United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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| ☒ | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Annual Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended April 30, 20172020
OR
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| ☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from February 1, 2020 to April 30, 2020
Commission File Number 001-34700
CASEY’S GENERAL STORES, INC.
(Exact name of registrant as specified in its charter)
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IOWAIowa | | 42-0935283 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification Number) |
ONE SE CONVENIENCE BLVD.BLVD., ANKENY, IOWAAnkeny, Iowa
(Address of principal executive offices)
50021
(Zip Code)
(515) (515) 965-6100
(Registrant’s telephone number, including area code)
Securities Registered pursuant to Section 12(b) of the Act
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COMMON STOCKTitle of each class | Trading Symbol(s) | NASDAQName of each exchange on which registered |
(Title of Class)Common Stock, no par value per share | CASY | (Name of Exchange on which Registered)The NASDAQ Global Select Market |
Securities Registered pursuant to Section 12(g) of the Act
NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x☒ No ¨☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨☐ No x☒
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x☒ No ¨☐
Indicate by check mark if disclosure of delinquent filerswhether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to ItemRule 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part IIIS-T (§232.405 of this Form 10-K or any amendmentchapter) during the preceding 12 months (or for such shorter period that the registrant was required to this Form 10-K. ¨submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act
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| Large accelerated filer | | x☒ | Accelerated filer | | ¨☐ |
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| Non-accelerated filer | | ¨☐ | Smaller reporting company | | ¨☐ |
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| Emerging growth company | | ¨☐ | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No x☒
The aggregate market value of the registrant’s common stock held by non-affiliates as of October 31, 2016,2019, was approximately $4.4$6.3 billion based on the closing sales price ($112.99170.81 per share) as quoted on the NASDAQ Global Select Market.
Indicate the number of shares outstanding of each of the issuer’s class of common stock, as of the latest practicable date.
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| Class | | Outstanding at June 21, 20179, 2020 |
| Common Stock, no par value per share | | 38,547,27836,849,324 shares |
DOCUMENTS INCORPORATED BY REFERENCE
TheCertain information called for by Item 5 of Part II and Items 10, 11, 12, 13 and 1514 of Part III is hereby incorporated by reference from the definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission not later than 120 days after April 30, 2017.2020.
FORM 10-K
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PART I
The Company
Casey’s General Stores, Inc. (“Casey’s”) and its wholly ownedwholly-owned subsidiaries (Casey’s, together with its subsidiaries, are referred to herein as the “Company” or “we”) operate convenience stores under the names "Casey's" and “Casey’s General Store” (hereinafter referred to as “Casey’s Store” or “Stores”) in 1516 Midwestern states, primarily in Iowa, Missouri, and Illinois. The Company also operates two stores under the name "Tobacco City", selling primarily tobacco and nicotine products, one liquor store, and one grocery store. The Casey's storesStores carry a broad selection of food (including freshly prepared foods such as pizza, donuts, and sandwiches), beverages, tobacco and nicotine products, health and beauty aids, automotive products, and other nonfood items. In addition, all but two storesthree offer fuel for sale on a self-service basis. Our fiscal year runs from May 1 through April 30 of each year. On April 30, 20172020, there were a total of 1,9782,207 stores in operation. There were 4860 stores newly constructed in fiscal 2017.2020. We closed 2013 stores in fiscal 2017.2020. We also acquired 2218 additional stores in fiscal 2017; 182020; 11 of those stores were opened in fiscal 2017,2020, and four7 will be opened during the 20182021 fiscal year. Finally, we opened three acquisitions purchased in the prior year. Two distribution centers are in operation (in Ankeny, Iowa adjacent to our corporate headquartersthe Store Support Center and in Terre Haute, Indiana) from which grocery and general merchandise items are supplied to our stores. Additionally, the Company is currently constructing a third distribution center in Joplin, Missouri. Casey’s, with executive officesthe Store Support Center located at One SE Convenience Blvd., Ankeny, Iowa 50021-8045 (telephone 515-965-6100), was incorporated in Iowa in 1967.
Approximately 57%56% of all our stores were opened in areas with populations of fewer than 5,000 persons, while approximately 18%19% of our stores were opened in communities with populations exceeding 20,000 persons. The Company competes on the basis of price, as well as on the basis of traditional features of convenience store operations such as location, extended hours, product offerings, and quality of service.
The Company’s internet address is www.caseys.com. Each year we make available through our website all of our SEC filings, including current reports on Form 8-K, quarterly reports on Form 10-Q, our annual report on Form 10-K, and amendments to those reports, free of charge as soon as reasonably practicable after they have been electronically filed with the Securities and Exchange Commission. Additionally, you can go to our website to read our Financial Code of Ethics, Corporate Governance Guidelines, Code of Conduct, and committee charters. We intend to post disclosureIn the event of any waiversa waiver to the Code of Conduct, onany required disclosure will be posted to our website.
General
We seek to meet the needs of residents of smaller towns by combining features of both general store and convenience store operations.through quality products at competitive prices with courteous service in clean stores at convenient locations. Smaller communities often are not served by national-chain convenience stores. We have succeeded at operating Casey’s General Stores in smaller towns by offering, at competitive prices, a broader selection of products than does a typical convenience store. We have also succeeded in meeting the needs of residents in larger communities with these offerings. We currently own most of our real estate, including substantially all of our stores, both distribution centers, the Services Companya construction and support services facility, and the Corporate HeadquartersStore Support Center facility.
The Company derives its revenue primarily from the retail sale of fuel and the products offered in our stores. Our sales historically have been strongest during the first and second fiscal quarters (May through October) relative to the third and fourth fiscal quarters (November through April). In warmer weather, customersguests tend to purchase greater quantities of fuel and certain convenience items such as beer, pop,isotonics, water, soft drinks, and ice.
Corporate Subsidiaries
Casey's Marketing Company (Marketing Company)(the "Marketing Company") and Casey's Services Company (Services Company)(the "Services Company") were organized as Iowa corporations in March 1995. Casey’s Retail Company (the "Retail Company") was organized as an Iowa corporation in April 2004,2004. CGS Sales Corp.Stores, LLC was organized in April 2019 as an Iowa corporation in 2008, and Tobacco City, Inc.limited liability company. Heartland Property Company, LLC was organized in September 2019 as an Iowa corporation in 2014. All such entitiesa Delaware limited liability company. The Marketing Company, Services Company, and Retail Company are wholly-owned subsidiaries of Casey’s. CGS Stores, LLC and Heartland Property Company, LLC are wholly-owned subsidiaries of the Marketing Company.
Casey’s Retail Company owns and operates stores in Illinois, Kansas, Minnesota, Nebraska, North Dakota, South Dakota and South Dakota;Michigan; it also holds the rights to the Casey’sCompany's trademarks, service marks, trade names, and other intellectual property. The Marketing Company owns and operates stores in Arkansas, Indiana, Iowa, Kentucky, Missouri, Ohio, Oklahoma, Tennesseeand
Wisconsin, and Wisconsin.until May 2019, stores in Tennessee. The Marketing Company also has responsibility for all of our wholesale operations, including both distribution centers. As of May 2019, CGS Stores, LLC owns and operates stores in Tennessee. The Services Company provides a variety of construction and transportation services for all stores. CGS Sales Corp. operates one store in Iowa and one in Nebraska. Tobacco City Inc. operates two stores in North Dakota.
Store Operations
Products Offered
Each Casey’s General Store typically carries over 3,000 food and nonfood items. Many of the products offered are those generally found in a supermarket. The selection is generally limited to one or two well-known brands of each item stocked. Most of our staple foodstuffsfood products are nationally advertised brands, and we also have an assortment of Casey's proprietary branded products. Stores sell regional brands of dairy and bakery products, and approximately 87%1,887 (85.5%) of the stores offer beer. Our nonfood items include tobacco and nicotine products, health and beauty aids, school supplies, housewares, pet supplies, and automotive products.
All but twothree Casey’s General Stores offer gasoline or dieselretail motor fuel products for sale on a self-service basis. Gasoline and diesel fuel are sold under the Casey’s name.
It is our policypractice to continually make additions to the Company’s product line, especially products with higher gross profit margins. As a result, we have added various prepared food items to our product line over the years, facilitated by the installation of snack centers,kitchens, which now are in the majority of stores. The snack centerskitchens sell sandwiches, fountain drinks, and other items that have gross profit margins higher than those of general staple goods. As of April 30, 2017,2020, the Company was selling donuts prepared on store premises in approximately 99%2,199 (99.6%) of our stores in addition to cookies, brownies, and other bakery items. The Company installs donut-making equipment in all newly constructed stores.
We began marketing made-from-scratch pizza in 1984, and it was available in 1,9542,198 stores (99%(99.6%) as of April 30, 2017.2020. Although pizza is our most popular prepared food offering, we continue to expand our prepared food product line, which nowcurrently includes ham and cheese sandwiches, pork, and chicken, fritters,and sausage sandwiches, chicken tenders, pizza rolls,bites, popcorn chicken, breakfast croissants and biscuits, breakfast pizza, hash browns, quarter-pound hamburgers and cheeseburgers, potato cheese bites and other seasonal items. The newly constructed1,553 (70.4%) stores and many of the remodeled stores nowcurrently offer made-to-order sub sandwiches.
The growth in our proprietary prepared food program reflects management’s strategy to promote high-margin products that are compatible with convenience store operations. In the last three fiscal years, retail sales of nonfuel items have generated about 39% of our total revenue, but they have resulted in approximately 77%75% of our gross profit. Gross profit marginsrevenue less cost of goods sold (excluding depreciation and amortization). Revenue less cost of goods sold (excluding depreciation and amortization) as a percentage of revenue on prepared food items averaged approximately 62%61% during the three fiscal years ended April 30, 2017—2020—substantially higher than the gross profit margin onimpact of retail sales of fuel, which averaged approximately 8%9%.
Store Design
Casey’s General Stores are primarily freestanding and, with a few exceptions to accommodate local conditions, conform to standard construction specifications. The current larger store design measures 4246 feet by 110130 feet with approximately 2,2003,000 square feet devoted to sales area, 550600 square feet to kitchen space, 425400 square feet to storage, and 2 large public restrooms. There is also a smaller store design that is generally designated for smaller communities that measures 39 feet by 86 feet, with approximately 1,5001,550 square feet devoted to sales area with the remaining areas similar in size. Store lots have sufficient frontage and depth to permit adequate drive-in parking facilities on one or more sides of each store. Each new store typically includes 45 to 10 islands of fuel dispensers and storage tanks with capacity for 60,000 to 70,000 gallons of fuel. The merchandising display follows a standard layout designed to encourage a flow of customerguest traffic through all sections of every store. All stores are air-conditioned and have modern refrigeration equipment. Nearly all the store locations feature our bright red and yellow sign which displays Casey’s name and service mark.
All Casey’s General Stores remain open at least sixteen hours per day, seven days a week. Hours of operation may be adjusted on a store-by-store basis to accommodate customerguest traffic patterns. As of April 30, 2017,2020, we operate approximately 995operated 38 stores on a 24-hour basis.basis, and another 307 that have expanded hours. Store hours as of year-end reflect temporarily adjusted hours in response to the COVID-19 pandemic. Prior to the COVID-19 pandemic, we operated 633 stores on a 24-hour basis and another 1,407 stores with expanded hours. All stores maintain a bright, clean interior and provide prompt checkout service.
Store Locations
The Company traditionally has located its stores in smaller towns not served by national-chain convenience stores. Management believes that a Casey’s General Store provides a service generally not otherwise available in small towns and that a
convenience store in an area with limited population can be profitable if it stresses sales volume and competitive prices. Our store-site selection criteria emphasize the population of the immediate area and daily highway traffic volume. We can operate effectively at a highway location in a community with a population of as few as 400.
Fuel Operations
Fuel sales are an important part of our revenue and earnings. Approximately 59%60% of Casey’s total revenue for the year ended April 30, 20172020 was derived from the retail sale of fuel. The following table summarizes (dollars and gallons in thousands) fuel sales for the last three fiscal years ended April 30, 2017:30:
| | | | Year ended April 30, | Year ended April 30, |
| | 2017 | | 2016 | | 2015 | 2020 | | 2019 | | 2018 |
| Number of gallons sold | 2,061,794 |
| | 1,951,814 |
| | 1,816,596 |
| 2,293,609 |
| | 2,296,030 |
| | 2,198,600 |
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| Total retail fuel sales | $ | 4,414,128 |
| | $ | 4,214,802 |
| | $ | 5,144,385 |
| $ | 5,517,412 |
| | $ | 5,848,770 |
| | $ | 5,145,988 |
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| Percentage of total revenue | 58.8 | % | | 59.2 | % | | 66.2 | % | 60.1 | % | | 62.5 | % | | 61.3 | % |
| Gross profit percentage (excluding credit card fees) | 8.6 | % | | 9.1 | % | | 6.8 | % | |
| Percentage of revenue less cost of goods sold (excluding depreciation and amortization and credit card fees) | | 11.1 | % | | 8.0 | % | | 7.9 | % |
| Average retail price per gallon | $ | 2.14 |
| | $ | 2.16 |
| | $ | 2.83 |
| $ | 2.41 |
| | $ | 2.55 |
| | $ | 2.34 |
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| Average gross profit margin per gallon (excluding credit card fees) |
| 18.35 | ¢ | |
| 19.55 | ¢ | |
| 19.33 | ¢ | |
| Average revenue less cost of goods sold per gallon (excluding depreciation and amortization and credit card fees) | |
| 26.81 | ¢ | |
| 20.30 | ¢ | |
| 18.50 | ¢ |
| Average number of gallons sold per store* | 1,053 |
| | 1,015 |
| | 968 |
| 1,055 |
| | 1,097 |
| | 1,087 |
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| * | Includes only those stores in operation at least one full year on April 30 of the fiscal year indicated. |
Retail prices of fuel during the year were consistent, on average, with thedecreased 5.5% from prior year. The total number of gallons we sold during this period increased, primarily becausedecreased by 0.1%. Over the course of the last year, the Company, as part of its evolving strategy around fuel price optimization, has been more proactive and balanced to grow profitability, which has partially contributed to higher numberfuel margins and lower same-store fuel gallons sold during that time. Additionally, shelter in place restrictions due to the COVID-19 pandemic diminished overall demand during the last two months of stores in operation, the slightly lower retail prices, continued benefit from our fuel saver programs,fiscal year.
Percentage of revenue less cost of goods sold (excluding depreciation and the growth in expanded hour stores. Gross profit percentageamortization and credit card fees) represents the fuel gross profit divided by the gross fuel sales dollars, so asdollars. As retail fuel prices fluctuate in a period of consistent gross margin per gallon, the gross profit percentage will also fluctuate in an inverse relationship to fuel price. For additional information concerning the Company’s fuel operations, see Item 7 herein.
Distribution and Wholesale Arrangements
The Marketing Company supplies all stores with groceries, food, health and beauty aids, and general merchandise from the distribution centers. The stores place orders for merchandise electronically to our headquartersthe Store Support Center in Ankeny, and the orders are filled with weekly shipments in Company-ownedCompany-operated delivery trucks from one of the distribution centers, dependingbased on geographic proximity toroute optimization for the store.fleet network. All of our existing and most of our proposed stores are within the two distribution centers' optimum efficiency range—a radius of approximately 500 miles around each distribution center.
In fiscal 2017,2020, a majority of the food and nonfood items supplied to stores from the distribution centers were purchased directly from manufacturers. With few exceptions, long-term supply contracts are not entered into with any of the suppliers of products sold by Casey’s General Stores. We believe the practice enables us to respond to changing market conditions with minimal impact on margins.
Personnel
On April 30, 2017,2020, we had 15,91117,282 full-time employeesteam members and 19,10319,871 part-time employees.team members. We have not experienced any work stoppages. There are no collective bargaining agreements between the Company and any of its employees.team members.
Competition
Our business is highly competitive. Food, including prepared foods, and nonfood items similar or identical to those sold by the Company are generally available from various competitors in the communities served by Casey’s General Stores. We believe our stores located in smaller towns compete principally with other local grocery and convenience stores, similar retail outlets, and, to a lesser extent, prepared food outlets, restaurants, and expanded fuel stations offering a more limited selection of grocery and
food items for sale. Stores located in more heavily populated communities may compete with local and national grocery and drug store chains, quick serve restaurants, expanded fuel stations, supermarkets, discount food stores, and traditional convenience stores. ConvenienceExamples of convenience store chains competing in the larger towns served by Casey’s General Stores include Quik Trip, Kwik Trip, Kum & Go, and other regional chains. Some of the Company’s competitors have greater financial and other resources than we do. These competitive factors are discussed further in Item 7 of this Form 10-K.
Trademarks and Service Marks
The names "Casey's""Casey’s" and “Casey’s General Store” and the marks consisting of the Casey’s design logos (with the words “Casey’s General Store”) and the weathervane are registered trademarks and service marks under federal law. We believe these marks are of material importance in promoting and advertising the Company’s business. The Company has a number of other
registered and unregistered trademarks and service marks that are significant to the Company from an operational and branding perspective (e.g. "Casey's"Casey’s Pizza", "Casey's Famous for Pizza", "Casey's Here for Good", etc.).
Government Regulation (dollars in thousands)
The United States Environmental Protection Agency and several states, including Iowa, have established requirements for owners and operators of underground fuel storage tanks (USTs) with regard to (i) maintenance of leak detection, corrosion protection, and overfill/spill protection systems; (ii) upgrade of existing tanks; (iii) actions required in the event of a detected leak; (iv) prevention of leakage through tank closings; and (v) required fuel inventory record keeping. Since 1984, our new stores have been equipped with noncorroding fiberglass USTs, including some with double-wall construction, overfill protection, and electronic tank monitoring. We currently have 4,4735,025 USTs, 3,5874,152 of which are fiberglass and 886873 are steel, and we believe that all capital expenditures for electronic monitoring, cathodic protection, and overfill/spill protection to comply with the existing UST regulations have been completed. Additional regulations or amendments to the existing UST regulations could result in future expenditures.
Several states in which we do business have trust fund programs with provisions for sharing or reimbursing corrective action or remediation costs incurred by UST owners, including the Company. For the years ended April 30, 20172020 and 2016,2019, we spent approximately $1,323$718 and $1,621,$774, respectively, for assessments and remediation. Substantially all of these expenditures were submitted for reimbursement from state-sponsored trust fund programs. As of April 30, 2017,2020, approximately $20,767$23,695 has been received from such programs since inception. The payments are typically subject to statutory provisions requiring repayment of the reimbursed funds for noncompliance with upgrade provisions or other applicable laws. None of the reimbursements received are currently expected to be repaid by the Company to the trust fund programs. At April 30, 2017,2020, we had an accrued liability of approximately $283$328 for estimated expenses related to anticipated corrective actions or remediation efforts, including relevant legal and consulting costs. We believe we have no material joint and several environmental liability with other parties.
You should carefully consider the risks described in this report before making a decision to invest in our securities. If any of such risks actually occur, our business, financial condition, and/or results of operations could be materially adversely affected. In that case, the trading price of our securities could decline and you might lose all or part of your investment.
Risks Related to Our Industry
Pandemics or disease outbreaks, such as the novel coronavirus (“COVID-19”), responsive actions taken by governments and others to mitigate their spread, and guest behavior in response to these events, have, and may in the future, adversely affect our business operations, supply chain and financial results.
Pandemics or disease outbreaks such as COVID-19 have, and may continue to have, adverse impacts on the Company’s business. These include, but are not limited to, decreased store traffic and changed guest behavior, decreased demand for our fuel, prepared food and other convenience offerings, decreased or slowed unit/store growth, issues with our supply chain, including difficulties obtaining certain items sold at our stores or that our guests may demand, issues with respect to our team members’ health, working hours and/or ability to perform their duties, and increased costs to the Company in response to these changing conditions and to protect the health and safety of our team members and guests.
In addition, the general economic and other impacts related to responsive actions taken by governments and others to mitigate the spread of COVID-19, including but not limited to “stay-at-home,” “shelter-in-place” and other travel restrictions,
social distancing requirements, limitations on certain businesses’ hours and operations, limits on public gatherings and other events, and restrictions on how certain products can be sold and offered to our guests, have, and may continue to, result in similar declines in store traffic and overall demand, increased operating costs, and decreased or slower unit/store growth. Further, although the Company’s business has been deemed an “essential service” by many public authorities, allowing our operations to continue (in some cases in a modified manner), there are no guarantees the designation will continue, or be applied during a future pandemic or COVID-19 outbreak, which would require us to reduce our operations and potentially close stores for an undetermined period of time.
We cannot predict the extent and duration of the COVID-19 pandemic or the severity and duration of its impact to the general economy, our guests or our operating results; however, its effects could be material and last for an extended period of time.
Our business and our reputation could be adversely affected by a data security incident or the failure to protect sensitive guest, team member or supplier data, or the failure to comply with applicable regulations relating to data security and privacy.
In the normal course of our business, we obtain and have access to large amounts of personal data, including but not limited to credit and debit card information, personally identifiable information and other data from and about our guests, team members, and suppliers. While we invest significant resources and have engaged professional advisers in the protection of such data and information, our IT systems, and incident response programs, and maintain what we believe are adequate security controls, a compromise or a breach in our systems, or other data security or privacy incident that results in the loss, unauthorized release, disclosure or acquisition of such data or information, or other sensitive data or information, could nonetheless occur and have a material adverse effect on our reputation, operating results and financial condition.
A data security or privacy incident of any kind could expose us to risk in terms of the loss, unauthorized release, disclosure or acquisition of sensitive guest, team member or supplier data, and could result in litigation or other regulatory action being brought against us and damages, monetary and other claims made by or on behalf of the payment card brands, guests, team members, shareholders, financial institutions and governmental agencies. Such claims could give rise to substantial monetary damages and losses which are not covered, or in some instances fully covered, by our insurance policies and which could adversely affect our reputation, results of operations, financial condition and liquidity. Moreover, a data security or privacy incident could require that we expend significant additional resources on mitigation efforts and to further upgrade the security and other measures that we employ to guard against, and respond to, such incidents.
The convenience store industry is highly competitive.
The convenience store and retail fuel industries in which we operate are highly competitive and characterized by ease of entry and constant change in the number and type of retailers offering the products and services found in our stores. We compete with many other convenience store chains, gasoline stations, supermarkets, drugstores, discount stores, club stores, fast food outlets, and mass merchants, and a variety of other retail companies, including retail gasoline companies that have more extensive retail outlets, greater brand name recognition and established fuel supply arrangements. Several non-traditional retailers such as supermarkets, club stores, and mass merchants have affected the convenience store industry by entering the retail fuel business. These non-traditional fuel retailers have obtained a significant share of the motor fuels market, and their market share is expected to grow. Certain of these non-traditional retailers may use more extensive promotional pricing or discounts, both at the fuel pump and in the store, to encourage in-store merchandise sales and gasoline sales. In some of our markets, our competitors have been in existence longer and have greater financial, marketing, and other resources than we do. As a result, our competitors may have a greater ability to bear the economic risks inherent in our industry, and may be able to respond better to changes in the economy and new opportunities within the industry. This intense competition could adversely affect our revenues and profitability, and have a material adverse impact on our business and results of operations.
To remain competitive, we must constantly analyze consumer preferences and competitors’ offerings and prices to ensure we offer convenience products and services consumers demand at competitive prices. We must also maintain and upgrade our customer service levels, facilities, and locations to remain competitive and attract customer traffic. These competitive pressures could materially and adversely affect our fuel and merchandise sales and gross profit margins, and therefore could have a material adverse effect on our business, financial condition and results of operations.
The volatility of wholesale petroleum costs could adversely affect our operating results.
Our net income is significantly affected by changes in the margins we receive on our retail fuel sales. Over the past three fiscal years, on average our fuel revenues accounted for approximately 61% of total revenue and our fuel gross profitrevenue less cost of goods sold excluding depreciation and amortization accounted for approximately 23%25% of the total gross profit.revenue less cost of goods sold excluding depreciation and amortization. Crude oil and domestic wholesale petroleum markets are, and in the recent past have been, marked by significant volatility. GeneralThe overall economic impact of the COVID-19 pandemic, general political conditions, threatened or actual acts of war or terrorism, and instability or other changes in oil producing regions, particularly in the Middle East and South America, and trade, economic or other disagreements between oil producing nations, can, and recently
have, significantly affectaffected crude oil supplies and wholesale petroleum costs. In addition, the supply of fuel and wholesale purchase costs could be adversely affected in the event of a shortage, which could result from, among other things, lack of capacity at United States oil refineries or, in our case, the absencelevel of fuel contracts that we have that guarantee an uninterrupted, unlimited supply of fuel. Significant increases and volatility in wholesale petroleum costs have resulted and could in the future result in significant increases in the retail price of petroleum products and in lower average fuel margins per gallon. Increases in the retail price of petroleum products have resulted and could in the future adversely affect consumer demand for fuel. This volatility makes it difficult to predict the impact that future wholesale cost fluctuations will have on our operating results and financial condition in future periods. These factors could adversely affect our fuel gallon volume, fuel gross profit, and overall customer traffic, which in turn would affect our sales of grocery and general merchandise and prepared food products.
In addition, wholesale petroleum prices, fuel gallons sold, fuel gross profits and merchandise sales can be subject to seasonal fluctuations. Consumer demand for motor fuel typically increases during the summer driving season and typically falls during the winter months. Travel, recreation and construction activities are usually higher in the summer months in the Midwest, increasing the demand for motor fuel and merchandise that we sell. For that reason, our fuel volumes are typically higher in the first and second quarters of our fiscal year. Any significant change in one or more of these factors could materially affect the number of fuel gallons sold, fuel gross profitsrevenue less cost of goods sold excluding depreciation and amortization and overall customerguest traffic, which in turn could have a material adverse effect on our business, financial condition and results of operations.
Changing consumer preferences for alternative motor
General economic conditions that are largely out of the Company’s control may adversely affect the Company’s financial condition and results of operations.
Current economic conditions, including those resulting from the COVID-19 pandemic, higher interest rates, higher fuel and improvementsother energy costs, inflation, increases or fluctuations in fuel efficiencycommodity prices such as cheese and coffee, higher levels of unemployment, higher consumer debt levels and lower consumer discretionary spending, higher tax rates and other changes in tax laws or other economic factors may affect input costs and consumer spending or buying habits, and could adversely impactaffect the costs of the products we sell in our business.
A shift toward electric, hydrogen, natural gas or other alternative fuel-powered vehicles could fundamentally changestores and the shoppingconsumer demand for such products. Unfavorable economic conditions, especially those affecting the agricultural industry, higher fuel prices, and driving habits of our customers orunemployment levels can affect consumer confidence, spending patterns, and miles driven, and can cause guests to “trade down” to lower priced products in certain categories when these conditions exist. These factors can lead to new forms of fueling destinations or new competitive pressure. Improvements to the fuel efficiency of automobiles, or further mandates to improve fuel efficiency, may resultsales declines, and in decreased demand for conventional fuel. Any of these outcomes could potentially result in fewer customer visits to our stores, decreases both in fuel and general merchandise sales revenue or lower profit margins, which couldturn have a materialan adverse effectimpact on our business, financial condition and results of operations.
Legal, political, scientific and technological developments related to fuel efficiency and climate change may decrease demand for motor fuel.
Changes in our climate, including the effects of greenhouse gas emissions in the environment, may lessen the demand for our largest revenue product, petroleum-based motor fuel, or lead to additional government regulation. Technological advances to reducing fuel use and governmental mandates to improve fuel efficiency could have a material adverse effect on our business, financial condition and results of operations. In addition, new advancements that improve fuel efficiency or other governmental mandates to advance fuel efficiency may result in a reduction in demand for petroleum-based motor fuel, which again could have a material adverse effect on our business.
Increased credit card expenses could increase operating expenses.
A significant percentage of our sales are made with the use of credit cards. Since the interchange fees we pay when credit cards are used to make purchases are based on transaction amounts, higher fuel prices at the pump and higher gallon movement result in higher credit card expenses. These additional fees increase operating expenses. Higher operating expenses that result from higher credit card fees may decrease our overall profit and have a material adverse effect on our business, financial condition and results of operations. Total credit card fees paid in fiscal 2017, 2016, and 2015, were approximately $110 million, $100 million, and $100 million, respectively.
Wholesale cost and tax increases relating to tobacco products could affect our operating results.
Sales of tobacco products have averaged approximately 11% of our total revenue over the past three fiscal years, and our tobacco gross profit accounted for approximately 10% of total gross profit for the same period. Any significant increases in wholesale cigarette costs or tax increases on tobacco products may have a materially adverse effect on unit demand for cigarettes. Currently, major cigarette manufacturers offer significant rebates to retailers, although there can be no assurance that such rebate programs will continue. We include these rebates as a component of cost of goods sold, which affects our gross margin from sales of cigarettes. In the event these rebates are no longer offered or decreased, our wholesale cigarette costs will
increase accordingly. In general, we attempt to pass price increases on to our customers. Due to competitive pressures in our markets, however, we may not always be able to do so. These factors could adversely affect our retail price of cigarettes, cigarette unit volume and revenues, merchandise gross profit, and overall customer traffic, and in turn have a material adverse effect on our business, financial condition and results of operations.
Governmental action and campaigns to discourage smokingtobacco and smoking relatednicotine use and other tobacco products may have a material adverse effect on our revenues and gross profit.
Congress has given the Food and Drug Administration (“FDA”) broad authority to regulate tobacco and nicotine products, and the FDA has enacted numerous regulations restricting the sale of such products. These governmental actions, as well as national, state and local campaigns and regulations to discourage smokingtobacco and other factors,nicotine use and limit the sale of such products, including but not limited to certain actions taken to increase the minimum age in order to purchase such products, have resulted or may in the future result in, reduced industry volume and consumption levels, and could materially affect the retail price of cigarettes, unit volume and revenues, gross profit, and overall customerguest traffic, which in turn could have a material adverse effect on our business, financial condition and results of operations.
Also, increasing regulations for e-cigarettes and vapor products could offset some of the recent gainsrevenue growth we have experienced from selling these types of products.
Future consumer
Consumer or other litigation could adversely affect our financial condition and results of operations.operations.
Our retail operations are characterized by a high volume of customerguest traffic and by transactions involving a wide array of product selections, including prepared food. These operations carry a higher exposure to consumer litigation risk when compared to the operations of companies operating in many other industries. Consequently, we may become a party to individual personal injury, bad fuel, product liability, accessibility, data security and privacy and other legal actions in the ordinary course of our business. While these actions are generally routine in nature, incidental to the operation of our business and immaterial in scope, if our assessment of any action or actions should prove inaccurate, our financial condition and results of operations could be adversely affected.
Additionally, we are occasionally exposed to industry-wide or class-action claims arising from the products we carry, industry-specific business practices or other operational matters. For example, various petroleum marketing retailers, distributors and refiners defended class-action claims alleging that the sale of unadjusted volumes of fuel at temperatures in excess of 60 degrees Fahrenheit violates various state consumer protection laws due to the expansion of the fuel with the increase of fuel temperatures. Certain claims asserted in these lawsuits, if resolved against us, could give rise to substantial damages. Our defense costs and any resulting damage awards or settlement amounts may not be covered, or in some instances fully covered, by our insurance policies. Thus, an unfavorable outcome or settlement of one or more of these lawsuits could have a material adverse effect on our financial position, liquidity and results of operations in a particular period or periods.operations.
Our business and our reputation
Increased credit card expenses could be adversely affected by the failure to protect sensitive customer, employee or vendor data, whether as a result of a cybersecurity incident or otherwise, or to comply with applicable regulations relating to data security and privacy.increase operating expenses.
In the normal course
A significant percentage of our business as a retailer,sales are made with the use of credit cards. Because the interchange fees we obtainpay when credit cards are used to make purchases are based on transaction amounts, higher fuel prices at the pump and have access to large amounts of personal data, including but not limited tohigher gallon movement result in higher credit and debit card information and other personally identifiable informationexpenses. These additional fees increase operating expenses. Higher operating expenses
that result from higher credit card fees may decrease our customers, employees, and vendors. While we invest significant amounts and have engaged professional advisers in the protection of such data and information, our IT systems, and incident response programs, and maintain what we believe are adequate security controls, a compromise or a breach in our systems, or other data security incident that results in the loss, unauthorized release, disclosure or acquisition of such data or information, or other sensitive data or information, could nonetheless occuroverall profit and have a material adverse effect on our reputation, operating results and financial condition.
A data security incident of any kind could expose us to risk in terms of the loss, unauthorized release, disclosure or acquisition of sensitive customer, employee or vendor data, and could result in litigation or other regulatory action being brought against us and damage, monetary and other claims made by or on behalf of the payment card brands, customers, employees, shareholders, financial institutions and governmental agencies. Such claims could give rise to substantial monetary damages and losses which are not covered, or in some instances fully covered, by our insurance policies and which could adversely affect our reputation, results of operations, financial condition and liquidity. Moreover, a data security incident could require that we expend significant additional resources to further upgrade the security and other measures that we employ to guard against, and respond to, such incidents.
General economic conditions that are largely out of the Company’s control may adversely affect the Company’sbusiness, financial condition and results of operations. Total credit card fees paid in fiscal 2020, 2019, and 2018, were approximately $145 million, $140 million, and $123 million, respectively.
Current economic conditions, higher interest rates, higher
Developments related to fuel efficiency, fuel conservation practices, climate change, and other energy costs, inflation, increases in commodity prices, higher levels of unemployment, higherchanging consumer debt levels, higher tax rates and other changes in tax laws or other
economic factorspreferences may affect consumer spending or buying habits, and could adversely affectdecrease the demand for productsmotor fuel.
Technological advances and consumer behavior in reducing fuel use and governmental mandates to improve fuel efficiency could lessen the Company sellsdemand for our largest revenue product, petroleum-based motor fuel, which may have a material adverse effect on our business, financial condition, and results of operation. Changes in its stores. Unfavorable economic conditions, especially those affectingour climate, including the agricultural industry, higher fuel prices, and unemployment levels can affect consumer confidence, spending patterns, and miles driven, causing customers to “trade down” to lower priced productseffects of greenhouse gas emissions in certain categories when these conditions exist. These factors canthe environment, may lessen demand or lead to additional government regulation. In addition, a shift toward electric, hydrogen, natural gas or other alternative fuel-powered vehicles, including driverless motor vehicles, could fundamentally change the shopping and driving habits of our guests or lead to new forms of fueling destinations or new competitive pressure. Any of these outcomes could potentially result in fewer guest visits to our stores, decreases in sales declines in both fuel and general merchandise, and in turnrevenue across all categories or lower profit margins, which could have ana material adverse impacteffect on our business, financial condition and results of operations.
Risks Related
Wholesale cost and tax increases relating to Our Businesstobacco and nicotine products could affect our operating results.
The prices
Sales of certain commoditiestobacco and "RINs" fluctuate widely.
The wholesale costs we pay for certain commodities such as cheese and coffee can fluctuate widely from period to period. Any significant increase in the wholesale costsnicotine products have averaged approximately 11% of such commodities could have a material adverse impact on our results of operations in a particular period or periods.
In certain states, we blend bulk fuel with ethanol and bio-diesel and sell the associated “renewable identification numbers” (“RINs”) that are generated in the process. The market prices paid to us for our RINs can fluctuate widely from period to period and can have a significant impact on our financial results for a particular period or periods. The market price for RINs fluctuates based on a variety of factors including, but not limited to, governmental and regulatory action, perceptions concerning the prospect for changes in the renewable fuels standards or the future availability of RINs, and other market dynamics. Duringtotal revenue over the past three fiscal years, and our tobacco and nicotine revenue less cost of goods sold excluding depreciation and amortization accounted for approximately 10% of the average sale price has been $0.64 per RIN. Duetotal revenue less cost of goods sold excluding depreciation and amortization for the same period. Any significant increases in wholesale cigarette and related product costs or tax increases on tobacco or nicotine products may have a materially adverse effect on unit demand for cigarettes (or related products). Currently, major cigarette and tobacco and nicotine manufacturers offer significant rebates to the inherent price volatility of RINs,retailers, although there can be no assurance that such rebate programs will continue. We include these rebates as a component of cost of goods sold, which affects our gross margin from sales of cigarettes and related products. In the event these rebates are no longer offered or decreased, our wholesale cigarette and related product costs will increase accordingly. In general, we willattempt to pass price increases on to our guests. Due to competitive pressures in our markets, however, we may not always be able to selldo so. These factors could adversely affect our RINsretail price of cigarettes and related products, cigarette or related product unit volume and revenues, merchandise revenue less cost of goods sold excluding depreciation and amortization, and overall guest traffic, and in turn have a material adverse effect on our business, financial condition and results of operations.
Risks Related to Our Business
Food-safety issues and food-borne illnesses, whether actual or reported, or the failure to comply with applicable regulations relating to the transportation, storage, preparation or service of food, could adversely affect our business and reputation.
Instances or reports of food-safety issues, such as food-borne illnesses, food tampering, food contamination or mislabeling, either during growing, manufacturing, packaging, transportation, storage, preparation or service, have in the future at any particular price.past significantly damaged the reputations and impacted the sales of companies in the food processing, grocery, quick service and “fast casual” restaurant sectors, and could affect us as well. Any significantinstances of, or reports linking us to, food-borne illnesses or food tampering, contamination, mislabeling or other food-safety issues could damage the value of our brand and severely hurt sales of our prepared food products and possibly lead to product liability and personal injury claims, litigation (including class actions), government agency investigations and damages. In addition, guest preferences and store traffic could be adversely impacted by food-safety issues, health concerns or negative publicity about the consumption of our products, which could cause a decline in demand for those products and adversely impact our sales.
Any failure to anticipate and respond to changes in consumer preferences, or to introduce and promote innovative technology for guest interaction, could adversely affect our financial results.
Our continued success depends on our ability to remain relevant with respect to consumer needs and wants, attitudes toward our industry, and our guests’ preferences for ways of doing business with us, particularly with respect to digital engagement, contactless delivery, curb-side pick-up and other non-traditional ordering and delivery platforms. We must continually work to develop, produce and market new products, maintain and enhance the recognition of our brands, offer a favorable mix of products, and refine our approach as to how and where we market, sell and deliver our products. This risk is compounded by the increasing use of social and digital media by consumers and the speed by which information and opinions
are shared. If we are unable to anticipate and respond to sudden challenges that we may face in the marketplace, trends in the market price of RINsfor our products and changing consumer demands and sentiment, it could have a material adverse effect on our business, financial condition and results of operations.
We rely on our information technology systems, and a number of third-party vendor platforms, to manage numerous aspects of our business, and a disruption of these systems could adversely affect our business.
We depend on our information technology (IT) systems, and a number of third-party vendor platforms, to manage and operate numerous aspects of our business, provide analytical information to management and serve as a platform for our business continuity plan. Our IT systems, and the technology platforms provided by our vendors, are an essential component of our business and growth strategies, and a serious disruption to these could significantly limit our ability to manage and operate our business efficiently. These systems are vulnerable to, among other things, damage and interruption from power loss or natural disasters, computer system and network failures, loss of telecommunications services, physical and electronic loss of, or loss of access to, data and information, security breaches or other security incidents, and computer viruses or attacks. Any disruption could cause our business and competitive position to suffer and cause our operating results to be reduced.
A significant disruption to our distribution network, to the capacity of the distribution centers, or timely receipt of inventory could adversely impact our sales or increase our transaction costs, which could have a material adverse effect on our business.
We rely on our distribution and transportation network, and the networks of our direct store delivery partners, to provide products to our stores in a timely and cost-effective manner. Products are either moved from supplier locations to our distribution centers, or delivered directly to our stores. Deliveries to our stores occur from the distribution centers or directly from our suppliers. Any disruption, unanticipated or unusual expense or operational failure related to this process could affect our store operations negatively.
We also depend on regular deliveries of products to and from our facilities and stores that meet our specifications. In addition, we may have a single supplier or limited number of suppliers for certain products. While we believe there are adequate reserve quantities and alternative suppliers, shortages or interruptions in the receipt or supply of products caused by unanticipated demand, problems in production or distribution, financial or other difficulties of suppliers, inclement weather or other economic conditions could adversely affect the availability, quality and cost of products, and our operating results.
We may experience difficulties implementing and realizing the results of our strategic plan.
In January 2020, Casey’s unveiled an updated, long-term/strategic plan, centered around four strategic objectives: reinvigorate hospitality and the guest experience; be where the guest is; best-in-class efficiencies; and, invest in our people and culture. While we have invested, and will continue to invest, significant resources in our team and in planning, development, project management, and implementation of the plan, it is possible that we may experience significant delays, increased costs and other difficulties that are not presently contemplated. Further, the intended results of the plan may not be realized as anticipated. Any such issues could adversely affect our operations and negatively impact our business, results of operations in a particular period or periods.and financial condition.
Last year, certain oil refiners and other interested parties initiated legal challenges and filed rulemaking requests with the U.S. Environmental Protection Agency (“EPA”), seeking reconsideration and/or changes in the RFS regulations identifying refiners and importers of gasoline and diesel fuel as the entities responsible for complying with the annual percentage standards adopted by EPA under the renewable fuel standards program. On November 10, 2016, EPA proposed denying the petitions for rulemaking it has received to change the “point of obligation” from refiners and importers, but at the same time EPA opened a 60 day public comment process to allow comments on its action, which has now closed. At some point in the future, EPA will issue a final decision on its proposed denial of the proposal to initiate rulemaking to change the point of obligation. Any change in the existing RFS regulations, whether as a result of EPA rulemaking or other legal challenge, could materially and adversely affect the market prices for RINs and/or our ability to sell our RINs to other parties, and there can be no assurance that such regulatory changes will not occur in the future.
Unfavorable weather conditions can adversely affect our business.
All of our stores are located in the Midwestcentral region of the United States, which is susceptible to tornadoes, thunderstorms, earthquakes, extended periods of rain or unseasonably cold temperatures, flooding, ice storms, and heavy snow. Inclement weather conditions could damage our facilities or could have a significant impact on consumer behavior, travel, and convenience store traffic patterns as well as our ability to operate our locations. In addition, we typically generate higher revenues and gross margins during warmer weather months, which fall within our first and second fiscal quarters. When weather conditions are not favorable during a particular period, our operating results and cash flow from operations could be adversely affected.
Any failure
Because we depend on our management’s and other team members’ experience and knowledge of our industry, we could be adversely affected were we to anticipatelose, or experience difficulty in recruiting and respondretaining, any such members of our team.
We are dependent on the continued knowledge and efforts of our management team and other key team members. If, for any reason, our executives do not continue to market trends and changesbe active in consumer preferences management, or we lose such persons, or other key team members, or we fail to identify and/or recruit for current or future positions of need, our business, financial condition or results of operations
could be adversely affect our financial results.
Our continued success dependsaffected. We also rely on our ability to anticipate, gaugerecruit qualified drivers, store and react in a timelyfield management and cost-effective mannerother store personnel. Failure to changes in consumer tastes, their attitudes toward our industry and brands, as well ascontinue to where and how consumers shop for those products. We must continually work to develop, produce and market new products, maintain and enhance the recognition of our brands, achieve a favorable mix of products, and refine our approach as to how and where we market and sell our products. While we devote considerable effort and resources to shape, analyze and respond to consumer preferences, we recognize that consumer tastes cannot be predicted with certainty and can change rapidly. The issue is compounded by the increasing use of social and digital media by consumers and the speed by which information and opinions are shared. If we are unable to anticipate and respond to sudden challenges that we may face in the marketplace, trends in the market for our products and changing consumer demands and sentiment, itattract these individuals at reasonable compensation levels could have a material adverse effect on our business financial condition and results of operations.
We may experience increased costs, disruptions or other difficulties with the implementation, operation and functionality of our enterprise resource planning system.
We are engaged in a phased implementation of an enterprise resource planning (ERP) system, which will replace or enhance certain internal financial and operating systems that are critical to our business operations. The implementation, operation, and functionality of the ERP system has and will continue to require a significant investment of human, technological, and financial resources. While we have invested, and continue to invest, significant resources in planning, project management, consulting, and training, it is possible that significant implementation, operational, and functionality issues may arise during the course of implementing and utilizing the ERP system, and it is further possible that we may experience significant delays, increased costs, and other difficulties that are not presently contemplated. Any significant disruptions, delays, deficiencies, or errors in the design, implementation, and utilization of the ERP system could adversely affect our operations, prevent us from accurately and timely reporting our financial results, and negatively impact our business, results of operations and financial condition. Additionally, if we do not effectively implement and utilize the ERP system as planned or the system does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to assess it adequately could be delayed.
Control deficiencies could prevent us from accurately and timely reporting our financial results.
Our internal control over financial reporting constitutes a process, including controls, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. generally accepted accounting principles. We have in the past and may in the future identify deficiencies in our internal control over financial reporting, including significant deficiencies and material weaknesses. Failure to identify and remediate deficiencies in our internal control over financial reporting in a timely manner could prevent us from accurately and timely reporting our financial results, which could cause us to fail to meet our reporting obligations, lead to a loss of investor confidence and have a negative impact on the trading price of our common stock.
Our operations present hazards and risks which may not be fully covered by insurance, if insured.
The scope and nature of our operations present a variety of operational hazards and risks that must be managed through continual oversight and control. As protection against hazards and risks, we maintain insurance against many, but not all, potential losses or liabilities arising from such risks. Uninsured losses and liabilities from operating risks could reduce the funds available to us for capital and investment spending and could have a material adverse impact on the results of operations.
We may not be able to identify, acquire, and integrate new properties and stores, which could adversely affect our ability to grow our business.
An important part of our growth strategy has been to purchase properties on which to build our stores, and in certain instances, acquire other convenience stores that complement our existing stores or broaden our geographic presence. From May 1, 2016 through April 30, 2017 we acquired 22 convenience stores and opened 18 of those stores. We expect to continue pursuing acquisition opportunities.
Acquisitionsopportunities, which involve risks that could cause our actual growth or operating results to differ materially from our expectations or the expectations of securities analysts. These risks include:
Theinclude, but are not limited to, the inability to identify and acquire suitable sites at advantageous prices;
Competition competition in targeted market areas;
Difficulties difficulties during the acquisition process in discovering some of the liabilities of the businesses that we acquire;
Difficulties difficulties associated with our existing financial controls, information systems, management resources and human resources needed to support our future growth;
Difficulties difficulties with hiring, training and retaining skilled personnel, including store managers;
Difficultiespersonnel; difficulties in adapting distribution and other operational and management systems to an expanded network of stores;
Difficulties difficulties in adopting, adapting to or changing the business practices, models or processes of stores or chains we acquire; difficulties in obtaining governmental and other third-party consents, permits and licenses needed to operate additional stores;
Difficulties difficulties in obtaining the cost savings and financial improvements we anticipate from future acquired stores;
The the potential diversion of our senior management’s attention from focusing on our core business due to an increased focus on acquisitions; and,
Challenges challenges associated with the consummation and integration of any future acquisition.
Covenants in our senior notes and credit facility agreements require us to comply with certain covenants and meet financial maintenance tests. Failure to comply with these requirements could have a material impact to us.
We are required to comply with certain financial and non-financial covenants under our existing senior notes and credit facility agreements. A breach of any covenant could result in a default under such agreements, which could, if not timely cured, permit lenders to declare all amounts outstanding to be immediately due and payable, and to terminate such instruments, which in turn could have a material adverse effect on our business, financial condition and results of operation.
Compliance with and changes in tax laws could adversely affect our performance.
We are subject to extensive tax liabilities imposed by multiple jurisdictions, including but not limited to income taxes, indirect taxes (excise, sales/use, and gross receipts taxes), payroll taxes, property taxes, and tobacco taxes. Tax laws and regulations are dynamic and subject to change as new laws are passed and new interpretations of existing laws are issued and applied. The activity could result in increased expenditures for tax liabilities in the future. Many of these liabilities are subject to periodic audits by the respective taxing authorities. Subsequent changes to our tax liabilities as a result of these audits may subject us to interest and penalties.
We are subject to extensive governmental regulations.
Our business is subject to extensive governmental laws and regulations that include, but are not limited to, those relating to environmental protection;protection and remediation; the preparation, sale and labeling of food; minimum wage, overtime and other employment laws and regulations; compliance with the Patient Protection and Affordable Care Act and the Americans with Disabilities Act; legal restrictions on the sale of alcohol, tobacco and nicotine products, money orderorders, lottery/lotto and lotteryother age-restricted products; compliance with the Payment Card Industry Data Security Standards and similar requirements; compliance with the Federal Motor Carriers Safety Administration regulations; and, securities laws and Nasdaq listing standards. In addition, during the COVID-19 pandemic, the Company was, and continues to be, subject to responsive actions taken by governments and others to mitigate the spread of COVID-19, which resulted in decreased store traffic and certain changes to how we operate our stores and offer certain products for sale to our guests. The effects created by these, including the costs of compliance with these laws and regulations, is substantial, and a violation of or change in such laws and/or regulations could have a material adverse effect on our business, financial condition, and results of operations.
Under various federal, state, and local laws, regulations, and ordinances, we may, as the owner/operator of our locations, be liable for the costs of removal or remediation of contamination at these or our former locations, whether or not we knew of, or were responsible for, the presence of such contamination. Failure to remediate such contamination properly may make us liable to third parties and adversely affect our ability to sell or lease such property.
Compliance with existing and future environmental laws regulating underground storage tanks may require significant capital expenditures and increased operating and maintenance costs. The remediation costs and other costs required to clean up or treat contaminated sites could be substantial. We pay tank registration fees and other taxes to state trust funds established in our operating areas in support of future remediation obligations.
These state trust funds are expected to pay or reimburse us for remediation expenses less a deductible. To the extent third parties do not pay for remediation as we anticipate, we will be obligated to make these payments, which could materially adversely affect our financial condition and results of operations. Reimbursements from state trust funds will be dependent on the maintenance and continued solvency of the various funds.
In the future, we may incur substantial expenditures for remediation of contamination that has yet to be discovered at existing locations or at locations we may acquire. We cannot assure you that we have identified all environmental liabilities at all of our current and former locations; that material environmental conditions not known to us do not exist; that future laws, ordinances, or regulations will not impose material environmental liability on us; or that a material environmental condition does not otherwise exist at any one or more of our locations. In addition, failure to comply with any environmental laws, regulations, or ordinances or an increase in regulations could adversely affect our operating results and financial condition.
State laws regulate the sale of alcohol, tobacco and lotterynicotine products, lottery/lotto products and other age-restricted products. A violation or change of these laws could adversely affect our business, financial condition, and results of operations because state and local regulatory agencies have the power to
approve, revoke, suspend, or deny applications for and renewals of permits and licenses relating to the sale of certain of these products or to seek other remedies.
Any appreciable increase in income,wages, overtime pay, or the statutory minimum salary requirements, minimum wage rate, mandatory scheduling or scheduling notification laws, or the adoption of additional mandated healthcare or paid-time-off benefits would result in an increase in our labor costs. Such cost increases, or the penalties for failing to comply, with such statutory minimum could adversely affect our business, financial condition, and results of operations. State or federal lawmakers or regulators may also enact new laws or regulations applicable to us that may have a material adverse and potentially disparate impact on our business.
The dangers inherent in the storage and transport of motor fuel could cause disruptions and could expose to us potentially significant losses, costs or liabilities.
We store motor fuel in storage tanks at our retail locations. Additionally, a significant portion of motor fuel is transported in our own trucks, instead of by third-party carriers. Our operations are subject to significant hazards and risks inherent in transporting and storing motor fuel. These hazards and risks include, but are not limited to, fires, explosions, traffic accidents, spills, discharges and other releases, any of which could result in distribution difficulties and disruptions, environmental pollution, governmentally-imposed fines or clean-up obligations, personal injury or wrongful death claims and other damage to our properties and the properties of others. As a result, any such event could have a material adverse effect on our business, financial condition and results of operations.
Customer preferences and store traffic could be adversely impacted by health concerns about certain prepared food products, reports of food-borne illnesses or food safety issues, any of which could result in a decrease in demandOther Risks
The market price for our prepared food offerings.
Customer preferences and store traffic could be adversely impacted by health concerns or negative publicity about the consumption of particular prepared food products such as pizza, which could cause a decline in demand for those products and adversely impact our sales.
Instances or reports, whether verified or not, of food-safety issues, such as food-borne illnesses, food tampering, food contamination or mislabeling, either during growing, manufacturing, packaging, transportation, storing or preparation, have in the past significantly damaged the reputations of companies in the food processing, grocery and quick service and “fast casual” restaurant sectors, and could affect us as well. Any instances of, or reports linking us to, food-borne illnesses or food tampering, contamination, mislabeling or other food-safety issues could damage the value of the Casey’s brand and severely hurt sales of our prepared food products and possibly lead to product liability claims, litigation (including class actions), government agency investigations and damages.
Because we depend on our management’s and other key employees' experience and knowledge of our industry, we could be adversely affected were we to lose any such members of our team.
We are dependent on the continued knowledge and efforts of our management team and other key employees. If, for any reason, our executives do not continue to be active in management, or we lose such persons, or other key employees, our business, financial condition or results of operations could be adversely affected. We also rely on our ability to recruit qualified store managers, supervisors, district managers, regional managers and other store personnel. Failure to continue to attract these individuals at reasonable compensation levels could have a material adverse effect on our business and results of operations.
We rely on our information technology systems to manage numerous aspects of our business, and a disruption of these systems could adversely affect our business.
We depend on our information technology (IT) systems to manage numerous aspects of our business transactions and provide analytical information to management. Our IT systems are an essential component of our business and growth strategies, and a serious disruption to our IT systems could significantly limit our ability to manage and operate our business efficiently. These systems are vulnerable to, among other things, damage and interruption from power loss or natural disasters, computer system and network failures, loss of telecommunications services, physical and electronic loss of, or loss of access to, data and information, security breaches or other security incidents, and computer viruses or attacks. Any disruption could cause our business and competitive position to suffer and cause our operating results to be reduced. Also, our business continuity plan could fail.
Control deficiencies could prevent us from accurately and timely reporting our financial results.
Our internal control over financial reporting constitutes a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”). We have in the pastcommon stock has been and may in the future identify deficiencies in our internal control over financial reporting, including significant deficiencies and material weaknesses. Failure to identify and remediate deficiencies in our internal control over financial reporting in a timely manner could prevent us from accurately and timely reporting our financial results,be volatile, which could cause usthe value of your investment to fail to meet our reporting obligations, lead to a loss of investor confidencedecline.
Securities markets worldwide experience significant price and have a negative impact onvolume fluctuations. This market volatility could significantly affect the tradingmarket price of our common stock.stock without regard to our operating performance. In addition, the price of
Our operations present hazards
our common stock could be subject to wide fluctuations in response to these, and risksother factors: a deviation in our results from the expectations of public market analysts and investors; statements by research analysts about our common stock, company, or industry; changes in market valuations of companies in our industry and market evaluations of our industry generally; additions or departures of key personnel; actions taken by our competitors; sales or repurchases of common stock by the Company or other affiliates; and, other general economic, political, or market conditions, many of which are beyond our control.
The market price of our common stock will also be affected by our quarterly operating results and same store sales results, which may be expected to fluctuate. Some of the factors that may affect our quarterly results and same store sales include general, regional, and national economic conditions; competition; unexpected costs; changes in retail pricing, consumer trends, and the number of stores we open and/or close during any given period; and the costs of compliance with corporate governance and other legal requirements. Other factors are discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations. You may not be fully covered by insurance, if insured.
The scope and natureable to resell your shares of our operations present a variety of operational hazards and risks that must be managed through continual oversight and control. As protection against hazards and risks, we maintain insurance against many, but not all, potential lossescommon stock at or liabilities arising from such risks. Uninsured losses and liabilities from operating risks could reduceabove the funds available to us for capital and investment spending and could have a material adverse impact on the results of operations in a particular period or periods.price you pay.
Covenants in the agreements relating to our Senior Notes require us to meet financial maintenance tests. Failure to comply with these requirements could have a material impact to us.
We are required to meet certain financial and non-financial covenants under our existing note agreements relating to our Senior Notes. A breach of any covenant could result in a default under the note agreements, which could, if not timely cured, permit lenders to declare all amounts outstanding to be immediately due and payable, and have an adverse effect on our business, financial condition, and results of operation.
Compliance with and changes in tax laws could adversely affect our performance.
We are subject to extensive tax liabilities imposed by multiple jurisdictions, including income taxes, indirect taxes (excise, sales/use, and gross receipts taxes), payroll taxes, property taxes, and tobacco taxes. Tax laws and regulations are dynamic and subject to change as new laws are passed and new interpretations of existing laws are issued and applied. The activity could result in increased expenditures for tax liabilities in the future. Many of these liabilities are subject to periodic audits by the respective taxing authorities. Subsequent changes to our tax liabilities as a result of these audits may subject us to interest and penalties.
A significant disruption to our distribution network, to the capacity of the distribution centers, or timely receipt of inventory could adversely impact our sales or increase our transaction costs, which could have a material adverse effect on our business.
We rely on our distribution and transportation network to provide products to our stores in a timely and cost-effective manner. Product is moved from vendor locations to the two distribution centers. Deliveries to our stores occur from the distribution center or directly from our vendors. Any disruption, unanticipated or unusual expense or operational failure related to this process could affect our store operations negatively.
Shortages or interruptions in the supply of products could affect our operating results. We depend on regular deliveries of products that meet our specifications. In addition, we have a single supplier or limited number of suppliers for certain products. While we believe there are adequate reserve quantities and alternative suppliers, shortages or interruptions in the receipt of products caused by unanticipated demand, problems in production or distribution, financial or other difficulties of suppliers, inclement weather or other conditions could adversely affect the availability, quality and cost of products, and our operating results.
Other Risks
Any issuance of shares of our common stock in the future could have a dilutive effect on your investment.
We could issue additional shares for investment, acquisition, or other business purposes. Even if there is not an immediate need for capital, we may choose to issue securities to sell in public or private equity markets, if and when conditions are favorable. Raising funds by issuing securities would dilute the ownership interests of our existing shareholders. Additionally, certain types of equity securities we may issue in the future could have rights, preferences, or privileges senior to the rights of existing holders of our common stock.
Iowa law and provisions in our charter documents may have the effect of preventing or hindering a change in control and adversely affecting the market price of our common stock.
Our articles of incorporation give the Company’s board of directors the authority to issue up to one million shares of preferred stock and to determine the rights and preferences of the preferred stock without obtaining shareholder approval. The existence of this preferred stock could make it more difficult or discourage an attempt to obtain control of the Company by means of a tender offer, merger, proxy contest, or otherwise. Furthermore, this preferred stock could be issued with other rights, including economic rights, senior to our common stock, thereby having a potentially adverse effect on the market price of our common stock.
Our articles
Although the Company began a phased declassification of incorporation were amended in 2011 to stagger the terms of the Company’sits board of directors asover a resultthree-year period starting with the Company’s 2019 annual shareholders’ meeting, its board of amendments to the Iowa Business Corporation Act.directors remains partially staggered. Our staggered board, along with other provisions of our articles of incorporation and bylaws and Iowa corporate law, could make it more difficult for a third party to acquire us or remove our directors by means of a proxy contest, even if doing so would be beneficial to our shareholders. For example, Section 409.1110 of the Iowa Business Corporation Act (the “Act”) prohibits publicly held Iowa corporations to which it applies from engaging in a business combination with an interested shareholder for a period of three years after the date of the transaction in which the person became an interested shareholder unless the business combination is approved in a prescribed manner. Further, Section 490.1108A of the Iowa Business Corporation Act permits a board of directors, in the context of a takeover proposal, to consider not only the effect of a proposed transaction on shareholders, but also on a corporation’s employees,team members, suppliers, customers,guests, creditors, and on the communities in which the corporation operates. These provisions could discourage others from bidding for our shares and could, as a result, reduce the likelihood of an increase in our stock price that would otherwise occur if a bidder sought to buy our stock.
We may, in the future, adopt other measures (such as a shareholder rights plan or “poison pill”) that could have the effect of delaying, deferring, or preventing an unsolicited takeover, even if such a change in control were at a premium price or favored by a majority of unaffiliated shareholders. These measures may be adopted without any further vote or action by our shareholders.
The market price for our common stock has been and may in the future be volatile, which could cause the value of your investment to decline.
Securities markets worldwide experience significant price and volume fluctuations. This market volatility could significantly affect the market price of our common stock without regard to our operating performance. In addition, the price of our common stock could be subject to wide fluctuations in response to these and other factors:
A deviation in our results from the expectations of public market analysts and investors;
Statements by research analysts about our common stock, company, or industry;
Changes in market valuations of companies in our industry and market evaluations of our industry generally;
Additions or departures of key personnel;
Actions taken by our competitors;
Sales of common stock by the Company, senior officers, or other affiliates; and
Other general economic, political, or market conditions, many of which are beyond our control.
The market price of our common stock will also be affected by our quarterly operating results and same store sales results, which may be expected to fluctuate. Some of the factors that may affect our quarterly results and same store sales include general, regional, and national economic conditions; competition; unexpected costs; changes in retail pricing, consumer trends, and the number of stores we open and/or close during any given period; costs of compliance with corporate governance and Sarbanes-Oxley requirements. Other factors are discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations. You may not be able to resell your shares of our common stock at or above the price you pay.
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| ITEM 1B. | UNRESOLVED STAFF COMMENTS |
Not applicable.
We own our corporate headquartersthe Store Support Center (built in 1990) and both distribution centers. Located on an approximately 51-acre57-acre site in Ankeny, Iowa, our corporate headquarters,the Store Support Center, our first distribution center, and our vehicle service and maintenance center occupy a total of approximately 375,000 square feet. We also own a building near our corporate headquartersthe Store Support Center where our construction and support services departments operate. In February 2016, we opened our second distribution center, located in Terre Haute, Indiana. This second distribution center has approximately 300,000 square feet of warehouse space. We are currently in the process of constructing a third distribution center located in Joplin, Missouri. The new distribution center is expected to provide approximately 230,000 square feet of available space.
On April 30, 2017,2020, we also owned the land at 1,9572,181 store locations and the buildings at 1,9622,189 locations and leased the land at 2126 locations and the buildings at 1618 locations. Most of the leases provide for the payment of a fixed rent plus property taxes, insurance, and maintenance costs. Generally, the leases are for terms of ten to twenty years with options to renew for additional periods or options to purchase the leased premises at the end of the lease period. Additionally, the Company regularly has land held for development, land under construction for new stores, and land held for sale as a result of store closures.
The information required to be set forth under this heading is incorporated by reference from Note 10, Contingencies, to the Consolidated Financial Statements included in Part II, Item 8.
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| ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
PART II
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| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES |
Common Stock
Casey’s common stock trades on the Nasdaq Global Select Market under the symbol CASY. The 38,765,82136,806,325 shares of common stock outstanding at April 30, 20172020 had a market value of approximately $4.3$5.6 billion. On that date, there were 1,7151,583 shareholders of record.
Common Stock Market Prices
| | Calendar
2015 | High | | Low | | Calendar 2016 | | High | | Low | | Calendar 2017 | | High | | Low | |
| Calendar 2018 | | High | | Low | | Calendar 2019 | | High | | Low | | Calendar 2020 | | High | | Low |
| Q1 | $ | 94.67 |
| | $ | 83.00 |
| | Q1 | | $ | 123.75 |
| | $ | 98.80 |
| | Q1 | | $ | 120.90 |
| | $ | 107.43 |
| $ | 128.51 |
| | $ | 105.45 |
| | Q1 | | $ | 138.45 |
| | $ | 122.86 |
| | Q1 | | $ | 181.99 |
| | $ | 114.01 |
|
| Q2 | $ | 98.22 |
| | $ | 80.94 |
| | Q2 | | $ | 131.52 |
| | $ | 105.17 |
| | | | | $ | 110.83 |
| | $ | 90.42 |
| | Q2 | | $ | 156.82 |
| | $ | 127.75 |
| | | | |
| Q3 | $ | 114.90 |
| | $ | 95.30 |
| | Q3 | | $ | 136.22 |
| | $ | 115.07 |
| | | | | $ | 130.74 |
| | $ | 102.47 |
| | Q3 | | $ | 173.31 |
| | $ | 154.58 |
| | | | |
| Q4 | $ | 129.53 |
| | $ | 101.36 |
| | Q4 | | $ | 126.49 |
| | $ | 110.45 |
| | | | | $ | 137.08 |
| | $ | 116.23 |
| | Q4 | | $ | 179.21 |
| | $ | 152.05 |
| | | | |
Dividends
We began paying cash dividends during fiscal 1991.The1991. The dividends declared in fiscal 20172020 totaled $0.96$1.28 per share. The dividends declared in fiscal 20162019 totaled $0.88$1.16 per share. On June 2, 2017,3, 2020, the Board of Directors declared a quarterly dividend of $0.26$0.32 per share payable August 15, 201717, 2020, to shareholders of record on August 1, 2017.3, 2020. The Board typically reviews the dividend every year at its June meeting.
The cash dividends declared during the calendar years 2015-172018 through 2020 were as follows: | | Calendar 2015 | Cash dividend declared | | Calendar 2016 | | Cash dividend declared | | Calendar 2017 | | Cash dividend declared | |
| Calendar 2018 | | Cash dividend declared | | Calendar 2019 | | Cash dividend declared | | Calendar 2020 | | Cash dividend declared |
| Q1 | $ | 0.200 |
| | Q1 | | $ | 0.220 |
| | Q1 | | $ | 0.240 |
| $ | 0.260 |
| | Q1 | | $ | 0.290 |
| | Q1 | | $ | 0.320 |
|
| Q2 | 0.220 |
| | Q2 | | 0.240 |
| | Q2 | | 0.260 |
| 0.290 |
| | Q2 | | 0.320 |
| | Q2 | | 0.320 |
|
| Q3 | 0.220 |
| | Q3 | | 0.240 |
| | | 0.290 |
| | Q3 | | 0.320 |
| | |
| Q4 | 0.220 |
| | Q4 | | 0.240 |
| | | 0.290 |
| | Q4 | | 0.320 |
| | |
| | 0.860 |
| | 0.940 |
| | | 1.130 |
| | 1.250 |
| | |
Issuer Purchases of Equity Securities
During the fourth quarter of the fiscal year ended April 30, 2017, the Company began a share repurchase program, wherein the Company is authorized to repurchase up to an aggregate of $300 million of the Company's outstanding common stock. The share repurchase authorization is valid for a period of two years. The timing and number of repurchase transactions under the program depends on a variety of factors including, but not limited to, market conditions, corporate considerations, business opportunities, debt agreements, and regulatory requirements. The program can be suspended or discontinued at any time. The following table sets forth information with respect to the Company's repurchases of common stock during the quarter ended April 30, 2017:
2020:
|
| | | | | | | | | | | | | |
| Period | Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs |
| Fourth Quarter: | | | | | | | |
| March 9-31, 2017 | 215,900 |
| | $ | 110.32 |
| | 215,900 |
| | $ | 276,182,253 |
|
| April 1-30, 2017 | 227,900 |
| | 112.14 |
| | 227,900 |
| | 250,626,279 |
|
| As of April 30, 2017 | 443,800 |
| | $ | 111.25 |
| | 443,800 |
| | $ | 250,626,279 |
|
|
| | | | | | | | | | | | | |
| Period | Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1) |
| Fourth Quarter: | | | | | | | |
| February 1-29, 2020 | — |
| | $ | — |
| | — |
| | $ | 300,000,000 |
|
| March 1-31, 2020 | — |
| | — |
| | — |
| | 300,000,000 |
|
| April 1-30, 2020 | — |
| | — |
| | — |
| | $ | 300,000,000 |
|
| Total | — |
| | $ | — |
| | — |
| | $ | 300,000,000 |
|
| |
| (1) | On March 6, 2017, the Company announced a share repurchase program, wherein the Company was authorized to repurchase up to an aggregate of $300 million of the Company's outstanding common stock. The share repurchase authorization was valid for a period of two years. The repurchase was completed in May 2018. In March 2018, the Company announced a second share repurchase program with an aggregate $300 million repurchase authorization, also valid for two years. On March 6, 2020, the authorization was extended through the end of the Company’s 2022 fiscal year. The timing and number of repurchase transactions under the program depends on a variety of factors including, but not limited to, market conditions, corporate considerations, business opportunities, debt agreements, and regulatory requirements. The program can be suspended or discontinued at any time. No stock was repurchased in the fourth quarter or fiscal year related to that authorization. |
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| ITEM 6. | SELECTED FINANCIAL DATA |
(In thousands, except per share amounts)
Statement of Income Data
| | | | Years ended April 30, | Years ended April 30, |
| | 2017 | | 2016 | | 2015 | | 2014 | | 2013 | 2020 | | 2019 | | 2018 | | 2017 | | 2016 |
| Total revenue | $ | 7,506,587 |
| | $ | 7,122,086 |
| | $ | 7,767,216 |
| | $ | 7,840,255 |
| | $ | 7,250,840 |
| $ | 9,175,296 |
| | $ | 9,352,910 |
| | $ | 8,391,124 |
| | $ | 7,506,587 |
| | $ | 7,122,086 |
|
| Cost of goods sold | 5,825,426 |
| | 5,508,465 |
| | 6,327,431 |
| | 6,618,239 |
| | 6,179,771 |
| |
| Gross profit | 1,681,161 |
| | 1,613,621 |
| | 1,439,785 |
| | 1,222,016 |
| | 1,071,069 |
| |
| Cost of goods sold (exclusive of depreciation and amortization, shown separately below) | | 7,030,612 |
| | 7,398,186 |
| | 6,621,731 |
| | 5,825,426 |
| | 5,508,465 |
|
| Operating expenses | 1,172,328 |
| | 1,053,805 |
| | 960,424 |
| | 857,297 |
| | 760,365 |
| 1,498,043 |
| | 1,391,279 |
| | 1,283,046 |
| | 1,172,328 |
| | 1,053,805 |
|
| Depreciation and amortization | 197,629 |
| | 170,937 |
| | 156,111 |
| | 131,160 |
| | 111,823 |
| 251,174 |
| | 244,387 |
| | 220,970 |
| | 197,629 |
| | 170,937 |
|
| Interest, net | 41,536 |
| | 40,173 |
| | 41,225 |
| | 39,915 |
| | 35,265 |
| 53,419 |
| | 55,656 |
| | 50,940 |
| | 41,536 |
| | 40,173 |
|
| Income before income taxes | 269,668 |
| | 348,706 |
| | 282,025 |
| | 193,644 |
| | 163,616 |
| 342,048 |
| | 263,402 |
| | 214,437 |
| | 269,668 |
| | 348,706 |
|
| Federal and state income taxes | 92,183 |
| | 122,724 |
| | 101,397 |
| | 66,824 |
| | 59,802 |
| 78,202 |
| | 59,516 |
| | (103,466 | ) | | 92,183 |
| | 122,724 |
|
| Net income | $ | 177,485 |
| | $ | 225,982 |
| | $ | 180,628 |
| | $ | 126,820 |
| | $ | 103,814 |
| $ | 263,846 |
| | $ | 203,886 |
| | $ | 317,903 |
| | $ | 177,485 |
| | $ | 225,982 |
|
| Basic earnings per common share | $ | 4.54 |
| | $ | 5.79 |
| | $ | 4.66 |
| | $ | 3.30 |
| | $ | 2.71 |
| $ | 7.14 |
| | $ | 5.55 |
| | $ | 8.41 |
| | $ | 4.54 |
| | $ | 5.79 |
|
| Diluted earnings per common share | $ | 4.48 |
| | $ | 5.73 |
| | $ | 4.62 |
| | $ | 3.26 |
| | $ | 2.69 |
| $ | 7.10 |
| | $ | 5.51 |
| | $ | 8.34 |
| | $ | 4.48 |
| | $ | 5.73 |
|
| Weighted average number of common shares outstanding—basic | 39,125 |
| | 39,016 |
| | 38,743 |
| | 38,458 |
| | 38,297 |
| 36,956 |
| | 36,710 |
| | 37,778 |
| | 39,125 |
| | 39,016 |
|
| Weighted average number of common shares outstanding—diluted | 39,579 |
| | 39,422 |
| | 39,104 |
| | 38,868 |
| | 38,620 |
| 37,186 |
| | 36,975 |
| | 38,132 |
| | 39,579 |
| | 39,422 |
|
| Dividends declared per common share | $ | 0.96 |
| | $ | 0.88 |
| | $ | 0.80 |
| | $ | 0.72 |
| | $ | 0.66 |
| $ | 1.28 |
| | $ | 1.16 |
| | $ | 1.04 |
| | $ | 0.96 |
| | $ | 0.88 |
|
Balance Sheet Data
| | | | As of April 30, | As of April 30, |
| | 2017 | | 2016 | | 2015 | | 2014 | | 2013 | 2020 | | 2019 | | 2018 | | 2017 | | 2016 |
| Current assets | $ | 350,685 |
| | $ | 325,885 |
| | $ | 305,260 |
| | $ | 389,558 |
| | $ | 278,967 |
| 387,250 |
| | $ | 410,580 |
| | $ | 396,840 |
| | $ | 350,685 |
| | $ | 325,885 |
|
| Total assets | 3,020,102 |
| | 2,726,148 |
| | 2,469,965 |
| | 2,304,876 |
| | 1,990,168 |
| $ | 3,943,892 |
| | 3,731,376 |
| | 3,469,927 |
| | 3,020,102 |
| | 2,726,148 |
|
| Current liabilities | 446,546 |
| | 387,571 |
| | 364,889 |
| | 390,889 |
| | 412,806 |
| 1,063,428 |
| | 590,932 |
| | 507,850 |
| | 446,546 |
| | 387,571 |
|
| Long-term debt, net of current maturities | 907,356 |
| | 822,869 |
| | 838,245 |
| | 853,642 |
| | 653,081 |
| 714,502 |
| | 1,283,275 |
| | 1,291,725 |
| | 907,356 |
| | 822,869 |
|
| Shareholders’ equity | 1,190,620 |
| | 1,083,463 |
| | 875,229 |
| | 703,264 |
| | 593,387 |
| 1,643,205 |
| | 1,408,769 |
| | 1,271,141 |
| | 1,190,620 |
| | 1,083,463 |
|
|
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| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars and gallons in thousands, except per share amounts) |
Please read the following discussion of the Company’s financial condition and results of operations in conjunction with the selected historical consolidated financial data and consolidated financial statements and accompanying notes presented elsewhere in this Form 10-K.
Overview
The Company primarily operates convenience stores under the names "Casey's" and “Casey’s General Store” in 1516 Midwestern states, primarily in Iowa, Missouri and Illinois. On April 30, 2017,2020, there were a total of 1,9782,207 stores in operation. All but two storesthree Casey's Stores offer fuel for sale on a self-serve basis and all carry a broad selection of food (including freshly prepared foods such as pizza, donuts and sandwiches), beverages, tobacco and nicotine products, health and beauty aids, automotive products and other non-food items. We derive our revenue from the retail sale of fuel and the products offered in our stores.
Approximately 57%56% of all Casey’s General Stores were opened in areas with populations of fewer than 5,000 people, while approximately 18%19% of all stores were opened in communities with populations exceeding 20,000 persons. The Marketing Company operates two distribution centers, through which grocery and generalother merchandise, and prepared food and fountain items are supplied to our stores. One is adjacent to our Corporate Headquartersthe Store Support Center facility in Ankeny, Iowa. The other was opened in February 2016 in Terre Haute, Indiana. At April 30, 2017,2020, the Company owned the land at 1,9572,181 store locations and the buildings at 1,9622,189 locations, and leased the land at 2126 locations and the buildings at 1618 locations.
During the fourth quarter of fiscal 2017, the Company earned $0.76 in diluted earnings per share compared to $1.19 per share for the same quarter a year ago. Fiscal 2017 diluted earnings per share were $4.48 versus $5.73 for the prior year. The Company’s business is seasonal, and generally the Company experiences higher sales and profitability during the first and second fiscal quarters (May-October), when customersguests tend to purchase greater quantities of fuel and certain convenience items such as beer, pop and ice.
The following table represents the roll forward of store growth through the fourth quarter of fiscal 2020: |
| |
| Store Count |
| Stores at April 30, 2019 | 2,146 |
| New store construction | 60 |
| Acquisitions | 18 |
| Acquisitions not opened | (7) |
| Prior acquisitions opened | 3 |
| Closed | (13) |
| Stores at April 30, 2020 | 2,207 |
Long-Term Strategic Plan
The Company announced an updated, long-term strategic plan in January 2020 focused on four strategic objectives: reinvigorate hospitality and the guest experience; be where the guest is; best-in-class efficiencies; and, invest in our people and culture. The Company's plan is based on building on our proud heritage and distinct advantages to become more contemporary through new capabilities, technology, data, and processes. We believe this will best position the Company to address rapidly evolving shifts in consumer habits and other macro retail trends.
COVID-19 and Fourth Quarter Results
During the 2017fourth quarter of fiscal year 2020, the COVID-19 pandemic began to take hold throughout our footprint, as the number of reported infections within the sixteen states in which we acquired 22 convenience storesoperate increased. Starting in mid-March, governmental restrictions, including shelter in place and stay at home orders, a widespread shift to working from home, other partiesefforts to restrict the spread of the outbreak, and opened 18 of them,our guests’ behavior in response to the pandemic resulted in a sharp, overall decline in store traffic. This resulted in lower demand for our products and completed 48 new store constructions. In addition to this activity, the Company also completed 103 major remodels, replaced 21 stores and closed 20 stores during the year.
The fourth quarter results reflected a 0.5% decrease in same-store fuel gallons sold,sales. Because we were considered an “essential service” by public authorities, we continued to operate with minimal (and only temporary) store closings. While our stores remained open, the manner in which we served our guests required changes at many of our locations, including restrictions on self-service food and beverages, reduced prepared food offerings, limiting guest traffic in our stores and social distancing measures. In addition, due to the decrease in demand, and to enhance our cleaning procedures, many of our stores saw a reduction in store hours. Throughout the pandemic, however, we have not experienced any significant disruptions in our supply chain to date, despite the increased restrictions and uncertainty.
Our top priority throughout this pandemic has been the health and well-being of our team members, our guests, and our communities. As a result, we implemented the following changes across our store footprint:
provided additional compensation and operational bonuses for key field and support team members;
provided additional paid leave for impacted team members;
provided personal protective equipment for team members;
installed Plexiglas shields at our cash registers;
enhanced cleaning and hygiene practices;
implemented health checks in all our distribution centers;
designated exclusive shopping times for higher risk guests;
established 6-foot markings in our stores to encourage social distancing; and
implemented contact-less delivery.
provided free meals for all store and distribution center team members;
After a strong start to the fourth quarter, the Company’s results of operations for fiscal 2020 in the last half of the quarter were significantly impacted in all categories by the COVID-19 pandemic as follows:
|
| | | | | | |
| Same-Store Sales | 1st Half | 2nd Half | 4th quarter total |
| Fuel Gallons | 2.9 | % | (32.2 | )% | (14.7 | )% |
| Grocery & Other Merchandise | 4.9 | % | (9.3 | )% | (2.0 | )% |
| Prepared Food & Fountain | 5.5 | % | (30.2 | )% | (13.5 | )% |
Despite these impacts, however, during the fourth quarter, the Company reported $1.67 in diluted earnings per share compared to $0.68 per share for the same quarter a year ago. The increase was driven largely by an averageunprecedented fuel margin of approximately 17.240.8 cents per gallon (comparedin the fourth quarter of fiscal 2020, compared to a 4.6% increase18.6 cents per gallon in same-storethe fourth quarter of fiscal 2019, which was primarily due to declining wholesale fuel costs related to macro-economic factors in the oil industry. The fuel margin peaked at the beginning of April, and moderated throughout the remainder of the quarter. Same-store fuel gallons sold and an average margin of 17.8 cents per gallon last year). The Company’s fourth quarter fuel margin was helped by our ability to sell approximately 15.5 million renewable fuel credits for $7.1 million (compared to 12.7 million credits sold last year for $9.1 million) . For the year, we sold 67.6 million renewable fuel credits for $52.2 million. In the prior year we sold 57.1 million credits for $31.0 million. For the fiscal year, same-store gallons increased 2.1% with an average margin of 18.4 cents per gallon. In the prior year, same-store gallons increased 3.0% with an average margin of 19.6 cents per gallon. The Company’s policy is to price to the competition, so the timing of retail price changes is primarily driven by local competitive conditions.
Same store sales of grocery & other merchandise increased 1.5% and prepared foods & fountain increased 3.2% during the fourth quarter of fiscal 2017, as2020 were down 14.7%, compared to the same perioda decrease of 2.8% in the prior year.
Also in the fourth quarter of fiscal 2020, same-store sales of grocery and other merchandise decreased 2.0% with an average margin of 30.4%. In the prior year, same-store sales were up 5.7% with a 31.5% average margin. The Company believes that reducing energy consumption where feasible isaverage margin was adversely affected by stronger sales of lower margin products in the category. Prepared food and fountain same-store sales in the fourth quarter of fiscal 2020 were down 13.5% with an average margin of 60.0%. In the prior year, same-store sales were up 2.0% with a sound62.2% average margin. The average margin was adversely impacted by higher commodity costs and increased promotional activity.
For the fourth quarter of fiscal 2020, operating expenses were up 6.2% to 367.5 million. Fourth quarter results were positively impacted by wage expense reductions related to a reduction in hours at the stores, along with lower credit card fees, offset by higher hourly wage rates and increased costs of cleaning and other pandemic-related supplies. Fourth quarter depreciation expense was consistent with prior year. Fourth quarter effective tax rate was higher than prior year, due primarily to larger prior year tax credits combined with lower pretax income.
As we continue to navigate through this near-term challenge, we made numerous adjustments in our business to maintain flexibility to ensure our continued long-term business strategy that reduces operating expenses. While individuallysuccess, including deferring some discretionary capital spending, temporarily adjusting store hours to meet guest demand to optimize profitability, expanding third-party delivery opportunities, expanding delivery items beyond prepared foods, expanding online assortment available for sale and modifying prepared food production to reduce food waste. In parallel, we continue to move forward in aggregate the financial impact of these initiatives may not be material, implementing them throughout our operations is a partexecuting on key elements of our overall expense management. Below is a listlong-term strategic plan.
While COVID-19 has resulted in, and will continue to bring, significant challenges and uncertainty, we believe that the strength of some ofour brand and balance sheet position us well to emerge from the energy initiativesCOVID-19 pandemic. However, given the uncertainties, we are unable to forecast or estimate the potential impact to our future operating results.
For more information related to the additional risks to the Company is currently undertaking:
All newly constructed stores use 100 percent high efficiency LED lighting. The Company is also inrelated to the process of retrofitting all of our legacy stores with LED lighting. The project is expected to take roughly four to five years to complete. Also, when we perform a major remodel of an existing store, the fluorescent lighting is replaced with LED lighting. Furthermore, new canopies over the fuel pumps are installed with time systems and photo eyes to help control the canopy lighting.
Multiple paperless initiatives are going on throughout the Company.
Our fleet of trucks is updated frequently, and uses electric fuel tank heaters to reduce idle time. Furthermore, timers have been installed that automatically turn off the engine if it is idling for more than ten minutes.
For further information concerning the Company’s operating environmentCOVID-19 pandemic, and certain conditions that may affect future performance, seeplease refer to the “Risk Factors” section above in Item 1A. and “Forward-looking Statements” at the end of this Item 7.
Fiscal 20172020 Compared with Fiscal 20162019
The Company’s results of operations for fiscal 2020 in the last two months of the year were significantly impacted in all categories by the COVID-19 pandemic. Total revenue for fiscal 2017 increased 5.4%2020 decreased 1.9% ($384,501)177,614) to $7,506,587, primarily due to an increase in the number of fuel gallons sold (which generated an additional $235,458), and a $185,993 increase in inside sales (grocery & other merchandise and prepared food & fountain), offset by a 1% decrease in the average retail price of a gallon of fuel (a $36,132 decrease).$9,175,296. Retail fuel sales for the fiscal year were $4,414,128, an increase$5,517,412, a decrease of 4.7%.5.7% primarily due to a 5.5% decrease in the price of fuel, which decreased fuel revenue by $321,444. Fuel gallons sold increased 5.6%decreased 0.1% to 2.12.3 billion gallons. Inside sales increased 6.5%gallons, which decreased fuel revenue by an additional $5,835. The decrease in fuel revenue was offset by a $152,358 increase to $3,040,779,$3,596,173 (4.4%) in grocery and other merchandise and prepared food and fountain, primarily as a result of a $77,872 increase fromdue to operating 61 more stores that were built or acquired after April 30, 2015, and a $50,593 increase from the rollout and expansion of our recent operating programs in our stores (expanded hours at select locations, stores with pizza delivery, and major remodels).than one year ago.
Total gross profit marginrevenue less cost of goods sold (excluding depreciation and amortization) was 22.4%23.4% for fiscal 20172020 compared with 22.7%20.9% for the prior year. TheFuel cents per gallon increased to 26.8 cents in fiscal 2020 from 20.3 cents in fiscal 2019 due to an unprecedented fourth quarter average fuel margin driven by macro-economic factors, as well as the Company's transition to a more balanced approach to fuel pricing and focus on optimizing gross profit dollars. The grocery and other merchandise revenue less related cost of goods sold (exclusive of depreciation and amortization) was relatively consistent at 32.0% in fiscal 2020 compared to 32.1% in fiscal 2019. The prepared food and fountain revenue less related cost of goods sold (exclusive of
depreciation and amortization) decreased to 8.6%60.9% from 62.2% during fiscal 2020, due mainly to higher commodity costs and increased promotional activity.
Operating expenses increased 7.7% ($106,764) in fiscal 2017 from 9.1% in fiscal 20162020 primarily due to less volatility in wholesale fuel prices, partially offset by gains in renewable fuel credits. The grocery & other merchandise margin was slightly lower at 31.5% in fiscal 2017 compared to
31.9% in fiscal 2016, due mainly tooperating 61 more stores than one year ago, and incremental expenses associated with the continued pricing pressures from cigarettes, transitioning to direct store delivery of ice, and a one time adjustment in the fourth quarter. The prepared food & fountain margin decreased to 62.3% from 62.5% during fiscal 2017.
Operating expenses increased 11.2% ($118,523) in fiscal 2017 primarily due to the expansion of our operating programs noted above ($36,393), and an increase from stores built or acquired after April 30, 2015 ($31,854).COVID-19 pandemic. The majority of all operating expenses are wages and relatedwage-related costs.
Depreciation and amortization expense increased 15.6%2.8% ($6,787) to $197,629$251,174 in fiscal 20172020 from $170,937$244,387 in fiscal 2016.2019. The increase was due primarily to capital expenditures made in fiscal 2017.2020 and fiscal 2019, primarily relating to new stores, offset by an adjustment to the useful lives of underground storage tanks.
The effective tax rate decreased 100 basis pointsincreased to 34.2%22.9% in fiscal 20172020 from 35.2%22.6% in fiscal 2016.2019. The decreaseincrease in the effective tax rate was primarily due to the adoption of ASU 2016-09a one-time benefit in the first quarter of fiscalprior year 2017. ASU 2016-09 requires excessfrom adjusting the Company’s deferred tax benefits from the settlement of share-based awardsassets and liabilities for enacted state law changes, offset by a one-time benefit related to be recognized in income tax expensenet operating loss carrybacks in the income statement, whereas they were previously recognized in equity.current year enacted by the Coronavirus Aid, Relief and Economic Security (CARES) Act.
Net income decreasedincreased to $177,485$263,846 in fiscal 20172020 from $225,982$203,886 in fiscal 2016. The decrease was due to a combination of a weaker agricultural economy, which has slowed the growth in customer traffic to stores, combined with less volatility in the wholesale fuel costs and wage rate increases. These were partially offset by an increase in the number of fuel gallons sold, as well as an increase in inside sales.
Fiscal 2016 Compared with Fiscal 2015
Total revenue for fiscal 2016 decreased 8.3% ($645,130) to $7,122,086, primarily due to a 24% decrease in the average retail price of a gallon of fuel (a $1,221,577 decrease), offset by an increase in the number of fuel gallons sold (which generated an additional $291,994), and a $279,077 increase in inside sales (grocery & other merchandise and prepared food & fountain). Retail fuel sales for the fiscal year were $4,214,802, a decrease of 18.1%. Fuel gallons sold increased 7.4% to 2.0 billion gallons. Inside sales increased 10.8% to $2,854,786, primarily as a result of a $81,018 increase from stores that were built or acquired after April 30, 2014, and a $54,845 increase from the rollout and expansion of our recent operating programs in our stores (expanded hours at select locations, stores with pizza delivery, and major remodels).
Total gross profit margin was 22.7% for fiscal 2016 compared with 18.5% for the prior year. The fuel margin increased to 9.1% in fiscal 2016 from 6.8% in fiscal 2015 primarily due to a steady fall in wholesale costs midyear combined with volatility in wholesale fuel prices, contributing to a stronger margin. The grocery & other merchandise margin was consistent at 31.9% in fiscal 2016 compared to 32.1% in fiscal 2015. The prepared food & fountain margin increased to 62.5% from 59.7% primarily due to the lower commodity costs during fiscal 2016.
Operating expenses increased 9.7% ($93,381) in fiscal 2016 primarily due to an increase from stores built or acquired after April 30, 2014 ($31,137), and the expansion of our operating programs noted above ($21,256). The majority of all operating expenses are wages and related costs.
Depreciation and amortization expense increased 9.5% to $170,937 in fiscal 2016 from $156,111 in fiscal 2015.2019. The increase was due to capital expenditures made in fiscal 2016.increased fuel margin contribution and operating 61 more stores than one year ago.
The effective tax rate decreased 80 basis points to 35.2% in fiscal 2016 from 36.0% in fiscal 2015. The decrease in the effective tax rate was primarily due to a decrease in state tax expense (approximately 40 basis points) and an increase in favorable permanent differences (approximately 30 basis points).
Net income increased to $225,982 in fiscal 2016 from $180,628 in fiscal 2015. The increase was due primarilyPlease refer to the increase inForm 10-K related to the numberfiscal year ended April 30, 2019, filed on June 28, 2019, for comparison of fuel gallons sold and a slight increase in the fuel gross profit margin, as well as an increase in inside sales, including a stronger prepared food margin. However, this was partially offset by an increase in operating expenses and depreciation and amortization.Fiscal 2019 to Fiscal 2018.
COMPANY TOTAL REVENUE AND GROSS PROFITREVENUE LESS COST OF GOODS SOLD (EXCLUDING DEPRECIATION AND AMORTIZATION) BY CATEGORY
| | | | Years ended April 30, | Years ended April 30, |
| | 2017 | | 2016 | | 2015 | 2020 | | 2019 | | 2018 |
| Total revenue by category | | | | | | | | | | |
| Fuel | $ | 4,414,128 |
| | $ | 4,214,802 |
| | $ | 5,144,385 |
| $ | 5,517,412 |
| | $ | 5,848,770 |
| | $ | 5,145,988 |
|
| Grocery & other merchandise | 2,087,349 |
| | 1,974,073 |
| | 1,794,822 |
| |
| Prepared food & fountain | 953,430 |
| | 880,713 |
| | 780,887 |
| |
| Grocery and other merchandise | | 2,498,966 |
| | 2,369,521 |
| | 2,184,147 |
|
| Prepared food and fountain | | 1,097,207 |
| | 1,074,294 |
| | 1,005,621 |
|
| Other | 51,680 |
| | 52,498 |
| | 47,122 |
| 61,711 |
| | 60,325 |
| | 55,368 |
|
| | $ | 7,506,587 |
| | $ | 7,122,086 |
| | $ | 7,767,216 |
| $ | 9,175,296 |
| | $ | 9,352,910 |
| | $ | 8,391,124 |
|
| Gross profit by category (1) | | | | | | |
| Revenue less cost of goods sold (excluding depreciation and amortization) by category | | | | | | |
| Fuel | $ | 378,347 |
| | $ | 381,659 |
| | $ | 351,155 |
| $ | 614,847 |
| | $ | 466,107 |
| | $ | 406,811 |
|
| Grocery & other merchandise | 657,190 |
| | 629,234 |
| | 575,510 |
| |
| Prepared food & fountain | 594,024 |
| | 550,292 |
| | 466,056 |
| |
| Grocery and other merchandise | | 800,140 |
| | 759,817 |
| | 693,576 |
|
| Prepared food and fountain | | 668,092 |
| | 668,598 |
| | 613,736 |
|
| Other | 51,600 |
| | 52,436 |
| | 47,064 |
| 61,605 |
| | 60,202 |
| | 55,270 |
|
| | $ | 1,681,161 |
| | $ | 1,613,621 |
| | $ | 1,439,785 |
| $ | 2,144,684 |
| | $ | 1,954,724 |
| | $ | 1,769,393 |
|
INDIVIDUAL STORE COMPARISONS (2)(1)
| | | | Years ended April 30, | Years ended April 30, |
| | 2017 | | 2016 | | 2015 | 2020 | | 2019 | | 2018 |
| Average retail sales | $ | 3,817 |
| | $ | 3,704 |
| | $ | 4,133 |
| $ | 4,203 |
| | $ | 4,449 |
| | $ | 4,150 |
|
Average retail inside sales | 1,561 |
| | 1,505 |
| | 1,384 |
| 1,659 |
| | 1,649 |
| | 1,602 |
|
| Average gross profit on inside items | 633 |
| | 618 |
| | 554 |
| |
| Average revenue less cost of goods sold (excluding depreciation and amortization) on inside items | | 674 |
| | 679 |
| | 643 |
|
| Average retail sales of fuel | 2,256 |
| | 2,199 |
| | 2,748 |
| 2,544 |
| | 2,800 |
| | 2,548 |
|
| Average gross profit on fuel (3) | 194 |
| | 202 |
| | 194 |
| |
| Average revenue less cost of goods sold (excluding depreciation and amortization) on fuel | | 280 |
| | 223 |
| | 202 |
|
Average operating income (4)(2) | 233 |
| | 280 |
| | 256 |
| 317 |
| | 281 |
| | 246 |
|
| Average number of gallons sold | 1,053 |
| | 1,015 |
| | 968 |
| 1,055 |
| | 1,097 |
| | 1,087 |
|
| |
| (1) | Gross profits represent total revenue less cost of goods sold. Gross profit is given before charges for depreciation, amortization, and credit card fees. Cost of goods sold includes the costs we incur to acquire fuel and merchandise, including excise taxes, less renewable fuel credits (RINs). |
| |
(2) | Individual store comparisons include only those stores that had been in operation for at least one full year and remained open on April 30 of the fiscal year indicated. |
| |
(3) | Retail fuel profit margins have a substantial impact on our net income. Profit margins on fuel sales can be adversely affected by factors beyond our control, including oversupply in the retail fuel market, uncertainty or volatility in the wholesale fuel market, and price competition from other fuel marketers. Any substantial decrease in profit margins on retail fuel sales or the number of gallons sold could have a material adverse effect on our earnings. |
| |
(4)(2) | Average operating income represents retail sales less cost of goods sold and operating expenses attributable to a particular store; it excludes federal and state income taxes, and Company operating expenses not attributable to a particular store. |
| |
| (3) | Inside sales is comprised of sales related to the grocery and other merchandise and prepared food and fountain categories |
SAME STORE SALES GROWTH BY CATEGORY
(1)
|
| | | | | | | | |
| | Years ended April 30, |
| | 2017 | | 2016 | | 2015 |
| Fuel gallons (1) | 2.1 | % | | 3.0 | % | | 2.6 | % |
| Grocery & other merchandise (1) | 2.9 | % | | 7.1 | % | | 7.8 | % |
| Prepared food & fountain (1) (2) | 4.8 | % | | 8.4 | % | | 12.4 | % |
|
| | | | | | | | |
| | Years ended April 30, |
| | 2020 | | 2019 | | 2018 |
| Fuel gallons (2) | (5.1 | )% | | (1.7 | )% | | 2.3 | % |
| Grocery and other merchandise (3) | 1.9 | % | | 3.6 | % | | 1.9 | % |
| Prepared food and fountain (3) | (1.5 | )% | | 1.9 | % | | 1.7 | % |
| |
| (1) | The declineSame-store sales is a common metric used in all categoriesthe convenience store industry. We define same-store sales as the total sales increase (or decrease) for stores open during the full time of the periods being presented. When comparing quarterly data the store must be open for each entire quarter. When comparing annual data, the store must be open for each entire fiscal year being compared. Remodeled stores that remained open or were closed for just a very brief period of time (less than a week) during the period being compared remain in the same store sales for 2017 as compared to 2016 was duecomparison. If a store is replaced, either at the same location (razed and rebuilt) or relocated to a generally weaker agricultural economy, whichnew location, it is removed from the comparison until the new store has slowedbeen open for each entire period being compared. Newly constructed and acquired stores do not enter the growth in customer traffic to stores.calculation until they are open for each entire period being compared as well. |
| |
| (2) | The decline in fuel gallons in fiscal 2020 as compared to fiscal 2019 was primarily due to shelter in place restrictions diminishing overall demand during the last two months of the fiscal year, as well as transitioning to a more balanced pricing approach that focuses on both gallon movement and margins. |
| |
| (3) | The decline in same store sales growth for 2016grocery and other merchandise and prepared food and fountain for 2020 as compared to 20152019 was impacted byprimarily due to slowing guest traffic related to the timingCOVID-19 pandemic over the last two months of implementation on the continued rollout of pizza delivery and major remodels in 2016, as well as cycling against strong results from the priorfiscal year. |
The same store sales comparison includes aggregated individual store results for all stores open throughout both periods presented. When comparing quarterly data the store must be open for each entire quarter. When comparing annual data, the store must be open for each entire fiscal year being compared.
Remodeled stores that remained open or were closed for just a very brief period of time (less than a week) during the period being compared remain in the same store sales comparison. If a store is replaced, either at the same location (razed and rebuilt) or relocated to a new location, it is removed from the comparison until the new store has been open for each entire period being compared. Newly constructed and acquired stores do not enter the calculation until they are open for each entire period being compared as well.
Use of Non-GAAP Measures
We define EBITDA as net income before net interest expense, income taxes, depreciation and amortization. Adjusted EBITDA further adjusts EBITDA by excluding the gain or loss on disposal of assets as well as impairment charges. Neither EBITDA nor Adjusted EBITDA are presented in accordance with GAAP.
We believe EBITDA and Adjusted EBITDA are useful to investors in evaluating our operating performance because securities analysts and other interested parties use such calculations as a measure of financial performance and debt service capabilities, and they are regularly used by management for internal purposes including our capital budgeting process, evaluating acquisition targets, and assessing store performance.
EBITDA and Adjusted EBITDA are not recognized terms under GAAP and should not be considered as a substitute for net income, cash flows from operating activities or other income or cash flow statement data. These measures have limitations as analytical tools, and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP. We strongly encourage investors to review our financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.
Because non-GAAP financial measures are not standardized, EBITDA and Adjusted EBITDA, as defined by us, may not be comparable to similarly titled measures reported by other companies. It therefore may not be possible to compare our use of these non-GAAP financial measures with those used by other companies.
The following table contains a reconciliation of net income to EBITDA and Adjusted EBITDA for the three months and years ended April 30, 20172020 and 2016,2019, respectively:
| | | | Three months ended | | Years ended | Three months ended | | Years ended |
| | April 30, 2017 | | April 30, 2016 | | April 30, 2017 | | April 30, 2016 | April 30, 2020 | | April 30, 2019 | | April 30, 2020 | | April 30, 2019 |
| Net income | $ | 30,078 |
| | $ | 47,044 |
| | $ | 177,485 |
| | $ | 225,982 |
| 62,091 |
| | $ | 25,212 |
| | $ | 263,846 |
| | $ | 203,886 |
|
| Interest, net | 10,362 |
| | 9,948 |
| | 41,536 |
| | 40,173 |
| 13,806 |
| | 13,749 |
| | 53,419 |
| | 55,656 |
|
| Depreciation and amortization | 51,947 |
| | 45,909 |
| | 197,629 |
| | 170,937 |
| 65,193 |
| | 62,867 |
| | 251,174 |
| | 244,387 |
|
| Federal and state income taxes | 13,242 |
| | 22,699 |
| | 92,183 |
| | 122,724 |
| 16,491 |
| | 4,377 |
| | 78,202 |
| | 59,516 |
|
| EBITDA | $ | 105,629 |
| | $ | 125,600 |
| | $ | 508,833 |
| | $ | 559,816 |
| $ | 157,581 |
| | $ | 106,205 |
| | $ | 646,641 |
| | $ | 563,445 |
|
| Loss on disposal of assets and impairment charges | 1,488 |
| | 523 |
| | 2,298 |
| | 837 |
| 1,380 |
| | 225 |
| | 3,495 |
| | 1,384 |
|
| Adjusted EBITDA | $ | 107,117 |
| | $ | 126,123 |
| | $ | 511,131 |
| | $ | 560,653 |
| $ | 158,961 |
| | $ | 106,430 |
| | $ | 650,136 |
| | $ | 564,829 |
|
For the three months ended April 30, 2017,2020, EBITDA and Adjusted EBITDA were down 15.9%up 48.4% and 15.1%49.4% respectively, when compared to the same period a year ago. The decreaseincrease was due primarily to slowing customer traffic due to challenges in the broader agricultural economy, lowergross profit dollar margin expansion from unprecedented average fuel margins driven by macro-economic factors. For the year ended April 30, 2020, EBITDA and increasesAdjusted EBITDA were up 14.8% and 15.1% respectively. The increase was due primarily to gross profit dollar margin expansion in fuel and operating expenses, primarily wages. These reductions were partially offset by operating 4761 more stores than the same period a year ago, increasedoffset by decreased fuel gallons sold, and increases in inside sales. For the year ended April 30, 2017, EBITDA and Adjusted EBITDA were down 9.1% and 8.8% respectively. The decrease was due to slowing customer traffic due to challenges in the broader agricultural economy, lower fuel margins, and increases in operating expenses, primarily wages. These reductions were partially offset by operating 47 more stores than the same period a year ago, increased fuel gallons sold, and increases in inside sales.sold.
Critical Accounting Policies
Critical accounting policies are those accounting policies that management believes are important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective judgments, often because of the need to estimate the effects of inherently uncertain factors.
Inventory
Inventories, which consist of merchandise and fuel, are stated at the lower of cost or market. For fuel, cost is determined through the use of the first-in, first-out (FIFO) method. For merchandise inventories, cost is determined through the use of the last-in, first-out (LIFO) method.
Vendor allowances include rebates and other funds received from vendors to promote their products. The Company often receives such allowances on the basis of quantitative contract terms that vary by product and vendor or directly on the basis of purchases made. Vendor rebates in the form of rack display allowances (RDAs) are funds that we receive from various vendors for allocating certain shelf space to carry their specific products or to introduce new products in our stores for a particular period of time. The RDAs are treated as a reduction in cost of goods sold and are recognized incrementally over the period covered by the applicable rebate agreement. These funds do not represent reimbursements of specific, incremental, identifiable costs incurred by us in selling the vendor’s products. Vendor rebates in the form of billbacks are treated as a reduction in cost of goods sold and are recognized at the time the rebate is earned per the contract. Reimbursements of an operating expense (e.g., advertising) are recorded as reductions of the related expense.
The Company takes title to RINs when we purchase clear unleaded gasoline or diesel fuel, and purchase ethanol or biodiesel separately. The ethanol or biodiesel is blended in the tanker during transit to the store and the blending is the event that enables the RIN to be separated from the ethanol or biodiesel it identifies and allows it to be sold to third parties. The RINs are recorded as a reduction in the cost of goods sold in the period when the Company commits to a price and agrees to sell all of the RINs acquired during a specified period.
Long-lived Assets
The Company periodically monitors closed and underperforming stores for an indication that the carrying amount of assets may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the assets, an impairment loss is recognized to the extent the carrying value of the assets exceeds their estimated fair value. The
Company bases the estimated net realizable value of property and equipment on its experience in utilizing and/or disposing of similar assets and on estimates provided by its own and/or third-party real estate experts. Fair value is based on management’s estimate of the future cash flows to be generated and the amount that could be realized from the sale of assets in a current transaction between willing parties, which are considered Level 3 inputs.inputs (See Note 3 to the consolidated financial statements). The estimate is derived from offers, actual sale or disposition of assets subsequent to year-end, and other indications of fair value. In determining whether an asset is impaired, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets, which for the Company is generally on a store-by-store basis. The Company recorded impairment charges of $705$1,177 in fiscal 2017, $1,6252020, $1,167 in fiscal 2016,2019, and $1,785$507 in fiscal 2015,2018, a portion of which was related to replacement store and acquisition activities. Impairment charges are a component of operating expenses.
Self-insurance
We are primarily self-insured for employeeteam member healthcare, workers’ compensation, general liability, and automobile claims. The self-insurance claim liability for workers’ compensation, general liability, and automobile claims is determined actuarially at each year endyear-end based on claims filed and an estimate of claims incurred but not yet reported. Actuarial projections of the losses are employed due to the potential of variability in the liability estimates. Some factors affecting the uncertainty of claims include the development time frame, settlement patterns, litigation and adjudication direction, and medical treatment and cost trends. The liability is not discounted. The balances of our self-insurance reserves were $37,984$44,959 and $35,535$44,334 for the years ended April 30, 20172020 and 2016,2019, respectively.
Goodwill
Goodwill and intangible assets with indefinite lives are tested for impairment at least annually. The Company assesses impairment annually at year-end using a market based approach to establish fair value. All of the goodwill assigned to the individual stores is aggregated into a single reporting unit due to the similar economic characteristics of the stores. As of April 30, 2017, there was $132,806 of goodwill and management’s analysis of recoverability completed as of the fiscal year-end yielded no evidence of impairment and no events have occurred since the annual test indicating a potential impairment.
Recent Accounting Pronouncements
In May 2014,
Refer to Note 1 of the Financial Accounting Standards Board (FASB) issued ASU No. 2014-9, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on May 1, 2018. Early application is not permitted. To address implementation of ASU 2014-09 and evaluate its impact on our consolidated financial statements we have developedfor a project plan to evaluate our revenue streams and related internal controls. Since a majoritydescription of our revenue is derived from point of sale transactions, we do not believe the implementation of this standard will have a material impact on our consolidated financial statements. However, certain areas of our consolidated financial statements that will be impacted include, but are not limited to, recognition of estimated breakage upon the sale of the Company’s gift cards and deferral of an estimated portion of revenue expected to be redeemed in the future through Casey’s pizza box tops and punch card programs. We expect the impact of such changes to be immaterialnew accounting pronouncements applicable to the consolidated financial statements. The Company expects to adopt the new standard using the full retrospective method beginning May 1, 2018 and will further disclose the impact to the financial statements at that point.
In April 2015, the FASB issued Accounting Standards Update (ASU) No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30), which provided guidance on the presentation of debt issuance costs. The new standard required that debt issuance costs be recorded as a reduction from the face amount of the related debt, with amortization recorded as interest expense, rather than recording as a deferred asset. The Company adopted this standard in the quarter ended July 31, 2016, retrospectively to all prior periods. The adoption of this standard did not have a material impact on the financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of ASU 2016-02.
In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The goal of the update was to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. This update was effective for the Company beginning May 1, 2017 with early
adoption permitted. The Company elected to early adopt this standard in the quarter ended July 31, 2016. See footnote 4 to the Consolidated Financial Statements included herein for further discussion of the impact of adoption.Company.
Liquidity and Capital Resources
Due to the nature of our business, cash provided by operations is our primary source of liquidity. We finance our inventory purchases primarily from normal trade credit aided by relatively rapid inventory turnover. This turnover allows us to conduct operations without large amounts of cash and working capital. As of April 30, 2017,2020, the Company’s ratio of current assets to current liabilities was 0.790.36 to 1. The ratio at April 30, 20162019 and at April 30, 20152018 was 0.840.69 to 1 and 0.840.78 to 1, respectively. The decrease in the ratio is primarily attributable to the reclassification of $569,000 5.22% Senior notes to current liabilities as they are due on August 9, 2020. The Company is in the process of refinancing the 5.22% Senior notes.
We believe our current $100,000$300,000 unsecured revolver, our $25,000 unsecured bank line of credit, together with the current cash and cash equivalents, and the future cash flow from operations will be sufficient to satisfy the working capital needs of our business.
Net cash provided by operating activities decreased $13,113 (2.8%$26,300 (5.0%) infor the year ended April 30, 2017,2020, primarily because ofdue to a decrease in net income,accounts payable, partially offset by increasesan increase in depreciationnet income and accounts payable.a decrease in inventories. Cash used in investing activities in the year ended April 30, 20172020 increased $59,757 (15.1%$8,812 (1.9%) primarily due to the increased level of acquisitions andan increase in new store construction.construction, offset by a decrease in acquisition activity. Cash flows used in financing activities decreased $46,578 (92.8%),$40,474, primarily due to proceeds from issuance of long-term debtreductions in fiscal 2017.share buyback activity.
Capital expenditures represent the single largest use of Company funds. We believe that by reinvesting in stores, we will be better able to respond to competitive challenges and increase operating efficiencies. During fiscal 2017,2020, we expended $458,865$471,683 for property and equipment, primarily for construction, acquisition, and remodeling of stores compared with $400,102$462,899 in the prior year. In fiscal 2018,2021, we anticipate expending between $500,000 and $600,000,funding our capital expenditures primarily from existing cash, funds generated by operations, and long-term debt proceeds for our construction acquisition, and remodelingacquisition of stores. Due to the continued uncertainty of COVID-19, guidance around capital expenditures will not be provided at this time. This will be reevaluated as conditions warrant.
At April 30, 2017,In January 2019, the Company hadentered into a bank linecredit agreement that provides for a $300 million unsecured revolving credit facility which includes a $30 million sublimit for letters of credit arrangement consisting of two Promissory Notes, in the principal amount of $50,000 each (together, the “Notes”and a $30 million sublimit for swingline loans (the "Credit Facility"). The Notes evidencedCredit Facility contains an expansion option permitting the Company to request an increase of the Credit Facility from time to time up to an aggregate additional $150 million from the lenders or other financial institutions acceptable to the Company and the Administrative Agent, upon the satisfaction of certain conditions, including the consent of the lenders whose commitments would increase. The maturity date is January 11, 2024. Amounts borrowed under the Credit Facility bear interest at variable rates based upon, at the Company's option, either (a) LIBOR plus an applicable margin or (b) an alternate base rate. The Credit Facility also carries a facility fee between 0.2% and 0.4% per annum based on the Company's consolidated leverage ratio as defined in the credit agreement. The Company had $120,000 and $75,000 outstanding under the Credit Facility at April 30, 2020 and 2019 respectively.
Concurrently with this credit agreement, the Company also reduced its existing unsecured revolving line of credit in the aggregate principal amount of $100,000 and bearfrom $150,000 to $25,000 (the "Bank Line"). The Bank Line bears interest at a variable ratesrate subject to change from time to time based on changes in an independent index referred to in the NotesBank Line as the Federal Funds Offered Rate (the “Index”). The interest rate to be applied to the unpaid principal balance of the first NoteBank Line was at a rate of 0.750% over the Index. The interest rate applicable to the second note is 1.000%1.0% over the Index. There was a $900 balance owed$0 outstanding on the NotesBank Line at April 30, 20172020 and $0 at April 30, 2016.2019. The line of credit is due upon demand.
As of April 30, 2017,2020, we had long-term debt and finance lease obligations of $714,502 (which is net of current maturities of $907,356$570,280) primarily consisting of $569,000 in principal amount of 5.22% Senior notes, $30,000 in principal amount of 5.72% Senior notes, Series A and B;of: $150,000 in principal amount of 3.67% Senior Notes, Series A,A; $50,000 in principal amount of 3.75% Senior Notes, Series B,B; $50,000 in principal amount of 3.65% Senior Notes, Series C,C; $50,000 in principal amount of 3.72% Senior Notes, Series D,D; $150,000 in principal amount of 3.51% Senior Notes, Series E; $250,000 in principal amount of 3.77% Senior Notes, Series F; and $8,356$14,502 of capitalfinance lease obligations. Current maturities of long-term debt is primarily comprised of $569,000 in principal amount of 5.22% Senior notes.
Interest on the 5.22% Senior notes is payable on the 9th day of each February and August. Principal on the 5.22% Senior notes is payable in full on August 9, 2020. We may prepay the 5.22% notes in whole or in part at any time in an amount of not less than $2,000 at a redemption price calculated in accordance with the Note Agreement dated August 9, 2010 between the Company and the purchasers of the 5.22% Senior notes.
Interest on the 5.72% Senior notes Series A and Series B is payable on the 30th day of each March and September. Principal on the Senior notes Series A and Series B is payable in various installments beginning September 30, 2012 and continuing through March 2020. We may prepay the 5.72% Senior notes Series A and Series B in whole or in part at any time in an amount of not less than $2,000 at a redemption price calculated in accordance with the Note Agreement dated September 29, 2006 between the Company and the purchasers of the 5.72% Senior notes Series A and Series B.
Interest on the 3.67% Senior notes Series A and 3.75% Senior notes Series B is payable on the 17th day of each June and December. Principal on the Senior notes Series A and Series B is payable in various installments beginning June 17, 2022 (Series A) and December 17, 2022 (Series B) through December 2028. We may prepay the 3.67% and 3.75% Senior notes in whole or in part at any time in an amount of not less than $2,000 at a redemption price calculated in accordance with the Note Agreement dated June 17, 2013, between the Company and the purchasers of the Senior notes Series A and Series B.
Interest on the 3.65% Senior notes Series C is payable on the 2nd day of each May and November, while the interest on the 3.72% Senior notes Series D is payable on the 28th day of each April and October. Principal on the Senior notes Series C and Series D is payable in various installments beginning May 2, 2025 (Series C) and October 28, 2025 (Series D) through October 2031. We may prepay the 3.65% and 3.72% Senior notes in whole or in part at any time in an amount of not less than
$2,000 $2,000 at a redemption price calculated in accordance with the Note Agreement dated May 2, 2016, between the Company and the purchasers of the Senior notes Series C and Series D.
Interest on the 3.51% Senior notes Series E is payable on the 13th day of each June and December, while the interest on the 3.77% Senior notes Series F is payable on the 22nd day of each February and August. Principal on the Senior notes Series E and Series F is payable in full on June 13, 2025 (Series E) and August 22, 2028 (Series F), respectively. We may prepay the 3.51% and 3.77% Senior notes in whole or in part at any time in an amount of not less than $2,000 at a redemption price calculated in accordance with the Note Agreement dated June 13, 2017, between the Company and the purchasers of the Senior notes Series E and Series F.
To date, we have funded capital expenditures primarily through funds generated from operations, the proceeds of the sale of common stock, issuance of debt, and existing cash. Future capital required to finance operations, improvements, and the anticipated growth in the number of stores is expected to come from cash generated by operations, the revolver, the bank line of credit, and additional long-term debt or other securities as circumstances may dictate. We do not expect such capital needs to adversely affect liquidity.
The table below presents our significant contractual obligations, including interest, at April 30, 2017:2020:
| | | Contractual obligations | Payments due by period | Payments due by period |
| | Total | | Less than 1 year | | 1-3 years | | 3-5 years | | More than 5 years | Total | | Less than 1 year | | 1-3 years | | 3-5 years | | More than 5 years |
| Senior notes | $ | 1,110,707 |
| | $ | 58,127 |
| | $ | 113,679 |
| | $ | 599,274 |
| | $ | 339,627 |
| $ | 1,451,662 |
| | $ | 602,899 |
| | $ | 70,963 |
| | $ | 111,103 |
| | $ | 666,697 |
|
| Capital lease obligations | 14,770 |
| | 900 |
| | 1,819 |
| | 1,791 |
| | 10,260 |
| |
| Finance lease obligations | | 23,840 |
| | 3,118 |
| | 6,226 |
| | 3,732 |
| | 10,764 |
|
| Operating lease obligations | 4,427 |
| | 1,172 |
| | 1,659 |
| | 781 |
| | 815 |
| 34,064 |
| | 1,829 |
| | 3,531 |
| | 3,369 |
| | 25,335 |
|
| Unrecognized tax benefits | 5,362 |
| | — |
| | — |
| | — |
| | — |
| 8,907 |
| | — |
| | — |
| | — |
| | — |
|
| Deferred compensation | 15,784 |
| | — |
| | — |
| | — |
| | — |
| 15,079 |
| | — |
| | — |
| | — |
| | — |
|
| Total | $ | 1,151,050 |
| | $ | 60,199 |
| | $ | 117,157 |
| | $ | 601,846 |
| | $ | 350,702 |
| $ | 1,518,488 |
| | $ | 607,846 |
| | $ | 80,720 |
| | $ | 118,204 |
| | $ | 702,796 |
|
Unrecognized tax benefits relate to uncertain tax positions and since we are not able to reasonably estimate the timing of the payments or the amount by which the liability will increase or decrease over time, the related timing of the payment of the balances have not been reflected in the above “Payments due by period” table.
At April 30, 2017,2020, the Company had a total of $5,362$8,907 in gross unrecognized tax benefits. Of this amount, $3,522$7,059 represents the amount of unrecognized tax benefits that, if recognized, would impact our effective tax rate. The total amount of accrued interest and penalties for such unrecognized tax benefits was $141$354 as of April 30, 2017.2020. Interest and penalties related to income taxes are classified as income tax expense in our consolidated financial statements. The federal statute of limitations remains open for the tax years 2012 and forward. Tax years 2012 and forward are subject to audit by state tax authorities depending on open statute of limitations waivers and the tax code of each state.
A number of years may elapse before an uncertain tax position is audited and ultimately settled. It is difficult to predict the ultimate outcome or the timing of resolution for uncertain tax positions. It is reasonably possible that the amount of unrecognized tax benefits could significantly increase or decrease within the next twelve months. These changes could result from the expiration of the statute of limitations, examinations or other unforeseen circumstances. The state of Nebraska is examining tax years 2012 through 2014. The state of Kansas is examining tax years 2013 through 2015. Additionally, the IRS is currently examining tax year 2012.2016 and 2017. The Company has no other ongoing federal or state income tax examinations. The Company currently does not have any outstanding litigation related to tax matters. At this time, management believes it is reasonably possible the aggregate amount of unrecognized tax benefits will decrease by $1,242$1,800 within the next 12 months. This expected decrease is due to the expiration of statute of limitations related to certain federal and state income tax filing positions.
Included in long-term liabilities on our consolidated balance sheet at April 30, 2017,2020, was a $15,784$13,604 obligation for deferred compensation. Additionally, $1,037 was recognized in current liabilities as of April 30, 2020 related to deferred compensation. As the specific payment dates for a portion of the deferred compensation outstanding are unknown due to the unknown retirement dates of many of the participants, the related timing of the payment of the balances have not been reflected in the above “Payments due by period” table. However, known payments of $5,323$7,875 will be due during the next 5 years.
At April 30, 2017,2020, we were partially self-insured for workers’ compensation claims in all 1516 states of our marketing territory; we also were partially self-insured for general liability and auto liability under an agreement that provides for annual stop-loss limits equal to or exceeding approximately $1,000.$500 for general liability and auto liability and $350 for workers' compensation. To facilitate this agreement, letters of credit approximating $21,126 and $20,115, respectively,$21,526 were issued and outstanding at April 30, 20172020 and 2016,2019, on the insurance company’s behalf. We renew the letters of credit on an annual basis.
Forward-looking
Forward-Looking Statements
This Form 10-K, including but not limited to the Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.amended, and the Private Securities Litigation Reform Act of 1995. The words “may,” “will,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “continue,” and similar expressions are used to identify forward-looking statements. Forward-looking statements represent ourthe Company’s current expectations or beliefs concerning future events including (i) any statements regarding future sales and gross
profit percentages, (ii) any statements regarding the continuationtrends that we believe may affect our financial condition, liquidity and needs, supply chain, results of historical trends, and (iii) any statements regarding the sufficiency of the Company’s cash balances and cash generated from operations and financing activities forperformance at our stores, business strategy, strategic plans, growth opportunities, short-term and long-term business operations and objectives, and the Company’s future liquidity and capital resource needs.potential effects of COVID-19 on our business. The words believe, expect, anticipate, intend, estimate, project and similar expressions are intended to identify forward-looking statements. We caution youCompany cautions that these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, including, without limitationslimitation, the following risk factors described more completely above in this Form 10-K.Item 1A entitled “Risk Factors”:
Industry. Pandemics or disease outbreaks, such as COVID-19, responsive actions taken by governments and others to mitigate their spread, and guest behavior in response to these events, have and may in the future adversely affect our business operations, supply chain and financial results; our business and our reputation could be adversely affected by a data security incident or the failure to protect sensitive guest, team member or vendor data, or the failure to comply with applicable regulations relating to data security and privacy; the convenience store industry is highly competitive; the volatility of wholesale petroleum costs could adversely affect our operating results; general economic conditions that are largely out of the Company’s control may adversely affect the Company’s financial condition and results of operations; governmental action and campaigns to discourage tobacco and nicotine use and other tobacco products may have a material adverse effect on our revenues and gross profit; consumer or other litigation could adversely affect our financial condition and results of operations; increased credit card expenses could increase operating expenses; developments related to fuel efficiency, fuel conservation practices, climate change, and changing consumer preferences may decrease the demand for motor fuel; and, wholesale cost and tax increases relating to tobacco and nicotine products could affect our operating results.
Our Business: Food-safety issues and food-borne illnesses, whether actual or reported, or the failure to comply with applicable regulations relating to the transportation, storage, preparation or service of food, could adversely affect our business and reputation; any failure to anticipate and respond to changes in consumer preferences, or to introduce and promote innovative technology for guest interaction, could adversely affect our financial results; we rely on our information technology systems, and a number of third-party vendor platforms, to manage numerous aspects of our business, and a disruption of these systems could adversely affect our business; a significant disruption to our distribution network, to the capacity of the distribution centers, or timely receipt of inventory could adversely impact our sales or increase our transaction costs, which could have a material adverse effect on our business; we may experience difficulties implementing and realizing the results of our strategic plan; unfavorable weather conditions can adversely affect our business; because we depend on our management’s and other team members’ experience and knowledge of our industry, we could be adversely affected were we to lose, or experience difficulty in recruiting and retaining, any such members of our team; we may experience increased costs, disruptions or other difficulties with the implementation, operation and functionality of our enterprise resource planning system; control deficiencies could prevent us from accurately and timely reporting our financial results; our operations present hazards and risks which may not be fully covered by insurance, if insured; we may not be able to identify, acquire, and integrate new properties and stores, which could adversely affect our ability to grow our business; covenants in our senior notes and credit facility agreements require us to comply with certain covenants and meet financial maintenance tests - failure to comply with these requirements could have a material impact to us; compliance with and changes in tax laws could adversely affect our performance; we are subject to extensive governmental regulations; and, the dangers inherent in the storage and transport of motor fuel could cause disruptions and could expose to us potentially significant losses, costs or liabilities.
Other: The market price for our common stock has been and may in the future be volatile, which could cause the value of your investment to decline; any issuance of shares of our common stock in the future could have a dilutive effect on your investment; and, Iowa law and provisions in our charter documents may have the effect of preventing or hindering a change in control and adversely affecting the market price of our common stock.
We ask you not to place undue reliance on such forward-looking statements because they speak only of our views as of the statement dates. Although we have attempted to list the important factors that presently affect the Company’s business and operating results, we further caution you that other factors may in the future prove to be important in affecting the Company’s results of operations. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
In addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements, factors that could cause the Company’s actual results to differ materially from those contemplated in any forward-looking statements include, among others, the following:
Competition
Our business is highly competitive and marked by ease of entry and constant change in terms of the numbers and type of retailers offering the products and services found in stores. Many of the food (including prepared foods) and nonfood items similar or identical to those we sell are generally available from a variety of competitors in the communities served by our stores, and we compete with other convenience store chains, gasoline stations, supermarkets, drug stores, discount stores, club stores, mass merchants, and fast-food outlets (with respect to the sale of prepared foods). Sales of nonfuel items (particularly prepared food items) have contributed substantially to our gross profit on retail sales in recent years. Fuel sales are also intensely competitive. We compete for fuel sales with both independent and national brand gasoline stations, other convenience store chains, and several nontraditional fuel retailers such as supermarkets in specific markets. Some of these other fuel retailers may have access to more favorable arrangements for fuel supply than we do or the firms that supply our stores. Some of our competitors have greater financial, marketing, and other resources than we have and therefore may be able to respond better to changes in the economy and new opportunities within the industry.
Fuel Operations
Fuel sales are an important part of our revenue and earnings, and retail fuel profit margins have a substantial impact on our net income. Profit margins on fuel sales can be adversely affected by factors beyond our control, including the supply of fuel available in the retail fuel market, uncertainty or volatility in the wholesale fuel market, increases in wholesale fuel costs generally during a period, and price competition from other fuel marketers. The market for crude oil and domestic wholesale petroleum products is marked by significant volatility and is affected by general political conditions and instability in oil producing regions such as the Middle East and South America. The volatility of the wholesale fuel market makes it extremely difficult to predict the impact of future wholesale cost fluctuation on our operating results and financial conditions. These factors could materially affect our fuel gallon volume, fuel gross profit, and overall customer traffic levels at stores. Any substantial decrease in profit margins on fuel sales or in the number of gallons sold by stores could have a material adverse effect on our earnings.
Fuel is purchased from a variety of independent national and regional petroleum distributors at current daily prices at the rack in which the fuel is loaded onto tanker trucks. While annual purchase agreements exist with a few distributors, those agreements primarily specify purchasing volumes that must be maintained to be eligible for certain discounts. We typically sell the fuel before the vendor is paid as a result of our short fuel inventory turnover rate. Any substantial change in the payment terms required by fuel vendors could impact the amount of cash and working capital we would need to conduct operations.
Although in recent years suppliers have not experienced any difficulties in obtaining sufficient amounts of fuel to meet our needs, unanticipated national and international events could result in a reduction of fuel supplies available for distribution. Any substantial curtailment in our fuel supply could reduce fuel sales. Further, we believe a significant amount of our business results from the patronage of customers primarily desiring to purchase fuel; accordingly, reduced fuel supplies could adversely affect the sale of nonfuel items. Such factors could have a material adverse effect on our earnings and operations.
Tobacco Products
Sales of tobacco products represent a significant portion of our revenues. Significant increases in wholesale cigarette costs and tax increases on tobacco products as well as national and local campaigns to further regulate and discourage smoking in the United States have had and are expected to continue having an adverse effect on the demand for tobacco products sold in our stores. We attempt to pass price increases on to our customers, but competitive pressures in specific markets may prevent us from doing so. These factors could materially impact the retail price of tobacco products, the gross profit obtained from the tobacco category, the volume of cigarettes and other tobacco products sold by stores, and overall customer traffic, and have a material adverse effect on the Company’s earnings and profits.
Environmental Compliance Costs
The United States Environmental Protection Agency and several of the states in which we do business have adopted laws and regulations relating to underground storage tanks used for petroleum products. In the past, we have incurred substantial costs to comply with such regulations, and additional substantial costs may be necessary in the future. Several states in which we do business have trust fund programs with provisions for sharing or reimbursing corrective action or remediation costs. Any reimbursements received in respect to such costs typically are subject to statutory provisions requiring repayment of the reimbursed funds for any future noncompliance with upgrade provisions or other applicable laws. Although we regularly accrue expenses for the estimated costs related to future corrective action or remediation efforts, there can be no assurance that the accrued amounts will be sufficient to pay such costs or that we have identified all environmental liabilities at all of our current store locations. In addition, there can be no assurance that we will not incur substantial expenditures in the future for remediation of contamination or related claims that have not been discovered or asserted with respect to existing store locations or locations that we may acquire in the future, that we will not be subject to any claims for reimbursement of funds disbursed to us under the various state programs, and/or that additional regulations or amendments to existing regulations will not require additional expenditures beyond those presently anticipated.
Seasonality of Sales
Company sales generally are strongest during its first two fiscal quarters (May–October) relative to the third and fourth fiscal quarters (November–April). In the warmer months, customers tend to purchase greater quantities of fuel and certain convenience items such as beer, pop, and ice. Difficult weather conditions (such as flooding, prolonged rain, or snowstorms) in any quarter, however, may adversely reduce sales at affected stores and may have an adverse impact on our earnings for that period.
Other Factors
Other factors and risks that may cause actual results to differ materially from those in the forward-looking statements include the risk that our cash balances and cash generated from operations and financing activities will not be sufficient for our future liquidity and capital resource needs, tax increases, potential liabilities and expenditures related to compliance with environmental and other laws and regulations, the seasonality of demand patterns, and weather conditions; the increased indebtedness that the Company has incurred to purchase shares of our common stock in our self-tender offer; and the other risks and uncertainties included from time to time in our filings with the SEC. Wewe further caution you that other factors we have not identified may in the future prove to be important in affecting our business and results of operations.
Please see Item 1A We ask you not to place undue reliance on any forward-looking statements because they speak only of this Form 10-K, entitled “Risk Factors,” for furtherour views as of the statement dates. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, on these and other factors that may affect our business and financial results.future events, or otherwise.
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| ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
The Company’s exposure to market risk for changes in interest rates relates primarily to our investment portfolio and long-term debt obligations. We place our investments with high-quality credit issuers and, by policy, limit the amount of credit exposure to any one issuer. Our first priority is to reduce the risk of principal loss. Consequently, we seek to preserve our invested funds by limitingattempting to limit default risk, market risk, and reinvestment risk. We attempt to mitigate default risk by investing in only high-quality credit securities that we believe to be low risk and by positioning our portfolio to respond appropriately to a significant reduction in a credit rating of any investment issuer or guarantor. The portfolio includes only marketable securities with active secondary or resale markets to ensure portfolio liquidity. We believe an immediate 100-basis-point move in interest rates affecting our floating and fixed rate financial instruments as of April 30, 2017,2020, would have no material effect on pretax earnings.
We do, from time to time, participate in a forward buy of certain commodities, primarily cheese and coffee.commodities. These are not accounted for as derivatives under the normal purchase and normal sale exclusions under the applicable accounting guidance.
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| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Shareholders and Board of Directors and Shareholders
Casey’s General Stores, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Casey’s General Stores, Inc. and subsidiaries (the Company) as of April 30, 20172020 and 2016, and2019, the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years in the three-year period ended April 30, 2017. 2020, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended April 30, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of April 30, 2017,2020, based on criteria established in Internal Control—Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, (COSO). and our report dated June 26, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Assessment of the self-insurance claim liability for workers’ compensation
As discussed in Notes 1 and 10 to the consolidated financial statements, at April 30, 2020, the Company was primarily self-insured for workers’ compensation claims. The self-insurance claim liability for workers’ compensation is determined actuarially based on claims filed and an estimate of claims incurred but not yet reported. Actuarial projections of the losses are employed due to the potential variability in the liability estimates. Factors affecting the uncertainty of the claim liability include the (1) loss development factors, which includes the development time frame, and settlement patterns, and (2) expected loss rates, which includes litigation and adjudication direction, and medical treatment and cost trends.
We identified the assessment of the self-insurance claim liability for workers’ compensation as a critical audit matter. The evaluation of the key assumptions used to estimate the liability, specifically the loss development factors and expected loss
rates involved significant measurement uncertainty requiring complex auditor judgment. Specialized skill and knowledge is necessary to evaluate the methods and key assumptions used to determine the liability.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s process to determine the self-insurance claim liability for workers’ compensation including controls over the selection of the methods used to determine the liability, and the loss development factors and expected loss rates. We involved actuarial professionals with specialized skill and knowledge, who assisted in:
–assessing the methods used by the Company’s external actuary by comparing them to generally accepted actuarial methods
–evaluating the loss development factors and expected loss rates used by the Company’s external actuary by comparing them to industry and regulatory trends.
/s/ KPMG LLP
We have served as the Company’s auditor since 1987.
Des Moines, Iowa
June 26, 2020
Report of Independent Registered Public Accounting Firm
The Shareholders and Board of Directors
Casey’s General Stores, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Casey’s General Stores, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of April 30, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 30, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of April 30, 2020 and 2019, the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years in the three-year period ended April 30, 2020, and the related notes (collectively, the consolidated financial statements), and our report dated June 26, 2020 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Overover Financial Reporting included in Item 9A (Controls and Procedures). Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our auditsaudit in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the auditsaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our auditsaudit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provideaudit provides a reasonable basis for our opinions.opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Casey’s General Stores, Inc. and subsidiaries as of April 30, 2017 and 2016, and the results of their operations and their cash flows for each of the years in the three-year period ended April 30, 2017, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, Casey's General Stores, Inc. maintained, in all material respects, effective internal control over financial reporting as of April 30, 2017, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
/s/ KPMG LLP
Des Moines, Iowa
June 29, 201726, 2020
CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In (In thousands, except share data) | | | | April 30, | April 30, |
| | 2017 | | 2016 | 2020 | | 2019 |
| Assets | | | | | | |
| Current assets | | | | | | |
| Cash and cash equivalents | $ | 76,717 |
| | $ | 75,775 |
| $ | 78,275 |
| | $ | 63,296 |
|
| Receivables | 43,244 |
| | 27,701 |
| 48,500 |
| | 37,856 |
|
| Inventories | 201,644 |
| | 204,988 |
| 236,007 |
| | 273,040 |
|
| Prepaid expenses | 9,179 |
| | 3,008 |
| 9,801 |
| | 7,493 |
|
| Income taxes receivable | 19,901 |
| | 14,413 |
| 14,667 |
| | 28,895 |
|
| Total current assets | 350,685 |
| | 325,885 |
| 387,250 |
| | 410,580 |
|
| Property and equipment, at cost | | | | | | |
| Land | 665,318 |
| | 593,043 |
| 872,151 |
| | 792,601 |
|
| Buildings and leasehold improvements | 1,422,586 |
| | 1,279,258 |
| 1,969,585 |
| | 1,770,695 |
|
| Machinery and equipment | 1,905,553 |
| | 1,704,379 |
| 2,369,361 |
| | 2,236,123 |
|
| Leasehold interest in property and equipment | 16,173 |
| | 16,044 |
| |
| Finance lease right-of-use assets | | 24,780 |
| | 25,323 |
|
| Construction in process | | 125,632 |
| | 124,613 |
|
| | 4,009,630 |
| | 3,592,724 |
| 5,361,509 |
| | 4,949,355 |
|
| Less accumulated depreciation and amortization | 1,496,472 |
| | 1,340,249 |
| 2,037,708 |
| | 1,826,936 |
|
| Net property and equipment | 2,513,158 |
| | 2,252,475 |
| 3,323,801 |
| | 3,122,419 |
|
| Other assets, net of amortization | 23,453 |
| | 19,222 |
| 71,766 |
| | 41,154 |
|
| Goodwill | 132,806 |
| | 128,566 |
| 161,075 |
| | 157,223 |
|
| Total assets | $ | 3,020,102 |
| | $ | 2,726,148 |
| $ | 3,943,892 |
| | $ | 3,731,376 |
|
| Liabilities and Shareholders’ Equity | | | | | | |
| Current liabilities | | | | | | |
| Notes payable to bank | $ | 900 |
| | $ | — |
| |
| Lines of credit | | $ | 120,000 |
| | $ | 75,000 |
|
| Current maturities of long-term debt | 15,421 |
| | 15,375 |
| 570,280 |
| | 17,205 |
|
| Accounts payable | 293,903 |
| | 241,207 |
| 184,800 |
| | 335,240 |
|
| Accrued expenses | | | | | | |
| Wages and related taxes | 25,010 |
| | 32,026 |
| 34,039 |
| | 39,950 |
|
| Property taxes | 26,721 |
| | 24,091 |
| 36,348 |
| | 32,931 |
|
| Insurance | 37,984 |
| | 35,535 |
| |
| Insurance accruals | | 22,097 |
| | 21,671 |
|
| Other | 46,607 |
| | 39,337 |
| 95,864 |
| | 68,935 |
|
| Total current liabilities | 446,546 |
| | 387,571 |
| 1,063,428 |
| | 590,932 |
|
| Long-term debt, net of current maturities | 907,356 |
| | 822,869 |
| |
| Long-term debt and finance lease obligations, net of current maturities | | 714,502 |
| | 1,283,275 |
|
| Deferred income taxes | 440,124 |
| | 394,934 |
| 435,598 |
| | 385,788 |
|
| Deferred compensation | 15,784 |
| | 17,813 |
| 13,604 |
| | 15,881 |
|
| Insurance accruals, net of current portion | | 22,862 |
| | 22,663 |
|
| Other long-term liabilities | 19,672 |
| | 19,498 |
| 50,693 |
| | 24,068 |
|
| Total liabilities | 1,829,482 |
| | 1,642,685 |
| 2,300,687 |
| | 2,322,607 |
|
| Commitments and contingencies |
| |
|
| |
|
| Shareholders’ equity | | | | | | |
| Preferred stock, no par value, none issued | — |
| | — |
| — |
| | — |
|
| Common stock, no par value, 38,765,821 and 39,055,570 shares issued and outstanding at April 30, 2017 and 2016, respectively | 40,074 |
| | 72,868 |
| |
| Common stock, no par value, 36,806,325 and 36,664,521 shares issued and outstanding at April 30, 2020 and 2019, respectively | | 33,286 |
| | 15,600 |
|
| Retained earnings | 1,150,546 |
| | 1,010,595 |
| 1,609,919 |
| | 1,393,169 |
|
| Total shareholders’ equity | 1,190,620 |
| | 1,083,463 |
| 1,643,205 |
| | 1,408,769 |
|
| Total liabilities and shareholders’ equity | $ | 3,020,102 |
| | $ | 2,726,148 |
| $ | 3,943,892 |
| | $ | 3,731,376 |
|
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
| | | | Years ended April 30, | Years ended April 30, |
| | 2017 | | 2016 | | 2015 | 2020 | | 2019 | | 2018 |
| Total revenue | $ | 7,506,587 |
| | $ | 7,122,086 |
| | $ | 7,767,216 |
| $ | 9,175,296 |
| | $ | 9,352,910 |
| | $ | 8,391,124 |
|
Cost of goods sold (exclusive of depreciation and amortization, shown separately below) | 5,825,426 |
| | 5,508,465 |
| | 6,327,431 |
| 7,030,612 |
| | 7,398,186 |
| | 6,621,731 |
|
| Gross profit | 1,681,161 |
| | 1,613,621 |
| | 1,439,785 |
| |
| Operating expenses | 1,172,328 |
| | 1,053,805 |
| | 960,424 |
| 1,498,043 |
| | 1,391,279 |
| | 1,283,046 |
|
| Depreciation and amortization | 197,629 |
| | 170,937 |
| | 156,111 |
| 251,174 |
| | 244,387 |
| | 220,970 |
|
| Interest, net | 41,536 |
| | 40,173 |
| | 41,225 |
| 53,419 |
| | 55,656 |
| | 50,940 |
|
| Income before income taxes | 269,668 |
| | 348,706 |
| | 282,025 |
| 342,048 |
| | 263,402 |
| | 214,437 |
|
| Federal and state income taxes | 92,183 |
| | 122,724 |
| | 101,397 |
| 78,202 |
| | 59,516 |
| | (103,466 | ) |
| Net income | $ | 177,485 |
| | $ | 225,982 |
| | $ | 180,628 |
| $ | 263,846 |
| | $ | 203,886 |
| | $ | 317,903 |
|
| Net income per common share | | | | | | | | | | |
| Basic | $ | 4.54 |
| | $ | 5.79 |
| | $ | 4.66 |
| $ | 7.14 |
| | $ | 5.55 |
| | $ | 8.41 |
|
| Diluted | $ | 4.48 |
| | $ | 5.73 |
| | $ | 4.62 |
| $ | 7.10 |
| | $ | 5.51 |
| | $ | 8.34 |
|
| | | | | | | | | | | |
| Dividends declared per share | $ | 0.96 |
| | $ | 0.88 |
| | $ | 0.80 |
| $ | 1.28 |
| | $ | 1.16 |
| | $ | 1.04 |
|
| | | | | | | |
| (a) Includes excise taxes of approximately: | | $ | 1,063,000 |
| | $ | 988,000 |
| | $ | 919,000 |
|
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, except per share and share amounts)
| | | | Shares Outstanding | | Common stock | | Retained earnings | | Shareholders' Equity | Shares Outstanding | | Common stock | | Retained earnings | | Shareholders' Equity |
| Balance at April 30, 2014 | 38,507,387 |
| | $ | 33,878 |
| | $ | 669,386 |
| | $ | 703,264 |
| |
| Balance at April 30, 2017 | | 38,765,821 |
| | $ | 40,074 |
| | $ | 1,150,546 |
| | $ | 1,190,620 |
|
| Net income | — |
| | — |
| | 180,628 |
| | 180,628 |
| — |
| | — |
| | 317,903 |
| | 317,903 |
|
| Dividends declared (80 cents per share) | — |
| | — |
| | (31,059 | ) | | (31,059 | ) | |
| Dividends declared ($1.04 per share) | | — |
| | — |
| | (39,060 | ) | | (39,060 | ) |
| Exercise of stock options | 310,224 |
| | 11,465 |
| | — |
| | 11,465 |
| 40,377 |
| | 1,377 |
| | — |
| | 1,377 |
|
| Tax benefits related to nonqualified stock options | — |
| | 3,624 |
| | — |
| | 3,624 |
| |
| Stock-based compensation | 68,554 |
| | 7,307 |
| | — |
| | 7,307 |
| |
| Balance at April 30, 2015 | 38,886,165 |
| | $ | 56,274 |
| | $ | 818,955 |
| | $ | 875,229 |
| |
| Net income | — |
| | — |
| | 225,982 |
| | 225,982 |
| |
| Dividends declared (88 cents per share) | — |
| | — |
| | (34,342 | ) | | (34,342 | ) | |
| Exercise of stock options | 108,100 |
| | 3,717 |
| | — |
| | 3,717 |
| |
| Issuance of common stock | 32,717 |
| | 2,762 |
| | — |
| — |
| 2,762 |
| |
| Tax benefits related to nonqualified stock options | — |
| | 2,702 |
| | — |
| | 2,702 |
| |
| Stock-based compensation | 28,588 |
| | 7,413 |
| | — |
| | 7,413 |
| |
| Balance at April 30, 2016 | 39,055,570 |
| | $ | 72,868 |
| | $ | 1,010,595 |
| | $ | 1,083,463 |
| |
| Net income | — |
| | — |
| | 177,485 |
| | 177,485 |
| |
| Dividends declared (96 cents per share) | — |
| | — |
| | (37,534 | ) | | (37,534 | ) | |
| Exercise of stock options | 69,150 |
| | 2,357 |
| | — |
| | 2,357 |
| |
| Issuance of common stock | 28,138 |
| | 3,526 |
| | — |
| | 3,526 |
| |
| Repurchase of common stock | (443,800 | ) | | (49,374 | ) | | — |
|
|
| (49,374 | ) | (1,997,800 | ) | | (57,186 | ) | | (158,248 | ) | | (215,434 | ) |
| Stock-based compensation | 56,763 |
| | 10,697 |
| | — |
| | 10,697 |
| 65,924 |
| | 15,735 |
| | — |
| | 15,735 |
|
| Balance at April 30, 2017 | 38,765,821 |
| | $ | 40,074 |
| | $ | 1,150,546 |
| | $ | 1,190,620 |
| |
| Balance at April 30, 2018 | | 36,874,322 |
| | $ | — |
| | $ | 1,271,141 |
| | $ | 1,271,141 |
|
| Implementation of ASU 2014-09 | | — |
| | — |
| | (4,140 | ) | | (4,140 | ) |
| Net income | | — |
| | — |
| | 203,886 |
| | 203,886 |
|
| Dividends declared ($1.16 per share) | | — |
| | — |
| | (42,471 | ) | | (42,471 | ) |
| Exercise of stock options | | 71,546 |
| | 2,290 |
| | — |
| | 2,290 |
|
| Repurchase of common stock | | (352,592 | ) | | — |
| | (35,247 | ) | | (35,247 | ) |
| Stock-based compensation | | 71,245 |
| | 13,310 |
| | — |
| | 13,310 |
|
| Balance at April 30, 2019 | | 36,664,521 |
| | $ | 15,600 |
| | $ | 1,393,169 |
| | $ | 1,408,769 |
|
| Net income | | — |
| | — |
| | 263,846 |
| | 263,846 |
|
| Dividends declared ($1.28 per share) | | — |
| | — |
| | (47,096 | ) | | (47,096 | ) |
| Exercise of stock options | | 66,638 |
| | 2,958 |
| | — |
| | 2,958 |
|
| Stock-based compensation | | 75,166 |
| | 14,728 |
| | — |
| | 14,728 |
|
| Balance at April 30, 2020 | | 36,806,325 |
| | $ | 33,286 |
| | $ | 1,609,919 |
| | $ | 1,643,205 |
|
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS (In
(in thousands)
| | | | Years ended April 30, | Years ended April 30, |
| | 2017 | | 2016 | | 2015 | 2020 | | 2019 | | 2018 |
| Cash flows from operating activities | | | | | | | | | | |
| Net income | $ | 177,485 |
| | $ | 225,982 |
| | $ | 180,628 |
| $ | 263,846 |
| | $ | 203,886 |
| | $ | 317,903 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | | |
| Depreciation and amortization | 197,629 |
| | 170,937 |
| | 156,111 |
| 251,174 |
| | 244,387 |
| | 220,970 |
|
| Stock-based compensation | 10,697 |
| | 7,413 |
| | 7,307 |
| 18,129 |
| | 16,410 |
| | 18,800 |
|
| Loss on disposal of assets and impairment charges | 2,298 |
| | 837 |
| | 2,370 |
| 3,495 |
| | 1,384 |
| | 2,281 |
|
| Deferred income taxes | 45,190 |
| | 55,492 |
| | 44,711 |
| 49,810 |
| | 45,337 |
| | (98,178 | ) |
| Changes in assets and liabilities: | | | | | | | | | | |
| Receivables | (15,543 | ) | | (5,092 | ) | | 3,232 |
| (10,644 | ) | | 7,189 |
| | (1,801 | ) |
| Inventories | 4,400 |
| | (7,390 | ) | | 10,365 |
| 37,713 |
| | (29,648 | ) | | (38,406 | ) |
| Prepaid expenses | (6,171 | ) | | (983 | ) | | (547 | ) | (2,308 | ) | | (1,727 | ) | | 3,413 |
|
| Accounts payable | 40,332 |
| | 3,011 |
| | (33,290 | ) | (140,151 | ) | | 12,451 |
| | 14,751 |
|
| Accrued expenses | 14,780 |
| | 14,983 |
| | (14,205 | ) | 26,400 |
| | 30,927 |
| | 15,967 |
|
| Income taxes receivable | (6,226 | ) | | 7,064 |
| | (7,801 | ) | |
| Income taxes | | 15,783 |
| | 22,545 |
| | (30,053 | ) |
| Other, net | (5,598 | ) | | 132 |
| | (236 | ) | (8,933 | ) | | (22,527 | ) | | (5,850 | ) |
| Net cash provided by operating activities | 459,273 |
| | 472,386 |
| | 348,645 |
| 504,314 |
| | 530,614 |
| | 419,797 |
|
| Cash flows from investing activities | | | | | | | | | | |
| Purchase of property and equipment | (433,392 | ) | | (392,839 | ) | | (360,734 | ) | (438,977 | ) | | (394,699 | ) | | (577,421 | ) |
| Payments for acquisitions of businesses, net of cash acquired | (25,473 | ) | | (7,263 | ) | | (41,157 | ) | (32,706 | ) | | (68,200 | ) | | (37,160 | ) |
| Proceeds from sales of property and equipment | 4,140 |
| | 5,134 |
| | 2,748 |
| 5,041 |
| | 5,069 |
| | 5,246 |
|
| Net cash used in investing activities | (454,725 | ) | | (394,968 | ) | | (399,143 | ) | (466,642 | ) | | (457,830 | ) | | (609,335 | ) |
| Cash flows from financing activities | | | | | | | | | | |
| Proceeds from long-term debt | 100,000 |
| | — |
| | — |
| — |
| | — |
| | 400,000 |
|
| Repayments of long-term debt | (15,399 | ) | | (15,399 | ) | | (553 | ) | (17,476 | ) | | (16,000 | ) | | (15,688 | ) |
| Net borrowings of short-term debt | 900 |
| | — |
| | — |
| 45,000 |
| | 35,400 |
| | 38,700 |
|
| Proceeds from exercise of stock options | 2,357 |
| | 3,717 |
| | 11,465 |
| 2,958 |
| | 2,290 |
| | 1,377 |
|
| Payments of cash dividends | (36,758 | ) | | (33,527 | ) | | (30,175 | ) | (45,951 | ) | | (41,430 | ) | | (38,780 | ) |
| Repurchase of common stock | (47,893 | ) | | — |
| | — |
| — |
| | (37,479 | ) | | (214,683 | ) |
| Tax withholdings on employee share-based awards | (6,813 | ) | | (4,975 | ) | | (3,339 | ) | (7,224 | ) | | (5,948 | ) | | (4,426 | ) |
| Net cash used in financing activities | (3,606 | ) | | (50,184 | ) | | (22,602 | ) | |
| Net cash (used in) provided by financing activities | | (22,693 | ) | | (63,167 | ) | | 166,500 |
|
| Net increase (decrease) in cash and cash equivalents | 942 |
| | 27,234 |
| | (73,100 | ) | 14,979 |
| | 9,617 |
| | (23,038 | ) |
| Cash and cash equivalents at beginning of year | 75,775 |
| | 48,541 |
| | 121,641 |
| 63,296 |
| | 53,679 |
| | 76,717 |
|
| Cash and cash equivalents at end of year | $ | 76,717 |
| | $ | 75,775 |
| | $ | 48,541 |
| $ | 78,275 |
| | $ | 63,296 |
| | $ | 53,679 |
|
| | | | | | | | | | | |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION | | | | | | | | | | |
| Cash paid during the year for interest, net of amount capitalized | $ | 41,268 |
| | $ | 40,401 |
| | $ | 41,382 |
| $ | 54,277 |
| | $ | 56,306 |
| | $ | 48,757 |
|
| Cash paid for income taxes, net | 52,961 |
| | 60,049 |
| | 64,367 |
| |
| Cash paid (received) for income taxes, net | | 9,364 |
| | (11,433 | ) | | 24,274 |
|
| Noncash investing and financing activities | | | | | | | | | | |
| Noncash additions from adoption of ASC 842 | | 22,635 |
| | — |
| | — |
|
| Purchased property and equipment in accounts payable | 10,883 |
| | 11,619 |
| | 9,060 |
| 5,328 |
| | 15,616 |
| | 12,014 |
|
| Shares repurchased in accounts payable | 1,481 |
| | — |
| | — |
| — |
| | — |
| | 2,232 |
|
See accompanying Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
1. SIGNIFICANT ACCOUNTING POLICIES
OperationsOperations: Casey’s General Stores, Inc. and its subsidiaries (the Company/Casey’s) operate 1,9782,207 convenience stores in 1516 Midwest states. The stores are located primarily in smaller communities, many with populations of less than 5,000. Retail salesrevenue in 20172020 by category are as follows: 59%60% fuel, 28% grocery &and other merchandise, and 13%12% prepared food &and fountain. The Company’s products are readily available, and the Company is generally not dependent on a single supplier or only a few suppliers.
Principles of consolidationconsolidation: The consolidated financial statements include the financial statements of Casey’s General Stores, Inc. and its wholly ownedwholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Certain amounts in prior year have been reclassified to conform to current year presentation.
Use of estimatesestimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash equivalentsequivalents: We consider all highly liquid investments with a maturity at purchase of three months or less to be cash equivalents. Included in cash equivalents are money market funds and credit card, debit card and electronic benefits transfer transactions that process within three days.
InventoriesInventories: Inventories, which consist of merchandise and fuel, are stated at the lower of cost or market. For fuel, cost is determined through the use of the first-in, first-out (FIFO) method. For merchandise inventories, cost is determined through the use of the last-in, first-out (LIFO) method.
The excess of currentreplacement cost over the stated LIFO value was $65,593$87,546 and $58,432$80,814 at April 30, 20172020 and 2016,2019, respectively. There were no material LIFO liquidations during the periods presented. Below is a summary of the inventory values at April 30, 20172020 and 2016:2019:
|
| | | | | | | |
| | Years ended April 30, |
| | 2020 | | 2019 |
| Fuel | $ | 33,695 |
| | $ | 83,204 |
|
| Merchandise | 202,312 |
| | 189,836 |
|
| Total inventory | $ | 236,007 |
| | $ | 273,040 |
|
|
| | | | | | | |
| | Fiscal 2017 | | Fiscal 2016 |
| Fuel | $ | 60,833 |
| | $ | 57,840 |
|
| Merchandise | 140,811 |
| | 147,148 |
|
| Total inventory | $ | 201,644 |
| | $ | 204,988 |
|
The Company often receives vendor allowances on the basis of quantitative contract terms that vary by product and vendor or directly on the basis of purchases made. Vendor allowances include rebates and other funds received from vendors to promote their products.Vendor rebates in the form of rack display allowances (RDAs) are funds that we receive from various vendors for allocating certain shelf space to carry their specific products or to introduce new products in our stores for a particular period of time. The RDAs are treated as a reduction in cost of goods sold and are recognized ratably over the period covered by the applicable rebate agreement. These funds do not represent reimbursements of specific, incremental, identifiable costs incurred by us in selling the vendor’s products. Vendor rebates, in the form ofincluding billbacks, are treated as a reduction in cost of goods sold and are recognized atprimarily based on the timepurchase of product or shipment of product from the warehouse to the store, or sale of product to our guests. These are recognized in the period earned based on the applicable rebate is earned per the contract.agreement. Reimbursements of an operating expense (e.g., advertising) are recorded as reductions of the related expense.
Renewable Identification Numbers (RINs) are recorded as a reduction in cost of goods sold in the period when the Company commits to a price and agrees to sell all of the RINs earned during a specified period. The Company includes in cost of goods sold the costs incurred to acquire fuel and merchandise, including excise taxes, less vendor allowances and rebates and RINs. The Company does not record an asset on the balance sheet related to RINs that hashave not been validated and contracted. Warehousing costs are recorded within operating expenses on the consolidated statements of income.
GoodwillCapitalized software implementation costs: The Company capitalizes expenditures related to the implementation of software as incurred. These costs are expensed on a straight-line basis within operating expenses over the contractual life of the contract with the related software provider. The useful lives utilized for capitalized software implementation costs range from 3-13 years. As of April 30, 2020 and April 30, 2019, the Company had recognized $38,593 and $27,873 of capitalized software implementation costs, respectively. The outstanding balance is recognized in other assets on the consolidated balance sheets.
Goodwill: Goodwill and intangible assets with indefinite lives are tested for impairment at least annually. The Company assesses impairment annually at year-end using a market based approach to establish fair value. All of the goodwill assigned to the individual stores is aggregated into a single reporting unit due to the similar economic characteristics of the stores. As of April 30, 20172020 and 2016,2019, there was $132,806$161,075 and $128,566$157,223 of goodwill, respectively. Management’s analysis of recoverability completed as of the fiscal year-end yieldedindicated no evidence of impairment for the years ended April 30, 2017, 2016,2020, 2019, and 2015.2018.
Depreciation and amortizationamortization: Depreciation of property and equipment and amortization of capital lease assets are computed principally byusing the straight-line method over the following estimated useful lives:
|
| |
| | |
| Buildings | 25-40 years |
| Machinery and equipment | 5-305-40 years |
Leasehold interest in property and equipmentFinance lease right-of-use assets | Lesser of term of lease or��or life of asset |
| Leasehold improvements | Lesser of term of lease or life of asset |
The Company monitors stores and will accelerate depreciation if the expected life of the asset is reduced due to the expected remaining operation of the store or the Company’s plans. Construction in process is reported at cost and not subject to depreciation until the related asset is placed in service.
Store closings and asset impairmentimpairment: The Company writes down property and equipment of stores it is closing to estimated net realizable value at the time management commits to a plan to close such stores and begins active marketing of the stores. The Company bases the estimated net realizable value of property and equipment on its experience in utilizing and/or disposing of similar assets, and onas well as estimates provided by its own and/or third-party real estate experts.
The Company monitors closed and underperforming stores for an indication that the carrying amount of assets may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the assets, an impairment loss is recognized to the extent carrying value of the assets exceeds their estimated fair value. Fair value is based on management’s estimate of the price that would be received to sell an asset in an orderly transaction between market participants. The estimate is derived from offers, actual sale or disposition of assets subsequent to year-end, and other indications of fair value, which are considered Level 3 inputs.inputs (see Note 3). In determining whether an asset is impaired, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets, which for the Company is generally on a store-by-store basis. The Company incurred impairment charges of $705$1,177 in fiscal 2017, $1,6252020, $1,167 in fiscal 2016,2019, and $1,785$507 in fiscal 2015.2018. Impairment charges are a component of operating expenses.
Excise taxestaxes: Excise taxes approximating $866,000, $818,000,$1,063,000, $988,000, and $715,000$919,000 on retail fuel sales are included in total revenue and cost of goods sold for fiscal 2017, 2016,2020, 2019, and 2015,2018, respectively.
Income taxestaxes: The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company calculates its current and deferred tax provision based on estimates and assumptions that could differ from actual results reflected in income tax returns filed in subsequent years. Adjustments based on filed returns are recorded when identified.
Revenue recognitionrecognition:The Company recognizes retail sales of fuel, grocery &and other merchandise, prepared food &and fountain and commissions on lottery, prepaid phone cards, and video rentalsother revenue at the time of the sale to the customer. guest. Sales taxes collected from customersguests and remitted to the government are recorded on a net basis in the consolidated financial statements.
A portion of revenue from sales that include a redeemable box top coupon or points under our Casey’s Rewards program is deferred. The deferred portion of the sale represents the value of the estimated future redemption of the box top coupon or points. The amounts related to redeemable box top coupons and points are deferred until their redemption or expiration. Revenue related to the box top coupons and points issued is expected to be recognized less than one year from the original sale to the guest. As of April 30, 2020 and April 30, 2019, the Company recognized a contract liability of $11,180 and $6,931,
respectively, related to the outstanding box top coupons and Casey's Rewards points, which is included in other accrued expenses on the consolidated balance sheets.
Gift card related revenue is recognized as the gift cards are used by the guest. Gift card breakage revenue is recognized based on the estimated gift card breakage rate over the pro rata usage of the card.
Net income per common shareshare: Basic earnings per share have been computed by dividing net income by the weighted average shares outstanding during each of the years. Unvested shares under equity awards are treated as common shares within the basic earnings per share calculation when a team member has met certain requirements in the award agreement. For example, if retirement provisions are satisfied which allow a team member to avoid forfeiture of the award upon a normal retirement from the Company, it is included in the basic earnings per share calculation. The calculation of diluted earnings per share treats stock options and unvested restricted stock units outstandingwith time-based restrictions as potential common shares to the extent they are dilutive. The diluted earnings per share calculation does not take into effect any shares that have not met performance or market conditions as of the reporting period.
Asset retirement obligationsobligations: The Company recognizes the estimated future cost to remove underground storage tanks over the estimated useful life of the storage tank. The Company records a discounted liability for the fair value of an asset retirement obligation with a corresponding increase to the carrying value of the relateda long-lived asset at the time an underground storage tank is installed. The Company amortizes the amount added to other assetsproperty and equipment on a straight-line basis and recognizes accretion expense in connection with the discounted liability over the remaining life of the tank. The estimates of the anticipated future costs for removal of an underground storage tank are based on our prior experience with removal. Because these estimates are subjective and are currently based on historical costs with adjustments for estimated future changes in the associated costs, we expect the dollar amount of these obligations to change as more information is obtained.
There were no material changes in our asset retirement obligation estimates during fiscal 2017.2020. The net amount recorded as an increase to the related underground storage tank asset forrelated to asset retirement obligations was $10,421$13,416 and $9,788$11,793 at April 30, 20172020 and 2016,2019, respectively, and is recorded in other assets,property and equipment, net of amortization.depreciation. The discounted liability was $15,899$22,658 and $14,975$18,058 at April 30, 20172020 and 2016,2019, respectively, and is recorded in other long-term liabilities.
Self-insuranceSelf-insurance: The Company is primarily self-insured for employeeteam member healthcare, workers’ compensation, general liability, and automobile claims. The self-insurance claim liability for workers’ compensation, general liability, and automobile claims is determined actuarially at each year end based on claims filed and an estimate of claims incurred but not yet reported. Actuarial projections of the losses are employed due to the potential of variability in the liability estimates. Some factors affecting the uncertainty of claimsthe claim liability include the loss development factors, which includes the development time frame and settlement patterns, and expected loss rates, which includes litigation and adjudication direction, and medical treatment and cost trends. The liability is not discounted. The balance of our self-insurance reserves were $37,984was $44,959 and $35,535$44,334 for the years ended April 30, 20172020 and 2016,2019, respectively.
Environmental remediation liabilitiesliabilities: The Company accrues for environmental remediation liabilities when it is probable a liability has been incurred and the amount of loss can be reasonably estimated.
Derivative instrumentsinstruments: There were no options or futures contracts as of or during the years ended April 30, 2017, 2016,2020, 2019, or 2015.2018. However, we do from time to time, participate in a forward buy of certain commodities, primarily cheese and coffee.commodities. These are not accounted for as derivatives under the normal purchase and normal sale exclusions underwithin the applicable accounting guidance.
Stock-based compensationcompensation: Stock-based compensation is recorded based upon the fair value of the award on the grant date. The cost of the award is recognized ratably in the statementconsolidated statements of income over the vesting period of the award. Noneaward, adjusted for certain retirement provisions. Additionally, certain awards include performance and market conditions. The majority of performance-based awards are based on the achievement of a three year average return on invested capital (ROIC). For these awards, stock-based compensation expense is estimated based on the probable outcome of shares to be awarded adjusted as necessary at each reporting period. The market-based awards are achieved based on our relative performance to a pre-determined peer group. The fair value of these awards is determined using a Monte Carlo simulation as of the date of the grant. For market-based awards, contain performance conditions.the stock-based compensation expense will not be adjusted should the target awards vary from actual awards.
Segment reportingreporting: As of April 30, 2017,2020, we operated 1,9782,207 stores in 1516 states. Our convenience stores offer a broad selection of merchandise, fuel and other products and services designed to appeal to the convenience needs of our customers.guests. We manage the business on the basis of one1 operating segment and therefore, have only one1 reportable segment. Our stores sell
similar products and services, use similar processes to sell those products and services, and sell their products and services to similar classes of customers.guests. We make specific disclosures concerning the three3 broad merchandise categories of fuel, grocery &and other merchandise, and prepared food &and fountain because it makes it easier for us to discuss trends and operational initiatives within our business and industry. Although we can separate gross marginsrevenues and cost of goods sold within these categories (and further sub-categories), the operating expenses associated with operating a store that sells these products are not separable by these three3 categories.
Recent accounting pronouncementspronouncements:
In May 2014, the FASB issued ASU No. 2014-9, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard, after deferral for one year, is effective for the Company on May 1, 2018. Early application is not permitted. To address implementation of ASU 2014-09 and evaluate its impact on our consolidated financial statements, we have developed a project plan to evaluate our revenue streams and related internal controls. Since a majority of our revenue is derived from point of sale transactions, we do not believe the implementation of this standard will have a material impact on our consolidated financial statements. However, certain areas of our consolidated financial statements that will be impacted include, but are not limited to, recognition of estimated breakage upon the sale of the Company’s gift cards and deferral of an estimated portion of revenue expected to be redeemed in the future through Casey’s pizza box tops and punch card programs. We expect the impact of such changes to be immaterial to the consolidated financial statements. The Company expects to adopt the new standard using the full retrospective method beginning May 1, 2018 and will further disclose the impact to the financial statements at that point.
In April 2015, the FASB issued Accounting Standards Update (ASU) No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30), which provided guidance2014-09, Revenue from Contracts with Customers (Topic 606). We adopted the standard on May 1, 2018 using the presentation of debt issuance costs. The new standard required that debt issuance costs be recorded as a reduction from the face amount of the related debt, with amortization recorded as interest expense, rather than recording as a deferred asset.modified retrospective approach. The Company adopted this standardtwo changes that affect the timing of recognition of revenues related to gift card breakage income and the redemption of coupon box tops attached to our pizza boxes. The impact related to gift cards was $879, net of $321 of deferred taxes and was an increase to shareholders' equity with a reduction in the quarter ended July 31, 2016, retrospectivelydeferred income. The impact related to all prior periods. The adoptionbox tops was $5,019, net of this standard did not have$1,816 of deferred taxes and was a material impact on the financial statements.reduction in shareholders' equity, with an increase in deferred income.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update seeks to increase the transparency and comparability among organizationsentities by recognizingrequiring public entities to recognize lease assets and lease liabilities on the balance sheet and disclosingdisclose key information about leasing arrangements. To satisfy the standard’s objective, a lessee will recognize a right-of-use asset representing its right to use the underlying asset for the lease term and a lease liability for the obligation to make lease payments. Both the right-of-use asset and lease liability will initially be measured at the present value of the lease payments, with subsequent measurement dependent on the classification of the lease as either a finance or an operating lease. For leases with a term of twelve months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term.
In July 2018, the FASB issued ASU 2016-022018-10, Leases (Topic 842) - Codification Improvements which contains several FASB Codification improvements for ASC Topic 842, including several implementation issues and ASU 2018-11, "Leases (Topic 842) - Targeted Improvements" which provides entities with an additional transition method for implementing ASC Topic 842. Entities have the option to apply the new standard at the adoption date, recognizing a cumulative-effect adjustment to the opening balance of retained earnings along with the modified retrospective approach previously identified, both of which include a number of practical expedients that companies may elect to apply. Under the cumulative-effect adjustment comparative periods would not
be restated. Under the modified retrospective approach leases are recognized and measured under the noted guidance at the beginning of the earliest period presented. The new standard is effective for fiscal yearspublic companies for annual periods beginning after December 15, 2018, includingand interim periods within those years, with early adoption permitted. We adopted this guidance as of May 1, 2019 using the modified retrospective approach and elected the cumulative-effect adjustment practical expedient. As a result of the transition method selected, the Company did not restate previously reported comparable periods. Please refer to note 7 for additional information regarding the Company’s adoption of ASC 842.
In October 2016, the FASB issued ASU No. 2016-16, Intra-Entity Transfers of Assets Other than Inventory. We adopted this standard in the quarter ended July 31, 2018, which resulted in no material impact to the Company.
In January 2017, the FASB issued ASU 2017-01, Business Combinations, Clarifying the Definition of a Business. The standard clarifies the definition of a business and adds guidance to assist entities in the determination of whether an acquisition (or disposal) represents assets or a business. The guidance requires the Company to utilize various criteria to evaluate whether or not an acquisition is a business. First, if substantially all of the fair value of the assets acquired is concentrated in a single asset or a group of similar identifiable assets, the acquired assets do not represent a business. If that is not the case, the update provides further guidance to evaluate if the acquisition represents a business focused on the nature and substance of the inputs and process acquired. The standard is generally expected to reduce the number of business combinations, which may impact the allocation of purchase consideration in future acquisitions. Where it is determined that an acquisition is not a business combination, there would be no resulting goodwill recorded. The Company prospectively adopted this guidance for all future acquisitions in the first quarter of fiscal years,2019.
In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This standard provides guidance on accounting for costs of implementation activities performed in a cloud computing arrangement that is a service contract. The amendments in the update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software and hosting
arrangements that include an internal-use software license. The Company early adopted this guidance retrospectively, in the first quarter of fiscal 2019. The adoption did not have a material impact on our consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes. The standard includes changes that eliminate certain exceptions related to the approach for intraperiod tax allocation and the methodology for calculating income taxes in an interim period. It also simplifies aspects of the accounting for franchise taxes, certain transactions that result in a step-up in the tax basis of goodwill, and enacted changes in tax laws or rates. The Company is required to adopt this guidance in the first quarter of its fiscal 2022, with early adoption permitted. The Company is currently evaluating the impact of ASU 2016-02.the standard has on the consolidated financial statements.
In March 2016,2020, the FASB issued ASU 2016-09, Compensation-Stock Compensation2020-04, Reference Rate Reform (Topic 718): Improvements to Employee Share-Based Payment Accounting. The goal848) - Facilitation of the update wasEffects of Reference Rate Reform on Financial Reporting. The standard included optional guidance for a limited period of time to simplify several aspects ofhelp ease the burden in accounting for share-based payment transactions, including the income tax consequences, classificationeffects of awards as either equity or liabilities and classification on the statement of cash flows. This update wasreference rate reform. The new standard is effective for the Company beginning May 1, 2017 with early adoption permitted.all entities through December 31, 2022. The Company elected to early adoptdoes not expect the adoption of this standard in the quarter ended July 31, 2016. See Footnote 4 for further discussion of theto have a material impact of adoption.on our consolidated financial statements.
2. ACQUISITIONS
During the year ended April 30, 2017,2020, the Company acquired 2218 stores through a variety of multi-store and single store transactions with several unrelated third parties. Of the 2218 stores acquired, 1811 were re-opened as a Casey's store during the 20172020 fiscal year, and four7 will be opened during the 20182021 fiscal year. The majority of the acquisitions meet the criteria to be considered business combinations. The purchase price of the stores were valued using a discounted cash flow model on a location by location basis. The acquisitions were recorded in the financial statements by allocating the purchase price to the assets acquired, including intangible assets and liabilities assumed, based on their estimated fair values at the acquisition date.date as determined by third party appraisals or internal estimates. The excess of the cost of the acquisition over the net amounts assigned to the fair value of the assets acquired and the liabilities assumed is recorded as goodwill.goodwill if the acquisition is considered to be a business combination. All of the goodwill associated with these transactions will be deductible for income tax purposes over 15 years.
Allocation of the purchase price for the transactions in aggregate for the year ended April 30, 20172020 is as follows (in thousands):
|
| | | |
| Assets acquired: | |
| Inventories | $ | 680 |
|
| Property and equipment | 28,384 |
|
| Total assets | 29,064 |
|
| Liabilities assumed: | |
| Accrued expenses | 210 |
|
| Total liabilities | 210 |
|
| Net tangible assets acquired | 28,854 |
|
| Goodwill | 3,852 |
|
| Total consideration paid | $ | 32,706 |
|
|
| | | |
| | |
| Assets acquired: | |
| Inventories | $ | 1,056 |
|
| Property and equipment | 20,283 |
|
| Total assets | 21,339 |
|
| Liabilities assumed: | |
| Accrued expenses | 106 |
|
| Total liabilities | 106 |
|
| Net tangible assets acquired | 21,233 |
|
| Goodwill | 4,240 |
|
| Total consideration paid | $ | 25,473 |
|
The following unaudited pro forma information presents a summary of our consolidated results of operations as if the transactions referenced above occurred at the beginning of the first fiscal year of the periods presented (amounts in thousands, except per share data):
|
| | | | | | | |
| | Years Ended April 30, |
| | 2020 | | 2019 |
| Total revenue | $ | 9,217,749 |
| | $ | 9,421,773 |
|
| Net income | $ | 265,233 |
| | $ | 205,987 |
|
| Net income per common share | | | |
| Basic | $ | 7.18 |
| | $ | 5.61 |
|
| Diluted | $ | 7.13 |
| | $ | 5.57 |
|
|
| | | | | | | |
| | Years Ended April 30, |
| | 2017 | | 2016 |
| Total revenue | $ | 7,540,386 |
| | $ | 7,156,075 |
|
| Net income | $ | 178,645 |
| | $ | 227,124 |
|
| Net income per common share | | | |
| Basic | $ | 4.57 |
| | $ | 5.82 |
|
| Diluted | $ | 4.51 |
| | $ | 5.76 |
|
3. FAIR VALUE OF FINANCIAL INSTRUMENTS AND LONG-TERM DEBT
A summary of the fair value of the Company’s financial instruments follows.
Cash and cash equivalents, receivables, and accounts payablepayable: The carrying amount approximates fair value due to the short maturity of these instruments or the recent purchase of the instruments at current rates of interest.
Long-term debtdebt: The fair value of the Company’s long-term debt (including current maturities) and capitalfinance lease obligations is estimated based on the current rates offered to the Company for debt of the same or similar issues. The fair value of the Company’s long-term debt and capital lease obligations was approximately $941,000$1,341,000 and $887,000,$1,272,000, respectively, at April 30, 20172020 and 2016.2019.
The carrying amount of the Company’s long-term debt at carrying amountand finance lease obligations by issuance is as follows:
|
| | | | | | | |
| | As of April 30, |
| | 2020 | | 2019 |
| Finance lease liabilities (Note 7) | $ | 16,746 |
| | $ | 16,480 |
|
| 5.72% Senior notes due in 14 installments beginning September 30, 2012 and ending March 30, 2020 | — |
| | 15,000 |
|
| 5.22% Senior notes due August 9, 2020 (1) | 569,000 |
| | 569,000 |
|
| 3.67% Senior notes (Series A) due in 7 installments beginning June 17, 2022, and ending June 15, 2028 | 150,000 |
| | 150,000 |
|
| 3.75% Senior notes (Series B) due in 7 installments beginning December 17, 2022 and ending December 18, 2028 | 50,000 |
| | 50,000 |
|
| 3.65% Senior notes (Series C) due in 7 installments beginning May 2, 2025 and ending May 2, 2031 | 50,000 |
| | 50,000 |
|
| 3.72% Senior notes (Series D) due in 7 installments beginning October 28, 2025 and ending October 28, 2031 | 50,000 |
| | 50,000 |
|
| 3.51% Senior notes (Series E) due June 13, 2025 | 150,000 |
| | 150,000 |
|
| 3.77% Senior notes (Series F) due August 22, 2028 | 250,000 |
| | 250,000 |
|
| | 1,285,746 |
| | 1,300,480 |
|
| Less current maturities (2) | 571,244 |
| | 17,205 |
|
| | $ | 714,502 |
| | $ | 1,283,275 |
|
|
| | | | | | | |
| | As of April 30, |
| | 2017 | | 2016 |
| Capitalized lease obligations discounted at 3.70% to 6.00% due in various monthly installments through 2048 (Note 7) | $ | 8,777 |
| | $ | 9,244 |
|
| 5.72% Senior notes due in 14 installments beginning September 30, 2012 and ending March 30, 2020 | 45,000 |
| | 60,000 |
|
| 5.22% Senior notes due August 9, 2020 | 569,000 |
| | 569,000 |
|
| 3.67% Senior notes (Series A) due in 7 installments beginning June 17, 2022, and ending June 15, 2028 | 150,000 |
| | 150,000 |
|
| 3.75% Senior notes (Series B) due in 7 installments beginning December 17, 2022 and ending December 18, 2028 | 50,000 |
| | 50,000 |
|
| 3.65% Senior notes (Series C) due in 7 installments beginning May 2, 2025 and ending May 2, 2031 | 50,000 |
| | — |
|
| 3.72% Senior notes (Series D) due in 7 installments beginning October 28, 2025 and ending October 28, 2031 | 50,000 |
| | — |
|
| | 922,777 |
| | 838,244 |
|
| Less current maturities | 15,421 |
| | 15,375 |
|
| | $ | 907,356 |
| | $ | 822,869 |
|
(1) The Company is in the process of refinancing these Senior notes, and expects to execute the applicable note purchase agreement for the refinancing in the near future shortly after the report date.
At
(2) Long-term debt is presented gross in the table above, but net of unamortized debt issuance costs of $964 and $1,171 on the consolidated balance sheets for the years ended April 30, 2017,2020 and 2019, respectively.
In January 2019, the Company hadentered into the Credit Facility that provides for a bank line of credit arrangement consisting of two Promissory Notes, in the principal amount of $50,000 each (together, the “Notes”). The Notes evidenced a$300 million unsecured revolving line of credit, ina $30 million sublimit for letters of credit and a $30 million sublimit for swingline loans. The Credit Facility contains an expansion option permitting the Company to request an increase of the Credit Facility from time to time up to an aggregate principal amountadditional $150 million from the lenders or other financial institutions acceptable to the Company and the Administrative Agent, upon the satisfaction of $100,000 andcertain conditions, including the consent of the lenders whose commitments would increase. The maturity date is January 11, 2024. Amounts borrowed under the Credit Facility bear interest at variable rates based upon, at the Company's option, either (a) LIBOR plus an applicable margin or (b) an alternate base rate. The Credit Facility also carries a facility fee between 0.2% and 0.4% per annum based on the Company's consolidated leverage ratio as defined in the credit agreement. The Company had $120,000 and 75,000 outstanding under the line of credit at April 30, 2020 and 2019, respectively.
Concurrently with this credit agreement, the Company also reduced the Bank Line from $150,000 to $25,000. The Bank Line bears interest at a variable rate subject to change from time to time based on changes in an independent index referred to in the NotesBank Line as the Federal Funds Offered Rate (the “Index”). The interest rate to be applied to the unpaid principal balance of the first NoteBank Line was at a rate of 0.750% over the Index. The interest rate applicable to the second note is 1.000%1.0% over the Index. There was a $900 balance owed on the Notes$0 outstanding at April 30, 20172020 and $0 at April 30, 2016.2019. The line of credit is due upon demand.
Interest expense is net of interest income of $588, $157,$860, $595, and $158$1,583 for the years ended April 30, 2017, 2016,2020, 2019, and 2015,2018, respectively. Interest expense is also net of interest capitalized of $1,470, $1,134,$5,258, $3,057, and $1,209$2,260 during the years ended April 30, 2017, 2016,2020, 2019, and 2015,2018, respectively.
The agreements relating to the above long-term debt contain certain operating and financial covenants. At April 30, 2017,2020, the Company was in compliance with all such operating and financial covenants.
Listed below are the aggregate maturities of long-term debt, including capitalizedfinance lease obligations, for the 5 years commencing May 1, 20172020 and thereafter:
|
| | | | | | | | | | | |
| Years ended April 30, | Finance Leases | | Senior Notes | | Total |
| 2021 | $ | 2,244 |
| | $ | 569,000 |
| | $ | 571,244 |
|
| 2022 | 2,354 |
| | — |
| | 2,354 |
|
| 2023 | 2,484 |
| | 20,000 |
| | 22,484 |
|
| 2024 | 2,060 |
| | 32,000 |
| | 34,060 |
|
| 2025 | 734 |
| | 32,000 |
| | 32,734 |
|
| Thereafter | 6,870 |
| | 616,000 |
| | 622,870 |
|
| | $ | 16,746 |
| | $ | 1,269,000 |
| | $ | 1,285,746 |
|
|
| | | | | | | | | | | |
| Years ended April 30, | Capital Leases | | Senior Notes | | Total |
| 2018 | $ | 421 |
| | $ | 15,000 |
| | $ | 15,421 |
|
| 2019 | 444 |
| | 15,000 |
| | 15,444 |
|
| 2020 | 468 |
| | 15,000 |
| | 15,468 |
|
| 2021 | 494 |
| | 569,000 |
| | 569,494 |
|
| 2022 | 455 |
| | — |
| | 455 |
|
| Thereafter | 6,495 |
| | 300,000 |
| | 306,495 |
|
| | $ | 8,777 |
| | $ | 914,000 |
| | $ | 922,777 |
|
4. PREFERRED AND COMMON STOCK
Preferred stockstock: The Company has 1,000,000 authorized shares of preferred stock, of which 250,000 shares have been designated as Series A Serial Preferred Stock. NoNaN shares have been issued.
Common stockstock: The Company currently has 120,000,000 authorized shares of common stock.
Stock option plansincentive plans: The 2018 Stock Incentive Plan (the “2018 Plan”), was approved by the Board in June 2018 and approved by the Company's shareholders on September 5, 2018 ("the "2018 Plan Effective Date"). The 2018 Plan replaced the 2009 Stock Incentive Plan (the “Plan”"2009 Plan") was approved byunder which no new awards are allowed to be granted as of the Board of Directors in June 2009 and approved by the shareholders in September 2009. The2018 Plan replaced the 2000 Option Plan and the Non-employee Director Stock Plan (together, the “Prior Plans”). There are 3,250,062 shares available for grant at April 30, 2017Effective Date.
Awards under the Plan. Awards made under the2018 Plan may take the form of stock options, stock appreciation rights, restricted stock, or restricted stock units.units and other equity-based and equity-related awards. Each share issued pursuant to a stock option will reduceand each share with respect to which a stock-settled stock appreciation right is exercised (regardless of the number of shares available for grant by one,actually delivered) is counted as 1 share against the maximum limit under the 2018 Plan, and each share issued pursuant to an award of restricted stock or restricted stock units will reduceis counted as 2 shares against the shares available for grant by two.maximum limit. Restricted stock is transferred to the employee or non-employee immediately upon grant (and may be subject to a holding period), whereas restricted stock units have a vesting period that must expire, and in some cases performance or market conditions that must be satisfied before the stock is transferred. There were 2,618,194 shares available for grant at April 30, 2020 under the 2018 Plan.
We account for stock-based compensation by estimating the grant date fair value of stock options using the Black Scholes model, and the fair value of time-based and performance-based restricted stock unit awards granted underusing the Plan using marketclosing price of a share of our common stock. For market based awards, we use a "Monte Carlo" approach to estimate the value of the awards, which simulates the prices of the Company’s and each member of the performance peer groups' common stock onprice at the dateend of grant.the relevant performance period, taking into account volatility and the specifics surrounding each total shareholder return metric under the relevant plan. We recognize this fair valuethese amounts as an operating expense in our consolidated statements of income ratably over the requisite service period using the straight-line method, as adjusted for certain retirement provisions, and updated estimates of shares to be issued under performance-based awards. All awards have been granted at no cost to the grantee and/or non-employee member of the Board.
The following table summarizes the equity-related grants made during the three-year period ended April 30, 2020:
|
| | | | | | |
| Date of Grant | Type of Grant | Shares Granted | Recipients | Vesting Date | Fair Value at Grant Date |
| | | | | | |
| June 1, 2017 | Restricted Stock Units | 63,699 |
| Key Employees | June 1, 2020 | $7,388 |
| July 14, 2017 | Restricted Stock Units (1) | 61,126 |
| Officers | June 15, 2020 | $6,912 |
| September 28, 2017 | Restricted Stock | 8,344 |
| Non-Employee Board Members | Immediate | $920 |
| March 29, 2018 | Restricted Stock Units | 2,150 |
| Non-Employee Board Members | September 21, 2018 | $236 |
| May 24, 2018 | Restricted Stock Units | 88,846 |
| Key Employees | May 24, 2021 | $8,593 |
| June 8, 2018 | Restricted Stock Units (1) | 75,402 |
| Officers | June 8, 2021 | $7,571 |
| September 5, 2018 | Restricted Stock Units | 7,984 |
| Non-Employee Board Members | 2019 Annual Shareholders' Meeting Date | $920 |
| June 4, 2019 | Restricted Stock Units | 75,959 |
| Key Employees | June 4, 2022 | $9,886 |
| June 4, 2019 | Restricted Stock Units (1) | 59,579 |
| Officers | June 4, 2022 | $9,097 |
| June 24, 2019 | Restricted Stock Units (2) | 32,786 |
| CEO | Various (2) | $5,700 |
| September 4, 2019 | Restricted Stock Units | 5,504 |
| Non-Employee Board Members | 2020 Annual Shareholders' Meeting Date | $919 |
| December 23, 2019 | Restricted Stock Units (3) | 5,000 |
| CEO | Various (3) | $788 |
| Various (4) | Restricted Stock Units (4) | 8,444 |
| Officers | Various (4) | $1,368 |
| Various (5) | Restricted Stock Units (5) | 1,763 |
| Officers | Various (5) | $354 |
(1) This grant of restricted stock units includes time-based, performance-based and market-based awards. The performance-based awards included in the figure above represent a “target” amount; the final amount earned is based on the satisfaction of certain performance measures over a three-year performance period and will range from 0% to 200% of the “target". The market-based awards incorporate market conditions in determining fair value as of the grant date, and will also range from 0% to 200% of the "target". Total market-based expense of approximately $2.3 million for the 2017 grant, $2.6 million for the 2018 grant, and $3.1 million for the 2019 grant will be recognized on a straight-line basis over the vesting period, subject to acceleration for retirement provisions.
(2) This grant of restricted stock units is comprised of time-based awards that vest ratably on each June 23, 2020 through 2022, along with a market-based award vesting June 23, 2022. The market-based award incorporates market conditions in determining fair value on the grant date and will range from 0% to 200% of the target. Total market-based expense of approximately $1.8 million will be recognized on a straight-line basis over the vesting period.
(3) This grant of restricted stock units is comprised of performance-based awards which are calculated based upon targets achieved over performance periods from January 1, 2020 to December 31, 2020. If the performance targets are met, the units vest ratably on each January 15, 2021 through 2023.
(4) These grants of restricted stock units were issued to various officers throughout the fiscal year. The grants were comprised of time-based awards and vest in accordance with the agreements, ranging from January 2021 to January 2023.
(5) These grants of restricted stock units were issued to various officers throughout the fiscal year. The grants includes time-based, performance-based and market-based awards. The performance-based awards included in the figure above represent a
“target” amount; the final amount earned is based on the satisfaction of certain performance measures over a three-year performance period and will range from 0% to 200% of the “target". The market-based awards incorporate market conditions in determining fair value as of the grant date, and will also range from 0% to 200% of the "target". Total market-based expense of approximately $177 will be recognized on a straight-line basis over the vesting period.
At April 30, 2017,2020, stock options for 222,05043,189 shares (which expire between fiscal years 2018 through 2022)on June 23, 2021) were outstanding. All stock option shares issued are previously unissued authorized shares.
The following table summarizes the most recent compensation grants made during the three-year period ended April 30, 2017:
|
| | | | | | |
| Date of Grant | Type of Grant | Shares Granted | Recipients | Vesting Date | Fair Value at Grant Date |
| | | | | | |
| June 6, 2014 | Restricted Stock Units | 91,000 |
| Officers & Key employees | June 6, 2017 | $6,584 |
| June 6, 2014 | Restricted Stock | 30,538 |
| Officers & Key employees | Immediate (Annual performance goal) | $2,209 |
| September 19, 2014 | Restricted Stock | 13,955 |
| Non-employee board members | Immediate | $990 |
| June 5, 2015 | Restricted Stock Units | 104,200 |
| Officers & Key employees | June 5, 2018 | $9,135 |
| June 5, 2015 | Restricted Stock | 48,913 |
| Officers & Key employees | Immediate (Annual performance goal) | $4,288 |
| September 18, 2015 | Restricted Stock | 7,748 |
| Non-employee board members | Immediate | $856 |
| April 12, 2016 | Restricted Stock Units | 10,000 |
| CEO | 20% each May 1, 2017-2021 | $1,060 |
| June 3, 2016 | Restricted Stock Units | 111,150 |
| Officers & Key employees | June 3, 2019 | $13,849 |
| June 3, 2016 | Restricted Stock | 40,996 |
| Officers & Key employees | Immediate (Annual performance goal) | $5,108 |
| September 16, 2016 | Restricted Stock | 8,941 |
| Non-employee board members | Immediate | $1,064 |
Information concerning the issuance of stock options under the 2009 Plan and Prior Plans is presented in the following table:table (no stock option awards have been granted under the 2018 Plan):
|
| | | | | | |
| | Number of option shares | | Weighted average option exercise price |
| Outstanding at April 30, 2017 | 222,050 |
| | $ | 38.51 |
|
| Exercised | (40,377 | ) | | 34.11 |
|
| Outstanding at April 30, 2018 | 181,673 |
| | $ | 39.48 |
|
| Exercised | (71,546 | ) | | 32.02 |
|
| Forfeited | (300 | ) | | 25.26 |
|
| Outstanding at April 30, 2019 | 109,827 |
| | $ | 44.39 |
|
| Exercised | (66,638 | ) | | 44.39 |
|
| Outstanding at April 30, 2020 | 43,189 |
| | $ | 44.39 |
|
|
| | | | | | |
| | Number of option shares | | Weighted average option exercise price |
| Outstanding at April 30, 2014 | 712,024 |
| | $ | 36.73 |
|
| Granted | — |
| | — |
|
| Exercised | (310,224 | ) | | 36.96 |
|
| Forfeited | — |
| | — |
|
| Outstanding at April 30, 2015 | 401,800 |
| | $ | 36.55 |
|
| Granted | — |
| | — |
|
| Exercised | (108,100 | ) | | 34.37 |
|
| Forfeited | (2,500 | ) | | 25.26 |
|
| Outstanding at April 30, 2016 | 291,200 |
| | $ | 37.46 |
|
| Granted | — |
| | — |
|
| Exercised | (69,150 | ) | | 34.08 |
|
| Forfeited | — |
| | — |
|
| Outstanding at April 30, 2017 | 222,050 |
| | $ | 38.51 |
|
At April 30, 2017,2020, all outstanding options had an aggregate intrinsic value of $16,335$4,622 and a weighted average remaining contractual life of 3.491.17 years. The weighted average exercise price for all remaining outstanding options is $44.39. All options are vested as of April 30, 2017.2020. The aggregate intrinsic value for the total of all options exercised during the year ended April 30, 20172020 was $6,137.
At April 30, 2017, the range of exercise prices for outstanding options was $25.26 – $44.39. The number of shares and weighted average remaining contractual life of the options by range of applicable exercise prices at April 30, 2017 were as follows:
|
| | | | | | | |
Range of exercise prices | Number of shares | | Weighted average exercise price | | Weighted average remaining contractual life (years) |
| 25.26-25.49 | 62,350 |
| | 25.28 |
| | 2.2 |
| 26.51-26.92 | 6,500 |
| | 26.73 |
| | 0.6 |
| 44.39 | 153,200 |
| | 44.39 |
| | 4.2 |
| | 222,050 |
| | | | |
Information concerning the issuance of restricted stock units under the 2018 Plan and the 2009 Plan is presented in the following table:
|
| | |
| | |
Unvested at April 30, 20142017 | 148,546303,400 |
|
| Granted | 91,000126,980 |
|
| Vested | (38,19888,700 | ) |
| Forfeited | (7,4182,699 | ) |
Unvested at April 30, 20152018 | 193,930338,981 |
|
| Granted | 114,200172,232 |
|
| Vested | (31,480104,166 | ) |
| Forfeited | (3,75010,530 | ) |
| Performance Award Adjustments | (7,717 | ) |
Unvested at April 30, 20162019 | 272,900388,800 |
|
| Granted | 111,150189,035 |
|
| Vested | (73,000108,484 | ) |
| Forfeited | (7,65025,146 | ) |
| Performance Award Adjustments | 29,594 |
|
Unvested at April 30, 20172020 | 303,400473,799 |
|
Total compensation costs recorded for employees and non-employee board members for the stock options, restricted stock, and restricted stock unit awards for the years ended April 30, 2017, 20162020, 2019 and 20152018 were $10,697, $7,413,$18,129, $16,410, and $7,307,$18,800, respectively. As of April 30, 2017,2020, there was $12,693$17,022 of total unrecognized compensation costs related to the 2018 Plan and Prior Plans2009 Plan for costs related to restricted stock units which are expected to be recognized ratably through fiscal 2020.
ASU No 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting was issued in March 2016 and early adopted by the Company in the first quarter of fiscal 2017. ASU 2016-09 eliminates the requirement to estimate and apply a forfeiture rate to reduce stock compensation expense during the vesting period, and instead, provides an alternative option to account for forfeitures as they occur, which is the option the Company adopted. ASU 2016-09 requires that this change be adopted using the modified retrospective approach. The adoption of this section had no material impact on the financial statements. Additionally, ASU 2016-09 addresses the presentation of excess tax benefits and employee taxes paid on the statement of cash flows. The standard requires presentation of excess tax benefits as an operating activity (combined with other income tax cash flows) on the statement of cash flows rather than as a financing activity. We adopted this change prospectively during the first quarter of 2017. ASU 2016-09 also requires the presentation of amounts withheld for applicable income taxes on employee share-based awards as a financing activity on the statement of cash flows. This adoption is reflected in the cash flow statement on a retrospective basis, which resulted in an increase in net cash used in financing activities and an increase in net cash provided by operating activities of $4,975 and $3,339 for the periods ended April 30, 2016 and April 30, 2015, respectively.
ASU No 2016-09 also eliminates additional paid in capital ("APIC") pools and requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. This requirement is to be adopted prospectively by the Company. The impact of this section of the standard was a benefit of $3,046 to income tax expense for the first quarter of fiscal 2017. In addition, the ASU requires that the excess tax benefit be removed from the overall calculation of diluted shares. The impact on diluted earnings per share of this adoption was not material.
Finally, modified retrospective adoption of ASC 2016-09 eliminates the requirement that excess tax benefits be realized (i.e. through a reduction in income taxes payable) before they are recognized. The adoption of this portion of the standard had no impact on the financial statements.2022.
During the fourth quarter of the fiscal year ended April 30, 2017, the Company began a share repurchase program, wherein the Company iswas authorized to repurchase up to an aggregate of $300 million of the Company's outstanding common stock. The share repurchase authorization iswas valid for a period of two years. From its inception on March 9, 2017, through May 2018, the company completed the $300 million authorization by repurchasing 2,794,192 shares of its common stock.
In March 2018, the Company announced a second share repurchase program with an aggregate $300 million share repurchase program. The share repurchase authorization was valid for a period of two years. On March 6, 2020, the authorization was extended through the end of the Company’s 2022 fiscal year. The timing and number of repurchase transactions under the program depends on a variety of factors including, but not limited to, market conditions, corporate considerations, business opportunities, debt agreements, and regulatory requirements. The program can be suspended or discontinued at any time. From its inceptionNaN repurchases were made on March 9, 2017, through the end ofthat program in fiscal year 2017, the company repurchased 443,800 shares of its common stock under its open market share repurchase program, for approximately $49.4 million. As of April 30, 2017, the Company had a total remaining authorized amount for share repurchases of $250.6 million.2020.
5. NET INCOME PER COMMON SHARE
Computations for basic and diluted earnings per common share are presented below:
|
| | | | | | | | | | | |
| | Years ended April 30, |
| | 2020 | | 2019 | | 2018 |
| Basic | | | | | |
| Net income | $ | 263,846 |
| | $ | 203,886 |
| | $ | 317,903 |
|
| Weighted average shares outstanding-basic | 36,956,115 |
| | 36,709,940 |
| | 37,778,304 |
|
| Basic earnings per common share | $ | 7.14 |
| | $ | 5.55 |
| | $ | 8.41 |
|
| Diluted |
| |
| |
|
| Net income | $ | 263,846 |
| | $ | 203,886 |
| | $ | 317,903 |
|
| Weighted-average shares outstanding-basic | 36,956,115 |
| | 36,709,940 |
| | 37,778,304 |
|
| Plus effect of stock options and restricted stock units | 229,713 |
| | 265,447 |
| | 353,795 |
|
| Weighted-average shares outstanding-diluted | 37,185,828 |
| | 36,975,387 |
| | 38,132,099 |
|
| Diluted earnings per common share | $ | 7.10 |
| | $ | 5.51 |
| | $ | 8.34 |
|
|
| | | | | | | | | | | |
| | Years ended April 30, |
| | 2017 | | 2016 | | 2015 |
| Basic | | | | | |
| Net income | $ | 177,485 |
| | $ | 225,982 |
| | $ | 180,628 |
|
| Weighted average shares outstanding-basic | 39,124,665 |
| | 39,016,299 |
| | 38,743,227 |
|
| Basic earnings per common share | $ | 4.54 |
| | $ | 5.79 |
| | $ | 4.66 |
|
| Diluted |
| |
| |
|
| Net income | $ | 177,485 |
| | $ | 225,982 |
| | $ | 180,628 |
|
| Weighted-average shares outstanding-basic | 39,124,665 |
| | 39,016,299 |
| | 38,743,227 |
|
| Plus effect of stock options and restricted stock units | 454,333 |
| | 405,900 |
| | 360,606 |
|
| Weighted-average shares outstanding-diluted | 39,578,998 |
| | 39,422,199 |
| | 39,103,833 |
|
| Diluted earnings per common share | $ | 4.48 |
| | $ | 5.73 |
| | $ | 4.62 |
|
There were no options considered antidilutive; therefore, all options were included in the computation of dilutive earnings per share for fiscal 2017, 2016,2020, 2019, and fiscal 2015,2018, respectively.
6. INCOME TAXES
Income tax expense (benefit) attributable to earnings consisted of the following components:
|
| | | | | | | | | | |
| | Years ended April 30, |
| | 2020 | | 2019 | | 2018 |
| Current tax expense (benefit): | | | | | |
| Federal | $ | 22,182 |
| | $ | 10,326 |
| | (7,057 | ) |
| State | 6,210 |
| | 3,853 |
| | 1,769 |
|
| | 28,392 |
| | 14,179 |
| | (5,288 | ) |
| Deferred tax expense (benefit) | 49,810 |
| | 45,337 |
| | (98,178 | ) |
| Total income tax expense (benefit) | $ | 78,202 |
| | $ | 59,516 |
| | (103,466 | ) |
|
| | | | | | | | | | | |
| | Years ended April 30, |
| | 2017 | | 2016 | | 2015 |
| Current tax expense | | | | | |
| Federal | $ | 41,300 |
| | $ | 58,273 |
| | $ | 49,593 |
|
| State | 5,693 |
| | 8,959 |
| | 7,093 |
|
| | 46,993 |
| | 67,232 |
| | 56,686 |
|
| Deferred tax expense | 45,190 |
| | 55,492 |
| | 44,711 |
|
| Total income tax expense | $ | 92,183 |
| | $ | 122,724 |
| | $ | 101,397 |
|
The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:
|
| | | | | | | |
| | As of April 30, |
| | 2020 | | 2019 |
| Deferred tax assets: | | | |
| Accrued liabilities and reserves | $ | 15,953 |
| | $ | 11,705 |
|
| Property and equipment depreciation | 27,512 |
| | 24,661 |
|
| Workers compensation | 8,303 |
| | 8,277 |
|
| Deferred compensation | 3,781 |
| | 3,827 |
|
| Equity compensation | 7,083 |
| | 6,727 |
|
| State net operating losses & tax credits | 424 |
| | 775 |
|
| Other | 1,335 |
| | 1,033 |
|
| Total gross deferred tax assets | 64,391 |
| | 57,005 |
|
| Less valuation allowance | 47 |
| | 47 |
|
| Total net deferred tax assets | 64,344 |
| | 56,958 |
|
| Deferred tax liabilities: |
| |
|
| Property and equipment depreciation | (474,829 | ) | | (420,710 | ) |
| Goodwill | (24,348 | ) | | (21,560 | ) |
| Other | (765 | ) | | (476 | ) |
| Total gross deferred tax liabilities | (499,942 | ) | | (442,746 | ) |
| Net deferred tax liability | $ | (435,598 | ) | | (385,788 | ) |
|
| | | | | | | |
| | As of April 30, |
| | 2017 | | 2016 |
| Deferred tax assets | | | |
| Accrued liabilities and reserves | $ | 10,948 |
| | $ | 11,522 |
|
| Property and equipment depreciation | 16,604 |
| | 15,914 |
|
| Workers compensation | 10,934 |
| | 10,540 |
|
| Deferred compensation | 5,916 |
| | 6,696 |
|
| Equity compensation | 6,923 |
| | 5,186 |
|
| State net operating losses & tax credits | 938 |
| | 973 |
|
| Other | 1,275 |
| | 1,582 |
|
| Total gross deferred tax assets | 53,538 |
| | 52,413 |
|
| Less valuation allowance | 60 |
| | 84 |
|
| Total net deferred tax assets | 53,478 |
| | 52,329 |
|
| Deferred tax liabilities |
| |
|
| Property and equipment depreciation | (468,470 | ) | | (425,586 | ) |
| Goodwill | (25,052 | ) | | (21,677 | ) |
| Other | (80 | ) | | — |
|
| Total gross deferred tax liabilities | (493,602 | ) | | (447,263 | ) |
| Net deferred tax liability | $ | (440,124 | ) | | $ | (394,934 | ) |
At April 30, 2017,2020, the Company had net operating loss carryforwards for state income tax purposes of approximately $61,154,$97,144, which are available to offset future state taxable income. TheseThe state net operating loss carryforwards begin to expire during the tax years 2020 through 2036. In addition, the Company had state alternative minimum tax credit carryforwards of approximately $7, which are available to reduce future state regular income taxes over an indefinite period.in 2021.
There was aThe valuation allowance of $60 and $84 for state net operating loss deferred tax assets as of April 30, 20172020 and 2016. The change in the valuation allowance2019 was $(24) and $(144) for the years ending April 30, 2017 and 2016, respectively.$47. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected taxable income, and tax planning strategies in making this assessment.
Total reported tax expense applicable to the Company’s continuing operations varies from the tax that would have resulted from applying the statutory U.S. federal income tax rates to income before income taxes.
|
| | | | | | | | |
| | Years ended April 30, |
| | 2020 | | 2019 | | 2018 |
| Income taxes at the statutory rates | 21.0 | % | | 21.0 | % | | 30.4 | % |
| Impact of Tax Reform Act | — | % | | 0.4 | % | | (80.5 | )% |
| Federal tax credits | (1.9 | )% | | (2.3 | )% | | (2.2 | )% |
| State income taxes, net of federal tax benefit | 4.0 | % | | 4.3 | % | | 3.7 | % |
| Impact of phased-in state law changes, net of federal benefit | (0.2 | )% | | (1.8 | )% | | 0.8 | % |
| ASU 2016-09 benefit (share based compensation) | (0.5 | )% | | (0.6 | )% | | (0.8 | )% |
| Other | 0.5 | % | | 1.6 | % | | 0.3 | % |
| | 22.9 | % | | 22.6 | % | | (48.3 | )% |
|
| | | | | | | | |
| | Years ended April 30, |
| | 2017 | | 2016 | | 2015 |
| Income taxes at the statutory rates | 35.0 | % | | 35.0 | % | | 35.0 | % |
| Federal tax credits | (1.8 | )% | | (1.7 | )% | | (1.7 | )% |
| State income taxes, net of federal tax benefit | 2.8 | % | | 2.7 | % | | 3.1 | % |
| ASU 2016-09 Benefit (share based compensation) | (1.3 | )% | | — | % | | — | % |
| Other | (0.5 | )% | | (0.8 | )% | | (0.4 | )% |
| | 34.2 | % | | 35.2 | % | | 36.0 | % |
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company had a total of $5,362$8,907 and $6,484$7,287 in gross unrecognized tax benefits at April 30, 20172020 and 2016,2019, respectively, which is recorded in other long-term liabilities in the consolidated balance sheet.sheets. Of this amount, $3,522$7,059 represents the amount of unrecognized tax benefits that, if recognized, would impact our effective tax rate. Unrecognized tax benefits decreased $1,122increased $1,620 during the twelve months ended April 30, 2017,2020, due primarily to the expiration of certain statutes of limitations exceeding the increase associated with income tax filing positions for the current year.year exceeding the decrease related to the expiration of certain statute of limitations.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|
| | | | | | | |
| | 2020 | | 2019 |
| Beginning balance | $ | 7,287 |
| | $ | 6,421 |
|
| Additions based on tax positions related to current year | 2,780 |
| | 2,169 |
|
| Reductions due to lapse of applicable statute of limitations | (1,160 | ) | | (1,303 | ) |
| Ending balance | $ | 8,907 |
| | $ | 7,287 |
|
|
| | | | | | | |
| | 2017 | | 2016 |
| Beginning balance | $ | 6,484 |
| | $ | 8,043 |
|
| Additions based on tax positions related to current year | 1,705 |
| | 1,084 |
|
| Additions for tax positions of prior years | — |
| | 26 |
|
| Reductions for tax positions of prior years | — |
| | — |
|
| Reductions due to lapse of applicable statute of limitations | (2,827 | ) | | (2,669 | ) |
| Settlements | — |
| | — |
|
| Ending balance | $ | 5,362 |
| | $ | 6,484 |
|
The total net amount of accrued interest and penalties for such unrecognized tax benefits was $141$354 and $217$242 at April 30, 20172020 and 2016,2019, respectively, and is included in other long-term liabilities. Net interest and penalties included in income tax expense for the twelve month periodperiods ended April 30, 20172020 and 2019 was a decreasean increase in tax expense of $76$112 and an increase of $65 for the year ended April 30, 2016.$51, respectively.
A number of years may elapse before an uncertain tax position is audited and ultimately settled. It is difficult to predict the ultimate outcome or the timing of resolution for uncertain tax positions. It is reasonably possible that the amount of unrecognized tax benefits could significantly increase or decrease within the next twelve months. These changes could result from the expiration of the statute of limitations, examinations or other unforeseen circumstances. The State of Nebraska is examining tax years 2012 through 2014, and the state of Kansas is examining tax years 2013 through 2015. Additionally, the IRS is currently examining tax year 2012.years 2016 and 2017. The Company has no other ongoing federal or state income tax examinations. The Company does not have any outstanding litigation related to tax matters.
At this time, the Company’s best estimate of the reasonably possible change in the amount of the gross unrecognized tax benefits is a decrease of $1,242$1,800 during the next twelve months mainly due to the expiration of certain statutes of limitations.limitation. The federal statute of limitations remains open for the tax years 2012 and forward. Tax years 2012 and forward are subject to audit by state tax authorities depending on open statute of limitations waivers and the tax code of each state.
7. LEASES
The Company leases certainis a lessee in situations where we lease property and equipment, usedmost commonly land or building, from a lessor. The Company is a lessor in its operations. Generally,situations where the Company owns land or building and leases a portion or all of the property or equipment to a tenant. In both situations, leases are reported in accordance with ASC 842 - Leases. As a lessee, the Company recognizes a right-of-use asset representing its right to use the underlying asset for primary termsthe lease term and a lease liability for the obligation to make lease payments. Both the right-of-use asset and lease liability are initially measured at the present value of fivethe lease payments, with subsequent measurement dependent on the classification of the lease as either a finance or an operating lease. For leases with a term of twelve months or less, we have elected to twenty years withnot recognize lease assets and lease liabilities and will recognize lease expense on a straight-line basis over the lease term. The Company records the operating lease liability in accrued expenses and other long-term liabilities and records the finance lease liability within current maturities of long-term debt and long term debt and finance lease obligations on the consolidated balance sheets. We have elected to adopt the package of practical expedients, as well as the land easement practical expedient. All lessor related activity is considered immaterial to the consolidated financial statements.
The leases initially recorded under ASC 842 were recognized, at the time of adoption, at an amount equal to the present value of the lease payments using the incremental borrowing rate of debt based upon the remaining term of the lease. New leases are recognized at the present value of the lease payments using the implicit rate in the lease agreement when it is readily determinable. In the case the implicit rate is not readily determinable, the Company uses the incremental borrowing rate of debt based on the term of the lease.
Several leases have variable payment components of the lease such as commission based payments or payments for property taxes and insurance. For these leases, the Company has not included those variable payments in the calculation of the lease liability as the payments are not in-substance fixed and do not depend on an index or rate. These variable payments will be expensed as incurred. The Company also has options either to renew for additional periods or to purchaseextend the premises and call for paymentcurrent lease arrangement on many of property taxes, insurance, and maintenance byour leases. In these situations, if it was reasonably certain the lessee.lease would be extended, we have included those extensions within the remaining lease payments at the time of measurement.
The following is an analysisLease right-of-use assets outstanding as of April 30, 2020 consisted of the leased property under capitalfollowing (in thousands):
|
| | | | | | | |
| | Classification | | | | April 30, 2020 |
| Operating lease right-of-use assets | Other assets | | | | $ | 21,143 |
|
| Finance lease right-of-use assets | Property and equipment | | | | $ | 14,583 |
|
Weighted average remaining lease terms, weighted average discount rates, and supplementary cash flow information for outstanding leases by major classes:
were as follows:
|
| | | | | | | |
| | | | | | April 30, 2020 |
| Weighted-average remaining lease-term - finance lease | | | | 10.9 |
|
| Weighted-average remaining lease-term - operating lease | | | | 20.4 |
|
| | | | | |
| Weighted-average discount rate - finance lease | | | | 5.34 | % |
| Weighted-average discount rate - operating lease | | | | 4.25 | % |
| | | | | |
| Right-of-use assets obtained in exchange for new finance lease liabilities (in thousands) | | $ | 1,520 |
|
| Right-of-use assets obtained in exchange for new operating lease liabilities (in thousands) | | $ | 2,840 |
|
|
| | | | | | | |
| | Asset balances at April 30, |
| | 2017 | | 2016 |
| Real estate | $ | 13,480 |
| | $ | 13,480 |
|
| Equipment | 2,693 |
| | 2,564 |
|
| | 16,173 |
| | 16,044 |
|
| Less accumulated amortization | 7,039 |
| | 6,365 |
|
| | $ | 9,134 |
| | $ | 9,679 |
|
Future minimum payments under the capitalfinance leases and noncancelable operating leases with initial or remaining terms of one year or more consisted of the following at April 30, 2017:
2020 and April 30, 2019:
| | | Years ended April 30, | Capital leases | | Operating leases | |
| 2018 | $ | 900 |
| | $ | 1,172 |
| |
| 2019 | 907 |
| | 1,001 |
| |
| 2020 | 912 |
| | 658 |
| |
| Years ended April 30, 2020 | | Finance leases | | Operating leases |
| 2021 | 908 |
| | 523 |
| $ | 3,118 |
| | $ | 1,829 |
|
| 2022 | 883 |
| | 258 |
| 3,110 |
| | 1,814 |
|
| 2023 | | 3,116 |
| | 1,717 |
|
| 2024 | | 2,565 |
| | 1,683 |
|
| 2025 | | 1,167 |
| | 1,686 |
|
| Thereafter | 10,260 |
| | 815 |
| 10,764 |
| | 25,335 |
|
| Total minimum lease payments | 14,770 |
| | $ | 4,427 |
| 23,840 |
| | 34,064 |
|
| Less amount representing interest | 5,993 |
| | | 7,094 |
| | 12,468 |
|
| Present value of net minimum lease payments | $ | 8,777 |
| | | $ | 16,746 |
| | $ | 21,596 |
|
|
| | | | | | | |
| Years ended April 30, 2019 | Capital leases | | Operating leases |
| 2020 | $ | 3,103 |
| | $ | 1,703 |
|
| 2021 | 3,109 |
| | 1,547 |
|
| 2022 | 3,096 |
| | 1,354 |
|
| 2023 | 3,098 |
| | 1,228 |
|
| 2024 | 2,548 |
| | 1,066 |
|
| Thereafter | 9,215 |
| | 10,438 |
|
| Total minimum lease payments | 24,169 |
| | $ | 17,336 |
|
| Less amount representing interest | 7,689 |
| | |
| Present value of net minimum lease payments | $ | 16,480 |
| | |
Effective during the third quarter of fiscal year 2020, Casey’s Marketing Company, and the City of Joplin, Missouri (“Joplin”) entered into an agreement in which Joplin agreed to issue up to $51.4 million of taxable industrial development revenue bonds for the purpose of acquiring, constructing, improving, purchasing, equipping and installing a warehouse and distribution facility, which is to be developed and used by the Company. As title transfers to Joplin throughout development and the Company subsequently leases the related asset from Joplin, we have accounted for the transaction under the sale-and-leaseback guidance included in ASC 842-40. We have a purchase option included in the lease agreement for below the fair value of the asset, which prevents the transfer of the assets to Joplin from being recognized as a sale. Accordingly, we have not recognized any gain or loss related to the transfer. Furthermore, we have not derecognized the transferred assets and continue to recognize them in property and equipment on the consolidated balance sheets. The total rent expenseCompany has the right and intends to set-off any obligations to make payments under operating leases was $1,936the lease, with proceeds due from the industrial revenue bonds. As of April 30, 2020, we have $5,505 recognized as construction in 2017, $1,862process in 2016,property and $1,961 in 2015.equipment on the consolidated balance sheets related to this agreement.
8. BENEFIT PLANS
401(k) planPlan: The Company provides employeesteam members with a defined contribution 401(k) plan.Plan. The 401(k) plan coversPlan is available to all employeesteam members who meet minimum age and service requirements. The Company contributions consist of matching amounts in Company stock and are allocated based on employeeteam member contributions. Contributions to the 401(k) planPlan were $8,181, $6,560,$10,571, $9,918, and $5,852$9,614 for the years ended April 30, 2017, 2016,2020, 2019, and 2015,2018, respectively.
On April 30, 20172020 and 2016, 1,401,7642019, 1,113,882 and 1,419,8411,261,258 shares of common stock, respectively, were held by the trustee of the 401(k) planPlan in trust for distribution to eligible participants upon death, disability, retirement, or termination of employment. Shares held by the 401(k) planPlan are treated as outstanding in the computation of net income per common share.
Supplemental executive retirement planplan: The Company has a nonqualified supplemental executive retirement plan (SERP) for two2 of its former executive officers, one of whom retired April 30, 2003 and the other on April 30, 2008. The SERP provides for the Company to pay annual retirement benefits, up to 50% of base compensation until death of the officer. If death occurs within twenty years of retirement, the benefits become payable to the officer’s spouse (at a reduced level) until the spouse’s death or twenty years from the date of the officer’s retirement, whichever comes first. The Company has accruedrecorded the deferred compensation over the term of employment. The amounts accrued at April 30, 20172020 and 2016,2019, respectively, were $4,737$3,434 and $5,230.$3,800. The discount rates were based off of the Company's incremental borrowing rate, and ranged from 2.04% to 2.44% for the year ended April 30, 2020. The discount rates used were 4.0% and 3.8%, respectively, atfor the year ended April 30, 2017 and 2016.2019 ranged from 3.78% to 4.01%. The amount expensed in fiscal 20172020 was $131$269 and the Company expects to pay $625$635 per year for each of the next five years.three years, and $354 in the fourth and fifth year. Expense incurred in fiscal 20162019 and fiscal 20152018 was $230$221 and $326,$112, respectively.
Other post-employment benefitsbenefits: The Company also has severance and/or deferred compensation agreements with three other former employees.team members. The amounts accrued at April 30, 20172020 and 20162019 were $3,825$3,793 and $4,043,$2,870, respectively. The Company expects to pay $507, $457, $432, $432$1,511 in fiscal 2021 and $432$401 for each of the next fivefour years thereafter under the agreements. The expense (benefit received) incurred in fiscal 2017, 20162020, 2019, and 20152018 related to these agreements was $370, $238,$2,727, $(97), and $219$131, respectively.
9. COMMITMENTS
TheDuring the 2019 fiscal year, the Company has entered intowas a party to an employment agreement with its chief executive officer. TheTerry W. Handley with respect to his service as President and Chief Executive Officer. Mr. Handley retired from the Company on June 23, 2019. In connection with the appointment of Darren M. Rebelez as President and Chief Executive Officer, effective June 24, 2019, the Company is a party to an employment agreement with Mr. Rebelez that provides that the officerhe will receive aggregate base compensation of not less than $900$950 per year, exclusive of bonuses. The agreement also provides for certain payments in the case of death or disability of the officer.incentive payments. The Company also has entered into employmentchange of control agreements with fourteenits president and CEO and 21 other key employees,officers, providing for certain payments in the event of termination followingin connection with a change of control of the Company.
We have entered into various purchase agreements related to our fuel supply, which include varying volume
commitments. Prices included in the purchase agreements are indexed to market prices. While volume commitments are
included in the contracts, we do not have a history of incurring material penalties related to these provisions. These
contracts are not accounted for as derivatives as they meet the normal purchases exclusion under derivative accounting.
10. CONTINGENCIES
Environmental compliancecompliance: The United States Environmental Protection Agency and several states have adopted laws and regulations relating to underground storage tanks used for petroleum products. Several states in which the Company does business have trust fund programs with provisions for sharing or reimbursing corrective action or remediation costs.
Management currently believes that substantially all capital expenditures for electronic monitoring, cathodic protection, and overfill/spill protection to comply with existing regulations have been completed. The Company has an accrued liability at April 30, 20172020 and 20162019 of approximately $283$328 and $341,$381, respectively, for estimated expenses related to anticipated corrective actions or remediation efforts, including relevant legal and consulting costs. Management believes the Company has no material joint and several environmental liability with other parties. Additional regulations or amendments to the existing regulations could result in future revisions to such estimated expenditures.
Legal matters As previously reported, the Company was named as a defendant in four lawsuits (“hot fuel” cases) brought in the federal courts in Kansas and Missouri against a variety of fuel retailers, which were consolidated in the U.S. District Court for the District of Kansas in Kansas City, Kansas as part of the multidistrict “Motor Fuel Temperature Sales Practices Litigation”. On November 20, 2012, the Court preliminarily approved the previously-reported settlement involving the Company, which when approved in final form by the Court following notice to the Class would result in the settlement and dismissal of all claims against Casey’s in the multidistrict litigation. The approved settlement includes, but is not limited to, a commitment on the part of the Company to “sticker” certain information on its fuel pumps and make a monetary payment (which is not considered to be material in amount) to the plaintiff class. An order awarding fees was filed by the Court on February 17, 2016, but is subject to resolution of any appeal to the Tenth Circuit Court of Appeals.
matters:From time to time we may be involved in other legal andor administrative proceedings or investigations arising from the conduct of our business operations, including, but not limited to, contractual disputes; employment, personnel, or personnelaccessibility matters; personal injury and property damage claims; and claims by federal, state, and local regulatory authorities relating to the sale of products pursuant to licenses and permits issued by those authorities. Claims for damages in those actions may be substantial. While the outcome of such litigation, proceedings, investigations, or claims is never certain, it is our
opinion, after taking into consideration legal counsel’s assessment and the availability of insurance proceeds and other collateral sources to cover
potential losses, that the ultimate disposition of such matters currently pending or threatened, individually or cumulatively, will not have a material adverse effectimpact on our consolidated financial position and results of operation.operations.
OtherOther: At April 30, 2017,2020, the Company was partiallyprimarily self-insured for workers’ compensation claims in all but one statetwo states of its marketing territory. In North Dakota and Ohio, the Company is required to participate in an exclusive, state managed fund for all workers compensation claims. The Company was also partially self-insured for general liability and auto liability under an agreement that provides for annual stop-loss limits equal to or exceeding approximately $1,000.$500 for general liability and auto liability and $350 for workers' compensation. To facilitate this agreement, letters of credit approximating $21,126 and $20,115, respectively,$21,526 were issued and outstanding at April 30, 20172020 and 2016,2019, on the insurance company’s behalf. The Company also has investments of approximately $223 in escrow as required by one state for partial self-insurance of workers’ compensation claims. Additionally, the Company is self-insured for its portion of employeeteam member medical expenses. At April 30, 20172020 and 2016,2019, the Company had $37,984$44,959 and $35,535,$44,334, respectively, in accrued expensesoutstanding for estimated claims relating to self-insurance, the majority of which has been actuarially determined.
11. SUBSEQUENT EVENTS
Events that have occurred subsequent to April 30, 2017 have been evaluated for disclosure. On June 13, 2017, the Company issued $150 million aggregate principal amount of 3.51% Senior Notes due June 13, 2025, and expects to issue on August 22, 2017, $250 million aggregate principal amount of 3.77% Senior Notes due August 22, 2028. Further information is set forth in the Current Report on Form 8-K filed by the Company on June 15, 2017.
12.11. QUARTERLY FINANCIAL DATA (Dollars in thousands, except per share amounts) (Unaudited)
|
| | | | | | | | | | | | | | | |
| | Year ended April 30, 2020 |
| | Q1 | | Q2 | | Q3 | | Q4 | | Year Total |
| Total revenue | | | | | | | | | |
| Fuel | $ | 1,627,568 |
| | 1,514,474 |
| | 1,376,018 |
| | 999,352 |
| | 5,517,412 |
|
| Grocery and other merchandise | 687,918 |
| | 660,562 |
| | 582,407 |
| | 568,080 |
| | 2,498,966 |
|
| Prepared food and fountain | 295,877 |
| | 297,846 |
| | 273,630 |
| | 229,853 |
| | 1,097,207 |
|
| Other | 15,266 |
| | 14,704 |
| | 16,143 |
| | 15,598 |
| | 61,711 |
|
| | $ | 2,626,629 |
| | 2,487,586 |
| | 2,248,198 |
| | 1,812,883 |
| | 9,175,296 |
|
| Revenue less cost of goods sold excluding depreciation and amortization and credit card fees |
| |
| |
| |
| |
|
| Fuel | $ | 150,989 |
| | 140,798 |
| | 124,257 |
| | 198,803 |
| | 614,847 |
|
| Grocery and other merchandise | 215,453 |
| | 220,134 |
| | 191,692 |
| | 172,862 |
| | 800,140 |
|
| Prepared food and fountain | 184,012 |
| | 181,452 |
| | 164,795 |
| | 137,833 |
| | 668,092 |
|
| Other | 15,232 |
| | 14,681 |
| | 16,119 |
| | 15,572 |
| | 61,605 |
|
| | $ | 565,686 |
| | 557,065 |
| | 496,863 |
| | 525,070 |
| | 2,144,684 |
|
| Net income | $ | 85,815 |
| | 81,981 |
| | 33,959 |
| | 62,091 |
| | 263,846 |
|
| Income per common share |
| |
| |
|
| |
| |
|
| Basic | 2.33 |
| | 2.22 |
| | 0.92 |
| | 1.68 |
| | 7.14 |
|
| Diluted | 2.31 |
| | 2.21 |
| | 0.91 |
| | 1.67 |
| | 7.10 |
|
| | | | | | | | | | |
| | Year ended April 30, 2019 |
| | Q1 | | Q2 | | Q3 | | Q4 | | Year Total |
| Total revenue | | | | | | | | | |
| Fuel | $ | 1,647,417 |
| | 1,621,868 |
| | 1,233,620 |
| | 1,345,866 |
| | 5,848,770 |
|
| Grocery and other merchandise | 644,800 |
| | 618,250 |
| | 543,773 |
| | 562,699 |
| | 2,369,521 |
|
| Prepared food and fountain | 281,003 |
| | 283,062 |
| | 256,144 |
| | 254,086 |
| | 1,074,294 |
|
| Other | 15,212 |
| | 14,825 |
| | 14,539 |
| | 15,746 |
| | 60,325 |
|
| | $ | 2,588,432 |
| | 2,538,005 |
| | 2,048,076 |
| | 2,178,397 |
| | 9,352,910 |
|
| Revenue less cost of goods sold excluding depreciation and amortization and credit card fees |
| |
| |
| |
| |
|
| Fuel | $ | 123,476 |
| | 118,656 |
| | 122,559 |
| | 101,417 |
| | 466,107 |
|
| Grocery and other merchandise | 208,925 |
| | 200,193 |
| | 173,512 |
| | 177,188 |
| | 759,817 |
|
| Prepared food and fountain | 174,184 |
| | 176,675 |
| | 159,682 |
| | 158,057 |
| | 668,598 |
|
| Other | 15,183 |
| | 14,797 |
| | 14,512 |
| | 15,708 |
| | 60,202 |
|
| | $ | 521,768 |
| | 510,321 |
| | 470,265 |
| | 452,370 |
| | 1,954,724 |
|
| Net income | $ | 70,224 |
| | 66,615 |
| | 41,835 |
| | 25,212 |
| | 203,886 |
|
| Income per common share |
| |
| |
| |
| |
|
| Basic | 1.92 |
| | 1.82 |
| | 1.14 |
| | 0.69 |
| | 5.55 |
|
| Diluted | 1.90 |
| | 1.80 |
| | 1.13 |
| | 0.68 |
| | 5.51 |
|
|
| | | | | | | | | | | | | | | |
| | Year ended April 30, 2017 |
| | Q1 | | Q2 | | Q3 | | Q4 | | Year Total |
| Total revenue | | | | | | | | | |
| Fuel | $ | 1,147,044 |
| | 1,113,351 |
| | 1,053,990 |
| | 1,099,743 |
| | 4,414,128 |
|
| Grocery & other merchandise | 566,174 |
| | 544,799 |
| | 476,309 |
| | 500,068 |
| | 2,087,349 |
|
| Prepared food & fountain | 243,655 |
| | 248,345 |
| | 228,278 |
| | 233,150 |
| | 953,430 |
|
| Other | 13,206 |
| | 13,560 |
| | 11,416 |
| | 13,499 |
| | 51,680 |
|
| | $ | 1,970,079 |
| | 1,920,055 |
| | 1,769,993 |
| | 1,846,460 |
| | 7,506,587 |
|
| Gross profit* |
| |
| |
| |
| |
|
| Fuel | $ | 104,429 |
| | 99,060 |
| | 89,265 |
| | 85,592 |
| | 378,347 |
|
| Grocery & other merchandise | 179,127 |
| | 174,590 |
| | 148,099 |
| | 155,374 |
| | 657,190 |
|
| Prepared food & fountain | 153,052 |
| | 156,329 |
| | 140,869 |
| | 143,774 |
| | 594,024 |
|
| Other | 13,187 |
| | 13,539 |
| | 11,396 |
| | 13,479 |
| | 51,600 |
|
| | $ | 449,795 |
| | 443,518 |
| | 389,629 |
| | 398,219 |
| | 1,681,161 |
|
| Net income | $ | 67,392 |
| | 57,180 |
| | 22,835 |
| | 30,078 |
| | 177,485 |
|
| Income per common share |
| |
| |
|
| |
| |
|
| Basic | 1.72 |
| | 1.46 |
| | 0.58 |
| | 0.77 |
| | 4.54 |
|
| Diluted | 1.70 |
| | 1.44 |
| | 0.58 |
| | 0.76 |
| | 4.48 |
|
| | | | | | | | | | |
| | Year ended April 30, 2016 |
| | Q1 | | Q2 | | Q3 | | Q4 | | Year Total |
| Total revenue | | | | | | | | | |
| Fuel | $ | 1,286,241 |
| | 1,166,736 |
| | 888,744 |
| | 873,081 |
| | 4,214,802 |
|
| Grocery & other merchandise | 526,620 |
| | 516,578 |
| | 453,388 |
| | 477,487 |
| | 1,974,073 |
|
| Prepared food & fountain | 223,381 |
| | 229,388 |
| | 209,595 |
| | 218,349 |
| | 880,713 |
|
| Other | 12,350 |
| | 11,898 |
| | 14,213 |
| | 14,037 |
| | 52,498 |
|
| | $ | 2,048,592 |
| | 1,924,600 |
| | 1,565,940 |
| | 1,582,954 |
| | 7,122,086 |
|
| Gross profit* |
| |
| |
| |
| |
|
| Fuel | $ | 87,681 |
| | 122,690 |
| | 85,460 |
| | 85,828 |
| | 381,659 |
|
| Grocery & other merchandise | 171,549 |
| | 162,904 |
| | 141,482 |
| | 153,299 |
| | 629,234 |
|
| Prepared food & fountain | 139,679 |
| | 145,513 |
| | 130,027 |
| | 135,073 |
| | 550,292 |
|
| Other | 12,333 |
| | 11,883 |
| | 14,200 |
| | 14,020 |
| | 52,436 |
|
| | $ | 411,242 |
| | 442,990 |
| | 371,169 |
| | 388,220 |
| | 1,613,621 |
|
| Net income | $ | 61,806 |
| | 79,033 |
| | 38,099 |
| | 47,044 |
| | 225,982 |
|
| Income per common share |
| |
| |
| |
| |
|
| Basic | 1.59 |
| | 2.03 |
| | 0.98 |
| | 1.20 |
| | 5.79 |
|
| Diluted | 1.57 |
| | 2.00 |
| | 0.97 |
| | 1.19 |
| | 5.73 |
|
|
| |
* | Gross profit is given before charge for depreciation and amortization and credit card fees. |
|
| |
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None.
|
| |
| ITEM 9A. | CONTROLS AND PROCEDURES |
(a) Evaluation of disclosure controls and procedures.
As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 240.13a-15(e)). Based on that evaluation, the CEOChief Executive Officer and CFOChief Financial Officer have concluded that the Company’s current disclosure controls and procedures were effective as of April 30, 2017.2020.
For purposes of Rule 13a-15(e), the term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (l5 U.S.C. 78a et seq.) is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
(b) Management's Report on Internal Control over Financial Reporting.
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control system was designed to provide reasonable assurance to the Company's management and Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of April 30, 2017.2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). On the basis of the prescribed criteria, management concluded that the Company's internal control over financial reporting was effective as of April 30, 2017.2020.
KPMG LLP, as the Company's independent registered public accounting firm, has issued a report on its assessment of the effectiveness of the Company's internal control over financial reporting. This report appears on page 29.33.
(c) Changes in Internal Control over Financial Reporting.
There were no changes in the Company's internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
(d) Other.
The Company does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all fraud and material errors. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations on all internal control systems, our internal control system can provide only reasonable assurance of achieving its objectives and no evaluation of controls can provide absolute assurance that all control issues and occurrences of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of internal control is also based in part upon certain assumptions about the likelihood of future events, and can provide only reasonable, not absolute, assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in circumstances, or the degree of compliance with the policies and procedures may deteriorate.
|
| |
| ITEM 9B. | OTHER INFORMATION |
Not applicable.
PART III
|
| |
| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE |
Those portions of the Company’s definitive Proxy Statement appearing under the captions “Election of Directors,” “Governance of the Company,” “Section 16(a) Beneficial Ownership Reporting Compliance,”"Information about our Executive Officers", “Executive Compensation”, "Nominating and “Executive OfficersCorporate Governance Committee", and Their Compensation”"Audit Committee", as filed with the Commission pursuant to Regulation 14A within 120 days after April 30, 20172020, and used in connection with the Company’s 20172020 Annual Meeting of Shareholders are hereby incorporated by reference.
The Company has adopted a Financial Code of Ethics applicable to its Chief Executive Officer and other senior financial officers. In addition, the Company has adopted a general code of business conduct (known as the Code of Business Conduct and Ethics) for its directors, officers, and all employees.team members. The Financial Code of Ethics, the Code of Business Conduct and Ethics, and other Company governance materials are available under the Corporate GovernanceInvestor Relations-Governance link of the Company Web sitewebsite located at www.caseys.com. The Company intendsIn the event of an amendment or waiver to disclose on this Web site any amendments to or waivers from the Financial Code of Ethics or the Code of Business Conduct and Ethics, that areany required disclosure will be posted to be disclosed pursuant to SEC rules.our website. To date, there have been no waivers of the Financial Code of Ethics or the Code of Business Conduct and Ethics. Shareholders may obtain copies of any of these corporate governance documents free of charge by downloading from the Web site or by writing to the Corporate Secretary at the address on the cover of this Form 10-K.
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| ITEM 11. | EXECUTIVE COMPENSATION |
That portion of the Company’s definitive Proxy Statement appearing under the caption "Compensation Discussion and Analysis", "Compensation Committee Report", "Compensation Committee", “Executive OfficersCompensation,” "Potential Payments Upon Termination or Change of Control", "Director Compensation", and Their Compensation”"Certain Relationships and Related Party Transactions", as filed with the Commission pursuant to Regulation 14A within 120 days after April 30, 20172020, and used in connection with the Company’s 20172020 Annual Meeting of Shareholders is hereby incorporated by reference.
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| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
Those portions of the Company’s definitive Proxy Statement appearing under the captions “Shares Outstanding,” “Voting Procedures,” and “Beneficial Ownership of Shares of Common Stock by Directors and Executive Officers”, "Principal Shareholders" and "Equity Compensation Plan Information", as filed with the Commission pursuant to Regulation 14A within 120 days after April 30, 20172020, and used in connection with the Company’s 20172020 Annual Meeting of Shareholders are hereby incorporated by reference.
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| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE |
That portion of the Company’s definitive Proxy Statement appearing under the captions “Certain Relationships and Related Transactions” and, “Governance of the Company” and "The Board of Directors and its Committees", as filed with the Commission pursuant to Regulation 14A within 120 days after April 30, 20172020, and used in connection with the Company’s 20172020 Annual Meeting of Shareholders is hereby incorporated by reference.
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| ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
That portion of the Company’s definitive Proxy Statement appearing under the caption “Independent“Ratification of Appointment of Independent Registered Public Accounting Firm Fees”Firm” as filed with the Commission within 120 days after April 30, 20172020, and used in connection with the Company’s 20172020 Annual Meeting of Shareholders is hereby incorporated by reference.
PART IV
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| ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
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| (a) | Documents filed as a part of this report on Form 10-K: |
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| (1) | The following financial statements are included herewith: |
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets, April 30, 20172020 and 20162019
Consolidated Statements of Income, Three Years Ended April 30, 20172020
Consolidated Statements of Shareholders’ Equity, Three Years Ended April 30, 20172020
Consolidated Statements of Cash Flows, Three Years Ended April 30, 20172020
Notes to Consolidated Financial Statements
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| (2) | No schedules are included because the required information is inapplicable or is presented in the consolidated financial statements or related notes thereto. |
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| (3) | The following exhibits are filed as a part of this report: |
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Exhibit Number | Description of Exhibits |
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| 3.1 | Second Restatement of the Restated and Amended Articles of Incorporation, (incorporatedas amended September 5, 2018, June 28, 2019 and September 4, 2019 (incorporated by reference from the Quarterly Report onto Exhibit 3.1 to Form 10-Q for the fiscal quarter ended October 31, 1996) and Articles of Amendment thereto (incorporated by reference from the Current Report on Form 8-Kas filed April 16, 2010, as amended by the Current Report on Form 8-K/A filed April 19, 2010 and the Current Report on Form 8-K filed May 20, 2011)September 9, 2019) |
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| 3.2(a) | SecondFourth Amended and Restated By-laws (incorporated by reference from the Current Report on Form 8-K filedBy-Laws, as amended September 5, 2018, June 16, 2009)28, 2019 and Amendments theretoSeptember 5, 2019 (incorporated by reference from the Current Reports onto Exhibit 3.2(a) to Form 8-K10-Q as filed May 20, 2011, August 2, 2011 and the Current Report on Form 8-K filed June 22, 2012)September 9, 2019) |
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4.84.1 | |
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4.94.2 | |
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4.104.3 | |
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4.114.4 | |
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4.124.5 | |
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10.21(a)*4.6 | |
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10.22(a)*10.1 | Amended and Restated Employment Agreement with Ronald M. Lamb (incorporated by reference from the Current Report on Form 8-K filed November 10, 1997), First Amendment thereto (incorporated by reference from the Current Report on Form 8-K filed April 2, 1998) and Second Amendment thereto (incorporated by reference from the Current Report on Form 8-K filed July 17, 2006)
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10.27* | Non-Employee Directors’ Stock Option Plan (incorporated by reference from the Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 1994) and related form of Grant Agreement (incorporated by reference from the Current Report on Form 8-K filed May 3, 2005)
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10.28(c) | |
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| 10.2 | |
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| 10.3* |
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| 10.4* |
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| 10.5* | |
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| 10.6* | |
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10.29(a)*10.7* | Form of “change of control” Employment Agreement (incorporated by reference from the Current Report on Form 8-K filed June 2, 2010)
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10.30* | Non-Qualified Supplemental Executive Retirement Plan (incorporated by reference from the Current Report on Form 8-K filed November 10, 1997) and Amendment thereto (incorporated by reference from the Current Report on Form 8-K filed July 17, 2006)
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10.31* | Non-Qualified Supplemental Executive Retirement Plan Trust Agreement with UMB Bank, n.a. (incorporated by reference from the Current Report on Form 8-K filed November 10, 1997)
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10.32* | Severance Agreement with Douglas K. Shull (incorporated by reference from the Current Report on Form 8-K filed July 28, 1998)
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10.33* | Casey’s General Stores, Inc. 2000 Stock Option Plan (incorporated by reference from the Annual Report on Form 10-K405 for the fiscal year ended April 30, 2001) and related form of Grant Agreement (incorporated by reference from the Current Report on Form 8-K filed July 6, 2005)
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10.34* | Casey’s General Stores 401(k) Plan (incorporated by reference from the Annual Report on Form 10-K for the fiscal year ended April 30, 2003)
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10.35* | Trustar Directed Trust Agreement (incorporated by reference from the Annual Report on Form 10-K for the fiscal year ended April 30, 2003)
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10.38* | |
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10.39*10.8* | Employment Agreement with Robert J. Myers (incorporated by reference from the Current Report on Form 8-K filed April 21, 2010) and Amendment to Employment Agreement (incorporated by reference from the Current Report on Form 8-K filed December 19, 2012)
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10.40* | Severance Agreement with John G. Harmon (incorporated by reference from the Current Report on Form 8-K filed January 17, 2008)
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10.41* | Casey’s General Stores, Inc. 2009 Stock Incentive Plan (incorporated(incorporated by reference from the Current Report onto Exhibit 10.41 to Form 8-K as filed September 23, 2009) and related forms of Restricted Stock Units Agreement (Non-employee Directors) (incorporated by reference from the Annual Report on Form 10-K for the fiscal year ended April 30, 2010) and Restricted Stock Units Agreement (Officers and Other Employees), Restricted Stock Units Agreement (Chief Executive Officer) and Stock Option Grant (incorporated by reference from the Current Report on Form 8-K filed June 27, 2011)
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10.42*10.9* | |
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| 10.10* | |
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| 10.11* | |
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| 10.12* | |
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| 10.13* | |
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| 10.14* | |
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| 10.15* | |
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| 10.16* | |
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| 10.17* | |
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| 10.18* | |
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| 10.19* | |
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| 10.20* | |
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| 10.21* | |
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| 10.22* | |
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| 10.23* | |
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| 10.24* | |
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| 21 | |
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| 23.1 | |
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| 31.1 | |
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| 31.2 | |
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| 32.1 | |
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| 32.2 | |
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| 101.INS | XBRL Instance Document |
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| 101.SCH | XBRL Taxonomy Extension Schema Document |
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| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
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| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
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| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
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| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
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| * | Indicates management contract or compensatory plan or arrangement. |
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| ITEM 16. | FORM 10-K SUMMARY |
Not Applicable
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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CASEY’S GENERAL STORES, INC. (Registrant) |
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Date: June 29, 201726, 2020 | By | /s/ Terry W. HandleyDarren M. Rebelez |
| | Terry W. Handley,Darren M. Rebelez, President and |
| | Chief Executive Officer |
| | (Principal Executive Officer and Director) |
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Date: June 29, 201726, 2020 | By | /s/ William J. WalljasperStephen P. Bramlage Jr. |
| | William J. WalljasperStephen P. Bramlage Jr. |
| | Senior Vice President and Chief Financial Officer |
| | (Authorized Officer and Principal Financial and Accounting Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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Date: June 29, 201726, 2020 | By | /s/ Robert J. MyersH. Lynn Horak |
| | Robert J. MyersH. Lynn Horak |
| | ChairmanChair and Director |
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Date: June 29, 201726, 2020 | By | /s/ William J. WalljasperDarren M. Rebelez |
| | William J. Walljasper |
| Senior Vice President and Chief Financial Officer |
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Date: June 29, 2017 | By | /s/ Terry W. Handley |
| Terry W. Handley,Darren M. Rebelez, President and |
| | Chief Executive Officer, Director |
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Date: June 29, 201726, 2020 | By | /s/ Johnny DanosStephen P. Bramlage Jr. |
| | Johnny DanosStephen P. Bramlage Jr. |
| Chief Financial Officer |
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| Date: June 26, 2020 | By | /s/ Cara K. Heiden |
| Cara K. Heiden |
| | Director |
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Date: June 29, 201726, 2020 | By | /s/ Diane C. Bridgewater |
| | Diane C. Bridgewater |
| | Director |
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Date: June 29, 201726, 2020 | By | /s/ Jeffrey M. LambertiDonald E. Frieson |
| | Jeffrey M. LambertiDonald E. Frieson |
| | Director |
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Date: June 29, 201726, 2020 | By | /s/ H. Lynn HorakDavid K. Lenhardt |
| | H. Lynn HorakDavid K. Lenhardt |
| | Director |
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Date: June 29, 201726, 2020 | By | /s/ Allison M. Wing |
| Allison M. Wing |
| Director |
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| Date: June 26, 2020 | By | /s/ Larree M. Renda |
| | Larree M. Renda |
| | Director |
EXHIBIT INDEX
The following exhibits are filed herewith:
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Exhibit No.Date: June 26, 2020 | DescriptionBy | /s/ Judy A. Schmeling |
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23.1 | Consent of Independent Registered Public Accounting FirmJudy A. Schmeling |
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31.1 | Certification of Terry W. Handley under Section 302 of the Sarbanes-Oxley Act of 2002 |
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31.2 | Certification of William J. Walljasper under Section 302 of the Sarbanes-Oxley Act of 2002 |
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32.1 | Certificate of Terry W. Handley under Section 906 of Sarbanes-Oxley Act of 2002 |
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32.2 | Certificate of William J. Walljasper under Section 906 of Sarbanes-Oxley Act of 2002 |
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101.INS | XBRL Instance Document |
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101.SCH | XBRL Taxonomy Extension Schema Document |
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101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
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101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
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101.DEF | XBRL Taxonomy Extension Definition Linkbase DocumentDirector |