10-QPeriod: Q3 FY2002

CASEYS GENERAL STORES INC Quarterly Report for Q3 Ended Jan 31, 2002

Filed March 13, 2002For Securities:CASY

Summary

Casey's General Stores, Inc. reported its third-quarter results for the fiscal year ending January 31, 2002. The company experienced an increase in net sales driven by strong performance in grocery and general merchandise, despite a decline in retail gasoline sales due to lower per-gallon prices. However, a decrease in gross profit margins for both gasoline and general merchandise, coupled with rising operating expenses as a percentage of net sales, led to a significant drop in net income for the quarter and year-to-date. Operationally, Casey's continues to invest heavily in expanding and remodeling its stores, with capital expenditures increasing year-over-year. The company's liquidity appears sufficient, supported by operating cash flow and a credit line, though current assets to current liabilities ratio has tightened. Management remains focused on navigating a competitive retail environment and complying with environmental regulations regarding underground storage tanks.

Key Highlights

  • 1Net sales increased by 3.8% to $453.5 million for the third quarter and 8.8% to $1.59 billion for the nine months ended January 31, 2002.
  • 2Retail gasoline sales volume increased 25% in Q3 and 18.4% year-to-date, but revenue declined due to a 25.4% and 11% decrease in average price per gallon, respectively.
  • 3Grocery and general merchandise sales saw robust growth of 24.3% in Q3 and 17.8% year-to-date, driven by new store additions and performance of existing stores.
  • 4Net income decreased significantly by 43% to $2.3 million for the third quarter and 18.4% to $27.4 million for the nine months.
  • 5Gross profit margins declined for both retail gasoline (from 8.2% to 7.6% in Q3, 8.3% to 7.3% year-to-date) and grocery/general merchandise (from 39.1% to 34.8% in Q3, 39.2% to 36.6% year-to-date).
  • 6Capital expenditures rose to $74.3 million for the nine months ended January 31, 2002, primarily for store construction, acquisition, and remodeling.
  • 7The company had $2.1 million in cash and cash equivalents at January 31, 2002, a significant decrease from $23.0 million at the start of the fiscal year.

Frequently Asked Questions

The primary driver for the decrease in net income is the erosion of gross profit margins on both retail gasoline and grocery/general merchandise sales. Additionally, operating expenses as a percentage of net sales increased, particularly due to a decrease in the average retail price per gallon of gasoline.

Capital expenditures are a significant use of funds, primarily for store development and improvements. Management anticipates these expenditures to be approximately $90 million for fiscal year 2002, funded by operations and a bank line of credit. While operating cash flow increased year-over-year, the company's cash and cash equivalents significantly decreased, and its current ratio has fallen below 1:1, indicating tighter liquidity. However, management believes its credit line and cash flow are sufficient for future needs.

For gasoline, while sales volume increased, revenue and margins were negatively impacted by falling prices. For grocery and general merchandise, the company is experiencing strong sales growth, benefiting from new store openings and existing store performance, although gross profit margins have compressed due to a competitive retail environment.

The company is subject to underground gasoline storage tank regulations and has an active inspection and renovation program. While they have incurred remediation costs, they believe they are in substantial compliance and have submitted claims for reimbursement from state trust fund programs. Management does not believe any environmental liabilities are material in the aggregate.