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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, 1997
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)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X ]
At the close of business on July 18, 1997, the Company had 26,257,206
shares of Common Stock, no par value, issued and outstanding. The aggregate
market value of the 21,444,565 shares of Common Stock held by non-affiliates of
the Company on that date was $485,183,283 based on a last reported sales price
of $22-5/8 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, 1997 (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 19, 1997 (Items 10, 11, 12 and 13 of Part III).
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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, 1997, there were
a total of 1,042 Casey's General Stores in operation, of which 878 were
operated by the Company ("Company Stores") and 164 stores were operated by
franchisees ("Franchised Stores"). There were 70 Company Stores and 1
Franchised Store newly opened in fiscal 1997. The Company operates a central
warehouse, the Casey's Distribution Center, adjacent to its Corporate
Headquarters facility in Ankeny, Iowa through which it supplies grocery and
general merchandise items to Company and Franchised Stores.
Approximately 71% of all Casey's General Stores are located in areas with
populations of fewer than 5,000 persons, while approximately 7% 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.
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
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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
92% 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, 1997:
<TABLE>
<CAPTION>
COMPANY FRANCHISED
STATE STORES STORES TOTAL
--------------------------- ------ ------ ------
<S> <C> <C> <C>
Iowa . . . . . . . . . 233 79 312
Illinois . . . . . . . 234 25 259
Indiana . . . . . . . 12 0 12
Kansas . . . . . . . . 83 3 86
Minnesota. . . . . . . 47 15 62
Missouri . . . . . . . 196 33 229
Nebraska . . . . . . . 46 7 53
South Dakota . . . . 20 0 20
Wisconsin . . . . . . 7 2 9
Total . . . . 878(84%) 164(16%) 1,042(100%)
</TABLE>
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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>
1993
Company . . . . . 36 10 639 (1)
Franchised . . . . 1 (10) 187 (1)
-- ---
Total . . . . . . 37 826
1994
Company . . . . . 56 1 687 (2)
Franchised . . . . 4 (1) 189 (2)
-- ---
Total . . . . . . 60 876
1995
Company . . . . . 60 0 741 (3)
Franchised . . . . 3 (0) 186 (3)
-- ---
Total . . . . . . 63 927
1996
Company . . . . . 65 1 801 (4)
Franchised . . . . 1 (1) 182 (4)
-- ---
Total . . . . . . 66 983
1997
Company . . . . . 70 8 878 (5)
Franchised . . . . 1 (8) 164 (5)
-- ---
Total . . . . . . 71 1,042
</TABLE>
_______________________
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(1) Four Company Stores and six Franchised Stores were closed in 1993.
(2) Nine Company Stores and one Franchised Store were closed in 1994.
(3) Six Company Stores and six Franchised Stores were closed in 1995.
(4) Six Company Stores and four Franchised Stores were closed in 1996.
(5) One Company Store and eleven Franchised Stores were closed in 1997.
Five Company Stores were opened in May and June 1997 and 31 Company Stores
were under construction at June 30, 1997. On June 30, 1997, the Company had
purchased or had the right to purchase 54 additional store sites. All the
stores under construction or planned for construction on such sites will be
Company Stores. Management anticipates opening approximately 75 new Company
Stores during fiscal 1998.
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 1995, 1996 and 1997, the Company
converted 0, 1 and 8 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 up
to 1,500 stores located within a 500-mile radius of the Casey's Distribution
Center.
In its expansion, the Company intends to follow its traditional store site
selection criteria and to locate most new stores in small towns. 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.
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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, Missouri and Wisconsin. 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 approximately 1,800 food and
non-food items. The products offered are those normally found in a
supermarket, except that the stores do not sell produce or fresh meats, and
selection is generally limited to one or two well-known brands of each item
stocked. Most staple foodstuffs carried are of nationally advertised brands.
Stores sell regional brands of dairy and bakery products, and approximately 91%
of the stores offer beer. The non-food items carried include tobacco products,
health and beauty aids, school supplies, housewares, pet supplies, photo
supplies, ammunition and automotive products.
All of the Casey's General Stores offer gasoline or gasohol for sale on a
self-service basis. The gasoline and gasohol offered by the stores generally
are sold under the Casey's name, although some Franchised Stores sell gasoline
under a major oil company brand name.
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It is management's policy to experiment with additions to the Company's
product line, especially products with higher gross profit margins. As a
result of this policy, the Company has added various prepared food items to its
product line over the years. In 1980, the Company initiated the installation
of "snack centers" which now are in all Company Stores. The snack centers sell
sandwiches, fountain drinks, and other items that have gross profit margins
higher than those of general staple goods. The Company also sells donuts,
prepared on store premises, in approximately 99% of the stores as of April 30,
1997, as well as cookies, brownies and muffins, and is installing donut-making
facilities in all newly constructed stores.
The Company began marketing made-from-scratch pizza in 1984, expanding its
availability to 966 (93%) stores as of April 30, 1997. 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, hot and mild sausage, tenderloin and chicken breast sandwiches,
pizza bread, garlic bread, breakfast croissants, quarter-pound hamburgers and
cheeseburgers.
The pizza and other prepared food products are made on store premises with
ingredients delivered from the Casey's Distribution Center. Pizza generally is
available in three sizes with ten different toppings and is sold for take-out
between the hours of 4:00 P.M. and 11:00 P.M. In addition, at selected store
locations a luncheon menu consisting of pizza-by-the-slice, sandwiches, pizza
bread, and garlic bread is available.
An important part of the Company's marketing strategy is to increase sales
volume by pricing competitively on price-sensitive items. On less
price-sensitive items, it is the Company's policy to maintain, or in the case
of Franchised Stores to recommend, a Company-wide pricing structure in each
store that is generally comparable to that of other convenience, gasoline or
grocery stores located in the area and competing for the same customers.
Management attributes the Company's ability to offer competitive prices to
a number of factors, including the Company's central distribution system, its
purchasing practices which avoid dependence upon jobbers and vendors by relying
on a few large wholesale companies and its success in minimizing land,
construction and equipment costs.
Management's decision to add snack center items, freshly prepared donuts
and pizza to the Company's product selection reflects its strategy to promote
high profit margin products that are compatible with convenience store
operations. Although retail sales of non-gasoline items during the last three
fiscal years have generated approximately 39% of the Company's retail sales,
such sales resulted in approximately
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73% 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, 1997, the aggregate investment in the
land, building, equipment and initial inventory for a typical Company Store
averaged approximately $720,000. The standard building designed by the Company
is a pre-engineered steel frame building mounted on a concrete slab. The
current store design measures 40 feet by 68 feet, with approximately 1,300
square feet devoted to sales area, 500 square feet to kitchen space, 500 square
feet to storage and two large public restrooms. Store lots have sufficient
frontage and depth to permit adequate drive-in parking facilities on one or
more sides of each store. Each store typically includes two to four islands of
gasoline dispensers and storage tanks having a capacity of 20,000 to 30,000
gallons of gasoline. The merchandising display in each store follows a
standard layout designed to encourage a flow of customer traffic through all
sections of the store. All stores are air conditioned and have modern
refrigeration facilities. The store locations feature the Company's bright red
and yellow pylon sign and facade, both of which display the name and service
mark of the Company.
All Casey's General Stores remain open at least 16 hours per day, seven
days a week. Most store locations are open from 6:00 a.m. to 11:00 p.m.,
although hours of operation may be adjusted on a store-by-store basis to
accommodate customer traffic patterns. The Company requires that all stores
maintain a bright, clean store interior and provide prompt check-out service.
It is the Company's policy not to permit the installation of electronic games
or sale of adult magazines on store premises.
STORE LOCATIONS
The Company traditionally has located its stores in small towns not served
by national-chain convenience stores. Approximately 71% of all stores operate
in areas with populations of fewer than 5,000 persons, while approximately 7%
of all stores are located in communities with populations exceeding 20,000
persons. Management believes that a Casey's General Store provides a service
not otherwise available in small towns, and that a convenience store in an area
with limited population can be profitable if it stresses sales volume and
competitive prices. The Company's store site selection criteria emphasize the
population of the immediate area and daily highway traffic volume. Management
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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 58% of Casey's net sales for the year ended April 30, 1997 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,
1997:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Number of
Gallons Sold 429,629,280 492,353,905 542,609,567
Total Retail
Gasoline Sales $455,310,780 $531,414,819 $643,005,485
Percentage of 53.6% 55.7% 58.0%
Net Sales
Gross Profit 9.4% 10.7% 8.6%
Percentage
Average Retail
Price per Gallon $1.06 $1.08 $1.19
Average Gross Profit
Margin per Gallon 9.91 cents 11.46 cents 10.17 cents
Average Number of
Gallons Sold per
Company Store * 596,684 637,904 643,684
</TABLE>
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_____________________________
* 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, 1997.
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
39 Company-
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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, 1997, the percentage of Company Stores
increased from 44% to 84%. From inception to April 30, 1997, the Company had
converted 144 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
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with respect to certain supplies and items provided in connection with
the opening of each store, each franchisee has unlimited authority to purchase
supplies and inventory from any supplier, provided the products meet the
Company's quality standards. 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, 1997, the Company had 3,728 full-time employees and 5,813
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 3 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 eight supervisors. Each of the
124 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-one years, one has been employed for more than
twenty-five years and one has been employed for more than twenty-nine years.
In addition to its four executive officers, the Company currently has Vice
Presidents of Store Operations, Property Management, Transportation, and
Marketing.
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The Company also has 40 other employees with managerial responsibilities
in the areas of store operations, gasoline marketing, real estate development,
construction, equipment maintenance, merchandising, advertising, Distribution
Center operations, payroll, accounting and data processing. The Company
believes that such employees are capable of carrying out their responsibilities
without substantial supervision by the executive officers.
COMPETITION
The Company's business is highly competitive. Food, including prepared
foods, and non-food items similar or identical to those sold by the Company are
generally available from various competitors in the communities served by
Casey's General Stores. Management believes that its stores located in small
towns compete principally with local convenience stores, grocery stores and
similar retail outlets and, to a lesser extent, with prepared food outlets or
restaurants and expanded gasoline stations offering a more limited selection of
grocery and food items for sale. Stores located in more heavily populated
communities may compete with local and national grocery and drug store chains,
expanded gasoline stations, supermarkets, discount food stores and traditional
convenience stores. Convenience store chains competing in the larger towns
served by Casey's General Stores include 7-Eleven, Kwik Shops, and regional
chains. Some of the Company's competitors have greater financial and other
resources than the Company.
Gasoline sales, in particular, are intensely competitive. The Company
competes with both independent and national brand gasoline stations, some of
which may have access to more favorable arrangements for gasoline supply than
do the Company or the firms that supply its stores. Management believes that
the most direct competition for gasoline sales comes from other self-service
installations in the vicinity of individual store locations, some of whom
regularly offer non-cash discounts on self-service gasoline purchases such as a
"discounted" car wash or "mini-service." Company Stores generally do not offer
such discounts. In addition, management believes that Company Stores compete
for gasoline customers who regularly travel outside of their relatively smaller
community for shopping or employment purposes, and who therefore are able to
purchase gasoline while in nearby larger communities where retail gasoline
prices generally are lower. For this reason, the Company attempts to offer
gasoline for sale at prices comparable to those prevailing in nearby larger
communities.
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.
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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 1,819 USTs of which 1,459 are
fiberglass and 360 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. In each of
the years ended April 30, 1996 and 1997, the Company spent approximately
$718,000 and $579,000, 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, 1997,
approximately $4,100,000 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, 1997, of approximately
$1,600,000 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.
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Management of the Company currently estimates that aggregate capital
expenditures for electronic monitoring, cathodic protection and overfill/spill
protection will approximate $1,000,000 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 entered into
prior to its July 1, 1992 effective date.
As of April 30, 1997, Casey's was a party to 79 franchise agreements
entered into with respect to Franchised Stores in the State of Iowa. Of that
number, only two of the franchise agreements were entered into following the
effective date of Chapter 523H (the "Covered Franchises"); the remainder were
all entered into prior to July 1, 1992. Certain provisions of the Covered
Franchises conflict with the provisions of Chapter 523H. As such, certain
contractual provisions of the Covered Franchises, including those relating to
transfer, termination or non-renewal and encroachment, may not be valid or
enforceable under Chapter 523H.
Chapter 523H was amended during the 1995 legislative session, but several
significant ambiguities and concerns remain. As a result, Casey's has
determined not to grant any new Iowa franchises until further amending
legislation is enacted or other favorable court rulings are rendered.
Management does not expect Chapter 523H to have a material effect on the
Company's business.
- 16 -
<PAGE> 17
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 formerly utilized (until February
1997) as a sandwich commissary center for the preparation of sandwiches sold in
Casey's General Stores.
On April 30, 1997, Casey's owned the land at 787 locations and the
buildings at 813 locations, and leased the land at 91 locations and the
buildings at 65 locations. Most of the leases provide for the payment of a
fixed rent, plus property taxes and insurance and maintenance costs.
Generally, the leases are for terms of 10 to 20 years, with options to renew
for additional periods or options to purchase the leased premises at the end of
the lease period.
ITEM 3. LEGAL PROCEEDINGS
The Company from time to time is a party to legal proceedings, claims and
demands arising from the conduct of its business operations, including those
relating to personal injury, property damage and employment or personnel
matters, environmental remediation or contamination, disputes under franchise
agreements and claims by state and federal regulatory authorities relating to
the sale of products pursuant to state or federal licenses or permits.
Management does not believe that the potential liability of the Company with
respect to such proceedings pending as of the date of this Form 10-K is
material in the aggregate.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- 17 -
<PAGE> 18
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,
1997.
The cash dividends declared by the Company during the periods indicated
have been as follows:
<TABLE>
<CAPTION>
Cash Dividend
Declared
-------------
<S> <C>
Calendar 1995
--------------
First Quarter $.02
Second Quarter .02
Third Quarter .025
Fourth Quarter .025
-----
$.09
Calendar 1996
-------------
First Quarter $.025
Second Quarter .025
Third Quarter .025
Fourth Quarter .025
-----
$.10
Calendar 1997
-------------
First Quarter $.025
Second Quarter .025
</TABLE>
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, 1997.
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
- 18 -
<PAGE> 19
the year ended April 30, 1997.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required in response to this Item is incorporated herein
by reference from pages 7 through 17 and page 24 of the Company's Annual Report
to shareholders for the year ended April 30, 1997.
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, 1997 and to be used in
connection with the Company's Annual Meeting of shareholders to be held on
September 19, 1997, is hereby incorporated by reference.
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, 1997 and to be used in
connection with the Company's Annual Meeting of shareholders to be held on
September 19, 1997, is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- 19 -
<PAGE> 20
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, 1997 and
to be used in connection with the Company's Annual Meeting of shareholders to be
held on September 19, 1997, 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, 1997 and to be used in connection with the Company's Annual
Meeting of shareholders to be held on September 19, 1997, is hereby
incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED
The documents listed below are filed as a part of this Report on Form 10-K
and are incorporated herein by reference:
(1) The following consolidated financial statements, shown on pages
7 through 17 of the Company's Annual Report to shareholders for the
year ended April 30, 1997:
Consolidated Balance Sheets, April 30, 1997 and 1996
Consolidated Statements of Income, Three Years Ended April 30, 1997
Consolidated Statements of Shareholders' Equity, Three Years
Ended April 30, 1997
Consolidated Statements of Cash Flows,
Three Years Ended April 30, 1997
Notes to Consolidated Financial Statements
Independent Auditors' Report
(2) The management contracts or compensatory plans or arrangements
required to be filed as an exhibit to this Form 10-K pursuant to Item
14(c), consisting of the following:
- 20 -
<PAGE> 21
<TABLE>
<CAPTION>
Exhibit Number Document
-------------- --------
<S> <C>
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) and First
Amendment thereto (w)
10.22 Employment Agreement with
Ronald M. Lamb (l) and First
Amendment thereto (w)
10.23 Employment Agreement with
Douglas K. Shull (l) and First
Amendment thereto (w)
10.24 Employment Agreement with
John G. Harmon (t) and First
Amendment thereto (w)
</TABLE>
____________________
(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.
- 21 -
<PAGE> 22
(v) Incorporated by reference from the Annual Report on Form 10-K for the
fiscal year ended April 30, 1995.
(w) Incorporated by reference from the Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1997.
(b) REPORTS ON FORM 8-K
There were no reports on Form 8-K filed during the fiscal quarter
ended April 30, 1997.
(c) EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Document
- ------ ------------
<S> <C>
3.1(a) Restatement of the Restated and Amended Articles of Incorporation (x)
3.2(a) Restatement of Amended and Restated By-Laws (w)
4.2 Rights Agreement between Casey's General Stores, Inc. and
United Missouri Bank of Kansas City, N.A., as Rights Agent, relating
to Common Share Purchase Rights (e) and amendments thereto (i), (p), (q)
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) and First
Amendment thereto (w)
</TABLE>
-22-
<PAGE> 23
<TABLE>
<CAPTION>
<S> <C>
10.22 Employment Agreement with Ronald M. Lamb (l) and First
Amendment thereto (w)
10.23 Employment Agreement with Douglas K. Shull (l) and First
Amendment thereto (w)
10.24 Employment Agreement with John G. Harmon (t) and First
Amendment thereto (w)
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)
10.29 Form of "change of control" Employment Agreement (w)
11 Statement regarding computation of earnings per share
13 Consolidated Financial Statements from 1997 Annual Report
21 Subsidiaries of Casey's General Stores, Inc.
24.1 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule
99 Cautionary Statement Relating to Forward-Looking Statements (w)
</TABLE>
- ---------------------------------
(a) Incorporated herein by reference from the Registration Statement on Form
S-1 (2-82651) filed August 31, 1983.
(b) Reserved.
(c) Reserved.
(d) Incorporated herein by reference from the Quarterly Report on Form 10-Q
for the fiscal quarter ended January 31, 1988 (0-12788).
(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.
- 23 -
<PAGE> 24
(h) Reserved.
(i) Incorporated by reference from the Form 8 (Amendment No. 1 to the
Registration Statement on Form 8-A filed June 19, 1989) filed September
10, 1990.
(j) Incorporated by reference from the Registration Statement on Form S-8
(33-42907) filed September 23, 1991.
(k) Incorporated by reference from the Annual Report on Form 10-K for the
fiscal year ended April 30, 1991.
(l) Incorporated by reference from the Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1992.
(m) 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.
(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.
- 24 -
<PAGE> 25
(v) Incorporated by reference from the Annual Report on Form 10-K for the
fiscal year ended April 30, 1995.
(w) Incorporated by reference from the Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1997.
(x) Incorporated by reference from the Quarterly Report on Form 10-Q for the
fiscal quarter ended October 31, 1996.
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 22, 1997 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 22, 1997 By: /s/ Donald F. Lamberti
-----------------------------
Donald F. Lamberti
Chief Executive Officer,
Chairman of the Board
(Principal Executive Officer)
Date: July 22, 1997 By: /s/ Ronald M. Lamb
-----------------------------
Ronald M. Lamb
President and Chief Operating
Officer, Director
Date: July 22, 1997 By: /s/ Douglas K. Shull
--------------------------------
Douglas K. Shull
Treasurer, Director
(Principal Financial Officer and
Principal Accounting Officer)
Date: July 22, 1997 By: /s/ John G. Harmon
--------------------------------
John G. Harmon
Secretary, Director
Date: July 29, 1997 By: /s/ Patricia Clare Sullivan
--------------------------------
Patricia Clare Sullivan
Director
- 26 -
<PAGE> 27
Date: July 29, 1997 By: /s/ Kenneth H. Haynie
--------------------------------
Kenneth H. Haynie
Director
Date: July 23, 1997 By: /s/ John R. Fitzgibbon
--------------------------------
John R. Fitzgibbon
Director
Date: July 23, 1997 By: /s/ Jack P. Taylor
--------------------------------
Jack P. Taylor
Director
- 27 -
<PAGE> 28
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
Exhibit No. Description Page
----------- ------------------------------------------ ----
11 Statement regarding computation
of earnings per share
13 Consolidated Financial Statements from
1997 Annual Report to shareholders
21 Subsidiaries of Casey's General
Stores, Inc.
24.1 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule
</TABLE>
- 28 -
<PAGE> 1
EXHIBIT 11
CASEY'S GENERAL STORES, INC.
____________________________
Computation of Per Share Earnings
Year Ended April 30,
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Net income $27,010,025 $26,767,085 $22,880,841
============= ============ ============
Average common shares
outstanding 26,228,373 26,110,419 25,930,614
Average common equivalent
shares applicable to
stock options 54,737 127,733 131,673
------------- ------------ ------------
26,283,110 26,238,152 26,062,287
============= ============ ============
Earnings per share $ 1.03 $ 1.02 $ .88
============= ============ ============
</TABLE>
<PAGE> 1
EXHIBIT 13
FINANCIAL SECTION - 1997
CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 30
------------------------
ASSETS 1997 1996
----------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,097,741 $ 12,673,855
Short-term investments 6,898,294 13,953,926
Receivables 2,701,740 2,679,967
Inventories (Note 1) 36,522,960 32,437,323
Prepaid expenses (Note 4) 5,452,646 8,266,308
------------ -----------
Total current assets 54,673,381 70,011,379
- ------------------------------------------------------------------------------------------------------
Long-term investments (Note 1) 3,561,865 5,153,169
Other assets, net of amortization 1,341,062 1,356,643
Property and equipment, at cost: (Note 2)
Land 58,904,564 49,142,635
Buildings and leasehold improvements 202,733,843 175,343,291
Machinery and equipment 251,115,290 223,625,219
Leasehold interest in property and equipment (Note 5) 12,812,136 12,812,136
------------ -----------
525,565,833 460,923,281
Less accumulated depreciation and amortization 158,097,550 132,609,514
------------ -----------
Net property and equipment 367,468,283 328,313,767
------------ -----------
$427,044,591 $404,834,958
======================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks (Note 2) $ 2,800,000 $21,025,000
Current maturities of long-term debt (Note 2) 11,795,806 8,679,217
Accounts payable 37,207,819 36,190,236
Accrued expenses: Salaries and wages 3,082,704 3,056,506
Other (Note 8) 14,466,526 13,975,769
Income taxes payable 4,433,626 - - - - - -
------------ -----------
Total current liabilities 73,786,481 82,926,728
- ------------------------------------------------------------------------------------------------------
Long-term debt, net of current maturities (Note 2) 79,685,011 81,249,264
Deferred income taxes (Note 4) 39,579,000 32,791,000
Deferred compensation (Note 7) 2,102,642 1,693,288
------------ -----------
Total liabilities 195,153,134 198,660,280
Shareholders' equity (Note 3)
Capital stock: Preferred stock, no par value, none issued - - - - - - - - - - - -
Common Stock, no par value, 26,241,206 and
26,221,706 shares issued and outstanding
at April 30, 1997 and 1996, respectively 64,886,032 63,556,842
Retained earnings 167,005,425 142,617,836
------------ -----------
Total shareholders' equity 231,891,457 206,174,678
------------ ------------
$427,044,591 $404,834,958
Commitments and contingencies (Notes 5, 7 and 8)
======================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE> 2
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30
------------------------------------------
1997 1996 1995
-------------- ------------ ------------
<S> <C> <C> <C>
Net sales $1,109,002,373 $954,764,056 $848,842,757
Franchise revenue 5,206,155 5,384,424 5,269,105
-------------- ------------ ------------
1,114,208,528 960,148,480 854,111,862
Cost of goods sold 886,349,155 748,183,597 665,924,372
Operating expenses 151,774,372 138,581,190 123,004,153
Depreciation and amortization 26,883,359 24,654,848 22,237,352
Interest, net (Note 2) 5,989,617 5,729,760 5,590,144
-------------- ------------ ------------
1,070,996,503 917,149,395 816,756,021
Income before income taxes 43,212,025 42,999,085 37,355,841
Provision for income taxes (Note 4) 16,202,000 16,232,000 14,475,000
-------------- ------------ ------------
Net income $27,010,025 $26,767,085 $22,880,841
===========================================================================================
Earnings per common and common
equivalent share (Note 3) $ 1.03 $1.02 $.88
===========================================================================================
</TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
------------- ------------ ------------
<S> <C> <C> <C>
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
Net income - - - - - - 27,010,025 27,010,025
Payment of dividends (10 cents per share) - - - - - - (2,622,436) (2,622,436)
Proceeds from exercise of stock options (19,500 shares) 204,190 - - - - - - 204,190
Tax benefits related to nonqualified stock options 1,125,000 - - - - - - 1,125,000
------------- ------------- ------------
Balance April 30, 1997 $ 64,886,032 $167,005,425 $231,891,457
===============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE> 3
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30
--------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net income $ 27,010,025 $ 26,767,085 $ 22,880,841
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 26,883,359 24,654,848 22,237,352
Deferred income taxes 6,600,000 8,000,000 2,000,000
Changes in assets and liabilities:
Receivables (21,773) 406,761 (246,828)
Inventories (4,085,637) (5,094,290) (3,588,777)
Prepaid expenses 3,001,662 (4,762,984) 207,884
Accounts payable 1,017,583 (3,670,607) 2,446,815
Accrued expenses 516,955 1,315,863 1,047,621
Income taxes payable 5,558,626 (1,544,909) 1,525,981
Other, net 1,220,804 1,899,966 1,013,324
------------ ------------ ------------
Net cash provided by operations 67,701,604 47,971,733 49,524,213
CASH FLOWS FROM INVESTING:
Purchase of property and equipment (66,722,419) (60,382,701) (52,645,839)
Purchase of investments (11,757,051) (17,294,466) (2,006,930)
Sale of investments 20,292,662 6,024,284 14,031,681
------------ ------------ ------------
Net cash used in investing activities (58,186,808) (71,652,883) (40,621,088)
CASH FLOWS FROM FINANCING:
Proceeds from long-term debt 15,000,000 30,000,000 7,500,000
Payments of long-term debt (13,447,664) (8,533,332) (5,317,525)
Net activity of short-term debt (18,225,000) 9,675,000 (7,150,000)
Proceeds from exercise of
stock options 204,190 2,213,850 464,619
Payment of cash dividends (2,622,436) (2,478,297) (2,074,099)
------------ ------------ ------------
Net cash (used in) provided by
financing activities (19,090,910) 30,877,221 (6,577,005)
------------ ------------ ------------
Net (decrease) increase in cash
and cash equivalents (9,576,114) 7,196,071 2,326,120
Cash and cash equivalents at
beginning of year 12,673,855 5,477,784 3,151,664
------------ ------------ ------------
Cash and cash equivalents at
end of year $ 3,097,741 $ 12,673,855 $ 5,477,784
===============================================================================
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
<TABLE>
<S> <C> <C> <C>
Cash paid during the year for:
Interest (net of amount
capitalized) $ 7,102,448 $ 5,770,509 $ 5,768,870
Income taxes 1,043,374 14,523,271 10,601,473
Noncash investing and financing activities:
Property and equipment acquired
through capital lease obligations - - - - - - - - - - 13,592
Increase in Common Stock and decrease
in income taxes payable due to
tax benefits related to nonqualified
stock options 1,125,000 - - - - - - - - - -
</TABLE>
===============================================================================
See accompanying notes to consolidated financial statements.
9
<PAGE> 4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS - Casey's General Stores, Inc. and Subsidiaries (the Company)
operates 1042 convenience stores in 9 midwestern states. At April 30, 1997,
the Company owned or leased 878 of these stores with 164 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 1997 were
distributed as follows: gasoline - 61% and grocery and other - 39%. 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 a maturity at purchase 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.
Long-term investments are classified as available for sale and maturities were
as follows at April 30, 1997:
<TABLE>
<CAPTION>
<S> <C>
Due after 1 year through 5 years $ 265,965
Due after 5 years through 10 years 1,000,000
Due after 10 years 2,295,900
----------
$3,561,865
==========
</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 $6,588,000 and
$6,486,000 below replacement cost as of April 30, 1997 and 1996, 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>
<CAPTION>
<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 - Earnings per share are 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.
The weighted average common and common equivalent shares outstanding were
26,283,110, 26,238,152 and 26,062,287 for 1997, 1996 and 1995, respectively.
EXCISE TAXES - Excise taxes approximating $196,000,000, $175,000,000 and
$151,000,000 collected from customers on retail gasoline sales are included in
net sales for 1997, 1996 and 1995, 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
10
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
STOCK OPTION PLAN - Prior to May 1, 1996, the Company accounted for its stock
option plan in accordance with the provisions of Accounting Principles Board
("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. As such, compensation expense would be recorded on the date of
grant only if the current market price of the underlying stock exceeded the
exercise price. On May 1, 1996, the Company adopted SFAS No. 123, Accounting
for Stock-Based Compensation, which permits entities to recognize as expense
over the vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 also allows entities to continue to apply
the provisions of APB Opinion No. 25 and provide pro forma net income and pro
forma earnings per share disclosures for employee stock option grants made in
1995 and future years as if the fair-value-based method defined in SFAS No. 123
had been applied. The Company has elected to continue to apply the provisions
of APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS
No. 123.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF - The
Company adopted the provisions of SFAS No. 121 Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of, on May 1, 1996.
This Statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to the future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceed the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount or fair
value less costs to sell. Adoption of this Statement did not have a material
impact on the Company's financial position, results of operations, or
liquidity.
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 $86,000,000 and $84,000,000, respectively, at April 30, 1997 and
1996.
Interest expense is net of interest income of $1,200,990, $754,799 and $213,480
for the years ended April 30, 1997, 1996 and 1995, respectively. Interest
expense in the amount of $717,088, $677,711 and $559,500 was capitalized
during the years ended April 30, 1997, 1996 and 1995, respectively.
At April 30, 1997 and 1996, notes payable to banks consisted of $27,000,000 in
lines of credit with balances owed of $2,800,000 and $21,025,000, respectively.
Within the notes payable to banks, $2,100,000 on a $15,000,000 line of credit
is due on demand and $700,000 on a $12,000,000 line of credit is due December
31, 1997. The weighted average interest rate was 6.24% at April 30, 1997 and
6.20% at April 30, 1996.
11
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
Long-term debt, at carrying value, consists of
the following: April
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Capitalized lease obligations, discounted at rates of
7.3% to 15.3%, due in various monthly installments
through 2008 (Note 5) $ 6,309,274 $ 7,699,760
Mortgage notes payable due in various monthly
installments through 2004 with interest at
7.8% to 9.5% 13,265,293 14,509,971
Unsecured notes payable to banks due in various
monthly and quarterly installments through
2000 with variable rates of interest 18,656,250 11,468,750
7.70% Senior Notes due in 40 quarterly
installments beginning in March 1995 23,250,000 26,250,000
7.38% Senior Notes due in 21 semi-annual
installments beginning in December 2010 30,000,000 30,000,000
----------- -----------
91,480,817 89,928,481
Less current maturities 11,795,806 8,679,217
----------- -----------
$79,685,011 $81,249,264
===============================================================================
</TABLE>
Mortgage notes payable includes a Secured Promissory Note, Mortgage and
Security Agreement with a balance of $12,836,529 and $13,928,193 at April 30,
1997 and 1996, 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 $14,500,000 at
April 30, 1997.
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, 1998 and thereafter are:
<TABLE>
<CAPTION>
YEAR ENDING APRIL 30
--------------------
<S> <C>
1999 $ 8,106,790
2000 15,325,332
2001 5,474,202
2002 5,460,426
Thereafter 45,318,261
-----------
$79,685,011
===========
</TABLE>
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 120,000,000 authorized shares of
Common Stock.
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 CompanyOs 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.
12
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 of the stock (110% of fair market value as to holders of 10% or more of
the CompanyOs stock) at the date the options are granted. Options for 690,832
shares were available for grant at April 30, 1997 and options for 339,500
shares (which expire between 1999-2006) were outstanding. The per share
weighted-average fair value of the stock options granted during 1997 and 1996
was $7.11 and $8.60, respectively, on the date of grant using the Black Scholes
option-pricing model with the following weighted-average assumptions: 1997 -
expected dividend yield .53%, risk-free interest rate of 5.2%, and an expected
life of 7.5 years; 1996 - expected dividend yield .46%, risk-free interest rate
of 5.5%, and an expected life of 7.5 years.
The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock options in
the financial statements. Had the Company determined compensation cost based on
the fair value at the grant date for its stock options under SFAS No. 123, the
Company's net income would have been reduced to the pro forma amount indicated
below:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C> <C>
Net income As reported $ 27,010,025 $ 26,767,085
Pro forma 26,581,103 26,023,331
Earnings per share As reported $ 1.03 $ 1.02
Pro forma 1.01 .99
</TABLE>
Pro forma net income reflects only options granted in the years ended April 30,
1997 and 1996. Therefore, the full impact of calculating compensation cost for
stock options under SFAS No. 123 is not reflected in the pro forma net income
amounts presented above because compensation cost is reflected over the
optionsO vesting period of ten years and compensation cost for options granted
prior to May 1, 1995 is not considered.
Stock option activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
Number of Weighted-Average
Shares Exercise Price
<S> <C> <C>
Balance at April 30, 1994 422,000 $ 9.12
Exercised (46,700) 9.95
Forfeited (4,000) 10.25
--------- --------
Balance at April 30, 1995 371,300 9.01
Granted 202,000 19.78
Exercised (254,800) 8.69
Forfeited (2,000) 10.25
--------- --------
Balance at April 30, 1996 316,500 16.13
Granted 54,000 18.13
Exercised (19,500) 10.47
Forfeited (11,500) 20.50
--------- --------
Balance at April 30, 1997 339,500 $ 16.63
========= ========
</TABLE>
At April 30, 1997, the range of exercise prices and weighted-average remaining
contractual life of outstanding options was $4.81-$21.38 and 7.73 years,
respectively. The number of shares and weighted-average remaining
13
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
contractual life of the options by range of applicable exercised prices at
April 30, 1997 is as follows:
<TABLE>
<CAPTION>
Range of Number Weighted-Average Weighted-Average Remaining
Exercise Prices of Shares Exercise Price Contractual Life (Years)
---------------- ---------- --------------- -------------------------
<S> <C> <C> <C>
$ 4.81 - 7.69 21,500 $ 7.65 4.40
$ 10.29 - 13.59 93,500 10.50 6.50
$ 17.88 - 21.38 224,500 20.05 8.54
-------- ======== ======
339,500
========
</TABLE>
4. INCOME TAXES
Income tax expense attributable to income from operations is comprised of the
following components:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
-----------------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Current tax expense: Federal $ 8,687,000 $ 6,843,000 $10,225,000
State 915,000 1,389,000 2,250,000
------------- ------------- -------------
9,602,000 8,232,000 12,475,000
Deferred tax expense 6,600,000 8,000,000 2,000,000
------------- ------------- -------------
Total income tax provision $16,202,000 $16,232,000 $14,475,000
</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
--------------------------------------------------------
1997 1996 1995
-------------- ------------- ---------------
<S> <C> <C> <C>
Deferred tax assets:
Accrued liabilities $ 3,313,000 $ 3,125,000 $ 5,604,000
Deferred compensation 841,000 639,000 512,000
Other 511,000 241,000 222,000
-------------- ------------- ---------------
Total gross deferred tax assets 4,665,000 4,005,000 6,338,000
-------------- ------------- ---------------
Deferred tax liabilities:
Excess of tax over book depreciation (40,029,000) (33,009,000) (27,909,000)
Other (902,000) (662,000) (95,000)
-------------- ------------- ---------------
Total gross deferred liabilities (40,931,000) (33,671,000) (28,004,000)
-------------- ------------- ---------------
Net deferred tax liability $(36,266,000) $(29,666,000) $ (21,666,000)
</TABLE>
================================================================================
The deferred tax asset relating to accrued liabilities is a current asset and
is included with prepaid expenses. At April 30, 1996, prepaid expenses also
included approximately $4,700,000 of recoverable taxes. 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
-----------------------------------------------------
<S> <C> <C> <C>
1997 1996 1995
---------- ----------- ----------
Income taxes at the statutory rates 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit 2.7 3.7 4.6
Other (.2) (1.0) (.9)
---------- ----------- ----------
37.5% 37.7% 38.7%
</TABLE>
14
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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
--------------------------
1997 1996
----------- ----------
<S> <C> <C>
Real estate $ 8,232,295 $ 8,232,295
Equipment 4,579,841 4,579,841
----------- -----------
12,812,136 12,812,136
Less accumulated amortization 7,686,647 6,559,445
----------- -----------
$ 5,125,489 $ 6,252,691
</TABLE>
===============================================================================
Future minimum payments under the capital leases and noncancelable operating
leases with initial or remaining terms of one year or more consisted of the
following at April 30, 1997:
<TABLE>
<CAPTION>
YEAR ENDING APRIL 30 CAPITAL LEASES OPERATING LEASES
- --------------------- -------------- ----------------
<S> <C> <C>
1998 $1,902,305 $ 354,000
1999 1,624,416 279,000
2000 1,123,358 251,000
2001 1,040,558 209,000
2002 906,806 187,000
Thereafter 1,766,445 923,000
---------- ----------
Total minimum lease payments 8,363,888 $2,203,000
==========
Less amount representing interest 2,054,614
----------
Present value of net minimum lease payments $6,309,274
</TABLE>
===============================================================================
The total rent expense under operating leases was $804,000 in 1997, $788,000
in 1996 and $820,000 in 1995.
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 years ended April 30, 1997 and 1996 and there was $600,000
of Plan expense for the year ended April 30, 1995.
On April 30, 1997, the Company had 3,728 full-time employees and 5,813
part-time employees, of which approximately 3,700 were participants in the
Plan. As of that same date, the Trustee under the Plan held 2,077,094 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 $1,184,000, $1,093,000 and $514,000 for the years ended April 30,
1997, 1996 and 1995, respectively.
15
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
7. COMMITMENTS
The Company has entered into employment agreements with four
officer-shareholders. The agreements provide that the four officer shareholders
will receive aggregate base compensation of $980,000 per year exclusive of
bonuses. These agreements also provide for certain payments in the case of
death or disability of the officer-shareholders.
Each agreement further provides for the voluntary retirement of the
officer-shareholders. Certain provisions of the employment agreements provide
for the Company to pay annual retirement benefits, depending on retirement
dates, up to one-half of the base compensation until death of the
officer-shareholder. If death occurs within 20 years of retirement, the
benefits become payable to the officer-shareholder's spouse for the shorter of
the period until the spouse's death or a period not to exceed 20 years from the
date of the officer-shareholder's retirement. 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.
Management currently estimates that aggregate capital expenditures for
electronic monitoring, cathodic protection and overfill/spill protection will
approximate $1,000,000 through December 23, 1998, to comply with existing
regulations. The Company has accrued a liability at April 30, 1997 and 1996,
respectively, of approximately $1,600,000 and $2,600,000 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, 1997, 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 $1,100,000. Letters of credit approximating $2,400,000
were issued and outstanding at April 30, 1997, 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, 1997.
Approximately $1,850,000 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, 1997 and 1996, the Company has accrued
$5,500,000 and $4,500,000, respectively, within other accrued expenses for
estimated claims relating to self insurance.
16
<PAGE> 11
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, 1997 and 1996, 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, 1997. 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, 1997 and 1996,
and the results of its operations and its cash flows for each of the years in
the three-year period ended April 30, 1997 in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
DES MOINES, IOWA
JUNE 17, 1997
17
<PAGE> 12
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
-----------------------------------------
1997 1996 1995
-------------- ------------ ------------
<S> <C> <C> <C>
NET SALES (1):
RETAIL SALES:
Grocery and general merchandise $ 386,656,356 $346,426,722 $316,444,290
Gasoline 643,005,485 531,414,819 455,310,780
-------------- ------------ ------------
1,029,661,841 877,841,541 771,755,070
============== ============ ============
WHOLESALE SALES:
Grocery and general merchandise 39,778,203 40,605,430 39,342,692
Gasoline 28,007,405 25,625,213 25,617,280
-------------- ------------ ------------
67,785,608 66,230,643 64,959,972
============== ============ ============
GROSS PROFITS (2):
RETAIL SALES:
Grocery and general merchandise 156,656,410 139,799,317 128,858,300
Gasoline 55,191,664 56,446,450 42,597,553
-------------- ------------ ------------
211,848,074 196,245,767 171,455,853
============== ============ ============
WHOLESALE SALES:
Grocery and general merchandise 1,351,452 1,581,173 1,621,928
Gasoline 881,764 844,339 843,679
-------------- ------------ ------------
2,233,216 2,425,512 2,465,607
============== ============ ============
</TABLE>
18
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - CONTINUED
- -------------------------------------------------------------------------------
INDIVIDUAL STORE INFORMATION
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30
--------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
COMPANY STORES:
Average retail sales $1,225,994 $1,143,340 $1,080,553
Average retail sales
of grocery and
general merchandise 463,037 454,422 448,060
Average gross profit on grocery and
general merchandise 179,280 174,387 169,216
Average retail sales of gasoline 762,958 688,918 632,493
Average gross profit on gasoline (4) 65,714 73,920 68,093
Average operating income (5) 78,430 83,763 80,556
Average number of gallons sold 643,684 637,904 596,684
FRANCHISED STORES:
Average franchise revenue (6) $ 30,116 $ 29,454 $ 28,487
</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> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - CONTINUED
FISCAL 1997 COMPARED TO FISCAL 1996
Net sales for fiscal 1997 increased by $154,238,000 (16.2%) over fiscal 1996.
Retail gasoline sales increased by $111,591,000 (20.0%) as the number of
gallons sold increased by 50,255,662 (10.2%). During fiscal 1997, retail sales
of grocery and general merchandise increased by $40,230,000 (11.6%) due to the
net addition of 77 Company Stores and a greater number of stores in operation
for at least three years.
Cost of goods sold as a percentage of net sales was 79.9% for fiscal 1997
compared to 78.4% for the prior year. This result occurred because the gross
profit margin on retail gasoline sales decreased.
Operating expenses as a percentage of net sales were 13.7% for fiscal 1997
compared to 14.5% for the prior year. The decrease in operating expenses as a
percentage of net sales was caused primarily by increased sales and the
increased number of Company Stores in operation.
Average operating income per Company Store decreased by $5,333 (6.4%),
primarily as the result of a decrease in the gross profit margins on retail
gasoline sales.
Net income increased by $242,940 (0.9%). The increase in net income was
attributable primarily to increases in retail sales and an increased number of
stores in operation for at least three years.
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share" (SFAS 128), which is intended to simplify the earnings per
share computation and increase comparability of earnings per share on an
international basis. SFAS 128 is effective for financial statements issued for
periods ending after December 15, 1997, and requires restatement of all prior
period earnings per share data presented. The adoption of SFAS 128 is not
expected to have a significant impact on the Company's financial statements.
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 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.
20
<PAGE> 15
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, 1997, the Company's ratio of current assets to current
liabilities was .74 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 increased $19,729,871 (41.1%) during
the year ended April 30, 1997, primarily as a result of an increase in income
taxes payable and a decrease in prepaid expenses. Cash flows used in investing
decreased during fiscal 1997, primarily because of the sale of investments.
During fiscal 1997, the Company expended approximately $67,000,000 for property
and equipment, primarily for the construction and remodeling of Company Stores.
The Company anticipates expending approximately $75,000,000 in fiscal 1998 for
construction, acquisition and remodeling of Company Stores, primarily from
funds generated by operations, existing cash and short-term investments.
As of April 30, 1997, the Company had long-term debt of $79,685,000, consisting
of $20,250,000 of 7.70% Senior Notes, $30,000,000 of 7.38% Senior Notes,
$11,976,000 of mortgage notes payable, $12,500,000 of unsecured notes payable
and $4,959,000 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 Convertible Subordinated
Debentures (converted into shares of common stock in 1994), 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> 16
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 1,819 USTs of which
1,459 are fiberglass and 360 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. In each of the
years ended April 30, 1997 and 1996, the Company spent approximately $579,000
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, 1997, a total of
approximately $4,100,000 has been received from such programs since their
inception. Such amounts are typically subject to statutory provisions requiring
repayment of the reimbursed funds for noncompliance with upgrade provisions or
the applicable laws. The Company has accrued a liability at April 30, 1997, of
approximately $1,600,000 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 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, Inc. historically have
been strongest during the Company's first and second fiscal quarters and have
become progressively weaker during its third and fourth quarters. In the
warmer months of the year (which comprise the CompanyOs 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 CompanyOs 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 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> 17
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
STATEMENT OF INCOME DATA
(amounts in thousands,
except per share data) YEARS ENDED APRIL 30
------------------------------------------------------
1997 1996 1995 1994 1993
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales $1,109,002 $954,764 $848,843 $731,206 $673,697
Franchise revenue 5,206 5,384 5,269 5,121 4,898
---------- -------- -------- -------- --------
1,114,208 960,148 854,112 736,327 678,595
Cost of goods sold 886,349 748,183 665,925 574,144 533,535
Operating expenses 151,774 138,581 123,004 110,083 102,379
Depreciation and
amortization 26,883 24,655 22,237 18,623 15,943
Interest, net 5,990 5,730 5,590 6,434 5,249
---------- -------- -------- -------- --------
Income before
income taxes 43,212 42,999 37,356 27,043 21,489
Provision for
income taxes 16,202 16,232 14,475 10,479 8,166
---------- -------- -------- -------- --------
Net income $ 27,010 $ 26,767 $ 22,881 $ 16,564 $ 13,323
</TABLE>
===============================================================================
<TABLE>
<S> <C> <C> <C> <C> <C>
*Net income per share $ 1.03 $ 1.02 $ .88 $ .73 $ .60
</TABLE>
===============================================================================
<TABLE>
<S> <C> <C> <C> <C> <C>
*Weighted average
number of common
and common equivalent
shares outstanding
- primary 26,283 26,238 26,062 22,651 22,193
*Dividends paid per
common share $ .10 $ .095 $ .08 $ .07125 $ .06
</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
-----------------------------------------------------
1997 1996 1995 1994 1993
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Current assets $ 54,673 $ 70,011 $ 43,191 $ 41,369 $ 46,513
Total assets 427,045 404,835 345,159 318,238 280,777
Current liabilities 73,786 82,927 76,971 75,453 55,456
Long-term debt 79,685 81,249 59,963 61,415 98,956
Shareholders' equity 231,891 206,175 179,672 158,410 107,976
</TABLE>
23
<PAGE> 18
QUARTERLY FINANCIAL DATA
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30, 1997 YEAR ENDED APRIL 30, 1996
----------------------------------------------------- ---------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR QUARTER QUARTER QUARTER QUARTER YEAR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $286,908 $286,291 $272,070 $263,733 $1,109,002 $252,997 $243,235 $221,608 $236,924 $954,764
Gross profit (A) 58,103 59,725 53,633 51,192 222,653 53,464 55,412 51,404 46,301 206,581
Net income $ 8,871 $ 8,905 $ 5,536 $ 3,698 $ 27,010 $ 7,912 $ 8,802 $ 6,848 $ 3,205 $ 26,767
Earnings per common
and common
equivalent share $ .34 $ .34 $ .21 $ .14 $ 1.03 $ .30 $ .34 $ .26 $ .12 $ 1.02
===================================================== ===================================================
</TABLE>
(A) Before charge for depreciation and amortization.
- -------------------------------------------------------------------------------
COMMON STOCK DATA
The following table sets forth for the calendar periods indicated the
high and low sale prices per share of Common Stock as reported on the NASDAQ
National Market System through June 30, 1997.
<TABLE>
<CAPTION>
CALENDAR 1995 HIGH LOW
- -------------------------------------------------------------------------------
<S> <C> <C>
First Quarter $ 16 3/8 $ 14 3/8
Second Quarter 18 15 1/4
Third Quarter 23 1/8 17 3/8
Fourth Quarter 25 3/8 19 1/8
CALENDAR 1996
- -------------------------------------------------------------------------------
First Quarter 25 19 5/8
Second Quarter 24 7/8 18
Third Quarter 20 3/4 16 1/8
Fourth Quarter 19 11/16 15 1/2
CALENDAR 1997
- -------------------------------------------------------------------------------
First Quarter 20 5/8 16 3/4
Second Quarter 23 18 1/2
- -------------------------------------------------------------------------------
</TABLE>
On July 7, 1997, the last reported sales price of the Company's Common Stock
was $22 3/8 per share. On July 7, 1997, there were 2,812 holders of record of
the Common Stock.
The Company commenced paying cash dividends during fiscal 1991. On June 16,
1997, the Board of Directors declared a 3 cents per share dividend for shares
held of record on August 1, 1997. The dividend is payable on August 15, 1997.
The Company currently intends to pay comparable cash dividends on a quarterly
basis in the future.
24
<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
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 17, 1997, relating to the consolidated balance sheets of
Casey's General Stores, Inc. and subsidiaries as of April 30, 1997 and 1996,
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, 1997,
which report appears in or is incorporated by reference in the April 30, 1997
Annual Report on Form 10-K of Casey's General Stores, Inc.
KPMG Peat Marwick LLP
Des Moines, Iowa
July 28, 1997
<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, 1997 OF CASEY'S GENERAL
STORES, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> APR-30-1997
<EXCHANGE-RATE> 1
<CASH> 3,097,741
<SECURITIES> 6,898,294<F1>
<RECEIVABLES> 2,701,740
<ALLOWANCES> 0
<INVENTORY> 36,522,960
<CURRENT-ASSETS> 54,673,381
<PP&E> 525,565,833
<DEPRECIATION> 158,097,550
<TOTAL-ASSETS> 427,044,591
<CURRENT-LIABILITIES> 73,786,481
<BONDS> 79,685,011<F2>
0
0
<COMMON> 64,886,032
<OTHER-SE> 167,005,425<F3>
<TOTAL-LIABILITY-AND-EQUITY> 427,044,591
<SALES> 1,109,002,373
<TOTAL-REVENUES> 1,114,208,528
<CGS> 886,349,155
<TOTAL-COSTS> 886,349,155
<OTHER-EXPENSES> 178,657,731
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,989,617
<INCOME-PRETAX> 43,212,025
<INCOME-TAX> 16,202,000
<INCOME-CONTINUING> 27,010,025
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,010,025
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
<FN>
<F1>short-term investments
<F2>long-term debt, net of current maturities
<F3>retained earnings
</FN>
</TABLE>
