10-QPeriod: Q1 FY2017

CASEYS GENERAL STORES INC Quarterly Report for Q1 Ended Jul 31, 2016

Filed September 6, 2016For Securities:CASY

Summary

Casey's General Stores, Inc. reported its fiscal first quarter results for the period ending July 31, 2016, showing a notable increase in net income compared to the prior year, driven primarily by stronger fuel margins and increased gallon sales. Total revenue experienced a slight decrease, largely due to a decline in fuel prices, but this was offset by robust growth in grocery and prepared food categories. The company continues its strategic expansion and reinvestment in its store base, with significant capital expenditures allocated to new store constructions, replacements, and major remodels. Despite increased operating expenses, attributed partly to the expanded store count and growth programs, Casey's demonstrated improved profitability and a strengthened balance sheet with increased cash reserves and a higher current asset to current liability ratio. The company also adopted new accounting standards, which had a positive impact on its effective tax rate.

Financial Highlights

46 data points
Beta

Revenue

$1.97B

22.8% Gross Margin

Net Income

$67.39M

3.4% Net Margin

EPS (Diluted)

$1.70

Total Assets

$2.89B

Cash & Equivalents

$189.49M

Free Cash Flow

$79.05M

Financial Statements
Beta
Revenue$1.97B
Cost of Revenue$1.52B
Gross Profit$449.80M
Operating Expenses$292.13M
Interest Expense$10.54M
Net Income$67.39M
EPS (Basic)$1.72
EPS (Diluted)$1.70
Shares Outstanding (Basic)39.16M
Shares Outstanding (Diluted)39.63M

Key Highlights

  • 1Net income increased by 9.0% to $67.4 million, or $1.70 per diluted share, up from $61.8 million, or $1.57 per diluted share, in the prior year's quarter.
  • 2Total revenue decreased by 3.8% to $1.97 billion, primarily due to a 10.8% decrease in fuel sales revenue caused by lower fuel prices, despite a 6.9% increase in fuel gallons sold.
  • 3Gross profit margin improved to 22.8% from 20.1% year-over-year, driven by a significant increase in fuel margin per gallon (from $0.175 to $0.195) and higher RIN values.
  • 4Same-store sales for grocery and other merchandise increased by 4.7%, and for prepared food and fountain increased by 5.1%, indicating continued strength in these key categories.
  • 5Operating expenses rose by 10.8%, influenced by the addition of 46 more stores compared to the prior year and ongoing expansion of growth programs.
  • 6Cash provided by operating activities increased significantly by 53.1% to $161.3 million, bolstered by higher net income and favorable changes in income taxes and accounts payable.
  • 7The company made substantial capital expenditures of $85.2 million in the quarter for property and equipment, focusing on new construction, remodels, and acquisitions, with plans to invest heavily in fiscal 2017.

Frequently Asked Questions

The increase in net income was primarily driven by improved fuel margins per gallon and an increase in the number of fuel gallons sold. Additionally, strong same-store sales growth in grocery and prepared food categories contributed positively. The adoption of new accounting standards, specifically ASU 2016-09, also provided a benefit through excess tax benefits, reducing the effective tax rate.

Casey's is actively investing in its growth through new store constructions, replacement stores, and major remodels. In the first quarter, the company completed three replacement stores, six major remodels, and acquired three stores. It has a robust pipeline with 39 new stores under construction and 72 sites under contract for future builds, aligning with its annual goal to build or acquire a significant number of stores and remodel existing ones.

For fuel, Casey's experienced higher margins per gallon and increased volume, despite lower retail prices. For non-fuel items, both grocery/merchandise and prepared food/fountain categories showed healthy same-store sales growth. The company aims to balance its revenue streams, leveraging the strong performance in these diverse product categories.

Casey's primary source of liquidity is cash provided by operations. In this quarter, cash provided by operations increased significantly. The company also utilized financing activities, including proceeds from a senior note offering, to supplement its liquidity and fund its substantial capital expenditures. A $100,000 line of credit remains available, with no balance outstanding as of July 31, 2016.