01—Abstract
Summary
Summary of the 10-K filed July 28, 1995. Cited figures are marked; the original filing is the authoritative source.
Casey's General Stores (NASDAQ: CASY) reported fiscal 1995 (year ended April 30, 1995) results that marked a strong year of growth and profitability for the Iowa-based convenience store operator.
Net sales rose 16.1% to $848.8 milliona, and net income climbed 38.1% to $22.9 million, or $0.88 per share, up from $0.73 in fiscal 1994. Operating expenses fell to 14.5% of net sales from 15.1%, and average operating income per Company Store rose 9.5% to about $80,600, reflecting the benefit of a growing base of mature stores. The company operated 927 stores at year-end, 741 of them Company Stores (80%), with 60 Company Stores opened in fiscal 1995 and a plan to open roughly 65 more in fiscal 1996, mainly in Iowa, Illinois and Minnesota, with seven in Indiana.
Gasoline remains the largest revenue driver at about 54%b of net sales, but it carries thin margins (about 9.4% gross margin). Prepared foods, pizza and donuts generate much higher margins (about 53% on average), which is central to management's strategy. Management also notes that roughly 94% of gross profit comes from Company Stores, which underscores the strategic shift away from franchising.
Balance-sheet strength improved modestly, with shareholders' equity of $179.7 millionc (up from $158.4 million), total assets of $345.2 million and long-term debt of $60.0 million. Working capital is structurally negative (current ratio of 0.56), typical for a high-turnover cash retailer. Key risks disclosed include gasoline margin volatility, supply disruptions, environmental UST compliance, and a pending Eighth Circuit appeal in the Bathke antitrust class action, which the company says it will contest vigorously.
02—Key points
Key Highlights
- Net sales up 16.1% to $848.8 million; net income up 38.1% to $22.9 million ($0.88 per share vs. $0.73).
- Store base grew to 927 total stores (741 Company-operated, 186 franchised); 60 new Company Stores opened in fiscal 1995 and about 65 are planned for fiscal 1996.
- Operating expenses improved to 14.5% of net sales (15.1% prior year); average operating income per Company Store rose 9.5% to about $80,556.
- Gasoline accounts for about 54% of net sales but earns only about a 9.4% gross margin, while prepared foods average about 53% margins, reflecting the mix strategy.
- Shareholders' equity increased to $179.7 million; long-term debt was $60.0 million and total assets were $345.2 million.
- Dividends were raised to 2.5 cents per quarter for the August 1995 payment, and management intends to continue quarterly payments.
- Pending Eighth Circuit appeal in the Bathke class action alleging predatory gasoline pricing; a decision is not expected until late 1995, and management considers the Company's liability unlikely.
03—Questions
Frequently Asked Questions
How much did Casey's grow in fiscal 1995, and what drove the improvement in earnings?
Net sales grew 16.1% to $848.8 million, driven by higher retail gasoline sales (up 20.5%) and grocery/general merchandise sales (up 12.5%), along with 54 net new Company Stores. Net income rose 38.1% to $22.9 million, helped by lower operating expenses as a share of sales and higher sales per store.
Why does Casey's emphasize Company Stores over franchised stores?
Company Stores are more profitable and give the company greater operating control. Company Stores generated about 94% of gross profit in each of the past two years, and management intends to keep converting franchised locations and building new Company Stores.
What are the main risks to future profitability?
The biggest risk is gasoline margin compression, which can result from oversupply, wholesale price volatility or competitive pricing; gasoline is about 54% of sales. Other risks include potential supply disruptions, the cost of complying with underground storage tank regulations (about $1 million planned through 1998), and the outcome of the Bathke antitrust litigation, which management does not expect to be material.
How strong is the company's balance sheet and liquidity position?
The company has equity of $179.7 million and long-term debt of $60.0 million, and its debt-to-equity ratio improved as equity grew. Its current ratio is only 0.56, which is normal for a cash-based convenience retailer with rapid inventory turnover. It had $27 million in bank lines of credit, with $11.35 million drawn at year-end, and expects operating cash flow and existing liquidity to fund its roughly $50 million fiscal 1996 capital plan.
What is the outlook for store growth and capital spending?
Management expects to open about 65 new Company Stores in fiscal 1996, mostly in Iowa, Illinois and Minnesota, with seven planned for Indiana. The company anticipates spending about $50 million on construction, acquisitions and remodeling in fiscal 1996, funded mainly by operations and existing cash and investments.
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