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 July 31, 1995
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 BLVD., ANKENY, IOWA
(Address of principal executive offices)
50021
(Zip Code)
(515) 965-6100
(Registrant's telephone number, including area code)
N/A
(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 26,113,406 shares
(Class) (Outstanding at
September 11, 1995)
CASEY'S GENERAL STORES, INC.
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
Consolidated condensed balance sheets -
July 31, 1995 and April 30, 1995 3
Consolidated condensed statements of
income - three months ended
July 31, 1995 and 1994 5
Consolidated condensed statements of
cash flows - three months ended
July 31, 1995 and 1994 6
Notes to consolidated condensed
financial statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations. 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 11
Item 6. Exhibits and Reports on Form 8-K. 12
SIGNATURE 14
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
July 31, April 30,
1995 1995
-------- ---------
ASSETS
Current assets
Cash and cash equivalents $ 11,677,491 $ 5,477,784
Short-term investments 1,228,407 1,300,700
Receivables 3,119,079 3,086,728
Inventories 28,502,768 27,343,033
Prepaid expenses 6,555,532 5,982,324
----------- ----------
Total current assets 51,083,277 43,190,569
---------- ----------
Long-term investments 3,605,402 6,445,934
Other assets 954,149 1,030,856
Property and equipment, net of
accumulated depreciation
July 31, 1995, $116,819,560
April 30, 1995, $111,656,704 307,223,185 294,491,313
----------- -----------
$362,866,013 345,158,672
----------- -----------
See notes to consolidated condensed financial statements.
CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable $ 18,200,000 $ 11,350,000
Current maturities of
long-term debt 8,225,143 8,498,891
Accounts payable 40,747,395 39,860,843
Accrued expenses 15,765,849 15,716,412
Income taxes payable 4,642,909 1,544,909
---------- ----------
Total current liabilities 87,581,296 76,971,055
---------- ----------
Long-term debt, net of
current maturities 58,053,203 59,962,922
---------- ----------
Deferred taxes 27,770,000 27,270,000
---------- ----------
Deferred compensation 1,384,520 1,282,655
--------- ---------
Shareholders' equity
Preferred stock, no par value --- ---
Common Stock, no par value 62,354,805 61,342,992
Retained earnings 125,722,189 118,329,048
----------- -----------
Total shareholders' equity 188,076,994 179,672,040
----------- -----------
$362,866,013 345,158,672
----------- -----------
See notes to consolidated condensed financial statements.
CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
July 31,
1995 1994
----------------------
Net sales $252,996,754 221,255,900
Franchise revenue 1,454,607 1,431,628
----------- -----------
254,451,361 222,687,528
----------- -----------
Cost of goods sold 199,532,946 175,384,559
Operating expenses 34,797,993 30,023,811
Depreciation and
amortization 5,852,285 5,276,824
Interest, net 1,557,657 1,504,947
----------- -----------
241,740,881 212,190,141
----------- -----------
Income before income taxes 12,710,480 10,497,387
Federal and state
income taxes 4,798,000 4,067,000
----------- -----------
Net income $ 7,912,480 6,430,387
----------- -----------
Earnings per common
and common equivalent
share $ .30 .25
----------- -----------
Weighted average number
of common and common
equivalent shares
outstanding 26,074,979 26,001,005
----------- -----------
See notes to consolidated condensed financial statements.
CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
July 31,
1995 1994
------------------
Cash flows from operations:
Net income $ 7,912,480 6,430,387
Adjustments to reconcile
net income to net cash
provided by operations:
Depreciation and amortization 5,852,285 5,276,824
Deferred income taxes 500,000 500,000
Changes in assets and liabilities:
Receivables (32,351) 135,018
Inventories (1,159,735) (944,072)
Prepaid expenses (573,208) (523,583)
Accounts payable 886,552 6,990,815
Accrued expenses 49,437 309,280
Income taxes payable 3,098,000 1,497,000
Other, net 307,405 464,813
---------- ----------
Net cash provided by operations 16,840,865 20,136,482
Cash flows from investing:
Purchase of property and equipment (18,644,674) (16,879,805)
Purchase of investments (602,625) (1,000,000)
Sale of investments 3,447,134 9,745,881
---------- ----------
Net cash used in investing activities (15,800,165) (8,133,924)
Cash flows from financing:
Payments of long-term debt (2,183,467) (1,097,443)
Net activity of short-term debt 6,850,000 (3,500,000)
Proceeds from exercise of
stock options 1,011,813 ---
Payment of cash dividend (519,339) (518,421)
---------- --------
Net cash provided by (used in)
financing activities 5,159,007 (5,115,864)
---------- ----------
Net increase in cash and
cash equivalents 6,199,707 6,886,694
Cash and cash equivalents at
beginning of the year 5,477,784 3,151,664
--------- ---------
Cash and cash equivalents at
end of the quarter $11,677,491 10,038,358
---------- ----------
See notes to consolidated condensed financial statements.
CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES
NOTES TO 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 July 31, 1995, and the results of
operations for the three months ended July 31, 1995 and
1994, and changes in cash flows for the three months ended
July 31, 1995 and 1994.
3. Sales generally are strongest during the Company's first
quarter (May-July) and weakest during its fourth quarter
(February-April). In the warmer months customers tend to
purchase greater quantities of gasoline and certain
convenience items, such as beer, soft drinks and ice. Due
to the continuing emphasis on high-margin, freshly prepared
food items, however, the Company's net sales and net income
(with the exception of the fourth quarter) have become
somewhat less seasonal in recent years.
4. Retail gasoline profit margins have a substantial impact on
the Company's net income. Profit margins on gasoline sales
can be adversely affected by factors beyond the control of
the Company, including over-supply in the retail gasoline
market, uncertainty or volitility in the wholesale gasoline
market (such as that experienced in fiscal 1991 as a result
of the Persian Gulf crisis) and price competition from other
gasoline marketers. Any substantial decrease in profit
margins on retail gasoline sales or the number of gallons
sold could have a materially adverse effect on the Company's
earnings.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 July 31, 1995, the Company's ratio of
current assets to current liabilities was .58 to 1. The ratio at
July 31, 1994 and April 30, 1995, was .51 to 1 and .56 to 1,
respectively. Management believes that the Company's current
$27,000,000 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 $3,295,617 (16.4%)
in the three months ended July 31, 1995 from the comparable
period in the prior year, primarily as a result of a smaller
increase in accounts payable. Cash flows from investing and
financing in the three months ended July 31, 1995 increased,
primarily as a result of increased short-term debt. Cash flows
in the future are expected to decrease as a result of the
anticipated growth in capital expenditures.
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 three months of fiscal 1995, the Company
expended $18,644,674 for property and equipment, primarily for
the construction and remodeling of Company stores, compared to
$16,879,805 for the comparable period in the prior year. The
Company anticipates expending approximately $50,000,000 in fiscal
1996 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 "Senior Notes").
As of July 31, 1995, the Company had long-term debt of
$58,053,203, consisting of $25,500,000 of 7.70% Senior Notes,
$14,288,991 of mortgage notes payable, $10,687,500 of unsecured
notes payable and $7,576,712 of capital lease obligations.
Interest on the Senior Notes is payable on the 15th day of
each month at the rate of 7.70% per annum. Principal of the
Senior Notes matures in forty quarterly installments beginning
March 15, 1995. The Company may prepay the Senior Notes in whole
or in part at any time in an amount of not less than $1,000,000
or integral multiples of $100,000 in excess thereof at a
redemption price calculated in accordance with the Note Agreement
dated as of February 1, 1994 between the Company and the
purchasers of the 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 3,683,064 shares of Common Stock on March 28,
1994) and the Senior Notes, a mortgage note, unsecured notes
payable 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, short-term and long-term 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 1,601 USTs, of which 1,211
are fiberglass and 390 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 known at
this time. In each of the years ended April 30, 1995 and 1994,
the Company spent approximately $2,137,000 and $1,814,000,
respectively, for assessments and remediation. During the three
months ended July 31, 1995, the Company expended approximately
$250,000 for such purposes. Substantially all of these
expenditures have been submitted for reimbursement from
state-sponsored trust fund programs and as of July 31, 1995,
approximately $3,800,000 has been received from such programs.
The Company has accrued a liability at July 31, 1995, of
approximately $3,300,000 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 estimates that aggregate
capital expenditures for electronic monitoring, cathodic
protection and overfill/spill protection will approximate
$1,000,000 in fiscal 1996 through December 23, 1998, in order to
comply with the existing UST regulations. 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, 1995 COMPARED TO THREE MONTHS
ENDED JULY 31, 1994
Net sales for the first quarter of fiscal 1996 increased by
$31,740,854 (14.3%) over the comparable period in fiscal 1995.
Retail gasoline sales increased by $24,617,520 (21.5%) as the
number of gallons sold increased by 14,789,775 (13.5%) while the
average retail price per gallon increased 7.1%. During this same
period, retail sales of grocery and general merchandise increased
by $7,095,444 (8.3%) due to the addition of 54 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 78.9%
for the first quarter of fiscal 1996, compared to 79.3% for the
comparable period in the prior year. The gross profit margins on
retail gasoline sales increased (10.2%) during the first quarter
of fiscal 1996 from the first quarter of the prior year (7.6%).
The gross profit margin per gallon also increased (to $.1137) in
the first quarter of fiscal 1996 from the comparable period in
the prior year ($.0792). These factors were partially offset by
a decrease in gross profits on retail sales of grocery and
general merchandise (to 38.8%) from the comparable period in the
prior year (39.7%).
Operating expenses as a percentage of net sales were 13.8%
for the first quarter of fiscal 1996 compared to 13.6% for the
comparable period in the prior year.
Net income increased by $1,482,093 (23%). 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, an increase in the gross
profit margin per gallon and an increased number of stores in
operation for at least three years.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
The Company is the sole defendant in a class action lawsuit
brought by five Iowa retail gasoline dealers and a trade
association representing independent distributors and retailers
of gasoline products within the State of Iowa, acting on behalf
of a class of such dealers. The Amended and Substituted
Complaint - Class Action (the "Bathke Complaint"), filed in the
United States District Court for the Southern District of Iowa
(GILBERT BATHKE, ET. AL. V. CASEY'S GENERAL STORES, INC., Civil
No. 4-90-CV-80658), alleges that by selling gasoline at "very low
prices which are supported by higher prices charged for the same
petroleum products in other markets," the Company violated
federal anti-trust laws (specifically, Section 2(a) of the
Robinson-Patman Act and Section 2 of the Sherman Act) and State
of Iowa unfair price discrimination laws. The Bathke Complaint
seeks as relief a permanent injunction enjoining such practices,
unspecified monetary damages (to be trebled as provided by law)
and attorneys' fees.
Following the completion of formal discovery activities, the
District Court granted the Company's motion for summary judgment
seeking the dismissal of all counts of the Bathke Complaint in an
Order entered on October 14, 1994. The District Court dismissed
the federal anti-trust claims with prejudice and dismissed the
State unfair price discrimination claim without prejudice,
concluding that there was an "insufficient basis and economic
reality and substantive federal law for the plaintiffs'
theories."
Plaintiffs appealed the dismissal of the Bathke Complaint to
the Eighth Circuit Court of Appeals in St. Louis, Missouri. In
an opinion filed August 11, 1995, the Court of Appeals affirmed
the ruling of the District Court in dismissing the Bathke
Complaint, and also affirmed the District Court's order assessing
costs to the plaintiffs. The plaintiffs did not seek a
re-hearing before the Eighth Circuit Court of Appeals but may
still file a petition for a writ of certiorari with the United
States Supreme Court. Management does not believe that the
Company is liable to plaintiffs for the conduct complained of and
intends to contest the matter vigorously, should any further
appeals be taken.
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, 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.
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 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 between Casey's
General Stores, Inc. and
Principal Mutual Life Insurance
Company and Nippon Life
Insurance Company of America (e)
11 Statement regarding computation
of per share earnings
27 Financial Data Schedule
____________________
(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 foregoing Registration Statement on Form 8-A) 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) Incorported by reference from the Current Report on Form 8-K
filed Feburary 18, 1993.
(b) There were no reports on Form 8-K filed during the
quarter for which this Report is filed.
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 13, 1995 By: /s/ Douglas K. Shull
--------------------
Douglas K. Shull, Treasurer
(Authorized Officer and
Principal Financial Officer)
EXHIBIT INDEX
Exhibit No. Description Page
----------- ----------- ----
11 Statement regarding
computation of
per share earnings
27 Financial Data Schedule
Exhibit 11
CASEY'S GENERAL STORES, INC.
Computation of Per Share Earnings
Three Months Ended
July 31,
1995 1994
-------------------
Weighted average number of
common and common equivalent
shares:
Weighted average number
of shares outstanding 26,009,989 25,921,020
Shares applicable to
stock options 64,990 79,985
---------- ----------
26,074,979 26,001,005
---------- ----------
Net income $ 7,912,480 6,430,387
---------- ----------
Earnings per common and
common equivalent share $ .30 .25
---------- ----------