Casey’s General Stores, Inc. — Q2 FY2022 Form 10-Q
Reporting period: Quarter and six months ended October 31, 2021; interim financial statements are unaudited. Casey’s operated 2,380 stores in 17 states at quarter-end.
Financial performance
| Metric | Three months | Six months |
|---|---|---|
| Revenue | $3.263 billion, up 47.3% year over year | $6.445 billion, up 49.2% |
| Net income | $96.8 million, down 13.5% | $216.0 million, down 7.1% |
| Diluted EPS | $2.59, versus $3.00 | $5.78, versus $6.24 |
| Adjusted EBITDA (non-GAAP) | $217.0 million, down 2.8% | $460.2 million, down 0.2% |
| Operating cash flow | $455.4 million for six months, down 17.5% |
Revenue growth reflected higher retail fuel prices and gallons sold, as well as acquired stores and the Buchanan Energy fuel dealer network. Q2 same-store sales increased 2.5% for fuel gallons, 6.8% for grocery and general merchandise, and 4.1% for prepared food and dispensed beverages. Fuel gross contribution was 34.7 cents per gallon in Q2 versus 35.3 cents; total revenue less cost of goods sold as a share of revenue fell to 22.0% from 28.5%, largely reflecting the greater weight of lower-margin fuel revenue.
Higher operating costs, depreciation and interest weighed on earnings. Q2 operating expenses rose 22.0%, driven by more stores, higher wages and credit-card fees. Six-month costs also included acquisition and integration expenses. The six-month effective tax rate was 24.1%, versus 23.7%.
Cash, debt and liquidity
Cash and cash equivalents were $311.7 million at October 31, 2021, compared with $336.5 million at April 30. Cash used in investing was $727.8 million, primarily for acquisitions; financing provided $247.5 million, including a $300 million term-loan draw. Capital expenditures were $123.5 million.
Total debt and finance lease obligations were approximately $1.712 billion, including $292.5 million outstanding on the term loan; no amounts were drawn on the $450 million revolving facility or $25 million bank line. The current ratio was 0.99, down from 1.18 at April 30, reflecting acquisition-related cash use and higher current liabilities. Management said cash, operating cash flow and available credit were expected to meet working-capital needs.
Material developments, outlook and risks
- Acquired Buchanan Energy in May for a stated purchase price of $572.5 million and 48 Circle K stores in June for $41.4 million. Acquisition accounting remained provisional; Buchanan Energy generated $470.6 million of revenue in the six-month period, while its net income contribution was not material.
- Entered an agreement to acquire 40 Pilot stores for $220 million, subject to closing conditions. The company expected to fund the transaction with cash and incremental financing.
- Management reported improved traffic and sales as businesses and schools reopened, but noted COVID-related store disruptions, labor challenges, supply-chain constraints and inflation. Potential vaccination or testing requirements were identified as a possible source of workforce cost and retention pressure.
- No specific financial guidance was provided. Management expressed confidence in the business’s ability to navigate pandemic challenges and stated that expected capital needs could be funded through operations, credit facilities and potential additional debt.
- Other risks include fuel-price and margin volatility, higher wages and credit-card costs, acquisition integration and synergy execution, competition, and regulatory, food-safety and cybersecurity exposures. Management said pending or threatened legal matters were not expected to materially affect consolidated results.
Most important facts for investors to verify
- Whether reported growth and margins persist after separating fuel-price effects, acquired revenue and same-store performance.
- Whether higher labor, inflation, credit-card and supply-chain costs continue to pressure earnings and cash generation.
- Progress integrating Buchanan Energy and Circle K, realizing expected synergies, and finalizing provisional purchase accounting.
- Closing, financing and expected contribution of the planned Pilot acquisition.
- Debt, liquidity and cash-flow capacity after acquisitions, including the impact of variable-rate borrowing.