Casey’s General Stores, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended April 30, 2022, compared primarily with the year ended April 30, 2021. This is an annual report, not a standalone 2021 fourth-quarter filing. Unless indicated otherwise, dollar amounts below are in millions.
Business context
Casey’s operated 2,452 convenience stores across 16 states at year-end, mainly in the Midwest, and supplied fuel to 76 independently operated dealer locations acquired with Buchanan Energy. It added 207 stores through acquisitions, built 21, opened four stores acquired in the prior year, and closed 20. Fuel generated 64.2% of revenue; inside-store sales, including prepared food, provide a larger share of gross contribution relative to their revenue.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $12,952.6 | $8,707.2 |
| Net income | $339.8 | $312.9 |
| Diluted EPS | $9.10 | $8.38 |
| Net cash from operating activities | $788.7 | $804.1 |
| Cash and cash equivalents at year-end | $158.9 | $336.5 |
| Long-term debt and finance lease obligations, net of current maturities | $1,663.4 | $1,361.4 |
Revenue increased 48.8%, while net income rose 8.6%. Revenue less cost of goods sold, excluding depreciation and amortization, was 21.3% of revenue versus 27.1% in FY2021. Fuel sales increased 72.3% to $8,312.0, reflecting a 45.7% increase in average fuel price and 18.3% more gallons sold. Fuel gross contribution per gallon was 36.0 cents, up from 34.9 cents. Grocery and general merchandise contribution margin increased to 32.7% from 32.0%; prepared food and dispensed beverage margin declined to 59.2% from 60.1%.
Operating cash flow declined 1.9%. Investing cash use was $1,158.0, including $901.6 for business acquisitions; financing cash flow was $191.6. The current ratio fell to 0.80 from 1.18, primarily reflecting acquisition-related cash use and higher current liabilities. The company reported $1,687.9 of debt and finance lease obligations before current maturities, and had no borrowings outstanding under its $450 million revolving facility at year-end. The annual dividend declared was $1.39 per share, compared with $1.32.
Material changes and unusual items
- Acquisitions of Buchanan Energy, 48 Circle K stores and 40 Pilot stores drove substantial store growth and contributed to higher revenue. These acquired locations generated 9% of consolidated revenue; their combined net income contribution was reported as not material.
- Operating expenses increased 19.8%, including $15.0 million of one-time deal and integration costs. Same-store labor rates increased 7.5%, and same-store credit-card fees increased 23% amid higher fuel prices.
- Cash paid for acquisitions was $901.6 million. The company also reported $450 million of term-loan proceeds and $188.5 million of long-term debt repayments, including $167.5 million of term-loan prepayments.
- Goodwill increased to $612.9 million from $161.1 million, largely due to acquisitions. FY2022 impairment charges were $1.1 million, versus $3.8 million in FY2021.
- Auditors issued unqualified opinions on the financial statements and internal controls. However, controls over Buchanan Energy, Circle K and Pilot, representing 18% of assets and 9% of revenue, were excluded from management’s and the auditor’s internal-control assessment.
Outlook, commentary and risks
Management forecast FY2023 capital expenditures of approximately $450–$500 million, including about $135 million for one-time remodels of acquired stores. No earnings or revenue guidance was provided. Management expected labor-market and supply-chain challenges to continue into FY2023. It also noted that store traffic had not fully returned to pre-pandemic levels and that elevated fuel prices could reduce fuel or discretionary inside-store demand. The company said its cash, operating cash flow, $450 million revolver and $25 million bank line were expected to meet working-capital needs.
Key risks include volatile fuel costs and margins, inflation and wage pressure, elevated credit-card fees, supply and staffing constraints, acquisition integration, food safety, cybersecurity and privacy, environmental obligations related to underground fuel tanks, and extensive regulation of fuel, tobacco, alcohol and food. The company had $10.3 million of gross unrecognized tax benefits and accrued $53.8 million for self-insurance claims. A collective wage-and-hour case involving store-manager classification was ongoing; management said it had provided for probable losses and did not expect the matter to be material.
Important facts for investors to verify
- Whether acquisition integration, remodeling and expected synergies deliver the anticipated returns, and how acquired-store performance develops.
- Whether fuel margins and gallon volumes remain resilient as prices change, and whether higher pump prices weigh on traffic or inside-store sales.
- How labor, supply-chain and credit-card costs affect margins, particularly given the decline in the company-wide contribution margin.
- Whether operating cash flow and available credit support planned capital spending, dividends and debt service while the current ratio is below 1.0.
- Progress integrating acquired entities into financial controls, and developments in the store-manager lawsuit, self-insurance estimates and uncertain tax positions.