10-QPeriod: Q1 FY2019

CASEYS GENERAL STORES INC Quarterly Report for Q1 Ended Jul 31, 2018

Filed September 10, 2018For Securities:CASY

Summary

Casey's General Stores, Inc. reported solid financial performance for the three months ended July 31, 2018, with total revenue increasing by 23.6% to $2.59 billion, driven by a significant rise in fuel sales and continued growth in grocery and prepared food categories. Net income saw a substantial jump of 23.7% to $70.2 million, largely attributable to improved fuel margins and the beneficial impact of the Tax Cuts and Jobs Act of 2017, which reduced the effective tax rate to 21.2% from 38.1% in the prior year's comparable period. The company continues to expand its store footprint, adding 15 new stores and one acquisition during the quarter, bringing the total to 2,085. While operating expenses increased by 11.9%, this was primarily due to the increased number of stores and higher costs for credit card fees, fleet fuel, and healthcare. Despite a slight decrease in the current ratio to 0.77:1, management remains confident in the company's liquidity, supported by operational cash flow, a bank line of credit, and future financing capabilities. The company is also actively managing its capital structure, with significant planned capital expenditures for store development and improvements.

Financial Highlights

46 data points
Beta

Revenue

$2.59B

20.2% Gross Margin

Net Income

$70.22M

2.7% Net Margin

EPS (Diluted)

$1.90

Total Assets

$3.52B

Cash & Equivalents

$44.84M

Free Cash Flow

$52.58M

Financial Statements
Beta
Revenue$2.59B
Cost of Revenue$2.07B
Gross Profit$521.77M
Operating Expenses$359.39M
Interest Expense$14.41M
Net Income$70.22M
EPS (Basic)$1.92
EPS (Diluted)$1.90
Shares Outstanding (Basic)36.67M
Shares Outstanding (Diluted)36.98M

Key Highlights

  • 1Total revenue increased by 23.6% to $2.59 billion for the three months ended July 31, 2018.
  • 2Net income rose by 23.7% to $70.2 million, with diluted EPS growing to $1.90 from $1.46 in the prior year.
  • 3Effective tax rate significantly decreased to 21.2% due to the Tax Cuts and Jobs Act of 2017.
  • 4Same-store sales increased by 0.5% for fuel gallons, 3.2% for grocery and other merchandise, and 1.7% for prepared food and fountain.
  • 5Operating expenses increased by 11.9%, largely due to the addition of 105 more stores compared to the prior year, alongside higher credit card fees and fleet fuel costs.
  • 6The company expanded its store base to 2,085 locations, with plans for further expansion through new construction and acquisitions.
  • 7Cash flow from operations increased by 28.1% to $150.1 million, supporting investing activities and capital expenditures.

Frequently Asked Questions

The primary driver of the revenue increase was a substantial rise in retail fuel sales, which increased by 34.9%. This was due to both a 26.7% increase in the average retail price per gallon and a 6.5% increase in gallons sold. Growth in grocery and other merchandise, as well as prepared food and fountain sales, also contributed to the overall revenue increase.

The Tax Cuts and Jobs Act of 2017 significantly reduced the federal corporate income tax rate from 35% to 21%. This resulted in a lower effective tax rate of 21.2% for the quarter, compared to 38.1% in the prior year, which directly contributed to a higher net income of $70.2 million.

Casey's General Stores is focused on growth through new store construction and acquisitions. During the quarter, 15 new stores were built and one acquisition was completed, bringing the total store count to 2,085. The company has budgeted $466 million for fiscal 2019 for construction, acquisition, and remodeling of stores, primarily funded by cash generated from operations, existing cash, and prior year debt issuance.

As of July 31, 2018, the company's current ratio was 0.77:1. While this indicates a tightening in short-term liquidity compared to the prior year, management believes that existing cash and cash equivalents, combined with operating cash flow and a $150 million bank line of credit, are sufficient to meet working capital needs.