Casey’s General Stores, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended April 30, 2021. Although the request references 2020 Q4, this filing is an annual report for fiscal 2021; it also provides select fourth-quarter comparisons. Unless stated otherwise, financial amounts below are in millions of dollars.
Business context
Casey’s operated 2,243 convenience stores in 16 Midwestern states at year-end, primarily selling fuel, grocery and other merchandise, and prepared food. Fiscal 2021 store growth included 40 new stores, five acquisitions, five openings from prior-year acquisitions, and 11 closures. Fuel represented 55.4% of revenue. The company reported one operating and reportable segment.
Key financial metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $8,707.2 | $9,175.3 |
| Revenue less cost of goods sold, excluding depreciation and amortization | $2,356.4 (27.1% of revenue) | $2,144.7 (23.4%) |
| Operating expenses | $1,637.2 | $1,498.0 |
| Operating income | $453.0 | $395.5 |
| Net income | $312.9 | $263.8 |
| Diluted earnings per share | $8.38 | $7.10 |
| Net cash provided by operating activities | $804.1 | $504.3 |
| Cash and cash equivalents at year-end | $336.5 | $78.3 |
| Long-term debt and finance lease obligations, including current maturities | $1,363.7 | $1,284.8 |
| Current ratio | 1.18 | 0.36 |
Cash used in investing activities was $444.3 million and cash used in financing activities was $101.5 million. Reported capital expenditures were $450.6 million; cash purchases of property and equipment were $441.3 million. The company declared dividends of $1.32 per share, up from $1.28.
Material changes versus the prior year
- Revenue declined 5.1%, mainly as retail fuel sales fell 12.5% to $4,825.5 million amid an 8.3% lower average fuel price and 4.9% fewer gallons sold. Grocery and other merchandise revenue increased 9.0% to $2,724.4 million; prepared food and fountain revenue declined slightly to $1,087.1 million.
- Despite lower fuel sales, fuel gross profit rose to $761.2 million from $614.8 million. Average fuel gross profit, excluding depreciation, amortization, and credit card fees, increased to 34.9 cents per gallon from 26.8 cents.
- Same-store fuel gallons fell 8.1%; same-store grocery and other merchandise sales increased 6.6%; prepared food and fountain same-store sales fell 2.1%. Management attributed key declines to pandemic-related demand changes and operating restrictions.
- Net income rose 18.6%, reflecting stronger fuel contribution and 36 more stores operating than a year earlier. Operating expenses rose 9.3%, including $38.4 million of COVID-related costs and $30.7 million of higher incentive compensation.
- Operating cash flow increased 59.4%, principally due to higher net income and increases in accounts payable and accrued expenses. The current ratio improved substantially as cash increased and current liabilities fell, including following refinancing of the 5.22% notes that matured in August 2020.
Outlook, commentary and risks
- Management anticipated approximately $500 million of fiscal 2022 capital expenditures, including remodeling acquired stores, funded primarily through cash, operating cash flow, and long-term debt.
- Management said fuel margins remained above historical averages but below pandemic highs, and expected them to decline gradually in the next fiscal year. Recovery in store traffic was underway, but pandemic effects remained uncertain.
- After year-end, Casey’s closed the approximately $580 million Buchanan Energy acquisition on May 13, 2021, adding 92 retail sites and fuel-supply agreements for a dealer network of 81 stores. It also closed a 48-store Circle K acquisition in June 2021. These transactions were not included in FY2021 results; the company said purchase accounting and pro forma information were not yet available.
- At April 30, 2021, the company had no borrowings under its $450 million revolving facility; its $25 million bank line was also undrawn. A subsequent $300 million term-loan draw helped fund Buchanan Energy. The company reported compliance with debt covenants at year-end.
- Principal risks include continuing or renewed pandemic impacts, fuel-margin and wholesale petroleum volatility, labor and supply-chain constraints, competition, food safety, cybersecurity, environmental obligations, and acquisition integration. COVID-related health and safety measures cost $38.4 million in FY2021.
- Environmental remediation accruals were approximately $0.4 million. Self-insurance reserves were $50.5 million; the auditor identified the workers’ compensation liability estimate as a critical audit matter because of actuarial assumptions and measurement uncertainty. Management said pending or threatened legal matters were not expected to have a material impact.
Important facts for investors to verify
- Whether fuel gross profit per gallon normalizes as management expects, and the resulting effect on earnings and cash flow.
- Post-pandemic trends in same-store fuel gallons, inside traffic, prepared food sales, and operating costs.
- Acquisition financing, integration costs, store performance, synergies, and final purchase-price allocations for Buchanan Energy and Circle K.
- Capital spending and leverage following the acquisitions, including use of the revolving facility and term loan.
- Key assumptions supporting the $50.5 million self-insurance reserve and any changes in environmental or legal contingencies.
The consolidated financial statements received an unqualified audit opinion, and management and the auditor reported effective internal control over financial reporting as of April 30, 2021.