Acquisitions

9 Months Ended

Jan. 31, 2022

Many of our acquisitions meet the criteria to be considered business combinations. The Company accounts for business combinations using the acquisition method of accounting. Under this method of accounting, acquired assets and assumed liabilities are included within the acquirer's accounts as of the date of acquisition, with any excess of purchase price over the fair value of the net assets acquired recognized as goodwill. Acquisition-related transaction costs are recognized as period costs as incurred. We accounted for the Buchanan Energy, Circle K, and Pilot acquisitions (discussed below) as business combinations.

Buchanan Energy

On May 13, 2021, the Company closed on the acquisition of 100% of the equity interest in Buchanan Energy (and certain of its related subsidiaries and affiliated entities), owner of Bucky’s Convenience Stores. The transaction included 92 retail locations (consisting of 24 stores in Nebraska, 56 in Illinois, five in Iowa, three in Missouri, and four in Texas), a dealer network of 81 stores where Casey’s will manage fuel wholesale supply agreements to these stores, as well as several parcels of real estate which may be used for new store construction. Three of the retail locations were divested shortly after closing as part of a consent order with the Federal Trade Commission. On January 25, 2022, the Company entered into a purchase agreement to sell the four stores and one parcel of property in Texas for an aggregate sale price of $41,000, subject to customary post-closing adjustments. The transaction is expected to close during the fourth quarter of the fiscal year, subject to customary closing conditions. We do not expect to record any material gain or loss related to the sale.

As a result of the Buchanan Energy acquisition, we added a fuel wholesale business. The Company expects to achieve certain synergies over time, in part, through the reduction of duplicate processes, improvements in purchasing power, installing our kitchens, and expanding merchandise offerings.

The aggregate purchase price for the acquisition totaled $573,420, which is net of a provisional working capital adjustment of $3,822. Upon closing, $577,242 was paid in cash using available cash on hand and proceeds from the $300 million term loan (as discussed above in Note 4) and a draw on the Revolving Facility. The draw on the Revolving Facility was repaid during the first quarter of the fiscal year.

The table below summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date. We utilized a third-party valuation specialist to assist in valuing the contractual customer relationships, leases, and property and equipment acquired. The accounting related to certain property and equipment, goodwill, contingent liabilities, deferred taxes, and the working capital adjustment is considered provisional and is subject to change.


Assets acquired:
Cash and cash equivalents	$	5,517
Receivables	2,836
Inventories	18,516
Prepaid expenses	150
Property and equipment	306,851
Contractual customer relationships	31,100
Deferred income taxes	1,343
Finance lease right-of-use assets	10,689
Operating lease right-of-use assets	11,816
Other assets	1,774
Goodwill	250,113
Total assets	640,705
Liabilities assumed:
Accounts payable	27,138
Accrued expenses	8,395
Finance lease liabilities	12,369
Operating lease liabilities	15,666
Other long-term liabilities	3,717
Total liabilities	67,285
Net assets acquired and total purchase price	$	573,420

Acquired operating lease right-of-use assets are included within other assets, net of amortization and acquired operating lease liabilities are included within accrued expenses and other long-term liabilities in the condensed consolidated balance sheets as of January 31, 2022.

The $31,100 of contractual customer relationships will be amortized over a useful life of 15 years and are included within other assets, net of amortization in the condensed consolidated balance sheets as of January 31, 2022. These assets were valued using the multi-period excess earnings method.

The goodwill acquired was assigned to the retail reporting unit in the amount of $242,060 and the fuel wholesale reporting unit in the amount of $8,053. The goodwill recognized is primarily attributable to the location of the seller’s stores in relation to our footprint and expected synergies due to expanded inside store offerings and improved purchasing power. Almost all of the goodwill acquired as the result of this transaction will be deductible for income tax purposes over 15 years.

The Company incurred total acquisition-related transaction costs of approximately $8.6 million. This includes approximately $6.7 million incurred during the nine months ended January 31, 2022, which are included in the condensed consolidated statements of income within operating expenses.

The Company recognized approximately $215,472 and $686,063 of revenue related to the acquired Buchanan Energy locations in the condensed consolidated statements of income for the three and nine months ended January 31, 2022,

respectively. The amount of net income related to the acquired Buchanan Energy locations was not material for the three and nine months ended January 31, 2022.

Circle K

Throughout June 2021, the Company closed on the acquisition of 48 stores located in Oklahoma from Circle K pursuant to the terms and conditions of an asset purchase agreement. The aggregate purchase price for the acquisition totaled $41,416, which was paid in cash upon closing using available cash on hand.


Assets acquired:
Inventories	$	5,299
Property and equipment	6,150
Finance lease right-of-use assets	37,086
Operating lease right-of-use assets	24,113
Goodwill	31,662
Total assets	104,310
Liabilities assumed:
Accrued expenses and other long-term liabilities	545
Finance lease liabilities	46,576
Operating lease liabilities	15,773
Total liabilities	62,894
Net assets acquired and total consideration paid	$	41,416

The goodwill recognized from this transaction is primarily attributable to the location of the seller's stores in relation to our footprint and expected synergies due, in part, to expanded inside store and fuel offerings. All of the goodwill acquired as a result of this transaction will be deductible for income tax purposes over 15 years.

The Company recognized approximately $43,259 and $114,650 of revenue related to the acquired Circle K locations in the condensed consolidated statements of income for the three and nine months ended January 31, 2022, respectively. The amount of net income related to the acquired Circle K locations was not material for the three and nine months ended January 31, 2022.

Pilot

On December 16, 2021, the Company closed on the acquisition of 40 stores from Pilot Corporation pursuant to the terms and conditions of an asset purchase agreement. The transaction included 39 stores located in Tennessee and 1 store located in Kentucky. The aggregate purchase price for the acquisition totaled $226,624, which was paid in cash using available cash on hand and certain incremental proceeds from the $150 million term loan, as discussed above in Note 4. As a result of this acquisition, we increased our total store count to over 2,400 stores.

The table below summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date. We are utilizing a third-party valuation specialist to assist in valuing the property and equipment and leases acquired. The valuation is still in process and, as a result, amounts related to goodwill, property and equipment, leases, and deferred income taxes are provisional measurements and subjected to change.


Assets acquired:
Cash and cash equivalents	$	95
Inventories	6,556
Prepaid expenses	87
Property and equipment	68,065
Deferred income taxes	468
Operating lease right-of-use assets	27,432
Goodwill	153,936
Total assets	256,639
Liabilities assumed:
Accrued expenses and other long-term liabilities	883
Operating lease liabilities	29,132
Total liabilities	30,015
Net assets acquired and total consideration paid	$	226,624

The goodwill recognized from this transaction is primarily attributable to the location of the seller's stores in relation to our footprint and expected synergies due, in part, to expanded inside store. Almost all of the goodwill acquired as a result of this transaction will be deductible for income tax purposes over 15 years.

The Company recognized approximately $35,259 of revenue related to the acquired Pilot locations in the condensed consolidated statements of income for the three and nine months ended January 31, 2022, respectively. The amount of net income related to the acquired Pilot locations was not material for the three and nine months ended January 31, 2022.

Pro Forma Information

The following unaudited pro forma information presents a summary of our condensed consolidated statements of income as if the Buchanan Energy, Circle K, and Pilot transactions referenced above occurred on May 1, 2020 (amounts in thousands, except per share data):


	Three Months Ended January 31,		Nine Months Ended January 31,
	2022	2021	2022	2021
Total revenue	3,082,346	2,251,406	9,731,049	7,197,255
Net income	66,898	41,590	300,140	282,473
Net income per common share
Basic	1.80	1.12	8.08	7.63
Diluted	1.79	1.12	8.04	7.58