-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, D2/PommPReffIwk+Yk0xCEKak0N9IYbj/+OS1kzaCD8ZKNetRfu/0w/josrjUqRL 2zDYKZiEB+GhL0sc7OOJeg== 0000950124-94-001250.txt : 19940801 0000950124-94-001250.hdr.sgml : 19940801 ACCESSION NUMBER: 0000950124-94-001250 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19940430 FILED AS OF DATE: 19940728 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CASEYS GENERAL STORES INC CENTRAL INDEX KEY: 0000726958 STANDARD INDUSTRIAL CLASSIFICATION: 5412 IRS NUMBER: 420935283 STATE OF INCORPORATION: IA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-12788 FILM NUMBER: 94540529 BUSINESS ADDRESS: STREET 1: ONE CONVENIENCE BLVD CITY: ANKENY STATE: IA ZIP: 50021 BUSINESS PHONE: 5159656100 10-K 1 FORM 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended April 30, 1994 Commission File Number 0-12788 CASEY'S GENERAL STORES, INC. (Exact name of registrant as specified in its charter) IOWA 42-0935283 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) ONE CONVENIENCE BLVD., ANKENY, IOWA (Address of principal executive offices) 50021 (Zip Code) (515) 965-6100 (Registrant's telephone number, including area code) Securities Registered Pursuant To Section 12(b) Of The Act: NONE Securities Registered Pursuant To Section 12(g) Of The Act: COMMON STOCK (Title of Class) COMMON SHARE PURCHASE RIGHTS (Title of Class) 2 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] At the close of business on July 25, 1994, the Company had 25,921,020 shares of Common Stock, no par value, issued and outstanding. The aggregate market value of the 20,229,908 shares of Common Stock stock held by non-affiliates of the Company on that date was $237,701,419, based on a last reported sales price of $11.75 per share on said date. DOCUMENTS INCORPORATED BY REFERENCE Portions of the following documents, as set forth herein, are incorporated by reference into the listed Parts and Items of this report on Form 10-K: 1. Annual Report for fiscal year ended April 30, 1994 (Items 5, 6, 7 and 8 of Part II and Item 14(a) of Part IV). 2. Proxy Statement dated August 15, 1994 (Item 2 of Part I and Items 10, 11, 12 and 13 of Part III). 3 PART I ITEM 1. BUSINESS THE COMPANY Casey's General Stores, Inc. (the "Company" or "Casey's") operates convenience stores under the name "Casey's General Store" in eight Midwestern states, primarily Iowa, Missouri and Illinois. The stores carry a broad selection of food (including freshly prepared foods such as pizza, donuts and sandwiches), beverages, tobacco products, health and beauty aids, automotive products and other non-food items. In addition, all stores offer gasoline for sale on a self-service basis. On April 30, 1994, there were a total of 876 Casey's General Stores in operation, of which 687 were operated by the Company ("Company Stores") and 189 stores were operated by franchisees ("Franchised Stores"). There were 56 Company Stores and 4 Franchised Store newly opened in fiscal 1994. The Company operates a central warehouse, the Casey's Distribution Center, adjacent to its Corporate Headquarters facility in Ankeny, Iowa through which it supplies grocery and general merchandise items to Company and Franchised Stores. The Company also operates a commissary in Creston, Iowa where it prepares sandwiches for sale through Company and Franchised Stores. Approximately 75% of all Casey's General Stores are located in areas with populations of fewer than 5,000 persons, while approximately 6% of all stores are located in communities with populations exceeding 20,000 persons. The Company competes on the basis of price, as well as on the basis of traditional features of convenience store operations such as location, extended hours and quality of service. The Company, with executive offices at One Convenience Blvd., Ankeny, Iowa 50021-8045 (telephone 515/965-6100) was incorporated in Iowa in 1967. GENERAL Casey's General Stores seek to meet the needs of residents of small towns by combining features of both general store and convenience store operations. Smaller communities often are not served by national-chain convenience stores. The Company has been successful in operating Casey's General Stores in small towns by offering, at competitive prices, a broader selection of products than a typical convenience store. - 1 - 4 In each of the past two fiscal years, the Company derived over 94% of its gross profits from retail sales by Company Stores. It also derives income from continuing monthly royalties based on sales by Franchised Stores, wholesale sales to Franchised Stores, sign and facade rental fees and the provision of certain maintenance, transportation and construction services to the Company's franchisees. Sales at Casey's General Stores historically have been strongest during the Company's first and second quarters and relatively weaker during its fourth quarter. 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. Due to the continuing emphasis on higher-margin, freshly prepared food items, however, Casey's net sales and net income (with the exception of the fourth quarter) have become somewhat less seasonal in recent years. The following table shows the number of Company Stores and Franchised Stores in each state on April 30, 1994:
COMPANY FRANCHISED STATE STORES STORES TOTAL ----- ------ ------- ----- Iowa . . . . . . . . . 215 94 309 Illinois . . . . . . . 156 31 187 Kansas . . . . . . . . 69 5 74 Minnesota. . . . . . . 21 15 36 Missouri . . . . . . . 183 32 215 Nebraska . . . . . . . 24 9 33 South Dakota . . . . . 19 1 20 Wisconsin . . . . . . 0 2 2 --- --- --- Total. . . . 687 (78%) 189 (22%) 876 (100%)
The Company has operational responsibility for all Company Stores. Franchised Stores generally follow the same operating policies as Company Stores and are subject to Company supervision pursuant to its franchise agreements. Franchised Stores and Company Stores offer substantially the same products and conform to the same basic store design. - 2 - 5 The following table shows the number of Company and Franchised Stores opened, Franchised Stores converted to Company Stores and total stores in operation during each of the last five fiscal years:
STORES IN FISCAL YEAR NEW OPERATION AT ENDED STORES CONVERTED END OF APRIL 30, OPENED STORES PERIOD - - ----------- ------ --------- ------------ 1990 Company . . . . . 38 17 566 (1) Franchised. . . . 2 (17) 203 (1) -- --- Total. . . . 40 769 1991 Company . . . . . 14 3 579 (2) Franchised. . . . 4 (3) 202 (2) -- --- Total. . . . 18 781 1992 Company . . . . . 23 2 597 (3) Franchised. . . . 3 (2) 202 (3) -- --- Total. . . . 26 799 1993 Company . . . . . 36 10 639 (4) Franchised. . . . 1 (10) 187 (4) -- --- Total. . . . 37 826 1994 Company . . . . . 56 1 687 (5) Franchised. . . . 4 (1) 189 (5) -- --- Total. . . . 60 876
(1) Two Company Stores and one Franchised Store were closed in 1990. (2) Four Company Stores and two Franchised Stores were closed in 1991. (3) Seven Company Stores and one Franchised Store were closed in 1992. (4) Four Company Stores and six Franchised Stores were closed in 1993. (5) Nine Company Stores and one Franchised Store were closed in 1994. - 3 - 6 Seven Company Stores were opened in May and June 1994 and 50 Company Stores and one Franchised Store were under construction at June 30, 1994. On June 30, 1994, Casey's had purchased or had the right to purchase 58 additional store sites. All but one of the 109 stores under construction or planned for construction on such sites will be Company Stores. Management anticipates opening approximately 60 new Company Stores during fiscal 1995, substantially all of which will be located in Iowa, Illinois and Minnesota. One such store will be located in Sullivan, Indiana, representing the Company's first expansion outside its eight-state market area since 1983. The Company intends to continue to increase the number of Company Stores, and the proportion of Company Stores relative to Franchised Stores, because of the greater profitability of Company Stores and the Company's greater operating control over such stores. The Company anticipates it will increase the number of Company Stores through construction of new stores and the acquisition of existing Franchised Stores. During fiscal 1992, 1993 and 1994, the Company converted 2, 10 and 1 stores, respectively, from Franchised Stores to Company Stores. Management believes that its current market area presents substantial opportunities for continued growth, and the Company intends to concentrate its expansion efforts in this area before pursuing expansion in other geographic markets. In the opinion of management, the Casey's Distribution Center in Ankeny, Iowa can adequately supply the general merchandise requirements of 800 to 1,000 stores located within a 500-mile radius of the Casey's Distribution Center, which would include the Sullivan, Indiana store and several additional store sites being considered in Indiana. In its expansion, the Company intends to follow its traditional store site selection criteria and to locate most new stores in small towns. Management believes that satisfaction of such criteria will provide opportunities for a better return on investment than could be realized from the opening of stores in larger communities. - 4 - 7 Store Operations Products Offered Each Casey's General Store typically carries over 2,500 food and non-food items. The products offered are those normally found in a supermarket, except that the stores do not sell produce or fresh meats, and selection is generally limited to one or two well-known brands of each item stocked. Most staple foodstuffs carried are of nationally advertised brands. Stores sell regional brands of dairy and bakery products, and approximately 94% of the stores offer beer. The non-food items carried include tobacco products, health and beauty aids, school supplies, housewares, pet supplies, photo supplies, ammunition and automotive products. All of the Casey's General Stores offer gasoline or gasohol for sale on a self-service basis. Stores in Iowa, Illinois and Nebraska sell primarily gasohol and are therefore able to avail themselves of a tax incentive for such sales provided in those states. The gasoline and gasohol offered by the stores generally are sold under the Casey's name, although some Franchised Stores sell gasoline under a major oil company brand name. It is management's policy to experiment with additions to the Company's product line, especially products with higher gross profit margins. As a result of this policy, the Company has added various prepared food items to its product line over the years. In 1980, the Company initiated the installation of "snack centers" which now are in approximately 99% of the stores. The snack centers sell sandwiches, fountain drinks, and other items that have gross profit margins higher than those of general staple goods. Casey's also has introduced the sale of donuts prepared on store premises, available in approximately 99% of the stores as of April 30, 1994, as well as cinnamon rolls and cookies, and is installing donut-making facilities in all newly constructed stores. Since 1986, the Company has operated a commissary at which it prepares sandwiches for sale in Casey's General Stores. Management expects the commissary to produce approximately 3 million sandwiches during fiscal 1995, for delivery to both Company and Franchised Stores through the Casey's Distribution Center. Casey's began marketing made-from-scratch pizza in 1984, expanding its availability to 818 (93%) stores as of April 30, 1994. Management believes pizza is the Company's most popular prepared food product, although the Company continues to expand - 5 - 8 its prepared food product line, which now includes ham and cheese, beef, and hot and mild sausage and tenderloin sandwiches, pizza bread, garlic bread, breakfast croissants, quarter-pound hamburgers and cheeseburgers. In addition, Casey's Crispy Fried Chicken was available for take-out at 87 (10%) stores as of April 30, 1994. The pizza and other prepared food products are made on store premises with ingredients delivered from the Casey's Distribution Center. Pizza generally is available in three sizes with ten different toppings and is sold for take-out between the hours of 4:00 P.M. and 11:00 P.M. In addition, at selected store locations a luncheon menu consisting of pizza-by-the-slice, sandwiches, pizza bread, and garlic bread is available. An important part of the Company's marketing strategy is to increase sales volume by pricing competitively on price-sensitive items. On less price-sensitive items, it is the Company's policy to maintain, or in the case of Franchised Stores to recommend, a Company-wide pricing structure in each store that is generally comparable to that of other convenience, gasoline or grocery stores located in the area and competing for the same customers. Management attributes the Company's ability to offer competitive prices to a number of factors, including the Company's central distribution system, its purchasing practices which avoid dependence upon jobbers and vendors by relying on a few large wholesale companies and its success in minimizing land, construction and equipment costs. Management's decision to add snack center items, freshly prepared donuts and pizza to the Company's product selection reflects its strategy to promote high profit margin products that are compatible with convenience store operations. Although retail sales of non-gasoline items during the last three fiscal years have generated approximately 43% of the Company's retail sales, such sales resulted in approximately 76% of the Company's gross profits from retail sales. Gross profit margins for prepared foods items, which have averaged approximately 53% during the last three fiscal years, are significantly higher than the gross profit margin for retail sales of gasoline, which has averaged approximately 9% during such period. Store Design Casey's General Stores are free-standing and, with a few exceptions to accommodate local conditions, conform to standard construction specifications. During the fiscal year ended April - 6 - 9 30, 1994, the aggregate investment in the land, building, equipment and initial inventory for a typical Company Store averaged approximately $600,000. The standard building designed by the Company is a pre-engineered steel frame building mounted on a concrete slab. The current store design measures 36 feet by 66 feet, with approximately 1,300 square feet devoted to sales area, 500 square feet to kitchen space and 575 square feet to storage. Store lots have sufficient frontage and depth to permit adequate drive-in parking facilities on one or more sides of each store. Each store typically includes two islands of gasoline dispensers and storage tanks having a capacity of 20,000 to 30,000 gallons of gasoline. The merchandising display in each store follows a standard layout designed to encourage a flow of customer traffic through all sections of the store. All stores are air conditioned and have modern refrigeration facilities. The store locations feature the Company's bright red and yellow pylon sign and facade, both of which display the name and service mark of the Company. All Casey's General Stores remain open at least 16 hours per day, seven days a week. Most store locations are open from 6:00 a.m. to 11:00 p.m., although hours of operation may be adjusted on a store-by-store basis to accommodate customer traffic patterns. The Company requires that all stores maintain a bright, clean store interior and provide prompt check-out service. It is the Company's policy not to permit the installation of electronic games or sale of adult magazines on store premises. Store Locations The Company traditionally has located its stores in small towns not served by national-chain convenience stores. Approximately 75% of all stores operate in areas with populations of fewer than 5,000 persons, while approximately 6% of all stores are located in communities with populations exceeding 20,000 persons. The Company believes that a Casey's General Store provides a service not otherwise available in small towns, and that a convenience store in an area with limited population can be profitable if it stresses sales volume and competitive prices. The Company's store site selection criteria emphasize the population of the immediate area and daily highway traffic volume. Management believes that, if there is no competing store, a Casey's General Store may operate profitably at a highway location in a community with a population of as few as 500 persons. - 7 - 10 Gasoline Operations Gasoline sales are an important part of the Company's sales and earnings. Approximately 52% of Casey's net sales for the year ended April 30, 1994 were derived from the retail sale of gasoline. The following table summarizes gasoline sales by Company Stores for the three fiscal years ended April 30, 1994:
YEAR ENDED APRIL 30, -------------------- 1992 1993 1994 ---- ---- ---- Number of Gallons Sold 289,456,103 336,192,288 375,962,172 Total Retail Gasoline Sales $302,201,644 $351,361,731 $377,807,750 Percentage of 49.8% 52.2% 51.7% Net Sales Gross Profit 8.2% 8.2% 10.1% Percentage Average Retail Price per Gallon $1.04 $1.05 $1.00 Average Gross Profit Margin per Gallon 8.60 cents 8.55 cents 10.12 cents Average Number of Gallons Sold per Company Store * 492,115 540,999 570,253
* Includes only those stores that had been in operation for at least one full year before commencement of the periods indicated. Retail prices of gasoline decreased slightly during the year ended April 30, 1994. However, the total number of gallons sold by the Company during this period increased, primarily as the result of the increased number of Company Stores in operation and the Company's efforts to price its retail gasoline competitively in the market area served by the particular store. See "BUSINESS--Store Operations--Competition" and "LEGAL PROCEEDINGS" herein. As a result of these conditions, total retail gasoline sales by the Company increased during the period, while the percentage of such sales to the Company's total net sales decreased slightly. - 8 - 11 Retail gasoline profit margins have a substantial impact on the Company's net income. Profit margins on gasoline sales can be adversely affected by factors beyond the control of the Company, including over-supply in the retail gasoline market, uncertainty or volitility in the wholesale gasoline market (such as that experienced during 1991 as a result of the Persian Gulf crisis) and price competition from other gasoline marketers. Any substantial decrease in profit margins on gasoline sales or number of gallons sold could have a material adverse effect on the Company's earnings. The Company purchases its gasoline from independent national and regional petroleum distributors. Although in recent years the Company's suppliers have not experienced any difficulties in obtaining sufficient amounts of gasoline to meet the Company's needs, unanticipated national and international events could result in a reduction of gasoline supplies available for distribution to the Company. A substantial curtailment in gasoline supplied to the Company could adversely affect the Company by reducing gasoline sales. Further, management believes that a significant amount of the Company's business results from the patronage of customers primarily desiring to purchase gasoline and, accordingly, reduced gasoline supplies could adversely affect the sale of non-gasoline items. These factors could have a material adverse impact upon the Company's earnings and operations. DISTRIBUTION AND WHOLESALE ARRANGEMENTS The Company supplies all Company Stores and over 90% of the Franchised Stores with groceries, food (including sandwiches prepared at the Company's commissary), health and beauty aids and general merchandise from the Casey's Distribution Center. The stores place orders for merchandise through a telecommunications link-up to the computer at the Company's headquarters in Ankeny, and weekly shipments are made from the Casey's Distribution Center by 36 Company-owned delivery trucks. The Company charges Franchised Stores processing and shipping fees for each order filled by the Casey's Distribution Center. The efficient service area of the Casey's Distribution Center is approximately 500 miles, which encompasses all of the Company's existing and proposed stores. The Company's only wholesale sales are to Franchised Stores, to which it sells groceries, prepared sandwiches, ingredients and supplies for donuts, sandwiches and pizza, health and beauty aids, general merchandise and gasoline. Although Casey's derives income from this activity, it makes such sales, particularly gasoline sales, at narrow profit - 9 - 12 margins in order to promote the competitiveness and increase the sales to Franchised Stores. In fiscal 1994, the Company purchased directly from manufacturers approximately 90% of the food and non-food items sold from the Casey's Distribution Center. The Company has not entered into contracts with any of the suppliers of products sold by Casey's General Stores. Management believes that the absence of such contracts is customary in the industry for purchasers such as the Company and enables Casey's to respond flexibly to changing market conditions. FRANCHISE OPERATIONS The Company has franchised Casey's General Stores since 1970. In addition to generating income for the Company, franchising historically enabled Casey's to obtain desirable store locations from persons who have preferred to become franchisees rather than to sell or lease their locations to the Company. Franchising also enabled the Company to expand its system of stores at a faster rate, thereby achieving operating efficiencies in its warehouse and distribution system as well as greater identification in its market area. As Casey's has grown and strengthened its financial resources, the advantages of franchising have decreased in importance and the Company currently grants new franchises only to existing franchisees on a limited basis. From April 30, 1983 to April 30, 1994, the percentage of Company Stores increased from 44% to 78%. From inception to April 30, 1994, the Company had converted 135 Franchised Stores to Company Stores by leasing or purchasing such stores. All franchisees pay the Company a royalty fee equal to 3% of gross receipts derived from total store sales excluding gasoline, subject to a minimum monthly royalty of $300. The Company currently assesses a royalty fee of $.018 per gallon on gasoline sales, although it has discretion to increase this amount to 3% of retail gasoline sales. In addition, franchisees pay the Company a sign and facade rental fee. The franchise agreements do not authorize the Company to establish the prices to be charged by franchisees. Further, except with respect to certain supplies and items provided in connection with the opening of each store, each franchisee has unlimited authority to purchase supplies and inventory from any supplier, provided the products meet the Company's quality standards. Each franchise agreement contains a non-competition clause that restricts the franchisee's ability to operate a convenience-style store in that area for a period of two or three years following termination of the agreement. See - 10 - 13 "BUSINESS - Government Regulation" herein for a discussion of recent legislation in Iowa concerning franchise agreements. PERSONNEL On April 30, 1994, the Company had 2,880 full-time employees and 4,393 part-time employees. The Company has not experienced any work stoppages. There are no collective bargaining agreements between the Company and any of its employees. The Company's supervisory personnel are responsible for monitoring and assisting all stores, including Franchised Stores. Centralized control of store operations is primarily maintained by the Chief Operating Officer of the Company, who is assisted by the Vice President of Store Operations. Reporting directly to the Vice President of Store Operations are four regional operations managers. Reporting directly to the regional managers are 15 district managers, each with responsibility over approximately equal numbers of stores. Each district manager is generally in charge of seven supervisors. Each of the 112 supervisors in turn is responsible for the operations of approximately eight individual stores. The majority of store managers and store personnel live in the community in which their Casey's store is located. Training of store managers and store personnel is conducted through the Store Operations Training Department overseen by the Director of Store Operations Training. The Company operates a central training facility at its Headquarters facility in Ankeny and provides continuing guidance and training in the areas of merchandising, advertising and promotion, administration, record keeping, accounting, inventory control and other general operating and management procedures. As an incentive to the Company's employees and those of franchisees, management stresses an internal promotion philosophy. Most district managers and store supervisors previously worked as store managers. At the senior management level, one of the Company's executive officers has been employed by the Company for more than eighteen years, one has been employed for more than twenty-two years and one has been employed for more than twenty-six years. In addition to its four executive officers, the Company has Vice Presidents of Store Operations, Property Management, Transportation, Food Service and Marketing. The Company also has 30 other employees with managerial responsibilities in the areas of store operations, gasoline marketing, real estate development, construction, equipment maintenance, merchandising, - 11 - 14 advertising, Distribution Center operations, payroll, accounting and data processing. The Company believes that such employees are capable of carrying out their responsibilities without substantial supervision by the executive officers. COMPETITION The Company's business is highly competitive. Food, including prepared foods, and non-food items similar or identical to those sold by the Company are generally available from various competitors in the communities served by Casey's General Stores. Management believes that its stores located in small towns compete principally with local convenience stores, grocery stores and similar retail outlets and, to a lesser extent, with prepared food outlets or restaurants and expanded gasoline stations offering a more limited selection of grocery and food items for sale. Stores located in more heavily populated communities may compete with local and national grocery and drug store chains, expanded gasoline stations, supermarkets, discount food stores and traditional convenience stores. Convenience store chains competing in the larger towns served by Casey's General Stores include 7-Eleven, Kwik Shops, and regional chains. Some of the Company's competitors have greater financial and other resources than the Company. Gasoline sales, in particular, are intensely competitive. The Company competes with both independent and national brand gasoline stations, some of which may have access to more favorable arrangements for gasoline supply than do the Company or the firms that supply its stores. Management believes that the most direct competition for gasoline sales comes from other self-service installations in the vicinity of individual store locations, some of whom regularly offer non-cash discounts on self-service gasoline purchases such as a "free" car wash or "mini-service." Company Stores generally do not offer such discounts. In addition, management believes that Company Stores compete for gasoline customers who regularly travel outside of their relatively smaller community for shopping or employment purposes, and who therefore are able to purchase gasoline while in nearby larger communities where retail gasoline prices generally are lower. For this reason, the Company attempts to offer gasoline for sale at prices comparable to those prevailing in nearby larger communities. See "LEGAL PROCEEDINGS" herein. The Company believes that the competitiveness of Casey's General Stores is based on price (particularly in the case of gasoline sales) as well as on a combination of store location, extended hours, a wide selection of name brand products, self-service gasoline facilities and prompt check-out service. The Company also believes it is important to its business to - 12 - 15 maintain a bright, clean store and to offer quality products for sale. SERVICE MARKS The name "Casey's General Store" and the service mark consisting of the Casey's design logo (with the words "Casey's General Store") are registered service marks of the Company under federal law. The Company believes that these service marks are of material importance in promoting and advertising the Company's business. GOVERNMENT REGULATION The United States Environmental Protection Agency and several states, including Iowa, have established requirements for owners and operators of underground gasoline storage tanks ("USTs") with regard to (i) maintenance of leak detection, corrosion protection and overfill/spill protection systems, (ii) upgrade of existing tanks, (iii) actions required in the event of a detected leak, (iv) prevention of leakage through tank closings and (v) required gasoline inventory recordkeeping. Since 1984, new Company Stores have been equipped with non-corroding fiberglass USTs, including some with double-wall construction, over-fill protection and electronic tank monitoring, and the Company has an active inspection and renovation program with respect to its older USTs. The Company currently has 1,455 USTs of which 1,043 are fiberglass and 412 are steel. Management believes that its existing gasoline procedures and planned capital expenditures will continue to keep the Company in substantial compliance with all current federal and state UST regulations. Several of the states in which the Company does business have trust fund programs with provisions for sharing or reimbursing corrective action or remediation costs incurred by UST owners, including the Company. These programs, other than the State of Iowa's, generally are in the early stages of operation and the extent of available coverage or reimbursement under such programs for costs incurred by the Company is not fully known at this time. In each of the years ended April 30, 1993 and 1994, the Company spent approximately $2,533,000 and $1,814,000, respectively, for assessments and remediation. Substantially all of these expenditures have been submitted for reimbursement from state-sponsored trust fund programs, and, as of June 30, 1994, approximately $3,000,000 has been received from such programs. The Company has accrued a liability at April 30, 1994, of approximately $3,200,000 for estimated expenses related to anticipated corrective actions or remediation efforts, including relevant legal and consulting - 13 - 16 costs. Management believes the Company has no material joint and several environmental liability with other parties. Management of the Company currently estimates that aggregate capital expenditures for electronic monitoring, cathodic protection and overfill/spill protection will approximate $2,000,000 in fiscal 1995 through December 23, 1998, in order to comply with the existing UST regulations. Additional regulations, or amendments to the existing UST regulations, could result in future revisions to such estimated expenditures. The Federal Trade Commission and some states have adopted laws regulating franchise operations. Existing laws generally require certain disclosures and/or registration in connection with the sale of the franchises, and regulate certain aspects of the relationship with franchisees, such as rights of termination, renewal and transfer. Management believes that the Company is duly registered in all states where its present operations require such registration. Management does not believe that the existing state registration and disclosure requirements, or the federal disclosure requirements, have a material effect on the Company's operations. During the 1992 legislative session, the Iowa General Assembly enacted legislation relating to franchise agreements and their enforcement and establishing certain duties and limitations on franchisors. The legislation, which became effective July 1, 1992, applies to all new or existing franchises that are operated in the State of Iowa, including those of the Company. The legislation contains, among other things, provisions regarding the transfer of franchises, the termination or nonrenewal of franchises, and the encroachment on existing franchises. Several such provisions conflict with those contained in existing franchise agreements entered into by the Company with respect to stores located in the State of Iowa. As a result, several provisions of the Company's existing franchise agreements may not be enforceable under the legislation. Although bills have subsequently been introduced that would modify or repeal certain provisions of the legislation, it was not amended during the most recent session of the General Assembly. On May 14, 1993, in an unrelated proceeding brought by other franchisors operating in Iowa, the United States District Court for the Southern District of Iowa ruled that certain provisions of the legislation (those which make the legislation applicable to franchises existing before its effective date and those provisions governing the transfer of franchises, encroachment, termination, and non-renewal) substantially - 14 - 17 impair, in violation of the United States and Iowa Constitutions, the franchisor-plaintiffs' contractual rights under their license agreements with certain Iowa franchisees. The Court made no ruling on the constitutionality of the legislation as applied to franchise agreements entered into or renewed after the effective date of the legislation. The Company understands that the Court's ruling was recently affirmed by the Eighth Circuit Court of Appeals. The Company has entered into two new franchise agreements in Iowa since the enactment of the legislation, and management does not expect the legislation to have a material effect on the Company's business. ITEM 2. PROPERTIES The Company owns and has consolidated its Corporate Headquarters and Distribution Center operations on a 36-acre site in Ankeny, Iowa. This facility consists of approximately 255,000 square feet, including a central Corporate Headquarters office building, expanded Distribution Center and vehicle service/maintenance center. The facility was completed in February 1990 and placed in full service at that time. The Company owns an approximately 10,000 square-foot building on an eight-acre site in Creston, Iowa that it utilizes as a sandwich commissary center for the preparation of sandwiches sold in Casey's General Stores. On April 30, 1994, Casey's owned the land at 557 locations and the buildings at 574 locations, and leased the land at 130 locations and the buildings at 113 locations. Most of the leases provide for the payment of a fixed rent, plus property taxes and insurance and maintenance costs. Generally, the leases are for terms of 10 to 20 years, with options to renew for additional periods or options to purchase the leased premises at the end of the lease period. The Company leases approximately 16,800 square feet of office and warehouse space at 1299 N.E. Broadway Avenue, Des Moines, Iowa, which was used as its principal offices and corporate headquarters until the new Corporate Headquarters facility became available in February 1990. See "Other Information Relating to Directors and Executive Officers - Certain Transactions" in the Company's Proxy Statement dated August 15, 1994 for a description of the terms of the Company's lease of such space. ITEM 3. LEGAL PROCEEDINGS The Company is the sole defendant in a class action lawsuit brought by five Iowa retail gasoline dealers and a trade association representing independent distributors and retailers - 15 - 18 of gasoline products within the State of Iowa, acting on behalf of a class of such dealers. The Amended and Substituted Complaint - Class Action (the "Bathke Complaint"), filed in the United States District Court for the Southern District of Iowa (Gilbert Bathke, et. al. v. Casey's General Stores, Inc., Civil No. 4-90-CV-80658), alleges that by selling gasoline at "very low prices which are supported by higher prices charged for the same petroleum products in other markets," the Company violated federal anti-trust laws (specifically, Section 2(a) of the Robinson-Patman Act and Section 2 of the Sherman Act) and State of Iowa unfair price discrimination laws. The Bathke Complaint seeks as relief a permanent injunction enjoining such practices, unspecified monetary damages (to be trebled as provided by law) and attorneys' fees. In its Answer to the Bathke Complaint, the Company denied the material allegations included therein and raised several affirmative defenses to said allegations. The Company initially attempted to have the case dismissed on jurisdictional grounds, but the Company's motion to that effect was overruled in an Order dated March 31, 1992. The Court granted plaintiffs' request to certify the lawsuit as a class action and the Company understands that approximately 50 potential class members formally elected out of the litigation. A number of the remaining class members ultimately may be excluded from the class by reason of non-compliance with discovery requests or at their own request. As a result, the precise number of class members cannot be ascertained at this time. Management currently believes that the class as certified for purposes of trial will most likely include approximately 165 members. All formal discovery activities (including depositions of class members) were recently completed and on July 13, 1994 the Company filed a motion for summary judgment seeking the dismissal of all counts of the Bathke Complaint. The Company maintains, among other arguments, that plaintiffs cannot establish liability by "common proof", that the record shows no evidence of the requisite predatory intent, that it has not been shown that the Company's prices were below the appropriate measure of cost, that plaintiffs have not borne their burden to show recoupment and that the record contains insufficient evidence of antitrust injury and damages. The Company also filed alternative motions to dismiss with prejudice as to certain class members who did not respond to discovery requests and to decertify the class action. Oral argument on the Company's motions is expected to be held on August 5, 1994. Trial is currently set to begin on October 17, 1994. - 16 - 19 Management does not believe that the Company is liable to plaintiffs for the conduct complained of and intends to contest the matter vigorously. The Company from time to time is a party to other legal proceedings arising from the conduct of its business operations, including proceedings relating to personal injury and employment claims, disputes under franchise agreements and claims by state and federal regulatory authorities relating to the sale of products pursuant to state or federal licenses or permits. Management does not believe that the potential liability of the Company with respect to such other proceedings pending as of the date of this Form 10-K is material in the aggregate. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information required in response to this Item is incorporated herein by reference from the section entitled "Common Stock Data" set forth on page 24 of the Company's Annual Report for the year ended April 30, 1994. The cash dividends declared by the Company (adjusted to give effect to the two-for-one stock split distributed on February 15, 1994) during the periods indicated have been as follows: Cash Dividend Declared ------------- Calendar 1992 ------------- First Quarter $.015 Second Quarter .015 Third Quarter .015 Fourth Quarter .015 ---- $.06 - 17 - 20 Calendar 1993 ------------- First Quarter $.015 Second Quarter .01875 Third Quarter .01875 Fourth Quarter .01875 ------- $.07125 Calendar 1994 ------------- First Quarter $.01875 Second Quarter .02 ITEM 6. SELECTED FINANCIAL DATA The information required in response to this Item is incorporated herein by reference from the section entitled "Selected Financial Data" set forth on page 23 of the Company's Annual Report for the year ended April 30, 1994. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required in response to this Item is incorporated herein by reference from pages 18 through 22 of the Company's Annual Report for the year ended April 30, 1994. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required in response to this Item is incorporated herein by reference from pages 8 through 17 and page 24 of the Company's Annual Report for the year ended April 30, 1994. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required in response to this Item is incorporated by reference from the section entitled "Election of Directors" set forth on pages 4 through 7 of the Company's Proxy Statement dated August 15, 1994. - 18 - 21 ITEM 11. EXECUTIVE COMPENSATION The information required in response to this Item is incorporated herein by reference from that portion of the section entitled "Executive Compensation" set forth on pages 13 through 17 of the Company's Proxy Statement dated August 15, 1994. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required in response to this Item is incorporated herein by reference from the sections entitled "Shares Outstanding" and "Voting Procedures", set forth on pages 2 and 3 of the Company's Proxy Statement dated August 15, 1994, and from the section entitled "Beneficial Ownership of Shares of Common Stock By Directors and Executive Officers" set forth on pages 8 and 9 thereof. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required in response to this Item is incorporated herein by reference from the section entitled "Other Information Relating to Directors and Executive Officers" set forth on pages 18 and 19 of the Company's Proxy Statement dated August 15, 1994. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) DOCUMENTS FILED The documents listed below are filed as a part of this Report on Form 10-K and are incorporated herein by reference: (1) The following financial statements, shown on pages 8 through 17 of the Company's Annual Report for the year ended April 30, 1994: Balance Sheets, April 30, 1994 and 1993 Statements of Income, Three Years Ended April 30, 1994 Statements of Shareholders' Equity, Three Years Ended April 30, 1994 Statements of Cash Flows, Three Years Ended April 30, 1994 Notes to Financial Statements Independent Auditors' Report - 19 - 22 (2) The financial statement schedules set forth in Item 14(d) of this report. (3) The exhibits set forth in Item 14(c) of this report. The management contracts or compensatory plans or arrangements required to be filed as an exhibit to this Form 10-K pursuant to Item 14(c) consist of the following: Exhibit Number Document -------------- -------- 10.4(a) Fifth Amended and Restated Casey's General Stores, Inc. Employees' Stock Ownership Plan and Trust Agreement (g) 10.19 Casey's General Stores, Inc. 1991 Incentive Stock Option Plan (j) and amendment thereto (o) 10.21 Employment Agreement with Donald F. Lamberti (l) 10.22 Employment Agreement with Ronald M. Lamb (l) 10.23 Employment Agreement with Douglas K. Shull (l) 10.24 Employment Agreement with John G. Harmon ____________________ (g) Incorporated by reference from the Annual Report on Form 10-K for the fiscal year ended April 30, 1989. (j) Incorporated by reference from the Registration Statement on Form S-8 (33-42907) filed September 23, 1991. (l) Incorporated by reference from the Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1992. (o) Incorporated by reference from the Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1994. - 20 - 23 (b) REPORTS ON FORM 8-K There were no reports on Form 8-K filed during the fiscal quarter ended April 30, 1994. (c) EXHIBITS Exhibit Number Document ------ -------- 3.1 Restated and Amended Articles of Incorporation (a) and Amendments thereto (b), (d), (f) 3.2 Amended and Restated By-Laws (h) 4.2 Rights Agreement between Casey's General Stores, Inc. and United Missouri Bank of Kansas City, N.A., as Rights Agent, relating to Common Share Purchase Rights (e) and amendments thereto (i), (p) 4.3 Note Agreement between Casey's General Stores, Inc. and Principal Mutual Life Insurance Company and Nippon Life Insurance Company of America (n) 9 Voting Trust Agreement (a) and Amendment thereto (d) 10.4(a) The Fifth Amended and Restated Casey's General Stores, Inc. Employees' Stock Ownership Plan and Trust Agreement (g) 10.6 Lease Agreement between Casey's General Stores, Inc. and Broadway Distributing Company (a) 10.8 Form of Franchise Agreement (a) 10.9 Form of Store Lease Agreement (a) 10.10 Form of Equipment Lease Agreement (a) 10.16 Secured Promissory Note dated November 30, 1989 given to Principal Mutual Life Insurance Company (f) 10.18 Commercial Note with Norwest Bank Iowa, N.A.(k) 10.19 Casey's General Stores, Inc. 1991 Incentive Stock Option Plan (j) and amendment thereto (o) 10.21 Employment Agreement with Donald F. Lamberti (l) 10.22 Employment Agreement with Ronald M. Lamb (l) 10.23 Employment Agreement with Douglas K. Shull (l) 10.24 Employment Agreement with John G. Harmon 10.25 Term Loan Agreement and Current Note with Norwest Bank Iowa, N.A. (m) 10.26 Loan Agreement and Commercial Note with Peoples Trust and Savings Bank (m) - 21 - 24 11 Statement regarding computation of earnings per share 13 Financial Statements from 1994 Annual Report 24.1 Report and Consent of KPMG Peat Marwick - - ----------------------------------------------- (a) Incorporated herein by reference from the Registration Statement on Form S-1 (2-82651) filed August 31, 1983. (b) Incorporated herein by reference from the Annual Report on Form 10-K for the fiscal year ended April 30, 1986 (0-12788). (c) Reserved. (d) Incorporated herein by reference from the Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1988 (0-12788). (e) Incorporated herein by reference from the Registration Statement on Form 8-A filed June 19, 1989 (0-12788). (f) Incorporated by reference from the Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 1989. (g) Incorporated by reference from the Annual Report on Form 10-K for the fiscal year ended April 30, 1989. (h) Incorporated by reference from the Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 1989. (i) Incorporated by reference from the Form 8 (Amendment No. 1 to the Registration Statement on Form 8-A filed June 19, 1989) filed September 10, 1990. (j) Incorporated by reference from the Registration Statement on Form S-8 (33-42907) filed September 23, 1991. (k) Incorporated by reference from the Annual Report on Form 10-K for the fiscal year ended April 30, 1991. (l) Incorporated by reference from the Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1992. (m) Incorporated by reference from the Annual Report on Form 10-K for the fiscal year ended April 30, 1992. (n) Incorporated by reference from the Current Report on Form 8-K filed February 18, 1993. - 22 - 25 (o) Incorporated by reference from the Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1994. (p) Incorporated by reference from the Form 8-A/A (Amendment No. 3 to the Registration Statement on Form 8-A filed June 19, 1989) filed March 30, 1994. (D) FINANCIAL STATEMENT SCHEDULES Schedule V - Property, Plant and Equipment Schedule VI - Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment Schedule IX - Short-Term Borrowings All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements and notes thereto. - 23 - 26 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. (Registrant) Date: July 25, 1994 By /s/ Donald F. Lamberti Donald F. Lamberti, Chief Executive Officer and Chairman of the Board (Principal Executive Officer) - 24 - 27 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: July 25, 1994 By /s/ Donald F. Lamberti --------------------------- Donald F. Lamberti Chief Executive Officer, Chairman of the Board (Principal Executive Officer) Date: July 25, 1994 By /s/ Ronald M. Lamb --------------------------- Ronald M. Lamb President and Chief Operating Officer, Director Date: July 25, 1994 By /s/ Douglas K. Shull --------------------------- Douglas K. Shull Treasurer, Director (Principal Financial Officer and Principal Accounting Officer) Date: July 25, 1994 By /s/ John G. Harmon --------------------------- John G. Harmon Secretary, Director Date: July 26, 1994 By /s/ George A. Doerner --------------------------- George A. Doerner Director Date: July 26, 1994 By /s/ Kenneth H. Haynie --------------------------- Kenneth H. Haynie Director Date: July 26, 1994 By /s/ John R. Fitzgibbon --------------------------- John R. Fitzgibbon Director Date: July 25, 1994 By /s/ Jack P. Taylor --------------------------- Jack P. Taylor Director - 25 - 28 CASEY'S GENERAL STORES, INC. _____________________________ SCHEDULE V. PROPERTY, PLANT AND EQUIPMENT
Column A Column B Column C Column D Column E Column F - - -------- -------- -------- -------- -------- -------- Balance at Other Balance beginning Additions changes - at end Classification of period at cost Retirements add (deduct) of period - - -------------- --------- --------- ----------- ------------ --------- Year ended April 30, 1994 Land $ 27,596,097 7,211,027 28,917 -- 34,778,207 Buildings and leasehold improvements 106,098,220 25,811,874 378,654 -- 131,531,440 Machinery and equipment 148,223,940 30,789,051 2,937,280 (55,658) 176,020,053 Leasehold interest in property and equipment 11,707,337 3,264,222 992,000 -- 13,979,559 ----------- ---------- ---------- ----------- ----------- $293,625,594 $67,076,174 $ 4,336,851 $ (55,658) $356,309,259 ----------- ---------- ---------- ----------- ----------- Year ended April 30, 1993 Land $ 21,539,035 6,057,062 -- -- 27,596,097 Buildings and leasehold improvements 87,525,756 19,340,804 768,340 -- 106,098,220 Machinery and equipment 124,948,783 25,999,010 2,668,299 (55,554) 148,223,940 Leasehold interest in property and equipment 12,362,872 -- 655,535 -- 11,707,337 ----------- ---------- ---------- ----------- ----------- $246,376,446 $51,396,876 $ 4,092,174 $ (55,554) $293,625,594 ----------- ---------- ---------- ----------- ----------- Year ended April 30, 1992 Land $ 17,890,067 $ 3,703,655 $ 54,687 $ -- $ 21,539,035 Buildings and leasehold improvements 76,479,998 11,405,077 359,319 -- 87,525,756 Machinery and equipment 107,050,428 20,279,480 1,614,626 (766,499)(A) 124,948,783 Leasehold interest in property and equipment 13,615,372 -- 1,252,500 -- 12,362,872 ----------- ---------- ---------- ---------- ----------- $215,035,865 $35,388,212 $3,281,132 $ (766,499) $246,376,446 ----------- ---------- --------- ----------- -----------
(A) Certain equipment reclassified at depreciated cost. 29 CASEY'S GENERAL STORES, INC. ____________________________________ SCHEDULE VI. ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
Column A Column B Column C Column D Column E Column F - - -------- -------- -------- -------- -------- -------- Additions Balance at charged to Other Balance beginning costs and changes - at end Description of period expenses Retirements add (deduct) of period - - ----------- --------- --------- ----------- ------------ --------- Year ended April 30, 1994 Buildings and leasehold improvements $15,276,157 $ 3,908,621 $ 143,387 $ -- $19,041,391 Machinery and equipment 56,151,304 13,613,035 1,849,711 (55,658) 67,858,970 Leasehold interest in property and equipment 4,816,794 883,433 666,500 -- 5,033,727 ---------- ---------- --------- ----------- ---------- $76,244,255 $18,405,089 $2,659,598 $ (55,658) $91,934,088 ---------- ---------- --------- ----------- ---------- Year ended April 30, 1993 Buildings and leasehold improvements $12,216,231 3,217,884 157,958 -- 15,276,157 Machinery and equipment 46,041,112 11,558,251 1,392,505 (55,554) 56,151,304 Leasehold interest in property and equipment 4,561,103 714,426 458,735 -- 4,816,794 ---------- ---------- --------- ----------- ---------- $62,818,446 $15,490,561 $2,009,198 $ (55,554) $76,244,255 ---------- ---------- --------- ----------- ---------- Year ended April 30, 1992 Buildings and leasehold improvements $ 9,716,004 $ 2,649,034 $ 148,807 $ -- $12,216,231 Machinery and equipment 37,955,535 9,816,858 964,782 (766,499)(A) 46,041,112 Leasehold interest in property and equipment 4,667,051 786,091 892,039 -- 4,561,103 ---------- ---------- --------- ----------- ---------- $52,338,590 $13,251,983 $2,005,628 $( 766,499) $62,818,446 ---------- ---------- --------- ----------- -----------
(A) Certain equipment reclassified at depreciated cost. 30 CASEY'S GENERAL STORES, INC. _____________________________ SCHEDULE IX. SHORT-TERM BORROWINGS
Column A Column B Column C Column D Column E Column F - - -------- -------- -------- -------- -------- -------- Weighted Maximum Average average Weighted amount amount interest Category of Balance average outstanding outstanding rate aggregate short- at end interest during the during the during the term borrowings of period rate period period (A) period (B) - - --------------- --------- --------- ----------- ----------- ------------- April 30, 1994 Notes Payable, banks $18,500,000 4.48% $25,000,000 $17,425,616 4.01% April 30, 1993 Notes Payable, banks $12,750,000 3.83% $20,000,000 $12,653,425 4.04% April 30, 1992 Notes Payable, banks $7,000,000 4.77% $15,000,000 $5,313,934 5.59%
_________________________ (A) The average was calculated based on the daily average outstanding balance. (B) The weighted average was computed by dividing related interest expense by the average short-term borrowings outstanding. 31 EXHIBIT INDEX Exhibit No. Description Page - - ----------- ----------- ---- 10.24 Employment Agreement with John G. Harmon 11 Statement regarding computation of earnings per share 13 Financial Statements from 1994 Annual Report 24.1 Report and Consent of KPMG Peat Marwick EX-10.24 2 EMPLOYMENT AGREEMENT 1 EXHIBIT 10.24 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of the 19th day of July, 1994, by and between Casey's General Stores, Inc., an Iowa corporation (the "Company"), and John G. Harmon ("Harmon"). WHEREAS, the Board of Directors of the Company (the "Board of Directors") recognizes that the dedication of Harmon as an officer and director to the affairs and welfare of the Company has resulted in a long and successful association; and WHEREAS, the Board of Directors further recognizes that the Company has grown and prospered as a result of its association with Harmon, and has determined that it is in the best interest of the Company and its shareholders to preserve this association so as to enable the Company to further benefit from Harmon's superior knowledge and expertise in all of its present and future business endeavors; and WHEREAS, the Board of Directors has further determined that it is appropriate and in the best interests of the Company and its shareholders to enter into written contractual arrangements with respect to Harmon's employment by the Company, with the concurrence of Harmon, in order to more accurately reflect the obligations and responsibilities currently being undertaken by Harmon as Secretary of the Company, as well as those reasonably expected of him in the future in that capacity, and to provide certain incentives and compensation arrangements as a result thereof; and WHEREAS, the Board of Directors has further determined that it is in the best interest of the Company and its shareholders to assure that the Company will have the continued dedication of Harmon, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company, and to further encourage Harmon's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide Harmon with compensation arrangements upon a Change of Control which provide him with compensation for expected losses that he would suffer in the event of a Change of Control and which are competitive with those of other corporations, and, in order to accomplish these objectives, has determined to cause the Company to enter into this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, the parties hereto agree as follows: -1- 2 1. Certain Definitions. For purposes of this Agreement, and in addition to the other definitions set forth herein, the following terms shall have the following meanings: a) "Change of Control" shall mean: (i) the acquisition (other than from the Company) by any Person (as hereinafter defined), entity or "group" within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act"), (excluding for this purpose, the Company or any employee benefit plan of the Company, which acquires beneficial ownership of voting securities of the Company) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of either the then outstanding shares of Common Stock, no par value, of the Company or the combined voting power of the Company's then outstanding voting securities entitled to vote generally in the election of directors (hereinafter referred to as the "Common Stock"), unless such beneficial ownership was acquired as a result of an acquisition of shares of Common Stock by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person, entity or "group" to twenty percent (20%) or more of the Common Stock of the Company then outstanding; provided, however, that if a Person, entity or "group" shall become the beneficial owner of twenty percent (20%) or more of the Common Stock of the Company then outstanding by reason of share purchases by the Company and shall, after such share purchases by the Company, become the beneficial owner of any additional shares of Common Stock of the Company, then such Person, entity or "group" shall be deemed to have met the conditions hereof; or (ii) individuals who, as of the date hereof, constitute the Board of Directors (as of the date hereof, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this Agreement considered as though such person were a member of the Incumbent Board; or -2- 3 (iii) approval by the shareholders of the Company of a reorganization, merger, consolidation (in each case, with respect to which persons who were the shareholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than fifty percent (50%) of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company's then outstanding voting securities) or a liquidation or dissolution of the Company or of the sale of all or substantially all of the assets of the Company. (b) "Annual Increase" shall take effect on each January 1 for which the benefit at issue is payable and shall mean fifty percent (50%) of the annual increase in the National Consumer Price Index for the City of Des Moines, Iowa, as published by the United States Bureau of Labor Statistics. (c) "Annual Bonus" shall mean any bonus payable at the discretion of the Board of Directors of the Company, on such terms and in such amounts as it shall determine. (d) "Employment Period" shall mean the term of Harmon's employment under this Agreement, as set forth in Section 2 hereof. (e) "Code" shall mean the Internal Revenue Code of 1986, as amended. (f) "Accrued Obligations" shall mean (i) Harmon's Salary through the Date of Termination at the rate in effect on the Date of Termination, (ii) the product of the Annual Bonus paid to Harmon for the last full fiscal year and a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (iii) any compensation previously deferred (together with any accrued interest thereon) and not yet paid by the Company and any accrued vacation pay not yet paid by the Company. (g) "Person" shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) and all "affiliates" and "associates" of such entity (as those terms are defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act). 2. Employment and Term. The Company agrees to employ Harmon, and Harmon agrees to serve the Company, as Secretary of the Company until March 1, 1997, unless his employment is otherwise terminated as provided herein; provided, however, that in the event of a Change of Control during the foregoing Employment Period, this Agreement shall continue in full force and -3- 4 effect for an additional period of three (3) years following the expiration of the Employment Period (until March 1, 2000). 3. Duties of Harmon. During the period of his employment in the capacity of Secretary, Harmon agrees to devote his professional skill and energy to the faithful and full satisfaction of his duties as Secretary. It is agreed and understood that Harmon will perform all duties assigned to him, which shall be substantially the same as those performed by Harmon as Secretary of the Company prior to the date of this Agreement (including status, offices, titles and reporting requirements), to the full satisfaction of the Board of Directors. The Company agrees that Harmon shall have such authority and discretion as is necessary to fully and faithfully perform his duties in a proper and efficient manner, subject to review by the Board of Directors. During the period of his employment, it shall not be a violation of this Agreement for Harmon to (i) serve on corporate, civil or charitable boards or committees, (ii) deliver lectures or fulfill speaking engagements and (iii) manage personal investments, so long as such activities do not significantly interfere with the performance of Harmon's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by Harmon prior to the date hereof, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the date hereof shall not thereafter be deemed to interfere with the performance of Harmon's responsibilities to the Company. 4. Compensation. The Company shall pay to Harmon an annual salary of One Hundred Five Thousand Dollars ($105,000), payable in equal monthly installments, or such other amount as shall be mutually agreed upon by the Company and Harmon, as evidenced by a duly signed Schedule of Compensation attached hereto and marked as Exhibit "A" (the "Salary"). In addition, Harmon and/or Harmon's family shall be entitled to all benefits presently provided or those which may hereafter be provided generally by the Company to its employees, officers or directors, including health insurance and life insurance. 5. Termination of Employment. (a) Death or Disability. Harmon's employment under this Agreement shall terminate automatically upon Harmon's death. If the Company determines in good faith that the Disability of Harmon has occurred (pursuant to the definition of "Disability" set forth below), it may give to Harmon written notice of its intention to terminate Harmon's employment as Secretary of the Company. In such event, Harmon's employment with the Company shall terminate effective on the thirtieth (30th) day after receipt of such notice by Harmon (the -4- 5 "Disability Effective Date"), provided that, within the thirty (30) days after such receipt, Harmon shall not have returned to full-time performance of his duties. For purposes of this Agreement, "Disability means disability or incapacity of Harmon which, at least twenty-six (26) weeks after its commencement, is determined by the Board of Directors upon competent medical advice to be such as to prevent Harmon from performing substantially all of the duties as Secretary of the Company. (b) Cause. The Company may terminate Harmon's employment for "Cause." For purposes of this Agreement, "Cause" means (i) an act or acts of personal dishonesty taken by Harmon and intended to result in substantial personal enrichment of Harmon at the expense of the Company, (ii) repeated violations by Harmon of Harmon's obligations under Section 3 of this Agreement which are demonstratively willful and deliberate on Harmon's part and which are not remedied in a reasonable period of time after receipt of written notice from the Company or (iii) the conviction of Harmon of a felony when such conviction is no longer subject to direct appeal. (c) Good Reason. Harmon's employment may be terminated by Harmon for Good Reason. For purposes of this Agreement, "Good Reason" means: (i) the assignment to Harmon of any duties inconsistent in any respect with Harmon's position (including status, office, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3 of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Harmon; (ii) Any failure by the Company to comply with the provisions of Section 4 of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Harmon; (iii) the Company's requiring Harmon to be based at any office or location other than the Company's Corporate Headquarters facility in Ankeny, Iowa, except for travel reasonably required in the performance of Harmon's responsibilities; -5- 6 (iv) any purported termination by the Company of Harmon's employment otherwise than for death, Disability or Cause as expressly permitted by this Agreement; or (v) any failure by the Company to comply with and satisfy Section 13(c) of this Agreement. For purposes of this Section 5(c), any good faith determination of "Good Reason" made by Harmon shall be conclusive. (d) Notice of Termination. Any termination by the Company for Cause or by Harmon for Good Reason shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 14(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Harmon's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than fifteen (15) days after the giving of such notice). The failure by Harmon to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason shall not waive any right of Harmon hereunder or preclude Harmon from asserting such fact or circumstance in enforcing his rights hereunder. (e) Date of Termination. "Date of Termination" means the date of receipt of the Notice of Termination or any later date specified therein, as the case may be; provided, however, that (i) if Harmon's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies Harmon of such termination and (ii) if Harmon's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of Harmon or the Disability Effective Date, as the case may be. 6. Obligations of the Company upon Termination of Employment. (a) Death of Harmon. In the event of the death of Harmon during the Employment Period, the Company shall pay to Harmon's spouse, commencing on the first day of the month following his death and continuing for a period of twelve (12) months thereafter, benefits equal to the monthly installments of Salary which would have been due to Harmon pursuant to Section 4 herein. Immediately following such one-year period, the Company shall commence the payment of monthly benefits to Harmon's spouse equal in amount to one-half (1/2) of the amount to which Harmon would have been entitled as retirement benefits under Section 9 herein, which monthly benefits shall be paid for a period of -6- 7 twenty (20) years or until the death of Harmon's spouse, whichever occurs first. (b) Cause; Other than for Good Reason. If Harmon's employment shall be terminated for Cause, Harmon's employment under this Agreement shall terminate without further obligations to Harmon (other than the obligation to pay to Harmon his Salary through the Date of Termination plus the amount of any compensation previously deferred by Harmon, together with accrued interest thereon). If Harmon terminates employment other than for Good Reason, this Agreement shall terminate without further obligations to Harmon, other than those obligations accrued or earned and vested (if applicable) by Harmon through the Date of Termination, including for this purpose, all Accrued Obligations. All such Accrued Obligations shall be paid to Harmon in a lump sum in cash within thirty (30) days of the Date of Termination. (c) Good Reason; Other than for Cause or Disability. If the Company shall terminate Harmon's employment other than for Cause, Disability, or death or if Harmon shall terminate his employment for Good Reason at any time during the Employment Period, except during a three-year period following any Change of Control (in which case the provisions of Section 6(d) shall apply), then in such event: (i) the Company shall pay to Harmon in a lump sum in cash within thirty (30) days after the Date of Termination the aggregate of the following amounts: A. to the extent not theretofore paid, Harmon's Salary through the Date of Termination; and B. the product of (x) the highest Annual Bonus paid to Harmon during the three fiscal years preceding the fiscal year in which the Date of Termination occurs (the "Recent Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the date of Termination and the denominator of which is 365; and C. the product of (x) two (2.0) and (y) the sum of (i) the Salary and (ii) the Recent Bonus; and D. in the case of compensation previously deferred by Harmon, all amounts previously deferred (together with any accrued interest thereon) and not yet paid by the Company, and any accrued vacation pay not yet paid by the Company; and -7- 8 E. a lump-sum amount representing the present value of the benefits payable to Harmon under Section 9(a) or 9(c) hereof in consideration for the services to be performed under Sections 10 and 12 hereof; and (ii) for a two-year period following the Date of Termination, the Company shall continue benefits to Harmon and/or Harmon's family at least equal to those which would have been provided to them in accordance with the plans programs, practices and policies provided under this Agreement if Harmon's employment had not been terminated, including health insurance and life insurance, in accordance with the most favorable plans, practices, programs or policies of the Company and its subsidiaries during the 90-day period immediately preceding the Date of Termination or, if more favorable to Harmon, as in effect at any time thereafter with respect to other key employees and their families. (d) Good Reason; Other than for Cause or Disability, following a Change of Control. If, during a three year period following any Change of Control, the Company shall terminate Harmon's employment other than for Cause, Disability, or death or if Harmon shall terminate his employment for Good Reason: (i) the Company shall pay to Harmon in a lump sum in cash on the thirtieth (30th) day following after the Date of Termination the aggregate of the following amounts (unless Harmon requests that such payments be deferred or reduced as provided in Section 6(e) hereof): A. to the extent not theretofore paid, Harmon's Salary through the Date of Termination; and B. the product of (x) the Recent Bonus and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the date of Termination and the denominator of which is 365; and C. the product of (x) three (3.0) and (y) the sum of (i) the Salary and (ii) the Recent Bonus; and D. in the case of compensation previously deferred by Harmon, all amounts previously deferred (together with any accrued interest thereon) and not yet paid by the Company, and any accrued vacation pay not yet paid by the Company; and E. a lump-sum amount representing the present value of the benefits payable to Harmon under Section -8- 9 9(a) or 9(c) hereof in consideration for the services to be performed under Sections 10 and 12 hereof; and (ii) for a three-year period following the Date of Termination, the Company shall continue benefits to Harmon and/or Harmon's family at least equal to those which would have been provided to them in accordance with the plans programs, practices and policies provided under this Agreement if Harmon's employment had not been terminated, including health insurance and life insurance, in accordance with the most favorable plans, practices, programs or policies of the Company and its subsidiaries during the 90-day period immediately preceding the Date of Termination or, if more favorable to Harmon, as in effect at any time thereafter with respect to other key employees and their families. (e) Alternative Cap. In the event that a Change of Control shall occur and a determination is made by the Company, pursuant to Sections 280G and 4999 of the Code, that a golden parachute excise tax is due, Harmon's benefits under this Agreement shall be limited to the amount necessary to avoid the excise tax only if applying such a limit results in a greater net benefit to Harmon had the benefits not been limited and an excise tax paid. 7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit Harmon's continuing or future participation in any benefit, bonus, incentive or other plans, programs, policies or practices, provided by the Company and for which Harmon may qualify, nor shall anything herein limit or otherwise affect such rights as Harmon may have under any stock option or other agreements with the Company. Amounts which are vested benefits or which Harmon is otherwise entitled to receive under any plan, policy, practice or program of the Company at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program. 8. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Harmon or others. In no event shall Harmon be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Harmon under any of the provisions of this Agreement, but such payments shall be reduced to the extent of Harmon's other earned income (if any) during any remaining portion of the Employment Period. Following any Change of Control, the Company agrees to pay, to the full extent permitted by law, all legal fees and expenses which Harmon may reasonably incur as a result of any contest (regardless -9- 10 of the outcome thereof) by the Company or others (including Harmon) of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof, plus in each case interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code. 9. Retirement of Harmon. (a) Normal Retirement. Provided that this Agreement or an extension thereof remains in effect, it is understood that Harmon shall retire on the last day of the calendar year during which he reaches sixty-five (65) years of age, and the Company, in consideration for the services performed under Sections 3 and 10 hereof, shall pay to Harmon, in such event, an annual retirement benefit equal to one-half (1/2) of his Salary (adjusted on an annual basis to include the Annual Increase), which benefits shall continue to be paid until Harmon's death. (b) Option of Board of Directors. Provided that this Agreement or an extension thereof remains in effect, the Board of Directors of the Company, at its sole option, may offer to extend Harmon's employment on a year-to-year basis after the calendar year in which Harmon reaches age sixty-five (65). At the conclusion of each year it will be presumed that Harmon will retire under terms set out in Section 9(a) above unless the Board of Directors determines to offer to extend Harmon's employment for an additional year. (c) Option of Harmon. Provided that this Agreement or an extension thereof remains in effect, Harmon, upon reaching fifty-five (55) years of age, at his option, may retire and shall no longer be required to perform his duties under Section 3 of this Agreement, but Harmon will be required to perform his duties under Section 10 of this Agreement. If Harmon elects to retire, the Company shall pay to Harmon an annual retirement benefit, in lieu of his Salary, in an amount equal to one-fourth (1/4) of his Salary adjusted on an annual basis to include the Annual Increase and increased each year by five percent (5%) of the adjusted annual Salary to a maximum of one-half (1/2) of Harmon's Salary on the date of his retirement, such benefits to continue to be paid until Harmon's death. The obligation of the Company to make payments pursuant to this subsection shall not become effective unless and until Harmon shall have given the Company thirty (30) days written notice of his intention to retire from active employment with the Company. (d) Eligibility for Benefits. The provisions of this Section 9 shall become effective and the Company shall be required to pay the benefits described herein only in the event that, immediately prior to the date of his retirement, Harmon is -10- 11 employed by the Company and this Agreement or an extension hereof remains in effect. 10. Availability of Harmon After Retirement. Harmon, upon his retirement pursuant to Section 9(a) or 9(c) hereof, in consideration of retirement benefits received pursuant to Section 9(a) or 9(c) hereof, shall at reasonable times and insofar as his physical condition may permit, hold himself available at the written request of the Board of Director's of the Company to consult with and advise the officers, directors, and other representatives of the Company. Such requests for Harmon's service shall, however, be structured so that reasonable allowances are made for Harmon's needs for vacation time and for other considerations of his physical well-being. All such services shall be provided by Harmon at his place of residence unless otherwise agreed to by Harmon. Harmon shall not be required to devote any prescribed hours to consulting with and giving advice to the officers, directors, and other representatives of the Company in order to be entitled to the retirement benefits as set out in Section 9(a) or 9(c) hereof, but all such benefits shall be considered as earned in return for the consulting service and advice that Harmon may give from time to time to the Company, its officers, directors, and other representatives. If Harmon's physical condition shall prevent him from consulting and advising with the officers, directors or other representatives of the Company, the retirement benefits provided under Section 9(a) or 9(c) hereof, as the case may be, shall nonetheless be paid as therein provided. Harmon shall be reimbursed by the Company for all reasonable expenses incurred as a consultant and advisor, including expenses for travel, communication, entertainment and similar items, upon presentation of itemized accounts of such expenditures. 11. Discretion of Board of Directors. Notwithstanding any other term or provision of this Agreement to the contrary, nothing stated herein is intended to, nor shall it be construed, to abrogate, limit, alter or affect the authority, rights and privileges of the Board of Directors of the Company to remove Harmon as Secretary of the Company, without Cause, or during the term of this Agreement to elect as Secretary of the Company a person other than Harmon, as provided by the laws of the State of Iowa; provided, however, it is expressly agreed and understood that, in the event any one or any combination of such events occurs, unless Harmon is terminated for Cause as defined in Section 5(b) hereof, Harmon shall be entitled to terminate his employment for Good Reason (as defined in Section 5(c) hereof) and -11- 12 receive the benefits described in either Section 6(c) or Section 6(d) of this Agreement, as applicable. 12. Confidential Information; Restrictive Covenant. (a) During the period of his employment, Harmon shall hold in fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its subsidiaries, and their respective businesses, which shall have been obtained by Harmon during Harmon's employment by the Company or any of its subsidiaries and which shall not be or become public knowledge (other than by acts by Harmon or his representatives in violation of this Agreement). During a three (3) year period following termination of Harmon's employment with the Company, Harmon shall not, without the prior written consent of the Company, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. (b) While this Agreement remains in effect and Harmon is entitled to compensation or benefits pursuant to Sections 4 through 6 hereof (or, in the event of termination of his employment for Good Reason, for a period of three (3) years thereafter), Harmon shall not directly or indirectly associate with, participate in or render service to, whether as an employee, officer, director, consultant, independent contractor or otherwise, any organization that is engaged in business in competition with the Company, and he shall not himself engage in any such business on his own account. (c) In the event of a demonstrated breach of this Section 12, the parties agree that the Company shall be entitled to seek equitable relief in a court of competent jurisdiction to prevent any anticipated continuing breach of the terms and conditions of this Section 12 and to secure the enforcement thereof. The foregoing remedy shall be exclusive and in lieu of any other remedy otherwise available to the Company under law. 13. Successors. (a) This Agreement is personal to Harmon and without the prior written consent of the Company shall not be assignable by Harmon otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Harmon's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company agrees and covenants to require (i) any successor or assignee (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company through a Change of -12- 13 Control or otherwise, and, (ii) within its lawful power to do so, any party effecting or taking steps to accomplish a Change of Control, to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or Change of Control had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 14. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Iowa, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If the Company, to Casey's General Stores, Inc., P. O. Box 2001, One Convenience Blvd., Ankeny, Iowa 50021, Attention: President; and if to Harmon, to his address appearing on the books of the Company, or to his residence, or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Company's or Harmon's failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of such provision or any other provision thereof. (f) This Agreement contains the entire understanding of the Company and Harmon with respect to the subject matter hereof, and shall serve to terminate the Employment Agreement dated as of March 2, 1992 between the Company and Harmon. -13- 14 (g) No change, amendment or modification of this Agreement, including Exhibit "A" attached hereto, shall be valid unless the same be in writing and signed by the Company and Harmon. (h) This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall constitute one and the same instrument with the same force and effect as if all the parties had executed the same document. IN WITNESS WHEREOF, the respective parties have caused this Agreement to be executed as of the day and year first above written. CASEY'S GENERAL STORES, INC. By /s/ Ronald M. Lamb ---------------------------- Ronald M. Lamb, President ATTEST: /s/ Eli J. Wirtz - - --------------------------------- Eli J. Wirtz, Assistant Secretary /s/ John G. Harmon ---------------------------- John G. Harmon -14- 15 EXHIBIT "A" Schedule of Compensation for John G. Harmon, Secretary AMENDMENT NO. ____ As provided in Section 4 of that certain Employment Agreement by and between Casey's General Stores, Inc. and John G. Harmon, dated as of ____________, 1994, to which this Exhibit "A" is attached, the undersigned Casey's General Stores, Inc., by authority of its Board of Directors, and John G. Harmon hereby agree that, effective as of the ______ day of __________________, 19__, the annual salary of John G. Harmon shall be the sum of _____________________________________ _________________________ ($_____________) (defined in said Employment Agreement as his "Salary"). Dated this _______ day of _______________________, 19__. CASEY'S GENERAL STORES, INC. By ________________________________ Ronald M. Lamb, President ATTEST: _________________________________ Eli J. Wirtz, Assistant Secretary ___________________________________ John G. Harmon EX-11 3 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 CASEY'S GENERAL STORES, INC. ____________________________ COMPUTATION OF PER SHARE EARNINGS Primary earnings per share - The computation of primary earnings per share is not presented since such computation can be clearly determined from the material contained in the Financial Statements and notes thereto included in the Company's Annual Report to Shareholders for the fiscal year ended April 30, 1994. Fully diluted earnings per share - The following sets forth the computation of per share earnings on a fully diluted basis:
Year Ended April 30, -------------------- 1994 1993 1992 ---- ---- ---- Net income $16,564,097 $13,323,156 $11,513,744 Interest savings net of income taxes on assumed conversion of convertible debentures 1,220,747 1,356,250 1,361,719 ----------- ----------- ----------- Earnings applicable to fully diluted shares $17,784,844 $14,679,406 $12,875,463 ----------- ----------- ----------- ----------- ----------- ----------- Average common shares outstanding 22,571,288 22,162,124 22,057,684 Average common equivalent shares applicable to stock options 125,704 32,446 57,738 Average common shares issuable on assumed conversion of convertible debentures 3,320,836 3,684,210 3,684,210 ----------- ----------- ----------- 26,017,828 25,878,780 25,799,632 ----------- ----------- ----------- ----------- ----------- ----------- Earnings per share-fully diluted basis (A) $ .68 $ .57 $ . 50 ----------- ----------- -----------
(A) Fully diluted earnings per share cannot exceed primary earnings per share. EX-13 4 BALANCE SHEETS 1 EXHIBIT 13 CASEY'S GENERAL STORES, INC. BALANCE SHEETS
APRIL 30 ---------------------------------------------------- ASSETS 1994 1993 ---------- ---------- Current assets: Cash and cash equivalents $ 3,151,664 $ 2,121,023 Short-term investments 8,720,235 15,964,340 Receivables 2,839,900 2,147,641 Inventories (Note 1) 23,754,256 25,728,476 Prepaid expenses (Note 4) 2,903,208 551,891 ----------- ----------- Total current assets 41,369,263 46,513,371 - - ------------------------------------------------------------------------------------------------------------------------------ Long-term investments 11,234,304 14,497,648 Other assets, net of amortization 1,259,138 2,384,484 Property and equipment, at cost: Land 34,778,207 27,596,097 Buildings and leasehold improvements 131,531,440 106,098,220 Machinery and equipment 176,020,053 148,223,940 Leasehold interest in property and equipment (Note 5) 13,979,559 11,707,337 ----------- ----------- 356,309,259 293,625,594 Less accumulated depreciation and amortization 91,934,088 76,244,255 ----------- ----------- Net property and equipment 264,375,171 217,381,339 ----------- ----------- $ 318,237,876 $ 280,776,842 - - ------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable to banks (Note 2) $ 18,500,000 $ 12,750,000 Current maturities of long-term debt (Note 2) 4,850,875 2,826,764 Accounts payable 37,414,028 25,142,803 Accrued expenses: Salaries and wages 2,130,418 2,218,769 Other (Note 8) 12,538,373 12,191,898 Income taxes payable 18,928 326,046 ----------- ----------- Total current liabilities 75,452,622 55,456,280 - - ------------------------------------------------------------------------------------------------------------------------------ Long-term debt, net of current maturities (Note 2) 61,414,871 98,956,360 Deferred income taxes (Note 4) 21,983,000 17,566,000 Deferred compensation (Note 7) 977,750 822,302 Commitments and contingencies (Notes 5, 7 and 8) Shareholders' equity (Notes 2 and 3): Capital stock: Preferred, no par value, none issued - - - - - - - - - - - - Common, no par value, 25,921,020 and 22,176,956 shares issued and outstanding at April 30, 1994 and 1993, respectively 60,887,327 25,435,693 Retained earnings 97,522,306 82,540,207 ----------- ----------- Total shareholders' equity 158,409,633 107,975,900 ----------- ----------- $ 318,237,876 $ 280,776,842 - - ------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. 8 2 STATEMENTS OF INCOME
YEARS ENDED APRIL 30 ---------------------------------------------------------- 1994 1993 1992 ---------- ---------- ---------- Net sales $ 731,206,162 $ 673,696,856 $ 606,585,663 Franchise revenue 5,120,526 4,897,660 4,990,768 --------------- -------------- -------------- 736,326,688 678,594,516 611,576,431 Cost of goods sold 574,143,909 533,534,357 480,357,096 Operating expenses 110,082,785 102,379,142 94,208,691 Depreciation and amortization 18,622,815 15,942,771 13,704,407 Interest, net (Note 2) 6,434,082 5,249,090 4,808,493 --------------- -------------- -------------- 709,283,591 657,105,360 593,078,687 Income before income taxes 27,043,097 21,489,156 18,497,744 Provision for income taxes (Note 4) 10,479,000 8,166,000 6,984,000 --------------- -------------- -------------- Net income $ 16,564,097 $ 13,323,156 $ 11,513,744 - - ----------------------------------------------------------------------------------------------------------------------------- - - ----------------------------------------------------------------------------------------------------------------------------- Earnings per common and common equivalent share (Note 3): Primary $ .73 $ .60 $ .52 Fully diluted $ .68 $ .57 $ .50 - - ----------------------------------------------------------------------------------------------------------------------------- - - ----------------------------------------------------------------------------------------------------------------------------- STATEMENTS OF SHAREHOLDERS' EQUITY COMMON RETAINED STOCK EARNINGS TOTAL ----------- ------------ ------- Balance April 30, 1991 $ 24,512,697 $ 60,300,589 $ 84,813,286 Net income - - - - - - 11,513,744 11,513,744 Payment of dividends (6 cents per share) - - - - - - (1,267,700) (1,267,700) Proceeds from exercise of stock options (102,852 shares) 388,809 - - - - - - 388,809 Common Stock issued to acquire property and equipment (50,000 shares) 406,250 - - - - - - 406,250 --------------- -------------- ------------- Balance April 30, 1992 25,307,756 70,546,633 95,854,389 Net income - - - - - - 13,323,156 13,323,156 Payment of dividends (6 cents per share) - - - - - - (1,329,582) (1,329,582) Proceeds from exercise of stock options (23,000 shares) 127,937 - - - - - - 127,937 --------------- -------------- ------------- Balance April 30, 1993 25,435,693 82,540,207 107,975,900 Net income - - - - - - 16,564,097 16,564,097 Payment of dividends (7 1/2 cents per share) - - - - - - (1,581,998) (1,581,998) Conversion of Convertible Subordinated Debentures (3,683,064 shares) 34,991,321 - - - - - - 34,991,321 Proceeds from exercise of stock options (61,000 shares) 460,313 - - - - - - 460,313 --------------- -------------- ------------- Balance April 30, 1994 $ 60,887,327 $ 97,522,306 $ 158,409,633 - - ----------------------------------------------------------------------------------------------------------------------------- - - -----------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. 9 3 STATEMENTS OF CASH FLOWS
YEARS ENDED APRIL 30 -------------------------------------------------------------- CASH FLOWS FROM OPERATIONS: 1994 1993 1992 -------- -------- -------- Net income $ 16,564,097 $ 13,323,156 $ 11,513,744 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 18,622,815 15,942,771 13,704,407 Deferred income taxes 2,100,000 2,650,000 2,200,000 Changes in assets and liabilities: Receivables (692,259) (221,408) 5,459 Inventories 1,974,220 (3,830,179) (1,633,591) Prepaid expenses (34,317) (122,438) 145,052 Accounts payable 12,271,225 (4,183,073) 5,230,125 Accrued expenses 258,124 7,050,406 2,119,815 Income taxes payable (307,118) (590,424) (560,969) Other, net 1,972,387 305,962 852,726 ------------- ------------ ------------ NET CASH PROVIDED BY OPERATIONS 52,729,174 30,324,773 33,576,768 Cash flows from investing: Purchase of property and equipment (62,879,021) (49,362,394) (34,779,916) Purchase of investments (7,179,357) (58,706,729) (3,602,519) Sale of investments 17,523,129 35,838,590 2,485,877 ------------- ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES (52,535,249) (72,230,533) (35,896,558) Cash flows from financing: Proceeds from long-term debt - - - - - - 40,500,000 - - - - - - Payments of long-term debt (3,791,599) (2,548,216) (1,813,661) Net activity of short-term debt 5,750,000 5,750,000 3,750,000 Proceeds from exercise of stock options 460,313 127,937 388,809 Payment of cash dividends (1,581,998) (1,329,582) (1,267,700) ------------- ------------ ------------ Net cash provided by financing activities 836,716 42,500,139 1,057,448 ------------- ------------ ------------ Net increase (decrease) in cash and cash equivalents 1,030,641 594,379 (1,262,342) Cash and cash equivalents at beginning of year 2,121,023 1,526,644 2,788,986 ------------- ------------ ------------ Cash and cash equivalents at end of year $ 3,151,664 $ 2,121,023 $ 1,526,644 - - ------------------------------------------------------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATON Cash paid during the year for Interest (net of amount capitalized) $ 7,730,310 $ 5,816,158 $ 5,175,436 Income taxes 9,034,500 6,106,424 5,494,969 Noncash investing and financing activities: Property and equipment acquired through the issuance of Common Stock - - - - - - - - - - - - 406,250 Property and equipment acquired through capital lease obligations and installment purchases 3,264,221 408,076 195,039 Cancellation of capitalized lease obligation - - - - - - - - - - - - 508,989 Conversion of Convertible Subordinated Debentures 34,991,321 - - - - - - - - - - - - - - ------------------------------------------------------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. 10 4 NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES OPERATIONS - Casey's General Stores, Inc. (the Company) operates 876 convenience stores in 8 midwestern states. At April 30, 1994, the Company owned or leased 687 of these stores with 189 stores being owned or leased by franchisees. The stores are located primarily in smaller communities, most with populations of fewer than 5,000. CASH EQUIVALENTS - Cash equivalents consist of money market funds. For purposes of the statements of cash flows, the Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. INVESTMENTS - Investments consist of treasury notes and tax-exempt revenue and municipal bonds. The investments are stated at cost plus accrued interest, which approximates market. The Financial Accounting Standards Board (FASB) has issued Statement 115, "Accounting for Certain Investments in Debt and Equity Securities." Statement 115, effective for fiscal years beginning after December 15, 1993, expands the use of fair value accounting for those securities but retains the use of the amortized cost method for investments in debt securities that the reporting enterprise has the positive intent and ability to hold to maturity. The Company anticipates its short-term and long-term investments will be classifed as "held-to-maturity" securities and the financial statement impact will not be material to the financial statements. The Company expects to adopt Statement 115 in the first quarter of fiscal 1995 on a prospective basis. INVENTORIES - Inventories, which consist of merchandise and gasoline, are stated at the lower of cost or market, which, as to merchandise in stores, is determined by the retail method. Cost is determined using the last-in, first-out (LIFO) method. Such inventory value is approximately $6,887,000 and $5,987,000 below replacement cost as of April 30, 1994 and 1993, 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 30-40 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 INTANGIBLES - The excess of cost over the underlying value of the tangible net assets of companies acquired is included in other assets and is being amortized on a straight-line basis over 20 years. DEBENTURE ISSUANCE COSTS - Costs associated with the issuance of the Convertible Subordinated Debentures were included in other assets and amortized over the 25-year term of the Debentures until written off upon conversion of the Debentures in 1994. EARNINGS PER SHARE - Primary earnings per share is determined by dividing net income by the weighted average number of common shares and common equivalent shares, consisting of options to purchase common shares, outstanding during the year. Fully diluted earnings per share further assume that the Convertible Subordinated Debentures were converted to Common Stock at the beginning of the period and no interest expense was paid on the Debentures. The weighted average common and common equivalent shares outstanding on a primary basis were 22,651,334, 22,193,462 and 22,095,832 for 1994, 1993 and 1992, respectively, and on a fully diluted basis were 26,017,828, 25,878,780 and 25,799,632 for 1994, 1993 and 1992, respectively. EXCISE TAXES - Excise taxes approximating $121,000,000, $101,000,000 and $86,300,000 collected from customers on retail gasoline sales are included in net sales for 1994, 1993 and 1992, respectively. INCOME TAXES - In February 1992, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Statement 109 requires a change from the deferred 5 NOTES TO FINANCIAL STATEMENTS (CONTINUED) method of accounting for income taxes of APB Opinion 11 to the asset and liability method of accounting for income taxes. Under the asset and liability method of Statement 109, 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. Under Statement 109, 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. Effective May 1, 1993, the Company adopted Statement 109 and the cumulative effect of that change was not material to the financial statements. Pursuant to the deferred method under APB Opinion 11, which was applied in 1993 and prior years, deferred income taxes were recognized for income and expense items that were reported in different years for financial reporting purposes and income tax purposes using the tax rate applicable for the year of the calculation. Under the deferred method, deferred taxes were not adjusted for subsequent changes in tax rates. RECLASSIFICATION - Certain amounts from the prior year have been reclassified to conform with current year presentation. 2. FAIR VALUE OF FINANCIAL INSTRUMENTS 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 because of the short maturity of these instruments or due to the recent purchase of the instruments at current rates of interest. NOTES PAYABLE TO BANKS - The carrying amount approximates fair value due to variable interest rates on these notes. LONG-TERM DEBT - The fair value of the Company's long-term debt, excluding capital lease obligations, is estimated based on the quoted market prices for the issue or on the current rates offered to the Company for debt of the same or similar issues. The fair value and carrying value of the Company's long-term debt, excluding capital lease obligations, was approximately $55,000,000 and $96,000,000, respectively, at April 30, 1994 and 1993.
APRIL 30 ---------------------- 1994 1993 -------- -------- Capitalized lease obligations, discounted at rates of 7.3% to 15.3%, due in various monthly installments through 2008 (Note 5) $ 10,265,048 $ 8,240,374 Mortgage notes payable due in various monthly installments through 2004 with interest at 8% to 9.5% 16,719,448 18,417,750 Unsecured notes payable to banks due in various monthly and quarterly installments through 1997 with variable rates of interest 9,281,250 10,125,000 7.70% Senior Notes due in 40 quarterly installments beginning in March 1995 30,000,000 30,000,000 6.25% Convertible Subordinated Debentures due May 1, 2012, converted March 28, 1994 - - - - - - 35,000,000 -------------- ------------- 66,265,746 101,783,124 Less current maturities 4,850,875 2,826,764 -------------- ------------- $ 61,414,871 $ 98,956,360 - - ----------------------------------------------------------------------------------------------- - - -----------------------------------------------------------------------------------------------
12 6 Various debt agreements contain certain operating and financial covenants. Aggregate maturities of long-term debt, including capitalized lease obligations, during the four years commencing May 1, 1995 and thereafter are: YEAR ENDING APRIL 30 -------------------- 1996 $ 7,249,861 1997 7,449,224 1998 9,330,077 1999 5,657,546 Thereafter 31,728,163 -------------- $ 61,414,871 -------------- -------------- Mortgage notes payable includes an $18,900,000 Secured Promisory Note, Mortgage and Security Agreement with a balance of $15,826,955 and $16,650,783 at April 30, 1994 and 1993, 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 $16,700,000 at April 30, 1994. The Company's $35,000,000 of Convertible Subordinated Debentures were converted on March 28, 1994 into 3,683,064 shares of Common Stock at the conversion price of $9.50 per share. Interest expense is net of interest income of $1,146,486, $709,952 and $401,796 for the years ended April 30, 1994, 1993 and 1992, respectively. Interest expense in the amount of $418,600, $273,600 and $171,350 was capitalized during the years ended April 30, 1994, 1993 and 1992, respectively. At April 30, 1994 and 1993, notes payable to banks consisted of $25,000,000 and $20,000,000 lines of credit with balances owed of $18,500,000 and $12,750,000, respectively. Within the notes payable to banks, $10,000,000 on a $15,000,000 line of credit is due on demand and $8,500,000 on a $10,000,000 line of credit is due December 31, 1994. The weighted average interest rate was 4.48% at April 30, 1994 and 3.83% at April 30, 1993. 3. PREFERRED AND COMMON STOCK PREFERRED STOCK - The Company has 1,000,000 authorized shares of preferred stock, none of which have been issued. COMMON STOCK - The Company has 60,000,000 authorized shares of Common Stock. Effective February 16, 1994 the Company approved a two-for-one stock split effected in the form of a 100% stock dividend. All share and earnings per share amounts have been restated to give effect to the stock split. COMMON SHARE PURCHASE RIGHTS - On June 14, 1989, the Board of Directors adopted a Shareholder Rights Plan (Rights Plan). In connection with the adoption of the Rights Plan, the Board of Directors declared a dividend distribution of one Common Share Purchase Right for each share of Common Stock held at the close of business on June 14, 1989. The Rights become exercisable 10 days following a public announcement that 20% or more of the Company's Common Stock has been acquired or such an intent to acquire has become apparent. The Rights will expire on the earlier of June 14, 1999 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 Rights Agreement between the Company and United Missouri Bank, n.a. as Rights Agent. STOCK OPTION PLAN - Under an incentive stock option plan, options can be granted to certain officers and key employees to purchase an aggregate of 2,280,000 shares of Common Stock at option prices not less than the fair market value (110% of fair market value as to holders of 10% or more of the Company's stock) at the date the options are granted. Options for 946,832 shares were available for grant at April 30, 1994 and options for 422,000 shares (which expire in 1997, 1999, 2001 and 2003) were outstanding as follows: 13 7 NOTES TO FINANCIAL STATEMENTS - CONTINUED
Price Range Aggregate Shares Per Share Exercise Price ------ ------------ -------------- Outstanding and exercisable at April 30, 1991 262,852 $ 2.34-9.00 $ 1,577,859 Granted in fiscal 1992 146,000 7.25-7.69 1,113,625 Exercised in fiscal 1992 102,852 2.34-4.81 388,809 ------- ------------- Outstanding and exercisable at April 30, 1992 306,000 4.81-9.00 2,302,675 Exercised in fiscal 1993 23,000 4.81-7.69 127,937 ------- ------------- Outstanding and exercisable at April 30, 1993 283,000 4.81-7.69 2,174,738 Granted in fiscal 1994 220,000 10.25 2,255,000 Exercised in fiscal 1994 61,000 4.81-7.69 460,313 Cancelled in fiscal 1994 20,000 4.81-10.25 118,925 ------- ------------- Outstanding and exercisable at April 30, 1994 422,000 $ 3,850,500 ------- ------------- ------- -------------
4. INCOME TAXES As discussed in note 1, the Company adopted Statement 109 as of May 1, 1993. Prior years' financial statements have not been restated to apply the provisions of Statement 109. Income tax expense attributable to income from operations is comprised of the following components:
YEAR ENDED APRIL 30 ----------------------------------------- 1994 1993 1992 ---------- ---------- ---------- Current tax expense: Federal $ 7,060,000 $ 4,499,000 $ 3,916,000 State 1,319,000 1,017,000 868,000 ------------- ------------ ------------ 8,379,000 5,516,000 4,784,000 Deferred tax expense 2,100,000 2,650,000 2,200,000 ------------- ------------ ------------ Total income tax provision $ 10,479,000 $ 8,166,000 $ 6,984,000
- - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- For the years ended April 30, 1993 and 1992, deferred income tax expense results from timing differences in the recognition of revenue and expense for income tax and financial reporting purposes. The sources of these differences and the tax effect of each are as follows:
YEAR ENDED APRIL 30 ----------------------------- 1993 1992 ----------- ----------- Excess of tax over book depreciation $ 2,988,000 $ 2,551,000 Amortization of other assets previously allowed for tax purposes (128,000) (133,000) Accrued vacation pay (117,000) (100,000) Other (93,000) (118,000) ------------ ------------ $ 2,650,000 $ 2,200,000
- - ------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------ The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at April 30, 1994 are as follows:
Deferred tax assets: Accrued liabilities $ 2,317,000 Alternative minimum tax credit carry forwards 1,500,000 Other 383,000 ---------------- Total gross deferred tax assets 4,200,000 Deferred tax liabilities: ---------------- Excess of tax over book depreciation (23,771,000) Other (95,000) ---------------- Total gross deferred liabilities (23,866,000) ---------------- Net deferred tax liability $ (19,666,000)
Current deferred tax asset relates to accrued liabilities and is included with prepaid expenses. - - ------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------ 14 8 The alternative minimum tax credit carryforward for income tax purposes of approximately $1,500,000 is available to offset future regular tax in excess of minimum tax over an indefinite period. Total reported tax expense applicable to the Company's operations varies from the tax that would have resulted by applying the statutory U.S. federal income tax rates to income before income taxes for the following reasons:
YEAR ENDED APRIL 30, 1994 ------------------------- 1994 1993 1992 ---- ---- ---- Income taxes at the statutory rates 35.0% 34.0% 34.0% State income taxes, net of federal tax benefit 4.4 4.5 4.4 Other (.7) (.5) (.6) ----- ----- ----- 38.7% 38.0% 37.8% ----- ----- ----- ----- ----- -----
5. 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 generally 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 -------------------------- 1994 1993 --------- --------- Real estate $ 9,049,491 $ 9,661,990 Equipment 4,930,068 2,045,347 13,979,559 11,707,337 Less accumulated amortization 5,033,727 4,816,794 ------------ ------------- $ 8,945,832 $ 6,890,543 ------------ ------------- ------------ -------------
Future minimum payments under the capital leases and noncancellable operating leases with initial or remaining terms of one year or more consisted of the following at April 30, 1994:
YEAR ENDING APRIL 30 CAPITAL LEASES OPERATING LEASES - - -------------------- -------------------------------- 1995 $ 2,051,910 $ 412,000 1996 2,028,631 397,000 1997 2,008,373 390,000 1998 1,943,909 351,000 1999 1,666,686 276,000 Thereafter 4,943,767 1,811,000 Total minimum lease payments 14,643,276 $ 3,637,000 Less amount representing interest 4,378,228 ----------- Present value of net minimum lease payments $ 10,265,048 ----------- -------------- --------------
The total rent expense under operating leases was $898,000 in 1994, $760,000 in 1993 and $702,000 in 1992. 6. BENEFIT PLANS EMPLOYEE STOCK OWNERSHIP PLAN - The Company has an Employees' Stock Ownership Plan and Trust (Plan) which 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 by a formula based on compensation. Plan expense was $550,000, $500,000 and $450,000 for the years ended April 30, 1994, 1993 and 1992, respectively. On April 30, 1994, the Company had 2,880 full-time employees and 4,393 part-time employees, of which approxi- 15 9 NOTES TO FINANCIAL STATEMENTS - CONTINUED mately 2,900 were participants in the Plan. As of that same date, the Trustee under the Plan held 2,333,520 shares of Common Stock in trust for participants in the Plan and may distribute such shares to eligible participants upon death, disability, retirement or termination of employment. 401(K) PLAN- The Company has a defined contribution 401(k) plan which 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 $406,000, $345,000 and $304,000 for the years ended April 30, 1994, 1993 and 1992, respectively. 7. COMMITMENTS In March 1992 the Company entered into five-year employment agreements with each of two officer-shareholders. The agreements provide that each officer- shareholder will receive compensation exclusive of bonuses at the rate of $250,000 per year or such amount as the Company and the officer mutually shall agree. These agreements also provide for certain payments in the case of death or disability of the officer-shareholder. Each agreement further provides for the voluntary retirement of the officer at age 65, or upon reaching 59 years of age and having completed 25 years of employment with the Company, with an annual retirement benefit equal to 50 percent of his most recent salary. Certain provisions of the employment agreements provide for the Company to pay upon termination of the officer- shareholder's employment other than for cause, disability or death, two to three times the sum of the annual salary and bonus, plus the present value of 50 percent of his most recent annual salary, if eligible for retirement benefits, until death, payable in a lump sum upon termination. The Company is accruing for the deferred compensation over the expected term of employment. 8. 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. Such programs, other than the state of Iowa, generally are in the early stages of operation and the extent of the available coverage or reimbursement under such programs for costs incurred by the Company is not fully known at this time. Management currently estimates that aggregate capital expenditures for electronic monitoring, cathodic protection and overfill/spill protection will approximate $2,000,000 in fiscal 1995 through December 23, 1998, to comply with existing regulations. The Company has accrued a liability at April 30, 1994 and 1993, respectively, of approximately $3,200,000 and $2,900,000 for estimated expenses related to the corrective action 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, including a class action lawsuit alleging violations of federal anti-trust laws and unfair price discrimination. In the opinion of management, the outcome of all such matters is not expected to have a material effect on the financial position of the Company. OTHER-At April 30, 1994, the Company is partially self-insured for workman's compensation claims, in all states except Iowa, Missouri and Kansas, general liability and auto liability all under an agreement which provides for annual stop-loss limits equal to or exceeding approximately $2,100,000. Letters of credit approximating $3,100,000 were issued and outstanding at April 30, 1994, on the insurance company's behalf to facilitate this agreement. The Company is self-insured for Iowa, Missouri and Kansas workman's compensation claims at April 30, 1994. Approximately $1,300,000 of investments are in escrow as required by these states. Additionally, the Company is self-insured for its portion of employee medical expenses. At April 30, 1994 and 1993, the Company has accrued $4,200,000 and $3,800,000, respectively, for estimated claims relating to self insurance. 16 10 INDEPENDENT AUDITORS' REPORT TO THE BOARD OF DIRECTORS AND SHAREHOLDERS CASEY'S GENERAL STORES, INC.: We have audited the accompanying balance sheets of Casey's General Stores, Inc. as of April 30, 1994 and 1993, and the related statements of income, shareholders' equity and cash flows for each of the years in the three-year period ended April 30, 1994. 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 generally accepted auditing standards. 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 financial statements referred to above present fairly, in all material respects, the financial position of Casey's General Stores, Inc. as of April 30, 1994 and 1993, and the results of its operations and its cash flows for each of the years in the three-year period ended April 30, 1994 in conformity with generally accepted accounting principles. KPMG PEAT MARWICK DES MOINES, IOWA JUNE 21, 1994 11 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, donuts and sandwiches), beverages and non-food products such as health and beauty aids, tobacco products, automotive products and gasoline by Company Stores and from wholesale sales of certain grocery and general merchandise items and gasoline to Franchised Stores. The Company also generates revenues from continuing monthly royalties based on sales by Franchised Stores, sign and facade rental fees and the provision of certain maintenance, transportation and construction services to the Company's franchisees. A typical store is generally not profitable for its first year of operation due to start-up costs and will usually attain representative levels of sales and profits during its third year of operation. The following tables set forth, for the periods indicated, the Company's net sales and gross profits according to its major revenue categories, and average sales and earnings information for Company and Franchised Stores: COMPANY NET SALES AND GROSS PROFITS
YEAR ENDED APRIL 30 ------------------------------------------ 1994 1993 1992 ------ ------ ------ NET SALES (1): RETAIL SALES: Grocery and general merchandise $ 281,235,753 $ 253,896,883 $ 233,527,291 Gasoline 377,807,750 351,361,731 302,201,644 ------------- ------------- ------------- 659,043,503 605,258,614 535,728,935 ------------- ------------- ------------- ------------- ------------- ------------- WHOLESALE SALES: Grocery and general merchandise 37,678,157 35,933,683 34,980,022 Gasoline 24,530,239 23,741,451 24,565,157 ------------- ------------- ------------- 62,208,396 59,675,134 59,545,179 ------------- ------------- ------------- ------------- ------------- ------------- GROSS PROFITS (2): RETAIL SALES: Grocery and general merchandise 109,812,153 103,051,219 90,810,873 Gasoline 38,045,217 28,755,619 24,902,701 ------------- ------------- ------------- 147,857,370 131,806,838 115,713,574 ------------- ------------- ------------- ------------- ------------- ------------- WHOLESALE SALES: Grocery and general merchandise 1,282,100 1,464,205 1,311,618 Gasoline 467,224 541,510 704,762 ------------- ------------- ------------- 1,749,324 2,005,715 2,016,380 ------------- ------------- ------------- ------------- ------------- -------------
18 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
INDIVIDUAL STORE INFORMATION (3) YEARS ENDED APRIL 30 ------------------------------------ 1994 1993 1992 ---- ---- ---- COMPANY STORES: Average retail sales $ 1,006,420 $ 977,310 $ 913,522 Average retail sales of grocery and general merchandise 433,256 411,582 399,731 Average gross profit on grocery and general merchandise 160,476 158,067 147,970 Average retail sales of gasoline 573,165 565,728 513,791 Average number of gallons sold 570,253 540,999 492,115 Average gross profit on gasoline 61,641 45,969 41,556 Average operating income (4) 73,553 61,162 54,211 Franchised Stores: Average franchise revenue (5) 27,215 25,529 24,420
(1) Net sales excludes 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. (3) Includes only those stores that had been in operation for at least one full year prior to April 30 of the fiscal year indicated. (4) Represents retail sales less cost of goods sold, including cost of merchandise, financing costs and operating expenses attributable to a particular store, but excluding 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. (5) Includes a royalty fee equal to 3% of gross receipts derived from store sales of non-gasoline items, a royalty fee of $.018 per gallon on gasoline sales and sign and facade rental fees. -19- 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED FISCAL 1994 COMPARED TO FISCAL 1993 Net sales for fiscal 1994 increased by $57,509,000 (8.5%) over fiscal 1993. Retail gasoline sales increased by $26,446,000 (7.5%) as the number of gallons sold increased by 39,770,000 (11.8%). During fiscal 1994, retail sales of grocery and general merchandise increased by $27,339,000 (10.8%) due to the net addition of 48 new Company Stores and a greater number of stores in operation for at least three years. Cost of goods sold as a percentage of net sales was 78.5% for fiscal 1994 compared to 79.2% for the prior year. This result occurred because the gross profit margin on retail gasoline sales increased. Operating expenses as a percentage of net sales were 15.1% for fiscal 1994 compared to 15.2% for the prior year. The decrease in operating expenses as a percentage of net sales was caused primarily by increased sales and the increased number of Company Stores in operation. Average operating income per Company Store increased by $12,391 (20.3%) primarily as the result of increases in the average sales of gasoline and grocery and general merchandise. Net income increased by $3,241,000 (24.3%). The increase in net income was attributable primarily to increases in retail sales and an increased number of stores in operation at least three years. In February 1992, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Statement 109 requires a change from the deferred method of accounting for income taxes of APB Opinion 11 to the asset and liability method of accounting for income taxes. Under the asset and liability method of Statement 109, 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. Under Statement 109, 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. Effective May 1, 1993, the Company adopted Statement 109 and the cumulative effect of that change was not material to the financial statements. Pursuant to the deferred method under APB Opinion 11, which was applied in 1993 and prior years, deferred income taxes are recognized for income and expense items that are reported in different years for financial reporting purposes and income tax purposes using the tax rate applicable for the year of the calculation. Under the deferred method, deferred taxes are not adjusted for subsequent changes in tax rates. The FASB has issued Statement 115, "Accounting for Certain Investments in Debt and Equity Securities." Statement 115, effective for fiscal years beginning after December 15, 1993, expands the use of fair value accounting for those securities but retains the use of the amortized cost method for investments in debt securities that the reporting enterprise has the positive intent and ability to hold to maturity. The Company anticipates its short-term and long-term investments will be classified as "held-to-maturity" securities and the financial statement impact will not be material to the financial statements. The Company expects to adopt Statement 115 in the first quarter of fiscal 1995 on a prospective basis. FISCAL 1993 COMPARED TO FISCAL 1992 Net sales for fiscal 1993 increased by $67,111,000 (11.1%) over fiscal 1992. Retail gasoline sales increased by $49,160,000 (16.3%) as the number of gallons sold increased by 46,736,000 (16.1%). During fiscal 1993, retail sales of grocery and general merchandise increased by $20,370,000 (8.7%) due to the net addition of 42 new Company Stores and a greater number of stores in operation for at least three years. Cost of goods sold as a percentage of net sales was 79.2% in both fiscal 1993 and fiscal 1992. 20 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED Operating expenses as a percentage of net sales were 15.2% for fiscal 1993 compared to 15.5% for the prior year. The decrease in operating expenses as a percentage of net sales was caused primarily by increased sales and the increased number of Company Stores in operation. Average operating income per Company Store increased by $6,951 (12.8%) primarily as the result of increases in the average sales of gasoline and grocery and general merchandise. Net income increased by $1,809,000 (15.7%). The increase in net income was attributable primarily to increases in retail sales and an increased number of stores in operation at least three years. LIQUIDITY AND CAPITAL RESOURCES Due to the nature of the Company's business, most sales are for cash and cash provided by operations is the Company's primary source of liquidity. The Company finances its inventory purchases primarily from normal trade credit aided by the relatively rapid turnover of inventory. This turnover allows the Company to conduct its operations without large amounts of cash and working capital. As of April 30, 1994, the Company's ratio of current assets to current liabilities was .55 to 1. Management believes that the Company's current $25,000,000 bank lines of credit (aggregate amount), together with cash flow from operations, will be sufficient to satisfy the working capital needs of its business. Net cash provided by operations increased $22,404,401 (73.9%) during the year ended April 30, 1994, primarily as a result of decreased levels of inventories and an increase in accounts payable compared to the prior year. Cash flows from investing decreased during fiscal 1994, primarily because the increased capital expenditure exceeded the investment activity. During fiscal 1994, the Company expended approximately $66,000,000 for property and equipment, primarily for the construction and remodeling of Company Stores. The Company anticipates expending approximately $50,000,000 in fiscal 1995 for construction, acquisition and remodeling of Company Stores, primarily from funds generated by operations, existing cash, short-term investments and the proceeds of the Senior Notes. As of April 30, 1994, the Company had long-term debt of $61,415,000, consisting of $29,250,000 of Senior Notes, $15,648,000 of mortgage notes payable, $7,406,000 of unsecured notes payable and $9,111,000 of capital lease obligations. Interest on the Senior Notes is payable on the 15th day of each month at the rate of 7.70% per annum. Principal of the Senior Notes matures in forty quarterly installments beginning March 15, 1995. The Company may prepay the Senior Notes in whole or in part at any time in an amount of not less than $1,000,000 or integral multiples of $100,000 in excess thereof at a redemption price calculated in accordance with the Note Agreement dated as of February 1, 1993 between the Company and the purchasers of the Senior Notes. On March 28, 1994, the 6.25% Convertible Subordinated Debentures were converted into 3,683,064 shares of Common Stock. To date, the Company has funded capital expenditures primarily from the proceeds of the sale of Common Stock, issuance of the Debentures and the Senior Notes, a mortgage note and through funds generated from operations. Future capital needs required to finance operations, improvements and the anticipated growth in the number of Company Stores are expected to be met from cash generated by operations, existing cash, investments and additional long-term debt or other securities as circumstances may dictate, and are not expected to adversely affect liquidity. 21 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED LIQUIDITY AND CAPITAL RESOURCES - CONTINUED 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) actions required in the event of a detected leak; (iv) prevention of leakage through tank closings; and (v) required gasoline inventory recordkeeping. Since 1984, new Company Stores have been equipped with non-corroding fiberglass USTs, including many with double-wall construction, over-fill protection and electronic tank monitoring, and the Company has an active inspection and renovation program with respect to its older USTs. The Company currently has 1,455 USTs of which 1,043 are fiberglass and 412 are steel. Management of the Company believes that its existing gasoline procedures and planned capital expenditures will continue to keep the Company in substantial compliance with all current federal and state UST regulations. Several of the states in which the Company does business have trust fund programs with provisions for sharing or reimbursing corrective action or remediation costs incurred by UST owners, including the Company. These programs, other than the state of Iowa, generally are in the early stages of operation and the extent of available coverage or reimbursement under such programs for costs incurred by the Company is not fully known at this time. In each of the years ended April 30, 1994 and 1993, the Company spent approximately $1,814,000 and $2,533,000, respectively, for assessments and remediation. Substantially all of these expenditures have been submitted for reimbursement from state-sponsored trust fund programs and as of June 30, 1994, approximately $3,000,000 has been received from such programs. The Company has accrued a liability at April 30, 1994, of approximately $3,200,000 for estimated expenses related to anticipated corrective actions or remediation efforts, including relevant legal and consulting costs. Management believes the Company has no material joint and several environmental liability with other parties. Management of the Company currently estimates that aggregate capital expenditures for electronic monitoring, cathodic protection and overfill/spill protection will approximate $2,000,000 in fiscal 1995 through December 23, 1998, in order to comply with the existing UST regulations. Additional regulations, or amendments to the existing UST regulations, could result in future revisions to such estimated expenditures. SEASONALITY OF SALES-Sales at Casey's General Stores historically have been strongest during the Company's first and second fiscal quarters and relatively 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. As a result of management's continuing emphasis on higher-margin prepared-food items, however, the Company's net sales and net income have become somewhat less seasonal in recent years. 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. Accordingly, management believes that inflation has not had a material impact upon the operating results of the Company. 22 16 SELECTED FINANCIAL DATA
STATEMENT OF INCOME DATA (amounts in thousands, except per share data) YEARS ENDED APRIL 30 ------------------------------------------------------------------------ 1994 1993 1992 1991 1990 ---- ---- ---- ----- ---- Net sales $ 731,206 $ 673,697 $ 606,585 $ 580,305 $ 500,656 Franchise revenue 5,121 4,898 4,991 4,807 4,798 ---------- ---------- ---------- --------- --------- 736,327 678,595 611,576 585,112 505,454 Cost of goods sold 574,144 533,535 480,357 463,090 394,201 Operating expenses 110,083 102,379 94,209 90,712 83,394 Depreciation and amortization 18,623 15,943 13,704 12,238 10,580 Interest, net 6,434 5,249 4,808 4,678 3,967 ---------- ---------- ---------- --------- --------- Income before income taxes 27,043 21,489 18,498 14,394 13,312 Provision for income taxes 10,479 8,166 6,984 5,362 4,959 ---------- ---------- ---------- --------- --------- Net income $ 16,564 $ 13,323 $ 11,514 $ 9,032 $ 8,353 - - ------------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------------ *Per share - primary: Net income $ .73 $ .60 $ .52 $ .40 $ .36 - - ------------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------------ *Weighted average number of common and common equivalent shares outstanding - primary 22,651 22,193 22,096 22,374 22,893 *Dividends paid per common share $ .07125 $ .06 $ .0575 $ .0375 - - - - *All share and per share data have been restated to reflect a two-for-one stock split effective February 16, 1994. - - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE SHEET DATA (amounts in thousands) AS OF APRIL 30 ------------------------------------------------------------------------ 1994 1993 1992 1991 1990 ---- ---- ---- ----- ---- Current assets $ 41,369 $ 46,513 $ 33,011 $ 31,646 $ 30,505 Total assets 318,238 280,777 219,476 197,741 185,447 Current liabilities 75,453 55,456 46,593 35,844 29,913 Long-term debt 61,415 98,956 61,433 63,770 64,470 Shareholders+ equity 158,410 107,976 95,854 84,813 79,469
23 17
QUARTERLY FINANCIAL DATA (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) YEAR ENDED APRIL 30, 1994 YEAR ENDED APRIL 30, 1993 ------------------------------------------------- ------------------------------------------------- FIRST SECOND THIRD FOURTH TOTAL FIRST SECOND THIRD FOURTH TOTAL QUARTER QUARTER QUARTER QUARTER YEAR QUARTER QUARTER QUARTER QUARTER YEAR Net sales $ 193,689 $186,965 $172,621 $177,931 $731,206 $177,301 $175,875 $158,347 $162,174 $673,697 Gross profit (A) 40,169 41,110 40,018 35,765 157,062 36,671 36,969 34,227 32,295 140,162 Net income $ 4,755 $ 5,381 $ 4,047 $ 2,381 $ 16,564 $ 4,111 $ 4,428 $ 3,148 $ 1,636 $ 13,323 Earnings per common and common equivalent share $ .21 $ .24 $ .18 $ .10 $ .73 $ .19 $ .20 $ .14 $ .07 $ .60 Fully diluted earnings per share $ .20 $ .22 $ .17 $ .10 $ .68 $ .17 $ .18 $ .13 $ .07 $ .57 ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- -------------------------------------------------
(A) Before charge for depreciation and amortization. COMMON STOCK DATA The following table sets forth for the calendar periods indicated the high and low sale prices per share of Common Stock as reported on the NASDAQ National Market System through June 30, 1994.
CALENDAR 1992 HIGH LOW -------- -------- First Quarter $ 8 3/4 $ 6 5/16 Second Quarter 8 5/8 6 5/8 Third Quarter 8 11/16 6 11/16 Fourth Quarter 9 3/4 7 11/16 CALENDAR 1993 First Quarter 9 1/8 8 1/8 Second Quarter 9 13/16 7 3/8 Third Quarter 10 3/4 8 1/2 Fourth Quarter 12 5/16 10 1/4 CALENDAR 1994 First Quarter 13 7/8 11 Second Quarter 12 5/8 10 1/2
On July 5, 1994, the last reported sales price of the Company's Common Stock was $11 5/8 per share. On July 5, 1994, there were 2,350 holders of record of the Common Stock. The Company commenced paying cash dividends during fiscal 1991. On June 20, 1994, the Board of Directors declared a 2 cents per share dividend for shares held of record on August 1, 1994. The dividend is payable on August 15, 1994. The Company currently intends to pay comparable cash dividends on a quarterly basis in the future. 24 EX-24.1 5 CONSENT OF INDEPENDENT AUDITORS 1 EXHIBIT 24.1 REPORT AND CONSENT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders Casey's General Stores, Inc. The audits referred to in our report dated June 21, 1994 included the related financial statement schedules as of April 30, 1994, and for each of the years in the three-year period ended April 30, 1994, included in the Annual Report on Form 10-K. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. We consent to incorporation by reference in the Registration Statements (No. 33-19179 and 33-42907) on Form S-8 of Casey's General Stores, Inc. of our reports dated June 21, 1994, relating to the balance sheets of Casey's General Stores, Inc. as of April 30, 1994 and 1993, and the related statements of income, shareholders' equity and cash flows and related financial statement schedules for each of the years in the three-year period ended April 30, 1994, which reports appear in or are incorporated by reference in the April 30, 1994 Annual Report on Form 10-K of Casey's General Stores, Inc. KPMG Peat Marwick Des Moines, Iowa July 25, 1994 EX-99 6 NOTICE AND PROXY STATEMENT 1 EXHIBIT 99 [CASEY'S GENERAL STORES, INC. LETTERHEAD] August 15, 1994 TO OUR SHAREHOLDERS: The Annual Meeting of the shareholders of Casey's General Stores, Inc., will be held at the Casey's General Stores, Inc. Corporate Headquarters, One Convenience Blvd., Ankeny, Iowa, at 10:00 A.M., Iowa time, on Friday, September 16, 1994. The formal Notice of Annual Meeting and Proxy Statement, which are contained in the following pages, outline the election of directors to be considered by the shareholders at the meeting. It is important that your shares be represented at the meeting whether or not you are personally able to attend. Accordingly, we ask that you please sign, date and return the enclosed Proxy Card promptly. If you later find that you may be present for the meeting or for any other reason desire to revoke your proxy, you may do so at any time before it is voted. Your copy of the Company's Annual Report for 1994 is also enclosed. Please read it carefully. It gives you a full report on the Company's operations for the fiscal year ended April 30, 1994. We look forward to seeing you at the meeting and thank you for your continued interest in the Company. Sincerely, DONALD F. LAMBERTI Chief Executive Officer and Chairman of the Board 2 [LOGO] NOTICE OF ANNUAL MEETING OF SHAREHOLDERS SEPTEMBER 16, 1994 TO THE SHAREHOLDERS OF CASEY'S GENERAL STORES, INC.: The Annual Meeting of the shareholders of Casey's General Stores, Inc., an Iowa corporation, will be held at the Casey's General Stores, Inc. Corporate Headquarters, One Convenience Boulevard, Ankeny, Iowa, on Friday, September 16, 1994, at 10:00 A.M., Iowa time, for the following purposes: 1. To elect eight members to the Board of Directors to serve until the next annual election or until their successors are elected and qualified; and 2. To transact such other business as may properly come before the meeting or at any adjournment thereof. The Board of Directors has fixed the close of business, August 8, 1994, as the record date for the determination of shareholders entitled to notice of and to vote at this meeting and at any and all adjournments thereof. A list of such holders will be open for examination by any shareholder, for any purpose germane to the meeting, at the Company's Corporate Headquarters at the address described above, for a period of ten days prior to the meeting. By Order of the Board of Directors, JOHN G. HARMON Secretary August 15, 1994 3 PROXY STATEMENT This Proxy Statement and the accompanying proxy card or voting instruction card (either, the "proxy card") are being mailed beginning on or about August 15, 1994, to each holder of record of the Common Stock, no par value (the "Common Stock") of Casey's General Stores, Inc., One Convenience Blvd., Ankeny Iowa 50021 (the "Company") at the close of business on August 8, 1994. Proxies in the form enclosed are solicited by the Board of Directors of the Company for use at the Annual Meeting of shareholders to be held at the Casey's General Stores, Inc. Corporate Headquarters, Ankeny, Iowa, at 10:00 A.M. Iowa time, on Friday, September 16, 1994. If the enclosed proxy card is properly executed and returned, the shares represented thereby will be voted at the meeting in accordance with the shareholder's instructions. If no instructions are given, the proxy will be voted FOR the election as directors of the nominees named herein. A person giving a proxy may revoke it at any time before it is voted. Any shareholder attending the meeting may, on request, vote his or her own shares even though the shareholder has previously sent in a proxy card. Unless revoked, the shares of Common Stock represented by proxies will be voted on all matters to be acted upon at the meeting. For participants in the Casey's General Stores, Inc. Employees' Stock Ownership Plan and Trust (the "ESOP"), the proxy card will also serve as a voting instruction card for United Missouri Bank, N.A. (the "Trustee"), the trustee of the ESOP, with respect to the shares held in the participants' accounts. A participant cannot direct the voting of shares allocated to the participant's account in the ESOP unless the proxy card is signed and returned. If proxy cards representing shares in the ESOP are not returned, those shares will be voted by the Trustee in the same proportion as the shares for which signed proxy cards are returned by the other participants in the ESOP. The cost of soliciting proxies will be borne by the Company. The Company expects to solicit proxies primarily by mail. Proxies may also be solicited personally and by telephone by certain officers and regular employees of the Company. The Company may reimburse brokers and their nominees for their expenses in communicating with the persons for whom they hold shares of the Company. So far as the Board of Directors and the management of the Company are aware, no matters other than those described in this Proxy Statement will be acted upon at the meeting. If, however, any other matters properly come before the meeting, it is the - 1 - 4 intention of the persons named in the enclosed proxy to vote the same in accordance with their judgment on such other matters. SHARES OUTSTANDING All share amounts in this Proxy Statement have been adjusted to give effect to the two-for-one stock split of the Company's Common Stock declared for shareholders of record on February 1, 1994 and distributed on February 15, 1994. On August 8, 1994, the record date for shareholders entitled to vote at the meeting, there were outstanding _______ shares of Common Stock, with each such share being entitled to one vote. The following table contains information with respect to each person, including any group, known to the Company to be the beneficial owner of more than 5% of the Common Stock of the Company as of the dates indicated below. Except as otherwise indicated, the persons listed in the table have the voting and investment powers with respect to the shares indicated.
NAME AND AMOUNT ADDRESS OF AND NATURE BENEFICIAL OF BENEFICIAL PERCENT OWNER OWNERSHIP OF CLASS - - ----------- -------------- --------- United Missouri Bank, N.A. 10th and Grand Kansas City, MO 64141 2,162,968 (1) 8.34% Donald F. Lamberti One Convenience Blvd. Ankeny, IA 50021 3,170,366 (2) 12.23% College Retirement Equities Fund 730 Third Ave. New York, NY 10017 1,318,800 (3) 5.09% Fiduciary Management, Inc. 225 East Mason Street Milwaukee, WI 53202 1,330,400 (4) 5.13%
- - ---------------------- (footnotes on next page) -2- 5 (1) Information is as of July 25, 1994 and consists of shares held by United Missouri Bank, N.A. as the Trustee of the ESOP. Under the trust agreement creating the ESOP, the shares of Common Stock held by the Trustee are voted by the Trustee in accordance with the participants' directions or, if no directions are received, in the same manner and proportion as the Trustee votes shares for which the Trustee does receive timely instructions. The trust agreement also contains provisions regarding the allocation of shares to participants, the vesting of plan benefits and the disposition of shares. The amount shown includes an aggregate of 853,596 shares voted by the Trustee in accordance with the instructions of Messrs. Lamberti, Lamb, Shull and Harmon as participants in the ESOP. (2) Information is as of July 25, 1994 and includes 545,494 shares held under the ESOP and allocated to the account of Mr. Lamberti, over which Mr. Lamberti exercises voting power. See footnote 1 above. (3) Information is as of December 31, 1993 and was supplied by College Retirement Equities Fund, an investment company. (4) Information is as of December 31, 1993 and was supplied by Fiduciary Management, Inc., a registered investment advisory firm. Such information indicates that Fiduciary Management, Inc. had sole dispositive power over 1,036,400 shares and shared dispositive power over 294,000 shares. VOTING PROCEDURES Under Iowa corporate law and the Company's Restated and Amended Articles of Incorporation and By-Laws, the holders of a majority of the issued and outstanding shares of Common Stock entitled to vote must be present or represented by proxy in order to constitute a quorum or conduct business at the meeting. Directors are elected by a majority of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present. Shares present at the meeting that are not voted for a nominee or shares present by proxy where the shareholder properly withheld authority to vote for such nominee (including broker non-votes) will not be counted toward such nominee's achievement of a majority. -3- 6 PROPOSAL 1 ELECTION OF DIRECTORS Eight directors will be elected by the holders of Common Stock at the Annual Meeting to serve until the next ensuing Annual Meeting of shareholders or until their respective successors are elected and qualified. Directors are elected by a majority of the votes cast by the shares present in person or represented by proxy at the meeting. All of the nominees have previously been elected as directors by the holders of the Company's Common Stock and all such nominees are presently serving as directors of the Company. It is intended that all proxies in the accompanying form, unless contrary instructions are given thereon, will be voted for the election of all the persons designated by the Board of Directors as nominees. In case any of the nominees is unavailable for election, an event which is not anticipated, the enclosed proxy may be voted for the election of a substitute nominee. Additional information regarding these nominees is set forth below, and the number of shares of Common Stock of the Company beneficially owned by each of them as of July 15, 1994 is set forth on pages 8 and 9. Except as may be otherwise expressly stated, all nominees for directors have been employed in the capacities indicated for more than five years. The Board of Directors recommends a vote FOR election of the nominees as directors of the Company. DONALD F. LAMBERTI, 56, Chairman of the Board and Chief Executive Officer of the Company. Mr. Lamberti co-founded the Company in 1967 and served as its President from 1975 to 1988, when he assumed his present position. Mr. Lamberti, a director of the Company since 1967, also serves as a director of Norwest Bank Iowa, N.A. and National By-Products, Inc. and as a member of the Board of Trustees of Buena Vista College. RONALD M. LAMB, 58, President and Chief Operating Officer of the Company. Mr. Lamb served as a Vice President of the Company from 1976 until 1987 when he was elected Chief Operating Officer. He has served as President of the Company since September 1988. Mr. Lamb has been a director of the Company since 1981. -4- 7 DOUGLAS K. SHULL, 51, Treasurer and Chief Financial Officer of the Company. Mr. Shull, a director of the Company since 1987, also serves as a member of the Board of Directors of Iowa National Bankshares Corp. and as President of the Board of Trustees of the Des Moines Area Community College. JOHN G. HARMON, 40, Corporate Secretary of the Company. Mr. Harmon has been associated with the Company since 1976 and has served as a director since 1987. JOHN R. FITZGIBBON, 72, consultant and former Vice Chairman and Chief Executive Officer of First Group Companies and former Chief Executive Officer of Iowa-Des Moines National Bank (currently Norwest Bank Iowa, N.A.). Mr. Fitzgibbon, a director of the Company since 1983, also serves as a member of the Board of Directors of the Iowa Student Loan Liquidity Corporation and as Chairman of the Des Moines International Airport Board. GEORGE A. DOERNER, 76, retired Iowa Agency Manager, The Equitable Life Assurance Society of the United States. Mr. Doerner has served as a director of the Company since 1983. KENNETH H. HAYNIE, 61, President of Ahlers, Cooney, Dorweiler, Haynie, Smith & Allbee, P.C., a law firm. Mr. Haynie, a director of the Company since 1987, also serves as a member of the Board of Trustees of the Orchard Place Foundation. JOHN P. TAYLOR, 47, Chairman and Chief Executive Officer of Taylor Ball (formerly known as Ringland-Johnson-Crowley), a general construction contractor. Mr. Taylor served as President of Taylor Ball from 1983 to 1992, when he assumed his present position. Mr. Taylor also serves as a director of West Des Moines State Bank, Allied Group Inc., Allied Life Insurance Company and three wholly-owned property and casualty insurance subsidiaries of Allied Group, Inc. MEETINGS AND COMMITTEES The Board of Directors held seven meetings during the fiscal year ended April 30, 1994. At intervals between formal meetings, members of the Board are provided with various items of information regarding the Company's operations and are frequently consulted on an informal basis with respect to pending business. Each member of the Board of Directors attended 75% or more of the aggregate number of Board meetings and meetings of committees on which he served, except Mr. Doerner who attended 70% of such meetings. - 5 - 8 The Company's Second Amended and Restated Bylaws (the "Bylaws") established four standing committees of the Board of Directors: the Executive Committee, the Audit Committee, the Compensation Committee and the Nominating Committee. In addition, the Bylaws authorize the Board of Directors to establish other committees for selected purposes. One such other committee, the Shareholder Ad Hoc Committee, was established during the 1994 fiscal year for the purpose of reviewing the Exercise Price of the Company's Common Share Purchase Rights and making recommendations with respect thereto. This Committee, consisting of Messrs. Fitzgibbon, Taylor and Doerner, met twice during the fiscal year ended April 30, 1994. The Executive Committee, presently consisting of Messrs. Lamberti, Lamb, Fitzgibbon and Doerner, is authorized, within certain limitations, to exercise the power and authority of the Board of Directors between meetings of the full Board. The Committee met twice during the fiscal year ended April 30, 1994. The principal functions of the Audit Committee, presently consisting of Messrs. Shull, Fitzgibbon, Doerner and Haynie, are the recommendation to the Board of Directors of an independent public accounting firm to be the Company's auditors, and the approval of the audit arrangements and audit results. The Committee met twice during the fiscal year ended April 30, 1994. The principal functions of the Compensation Committee, presently consisting of Messrs. Fitzgibbon, Taylor, Doerner and Haynie, are to review management's evaluation of the performance of the Company's officers and their compensation arrangements and to make recommendations to the Board of Directors concerning the compensation of the Company's executive officers and outside directors. The Committee met four times and acted by unanimous consent on one other occasion during the fiscal year ended April 30, 1994. The Nominating Committee, presently consisting of Messrs. Lamberti, Lamb, Shull and Harmon, generally reviews the qualifications of candidates proposed for nomination and recommends to the Board candidates for election at the Annual Meeting of shareholders. The Committee met once during the fiscal year ended April 30, 1994. Shareholders may nominate director candidates for election pursuant to procedures set forth in the Company's By-laws. To make such nominations, shareholders must deliver written notice thereof to the Secretary of the Company not later than (i) with respect to an election to be held at an Annual Meeting of shareholders, at least 30 days, but not more than 90 days, prior to the anniversary date of the record date set for the immediately preceding Annual Meeting of shareholder, and (ii) -6- 9 with respect to an election to be held at a special meeting of shareholders, the close of business on the seventh day following the date on which notice of such meeting is first given to shareholders. The notice must set forth certain information concerning such shareholder and the shareholder's nominee(s), including their names and addresses, a representation that the shareholder is entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, a description of all arrangements or understandings between the shareholder and each nominee, such other information as would be required to be included in a proxy statement soliciting proxies for the election of the nominees of such shareholder and the consent of each nominee to serve as a director of the Company if so elected. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliane with the foregoing procedure. COMPENSATION OF DIRECTORS During the fiscal year ended April 30, 1994, each non-employee director was paid an annual cash retainer fee of $7,500 plus a meeting fee of $500 for each Board, committee or shareholders' meeting attended. The Company also pays the premiums on a directors' and officers' liability insurance policy insuring all directors. In addition, see "Compensation Committee Interlocks and Insider Participation" on page 18 herein for information concerning the temporary use of Company office space during the 1994 fiscal year by Kenneth H. Haynie, a director of the Company, and other members and staff of his law firm. -7- 10 BENEFICIAL OWNERSHIP OF SHARES OF COMMON STOCK BY DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth, as of July 25, 1994, the beneficial ownership of shares of the Company's Common Stock, the only class of capital stock outstanding, by the current directors of the Company and the executive officers named in the Summary Compensation Table herein, and all directors and executive officers as a group. Except as otherwise indicated, the shareholders listed in the table have the voting and investment powers with respect to the shares indicated.
TOTAL AMOUNT NAME OF SHARES AND NATURE BENEFICIAL DIRECT SUBJECT TO ESOP OF BENEFICIAL PERCENT OWNER OWNERSHIP OPTIONS(1) SHARES(2) OWNERSHIP (3) OF CLASS - - ----------------- ---------- ---------- --------- ------------- -------- Donald F. Lamberti 2,624,872 - 0 - 545,494 3,170,366 12.23% Ronald M. Lamb 421,500 - 0 - 253,378 674,878 2.60% Douglas K. Shull - 0 - 130,000 2,208 132,208 * John G. Harmon - 0 - 20,000 52,516 72,516 * John R. Fitzgibbon 61,860 - 0 - - 0 - 61,860 * George A. Doerner 12,028(4) - 0 - - 0 - 12,028 * Kenneth H. Haynie 27,631(5) - 0 - - 0 - 428,831 (6) 1.65% John P. Taylor 8,000 - 0 - - 0 - 8,000 * All executive officers and directors as a group (8 persons) 3,126,944 150,000 853,596 4,560,687 17.59%
- - ------------------- * Less than 1% (1) Amounts shown (which are included in the totals) are subject to acqusition through exercise of stock options granted under the 1991 Incentive Stock Option Plan (or the predecessor plan) and cannot be presenty voted by the executive officers holding the options. See "EXECUTIVE COMPENSATION -- Option Grants and Exercises" on pages 14 and 15 herein. - - ----------------------------------- (additional footnotes on next page) - 8 - 11 (2) The amounts shown (which are included in the totals) consist of shares allocated to the named executive officers' accounts in the ESOP as of April 30, 1994 over which the officer exercises voting power. See Footnote 1 to the table set forth under the heading "SHARES OUTSTANDING" on page 3 herein. (3) Except as otherwise indicated, the amounts shown are the aggregate numbers of shares attributable to the shareholders' direct ownership of shares, shares subject to options and ESOP shares. (4) The amount shown includes 1,788 shares owned by Mr. Doerner's spouse. (5) The amount shown consists of 7,000 shares owned by Mr. Haynie's spouse and 20,631 shares jointly owned by Mr. Haynie and his spouse. (6) The amount shown consists of 400,000 shares held by the Lamberti Family Trust, for which Mr. Haynie acts as co-trustee with shared voting and dispositive power, and 1,200 shares of Common Stock owned by one of Mr. Haynie's children, both as to which Mr. Haynie disclaims beneficial ownership. VOTING TRUST AGREEMENT Messrs. Lamberti and Lamb are parties to a voting trust agreement that will become effective upon the date of death of the first of such shareholders. Under the voting trust agreement, the shareholders have agreed to deposit all of the shares of Common Stock of the Company beneficially owned by them ("Voting Shares") with the survivors of Messrs. Lamberti and Lamb, and their successors, as voting trustees. Upon the effectiveness of the voting trust, the voting trustees generally will be entitled to vote the Voting Shares in their discretion in accordance with the determination of a majority of the voting trustees. However, in order to approve certain extraordinary corporate actions, such as the merger of the Company into any other company, the voting trustees will be required to obtain the prior affirmative vote of the holders of voting trust certificates representing not less than two-thirds of the Voting Shares. Unless earlier terminated by the vote of all of the voting trustees or of holders of voting trust certificates representing at least three-quarters of the Voting Shares, the agreement will terminate upon the expiration of three years after the effective date of the voting trust. - 9 - 12 EXECUTIVE COMPENSATION REPORT OF COMPENSATION COMMITTEE The Compensation Committee of the Board of Directors (the "Committee"), composed of three outside directors, is responsible for evaluating the performance of management and determining the annual compensation to be paid to the Company's chief executive officer and the executive officers named in the Summary Compensation Table. The Committee also administers the 1991 Incentive Stock Option Plan (the "1991 Option Plan"). OBJECTIVES The Committee's executive compensation policies are designed to attract, motivate and retain executives who will contribute to the long-term success of the Company, and to reward executives for achieving both short-term and long-term strategic goals of the Company. The Company is committed to providing a fair and competitive pay package to all employees. Compensation for executive officers is linked directly to the Company's financial performance as well as the attainment of each executive officer's individual performance goals. As a result, a substantial portion of each executive officer's total compensation is intended to be variable and to relate to and be contingent upon the financial performance of the Company, as well as each executive officer's job performance. Each year, typically in August, the Committee reviews the Company's executive compensation program and approves individual salary levels and performance goals for all executive officers and other senior Company personnel. The Committee also makes any determinations with respect to the award of stock options under the 1991 Option Plan at that time. In 1992, this review included a report from an independent compensation consultant concerning the terms of the Company's employment agreements with its executive officers and the level of salaries and benefits provided therein. EXECUTIVE OFFICER COMPENSATION As has been the practice in recent years, the three principal components of the Company's executive compensation program during the 1994 fiscal year were base salary, annual incentive payments and stock options. BASE SALARY. Base salaries for executive officers of the Company are determined primarily on the basis of each executive officer's job description and corresponding responsibilities, rather than on the basis of job titles or comparisons with executive officers at comparably sized companies. The Company -10- 13 has established only four executive officer positions and, as a result, the Committee believes that the Company's executive officers generally assume more extensive responsibilities than those found in similar positions with comparably sized companies. The base salary of each executive officer is set forth in the officer's employment agreement with the Company and may be adjusted during the terms thereof with the consent of the officer. ANNUAL INCENTIVE PAYMENTS. The Company's executive officers (as well as its Vice Presidents) annually participate in an incentive compensation bonus pool. Bonus awards are made only if the Company achieves specific performance targets in earnings per share established each year by the Committee, with the amount of the bonus increasing as earnings per share increase above the levels specified by the Committee. The purpose of the bonus awarded is to reward superior performance by the Company's executive officers that has resulted in the Company achieving certain financial performance levels. During the 1994 fiscal year, each of the Company's executive officers received the maximum bonus award for which he was eligible under the levels established by the Committee. STOCK OPTIONS. Stock options may be granted to executive officers and other key employees of the Company under the terms of the 1991 Option Plan. The size of stock option awards is based primarily on individual performance and the individual's responsibilities and position with the Company. The 1991 Option Plan is designed to assist the Company in attracting, retaining and motivating executive officers and other key employees. The stock options are also designed to align the interests of the executive officers and other key employees with those of the Company's shareholders. The stock options are granted with an exercise price equal to the fair market value of the Company's Common Stock on the date of grant. This approach encourages the creation of shareholder value over the long-term, in that no benefit is realized from the stock option grants unless the price of the Company's Common Stock rises over a number of years. During the 1994 fiscal year, the Committee granted options to purchase an aggregate of 220,000 shares to a total of 71 employees, including two of the executive officers and each of the Company's five Vice Presidents. ADDITIONAL COMPENSATION AND BENEFITS. The Company's compensation of executive officers includes certain other benefits. Each executive officer is entitled to receive additional compensation in the form of payments, allocations, or accruals under various benefit plans, consisting primarily of contributions to the Company's 401(k) plan and employee stock ownership plan. The Committee believes that these plans are an integral part of the overall compensation program of the Company. -11- 14 CHIEF EXECUTIVE OFFICER. Mr. Lamberti's compensation for the fiscal year ended April 30, 1994 was determined in accordance with the above policies and in light of his employment agreement with the Company. No adjustment was made to Mr. Lamberti's base salary during 1994. Mr. Lamberti earned $200,000 in annual bonus for performance in the 1994 fiscal year based upon the Company's ability to achieve specified financial performance targets in earnings per share established by the Committee at the beginning of the fiscal year. OTHER. The Committee is aware of the limitations placed recently on the deductibility of compensation in excess of $1 million which is earned by an executive officer in any year. None of the executive officers earned compensation that would be subject to such limitations, but the Committee will continue to monitor developments in this area. COMPENSATION COMMITTEE John R. Fitzgibbon, Chairman George A. Doerner Kenneth H. Haynie John P. Taylor EXECUTIVE COMPENSATION The following table sets forth the cash and noncash compensation earned or awarded for the last three fiscal years to the chief executive officer and the three other most highly compensated executive officers of the Company whose compensation (based on the total of the amounts required to be shown in the salary and bonus columns of such table) exceeded $100,000. - 12 - 15
SUMMARY COMPENSATION TABLE -------------------------- LONG-TERM ANNUAL COMPENSATION COMPENSATION --------------------------------------------------- ------------ NAME AND OTHER ANNUAL ALL OTHER PRINCIPAL COMPENSATION COMPENSATION POSITION(1) YEAR SALARY($) BONUS($) ($) OPTIONS(#) ($) (2) - - ----------- ---- --------- -------- ------------ ---------- ------------- Donald F. Lamberti Chairman 1994 $250,000 $200,000 $2,444 0 $3,681 and 1993 250,000 200,000 2,444 0 3,293 Chief 1992 250,000 200,000 2,444 0 3,378 Executive Officer Ronald M. Lamb President 1994 $250,000 $200,000 $ 836 0 $3,681 and Chief 1993 250,000 200,000 965 0 $3,293 Operating 1992 250,000 200,000 1,352 0 $3,378 Officer Douglas K. Shull Treasurer 1994 $119,000 $ 80,000 $2,248 10,000 $5,521 and Chief 1993 117,000 80,000 2,248 0 $5,207 Financial 1992 117,000 80,000 2,248 10,000 $5,369 Officer John G. Harmon Secretary 1994 $ 98,334 $ 80,000 $1,789 10,000 $4,778 1993 95,000 $ 80,000 $1,789 0 $4,444 1992 95,000 $ 80,000 $1,789 10,000 $4,587
- - ---------- (1) The Company has only four executive officers for whom individualized pay disclosure is required under the rules of the Securities and Exchange Commission. (2) The amount shown for each named executive officer is the total of the Company's contributions to the Company's 401(k) plan, in which all employees are eligible to participate, and contributions to the ESOP. For the year ended April 30, 1994, the Company contributed $2,380 and $1,967 to the 401(k) plan on behalf of Messrs. Shull and Harmon, respectively (neither Mr. Lamberti nor Mr. Lamb participate in such plan). The Company's contributions to the ESOP for the named executive officers were as follows: Mr. Lamberti, $3,681; Mr. Lamb, $3,681; Mr. Shull, $3,141; and Mr. Harmon, $2,811. - 13 - 16 OPTION GRANTS AND EXERCISES The following tables summarize, for the fiscal year ended April 30, 1994, option grants to and option exercises by the executive officers named in the Summary Compensation Table under the Company's 1991 Incentive Stock Option Plan, and the value of the options held by such persons at April 30, 1994:
OPTION GRANTS IN LAST FISCAL YEAR --------------------------------- POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK PRICE APPRECIATION FOR INDIVIDUAL GRANTS OPTION TERM(2) - - ----------------------------------------------------------------------------------------------------------- ---------------------- PERCENT OF TOTAL OPTIONS OPTIONS GRANTED EXERCISE GRANTED TO EMPLOYEES PRICE EXPIRATION 5% 10% NAME (#)(1) IN FISCAL YEAR ($/SH) DATE ($) ($) - - ---- -------- -------------- --------- ---------- ---- ---- Donald F. Lamberti -0- -- -- -- -- -- Ronald M. Lamb -0- -- -- -- -- -- Douglas K. Shull 10,000 4.5% $10.25 9-1-2003 $64,460 $163,360 John G. Harmon 10,000 4.5% $10.25 9-1-2003 $64,460 $163,360
- - ------------- (1) Stock options have no value on the date of grant because the exercise price per share is equal to the market price per share of the Company's Common Stock on the date the option is granted. A stock option has value to the optionee in the future only if the market price of the Company's Common Stock at the time the option is exercised exceeds the exercise price. (2) The dollar amounts under the 5% and 10% Columns are the result of calculations required by the Securities and Exchange Commission and should not be viewed as, and are not intended to be, a forecast of possible future appreciation in the Company's stock price. -14- 17
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES --------------------------------- NUMBER OF SECURITIES VALUE OF UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY OPTIONS AT OPTIONS AT YEAR-END YEAR-END ------------- -------------- SHARES VALUE EXERCISABLE/ EXERCISABLE/ ACQUIRED ON REALIZED UNEXERCISABLE UNEXERCISABLE NAME EXERCISE (#) ($) (#) (IN SHARES) (IN DOLLARS) - - ------------------------- ------------ -------- --------------- --------------- Donald F. Lamberti 0 0 0/0 0/0 Ronald M. Lamb 0 0 0/0 0/0 Douglas K. Shull 0 0 130,000/0 $453,125/0 John G. Harmon 0 0 20,000/0 $ 67,500/0
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS Effective as of March 2, 1992, the Company entered into employment agreements with each of Messrs. Lamberti, Lamb, Shull and Harmon. The agreements with Messrs. Lamberti, Lamb and Shull are for terms of five years (with automatic renewal terms of three years in the case of Messrs. Lamberti and Lamb) and the agreement with Mr. Harmon was for a term of three years. On June 20, 1994, the Board of Directors approved of an extension of the Company's contract with Mr. Harmon, on essentially the same terms as those approved in 1992, for a period expiring on March 1, 1997. The term of employment for Messrs. Shull and Harmon would be extended for a three year period in the event of a "change of control" (as defined in the agreements) of the Company. Each of the agreements with the executive officers continues their levels of responsibility on an equivalent basis to the duties performed by each of them prior to the effective date of the agreement. The agreements with Messrs. Lamberti and Lamb provide that each such executive officer will receive compensation exclusive of bonuses at the rate of $250,000 per year or such other amount as the Company and the officer mutually shall agree. In the case of Messrs. Shull and Harmon, the agreements provide for compensation exclusive of bonuses at the rates of $120,000 and $100,000, respectively, or such other amounts as the Company and the officers shall agree upon. -15- 18 In each case, the officer's employment may be terminated as a result of death, disability, cause or "good reason", both before or following any change in control of the Company. For this purpose, good reason is generally defined as a diminution in compensation or level of responsibility, forced relocation to another area, or the failure to continue employment upon the stated terms and conditions. Under the agreements, the death of either Messrs. Lamberti or Lamb would obligate the Company to pay their surviving spouse the officer's salary for a period of 24 months, after which the spouse would receive monthly benefits equal to one-half of the officer's retirement benefits for period of 20 years or until the spouse's death, whichever occurs first. A similar obligation would arise in the event of the death of either Messrs. Shull or Harmon, except at the period during which full salary would be paid would be 12 rather than 24 months. In the event either Messr. Lamberti or Lamb become disabled, the officer would be entitled to disability benefits equal to one-half of their annual salary until they reach age 65 or are no longer disabled or until their death, whichever occurs first. In the event they recover from their disability, retirement benefits would be paid thereafter until death. Neither Messrs. Shull nor Harmon are entitled to receive any disability payments under their agreements with the Company. In the event of termination for cause (or other than for good reason), each of the four officers is entitled to receive their salary to the date of termination. In the event an officer terminates employment for good reason, the Company would be obligated to pay such officer (i) his salary through the date of termination, (ii) a portion of the highest annual bonus received during the three previous fiscal years, if any, (iii) a payment equal to 2.0 times the sum of the officer's salary and bonus allocation, (iv) all compensation previously deferred and (v) the present value of their retirement benefits, if any. Certain employee benefits also would be continued for a two-year period following the date of termination. If an officer terminates employment for good reason within three years following a change of control, the Company would be obligated to pay such officer as it would for a "good reason" termination described above, except that the multiple would be 3.0 times the sum of the officer's salary and bonus allocation rather than 2.0 times. Similarly, certain employee benefits also would be continued for a three-year period following the date of termination. In the event of such a termination, the Company would be obligated to take into account the golden parachute tax provisions of the Internal Revenue Code of 1986 and may be required to adjust the payment amount to avoid an adverse tax result to the officer as a result of receiving the foregoing amounts. - 16 - 19 Each agreement further provides for the voluntary retirement of the officer at age 65, or upon reaching 59 years of age and having completed 25 years of employment with the Company, following which an officer would be entitled to receive an annual retirement benefit equal to one-half of his most recent salary payable until his death. The Board of Directors may extend an officer's employment on a year-to-year basis following age 65, and each officer is expected to hold themselves available at the written request of the Board of Directors to consult and advise with the officers and directors of the Company. COMPARATIVE STOCK PERFORMANCE The Performance Graph set forth below compares the cumulative total shareholder return on the Company's Common Stock for the last five fiscal years with the cumulative total return on the Russell 2000 Index and a peer group index based on the common stock of the following three companies: Dairy Mart Convenience Stores, Uni-Marts Incorporated and Sunshine Jr. Stores Incorporated. The cumulative total shareholder return computations set forth in the Performance Graph assume the investment of $100 in the Company's Common Stock and each index on April 30, 1989, and reinvestment of all dividends. The total shareholder returns shown are not necessarily indicative of future returns. -17- 20
April 30 --------------------------------------------------------------------------------------- 1989 1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- ---- CASEY'S GENERAL STORES, INC. $100 $78 $ 82 $143 $146 $216 PEER GROUP $100 $70 $ 62 $ 70 $ 49 $ 83 RUSSELL 2000 $100 $98 $107 $126 $145 $168
- - ------------- * The peer group index reflected on the above Performance Graph does not include Circle K Corp., a company that was included in the peer group index set forth in the Proxy Statement for the 1993 Annual Meeting of the Company's shareholders. The Company understands that Circle K Corp. ceased active trading and public reporting in November 1993 and is now a privately held concern, and that the information necessary to include the same in the peer group index is no longer publicly available. 21 OTHER INFORMATION RELATING TO DIRECTORS AND EXECUTIVE OFFICERS COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee of the Board of Directors determines annually the compensation to be paid to the Company's Chief Executive Officer and other executive officers, including the executive officers named in the Summary Compensation Table. The Compensation Committee members are John R. Fitzgibbon (Chairman), John P. Taylor, George A. Doerner and Kenneth H. Haynie. Mr. Haynie is a shareholder and President of Ahlers, Cooney, Dorweiler, Haynie, Smith & Allbee, P.C., a law firm in Des Moines, Iowa. The Company retained this law firm during fiscal 1994 for legal services and expects to retain such firm in the current fiscal year. During the flooding that struck Des Moines in July 1993, the Company permitted Mr. Haynie and several lawyers and staff members with his law firm to utilize office and working space in the Company's Corporate Headquarters as their temporary office facilities while the law firm's offices were inaccessible. Such usage extended for a period of approximately six weeks. No specific rental arrangements for such use were ever formalized, and no independent determination was made of the fair market value thereof. In September 1993 the law firm paid the Company $1,500 as a rental fee and reimbursed the Company $642 for postage and facsimile charges incurred during the period. CERTAIN TRANSACTIONS At one store location, the Company is currently a sublessee of a trust created by Mr. Lamberti for the benefit of his heirs. The trust is irrevocable for federal income tax purposes, and Mr. Lamberti exercises no incidents of ownership over it. Following the December 1, 1984, dissolution of a corporation beneficially owned by Mr. Lamberti, the trust succeeded to the interest in the lease with the Company. The trust currently owns the building at that location and itself leases the real estate at that location from another trust. The Company's sublease originally commenced on October 1, 1977, for a term of 10 years, and provided for a fixed monthly rental payment of $1,300 and payment of an amount equal to 1% of sales by the leased store. In December 1984, the Company's sublease was extended until September 30, 1997 for the same rental. The amounts received by the trust under the lease during the past three fiscal years were $20,639 in fiscal 1992, $24,565 in fiscal 1993 and $34,903 in fiscal 1994. The Company does not intend to lease additional store sites or buildings from affiliated persons. -18- 22 During the fiscal 1994, the Company leased its former headquarters site and building, primarily for storage purposes, from a general partnership (Broadway Distributing Co.) composed of the Company (50%), Mr. Lamberti (25%) and Walter J. Carlson (25%), a former director and officer of the Company. The property was leased under the terms of a 15-year lease that commenced on January 1, 1978 and terminated on December 31, 1992, and provided for an annual rental of $54,000 plus the payment by the Company of all property taxes. The Company has continued to occupy the property following termination of the lease as a tenant at will and has subleased a portion of the same to a local government agency. The Company has paid $64,800 in rentals under the lease during each of the past three fiscal years. AUDITORS KPMG Peat Marwick was engaged by the Company to serve as its auditors for fiscal 1994. Representatives of KPMG Peat Marwick will be in attendance at the Annual Meeting to be held on September 16, 1994, and will be available to respond to appropriate questions and may make a statement if they so desire. DEADLINE FOR SUBMISSION OF SHAREHOLDER PROPOSALS Any proposal which a shareholder intends to present at the Annual Meeting of shareholders in 1995 must be received by the Company by April 14, 1995 in order to be eligible for inclusion in the proxy statement and proxy card relating to such meeting. ANNUAL REPORT The Company's 1994 Annual Report is being mailed to shareholders with this Proxy Statement. The Company will provide without charge to each shareholder, on written request, a copy of the Company's Annual Report on Form 10-K for the year 1994, including the financial statements and schedules thereto, filed with the Securities and Exchange Commission. If a shareholder requests copies of any exhibits to such Form 10-K, the Company will require the payment of a fee covering its reasonable expenses. A written request should be addressed to the Corporate Secretary, Casey's General Stores, Inc., One Convenience Blvd., Ankeny, Iowa 50021-0845. -19- 23 By Order of the Board of Directors, John G. Harmon Secretary August 15, 1994 YOUR VOTE IS IMPORTANT. PLEASE COMPLETE AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING POSTPAID ENVELOPE. -20- -----END PRIVACY-ENHANCED MESSAGE-----