Casey’s General Stores, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended April 30, 2023. Although the request references “2022 Q4,” this filing is an annual report for FY2023, not a quarterly report. Unless stated otherwise, dollar amounts below are in millions.
Business context
Casey’s operated 2,521 convenience stores in 16 states, primarily in the Midwest, at year-end. The business combines retail fuel with grocery and general merchandise, prepared food and dispensed beverages. It added 34 newly constructed stores and acquired 47 stores during the year, including 26 Minit Mart locations; 10 stores closed. The business is seasonal, with typically stronger sales and profitability in the first half of its fiscal year.
Financial performance
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $15,094.5 | $12,952.6 |
| Revenue less cost of goods sold | $3,072.4 | $2,762.7 |
| Revenue less cost of goods sold as % of revenue | 20.4% | 21.3% |
| Operating expenses | $2,119.9 | $1,961.5 |
| Depreciation and amortization | $313.1 | $303.5 |
| Net interest expense | $51.8 | $57.0 |
| Net income | $446.7 | $339.8 |
| Diluted earnings per share | $11.91 | $9.10 |
| Cash provided by operating activities | $882.0 | $788.7 |
Revenue increased 16.5% and net income increased 31.5%. Management attributed the earnings improvement to higher profitability in fuel and inside-store sales, partly offset by higher operating costs, depreciation and taxes. The effective tax rate rose to 24.0% from 22.9%.
Fuel generated $10,027.3 million of revenue, up 20.6%; gallons sold rose 3.6% to 2.67 billion, while average retail fuel price increased 16.5% to $3.75 per gallon. Fuel gross profit was 40.22 cents per gallon, versus 36.01 cents. Grocery and general merchandise revenue increased 9.7% to $3,445.8 million; its gross margin rose to 33.6% from 32.7%. Prepared food and dispensed beverage revenue increased 9.8% to $1,322.6 million, but its gross margin declined to 56.6% from 59.2%, mainly due to higher ingredient costs, especially cheese, and increased stales.
Capital expenditures were $476.6 million in cash-flow reporting, versus $326.5 million in FY2022; the MD&A separately reports $562.1 million expended for property and equipment. Acquisitions used $85.6 million, down from $901.6 million. Cash and cash equivalents were $378.9 million at year-end, compared with $158.9 million. The current ratio was 0.99, versus 0.80.
Long-term debt and finance lease obligations totaled $1,673.4 million, including $95.1 million of finance leases; $52.9 million was classified as current. The company had no borrowings outstanding on its $850 million revolving facility. It reported compliance with debt covenants. The Board declared dividends of $1.52 per share during FY2023, up from $1.39; no shares were repurchased in the fourth quarter under the $400 million authorization.
Material changes and outlook
- Growth reflected higher fuel prices, strategic retail price adjustments, 69 more stores than a year earlier, and stronger inside-store sales. Same-store fuel gallons declined 0.8%, while same-store grocery/general merchandise sales rose 6.3% and prepared food/dispensed beverage sales rose 7.1%.
- Management expected comparatively elevated fuel prices to continue into FY2024 and said fuel margins could remain above historical levels, while emphasizing that both fuel prices and cents-per-gallon profitability can be volatile. The filing provides no specific earnings or revenue guidance.
- The company installed 138 EV charging stations at 29 stores across 10 states and said it would expand selectively based on demand. Nearly all stores offered fuel blended with at least 10% ethanol, and 43% offered biodiesel.
- Management closed out its three-year strategic plan, citing store growth, diluted EPS growth, private-label penetration above 9% in grocery/general merchandise, and 6.4 million Casey’s Rewards members.
Risks, contingencies and unusual items
- Key risks include fuel-price and fuel-margin volatility, commodity and labor inflation, competition, supply-chain or distribution disruption, food safety, cyber and IT incidents, credit-card fees, severe weather, and regulatory changes affecting fuel, tobacco, alcohol and labor. Management noted that pandemic-related traffic patterns had not fully returned to pre-pandemic levels, partly due to working from home.
- A $15.3 million one-time legal-resolution payment reduced FY2023 operating expenses. The company is defending a wage-and-hour case involving the classification of store managers; approximately 1,400 current or former managers remained opted in. Management said adequate provisions were made and did not expect the matter to materially affect results.
- Environmental remediation accruals were $0.3 million. Self-insurance reserves were $61.2 million, up from $53.8 million; their estimation was identified by the auditor as a critical audit matter due to actuarial assumptions and measurement uncertainty.
- The April 2023 refinancing established a $250 million variable-rate term loan and an $850 million unsecured revolving facility. Management said a 100-basis-point rate move would change annualized interest expense by approximately $2.5 million based on the term-loan balance.
- KPMG issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective.
Investor verification priorities
- Reconcile the MD&A’s $562.1 million property-and-equipment expenditure figure with the cash-flow statement’s $476.6 million cash purchases, including timing and noncash amounts.
- Assess how much FY2023 earnings and fuel profitability depended on elevated fuel prices and cents-per-gallon margins, and whether those conditions persist.
- Monitor prepared-food margin recovery against cheese and other ingredient inflation, labor costs, and stales.
- Review acquisition integration, acquired-store conversions, and returns on new construction and remodel spending.
- Track self-insurance estimates, the store-manager litigation, and exposure to variable interest rates and debt covenants.