compensation expense 2.4     2.4  
Balance (in shares) at Jun. 30, 2018   46,767,164      
Ending balance at Jun. 30, 2018 686.3 $ 0.5 (945.9) 546.1 1,085.6
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income (loss) 45.0       45.0
Purchase of treasury stock 0.0   0.0    
Issuance of treasury stock 0.0   4.3 (4.3)  
Amounts related to share-based compensation (4.6)     (4.6)  
Share-based compensation expense 2.2     2.2  
Balance (in shares) at Sep. 30, 2018   46,767,164      
Ending balance at Sep. 30, 2018 728.9 $ 0.5 (941.6) 539.4 1,130.6
Balance (in shares) at Dec. 31, 2018   46,767,164      
Beginning balance at Dec. 31, 2018 807.3 $ 0.5 (940.3) 539.0 1,208.1
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income (loss) 5.3       5.3
Purchase of treasury stock (13.3)   (13.3)    
Issuance of treasury stock 0.0   5.6 (5.6)  
Amounts related to share-based compensation (4.1)     (4.1)  
Share-based compensation expense 2.6     2.6  
Balance (in shares) at Mar. 31, 2019   46,767,164      
Ending balance at Mar. 31, 2019 797.8 $ 0.5 (948.0) 531.9 1,213.4
Balance (in shares) at Dec. 31, 2018   46,767,164      
Beginning balance at Dec. 31, 2018 807.3 $ 0.5 (940.3) 539.0 1,208.1
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income (loss) 107.2        
Balance (in shares) at Sep. 30, 2019   46,767,164      
Ending balance at Sep. 30, 2019 779.0 $ 0.5 (1,073.2) 536.4 1,315.3
Balance (in shares) at Mar. 31, 2019   46,767,164      
Beginning balance at Mar. 31, 2019 797.8 $ 0.5 (948.0) 531.9 1,213.4
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income (loss) 32.7       32.7
Purchase of treasury stock (16.8)   (16.8)    
Issuance of treasury stock 0.0   0.1 (0.1)  
Amounts related to share-based compensation (0.2)     (0.2)  
Share-based compensation expense 2.8     2.8  
Balance (in shares) at Jun. 30, 2019   46,767,164      
Ending balance at Jun. 30, 2019 816.3 $ 0.5 (964.7) 534.4 1,246.1
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income (loss) 69.2       69.2
Purchase of treasury stock (109.0)   (109.0)    
Issuance of treasury stock 0.0   0.5 (0.5)  
Amounts related to share-based compensation (0.1)     (0.1)  
Share-based compensation expense 2.6     2.6  
Balance (in shares) at Sep. 30, 2019   46,767,164      
Ending balance at Sep. 30, 2019 $ 779.0 $ 0.5 $ (1,073.2) $ 536.4 $ 1,315.3
v3.19.3
Description of Business and Basis of Presentation
9 Months Ended
Sep. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of Business and Basis of Presentation Description of Business and Basis of Presentation
 
Description of business — Murphy USA Inc. and its consolidated subsidiaries (“Murphy USA” or the “Company”) markets refined products through a network of retail gasoline stations and to unbranded wholesale customers. Murphy USA’s owned retail stations 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 stations under the Murphy Express brand. At September 30, 2019, Murphy USA had a total of 1,479 Company stations of which 1,160 were Murphy USA and 319 were Murphy Express.
 
Basis of Presentation — Murphy USA was incorporated in March 2013 and, in connection with its incorporation, Murphy USA issued 100 shares of common stock, par value $0.01 per share, to Murphy Oil Corporation (“Murphy Oil”) for $1.00. On August 30, 2013, Murphy USA was separated from Murphy Oil through the distribution of 100% of the common stock of Murphy USA to holders of Murphy Oil stock. 
 
In preparing the financial statements of Murphy USA in conformity with accounting principles generally accepted in the United States, management has made a number of estimates and assumptions related to the reporting of assets, liabilities, revenues, expenses and the disclosure of contingent assets and liabilities. Actual results may differ from these estimates.

Interim Financial Information — The interim period financial information presented in these consolidated financial statements is unaudited and includes all known accruals and adjustments, in the opinion of management, necessary for a fair presentation of the consolidated financial position of Murphy USA and its results of operations and cash flows for the periods presented. All such adjustments are of a normal and recurring nature.
 
These interim consolidated financial statements should be read together with our audited financial statements for the years ended December 31, 2018, 2017 and 2016, included in our Annual Report on Form 10-K (File No. 001-35914), as filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934 on February 19, 2019.
 
Recently Issued Accounting Standards 

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)" (“ASU 2016-02”). ASU 2016-02 amends 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. See Note 13 "Lease Accounting" for further details.

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 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.
v3.19.3
Revenues
9 Months Ended
Sep. 30, 2019
Revenue from Contract with Customer [Abstract]  
Revenues Revenues

Revenue Recognition

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

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

The following tables disaggregates our revenue by major source for the three and nine months ended September 30, 2019 and 2018, respectively:


 
 
Three Months Ended September 30, 2019
 
Three Months Ended September 30, 2018
(Millions of dollars)
 
Marketing
 
Corporate and Other Assets
 
Consolidated
 
Marketing
 
Corporate and Other Assets
 
Consolidated
Petroleum product sales (at retail) 1
 
$
2,660.8

 
$

 
$
2,660.8

 
$
2,770.1

 
$

 
$
2,770.1

Petroleum product sales (at wholesale)
 
304.7

 

 
304.7

 
381.4

 

 
381.4

Total petroleum product sales
 
2,965.5

 

 
2,965.5

 
3,151.5

 

 
3,151.5

Merchandise sales
 
681.1

 

 
681.1

 
623.7

 

 
623.7

Other operating revenues:
 
 
 
 
 
 
 
 
 
 
 
 
RINs
 
8.6

 

 
8.6

 
11.6

 

 
11.6

Other revenues 2
 
2.4

 

 
2.4

 
1.2

 

 
1.2

Total revenues
 
$
3,657.6

 
$

 
$
3,657.6

 
$
3,788.0

 
$

 
$
3,788.0





 
 
Nine Months Ended September 30, 2019
 
Nine Months Ended September 30, 2018
(Millions of dollars)
 
Marketing
 
Corporate and Other Assets
 
Consolidated
 
Marketing
 
Corporate and Other Assets
 
Consolidated
Petroleum product sales (at retail) 1
 
$
7,717.7

 
$

 
$
7,717.7

 
$
7,910.6

 
$

 
$
7,910.6

Petroleum product sales (at wholesale)
 
877.3

 

 
877.3

 
1,072.2

 

 
1,072.2

Total petroleum product sales
 
8,595.0

 

 
8,595.0

 
8,982.8

 

 
8,982.8

Merchandise sales
 
1,946.1

 

 
1,946.1

 
1,807.5

 

 
1,807.5

Other operating revenues:
 
 
 
 
 
 
 
 
 
 
 
 
RINs
 
28.6

 

 
28.6

 
67.3

 

 
67.3

Other revenues 2
 
4.6

 
0.1

 
4.7

 
3.1

 
0.5

 
3.6

Total revenues
 
$
10,574.3

 
$
0.1

 
$
10,574.4

 
$
10,860.7

 
$
0.5

 
$
10,861.2

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



Marketing segment

Petroleum product sales (at retail). For our retail store locations, the revenue related to petroleum product sales is recognized as the fuel is pumped to our customers. The transaction price at the pump typically includes some portion of sales or excise taxes as levied in the respective jurisdictions. Those taxes that are collected for remittance to governmental entities on a pass through basis are not recognized as revenue and they are recorded to a liability account until they are paid. Our customers typically use a mixture of cash, checks, credit cards and debit cards to pay for our products as they are received. We have accounts receivable from the various credit/debit card providers at any point in time related to product sales made on credit cards and debit cards. These receivables are typically collected in two to seven days, depending on the terms with the particular credit/debit card providers. Payment fees retained by the credit/debit card providers are recorded as 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 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. 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 merchandise or cash discounts on fuel purchases. The program was rolled out chain-wide in March 2019. The deferred revenues recorded in the three and nine months ended September 30, 2019 were immaterial.

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

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

Accounts receivable

Trade accounts receivable on the balance sheet represents both receivables related to contracts with customers and other trade receivables. At September 30, 2019 and December 31, 2018, we had $96.2 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 to our customers, which have a very short settlement window.
v3.19.3
Inventories
9 Months Ended
Sep. 30, 2019
Inventory Disclosure [Abstract]  
Inventories Inventories
 
Inventories consisted of the following:
(Millions of dollars)
 
September 30,
2019
 
December 31,
2018
Finished products - First-In, First-Out ("FIFO") basis
 
$
276.6

 
$
219.4

Less: Last-In, First-Out ("LIFO") reserve - finished products
 
(162.9
)
 
(115.5
)
Finished products - LIFO basis
 
113.7

 
103.9

Store merchandise for resale
 
113.5

 
107.2

Materials and supplies
 
6.6

 
10.4

Total inventories
 
$
233.8

 
$
221.5


 
At September 30, 2019 and December 31, 2018, the replacement cost (market value) of LIFO inventories exceeded the LIFO carrying value by $162.9 million and $115.5 million, respectively.
v3.19.3
Long-Term Debt
9 Months Ended
Sep. 30, 2019
Debt Disclosure [Abstract]  
Long-Term Debt Long-Term Debt
 
Long-term debt consisted of the following:
(Millions of dollars)
 
September 30,
2019
 
December 31,
2018
6.00% senior notes due 2023 (net of unamortized discount of $4.1 at December 2018)
 
$

 
$
495.9

5.625% senior notes due 2027 (net of unamortized discount of $2.8 at September 30, 2019 and $3.1 at December 2018)
 
297.1

 
296.9

4.75% senior notes due 2029 (net of unamortized discount of $6.2 at September 30, 2019)
 
493.8

 

Term loan due 2023 (effective interest rate of 4.57% at September 30, 2019)
 
200.0

 

Term loan due 2020 (effective interest rate of 5.0% at December 31,2018)
 

 
72.0

Capitalized lease obligations, vehicles, due through 2022
 
2.5

 
2.3

Less unamortized debt issuance costs
 
(5.7
)
 
(3.8
)
Total long-term debt
 
987.7

 
863.3

Less current maturities
 
21.3

 
21.2

Total long-term debt, net of current
 
$
966.4

 
$
842.1



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 with a current outstanding principal of $200 million and prepaid the remaining balance of the prior term loan of $57 million. As of September 30, 2019, we have 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 midstream 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
the Alternate Base Rate, which is defined as the highest of (a) the prime rate, (b) the greater of the federal funds effective rate and the overnight bank funding rate determined by the Federal Reserve Bank of New York from time to time plus 0.50% per annum and (c) the one-month Adjusted LIBO Rate plus 1.00% per annum,
 
plus, (A) in the case of 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 loan 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 or (ii) with respect to the term loan 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 onetwothree, 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 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 million (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 total debt to EBITDA ratio of 4.5 to 1.0 at any time when term facility commitments or term loans are outstanding.  As of September 30, 2019, our fixed charge coverage ratio was 1.1. Our secured debt to EBITDA ratio as of September 30, 2019 was 0.43 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 September 30, 2019 and December 31, 2018, our ability to make restricted payments was not limited as our fixed charge coverage ratio was greater than 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.
v3.19.3
Asset Retirement Obligations (ARO)
9 Months Ended
Sep. 30, 2019
Asset Retirement Obligation Disclosure [Abstract]  
Asset Retirement Obligations (ARO) Asset Retirement Obligations (ARO)

The majority of the ARO recognized by the Company at September 30, 2019 and December 31, 2018 is 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.
A reconciliation of the beginning and ending aggregate carrying amount of the ARO is shown in the following table.
 
(Millions of dollars)
 
September 30,
2019
 
December 31,
2018
Balance at beginning of period
 
$
30.7

 
$
28.2

Accretion expense
 
1.6

 
2.0

Settlements of liabilities
 
(0.2
)
 
(0.3
)
Liabilities incurred
 
0.2

 
0.8

Balance at end of period
 
$
32.3

 
$
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.
v3.19.3
Income Taxes
9 Months Ended
Sep. 30, 2019
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
 
The effective tax rate is calculated as the amount of income tax expense (benefit) divided by income before income tax expense (benefit). For the three and nine month periods ended September 30, 2019 and 2018, the Company’s approximate effective tax rates were as follows:
 
 
 
2019
 
2018
Three months ended September 30,
 
24.2%
 
21.1%
Nine months ended September 30,
 
23.7%
 
21.5%


In the nine months ended September 30, 2019, the Company recognized approximately $0.9 million of excess tax benefits related to stock compensation for employees. For the nine months ended September 30, 2018, the Company recognized a tax benefit of approximately $2.8 million of excess tax benefits related to stock compensation and a tax benefit of approximately $2.7 million related to the settlement of prior year state uncertain tax positions.
 
The Company was included in Murphy Oil’s tax returns for the periods prior to the separation. The statute of several jurisdictions remains subject to audit by taxing authorities. As of September 30, 2019, the earliest year
remaining open for federal examination is 2016 and for certain states it ranges from 2013-2017.  In addition to the pre-separation state returns being open under statute, certain federal and state tax returns post separation are also open under statute for examination. Although the Company believes that recorded liabilities for uncertain tax positions are adequate, additional gains or losses could occur in future periods from resolution of outstanding unsettled matters.
v3.19.3
Incentive Plans
9 Months Ended
Sep. 30, 2019
Share-based Payment Arrangement [Abstract]  
Incentive Plans Incentive Plans

2013 Long-Term Incentive Plan
Effective August 30, 2013, certain of our employees 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 MUSA common stock may be delivered under the MUSA 2013 Plan and no more than 1 million shares of common stock may be awarded to any one employee, subject to adjustment for changes in capitalization. The maximum cash amount payable pursuant to any “performance-based” award to any participant in any calendar year is $5.0 million.
 
On February 6, 2019, the Committee granted nonqualified stock options for 99,400 shares at an exercise price of $76.15 per share under the terms of the MUSA 2013 Plan.  The Black-Scholes valuation for these awards is $20.48 per option.  The Committee also awarded time-based restricted stock units and performance-based restricted stock units (performance units) to certain employees on the same date.  There were 26,550 time-based restricted units granted at a grant date fair value of $76.15 along with 53,100 performance units.  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 16 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 will be 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. 
 
On March 26, 2019, the Committee also granted 46,725 time-based restricted stock units granted to certain employees with a grant date fair value of $82.84 per unit.
 
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. 
 
During the first quarter of 2019, the Company issued 13,086 restricted stock units to its non-employee directors at a grant date fair value of $76.63 per share.  These shares vest in three years from the grant date. 
 
For the nine months ended September 30, 2019 and 2018, share-based compensation was $8.0 million and $6.8 million, respectively.  The income tax benefit realized for the tax deductions from options exercised for the nine months ended September 30, 2019 and 2018 was $0.1 million and $2.1 million, respectively.
v3.19.3
Financial Instruments and Risk Management
9 Months Ended
Sep. 30, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Financial Instruments and Risk Management Financial Instruments and Risk Management
 
DERIVATIVE INSTRUMENTS — The Company makes 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 the Company’s senior management. The Company does not hold any derivatives for speculative purposes and it does not use derivatives with leveraged or complex features. Derivative instruments are traded primarily with credit worthy major financial institutions or over national exchanges such as the New York Mercantile Exchange (“NYMEX”). As of September 30, 2019, all current derivative activity is immaterial.
 
At September 30, 2019 and December 31, 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, respectively. These cash deposits have not been used to increase the reported net assets or reduce the reported net liabilities on the derivative contracts at September 30, 2019 or December 31, 2018, respectively.
v3.19.3
Earnings Per Share
9 Months Ended
Sep. 30, 2019
Earnings Per Share [Abstract]  
Earnings Per Share 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 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 its past practice, subject to market conditions and cash availability. For the nine months ended September 30, 2019, the Company acquired 1,597,731 shares of common stock for an average price of $87.09 per share including brokerage fees and for the nine months ended September 30, 2018, 1,994,632 shares were repurchased for an average price of $72.39 per share.
 
The following table provides a reconciliation of basic and diluted earnings per share computations for the three and nine months ended September 30, 2019 and 2018:

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(Millions of dollars, except share and per share amounts)
2019
 
2018
 
2019
 
2018
Earnings per common share:
 
 
 
 
 
 
 
Net income per share - basic
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
69.2

 
$
45.0

 
$
107.2

 
$
136.1

 
 
 
 
 
 
 
 
Weighted average common shares outstanding (in thousands)
31,447

 
32,213

 
31,961

 
32,815

 
 
 
 
 
 
 
 
Earnings per common share
$
2.20

 
$
1.40

 
$
3.35

 
$
4.15

 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(Millions of dollars, except share and per share amounts)
2019
 
2018
 
2019
 
2018
Earnings per common share - assuming dilution:
 
 
 
 
 
 
 
Net income per share - diluted
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
69.2

 
$
45.0

 
$
107.2

 
$
136.1

 
 
 
 
 
 
 
 
Weighted average common shares outstanding (in thousands)
31,447

 
32,213

 
31,961

 
32,815

Common equivalent shares:
 
 
 
 
 
 
 
Dilutive share-based awards
257

 
323

 
228

 
327

Weighted average common shares outstanding - assuming dilution (in thousands)
31,704


32,536

 
32,189

 
33,142

 
 
 
 
 
 
 
 
Earnings per common share assuming dilution
$
2.18

 
$
1.38

 
$
3.33

 
$
4.11



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 restricted stock units, performance based units and non-qualified stock options that are excluded due to their anti-dilutive nature is immaterial.
v3.19.3
Other Financial Information
9 Months Ended
Sep. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Other Financial Information Other Financial Information
  
CASH FLOW DISCLOSURES — Cash income taxes paid (collected), net of refunds, were $16.2 million and $12.0 million for the nine month periods ended September 30, 2019 and 2018, respectively. Interest paid, net of amounts capitalized, was $46.0 million and $41.0 million for the nine month periods ended September 30, 2019 and 2018, respectively.  

CHANGES IN WORKING CAPITAL:
 
Nine Months Ended
September 30,
(Millions of dollars)
2019
 
2018
Accounts receivable
$
(25.4
)
 
$
(6.0
)
Inventories
(12.3
)
 
(32.6
)
Prepaid expenses and other current assets
6.8

 
17.1

Accounts payable and accrued liabilities
27.2

 
5.7

Net (increase) decrease in noncash operating working capital
$
(3.7
)
 
$
(15.8
)

v3.19.3
Assets and Liabilities Measured at Fair Value
9 Months Ended
Sep. 30, 2019
Fair Value Disclosures [Abstract]  
Assets and Liabilities Measure at Fair Value Assets and Liabilities Measured at Fair Value
 
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 derivative contracts was determined using NYMEX quoted values but was immaterial.
 
The following table presents the carrying amounts and estimated fair values of financial instruments held by the Company at September 30, 2019 and December 31, 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, Restricted cash, 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.  
 
 
At September 30, 2019
 
At December 31, 2018
 
 
Carrying
 
 
 
Carrying
 
 
(Millions of dollars)
 
Amount
 
Fair Value
 
Amount
 
Fair Value
Financial liabilities
 
 
 
 
 
 
 
 
Current and long-term debt
 
$
(987.7
)
 
$
(1,011.6
)
 
$
(863.3
)
 
$
(866.7
)

v3.19.3
Contingencies
9 Months Ended
Sep. 30, 2019
Commitments and Contingencies Disclosure [Abstract]  
Contingencies 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. The Company believes costs related to these sites will not have a material adverse effect on Murphy USA’s net income, financial condition 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 September 30, 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. 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 September 30, 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 condition or liquidity in a future period.
 
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.
 
Other than as noted above, 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 self-insured retention of $3.0 million per occurrence, and auto liability insurance with a deductible of $0.3 million per occurrence. As of September 30, 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 $21.3 million will be sufficient to cover the related liability for all insurance claims 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 September 30, 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.
v3.19.3
Lease Accounting
9 Months Ended
Sep. 30, 2019
Leases [Abstract]  
Lease Accounting Lease Accounting

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 216 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)
Classification
 
September 30,
2019
Assets
 
 
 
Operating (Right-of-use)
Other Assets
 
$
118.1

Finance
Property, plant, and equipment, at cost, less accumulated depreciation of $2.2 million
 
3.1

Total leased assets
 
 
$
121.2

 
 
 
 
Liabilities
 
 
 
Current
 
 
 
     Operating
Trade accounts payable and accrued liabilities
 
$
6.5

     Finance
Current maturities of long-term debt
 
1.3

Noncurrent
 
 
 
     Operating
Deferred credits and other liabilities
 
112.5

     Finance
Long-term debt, including capitalized lease obligations
 
1.2

Total lease liabilities
 
 
$
121.5







Lease Cost:
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(Millions of dollars)
Classification
 
2019
 
2019
Operating lease cost
Station and other operating expenses
 
$
3.7

 
$
10.8

Finance lease cost
 
 
 
 
 
   Amortization of leased assets
Depreciation & amortization expense
 
0.3

 
0.9

   Interest on lease liabilities
Interest expense
 

 
0.1

Net lease costs
 
 
$
4.0

 
$
11.8



Cash flow information:
 
 
 
Nine Months Ended
September 30,
(Millions of dollars)
 
 
2019
Cash paid for amounts included in the measurement of liabilities
 
 
 
   Operating cash flows from operating leases
 
 
$
10.2

   Operating cash flows from finance leases
 
 
$
0.1

   Financing cash flows from finance leases
 
 
$
1.1



Maturity of Lease Liabilities:
(Millions of dollars)
 
Operating leases
 
Finance leases
2019
 
$
7.1

 
$
0.8

2020
 
14.3

 
1.3

2021
 
13.5

 
0.8

2022
 
12.7

 
0.2

2023
 
12.1

 

After 2023
 
146.4

 

Total lease payments
 
206.1

 
3.1

 less: interest
 
87.1

 
0.5

Present value of lease liabilities
 
$
119.0

 
$
2.6


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
 
$
13.7

 
$
1.5

2020
 
13.3

 
1.1

2021
 
12.5

 
0.6

2022
 
11.7

 
0.1

2023
 
11.1

 

After 2023
 
122.6

 

Total lease payments
 
184.9

 
3.3

 less: interest
 

 
0.2

Present value of minimum payments
 
$
184.9

 
$
3.1




Lease Term and Discount Rate:
 
 
 
Nine Months Ended
September 30,
 
 
 
2019
Weighted average remaining lease term (years)
 
 
 
   Finance leases
 
 
2.1

   Operating leases
 
 
15.5

Weighted average discount rate
 
 
 
    Finance leases
 
 
4.9
%
   Operating leases
 
 
6.1
%

Lease Accounting Lease Accounting

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 216 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)
Classification
 
September 30,
2019
Assets
 
 
 
Operating (Right-of-use)
Other Assets
 
$
118.1

Finance
Property, plant, and equipment, at cost, less accumulated depreciation of $2.2 million
 
3.1

Total leased assets
 
 
$
121.2

 
 
 
 
Liabilities
 
 
 
Current
 
 
 
     Operating
Trade accounts payable and accrued liabilities
 
$
6.5

     Finance
Current maturities of long-term debt
 
1.3

Noncurrent
 
 
 
     Operating
Deferred credits and other liabilities
 
112.5

     Finance
Long-term debt, including capitalized lease obligations
 
1.2

Total lease liabilities
 
 
$
121.5







Lease Cost:
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(Millions of dollars)
Classification
 
2019
 
2019
Operating lease cost
Station and other operating expenses
 
$
3.7

 
$
10.8

Finance lease cost
 
 
 
 
 
   Amortization of leased assets
Depreciation & amortization expense
 
0.3

 
0.9

   Interest on lease liabilities
Interest expense
 

 
0.1

Net lease costs
 
 
$
4.0

 
$
11.8



Cash flow information:
 
 
 
Nine Months Ended
September 30,
(Millions of dollars)
 
 
2019
Cash paid for amounts included in the measurement of liabilities
 
 
 
   Operating cash flows from operating leases
 
 
$
10.2

   Operating cash flows from finance leases
 
 
$
0.1

   Financing cash flows from finance leases
 
 
$
1.1



Maturity of Lease Liabilities:
(Millions of dollars)
 
Operating leases
 
Finance leases
2019
 
$
7.1

 
$
0.8

2020
 
14.3

 
1.3

2021
 
13.5

 
0.8

2022
 
12.7

 
0.2

2023
 
12.1

 

After 2023
 
146.4

 

Total lease payments
 
206.1

 
3.1

 less: interest
 
87.1

 
0.5

Present value of lease liabilities
 
$
119.0

 
$
2.6


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
 
$
13.7

 
$
1.5

2020
 
13.3

 
1.1

2021
 
12.5

 
0.6

2022
 
11.7

 
0.1

2023
 
11.1

 

After 2023
 
122.6

 

Total lease payments
 
184.9

 
3.3

 less: interest
 

 
0.2

Present value of minimum payments
 
$
184.9

 
$
3.1




Lease Term and Discount Rate:
 
 
 
Nine Months Ended
September 30,
 
 
 
2019
Weighted average remaining lease term (years)
 
 
 
   Finance leases
 
 
2.1

   Operating leases
 
 
15.5

Weighted average discount rate
 
 
 
    Finance leases
 
 
4.9
%
   Operating leases
 
 
6.1
%

v3.19.3
Business Segment
9 Months Ended
Sep. 30, 2019
Segment Reporting [Abstract]  
Business Segment Business Segment
 
The Company's operations have one reportable segment which is Marketing.  The 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 ("PS&W") group. As the primary purpose of the PS&W 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 performed 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 functions of the Company. Results not included in the reportable segment include Corporate and Other Assets. Net settlement proceeds from litigation are included in Corporate and other assets operating income. The reportable segment was determined based on information reviewed by the Chief Operating Decision Maker (CODM).
 
 
 
 
 
Three Months Ended
 
 
 
 
September 30, 2019
 
September 30, 2018
 
 
Total Assets at
 
External
 
Income
 
External
 
Income
(Millions of dollars)
 
September 30, 2019
 
Revenues
 
(Loss)
 
Revenues
 
(Loss)
Marketing
 
$
2,199.7

 
$
3,657.6

 
$
94.0

 
$
3,788.0

 
$
54.6

Corporate and other assets
 
417.0

 

 
(24.8
)
 

 
(9.6
)
Total
 
$
2,616.7

 
$
3,657.6

 
$
69.2

 
$
3,788.0

 
$
45.0


 
 
 
 
Nine Months Ended
 
 
 
 
September 30, 2019
 
September 30, 2018
 
 
 
 
External
 
Income
 
External
 
Income
(Millions of dollars)
 
 
 
Revenues
 
(Loss)
 
Revenues
 
(Loss)
Marketing
 
 
 
$
10,574.3

 
$
154.7

 
$
10,860.7

 
$
126.1

Corporate and other assets
 
 
 
0.1

 
(47.5
)
 
0.5

 
10.0

Total
 

 
$
10,574.4

 
$
107.2

 
$
10,861.2

 
$
136.1


v3.19.3
Guarantor Subsidiaries
9 Months Ended
Sep. 30, 2019
Guarantor Subsidiaries [Abstract]  
Guarantor Subsidiaries Guarantor Subsidiaries
Murphy USA Inc. ("Parent Company") and 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 Murphy Oil USA, Inc. (the "Issuer"), including the 4.75% senior notes due 2029 and the 5.625% senior notes due 2027.  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, except share amounts)
September 30, 2019
Assets
Parent Company
 
Issuer
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Current assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
246.9

 
$
0.8

 
$

 
$

 
$
247.7

Accounts receivable—trade, less allowance for doubtful accounts of $1.2 in 2019

 
164.4

 
(0.1
)
 

 

 
164.3

Inventories, at lower of cost or market

 
233.8

 

 

 

 
233.8

Prepaid expenses and other current assets

 
18.9

 
0.2

 

 

 
19.1

Total current assets

 
664.0

 
0.9

 

 

 
664.9

Property, plant and equipment, at cost less accumulated depreciation and amortization of $1,074.8 in 2019

 
1,782.6

 
6.7

 

 

 
1,789.3

Investments in subsidiaries
2,544.2

 
144.0

 

 

 
(2,688.2
)
 

Other assets

 
162.5

 

 

 

 
162.5

Total assets
$
2,544.2

 
$
2,753.1

 
$
7.6

 
$

 
$
(2,688.2
)
 
$
2,616.7

Liabilities and Stockholders' Equity
 

 
 

 
 

 
 

 
 

 
 

Current liabilities
 

 
 

 
 

 
 

 
 

 
 

Current maturities of long-term debt
$

 
$
21.3

 
$

 
$

 
$

 
$
21.3

Inter-company accounts payable
139.0

 
58.9

 
(43.6
)
 
(154.3
)
 

 

Trade accounts payable and accrued liabilities

 
495.6

 

 

 

 
495.6

Total current liabilities
139.0

 
575.8

 
(43.6
)
 
(154.3
)
 

 
516.9

Long-term debt, including capitalized lease obligations

 
966.4

 

 

 

 
966.4

Deferred income taxes

 
199.0

 

 

 

 
199.0

Asset retirement obligations

 
32.3

 

 

 

 
32.3

Deferred credits and other liabilities

 
123.1

 

 

 

 
123.1

Total liabilities
139.0

 
1,896.6

 
(43.6
)
 
(154.3
)
 

 
1,837.7

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 September 30, 2019)
0.5