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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K405
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED APRIL 30, 1998
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 21, 1998, the Company had 52,613,012
shares of Common Stock, no par value, issued and outstanding. The aggregate
market value of the 44,408,753 shares of Common Stock held by non-affiliates of
the Company on that date was $729,968,877 based on a last reported sales price
of $16-7/16 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, 1998 (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 18, 1998 (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, 1998, there were a total of 1,109
Casey's General Stores in operation, of which 946 were operated by the Company
("Company Stores") and 163 stores were operated by franchisees ("Franchised
Stores"). There were 75 Company Stores newly opened in fiscal 1998. 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 70% 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 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.
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In each of the past two fiscal years, the Company derived approximately
95% of its gross profits from retail sales by Company Stores. It also derives
income from continuing monthly royalties based on sales by Franchised Stores,
wholesale sales to Franchised Stores, sign and facade rental fees and the
provision of certain maintenance, transportation and construction services to
the Company's franchisees. Sales at Casey's General Stores historically have
been strongest during the Company's first and second quarters and relatively
weaker during its fourth quarter. In the warmer months of the year (which
comprise the Company's first two fiscal quarters), customers tend to purchase
greater quantities of gasoline and certain convenience items such as beer, soft
drinks and ice. Due to the continuing emphasis on higher-margin, freshly
prepared food items, however, Casey's net sales and net income (with the
exception of the fourth quarter) have become somewhat less seasonal in recent
years.
The following table shows the number of Company Stores and Franchised
Stores in each state on April 30, 1998:
<TABLE>
<CAPTION>
COMPANY FRANCHISED
STATE STORES STORES TOTAL
----- -------- ------ ----
<S> <C> <C> <C>
Iowa ................................................ 238 79 317
Illinois............................................. 258 25 283
Indiana ............................................. 19 0 19
Kansas .............................................. 92 3 95
Minnesota ........................................... 52 15 67
Missouri ............................................ 206 32 238
Nebraska ............................................ 47 7 54
South Dakota ........................................ 20 0 20
Wisconsin ........................................... 14 2 16
Total .......................................... 946 (85%) 163 (15%) 1,109 (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>
1994
Company . . . . . 56 1 687 (1)
Franchised . . . . 4 (1) 189 (1)
--- ---
Total . . . . 60 876
1995
Company . . . . . 60 0 741 (2)
Franchised . . . . 3 (0) 186 (2)
--- ---
Total . . . . . 63 927
1996
Company . . . . . 65 1 801 (3)
Franchised . . . . 1 (1) 182 (3)
--- ---
Total . . . . 66 983
1997
Company . . . . . 70 8 878 (4)
Franchised . . . . 1 (8) 164 (4)
--- ---
Total . . . . 71 1,042
1998
Company . . . . . 75 0 946 (5)
Franchised . . . . 0 (0) 163 (5)
--- ------
Total . . . . 75 1,109
- -----------------------
</TABLE>
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(1) Nine Company Stores and one Franchised Store were closed in 1994.
(2) Six Company Stores and six Franchised Stores were closed in 1995.
(3) Six Company Stores and four Franchised Stores were closed in 1996.
(4) One Company Store and eleven Franchised Stores were closed in 1997.
(5) Seven Company Stores and one Franchised Store were closed in 1998.
Five Company Stores were opened in May and June 1998 and 34 Company
Stores were under construction at June 30, 1998. On June 30, 1998, the Company
had purchased or had the right to purchase 46 additional store sites. All the
stores under construction or planned for construction on such sites will be
Company Stores. Management anticipates opening approximately 80 new Company
Stores during fiscal 1999.
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 1996, 1997 and 1998, the Company
converted 1, 8 and 0 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, and along
busy highways near or at the edge of larger metropolitan areas.
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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 89%
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, 1998, 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 1,040 (94%) stores as of April 30, 1998. 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 53% 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, 1998, the aggregate investment in the
land, building, equipment and initial inventory for a typical Company Store
averaged approximately $800,000. 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 70% 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 57% of Casey's net sales for the year ended April 30,
1998 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, 1998:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
--------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Number of
Gallons Sold 492,353,905 542,609,567 608,977,313
Total Retail
Gasoline Sales $531,414,819 $643,005,485 $671,942,031
Percentage of 55.7% 58.0% 56.6%
Net Sales
Gross Profit 10.7% 8.6% 9.6%
Percentage
Average Retail
Price per Gallon $1.08 $1.19 $1.10
Average Gross Profit
Margin per Gallon 11.46 (cents) 10.17 (cents) 10.64 (cents)
Average Number of
Gallons Sold per
Company Store * 637,904 643,684 668,670
</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 decreased during the year ended April 30,
1998. The total number of gallons sold by the Company during this period
increased, primarily as the result of the increased number of Company Stores in
operation and the Company's efforts to price its retail gasoline competitively
in the market area served by the particular store. See "BUSINESS--Store
Operations--Competition" herein. As a result of these conditions, total retail
gasoline sales by the Company increased during the period, while the percentage
of such sales to the Company's total net sales decreased.
Retail gasoline profit margins have a substantial impact on the
Company's net income. Profit margins on gasoline sales can be adversely affected
by factors beyond the control of the Company, including over-supply in the
retail gasoline market, uncertainty or volatility in the wholesale gasoline
market (such as that experienced during 1991 as a result of the Persian Gulf
crisis) and price competition from other gasoline marketers. Any substantial
decrease in profit margins on gasoline sales or number of gallons sold could
have a material adverse effect on the Company's earnings.
The Company purchases its gasoline from independent national and
regional petroleum distributors. Although in recent years the Company's
suppliers have not experienced any difficulties in obtaining sufficient amounts
of gasoline to meet the Company's needs, unanticipated national and
international events could result in a reduction of gasoline supplies available
for distribution to the Company. A substantial curtailment in gasoline supplied
to the Company could adversely affect the Company by reducing gasoline sales.
Further, management believes that a significant amount of the Company's business
results from the patronage of customers primarily desiring to purchase gasoline
and, accordingly, reduced gasoline supplies could adversely affect the sale of
non-gasoline items. These factors could have a material adverse impact upon the
Company's earnings and operations.
DISTRIBUTION AND WHOLESALE ARRANGEMENTS
The Marketing Company supplies all Company Stores and over 90% of the
Franchised Stores with groceries, food (including sandwiches prepared at the
Company's commissary), health and beauty aids and general merchandise from the
Casey's Distribution Center. The stores place orders for merchandise through a
telecommunications link-up to the computer at the Company's headquarters in
Ankeny, and weekly shipments are made from the Casey's Distribution Center by 40
Company-
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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 1998, the Company purchased directly from manufacturers
approximately 90% of the food and non-food items sold from the Casey's
Distribution Center. It is the Company's practice, with few exceptions, not to
enter into contracts with any of the suppliers of products sold by Casey's
General Stores. Management believes that the absence of such contracts is
customary in the industry for purchasers such as the Company and enables the
Company to respond flexibly to changing market conditions.
FRANCHISE OPERATIONS
Casey's has franchised Casey's General Stores since 1970. In addition
to generating income for Casey's, franchising historically enabled Casey's to
obtain desirable store locations from persons who have preferred to become
franchisees rather than to sell or lease their locations to Casey's. Franchising
also enabled Casey's to expand its system of stores at a faster rate, thereby
achieving operating efficiencies in its warehouse and distribution system as
well as greater identification in its market area. As the Company has grown and
strengthened its financial resources, the advantages of franchising have
decreased in importance and management currently expects to grant new franchises
only to existing franchisees operating in states other than Iowa on a limited
basis. See "BUSINESS - Government Regulation" herein. From April 30, 1983 to
April 30, 1998, the percentage of Company Stores increased from 44% to 85%. From
inception to April 30, 1998, 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, 1998, the Company had 3,986 full-time employees and 6,380
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 18 district managers,
each with responsibility over approximately equal numbers of stores. Each
district manager is generally in charge of eight supervisors. Each of the 132
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-two years, one has been employed for more than twenty-six
years and one has been employed for more than thirty years.
In addition to its four executive officers, the Company currently has
Vice Presidents of Store Operations, Property Management, Marketing, Food
Service,
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Advertising and Human Resources. The Company also has 40 other employees with
managerial responsibilities in the areas of store operations, gasoline
marketing, real estate development, construction, transportation, equipment
maintenance, merchandising, advertising, Distribution Center operations,
payroll, accounting and data processing. The Company believes that such
employees are capable of carrying out their responsibilities without substantial
supervision by the executive officers.
COMPETITION
The Company's business is highly competitive. Food, including prepared
foods, and non-food items similar or identical to those sold by the Company are
generally available from various competitors in the communities served by
Casey's General Stores. Management believes that its stores located in small
towns compete principally with local convenience stores, grocery stores and
similar retail outlets and, to a lesser extent, with prepared food outlets or
restaurants and expanded gasoline stations offering a more limited selection of
grocery and food items for sale. Stores located in more heavily populated
communities may compete with local and national grocery and drug store chains,
expanded gasoline stations, supermarkets, discount food stores and traditional
convenience stores. Convenience store chains competing in the larger towns
served by Casey's General Stores include 7-Eleven, Kwik Shops, and regional
chains. Some of the Company's competitors have greater financial and other
resources than the Company.
Gasoline sales, in particular, are intensely competitive. The Company
competes with both independent and national brand gasoline stations, some of
which may have access to more favorable arrangements for gasoline supply than do
the Company or the firms that supply its stores. Management believes that the
most direct competition for gasoline sales comes from other self-service
installations in the vicinity of individual store locations, some of whom
regularly offer non-cash discounts on self-service gasoline purchases such as a
"discounted" car wash or "mini-service." Company Stores generally do not offer
such discounts. In addition, management believes that Company Stores compete for
gasoline customers who regularly travel outside of their relatively smaller
community for shopping or employment purposes, and who therefore are able to
purchase gasoline while in nearby larger communities where retail gasoline
prices generally are lower. For this reason, the Company attempts to offer
gasoline for sale at prices comparable to those prevailing in nearby larger
communities.
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 1,885 USTs of which 1,554 are fiberglass and 331 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, 1997 and 1998, the Company spent approximately $579,000
and $502,000, 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, 1998, approximately $4,300,000 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, 1998, 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 $800,000 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 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, 1997, 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, 1998, 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, 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, 1998, Casey's owned the land at 872 locations and the
buildings at 894 locations, and leased the land at 74 locations and the
buildings at 52 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 has filed administrative appeals from adverse decisions by
the Iowa Department of Natural Resources ("IDNR") and the Iowa Underground
Storage Tank Financial Responsibility Program Board (the "UST Board") with
respect to the installation of cathodic protection at certain of the Company's
underground storage tanks ("USTs") located in the State of Iowa. The appeals
followed IDNR's determination that certain of such installations, which were
performed on behalf of the Company by a third-party contractor (Corrpro
Companies, Inc.) ("Corrpro"), were not fully in compliance with IDNR
administrative rules for corrosion protection upgrade. The IDNR upgrade
compliance date is December 22, 1998. However, the UST Board, which controls
funds to partially reimburse tank owners for the costs of corrective action for
past releases from leaking USTs, set an upgrade compliance date of January 1,
1995 for owners such as the Company. As a result of the IDNR determination, the
UST Board has demanded a refund from the Company in the amount of $1,603,102.57
for remedial costs previously reimbursed to the Company by the UST Board with
respect to said locations. In addition, the UST Board is withholding future
payment of remedial funds pending resolution of the compliance issue.
The Company has been participating in informal settlement discussions
with IDNR and the UST Board in an effort to resolve the matter. An agreement in
principle has been reached with the IDNR and is in the process of being
formalized. That settlement
- 17 -
<PAGE> 18
requires the Company to further test certain of its tanks at an aggregate cost
of approximately $100,000 and to take whatever further corrective action may be
necessary to remediate any test failures. This settlement allows all tanks
subject to the controversy to be considered in compliance with the December,
1998 IDNR upgrade rules. No settlement has yet been reached with the UST Board
and there can be no assurance that an acceptable settlement will be forthcoming.
In the event it is not possible to reach a settlement, the Company expects to
pursue its administrative appeal and proceed with contested case hearings before
an administrative law judge (whose decision may be appealed to district court).
If it is finally determined that the affected sites did not meet the applicable
IDNR standards on January 1, 1995, such sites would not qualify for remedial
benefits provided through the UST Board and the benefits received with respect
to such sites would be subject to repayment.
The Company and Corrpro are parties to a contract under which Corrpro
agreed to install cathodic protection systems in all of the Company's qualifying
USTs in the State of Iowa in order to meet the upgrade requirements by January
1, 1995, and further agreed to defend and indemnify the Company for all
liability arising out of the acts or omissions of Corrpro in the performance of
its work under that agreement. The Company would expect to litigate its claims
against Corrpro for whatever costs or expenses it may incur as a result of the
foregoing claims and proceedings.
The Company from time to time is a party to other 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 other proceedings pending as of the date of this Form 10-K
is material in the aggregate.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
Not applicable.
- 18 -
<PAGE> 19
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The information required in response to this Item is incorporated
herein by reference from the section entitled "Common Stock Data" set forth on
page 24 of the Company's Annual Report to shareholders for the year ended April
30, 1998.
The cash dividends declared by the Company (adjusted to give effect to
the two-for-one stock split distributed on February 17, 1998) during the periods
indicated have been as follows:
Cash Dividend
Declared
--------------
Calendar 1996
-------------
First Quarter $.0125
Second Quarter .0125
Third Quarter .0125
Fourth Quarter .0125
-----
$.05
Calendar 1997
-------------
First Quarter $.0125
Second Quarter .0125
Third Quarter .015
Fourth Quarter .015
----
$.055
Calendar 1998
-------------
First Quarter $.015
Second Quarter .015
- 19 -
<PAGE> 20
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, 1998.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required in response to this Item is incorporated herein
by reference from pages 18 through 22 of the Company's Annual Report to
shareholders for the year ended April 30, 1998.
The foregoing Management's Discussion and Analysis of Financial
Condition and Results of Operations contains various "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements represent the Company's expectations or beliefs
concerning future events, including (i) any statements regarding future sales
and gross profit percentages, (ii) any statements regarding the continuation of
historical trends and (iii) any statements regarding the sufficiency of the
Company's cash balances and cash generated from operations and financing
activities for the Company's future liquidity and capital resource needs. The
Company cautions that these statements are further qualified by important
factors that could cause actual results to differ materially from those in the
forward-looking statements, including, without limitations, the factors
described in the Cautionary Statement Relating to Forward-Looking Statements
included as Exhibit 99 to the Form 10-Q for the fiscal quarter ended January 31,
1997.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
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, 1998.
- 20 -
<PAGE> 21
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, 1998 and to be used in connection
with the Company's Annual Meeting of shareholders to be held on September 18,
1998, 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, 1998 and to be used in
connection with the Company's Annual Meeting of shareholders to be held on
September 18, 1998, is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
That portion of the Company's definitive Proxy Statement appearing under
the captions "Shares Outstanding" and "Voting Procedures", to be filed with the
Commission pursuant to Regulation 14A within 120 days after April 30, 1998 and
to be used in connection with the Company's Annual Meeting of shareholders to be
held on September 18, 1998, 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, 1998 and to be used in connection with the Company's Annual Meeting of
shareholders to be held on September 18, 1998, is hereby incorporated by
reference.
- 21 -
<PAGE> 22
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, 1998:
Consolidated Balance Sheets, April 30, 1998 and 1997
Consolidated Statements of Income, Three Years Ended April 30, 1998
Consolidated Statements of Shareholders' Equity, Three Years
Ended April 30, 1998
Consolidated Statements of Cash Flows,
Three Years Ended April 30, 1998
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:
Exhibit Number Document
-------------- --------
10.4(b) Sixth Amended and Restated
Casey's General Stores, Inc.
Employees' Stock Ownership
Plan and Trust Agreement (v)
10.19 Casey's General Stores, Inc.
1991 Incentive Stock Option
Plan (j) and amendment
thereto (o)
- 22 -
<PAGE> 23
10.21(a) Amended and Restated
Employment Agreement with
Donald F. Lamberti (z) and First
Amendment thereto (aa)
10.22(a) Amended and Restated
Employment Agreement with
Ronald M. Lamb (z) and First
Amendment thereto (aa)
10.23(a) Amended and Restated
Employment Agreement with
Douglas K. Shull (z)
10.24(a) Amended and Restated
Employment Agreement with
John G. Harmon (z)
10.30 Non-Qualified Supplemental Executive
Retirement Plan (z)
10.31 Non-Qualified Supplemental Executive
Retirement Plan Trust Agreement with
UMB Bank, n.a. (z)
10.32 Severance Agreement with Douglas K.
Shull (bb)
- --------------------
(j) Incorporated by reference from the Registration Statement on Form S-8
(33-42907) filed September 23, 1991.
(l) Incorporated by reference from the Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1992.
(o) Incorporated by reference from the Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1994.
(t) Incorporated by reference from the Annual Report on Form 10-K for the
fiscal year ended April 30, 1994.
(v) Incorporated by reference from the Annual Report on Form 10-K for the
fiscal year ended April 30, 1995.
- 23 -
<PAGE> 24
(w) Incorporated by reference from the Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1997.
(z) Incorporated by reference from the Current Report on Form 8-K filed
November 10, 1997.
(aa) Incorporated by reference from the Current Report on Form 8-K filed
April 12, 1998.
(bb) Incorporated by reference from the Current Report on Form 8-K filed
July 28, 1998.
(b) REPORTS ON FORM 8-K
On April 2, 1998, the Company filed a Form 8-K setting forth
information with respect to the amendments to the employment agreements
with Donald F. Lamberti and Ronald M. Lamb. There were no other reports
on Form 8-K filed during the fiscal quarter ended April 30, 1998.
(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)
4.5 Note Agreement dated as of December 1, 1997 among the Company
and Principal Mutual Life Insurance Company, Nippon Life
Insurance Company of America and TMG Life Insurance Company (y)
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)
</TABLE>
- 24 -
<PAGE> 25
10.10 Form of Equipment Lease Agreement (a)
10.16 Secured Promissory Note dated November 30, 1989 given to Principal
Mutual Life Insurance Company (f)
10.18 Commercial Note with Norwest Bank Iowa, N.A.(k)
10.19 Casey's General Stores, Inc. 1991 Incentive Stock Option Plan (j) and
amendment thereto (o)
10.21(a) Amended and Restated Employment Agreement with Donald F. Lamberti
(z) and First Amendment thereto (aa)
10.22(a) Amended and Restated Employment Agreement with Ronald M. Lamb
(z) and First Amendment thereto (aa)
10.23(a) Amended and Restated Employment Agreement with Douglas K. Shull
(z)
10.24(a) Amended and Restated Employment Agreement with John G. Harmon (z)
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)
10.30 Non-Qualified Supplemental Executive Retirement Plan (z)
10.31 Non-Qualified Supplemental Executive Retirement Plan Trust
Agreement with UMB Bank, n.a. (z)
10.32 Severance Agreement with Douglas K. Shull (bb)
11 Statement regarding computation of earnings per share
13 Consolidated Financial Statements from 1998 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)
- ------------------------------
(a) Incorporated herein by reference from the Registration Statement on Form
S-1 (2-82651) filed August 31, 1983.
(b) Reserved.
(c) Reserved.
(d) Incorporated herein by reference from the Quarterly Report on Form 10-Q
for the fiscal quarter ended January 31, 1988 (0-12788).
- 25 -
<PAGE> 26
(e) Incorporated herein by reference from the Registration Statement on Form
8-A filed June 19, 1989 (0-12788).
(f) Incorporated by reference from the Quarterly Report on Form 10-Q for the
fiscal quarter ended October 31, 1989.
(g) Incorporated by reference from the Annual Report on Form 10-K for the
fiscal year ended April 30, 1989.
(h) Reserved.
(i) Incorporated by reference from the Form 8 (Amendment No. 1 to the
Registration Statement on Form 8-A filed June 19, 1989) filed September
10, 1990.
(j) Incorporated by reference from the Registration Statement on Form S-8
(33-42907) filed September 23, 1991.
(k) Incorporated by reference from the Annual Report on Form 10-K for the
fiscal year ended April 30, 1991.
(l) Incorporated by reference from the Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1992.
(m) 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.
- 26 -
<PAGE> 27
(s) Incorporated by reference from the Quarterly Report on Form 10-Q for the
fiscal quarter ended July 31, 1994.
(t) Incorporated by reference from the Annual Report on Form 10-K for the
fiscal year ended April 30, 1994.
(u) Incorporated by reference from the Current Report on Form 8-K filed
January 11, 1996.
(v) Incorporated by reference from the Annual Report on Form 10-K for the
fiscal year ended April 30, 1995.
(w) Incorporated by reference from the Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1997.
(x) Incorporated by reference from the Quarterly Report on Form 10-Q for the
fiscal quarter ended October 31, 1996.
(y) Incorporated by reference from the Current Report on Form 8-K filed
January 7, 1998.
(z) Incorporated by reference from the Current Report on Form 8-K filed
November 10, 1997.
(aa) Incorporated by reference from the Current Report on Form 8-K filed
April 2, 1998.
(bb) Incorporated by reference from the Current Report on Form 8-K filed
July 28, 1998.
- 27 -
<PAGE> 28
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 20, 1998 By: /s/ Ronald M. Lamb
-------------------
Ronald M. Lamb,
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: July 20, 1998 By: /s/ Ronald M. Lamb
-------------------
Ronald M. Lamb
Chief Executive Officer, Director
Date: July 20, 1998 By: /s/ Donald F. Lamberti
-----------------------
Donald F. Lamberti
Chairman of the Executive
Committee, Director
- 28 -
<PAGE> 29
Date: July 23, 1998 By: /s/ John G. Harmon
-------------------
John G. Harmon
Secretary/Treasurer, Director
(Principal Financial Officer and
Principal Accounting Officer)
Date: July 20, 1998 By: /s/ Patricia Clare Sullivan
---------------------------
Patricia Clare Sullivan
Director
Date: July 20, 1998 By: /s/ Kenneth H. Haynie
----------------------
Kenneth H. Haynie
Director
Date: July 20, 1998 By:/s/ John R. Fitzgibbon
-----------------------
John R. Fitzgibbon
Director
Date: July 17, 1998 By:/s/ Jack P. Taylor
-------------------
Jack P. Taylor
Director
- 29 -
<PAGE> 30
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
11 Statement regarding computation
of earnings per share
13 Consolidated Financial Statements from
1998 Annual Report to shareholders
21 Subsidiaries of Casey's General
Stores, Inc.
24.1 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule
- 30 -
<PAGE> 1
Exhibit 11
CASEY'S GENERAL STORES, INC.
----------------------------
Computation of Per Share Earnings
Year Ended April 30,
--------------------
1998 1997 1996
---- ---- ----
Net income $33,467,497 $27,010,025 $26,767,085
=========== =========== ===========
Average common shares
outstanding 52,537,954 52,456,746 52,220,838
Average common equivalent
shares applicable to
stock options 387,182 109,474 258,826
----------- ----------- -----------
52,925,136 52,566,220 52,479,664
=========== =========== ===========
Earnings per share-dilutive $ .63 $ .51 $ .51
=========== =========== ===========
<PAGE> 1
FINANCIAL SECTION - 1998
CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 30
-------------------
ASSETS 1998 1997
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,022 $ 3,098
Short-term investments 1,328 6,898
Receivables 2,537 2,702
Inventories (Note 1) 39,200 36,523
Prepaid expenses (Note 5) 5,437 5,453
-------- --------
Total current assets 52,524 54,674
- ----------------------------------------------------------------------------------------------------
Long-term investments (Note 1) 6,137 3,562
Other assets, net of amortization 1,405 1,341
Property and equipment, at cost: (Note 2)
Land 69,801 58,905
Buildings and leasehold improvements 236,494 202,734
Machinery and equipment 286,194 251,115
Leasehold interest in property and equipment (Note 6) 12,552 12,812
-------- --------
605,041 525,566
Less accumulated depreciation and amortization 185,133 158,098
-------- --------
Net property and equipment 419,908 367,468
-------- --------
$479,974 $427,045
====================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks (Note 2) $ 16,600 $ 2,800
Current maturities of long-term debt (Note 2) 5,515 11,796
Accounts payable 43,745 37,208
Accrued expenses: Salaries and wages 4,212 3,083
Other (Note 9)
15,536 14,466
Income taxes payable 4,380 4,434
-------- --------
Total current liabilities 89,988 73,787
- ----------------------------------------------------------------------------------------------------
Long-term debt, net of current maturities (Note 2) 79,094 79,685
Deferred income taxes (Note 5) 45,004 39,579
Deferred compensation (Note 7) 2,514 2,103
Total liabilities 216,600 195,154
Shareholders' equity: (Note 3)
Capital stock: Preferred stock, no par value, none issued - - - - - - - -
Common Stock, no par value, 52,600,012 and
52,482,412 shares issued and outstanding
at April 30, 1998 and 1997, respectively 65,922 64,886
Retained earnings 197,452 167,005
-------- --------
Total shareholders' equity 263,374 231,891
-------- --------
$479,974 $427,045
Commitments and contingencies (Notes 6, 8 and 9)
====================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
7
CASEY'S GENERAL STORES, INC. 1998 ANNUAL REPORT
<PAGE> 2
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30
------------------------------------
1998 1997 1996
----------- ---------- ----------
<S> <C> <C> <C>
Net sales $1,186,885 $1,109,002 $ 954,764
Franchise revenue 5,106 5,206 5,384
---------- ---------- ----------
1,191,991 1,114,208 960,148
Cost of goods sold 930,513 886,349 748,183
Operating expenses 171,652 151,774 138,581
Depreciation and amortization 30,354 26,883 24,655
Interest, net (Note 2) 5,924 5,990 5,730
---------- ---------- ----------
1,138,443 1,070,996 917,149
Income before income taxes 53,548 43,212 42,999
Provision for income taxes (Note 5) 20,081 16,202 16,232
---------- ---------- ----------
Net income $ 33,467 $ 27,010 $ 26,767
================================================================================
Earnings per common share (Notes 3 and 4)
Basic $ .64 $ .51 $ .51
Diluted $ .63 $ .51 $ .51
================================================================================
</TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER AMOUNTS)
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
--------- --------- ---------
<S> <C> <C> <C> <C>
Balance at April 30, 1995 $ 61,343 $ 118,329 $ 179,672
Net income - - - - - 26,767 26,767
Payment of dividends (4 3/4 cents per share) - - - - - (2,478) (2,478)
Proceeds from exercise of stock options (509,600 shares) 2,214 - - - - - 2,214
--------- --------- ---------
Balance at April 30, 1996 63,557 142,618 206,175
Net income - - - - - 27,010 27,010
Payment of dividends (5 cents per share) - - - - - (2,623) (2,623)
Proceeds from exercise of stock options (39,000 shares) 204 - - - - - 204
Tax benefits related to nonqualified stock options (Note 3) 1,125 - - - - - 1,125
--------- --------- ---------
Balance at April 30, 1997 64,886 167,005 231,891
Net income - - - - - 33,467 33,467
Payment of dividends (5 3/4 cents per share) - - - - - (3,020) (3,020)
Proceeds from exercise of stock options (117,600 shares) 916 - - - - - 916
Tax benefits related to nonqualified stock options (Note 3) 120 - - - - - 120
--------- --------- ---------
Balance at April 30, 1998 $ 65,922 $ 197,452 $ 263,374
================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
8
CASEY'S GENERAL STORES, INC. 1998 ANNUAL REPORT
<PAGE> 3
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30
------------------------------------------------
1998 1997 1996
--------- -------- ---------
CASH FLOWS FROM OPERATIONS:
<S> <C> <C> <C>
Net income $ 33,467 $ 27,010 $ 26,767
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation and amortization 30,354 26,883 24,655
Deferred income taxes 5,422 6,600 8,000
Changes in assets and liabilities:
Receivables 165 (22) 407
Inventories (2,677) (4,086) (5,094)
Prepaid expenses 19 3,002 (4,763)
Accounts payable 6,537 1,018 (3,671)
Accrued expenses 2,199 517 1,316
Income taxes payable 66 5,559 (1,545)
Other, net 3,025 1,221 1,900
-------- -------- --------
Net cash provided by operations 78,577 67,702 47,972
CASH FLOWS FROM INVESTING:
Purchase of property and equipment (85,276) (66,722) (60,383)
Purchase of investments (7,466) (11,757) (17,294)
Sale of investments 10,345 20,292 6,024
-------- -------- --------
Net cash used in investing activities (82,397) (58,187) (71,653)
CASH FLOWS FROM FINANCING:
Proceeds from long-term debt 18,000 15,000 30,000
Payments of long-term debt (24,952) (13,448) (8,533)
Net activity of short-term debt 13,800 (18,225) 9,675
Proceeds from exercise of stock options 916 204 2,213
Payments of cash dividends (3,020) (2,622) (2,478)
-------- -------- --------
Net cash provided by (used in) financing activities 4,744 (19,091) 30,877
Net increase (decrease) in cash and cash equivalents 924 (9,576) 7,196
Cash and cash equivalents at beginning of year 3,098 12,674 5,478
-------- -------- --------
Cash and cash equivalents at end of year $ 4,022 $ 3,098 $ 12,674
======================================================================================================
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
<TABLE>
<CAPTION>
Cash paid during the year for:
<S> <C> <C> <C>
Interest (net of amount capitalized) $ 6,675 $ 7,102 $ 5,770
Income taxes 14,585 1,043 14,523
Noncash investing and financing activities:
Property and equipment acquired through
an installment purchase 80 - - - - - - - -
Increase in Common Stock and decrease in
income taxes payable due to tax benefits
related to nonqualified stock options (Note 3) 120 1,125 - - - -
======================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
9
CASEY'S GENERAL STORES, INC. 1998 ANNUAL REPORT
<PAGE> 4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS - Casey's General Stores, Inc. and Subsidiaries (the Company)
operates 1,109 convenience stores in 9 midwestern states. At April 30, 1998, the
Company owned or leased 946 of these stores with 163 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 1998 were distributed as
follows: gasoline - 59% and grocery and other - 41%. The Company's materials are
readily available, and the Company is not dependent on a single supplier or only
a few suppliers.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
financial statements of Casey's General Stores, Inc. and its two wholly-owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS - Cash equivalents consist of money market funds. The Company
considers all highly liquid investments with 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, 1998:
<TABLE>
<S> <C>
Due after 1 year through 5 years $ 851
Due after 5 years through 10 years 1,190
Due after 10 years 4,096
-------
$ 6,137
=======
</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 $7,232 and $6,588 below
replacement cost as of April 30, 1998 and 1997, respectively.
DEPRECIATION AND AMORTIZATION - Depreciation of property and equipment and
amortization of capital lease assets are computed principally by the
straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Buildings 30-40 Years
Machinery and equipment 5-30 Years
Leasehold interest in property and equipment Lesser of term of lease or life of asset
Leasehold improvements Lesser of term of lease or life of asset
</TABLE>
EXCISE TAXES - Excise taxes approximating $219,000, $196,000 and $175,000
collected from customers on retail gasoline sales are included in net sales for
1998, 1997 and 1996, respectively.
INCOME TAXES - Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
10
CASEY'S GENERAL STORES, INC. 1998 ANNUAL REPORT
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
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.
EARNINGS PER COMMON SHARE - The Company adopted the provisions of SFAS No. 128,
Earnings Per Share effective January 31, 1998. SFAS No. 128 is retroactive to
prior years, however, the adoption had no effect on prior years' earnings per
share as previously reported. Basic earnings per share have been computed by
dividing net income by the weighted-average outstanding common shares during
each of the years. Diluted earnings per share has been calculated by also
including in the computation the effect of stock options granted as potential
common shares.
ENVIRONMENTAL REMEDIATION LIABILITIES - In October 1996, the American Institute
of Certified Public Accountants issued Statement of Position ("SOP") 96-1,
Environmental Remediation Liabilities. SOP 96-1 was adopted by the Company on
May 1, 1997 and requires, among other things, environmental remediation
liabilities to be accrued when the criteria of SFAS No. 5, Accounting for
Contingencies, have been met. The guidance provided by the SOP is consistent
with the Company's current method of accounting for environmental remediation
costs as described in Note 9 and, therefore, adoption of this new Statement does
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. At April 30, 1998 and 1997, notes
payable to banks consisted of $37,000 and $27,000 in lines of credit with
balances owed of $16,600 and $2,800, respectively. Within the notes payable to
banks, $7,775 on a $25,000 line of credit is due on demand and $8,825 on a
$12,000 line of credit is due December 31, 1998. The weighted average interest
rate was 6.25% at April 30, 1998 and 6.24% at April 30, 1997.
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
$83,000 and $86,000, respectively, at April 30, 1998 and 1997.
Interest expense is net of interest income of $681, $1,201 and $755 for the
years ended April 30, 1998, 1997 and 1996, respectively. Interest expense in the
amount of $847, $717 and $678 was capitalized during the years ended April 30,
1998, 1997 and 1996, respectively.
11
CASEY'S GENERAL STORES, INC. 1998 ANNUAL REPORT
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Long-term debt, at carrying value, consists of the following: APRIL 30
-----------------
1998 1997
<S> <C> <C>
Capitalized lease obligations, discounted at rates of
7.4% to 15.2%, due in various monthly installments
through 2008 (Note 6) $ 4,608 $ 6,309
Mortgage notes payable due in various monthly installments
through 2004 with interest at 6.0% to 9.4% 11,751 13,266
7.70% Senior Notes due in 40 quarterly installments beginning in
March 1995 20,250 23,250
7.38% Senior Notes due in 21 semi-annual installments beginning
in December 2010 30,000 30,000
6.55% Senior Notes due in five annual installments beginning
in December 1999 18,000 - - - -
Unsecured notes payable to banks with variable
rates of interest - - - - 18,656
------- -------
84,609 91,481
Less current maturities 5,515 11,796
------- -------
$79,094 $79,685
====================================================================================
</TABLE>
Mortgage notes payable includes a Secured Promissory Note, Mortgage and Security
Agreement with a balance of $11,637 and $12,837 at April 30, 1998 and 1997,
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 $13,800 at April 30, 1998.
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, 1999 and thereafter are:
<TABLE>
<CAPTION>
<S> <C>
YEAR ENDING APRIL 30
--------------------
2000 $ 8,823
2001 8,960
2002 9,027
2003 9,109
Thereafter 43,175
---------
$ 79,094
=========
</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. Effective February 17, 1998 the Company approved a two-for-one stock
split effected in the form of a 100% stock dividend. All share and per share
amounts have been restated to give effect to the stock split.
COMMON SHARE PURCHASE RIGHTS - On June 14, 1989, the Board of Directors adopted
a Shareholder Rights Plan (Rights Plan). In connection with the adoption of the
Rights Plan, the Board of Directors declared a dividend distribution of one
Common Share Purchase Right for each share of Common Stock held at the close of
business on June 14, 1989. The Rights become exercisable 10 days following a
public announcement that 20% or more of the Company's Common Stock has been
acquired or such an intent to acquire has become apparent. The Rights will
expire on the earlier of June 14, 1999 or redemption by the Company. Certain
terms of the Rights are subject to adjustment to prevent dilution. Further
description and terms of the Rights are set forth in the Rights Agreement
between the Company and UMB Bank, n.a. as Rights Agent.
12
CASEY'S GENERAL STORES, INC. 1998 ANNUAL REPORT
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
STOCK OPTION PLAN - Under an incentive stock option plan, options can be granted
to certain officers and key employees to purchase an aggregate of 4,560,000
shares of Common Stock at option prices not less than the fair market value of
the stock (110% of fair market value as to holders of 10% or more of the
Company's stock) at the date the options are granted. Options for 1,009,664
shares were available for grant at April 30, 1998 and options for 915,400 shares
(which expire between 2001-2007) were outstanding. The per share
weighted-average fair value of the stock options granted during 1998, 1997 and
1996 was $11.33, $7.11 and $8.60, respectively, on the date of grant using the
Black Scholes option-pricing model with the following weighted-average
assumptions: 1998 - expected dividend yield .61%, risk-free interest rate of
6.2%, and an expected life of 7.5 years; 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 incentive stock
option 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>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net income As reported $ 33,467 $ 27,010 $ 26,767
Pro forma 32,663 26,581 26,023
Basic earnings per share As reported $ .64 $ .51 $ .51
Pro forma .62 .50 .50
</TABLE>
Pro forma net income reflects only options granted in the years ended April 30,
1998, 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
options` expected life 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, 1995 742,600 $ 4.50
Granted 404,000 9.89
Exercised (509,600) 4.34
Forfeited (4,000) 5.13
-------- ---------
Balance at April 30, 1996 633,000 8.07
Granted 108,000 9.07
Exercised (39,000) 5.24
Forfeited (23,000) 10.25
-------- ---------
Balance at April 30, 1997 679,000 8.31
Granted 372,000 11.09
Exercised (117,600) 7.79
Forfeited (18,000) 10.80
-------- ---------
Balance at April 30, 1998 915,400 $ 9.56
======== =========
</TABLE>
At April 30, 1998, the range of exercise prices and weighted-average remaining
contractual life of outstanding options was $3.84-$11.38 and 6.15 years,
respectively. The number of shares and weighted-average remaining
13
CASEY'S GENERAL STORES, INC. 1998 ANNUAL REPORT
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
contractual life of the options by range of applicable exercise prices at April
30, 1998 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>
$ 3.84 - 6.80 174,900 $ 4.99 5.13
8.94 - 9.44 108,000 8.97 8.38
10.25 - 11.38 632,500 10.92 8.42
-------- =========== ======
915,400
========
</TABLE>
4. EARNINGS PER SHARE
A summary of the basic and diluted earnings per share computations for the years
ended April 30, 1998, 1997 and 1996 is presented below:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED 1998 FOR THE YEAR ENDED 1997 FOR THE YEAR ENDED 1996
Net earnings Shares Per share Net earnings Shares Per share Net earnings Shares Per share
(numerator) (denominator) amount (numerator) (denominator) amount (numerator) (denominator) amount
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS
Net earnings available
to common shareholders $ 33,467 52,537,954 $ .64 $ 27,010 52,456,746 $ .51 $ 26,767 52,220,838 $.51
Effect of dilutive
securities
Common stock options - - - - - 387,182 - - - - 109,474 - - - - 258,826
-------------------------------- ------------------------------------ ----------------------------
Diluted EPS $ 33,467 52,925,136 $ .63 $ 27,010 52,566,220 $ .51 $ 26,767 52,479,664 $.51
=================================================================================================================================
</TABLE>
5. INCOME TAXES
Income tax expense attributable to income from operations is comprised of the
following components:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
----------------------------------------------------------
1998 1997 1996
---------- ----------- ----------
<S> <C> <C> <C>
Current tax expense: Federal $ 12,460 $ 8,687 $ 6,843
State 2,199 915 1,389
---------- ----------- ----------
14,659 9,602 8,232
Deferred tax expense 5,422 6,600 8,000
---------- ---------- ---------
Total income tax provision $ 20,081 $ 16,202 $ 16,232
======================================================================================================================
</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
-----------------------------------
1998 1997 1996
-------- -------- --------
Deferred tax assets:
<S> <C> <C> <C>
Accrued liabilities $ 3,316 $ 3,313 $ 3,125
Deferred compensation 1,005 841 639
Other 731 511 241
-------- -------- --------
Total gross deferred tax assets 5,052 4,665 4,005
-------- -------- --------
Deferred tax liabilities:
Excess of tax over book depreciation (45,869) (40,029) (33,009)
Other (871) (902) (662)
-------- -------- --------
Total gross deferred liabilities (46,740) (40,931) (33,671)
-------- -------- --------
Net deferred tax liability $(41,688) $(36,266) $(29,666)
===============================================================================
</TABLE>
The deferred tax asset relating to accrued liabilities is a current asset and is
included with prepaid expenses. Management believes that future operations will
generate sufficient taxable income to realize the deferred tax assets.
14
CASEY'S GENERAL STORES, INC. 1998 ANNUAL REPORT
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
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
------------------------------
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
Income taxes at the statutory rates 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit 3.1 2.7 3.7
Other (.6) (.2) (1.0)
------ ----- -----
37.5% 37.5% 37.7%
===============================================================================================
</TABLE>
6. LEASES
The Company leases certain property and equipment used in its operations.
Generally, the leases are for primary terms of from 5 to 20 years with options
either to renew for additional periods or to purchase the premises and 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
-------------------------------------
1998 1997
---------- ----------
<S> <C> <C>
Real estate $ 8,050 $ 8,232
Equipment 4,502 4,580
---------- ----------
12,552 12,812
Less accumulated amortization 8,649 7,687
---------- ----------
$ 3,903 $ 5,125
===============================================================================================
</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, 1998:
<TABLE>
<CAPTION>
YEAR ENDING APRIL 30 CAPITAL LEASES OPERATING LEASES
<S> <C> <C> <C>
1999 $ 1,550 $ 346
2000 1,049 317
2001 966 276
2002 832 251
2003 688 229
Thereafter 778 898
---------- -----------
Total minimum lease payments 5,863 $ 2,317
Less amount representing interest 1,255 ===========
----------
Present value of net minimum lease payments $ 4,608
===============================================================================================
</TABLE>
The total rent expense under operating leases was $1,060 in 1998, $804 in 1997
and $788 in 1996.
7. 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 $150
of Plan expense in the year ended April 30, 1998 and there was no Plan expense
for the years ended April 30, 1997 and 1996.
On April 30, 1998, the Company had 3,986 full-time employees and 6,380 part-time
employees, of which approximately 4,300 were participants in the Plan. As of
that same date, the Trustee under the Plan held 3,879,133 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.
15
CASEY'S GENERAL STORES, INC. 1998 ANNUAL REPORT
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
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 $1,290, $1,184 and $1,093 for the years ended April 30, 1998,
1997 and 1996, respectively.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN - The Company has a non-qualified
supplemental executive retirement plan (SERP) for its four executive officers.
The SERP provides 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. 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 $1,180 per year exclusive of
bonuses. These agreements also provide for certain payments in the case of death
or disability of the officer-shareholders.
The Company also has entered into "change of control" employment agreements with
11 other key employees, providing for certain payments in the event of their
termination following a change of control of the Company.
9. CONTINGENCIES
ENVIRONMENTAL COMPLIANCE - The United States Environmental Protection Agency and
several states have adopted laws and regulations relating to underground storage
tanks used for petroleum products. Several states in which the Company does
business have trust fund programs with provisions for sharing or reimbursing
corrective action or remediation costs.
Management currently estimates that aggregate capital expenditures for
electronic monitoring, cathodic protection and overfill/spill protection will
approximate $800 through December 23, 1998, to comply with existing regulations.
The Company has accrued a liability at April 30, 1998 and 1997 of approximately
$1,600 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, 1998, the Company is partially self-insured for workman's
compensation claims, in all states except Iowa. 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.
Letters of credit approximating $2,200 were issued and outstanding at April 30,
1998, on the insurance company's behalf to facilitate this agreement. The
Company is self-insured for Iowa workman's compensation claims at April 30,
1998. Approximately $1,300 of investments are in escrow as required by this
state. Additionally, the Company is self-insured for its portion of employee
medical expenses. At April 30, 1998 and 1997, the Company has accrued $5,600 and
$5,500, respectively, within other accrued expenses for estimated claims
relating to self insurance.
16
CASEY'S GENERAL STORES, INC. 1998 ANNUAL REPORT
<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, 1998 and 1997, 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, 1998. 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 financial position of Casey's General
Stores, Inc. and subsidiaries as of April 30, 1998 and 1997, and the results of
their operations and their cash flows for each of the years in the three-year
period ended April 30, 1998 in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
DES MOINES, IOWA
JUNE 12, 1998
17
CASEY'S GENERAL STORES, INC. 1998 ANNUAL REPORT
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS)
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 second or 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:
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30
------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
NET SALES (1):
RETAIL SALES:
Grocery and general merchandise $ 438,780 $ 386,656 $ 346,427
Gasoline 671,942 643,005 531,415
---------- ---------- ----------
$1,110,722 $1,029,661 $ 877,842
========== ========== ==========
WHOLESALE SALES:
Grocery and general merchandise $ 39,670 $ 39,778 $ 40,605
Gasoline 25,749 28,007 25,625
---------- ---------- ----------
$ 65,419 $ 67,785 $ 66,230
========== ========== ==========
GROSS PROFITS (2):
RETAIL SALES:
Grocery and general merchandise $ 181,718 $ 156,656 $ 139,799
Gasoline 64,781 55,192 56,446
---------- ---------- ----------
$ 246,499 $ 211,848 $ 196,245
========== ========== ==========
WHOLESALE SALES:
Grocery and general merchandise $ 1,344 $ 1,351 $ 1,581
Gasoline 767 882 844
---------- ---------- ----------
$ 2,111 $ 2,233 $ 2,425
========== ========== ==========
</TABLE>
18
CASEY'S GENERAL STORES, INC. 1998 ANNUAL REPORT
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - CONTINUED (DOLLARS AND AMOUNTS IN THOUSANDS)
INDIVIDUAL STORE INFORMATION (3)
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30
----------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
COMPANY STORES:
Average retail sales $1,225 $1,226 $1,143
Average retail sales of grocery and
general merchandise 485 463 454
Average gross profit on grocery and
general merchandise 191 179 174
Average retail sales of gasoline 740 763 689
Average gross profit on gasoline (4) 72 66 74
Average operating income (5) 89 78 84
Average number of gallons sold 669 644 638
FRANCHISED STORES:
Average franchise revenue (6) $ 31 $ 30 $ 29
</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
CASEY'S GENERAL STORES, INC. 1998 ANNUAL REPORT
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - CONTINUED (DOLLARS IN THOUSANDS)
FISCAL 1998 COMPARED TO FISCAL 1997
Net sales for fiscal 1998 increased by $77,883 (7.0%) over fiscal 1997. Retail
gasoline sales increased by $28,937 (4.5%) as the number of gallons sold
increased by 66,367,746 (12.2%). During fiscal 1998, retail sales of grocery and
general merchandise increased by $52,124 (13.5%) due to the net addition of 68
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 1998
compared to 79.9% for the prior year. This result occurred because the gross
profit margin on retail gasoline sales increased and the gross profits on retail
sales of grocery and general merchandise also increased (to 41.4%) from the
prior year (40.5%).
Operating expenses as a percentage of net sales were 14.5% for fiscal 1998
compared to 13.7% for the prior year. The increase in operating expenses as a
percentage of net sales was caused primarily by a decrease in the average retail
price per gallon of gasoline sold.
Average operating income per Company Store increased by $11 (14.1%) primarily as
the result of increases in the gross profit margins on gasoline and grocery and
general merchandise.
Net income increased by $6,457 (23.9%). The increase in net income was
attributable primarily to increases in gross profit margins on gasoline and
grocery and general merchandise and an increased number of stores in operation
at least three years.
FISCAL 1997 COMPARED TO FISCAL 1996
Net sales for fiscal 1997 increased by $154,238 (16.2%) over fiscal 1996. Retail
gasoline sales increased by $111,590 (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 $40,229 (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 $6 (6.4%), primarily as
the result of a decrease in the gross profit margins on retail gasoline sales.
Net income increased by $243 (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.
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, 1998, the Company's ratio of current assets to current liabilities was
.58 to 1. Management believes that the Company's current $37,000 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 $10,875 (16.1%) during the year ended
April 30, 1998, primarily as a result of an increase in net income and an
increase in accounts payable. Cash flows used in investing increased during
fiscal 1998, primarily because of the purchase of property and equipment. During
fiscal 1998, the
20
CASEY'S GENERAL STORES, INC. 1998 ANNUAL REPORT
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - CONTINUED (DOLLARS IN THOUSANDS)
Company expended approximately $85,000 for property and equipment, primarily for
the construction and remodeling of Company Stores. The Company anticipates
expending approximately $90,000 in fiscal 1999 for construction, acquisition and
remodeling of Company Stores, primarily from funds generated by operations,
existing cash and short-term investments.
As of April 30, 1998, the Company had long-term debt of $79,094, consisting of
$17,250 of 7.70% Senior Notes, $30,000 of 7.38% Senior Notes, $18,000 of 6.55%
Senior Notes, $10,403 of mortgage notes payable and $3,441 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 or integral
multiples of $100 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 or integral multiples of $100 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.
Interest on the 6.55% Senior Notes is payable on the 18th day of each March,
June, September and December. Principal of the 6.55% Senior Notes matures in
five annual installments beginning December 18, 1999. The Company may prepay the
6.55% Senior Notes in whole or in part at any time in an amount of not less than
$1,000 or integral multiples of $100 in excess thereof at a redemption price
calculated in accordance with the Note Agreement dated as of December 1, 1997
between the Company and the purchaser of the 6.55% 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.
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 1,885 USTs of which 1,554
are fiberglass and 331 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, 1998 and 1997, the Company spent approximately $502 and
$579, 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, 1998, a total of approximately $4,300 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.
21
CASEY'S GENERAL STORES, INC. 1998 ANNUAL REPORT
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - CONTINUED (DOLLARS IN THOUSANDS)
LIQUIDITY AND CAPITAL RESOURCES - CONTINUED
The Company has accrued a liability at April 30, 1998, of approximately $1,600
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 $800 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 Company's first two fiscal quarters),
customers tend to purchase greater quantities of gasoline and certain
convenience items such as beer, soft drinks and ice. Difficult weather
conditions in any quarter, however, may affect sales of Company stores in
specific regions and have an adverse impact on net income for that period.
INFLATION - The Company has generally been able to pass along inflationary
increases in its costs through increased sales prices of products sold, except
in those instances where doing so would have had a material adverse impact on
the Company's ability to compete. Accordingly, management believes that
inflation has not had a material impact upon the operating results of the
Company.
MINIMUM WAGE LEGISLATION - Recent congressional action to increase the federal
minimum wage may have a significant impact on the Company's operating results,
particularly in the near term, to the extent the 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.
YEAR 2000 - Management has initiated a "Year 2000" program to prepare the
Company's information technology systems (including hardware, software and
application programs) for year 2000 compliance, with project completion
currently scheduled for April 30, 1999. All necessary expenditures, which are
not expected to be material (including internal staff and consulting costs),
will be funded through operating cash flow. The Company also is working
cooperatively with third parties having systems upon which the Company must
rely, but cannot give any assurances that the systems of such other parties will
be year 2000 compliant on a timely basis. Systems operated by others which the
Company would use and/or rely upon include those of banking institutions and
telephone companies, as well as vendor and franchisee workstations and product
ordering systems. The Company's business and financial condition and/or results
of operations could be materially adversely affected by the failure of its
systems and applications or those operated by such other third parties.
RECENT ACCOUNTING PRONOUNCEMENTS - In June 1997, the Financial Accounting
Standards Board (FASB) issued SFAS No. 130 Reporting Comprehensive Income. SFAS
No. 130 establishes standards for reporting and displaying comprehensive income
and its components in financial statements. Comprehensive income, as defined,
includes all changes in equity (net assets) during a period from non-owner
sources . An example of items to be included in comprehensive income, which are
excluded from net income, would be unrealized gains/losses on available for sale
securities. The disclosure prescribed by SFAS No. 130 must be made beginning
with the first quarter of fiscal 1999.
22
CASEY'S GENERAL STORES, INC. 1998 ANNUAL REPORT
<PAGE> 17
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF INCOME DATA
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30
----------------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $ 1,186,885 $ 1,109,002 $ 954,764 $ 848,843 $ 731,206
Franchise revenue 5,106 5,206 5,384 5,269 5,121
----------- ----------- --------- --------- ---------
1,191,991 1,114,208 960,148 854,112 736,327
Cost of goods sold 930,513 886,349 748,183 665,925 574,144
Operating expenses 171,652 151,774 138,581 123,004 110,083
Depreciation and amortization 30,354 26,883 24,655 22,237 18,623
Interest, net 5,924 5,990 5,730 5,590 6,434
----------- ----------- --------- --------- ----------
Income before income taxes 53,548 43,212 42,999 37,356 27,043
Provision for income taxes 20,081 16,202 16,232 14,475 10,479
----------- ----------- --------- --------- ---------
Net income $ 33,467 $ 27,010 $ 26,767 $ 22,881 $ 16,564
===========================================================================================================================
*Net income per share - basic $ .64 $ .51 $ .51 $ .44 $ .37
===========================================================================================================================
*Weighted average number of common
and common equivalent shares
outstanding - basic 52,538 52,457 52,221 51,934 45,143
*Dividends paid per common share $ .0575 $ .05 $ .0475 $ .04 $ .035625
</TABLE>
*All share and per share data have been restated to reflect a two-for-one stock
split effective February 17, 1998.
- --------------------------------------------------------------------------------
BALANCE SHEET DATA
<TABLE>
<CAPTION>
AS OF APRIL 30
----------------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Current assets $ 52,524 $ 54,674 $ 70,011 $ 43,191 $ 41,369
Total assets 479,974 427,045 404,835 345,159 318,238
Current liabilities 89,988 73,787 82,927 76,971 75,453
Long-term debt 79,094 79,685 81,249 59,963 61,415
Shareholders' equity 263,374 231,891 206,175 179,672 158,410
</TABLE>
23
CASEY'S GENERAL STORES, INC. 1998 ANNUAL REPORT
<PAGE> 18
QUARTERLY FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30, 1998 YEAR ENDED APRIL 30, 1997
------------------------------------------- -----------------------------------------------------------------
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 $ 320,654 $ 317,436 $ 276,927 $ 271,868 $1,186,885 $ 286,908 $ 286,291 $ 272,070 $263,733 $1,109,002
Gross profit (A) 66,373 68,261 63,109 58,629 256,372 58,103 59,725 53,633 51,192 222,653
Net income $ 10,541 $ 10,808 $ 7,363 $ 4,755 $ 33,467 $ 8,871 $ 8,905 $ 5,536 $ 3,698 $ 27,010
=========================================== =================================================================
Earnings per
common share
Basic $ .20 $ .21 $ .14 $ .09 $ .64 $ .17 $ .17 $ .10 $ .07 $ .51
Diluted $ .20 $ .20$ .14 $ .09 $ .63 $ .17 $ .17 $ .10 $ .07 $ .51
=========================================== =================================================================
</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, 1998.
<TABLE>
<CAPTION>
CALENDAR 1996 HIGH LOW
- --------------------------------------------------------------------------------
<S> <C> <C>
First Quarter $ 12 1/2 $ 9 13/16
Second Quarter 12 7/16 9
Third Quarter 10 3/8 8 1/16
Fourth Quarter 9 27/32 7 3/4
CALENDAR 1997
- --------------------------------------------------------------------------------
First Quarter 10 5/16 8 3/8
Second Quarter 11 1/2 9 1/4
Third Quarter 12 1/2 10 3/4
Fourth Quarter 12 13/16 11 1/2
CALENDAR 1998
- --------------------------------------------------------------------------------
First Quarter 16 3/8 12 3/4
Second Quarter 18 1/4 13 5/8
- --------------------------------------------------------------------------------
</TABLE>
On July 7, 1998, the last reported sales price of the Company's Common Stock was
$16 11/16 per share. On July 7, 1998, there were 3,057 holders of record of the
Common Stock.
The Company commenced paying cash dividends during fiscal 1991. On June 12,
1998, the Board of Directors declared a 1 1/2 cents per share dividend for
shares held of record on August 3, 1998. The dividend is payable on August 17,
1998. The Company currently intends to pay comparable cash dividends on a
quarterly basis in the future.
24
CASEY'S GENERAL STORES, INC. 1998 ANNUAL REPORT
<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, 33-42907 and 33-56977) on Form S-8 of Casey's General Stores, Inc. of
our report dated June 12, 1998, relating to the consolidated balance sheets of
Casey's General Stores, Inc. and subsidiaries as of April 30, 1998 and 1997, 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, 1998, which
report is incorporated by reference in the April 30, 1998 Annual Report on Form
10-K of Casey's General Stores, Inc.
KPMG Peat Marwick LLP
Des Moines, Iowa
July 27, 1998
<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, 1998 OF CASEY'S GENERAL
STORES, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<PERIOD-START> MAY-01-1997
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
<CASH> 4,022
<SECURITIES> 1,328<F1>
<RECEIVABLES> 2,537
<ALLOWANCES> 0
<INVENTORY> 39,200
<CURRENT-ASSETS> 52,524
<PP&E> 605,041
<DEPRECIATION> 185,133
<TOTAL-ASSETS> 479,974
<CURRENT-LIABILITIES> 89,988
<BONDS> 79,094<F2>
0
0
<COMMON> 65,922
<OTHER-SE> 197,452<F3>
<TOTAL-LIABILITY-AND-EQUITY> 479,974
<SALES> 1,186,885
<TOTAL-REVENUES> 1,191,991
<CGS> 930,513
<TOTAL-COSTS> 930,513
<OTHER-EXPENSES> 202,006
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,924
<INCOME-PRETAX> 53,548
<INCOME-TAX> 20,081
<INCOME-CONTINUING> 33,467
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,467
<EPS-PRIMARY> .64
<EPS-DILUTED> .63
<FN>
<F1>SHORT-TERM INVESTMENTS
<F2>LONG-TERM DEBT, NET OF CURRENT MATURITIES
<F3>RETAINED EARNINGS
</FN>
</TABLE>
