Casey’s General Stores, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended April 30, 2020. The filing also reports fourth-quarter results; the pandemic materially affected business beginning in mid-March. Casey’s operated 2,207 stores across 16 Midwestern states at year-end.
Financial performance
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | $9.175 billion | $9.353 billion |
| Net income | $263.8 million | $203.9 million |
| Diluted EPS | $7.10 | $5.51 |
| Operating cash flow | $504.3 million | $530.6 million |
| Capital expenditures | $471.7 million | $462.9 million |
- Revenue declined 1.9%, largely reflecting a 5.5% lower average retail fuel price. Fuel revenue was $5.52 billion (60.1% of total); fuel gallons sold were nearly flat, down 0.1%.
- Revenue less cost of goods sold, excluding depreciation and amortization, increased to $2.145 billion from $1.955 billion; the reported measure was 23.4% of revenue versus 20.9% a year earlier. Fuel gross margin rose to 26.8 cents per gallon from 20.3 cents. Grocery and other merchandise margin was 32.0% versus 32.1%; prepared food and fountain margin was 60.9% versus 62.2%.
- Operating expenses rose 7.7% to $1.498 billion, reflecting 61 more stores and pandemic-related costs. Net income increased 29.4%, supported chiefly by higher fuel margins and store growth.
- Fourth-quarter diluted EPS was $1.67 versus $0.68. The quarter’s fuel margin averaged 40.8 cents per gallon versus 18.6 cents a year earlier; this exceptional margin offset sharp declines in same-store fuel gallons and inside sales.
- Cash and cash equivalents were $78.3 million. Current assets were $387.3 million and current liabilities $1.063 billion; the 0.36 current ratio was depressed largely by reclassifying $569 million of senior notes due August 2020 as current.
- Debt and finance lease obligations totaled about $1.285 billion before current/noncurrent classification, including $120 million drawn on the $300 million revolving facility. The company said it was refinancing the $569 million notes due August 2020. Long-term debt and finance lease obligations, net of current maturities, were $714.5 million.
Changes, outlook, and risks
- FY2020 same-store sales: fuel gallons fell 5.1%; grocery and other merchandise rose 1.9%; prepared food and fountain fell 1.5%. In Q4, the respective changes were down 14.7%, down 2.0%, and down 13.5%, following a strong first half of the quarter.
- Management reported reduced traffic, changed service and product offerings, shorter store hours, and lower demand during pandemic restrictions. It reported no significant supply-chain disruption to date and implemented added cleaning, protective equipment, paid leave, compensation, and contactless delivery measures.
- Management could not estimate the pandemic’s future financial impact and provided no FY2021 capital-spending guidance because of uncertainty. Planned responses included deferring discretionary spending, adjusting store hours, expanding delivery and online offerings, and reducing prepared-food waste.
- The January 2020 long-term plan targets improved hospitality and guest experience, meeting guests through new channels, operating efficiencies, and investment in employees and culture. A third distribution center in Joplin, Missouri, was under construction.
- Key risks include pandemic-related demand and operating effects; volatile fuel costs and margins; intense competition; food safety; cybersecurity and IT disruption; labor and regulatory costs; acquisition and strategic-plan execution; and environmental, litigation, and self-insurance exposures. The company is primarily self-insured; reserves were $45.0 million. The auditor identified workers’ compensation claim-liability estimation as a critical audit matter.
- The board declared a quarterly dividend of $0.32 per share in June 2020. The company reported no share repurchases in FY2020 and remained within its debt covenants at year-end. Auditors issued unqualified opinions on the financial statements and internal control over financial reporting.
Important facts for investors to verify
- Whether the August 2020 $569 million note refinancing was completed, and its terms and effect on liquidity and interest expense.
- Post-year-end trends in fuel margins and gallons, same-store inside sales, operating costs, and pandemic-related demand.
- Whether operating cash flow can sustain planned investment, dividends, and debt obligations, particularly given the low reported current ratio.
- Progress, costs, and returns from the Joplin distribution center, store growth, and the long-term strategic plan.
- Changes in self-insurance estimates, environmental remediation exposure, and any material developments in tax or legal contingencies.