-----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, ND5Uuu7Fsj/6p828k/MbF+SE1o0PS7ixu1+WWROSexSR1t+3wGmnznuyg9uhyPxB W5pYAzreJYQibuvQO3xu9A== /in/edgar/work/20000727/0000950131-00-004490/0000950131-00-004490.txt : 20000921 0000950131-00-004490.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950131-00-004490 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20000430 FILED AS OF DATE: 20000727 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CASEYS GENERAL STORES INC CENTRAL INDEX KEY: 0000726958 STANDARD INDUSTRIAL CLASSIFICATION: [5412 ] IRS NUMBER: 420935283 STATE OF INCORPORATION: IA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-12788 FILM NUMBER: 679682 BUSINESS ADDRESS: STREET 1: P.O. BOX 3001 CITY: ANKENY STATE: IA ZIP: 50021 BUSINESS PHONE: 5152437611 MAIL ADDRESS: STREET 1: PO BOX 3001 CITY: ANKENY STATE: IA ZIP: 50026 10-K405 1 0001.txt FORM 10-K405 United States SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K405 Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended April 30, 2000 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) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] At the close of business on July 19, 2000, the Company had 49,457,762 shares of Common Stock, no par value, issued and outstanding. The aggregate market value of the 41,871,623 shares of Common Stock held by non-affiliates of the Company on that date was $502,459,476, based on a last reported sales price of $12.00 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 to shareholders for fiscal year ended April 30, 2000 (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 15, 2000 (Items 10, 11, 12 and 13 of Part III). -2- PART I ITEM 1. BUSINESS The Company - ----------- Casey's General Stores, Inc. ("Casey's") and its wholly-owned subsidiaries (Casey's, together with its Subsidiaries, 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, 2000, there were a total of 1,246 Casey's General Stores in operation, of which 1,119 were operated by the Company ("Company Stores") and 127 stores were operated by franchisees ("Franchised Stores"). There were 84 Company Stores newly opened in fiscal 2000. 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. Approximately 66% of all Casey's General Stores are located in areas with populations of fewer than 5,000 persons, while approximately 9% 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. Two of the Company's subsidiaries, Casey's Marketing Company (the "Marketing Company") and Casey's Services Company (the "Services Company") also operate from the Corporate Headquarters facilities, and were incorporated in Iowa in March 1995. 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. -3- In each of the past two fiscal years, the Company derived approximately 95% 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, 2000: Company Franchised State Stores Stores Total ----- ------ ------ ----- Iowa............ 272 57 329 Illinois........ 315 23 338 Indiana......... 32 -0- 32 Kansas.......... 96 3 99 Minnesota....... 67 14 81 Missouri........ 244 22 266 Nebraska........ 52 7 59 South Dakota.... 27 -0- 27 Wisconsin....... 14 1 15 Total.... 1,119 (90%) 127 (10%) 1,246 (100%) -4- 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, closed, 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 Closed Converted at End of April 30, Opened Stores Stores Period - ---------- ------ ------ --------- ---------- 1996 Company..... 65 6 1 801 Franchised.. 1 4 (1) 182 -- -- ----- Total..... 66 10 983 1997 Company..... 70 1 8 878 Franchised.. 1 11 (8) 164 -- -- ----- Total..... 71 12 1,042 1998 Company..... 75 7 0 946 Franchised.. 0 1 (0) 163 -- -- ----- Total..... 75 8 1,109 1999 Company..... 80 4 0 1,022 Franchised.. 1 3 (0) 161 -- -- ----- Total..... 81 7 1,183 2000 Company..... 84 4 17 1,119 Franchised.. 1 18 (17) 127 -- -- ----- Total..... 85 22 1,246 -5- Six Company Stores were opened in May and June 2000 and 25 Company Stores were under construction at June 30, 2000. On June 30, 2000, the Company had purchased or had the right to purchase 47 additional store sites. All the stores under construction or planned for construction on such sites will be Company Stores. Management anticipates opening approximately 90 new or acquired Company Stores during fiscal 2001. 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. The Company converted 17 stores from Franchised Stores to Company Stores during fiscal 2000. 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 up to 1,500 stores located within a 500-mile radius of the Casey's Distribution Center. In its expansion, the Company intends to follow its traditional store site selection criteria and to locate most new stores in small towns, and along busy highways near or at the edge of larger metropolitan areas. 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 East Central, Inc., an Iowa corporation ("Casey's East Central"), was organized as a wholly-owned subsidiary of the Marketing Company in April 1999. At the same time, Casey's East Central and Casey's formed Casey's Enterprises, LLC, an Iowa limited liability company ("Casey's Enterprises") for the purpose of owning and operating Company Stores in the State of Indiana. -6- 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. The Marketing Company has responsibility for the operation of Company Stores in the States of Iowa, Missouri and Wisconsin. The Marketing Company also has responsibility for all Company wholesale operations, including the operation of the Casey's Distribution Center. Casey's East Central employs store personnel in Indiana who operate the convenience stores owned by Casey's Enterprises in that state. The Services Company provides a variety of construction and transportation services for all Company Stores. All of the foregoing subsidiaries utilize the Corporate Headquarters facility for their base of operations. Store Operations - ---------------- Products Offered Each Casey's General Store typically carries approximately 1,800 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 85% 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. The gasoline and gasohol offered by the stores generally are sold under the Casey's name, although some Franchised Stores sell gasoline under a major oil company brand name. It is management's policy to experiment with additions to the Company's product line, especially products with higher gross profit margins. As a result of this policy, the Company has added various prepared food items to its product line over the years. In 1980, the Company initiated the installation of "snack centers" which now are in all Company 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 sells donuts, prepared on store premises, in approximately 99% of the stores as of April 30, 2000, as well as cookies, brownies and muffins, and is installing donut-making facilities in all newly constructed stores. -7- The Company began marketing made-from-scratch pizza in 1984, expanding its availability to 1,176 (94%) stores as of April 30, 2000. 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, barbeque beef, tenderloin and chicken breast sandwiches, chicken tenders, breakfast croissants, hash browns, quarter-pound hamburgers and cheeseburgers and french fries. 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 and sandwiches is available. An important part of the Company's marketing strategy is to increase sales volume by pricing competitively on price-sensitive items. On less price- sensitive items, it is the Company's policy to maintain, or in the case of Franchised Stores to recommend, a Company-wide pricing structure in each store that is generally comparable to that of other convenience, gasoline or grocery stores located in the area and competing for the same customers. Management attributes the Company's ability to offer competitive prices to a number of factors, including the Company's central distribution system, its purchasing practices which avoid dependence upon jobbers and vendors by relying on a few large wholesale companies and its success in minimizing land, construction and equipment costs. Management's decision to add snack center items, freshly prepared donuts and pizza to the Company's product selection reflects its strategy to promote high profit margin products that are compatible with convenience store operations. Although retail sales of non-gasoline items during the last three fiscal years have generated approximately 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 57% 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. -8- 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, 2000, the aggregate investment in the land, building, equipment and initial inventory for a typical Company Store averaged approximately $900,000. 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 to four 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 66% of all stores operate in areas with populations of fewer than 5,000 persons, while approximately 9% of all stores are located in communities with populations exceeding 20,000 persons. Management believes that a Casey's General Store provides a service not otherwise available in small towns, and that a convenience store in an area with limited population can be profitable if it stresses sales volume and competitive prices. The Company's store site selection criteria emphasize the population of the immediate area and daily highway traffic volume. Management believes that, if there is no competing store, a Casey's General Store may operate profitably at a highway location in a community with a population of as few as 500 persons. -9- Gasoline Operations ------------------- Gasoline sales are an important part of the Company's sales and earnings. Approximately 57% of Casey's net sales for the year ended April 30, 2000 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, 2000: Year Ended April 30, -------------------- 2000 1999 1998 ---- ---- ---- Number of Gallons Sold 783,249,741 692,770,269 608,977,313 Total Retail Gasoline Sales $934,455,675 $662,123,770 $671,942,031 Percentage of Net Sales 56.7% 52.9% 56.6% Gross Profit 8.2% 11.0% 9.6% Percentage Average Retail Price per Gallon $ 1.19 $ 0.96 $ 1.10 Average Gross Profit Margin per Gallon 9.84 cents 10.53 cents 10.64 cents Average Number of Gallons Sold per Company Store * 734,262 706,550 668,670 _____________________________ * Includes only those stores that had been in operation for at least one full year before commencement of the periods indicated. -10- Retail prices of gasoline increased during the year ended April 30, 2000. 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, while the percentage of such sales to the Company's total net sales also increased. 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 the 2000 fiscal year) 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, 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 53 Company-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. -11- 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 2000, the Company purchased directly from manufacturers approximately 90% of the food and non-food items sold from the Casey's Distribution Center. It is the Company's practice, with few exceptions, not to enter 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, 2000, the percentage of Company Stores increased from 44% to 90%. From inception to April 30, 2000, the Company had converted 161 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 from any supplier, provided the products meet the Company's quality standards. -12- 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, 2000, the Company had 4,999 full-time employees and 7,797 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 Executive Officer of the Company, who is assisted by the Vice President of Store Operations. Reporting directly to the Vice President of Store Operations are three regional operations managers. Reporting directly to the regional managers are 20 district managers, each with responsibility over approximately equal numbers of stores. Each district manager is generally in charge of eight supervisors. Each of the 158 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-four years, one has been employed for more than twenty-eight years and one has been employed for more than thirty-two years. In addition to those three executive officers, the Company currently has a Senior Vice President, a Vice President and Chief Financial Officer, and Vice Presidents of Real -13- Estate-Store Development, Store Operations, Marketing, Transportation, Advertising, Human Resources, Information Systems and Support Services. The Company also has 37 other employees with managerial responsibilities in the areas of store operations, gasoline marketing, real estate development, construction, transportation, equipment 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 "discounted" 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. -14- 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. 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 2,320 USTs of which 1,998 are fiberglass and 322 are steel. Management of the Company currently believes that substantially all capital expenditures for electronic monitoring, cathodic protection and overfill/spill protection to comply with the existing UST regulations has been completed. Additional regulations, or amendments to the existing UST regulations, could result in future expenditures. Several of the states in which the Company does business have trust fund programs with provisions for sharing or reimbursing corrective action or remediation costs incurred by UST owners, including the Company. In each of the years ended April 30, 2000 and 1999, the Company spent approximately $447,000 and $516,000, 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, 2000, approximately $4,700,000 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. -15- The Company has accrued a liability at April 30, 2000, of approximately $200,000 for estimated expenses related to anticipated corrective actions or remediation efforts, including relevant legal and consulting costs. Management believes the Company has no material joint and several environmental liability with other parties. 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 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, 1999, 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 entered into prior to its July 1, 1992 effective date. As of April 30, 2000, Casey's was a party to 57 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. Chapter 523H was amended during the 1995 and 2000 legislative sessions, but several significant ambiguities and concerns remain. As a result, Casey's has 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. -16- 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, Distribution Center and vehicle service/maintenance center. The facility was completed in February 1990 and placed in full service at that time. On April 30, 2000, Casey's owned the land at 1,059 locations and the buildings at 1,076 locations, and leased the land at 60 locations and the buildings at 43 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, claims and demands arising from the conduct of its business operations, including those relating to personal injury, property damage and employment or personnel matters, 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- 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 Market Prices" set forth on page 32 of the Company's Annual Report to shareholders for the year ended April 30, 2000. The cash dividends declared by the Company during the periods indicated have been as follows: Cash Dividend Declared ------------- Calendar 1998 ------------- First Quarter $.015 Second Quarter .015 Third Quarter .015 Fourth Quarter .015 ----- $. 06 Calendar 1999 ------------- First Quarter $.015 Second Quarter .015 Third Quarter .015 Fourth Quarter .015 ----- $. 06 Calendar 2000 ------------- First Quarter $.015 Second Quarter .020 -18- 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 16 of the Company's Annual Report to shareholders for the year ended April 30, 2000. 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 17 through 20 of the Company's Annual Report to shareholders for the year ended April 30, 2000. The foregoing Management's Discussion and Analysis of Financial Condition and Results of Operations contains various "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements represent the Company's expectations or beliefs concerning future events, including (i) any statements regarding future sales and gross profit percentages, (ii) any statements regarding the continuation of historical trends and (iii) any statements regarding the sufficiency of the Company's cash balances and cash generated from operations and financing activities for the Company's future liquidity and capital resource needs. The Company cautions that these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, including, without limitations, the factors described in the Cautionary Statement Relating to Forward-Looking Statements included as Exhibit 99 to the Form 10-Q for the fiscal quarter ended January 31, 1997. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's exposure to market risk for changes in interest rates relates primarily to its investment portfolio and long-term debt obligations. The Company places its investments with high quality credit issuers and, by policy, limits the amount of credit exposure to any one issuer. As stated in its policy, the Company's first priority is to reduce the risk of principal loss. Consequently, the Company seeks to preserve its invested funds by limiting default risk, market risk and reinvestment risk. The Company mitigates default risk by investing in only high quality -19- credit securities that it believes to be low risk and by positioning its portfolio to respond appropriately to a significant reduction in a credit rating of any investment issuer or guarantor. The portfolio includes only marketable securities with active secondary or resale markets to ensure portfolio liquidity. The Company believes that an immediate 100 basis point move in interest rates affecting the Company's floating and fixed rate financial instruments as of April 30, 2000, would have an immaterial effect on the Company's pretax earnings. The Company also believes that an immediate 100 basis point move in interest rates would have an immaterial effect on the fair value of the Company's financial instruments. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required in response to this Item is incorporated herein by reference from pages 21 through 31 of the Company's Annual Report to shareholders for the year ended April 30, 2000. 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, 2000 and to be used in connection with the Company's Annual Meeting of shareholders to be held on September 15, 2000, is hereby incorporated by reference. -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, 2000 and to be used in connection with the Company's Annual Meeting of shareholders to be held on September 15, 2000, 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, 2000 and to be used in connection with the Company's Annual Meeting of shareholders to be held on September 15, 2000, 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, 2000 and to be used in connection with the Company's Annual Meeting of shareholders to be held on September 15, 2000, is hereby incorporated by reference. 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- K405 and are incorporated herein by reference: (1) The following consolidated financial statements, shown on pages 21 through 31 of the Company's Annual Report to shareholders for the year ended April 30, 2000: -21- Consolidated Balance Sheets, April 30, 2000 and 1999 Consolidated Statements of Income, Three Years Ended April 30, 2000 Consolidated Statements of Shareholders' Equity, Three Years Ended April 30, 2000 Consolidated Statements of Cash Flows, Three Years Ended April 30, 2000 Notes to Consolidated Financial Statements Independent Auditors' Report (2) The management contracts or compensatory plans or arrangements required to be filed as an exhibit to this Form 10-K405 pursuant to Item 14(c), consisting 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(a) Amended and Restated Employment Agreement with Donald F. Lamberti (z) and First Amendment thereto (aa) 10.22(a) Amended and Restated Employment Agreement with Ronald M. Lamb (z) and First Amendment thereto (aa) 10.24(a) Amended and Restated Employment Agreement with John G. Harmon (z) -22- 10.30 Non-Qualified Supplemental Executive Retirement Plan (z) 10.31 Non-Qualified Supplemental Executive Retirement Plan Trust Agreement with UMB Bank, n.a. (z) 10.32 Severance Agreement with Douglas K. Shull (bb) ____________________ (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. (w) Incorporated by reference from the Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1997. (z) Incorporated by reference from the Current Report on Form 8-K filed November 10, 1997. (aa) Incorporated by reference from the Current Report on Form 8-K filed April 12, 1998. (bb) Incorporated by reference from the Current Report on Form 8-K filed July 28, 1998. -23- (b) Reports on Form 8-K ------------------- On May 23, 2000, the Company filed a Form 8-K setting forth information with respect to the issuance on May 15, 2000 of $80,000,000 principal amount of 7.89% Senior Notes, Series 2000-A. There were no reports on Form 8-K filed during the fiscal quarter ended April 30, 2000. (c) Exhibits -------- Exhibit Number Document ------ -------- 3.1(a) Restatement of the Restated and Amended Articles of Incorporation (x) 3.2(a) Restatement of Amended and Restated By-Laws (w) 4.2 Rights Agreement between Casey's General Stores, Inc. and UMB Bank, n.a., as Rights Agent, relating to Common Share Purchase Rights (e) and amendments thereto (i), (p), (q), (cc), (dd) 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) 4.5 Note Agreement dated as of December 1, 1997 among the Company and Principal Mutual Life Insurance Company, Nippon Life Insurance Company of America and TMG Life Insurance Company (y) 4.6 Note Agreement dated as of April 15, 1999 among the Company and Principal Life Insurance Company and other purchasers of $50,000,000 Senior Notes, Series A through Series F (cc) 4.7 Note Purchase Agreement dated as of May 1, 2000 among the Company and the purchasers of $80,000,000 in principal amount of 7.89% Senior Notes, Series 2000-A, due May 15, 2010 (ee) 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) -24- 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(a) Amended and Restated Employment Agreement with Donald F. Lamberti (z) and First Amendment thereto (aa) 10.22(a) Amended and Restated Employment Agreement with Ronald M. Lamb (z) and First Amendment thereto (aa) 10.24(a) Amended and Restated Employment Agreement with John G. Harmon (z) 10.27 Non-Employee Directors' Stock Option Plan (s) 10.28 Term Note with UMB Bank, n.a. (r) 10.29 Form of "change of control" Employment Agreement (w) 10.30 Non-Qualified Supplemental Executive Retirement Plan (z) 10.31 Non-Qualified Supplemental Executive Retirement Plan Trust Agreement with UMB Bank, n.a. (z) 10.32 Severance Agreement with Douglas K. Shull (bb) 11 Statement regarding computation of earnings per share 13 Consolidated Financial Statements from 2000 Annual Report 21 Subsidiaries of Casey's General Stores, Inc. 23.1 Consent of KPMG LLP 27 Financial Data Schedule 99 Cautionary Statement Relating to Forward-Looking Statements (w) ______________________________ (a) Incorporated herein by reference from the Registration Statement on Form S- 1 (2-82651) filed August 31, 1983. (b) Reserved. (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). -25- (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) Reserved. (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) Reserved. (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. (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. -26- (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. (w) Incorporated by reference from the Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1997. (x) Incorporated by reference from the Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 1996. (y) Incorporated by reference from the Current Report on Form 8-K filed January 7, 1998. (z) Incorporated by reference from the Current Report on Form 8-K filed November 10, 1997. (aa) Incorporated by reference from the Current Report on Form 8-K filed April 2, 1998. (bb) Incorporated by reference from the Current Report on Form 8-K filed July 28, 1998. (cc) Incorporated by reference from the Current Report on Form 8-K filed May 10, 1999. (dd) Incorporated by reference from the Current Report on Form 8-K filed September 27, 1999. (ee) Incorporated by reference from the Current Report on Form 8-K filed May 23, 2000. -27- 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 10, 2000 By: /s/ Ronald M. Lamb ------------------ Ronald M. Lamb, Chief Executive Officer (Principal Executive Officer) 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 10, 2000 By: /s/ Ronald M. Lamb ------------------ Ronald M. Lamb Chief Executive Officer, Director Date: July 10, 2000 By: /s/ Donald F. Lamberti ---------------------- Donald F. Lamberti Chairman of the Executive Committee, Director -28- Date: July 10, 2000 By: /s/ John G. Harmon ------------------ John G. Harmon Secretary/Treasurer, Director (Principal Financial Officer and Principal Accounting Officer) Date: July 18, 2000 By: /s/ Patricia Clare Sullivan --------------------------- Patricia Clare Sullivan Director Date: July 18, 2000 By: /s/ Kenneth H. Haynie --------------------- Kenneth H. Haynie Director Date: July 13, 2000 By: /s/ John R. Fitzgibbon ---------------------- John R. Fitzgibbon Director Date: July 12, 2000 By: /s/ Jack Taylor --------------- Jack P. Taylor Director -29- EXHIBIT INDEX ------------- Exhibit No. Description Page - ----------- ----------- ---- 11 Statement regarding computation of earnings per share 13 Consolidated Financial Statements from 2000 Annual Report to shareholders 21 Subsidiaries of Casey's General Stores, Inc. 23.1 Consent of KPMG LLP 27 Financial Data Schedule -30- EX-11 2 0002.txt STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE Exhibit 11 CASEY'S GENERAL STORES, INC. ____________________________ Computation of Per Share Earnings Year Ended April 30, -------------------- 2000 1999 1998 ---- ---- ---- Net income $39,447,704 $40,236,976 $33,467,497 =========== =========== =========== Average common shares outstanding 51,914,953 52,664,912 52,537,954 Effect of dilutive securities - Common Stock options 176,254 265,589 387,182 ----------- ----------- ----------- 52,091,207 52,930,501 52,925,136 =========== =========== =========== Earnings per share-dilutive $ .76 $ .76 $ .63 =========== =========== =========== EX-13 3 0003.txt CONSOL. FIN. STATEMENTS FROM 2000 ANNUAL REPORT Exhibit 13 Financial information ------------------------------------------------------------------- SELECTED FINANCIAL DATA ------------------------------------------------------------------- (Dollars in thousands, except per share amounts)
STATEMENT OF INCOME DATA Years ended April 30, 2000 1999 1998 1997 1996 Net sales $ 1,648,195 $ 1,251,057 $ 1,186,885 $ 1,109,002 $ 954,764 Franchise revenue 5,268 5,433 5,106 5,206 5,384 ------------ ----------- ----------- ----------- ---------- 1,653,463 1,256,490 1,191,991 1,114,208 960,148 Cost of goods sold $ 1,322,830 $ 961,853 $ 930,513 $ 886,349 $748,183 Operating expenses 220,356 189,284 171,652 151,774 138,581 Depreciation and amortization 38,208 33,941 30,354 26,883 24,655 Interest, net 9,254 7,034 5,924 5,990 5,730 Income before income taxes 62,815 64,378 53,548 43,212 42,999 Provision for income taxes 23,367 24,141 20,081 16,202 16,232 ------------ ----------- ----------- ----------- ---------- Net income $ 39,448 $ 40,237 $ 33,467 $ 27,010 $ 26,767 Net income per share--basic $ 0.76 $ 0.76 $ 0.64 $ 0.51 $ 0.51 Weighted average number of common shares outstanding--basic 51,915 52,665 52,538 52,457 52,221 Dividends paid per common share $ 0.06 $ 0.06 $ 0.0575 $ 0.05 $ 0.0475
BALANCE SHEET DATA As of April 30, 2000 1999 1998 1997 1996 Current assets $ 75,061 $ 70,207 $ 52,524 $ 54,674 $ 70,011 Total assets 623,565 562,860 479,974 427,045 404,835 Current liabilities 140,651 83,819 89,988 73,787 82,927 Long-term debt 112,896 122,513 79,094 79,685 81,249 Shareholders' equity 308,762 301,868 263,374 231,891 206
Financial Information 16 Management's Discussion and Analysis of Financial ---------------------------------------- CONDITION AND RESULTS OF OPERATIONS ---------------------------------------- (Dollars and amounts in thousands) The following tables set forth the Company's net sales and gross profits according to its major revenue categories and average sales and earnings information for corporate and franchise stores:
COMPANY NET SALES AND GROSS PROFITS Years ended April 30, 2000 1999 1998 Net sales (1) Retail sales Inside (nongas) $ 618,454 $ 507,422 $ 438,780 Gasoline 934,456 662,124 671,942 ----------- ---------- ---------- $ 1,552,910 $ 169,546 $1,110,722 Wholesale sales Inside (nongas) $ 48,961 $ 44,731 $ 39,670 Gasoline 30,525 23,080 25,749 ----------- ---------- ---------- $ 79,486 $ 67,811 $ 65,419 Gross profits (2) Retail sales Inside (nongas) $ 233,035 $ 203,843 $ 181,718 Gasoline 77,080 72,925 64,781 ----------- ----------- ---------- $ 310,115 $ 276,768 $ 246,499 Wholesale sales Inside (nongas) $ 2,566 $ 1,563 $ 1,344 Gasoline 835 766 767 ----------- ----------- ---------- $ 3,401 $ 2,329 $ 2,111 SAME-STORE COMPARISONS (3) Years ended April 30, 2000 1999 1998 Corporate stores Average retail sales $ 1,457 $ 1,198 $ 1,225 Average retail inside (nongas) sales 583 521 485 Average gross profit on inside (nongas) items 212 200 191 Average retail sales of gasoline 874 677 740 Average gross profit on gasoline (4) 74 75 72 Average operating income (5) 91 93 89 Average number of gallons sold 734 707 669 Franchise stores Average franchise revenue (6) $ 35 $ 34 $ 31
(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 cost of goods sold. (3) Same-store comparisons include only those stores that had been in operation for at least one full year on April 30 of the fiscal year indicated. (4) Retail gasoline profit margins have a substantial impact on the Company's net income. Profit margins on gasoline sales can be adversely affected by factors beyond the control of the Company, including oversupply in the retail gasoline market, uncertainty or volatility in the wholesale gasoline market, and price competition from other gasoline marketers. Any substantial decrease in profit margins on retail gasoline sales or the number of gallons sold could have a material adverse effect on the Company's earnings. (5) Average operating income represents retail sales less cost of goods sold, including cost of merchandise, financing costs, and operating expenses attributable to a particular store; it excludes federal and state income taxes, operating expenses of the Company not attributable to a particular store, and payments by the Company to its benefit plans. (6) Average franchise revenue includes a royalty fee equal to 3% of gross receipts derived from store sales of nongasoline items, a royalty fee of $0.018 per gallon on gasoline sales, and sign and facade rental fees. 17 Management's Discussion and Analysis of Financial Condition and Results of - -------------------------------------------------------------------------- Operations - ---------- Casey's derives its revenue from retail sales of food (including freshly prepared foods such as pizza, doughnuts, and sandwiches), beverages, and nonfood products such as health and beauty aids, tobacco products, automotive products, and gasoline by corporate stores and from wholesale sales of certain merchandise and gasoline to franchise stores. The Company also generates revenues from continuing monthly royalties based on sales by franchise stores; sign and facade rental fees; and the provision of certain maintenance, transportation, and construction services to the Company's franchisees. A typical store 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 second or third year of operation. FISCAL 2000 COMPARED WITH FISCAL 1999 Net sales for fiscal 2000 increased 31.7% to $1,648,195, primarily due to a 24.8% increase in gas prices, a 49.8% increase in cigarette sales, and the net addition of 97 corporate stores. Retail gasoline sales for the fiscal year were $934,456, an increase of 41.1%, and gallons sold increased 13.1% to 783 million. Cost of goods sold as a percentage of sales was 80.3% for fiscal 2000 compared with 76.9% for the prior year. The increase was caused by a reduction in gas margin to 8.2% of sales in fiscal 2000 from 11.0% in fiscal 1999. It was also affected by the reduction in the grocery & other merchandise margin to 32.9% from 35.7%, primarily attributed to lower cigarette margins caused by higher costs. Operating expenses increased 16.4% in fiscal 2000, driven by higher wages and benefits, by increased bank fees resulting from customers' greater use of credit cards, and by the increase in the number of corporate stores. Higher sales reduced the operating expense ratio to 13.4% of sales in fiscal 2000 from 15.1% the prior year. Net income decreased slightly to $39,448 in fiscal 2000 from $40,237 in fiscal 1999. The decrease was the result of the combination of lower gasoline and cigarette margins and higher expenses. Shareholders' equity increased 2.3%, constrained by the repurchase of 3.3 million shares of common stock during the year at an average cost of $9.08 per share. Current liabilities increased $56,832 during fiscal 2000, primarily due to the increase in corporate stores and the stock repurchase. Notes payable of $45,950 were repaid from the proceeds of long-term debt issued after the close of the fiscal year. (See Subsequent Event.) FISCAL 1999 COMPARED WITH FISCAL 1998 Net sales for fiscal 1999 increased by $64,171 (5.4%) over fiscal 1998's. Retail gasoline sales decreased by $9,818 (1.5%) as the number of gallons sold increased by 83,792,956 (13.8%). During fiscal 1999, retail inside (nongas) sales increased by $68,643 (15.6%) due to the net addition of 76 corporate stores and a greater number of stores in operation for at least 3 years. Cost of goods sold as a percentage of net sales was 76.9% for fiscal 1999 compared with 78.4% for the prior year. This result occurred because the gross profit margin on retail gasoline sales increased. This increase was partially offset by the gross profits on retail inside sales (to 40.2%) from the prior year (41.4%). Operating expenses as a percentage of net sales were 15.1% for fiscal 1999 compared with 14.5% for the prior year. The increase in operating expenses as a percentage of net sales was caused primarily by a decrease in the average retail price per gallon of gasoline sold. Average operating income per corporate store increased by $4 (4.5%), primarily as the result of an increase in the gross profit margins on retail gasoline sales. Net income increased by $6,770 (20.2%). The increase in net income was attributable primarily to increases in gross profit margins on gasoline and an increased number of stores in operation for at least 3 years. Financial Information 18 LIQUIDITY AND CAPITAL RESOURCES Due to the nature of the Company's business, most sales are for cash; cash from operations is the Company's primary source of liquidity. The Company finances its inventory purchases primarily from normal trade credit aided by relatively rapid inventory turnover. This turnover allows the Company to conduct its operations without large amounts of cash and working capital. As of April 30, 2000, the Company's ratio of current assets to current liabilities was .53 to 1. Management believes the Company's current $90,000 bank lines of credit (aggregate amount) together with cash flow from operations will be sufficient to satisfy the working capital needs of its business. Net cash provided by operations increased 46.4% to $34,534 during the year ended April 30, 2000, primarily as a result of a decrease in inventories and an increase in accounts payable. Cash flows used in investing decreased during fiscal 2000, primarily because of the smaller purchase of investments. During fiscal 2000 the Company expended approximately $103,000 for property and equipment, primarily for the construction and remodeling of corporate stores. The Company anticipates expending approximately $90,000 for capital expenditures in fiscal 2001, primarily from funds generated by operations, existing cash, short-term investments, and the proceeds of the senior notes received May 15, 2000. As of April 30, 2000, the Company had long-term debt of $112,896, consisting of $11,250 of 7.70% senior notes, $30,000 of 7.38% senior notes, $10,800 of 6.55% senior notes, $50,000 of senior notes with interest rates ranging from 6.18% to 7.23%, $7,303 of mortgage notes payable, and $3,543 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 40 quarterly installments beginning March 15, 1995. The Company may prepay the 7.70% senior notes in whole or in part at any time in an amount not less than $1,000 or integral multiples of $100 in excess thereof at a redemption price calculated in accordance with the Note Agreement dated February 1, 1993 between the Company and the 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 21 semi-annual installments beginning December 28, 2010. The Company may prepay the 7.38% senior notes in whole or in part at any time in an amount of not less than $1,000 or integral multiples of $100 in excess thereof at a redemption price calculated in accordance with the Note Agreement dated December 1, 1995 between the Company and the purchaser of the 7.38% senior notes. Interest on the 6.55% senior notes is payable on the 18th day of each March, June, September, and December. Principal of the 6.55% senior notes matures in 5 annual installments beginning December 18, 1999. The Company may prepay the 6.55% senior notes in whole or in part at any time in an amount of not less than $1,000 or integral multiples of $100 in excess thereof at a redemption price calculated in accordance with the Note Agreement dated December 1, 1997 between the Company and the purchaser of the 6.55% senior notes. Interest on the 6.18% to 7.23% senior notes is payable on the 23rd day of each April and October. Principal of the 6.18% to 7.23% senior notes matures in various installments beginning April 23, 2004. The Company may prepay the 6.18% to 7.23% senior notes in whole or in part at any time in an amount of not less than $1,000 or integral multiples of $100 in excess thereof at a redemption price calculated in accordance with the Note Agreement dated April 15, 1999 between the Company and the purchasers of the 6.18% to 7.23% senior notes. To date, the Company has funded capital expenditures primarily from the proceeds of the sale of common stock, issuance of the convertible subordinated debentures (converted into shares of common stock in 1994), the senior notes, and a mortgage note and through funds generated from operations. Future capital required to finance operations, improvements, and the anticipated growth in the number of corporate stores is expected to come from cash generated by operations, existing cash, investments, and additional long-term debt or other securities as circumstances may dictate. Future capital needs are not expected to adversely affect liquidity. Environmental Compliance--The United States Environmental Protection Agency and several states, including Iowa, have established requirements for owners and operators of underground gasoline storage tanks (USTs) with regard to (i) maintenance of leak detection, corrosion protection, and overfill/spill protection systems; (ii) upgrade of existing tanks; (iii) response to a detected leak; (iv) prevention of leakage through tank closings; and (v) required gasoline inventory recordkeeping. Since 1984, new corporate stores have been equipped with noncorroding fiberglass USTs, including many with double-wall construction, overfill protection, and electronic tank monitoring. The Company has an active inspection and renovation program for its older USTs. Of the Company's 2,320 USTs, 1,998 are fiberglass and 322 are steel. Management currently believes that substantially all capital expenditures for electronic monitoring, cathodic protection, and overfill/spill protection to comply with the existing UST regulations have been completed. Additional regulations or amendments to the existing UST regulations could result in future expenditures. 19 Management's Discussion and Analysis of Financial Condition and Results of - -------------------------------------------------------------------------- Operations - ---------- Several of the states in which the Company does business have trust fund programs with provisions for sharing or reimbursing corrective action or remediation costs incurred by UST owners, including the Company. In the years ended April 30, 2000 and 1999, the Company spent approximately $447 and $516, respectively, for assessments and remediation. Substantially all of these expenditures have been submitted for reimbursement from state-sponsored trust fund programs. As of June 30, 2000, a cumulative total of approximately $4,700 has been received from such programs. Reimbursements are typically subject to statutory provisions requiring repayment of such funds for noncompliance with upgrade provisions or other applicable laws. The Company accrued a liability at April 30, 2000 of approximately $200 for estimated expenses related to anticipated corrective actions or remediation efforts, including relevant legal and consulting costs. Management believes the Company has no material joint and several environmental liability with other parties. Seasonality of Sales--Sales at Casey's General Stores, Inc. historically have been strongest during the Company's first and second fiscal quarters and have become progressively weaker during its third and fourth quarters. In the warmer months of the year, which comprise the Company's first two fiscal quarters, customers tend to purchase greater quantities of gasoline and certain convenience items such as beer, soft drinks, and ice. Difficult weather conditions in any quarter, however, may affect corporate store sales in specific regions and may have an adverse impact on net income for that period. Inflation--The Company has generally been able to pass along inflationary increases in its costs through increased sales prices of products sold, except in those instances where doing so would have had a material adverse impact on the Company's ability to compete. Management believes inflation has not had a material impact on the operating results of the Company. Minimum Wage Legislation--Congressional action to increase the federal minimum wage had an impact on the Company's operating results to the extent the increase in labor expenses could not be passed along to customers through price increases. Although the Company has in the past been able to, and will continue to attempt to, pass along increases in operating costs through price increases, there can be no assurance that increases in labor costs can be reflected in prices or that price increases will not diminish customer spending. Year 2000--To date, the Company's systems have experienced no adverse impact from the transition to the Year 2000. In addition, the Company is not aware of any material Year 2000 related issues with any of its shippers, suppliers, or other third parties with whom it has business relationships. Through April 30, 2000, the Company spent less than $100,000 to address Year 2000 issues. The Company does not expect to incur any significant additional costs relating to Year 2000 issues. Recent Accounting Pronouncements--In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, which was later amended by SFAS No. 137 and SFAS No. 138. This statement as amended establishes accounting and reporting standards for derivative instruments and all hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities at their fair values. Accounting for changes in the fair value of a derivative depends on its designation and effectiveness. For derivatives that qualify as effective hedges, the change in fair value will have no impact on earnings until the hedged item affects earnings. For derivatives that are not designated as hedging instruments or for the ineffective portion of a hedging instrument, the change in fair value will affect current period earnings. At April 30, 2000, the Company had no derivative instruments. FORWARD-LOOKING STATEMENTS This annual report contains forward-looking statements that anticipate results based on management's plans that are subject to uncertainty. Forward-looking statements do not relate strictly to historical or current facts and may be identified by the use of words like plans, will, anticipates, estimates and other words of similar meaning. These statements may address, among other things, the Company's strategy for growth, product development, market position, expenditures, and financial results. Forward-looking statements are based on current expectations of future events. The Company cannot guarantee that any forward-looking statements will be accurate, although the Company believes it has been reasonable in its expectations and assumptions. Investors should realize if underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results could vary materially from projections. The Company assumes no obligation to update any forward-looking statements as a result of future events or developments. The Company's annual report on Form 10-K for the year ended April 30, 2000 contains as an exhibit a discussion of various factors that could cause actual results to differ from expectations. The Company notes these factors as permitted by the Private Securities Litigation Reform Act of 1995. Investors are cautioned not to place undue reliance on any forward-looking statements. Investors also should understand it is not possible to predict or identify all such factors and should not consider this list to be a complete statement of all potential risks and uncertainties. SUBSEQUENT EVENT In May 2000, the Company issued $80 million of senior notes maturing in 2010. The notes have an average life of 7 years and have a 7.89% interest rate. The proceeds were used to repay short-term debt, and the balance was invested in short-term securities for future capital expenditures. Financial Information 20 Consolidated Financial Statements 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, 2000 and 1999 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, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Casey's General Stores, Inc. and subsidiaries as of April 30, 2000 and 1999 and the results of their operations and their cash flows for each of the years in the three-year period ended April 30, 2000 in conformity with accounting principles generally accepted in the United States of America. KPMG LLP KPMG LLP Des Moines, Iowa June 13, 2000 Casey's General Stores, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
As of April 30, 2000 1999 Assets Current assets Cash and cash equivalents $ 15,917 $ 5,935 Short-term investments 7,925 8,800 Receivables 4,111 2,822 Inventories (Note 1) 41,363 47,204 Prepaid expenses (Note 5) 5,745 5,446 --------- ---------- Total current assets 75,061 70,207 Long-term investments $ - $ 6,640 Other assets, net of amortization 1,513 1,469 Property and equipment, at cost (Note 2) Land 107,261 92,724 Buildings and leasehold improvements 315,956 267,383 Machinery and equipment 357,829 324,326 Leasehold interest in property and equipment (Note 6) 11,803 12,494 --------- ---------- 792,849 696,927 Less accumulated depreciation and amortization 245,858 212,383 --------- ---------- Net property and equipment 546,991 484,544 --------- ---------- Total assets $ 623,565 $ 562,860 Liabilities and Shareholders' Equity Current liabilities Notes payable to banks (Note 2) $ 45,950 $ 7,400 Current maturities of long-term debt (Note 2) 9,703 9,352 Accounts payable 60,959 44,227 Accrued expenses Property taxes 6,558 5,392 Other (Note 9) 15,390 14,991 Income taxes payable 2,091 2,457 --------- ---------- Total current liabilities $ 140,651 $ 83,819 Long-term debt, net of current maturities (Note 2) $ 112,896 $ 122,513 Deferred income taxes (Note 5) 57,650 51,650 Deferred compensation (Note 7) 3,606 3,010 Total liabilities 314,803 260,992 Shareholders' equity (Note 3) Preferred stock, no par value, none issued - - Common stock, no par value, 49,450,762 and 52,711,512 shares issued and outstanding at April 30, 2000 and 1999, respectively 37,930 67,338 Retained earnings 270,832 234,530 Total shareholders' equity 308,762 301,868 Total liabilities and shareholder's equity $ 623,565 $ 562,860
Commitments and contingencies (Notes 6, 8, and 9) See accompanying Notes to Consolidated Financial Statements. 21 Consolidated Financial Statements Consolidated Statements of - -------------------------------------------------------------------------------- INCOME - -------------------------------------------------------------------------------- (Dollars in thousands, except share and per share amounts)
Years ended April 30, 2000 1999 1998 Net sales $ 1,648,195 $ 1,251,057 $1,186,885 Franchise revenue 5,268 5,433 5,106 ----------- ----------- ---------- 1,653,463 1,256,490 1,191,991 Cost of goods sold $ 1,322,830 $ 961,853 $ 930,513 Operating expenses 220,356 189,284 171,652 Depreciation and amortization 38,208 33,941 30,354 Interest, net (Note 2) 9,254 7,034 5,924 ----------- ----------- ---------- 1,590,648 1,192,112 1,138,443 Income before income taxes $ 62,815 $ 64,378 $ 53,548 Provision for income taxes (Note 5) 23,367 24,141 20,081 ----------- ----------- ---------- Net income $ 39,448 $ 40,237 $ 33,467 Earnings per common share (Notes 3 and 4) Basic $ 0.76 $ 0.76 $ 0.64 Diluted $ 0.76 $ 0.76 $ 0.63
Consolidated Statements of SHAREHOLDERS' EQUITY (Dollars in thousands, except share and per share amounts)
Common Retained Stock Earnings Total Balance at April 30, 1997 $ 64,886 $ 167,005 $ 231,891 Net income - 33,467 33,467 Payment of dividends (5 3/4 cents per share) - (3,020) (3,020) Proceeds from exercise of stock options (117,600 shares) 916 - 916 Tax benefits related to nonqualified stock options (Note 3) 120 - 120 Balance at April 30, 1998 $ 65,922 $ 197,452 $ 263,374 Net income - 40,237 40,237 Payment of dividends (6 cents per share) - (3,159) (3,159) Proceeds from exercise of stock options (111,500 shares) 1,091 - 1,091 Tax benefits related to nonqualified stock options (Note 3) 325 - 325 Balance at April 30, 1999 $ 67,338 $ 234,530 $ 301,868 Net income - 39,448 39,448 Payment of dividends (6 cents per share) - (3,146) (3,146) Repurchase of common stock (3,301,200 shares) (29,970) - (29,970) Proceeds from exercise of stock options (40,450 shares) 384 - 384 Tax benefits related to nonqualified stock options (Note 3) 178 - 178 Balance at April 30, 2000 $ 37,930 $ 270,832 $ 308,762
See accompanying Notes to Consolidated Financial Statements. Consolidated Statements of CASH FLOW (Dollars in thousands)
Years ended April 30, 2000 1999 1998 Cash flows from operations Net income $ 39,448 $ 40,237 $ 33,467 Adjustments to reconcile net income to net cash provided by operations Depreciation and amortization 38,208 33,941 30,354 Deferred income taxes 6,000 6,511 5,422 Changes in assets and liabilities Receivables (1,289) (285) 165 Inventories 5,841 (8,004) (2,677) Prepaid expenses (299) (9) 19 Accounts payable 16,732 482 6,537 Accrued expenses 1,565 635 2,199 Income taxes payable (188) (1,598) 66 Other, net 2,964 2,538 3,025 ------------ ---------- -------- Net cash provided by operations $ 108,982 $ 74,448 $ 78,577 Cash flows from investing Purchase of property and equipment $ (102,836) (97,703) $(85,276) Purchase of investments (2,746) (15,539) (7,466) Sale of investments 10,230 7,699 10,345 ------------ ---------- -------- Net cash used in investing activities $ (95,352) $ (105,543) $(82,397) Cash flows from financing Proceeds from long-term debt $ - $ 50,000 $ 18,000 Payments of long-term debt (9,466) (5,724) (24,952) Net activity of short-term debt 38,550 (9,200) 13,800 Repurchase of common stock (29,970) - - Proceeds from exercise of stock options 384 1,091 916 Payments of cash dividends (3,146) (3,159) (3,020) ------------ ---------- -------- Net cash (used in) provided by financing activities (3,648) 33,008 4,744 ------------ ---------- -------- Net increase in cash and cash equivalents 9,982 1,913 924 Cash and cash equivalents at beginning of year 5,935 4,022 3,098 ------------ ---------- -------- Cash and cash equivalents at end of year $ 15,917 $ 5,935 $ 4,022
Supplemental Disclosures of CASH FLOW INFORMATION (Dollars in thousands)
Years ended April 30, 2000 1999 1998 Cash paid during the year for Interest, net of amount capitalized $ 9,980 $ 7,542 $ 6,675 Income taxes 17,556 19,093 14,585 Noncash investing and financing activities Property and equipment acquired through capital lease obligations and an installment purchase 200 2,980 80 Increase in common stock and decrease in income taxes payable due to tax benefits related to nonqualified stock options (Note 3) 178 325 120
See accompanying Notes to Consolidated Financial Statements. 23 Notes to Consolidated Financial - -------------------------------------------------------------------------------- statements (Dollars in thousands, except share and per share amounts) 1. SIGNIFICANT ACCOUNTING POLICIES Operations--Casey's General Stores, Inc. and Subsidiaries (the Company) operates 1,246 convenience stores in 9 midwestern states. At April 30, 2000, the Company owned or leased 1,119 of these stores and 127 stores were owned or leased by franchisees. The stores are located primarily in smaller communities, a majority with populations of less than 5,000. Sales in 2000 were distributed as follows: 59% gasoline, 33% grocery & other merchandise, and 8% prepared food & fountain. The Company's materials are readily available, and the Company is not dependent on a single supplier or only a few suppliers. Principles of consolidation--The consolidated financial statements include the financial statements of Casey's General Stores, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Use of estimates--The preparation of financial statements in conformity with 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 a maturity at purchase of 3 months or less to be cash equivalents. Investments--Investments consist of treasury notes and investment-grade bonds. The investments are stated at cost plus accrued interest, which approximates market. Inventories--Inventories, which consist of merchandise and gasoline, are stated at the lower of cost or market; in-store inventory is determined by the retail method. Cost is determined using the last-in, first-out (LIFO) method. Such inventory value was approximately $14,750 and $11,200 below replacement cost as of April 30, 2000 and 1999, respectively. Depreciation and amortization--Depreciation of property and equipment and amortization of capital lease assets are computed principally by the straight-line method over the following estimated useful lives: Buildings..................................................................................25-40 years Machinery and equipment.....................................................................5-30 years Leasehold interest in property and equipment..................Lesser of term of lease or life of asset Leasehold improvements........................................Lesser of term of lease or life of asset
Excise taxes--Excise taxes approximating $279,000, $244,000, and $219,000 collected from customers on retail gasoline sales are included in net sales for 2000, 1999, and 1998, respectively. Income taxes--Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Stock option plan--The Company has elected the pro forma disclosure option of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. The Company will continue applying the accounting treatment prescribed by the provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees. Pro forma net earnings and pro forma net earnings per common share have been provided as if SFAS No. 123 were adopted for all stock-based compensation plans. Financial Information 24 Earnings per common share--Basic earnings per share have been computed by dividing net income by the weighted average outstanding common shares during each of the years. Calculation of diluted earnings per share treats stock options granted as potential common shares. Environmental remediation liabilities--The Company accounts for environmental remediation liabilities in accordance with the American Institute of Certified Public Accountants' Statement of Position (SOP) 96-1, Environmental Remediation Liabilities. SOP 96-1 requires, among other things, environmental remediation liabilities to be accrued when the criteria of SFAS No. 5, Accounting for Contingencies, have been met. The guidance provided by the SOP is consistent with the Company's current method of accounting for environmental remediation costs as described in Note 9. 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 due to the short maturity of these instruments or 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. At April 30, 2000 and 1999, notes payable to banks consisted of $90,000 in lines of credit with balances owed of $45,950 and $7,400, respectively; $23,750 on a $50,000 line of credit is due on demand. The weighted average interest rate was 6.88% at April 30, 2000 and 5.69% at April 30, 1999. 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 $112,000 and $127,000, respectively, at April 30, 2000 and 1999. Interest expense is net of interest income of $861, $563, and $681 for the years ended April 30, 2000, 1999, and 1998, respectively. Interest expense in the amount of $680, $574, and $847 was capitalized during the years ended April 30, 2000, 1999, and 1998, respectively. Long-term debt at carrying value consists of the following:
As of April 30, 2000 1999 Capitalized lease obligations discounted at 7.3% to 11.8% due in various monthly installments through 2008 (Note 6) $ 4,824 $ 6,212 Mortgage notes payable due in various monthly installments through 2004 with interest at 7.0% to 9.4% 9,125 10,403 7.70% senior notes due in 40 quarterly installments beginning in March 1995 14,250 17,250 7.38% senior notes due in 21 semi-annual installments beginning in December 2010 30,000 30,000 6.55% senior notes due in 5 annual installments beginning in December 1999 14,400 18,000 Senior notes due in various installments through 2019 with interest at 6.18% to 7.23% 50,000 50,000 ------- ------- 122,599 131,865 Less current maturities 9,703 9,352 ------- -------- $ 112,896 $122,513
Mortgage notes payable include a Secured Promissory Note, Mortgage and Security Agreement with a balance of $8,874 and $10,320 at April 30, 2000 and 1999, 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 $12,300 at April 30, 2000. 25 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- (Dollars in thousands, except per share amounts) Various debt agreements contain certain operating and financial covenants. Listed below are the aggregate maturities of long-term debt, including capitalized lease obligations, for the 4 years commencing May 1, 2001 and thereafter: Years ended April 30, 2002................................................................... $ 9,611 2003................................................................... 9,733 2004................................................................... 14,539 2005................................................................... 12,937 Thereafter............................................................. 66,076 -------- $112,896
In May 2000, the Company issued $80 million of senior notes maturing in 2010. The notes have an average life of 7 years and have a 7.89% interest rate. The proceeds were used to repay short-term debt, and the balance was invested in short-term securities for future capital expenditures. 3. PREFERRED AND COMMON STOCK Preferred stock--The Company has 1,000,000 authorized shares of preferred stock, none of which has been issued. Common stock--The Company currently has 120,000,000 authorized shares of common stock. Common share purchase rights--On June 14, 1989, the Board of Directors adopted the Shareholder Rights Plan, providing for the distribution of one common share purchase right for each share of common stock outstanding. The rights generally become exercisable 10 days following a public announcement that 15% or more of the Company's common stock has been acquired or an intent to acquire has become apparent. The rights will expire on the earlier of June 14, 2009 or redemption by the Company. Certain terms of the rights are subject to adjustment to prevent dilution. Further description and terms of the rights are set forth in the amended Rights Agreement between the Company and UMB Bank, n.a., which serves as Rights Agent. Stock option plan--Under the Company's incentive stock option plan, options can be granted to certain officers and key employees to purchase an aggregate of 4,560,000 shares of common stock at option prices not less than the fair market value of the stock (110% of fair market value for holders of 10% or more of the Company's stock) at the date the options are granted. Options for 703,164 shares were available for grant at April 30, 2000, and options for 1,053,450 shares (which expire between 2001 and 2009) were outstanding. The weighted average fair value of the stock options granted during 2000, 1999, and 1998 was $14.90, $12.81, and $11.33, respectively, on the date of grant. Fair value was calculated using the Black Scholes option-pricing model with the following weighted average assumptions: 2000--expected dividend yield of .74%, risk-free interest rate of 6.3%, estimated volatility of 26%, and an expected life of 4.5 years; 1999--expected dividend yield of .47%, risk-free interest rate of 5.9%, estimated volatility of 50%, and an expected life of 4.5 years; 1998--expected dividend yield of .61%, risk-free interest rate of 6.2%, estimated volatility of 20%, and an expected life of 7.5 years. The Company applies APB Opinion No. 25 in accounting for its incentive stock option plan; accordingly, the financial statements recognize no compensation cost for stock options. Financial Information 26 Had the Company determined compensation cost of its stock options based on the fair value at the grant date under SFAS No. 123, the Company's net income would have been reduced to the pro forma amounts below:
2000 1999 1998 Net income As reported $ 39,448 $ 40,237 $ 33,467 Pro forma 38,581 39,957 32,663 Basic earnings per share As reported $ 0.76 $ 0.76 $ 0.64 Pro forma 0.74 0.76 0.62
Pro forma net income reflects only options granted in the years ended April 30, 2000, 1999, and 1998. The full impact of calculating compensation cost for stock options under SFAS No. 123 is not reflected in the preceding pro forma net income amounts because compensation cost is reflected over the options' expected life and compensation cost for options granted prior to May 1997 is not considered. Stock option activity during the periods indicated is as follows: Number of Weighted Average Shares Exercise Price Granted Balance at April 30, 1997 679,000 $ 8.31 Granted 372,000 11.09 Exercised (117,600) 7.79 Forfeited (18,000) 10.80 Balance at April 30, 1998 915,400 $9.56 Granted 8,000 12.81 Exercised (111,500) 9.78 Balance at April 30, 1999 811,900 $ 9.56 Granted 298,500 14.90 Exercised (40,450) 9.49 Forfeited (16,500) 11.70 Balance at April 30, 2000 1,053,450 $ 11.04 At April 30, 2000, the range of exercise prices was $3.84-$14.94, and the weighted average remaining contractual life of outstanding options was 6.73 years. The number of shares and weighted average remaining contractual life of the options by range of applicable exercise prices at April 30, 2000 are as follows:
Range of Number Weighted Average Weighted Average Remaining Exercise Prices of Shares Exercise Price Contractual Life (years) $ 3.84 - 6.80 163,150 $ 5.02 3.17 8.94 - 9.44 56,000 8.99 6.40 10.25 -10.69 228,100 10.34 5.34 11.38 -12.81 309,700 11.41 7.27 13.75 -14.94 296,500 14.89 9.24 ---------- 1,053,450
27 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- (Dollars in thousands, except per share amounts) 4. EARNINGS PER SHARE A summary of the basic and diluted earnings per share computations for the years ended April 30, 2000, 1999, and 1998 is presented below:
Years ended 2000 Net earnings Shares Per share (numerator) (denominator) amount Basic earnings per share Net earnings available to common shareholders $ 39,448 51,914,953 $ 0.76 Effect of stock options 176,254 -------- ---------- ------ Diluted earnings per share $ 39,448 52,091,207 $ 0.76 1999 Net earnings Shares Per share (numerator) (denominator) amount Basic earnings per share Net earnings available to common shareholders $ 40,237 52,664,912 $0.76 Effect of stock options - 265,589 -------- ---------- ----- Diluted earnings per share $ 40,237 52,930,501 $0.76 1998 Net earnings Shares Per share (numerator) (denominator) amount Basic earnings per share Net earnings available to common shareholders $ 33,467 52,537,954 $0.64 Effect of stock options - 387,182 -------- ---------- ----- Diluted earnings per share $ 33,467 52,925,136 $0.63
5. INCOME TAXES Income tax expense attributable to income from operations is comprised of the following components:
Years ended April 30, 2000 1999 1998 Current tax expense Federal $ 15,487 $ 15,280 $ 12,460 State 1,880 2,350 2,199 ---------- --------- -------- 17,367 17,630 14,659 Deferred tax expense 6,000 6,511 5,422 ---------- --------- -------- Total income tax provision $ 23,367 $ 24,141 $ 20,081
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows: As of April 30, 2000 1999 1998 Deferred tax assets Accrued liabilities $ 3,112 $ 3,451 $ 3,316 Deferred compensation 1,342 1,204 1,005 Other 834 1,162 731 --------- --------- -------- Total gross deferred tax assets $ 5,288 $ 5,817 $ 5,052 Deferred tax liabilities Excess of tax over book depreciation (58,651) (53,983) (45,869 Other (1,175) (33) (871 --------- --------- -------- Total gross deferred tax liabilities (59,826) (54,016) (46,740) --------- --------- -------- Net deferred tax liability $ (54,538) $ (48,199) $(41,688) The deferred tax asset relating to accrued liabilities is a current asset and is included with prepaid expenses. Management believes future operations will generate sufficient taxable income to realize the deferred tax assets. Financial Information 28 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. Years ended April 30, 2000 1999 1998 Income taxes at the statutory rates 35.0% 35.0% 35.0% State income taxes, net of federal tax benefit 2.0 2.3 3.1 Other .2 .2 (.6) ---- ---- ----- 37.2% 37.5% 37.5% 6. LEASES The Company leases certain property and equipment used in its operations. Generally, the leases are for primary terms of from 5 to 20 years with options either to renew for additional periods or to purchase the premises and call for payment of property taxes, insurance, and maintenance by the lessee. The following is an analysis of the leased property under capital leases by major classes: Asset balances at April 30, 2000 1999 Real estate $ 7,525 $ 8,009 Equipment 4,278 4,485 -------- -------- 11,803 12,494 Less accumulated amortization 7,215 6,785 -------- -------- $ 4,588 $ 5,709 Future minimum payments under the capital leases and noncancelable operating leases with initial or remaining terms of 1 year or more consisted of the following at April 30, 2000: Years ended April 30, Capital leases Operating Leases 2001 $ 1,640 $ 287 2002 1,506 274 2003 1,362 260 2004 898 225 2005 185 214 Thereafter 85 746 Total minimum lease payments 5,676 $ 2,006 Less amount representing interest 852 Present value of net minimum lease payments $ 4,824 The total rent expense under operating leases was $810 in 2000, $843 in 1999, and $1,060 in 1998. 29 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- (Dollars in thousands, except per share amounts) 7. BENEFIT PLANS Employee stock ownership plan--The Company has an Employees' Stock Ownership Plan and Trust (Plan) that covers all employees who meet minimum age and service requirements. Contributions to the Plan can be made by the Company in either cash or shares of common stock. The discretionary contribution is allocated to participants using a formula based on compensation. Plan expense was $150 for the year ended April 30, 1998; there was no Plan expense for the years ended April 30, 2000 and 1999. On April 30, 2000, the Company had 4,999 full-time employees and 7,797 part-time employees; approximately 4,200 were participants in the Plan. As of that same date, the Trustee of the Plan held 3,564,127 shares of common stock in trust for distribution to eligible participants upon death, disability, retirement, or termination of employment. Shares held by the Plan are treated as outstanding in the computation of earnings per share. 401(k) plan--The Company has a defined contribution 401(k) plan that covers all employees who meet minimum age and service requirements. Employees may make voluntary contributions. The Company contributions consist of matching and discretionary amounts. The Company contributions are allocated based upon employee contributions and compensation. Expense for the 401(k) plan was approximately $1,594, $1,427, and $1,290 for the years ended April 30, 2000, 1999, and 1998, respectively. Supplemental Executive Retirement Plan--The Company has a nonqualified supplemental executive retirement plan (SERP) for 3 of its executive officers. The SERP provides for the Company to pay annual retirement benefits, depending on retirement dates, up to 50% of base compensation until death of the officer. If death occurs within 20 years of retirement, the benefits become payable to the officer's spouse until the spouse's death or 20 years from the date of the officer's retirement, whichever comes first. The Company is accruing the deferred compensation over the expected term of employment. 8. COMMITMENTS The Company has entered into employment agreements with 3 of its executive officers. The agreements provide that the 3 officers will receive aggregate base compensation of $1,075 per year exclusive of bonuses. These agreements also provide for certain payments in the case of death or disability of the officers. The Company also has entered into employment agreements with 12 other key employees, providing for certain payments in the event of their termination following a change of control of the Company. 9. CONTINGENCIES Environmental compliance--The United States Environmental Protection Agency and several states have adopted laws and regulations relating to underground storage tanks used for petroleum products. Several states in which the Company does business have trust fund programs with provisions for sharing or reimbursing corrective action or remediation costs. Management currently believes that substantially all capital expenditures for electronic monitoring, cathodic protection, and overfill/spill protection to comply with existing regulations have been completed. The Company accrued a liability at April 30, 2000 and 1999 of approximately $200 and $500, respectively, for estimated expenses related to anticipated corrective actions or remediation efforts, including relevant legal and consulting costs. Management believes the Company has no material joint and several environmental liability with other parties. Additional regulations or amendments to the existing regulations could result in future revisions to such estimated expenditures. Financial Information 30 Legal matters--The Company is a defendant in several lawsuits arising in the normal course of business. In the opinion of management, the outcome of such suits is not expected to have a material effect on the financial position of the Company. Other--At April 30, 2000, the Company is partially self-insured for workers' compensation claims in all 9 states of its marketing territory and is also partially self-insured for general liability and auto liability under an agreement that provides for annual stop-loss limits equal to or exceeding approximately $1,000. Letters of credit approximating $2,700 were issued and outstanding at April 30, 2000 on the insurance company's behalf to facilitate this agreement. The Company also has investments of approximately $1,500 in escrow as required by 1 state for partial self-insurance for workers' compensation claims. Additionally, the Company is self-insured for its portion of employee medical expenses. At April 30, 2000 and 1999, the Company accrued $5,600 and $6,500, respectively, within other accrued expenses for estimated claims relating to self-insurance. 10. QUARTERLY FINANCIAL DATA (UNAUDITED)
Year ended April 30, 2000 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Total Net sales $ 387,194 $ 412,752 $ 402,029 $ 446,220 $ 1,648,195 Gross profit* 84,492 84,983 75,223 80,667 325,365 Net income $ 14,651 $ 12,662 $ 5,209 $ 6,926 $ 39,448 Earnings per common share Basic $ 0.28 $ 0.24 $ 0.10 $ 0.14 $ 0.76 Diluted $ 0.28 $ 0.24 $ 0.10 $ 0.14 $ 0.76
*Gross profit is given before charge for depreciation and amortization.
Year ended April 30, 1999 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Total Net sales $ 332,446 $ 322,370 $291,561 $304,680 $1,251,057 Gross profit* 73,998 76,959 72,627 65,620 289,204 Net income $ 12,497 $ 12,627 $ 8,896 $ 6,217 $ 40,237 Earnings per common share Basic $ 0.24 $ 0.24 $ 0.17 $ 0.12 $ 0.76 Diluted $ 0.24 $ 0.24 $ 0.17 $ 0.12 $ 0.76
*Gross profit is given before charge for depreciation and amortization. 31 Investor - -------------------------------------------------------------------------------- information COMMON STOCK Casey's General Stores, Inc. common stock trades on the Nasdaq Stock Exchange under the symbol CASY. The 49.5 million shares of common stock outstanding at April 30, 2000 had a market value of $578.6 million. As of that same date, there were 3,404 shareholders of record. COMMON STOCK MARKET PRICES Calendar 1998 High Low 1st Quarter $16.38 $12.75 2nd Quarter 18.25 13.63 3rd Quarter 17.50 12.25 4th Quarter 15.63 12.25 Calendar 1999 High Low 1st Quarter $15.63 $12.56 2nd Quarter 15.13 12.25 3rd Quarter 16.75 12.94 4th Quarter 13.88 9.69 Calendar 2000 High Low 1st Quarter $11.88 $ 7.88 2nd Quarter 12.75 9.75 On July 14, 2000, the last reported sales price of the Company's common stock was $12.13 per share. On that same date, the market value was $600.4 million. DIVIDENDS The Company began paying cash dividends during fiscal 1991. The fiscal 2000 annual dividend was $0.06 per basic share. On June 6, 2000 the Board of Directors declared a quarterly dividend of $0.02 per share, payable August 15, 2000 to shareholders of record on August 1, 2000. The Company currently intends to pay comparable cash dividends on a quarterly basis in the future. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN This plan, introduced in the fall of 1998, gives Casey's General Stores, Inc. common stockholders a convenient and economical way of purchasing additional shares at market prices by reinvesting their dividends in full or in part. Stockholders may also take advantage of the cash payment option to purchase additional shares. Those wishing to enroll should contact the transfer agent and registrar: Securities Transfer Division UMB Bank, n.a. P.O. Box 410064 Kansas City, Missouri 64141 INVESTOR INQUIRIES Current or prospective Casey's General Stores, Inc. investors can receive annual reports, proxy statements, Forms 10-K and 10-Q, and earnings announcements at no cost by calling (515) 965-6107 or sending written requests to the following address: Casey's General Stores, Inc. One Convenience Blvd. Ankeny, Iowa 50021 Corporate information is available at http://www.caseys.com --------------------- ANNUAL MEETING All shareholders and prospective investors are cordially invited to attend the annual meeting at 9:00 a.m., September 15, 2000 at the corporate headquarters in Ankeny, Iowa. Investor Information 32 EX-21 4 0004.txt SUBSIDIARIES OF CASEY'S GENERAL STORES, INC. 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. 3. Casey's East Central, Inc., an Iowa corporation. 4. Casey's Enterprises, LLC, an Iowa limited liability company. All of such subsidiaries are wholly-owned by Casey's General Stores, Inc. or another subsidiary thereof and do business under the above names. Stores operated by Casey's Marketing Company and Casey's Enterprises, LLC do business under the name "Casey's General Store." EX-23.1 5 0005.txt CONSENT OF KPMG LLP Exhibit 23.1 CONSENT OF INDEPENDENT AUDITORS ------------------------------- The Board of Directors Casey's General Stores, Inc.: We consent to incorporation by reference in the Registration Statements (No. 33- 19179, 33-42907 and 33-56977) on Form S-8 of Casey's General Stores, Inc. of our report dated June 13, 2000, relating to the consolidated balance sheets of Casey's General Stores, Inc. and subsidiaries as of April 30, 2000 and 1999, 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, 2000, which report is incorporated by reference in the April 30, 2000 Annual Report on Form 10-K of Casey's General Stores, Inc. KPMG LLP Des Moines, Iowa July 21, 2000 EX-27 6 0006.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL REPORT ON FORM 10-K405 FOR THE FISCAL YEAR ENDED APRIL 30, 2000 OF CASEY'S GENERAL STORES, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR APR-30-2000 MAY-01-1999 APR-30-2000 15,917 7,925 4,111 0 41,363 75,061 792,849 245,858 623,565 140,651 112,896 0 0 37,930 270,832 623,565 1,648,195 1,653,463 1,322,830 1,322,830 258,564 0 9,254 62,815 23,367 39,448 0 0 0 39,448 .76 .76 SHORT-TERM INVESTMENTS LONG-TERM DEBT, NET OF CURRENT MATURITIES RETAINED EARNINGS
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