CASEYS GENERAL STORES INC - Quarter Report: 2023 July (Form 10-Q)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarterly period ended July 31, 2023
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
Commission File Number 001-34700
CASEY’S GENERAL STORES, INC.
(Exact name of registrant as specified in its charter)
| Iowa | 42-0935283 | |||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |||||||
One SE Convenience Blvd., Ankeny, Iowa
(Address of principal executive offices)
50021
(Zip Code)
(515) 965-6100
(Registrant’s telephone number, including area code)
Securities Registered pursuant to Section 12(b) of the Act
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Common Stock, no par value per share | CASY | The NASDAQ Global Select Market | ||||||
Securities Registered pursuant to Section 12(g) of the Act
NONE
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | ||||||||||||
| Smaller reporting company | ☐ | Emerging growth company | ☐ | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding at September 1, 2023 | |||||||
| Common stock, no par value per share | 37,266,636 shares | |||||||
CASEY’S GENERAL STORES, INC.
INDEX
| Page | |||||||||||
| PART I | |||||||||||
| Item 1. | |||||||||||
| Item 2. | |||||||||||
| Item 3. | |||||||||||
| Item 4. | |||||||||||
| PART II | |||||||||||
| Item 1. | |||||||||||
| Item 1A. | |||||||||||
| Item 2 | |||||||||||
| Item 6. | |||||||||||
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PART I—FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(DOLLARS IN THOUSANDS)
| July 31, 2023 | April 30, 2023 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 439,112 | $ | 378,869 | |||||||
| Receivables | 133,726 | 120,547 | |||||||||
| Inventories | 424,728 | 376,085 | |||||||||
| Prepaid expenses | 24,625 | 22,107 | |||||||||
| Income taxes receivable | — | 23,347 | |||||||||
| Total current assets | 1,022,191 | 920,955 | |||||||||
| Other assets, net of amortization | 191,900 | 192,153 | |||||||||
| Goodwill | 618,477 | 615,342 | |||||||||
Property and equipment, net of accumulated depreciation of $2,694,571 at July 31, 2023 and $2,620,149 at April 30, 2023 | 4,229,784 | 4,214,820 | |||||||||
| Total assets | $ | 6,062,352 | $ | 5,943,270 | |||||||
| Liabilities and Shareholders' Equity | |||||||||||
| Current liabilities: | |||||||||||
| Current maturities of long-term debt and finance lease obligations | $ | 53,640 | $ | 52,861 | |||||||
| Accounts payable | 570,485 | 560,546 | |||||||||
| Accrued expenses | 294,873 | 313,718 | |||||||||
| Income taxes payable | 15,001 | — | |||||||||
| Total current liabilities | 933,999 | 927,125 | |||||||||
| Long-term debt and finance lease obligations, net of current maturities | 1,598,524 | 1,620,513 | |||||||||
| Deferred income taxes | 559,493 | 543,598 | |||||||||
| Insurance accruals, net of current portion | 32,070 | 32,312 | |||||||||
| Other long-term liabilities | 161,971 | 159,056 | |||||||||
| Total liabilities | 3,286,057 | 3,282,604 | |||||||||
| Shareholders’ equity: | |||||||||||
| Preferred stock, no par value | — | — | |||||||||
| Common stock, no par value | 72,643 | 110,037 | |||||||||
| Retained earnings | 2,703,652 | 2,550,629 | |||||||||
| Total shareholders’ equity | 2,776,295 | 2,660,666 | |||||||||
| Total liabilities and shareholders' equity | $ | 6,062,352 | $ | 5,943,270 | |||||||
See notes to unaudited condensed consolidated financial statements.
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CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
| Three Months Ended July 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Total revenue | $ | 3,869,251 | $ | 4,454,644 | ||||||||||
| Cost of goods sold (exclusive of depreciation and amortization, shown separately below) | 2,991,497 | 3,618,394 | ||||||||||||
| Operating expenses | 560,855 | 543,271 | ||||||||||||
| Depreciation and amortization | 82,905 | 76,295 | ||||||||||||
| Interest, net | 12,495 | 13,816 | ||||||||||||
| Income before income taxes | 221,499 | 202,868 | ||||||||||||
| Federal and state income taxes | 52,262 | 49,936 | ||||||||||||
| Net income | $ | 169,237 | $ | 152,932 | ||||||||||
| Net income per common share | ||||||||||||||
| Basic | $ | 4.54 | $ | 4.11 | ||||||||||
| Diluted | $ | 4.52 | $ | 4.09 | ||||||||||
| Basic weighted average shares outstanding | 37,300,952 | 37,222,943 | ||||||||||||
| Plus effect of stock compensation | 155,187 | 186,762 | ||||||||||||
| Diluted weighted average shares outstanding | 37,456,139 | 37,409,705 | ||||||||||||
| Dividends declared per share | $ | 0.43 | $ | 0.38 | ||||||||||
See notes to unaudited condensed consolidated financial statements.
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CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
| Shares Outstanding | Common Stock | Retained Earnings | Shareholders' Equity | ||||||||||||||||||||
| Balance at April 30, 2023 | 37,263,248 | $ | 110,037 | $ | 2,550,629 | $ | 2,660,666 | ||||||||||||||||
| Net income | — | — | 169,237 | 169,237 | |||||||||||||||||||
Dividends declared (43 cents per share) | — | — | (16,214) | (16,214) | |||||||||||||||||||
| Repurchase of common stock | (123,569) | (29,893) | — | (29,893) | |||||||||||||||||||
| Share-based compensation (net of tax withholding on employee share-based awards) | 126,774 | (7,501) | — | (7,501) | |||||||||||||||||||
| Balance at July 31, 2023 | 37,266,453 | $ | 72,643 | $ | 2,703,652 | $ | 2,776,295 | ||||||||||||||||
| Shares Outstanding | Common Stock | Retained Earnings | Shareholders' Equity | ||||||||||||||||||||
| Balance at April 30, 2022 | 37,111,667 | $ | 79,412 | $ | 2,161,426 | $ | 2,240,838 | ||||||||||||||||
| Net income | — | — | 152,932 | 152,932 | |||||||||||||||||||
Dividends declared (38 cents per share) | — | — | (14,431) | (14,431) | |||||||||||||||||||
| Share-based compensation (net of tax withholding on employee share-based awards) | 138,132 | 707 | — | 707 | |||||||||||||||||||
| Balance at July 31, 2022 | 37,249,799 | $ | 80,119 | $ | 2,299,927 | $ | 2,380,046 | ||||||||||||||||
See notes to unaudited condensed consolidated financial statements.
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CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(DOLLARS IN THOUSANDS)
| Three months ended July 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 169,237 | $ | 152,932 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 82,905 | 76,295 | |||||||||
| Amortization of debt issuance costs | 278 | 345 | |||||||||
| Share-based compensation | 10,468 | 16,185 | |||||||||
| (Gain) loss on disposal of assets and impairment charges | (1,448) | 230 | |||||||||
| Deferred income taxes | 15,895 | 24,727 | |||||||||
| Changes in assets and liabilities: | |||||||||||
| Receivables | (13,179) | (37,859) | |||||||||
| Inventories | (48,256) | (2,899) | |||||||||
| Prepaid expenses | (2,518) | (6,504) | |||||||||
| Accounts payable | (4,344) | 34,799 | |||||||||
| Accrued expenses | (20,150) | (7,865) | |||||||||
| Income taxes | 39,139 | 23,953 | |||||||||
| Other, net | 1,104 | 1,867 | |||||||||
| Net cash provided by operating activities | 229,131 | 276,206 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchase of property and equipment | (68,903) | (82,070) | |||||||||
| Payments for acquisition of businesses, net of cash acquired | (13,297) | (1,065) | |||||||||
| Proceeds from sales of assets | 5,784 | 5,019 | |||||||||
| Net cash used in investing activities | (76,416) | (78,116) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Payments of long-term debt | (29,665) | (15,998) | |||||||||
| Payments of cash dividends | (14,945) | (13,128) | |||||||||
| Repurchase of common stock | (29,893) | — | |||||||||
| Tax withholdings on employee share-based awards | (17,969) | (15,478) | |||||||||
| Net cash used in financing activities | (92,472) | (44,604) | |||||||||
| Net increase in cash and cash equivalents | 60,243 | 153,486 | |||||||||
| Cash and cash equivalents at beginning of the period | 378,869 | 158,878 | |||||||||
| Cash and cash equivalents at end of the period | $ | 439,112 | $ | 312,364 | |||||||
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CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
(DOLLARS IN THOUSANDS)
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
| Three months ended July 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash paid during the period for: | |||||||||||
| Interest, net of amount capitalized | $ | 10,701 | $ | 8,689 | |||||||
| Income taxes, net | — | — | |||||||||
| Noncash investing and financing activities: | |||||||||||
| Purchased property and equipment in accounts payable | 42,188 | 42,008 | |||||||||
| Right-of-use assets obtained in exchange for new finance lease liabilities | 8,345 | 736 | |||||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | 2,214 | — | |||||||||
See notes to unaudited condensed consolidated financial statements.
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CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Dollars in Thousands, Except Share and Per Share Amounts)
1. Presentation of Financial Statements
Casey’s General Stores, Inc. and its subsidiaries (hereinafter referred to as the "Company" or "Casey’s") operate 2,536 convenience stores in 16 states, primarily in the Midwest. Many of the stores are located in smaller communities, often with populations of less than 5,000.
The accompanying condensed consolidated financial statements include the accounts and transactions of Casey's General Stores, Inc. and its direct and indirect wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.
2. Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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.
In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position as of July 31, 2023 and April 30, 2023, the results of operations, for the three months ended July 31, 2023 and 2022, and shareholders' equity and cash flows for the three months ended July 31, 2023 and 2022. Although management believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these interim condensed consolidated financial statements be read in conjunction with the Company’s most recent audited financial statements and notes thereto. Additionally, see the Form 10-K for the year ended April 30, 2023 for our consideration of new accounting pronouncements.
3. Revenue and Cost of Goods Sold
The Company recognizes retail sales of fuel, grocery and general merchandise, prepared food and dispensed beverage and other revenue at the time of the sale to the guest. Sales taxes collected from guests and remitted to the government are recorded on a net basis in the condensed consolidated statements of income.
A portion of revenue from sales that include a redeemable digital box top coupon or points under our Casey’s Rewards program is deferred. The deferred portion of the sale represents the value of the estimated future redemption of the digital box top coupon or points. The amounts related to digital box top coupons and points are deferred until their redemption or expiration. Revenue related to the digital box top coupons and points issued is expected to be recognized less than one year from the original sale to the guest. As of July 31, 2023 and April 30, 2023, the Company recognized a contract liability of $52,935 and $55,561, respectively, related to the outstanding digital box top coupons and Casey's Rewards points, which is included in accrued expenses on the condensed consolidated balance sheets. During the quarter ended July 31, 2023, the Company recorded a reduction of the liability of $4,800 due to planned changes in the digital box top program.
Gift card related revenue is recognized as the gift cards are used by the guest. Gift card breakage revenue is recognized based on the estimated gift card breakage rate over the pro rata usage of the card. As of July 31, 2023 and April 30, 2023, the Company recognized a liability of $16,563 and $17,463, respectively, related to outstanding gift cards, which is included in accrued expenses on the condensed consolidated balance sheets.
The Company often receives vendor allowances on the basis of quantitative contract terms that vary by product and vendor or directly on the basis of purchases made. Vendor allowances include rebates and other funds received from vendors to promote their products. These amounts are recognized in the period earned based on the applicable rebate agreement. Reimbursements of an operating expense (e.g., advertising) are recorded as reductions of the related expense.
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Renewable identification numbers (“RINs”) are assigned to gallons of renewable fuels produced and are used to track compliance with the renewable fuel standard. At times, we purchase fuel components (ethanol, gasoline, biodiesel or diesel) and blend those components into a finished product in a fuel truck. This process enables the Company to take title to the RIN assigned to each gallon of ethanol or biodiesel produced. RINs are recorded as a reduction in cost of goods sold at the contracted sales price, in the period when the Company transfers the RIN. The Company does not record inventories on the balance sheet related to RINs, as they are acquired at no cost to the Company.
The Company includes in cost of goods sold the costs incurred to acquire fuel and merchandise, including excise taxes, less vendor allowances, vendor rebates and RINs. Warehousing costs are recorded within operating expenses on the condensed consolidated statements of income.
4. Long-Term Debt and Finance Lease Obligations, Lines of Credit and Fair Value Disclosure
The fair value of the Company’s long-term debt (including current maturities) is estimated based on the current rates offered to the Company for debt of the same or similar issuances. The fair value of the Company’s long-term debt was approximately $1,396,000 and $1,437,000 at July 31, 2023 and April 30, 2023, respectively. The fair value calculated excludes finance lease obligations of $100,908 and $95,072 outstanding at July 31, 2023 and April 30, 2023, respectively, which are grouped with long-term debt on the condensed consolidated balance sheets.
Interest, net on the condensed consolidated statements of income is net of interest income of $3,576, and $0 for the three months ended July 31, 2023 and 2022, respectively. Interest, net is also net of interest capitalized of $794, and $581 for the three months ended July 31, 2023 and 2022, respectively.
Revolving Facility
The Company has a credit agreement that provides for an $850,000 unsecured revolving credit facility (“Revolving Facility”). Amounts borrowed under the Revolving Facility bear interest at variable rates based upon, at the Company’s option: (a) either Term SOFR or Daily Simple SOFR, in each case plus 0.10% (with a floor of 0.00%) for the interest period in effect, plus an applicable margin ranging from 1.10% to 1.70% or (b) an alternate base rate, which generally equals the highest of (i) the prime commercial lending rate announced by the Administrative Agent as its “prime rate”, (ii) the federal funds rate plus 1/2 of 1.00%, and (iii) Adjusted Daily Simple SOFR plus 1.00%, each plus an applicable margin ranging from 0.10% to 0.70% and each with a floor of 1.00%. The Revolving Facility carries a facility fee of 0.15% to 0.30% per annum. The applicable margins and facility fee, in each case, are dependent upon the Company’s quarterly Consolidated Leverage Ratio, as defined in the credit agreement. The Company had $0 outstanding under the Revolving Facility at July 31, 2023 and April 30, 2023.
Bank Line
The Company has an additional unsecured bank line of credit (the "Bank Line"). Effective June 1, 2023, the Bank Line availability was increased from $25,000 to $50,000. The $50,000 availability under the Bank Line is encumbered by letters of credits totaling $432. The Bank Line bears interest at a variable rate subject to change from time to time based on changes in an independent index referred to in the Bank Line as the Federal Funds Offered Rate (the “Index”). There was $0 outstanding under the Bank Line at July 31, 2023 and April 30, 2023. The Bank Line is due upon demand.
5. Compensation Related Costs and Share Based Payments
The 2018 Stock Incentive Plan (the “2018 Plan”) was approved by the Company's shareholders on September 5, 2018. Awards under the 2018 Plan may take the form of stock options, stock appreciation rights, restricted stock, restricted stock units and other equity-based and equity-related awards. Each share issued pursuant to a stock option and each share with respect to which a stock-settled stock appreciation right is exercised (regardless of the number of shares actually delivered) is counted as one share against the maximum limit under the 2018 Plan, and each share issued pursuant to an award of restricted stock or restricted stock units is counted as two shares against the maximum limit. Restricted stock is transferred immediately upon grant (and may be subject to a holding period), whereas restricted stock units have a vesting period that must expire, and in some cases performance or market conditions that must be satisfied before the stock is transferred. At July 31, 2023, there were 1,143,924 shares available for grant under the 2018 Plan.
We account for stock-based compensation by estimating the grant date fair value of time-based and performance-based restricted stock unit awards using the closing price of our common stock on the applicable grant date, or the date on which performance goals for performance-based units are established, if after the grant date. Forfeitures are recognized as they occur.
The time-based awards most commonly vest ratably over a three-year period commencing on the first anniversary of the grant date. The performance-based awards represent a “target” amount; the final amount earned is based on the satisfaction of certain performance measures over a three-year performance period and will range from 0% to 200% of
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“target." Additionally, if the Company's relative total shareholder return over the performance period is in the bottom or top quartile of the companies comprising the S&P 500, the performance-based shares included will be adjusted downward by 25%, or upward by 25%, respectively. The fair value of these awards is determined using a Monte Carlo simulation as of the date of the grant. For market-based awards, the stock-based compensation expense will not be adjusted should the target awards vary from actual awards.
We recognize these amounts as an operating expense in our condensed consolidated statements of income ratably over the requisite service period using the straight-line method, as adjusted for certain retirement provisions, and updated estimates of shares to be issued under performance-based awards. All awards have been granted at no cost to the grantee.
Information concerning the unvested restricted stock units under the 2018 Plan is presented in the following table:
| Weighted-Average | |||||||||||
| Grant Date Fair | |||||||||||
| Shares | Value per Share | ||||||||||
| Unvested at April 30, 2023 | 550,840 | $ | 212 | ||||||||
| Granted | 129,879 | 236 | |||||||||
| Vested | (207,043) | 194 | |||||||||
| Forfeited | (6,044) | 224 | |||||||||
| Unvested at July 31, 2023 | 467,632 | $ | 227 | ||||||||
Total compensation costs recorded for employees and non-employee directors for the three months ended July 31, 2023 and 2022, respectively, were $10,468 and $16,185, related entirely to restricted stock unit awards. As of July 31, 2023, there was $60,290 of unrecognized compensation costs related to restricted stock units which are expected to be recognized through fiscal 2027, with a weighted average remaining term of 1.6 years. The fair value of restricted stock unit awards vested for the three months ended July 31, 2023 was $46,369 as of the applicable vest date. No stock option awards have been granted under the 2018 Plan.
6. Commitments and Contingencies
From time to time we may be involved in legal or administrative proceedings or investigations arising from the conduct of our business operations, including, but not limited to, contractual or other general business disputes; employment, personnel, or accessibility matters; personal injury and property damage claims; claims by federal, state, and local regulatory authorities relating to the sale of products pursuant to licenses and permits issued by those authorities; and, other claims or proceedings. Claims for damages in those actions may be substantial. While the outcome of such litigation, proceedings, investigations, or claims is never certain, it is our opinion, after taking into consideration legal counsel’s assessment and the availability of insurance proceeds and other collateral sources to cover potential losses, that the ultimate disposition of such matters currently pending or threatened, individually or cumulatively, will not have a material adverse effect on our consolidated financial position and results of operations.
The Company is named as a defendant in a lawsuit filed in the United States District Court for the Northern District of Indiana, titled McColley v. Casey’s General Stores, Inc., in which the plaintiff alleges that the Company misclassified its Store Managers as exempt employees under the Fair Labor Standards Act (FLSA). The complaint seeks unpaid wages, liquidated damages and attorneys’ fees for the plaintiff and all similarly situated Store Managers who worked at the Company from February 16, 2015 to the present. On March 31, 2021, the Court granted conditional certification, and to-date, approximately 1,400 current and/or former Store Managers (representing less than 1/4 of those eligible) remain opted-in to participate in the lawsuit. The Company believes that adequate provisions have been made for probable losses related to this matter, and that those, and the reasonably possible losses in excess of amounts accrued, where such range of loss can be estimated, are not material to the Company’s financial position, results of operations or cash flows. The Company believes that its Store Managers are properly classified as exempt employees under the FLSA and it intends to continue to vigorously defend the matter.
We have entered into various purchase agreements related to our fuel supply, which include varying volume commitments. Prices included in the purchase agreements are indexed to market prices. While volume commitments are included in the contracts, we do not have a history of incurring material penalties related to these provisions. These contracts are not accounted for as derivatives as they meet the normal purchases exclusion under derivative accounting.
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We have entered into forward contracts for cheese in order to fix the price per pound for a portion of our expected supply. As of July 31, 2023, the forward contracts run through April 2024. The commitment under these contracts is approximately $55,623. These contracts are not accounted for as derivatives as they meet the normal purchases exclusion under derivative accounting.
7. Unrecognized Tax Benefits
The total amount of gross unrecognized tax benefits was $11,980 and $10,957 at July 31, 2023 and April 30, 2023, respectively. If this unrecognized tax benefit were ultimately recognized, $9,465 is the amount that would impact our effective tax rate. The total amount of accrued interest and penalties for such unrecognized tax benefits was $445 at July 31, 2023, and $386 at April 30, 2023. Net interest and penalties included in income tax expense for the three months ended July 31, 2023 and 2022, was a net expense of $59 and $53, respectively.
A number of years may elapse before an uncertain tax position is audited and ultimately settled. It is difficult to predict the ultimate outcome or the timing of resolution for uncertain tax positions. It is reasonably possible that the amount of unrecognized tax benefits could significantly increase or decrease within the next twelve months. These changes could result from the expiration of the statute of limitations, examinations or other unforeseen circumstances. The Company has no ongoing federal or state income tax examinations. At this time, the Company’s best estimate of the reasonably possible change in the amount of the gross unrecognized tax benefits is a decrease of $2,500 during the next twelve months mainly due to the expiration of certain statute of limitations.
The federal statute of limitations remains open for the tax years 2019 and forward. Tax years 2016 and forward are subject to audit by state tax authorities depending on open statute of limitations waivers and the tax code of each state.
8. Segment Reporting
As of July 31, 2023, we operated 2,536 stores in 16 states. Our convenience stores offer a broad selection of merchandise, fuel and other products and services designed to appeal to the convenience needs of our guests. We manage the business on the basis of one operating segment and therefore, have only one reportable segment. Our stores sell similar products and services, use similar processes to sell those products and services, and sell their products and services to similar classes of guests. We make specific disclosures concerning the three broad categories of fuel, grocery and general merchandise, and prepared food and dispensed beverage because it allows us to more effectively discuss trends and operational initiatives within our business and industry. Although we can separate revenues and cost of goods sold within these categories (and further sub-categories), the operating expenses associated with operating a store that sells these products are not separable by these three categories.
9. Subsequent Events
Subsequent to the end of the quarter, we entered into purchase agreements for the acquisition of 92 stores, for a total aggregate purchase price of $221.5 million, subject to customary post-closing adjustments. The Company expects to fund the acquisitions with cash on hand. The transactions are expected to close later this fiscal year, subject to customary regulatory approvals.
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| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Dollars in Thousands). | ||||
Overview
As of July 31, 2023, Casey’s General Stores, Inc. and its direct and indirect wholly-owned subsidiaries operate convenience stores primarily under the names "Casey's" and "Casey’s General Store" (collectively, with the stores below referenced as "GoodStop", "Bucky's" or "Minit Mart", referred to as "Casey's" or the "Company") throughout 16 states, over half of which are located in Iowa, Missouri and Illinois. Approximately 49% of all Casey's were opened in areas with populations of fewer than 5,000 persons, while approximately 26% of all stores were opened in communities with populations exceeding 20,000 persons. As of July 31, 2023, there were a total of 2,536 stores in operation.
All convenience stores carry a broad selection of food items (including, but not limited to, freshly prepared foods such as regular and breakfast pizza, donuts, hot breakfast items, and hot and cold sandwiches), beverages, tobacco and nicotine products, health and beauty aids, automotive products, and other nonfood items. As of July 31, 2023, 216 store locations offered car washes. In addition, all but seven store locations offer fuel for sale on a self-service basis.
The Company had 44 stores operate under the "GoodStop (by Casey’s)" brand as of July 31, 2023. Similar to most of our store footprint, the "GoodStop" locations offer fuel for sale on a self-serve basis, and a broad selection of snacks, beverages, tobacco products, and other essentials. However, these locations typically do not have a kitchen and have limited prepared food offerings.
The Company is also temporarily operating certain locations acquired from Buchanan Energy under the name "Bucky's" and certain locations acquired from Minit Mart LLC under the name "Minit Mart." The Company is in the process of transitioning all "Bucky's" and "Minit Mart" locations to either the "Casey's" or "GoodStop" brand. These locations typically have similar offerings to the "Casey’s" or "GoodStop" branded stores.
The Company has 76 dealer locations, where Casey’s manages fuel wholesale supply agreements to these stores. These locations are not operated by Casey's and are not included in our overall store count in the paragraph below. Approximately 1% of total revenue for the three-months ended July 31, 2023 relates to this dealer network.
The Company operates three distribution centers, through which certain grocery and general merchandise and prepared food and dispensed beverage items are supplied to our stores. One distribution center is adjacent to our corporate headquarters, which we refer to as the Store Support Center facility in Ankeny, Iowa. The other two distribution centers are located in Terre Haute, Indiana (opened in February 2016) and Joplin, Missouri (opened in April 2021).
The Company’s business is seasonal, and generally experiences higher sales and profitability during the first and second fiscal quarters (May-October), when guests tend to purchase greater quantities of fuel and certain convenience items such as beer, sports drinks, water, soft drinks and ice.
The Company reported diluted earnings per common share of $4.52 for the first quarter of fiscal 2024. For the same quarter a year-ago, diluted earnings per common share was $4.09.
The following table represents the roll forward of store growth through the first quarter of fiscal 2024:
| Store Count | |||||
| Total stores at April 30, 2023 | 2,521 | ||||
| New store construction | 10 | ||||
| Acquisitions | 4 | ||||
| Acquisitions not opened | (2) | ||||
| Prior acquisitions opened | 4 | ||||
| Closed | (1) | ||||
| Total stores at July 31, 2023 | 2,536 | ||||
COVID-19 and Related Impacts
The onset of COVID-19 caused a significant decrease in store traffic across our entire footprint. While store traffic has markedly increased as the economy reopened over the past two or so years, the Company has not seen a full return to store traffic levels experienced prior to the pandemic. The Company believes this has largely contributed to the increased prevalence and acceptance across all industries of working from home, a trend which the Company expects to continue into the foreseeable future.
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Fuel Volatility
Since early calendar 2020, the price of crude oil, and in turn the wholesale cost of fuel, has been volatile compared to historical averages. Initially, at the outset of the pandemic, oil and fuel prices fell dramatically; however, as the economy in general began to emerge from the COVID-19 pandemic, prices began to modestly increase over time. More recently, during the end of the Company’s 2022 fiscal year, oil and fuel prices saw a quick and dramatic increase, in part, as a result of the conflict in Ukraine, as well as other macroeconomic conditions. Generally, oil and fuel prices have decreased from levels seen throughout the past two years, but they remain elevated compared to historical levels. The Company expects these comparatively higher prices to remain further into the 2024 fiscal year.
In addition, during the past three calendar years, the Company, and the retail fuel industry as a whole, has experienced historically high average revenue less cost of goods sold per gallon (excluding depreciation and amortization). Although this has remained relatively consistent since that time, on a longer-term basis, this metric can fluctuate significantly, and sometimes unpredictably, in the short-term. While the Company believes that its average revenue less cost of goods sold per gallon (excluding depreciation and amortization) will remain elevated from historical levels for the foreseeable future, it is possible that increased oil and fuel prices, rising interest rates, macroeconomic conditions and/or continuing conflicts or disruptions involving oil producing countries may materially impact the performance of this metric.
Electric Vehicles and Renewable Fuels
Casey's continues its process of developing a robust electric vehicle ("EV") strategy and our management team remains committed to understanding if and how the increased demand for, and usage of, EVs impacts consumer behavior across our store footprint and beyond. As consumer demand for alternative fuel options continues to grow, Casey’s has continued to add EV charging stations across our 16-state footprint. As of July 31, 2023, the Company has installed 146 charging stations at 30 stores, across 11 states. Our installation strategy is currently designed to selectively increase our charging stations at locations within our region where we see higher levels of consumer EV buying trends and demand for EV charging. To date, consumer EV demand within our Midwest footprint has been comparatively lower than the levels along the coasts. As EV demand from our guests increases, we are prepared to strategically integrate charging station options at select stores.
The Company also remains committed to offering renewable fuel options at our stores and continues to expand its alternative fuel options in response to evolving guest needs and as part of its environmental stewardship efforts. Currently, almost all of our stores offer fuel with at least 10% of blended ethanol and 42% of our stores offer biodiesel. Every new store has the capability to sell higher blended ethanol, and we aim to continue growing sales of renewable fuels throughout our footprint.
Same-Store Sales
Same-store sales is a common metric used in the convenience store industry. We define same-store sales as the total sales increase (or decrease) for stores open during the full time of both periods being presented. When comparing data, the store must be open for each entire fiscal period being compared. Remodeled stores that remained open or were closed for just a very brief period of time (i.e., less than a week) during the period being compared remain in the same-store sales comparison. If a store is replaced, either at the same location (i.e., razed and rebuilt) or relocated to a new location, it is removed from the comparison until the new store has been open for each entire period being compared. Newly constructed and acquired stores do not enter the calculation until they are open for each entire period being compared.
The first quarter results reflected a 0.4% increase in same-store fuel gallons sold. Same-store sales of grocery and general merchandise increased 5.2% and prepared food and dispensed beverage increased 5.9% during the quarter. The increase in grocery and general merchandise same-store sales was primarily due to strong sales of non-alcoholic and alcoholic beverages, snacks, and candy. The increase in prepared food and dispensed beverage same-store sales was attributable to improved sales of hot sandwiches, whole pizza pies and donuts. Additionally a one-time adjustment of $4,800 was recognized as a result of planned changes in the digital box top program, which favorably impacted the prepared food and dispensed beverage same-store sales increase.
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Three Months Ended July 31, 2023 Compared to
Three Months Ended July 31, 2022
(Dollars and Amounts in Thousands)
| Three Months Ended July 31, 2023 | Fuel | Grocery & General Merchandise | Prepared Food & Dispensed Beverage | Other | Total | ||||||||||||||||||||||||
| Revenue | $ | 2,427,333 | $ | 996,936 | $ | 372,813 | $ | 72,169 | $ | 3,869,251 | |||||||||||||||||||
| Revenue less cost of goods sold (excluding depreciation and amortization) | $ | 296,978 | $ | 339,573 | $ | 216,861 | $ | 24,342 | $ | 877,754 | |||||||||||||||||||
| 12.2 | % | 34.1 | % | 58.2 | % | 33.7 | % | 22.7 | % | ||||||||||||||||||||
| Fuel gallons | 713,991 | ||||||||||||||||||||||||||||
| Three Months Ended July 31, 2022 | Fuel | Grocery & General Merchandise | Prepared Food & Dispensed Beverage | Other | Total | ||||||||||||||||||||||||
| Revenue | $ | 3,096,342 | $ | 923,064 | $ | 343,553 | $ | 91,685 | $ | 4,454,644 | |||||||||||||||||||
| Revenue less cost of goods sold (excluding depreciation and amortization) | $ | 308,188 | $ | 313,307 | $ | 190,953 | $ | 23,802 | $ | 836,250 | |||||||||||||||||||
| 10.0 | % | 33.9 | % | 55.6 | % | 26.0 | % | 18.8 | % | ||||||||||||||||||||
| Fuel gallons | 689,467 | ||||||||||||||||||||||||||||
Total revenue for the first quarter of fiscal 2024 decreased by $585,393 (13.1%) over the comparable period in fiscal 2023. Retail fuel sales decreased by $669,009 (21.6%) as the average retail price per gallon decreased 24.3%, offset by an increase in the number of gallons sold by 24,524 (3.6%). During this same period, retail sales of grocery and general merchandise increased by $73,872 (8.0%), due to strong sales of non-alcoholic and alcoholic beverages, snacks, and candy. Prepared food and dispensed beverage sales increased by $29,260 (8.5%), due to improved sales of hot sandwiches, whole pizza pies and donuts. Additionally, total revenues were impacted favorably by operating 82 more stores than a year ago.
The other revenue category primarily consists of activity related to car wash revenue and the wholesale fuel revenue from the dealer network, which are both presented gross of applicable costs, as well as lottery, which is presented net of applicable costs. Other revenues decreased $19,516 (21.3%) for the first quarter of fiscal 2024 compared to the prior year, driven primarily by a decrease in wholesale fuel prices.
Revenue less cost of goods sold (excluding depreciation and amortization) was 22.7% of revenue for the first quarter of fiscal 2024, compared to 18.8% for the comparable period in the prior year. Fuel revenue less related cost of goods sold (exclusive of depreciation and amortization) was 12.2% of fuel revenue during the first quarter of fiscal 2024, compared to 10.0% for the comparable period in the prior year. Revenue per gallon less cost of goods sold (exclusive of depreciation and amortization) per gallon decreased to 41.6 cents in the first quarter of fiscal 2024, compared to 44.7 cents for the comparable period in the prior year. The Company sold 12.8 million RINs [renewable identification numbers] for $20,197 during the quarter, compared to the sale of 10.7 million RINs in the first quarter of the prior year, which generated $17,676 (see footnote 3, above, for a further description of RINs and how they are generated).
Grocery and general merchandise revenue less related cost of goods sold (exclusive of depreciation and amortization) was 34.1% of revenue for the first quarter of fiscal 2024, compared to 33.9% for the comparable period in the prior year. The current year percentage was positively impacted by increased penetration of private label products. Prepared food and dispensed beverage revenue less related cost of goods sold (exclusive of depreciation and amortization) increased to 58.2% of revenue, compared to 55.6% of revenue for the comparable period in the prior year, primarily due to a one-time $4,800 adjustment recognized as a result of planned changes in the digital box top program and softening ingredient costs.
Operating expenses increased $17,584 (3.2%) in the first quarter of fiscal 2024 from the comparable period in the prior year. Approximately 3% of the increase is due to operating 82 more stores than the comparable period in the prior year. Credit card fees decreased approximately $6,292 due to lower retail fuel price which offset all remaining operating expense increases. Same-store employee expense was approximately flat, as the increase in wage rate was nearly offset by the reduction in same-store hours.
Depreciation and amortization expense increased by 8.7% to $82,905 in the first quarter of fiscal 2024 from $76,295. The increase was primarily due to operating 82 more stores than a year ago and capital expenditures during the previous twelve months.
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Interest, net decreased by 9.6% to $12,495 in the first quarter of fiscal 2024 from $13,816. The decrease was primarily attributable to an increase in interest income due to the increase in cash and cash equivalents and interest rates.
The effective tax rate decreased to 23.6% in the first quarter of fiscal 2024 compared to 24.6% in the same period of fiscal 2023. The decrease in the effective tax rate was primarily due to a one-time benefit from adjusting the Company’s deferred tax assets and liabilities for state law changes enacted during the quarter.
Net income increased by $16,305 (10.7%) to $169,237 from $152,932 in the comparable period in the prior year. The increase in net income was primarily attributable to higher profitability inside the store, offset by decreased fuel profitability and increases in operating expenses and depreciation and amortization. See discussion in the paragraphs above for the primary drivers for each of these changes.
Use of Non-GAAP Measures
We define EBITDA as net income before net interest expense, income taxes, depreciation and amortization. Adjusted EBITDA further adjusts EBITDA by excluding the gain or loss on disposal of assets as well as impairment charges. Neither EBITDA nor Adjusted EBITDA are considered GAAP measures, and should not be considered as a substitute for net income, cash flows from operating activities or other income or cash flow statement data. These measures have limitations as analytical tools, and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP. We strongly encourage investors to review our financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.
We believe EBITDA and Adjusted EBITDA are useful to investors in evaluating our operating performance because securities analysts and other interested parties use such calculations as a measure of financial performance and debt service capabilities, and they are regularly used by management for internal purposes including our capital budgeting process, evaluating acquisition targets, assessing performance, and awarding incentive compensation.
Because non-GAAP financial measures are not standardized, EBITDA and Adjusted EBITDA, as defined by us, may not be comparable to similarly titled measures reported by other companies. It therefore may not be possible to compare our use of these non-GAAP financial measures with those used by other companies.
The following table contains a reconciliation of net income to EBITDA and Adjusted EBITDA for the three months ended July 31, 2023 and 2022:
| Three months ended | |||||||||||
| July 31, 2023 | July 31, 2022 | ||||||||||
| Net income | $ | 169,237 | $ | 152,932 | |||||||
| Interest, net | 12,495 | 13,816 | |||||||||
| Federal and state income taxes | 52,262 | 49,936 | |||||||||
| Depreciation and amortization | 82,905 | 76,295 | |||||||||
| EBITDA | $ | 316,899 | $ | 292,979 | |||||||
| (Gain) loss on disposal of assets and impairment charges | (1,448) | 230 | |||||||||
| Adjusted EBITDA | $ | 315,451 | $ | 293,209 | |||||||
For the three months ended July 31, 2023, EBITDA and Adjusted EBITDA increased 8.2% and 7.6%, respectively, when compared to the same period a year ago. The increase in EBITDA and Adjusted EBITDA was primarily attributable to higher profitability inside the store, which was partially offset by decreased fuel profitability and higher operating expenses.
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. The Company's critical accounting policies are described in the Form 10-K for the year ended April 30, 2023, and such discussion is incorporated herein by reference. There have been no changes to these policies in the three months ended July 31, 2023.
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Liquidity and Capital Resources
Due to the nature of the Company’s business, 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, 2023, the Company’s ratio of current assets to current liabilities was 1.09 to 1. The ratio at July 31, 2022 and April 30, 2023 was 0.96 to 1 and 0.99 to 1, respectively. The increase in the ratio from the prior year is primarily attributable to an increase in cash and cash equivalents due to strong free cash flows.
Management believes that the net availability under the Bank Line of approximately $49,568 and the Revolving Facility of $850,000, combined with the current cash and cash equivalents and the future cash flow from operations will be sufficient to satisfy the working capital needs of our business.
Net cash provided by operations decreased $47,075 in the three months ended July 31, 2023 from the comparable period in the prior year, primarily due to the changes in assets and liabilities. Cash impacts due to changes in accounts payable decreased operating cash flows by $39,143 primarily due to the timing of payments during the first three months of fiscal 2024, compared to the comparable period in fiscal 2023. The impacts from changes in inventories decreased by $45,357, attributable to an increase in inventory quantities on hand at the end of the first quarter of fiscal 2024, compared to the prior year. The decrease in operating cash flows was partially offset by impacts from changes in receivables of $24,680 primarily due to the timing of RINs and vendor rebate payments during the first three months of fiscal 2024, compared to the comparable period in fiscal 2023, as well as an increase in net income of $16,305. Refer to "Three Months Ended July 31, 2023 Compared to Three Months Ended July 31, 2022" for further details on the primary driver for the changes in net income.
Cash used in investing activities decreased $1,700. During the first three months of fiscal 2024, the Company expended $82,200 for purchases of property and equipment and payments for acquisitions compared with $83,135 for the comparable period in the prior year related to these activities. Purchases of property and equipment and payments for acquisitions of businesses typically represent the single largest use of excess Company funds. Management believes that by acquiring, building, and reinvesting in stores, the Company will be better able to respond to competitive challenges and increase operating efficiencies.
Cash used in financing increased $47,868, primarily due to the repurchase and retirement of common stock under our share repurchase program for a total of approximately $29,893, as well as an increase in debt payments compared to the comparable period in fiscal 2023.
As of July 31, 2023, the Company had long-term debt consisting of:
| Finance lease liabilities | $ | 100,908 | |||
| 3.67% Senior notes (Series A) due in 7 installments beginning June 17, 2022, and ending June 15, 2028 | 111,000 | ||||
| 3.75% Senior notes (Series B) due in 7 installments beginning December 17, 2022 and ending December 18, 2028 | 45,000 | ||||
| 3.65% Senior notes (Series C) due in 7 installments beginning May 2, 2025 and ending May 2, 2031 | 50,000 | ||||
| 3.72% Senior notes (Series D) due in 7 installments beginning October 28, 2025 and ending October 28, 2031 | 50,000 | ||||
| 3.51% Senior notes (Series E) due June 13, 2025 | 150,000 | ||||
| 3.77% Senior notes (Series F) due August 22, 2028 | 250,000 | ||||
| 2.85% Senior notes (Series G) due August 7, 2030 | 325,000 | ||||
| 2.96% Senior notes (Series H) due August 6, 2032 | 325,000 | ||||
| Variable rate term loan facility, requiring quarterly installments ending April 21, 2028 | 246,875 | ||||
| Less debt issuance costs | (1,619) | ||||
| 1,652,164 | |||||
| Less current maturities | (53,640) | ||||
| $ | 1,598,524 | ||||
The Company has funded purchases of property and equipment and payments for acquisitions of businesses primarily from the issuance of debt, existing cash, and funds generated from operations. Future capital needs required to finance operations, improvements and the anticipated growth in the number of stores are expected to be met from cash generated by operations, the Revolving Facility, the Bank Line, and additional long-term debt or other securities as circumstances may dictate, and are not expected to adversely affect liquidity.
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Cautionary Statements
This Form 10-Q, including the foregoing Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. The words “may,” “will,” "should," “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “continue,” and similar expressions are used to identify forward-looking statements. Forward-looking statements represent the Company’s current expectations or beliefs concerning future events and trends that we believe may affect our financial condition, liquidity and related sources and needs, supply chain, results of operations and performance at our stores, business strategy, strategic plans, growth opportunities, integration of acquisitions, acquisition synergies, short-term and long-term business operations and objectives including our long-term strategic plan, wholesale fuel, inventory and ingredient costs and the potential effects of the conflict in Ukraine and COVID-19 on our business. The Company cautions that these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, including, without limitation, the following risk factors described more completely in the Company’s Form 10-K for the fiscal year ended April 30, 2023:
Business Operations; Our business and our reputation could be adversely affected by a cyber or data security incident or the failure to protect sensitive guest, Team Member or supplier data, or the failure to comply with applicable regulations relating to data security and privacy; food-safety issues and foodborne illnesses, whether actual or reported, or the failure to comply with applicable regulations relating to the transportation, storage, preparation or service of food, could adversely affect our business and reputation; we may be adversely impacted by increases in the cost of food ingredients and other related costs; a significant disruption to our distribution network, to the capacity of the distribution centers, or timely receipt of inventory could adversely impact our sales or increase our transaction costs, which could have a material adverse effect on our business; we could be adversely affected if we experience difficulties in, or are unable to recruit, hire or retain, members of our leadership team and other distribution, field and store Team Members; any failure to anticipate and respond to changes in consumer preferences, or to introduce and promote innovative technology for guest interaction, could adversely affect our financial results; we rely on our information technology systems, and a number of third-party software providers, to manage numerous aspects of our business, and a disruption of these systems could adversely affect our business; increased credit card expenses could lead to higher operating expenses and other costs for the Company; our operations present hazards and risks which may not be fully covered by insurance, if insured; the dangers inherent in the storage and transport of fuel could cause disruptions and could expose to us potentially significant losses, costs or liabilities; consumer or other litigation could adversely affect our financial condition and results of operations; pandemics or disease outbreaks, such as COVID-19, responsive actions taken by governments and others to mitigate their spread, and guest behavior in response to these events, have, and may in the future, adversely affect our business operations, supply chain and financial results; and, covenants in our Senior Notes and credit facility agreements require us to comply with certain covenants and meet financial maintenance tests and the failure to comply with these requirements could have a material impact to us.
Governmental Actions, Regulations, and Oversight: Compliance with and changes in tax laws could adversely affect our performance; we are subject to extensive governmental regulations; governmental action and campaigns to discourage tobacco and nicotine use and other tobacco products may have a material adverse effect on our revenues and gross profit; and, wholesale cost and tax increases relating to tobacco and nicotine products could affect our operating results.
Industry: General economic and political conditions that are largely out of the Company’s control may adversely affect the Company’s financial condition and results of operations; developments related to fuel efficiency, fuel conservation practices, climate change, and changing consumer preferences may decrease the demand for motor fuel; unfavorable weather conditions can adversely affect our business; the volatility of wholesale petroleum costs could adversely affect our operating results; and, the convenience store industry is highly competitive.
Growth Strategies: We may not be able to identify, acquire, and integrate new properties and stores, which could adversely affect our ability to grow our business.
Common Stock: The market price for our common stock has been and may in the future be volatile, which could cause the value of your investment to decline; any issuance of shares of our common stock in the future could have a dilutive effect on your investment; and, Iowa law and provisions in our charter documents may have the effect of preventing or hindering a change in control and adversely affecting the market price of our common stock.
We further caution you that other factors we have not identified may in the future prove to be important in affecting our business and results of operations. We ask you not to place undue reliance on any forward-looking statements because they speak only of our views as of the statement dates. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk.
The Company’s exposure to market risk for changes in interest rates relates primarily to our investment portfolio and floating rate long-term debt obligations. We place our investments with high-quality credit issuers and, by policy, limit the amount of credit exposure to any one issuer. Our first priority is to attempt to reduce the risk of principal loss. Consequently, we seek to preserve our invested funds by limiting default risk, market risk, and reinvestment risk. We attempt to mitigate default risk by investing in only high-quality credit securities that we believe to be low risk and by positioning our portfolio to respond appropriately to a significant reduction in a credit rating of any investment issuer or guarantor. The portfolio includes only marketable securities with active secondary or resale markets to ensure portfolio liquidity. Based upon the outstanding balance of the Company's term loan facility as of July 31, 2023, an immediate 100-basis-point move in interest rates would have an approximate annualized impact of $2.5 million on interest expense.
We do from time to time, participate in a forward buy of certain commodities. These contracts are not accounted for as derivatives as they meet the normal purchases exclusion under derivative accounting.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 240.13a-15(e)). Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company’s current disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.
Changes in Internal Controls Over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting during the quarter ended July 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
The information required by this Item is set forth in Note 6 to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q and is incorporated herein by this reference.
Item 1A. Risk Factors
There have been no material changes in our “risk factors” from those previously disclosed in our 2023 Annual Report on Form 10-K.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table sets forth information with respect to the Company's repurchases of common stock during the quarter ended July 31, 2023:
| Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs | |||||||||||||||||||
| First Quarter | |||||||||||||||||||||||
| May 1 - May 31, 2023 | — | $ | — | — | $ | 400,000,000 | |||||||||||||||||
| June 1 - June 30, 2023 | 62,733 | 239.05 | 62,733 | 385,003,771 | |||||||||||||||||||
| July 1 - July 31, 2023 | 60,836 | 244.83 | 60,836 | 370,109,397 | |||||||||||||||||||
| Total | 123,569 | $ | 241.89 | 123,569 | $ | 370,109,397 | |||||||||||||||||
On, and effective as of, March 3, 2022, the Board authorized a share repurchase program, whereby the Company was authorized to repurchase its outstanding common stock from time-to-time, for an aggregate amount of up to $400 million, exclusive of fees, commissions or other expenses (the "Repurchase Program"). The Repurchase Program has no set expiration date. The timing and number of repurchase transactions under the Repurchase Program depends on a variety of factors including, but not limited to, market conditions, corporate considerations, business opportunities, debt agreements, and regulatory requirements. The Repurchase Program can be suspended or discontinued at any time. During the first quarter of 2024, we repurchased and retired 123,569 shares of our common stock under our share repurchase program for a total of $29.9 million, net of fees, commissions and other expenses. As of July 31, 2023, $370.1 million remained available for future purchases under this share repurchase program.
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Item 6. Exhibits.
| Exhibit No. | Description | ||||
| 3.1 | |||||
| 3.2 | |||||
| 10.1 | |||||
| 31.1* | |||||
| 31.2* | |||||
| 32.1* | |||||
| 32.2* | |||||
| 101.INS | XBRL Instance Document | ||||
| 101.SCH | XBRL Taxonomy Extension Schema Document | ||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | ||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | ||||
| 101. DEF | XBRL Taxonomy Extension Definition Linkbase Document | ||||
* Filed herewith
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CASEY’S GENERAL STORES, INC. | ||||||||
| Date: September 11, 2023 | By: | /s/ Stephen P. Bramlage Jr. | ||||||
| Stephen P. Bramlage Jr. | ||||||||
| Its: | Chief Financial Officer | |||||||
| (Authorized Officer and Principal Financial and Accounting Officer) | ||||||||
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