Exhibit 13
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF INCOME DATA
- ---------------------------------------------------------------------------------------------------------------
Years ended April 30, 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------
Net sales $ 2,155,606 $ 2,032,226 $ 1,904,899 $ 1,631,158 $ 1,236,531
Franchise revenue 2,451 3,059 3,767 5,268 5,433
------------ ------------ ------------ ------------ ------------
2,158,057 2,035,285 1,908,666 1,636,426 1,241,964
- ---------------------------------------------------------------------------------------------------------------
Cost of goods sold $ 1,743,971 $ 1,658,511 $ 1,558,147 $ 1,320,372 $ 961,192
Operating expenses 290,801 268,766 241,444 205,777 175,419
Depreciation and amortization 47,299 44,702 41,492 38,208 33,941
Interest, net 13,030 12,756 11,998 9,254 7,034
- ---------------------------------------------------------------------------------------------------------------
Income before income taxes $ 62,956 $ 50,550 $ 55,585 $ 62,815 $ 64,378
Provision for income taxes 23,420 18,805 20,584 23,367 24,141
------------ ------------ ------------ ------------ ------------
Net income $ 39,536 $ 31,745 $ 35,001 $ 39,448 $ 40,237
Net income per share--basic $ .80 $ .64 $ 0.71 $ 0.76 $ 0.76
Net income per share--diluted $ .80 $ .64 $ 0.71 $ 0.76 $ 0.76
===============================================================================================================
Weighted average number of
common shares outstanding--basic 49,643 46,553 49,475 51,915 52,665
Weighted average number of
common shares outstanding--
diluted 49,720 46,692 49,625 52,091 52,931
===============================================================================================================
Dividends paid per common share $ .10 $ 0.085 $ 0.075 $ 0.06 $ 0.06
- ---------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
- ---------------------------------------------------------------------------------------------------------------
As of April 30, 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------
Current assets $ 116,874 $ 97,619 $ 106,893 $ 75,061 $ 70,207
Total assets 775,325 735,255 693,484 623,565 562,860
Current liabilities 117,338 112,073 102,041 140,651 83,819
Long-term debt 162,394 173,797 183,107 112,896 122,513
Shareholders' equity 404,238 369,219 340,476 308,762 301,868
- ---------------------------------------------------------------------------------------------------------------
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Management's Discussion and Analysis of
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(IN THOUSANDS)
The following tables set forth the Company's net sales and gross profits
according to its major revenue categories and average sales and earnings
information for corporate and franchise stores.
COMPANY NET SALES AND GROSS PROFITS
- ------------------------------------------------------------------------------
Years ended April 30, 2003 2002 2001
- ------------------------------------------------------------------------------
Net sales (1)
Retail sales
Inside $ 825,206 $ 788,060 $ 673,494
Gasoline 1,290,094 1,191,157 1,163,026
----------- ----------- -----------
$ 2,115,300 $ 1,979,217 $ 1,836,520
- ------------------------------------------------------------------------------
Wholesale sales
Inside $ 21,940 $ 28,046 $ 32,910
Gasoline 16,578 22,373 32,593
----------- ----------- -----------
$ 38,518 $ 50,419 $ 65,503
- ------------------------------------------------------------------------------
Gross profits (2)
Retail sales
Inside $ 306,960 $ 278,970 $ 251,878
Gasoline 102,030 90,911 90,447
----------- ----------- -----------
$ 408,990 $ 369,881 $ 342,325
- ------------------------------------------------------------------------------
Wholesale sales
Inside $ 521 $ 972 $ 1,261
Gasoline 639 613 1,065
----------- ----------- -----------
$ 1,160 $ 1,585 $ 2,326
- ------------------------------------------------------------------------------
SAME-STORE COMPARISONS (3)
- ------------------------------------------------------------------------------
Years ended April 30, 2003 2002 2001
- ------------------------------------------------------------------------------
Corporate stores
Average retail sales $ 1,659 $ 1,618 $ 1,590
Average retail inside sales 648 646 584
Average gross profit on inside items 239 228 218
Average retail sales of gasoline 1,011 972 1,007
Average gross profit on gasoline (4) 74 69 81
Average operating income (5) 82 75 88
Average number of gallons sold 732 755 692
- -------------------------------------------------------------------------------
Franchise stores
Average franchise revenue (6) $ 34 $ 35 $ 35
(1) Net sales exclude franchise revenue and charges to franchisees for certain
maintenance, transportation, and construction services provided by the
Company.
(2) Gross profits represent net sales less costs of goods sold. Gross profit is
given before charge for depreciation and amortization.
(3) Same-store comparisons include only those stores that had been in operation
for at least one full year on April 30 of the fiscal year indicated.
(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 oversupply in the
retail gasoline market, uncertainty or volatility in the wholesale gasoline
market, 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 material adverse effect on the
Company's earnings.
(5) Average operating income represents retail sales less cost of goods sold,
including cost of merchandise, financing costs, and operating expenses
attributable to a particular store; it excludes federal and state income
taxes, operating expenses of the Company not attributable to a particular
store, and payments by the Company to its benefit plans.
(6) Average franchise revenue includes a royalty fee equal to 3% of gross
receipts derived from store sales of nongasoline items, a royalty fee of
$0.018 per gallon on gasoline sales, and sign and facade rental fees.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Casey's derives its revenue from retail sales of food (including freshly
prepared foods such as pizza, doughnuts, and sandwiches), beverages, and nonfood
products (including health and beauty aids, tobacco products, automotive
products, and gasoline) by corporate stores and wholesale sales of certain
merchandise and gasoline to franchise stores. The Company also generates
revenues from continuing monthly royalties based on sales by franchise stores;
sign and facade rental fees; and the provision of certain maintenance,
transportation, and construction services to the Company's franchisees. A
typical store generally is not profitable for its first year of operation due to
start-up costs and usually will attain representative levels of sales and
profits during its third or fourth year of operation.
FISCAL 2003 COMPARED WITH FISCAL 2002
Net sales for fiscal 2003 increased 6.1% to $2,155,606, primarily due to a 7.6%
increase in gas prices and the net addition of 32 corporate stores. Retail
gasoline sales for the fiscal year were $1,290,094, an increase of 8.3%, and
gallons sold increased .7% to 934 million. Retail sales of grocery & other
merchandise increased 4.7% to $825.2 million.
Cost of goods sold as a percentage of sales was 80.9% for fiscal 2003 compared
with 81.6% for the prior year. The decrease was caused by an increase in gas
margin to 7.9% of sales in fiscal 2003 from 7.6% in fiscal 2002. The grocery &
other merchandise margin increased to 31.5% from 30.3%, primarily attributed to
the scanning of tobacco products. The prepared food & fountain margin increased
to 59.4% in fiscal 2003 from 55.4% the prior year. The improvement was due to
buying forward to lower the wholesale cost of cheese, obtaining other products
at decreased costs, making price adjustments, introducing new food items, and
reducing stales.
Operating expenses increased 8.2% in fiscal 2003, driven by higher insurance
costs, increased bank fees resulting from customers' greater use of credit
cards, and the larger number of corporate stores. These factors also increased
the operating expense ratio to 13.5% of sales in fiscal 2003 from 13.2% the
prior year.
Net income increased to $39,536 in fiscal 2003 from $31,745 in fiscal 2002. The
increase resulted from the combination of higher gasoline and grocery & other
merchandise margins.
FISCAL 2002 COMPARED WITH FISCAL 2001
Net sales for fiscal 2002 increased only 6.7% to $2,032,226, primarily due to a
15.4% decrease in gas prices and the net addition of 67 corporate stores. Retail
gasoline sales for the fiscal year were $1,191,157, an increase of 2.4%, and
gallons sold increased 15.9% to 927.5 million. Retail sales of grocery & other
merchandise increased 17% to $788.1 million.
Cost of goods sold as a percentage of sales was 81.6% for fiscal 2002 compared
with 81.8% for the prior year. The slight decrease was caused by the grocery &
other merchandise category having a greater percentage of the total gross profit
as the gas margin decreased to 7.6% in fiscal 2002 from 7.8% in fiscal 2001 and
the grocery & other merchandise margin decreased to 30.3% in fiscal 2002 from
32.4% in fiscal 2001. The prepared food & fountain gross profit margin decreased
to 55.4% in fiscal 2002 from 56.3% in the prior year.
Operating expenses increased 11.3% in fiscal 2002, driven by higher insurance
costs, by increased bank fees resulting from customers' greater use of credit
cards, and by the larger number of corporate stores. Lower gasoline prices
increased the operating expense ratio to 13.2% of sales in fiscal 2002 from
12.7% the prior year.
Net income decreased to $31,745 in fiscal 2002 from $35,001 in fiscal 2001. The
decrease was the result of the combination of lower gasoline and grocery & other
merchandise margins and higher expenses.
Inventories increased $8,726 due to the increase in cigarette inventories of
approximately $3,000, the addition of approximately $2,500 of novelty items in
the store reset, the reduction of the LIFO reserve by $3,280, and the net
addition of 67 corporate stores. These increases were partially offset by a
reduction of approximately $2,400 of gasoline inventories.
Short-term investments decreased $18,215 as certain investments matured. The
proceeds were used for capital expenditures throughout the fiscal year.
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CRITICAL ACCOUNTING POLICIES
Critical accounting policies are those accounting policies that management
believes are important to the portrayal of the Company's financial condition and
results of operations and require management's most difficult, subjective
judgments, often because of the need to estimate the effects of inherently
uncertain factors.
Inventory--Inventories are stated at the lower of cost or market. For
substantially all Company inventories, cost is determined through the use of the
last-in, first-out (LIFO) method applied to inventory values determined
primarily by the first-in, first-out (FIFO) cost inventory method for warehouse
inventories and the retail inventory method (RIM) for store inventories. RIM is
an averaging method widely used in the retail industry because of its
practicality.
Under RIM, inventory valuations are at cost and the resulting gross margins are
calculated by applying a cost-to-retail ratio to sales. Inherent in the RIM
calculations are certain management judgments and estimates, which could affect
the ending inventory valuation at cost and the resulting gross margins.
Long-lived Assets--The Company periodically monitors under-performing stores for
an indication that the carrying amount of assets may not be recoverable. If the
sum of the expected future undiscounted cash flows is less than the carrying
amount of the asset, including goodwill where applicable, an impairment loss is
recognized. Impairment is based on the estimated fair value of the asset. Fair
value is based on management's estimate of the amount that could be realized
from the sale of assets in a current transaction between willing parties. The
estimate is derived from professional appraisals, offers, actual sale or
disposition of assets subsequent to year-end, and other indications of asset
value. In determining whether an asset is impaired, assets are grouped at the
lowest level for which there are identifiable cash flows that are largely
independent of the cash flows of other groups of assets, which for the Company
is generally on a store-by-store basis.
Self-insurance--The Company is primarily self-insured for workers' compensation,
general liability, and automobile claims. The self-insurance claim liability is
determined actuarially based on claims filed and an estimate of claims incurred
but not yet reported. Actuarial projections of the losses are employed due to
the high degree of variability in the liability estimates. Some factors
affecting the uncertainty of claims include the time frame of development,
settlement patterns, litigation and adjudication direction, and medical
treatment and cost trends. The liability is not discounted.
LIQUIDITY AND CAPITAL RESOURCES
Due to the nature of the Company's business, most sales are for cash; cash from
operations is the Company's primary source of liquidity. The Company finances
its inventory purchases primarily from normal trade credit aided by relatively
rapid inventory turnover. This turnover allows the Company to conduct its
operations without large amounts of cash and working capital. As of April 30,
2003, the Company's ratio of current assets to current liabilities was 1 to 1.
Management believes the Company's current $35,000 bank line of credit together
with cash flow from operations will be sufficient to satisfy the working capital
needs of its business.
Net cash provided by operations increased 25.1% to $103,914 during the year
ended April 30, 2003, primarily as a result of an increase in net income and a
reduction in income taxes receivable. Cash flows used in investing decreased
during fiscal 2003 primarily because fewer stores were built. Cash used in
financing increased during fiscal 2003 primarily due to the net activity of
short-term debt. During fiscal 2003 the Company expended approximately $63,000
for property and equipment, primarily for the construction and remodeling of
corporate stores. The Company anticipates approximately $70,000 in capital
expenditures for fiscal 2004, primarily from existing cash and funds generated
by operations.
As of April 30, 2003, the Company had long-term debt of $162,394 consisting of
$2,250 of 7.70% senior notes, $30,000 of 7.38% senior notes, $45,000 of senior
notes with interest rates ranging from 6.18% to 7.23%, $80,000 of 7.89% senior
notes, $4,903 of mortgage notes payable, and $241 of capital lease obligations.
Interest on the 7.70% senior notes is payable on the 15/th/ day of each month.
Principal of the 7.70% senior notes matures in 40 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 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 February 1, 1993 between the Company and the purchaser
of the 7.70% senior notes.
Interest on the 7.38% senior notes is payable on the 28th day of each June and
December. Principal of the 7.38% senior notes matures in 21 semi-annual
installments beginning December 28, 2010. 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 integral multiples of $100 in excess thereof at a redemption price
calculated in accordance with the Note Agreement dated December 1, 1995 between
the Company and the purchaser of the 7.38% senior notes.
Interest on the 6.55% senior notes is payable on the 18th day of each March,
June, September, and December. Principal of the 6.55% senior notes matures in 5
annual installments beginning 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 December 1, 1997 between
the Company and the purchaser of the 6.55% senior notes.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The table below presents significant contractual obligations, including
interest, of the Company at April 30, 2003: (DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------
2004 2005 2006 2007 2008 Thereafter Total
- --------------------------------------------------------------------------------------------------------------------
Senior notes $ 20,162 $ 33,844 $ 25,049 $ 23,887 $ 23,725 $ 118,127 $ 244,794
Mortgage notes 12,063 2,484 2,468 173 125 100 17,413
Capital lease obligations 851 185 36 28 21 -- 1,121
Operating leases 329 228 206 186 101 198 1,248
---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 33,405 $ 36,741 $ 27,759 $ 24,274 $ 23,972 $ 118,425 $ 264,576
====================================================================================================================
Interest on the 6.18% to 7.23% senior notes is payable on the 23rd day of each
April and October. Principal of the 6.18% to 7.23% senior notes matures in
various installments beginning April 23, 2004. The Company may prepay the 6.18%
to 7.23% 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 April 15, 1999
between the Company and the purchasers of the 6.18% to 7.23% senior notes.
Interest on the 7.89% senior notes is payable on the 15th day of each May and
November. Principal of the 7.89% senior notes matures in 7 annual installments
beginning May 15, 2004. The Company may prepay the 7.89% 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 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 convertible subordinated debentures
(converted into shares of common stock in 1994), the senior notes, and a
mortgage note; and funds generated from operations. Future capital required to
finance operations, improvements, and the anticipated growth in the number of
corporate stores is expected to come from cash generated by operations, existing
cash, and additional long-term debt or other securities as circumstances may
dictate. Future capital needs are not expected to adversely affect liquidity.
Environmental Compliance--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) response to a detected
leak; (iv) prevention of leakage through tank closings; and (v) required
gasoline inventory recordkeeping. Since 1984, new corporate stores have been
equipped with noncorroding fiberglass USTs, including many with double-wall
construction, overfill protection, and electronic tank monitoring. The Company
has an active inspection and renovation program for its older USTs. Of the
Company's 2,632 USTs, 2,277 are fiberglass and 355 are steel. Management
currently believes that substantially all capital expenditures for electronic
monitoring, cathodic protection, and overfill/spill protection to comply with
the existing UST regulations have been completed. Additional regulations or
amendments to the existing UST regulations could result in future expenditures.
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. In the years
ended April 30, 2003 and 2002, the Company spent approximately $1,138 and $757,
respectively, for assessments and remediation. Substantially all of these
expenditures have been submitted for reimbursement from state-sponsored trust
fund programs. As of June 30, 2003, a cumulative total of approximately $6,600
has been received from such programs. Reimbursements are typically subject to
statutory provisions requiring repayment of such funds for noncompliance with
upgrade provisions or other applicable laws. The Company had an accrued
liability at April 30, 2003 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.
The Company accounts for environmental contamination costs in accordance with
the Emerging Issues Task Force (EITF) Issue No. 90-8, Capitalization of Costs to
Treat Environmental Contamination. EITF 90-8 allows these costs to be
capitalized if the costs extend the life of the asset and if the costs mitigate
or prevent environmental contamination that has yet to occur. The Company
applies any refunds received under the reimbursement programs as described in
Note 9 to these capitalized costs.
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Seasonality of Sales--Sales at Casey's General Stores, Inc. historically have
been strongest during the Company's first and second fiscal quarters and have
become progressively weaker during its third and fourth quarters. In the warmer
months of the year, which comprise the Company's first two fiscal quarters,
customers tend to purchase greater quantities of gasoline and certain
convenience items such as beer, soft drinks, and ice. Difficult weather
conditions in any quarter, however, may affect corporate store sales in specific
regions and may have an adverse impact on net income for that period.
Inflation--The Company has generally been able to pass along inflationary
increases in its costs through increased sales prices of products sold, except
in those instances where doing so would have had a material adverse impact on
the Company's ability to compete. Management believes inflation has not had a
material impact on the operating results of the Company.
Minimum Wage Legislation--Congressional action to increase the federal minimum
wage had an impact on the Company's operating results to the extent the increase
in labor expenses could not be passed along to customers through price
increases. Although the Company has in the past been able to, and will continue
to attempt to, pass along increases in operating costs through price increases,
there can be no assurance that increases in labor costs can be reflected in
prices or that price increases will not diminish customer spending.
Recent Accounting Pronouncements--The Financial Accounting Standards Board
(FASB) Emerging Issues Task Force (EITF), a group responsible for promulgating
changes to accounting policies and procedures, has issued an accounting
pronouncement, EITF Issue No. 01-9, which addresses the recognition,
measurement, and income statement classification for certain sales incentives
offered by companies in the form of discounts, coupons, or rebates.
Implementation of this accounting pronouncement in the first quarter of fiscal
2003 required the Company to make certain reclassifications between total sales
and cost of goods sold in the Company's consolidated statements of income. The
implementation of EITF Issue No. 01-9 did not have an effect on reported
operating income or net earnings. The Company reclassified certain prior period
financial statements for comparability purposes, which had the following impact
on total sales and cost of goods sold:
(DOLLARS IN THOUSANDS)
- ---------------------------------------------------------
April 30, April 30, April 30,
2003 2002 2001
- ---------------------------------------------------------
Sales decrease $ 2,994 $ 2,542 $ 1,952
Cost of goods sold
decrease $ 2,994 $ 2,542 $ 1,952
EITF Issue No. 02-16, Accounting by a Customer (Including a Reseller) for
Certain Consideration Received from a Vendor, became effective for the Company
on January 1, 2003. This issue addresses the appropriate accounting for cash
consideration received from a vendor that is presumed to be a reduction of the
prices of the vendor's products or services and should, therefore, be
characterized as a reduction in the cost of sales when the related products are
sold unless it is a payment for assets or services delivered to the vendor, in
which case the cash consideration should be characterized as revenue, or it is a
reimbursement of costs incurred to sell the vendor's products, in which case the
cash consideration should be characterized as a reduction of that cost.
Historically, the Company has recognized those allowances as they were earned.
This accounting treatment was consistent with generally accepted accounting
principles. For all contracts entered or modified after January 1, 2003, the
Company has recognized prospectively and will continue to recognize vendor
allowances in accordance with EITF Issue No. 02-16. Net income for fiscal 2003
was not materially affected by the adoption of EITF Issue No. 02-16.
In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143 requires a company to record the fair value of an
asset retirement obligation as a liability in the period in which it incurs a
legal obligation associated with the retirement of tangible long-lived assets
that result from the acquisition, construction, development, and/ or normal use
of the assets. A corresponding asset, which is depreciated over the life of the
asset, is also recorded. Subsequent to the initial measurement of the asset
retirement obligation, the obligation is adjusted at the end of each period to
reflect the passage of time and changes in the estimated future cash flows
underlying the obligation. The Company is required to adopt SFAS No. 143 for
fiscal years beginning after June 15, 2002. The Company does not expect this
adoption to have a material effect on its consolidated financial statements.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-lived Assets. SFAS No. 144 supersedes SFAS No. 121 and the
accounting and reporting provision of APB Opinion No. 30 for the disposal of a
segment of a business. SFAS No. 144 addresses financial accounting and reporting
for the impairment or disposal of long-lived assets and requires that long-lived
assets be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to be generated by
the asset. If the carrying amount of an asset exceeds its estimated undiscounted
future cash flows, an impairment charge is recognized by the amount by which the
carrying amount of the asset exceeds the fair value of the asset. SFAS No. 144
requires companies to report discontinued operations separately and extends that
reporting to a component of an entity that either has been disposed of (by sale,
abandonment, or in a distribution to owners) or is classified as held for sale.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less cost to sell. The Company implemented the statement on May 1,
2002. There was no material impact
on the Company's financial statements as a result of the implementation.
In April 2002, the FASB issued SFAS No. 145, Rescision of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. Under
Statement No. 4, all gains and losses from extinguishment of debt are required
to be aggregated and, if material, classified as an extraordinary item. The
Company is required to adopt SFAS No. 145 for fiscal years beginning after June
15, 2002. The Company does not expect adoption to have a material effect on its
consolidated financial statements.
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities. This statement addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred
in a Restructuring). Under EITF Issue No. 94-3, a liability for an exit cost was
recognized at the date of the company's commitment to an exit plan. SFAS No. 146
requires that the liability for costs associated with an exit or disposal
activity be recognized when the liability is incurred. In accordance with SFAS
No. 146, store lease exit costs are accrued when a store is closed. SFAS No. 146
also established that the liability should initially be measured and recorded at
fair value. SFAS No. 146 may affect the timing of recognizing future store
closures, if any, as well as the amounts recognized. The provisions of the
statement were effective for exit and disposal activities initiated after
December 31, 2002. There was no material impact on the Company's financial
statements as a result of the implementation.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation--Transition and Disclosure. SFAS No. 148 amends SFAS No. 123,
Accounting for Stock-Based Compensation, to provide alternative methods of
transition for a voluntary change to the fair-value method of accounting for
stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirement of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The provisions of SFAS No. 148 are effective for financial statements
for fiscal years ending after December 15, 2002. The Company accounts for
stock-based employee compensation arrangements in accordance with the provisions
of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and complies with the disclosure provisions of SFAS No. 123 and SFAS
No. 148 in these financial statements.
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies
financial accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities under FASB No. 133, Accounting for
Derivative Instruments and Hedging Activities. This statement is primarily
effective for contracts entered into or modified after June 30, 2003. The
Company does not expect adoption to have a material effect on its consolidated
financial statements.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify such a financial instrument as a liability when
previously it was classified as equity (or an asset in some circumstances).
This statement is effective for financial instruments entered into or modified
after May 31, 2003. The Company does not expect adoption to have a material
effect on its consolidated financial statements.
Forward-looking Statements--This annual report contains forward-looking
statements that anticipate results based on management's plans that are subject
to uncertainty. Forward-looking statements do not relate strictly to historical
or current facts and may be identified by the use of words like plans, will,
anticipates, estimates and other words of similar meaning. These statements may
address, among other things, the Company's strategies for growth, product
development, market position, expenditures, and financial results.
Forward-looking statements are based on current expectations of future events.
The Company cannot guarantee that any forward-looking statements will be
accurate, although the Company believes it has been reasonable in its
expectations and assumptions. Investors should realize if underlying assumptions
prove inaccurate or unknown risks or uncertainties materialize, actual results
could vary materially from projections. The Company assumes no obligation to
update any forward-looking statements as a result of future events or
developments.
The Company's annual report on Form 10-K for the year ended April 30, 2003
contains as an exhibit a discussion of various factors that could cause actual
results to differ from expectations. The Company notes these factors as
permitted by the Private Securities Litigation Reform Act of 1995. Investors are
cautioned not to place undue reliance on any forward-looking statements.
Investors also should understand it is not possible to predict or identify all
such factors and should not consider the exhibit to be a complete statement of
all potential risks and uncertainties.
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Casey's General Stores, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
- --------------------------------------------------------------------------------
April 30 2003 2002
- --------------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $ 40,544 $ 18,946
Short-term investments -- 10
Receivables 5,742 5,127
Inventories (Note 1) 63,009 60,498
Prepaid expenses (Note 5) 4,590 3,816
Income taxes receivable 2,989 9,222
------------ ------------
Total current assets 116,874 97,619
- --------------------------------------------------------------------------------
Other assets 808 992
Property and equipment, at cost (Note 2)
Land 166,262 155,794
Buildings and leasehold improvements 386,552 366,328
Machinery and equipment 463,240 429,012
Leasehold interest in property and equipment
(Note 6) 9,712 10,446
------------ ------------
1,025,766 961,580
Less accumulated depreciation and amortization 368,123 324,936
------------ ------------
Net property and equipment 657,643 636,644
------------ ------------
Total assets $ 775,325 $ 735,255
================================================================================
Liabilities and shareholders' equity
Current liabilities
Note payable to bank (Note 2) $ -- $ 5,275
Current maturities of long-term debt (Note 2) 19,897 9,648
Accounts payable 64,880 69,912
Accrued expenses
Property taxes 8,011 7,470
Other (Note 9) 24,550 19,768
------------ ------------
Total current liabilities 117,338 112,073
- --------------------------------------------------------------------------------
Long-term debt, net of current maturities (Note 2) 162,394 173,797
Deferred income taxes (Note 5) 86,871 75,786
Deferred compensation (Note 7) 4,484 4,380
------------ ------------
Total liabilities 371,087 366,036
Shareholders' equity (Note 3)
Preferred stock, no par value, none issued -- --
Common stock, no par value, 49,669,112 and
49,623,812 shares issued and outstanding at
April 30, 2003 and 2002, respectively 40,008 39,562
Retained earnings 364,230 329,657
------------ ------------
Total shareholders' equity 404,238 369,219
------------ ------------
Total liabilities and shareholders' equity $ 775,325 $ 735,255
================================================================================
Commitments and contingencies (Notes 6, 8, and 9)
See accompanying Notes to Consolidated Financial Statements.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of Casey's General Stores, Inc.:
We have audited the accompanying consolidated balance sheets of Casey's General
Stores, Inc. and subsidiaries as of April 30, 2003 and 2002 and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the years in the three-year period ended April 30, 2003. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Casey's General
Stores, Inc. and subsidiaries as of April 30, 2003 and 2002 and the results of
their operations and their cash flows for each of the years in the three-year
period ended April 30, 2003 in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
KPMG LLP
Des Moines, Iowa
June 11, 2003
Consolidated
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- -------------------------------------------------------------------------------
Years ended April 30, 2003 2002 2001
- -------------------------------------------------------------------------------
Net sales $ 2,155,606 $ 2,032,226 $ 1,904,899
Franchise revenue 2,451 3,059 3,767
------------ ------------ ------------
2,158,057 2,035,285 1,908,666
Cost of goods sold 1,743,971 1,658,511 1,558,147
Operating expenses 290,801 268,766 241,444
Depreciation and amortization 47,299 44,702 41,492
Interest, net (Note 2) 13,030 12,756 11,998
------------ ------------ ------------
2,095,101 1,984,735 1,853,081
- -------------------------------------------------------------------------------
Income before income taxes 62,956 50,550 55,585
Provision for income taxes
(Note 5) 23,420 18,805 20,584
------------ ------------ ------------
Net income $ 39,536 $ 31,745 $ 35,001
===============================================================================
Earnings per common share
(Notes 3 and 4)
Basic $ .80 $ 0.64 $ 0.71
Diluted $ .80 $ 0.64 $ 0.71
===============================================================================
Consolidated
STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
- -----------------------------------------------------------------------------------------------------------
Common Retained
stock earnings Total
- -----------------------------------------------------------------------------------------------------------
Balance at April 30, 2000 37,930 270,832 308,762
Net income -- 35,001 35,001
Payment of dividends (7.5 cents per share) -- (3,710) (3,710)
Proceeds from exercise of stock options (44,000 shares) 374 -- 374
Tax benefits related to nonqualified stock options (Note 3) 49 -- 49
- -----------------------------------------------------------------------------------------------------------
Balance at April 30, 2001 $ 38,353 $ 302,123 $ 340,476
Net income -- 31,745 31,745
Payment of dividends (8.5 cents per share) -- (4,211) (4,211)
Proceeds from exercise of stock options (129,050 shares) 1,051 -- 1,051
Tax benefits related to nonqualified stock options (Note 3) 158 -- 158
- -----------------------------------------------------------------------------------------------------------
Balance at April 30, 2002 $ 39,562 $ 329,657 $ 369,219
Net income -- 39,536 39,536
Payment of dividends (10 cents per share) -- (4,963) (4,963)
Proceeds from exercise of stock options (45,300 shares) 346 -- 346
Tax benefits related to nonqualified stock options (Note 3) 100 -- 100
- -----------------------------------------------------------------------------------------------------------
Balance at April 30, 2003 $ 40,008 $ 364,230 $ 404,238
See accompanying Notes to Consolidated Financial Statements.
26
27
Consolidated
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
- ----------------------------------------------------------------------------------------
Years ended April 30, 2003 2002 2001
- ----------------------------------------------------------------------------------------
Cash flows from operations
Net income $ 39,536 $ 31,745 $ 35,001
Adjustments to reconcile net income to net
cash provided by operations
Depreciation and amortization 47,299 44,702 41,492
Deferred income taxes 11,085 12,136 6,000
Changes in assets and liabilities
Receivables (615) 63 (1,079)
Inventories (2,511) (8,726) (10,409)
Prepaid expenses (774) 1,645 284
Accounts payable (5,032) 2,177 6,776
Accrued expenses 5,323 2,414 2,876
Income taxes 6,333 (5,777) (5,329)
Other, net 3,270 2,711 2,384
------------ ------------ ------------
Net cash provided by operations 103,914 83,090 77,996
- ----------------------------------------------------------------------------------------
Cash flows from investing
Purchase of property and equipment (62,736) (97,569) (81,556)
Purchase of investments -- -- (34,190)
Maturities of investments 10 17,862 24,087
------------ ------------ ------------
Net cash used in investing activities (62,726) (79,707) (91,659)
- ----------------------------------------------------------------------------------------
Cash flows from financing
Proceeds from long-term debt -- -- 80,000
Payments of long-term debt (9,698) (9,510) (10,010)
Net activity of short-term debt (5,275) 5,275 (45,950)
Proceeds from exercise of stock options 346 1,051 374
Payments of cash dividends (4,963) (4,211) (3,710)
------------ ------------ ------------
Net cash (used in) provided by financing
activities (19,590) (7,395) 20,704
------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents 21,598 (4,012) 7,041
Cash and cash equivalents at beginning of
year 18,946 22,958 15,917
------------ ------------ ------------
Cash and cash equivalents at end of year $ 40,544 $ 18,946 $ 22,958
========================================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
- ----------------------------------------------------------------------------------------
Years ended April 30, 2003 2002 2001
- ----------------------------------------------------------------------------------------
Cash paid during the year for
Interest, net of amount capitalized $ 13,331 $ 13,677 $ 11,982
Income taxes 6,752 10,847 19,388
Noncash investing and financing activities
Property and equipment acquired through
installment purchases 8,545 365 --
Increase in common stock and increase
in income taxes receivable due to tax
benefits related to nonqualified stock
options (Note 3) 100 158 49
- ----------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
Notes to Consolidated
FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. SIGNIFICANT ACCOUNTING POLICIES
Operations--Casey's General Stores, Inc. and subsidiaries (the Company) operates
1,345 convenience stores in 9 midwestern states. At April 30, 2003, the Company
owned or leased 1,290 of these stores and 55 stores were owned or leased by
franchisees. The stores are located primarily in smaller communities, a majority
with populations of less than 5,000. Sales in 2003 were distributed as follows:
61% gasoline, 31% grocery & other merchandise, and 8% prepared food & fountain.
The Company's materials are readily available, and the Company is not dependent
on a single supplier or only a few suppliers.
Principles of consolidation--The consolidated financial statements include the
financial statements of Casey's General Stores, Inc. and its wholly owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation.
Use of estimates--The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Cash equivalents--Cash equivalents consist of money market funds and a treasury
note. The Company considers all highly liquid investments with a maturity at
purchase of 3 months or less to be cash equivalents.
Investments--Investments consist of treasury notes and investment-grade bonds.
The investments are stated at cost plus accrued interest, which approximates
market.
Inventories--Inventories, which consist of merchandise and gasoline, are stated
at the lower of cost or market; in-store inventory is determined by the retail
method. Cost is determined using the last-in, first-out (LIFO) method. Such
inventory value was approximately $17,800 and $17,670 below replacement cost as
of April 30, 2003 and 2002, respectively.
Depreciation and amortization--Depreciation of property and equipment and
amortization of capital lease assets are computed principally by the
straight-line method over the following estimated useful lives:
- ---------------------------------------------------
Buildings 25-40 years
- ---------------------------------------------------
Machinery and equipment 5-30 years
- ---------------------------------------------------
Leasehold interest in
property and equipment Lesser of term
of lease or
life of asset
- ---------------------------------------------------
Leasehold improvements Lesser of term
of lease or
life of asset
- ---------------------------------------------------
Excise taxes--Excise taxes approximating $328,000, $338,000, and $289,000
collected from customers on retail gasoline sales are included in net sales for
2003, 2002, and 2001, respectively.
Income taxes--Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Stock option plan--The Company has elected the pro forma disclosure alternative
of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation. The Company will continue applying the accounting
treatment prescribed by the provisions of APB Opinion No. 25, Accounting for
Stock Issued to Employees. Pro forma net earnings and pro forma net earnings per
common share have been provided as if SFAS No. 123 were adopted for all
stock-based compensation plans.
Revenue recognition--The Company recognizes retail sales of gasoline, grocery &
other merchandise, and prepared food & fountain at the time of sale to the
customer. Wholesale sales to franchisees are recognized at the time of delivery
to the franchise location. Franchise fees, license fees to franchisees, and rent
for franchise facades are recognized monthly when billed to the franchisees.
Other maintenance services and transportation charges are recognized at the time
the service is provided.
Earnings per common share--Basic earnings per share have been computed by
dividing net income by the weighted average outstanding common shares during
each of the years. Calculation of diluted earnings per share treats stock
options outstanding as potential common shares.
Environmental remediation liabilities--The Company accounts for environmental
remediation liabilities in accordance with the American Institute of Certified
Public Accountants' Statement of Position (SOP) 96-1, Environmental Remediation
Liabilities. SOP 96-1 requires, among other things, environmental remediation
liabilities to be accrued when the criteria of SFAS No. 5, Accounting for
Contingencies, have been met.
28
29
Derivative instruments--The Company uses a variety of derivative instruments
such as options and futures to hedge against the volatility of gasoline cost.
The Company is at risk for possible changes in the market value for these
derivative instruments. It is anticipated that such risk would be mitigated by
price changes in the underlying hedged items. Market risks associated with all
of the Company's derivative contracts are reviewed regularly by management.
At April 30, 2003, the Company had accumulated net hedging losses before income
taxes of $55 on its open options and futures contracts. The amount represented
their fair value as determined using various indices and dealer quotes. The
Company had net hedging losses before income taxes of $182 at April 30, 2003 on
closed options and futures contracts related to hedged transactions occurring in
2003. These derivative contracts are not linked to specific assets or
liabilities on the balance sheet or to forecasted transactions in an accounting
hedge relationship and therefore do not qualify for hedge accounting. They are
carried at fair value with any changes in fair value recorded as part of cost of
goods sold in the income statement.
Stock-based compensation--The Company applies APB Opinion No. 25 in accounting
for its incentive stock option plan; accordingly, the financial statements
recognize no compensation cost for stock options. Had the Company determined
compensation cost of its stock options based on the fair value at the grant date
under SFAS No. 123, the Company's net income would have been reduced to the pro
forma amounts shown in the table below.
Pro forma net income reflects only options granted in the years ended April 30,
2003, 2002, and 2001.
Recent accounting pronouncements The Financial Accounting Standards Board (FASB)
Emerging Issues Task Force (EITF), a group responsible for promulgating changes
to accounting policies and procedures, has issued an accounting pronouncement,
EITF Issue No. 01-9, which addresses the recognition, measurement, and income
statement classification for certain sales incentives offered by companies in
the form of discounts, coupons, or rebates. Implementation of this accounting
pronouncement in the first quarter of fiscal 2003 required the Company to make
certain reclassifications between total sales and cost of goods sold in the
Company's consolidated statements of income. The implementation of EITF Issue
No. 01-9 did not have an effect on reported operating income or net earnings.
The Company reclassified certain prior period financial statements for
comparability purposes, which had the following impact on total sales and cost
of goods sold:
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------
April 30, April 30, April 30,
2003 2002 2001
- --------------------------------------------------------------------------
Sales decrease $ 2,994 $ 2,542 $ 1,952
Cost of goods sold decrease $ 2,994 $ 2,542 $ 1,952
EITF Issue No. 02-16, Accounting by a Customer (Including a Reseller) for
Certain Consideration Received from a Vendor, became effective for the Company
on January 1, 2003. This issue addresses the appropriate accounting for cash
consideration received from a vendor that is presumed to be a reduction of the
prices of the vendor's products or services and should, therefore, be
characterized as a reduction in the cost of sales when the related products are
sold unless it is a payment for assets or services delivered to the vendor, in
which case the cash consideration should be characterized as revenue, or it is a
reimbursement of costs incurred to sell the vendor's products, in which case the
cash consideration should be characterized as a reduction of that cost.
Historically, the Company has recognized those allowances as they were earned.
This accounting treatment was consistent with generally accepted accounting
principles. For all contracts entered or modified after January 1, 2003, the
Company has recognized prospectively and will continue to recognize vendor
allowances in accordance with EITF Issue No. 02-16.
- -------------------------------------------------------------------------------
2003 2002 2001
- -------------------------------------------------------------------------------
Net income, as reported $ 39,536 $ 31,745 $ 35,001
Deducted amount
Total stock-based employee
compensation expense determined by
fair-value method for all awards,
net of related tax effects 24 687 30
Pro forma net income $ 39,512 $ 31,058 $ 34,971
- -------------------------------------------------------------------------------
Basic earnings per share
As reported $ 0.80 $ 0.64 $ 0.71
Pro forma $ 0.80 $ 0.63 0.71
- -------------------------------------------------------------------------------
Diluted earnings per share
As reported $ 0.80 $ 0.64 $ 0.71
Pro forma $ 0.80 $ 0.63 $ 0.71
Notes to Consolidated Financial Statements
Net income for fiscal 2003 was not materially affected by the adoption of EITF
Issue No. 02-16.
In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143 requires a company to record the fair value of an
asset retirement obligation as a liability in the period in which it incurs a
legal obligation associated with the retirement of tangible long-lived assets
that result from the acquisition, construction, development, and/ or normal use
of the assets. A corresponding asset, which is depreciated over the life of the
asset, is also recorded. Subsequent to the initial measurement of the asset
retirement obligation, the obligation is adjusted at the end of each period to
reflect the passage of time and changes in the estimated future cash flows
underlying the obligation. The Company is required to adopt SFAS No. 143 for
fiscal years beginning after June 15, 2002. The Company does not expect this
adoption to have a material effect on its consolidated financial statements.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-lived Assets. SFAS No. 144 supersedes SFAS No. 121 and the
accounting and reporting provision of APB Opinion No. 30 for the disposal of a
segment of a business. SFAS No. 144 addresses financial accounting and reporting
for the impairment or disposal of long-lived assets and requires that long-lived
assets be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to be generated by
Notes to Consolidated Financial Statements the asset. If the carrying amount of
an asset exceeds its estimated undiscounted future cash flows, an impairment
charge is recognized by the amount by which the carrying amount of the asset
exceeds the fair value of the asset. SFAS No. 144 requires companies to report
discontinued operations separately and extends that reporting to a component of
an entity that either has been disposed of (by sale, abandonment, or in a
distribution to owners) or is classified as held for sale. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less cost to
sell. The Company implemented the statement on May 1, 2002. There was no
material impact on the Company's financial statements as a result of the
implementation.
In April 2002, the FASB issued SFAS No. 145, Rescision of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. Under
Statement No. 4, all gains and losses from extinguishment of debt are required
to be aggregated and, if material, classified as an extraordinary item. The
Company is required to adopt SFAS No. 145 for fiscal years beginning after June
15, 2002. The Company does not expect adoption to have a material effect on its
consolidated financial statements.
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities. This statement addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred
in a Restructuring). Under EITF Issue No. 94-3, a liability for an exit cost was
recognized at the date of the company's commitment to an exit plan. SFAS No. 146
requires that the liability for costs associated with an exit or disposal
activity be recognized when the liability is incurred. In accordance with SFAS
No. 146, store lease exit costs are accrued when a store is closed. SFAS No. 146
also established that the liability should initially be measured and recorded at
fair value. SFAS No. 146 may affect the timing of recognizing future store
closures, if any, as well as the amounts recognized. The provisions of the
statement were effective for exit and disposal activities initiated after
December 31, 2002. There was no material impact on the Company's financial
statements as a result of the implementation.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation--Transition and Disclosure. SFAS No. 148 amends SFAS No. 123,
Accounting for Stock-Based Compensation, to provide alternative methods of
transition for a voluntary change to the fair-value method of accounting for
stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirement of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The provisions of SFAS No. 148 are effective for financial statements
for fiscal years ending after December 15, 2002. The Company accounts for
stock-based employee compensation arrangements in accordance with the provisions
of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and complies with the disclosure provisions of SFAS No. 123 and SFAS
No. 148 in these financial statements.
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies
financial accounting and reporting
30
31
for derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities under FASB No. 133, Accounting for Derivative Instruments and Hedging
Activities. This statement is primarily effective for contracts entered into or
modified after June 30, 2003. The Company does not expect adoption to have a
material effect on its consolidated financial statements.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify such a financial instrument as a liability when
previously it was classified as equity (or an asset in some circumstances).
This statement is effective for financial instruments entered into or modified
after May 31, 2003. The Company does not expect adoption to have a material
effect on its consolidated financial statements.
Reclassifications--Certain amounts in the prior years' financial statements have
been reclassified to conform to the current year presentation.
2. FAIR VALUE OF FINANCIAL INSTRUMENTS, NOTE PAYABLE TO BANK, AND LONG-TERM DEBT
The fair value of the Company's financial instruments is summarized below.
Cash and cash equivalents, investments, receivables, and accounts payable--The
carrying amount approximates fair value due to the short maturity of these
instruments or the recent purchase of the instruments at current rates of
interest.
- --------------------------------------------------------------------------
April 30, 2003 2002
- --------------------------------------------------------------------------
Capitalized lease obligations discounted at
7.3% to 10.8% due in various monthly
installments through 2008 (Note 6) $ 1,030 $ 2,113
Mortgage notes payable due in various
installments through 2006 with interest at
6.0% to 9.4% 12,411 5,882
7.70% senior notes due in 40 quarterly
installments beginning in March 1995 5,250 8,250
7.38% senior notes due in 21 semi-annual
installments beginning in December 2010 30,000 30,000
6.55% senior notes due in 5 annual
installments beginning in December 1999 3,600 7,200
Senior notes due in various installments
from 2004 through 2019 with interest at
6.18% to 7.23% 50,000 50,000
7.89% senior notes due in 7 annual
installments beginning in May 2004 80,000 80,000
------------ ------------
182,291 183,445
Less current maturities 19,897 9,648
------------ ------------
$ 162,394 $ 173,797
Note payable to bank--The carrying amount approximates fair value due to a
variable interest rate on this note. At April 30, 2003, note payable to bank
consisted of a $35,000 line of credit with a 2.13% interest rate and no balance
owed. At April 30, 2002, there was a balance owed of $5,275, which was due on
demand. The interest rate was 2.63% at April 30, 2002.
Long-term debt--The fair value of the Company's long-term debt excluding capital
lease obligations is estimated based on the current rates offered to the Company
for debt of the same or similar issues. The fair value of the Company's
long-term debt excluding capital lease obligations was approximately $221,000
and $222,000, respectively, at April 30, 2003 and 2002. Interest expense is net
of interest income of $238, $876, and $2,554 for the years ended April 30, 2003,
2002, and 2001, respectively. Interest expense in the amount of $236, $596, and
$365 was capitalized during the years ended April 30, 2003, 2002, and 2001,
respectively.
The table above delineates the Company's long-term debt at carrying value.
Mortgage notes payable include a Secured Promissory Note, Mortgage and Security
Agreement with a balance of $3,623 and $5,540 at April 30, 2003 and 2002,
respectively. The mortgage note has a 15-year term, bears interest at the rate
of 9.42%, is payable in monthly installments, and is secured by property with a
depreciated cost of approximately $10,200 at April 30, 2003.
Notes to Consolidated Financial Statements
Various debt agreements contain certain operating and financial covenants. At
April 30, 2003, the Company was in compliance with all covenants. Listed below
are the aggregate maturities of long-term debt, including capitalized lease
obligations, for the 5 years commencing May 1, 2003 and thereafter:
- --------------------------------------
Years ended April 30,
- --------------------------------------
2004 $ 19,897
2005 25,072
2006 17,769
2007 15,608
2008 16,563
Thereafter 87,382
------------
$ 182,291
======================================
3. PREFERRED AND COMMON STOCK
Preferred stock--The Company has 1,000,000 authorized shares of preferred stock,
none of which has been issued.
Common stock--The Company currently has 120,000,000 authorized shares of common
stock.
Common share purchase rights--On June 14, 1989, the Board of Directors adopted
the Shareholder Rights Plan, providing for the distribution of one common share
purchase right for each share of common stock outstanding. The rights generally
become exercisable 10 days following a public announcement that 15% or more of
the Company's common stock has been acquired or an intent to acquire has become
apparent. The rights will expire on the earlier of June 14, 2009 or redemption
by the Company.
Certain terms of the rights are subject to adjustment to prevent dilution.
Further description and terms of the rights are set forth in the amended Rights
Agreement between the Company and UMB Bank, n.a., which serves as Rights Agent.
Stock option plan--Under the Company's incentive stock option plan, options may
be granted to certain officers and key employees to purchase an aggregate of
4,560,000 shares of common stock at option prices not less than the fair market
value of the stock (110% of fair market value for holders of 10% or more of the
Company's stock) at the date the options are granted. Options for 1,219,164
shares were available for grant at April 30, 2003, and options for 1,118,850
shares (which expire between 2004 and 2012) were outstanding. The weighted
average fair value of the stock options granted during 2003, 2002, and 2001 was
$2.90, $3.36, and $3.63 per share, respectively, on the date of grant. Fair
value was calculated using the Black Scholes option-pricing model with the
following weighted average assumptions: 2003--expected dividend yield of .97%,
risk-free interest rate of 1.7%, estimated volatility of 24%, and an expected
life of 5.8 years; 2002--expected dividend yield of .87%, risk-free interest
rate of 4.2%, estimated volatility of 25%, and an expected life of 5.4 years;
2001--expected dividend yield of .71%, risk-free interest rate of 4.9%,
estimated volatility of 25%, and an expected life of 5 years.
Stock option activity during the periods indicated is as follows:
- -------------------------------------------------------------
Weighted
average
Number of exercise
shares price
- -------------------------------------------------------------
Balance at April 30, 2000 1,053,450 $ 11.04
Granted 13,000 12.31
Exercised (44,000) 8.52
Forfeited (17,000) 14.10
- -------------------------------------------------------------
Balance at April 30, 2001 1,005,450 $ 11.12
Granted 325,500 11.59
Exercised (130,300) 8.06
Forfeited (27,000) 11.76
- -------------------------------------------------------------
Balance at April 30, 2002 1,173,650 $ 11.61
Granted 13,000 12.58
Exercised (45,300) 7.64
Forfeited (22,500) 12.77
- -------------------------------------------------------------
Balance at April 30, 2003 1,118,850 $ 11.76
32
33
At April 30, 2003, the range of exercise prices was $5.13-$14.94 and the
weighted average remaining contractual life of outstanding options was 5.33
years. The number of shares and weighted average remaining contractual life of
the options by range of applicable exercise prices at April 30, 2003 are as
follows:
- ------------------------------------------------------------------
Weighted average
Weighted remaining
Range of Number average contractual
exercise prices of shares exercise price life (years)
- ------------------------------------------------------------------
$ 5.13 - 6.80 65,400 $ 5.48 .82
8.94 - 9.44 31,000 9.03 3.46
10.25 - 10.69 187,000 10.36 2.36
11.20 - 13.07 570,950 11.63 6.51
13.75 - 14.94 264,500 14.89 6.24
---------
1,118,850
==================================================================
4. EARNINGS PER SHARE
A summary of the basic and diluted earnings per share computations for the years
ended April 30, 2003, 2002, and 2001 is presented below:
- -----------------------------------------------------------------------------------------------------------------------------
For the year ended 2003 For the year ended 2002 For the year ended 2001
- -----------------------------------------------------------------------------------------------------------------------------
Net Net Net
earnings Shares Per earnings Shares Per earnings Shares Per
(nume- (denomi- share (nume- (denomi- share (nume- (denomi- share
rator) nator) amount rator) nator) amount rator) nator) amount
- -----------------------------------------------------------------------------------------------------------------------------
Basic earnings per share
Net earnings available to
common shareholders $ 39,536 49,642,966 $ 0.80 $ 31,745 49,552,612 $ 0.64 $ 35,001 49,474,804 $ 0.71
Effect of stock options -- 76,935 -- -- 139,682 -- -- 149,967 --
-------- ---------- -------- -------- ---------- -------- --------- ---------- --------
Diluted earnings per share $ 39,536 49,719,901 $ 0.80 $ 31,745 49,692,294 $ 0.64 $ 35,001 49,624,771 $ 0.71
5. INCOME TAXES
Income tax expense attributable to income from operations is comprised of the
following components:
- ------------------------------------------------------------------
Years ended April 30, 2003 2002 2001
- ------------------------------------------------------------------
Current tax expense
Federal $ 11,672 $ 5,588 $ 13,189
State 1,414 819 1,480
----------- ---------- ----------
13,086 6,407 14,669
Deferred tax expense 10,334 12,398 5,915
----------- ---------- ----------
Total income tax provision $ 23,420 $ 18,805 $ 20,584
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are as follows:
- -------------------------------------------------------------------------
Years ended April 30, 2003 2002 2001
- -------------------------------------------------------------------------
Deferred tax assets
Accrued liabilities $ 3,686 $ 2,935 $ 3,197
Deferred compensation 1,736 1,708 1,566
Other 656 812 687
---------- --------- ---------
Total gross deferred tax assets $ 6,078 $ 5,455 $ 5,450
Deferred tax liabilities
Excess of tax over book depreciation (86,921) (76,248) (64,841)
Other (2,342) (2,058) (1,062)
---------- --------- ---------
Total gross deferred tax liabilities (89,263) (78,306) (65,903)
---------- --------- ---------
Net deferred tax liability $ (83,185) $ (72,851) $ (60,453)
=========================================================================
The deferred tax asset relating to accrued liabilities is a current asset and is
included with prepaid expenses. Management believes future operations will
generate sufficient taxable income to realize the deferred tax assets.
Total reported tax expense applicable to the Company's operations varies from
the tax that would have resulted from applying the statutory U.S. federal income
tax rates to income before income taxes.
- --------------------------------------------------------------
Years ended April 30,
2003 2002 2001
- --------------------------------------------------------------
Income taxes at the statutory rates 35.0% 35.0% 35.0%
State income taxes, net of
federal tax benefit 1.5 1.1 1.7
Other .7 1.1 .3
- --------------------------------------------------------------
37.2% 37.2% 37.0%
6. LEASES
The Company leases certain property and equipment used in its operations.
Generally, the leases are for primary terms of from 5 to 20 years with options
either to renew for additional periods or to purchase the premises and call for
payment of property taxes, insurance, and maintenance by the lessee.
The following is an analysis of the leased property under capital leases by
major classes:
- ------------------------------------------------------------
Asset balances at
April 30,
2003 2002
- ------------------------------------------------------------
Real estate $ 6,061 $ 6,575
Equipment 3,651 3,871
--------- ---------
9,712 10,446
Less accumulated amortization 8,242 8,031
--------- ---------
$ 1,470 $ 2,415
Future minimum payments under the capital leases and noncancelable operating
leases with initial or remaining terms of 1 year or more consisted of the
following at April 30, 2003:
- ------------------------------------------------------------------------
Years ended at
April 30,
Capital Operating
leases leases
- ------------------------------------------------------------------------
2004 $ 851 $ 329
2005 185 228
2006 36 206
2007 28 186
2008 21 101
Thereafter 0 198
-------- ---------
Total minimum lease payments $ 1,121 $ 1,248
=========
Less amount representing interest 91
--------
Present value of net minimum lease payments $ 1,030
========================================================================
The total rent expense under operating leases was $905 in 2003, $852 in 2002,
and $771 in 2001.
7. BENEFIT PLANS
Employee stock ownership plan--The Company has an employees' stock ownership
plan and trust (Plan) that covers all employees who meet minimum age and service
requirements. Contributions to the Plan can be made by the Company in either
cash or shares of common stock. The discretionary contribution is allocated to
participants using a formula based on compensation. There was no Plan expense
for the years ended April 30, 2003, 2002, and 2001.
On April 30, 2003, the Company had 5,664 full-time employees and 8,724 part-time
employees; approximately 3,900 were participants in the Plan. As of that same
date, the Trustee of the Plan held 2,147,437 shares of common stock in trust for
distribution to eligible participants upon death, disability, retirement, or
termination of employment. Shares held by the Plan are treated as outstanding in
the computation of earnings per share.
34
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401(k) plan--The Company has a defined contribution 401(k) plan that covers all
employees who meet minimum age and service requirements. Employees may make
voluntary contributions. The Company contributions consist of matching and
discretionary amounts. The Company contributions are allocated based upon
employee contributions and compensation. Expense for the 401(k) plan was
approximately $2,024, $1,949, and $1,725 for the years ended April 30, 2003,
2002, and 2001, respectively.
KSOP--Effective April 30, 2003 the Company merged its employee stock ownership
plan with its defined contribution 401(k) plan. The combined plan convers all
employees who meet minimum age and service requirements. The Company
contributions consist of matching amounts and are allocated based on employee
contributions.
Supplemental executive retirement plan--The Company has a nonqualified
supplemental executive retirement plan (SERP) for 3 of its executive officers,
one of whom retired April 30, 2003. The SERP provides for the Company to pay
annual retirement benefits, depending on retirement dates, up to 50% of base
compensation until death of the officer. If death occurs within 20 years of
retirement, the benefits become payable to the officer's spouse until the
spouse's death or 20 years from the date of the officer's retirement, whichever
comes first. The Company is accruing the deferred compensation over the expected
term of employment.
8. COMMITMENTS
The Company has entered into employment agreements with 2 of its executive
officers. The agreements provide that the 2 officers will receive aggregate base
compensation of $780 per year exclusive of bonuses. These agreements also
provide for certain payments in the case of death or disability of the officers.
The Company also has entered into employment agreements with 12 other key
employees, providing for certain payments in the event of their termination
following a change of control of the Company. The Company has entered into
long-term purchase agreements with some of its suppliers. The range of prices
and volume of purchases under the agreements may vary according to the Company's
demand for the products and fluctuations in market rates. The Company has
commitments to purchase approximately $6,100 of product at set prices through
September 2003.
9. CONTINGENCIES
Environmental compliance--The United States Environmental Protection Agency and
several states have adopted laws and regulations relating to underground storage
tanks used for petroleum products. Several states in which the Company does
business have trust fund programs with provisions for sharing or reimbursing
corrective action or remediation costs.
Management currently believes that substantially all capital expenditures for
electronic monitoring, cathodic protection, and overfill/spill protection to
comply with existing regulations have been completed. The Company had an accrued
liability at April 30, 2003 and 2002 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.
Additional regulations or amendments to the existing regulations could result in
future revisions to such estimated expenditures.
Legal matters--The Company is a defendant in several lawsuits arising in the
normal course of business. In the opinion of management, the outcome of such
suits is not expected to have a material effect on the financial position of the
Company.
Other--At April 30, 2003, the Company was partially self-insured for workers'
compensation claims in all 9 states of its marketing territory and was also
partially self-insured for general liability and auto liability under an
agreement that provides for annual stop-loss limits equal to or exceeding
approximately $1,000. To facilitate this agreement, letters of credit
approximating $6,200 were issued and outstanding at April 30, 2003 on the
insurance company's behalf. The Company also has investments of approximately
$1,600 in escrow as required by 1 state for partial self-insurance for workers'
compensation claims. Additionally, the Company is self-insured for its portion
of employee medical expenses. At April 30, 2003 and 2002, the Company had $8,100
and $7,000, respectively, in other accrued expenses for estimated claims
relating to self-insurance.
10. QUARTERLY FINANCIAL DATA
(UNAUDITED)
- ------------------------------------------------------------------------------------------------
Year ended April 30, 2003 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Total
- ------------------------------------------------------------------------------------------------
Net sales $ 550,497 $ 548,480 $ 511,948 $ 544,681 $ 2,155,606
Gross profit* 106,588 109,749 97,428 97,870 411,635
Net income $ 12,191 $ 13,445 $ 6,967 $ 6,933 $ 39,536
================================================================================================
Earnings per common share
Basic $ 0.25 $ 0.27 $ 0.14 $ 0.14 $ 0.80
Diluted $ 0.25 $ 0.27 $ 0.14 $ 0.14 $ 0.80
================================================================================================
Year ended April 30, 2002 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Total
- ------------------------------------------------------------------------------------------------
Net sales $ 573,835 $ 551,985 $ 447,891 $ 458,515 $ 2,032,226
Gross profit* 100,443 100,581 83,741 88,950 373,715
Net income $ 12,708 $ 12,392 $ 2,269 $ 4,376 $ 31,745
================================================================================================
Earnings per common share
Basic $ 0.26 $ 0.25 $ 0.05 $ 0.09 $ 0.64
Diluted $ 0.26 $ 0.25 $ 0.05 $ 0.09 $ 0.64
================================================================================================
<FN>
<F1>
*Gross profit is given before charge for depreciation and amortization.
</FN>
INVESTOR INFORMATION
COMMON STOCK
Casey's General Stores, Inc. common stock trades on the Nasdaq Stock Exchange
under the symbol CASY. The 49.7 million shares of common stock outstanding at
April 30, 2003 had a market value of $632.5 million. As of that same date, there
were 2,986 shareholders of record.
COMMON STOCK MARKET PRICES
Calendar 2001 High Low
1st Quarter $ 14.81 $ 10.75
2nd Quarter 13.41 10.73
3rd Quarter 14.31 10.91
4th Quarter 15.47 11.00
Calendar 2002 High Low
1st Quarter $ 15.39 $ 11.76
2nd Quarter 13.90 11.08
3rd Quarter 12.93 9.86
4th Quarter 13.40 9.71
Calendar 2003 High Low
1st Quarter $ 13.03 $ 10.45
2nd Quarter 14.90 11.85
On July 3, 2003, the last reported sales price of the Company's common stock was
$14.61 per share. On that same date, the market cap was $725 million.
DIVIDENDS
The Company began paying cash dividends during fiscal 1991. The dividends paid
in fiscal 2003 totaled $0.10 per share. The Board of Directors recently approved
an increase in the quarterly dividend to $0.035 from $0.025, payable August 15,
2003 to shareholders of record on August 1, 2003. The Board currently expects to
award comparable cash dividends on a quarterly basis in the future.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
This plan, introduced in the fall of 1998, gives holders of Casey's General
Stores, Inc. common stock a convenient and economical way of purchasing
additional shares at market prices by reinvesting their dividends in full or in
part.
Stockholders may also take advantage of the cash payment option to purchase
additional shares. Those wishing to enroll should contact the transfer agent and
registrar:
Securities Transfer Division
UMB Bank, n.a.
P.O. Box 410064
Kansas City, Missouri 64141
INVESTOR INQUIRIES
Current or prospective Casey's General Stores, Inc. investors can receive annual
reports, proxy statements, Forms 10-K and 10-Q, and earnings announcements at no
cost by calling (515) 965-6107 or sending written requests to the following
address:
Casey's General Stores, Inc.
One Convenience Blvd.
Ankeny, Iowa 50021-8045
Corporate information is also available at www.caseys.com. Quarterly conference
calls are broadcast live over the Internet via the Investor Relations Web page
and made available in archived format. Broadcast times for the quarterly calls
will be announced on the Web page and in corresponding press releases.
ANNUAL MEETING
All shareholders and prospective investors are cordially invited to attend the
annual meeting at 9:00 a.m., September 19, 2003 at the corporate headquarters in
Ankeny, Iowa.
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