<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED APRIL 30, 1996
COMMISSION FILE NUMBER 0-12788
CASEY'S GENERAL STORES, INC.
(Exact name of registrant as specified in its charter)
IOWA 42-0935283
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
ONE CONVENIENCE BLVD., ANKENY, IOWA
(Address of principal executive offices)
50021
(Zip Code)
(515) 965-6100
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK
(Title of Class)
COMMON SHARE PURCHASE RIGHTS
(Title of Class)
<PAGE> 2
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
At the close of business on July 22, 1996, the Company had 26,225,206
shares of Common Stock, no par value, issued and outstanding. The aggregate
market value of the 21,261,664 shares of Common Stock held by non-affiliates of
the Company on that date was $380,052,244, based on a last reported sales price
of $17-7/8 per share on said date.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents, as set forth herein, are
incorporated by reference into the listed Parts and Items of this report on
Form 10-K:
1. Annual Report for fiscal year ended April 30, 1996 (Items 5, 6, 7
and 8 of Part II and Item 14(a) of Part IV).
2. Proxy Statement to be filed with the Securities and Exchange
Commission in connection with the Annual Meeting of shareholders to be held on
September 20, 1996 (Items 10, 11, 12 and 13 of Part III).
-2-
<PAGE> 3
PART I
ITEM 1. BUSINESS
THE COMPANY
Casey's General Stores, Inc. ("Casey's") and its two wholly-owned
subsidiaries, Casey's Marketing Company (the "Marketing Company") and Casey's
Services Company (the "Services Company") (Casey's, together with the Marketing
Company and the Services Company, shall be referred to herein as the
"Company"), operate convenience stores under the name "Casey's General Store"
in nine Midwestern states, primarily Iowa, Missouri and Illinois. The stores
carry a broad selection of food (including freshly prepared foods such as
pizza, donuts and sandwiches), beverages, tobacco products, health and beauty
aids, automotive products and other non-food items. In addition, all stores
offer gasoline for sale on a self-service basis. On April 30, 1996, there were
a total of 983 Casey's General Stores in operation, of which 801 were operated
by the Company ("Company Stores") and 182 stores were operated by franchisees
("Franchised Stores"). There were 65 Company Stores and 1 Franchised Stores
newly opened in fiscal 1996. The Company operates a central warehouse, the
Casey's Distribution Center, adjacent to its Corporate Headquarters facility in
Ankeny, Iowa through which it supplies grocery and general merchandise items to
Company and Franchised Stores. The Company also operates a commissary in
Creston, Iowa where it prepares sandwiches for sale through Company and
Franchised Stores.
Approximately 72% of all Casey's General Stores are located in areas
with populations of fewer than 5,000 persons, while approximately 6% of all
stores are located in communities with populations exceeding 20,000 persons.
The Company competes on the basis of price, as well as on the basis of
traditional features of convenience store operations such as location, extended
hours and quality of service.
Casey's, with executive offices at One Convenience Blvd., Ankeny, Iowa
50021-8045 (telephone 515/965-6100) was incorporated in Iowa in 1967. The
Marketing Company and the Services Company also operate from the Corporate
Headquarters facilities, and were incorporated in Iowa in March 1995.
-3-
<PAGE> 4
GENERAL
Casey's General Stores seek to meet the needs of residents of small
towns by combining features of both general store and convenience store
operations. Smaller communities often are not served by national-chain
convenience stores. The Company has been successful in operating Casey's
General Stores in small towns by offering, at competitive prices, a broader
selection of products than a typical convenience store.
In each of the past two fiscal years, the Company derived approximately
94% of its gross profits from retail sales by Company Stores. It also derives
income from continuing monthly royalties based on sales by Franchised Stores,
wholesale sales to Franchised Stores, sign and facade rental fees and the
provision of certain maintenance, transportation and construction services to
the Company's franchisees. Sales at Casey's General Stores historically have
been strongest during the Company's first and second quarters and relatively
weaker during its fourth quarter. In the warmer months of the year (which
comprise the Company's first two fiscal quarters), customers tend to purchase
greater quantities of gasoline and certain convenience items such as beer, soft
drinks and ice. Due to the continuing emphasis on higher-margin, freshly
prepared food items, however, Casey's net sales and net income (with the
exception of the fourth quarter) have become somewhat less seasonal in recent
years.
The following table shows the number of Company Stores and Franchised
Stores in each state on April 30, 1996:
<TABLE>
<CAPTION>
COMPANY FRANCHISED
STATE STORES STORES TOTAL
----- ------- ---------- -----
<S> <C> <C> <C>
Iowa . . . . . . . . . 223 89 312
Illinois . . . . . . . 204 31 235
Indiana . . . . . . . 8 0 8
Kansas . . . . . . . . 73 4 77
Minnesota. . . . . . . 41 15 56
Missouri . . . . . . . 189 33 222
Nebraska . . . . . . . 43 8 51
South Dakota . . . . 19 0 19
Wisconsin . . . . . . 1 2 3
Total . . . . 801(81%) 182(19%) 983 (100%)
</TABLE>
-4-
<PAGE> 5
The Company has operational responsibility for all Company Stores.
Franchised Stores generally follow the same operating policies as Company
Stores and are subject to Company supervision pursuant to its franchise
agreements. Franchised Stores and Company Stores offer substantially the same
products and conform to the same basic store design.
The following table shows the number of Company and Franchised Stores
opened, Franchised Stores converted to Company Stores and total stores in
operation during each of the last five fiscal years:
<TABLE>
<CAPTION>
STORES IN
FISCAL YEAR NEW OPERATION
ENDED STORES CONVERTED AT END OF
APRIL 30, OPENED STORES PERIOD
- ----------- ------ --------- ---------
<S> <C> <C> <C>
1992
Company . . . . . 23 2 597 (1)
Franchised . . . . 3 (2) 202 (1)
-- ---
Total . . . . . 26 799
1993
Company . . . . . 36 10 639 (2)
Franchised . . . . 1 (10) 187 (2)
-- ---
Total . . . . . 37 826
1994
Company . . . . . 56 1 687 (3)
Franchised . . . . 4 (1) 189 (3)
-- ---
Total . . . . . 60 876
1995
Company . . . . . 60 0 741 (4)
Franchised . . . . 3 (0) 186 (4)
-- ---
Total . . . . . 63 927
1996
Company . . . . . 65 1 801
Franchised . . . . 1 (1) 182 (5)
-- ---
Total . . . . . 66 983
- -----------------------
</TABLE>
-5-
<PAGE> 6
(1) Seven Company Stores and one Franchised Store were closed in
1992.
(2) Four Company Stores and six Franchised Stores were closed in
1993.
(3) Nine Company Stores and one Franchised Store were closed in
1994.
(4) Six Company Stores and six Franchised Stores were closed in
1995.
(5) Six Company Stores and four Franchised Stores were closed in
1996.
Six Company Stores were opened in May and June 1996 and 38 Company
Stores were under construction at June 30, 1996. On June 30, 1996, the Company
had purchased or had the right to purchase 47 additional store sites. All but
two of the 85 stores under construction or planned for construction on such
sites will be Company Stores. Management anticipates opening approximately 70
new Company Stores during fiscal 1997.
The Company intends to continue to increase the number of Company
Stores, and the proportion of Company Stores relative to Franchised Stores,
because of the greater profitability of Company Stores and the Company's
greater operating control over such stores. The Company anticipates it will
increase the number of Company Stores through construction of new stores and
the acquisition of existing Franchised Stores. During fiscal 1994, 1995 and
1996, the Company converted 1, 0 and 1 stores, respectively, from Franchised
Stores to Company Stores.
Management believes that its current market area presents substantial
opportunities for continued growth, and the Company intends to concentrate its
expansion efforts in this area before pursuing expansion in other geographic
markets. In the opinion of management, the Casey's Distribution Center in
Ankeny, Iowa can adequately supply the general merchandise requirements of
1,000 to 1,500 stores located within a 500-mile radius of the Casey's
Distribution Center, which would include the additional store sites being
planned for Indiana.
In its expansion, the Company intends to follow its traditional store
site selection criteria and to locate most new stores in small towns.
Management believes that satisfaction of such criteria will provide
opportunities for a better return on investment than could be realized from the
opening of stores in larger communities.
-6-
<PAGE> 7
CORPORATE SUBSIDIARIES
The Marketing Company and the Services Company were organized as Iowa
corporations in March 1995, and both are wholly-owned subsidiaries of Casey's.
Certain Casey's employees became employees of the Marketing Company or the
Services Company on May 1, 1995, and both of those subsidiaries assumed certain
responsibilities and functions formerly held by Casey's on that date.
Casey's now operates Company Stores in the States of Illinois, Kansas,
Minnesota, Nebraska and South Dakota. Casey's also holds the rights to the
Casey's trademark and trade name, and serves as franchisor in connection with
the operation of Franchised Stores. Effective May 1, 1995, the Marketing
Company assumed responsibility for the operation of Company Stores in the
States of Iowa, Indiana and Missouri. The Marketing Company also has
responsibility for all Company wholesale operations, including the operation of
the Casey's Distribution Center. The Services Company provides a variety of
construction and transportation services for all Company Stores. Both the
Marketing Company and Services Company personnel utilize the Corporate
Headquarters facility for their base of operations.
STORE OPERATIONS
PRODUCTS OFFERED
Each Casey's General Store typically carries over 2,500 food and
non-food items. The products offered are those normally found in a
supermarket, except that the stores do not sell produce or fresh meats, and
selection is generally limited to one or two well-known brands of each item
stocked. Most staple foodstuffs carried are of nationally advertised brands.
Stores sell regional brands of dairy and bakery products, and approximately 92%
of the stores offer beer. The non-food items carried include tobacco products,
health and beauty aids, school supplies, housewares, pet supplies, photo
supplies, ammunition and automotive products.
All of the Casey's General Stores offer gasoline or gasohol for sale on
a self-service basis. Stores in Iowa, Illinois and Nebraska sell primarily
gasohol and are therefore able to avail themselves of a tax incentive for such
sales provided in those states. The gasoline and gasohol offered by the stores
generally are sold under the Casey's name, although some Franchised Stores sell
gasoline under a major oil company brand name.
-7-
<PAGE> 8
It is management's policy to experiment with additions to the Company's
product line, especially products with higher gross profit margins. As a
result of this policy, the Company has added various prepared food items to its
product line over the years. In 1980, the Company initiated the installation
of "snack centers" which now are in approximately 99% of the stores. The snack
centers sell sandwiches, fountain drinks, and other items that have gross
profit margins higher than those of general staple goods. The Company also has
introduced the sale of donuts prepared on store premises, available in
approximately 99% of the stores as of April 30, 1996, as well as cinnamon rolls
and cookies, and is installing donut-making facilities in all newly constructed
stores.
Since 1986, the Company has operated a commissary at which it prepares
sandwiches for sale in Casey's General Stores. Management expects the
commissary to produce approximately 2 million sandwiches during fiscal 1997,
for delivery to both Company and Franchised Stores through the Casey's
Distribution Center.
The Company began marketing made-from-scratch pizza in 1984, expanding
its availability to 902 (92%) stores as of April 30, 1996. Management believes
pizza is the Company's most popular prepared food product, although the Company
continues to expand its prepared food product line, which now includes ham and
cheese, beef, and hot and mild sausage and tenderloin sandwiches, pizza bread,
garlic bread, breakfast croissants, quarter-pound hamburgers and cheeseburgers.
In addition, Casey's Crispy Fried Chicken was available for take-out at 25 (3%)
stores as of April 30, 1996.
The pizza and other prepared food products are made on store premises
with ingredients delivered from the Casey's Distribution Center. Pizza
generally is available in three sizes with ten different toppings and is sold
for take-out between the hours of 4:00 P.M. and 11:00 P.M. In addition, at
selected store locations a luncheon menu consisting of pizza-by-the-slice,
sandwiches, pizza bread, and garlic bread is available.
An important part of the Company's marketing strategy is to increase
sales volume by pricing competitively on price-sensitive items. On less
price-sensitive items, it is the Company's policy to maintain, or in the case
of Franchised Stores to recommend, a Company-wide pricing structure in each
store that is generally comparable to that of other convenience, gasoline or
grocery stores located in the area and competing for the same customers.
Management attributes the Company's ability to offer competitive prices
to a number of factors, including the Company's central distribution system,
its purchasing practices which avoid dependence upon jobbers and vendors by
relying on a few large wholesale companies and its success in minimizing land,
construction and equipment costs.
-8-
<PAGE> 9
Management's decision to add snack center items, freshly prepared
donuts and pizza to the Company's product selection reflects its strategy to
promote high profit margin products that are compatible with convenience store
operations. Although retail sales of non-gasoline items during the last three
fiscal years have generated approximately 41% of the Company's retail sales,
such sales resulted in approximately 74% of the Company's gross profits from
retail sales. Gross profit margins for prepared foods items, which have
averaged approximately 52% during the last three fiscal years, are
significantly higher than the gross profit margin for retail sales of gasoline,
which has averaged approximately 10% during such period.
STORE DESIGN
Casey's General Stores are free-standing and, with a few exceptions to
accommodate local conditions, conform to standard construction specifications.
During the fiscal year ended April 30, 1996, the aggregate investment in the
land, building, equipment and initial inventory for a typical Company Store
averaged approximately $680,000. The standard building designed by the Company
is a pre-engineered steel frame building mounted on a concrete slab. The
current store design measures 40 feet by 68 feet, with approximately 1,300
square feet devoted to sales area, 500 square feet to kitchen space, 500 square
feet to storage and two large public restrooms. Store lots have sufficient
frontage and depth to permit adequate drive-in parking facilities on one or
more sides of each store. Each store typically includes two islands of
gasoline dispensers and storage tanks having a capacity of 20,000 to 30,000
gallons of gasoline. The merchandising display in each store follows a standard
layout designed to encourage a flow of customer traffic through all sections of
the store. All stores are air conditioned and have modern refrigeration
facilities. The store locations feature the Company's bright red and yellow
pylon sign and facade, both of which display the name and service mark of the
Company.
All Casey's General Stores remain open at least 16 hours per day, seven
days a week. Most store locations are open from 6:00 a.m. to 11:00 p.m.,
although hours of operation may be adjusted on a store-by-store basis to
accommodate customer traffic patterns. The Company requires that all stores
maintain a bright, clean store interior and provide prompt check-out service.
It is the Company's policy not to permit the installation of electronic games
or sale of adult magazines on store premises.
STORE LOCATIONS
The Company traditionally has located its stores in small towns not
served by national-chain convenience stores. Approximately 72% of all stores
operate in areas with populations of fewer than 5,000 persons, while
approximately 6% of all stores are located in communities with populations
exceeding 20,000 persons. Management believes that a
-9-
<PAGE> 10
Casey's General Store provides a service not otherwise available in small
towns, and that a convenience store in an area with limited population can
be profitable if it stresses sales volume and competitive prices. The Company's
store site selection criteria emphasize the population of the immediate area
and daily highway traffic volume. Management believes that, if there is no
competing store, a Casey's General Store may operate profitably at a highway
location in a community with a population of as few as 500 persons.
GASOLINE OPERATIONS
Gasoline sales are an important part of the Company's sales and
earnings. Approximately 56% of Casey's net sales for the year ended April 30,
1996 were derived from the retail sale of gasoline. The following table
summarizes gasoline sales by Company Stores for the three fiscal years ended
April 30, 1996:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
--------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Number of
Gallons Sold 375,962,172 429,629,280 492,353,905
Total Retail
Gasoline Sales $377,807,750 $455,310,780 $531,414,819
Percentage of 51.7% 53.6% 55.7%
Net Sales
Gross Profit 10.1% 9.4% 10.7%
Percentage
Average Retail
Price per Gallon $1.00 $1.06 $1.08
Average Gross Profit
Margin per Gallon 10.12 9.91 11.46
Average Number of
Gallons Sold per
Company Store * 570,253 596,684 637,904
- ----------------------
</TABLE>
-10-
<PAGE> 11
* Includes only those stores that had been in operation for at
least one full year before commencement of the periods indicated.
Retail prices of gasoline increased during the year ended April 30,
1996. The total number of gallons sold by the Company during this period also
increased, primarily as the result of the increased number of Company Stores in
operation and the Company's efforts to price its retail gasoline competitively
in the market area served by the particular store. See "BUSINESS--Store
Operations--Competition" herein. As a result of these conditions, total retail
gasoline sales by the Company increased during the period, as did the
percentage of such sales to the Company's total net sales.
Retail gasoline profit margins have a substantial impact on the
Company's net income. Profit margins on gasoline sales can be adversely
affected by factors beyond the control of the Company, including over-supply in
the retail gasoline market, uncertainty or volatility in the wholesale gasoline
market (such as that experienced during 1991 as a result of the Persian Gulf
crisis) and price competition from other gasoline marketers. Any substantial
decrease in profit margins on gasoline sales or number of gallons sold could
have a material adverse effect on the Company's earnings.
The Company purchases its gasoline from independent national and
regional petroleum distributors. Although in recent years the Company's
suppliers have not experienced any difficulties in obtaining sufficient amounts
of gasoline to meet the Company's needs, unanticipated national and
international events could result in a reduction of gasoline supplies available
for distribution to the Company. A substantial curtailment in gasoline
supplied to the Company could adversely affect the Company by reducing gasoline
sales. Further, management believes that a significant amount of the Company's
business results from the patronage of customers primarily desiring to purchase
gasoline and, accordingly, reduced gasoline supplies could adversely affect the
sale of non-gasoline items. These factors could have a material adverse impact
upon the Company's earnings and operations.
DISTRIBUTION AND WHOLESALE ARRANGEMENTS
The Marketing Company supplies all Company Stores and over 90% of the
Franchised Stores with groceries, food (including sandwiches prepared at the
Company's commissary), health and beauty aids and general merchandise from the
Casey's Distribution Center. The stores place orders for merchandise through a
telecommunications link-up to the computer at the Company's headquarters in
Ankeny, and weekly shipments are made from the Casey's Distribution Center by
40 Company-
-11-
<PAGE> 12
owned delivery trucks. The Marketing Company charges Franchised Stores
processing and shipping fees for each order filled by the Casey's Distribution
Center. The efficient service area of the Casey's Distribution Center is
approximately 500 miles, which encompasses all of the Company's existing and
proposed stores.
The Marketing Company's only wholesale sales are to Franchised Stores,
to which it sells groceries, prepared sandwiches, ingredients and supplies for
donuts, sandwiches and pizza, health and beauty aids, general merchandise and
gasoline. Although the Company derives income from this activity, it makes such
sales, particularly gasoline sales, at narrow profit margins in order to
promote the competitiveness and increase the sales to Franchised Stores.
In fiscal 1996, the Company purchased directly from manufacturers
approximately 90% of the food and non-food items sold from the Casey's
Distribution Center. The Company has not entered into contracts with any of
the suppliers of products sold by Casey's General Stores. Management believes
that the absence of such contracts is customary in the industry for purchasers
such as the Company and enables the Company to respond flexibly to changing
market conditions.
FRANCHISE OPERATIONS
Casey's has franchised Casey's General Stores since 1970. In addition
to generating income for Casey's, franchising historically enabled Casey's to
obtain desirable store locations from persons who have preferred to become
franchisees rather than to sell or lease their locations to Casey's.
Franchising also enabled Casey's to expand its system of stores at a faster
rate, thereby achieving operating efficiencies in its warehouse and
distribution system as well as greater identification in its market area. As
the Company has grown and strengthened its financial resources, the advantages
of franchising have decreased in importance and management currently expects to
grant new franchises only to existing franchisees operating in states other
than Iowa on a limited basis. See "BUSINESS - Government Regulation" herein.
From April 30, 1983 to April 30, 1996, the percentage of Company Stores
increased from 44% to 81%. From inception to April 30, 1996, the Company had
converted 136 Franchised Stores to Company Stores by leasing or purchasing such
stores.
All franchisees pay Casey's a royalty fee equal to 3% of gross receipts
derived from total store sales excluding gasoline, subject to a minimum monthly
royalty of $300. Casey's currently assesses a royalty fee of $.018 per gallon
on gasoline sales, although it has discretion to increase this amount to 3% of
retail gasoline sales. In addition, franchisees pay Casey's a sign and facade
rental fee. The franchise agreements do not authorize Casey's to establish the
prices to be charged by franchisees. Further, except with respect to certain
supplies and items provided in connection with the opening of each store, each
franchisee has unlimited authority to purchase supplies and inventory
-12-
<PAGE> 13
from any supplier, provided the products meet the Company's quality standards.
Franchise agreements typically contain a non-competition clause that restricts
the franchisee's ability to operate a convenience-style store in that area for
a period of two or three years following termination of the agreement. See
"BUSINESS - Government Regulation" herein for a discussion of recent
legislation in Iowa concerning franchise agreements.
PERSONNEL
On April 30, 1996, the Company had 3,480 full-time employees and 4,863
part-time employees. The Company has not experienced any work stoppages.
There are no collective bargaining agreements between the Company and any of
its employees.
The Company's supervisory personnel are responsible for monitoring and
assisting all stores, including Franchised Stores. Centralized control of store
operations is primarily maintained by the Chief Operating Officer of the
Company, who is assisted by the Vice President of Store Operations. Reporting
directly to the Vice President of Store Operations are 4 regional operations
managers. Reporting directly to the regional managers are 16 district
managers, each with responsibility over approximately equal numbers of stores.
Each district manager is generally in charge of seven supervisors. Each of the
120 supervisors in turn is responsible for the operations of approximately
eight individual stores.
The majority of store managers and store personnel live in the
community in which their Casey's store is located. Training of store managers
and store personnel is conducted through the Store Operations Training
Department overseen by the Director of Store Operations Training. The Company
operates a central training facility at its Headquarters facility in Ankeny and
provides continuing guidance and training in the areas of merchandising,
advertising and promotion, administration, record keeping, accounting,
inventory control and other general operating and management procedures.
As an incentive to the Company's employees and those of franchisees,
management stresses an internal promotion philosophy. Most district managers
and store supervisors previously worked as store managers. At the senior
management level, one of the Company's executive officers has been employed by
the Company for more than twenty years, one has been employed for more than
twenty-four years and one has been employed for more than twenty-eight years.
In addition to its four executive officers, the Company currently has
Vice Presidents of Store Operations, Property Management, Transportation, and
Marketing. The Company also has 34 other employees with managerial
responsibilities in the areas of store operations, gasoline marketing, real
estate development, construction, equipment
-13-
<PAGE> 14
maintenance, merchandising, advertising, Distribution Center operations,
payroll, accounting and data processing. The Company believes that such
employees are capable of carrying out their responsibilities without
substantial supervision by the executive officers.
COMPETITION
The Company's business is highly competitive. Food, including prepared
foods, and non-food items similar or identical to those sold by the Company are
generally available from various competitors in the communities served by
Casey's General Stores. Management believes that its stores located in small
towns compete principally with local convenience stores, grocery stores and
similar retail outlets and, to a lesser extent, with prepared food outlets or
restaurants and expanded gasoline stations offering a more limited selection of
grocery and food items for sale. Stores located in more heavily populated
communities may compete with local and national grocery and drug store chains,
expanded gasoline stations, supermarkets, discount food stores and traditional
convenience stores. Convenience store chains competing in the larger towns
served by Casey's General Stores include 7-Eleven, Kwik Shops, and regional
chains. Some of the Company's competitors have greater financial and other
resources than the Company.
Gasoline sales, in particular, are intensely competitive. The Company
competes with both independent and national brand gasoline stations, some of
which may have access to more favorable arrangements for gasoline supply than
do the Company or the firms that supply its stores. Management believes that
the most direct competition for gasoline sales comes from other self-service
installations in the vicinity of individual store locations, some of whom
regularly offer non-cash discounts on self-service gasoline purchases such as a
"free" car wash or "mini-service." Company Stores generally do not offer such
discounts. In addition, management believes that Company Stores compete for
gasoline customers who regularly travel outside of their relatively smaller
community for shopping or employment purposes, and who therefore are able to
purchase gasoline while in nearby larger communities where retail gasoline
prices generally are lower. For this reason, the Company attempts to offer
gasoline for sale at prices comparable to those prevailing in nearby larger
communities.
The Company believes that the competitiveness of Casey's General Stores
is based on price (particularly in the case of gasoline sales) as well as on a
combination of store location, extended hours, a wide selection of name brand
products, self-service gasoline facilities and prompt check-out service. The
Company also believes it is important to its business to maintain a bright,
clean store and to offer quality products for sale.
-14-
<PAGE> 15
SERVICE MARKS
The name "Casey's General Store" and the service mark consisting of the
Casey's design logo (with the words "Casey's General Store") are registered
service marks of Casey's under federal law. Management believes that these
service marks are of material importance in promoting and advertising the
Company's business.
GOVERNMENT REGULATION
The United States Environmental Protection Agency and several states,
including Iowa, have established requirements for owners and operators of
underground gasoline storage tanks ("USTs") with regard to (i) maintenance of
leak detection, corrosion protection and overfill/spill protection systems,
(ii) upgrade of existing tanks, (iii) actions required in the event of a
detected leak, (iv) prevention of leakage through tank closings and (v)
required gasoline inventory recordkeeping. Since 1984, new Company Stores have
been equipped with non-corroding fiberglass USTs, including some with
double-wall construction, over-fill protection and electronic tank monitoring,
and the Company has an active inspection and renovation program with respect to
its older USTs. The Company currently has 1,683 USTs of which 1,311 are
fiberglass and 372 are steel. Management believes that its existing gasoline
procedures and planned capital expenditures will continue to keep the Company
in substantial compliance with all current federal and state UST regulations.
Several of the states in which the Company does business have trust
fund programs with provisions for sharing or reimbursing corrective action or
remediation costs incurred by UST owners, including the Company. These
programs, other than the State of Iowa's, generally are in the early stages of
operation and the extent of available coverage or reimbursement under such
programs for costs incurred by the Company is not fully known at this time. In
each of the years ended April 30, 1995 and 1996, the Company spent
approximately $2,137,000 and $718,000, respectively, for assessments and
remediation. Substantially all of these expenditures have been submitted for
reimbursement from state-sponsored trust fund programs, and, as of June 30,
1996, approximately $3,900,000 has been received from such programs. Such
amounts are typically subject to statutory provisions requiring repayment of
the reimbursed funds for noncompliance with upgrade provisions or other
applicable laws. The Company has accrued a liability at April 30, 1996, of
approximately $2,600,000 for estimated expenses related to anticipated
corrective actions or remediation efforts, including relevant legal and
consulting costs. Management believes the Company has no material joint and
several environmental liability with other parties.
-15-
<PAGE> 16
Management of the Company currently estimates that aggregate capital
expenditures for electronic monitoring, cathodic protection and overfill/spill
protection will approximate $1,000,000 in fiscal 1997 through December 23,
1998, in order to comply with the existing UST regulations. Additional
regulations, or amendments to the existing UST regulations, could result in
future revisions to such estimated expenditures.
The Federal Trade Commission and some states have adopted laws
regulating franchise operations. Existing laws generally require certain
disclosures and/or registration in connection with the sale of the franchises,
and regulate certain aspects of the relationship with franchisees, such as
rights of termination, renewal and transfer. Management believes that the
Company is duly registered in all states where its present operations require
such registration. Management does not believe that the existing state
registration and disclosure requirements, or the federal disclosure
requirements, have a material effect on the Company's operations.
During the 1992 legislative session, the Iowa General Assembly enacted
legislation relating to franchise agreements and their enforcement and
establishing certain duties and limitations on franchisors. The legislation,
currently set forth in Chapter 523H, Code of Iowa, 1995, as amended ("Chapter
523H"), became effective on July 1, 1992, and purports to apply to all new or
existing franchises that are operated in the State of Iowa after the effective
date, including those of Casey's. The legislation contains, among other
things, provisions regarding the transfer of franchises, the termination or
nonrenewal of franchises, and the encroachment on existing franchises.
Subsequent judicial rulings in cases brought by other Iowa franchisors have
held, however, that Chapter 523H does not apply to any franchises enter into
prior to its July 1, 1992 effective date.
As of April 30, 1996, Casey's was a party to 89 franchise agreements
entered into with respect to Franchised Stores in the State of Iowa. Of that
number, only two of the franchise agreements were entered into following the
effective date of Chapter 523H (the "Covered Franchises"); the remainder were
all entered into prior to July 1, 1992. Certain provisions of the Covered
Franchises conflict with the provisions of Chapter 523H. As such, certain
contractual provisions of the Covered Franchises, including those relating to
transfer, termination or non-renewal and encroachment, may not be valid or
enforceable under Chapter 523H.
-16-
<PAGE> 17
Chapter 523H was amended during the 1995 legislative session, but
several significant ambiguities and concerns remain. As a result, Casey's
recently determined not to grant any new Iowa franchises until further amending
legislation is enacted or other favorable court rulings are rendered.
Management does not expect Chapter 523H to have a material effect on the
Company's business.
ITEM 2. PROPERTIES
The Company owns and has consolidated its Corporate Headquarters and
Distribution Center operations on a 36-acre site in Ankeny, Iowa. This
facility consists of approximately 255,000 square feet, including a central
Corporate Headquarters office building, expanded Distribution Center and
vehicle service/maintenance center. The facility was completed in February
1990 and placed in full service at that time.
The Company owns an approximately 10,000 square-foot building on an
eight-acre site in Creston, Iowa that it utilizes as a sandwich commissary
center for the preparation of sandwiches sold in Casey's General Stores.
On April 30, 1996, Casey's owned the land at 711 locations and the
buildings at 738 locations, and leased the land at 90 locations and the
buildings at 63 locations. Most of the leases provide for the payment of a
fixed rent, plus property taxes and insurance and maintenance costs.
Generally, the leases are for terms of 10 to 20 years, with options to renew
for additional periods or options to purchase the leased premises at the end of
the lease period.
ITEM 3. LEGAL PROCEEDINGS
The Company from time to time is a party to legal proceedings arising
from the conduct of its business operations, including proceedings relating to
personal injury, property damage and employment claims, environmental
remediation or contamination, disputes under franchise agreements and claims by
state and federal regulatory authorities relating to the sale of products
pursuant to state or federal licenses or permits. Management does not believe
that the potential liability of the Company with respect to such proceedings
pending as of the date of this Form 10-K is material in the aggregate.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
-17-
<PAGE> 18
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required in response to this Item is incorporated
herein by reference from the section entitled "Common Stock Data" set forth on
page 24 of the Company's Annual Report to shareholders for the year ended April
30, 1996.
The cash dividends declared by the Company (adjusted to give effect to
the two-for-one stock split distributed on February 15, 1994) during the
periods indicated have been as follows:
<TABLE>
<CAPTION>
Cash Dividend
Declared
-------------
<S> <C>
Calendar 1994
First Quarter $.01875
Second Quarter .02
Third Quarter .02
Fourth Quarter .02
-------
$.07875
Calendar 1995
First Quarter $.02
Second Quarter .02
Third Quarter .025
Fourth Quarter .025
-----
$.09
Calendar 1996
First Quarter $.025
Second Quarter .025
</TABLE>
-18-
<PAGE> 19
ITEM 6. SELECTED FINANCIAL DATA
The information required in response to this Item is incorporated
herein by reference from the section entitled "Selected Financial Data" set
forth on page 23 of the Company's Annual Report to shareholders for the year
ended April 30, 1996.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required in response to this Item is incorporated
herein by reference from pages 18 through 22 of the Company's Annual Report to
shareholders for the year ended April 30, 1996.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required in response to this Item is incorporated
herein by reference from pages 8 through 17 and page 24 of the Company's Annual
Report to shareholders for the year ended April 30, 1996.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
That portion of the Company's definitive Proxy Statement appearing
under the caption "Election of Directors", to be filed with the Commission
pursuant to Regulation 14A within 120 days after April 30, 1996 and to be used
in connection with the Company's Annual Meeting of shareholders to be held on
September 20, 1996, is hereby incorporated by reference.
-19-
<PAGE> 20
ITEM 11. EXECUTIVE COMPENSATION
That portion of the Company's definitive Proxy Statement appearing
under the caption "Executive Compensation", to be filed with the Commission
pursuant to Regulation 14A within 120 days after April 30, 1996 and to be used
in connection with the Company's Annual Meeting of shareholders to be held on
September 20, 1996, is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
That portion of the Company's definitive Proxy Statement appearing
under the captions "Shares Outstanding" and "Voting Procedures", to be filed
with the Commission pursuant to Regulation 14A within 120 days after April 30,
1996 and to be used in connection with the Company's Annual Meeting of
shareholders to be held on September 20, 1996, is hereby incorporated by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
That portion of the Company's definitive Proxy Statement appearing
under the caption "Other Information Relating to Directors and Executive
Officers", to be filed with the Commission pursuant to Regulation 14A within
120 days after April 30, 1996 and to be used in connection with the Company's
Annual Meeting of shareholders to be held on September 20, 1996, is hereby
incorporated by reference.
-20-
<PAGE> 21
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents Filed
---------------
The documents listed below are filed as a part of this Report on Form
10-K and are incorporated herein by reference:
(1) The following consolidated financial statements, shown on pages 8
through 17 of the Company's Annual Report to shareholders for the
year ended April 30, 1996:
Consolidated Balance Sheets, April 30, 1996 and 1995
Consolidated Statements of Income, Three Years Ended April 30, 1996
Consolidated Statements of Shareholders' Equity, Three Years
Ended April 30, 1996
Consolidated Statements of Cash Flows,
Three Years Ended April 30, 1996
Notes to Consolidated Financial Statements
Independent Auditors' Report
(2) The exhibits set forth in Item 14(c) of this report. The management
contracts or compensatory plans or arrangements required to be filed
as an exhibit to this Form 10-K pursuant to Item 14(c) consist of
the following:
Exhibit Number Document
-------------- --------
10.4(b) Sixth Amended and Restated
Casey's General Stores, Inc.
Employees' Stock Ownership
Plan and Trust Agreement (v)
10.19 Casey's General Stores, Inc.
1991 Incentive Stock Option
Plan (j) and amendment
thereto (o)
10.21 Employment Agreement with
Donald F. Lamberti (l)
-21-
<PAGE> 22
10.22 Employment Agreement with
Ronald M. Lamb (l)
10.23 Employment Agreement with
Douglas K. Shull (l)
10.24 Employment Agreement with
John G. Harmon (t)
- ---------------------
(j) Incorporated by reference from the Registration Statement on Form S-8
(33-42907) filed September 23, 1991.
(l) Incorporated by reference from the Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1992.
(o) Incorporated by reference from the Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1994.
(t) Incorporated by reference from the Annual Report on Form 10- K for the
fiscal year ended April 30, 1994.
(v) Incorporated by reference from the Annual Report on Form 10- K for the
fiscal year ended April 30, 1995.
(b) REPORTS ON FORM 8-K
-------------------
There were no reports on Form 8-K filed during the fiscal quarter ended
April 30, 1996.
(c) EXHIBITS
--------
Exhibit
Number Document
------- --------
3.1 Restated and Amended Articles of Incorporation (a) and
Amendments thereto (b), (d), (f)
3.2 Amended and Restated By-Laws (h)
4.2 Rights Agreement between Casey's General Stores, Inc. and United
Missouri Bank of Kansas City, N.A., as Rights Agent, relating to
Common Share Purchase Rights (e) and amendments thereto (i), (p), (q)
-22-
<PAGE> 23
4.3 Note Agreement dated as of February 1, 1993 between Casey's
General Stores, Inc. and Principal Mutual Life Insurance Company
and Nippon Life Insurance Company of America (n) and First
Amendment thereto (u)
4.4 Note Agreement dated as of December 1, 1995 between Casey's
General Stores, Inc. and Principal Mutual Life Insurance Company
(u)
9 Voting Trust Agreement (a) and Amendment thereto (d)
10.4(b) Sixth Amended and Restated Casey's General Stores, Inc.
Employees' Stock Ownership Plan and Trust Agreement (v)
10.6 Lease Agreement between Casey's General Stores, Inc. and Broadway
Distributing Company (a)
10.8 Form of Franchise Agreement (a)
10.9 Form of Store Lease Agreement (a)
10.10 Form of Equipment Lease Agreement (a)
10.16 Secured Promissory Note dated November 30, 1989 given to
Principal Mutual Life Insurance Company (f)
10.18 Commercial Note with Norwest Bank Iowa, N.A.(k)
10.19 Casey's General Stores, Inc. 1991 Incentive Stock Option Plan (j)
and amendment thereto (o)
10.21 Employment Agreement with Donald F. Lamberti (l)
10.22 Employment Agreement with Ronald M. Lamb (l)
10.23 Employment Agreement with Douglas K. Shull (l)
10.24 Employment Agreement with John G. Harmon (t)
10.25 Term Loan Agreement and Current Note with Norwest Bank Iowa, N.A.
(m)
10.26 Loan Agreement and Commercial Note with Peoples Trust and Savings
Bank (m)
10.27 Non-Employee Directors' Stock Option Plan (s)
10.28 Term Note with UMB Bank, n.a. (r)
11 Statement regarding computation of earnings per share
13 Consolidated Financial Statements from 1996 Annual Report
21 Subsidiaries of Casey's General Stores, Inc.
24.1 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule
- ----------------------
(a) Incorporated herein by reference from the Registration Statement on Form
S-1 (2-82651) filed August 31, 1983.
(b) Incorporated herein by reference from the Annual Report on Form 10-K for
the fiscal year ended April 30, 1986 (0-12788).
-23-
<PAGE> 24
(c) Reserved.
(d) Incorporated herein by reference from the Quarterly Report on Form 10-Q
for the fiscal quarter ended January 31, 1988 (0-12788).
(e) Incorporated herein by reference from the Registration Statement on Form
8-A filed June 19, 1989 (0-12788).
(f) Incorporated by reference from the Quarterly Report on Form 10-Q for the
fiscal quarter ended October 31, 1989.
(g) Incorporated by reference from the Annual Report on Form 10-K for the
fiscal year ended April 30, 1989.
(h) Incorporated by reference from the Quarterly Report on Form 10-Q for the
fiscal quarter ended July 31, 1989.
(i) Incorporated by reference from the Form 8 (Amendment No. 1 to the
Registration Statement on Form 8-A filed June 19, 1989) filed September
10, 1990.
(j) Incorporated by reference from the Registration Statement on Form S-8
(33-42907) filed September 23, 1991.
(k) Incorporated by reference from the Annual Report on Form 10-K for the
fiscal year ended April 30, 1991.
(l) Incorporated by reference from the Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1992.
(m) Incorporated by reference from the Annual Report on Form 10-K for the
fiscal year ended April 30, 1992.
(n) Incorporated by reference from the Current Report on Form 8-K filed
February 18, 1993.
(o) Incorporated by reference from the Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1994.
(p) Incorporated by reference from the Form 8-A/A (Amendment No. 3 to the
Registration Statement on Form 8-A filed June 19, 1989) filed March 30,
1994.
-24-
<PAGE> 25
(q) Incorporated by reference from the Form 8-A12G/A (Amendment No. 2 to the
Registration Statement on Form 8-A filed June 19, 1989) filed July 29,
1994.
(r) Incorporated by reference from the Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1995.
(s) Incorporated by reference from the Quarterly Report on Form 10-Q for the
fiscal quarter ended July 31, 1994.
(t) Incorporated by reference from the Annual Report on Form 10-K for the
fiscal year ended April 30, 1994.
(u) Incorporated by reference from the Current Report on Form 8-K filed
January 11, 1996.
(v) Incorporated by reference from the Annual Report on Form 10-K for the
fiscal year ended April 30, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
CASEY'S GENERAL STORES, INC.
(Registrant)
Date: July 24, 1996 By: /s/ Donald F. Lamberti
----------------------
Donald F. Lamberti,
Chief Executive Officer
and Chairman of the Board
(Principal Executive Officer)
-25-
<PAGE> 26
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: July 24, 1996 By: /s/ Donald F. Lamberti
----------------------
Donald F. Lamberti
Chief Executive Officer,
Chairman of the Board
(Principal Executive Officer)
Date: July 23, 1996 By: /s/ Ronald M. Lamb
------------------
Ronald M. Lamb
President and Chief Operating
Officer, Director
Date: July 22, 1996 By: /s/ Douglas K. Shull
--------------------
Douglas K. Shull
Treasurer, Director
(Principal Financial Officer
and Principal Accounting Officer)
Date: July 22, 1996 By: /s/ John G. Harmon
------------------
John G. Harmon
Secretary, Director
Date: July 25, 1996 By: /s/ Patricia Clare Sullivan
---------------------------
Patricia Clare Sullivan
Director
-26-
<PAGE> 27
Date: July 22, 1996 By: /s/ Kenneth H. Haynie
---------------------
Kenneth H. Haynie
Director
Date: July 25, 1996 By: /s/ John R. Fitzgibbon
----------------------
John R. Fitzgibbon
Director
Date: July 25, 1996 By: /s/ Jack P. Taylor
------------------
Jack P. Taylor
Director
-27-
<PAGE> 28
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
11 Statement regarding computation
of earnings per share 29
13 Consolidated Financial Statements from
1996 Annual Report to shareholders 30
21 Subsidiaries of Casey's General
Stores, Inc. 47
24.1 Consent of KPMG Peat Marwick LLP 48
27 Financial Data Schedule 49
-28-
<PAGE> 1
EXHIBIT 11
CASEY'S GENERAL STORES, INC.
----------------------------
Computation of Per Share Earnings
PRIMARY EARNINGS PER SHARE - The computation of primary earnings per share is
not presented since such computation can be clearly determined from the
material contained in the Consolidated Financial Statements and notes thereto
included in the Company's Annual Report to Shareholders for the fiscal year
ended April 30, 1996.
FULLY DILUTED EARNINGS PER SHARE - The following sets forth the computation of
per share earnings on a fully diluted basis:
<TABLE>
<CAPTION>
Year Ended April 30,
--------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net income $26,767,085 $22,880,841 $16,564,097
Interest savings net of
income taxes on assumed
conversion of convertible
debentures --- --- 1,220,747
----------- ----------- -----------
Earnings applicable to
fully diluted shares $26,767,085 $22,880,841 $17,784,844
=========== =========== ===========
Average common shares
outstanding 26,110,419 25,930,614 22,571,288
Average common equivalent
shares applicable to
stock options 129,413 194,473 125,704
Average common shares
issuable on assumed
conversion of convertible
debentures --- --- 3,320,836
----------- ----------- -----------
26,239,832 26,125,087 26,017,828
=========== =========== ===========
Earnings per share-fully
diluted basis (A) $ 1.02 $ .88 $ .68
=========== =========== ===========
</TABLE>
(A) Fully diluted earnings per share cannot exceed primary earnings per share.
<PAGE> 1
EXHIBIT 13
CASEY'S GENERAL STORES, INC. CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30
-----------------------------
ASSETS 1996 1995
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12,673,855 $ 5,477,784
Short-term investments 13,953,926 1,300,700
Receivables 2,679,967 3,086,728
Inventories (Note 1) 32,437,323 27,343,033
Prepaid expenses (Note 4) 8,266,308 5,982,324
------------ ------------
Total current assets 70,011,379 43,190,569
- -------------------------------------------------------------------------------------------------------------
Long-term investments (Note 1) 5,153,169 6,445,934
Other assets, net of amortization 1,356,643 1,030,856
Property and equipment, at cost: (Note 2)
Land 49,142,635 41,082,729
Buildings and leasehold improvements 175,343,291 152,002,492
Machinery and equipment 223,625,219 199,609,874
Leasehold interest in property and equipment (Note 5) 12,812,136 13,452,922
------------ ------------
460,923,281 406,148,017
Less accumulated depreciation and amortization 132,609,514 111,656,704
------------ ------------
Net property and equipment 328,313,767 294,491,313
------------ ------------
$404,834,958 $345,158,672
=============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks (Note 2) $ 21,025,000 $ 11,350,000
Current maturities of long-term debt (Note 2) 8,679,217 8,498,891
Accounts payable 36,190,236 39,860,843
Accrued expenses: Salaries and wages 3,056,506 2,620,124
Other (Note 8) 13,975,769 13,096,288
Income taxes payable - - - - - - 1,544,909
------------ ------------
Total current liabilities 82,926,728 76,971,055
- -------------------------------------------------------------------------------------------------------------
Long-term debt, net of current maturities (Note 2) 81,249,264 59,962,922
Deferred income taxes (Note 4) 32,791,000 27,270,000
Deferred compensation (Note 7) 1,693,288 1,282,655
------------ ------------
Total liabilities 198,660,280 165,486,632
Shareholders' equity (Note 3)
Capital stock: Preferred stock, no par value, none issued - - - - - - - - - - -
Common stock, no par value, 26,221,706 and
25,966,906 shares issued and outstanding
at April 30, 1996 and 1995, respectively 63,556,842 61,342,992
Retained earnings 142,617,836 118,329,048
------------ ------------
Total shareholders' equity 206,174,678 179,672,040
------------ ------------
$404,834,958 $345,158,672
Commitments and contingencies (Notes 5, 7 and 8)
=============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE> 2
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30
--------------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $954,764,056 $848,842,757 $731,206,162
Franchise revenue 5,384,424 5,269,105 5,120,526
------------ ------------ ------------
960,148,480 854,111,862 736,326,688
Cost of goods sold 748,183,597 665,924,372 574,143,909
Operating expenses 138,581,190 123,004,153 110,082,785
Depreciation and amortization 24,654,848 22,237,352 18,622,815
Interest, net (Note 2) 5,729,760 5,590,144 6,434,082
------------ ------------ ------------
917,149,395 816,756,021 709,283,591
Income before income taxes 42,999,085 37,355,841 27,043,097
Provision for income taxes (Note 4) 16,232,000 14,475,000 10,479,000
------------ ------------ ------------
Net income $ 26,767,085 $ 22,880,841 $ 16,564,097
================================================================================================================
Earnings per common and common
equivalent share (Note 3):
Primary $ 1.02 $ .88 $ .73
Fully diluted $ 1.02 $ .88 $ .68
================================================================================================================
</TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
------------ ------------ ------------
<S> <C> <C> <C>
Balance April 30, 1993 $ 25,435,693 $ 82,540,207 $107,975,900
Net income - - - - - - 16,564,097 16,564,097
Payment of dividends (7 1/4 cents per share) - - - - - - (1,581,998) (1,581,998)
Conversion of Convertible Debentures (3,683,064 shares) 34,991,321 - - - - - - 34,991,321
Proceeds from exercise of stock options (61,000 shares) 460,313 - - - - - - 460,313
------------ ------------ ------------
Balance April 30, 1994 60,887,327 97,522,306 158,409,633
Net income - - - - - - 22,880,841 22,880,841
Payment of dividends (8 cents per share) - - - - - - (2,074,099) (2,074,099)
Proceeds from exercise of stock options (46,700 shares) 464,619 - - - - - - 464,619
Retirement of shares from Employees' Stock
Ownership Plan and Trust (814 shares) (8,954) - - - - - - (8,954)
------------ ------------ ------------
Balance April 30, 1995 61,342,992 118,329,048 179,672,040
Net income - - - - - - 26,767,085 26,767,085
Payment of dividends (9 1/2 cents per share) - - - - - - (2,478,297) (2,478,297)
Proceeds from exercise of stock options (254,800 shares) 2,213,850 - - - - - - 2,213,850
------------ ------------ ------------
Balance April 30, 1996 $ 63,556,842 $142,617,836 $206,174,678
================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
9
<PAGE> 3
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30
-------------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net income $ 26,767,085 $ 22,880,841 $ 16,564,097
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation and amortization 24,654,848 22,237,352 18,622,815
Deferred income taxes 8,000,000 2,000,000 2,100,000
Changes in assets and liabilities:
Receivables 406,761 (246,828) (692,259)
Inventories (5,094,290) (3,588,777) 1,974,220
Prepaid expenses (4,762,984) 207,884 (34,317)
Accounts payable (3,670,607) 2,446,815 12,271,225
Accrued expenses 1,315,863 1,047,621 258,124
Income taxes payable (1,544,909) 1,525,981 (307,118)
Other, net 1,899,966 1,013,324 1,972,387
------------ ------------ ------------
Net cash provided by operations 47,971,733 49,524,213 52,729,174
CASH FLOWS FROM INVESTING:
Purchase of property and equipment (60,382,701) (52,645,839) (62,879,021)
Purchase of investments (17,294,466) (2,006,930) (7,179,357)
Sale of investments 6,024,284 14,031,681 17,523,129
------------ ------------ ------------
Net cash used in investing activities (71,652,883) (40,621,088) (52,535,249)
CASH FLOWS FROM FINANCING:
Proceeds from long-term debt 30,000,000 7,500,000 - - - - - -
Payments of long-term debt (8,533,332) (5,317,525) (3,791,599)
Net activity of short-term debt 9,675,000 (7,150,000) 5,750,000
Proceeds from exercise of stock options 2,213,850 464,619 460,313
Payment of cash dividends (2,478,297) (2,074,099) (1,581,998)
------------ ------------ ------------
Net cash provided by (used in) financing activities 30,877,221 (6,577,005) 836,716
------------ ------------ ------------
Net increase in cash and cash equivalents 7,196,071 2,326,120 1,030,641
Cash and cash equivalents at beginning of year 5,477,784 3,151,664 2,121,023
------------ ------------ ------------
Cash and cash equivalents at end of year $ 12,673,855 $ 5,477,784 $ 3,151,664
=====================================================================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
<CAPTION>
<S> <C> <C> <C>
Cash paid during the year for:
Interest (net of amount capitalized) $ 5,770,509 $ 5,768,870 $ 7,730,310
Income taxes 14,523,271 10,601,473 9,034,500
Noncash investing and financing activities:
Property and equipment acquired through capital
lease obligations and installment purchases - - - - - - 13,592 3,264,221
Conversion of Convertible Subordinated Debentures - - - - - - - - - - - - 34,991,321
=====================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
10
<PAGE> 4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS - Casey's General Stores, Inc. (the Company) operates 983
convenience stores in 9 midwestern states. At April 30, 1996, the Company
owned or leased 801 of these stores with 182 stores being owned or leased by
franchisees. The stores are located primarily in smaller communities, most
with populations of fewer than 5,000. Sales in 1996 were distributed as
follows: gasoline - 58% and grocery - 41%. The Company's materials are readily
available, and the Company is not dependent on a single supplier or only a few
suppliers.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
financial statements of Casey's General Stores, Inc. and its two wholly-owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS - Cash equivalents consist of money market funds. The Company
considers all highly liquid investments with original maturities of three
months or less to be cash equivalents.
INVESTMENTS - Investments consist of treasury notes and tax-exempt revenue and
municipal bonds. The investments are stated at cost plus accrued interest,
which approximates market.
The Financial Accounting Standards Board (FASB) has issued Statement 115,
"Accounting for Certain Investments in Debt and Equity Securities." In December
1995, the Company reclassified certain investments, with an amortized cost of
$5,915,152, to available for sale as permitted by the implementation guide for
SFAS 115. The financial statement impact was not material.
Maturities of debt securities classified as available for sale were as follows
at April 30, 1996:
<TABLE>
<S> <C>
Due after 1 year through 5 years $ 805,917
Due after 5 years through 10 years 1,000,000
Due after 10 years 3,347,252
-----------
$ 5,153,169
===========
</TABLE>
INVENTORIES - Inventories, which consist of merchandise and gasoline, are
stated at the lower of cost or market, which, as to merchandise in stores, is
determined by the retail method. Cost is determined using the last-in,
first-out (LIFO) method. Such inventory value is approximately $6,486,000 and
$5,487,000 below replacement cost as of April 30, 1996 and 1995, respectively.
DEPRECIATION AND AMORTIZATION - Depreciation of property and equipment and
amortization of capital lease assets are computed principally by the
straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Buildings 30-40 Years
Machinery and equipment 5-30 Years
Leasehold interest in property and equipment Lesser of term of lease or life of asset
Leasehold improvements Lesser of term of lease or life of asset
</TABLE>
EARNINGS PER SHARE - Primary earnings per share is determined by dividing net
income by the weighted average number of common shares and common equivalent
shares, consisting of options to purchase common shares, outstanding during the
year. Fully diluted earnings per share, prior to the 1994 conversion of the
Convertible Subordinated Debentures (the Debentures), further assumed that the
Debentures were converted to Common Stock at the beginning of the period and no
interest expense was paid on the Debentures. The weighted average common and
common equivalent shares outstanding on a primary basis were 26,238,152,
26,062,287 and 22,651,334
11
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
for 1996, 1995 and 1994, respectively, and on a fully diluted basis were
26,239,832, 26,125,087 and 26,017,828 for 1996, 1995 and 1994, respectively.
EXCISE TAXES - Excise taxes approximating $175,000,000, $151,000,000 and
$121,000,000 collected from customers on retail gasoline sales are included in
net sales for 1996, 1995 and 1994, respectively.
INCOME TAXES - Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
2. FAIR VALUE OF FINANCIAL INSTRUMENTS, NOTES PAYABLE TO BANKS AND LONG-TERM
DEBT
The fair value of the Company's financial instruments is summarized below.
CASH AND CASH EQUIVALENTS, INVESTMENTS, RECEIVABLES AND ACCOUNTS PAYABLE - The
carrying amount approximates fair value because of the short maturity of these
instruments or due to the recent purchase of the instruments at current rates
of interest.
NOTES PAYABLE TO BANKS - The carrying amount approximates fair value due to
variable interest rates on these notes.
LONG-TERM DEBT - The fair value of the Company's long-term debt, excluding
capital lease obligations, is estimated based on the current rates offered to
the Company for debt of the same or similar issues. The fair value of the
Company's long-term debt, excluding capital lease obligations, was
approximately $84,000,000 and $61,000,000, respectively, at April 30, 1996 and
1995.
<TABLE>
<CAPTION>
Long-term debt, at carrying value, consists of the following:
APRIL 30
----------------------------
1996 1995
----------- -----------
<S> <C> <C>
Capitalized lease obligations, discounted at rates of
7.3% to 15.3%, due in various monthly installments
through 2008 (Note 5) $ 7,699,760 $ 8,976,899
Mortgage notes payable due in various monthly installments
through 2004 with interest at 6.8% to 9.5% 14,509,971 15,641,164
Unsecured notes payable to banks due in various monthly and
quarterly installments through 1998 with variable rates of interest 11,468,750 14,593,750
7.70% Senior Notes due in 40 quarterly installments beginning in
March 1995 26,250,000 29,250,000
7.38% Senior Notes due in 21 semi-annual installments beginning
in December 2010 30,000,000 - - - - - -
----------- -----------
89,928,481 68,461,813
Less current maturities 8,679,217 8,498,891
----------- -----------
$81,249,264 $59,962,922
===================================================================================================================
</TABLE>
Mortgage notes payable includes an $18,900,000 Secured Promisory Note, Mortgage
and Security Agreement with a balance of $13,928,193 and $14,922,083 at April
30, 1996 and 1995, respectively. The mortgage note has a 15-year term, bears
interest at the rate of 9.42%, is payable in monthly installments and is
secured by property with a depreciated cost of approximately $15,200,000 at
April 30, 1996.
12
<PAGE> 6
Various debt agreements contain certain operating and financial covenants.
Aggregate maturities of long-term debt, including capitalized lease
obligations, during the four years commencing May 1, 1997 and thereafter are:
<TABLE>
<CAPTION>
YEAR ENDING APRIL 30
--------------------
<S> <C>
1998 $ 13,992,625
1999 5,620,183
2000 5,340,430
2001 5,491,224
Thereafter 50,804,802
------------
$ 81,249,264
============
</TABLE>
Interest expense is net of interest income of $754,799, $213,480 and $1,146,486
for the years ended April 30, 1996, 1995 and 1994, respectively. Interest
expense in the amount of $677,711, $559,500 and $418,600 was capitalized during
the years ended April 30, 1996, 1995 and 1994, respectively.
At April 30, 1996 and 1995, notes payable to banks consisted of $27,000,000 in
lines of credit with balances owed of $21,025,000 and $11,350,000,
respectively. Within the notes payable to banks, $14,500,000 on a $15,000,000
line of credit is due on demand and $6,525,000 on a $12,000,000 line of credit
is due December 31, 1996. The weighted average interest rate was 6.20% at April
30, 1996 and 6.87% at April 30, 1995.
3. PREFERRED AND COMMON STOCK
PREFERRED STOCK - The Company has 1,000,000 authorized shares of preferred
stock, none of which have been issued.
COMMON STOCK - The Company currently has 60,000,000 authorized shares of Common
Stock and is seeking shareholder approval to increase the number of authorized
shares to 120,000,000.
COMMON SHARE PURCHASE RIGHTS - On June 14, 1989, the Board of Directors adopted
a Shareholder Rights Plan (Rights Plan). In connection with the adoption of the
Rights Plan, the Board of Directors declared a dividend distribution of one
Common Share Purchase Right for each share of Common Stock held at the close of
business on June 14, 1989. The Rights become exercisable 10 days following a
public announcement that 20% or more of the Company's Common Stock has been
acquired or such an intent to acquire has become apparent. The Rights will
expire on the earlier of June 14, 1999 or redemption by the Company. Certain
terms of the Rights are subject to adjustment to prevent dilution. Further
description and terms of the Rights are set forth in the Rights Agreement
between the Company and UMB Bank, n.a. as Rights Agent.
STOCK OPTION PLAN - Under an incentive stock option plan, options can be
granted to certain officers and key employees to purchase an aggregate of
2,280,000 shares of Common Stock at option prices not less than the fair market
value (110% of fair market value as to holders of 10% or more of the Company's
stock) at the date the options are granted. Options for 744,832 shares were
available for grant at April 30, 1996 and options for 316,500 shares (which
expire between 1997-2005) were outstanding as follows:
<TABLE>
<CAPTION>
Price Range Aggregate
Shares Per Share Exercise Price
------- ------------ ---------------
<S> <C> <C> <C>
Outstanding and exercisable at April 30, 1993 283,000 $ 4.81-9.00 $ 2,174,738
Granted in fiscal 1994 220,000 10.25 2,255,000
Exercised in fiscal 1994 61,000 4.81-7.69 460,313
Cancelled in fiscal 1994 20,000 4.81-10.25 118,925
------- --------------
Outstanding and exercisable at April 30, 1994 422,000 4.81-10.25 3,850,500
Exercised in fiscal 1995 46,700 4.81-10.25 464,619
Cancelled in fiscal 1995 4,000 10.25 41,000
------- --------------
Outstanding and exercisable at April 30, 1995 371,300 4.81-10.25 3,344,881
Granted in fiscal 1996 202,000 11.47-21.38 3,995,130
Exercised in fiscal 1996 254,800 4.81-10.25 2,213,850
Cancelled in fiscal 1996 2,000 10.25 20,500
------- --------------
Outstanding and exercisable at April 30, 1996 316,500 $ 4.81-21.38 $ 5,105,661
======= ==============
</TABLE>
13
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
4. INCOME TAXES
Income tax expense attributable to income from operations is comprised of the
following components:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
-----------------------------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current tax expense: Federal $ 6,843,000 $ 10,225,000 $ 7,060,000
State 1,389,000 2,250,000 1,319,000
------------- ---------------- ---------------
8,232,000 12,475,000 8,379,000
Deferred tax expense 8,000,000 2,000,000 2,100,000
------------- ---------------- ---------------
Total income tax provision $ 16,232,000 $ 14,475,000 $ 10,479,000
</TABLE>
================================================================================
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
APRIL 30
--------------------------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Deferred tax assets:
Accrued liabilities $ 3,125,000 $ 5,604,000 $ 2,317,000
Alternative minimum tax credit carry forwards - - - - - - 140,000 1,500,000
Other 386,000 594,000 383,000
-------------- --------------- --------------
Total gross deferred tax assets 3,511,000 6,338,000 4,200,000
-------------- --------------- --------------
Deferred tax liabilities:
Excess of tax over book depreciation (33,009,000) (27,909,000) (23,771,000)
Other (168,000) (95,000) (95,000)
-------------- --------------- --------------
Total gross deferred liabilities (33,177,000) (28,004,000) (23,866,000)
-------------- --------------- --------------
Net deferred tax liability $ (29,666,000) $ (21,666,000) $ (19,666,000)
</TABLE>
The current deferred tax asset relates to accrued liabilities and is included
with prepaid expenses. Also included in prepaid expenses are recoverable taxes
of approximately $4,700,000 at April 30, 1996. Management believes that future
operations will generate sufficient taxable income to realize the deferred tax
assets.
================================================================================
Total reported tax expense applicable to the Company's operations varies from
the tax that would have resulted by applying the statutory U.S. federal income
tax rates to income before income taxes for the following reasons:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
----------------------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income taxes at the statutory rates 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit 3.7 4.6 4.4
Other (1.0) (.9) (.7)
---- ---- ----
37.7% 38.7% 38.7%
</TABLE>
================================================================================
14
<PAGE> 8
5. LEASES
The Company leases certain property and equipment used in its operations.
Generally, the leases are for primary terms of from 5 to 20 years with options
either to renew for additional periods or to purchase the premises and
generally call for payment of property taxes, insurance and maintenance by the
lessee.
The following is an analysis of the leased property under capital leases by
major classes:
<TABLE>
<CAPTION>
ASSET BALANCES AT APRIL 30
--------------------------------------
1996 1995
---- ----
<S> <C> <C>
Real estate $ 8,232,295 $ 8,680,845
Equipment 4,579,841 4,772,077
------------- --------------
12,812,136 13,452,922
Less accumulated amortization 6,559,445 6,029,260
------------- --------------
$ 6,252,691 $ 7,423,662
</TABLE>
================================================================================
Future minimum payments under the capital leases and noncancellable operating
leases with initial or remaining terms of one year or more consisted of the
following at April 30, 1996:
<TABLE>
<CAPTION>
YEAR ENDING APRIL 30 CAPITAL LEASES OPERATING LEASES
-------------------- -------------- ----------------
<S> <C> <C>
1997 $ 1,990,769 $ 407,000
1998 1,902,305 354,000
1999 1,624,416 279,000
2000 1,123,358 251,000
2001 1,040,558 238,000
Thereafter 2,673,251 1,067,000
------------- --------------
Total minimum lease payments 10,354,657 $ 2,596,000
Less amount representing interest 2,654,897 ==============
-------------
Present value of net minimum lease payments $ 7,699,760
</TABLE>
================================================================================
The total rent expense under operating leases was $788,000 in 1996, $820,000 in
1995 and $898,000 in 1994.
6. BENEFIT PLANS
EMPLOYEE STOCK OWNERSHIP PLAN - The Company has an Employees' Stock Ownership
Plan and Trust (Plan) which covers all employees who meet minimum age and
service requirements. Contributions to the Plan can be made by the Company in
either cash or shares of Common Stock. The discretionary contribution is
allocated to participants using a formula based on compensation. There was no
Plan expense in the year ended April 30, 1996 and $600,000 and $550,000 of Plan
expense for the years ended April 30, 1995 and 1994, respectively.
On April 30, 1996, the Company had 3,480 full-time employees and 4,863
part-time employees, of which approximately 3,200 were participants in the
Plan. As of that same date, the Trustee under the Plan held 2,151,179 shares of
Common Stock in trust for participants in the Plan and may distribute such
shares to eligible participants upon death, disability, retirement or
termination of employment. Shares held by the Plan are treated as outstanding
in the computation of earnings per share.
401(K) PLAN- The Company has a defined contribution 401(k) plan which covers
all employees who meet minimum age and service requirements. Employees may
make voluntary contributions. The Company contributions consist of matching
and discretionary amounts. The Company contributions are allocated based upon
employee contributions and compensation. Expense for the 401(k) plan was
approximately $1,093,000, $514,000 and $406,000 for the years ended April 30,
1996, 1995 and 1994, respectively.
15
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
7. COMMITMENTS
In March 1992 the Company entered into five-year employment agreements with
each of two officer-shareholders. The agreements provide that each
officer-shareholder will receive compensation exclusive of bonuses at the rate
of $250,000 per year or such amount as the Company and the officer mutually
shall agree upon ($350,000 in fiscal 1996). These agreements also provide for
certain payments in the case of death or disability of the officer-shareholder.
Each agreement further provides for the voluntary retirement of the officer at
age 65, or upon reaching 59 years of age and having completed 25 years of
employment with the Company, with an annual retirement benefit equal to 50
percent of his most recent salary. Certain provisions of the employment
agreements provide for the Company to pay upon termination of the
officer-shareholder's employment other than for cause, disability or death, two
to three times the sum of the annual salary and bonus, plus the present value
of 50 percent of his most recent annual salary, if eligible for retirement
benefits, until death, payable in a lump sum upon termination. The Company is
accruing for the deferred compensation over the expected term of employment.
8. CONTINGENCIES
ENVIRONMENTAL COMPLIANCE-The United States Environmental Protection Agency and
several states have adopted laws and regulations relating to underground
storage tanks used for petroleum products. Several states in which the Company
does business have trust fund programs with provisions for sharing or
reimbursing corrective action or remediation costs. Such programs, other than
the state of Iowa, generally are in the early stages of operation and the
extent of the available coverage or reimbursement under such programs for costs
incurred by the Company is not fully known at this time.
Management currently estimates that aggregate capital expenditures for
electronic monitoring, cathodic protection and overfill/spill protection will
approximate $1,000,000 in fiscal 1997 through December 23, 1998, to comply with
existing regulations. The Company has accrued a liability at April 30, 1996
and 1995, respectively, of approximately $2,600,000 and $3,300,000 within other
accrued expenses for estimated expenses related to corrective action or
remediation efforts, including relevant legal and consulting costs. Management
believes the Company has no material joint and several environmental liability
with other parties. Additional regulations, or amendments to the existing
regulations, could result in future revisions to such estimated expenditures.
LEGAL MATTERS-The Company is a defendant in several lawsuits arising in the
normal course of business. In the opinion of management, the outcome of all
such matters is not expected to have a material effect on the financial
position of the Company.
OTHER-At April 30, 1996, the Company is partially self-insured for workman's
compensation claims, in all states except Iowa, Missouri and Kansas. The
Company is also partially self-insured for general liability and auto liability
under an agreement which provides for annual stop-loss limits equal to or
exceeding approximately $1,320,000. Letters of credit approximating $1,400,000
were issued and outstanding at April 30, 1996, on the insurance company's
behalf to facilitate this agreement. The Company is self-insured for Iowa,
Missouri and Kansas workman's compensation claims at April 30, 1996.
Approximately $1,800,000 of investments are in escrow as required by these
states. Additionally, the Company is self-insured for its portion of employee
medical expenses. At April 30, 1996 and 1995, the Company has accrued
$4,500,000 within other accrued expenses for estimated claims relating to self
insurance.
16
<PAGE> 10
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
CASEY'S GENERAL STORES, INC.:
We have audited the accompanying consolidated balance sheets of Casey's General
Stores, Inc. and subsidiaries as of April 30, 1996 and 1995, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the years in the three-year period ended April 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Casey's General Stores, Inc. and subsidiaries as of April 30, 1996 and 1995,
and the results of its operations and its cash flows for each of the years in
the three-year period ended April 30, 1996 in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
DES MOINES, IOWA
JUNE 18, 1996
17
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Casey's derives its revenue from retail sales of food (including freshly
prepared foods such as pizza, donuts and sandwiches), beverages and non-food
products such as health and beauty aids, tobacco products, automotive products
and gasoline by Company Stores and from wholesale sales of certain grocery and
general merchandise items and gasoline to Franchised Stores. The Company also
generates revenues from continuing monthly royalties based on sales by
Franchised Stores, sign and facade rental fees and the provision of certain
maintenance, transportation and construction services to the Company's
franchisees. A typical store is generally not profitable for its first year of
operation due to start-up costs and will usually attain representative levels
of sales and profits during its third year of operation.
The following tables set forth, for the periods indicated, the Company's net
sales and gross profits according to its major revenue categories, and average
sales and earnings information for Company and Franchised Stores:
COMPANY NET SALES AND GROSS PROFITS
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30
---------------------------------------------------------
1996 1995 1994
-------------- ------------- ------------
<S> <C> <C> <C>
NET SALES (1):
RETAIL SALES:
Grocery and general merchandise $ 346,426,722 $ 316,444,290 $ 281,235,753
Gasoline 531,414,819 455,310,780 377,807,750
------------- ------------- ------------
877,841,541 771,755,070 659,043,503
============== ============= ============
WHOLESALE SALES:
Grocery and general merchandise 40,605,430 39,342,692 37,678,157
Gasoline 25,625,213 25,617,280 24,530,239
------------- ------------- ------------
66,230,643 64,959,972 62,208,396
============== ============= ============
GROSS PROFITS (2):
RETAIL SALES:
Grocery and general merchandise 139,799,317 128,858,300 109,812,153
Gasoline 56,446,450 42,597,553 38,045,217
------------- ------------- ------------
196,245,767 171,455,853 147,857,370
============== ============= ============
WHOLESALE SALES:
Grocery and general merchandise 1,581,173 1,621,928 1,282,100
Gasoline 844,339 843,679 467,224
------------- ------------- ------------
2,425,512 2,465,607 1,749,324
============== ============= ============
</TABLE>
18
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - CONTINUED
INDIVIDUAL STORE INFORMATION (3)
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30
--------------------------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
COMPANY STORES:
Average retail sales $ 1,143,340 $ 1,080,553 $ 1,006,420
Average retail sales of grocery and
general merchandise 454,422 448,060 433,256
Average gross profit on grocery and
general merchandise 174,387 169,216 160,476
Average retail sales of gasoline 688,918 632,493 573,165
Average number of gallons sold 637,904 596,684 570,253
Average gross profit on gasoline (4) 73,920 68,093 61,641
Average operating income (5) 83,763 80,556 73,553
FRANCHISED STORES:
Average franchise revenue (6) 29,454 28,487 27,215
</TABLE>
(1) Net sales excludes franchise revenue and charges to franchisees for certain
maintenance, transportation and construction services provided by the Company.
(2) Gross profits represent net sales less costs of goods sold.
(3) Includes only those stores that had been in operation for at least one full
year prior to April 30 of the fiscal year indicated.
(4) Retail gasoline profit margins have a substantial impact on the Company's
net income. Profit margins on gasoline sales can be adversely affected by
factors beyond the control of the Company, including over-supply in the retail
gasoline market, uncertainty or volatility in the wholesale gasoline market and
price competition from other gasoline marketers. Any substantial decrease in
profit margins on retail gasoline sales or the number of gallons sold could
have a material adverse effect on the Company's earnings.
(5) Represents retail sales less cost of goods sold, including cost of
merchandise, financing costs and operating expenses attributable to a
particular store, but excluding federal and state income taxes, operating
expenses of the Company not attributable to a particular store, and payments by
the Company to its benefit plans.
(6) Includes a royalty fee equal to 3% of gross receipts derived from store
sales of non-gasoline items, a royalty fee of $.018 per gallon on gasoline
sales and sign and facade rental fees.
19
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - CONTINUED
FISCAL 1996 COMPARED TO FISCAL 1995
Net sales for fiscal 1996 increased by $105,921,000 (12.5%) over fiscal 1995.
Retail gasoline sales increased by $76,104,000 (16.7%) as the number of gallons
sold increased by 62,725,000 (14.6%). During fiscal 1996, retail sales of
grocery and general merchandise increased by $29,982,000 (9.5%) due to the net
addition of 60 new Company Stores and a greater number of stores in operation
for at least three years.
Cost of goods sold as a percentage of net sales was 78.4% for fiscal 1996
compared to 78.5% for the prior year. This result occurred because the gross
profit margin on retail gasoline sales increased.
Operating expenses as a percentage of net sales were 14.5% for both fiscal 1996
and fiscal 1995.
Average operating income per Company Store increased by $3,207 (4.0%) primarily
as the result of increases in the average sales of gasoline and grocery and
general merchandise.
Net income increased by $3,886,000 (17.0%). The increase in net income was
attributable primarily to increases in retail sales and an increased number of
stores in operation at least three years.
The Financial Accounting Standards Board (FASB) has issued Statement 115,
"Accounting for Certain Investments in Debt and Equity Securities." In December
1995, the Company reclassified certain investments, with an amortized cost of
$5,915,152, to available for sale as permitted by the implementation guide for
SFAS 115. The financial statement impact was not material.
The FASB has also issued Statement 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Statement 121,
effective for fiscal years beginning after December 15, 1995, requires that
long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company has not yet determined the impact of Statement 121,
but it is not expected to be material to its financial statements. The Company
expects to adopt the Statement on a prospective basis in the first quarter of
fiscal 1996.
The FASB has also issued Statement 123, "Accounting for Stock-Based
Compensation." Statement 123, effective for fiscal years beginning after
December 15, 1995, defines a fair value based method of accounting for stock
options or similar equity instruments. The Company has elected under the
statement to continue the present accounting method and will make the pro forma
disclosures required. The Company has not yet completed its analysis of the
effect of this statement on pro forma disclosures which will be included in the
April 30, 1997 financial statements.
FISCAL 1995 COMPARED TO FISCAL 1994
Net sales for fiscal 1995 increased by $117,637,000 (16.1%) over fiscal 1994.
Retail gasoline sales increased by $77,503,000 (20.5%) as the number of gallons
sold increased by 53,667,000 (14.3%). During fiscal 1995, retail sales of
grocery and general merchandise increased by $35,209,000 (12.5%) due to the net
addition of 54 new Company Stores and a greater number of stores in operation
for at least three years.
Cost of goods sold as a percentage of net sales was 78.5% in both fiscal 1995
and fiscal 1994.
Operating expenses as a percentage of net sales were 14.5% for fiscal 1995
compared to 15.1% for the prior year. The decrease in operating expenses as a
percentage of net sales was caused primarily by increased sales and the
increased number of Company Stores in operation.
Average operating income per Company Store increased by $7,003 (9.5%),
primarily as the result of increases in the average sales of gasoline and
grocery and general merchandise.
Net income increased by $6,316,744 (38.1%). The increase in net income was
attributable primarily to increases in retail sales and an increased number of
stores in operation at least three years.
20
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - CONTINUED
LIQUIDITY AND CAPITAL RESOURCES
Due to the nature of the Company's business, most sales are for cash and cash
provided by operations is the Company's primary source of liquidity. The
Company finances its inventory purchases primarily from normal trade credit
aided by the relatively rapid turnover of inventory. This turnover allows the
Company to conduct its operations without large amounts of cash and working
capital. As of April 30, 1996, the Company's ratio of current assets to current
liabilities was .84 to 1. Management believes that the Company's current
$27,000,000 bank lines of credit (aggregate amount), together with cash flow
from operations, will be sufficient to satisfy the working capital needs of its
business.
Net cash provided by operations decreased $1,552,480 (3.1%) during the year
ended April 30, 1996, primarily as a result of increased levels of inventories
and a decrease in accounts payable. Cash flows used in investing increased
during fiscal 1996, primarily because of the increased capital expenditures.
During fiscal 1996, the Company expended approximately $60,000,000 for property
and equipment, primarily for the construction and remodeling of Company Stores.
The Company anticipates expending approximately $65,000,000 in fiscal 1997 for
construction, acquisition and remodeling of Company Stores, primarily from
funds generated by operations, existing cash and short-term investments.
As of April 30, 1996, the Company had long-term debt of $81,249,000, consisting
of $23,250,000 of 7.70% Senior Notes, $30,000,000 of 7.38% Senior Notes,
$13,263,000 of mortgage notes payable, $8,344,000 of unsecured notes payable
and $6,392,000 of capital lease obligations.
Interest on the 7.70% Senior Notes is payable on the 15th day of each month.
Principal of the 7.70% Senior Notes matures in forty quarterly installments
beginning March 15, 1995. The Company may prepay the 7.70% Senior Notes in
whole or in part at any time in an amount of not less than $1,000,000 or
integral multiples of $100,000 in excess thereof at a redemption price
calculated in accordance with the Note Agreement dated as of February 1, 1993
between the Company and the purchasers of the 7.70% Senior Notes.
Interest on the 7.38% Senior Notes is payable on the 28th day of each June and
December. Principal of the 7.38% Senior Notes matures in twenty-one
semi-annual installments beginning December 28, 2010. The Company may prepay
the 7.38% Senior Notes in whole or in part at any time in an amount of not less
than $1,000,000 or integral multiples of $100,000 in excess thereof at a
redemption price calculated in accordance with the Note Agreement dated as of
December 1, 1995 between the Company and the purchaser of the 7.38% Senior
Notes.
To date, the Company has funded capital expenditures primarily from the
proceeds of the sale of Common Stock, issuance of the Debentures and the Senior
Notes, a mortgage note and through funds generated from operations. Future
capital needs required to finance operations, improvements and the anticipated
growth in the number of Company Stores are expected to be met from cash
generated by operations, existing cash, investments and additional long-term
debt or other securities as circumstances may dictate, and are not expected to
adversely affect liquidity.
21
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - CONTINUED
LIQUIDITY AND CAPITAL RESOURCES - CONTINUED
ENVIRONMENTAL COMPLIANCE - The United States Environmental Protection Agency
and several states, including Iowa, have established requirements for owners
and operators of underground gasoline storage tanks (USTs) with regard to (i)
maintenance of leak detection, corrosion protection and overfill/spill
protection systems; (ii) upgrade of existing tanks; (iii) actions required in
the event of a detected leak; (iv) prevention of leakage through tank closings;
and (v) required gasoline inventory recordkeeping. Since 1984, new Company
Stores have been equipped with non-corroding fiberglass USTs, including many
with double-wall construction, over-fill protection and electronic tank
monitoring, and the Company has an active inspection and renovation program
with respect to its older USTs. The Company currently has 1,683 USTs of which
1,311 are fiberglass and 372 are steel. Management of the Company believes
that its existing gasoline procedures and planned capital expenditures will
continue to keep the Company in substantial compliance with all current federal
and state UST regulations.
Several of the states in which the Company does business have trust fund
programs with provisions for sharing or reimbursing corrective action or
remediation costs incurred by UST owners, including the Company. These
programs, other than the state of Iowa, generally are in the early stages of
operation and the extent of available coverage or reimbursement under such
programs for costs incurred by the Company is not fully known at this time. In
each of the years ended April 30, 1996 and 1995, the Company spent
approximately $718,000 and $2,137,000, respectively, for assessments and
remediation. Substantially all of these expenditures have been submitted for
reimbursement from state-sponsored trust fund programs and as of June 30, 1996,
approximately $3,900,000 has been received from such programs. The Company has
accrued a liability at April 30, 1996, of approximately $2,600,000 for
estimated expenses related to anticipated corrective actions or remediation
efforts, including relevant legal and consulting costs. Management believes the
Company has no material joint and several environmental liability with other
parties.
Management of the Company currently estimates that aggregate capital
expenditures for electronic monitoring, cathodic protection and overfill/spill
protection will approximate $1,000,000 in fiscal 1997 through December 23,
1998, in order to comply with the existing UST regulations. Additional
regulations, or amendments to the existing UST regulations, could result in
future revisions to such estimated expenditures.
SEASONALITY OF SALES - Sales at Casey's General Stores historically have been
strongest during the Company's first and second fiscal quarters and have become
progressively weaker during its third and fourth quarters. In the warmer
months of the year (which comprise the Company's first two fiscal quarters),
customers tend to purchase greater quantities of gasoline and certain
convenience items such as beer, soft drinks and ice. Difficult weather
conditions in any quarter, however, may affect sales of Company stores in
specific regions and have an adverse impact on net income for that period.
INFLATION - The Company has generally been able to pass along inflationary
increases in its costs through increased sales prices of products sold, except
in those instances where doing so would have had a material adverse impact on
the Company's ability to compete. Accordingly, management believes that
inflation has not had a material impact upon the operating results of the
Company.
MINIMUM WAGE LEGISLATION - Recent congressional action to increase the federal
minimum wage may have a significant impact on the Company's operating results,
particularly in the near term, to the extent the forthcoming increase in labor
expenses cannot be passed along to customers through price increases. Although
the Company has in the past been able to, and will continue to attempt to, pass
along increases in operating costs through price increases, there can be no
assurance that all of the expected increases in labor costs can be reflected in
prices, or that price increases will be absorbed by customers without
diminishing customer spending at Company stores.
22
<PAGE> 16
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
STATEMENT OF INCOME DATA
(amounts in thousands, except per share data) YEARS ENDED APRIL 30
-------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $ 954,764 $ 848,843 $ 731,206 $ 673,697 $ 606,585
Franchise revenue 5,384 5,269 5,121 4,898 4,991
----------- ---------- ----------- --------- ---------
960,148 854,112 736,327 678,595 611,576
Cost of goods sold 748,183 665,925 574,144 533,535 480,357
Operating expenses 138,581 123,004 110,083 102,379 94,209
Depreciation and amortization 24,655 22,237 18,623 15,943 13,704
Interest, net 5,730 5,590 6,434 5,249 4,808
----------- ---------- ----------- --------- ---------
Income before income taxes 42,999 37,356 27,043 21,489 18,498
Provision for income taxes 16,232 14,475 10,479 8,166 6,984
----------- ---------- ----------- --------- ---------
Net income $ 26,767 $ 22,881 $ 16,564 $ 13,323 $ 11,514
========================================================================================================================
*Per share - primary:
Net income $ 1.02 $ .88 $ .73 $ .60 $ .52
========================================================================================================================
*Weighted average number of common
and common equivalent shares
outstanding - primary 26,238 26,062 22,651 22,193 22,096
*Dividends paid per common share $ .095 $ .08 $ .07125 $ .06 .0575
</TABLE>
*All share and per share data have been restated to reflect a two-for-one stock
split effective February 16, 1994.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCE SHEET DATA
(amounts in thousands) AS OF APRIL 30
-------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Current assets $ 70,011 $ 43,191 $ 41,369 $ 46,513 $ 33,011
Total assets 404,835 345,159 318,238 280,777 219,476
Current liabilities 82,927 76,971 75,453 55,456 46,593
Long-term debt 81,249 59,963 61,415 98,956 61,433
Shareholders' equity 206,175 179,672 158,410 107,976 95,854
</TABLE>
23
<PAGE> 1
Exhibit 21
Subsidiaries of Casey's General Stores, Inc.
1. Casey's Marketing Company, an Iowa corporation.
2. Casey's Services Company, an Iowa corporation.
Both of such subsidiaries are wholly-owned by Casey's General Stores,
Inc. and do business under the above names. Stores operated by Casey's
Marketing Company do business under the name "Casey's General Store."
<PAGE> 1
Exhibit 24.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Casey's General Stores, Inc.:
We consent to incorporation by reference in the Registration
Statements (No. 33-19179 and 33-42907) on Form S-8 of Casey's
General Stores, Inc. of our report dated June 18, 1996, relating
to the consolidated balance sheets of Casey's General Stores,
Inc. and subsidiaries as of April 30, 1996 and 1995, and the
related consolidated statements of income, shareholders' equity
and cash flows for each of the years in the three-year period
ended April 30, 1996, which report appears in or is incorporated
by reference in the April 30, 1996 Annual Report on Form 10-K of
Casey's General Stores, Inc.
KPMG Peat Marwick LLP
Des Moines, Iowa
July 29, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED APRIL 30, 1996 OF CASEY'S GENERAL
STORES, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> APR-30-1996
<CASH> 12,673,855
<SECURITIES> 13,953,926<F1>
<RECEIVABLES> 2,679,967
<ALLOWANCES> 0
<INVENTORY> 32,437,323
<CURRENT-ASSETS> 70,011,379
<PP&E> 460,923,281
<DEPRECIATION> 132,609,514
<TOTAL-ASSETS> 404,834,958
<CURRENT-LIABILITIES> 82,926,728
<BONDS> 81,249,264<F2>
0
0
<COMMON> 63,556,842
<OTHER-SE> 142,617,836<F3>
<TOTAL-LIABILITY-AND-EQUITY> 404,834,958
<SALES> 954,764,056
<TOTAL-REVENUES> 960,148,480
<CGS> 748,183,597
<TOTAL-COSTS> 748,183,597
<OTHER-EXPENSES> 163,236,038
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,729,760
<INCOME-PRETAX> 42,999,085
<INCOME-TAX> 16,232,000
<INCOME-CONTINUING> 26,767,085
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,767,085
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 1.02
<FN>
<F1>short-term investments
<F2>long-term debt, net of current maturities
<F3>retained earnings
</FN>
</TABLE>