10-QPeriod: Q2 FY2017

CASEYS GENERAL STORES INC Quarterly Report for Q2 Ended Oct 31, 2016

Filed December 7, 2016For Securities:CASY

Summary

Casey's General Stores, Inc. (CASY) reported its third quarter fiscal year 2017 results, ending October 31, 2016. The company experienced a decrease in net income primarily due to lower fuel margins compared to the prior year's strong performance, despite an increase in inside sales and fuel gallons sold. Total revenue saw a slight decrease, largely driven by a decline in average retail fuel prices, though fuel gallon volume increased. Growth in grocery and prepared food sales continues to be a positive driver, offsetting some of the pressure from fuel margins. The company is actively investing in growth, evidenced by new store constructions, replacements, and remodels. Despite increased operating expenses related to expansion and wage increases, Casey's maintains a positive outlook on its liquidity and capital resources, supported by operational cash flow and available credit facilities. Investors should note the ongoing trend of increasing dependence on inside sales for profitability, as fuel margins remain volatile.

Financial Highlights

46 data points
Beta

Revenue

$1.92B

23.1% Gross Margin

Net Income

$57.18M

3.0% Net Margin

EPS (Diluted)

$1.44

Total Assets

$2.95B

Cash & Equivalents

$177.97M

Free Cash Flow

-$42.57M

Financial Statements
Beta
Revenue$1.92B
Cost of Revenue$1.48B
Gross Profit$443.52M
Operating Expenses$295.29M
Interest Expense$10.07M
Net Income$57.18M
EPS (Basic)$1.46
EPS (Diluted)$1.44
Shares Outstanding (Basic)39.19M
Shares Outstanding (Diluted)39.66M

Key Highlights

  • 1Net income decreased by 27.7% to $57.2 million for the three months ended October 31, 2016, compared to $79.0 million in the prior year, primarily due to lower fuel margins.
  • 2Total revenue for the quarter was $1.92 billion, a slight decrease of 0.2% year-over-year, driven by a 4.6% decrease in retail fuel sales despite a 7.1% increase in fuel gallons sold.
  • 3Same-store sales for grocery and other merchandise increased by 3.1%, and prepared food and fountain sales increased by 5.1% in the second quarter.
  • 4Operating expenses increased by 10.2% due to wage increases, expansion of growth programs, and higher store count.
  • 5The company continues its aggressive store expansion and remodeling strategy, with 39 new stores under construction and 84 sites under contract.
  • 6Cash and cash equivalents increased significantly to $178.0 million at October 31, 2016, from $75.8 million at April 30, 2016, bolstered by financing activities including a senior note offering.
  • 7The company's effective tax rate for the quarter increased slightly to 36.1% from 35.8% in the prior year.

Frequently Asked Questions

The primary reason for the decrease in net income for the quarter ended October 31, 2016, was a significant decrease in the gross profit margin per gallon of fuel sold. This was compared to a strong fuel margin performance in the prior year, despite increases in inside sales and fuel gallons sold.

Operating expenses increased due to several factors, including wage rate increases, the continued rollout and expansion of growth programs (such as expanded hours and pizza delivery), and an increase in the number of stores operated. The company is focused on offsetting these costs through revenue growth, particularly in its higher-margin inside sales categories.

Casey's General Stores continues to prioritize growth through new store construction, replacement stores, and major remodels. The company reported 39 new stores under construction and 84 sites under contract for future development, indicating a strong commitment to expanding its store footprint and capabilities.

The company maintains strong liquidity, with a significant increase in cash and cash equivalents. Cash flow from operations remains the primary source of liquidity. Casey's also utilizes a bank line of credit and has recently completed a senior note offering to fund capital expenditures and support its growth initiatives. Long-term debt has increased due to these financing activities.