Casey’s General Stores, Inc. — Form 10-Q
Reporting period: Third quarter and first nine months of fiscal 2021, ended January 31, 2021. The unaudited filing covers a convenience-store operator with 2,229 stores across 16 Midwestern states.
Financial performance
| Metric | Three months ended Jan. 31, 2021 | Prior-year quarter | Nine months ended Jan. 31, 2021 | Prior-year period |
|---|---|---|---|---|
| Revenue | $2.008 billion | $2.248 billion | $6.329 billion | $7.362 billion |
| Income before taxes | $49.1 million | $43.0 million | $353.8 million | $263.5 million |
| Net income | $38.6 million | $34.0 million | $271.2 million | $201.8 million |
| Diluted EPS | $1.04 | $0.91 | $7.28 | $5.43 |
| Adjusted EBITDA (non-GAAP) | $127.4 million | $120.4 million | $588.4 million | $491.2 million |
Quarterly revenue fell 10.7%, while net income increased 13.7%. For the nine months, revenue fell 14.0% and net income rose 34.4%. Management attributed stronger earnings mainly to higher fuel contribution and operating 36 more stores than a year earlier. Revenue includes excise taxes: $249.7 million for the quarter and $785.0 million for the nine months.
Quarterly same-store fuel gallons declined 12.1%; fuel margin was 32.9 cents per gallon versus 21.7 cents a year earlier. Same-store grocery and other merchandise sales increased 5.4%, while prepared food and fountain sales declined 5.0%. For the quarter, revenue less cost of goods sold, excluding depreciation and amortization, was 26.9% of revenue versus 22.1%; this is not a GAAP operating margin.
Cash flow, debt, and liquidity
- Nine-month operating cash flow was $663.1 million, up from $399.7 million. Investing cash outflow was $264.0 million; financing cash outflow was $88.4 million.
- Cash and cash equivalents were $388.9 million at January 31, 2021, versus $78.3 million at April 30, 2020. The current ratio was 1.28, compared with 0.36 at April 30, 2020.
- Long-term debt and finance lease obligations totaled approximately $1.364 billion, including current maturities. The company had no revolver borrowings against its $450 million facility; a separate $25 million bank line was also disclosed.
- Casey’s issued $650 million of senior notes at 2.85% and 2.96%, using part of the proceeds to repay $569 million of 5.22% notes that matured in August 2020.
- Capital expenditures were $268.9 million for the nine months, per management’s discussion. The company said COVID-related uncertainty prevented it from providing capital expenditure guidance.
Material developments, outlook, and risks
- COVID-19 continued to weigh on traffic and demand, particularly fuel and morning-daypart food categories, and increased operating costs. COVID-related expenses were approximately $11 million in the quarter and $32 million year to date. Management said it could not estimate the pandemic’s future financial impact.
- The planned all-cash, $580 million Buchanan Energy acquisition remained pending. The FTC issued a request for additional information, extending the expected closing timetable. The company said it continued to cooperate and did not expect the review to have a material impact on the acquisition.
- Management expected to complete approximately 40 new stores during the fiscal year. It provided no capital expenditure guidance.
- Other noted risks include fuel-price volatility, competition, changing fuel and tobacco demand, food safety, cybersecurity and technology disruptions, supply-chain interruption, regulation, and compliance with debt covenants. The filing reported no material change in risk factors.
- Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. No shares were repurchased during the quarter.
Important facts for investors to verify
- Whether fuel margins and fuel contribution remain strong as traffic and gallons recover or change.
- The status, timing, financing, and final terms of the Buchanan Energy acquisition following FTC review.
- Whether COVID-related costs, store traffic, and prepared-food sales improve or remain pressured.
- Capital expenditure needs, store-opening plans, and the effect of increased debt on liquidity and covenant headroom.
- The sustainability of earnings growth given lower reported revenue and the role of fuel margins, store additions, and non-GAAP adjustments.