10-QPeriod: Q1 FY2021

CASEYS GENERAL STORES INC Quarterly Report for Q1 Ended Jul 31, 2020

Filed September 8, 2020For Securities:CASY

Summary

Casey's General Stores Inc. reported a strong financial performance for the first quarter of fiscal year 2021, concluding July 31, 2020. Despite a notable decrease in total revenue primarily due to a significant drop in fuel sales, the company achieved a substantial increase in net income, up 40.5% to $120.6 million. This was driven by a substantial improvement in fuel margins, which benefited from a centralized retail pricing strategy and procurement enhancements, offsetting the volume decline. The company also saw growth in grocery and other merchandise sales, though prepared food and fountain sales experienced a decline, attributed to pandemic-related restrictions. Management highlighted the impact of the COVID-19 pandemic, which led to reduced store traffic and sales. However, the company expressed confidence in its brand strength and balance sheet to navigate these challenges. Liquidity remains strong, with a significant increase in cash and cash equivalents and improved current assets to current liabilities ratio. Capital expenditures were reduced year-over-year, reflecting a cautious approach amid pandemic-related uncertainties.

Financial Highlights

43 data points
Beta

Revenue

$2.11B

Net Income

$120.59M

5.7% Net Margin

EPS (Diluted)

$3.24

Total Assets

$4.10B

Cash & Equivalents

$246.52M

Free Cash Flow

$306.90M

Financial Statements
Beta
Revenue$2.11B
Operating Expenses$386.09M
Interest Expense$13.41M
Net Income$120.59M
EPS (Basic)$3.26
EPS (Diluted)$3.24
Shares Outstanding (Basic)36.97M
Shares Outstanding (Diluted)37.24M

Key Highlights

  • 1Net income increased by 40.5% to $120.6 million for the three months ended July 31, 2020, compared to $85.8 million in the prior year.
  • 2Total revenue decreased by 19.9% to $2.1 billion, primarily driven by a 33.3% decline in retail fuel sales.
  • 3Fuel margins significantly improved, with revenue less cost of goods sold per gallon increasing to 38.2 cents from 24.4 cents year-over-year.
  • 4Same-store sales for grocery and other merchandise increased by 3.6%, while prepared food and fountain sales decreased by 9.8%.
  • 5Operating expenses saw a modest increase of 1.6% due to additional stores and COVID-19 related expenses, but same-store operating expenses excluding credit card fees decreased by 5.6%.
  • 6Cash flow from operating activities more than doubled, increasing by 96.9% to $352.1 million, driven by higher net income and improved working capital management.
  • 7Capital expenditures decreased by 57.5% to $45.1 million due to reduced discretionary spending related to the COVID-19 pandemic.

Frequently Asked Questions

The COVID-19 pandemic led to a sharp decline in store traffic and a decrease in overall same-store sales, particularly impacting fuel and prepared food & fountain categories. However, the company noted an increase in store traffic as restrictions eased, though not yet back to prior year levels. Management believes the company's brand strength and balance sheet position it well to manage these ongoing uncertainties.

The substantial increase in net income, up 40.5%, is primarily attributed to a dramatic improvement in fuel margins. Revenue less cost of goods sold per gallon for fuel increased from 24.4 cents in the prior year to 38.2 cents in the current quarter. This was due to a centralized retail pricing strategy and procurement improvements, which more than compensated for the decrease in fuel gallons sold.

Casey's General Stores reported a significant increase in cash and cash equivalents, rising to $246.5 million at July 31, 2020, from $78.3 million at April 30, 2020. This was driven by strong cash flow from operations. The company's current ratio also improved substantially to 1.05:1 from 0.36:1, indicating a healthier liquidity position.

Capital expenditures were significantly reduced by 57.5% to $45.1 million during the quarter, reflecting a cautious approach due to the uncertainties surrounding COVID-19. The company has decided not to provide capital expenditure guidance at this time but will re-evaluate as conditions warrant. This reduction was primarily for property and equipment, construction, and remodeling, with a focus on discretionary spending.