Casey’s General Stores, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended April 30, 2012. The filing also reports the fourth quarter of fiscal 2012, ended April 30, 2012; this is not calendar Q4 2011. Financial amounts below are in U.S. dollars.
Business context
Casey’s operated 1,699 convenience stores in 11 Midwestern states, primarily Iowa, Missouri, and Illinois. All stores sold gasoline; the company also emphasized grocery merchandise and higher-margin prepared foods. It opened 30 newly constructed and 35 acquired stores during the year and closed three.
Financial performance and liquidity
| Metric | FY2012 | FY2011 |
|---|---|---|
| Revenue | $6,987.8 million | $5,635.2 million |
| Gross profit | $1,003.7 million | $881.1 million |
| Gross margin | 14.4% | 15.6% |
| Operating expenses | $688.4 million | $607.6 million |
| Depreciation and amortization | $96.6 million | $82.4 million |
| Net earnings | $116.8 million | $94.6 million |
| Basic / diluted EPS | $3.07 / $3.04 | $2.24 / $2.22 |
| Cash provided by operating activities | $294.9 million | $261.4 million |
| Capital expenditures | $280.3 million | $328.1 million |
- Revenue rose 24%; gasoline revenue increased 27.3% to $5,092.3 million, while inside sales increased 15.8% to $1,864.7 million. Gasoline represented 72.9% of revenue.
- Gasoline gallons sold increased 5.9% overall, but same-store gallons declined 1.5%. The average retail price was $3.45 per gallon; reported gasoline gross margin was 4.4%, down from 5.3%.
- Grocery and other merchandise margin increased to 32.5% from 32.2%. Prepared food and fountain margin declined to 60.7% from 62.2%, primarily due to higher commodity costs.
- At year-end, cash was $55.9 million; current assets were $279.3 million and current liabilities $306.6 million, for a 0.91 current ratio. Long-term debt, net of current maturities, was $667.9 million; current maturities were $10.7 million. The company had no balance drawn on its $100 million revolving credit line and reported compliance with debt covenants.
- Cash used in investing activities was $278.1 million and cash used in financing activities was $20.4 million. Cash and cash equivalents ended the year at $55.9 million.
- Fiscal 2012 dividends paid were $0.60 per share. The board declared a subsequent quarterly dividend of $0.165 per share.
Fourth-quarter results and changes versus prior year
Fiscal Q4 revenue was $1,752.5 million versus $1,549.5 million; gross profit was $245.2 million versus $217.2 million. Net earnings were $23.1 million versus $22.8 million, and basic EPS was $0.61 versus $0.60. Same-store gasoline gallons rose 2.5% in the quarter, while same-store grocery and other merchandise sales increased 8.5% and prepared food and fountain sales increased 16.8%.
Full-year net earnings increased 23.4%, but the comparison benefited from prior-year costs associated with the recapitalization and unsolicited Couche-Tard offer. Those fiscal 2011 costs had a reported after-tax impact of $17.6 million; management presented adjusted prior-year basic EPS of $2.65, compared with FY2012 basic EPS of $3.07. Fiscal 2012 gross margin fell despite higher gross profit dollars, reflecting lower gasoline and prepared-food margins. The average share count was also lower following the prior-year repurchase of approximately 13.2 million shares.
Outlook, risks, contingencies, and unusual items
- Management anticipated fiscal 2013 capital expenditures of $276 million to $338 million, principally for store construction, acquisitions, and remodeling, funded mainly from cash and operating cash flow. The filing does not provide earnings or revenue guidance.
- Management cited growth initiatives including acquisitions, remodels, 24-hour store conversions, and pizza delivery expansion. The business is seasonal, with stronger sales generally in the warmer first half of the fiscal year.
- Principal risks include volatile wholesale fuel costs and retail fuel margins, fuel-related credit-card fees (approximately $80 million in FY2012), intense competition, tobacco demand and pricing, adverse weather, food safety, labor and regulatory costs, and environmental obligations related to underground storage tanks.
- The company accrued approximately $0.38 million for estimated environmental corrective-action and remediation costs. It spent approximately $1.15 million on assessments and remediation in FY2012, with substantially all submitted for state trust-fund reimbursement.
- Casey’s reported reaching an enforceable settlement in April 2012 in the “hot fuel” class-action litigation; the company’s settlement amount was stated to be immaterial, subject to court approval. Management said other pending or threatened matters were not expected to have a material adverse effect.
- Auditors issued an unqualified opinion on the financial statements and reported effective internal control over financial reporting. No material control changes were reported.
Important facts for investors to verify
- Whether FY2012 earnings growth remains strong after accounting for the prior-year exceptional costs and the reduced share count.
- Whether gasoline margin compression and higher fuel-related credit-card expenses persist, and how inside-sales growth translates into profit.
- How the planned $276 million to $338 million of FY2013 capital spending affects free cash flow, borrowing, and store returns.
- Debt repayment requirements, covenant headroom, and the company’s ability to maintain liquidity with a current ratio below 1.0.
- Final court approval and terms of the hot-fuel settlement, along with developments in environmental remediation and tax uncertainties.