Casey’s General Stores, Inc. — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended January 31, 2024; comparable periods ended January 31, 2023. The filing was signed March 11, 2024. Casey’s operated 2,639 stores in 17 states at quarter-end.
Financial results
Amounts below are in millions, except per-share data and percentages.
| Metric | Three months ended Jan. 31, 2024 | Year-over-year change | Nine months ended Jan. 31, 2024 | Year-over-year change |
|---|---|---|---|---|
| Revenue | $3,329.2 | Down 0.1% | $11,262.9 | Down 4.3% |
| Net income | $86.9 | Down 13.2% | $415.0 | Up 6.2% |
| Diluted EPS | $2.33 | Down from $2.67 | $11.09 | Up from $10.42 |
| Adjusted EBITDA (non-GAAP) | $218.7 | Down 1.9% | $841.3 | Up 6.2% |
| Operating cash flow | Not presented for quarter | — | $604.6 | Down from $636.6 |
For the third quarter, revenue less cost of goods sold, excluding depreciation and amortization, was 23.6% of revenue, versus 22.1% a year earlier. Prepared food and dispensed beverage margin was 59.6% (57.3% prior year); grocery and general merchandise was 33.9% (34.0%); and fuel was 12.5% (12.2%). Fuel margin per gallon declined to 37.3 cents from 40.7 cents.
For the nine-month period, the same measure was 22.6% of revenue versus 20.3%. Prepared food margin was 58.9% (56.5%); grocery and general merchandise was 34.0% (33.7%); and fuel was 12.1% (10.8%). Fuel margin per gallon was 40.4 cents versus 42.0 cents.
Balance sheet, liquidity and capital allocation
- At January 31, 2024, cash was $177.9 million, down from $378.9 million at April 30, 2023. Current assets were $781.0 million and current liabilities were $880.9 million; the current ratio was 0.89 to 1.
- Total debt and finance lease obligations were $1,636.9 million, including $53.3 million of current maturities. The company had no borrowings on its $850 million revolving facility or $50 million bank line; approximately $49.3 million remained available on the bank line after letters of credit.
- Operating cash flow of $604.6 million was more than offset by $602.2 million used in investing and $203.4 million used in financing. Investing included $325.7 million for property and equipment and $296.8 million for acquisitions, net of cash acquired.
- The company paid $47.0 million in cash dividends and repurchased $89.8 million of stock during the nine months. At quarter-end, $309.7 million remained available under the repurchase authorization. The quarterly dividend declared was $0.43 per share, compared with $0.38 a year earlier.
- Management stated that cash, future operating cash flow and available credit facilities should be sufficient for working capital needs.
Material changes and management commentary
- Third-quarter prepared food and grocery sales rose 11.4% and 8.8%, respectively, supported by same-store sales growth of 7.5% and 2.8%. Same-store fuel gallons declined 0.4%; total fuel gallons sold increased 6.9%, while lower average retail prices reduced fuel revenue 4.9%.
- For the nine months, prepared food and grocery revenue rose 9.6% and 7.2%; same-store sales increased 6.2% and 3.3%. Fuel revenue fell 9.7%, as average retail fuel prices decreased 13.8%, partly offset by 4.8% more gallons sold.
- Management attributed the third-quarter net income decline mainly to a strong prior-year fuel margin comparison and higher operating and depreciation expenses, partly offset by improved in-store profitability. Nine-month net income increased on higher in-store profitability, partly offset by higher expenses.
- Operating expenses rose 10.3% in the quarter and 7.0% for the nine months. Comparisons were affected by a prior-year one-time $15.3 million benefit from resolving a legal matter; store growth also contributed to expense increases. Depreciation and amortization rose 13.9% for the quarter and 10.7% for the nine months.
- Casey’s acquired 105 stores during the nine months and opened 23 newly constructed stores; the reported store count rose from 2,521 at April 30, 2023 to 2,639 at January 31, 2024. Acquisition-related transaction costs were $8.0 million for the nine months. Acquisition valuation amounts remain provisional.
Outlook, risks and contingencies
- The filing provides no specific earnings or revenue guidance. Management expected comparatively elevated fuel prices to continue through fiscal 2024 and said fuel margins can fluctuate significantly and unpredictably. It also noted that the Midwest footprint has comparatively lower EV demand than coastal markets; 170 charging stations had been installed at 37 stores across 12 states.
- Management cited risks including fuel-price and commodity-cost volatility, higher interest rates, economic and geopolitical conditions, competition, weather, labor availability, supply-chain disruption, food safety, cybersecurity, regulation and acquisition integration. It noted store traffic had not fully returned to pre-pandemic levels, partly due to increased work-from-home prevalence.
- The company is defending a federal wage-classification lawsuit involving Store Managers; approximately 1,400 current or former managers had opted in. The company believes its accruals are adequate and that reasonably possible additional losses, where estimable, are not material.
- Fuel purchase agreements include volume commitments. Forward cheese contracts through July 2024 represented commitments of approximately $35.4 million. Management said pending or threatened legal matters are not expected to have a material adverse effect on consolidated financial position or results.
- A 100-basis-point interest-rate move would have an estimated annualized $2.4 million impact on interest expense based on the outstanding variable-rate term loan. The company reported no material change in risk factors from its prior Form 10-K.
Important facts for investors to verify
- Whether stronger prepared-food and grocery sales and margins can continue to offset fuel-price and fuel-margin variability.
- How acquisition integration, provisional purchase accounting and store growth affect future expenses, cash generation and returns.
- Cash needs and liquidity following acquisitions, capital spending, debt payments and share repurchases, particularly with a current ratio below 1.0.
- Developments in the Store Manager lawsuit and any changes in accrued or potential losses.
- Updates to fuel-price assumptions, interest-rate exposure, commodity commitments and EV investment strategy.