-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JfYAN0zODCtpozYp/lI+ll2zUNh9oiJ/kH0qJ6l4avNkkmJZjaHGxEU1iB12by52 LqgXu148lOTko3EclLxeUA== 0000950124-96-003247.txt : 19960729 0000950124-96-003247.hdr.sgml : 19960729 ACCESSION NUMBER: 0000950124-96-003247 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960726 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CASEYS GENERAL STORES INC CENTRAL INDEX KEY: 0000726958 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CONVENIENCE STORES [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: 96599767 BUSINESS ADDRESS: STREET 1: ONE CONVENIENCE BLVD CITY: ANKENY STATE: IA ZIP: 50021 BUSINESS PHONE: 5159656100 10-K 1 FORM 10-K ANNUAL REPORT 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, 1996 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. [ ] At the close of business on July 22, 1996, the Company had 26,225,206 shares of Common Stock, no par value, issued and outstanding. The aggregate market value of the 21,261,664 shares of Common Stock held by non-affiliates of the Company on that date was $380,052,244, based on a last reported sales price of $17-7/8 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, 1996 (Items 5, 6, 7 and 8 of Part II and Item 14(a) of Part IV). 2. Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Annual Meeting of shareholders to be held on September 20, 1996 (Items 10, 11, 12 and 13 of Part III). -2- 3 PART I ITEM 1. BUSINESS THE COMPANY Casey's General Stores, Inc. ("Casey's") and its two wholly-owned subsidiaries, Casey's Marketing Company (the "Marketing Company") and Casey's Services Company (the "Services Company") (Casey's, together with the Marketing Company and the Services Company, shall be referred to herein as the "Company"), operate convenience stores under the name "Casey's General Store" in nine 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, 1996, there were a total of 983 Casey's General Stores in operation, of which 801 were operated by the Company ("Company Stores") and 182 stores were operated by franchisees ("Franchised Stores"). There were 65 Company Stores and 1 Franchised Stores newly opened in fiscal 1996. 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 72% 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. Casey's, with executive offices at One Convenience Blvd., Ankeny, Iowa 50021-8045 (telephone 515/965-6100) was incorporated in Iowa in 1967. The Marketing Company and the Services Company also operate from the Corporate Headquarters facilities, and were incorporated in Iowa in March 1995. -3- 4 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. In each of the past two fiscal years, the Company derived approximately 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, 1996:
COMPANY FRANCHISED STATE STORES STORES TOTAL ----- ------- ---------- ----- Iowa . . . . . . . . . 223 89 312 Illinois . . . . . . . 204 31 235 Indiana . . . . . . . 8 0 8 Kansas . . . . . . . . 73 4 77 Minnesota. . . . . . . 41 15 56 Missouri . . . . . . . 189 33 222 Nebraska . . . . . . . 43 8 51 South Dakota . . . . 19 0 19 Wisconsin . . . . . . 1 2 3 Total . . . . 801(81%) 182(19%) 983 (100%)
-4- 5 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. 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 ENDED STORES CONVERTED AT END OF APRIL 30, OPENED STORES PERIOD - ----------- ------ --------- --------- 1992 Company . . . . . 23 2 597 (1) Franchised . . . . 3 (2) 202 (1) -- --- Total . . . . . 26 799 1993 Company . . . . . 36 10 639 (2) Franchised . . . . 1 (10) 187 (2) -- --- Total . . . . . 37 826 1994 Company . . . . . 56 1 687 (3) Franchised . . . . 4 (1) 189 (3) -- --- Total . . . . . 60 876 1995 Company . . . . . 60 0 741 (4) Franchised . . . . 3 (0) 186 (4) -- --- Total . . . . . 63 927 1996 Company . . . . . 65 1 801 Franchised . . . . 1 (1) 182 (5) -- --- Total . . . . . 66 983 - -----------------------
-5- 6 (1) Seven Company Stores and one Franchised Store were closed in 1992. (2) Four Company Stores and six Franchised Stores were closed in 1993. (3) Nine Company Stores and one Franchised Store were closed in 1994. (4) Six Company Stores and six Franchised Stores were closed in 1995. (5) Six Company Stores and four Franchised Stores were closed in 1996. Six Company Stores were opened in May and June 1996 and 38 Company Stores were under construction at June 30, 1996. On June 30, 1996, the Company had purchased or had the right to purchase 47 additional store sites. All but two of the 85 stores under construction or planned for construction on such sites will be Company Stores. Management anticipates opening approximately 70 new Company Stores during fiscal 1997. 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 1994, 1995 and 1996, the Company converted 1, 0 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 1,000 to 1,500 stores located within a 500-mile radius of the Casey's Distribution Center, which would include the additional store sites being planned for 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. -6- 7 CORPORATE SUBSIDIARIES The Marketing Company and the Services Company were organized as Iowa corporations in March 1995, and both are wholly-owned subsidiaries of Casey's. Certain Casey's employees became employees of the Marketing Company or the Services Company on May 1, 1995, and both of those subsidiaries assumed certain responsibilities and functions formerly held by Casey's on that date. Casey's now operates Company Stores in the States of Illinois, Kansas, Minnesota, Nebraska and South Dakota. Casey's also holds the rights to the Casey's trademark and trade name, and serves as franchisor in connection with the operation of Franchised Stores. Effective May 1, 1995, the Marketing Company assumed responsibility for the operation of Company Stores in the States of Iowa, Indiana and Missouri. The Marketing Company also has responsibility for all Company wholesale operations, including the operation of the Casey's Distribution Center. The Services Company provides a variety of construction and transportation services for all Company Stores. Both the Marketing Company and Services Company personnel utilize the Corporate Headquarters facility for their base of operations. 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 92% 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. -7- 8 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. The Company also has introduced the sale of donuts prepared on store premises, available in approximately 99% of the stores as of April 30, 1996, 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 2 million sandwiches during fiscal 1997, for delivery to both Company and Franchised Stores through the Casey's Distribution Center. The Company began marketing made-from-scratch pizza in 1984, expanding its availability to 902 (92%) stores as of April 30, 1996. Management believes pizza is the Company's most popular prepared food product, although the Company continues to expand 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 25 (3%) stores as of April 30, 1996. 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. -8- 9 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 41% of the Company's retail sales, such sales resulted in approximately 74% of the Company's gross profits from retail sales. Gross profit margins for prepared foods items, which have averaged approximately 52% during the last three fiscal years, are significantly higher than the gross profit margin for retail sales of gasoline, which has averaged approximately 10% 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 30, 1996, the aggregate investment in the land, building, equipment and initial inventory for a typical Company Store averaged approximately $680,000. The standard building designed by the Company is a pre-engineered steel frame building mounted on a concrete slab. The current store design measures 40 feet by 68 feet, with approximately 1,300 square feet devoted to sales area, 500 square feet to kitchen space, 500 square feet to storage and two large public restrooms. 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 72% 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. Management believes that a -9- 10 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. GASOLINE OPERATIONS Gasoline sales are an important part of the Company's sales and earnings. Approximately 56% of Casey's net sales for the year ended April 30, 1996 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, 1996:
YEAR ENDED APRIL 30, -------------------- 1994 1995 1996 ---- ---- ---- Number of Gallons Sold 375,962,172 429,629,280 492,353,905 Total Retail Gasoline Sales $377,807,750 $455,310,780 $531,414,819 Percentage of 51.7% 53.6% 55.7% Net Sales Gross Profit 10.1% 9.4% 10.7% Percentage Average Retail Price per Gallon $1.00 $1.06 $1.08 Average Gross Profit Margin per Gallon 10.12 9.91 11.46 Average Number of Gallons Sold per Company Store * 570,253 596,684 637,904 - ----------------------
-10- 11 * 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 increased during the year ended April 30, 1996. The total number of gallons sold by the Company during this period also 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" herein. As a result of these conditions, total retail gasoline sales by the Company increased during the period, as did the percentage of such sales to the Company's total net sales. 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 volatility 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 Marketing 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 40 Company- -11- 12 owned delivery trucks. The Marketing 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 Marketing 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 the Company derives income from this activity, it makes such sales, particularly gasoline sales, at narrow profit margins in order to promote the competitiveness and increase the sales to Franchised Stores. In fiscal 1996, 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 the Company to respond flexibly to changing market conditions. FRANCHISE OPERATIONS Casey's has franchised Casey's General Stores since 1970. In addition to generating income for Casey's, 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 Casey's. Franchising also enabled Casey's 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 the Company has grown and strengthened its financial resources, the advantages of franchising have decreased in importance and management currently expects to grant new franchises only to existing franchisees operating in states other than Iowa on a limited basis. See "BUSINESS - Government Regulation" herein. From April 30, 1983 to April 30, 1996, the percentage of Company Stores increased from 44% to 81%. From inception to April 30, 1996, the Company had converted 136 Franchised Stores to Company Stores by leasing or purchasing such stores. All franchisees pay Casey's a royalty fee equal to 3% of gross receipts derived from total store sales excluding gasoline, subject to a minimum monthly royalty of $300. Casey's 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 Casey's a sign and facade rental fee. The franchise agreements do not authorize Casey's 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 -12- 13 from any supplier, provided the products meet the Company's quality standards. Franchise agreements typically contain 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 "BUSINESS - Government Regulation" herein for a discussion of recent legislation in Iowa concerning franchise agreements. PERSONNEL On April 30, 1996, the Company had 3,480 full-time employees and 4,863 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 4 regional operations managers. Reporting directly to the regional managers are 16 district managers, each with responsibility over approximately equal numbers of stores. Each district manager is generally in charge of seven supervisors. Each of the 120 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 twenty years, one has been employed for more than twenty-four years and one has been employed for more than twenty-eight years. In addition to its four executive officers, the Company currently has Vice Presidents of Store Operations, Property Management, Transportation, and Marketing. The Company also has 34 other employees with managerial responsibilities in the areas of store operations, gasoline marketing, real estate development, construction, equipment -13- 14 maintenance, merchandising, 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. 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 maintain a bright, clean store and to offer quality products for sale. -14- 15 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 Casey's under federal law. Management 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 1,683 USTs of which 1,311 are fiberglass and 372 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, 1995 and 1996, the Company spent approximately $2,137,000 and $718,000, 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, 1996, approximately $3,900,000 has been received from such programs. Such amounts are typically subject to statutory provisions requiring repayment of the reimbursed funds for noncompliance with upgrade provisions or other applicable laws. The Company has accrued a liability at April 30, 1996, of approximately $2,600,000 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. -15- 16 Management of the Company currently estimates that aggregate capital expenditures for electronic monitoring, cathodic protection and overfill/spill protection will approximate $1,000,000 in fiscal 1997 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, currently set forth in Chapter 523H, Code of Iowa, 1995, as amended ("Chapter 523H"), became effective on July 1, 1992, and purports to apply to all new or existing franchises that are operated in the State of Iowa after the effective date, including those of Casey's. The legislation contains, among other things, provisions regarding the transfer of franchises, the termination or nonrenewal of franchises, and the encroachment on existing franchises. Subsequent judicial rulings in cases brought by other Iowa franchisors have held, however, that Chapter 523H does not apply to any franchises enter into prior to its July 1, 1992 effective date. As of April 30, 1996, Casey's was a party to 89 franchise agreements entered into with respect to Franchised Stores in the State of Iowa. Of that number, only two of the franchise agreements were entered into following the effective date of Chapter 523H (the "Covered Franchises"); the remainder were all entered into prior to July 1, 1992. Certain provisions of the Covered Franchises conflict with the provisions of Chapter 523H. As such, certain contractual provisions of the Covered Franchises, including those relating to transfer, termination or non-renewal and encroachment, may not be valid or enforceable under Chapter 523H. -16- 17 Chapter 523H was amended during the 1995 legislative session, but several significant ambiguities and concerns remain. As a result, Casey's recently determined not to grant any new Iowa franchises until further amending legislation is enacted or other favorable court rulings are rendered. Management does not expect Chapter 523H 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, 1996, Casey's owned the land at 711 locations and the buildings at 738 locations, and leased the land at 90 locations and the buildings at 63 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. ITEM 3. LEGAL PROCEEDINGS The Company from time to time is a party to legal proceedings arising from the conduct of its business operations, including proceedings relating to personal injury, property damage and employment claims, environmental remediation or contamination, 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 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. -17- 18 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 to shareholders for the year ended April 30, 1996. 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 1994 First Quarter $.01875 Second Quarter .02 Third Quarter .02 Fourth Quarter .02 ------- $.07875 Calendar 1995 First Quarter $.02 Second Quarter .02 Third Quarter .025 Fourth Quarter .025 ----- $.09 Calendar 1996 First Quarter $.025 Second Quarter .025
-18- 19 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 to shareholders for the year ended April 30, 1996. 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 to shareholders for the year ended April 30, 1996. 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 to shareholders for the year ended April 30, 1996. 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 That portion of the Company's definitive Proxy Statement appearing under the caption "Election of Directors", to be filed with the Commission pursuant to Regulation 14A within 120 days after April 30, 1996 and to be used in connection with the Company's Annual Meeting of shareholders to be held on September 20, 1996, is hereby incorporated by reference. -19- 20 ITEM 11. EXECUTIVE COMPENSATION That portion of the Company's definitive Proxy Statement appearing under the caption "Executive Compensation", to be filed with the Commission pursuant to Regulation 14A within 120 days after April 30, 1996 and to be used in connection with the Company's Annual Meeting of shareholders to be held on September 20, 1996, is hereby incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT That portion of the Company's definitive Proxy Statement appearing under the captions "Shares Outstanding" and "Voting Procedures", to be filed with the Commission pursuant to Regulation 14A within 120 days after April 30, 1996 and to be used in connection with the Company's Annual Meeting of shareholders to be held on September 20, 1996, is hereby incorporated by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS That portion of the Company's definitive Proxy Statement appearing under the caption "Other Information Relating to Directors and Executive Officers", to be filed with the Commission pursuant to Regulation 14A within 120 days after April 30, 1996 and to be used in connection with the Company's Annual Meeting of shareholders to be held on September 20, 1996, is hereby incorporated by reference. -20- 21 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 consolidated financial statements, shown on pages 8 through 17 of the Company's Annual Report to shareholders for the year ended April 30, 1996: Consolidated Balance Sheets, April 30, 1996 and 1995 Consolidated Statements of Income, Three Years Ended April 30, 1996 Consolidated Statements of Shareholders' Equity, Three Years Ended April 30, 1996 Consolidated Statements of Cash Flows, Three Years Ended April 30, 1996 Notes to Consolidated Financial Statements Independent Auditors' Report (2) 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(b) Sixth Amended and Restated Casey's General Stores, Inc. Employees' Stock Ownership Plan and Trust Agreement (v) 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) -21- 22 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 (t) - --------------------- (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. (t) Incorporated by reference from the Annual Report on Form 10- K for the fiscal year ended April 30, 1994. (v) Incorporated by reference from the Annual Report on Form 10- K for the fiscal year ended April 30, 1995. (b) REPORTS ON FORM 8-K ------------------- There were no reports on Form 8-K filed during the fiscal quarter ended April 30, 1996. (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), (q) -22- 23 4.3 Note Agreement dated as of February 1, 1993 between Casey's General Stores, Inc. and Principal Mutual Life Insurance Company and Nippon Life Insurance Company of America (n) and First Amendment thereto (u) 4.4 Note Agreement dated as of December 1, 1995 between Casey's General Stores, Inc. and Principal Mutual Life Insurance Company (u) 9 Voting Trust Agreement (a) and Amendment thereto (d) 10.4(b) Sixth Amended and Restated Casey's General Stores, Inc. Employees' Stock Ownership Plan and Trust Agreement (v) 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 (t) 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) 10.27 Non-Employee Directors' Stock Option Plan (s) 10.28 Term Note with UMB Bank, n.a. (r) 11 Statement regarding computation of earnings per share 13 Consolidated Financial Statements from 1996 Annual Report 21 Subsidiaries of Casey's General Stores, Inc. 24.1 Consent of KPMG Peat Marwick LLP 27 Financial Data Schedule - ---------------------- (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). -23- 24 (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. (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. -24- 25 (q) Incorporated by reference from the Form 8-A12G/A (Amendment No. 2 to the Registration Statement on Form 8-A filed June 19, 1989) filed July 29, 1994. (r) Incorporated by reference from the Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1995. (s) Incorporated by reference from the Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 1994. (t) Incorporated by reference from the Annual Report on Form 10-K for the fiscal year ended April 30, 1994. (u) Incorporated by reference from the Current Report on Form 8-K filed January 11, 1996. (v) Incorporated by reference from the Annual Report on Form 10-K for the fiscal year ended April 30, 1995. 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 24, 1996 By: /s/ Donald F. Lamberti ---------------------- Donald F. Lamberti, Chief Executive Officer and Chairman of the Board (Principal Executive Officer) -25- 26 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 24, 1996 By: /s/ Donald F. Lamberti ---------------------- Donald F. Lamberti Chief Executive Officer, Chairman of the Board (Principal Executive Officer) Date: July 23, 1996 By: /s/ Ronald M. Lamb ------------------ Ronald M. Lamb President and Chief Operating Officer, Director Date: July 22, 1996 By: /s/ Douglas K. Shull -------------------- Douglas K. Shull Treasurer, Director (Principal Financial Officer and Principal Accounting Officer) Date: July 22, 1996 By: /s/ John G. Harmon ------------------ John G. Harmon Secretary, Director Date: July 25, 1996 By: /s/ Patricia Clare Sullivan --------------------------- Patricia Clare Sullivan Director -26- 27 Date: July 22, 1996 By: /s/ Kenneth H. Haynie --------------------- Kenneth H. Haynie Director Date: July 25, 1996 By: /s/ John R. Fitzgibbon ---------------------- John R. Fitzgibbon Director Date: July 25, 1996 By: /s/ Jack P. Taylor ------------------ Jack P. Taylor Director -27- 28 EXHIBIT INDEX Exhibit No. Description Page - ----------- ----------- ---- 11 Statement regarding computation of earnings per share 29 13 Consolidated Financial Statements from 1996 Annual Report to shareholders 30 21 Subsidiaries of Casey's General Stores, Inc. 47 24.1 Consent of KPMG Peat Marwick LLP 48 27 Financial Data Schedule 49 -28- EX-11 2 COMPUTATION OF 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 Consolidated Financial Statements and notes thereto included in the Company's Annual Report to Shareholders for the fiscal year ended April 30, 1996. FULLY DILUTED EARNINGS PER SHARE - The following sets forth the computation of per share earnings on a fully diluted basis:
Year Ended April 30, -------------------- 1996 1995 1994 ---- ---- ---- Net income $26,767,085 $22,880,841 $16,564,097 Interest savings net of income taxes on assumed conversion of convertible debentures --- --- 1,220,747 ----------- ----------- ----------- Earnings applicable to fully diluted shares $26,767,085 $22,880,841 $17,784,844 =========== =========== =========== Average common shares outstanding 26,110,419 25,930,614 22,571,288 Average common equivalent shares applicable to stock options 129,413 194,473 125,704 Average common shares issuable on assumed conversion of convertible debentures --- --- 3,320,836 ----------- ----------- ----------- 26,239,832 26,125,087 26,017,828 =========== =========== =========== Earnings per share-fully diluted basis (A) $ 1.02 $ .88 $ .68 =========== =========== ===========
(A) Fully diluted earnings per share cannot exceed primary earnings per share. EX-13 3 CONSOLIDATED FINANCIAL STATE 1 EXHIBIT 13 CASEY'S GENERAL STORES, INC. CONSOLIDATED BALANCE SHEETS
APRIL 30 ----------------------------- ASSETS 1996 1995 ------------ ------------ Current assets: Cash and cash equivalents $ 12,673,855 $ 5,477,784 Short-term investments 13,953,926 1,300,700 Receivables 2,679,967 3,086,728 Inventories (Note 1) 32,437,323 27,343,033 Prepaid expenses (Note 4) 8,266,308 5,982,324 ------------ ------------ Total current assets 70,011,379 43,190,569 - ------------------------------------------------------------------------------------------------------------- Long-term investments (Note 1) 5,153,169 6,445,934 Other assets, net of amortization 1,356,643 1,030,856 Property and equipment, at cost: (Note 2) Land 49,142,635 41,082,729 Buildings and leasehold improvements 175,343,291 152,002,492 Machinery and equipment 223,625,219 199,609,874 Leasehold interest in property and equipment (Note 5) 12,812,136 13,452,922 ------------ ------------ 460,923,281 406,148,017 Less accumulated depreciation and amortization 132,609,514 111,656,704 ------------ ------------ Net property and equipment 328,313,767 294,491,313 ------------ ------------ $404,834,958 $345,158,672 ============================================================================================================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable to banks (Note 2) $ 21,025,000 $ 11,350,000 Current maturities of long-term debt (Note 2) 8,679,217 8,498,891 Accounts payable 36,190,236 39,860,843 Accrued expenses: Salaries and wages 3,056,506 2,620,124 Other (Note 8) 13,975,769 13,096,288 Income taxes payable - - - - - - 1,544,909 ------------ ------------ Total current liabilities 82,926,728 76,971,055 - ------------------------------------------------------------------------------------------------------------- Long-term debt, net of current maturities (Note 2) 81,249,264 59,962,922 Deferred income taxes (Note 4) 32,791,000 27,270,000 Deferred compensation (Note 7) 1,693,288 1,282,655 ------------ ------------ Total liabilities 198,660,280 165,486,632 Shareholders' equity (Note 3) Capital stock: Preferred stock, no par value, none issued - - - - - - - - - - - Common stock, no par value, 26,221,706 and 25,966,906 shares issued and outstanding at April 30, 1996 and 1995, respectively 63,556,842 61,342,992 Retained earnings 142,617,836 118,329,048 ------------ ------------ Total shareholders' equity 206,174,678 179,672,040 ------------ ------------ $404,834,958 $345,158,672 Commitments and contingencies (Notes 5, 7 and 8) =============================================================================================================
See accompanying notes to consolidated financial statements. 8 2 CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED APRIL 30 -------------------------------------------------- 1996 1995 1994 ------------ ------------ ------------ Net sales $954,764,056 $848,842,757 $731,206,162 Franchise revenue 5,384,424 5,269,105 5,120,526 ------------ ------------ ------------ 960,148,480 854,111,862 736,326,688 Cost of goods sold 748,183,597 665,924,372 574,143,909 Operating expenses 138,581,190 123,004,153 110,082,785 Depreciation and amortization 24,654,848 22,237,352 18,622,815 Interest, net (Note 2) 5,729,760 5,590,144 6,434,082 ------------ ------------ ------------ 917,149,395 816,756,021 709,283,591 Income before income taxes 42,999,085 37,355,841 27,043,097 Provision for income taxes (Note 4) 16,232,000 14,475,000 10,479,000 ------------ ------------ ------------ Net income $ 26,767,085 $ 22,880,841 $ 16,564,097 ================================================================================================================ Earnings per common and common equivalent share (Note 3): Primary $ 1.02 $ .88 $ .73 Fully diluted $ 1.02 $ .88 $ .68 ================================================================================================================
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
COMMON RETAINED STOCK EARNINGS TOTAL ------------ ------------ ------------ 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 1/4 cents per share) - - - - - - (1,581,998) (1,581,998) Conversion of Convertible 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 Net income - - - - - - 22,880,841 22,880,841 Payment of dividends (8 cents per share) - - - - - - (2,074,099) (2,074,099) Proceeds from exercise of stock options (46,700 shares) 464,619 - - - - - - 464,619 Retirement of shares from Employees' Stock Ownership Plan and Trust (814 shares) (8,954) - - - - - - (8,954) ------------ ------------ ------------ Balance April 30, 1995 61,342,992 118,329,048 179,672,040 Net income - - - - - - 26,767,085 26,767,085 Payment of dividends (9 1/2 cents per share) - - - - - - (2,478,297) (2,478,297) Proceeds from exercise of stock options (254,800 shares) 2,213,850 - - - - - - 2,213,850 ------------ ------------ ------------ Balance April 30, 1996 $ 63,556,842 $142,617,836 $206,174,678 ================================================================================================================
See accompanying notes to consolidated financial statements. 9 3 CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED APRIL 30 ------------------------------------------------- 1996 1995 1994 ------------ ------------ ------------ CASH FLOWS FROM OPERATIONS: Net income $ 26,767,085 $ 22,880,841 $ 16,564,097 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 24,654,848 22,237,352 18,622,815 Deferred income taxes 8,000,000 2,000,000 2,100,000 Changes in assets and liabilities: Receivables 406,761 (246,828) (692,259) Inventories (5,094,290) (3,588,777) 1,974,220 Prepaid expenses (4,762,984) 207,884 (34,317) Accounts payable (3,670,607) 2,446,815 12,271,225 Accrued expenses 1,315,863 1,047,621 258,124 Income taxes payable (1,544,909) 1,525,981 (307,118) Other, net 1,899,966 1,013,324 1,972,387 ------------ ------------ ------------ Net cash provided by operations 47,971,733 49,524,213 52,729,174 CASH FLOWS FROM INVESTING: Purchase of property and equipment (60,382,701) (52,645,839) (62,879,021) Purchase of investments (17,294,466) (2,006,930) (7,179,357) Sale of investments 6,024,284 14,031,681 17,523,129 ------------ ------------ ------------ Net cash used in investing activities (71,652,883) (40,621,088) (52,535,249) CASH FLOWS FROM FINANCING: Proceeds from long-term debt 30,000,000 7,500,000 - - - - - - Payments of long-term debt (8,533,332) (5,317,525) (3,791,599) Net activity of short-term debt 9,675,000 (7,150,000) 5,750,000 Proceeds from exercise of stock options 2,213,850 464,619 460,313 Payment of cash dividends (2,478,297) (2,074,099) (1,581,998) ------------ ------------ ------------ Net cash provided by (used in) financing activities 30,877,221 (6,577,005) 836,716 ------------ ------------ ------------ Net increase in cash and cash equivalents 7,196,071 2,326,120 1,030,641 Cash and cash equivalents at beginning of year 5,477,784 3,151,664 2,121,023 ------------ ------------ ------------ Cash and cash equivalents at end of year $ 12,673,855 $ 5,477,784 $ 3,151,664 ===================================================================================================================== SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION Cash paid during the year for: Interest (net of amount capitalized) $ 5,770,509 $ 5,768,870 $ 7,730,310 Income taxes 14,523,271 10,601,473 9,034,500 Noncash investing and financing activities: Property and equipment acquired through capital lease obligations and installment purchases - - - - - - 13,592 3,264,221 Conversion of Convertible Subordinated Debentures - - - - - - - - - - - - 34,991,321 =====================================================================================================================
See accompanying notes to consolidated financial statements. 10 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES OPERATIONS - Casey's General Stores, Inc. (the Company) operates 983 convenience stores in 9 midwestern states. At April 30, 1996, the Company owned or leased 801 of these stores with 182 stores being owned or leased by franchisees. The stores are located primarily in smaller communities, most with populations of fewer than 5,000. Sales in 1996 were distributed as follows: gasoline - 58% and grocery - 41%. The Company's materials are readily available, and the Company is not dependent on a single supplier or only a few suppliers. PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the financial statements of Casey's General Stores, Inc. and its two wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. USE OF ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH EQUIVALENTS - Cash equivalents consist of money market funds. 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." In December 1995, the Company reclassified certain investments, with an amortized cost of $5,915,152, to available for sale as permitted by the implementation guide for SFAS 115. The financial statement impact was not material. Maturities of debt securities classified as available for sale were as follows at April 30, 1996: Due after 1 year through 5 years $ 805,917 Due after 5 years through 10 years 1,000,000 Due after 10 years 3,347,252 ----------- $ 5,153,169 ===========
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 $6,486,000 and $5,487,000 below replacement cost as of April 30, 1996 and 1995, 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
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, prior to the 1994 conversion of the Convertible Subordinated Debentures (the Debentures), further assumed that the 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 26,238,152, 26,062,287 and 22,651,334 11 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED for 1996, 1995 and 1994, respectively, and on a fully diluted basis were 26,239,832, 26,125,087 and 26,017,828 for 1996, 1995 and 1994, respectively. EXCISE TAXES - Excise taxes approximating $175,000,000, $151,000,000 and $121,000,000 collected from customers on retail gasoline sales are included in net sales for 1996, 1995 and 1994, respectively. INCOME TAXES - Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. 2. FAIR VALUE OF FINANCIAL INSTRUMENTS, NOTES PAYABLE TO BANKS 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 current rates offered to the Company for debt of the same or similar issues. The fair value of the Company's long-term debt, excluding capital lease obligations, was approximately $84,000,000 and $61,000,000, respectively, at April 30, 1996 and 1995.
Long-term debt, at carrying value, consists of the following: APRIL 30 ---------------------------- 1996 1995 ----------- ----------- Capitalized lease obligations, discounted at rates of 7.3% to 15.3%, due in various monthly installments through 2008 (Note 5) $ 7,699,760 $ 8,976,899 Mortgage notes payable due in various monthly installments through 2004 with interest at 6.8% to 9.5% 14,509,971 15,641,164 Unsecured notes payable to banks due in various monthly and quarterly installments through 1998 with variable rates of interest 11,468,750 14,593,750 7.70% Senior Notes due in 40 quarterly installments beginning in March 1995 26,250,000 29,250,000 7.38% Senior Notes due in 21 semi-annual installments beginning in December 2010 30,000,000 - - - - - - ----------- ----------- 89,928,481 68,461,813 Less current maturities 8,679,217 8,498,891 ----------- ----------- $81,249,264 $59,962,922 ===================================================================================================================
Mortgage notes payable includes an $18,900,000 Secured Promisory Note, Mortgage and Security Agreement with a balance of $13,928,193 and $14,922,083 at April 30, 1996 and 1995, 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 $15,200,000 at April 30, 1996. 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, 1997 and thereafter are:
YEAR ENDING APRIL 30 -------------------- 1998 $ 13,992,625 1999 5,620,183 2000 5,340,430 2001 5,491,224 Thereafter 50,804,802 ------------ $ 81,249,264 ============
Interest expense is net of interest income of $754,799, $213,480 and $1,146,486 for the years ended April 30, 1996, 1995 and 1994, respectively. Interest expense in the amount of $677,711, $559,500 and $418,600 was capitalized during the years ended April 30, 1996, 1995 and 1994, respectively. At April 30, 1996 and 1995, notes payable to banks consisted of $27,000,000 in lines of credit with balances owed of $21,025,000 and $11,350,000, respectively. Within the notes payable to banks, $14,500,000 on a $15,000,000 line of credit is due on demand and $6,525,000 on a $12,000,000 line of credit is due December 31, 1996. The weighted average interest rate was 6.20% at April 30, 1996 and 6.87% at April 30, 1995. 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 currently has 60,000,000 authorized shares of Common Stock and is seeking shareholder approval to increase the number of authorized shares to 120,000,000. 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 UMB 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 744,832 shares were available for grant at April 30, 1996 and options for 316,500 shares (which expire between 1997-2005) were outstanding as follows:
Price Range Aggregate Shares Per Share Exercise Price ------- ------------ --------------- Outstanding and exercisable at April 30, 1993 283,000 $ 4.81-9.00 $ 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 4.81-10.25 3,850,500 Exercised in fiscal 1995 46,700 4.81-10.25 464,619 Cancelled in fiscal 1995 4,000 10.25 41,000 ------- -------------- Outstanding and exercisable at April 30, 1995 371,300 4.81-10.25 3,344,881 Granted in fiscal 1996 202,000 11.47-21.38 3,995,130 Exercised in fiscal 1996 254,800 4.81-10.25 2,213,850 Cancelled in fiscal 1996 2,000 10.25 20,500 ------- -------------- Outstanding and exercisable at April 30, 1996 316,500 $ 4.81-21.38 $ 5,105,661 ======= ==============
13 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED 4. INCOME TAXES Income tax expense attributable to income from operations is comprised of the following components:
YEAR ENDED APRIL 30 ----------------------------------------------------------------- 1996 1995 1994 ---- ---- ---- Current tax expense: Federal $ 6,843,000 $ 10,225,000 $ 7,060,000 State 1,389,000 2,250,000 1,319,000 ------------- ---------------- --------------- 8,232,000 12,475,000 8,379,000 Deferred tax expense 8,000,000 2,000,000 2,100,000 ------------- ---------------- --------------- Total income tax provision $ 16,232,000 $ 14,475,000 $ 10,479,000
================================================================================ The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
APRIL 30 -------------------------------------------------------------- 1996 1995 1994 ---- ---- ---- Deferred tax assets: Accrued liabilities $ 3,125,000 $ 5,604,000 $ 2,317,000 Alternative minimum tax credit carry forwards - - - - - - 140,000 1,500,000 Other 386,000 594,000 383,000 -------------- --------------- -------------- Total gross deferred tax assets 3,511,000 6,338,000 4,200,000 -------------- --------------- -------------- Deferred tax liabilities: Excess of tax over book depreciation (33,009,000) (27,909,000) (23,771,000) Other (168,000) (95,000) (95,000) -------------- --------------- -------------- Total gross deferred liabilities (33,177,000) (28,004,000) (23,866,000) -------------- --------------- -------------- Net deferred tax liability $ (29,666,000) $ (21,666,000) $ (19,666,000)
The current deferred tax asset relates to accrued liabilities and is included with prepaid expenses. Also included in prepaid expenses are recoverable taxes of approximately $4,700,000 at April 30, 1996. Management believes that future operations will generate sufficient taxable income to realize the deferred tax assets. ================================================================================ Total reported tax expense applicable to the Company's operations varies from the tax that would have resulted by applying the statutory U.S. federal income tax rates to income before income taxes for the following reasons:
YEAR ENDED APRIL 30 ---------------------------------------------------------- 1996 1995 1994 ---- ---- ---- Income taxes at the statutory rates 35.0% 35.0% 35.0% State income taxes, net of federal tax benefit 3.7 4.6 4.4 Other (1.0) (.9) (.7) ---- ---- ---- 37.7% 38.7% 38.7%
================================================================================ 14 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 -------------------------------------- 1996 1995 ---- ---- Real estate $ 8,232,295 $ 8,680,845 Equipment 4,579,841 4,772,077 ------------- -------------- 12,812,136 13,452,922 Less accumulated amortization 6,559,445 6,029,260 ------------- -------------- $ 6,252,691 $ 7,423,662
================================================================================ 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, 1996:
YEAR ENDING APRIL 30 CAPITAL LEASES OPERATING LEASES -------------------- -------------- ---------------- 1997 $ 1,990,769 $ 407,000 1998 1,902,305 354,000 1999 1,624,416 279,000 2000 1,123,358 251,000 2001 1,040,558 238,000 Thereafter 2,673,251 1,067,000 ------------- -------------- Total minimum lease payments 10,354,657 $ 2,596,000 Less amount representing interest 2,654,897 ============== ------------- Present value of net minimum lease payments $ 7,699,760
================================================================================ The total rent expense under operating leases was $788,000 in 1996, $820,000 in 1995 and $898,000 in 1994. 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 using a formula based on compensation. There was no Plan expense in the year ended April 30, 1996 and $600,000 and $550,000 of Plan expense for the years ended April 30, 1995 and 1994, respectively. On April 30, 1996, the Company had 3,480 full-time employees and 4,863 part-time employees, of which approximately 3,200 were participants in the Plan. As of that same date, the Trustee under the Plan held 2,151,179 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. Shares held by the Plan are treated as outstanding in the computation of earnings per share. 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 $1,093,000, $514,000 and $406,000 for the years ended April 30, 1996, 1995 and 1994, respectively. 15 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED 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 upon ($350,000 in fiscal 1996). 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 $1,000,000 in fiscal 1997 through December 23, 1998, to comply with existing regulations. The Company has accrued a liability at April 30, 1996 and 1995, respectively, of approximately $2,600,000 and $3,300,000 within other accrued expenses for estimated expenses related to 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. 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, 1996, the Company is partially self-insured for workman's compensation claims, in all states except Iowa, Missouri and Kansas. The Company is also partially self-insured for general liability and auto liability under an agreement which provides for annual stop-loss limits equal to or exceeding approximately $1,320,000. Letters of credit approximating $1,400,000 were issued and outstanding at April 30, 1996, 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, 1996. Approximately $1,800,000 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, 1996 and 1995, the Company has accrued $4,500,000 within other accrued expenses 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 consolidated balance sheets of Casey's General Stores, Inc. and subsidiaries as of April 30, 1996 and 1995, and the related consolidated statements of income, shareholders' equity and cash flows for each of the years in the three-year period ended April 30, 1996. 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Casey's General Stores, Inc. and subsidiaries as of April 30, 1996 and 1995, and the results of its operations and its cash flows for each of the years in the three-year period ended April 30, 1996 in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP DES MOINES, IOWA JUNE 18, 1996 17 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
YEARS ENDED APRIL 30 --------------------------------------------------------- 1996 1995 1994 -------------- ------------- ------------ NET SALES (1): RETAIL SALES: Grocery and general merchandise $ 346,426,722 $ 316,444,290 $ 281,235,753 Gasoline 531,414,819 455,310,780 377,807,750 ------------- ------------- ------------ 877,841,541 771,755,070 659,043,503 ============== ============= ============ WHOLESALE SALES: Grocery and general merchandise 40,605,430 39,342,692 37,678,157 Gasoline 25,625,213 25,617,280 24,530,239 ------------- ------------- ------------ 66,230,643 64,959,972 62,208,396 ============== ============= ============ GROSS PROFITS (2): RETAIL SALES: Grocery and general merchandise 139,799,317 128,858,300 109,812,153 Gasoline 56,446,450 42,597,553 38,045,217 ------------- ------------- ------------ 196,245,767 171,455,853 147,857,370 ============== ============= ============ WHOLESALE SALES: Grocery and general merchandise 1,581,173 1,621,928 1,282,100 Gasoline 844,339 843,679 467,224 ------------- ------------- ------------ 2,425,512 2,465,607 1,749,324 ============== ============= ============
18 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED INDIVIDUAL STORE INFORMATION (3)
YEARS ENDED APRIL 30 -------------------------------------------------------------- 1996 1995 1994 ------------ ------------ ------------ COMPANY STORES: Average retail sales $ 1,143,340 $ 1,080,553 $ 1,006,420 Average retail sales of grocery and general merchandise 454,422 448,060 433,256 Average gross profit on grocery and general merchandise 174,387 169,216 160,476 Average retail sales of gasoline 688,918 632,493 573,165 Average number of gallons sold 637,904 596,684 570,253 Average gross profit on gasoline (4) 73,920 68,093 61,641 Average operating income (5) 83,763 80,556 73,553 FRANCHISED STORES: Average franchise revenue (6) 29,454 28,487 27,215
(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) 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 volatility in the wholesale gasoline market and price competition from other gasoline marketers. Any substantial decrease in profit margins on retail gasoline sales or the number of gallons sold could have a material adverse effect on the Company's earnings. (5) 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. (6) 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 1996 COMPARED TO FISCAL 1995 Net sales for fiscal 1996 increased by $105,921,000 (12.5%) over fiscal 1995. Retail gasoline sales increased by $76,104,000 (16.7%) as the number of gallons sold increased by 62,725,000 (14.6%). During fiscal 1996, retail sales of grocery and general merchandise increased by $29,982,000 (9.5%) due to the net addition of 60 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 78.4% for fiscal 1996 compared to 78.5% 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 14.5% for both fiscal 1996 and fiscal 1995. Average operating income per Company Store increased by $3,207 (4.0%) primarily as the result of increases in the average sales of gasoline and grocery and general merchandise. Net income increased by $3,886,000 (17.0%). 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. The Financial Accounting Standards Board (FASB) has issued Statement 115, "Accounting for Certain Investments in Debt and Equity Securities." In December 1995, the Company reclassified certain investments, with an amortized cost of $5,915,152, to available for sale as permitted by the implementation guide for SFAS 115. The financial statement impact was not material. The FASB has also issued Statement 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Statement 121, effective for fiscal years beginning after December 15, 1995, requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has not yet determined the impact of Statement 121, but it is not expected to be material to its financial statements. The Company expects to adopt the Statement on a prospective basis in the first quarter of fiscal 1996. The FASB has also issued Statement 123, "Accounting for Stock-Based Compensation." Statement 123, effective for fiscal years beginning after December 15, 1995, defines a fair value based method of accounting for stock options or similar equity instruments. The Company has elected under the statement to continue the present accounting method and will make the pro forma disclosures required. The Company has not yet completed its analysis of the effect of this statement on pro forma disclosures which will be included in the April 30, 1997 financial statements. FISCAL 1995 COMPARED TO FISCAL 1994 Net sales for fiscal 1995 increased by $117,637,000 (16.1%) over fiscal 1994. Retail gasoline sales increased by $77,503,000 (20.5%) as the number of gallons sold increased by 53,667,000 (14.3%). During fiscal 1995, retail sales of grocery and general merchandise increased by $35,209,000 (12.5%) due to the net addition of 54 new Company Stores and a greater number of stores in operation for at least three years. Cost of goods sold as a percentage of net sales was 78.5% in both fiscal 1995 and fiscal 1994. Operating expenses as a percentage of net sales were 14.5% for fiscal 1995 compared to 15.1% 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 $7,003 (9.5%), primarily as the result of increases in the average sales of gasoline and grocery and general merchandise. Net income increased by $6,316,744 (38.1%). 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. 20 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED 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, 1996, the Company's ratio of current assets to current liabilities was .84 to 1. Management believes that the Company's current $27,000,000 bank lines of credit (aggregate amount), together with cash flow from operations, will be sufficient to satisfy the working capital needs of its business. Net cash provided by operations decreased $1,552,480 (3.1%) during the year ended April 30, 1996, primarily as a result of increased levels of inventories and a decrease in accounts payable. Cash flows used in investing increased during fiscal 1996, primarily because of the increased capital expenditures. During fiscal 1996, the Company expended approximately $60,000,000 for property and equipment, primarily for the construction and remodeling of Company Stores. The Company anticipates expending approximately $65,000,000 in fiscal 1997 for construction, acquisition and remodeling of Company Stores, primarily from funds generated by operations, existing cash and short-term investments. As of April 30, 1996, the Company had long-term debt of $81,249,000, consisting of $23,250,000 of 7.70% Senior Notes, $30,000,000 of 7.38% Senior Notes, $13,263,000 of mortgage notes payable, $8,344,000 of unsecured notes payable and $6,392,000 of capital lease obligations. Interest on the 7.70% Senior Notes is payable on the 15th day of each month. Principal of the 7.70% Senior Notes matures in forty quarterly installments beginning March 15, 1995. The Company may prepay the 7.70% Senior Notes in whole or in part at any time in an amount 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 7.70% Senior Notes. Interest on the 7.38% Senior Notes is payable on the 28th day of each June and December. Principal of the 7.38% Senior Notes matures in twenty-one semi-annual installments beginning December 28, 2010. The Company may prepay the 7.38% Senior Notes in whole or in part at any time in an amount of not less than $1,000,000 or integral multiples of $100,000 in excess thereof at a redemption price calculated in accordance with the Note Agreement dated as of December 1, 1995 between the Company and the purchaser of the 7.38% Senior Notes. 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 1,683 USTs of which 1,311 are fiberglass and 372 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, 1996 and 1995, the Company spent approximately $718,000 and $2,137,000, 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, 1996, approximately $3,900,000 has been received from such programs. The Company has accrued a liability at April 30, 1996, of approximately $2,600,000 for estimated expenses related to anticipated corrective actions or remediation efforts, including relevant legal and consulting costs. Management believes the Company has no material joint and several environmental liability with other parties. Management of the Company currently estimates that aggregate capital expenditures for electronic monitoring, cathodic protection and overfill/spill protection will approximate $1,000,000 in fiscal 1997 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 have become progressively weaker during its third and fourth quarters. In the warmer months of the year (which comprise the Company's first two fiscal quarters), customers tend to purchase greater quantities of gasoline and certain convenience items such as beer, soft drinks and ice. Difficult weather conditions in any quarter, however, may affect sales of Company stores in specific regions and have an adverse impact on net income for that period. INFLATION - The Company has generally been able to pass along inflationary increases in its costs through increased sales prices of products sold, except in those instances where doing so would have had a material adverse impact on the Company's ability to compete. Accordingly, management believes that inflation has not had a material impact upon the operating results of the Company. MINIMUM WAGE LEGISLATION - Recent congressional action to increase the federal minimum wage may have a significant impact on the Company's operating results, particularly in the near term, to the extent the forthcoming increase in labor expenses cannot be passed along to customers through price increases. Although the Company has in the past been able to, and will continue to attempt to, pass along increases in operating costs through price increases, there can be no assurance that all of the expected increases in labor costs can be reflected in prices, or that price increases will be absorbed by customers without diminishing customer spending at Company stores. 22 16 SELECTED FINANCIAL DATA
STATEMENT OF INCOME DATA (amounts in thousands, except per share data) YEARS ENDED APRIL 30 ------------------------------------------------------------------------- 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- Net sales $ 954,764 $ 848,843 $ 731,206 $ 673,697 $ 606,585 Franchise revenue 5,384 5,269 5,121 4,898 4,991 ----------- ---------- ----------- --------- --------- 960,148 854,112 736,327 678,595 611,576 Cost of goods sold 748,183 665,925 574,144 533,535 480,357 Operating expenses 138,581 123,004 110,083 102,379 94,209 Depreciation and amortization 24,655 22,237 18,623 15,943 13,704 Interest, net 5,730 5,590 6,434 5,249 4,808 ----------- ---------- ----------- --------- --------- Income before income taxes 42,999 37,356 27,043 21,489 18,498 Provision for income taxes 16,232 14,475 10,479 8,166 6,984 ----------- ---------- ----------- --------- --------- Net income $ 26,767 $ 22,881 $ 16,564 $ 13,323 $ 11,514 ======================================================================================================================== *Per share - primary: Net income $ 1.02 $ .88 $ .73 $ .60 $ .52 ======================================================================================================================== *Weighted average number of common and common equivalent shares outstanding - primary 26,238 26,062 22,651 22,193 22,096 *Dividends paid per common share $ .095 $ .08 $ .07125 $ .06 .0575
*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 ------------------------------------------------------------------------- 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- Current assets $ 70,011 $ 43,191 $ 41,369 $ 46,513 $ 33,011 Total assets 404,835 345,159 318,238 280,777 219,476 Current liabilities 82,927 76,971 75,453 55,456 46,593 Long-term debt 81,249 59,963 61,415 98,956 61,433 Shareholders' equity 206,175 179,672 158,410 107,976 95,854
23 EX-21 4 SUBSIDIARIES 1 Exhibit 21 Subsidiaries of Casey's General Stores, Inc. 1. Casey's Marketing Company, an Iowa corporation. 2. Casey's Services Company, an Iowa corporation. Both of such subsidiaries are wholly-owned by Casey's General Stores, Inc. and do business under the above names. Stores operated by Casey's Marketing Company do business under the name "Casey's General Store." EX-24.1 5 CONSENT OF KPMG PEAT MARWICK LLP 1 Exhibit 24.1 CONSENT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders Casey's General Stores, Inc.: 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 report dated June 18, 1996, relating to the consolidated balance sheets of Casey's General Stores, Inc. and subsidiaries as of April 30, 1996 and 1995, and the related consolidated statements of income, shareholders' equity and cash flows for each of the years in the three-year period ended April 30, 1996, which report appears in or is incorporated by reference in the April 30, 1996 Annual Report on Form 10-K of Casey's General Stores, Inc. KPMG Peat Marwick LLP Des Moines, Iowa July 29, 1996 EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED APRIL 30, 1996 OF CASEY'S GENERAL STORES, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR APR-30-1996 MAY-01-1995 APR-30-1996 12,673,855 13,953,926 2,679,967 0 32,437,323 70,011,379 460,923,281 132,609,514 404,834,958 82,926,728 81,249,264 0 0 63,556,842 142,617,836 404,834,958 954,764,056 960,148,480 748,183,597 748,183,597 163,236,038 0 5,729,760 42,999,085 16,232,000 26,767,085 0 0 0 26,767,085 1.02 1.02 short-term investments long-term debt, net of current maturities retained earnings
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