SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Quarter Ended JulyOctober 31, 1998
Commission File Number 0-12788
CASEY'S GENERAL STORES, INC.
(Exact name of registrant as specified in its charter)
IOWA 42-0935283
State(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
ONE CONVENIENCE BOULEVARD, ANKENY, IOWA
(Address of principal executive offices)
50021
(Zip Code)
(515) 965-6100
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO ------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, No Par Value 52,627,26252,695,862 shares
(Class) (Outstanding at SeptemberDecember 2, 1998)
CASEY'S GENERAL STORES, INC.
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
Consolidated condensed balance sheets -
JulyOctober 31, 1998 and April 30, 1998 3
Consolidated condensed statements of
income - three and six months ended
JulyOctober 31, 1998 and 1997 5
Consolidated condensed statements of
cash flows - threesix months ended
JulyOctober 31, 1998 and 1997 6
Notes to consolidated condensed
financial statements 78
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations. 89
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 1315
Item 4. Submission of Matters to a Vote of
Security Holders. 16
Item 6. Exhibits and Reports on Form 8-K. 1416
SIGNATURE 1719
- 2 -
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(DOLLARS IN THOUSANDS)
JulyItem 1. Financial Statements.
CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
October 31,
1998 April 30,
(Unaudited) 1998 1998
-------- --------
ASSETS
ASSETS
Current assets:
Cash and cash equivalentequivalents $ 4,95010,698 4,022
Short-term investments 1,0701,082 1,328
Receivables 2,9623,251 2,537
Inventories 40,44642,518 39,200
Prepaid expenses 5,7145,733 5,437
---------------- ------
Total current assets 55,14263,282 52,524
---------------- ------
Long-term investments 6,4335,937 6,137
Other assets 1,3911,375 1,405
Property and equipment, net of
accumulated depreciation
JulyOctober 31, 1998, $192,489$200,726
April 30, 1998, $185,133 437,134458,189 419,908
$500,100------- -------
$528,783 479,974
------- -------
See notes to consolidated condensed financial statements.
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CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(Continued)
(DOLLARS IN THOUSANDS)(Dollars in Thousands)
October 31,
1998 April 30,
(Unaudited) 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 26,72535,050 16,600
Current maturities of
long-term debt 5,4595,402 5,515
Accounts payable 41,96247,668 43,745
Accrued expenses 19,10120,810 19,748
Income taxes payable 4,8004,953 4,380
------- -------
Total current liabilities 98,047113,883 89,988
------- -------
Long-term debt, net of
current maturities 77,73576,363 79,094
------- -------
Deferred income taxes 46,50448,004 45,004
------- -------
Deferred compensation 2,5972,735 2,514
------- -------
Shareholders' equity
Preferred stock, no par value --- ---
Common Stock, no par value 66,05666,800 65,922
Retained earnings 209,161220,998 197,452
------- -------
Total shareholders' equity 275,217287,798 263,374
------- -------
$500,100$528,783 479,974
------- -------
See notes to consolidated condensed financial statements.
- 4 -
CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)(Dollars in Thousands, except per share amounts)
Three Months Ended JulySix Months Ended
October 31, October 31,
1998 1997 ---- ----1998 1997
Net Sales $332,446 320,654sales $322,370 317,436 654,816 638,090
Franchise revenue 1,484 1,3671,395 1,343 2,879 2,710
------- ------- 333,930 322,021------- -------
323,765 318,779 657,695 640,800
------- ------- ------- -------
Cost of goods sold 258,448 254,281245,411 249,175 503,859 503,456
Operating expenses 45,701 42,39048,141 43,502 93,842 85,891
Depreciation and
amortization 8,072 7,1618,445 7,446 16,517 14,608
Interest, net 1,714 1,3241,565 1,363 3,279 2,687
------- ------- 313,935 305,156
------- -------
Income before income taxes 19,995 16,865303,562 301,486 617,497 606,642
------- ------- ------- -------
20,203 17,293 40,198 34,158
Federal and state
income taxes 7,498 6,3247,576 6,485 15,074 12,809
------- ------- ------- -------
Net income $ 12,497 10,54112,627 10,808 25,124 21,349
------- ------- ------- -------
Earnings per common
and common
equivalent share
Basic $ .24 .20.21 .48 .41
------- -------- ------- -------
Dilutive $ .24 .20 .48 .40
------- -------- ------- -------
See notes to consolidated condensed financial statements.
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CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(DOLLARS IN THOUSANDS)(Dollars in Thousands)
ThreeSix Months Ended
JulyOctober 31,
1998 1997
Cash flows from operations:
Net income $ 12,497 10,541$25,124 21,349
Adjustments to reconcile
net income to net cash
provided by operations:
Depreciation and amortization 8,072 7,16116,517 14,608
Deferred income taxes 1,500 1,7503,000 3,500
Changes in assets and liabilities:
Receivables (425) (184)(714) (252)
Inventories (1,246) (1,488)(3,318) (2,373)
Prepaid expenses (277) (193)(296) (164)
Accounts payable (1,783) 4,4433,923 4,050
Accrued expenses (647) 6161,062 104
Income taxes payable 4,420 4,574573 5,308
Other, net 325 900800 1,600
------ -------------
Net cash provided by operations 22,436 28,120
------- -------46,671 47,730
------ ------
Cash flows from investing:
Purchase of property and equipment (25,535) (22,163)(55,368) (50,304)
Purchase of investments (1,295) (3,553)(4,844)
Sale of investments 1,266 5,6141,762 7,720
------ -------------
Net cash used in investing activities (25,564) (20,102)
------- --------(54,901) (47,428)
------ ------
- 6 -
CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
(continued)
Six Months Ended
October 31,
1998 1997
Cash flows from financing:
Payments ofon long-term debt (1,415) (2,660)(2,844) (5,131)
Net activity of short-term debt 6,125 (800)18,450 7,000
Proceeds from exercise of stock
options 134 243878 363
Payment of cash dividends (788) (656)
------- -------(1,578) (1,444)
------ -----
Net cash provided by
(used in)
financing activities 4,056 (3,873)
------- -------14,906 788
------ -----
Net increase in cash
and cash equivalents 928 4,1456,676 1,090
Cash and cash equivalents at
beginning of the yearperiod 4,022 3,098
------ ------------
Cash and cash equivalents at
end of the quarter $ 4,950 7,243
------- -------period $10,698 4,188
------ -----
See notes to consolidated condensed financial statements.
- 7 -
CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
1. The accompanying consolidated condensed financial statements (unaudited) include the
accounts and transactions of the Company and its two wholly-owned subsidiaries,
Casey's Marketing Company and Casey's Services Company. All material
inter-company balances and transactions have been eliminated in consolidation.
2. The accompanying consolidated condensed financial statements (unaudited) have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. Although management believes that the disclosures are adequate to
make the information presented not misleading, it is suggested that these
interim consolidated condensed financial statements be read in conjunction with
the Company's most recent audited financial statements and notes thereto. In the
opinion of management, the accompanying consolidated condensed financial
statements (unaudited) contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of JulyOctober 31,
1998, and the results of operations for the six and three months ended JulyOctober
31, 1998 and 1997, and changes in cash flows for the threesix months ended JulyOctober
31, 1998 and 1997.
3. The Company's financial condition and results of operations are affected
by a variety of factors and business influences, certain of which are described
in the Cautionary Statement Relating to Forward-Looking Statements filed as
Exhibit 99 to the Quarterly Report on Form 10-Q for the fiscal quarter ended
January 31, 1997. These interim consolidated condensed financial statements
(unaudited) should be read in conjunction with that Cautionary Statement.
4. AllPrior years per-share amounts and number of shares outstanding set forth
in this Form 10- Q10-Q (and in the exhibits hereto) have been adjusted to reflect the
two-for-one stock split declared for shareholders of record on February 2, 1998
and distributed as of February 17, 1998.
5. In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement is effective for all fiscal
quarters of all fiscal years beginning after June 15, 1999. The Company has
little or no derivative or hedging activities; therefore, it is not anticipated
this statement will have a material effect on the results of operations or the
financial position of the Company.
- 8 -
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
FINANCIAL CONDITION AND RESULTS OF OPERATIONSManagement's Discussion and Analysis of Financial
Condition and Results of Operations.
Financial Condition and Results of Operations (Dollars in Thousands)
Casey's derives its revenue from the retail sale of food (including freshly
prepared foods such as pizza, donuts and sandwiches), beverages and non-food
products such as health and beauty aids, tobacco products, automotive products
and gasoline by Company stores and from the wholesale sale of certain grocery
and general merchandise items and gasoline to franchised stores. The Company
also generates revenues from continuing monthly royalties based on sales by
franchised stores, sign and facade rental fees and the provision of certain
maintenance, transportation and construction services to the Company's
franchisees. A typical store is generally not profitable for its first year of
operation due to start-up costs and will usually attain representative levels of
sales and profits during its third year of operation.
Due to the nature of the Company's business, most sales are for cash, and
cash provided by operations is the Company's primary source of liquidity. The
Company finances its inventory purchases primarily from normal trade credit
aided by the relatively rapid turnover of inventory. This turnover allows the
Company to conduct its operations without large amounts of cash and working
capital. As of JulyOctober 31, 1998, the Company's ratio of current assets to
current liabilities was .56 to 1. The ratio at JulyOctober 31, 1997 and April 30,
1998, was .72.60 to 1 and .58 to 1, respectively. Management believes that the
Company's current $42,000$42,000,000 bank lines of credit (aggregate amount), together
with cash flow from operations, will be sufficient to satisfy the working
capital needs of its business.
Net cash provided by operations decreased $5,684 (20.2%$1,059 (2.2%) in the threesix months
ended JulyOctober 31, 1998 from the comparable period in the prior year, primarily
as a result of a decreaselarger net income being offset by a smaller increase in accountsincome
taxes payable. Cash flows from investing in the threesix months ended JulyOctober 31,
1998 decreased, primarily due to the
increase inas a result of increased capital expenditures. Cash
flows from financing increased, primarily as a result of an increase in
short-term debt. Cash flows in the future are expected to decrease as a result
of the anticipated growth in capital expenditures.
- 9 -
Capital expenditures represent the single largest use of Company funds.
Management believes that by reinvesting in Company stores, the Company will be
better able to respond to competitive challenges and increase operating
efficiencies. During the first threesix months of fiscal 1999, the Company expended
$25,535$55,368 for property and equipment, primarily for the construction and
remodeling of Company stores, compared to $22,163$50,304 for the comparable period in
the prior year. The Company anticipates expending approximately $90,000 in
fiscal 1999 for construction, acquisition and remodeling of Company stores,
primarily from funds generated by operations, existing cash and short-term
investments and proceeds of the 7.70% Senior Notes due December 15, 2004 (the
"7.70% Notes"), the 7.38% Senior Notes due December 28, 2020 (the "7.38%7.38% Notes")
and the 6.55% Senior Notes due December 18, 2003 (the "6.55%6.55% Notes") (together,
the "Senior Notes").
As of JulyOctober 31, 1998, the Company had long-term debt of $77,735,$76,363,
consisting of $16,500$15,750 in principal amount of 7.70% Notes, $30,000 in principal
amount of 7.38% Notes, $18,000 in principal amount of 6.55% Notes, $10,051$9,691 of
mortgage notes payable, and $3,184$2,922 of capital lease obligations.
Interest on the 7.70% Notes is payable on the 15th day of each month at the
rate of 7.70% per annum. Principal of the 7.70% Notes matures in forty quarterly
installments beginning March 15, 1995. The Company may prepay the 7.70% Notes in
whole or in part at any time in an amount of not less than $1,000 or integral
multiples of $100 in excess thereof at a redemption price calculated in
accordance with the Note Agreement dated as of February 1, 1993 between the
Company and the purchasers of the 7.70% Notes.
Interest on the 7.38% Notes is payable semi-annually on the twenty-eighth28th day of
June and December in each year, commencing June 28, 1996, and at maturity, at
the rate of 7.38% per annum. The 7.38% Notes mature on December 28, 2020, with
prepayments of principal commencing December 28, 2010 and ending June 28, 2020,
inclusive, with the remaining principal payable at maturity on December 28,
2020. The Company may prepay the 7.38% Notes in whole or in part at any time in
an amount not less than $1,000 or in integral multiples of $100 in excess thereof
at a redemption price calculated in accordance with the Note Agreement dated as
of December 1, 1995 between the Company and Principal Mutual Life Insurance
Company, as the purchaser of the 7.38% Notes.
- 10 -
Interest on the 6.55% Notes is payable quarterly on the 18th day of March,
June, September and December of each year, commencing March 18, 1998, and at
maturity, at the rate of 6.55% per annum. Principal of the 6.55% Notes matures
in five annual installments commencing December 18, 1999. The Company may prepay
the 6.55% Notes in whole or in part at any time in an amount of not less than
$1,000 or integral multiples of $100 in excess thereof at a redemption price
calculated in accordance with the Note Agreement dated as of December 1, 1997
between the Company and the Purchasers of the 6.55% Notes.
To date, the Company has funded capital expenditures primarily from the
proceeds of the sale of Common Stock, issuance of the 6-1/4% Convertible
Subordinated Debentures (which were converted into shares of Common Stock in
1994), the Senior Notes, a mortgage note, and through funds generated from
operations. Future capital needs required to finance operations, improvements
and the anticipated growth in the number of Company stores are expected to be
met from cash generated by operations, existing cash, investments and additional
long-term debt or other securities as circumstances may dictate, and are not
expected to adversely affect liquidity.
The United States Environmental Protection Agency and several states,
including Iowa, have established requirements for owners and operators of
underground gasoline storage tanks (USTs) with regard to (i) maintenance of leak
detection, corrosion protection and overfill/spill protection systems; (ii)
upgrade of existing tanks; (iii) actions required in the event of a detected
leak; (iv) prevention of leakage through tank closings; and (v) required
gasoline inventory recordkeeping. Since 1984, new Company stores have been
equipped with non-corroding fiberglass USTs, including many with double- wall
construction, over-fill protection and electronic tank monitoring, and the
Company has an active inspection and renovation program with respect to its
older USTs. The Company currently has 1,8851,879 USTs, of which 1,558 are fiberglass
and 327321 are steel. Management believes that its existing gasoline procedures and
planned capital expenditures will continue to keep the Company in substantial
compliance with all current federal and state UST regulations.
Several of the states in which the Company does business have trust fund
programs with provisions for sharing or reimbursing corrective action or
remediation costs incurred by UST owners, including the Company. These programs,
other than the State of Iowa, generally are in the early stages of operation and
the extent of available coverage or reimbursement under such programs for costs
incurred by the Company is not fully
- 11 -
known at this time. In each of the years ended April 30, 1998 and 1997, the
Company spent approximately $502 and $579, respectively, for assessments and
remediation. During the threesix months ended JulyOctober 31, 1998, the Company expended
approximately $198$350 for such purposes. Substantially all of these expenditures
have been submitted for reimbursement from state-sponsored trust fund programs
and as of JulyOctober 31, 1998, a total of approximately $4,300 has been received from such
programs since their inception. Such amounts are typically subject to statutory
provisions requiring repayment of the reimbursed funds for noncompliance with
upgrade provisions or other applicable laws. See "Legal Proceedings" under Part II, Item 1 hereof. The Company has accrued a liability
at JulyOctober 31, 1998 of approximately $1,600 for estimated expenses related to
anticipated corrective actions or remediation efforts, including relevant legal
and consulting costs. Management believes the Company has no material joint and
several environmental liability with other parties.
Management of the Company currently estimatesbelieves that aggregate capital
expenditures forthe Company is in substantial
compliance with the electronic monitoring, cathodic protection and
overfill/spill protection
will approximate $1,000 throughregulations having a December 23, 1998 in order to comply with the
existing UST regulations.effective date.
Additional regulations, or amendments to the existing UST regulations, could
result in future revisions to such estimated expenditures. Such expenditures are
expected to be funded as described above, and are not expected to adversely
affect liquidity.
THREE MONTHS ENDED JULY 31,1998 COMPARED TO THREE MONTHS
ENDED JULY 31,1997Three Months Ended October 31, 1998 Compared to Three Months Ended
October 31, 1997 (Dollars and Amounts in Thousands)
Net sales for the firstsecond quarter of fiscal 1999 increased by $1,179 (3.7%$4,934 (1.6%)
over the comparable period in fiscal 1998. Retail gasoline sales decreased by
$4,321 (2.4%$10,954 (6.0%) as the number of gallons sold increased by 19,757 (12.6%21,357 (13.8%) while
the average retail price per gallon decreased 13.3%17.4%. During this same period,
retail sales of grocery and general merchandise increased by $15,586 (13.3%$15,055 (13.0%) due
to the addition of 6873 new Company Stores and a greater number of stores in
operation for at least three years.
Cost of goods sold as a percentage of net sales was 77.7%76.1% for the firstsecond
quarter of fiscal 1999, compared to 79.3%78.5% for the comparable period in the prior
year. The gross profit margins on retail gasoline sales increased (to 10.1%(11.5%) during
the firstsecond quarter of fiscal 1999 from the firstsecond quarter of the prior year
(9.4%(8.8%). However, due to the decrease in wholesale gasoline costs during the quarter. The
gross profit margin per gallon decreasedalso increased (to $.1026)$.1119) in the firstsecond quarter
of fiscal 1999 from the comparable period in the prior year ($.1104).1033). The gross
profits on retail sales of grocery and general merchandise also increaseddecreased (to 39.9%41.3%)
from the comparable period in the prior year (39.7%(43.3%).
- 12 -
Operating expenses as a percentage of net sales were 14.9% for the second
quarter of fiscal 1999 compared to 13.7% for the comparable period in the prior
year. The increase in operating expenses as a percentage of net sales was caused
by a decrease in the average retail price per gallon of gasoline sold (17.4%).
Net income increased by $1,819 (16.8%). The increase in net income was
attributable primarily to the increase in retail sales of grocery and general
merchandise, an increase in the number of gallons of gasoline sold and an
increased number of stores in operation for at least three years.
Six Months Ended October 31, 1998 Compared to Six Months Ended October
31, 1997 (Dollars and Amounts in Thousands)
Net sales for the first six months of fiscal 1999 increased by $16,726
(2.6%) over the comparable period in fiscal 1998. Retail gasoline sales
decreased by $15,275 (4.2%) as the number of gallons sold increased by 41,114
(13.2%) and the average retail price per gallon decreased 15.4%. During this
same period, retail sales of grocery and general merchandise increased by
$30,641 (13.2%) due to the addition of 73 new Company stores and a greater
number of stores in operation for at least three years.
Cost of goods sold as a percentage of net sales was 76.9% for the first six
months of fiscal 1999 compared to 78.9% for the comparable period in the prior
year. This result occurred because the gross profit margins on retail gasoline
sales increased (10.8%) during the first six months of fiscal 1999 from the
comparable period in the prior year (9.1%) due to the decrease in wholesale
gasoline costs during the period. The gross profit margin per gallon also
increased in the first six months of fiscal 1999 (to $.1073) from the comparable
period in the prior year ($.1068). The gross profits on retail sales of grocery
and general merchandise decreased (to 40.6%) from the comparable period in the
prior year (41.5%).
Operating expenses as a percentage of net sales were 13.7%14.3% for the first
quartersix months of fiscal 1999 compared to 13.2% for13.5% during the comparable period in the
prior year. The increase in operating expenses as a percentage of net sales was
caused primarily by a decrease in the average retail price per gallon of
gasoline sold.sold (15.4%).
Net income increased by $1,956 (18.6%$3,775 (17.7%). The increase in net income was
attributable primarily to the increase in retail sales of grocery and general
merchandise, an increase in gross profit margins, an increase in the number of gallons of gasoline sold, and an
increased number of stores in operation for at least three years.
YEAR- 13 -
Year 2000
Management has initiated a "Year 2000" program to prepare the Company's
information technology systems (including hardware, software and application
programs) for year 2000 compliance, with project completion currently scheduled
for April 30, 1999. All necessary expenditures, which are not expected to be
material (including internal staff and consulting costs), will be funded through
operating cash flow. The Company also is working cooperatively with third
parties having systems upon which the Company must rely, but cannot give any
assurances that the systems of such other parties will be year 2000 compliant on
a timely basis. Systems operated by others which the Company would use and/or
rely upon include those of banking institutions and telephone companies, as well
as vendor and franchisee workstations and product ordering systems. The
Company's business and financial condition and/or results of operations could be
materially adversely affected by the failure of its systems and applications or
those operated by such other third parties. CAUTIONARY STATEMENTThe Company is developing a
contingency plan for its year 2000 exposure, and intends to incorporate the plan
as part of its efforts to ensure that its systems are year 2000 compliant by
April 30, 1999.
Cautionary Statement
The foregoing Management's Discussion and Analysis of Financial Condition
and Results of Operations contains various "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements represent the Company's expectations or beliefs concerning future
events, including (i) any statements regarding future sales and gross profit
percentages, (ii) any statements regarding the continuation of historical trends
and (iii) any statements regarding the sufficiency of the Company's cash
balances and cash generated from operations and financing activities for the
Company's future liquidity and capital resource needs. The Company cautions that
these statements are further qualified by important factors that could cause
actual results to differ materially from those in the forward-looking
statements, including, without limitations, the factors described in the
Cautionary Statement Relating to Forward-Looking Statements included as Exhibit
99 to the Form 10-Q for the fiscal quarter ended January 31, 1997.
- 14 -
PART II - OTHER INFORMATION
Item 1. Legal Proceedings (DollarsProceedings.
The Company recently was named as defendant in Thousands)an action brought in the
United States District Court for the District of Kansas under the Americans With
Disabilities Act ("ADA") (Robert Mikesic and Benjamin Crousore V. Casey's
General Stores, Inc., Case No. 98-4165 R.D.R.). Plaintiffs allege that the
Company's convenience stores in Kansas, particularly those allegedly surveyed by
plaintiffs prior to filing suit, fail to comply with certain ADA accessibility
requirements. Plaintiffs seek declaratory and injunctive relief, an award of
attorneys fees, costs, expenses and other equitable or legal relief, including a
permanent injunction directing the Company to make all necessary modifications
to eliminate all barriers that prevent access by the plaintiffs. Plaintiffs seek
to maintain the action as a class action on behalf of all individuals with
disabilities in Kansas and all other states in which the Company does business.
The Company has filed administrative appeals from adverse decisionsengaged Kansas legal counsel and intends to defend the
matter vigorously. It is the Company's position that those of its stores that
were opened for business prior to the 1992 effective date of the ADA (which
includes all those allegedly surveyed by the Iowa Department of Natural Resources ("IDNR")plaintiffs) are not subject to ADA
accessibility requirements except as, and the Iowa Underground Storage
Tank Financial Responsibility Program Board (the "UST Board") with respect to the installationextent that, removal of cathodic protection at certain of the Company's underground
storage tanks ("USTs") locatedany
architectural barriers present in the State of Iowa. The appeals followed IDNR's
determination that certain of such installations, which were performed on behalf
of the Company by a third- party contractor (Corrpro Companies, Inc.)
("Corrpro"), were not fully in compliance
with IDNR administrative rules for corrosion protection upgrade. The IDNR
upgrade compliance datestores is December 22, 1998. However, the UST Board, which
controls funds to partially reimburse tank owners for the costs of corrective
action for past releases from leaking USTs, set an upgrade compliance date of
January 1, 1995 for owners such as the Company. As a result of the IDNR
determination, the UST Board has demanded a refund from the Company in the
amount of $1,603 for remedial costs previously reimbursed to the Company by the
UST Board with respect to said locations. In addition, the UST Board is
withholding future payment of remedial funds pending resolution of the
compliance issue.
The Company has been participating in informal settlement discussions with
IDNR and the UST Board in an effort to resolve the matter, and a settlement has
been reached with the IDNR. That settlement requires the Company to further test
certain of its tanks at an aggregate cost of approximately $100 and to take
whatever further corrective action may be necessary to remediate any test
failures. This settlement allows all tanks subject to the controversy to be
considered in compliance with the December, 1998 IDNR upgrade rules. No
settlement has yet been reached with the UST Board and there can be no assurance
that an acceptable settlement will be forthcoming. In the event it is not
possible to reach a settlement, the Company expects to pursue its administrative
appeal and proceed with contested case hearings before an administrative law
judge (whose decision may be appealed to district court). If it is finally
determined that the affected sites did not meet the applicable IDNR standards on
January 1, 1995, such sites would not qualify for remedial benefits provided
through the UST Board and the benefits received with respect to such sites would
be subject to repayment.
The Company and Corrpro are parties to a contract under which Corrpro
agreed to install cathodic protection systems in all of the Company's qualifying
USTs in the State of Iowa in order to meet the upgrade requirements by January
1, 1995, and further agreed to defend and indemnify the Company for all
liability arising out of the acts or omissions of Corrpro in the performance of
its work under that agreement. The Company would expect to litigate its claims
against Corrpro for whatever costs or expenses it may incur as a result of the
foregoing claims and proceedings.readily achievable.
The Company from time to time is a party to other legal proceedings arising from
the conduct of its business operations, including proceedings relating to
personal injury and employment claims, environmental remediation activities or
contamination,contamination-related claims, disputes under franchise agreements and claims by
state and federal regulatory authorities relating to the sale of products
pursuant to state or federal licenses or permits. Management does not believe
that the potential liability of the Company with respect to such other
proceedings pending as of the date of this Form 10-Q is material in the
aggregate.
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Item 4. Submission of Matters to a Vote of Security Holders.
At the Annual Meeting of shareholders held on September 18, 1998, seven
directors were elected for a term of one year. Each of the nominees so elected
previously has served as a director of the Company.
The votes cast or withheld for each nominee were as follows:
Number of Shares
Number of Shares That Withheld
Name Voting For Authority
Donald F. Lamberti 45,097,389 1,063,816
Ronald M. Lamb 45,099,404 1,061,801
John G. Harmon 45,078,275 1,082,930
John R. Fitzgibbon 45,349,922 811,283
Patricia Clare Sullivan 45,245,339 915,866
Kenneth H. Haynie 45,071,235 1,089,970
Jack P. Taylor 45,381,974 779,231
Item 6. EXHIBITS AND REPORTS ON FORMExhibits and Reports on Form 8-K.
(a) The following exhibits are filed with this Report or, if so
indicated, incorporated by reference.
reference:
Exhibit
No. Description
--------- ---------------
4.2 Rights Agreement dated as of June 14, 1989 between Casey's
General Stores, Inc. and United Missouri Bank of Kansas
City, N.A., as Rights Agent(a), and amendments thereto
(b),(c),(d)
4.3 Note Agreement dated as of February 1, 1993 between
Casey's General Stores, Inc. and Principal Mutual Life
Insurance Company and Nippon Life Insurance Company of
America (e) and First Amendment thereto (f)
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4.4 Note Agreement dated as of December 1, 1995 between
Casey's General Stores, Inc. and Principal Mutual Life
Insurance Company (f)
4.5 Note Agreement dated as of December 1, 1997 among the
Company and Principal Mutual Life Insurance Company,
Nippon Life Insurance Company of America and TMG Life
Insurance Company (g)
11 Statement regarding computation of per share earnings
27 Financial Data Schedule
99 Cautionary Statement Relating to
Forward-Looking Statements (h)
- --------------------------------
(a) Incorporated by reference from the Registration Statement on Form 8-A
(0-12788) filed June 19, 1989 relating to Common Share Purchase Rights.
(b) Incorporated by reference from the Form 8 (Amendment No. 1 to the
Registration Statement on Form 8-A filed June 19, 1989) filed September
10, 1990.
(c) Incorporated by reference from the Form 8-A/A (Amendment No. 3 to the
Registration Statement on Form 8-A filed June 19, 1989) filed March 30,
1994.
(d) Incorporated by reference from the Form 8-A12G/A (Amendment No. 2 to
the Registration Statement on Form 8-A filed June 19, 1989) filed July
29, 1994.
(e) Incorporated by reference from the Current Report on Form 8-K filed
February 18, 1993.
(f) Incorporated by reference from the Current Report on Form 8-K filed
January 11, 1996.
(g) Incorporated by reference from the Current Report on Form 8-K filed
January 7, 1998.
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(h) Incorporated by reference from the Quarterly Report on Form 10-Q for
the fiscal quarter ended January 31, 1997.
(b) On July 28, 1998, the Company filed a Current ReportThere were no reports on Form 8-K with respect tofiled during the resignations of Douglas K. Shull as Treasurer
and as a member of the Board of Directors.quarter for
which this Report is filed.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CASEY'S GENERAL STORES, INC.
Date: September 4,December 7, 1998 By: /s/ John G. Harmon
----------------------
John G. Harmon,
Secretary/Treasurer
(Authorized Officer and Principal
Financial Officer)
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGEExhibit No. Description Page
11 Statement regarding 19 computation
of per share earnings 21
27 Financial Data Schedule 2023