Casey’s General Stores, Inc. — FY2014 Form 10-K
Reporting period: Fiscal year ended April 30, 2014; the filing also reports fourth-quarter results. Unless otherwise noted, financial amounts below are in millions of dollars.
Business context and reporting period
Casey’s operated 1,808 convenience stores in 14 Midwestern states, primarily in Iowa, Missouri, and Illinois. Fuel generated about 71% of FY2014 revenue, while prepared food and merchandise contributed disproportionately to gross profit. The company completed 44 new-store constructions, acquired 28 stores (25 opened during the year), replaced 20 stores, and closed 12.
Key financial metrics
| Metric | FY2014 | FY2013 |
|---|---|---|
| Revenue | $7,840.3 | $7,250.8 |
| Gross profit / gross margin | $1,234.3 / 15.7% | $1,082.4 / 14.9% |
| Operating expenses | $857.3 | $760.4 |
| Depreciation and amortization | $131.2 | $111.8 |
| Net income | $134.5 | $110.6 |
| Diluted EPS | $3.46 | $2.86 |
| Cash from operating activities | $314.2 | $286.3 |
| Cash used in investing activities | $336.9 | $331.3 |
| Cash and cash equivalents at year-end | $121.6 | $41.3 |
| Long-term debt, net of current maturities | $853.6 | $653.1 |
- Revenue increased 8.1%; net income rose about 21.6%. Fuel sales were $5,554.6 million, up 6.2%, on 8.5% more gallons. Inside sales increased 13% to $2,242.4 million.
- Fuel gross margin was 5.0%, versus 4.5%; grocery and other merchandise margin declined to 32.1% from 32.6%, and prepared food and fountain margin fell to 61.1% from 61.8%.
- Full-year same-store fuel gallons increased 3.1%; same-store grocery and other merchandise sales rose 7.4%, and prepared food and fountain sales rose 11.8%.
- Capital expenditures were $340.2 million. Cash dividends declared were $0.72 per share, compared with $0.66 in FY2013.
- Current assets were $378.1 million and current liabilities $362.9 million; the current ratio was 1.04, up from 0.69. The company reported no bank-line borrowings at year-end and a $100 million revolving credit line.
Fourth-quarter results and changes versus the prior comparable period
- Q4 FY2014 diluted EPS was $0.59, compared with $0.60 a year earlier; net income was $22.8 million versus $23.3 million.
- Fourth-quarter same-store fuel gallons increased 1.8%, with an average fuel margin of approximately 13.8 cents per gallon. Management said the quarter’s fuel margin benefited from selling about 12.1 million renewable fuel credits (RINs) for $5.7 million.
- Q4 same-store grocery and other merchandise sales increased 7.2%, and prepared food and fountain sales increased 12.1%.
- For the full year, higher fuel-credit value, increased gallons, stronger inside sales, and growth in the store base supported earnings. Higher operating expenses and depreciation, and lower inside-category margins, partly offset those gains.
Outlook, management commentary, risks, and unusual items
- Management expected FY2015 capital expenditures of $360–$410 million, principally for store construction, acquisitions, and remodeling, funded from cash, operating cash flow, and recent long-term debt proceeds.
- The company announced plans for a second distribution center in Terre Haute, Indiana, projected at approximately 250,000 square feet; it was also expanding its Ankeny distribution center.
- Management stated that operating cash flow and the bank line were expected to meet working-capital needs. This is forward-looking and not a guarantee.
- RIN price increases materially supported FY2014 fuel gross profit; the filing cautions that RIN prices are volatile. Fuel wholesale-cost volatility, price competition, credit-card fees, tobacco trends, weather, commodity costs, regulation, environmental obligations, food safety, litigation, cybersecurity, and acquisition integration are among the identified risks.
- The effective tax rate declined to 34.9% from 36.8%, partly due to a $2.76 million out-of-period adjustment for deferred-tax variances.
- Environmental remediation accrual was approximately $0.3 million. FY2014 remediation and assessment spending was approximately $1.224 million, substantially submitted for state-program reimbursement. The company disclosed a preliminary settlement in the “hot fuel” litigation, including pump notices and a monetary payment described as immaterial.
- Long-term debt rose, including $200 million of new senior notes issued in FY2014. The company reported compliance with debt covenants at year-end. The filing provides no formal earnings or revenue guidance.
Important facts for investors to verify
- How much FY2014 earnings and fuel margin depended on RIN sales, and how sensitive future results are to RIN prices.
- Whether same-store sales and margins remain resilient as operating expenses and depreciation increase.
- Funding, timing, expected returns, and execution risks for planned capital spending and the Terre Haute distribution center.
- Debt maturities, interest costs, covenant headroom, and liquidity after the FY2014 borrowing and investment program.
- Potential changes in remediation reimbursements, self-insurance claims, tax positions, and litigation exposure.