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 OctoberJanuary 31, 20012002
Commission File Number 0-12788
CASEY'S GENERAL STORES, INC.
(Exact name of registrant as specified in its charter)
IOWA 42-0935283
(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 49,542,86249,615,362 shares
(Class) (Outstanding at November 30, 2001)March 4, 2002)
CASEY'S GENERAL STORES, INC.
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
Consolidated condensed balance sheets -
October 31, 2001
Page
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
Consolidated condensed balance sheets -
January 31, 2002 and April 30, 2001 3
Consolidated condensed statements
of income - three and nine months ended
January 31, 2002 and 2001 5
Consolidated condensed statements of
cash flows - nine months ended
January 31, 2002 and 2001 6
Notes to consolidated condensed
financial statements 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations. 9
Item 3. Quantitative and Qualitative Disclosure
about Market Risk. 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 16
Item 6. Exhibits and Reports on Form 8-K. 16
SIGNATURE 19
2
Consolidated condensed statements of
income - three and six months ended
October 31, 2001 and 2000 4
Consolidated condensed statements of
cash flows - six months ended
October 31, 2001 and 2000 5
Notes to consolidated condensed
financial statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations. 8
Item 3. Quantitative and Qualitative Disclosure
about Market Risk. 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 14
Item 4. Submission of Matters to a Vote of
Security Holders. 15
Item 6. Exhibits and Reports on Form 8-K. 15
SIGNATURE 18
-1-
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Consolidated Financial Statements.
---------------------------------
CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
OctoberJanuary 31,
20012002 April 30,
(Unaudited) 2001
----------- --------------------
ASSETS
Current assets:
Cash and cash equivalents $ 13,6362,066 22,958
Short-term investments 5,82711 18,225
Receivables 5,1684,255 5,190
Inventories 63,91465,315 51,772
Prepaid expenses 6,1886,197 5,461
Income tax receivable --2,284 3,287
-------- -----------------
Total current assets 94,73380,128 106,893
-------- -----------------
Other assets 1,2611,243 1,297
Property and equipment, net of
accumulated depreciation
OctoberJanuary 31, 2001, $305,4572002, $314,865
April 30, 2001, $284,483 617,324625,756 585,294
-------- ---------
$ 713,318--------
$707,127 693,484
======== =================
See notes to unaudited consolidated condensed financial statements.
-2-3
CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(Continued)
(Dollars in Thousands)
OctoberJanuary 31,
20012002 April 30,
(Unaudited) 2001
----------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 4,400 --
Current maturities of
long-term debt $ 9,4059,351 9,482
Accounts payable 61,22654,492 67,735
Accrued expenses 25,66725,087 24,824
Income taxes payable 1,615 ---
--------- ----------------- --------
Total current liabilities 97,91393,330 102,041
--------- ----------------- --------
Long-term debt, net of current maturities 180,604175,581 183,107
--------- ----------------- --------
Deferred income taxes 66,65068,150 63,650
--------- ----------------- --------
Deferred compensation 4,2954,338 4,210
--------- ----------------- --------
Total liabilities 349,462341,399 353,008
--------- ----------------- --------
Shareholders' equity:equity
Preferred stock, no par value --- ----- --
Common Stock, no par value 38,61339,207 38,353
Retained earnings 325,243326,521 302,123
--------- ----------------- --------
Total shareholders' equity 363,856365,728 340,476
--------- ---------
$ 713,318-------- --------
$707,127 693,484
========= ================= ========
See notes to unaudited consolidated condensed financial statements.
-3-4
CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands, except per share amounts)
Three Months Ended SixNine Months Ended
OctoberJanuary 31, OctoberJanuary 31,
------------------------ --------------------------------------------- ---------------------
2002 2001 20002002 2001
2000
---------- ---------- ---------- ------------------- --------- --------- ---------
Net sales $ 557,654 495,708 1,136,577 1,024,599453,507 437,004 1,590,084 1,461,603
Franchise revenue 796 981 1,672 2,126
---------- ---------- ---------- ----------
558,450 496,689 1,138,249 1,026,725
---------- ---------- ---------- ----------725 832 2,397 2,958
--------- --------- --------- ---------
454,232 437,836 1,592,481 1,464,561
--------- --------- --------- ---------
Cost of goods sold 452,379 396,570 926,256 824,632365,248 352,903 1,291,504 1,177,535
Operating expenses 72,241 64,890 144,017 128,78270,851 64,999 214,868 193,781
Depreciation and
amortization 11,074 10,321 21,881 20,39211,315 10,473 33,196 30,865
Interest, net 3,024 2,890 6,127 5,861
---------- ---------- ---------- ----------
538,718 474,671 1,098,281 979,667
---------- ---------- ---------- ----------
19,732 22,018 39,968 47,0583,205 3,117 9,332 8,978
--------- --------- --------- ---------
450,619 431,492 1,548,900 1,411,159
--------- --------- --------- ---------
Income before
income taxes 3,613 6,344 43,581 53,402
Federal and state
income taxes 7,340 8,190 14,868 17,505
---------- ---------- ---------- ----------1,344 2,361 16,212 19,866
--------- --------- --------- ---------
Net income $ 12,392 13,828 25,100 29,553
========== ========== ========== ==========2,269 3,983 27,369 33,536
========= ========= ========= =========
Earnings per common share
Basic $ .25 .28 .51 .60
========== ========== ========== ==========.05 .08 .55 .68
========= ========= ========= =========
Diluted $ .25 .28 .51 .60
========== ========== ========== ==========.05 .08 .55 .68
========= ========= ========= =========
See notes to unaudited consolidated condensed financial statements.
-4-5
CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
Six Months Ended
October 31,
--------------------------
2001 2000
---------- ---------
Cash flows from operations:
Net income $ 25,100 29,553
Adjustments to reconcile
net income to net cash
provided by operations:
Depreciation and amortization 21,881 20,392
Deferred income taxes 3,000 3,000
Changes in assets and liabilities:
Receivables 22 (44)
Inventories (12,142) (14,047)
Prepaid expenses (727) (455)
Accounts payable (6,509) (1,444)
Accrued expenses 843 3,111
Income taxes payable 4,902 4,984
Other, net 785 721
--------- ---------
Net cash provided by operations 37,155 45,771
--------- ---------
Cash flows from investing:
Purchase of property and equipment (54,020) (46,830)
Purchase of investments - (34,190)
Sale of investments 12,208 4,737
--------- ---------
Net cash used in investing activities (41,812) (76,283)
--------- ---------
Cash flows from financing:
Proceeds from long-term debt ---- 80,000
Payments on long-term debt (2,945) (2,914)
Net activity of short-term debt (42,550)
Proceeds from exercise of stock options 260 208
Payment of cash dividends (1,980) (1,731)
--------- ---------
Net cash (used in) provided by financing
activities (4,665) 33,013
--------- ---------
Net (decrease) increase in cash and cash
equivalents (9,322) 2,501
Cash and cash equivalents at
beginning of the period 22,958 15,917
--------- ---------
Cash and cash equivalents at end of the period $ 13,636 18,418
========= =========
See notes to unaudited consolidated condensed financial statements.
-5-
Nine Months Ended
January 31,
-----------------
2002 2001
-------- --------
Cash flows from operations:
Net income $ 27,369 33,536
Adjustments to reconcile
net income to net cash
provided by operations:
Depreciation and amortization 33,196 30,865
Deferred income taxes 4,500 4,500
Changes in assets and liabilities:
Receivables 935 (816)
Inventories (13,543) (19,152)
Prepaid expenses (736) (2,401)
Accounts payable (13,243) (9,483)
Accrued expenses 263 2,675
Income taxes 1,003 (2,091)
Other, net 1,523 1,213
-------- -------
Net cash provided by operations 41,267 38,846
-------- -------
Cash flows from investing:
Purchase of property and equipment (74,282) (65,729)
Purchase of investments ---- (34,190)
Sale of investments 17,862 12,918
-------- -------
Net cash used in investing activities (56,420) (87,001)
-------- -------
6
CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Con't)(Continued)
(Dollars in Thousands)
Nine Months Ended
January 31,
-----------------
2002 2001
-------- ---------
Cash flows from financing:
Proceeds from long-term debt ---- 80,000
Payments of long-term debt (8,022) (8,456)
Net activity of short-term debt 4,400 (31,650)
Proceeds from exercise of stock options 854 331
Payments of cash dividends (2,971) (2,720)
-------- ---------
Net cash provided by (used in)
financing activities (5,739) 37,505
-------- ---------
Net decrease in cash and cash equivalents (20,892) (10,650)
Cash and cash equivalents at
beginning of the year 22,958 15,917
-------- ---------
Cash and cash equivalents at
end of the period $ 2,066 5,267
======== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Six Months Ended
October 31,
----------------
2001 2000
---- ----
Cash paid during the year for
Interest, net of amount capitalized $6,865 4,551
Income taxes 7,490 9,521
Nine Months Ended
January 31,
------------------
2002 2001
-------- ---------
Cash paid during the year for
Interest, net of amount capitalized $ 11,481 9,561
Income taxes 11,233 19,388
Noncash investing and financing activities
Property and equipment acquired through
an installment purchase 365 ---
See notes to unaudited consolidated condensed financial statements.
-6-7
CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying consolidated condensed financial statements include the
accounts and transactions of the Company and its wholly-owned subsidiaries.
All material inter-company balances and transactions have been eliminated
in consolidation.
2. The accompanying consolidated condensed financial statements 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 contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position as
of OctoberJanuary 31, 2001,2002, and the results of operations for the sixthree and threenine
months ended OctoberJanuary 31, 20012002 and 2000,2001, and changes in cash flows for the
sixnine months ended OctoberJanuary 31, 20012002 and 2000.2001.
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 should be read in conjunction with that Cautionary
Statement.
-7-8
Item 2. Management'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 second or 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 OctoberJanuary 31, 2001,2002, the Company's ratio of current assets to
current liabilities was .97.86 to 1. The ratio at OctoberJanuary 31, 20002001 and April 30,
2001 was 1.09 to 1 and 1.05 to 1, respectively. Management believes that the
Company's current bank linesline of credit of $35,000, together with cash flow from
operations, will be sufficient to satisfy the working capital needs of its
business.
Net cash provided by operations decreased $8,616 (18.8%increased $2,421 (6.2%) in the sixnine months
ended OctoberJanuary 31, 20012002 from the comparable period in the prior year, primarily
as a result of a lower net incomelarger increase in inventories and a larger decrease in
accounts payable. Cash flows fromused in investing in the sixnine months ended OctoberJanuary
31, 20012002 decreased, due
toprimarily as a result of an increased sale of investments
and no purchases of investments. Cash flows from financing also decreased,
primarily due to the proceeds from long-term debt exceeding the pay down of the
short-term debtHowever, this result was partially offset by an
increase in the comparable period of the prior year.capital expenditures. Cash used in investing activities is expected
to increase as a result of the anticipated growth in capital expenditures. Cash
flows from financing also decreased, primarily due to the proceeds from the
long-term debt in the comparable period of the prior year.
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 sixnine months of fiscal 2002, the Company expended
$54,020$74,282 for property and
-8-
equipment, primarily for the construction, acquisition
and remodeling of Company stores, compared to $46,830$65,729 for the comparable period
in the prior year. The Company
9
anticipates expending approximately $90,000 in fiscal 2002 for construction,
acquisition and remodeling of Company stores, primarily from funds generated by
operations, existing cash and short-term investments andthe bank linesline of credit.
As of OctoberJanuary 31, 2001,2002, the Company had long-term debt of $180,604,$175,581,
consisting of $6,750$6,000 in principal amount of 7.70% Senior Notes, $30,000 in
principal amount of 7.38% Senior Notes, $7,200$3,600 in principal amount of 6.55%
Senior Notes, $50,000 in principal amount of Senior Notes, Series A through
Series F, with interest rates ranging from 6.18% to 7.23%, $80,000 in principal
amount of 7.89% Senior Notes, Series A, $4,920$4,425 of mortgage notes payable, and
$1,734$1,556 of capital lease obligations.
Interest on the 7.70% Senior Notes is payable on the 15th day of each month at the
rate of 7.70% per annum. Principal of the 7.70% Senior Notes matures in forty quarterly
installments beginning March 15, 1995. The Company may prepay the 7.70% Senior 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% Senior Notes.
Interest on the 7.38% Senior Notes is payable semi-annually on the 28thtwenty-eighth
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% Senior 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% Senior Notes in whole or in part at
any time in an amount of 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 the purchaser of
the 7.38% Senior Notes.
Interest on the 6.55% Senior 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% Senior Notes matures
in five annual installments commencing December 18, 1999. The Company may prepay
the 6.55% Senior 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% Senior
Notes.
-9-
Interest on the 6.18% to 7.23% Senior Notes, Series A through Series F, is
payable on the 23rd day of each April and October. Principal of the 6.18% to
7.23% Senior Notes, Series A through Series F, matures in various installments
beginning April 23, 2004. The Company may prepay the 6.18% to 7.23% Senior
Notes, Series A through Series F, in whole or in part at any time in an amount
of not less than $1,000 or integral
10
multiples of $100 in excess thereof at a redemption price calculated in
accordance with the Note Agreement dated as of April 15, 1999 between the
Company and the purchasers of the 6.18% to 7.23% Senior Notes, Series A through
Series F.
Interest on the 7.89% Senior Notes, Series A, is payable semi-annually on
the 15th day of May and November in each year, commencing November 15, 2000, and
at maturity, at the rate of 7.89% per annum. The 7.89% Senior Notes mature on
May 15, 2010, with prepayments of principal commencing on May 15, 2004 and on
each May 15 thereafter to and including May 15, 2009, with the remaining
principal payable at maturity on May 15, 2010. The Company may prepay the 7.89%
Senior Notes in whole or in part at any time in an amount not less than $2,000
in the case of a partial prepayment at a redemption price calculated in
accordance with the Note Purchase Agreement dated as of May 1, 2000 between the
Company and the purchasers of the 7.89% Senior 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 above-described 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, investmentsthe bank line of credit,
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 2,5212,535 USTs, of which 2,1752,191 are fiberglass
and 346344 are steel.
-10-
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. The extent of
available coverage or reimbursement under such programs for costs incurred by
the Company is not fully known at this time. In each of the years ended April
30, 2001 and 2000, the Company
11
spent approximately $944 and $447, respectively, for assessments and
remediation. During the sixnine months ended OctoberJanuary 31, 2001,2002, the Company expended
approximately $348$517 for such purposes. Substantially all of these expenditures
have been submitted for reimbursement from state-sponsored trust fund programs
and as of OctoberJanuary 31, 2001,2002, approximately $5,400$5,500 has been received from such
programs since their inception. Such amounts are typically subject to statutory
provisions requiring repayment of the reimbursed funds for noncompliancenon-compliance with
upgrade provisions or other applicable laws. The Company has accrued a liability
at OctoberJanuary 31, 20012002 of approximately $200 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.
Three Months Ended OctoberJanuary 31, 20012002 Compared to Three Months Ended OctoberJanuary
--------------------------------------------------------------------------
31, 20002001 (Dollars and Amounts in Thousands)
- -------------------------------------------
Net sales for the secondthird quarter of fiscal 2002 increased by $61,946
(12.5%$16,503 (3.8%)
over the comparable period in fiscal 2001. Retail gasoline sales increaseddecreased by
$37,477 (12.7%$17,931 (6.8%) as the number of gallons sold increased by 36,622
(18%47,100 (25.0%) while
the average retail price per gallon decreased 4.5%25.4%. During this same period,
retail sales of grocery and general merchandise increased by $27,535
(15.5%$37,089 (24.3%) due
to the addition of 5866 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 81.1%80.5% for the secondthird
quarter of fiscal 2002, compared to 80.0%80.8% for the comparable period in the prior
year.year due to total sales consisting of a smaller percentage of retail gasoline
sales (54.6%) than the comparable period in the prior year (60.8%). The gross
profit margins on retail gasoline sales decreased (to 8.0%7.6%) during the secondthird
quarter of fiscal 2002 from the secondthird quarter of the prior year (8.1%(8.2%). The due to
the gross profit margin per gallon also decreaseddecreasing (to $.1107) in
the second quarter of fiscal 2002$.08) from the comparable
period in the prior year ($.1173).1152). The gross profits on retail sales of grocery
and general merchandise also decreased (to 36.5%34.8%) from the comparable period in
the prior year (40.3%(39.1%), primarily due primarily to the dominance of cigarettes in our business mix,a more competitive pricing and the discounting of products phased out as part of our recent store
resets.
-11-
retail environment.
Operating expenses as a percentage of net sales were 13%15.6% for the secondthird
quarter of fiscal 2002 compared to 13.1%14.9% for the comparable period in the prior
year. The slight decreaseincrease in operating expenses as a percentage of net sales was caused
primarily by an increase in retail sales of grocery and general merchandise and an
increase in the number of gallons of gasoline sold. However, these increases
were partially offset by thea decrease in the average retail price per gallon of gasoline sold (4.5%).sold.
Net income decreased by $1,436 (10.4%$1,714 (43%). The decrease in net income was
attributable primarily to the decrease in the gross profit margin per gallon ofmargins on retail
gasoline soldsales and the decrease in the gross profitsprofit margins on retail sales of
grocery and general merchandise.
SixNine Months Ended OctoberJanuary 31, 20012002 Compared to SixNine Months Ended
October----------------------------------------------------------------
12
January 31, --------------------------------------------------------------------------
20002001 (Dollars and Amounts in Thousands)
- -----------------------------------------------------------------------------------------
Net sales for the first sixnine months of fiscal 2002 increased by $111,978
(10.9%$128,481
(8.8%) over the comparable period in fiscal 2001. Retail gasoline sales
increased by $65,284 (10.6%$47,352 (5.4%) as the number of gallons sold increased by 63,770
(15.4%110,870
(18.4%) andwhile the average retail price per gallon decreased 4.2%11%. During this
same period, retail sales of grocery and general merchandise increased by
$53,892
(15%$90,981 (17.8%) due to the addition of 5866 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 81.5%81.2% for the first
sixnine months of fiscal 2002 compared to 80.5%80.6% for the comparable period in the
prior year. This result occurred because the gross profit margins on retail
gasoline sales decreased (to 7.1%7.3%) during the first sixnine months of fiscal 2002
from the comparable period in the prior year (8.3%). The due to the gross profit
margin per gallon also decreased in the first six months of fiscal 2002decreasing (to $.1019)$.0947) from the comparable period in the prior
year ($.1242).1214). The gross profits on retail sales of grocery and general
merchandise also decreased (to 37.5%36.6%) from the comparable period in the prior
year (39.3%(39.2%), primarily due primarily to the dominance of cigarettes in
our business mix,a more competitive pricing and the discounting of products phased out
as part of our recent store resets.retail environment.
Operating expenses as a percentage of net sales were 12.7%13.5% for the first
sixnine months of fiscal 2002 compared to 12.6% during13.3% for the comparable period in the
prior year. The slight 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 (4.2%). However, this decrease was partially offset by an
increase in retail sales of grocery and general merchandise and an increase in
the number of gallons of gasoline sold.
-12-
Net income decreased by $4,453 (15.1%$6,167 (18.4%). The decrease in net income was
attributable primarily to the decrease in the gross profit margin per gallon ofmargins on retail
gasoline soldsales and the decrease in the gross profitsprofit margins on retail sales of
grocery and general merchandise.
Other Matters
-------------
On July 20, 2001, the Financial Accounting Standards Board issued
Statements No. 141, "Business Combinations" and No. 142, "Goodwill and Other
Intangible Assets." Statement 141 requires all business combinations initiated
after June 30, 2001 to be accounted for using the purchase method. Statement 142
replaces the requirement to amortize intangible assets with indefinite lives and
goodwill with a requirement for an impairment test. Statement 142 also requires
an evaluation of intangible assets and their useful lives and a transitional
impairment test for goodwill and certain intangible assets. After transition,
the impairment tests will be performed annually. Statement 142 is required to be
applied starting with fiscal years beginning after December 15, 2001 and is
required to be applied at the beginning of the fiscal year. The Company does not
expect either of these Statements to have a material effect on their
consolidated financial statements.
13
In August 2001, the Financial Accounting Standards Board issued FASB
Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets (Statement 144), which supercedes FASB Statement 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of
(Statement 121). Statement 144 retains the fundamental provisions in Statement
121 for recognizing and measuring impairment losses on long-lived assets held
for use and long-lived assets to be disposed of by sale, while also resolving
significant implementation issues associated with Statement 121. The Company is
required to adopt Statement 144 no later than the year beginning after December
15, 2001, and plans to adopt its provisions for the quarter ending July 31,
2002. Management does not expect the adoption of Statement 144 for long-lived
assets held for use to have a material impact on the Company's financial
statements because the impairment assessment under Statement 144 is largely
unchanged from Statement 121.
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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
----------------------------------------------------------
The Company's exposure to market risk for changes in interest rates relates
primarily to its investment portfolio and long-term debt obligations. The
Company places its investments with high quality credit issuers and, by policy,
limits the amount of credit exposure to any one issuer. As stated in its policy,
the Company's first priority is to reduce the risk of principal loss.
Consequently, the Company seeks to preserve its invested funds by limiting
default risk, market risk and reinvestment risk. The Company mitigates default
risk by investing in only high quality credit securities that it believes to be
low risk and by positioning its portfolio to respond appropriately to a
significant reduction in a credit rating of any investment issuer or guarantor.
The portfolio includes
14
only marketable securities with active secondary or resale markets to ensure
portfolio liquidity.
At OctoberJanuary 31, 2001,2002, the Company had no derivative instruments, but
management is aware of the provisions of SFAS No. 133 (as amended by SFAS Nos.
137 and 138) establishing accounting and reporting standards for derivative
instruments.
-13-
The Company believes that an immediate 100 basis point move in interest
rates affecting the Company's floating and fixed rate financial instruments as
of October 31, 2001January 1, 2002 would have an immaterial effect on the Company's pretax
earnings and on the fair value of those instruments.
On July 20, 2001, the Financial Accounting Standards Board issued
Statements No. 141, Business Combinations and No. 142, Goodwill and Other
Intangible Assets. Statement 141 requires all business combinations initiated
after June 30, 2001 to be accounted for using the purchase method. Statement 142
replaces the requirement to amortize intangible assets with indefinite lives and
goodwill with a requirement for an impairment test. Statement 142 also requires
an evaluation of intangible assets and their useful lives and a transitional
impairment test for goodwill and certain intangible assets. After transition,
the impairment tests will be performed annually. Statement 142 is required to be
applied starting with fiscal years beginning after December 15
2001 and is
required to be applied at the beginning of the fiscal year. The Company does not
expect either of these Statements to have a material effect on their
consolidated financial statements.
In August 2001, the Financial Accounting Standards Board issued FASB
Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets (Statement 144), which supercedes FASB Statement 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of
(Statement 121). Statement 144 retains the fundamental provisions in Statement
121 for recognizing and measuring impairment losses on long-lived assets held
for use and long-lived assets to be disposed of by sale, while also resolving
significant implementation issues associated with Statement 121. The Company is
required to adopt Statement 144 no later than the year beginning after December
15, 2001, and plans to adopt its provisions for the quarter ending July 31,
2002. Management does not expect the adoption of Statement 144 for long-lived
assets held for use to have a material impact on the Company's financial
statements because the impairment assessment under Statement 144 is largely
unchanged from Statement 121.
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings.
-----------------
The Company from time to time is a party to 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 -14-
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.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
At the Annual Meeting of shareholders held on September 21, 2001, 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 43,046,349 2,270,092
Ronald M. Lamb 36,251,481 9,064,960
John G. Harmon 36,878,084 8,438,357
John R. Fitzgibbon 43,865,709 1,450,732
Patricia Clare Sullivan 43,869,252 1,447,189
Kenneth H. Haynie 40,519,088 4,797,353
John P. Taylor 43,891,742 1,424,699
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) The following exhibits are filed with this Report or, if so indicated,
incorporated by 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),(i),(j)
-15-
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)
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)
4.6 Note Agreement dated as of April 15, 1999 among Casey's
General Stores, Inc. and other purchasers of the 6.18% to
7.23% Senior Notes, Series A through F (i)
16
4.7 Note Purchase Agreement dated as of May 1, 2000 among the Company
and the purchasers of the 7.89% Senior Notes, Series 2000-A (k)
11 Statement regarding computation of per share earnings
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.
-16-
(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.
(h) Incorporated by reference from the Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1997.
(i) Incorporated by reference from the Current Report on Form 8-K filed May 10,
1999.
(j) Incorporated by reference from the Current Report on Form 8-K filed
September 27, 1999.
(k) Incorporated by reference from the Current Report on Form 8-K filed May 22,
2000.
17
(b) There were no reportsOn January 3, 2002, the Company filed a Current Report on Form
8-K filed duringrelating to the quarter ended October
31, 2001.
-17-amendment of its insider trading policy.
As disclosed therein, the purpose of the amendment was to
permit Company officers and other insiders to enter into
trading plans or arrangements for systematic trading of the
Company's Common Stock under SEC Rule 15b5-1.
18
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: December 4, 2001March 11, 2002 By: /s/ John G. Harmon
---------------------------------
John G. Harmon
Secretary/Treasurer
(Authorized Officer and
Principal Financial Officer)
-18-19
EXHIBIT INDEX
-------------
Exhibit No. Description Page
- ----------- ----------- ----
11 Statement regarding
computation of
per share earnings
19
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