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we’re a convenience store and a whole lot more
Casey’s General Stores, Inc.
One Convenience Blvd. | Ankeny, Iowa 50021-9437
07
annual
report
we’re a convenience store
and a whole lot more
Casey’s and community
At Casey’s, we believe giving is important.
For us, generosity begins at home—in the
communities we serve day in and day out.
Our support is part of our approach to
store operations and reinforces our
commitment to our customers and our
desire to be part of their daily lives. In
2007, most of our donations went to
support thousands of local projects and
events across our marketing territory.
Sometimes we joined with other businesses
Our Web site at caseys.com is designed
Families are the heart of Iowa baseball,
to sponsor community improvement
to be a practical tool. Viewers can rely on
Midwest living, and Casey’s business.
projects—a new gazebo on the town
the complete nutritional information we
They were also at the center of our
square here, an updated baseball field
publish regarding every prepared food
television advertising campaign that
there, fresh plantings in a park somewhere
item we serve at our stores. We also use
features families enjoying great food
else. Often, we participated in local
the site to provide quick access to Casey’s
from a nearby Casey’s store.
fundraising efforts for student trips or
financial information, post job openings,
high school celebrations by serving up
and invite feedback from customers and
Whether we’re updating a local library,
Casey’s pizza and soft drinks for free or
shareholders. Our CEO Bob Myers reads
organizing a golf event for charity, or taping
at discounted prices.
and responds to every customer comment.
our latest television commercial, we’re
In addition to financial support, Casey’s
Casey’s is the 2007 official pizza maker of
We’ve learned we perform better—and
employees almost always contributed their
the Iowa Cubs, our home state’s minor
feel better—when we help our communities
own enthusiasm and personal time in
league baseball team; we’re in the stands
prosper. That’s why we’re Casey’s, a
support of their communities.
and at our kiosks for every home game.
convenience store and a whole lot more.
serving our shareholders’ interests.
In the Midwest, Casey’s General
Stores, Inc. is a part of life.
Each store is a place where people can start their days
by picking up a paper, a cup of coffee, and a homemade
donut; greeting their friends and neighbors; and sharing
local news. No matter the time of day, when customers
shop at Casey’s, they find competitively priced gasoline,
a large variety of quality grocery and other merchandise,
freshly prepared foods, and friendly employees providing
excellent service—all in a clean and attractive environment.
Not only do we support those communities in which
we do business, but many other communities in our
07t
annual
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message to shareholders ..............3
management team .........................5
store operations ...............................6
store development ...................... 12
corporate finance ......................... 14
board of directors ......................... 16
investor information .................... 17
financial information ................... 18
operating area as well. Whether it’s by joining with local
FINANCIAL HIGHLIGHTS (dollars in thousands, except share data)
groups to promote fund-raising or making contributions
for town projects, we know it’s sound marketing to help
communities thrive. When you’re a loyal neighbor, you
have loyal customers.
We are raising the bar for more sophisticated, higher-caliber
convenience stores. We’re making the most of innovations
from full point-of-sale technology to real-time satellite
communication. We’re known for having one of the best
proprietary prepared food programs in the industry. We
have a vertically integrated distribution system with our
own warehouse, delivery trucks, and gasoline transports
that adds efficiencies to our operations.
Our customers, their communities, our competitors, and
our shareholders realize we’re not just a convenience store.
We’re a whole lot more.
1,463
15
1,448
07
1,364
25
1,339
05
1,413
19
1,394
06
CASEY’S STORES
❚ total
❚ franchise
❚ corporate
$ 1.25
$ 98.6
06
$ 1.26
$ 97.7
07
CONTINUING OPERATIONS
❚ eps from continuing operations
❚ net earnings from continuing
operations (in millions)
$ 0.84
$ 67.4
05
Our goals are one of the factors that
support the cover’s assertion: we’re a
convenience store and a whole lot more.
They are performance goals aligned
with our business model and
long-term strategic plans.
page 2
message to shareholders
Allow me to begin my first message as
our stores. Our goal for same-store gallons
32.2%. By fiscal year-end, same-store sales
chief executive officer with sincere thanks
sold was a 2% increase; the actual increase
were up 4.6%; our margin was 32.7%,
to our outstanding management team, the
was 1.4%.
aided by a one-time benefit related to
dedicated employees in our stores and at
cigarettes. Without the one-time benefit,
our corporate headquarters, the growing
In fiscal 2007, the retail environment across
the margin would have been nearly on
ranks of Casey’s customers, and you in
our marketing territory held Casey’s
goal at 32.1%.
the investment community for making
average margin to 10.4 cents per gallon.
fiscal 2007 another year of progress for
The margin was below our goal because we
Prepared food & fountain continued its
Casey’s General Stores, Inc.
adhered to our policy of pricing with the
momentum to achieve another year of
competition to avoid giving our customers
outstanding sales gains. We thought we
Our goals are one of the factors that support
a reason to take their business elsewhere.
had set a challenging goal when we
the cover’s assertion: we’re a convenience store
called for a 7.9% increase in fiscal 2007
and a whole lot more. They are performance
Gasoline customers who came inside our
same-store sales, but we were too
goals aligned with our business model and
doors helped raise fiscal 2007’s inside sales
conservative. Spurred by the growing
long-term strategic plans. They identify
to $1.12 billion, a 12.5% increase following
popularity of our premier prepared
benchmarks for enhancing this company’s
the previous year’s 9.7% rise. Gross profit
foods, same-store sales grew 11%.
value now and in the future.
on those sales was up 13.6% to $444.4
million. We continued to seek new synergies
The first four goals, same-store sales and
between the two contributing business
margin targets in our business categories
categories: grocery & other merchandise
as well as containment of operating
and prepared food & fountain.
expenses, were in place to measure our
performance of the stores we already
The performance of our grocery & other
own. The final goal called for continued
merchandise category has improved
execution of Casey’s acquisition strategy.
significantly over the past three years, and
we are confident there are more benefits to
Gasoline, our leading destination item,
derive from point of sale and our analysis
drew traffic to our stores again in fiscal
of the data it provides. Our annual goal
2007. We sold 1.19 billion gallons at our
was to build on the previous year’s strong
pumps, and every gasoline purchase was an
performance by increasing same-store
opportunity to sell additional items inside
sales 3.9% with an average margin of
page 3
The margin on prepared food & fountain’s
Our fiscal 2008 goals quantify expectations
sales was a very profitable 62%. The major
for building on our 2007 performance:
reason we missed our 63.4% target was
the higher cost of goods sold that resulted
• Increase same-store gasoline gallons
from switching to a dual cola program at
sold 2% with an average margin of
the end of fiscal 2006. Though the loss of
10.7 cents per gallon.
our exclusivity contract cost us a little in
fiscal 2007 margin, having additional
• Increase same-store grocery & other
products in our fountain line-up means
merchandise sales 4.3% with an average
we can satisfy more customers year in and
margin of 32.2%.
year out. By the close of 2007, fountain
sales were up a remarkable 24%.
• Increase same-store prepared food &
fountain sales 8.4% with an average
Our fourth goal was to hold the percentage
margin of 62%.
increase in operating expenses to less than
the percentage increase in gross profit. Our
• Hold the percentage increase in
drop in gasoline margin slowed the
operating expenses to less than the
increase in total gross profit to 10.9%
percentage increase in gross profit.
versus 15.2% in fiscal 2006. Expenses
rose 13.4% primarily because of a 31.1%
• Acquire 50 stores and build 10 stores.
increase in bank fees for customers’ credit
card charges plus higher wages and utilities.
This annual report will show how we plan
to meet these goals and how we intend to
Our fiscal 2007 expansion goal was to
make sure that no matter how many
acquire 50 stores and build 10 stores. We
locations we own, every Casey’s store is
actually acquired 52 and built 8. The 33
a convenience store and a whole lot more.
HandiMart stores we purchased in October
helped us exceed our acquisition target
and served our priority of purchasing
good sites that will flourish under our
Robert J. Myers
business model. During the past three
President and Chief Executive Officer
fiscal years we have added a total of 148
stores through acquisition.
page 4
management team
Robert C. Ford
VP-Store Operations
Russell D. Sukut
VP-Treasurer
Cleo R. Kuhns
VP-Real Estate-Store
Development
William J. Walljasper
Senior VP & CFO
Hal D. Brown
VP-Support Services
Terry W. Handley
COO
Darryl F. Bacon
VP-Food Services
Robert J.
Myers
President
& CEO
Eli J. Wirtz
VP-Corporate
Counsel
Michael R.
Richardson
VP-Marketing
Sam J. Billmeyer
Senior VP-Transportation
& Support Operations
John G. Harmon
Senior VP & Secretary
Bradley G. Heyer
VP-Information Systems
Julia L. Jackowski
VP-Human Resources
page 5
store operations
We choose to be more than a convenience
“Every year we get better at drawing
store because consumers in the Midwest
traffic inside our stores and converting
communities we serve need us to be more.
that traffic to gross profit,” said Chief
In some of the smallest towns, we’re the
Operating Officer Terry Handley. In fiscal
only place to buy groceries and prepared
2007, same-store inside sales were up 6%
foods. In others, we are the preferred
and total inside sales rose 12.5% to $1.12
choice because our stores are inviting, our
billion. Gross profit on inside sales
prices are reasonable, we have what local
increased 13.6% to reach $444.4 million.
shoppers are looking for, and we make
We’ll show you how we achieved the
ourselves part of community life.
improvements and how we plan to make
those totals grow in fiscal 2008.
page 6
gasoline
Our approach to this business category is
“We are proficient at purchasing and
straightforward. We attract customers by
delivering gasoline, but the retail
making sure we have the gasoline they
environment has a significant impact
4.4 %
11.5 ¢
06
05
want at a price they can’t beat locally. We
on our bottom line,” said Sam Billmeyer,
make the purchase easy and quick with
Senior Vice President–Transportation &
pay at the pump. Customers can use almost
Support Operations. In fiscal 2006, sales
GASOLINE
❚ same-store sales (gallons)
❚ margin
any recognized credit card, including
and margins were extraordinarily high,
1.9 %
10.8 ¢
1.4 %
10.4
07
Casey’s own co-branded MasterCard.
and our results were also extraordinary—
same-store gallons sold 2% with a margin
We canopy our service areas for comfort
we increased gasoline gross profit 15.2%
of 10.8 cents. Same-store gallons sold were
and light them for safety.
to $125.4 million.
up 1.4%, contributing to a 9.1% increase
in total gallons sold, and the average
We price with the local competition,
Conditions were less favorable in fiscal
margin was 10.4 cents. As a result,
whether in the next block or the next
2007. Gasoline sales were slow primarily
gasoline gross profit was down 1.1% to
town, because if we lose customers over
due to high retail prices throughout the
$124.1 million.
our gasoline price, we may never see them
Midwest during the spring and summer,
again. “We’ll accept some margin volatility
usually our busiest months. In the fall and
We are confident that we’ll increase
so we can draw the customers inside our
winter, competitors kept retail prices low
same-store gallons sold 2% by April 30,
stores. That’s where we generate over 75%
relative to wholesale costs, and we priced
2008. We lowered the margin goal to 10.7
of Casey’s gross profit,” said Handley. In
right along with them. Though both sales
cents per gallon because we know we’ll
recent years, quarterly margins generally
and margin improved in the fourth
likely lose some state tax credits on ethanol
have varied from about 9 cents to roughly
quarter, we didn’t gain enough ground to
we sell in Iowa. We were pleased that
12 cents per gallon for a historical annual
meet the goal for this category— increase
retail prices were more responsive to rising
average of 10.8 cents.
wholesale costs during the last three
months of fiscal 2007 and hope the
pattern continues.
1,094
$ 767
$ 229
06
SALES (in millions)
❚ gasoline (gallons)
❚ grocery & other merchandise
❚ prepared food & fountain
1,194
$ 853
$ 267
07
1,010
$ 704
$ 204
05
$ 125.4
$ 247.0
$ 144.0
06
GROSS PROFIT (in millions)
❚ gasoline
❚ grocery & other merchandise
❚ prepared food & fountain
$ 124.1
$ 278.7
$ 165.8
$ 108.9
$ 219.1
$ 123.2
07
05
page 7
grocery & other
merchandise
We’ve been selling groceries as long as
Cigarettes were a profitable destination item
we’ve been selling gasoline. We offer a
in fiscal 2007, and POS data helped us
large and varied array of products—and
match rack space to customer preferences
everything in a given store from cigarettes,
and keep tight control of inventory.
seasonal items, and energy drinks to dairy
Available in most of our stores since late in
products, beer, and Casey’s branded
fiscal 2005, lottery tickets produced a
bottled water is stocked and arranged to
double-digit increase in ticket sales during
match that store’s customer demand.
the year just ended. We profited most from
increased store traffic and higher inside
All products carry SKU numbers for instant
sales, but we also earned commission on
sales and inventory information that lets
the tickets we sold. The commission is
us respond quickly to changing habits. For
accounted for separately and is not
instance, in the last fiscal year energy
included in the grocery & other
drinks became more popular. In response,
merchandise category results.
Casey’s doubled the shelf space allotted to
this product.
Heavier store traffic, better inventory
management, and a one-time benefit
“The ability to address customer needs
related to cigarettes contributed to a 12.8%
store by store is the most visible benefit
improvement in the category’s gross profit.
we’ve gained from our investment in point
Total sales rose 11.1% with a margin of
of sale and related technologies,” said
32.7%. As you know we exceeded our 3.9%
Mike Richardson, Vice President–
same-store sales target with a 4.6%
Marketing. As we begin fiscal 2008, we
improvement, and even without the
have at least twelve months of sales data
one-time benefit we would have been
from every established Casey’s store.
only slightly off our 32.2% margin
Thanks to our data-mining software, the
target at 32.1%.
management team can select and sort the
information they need to meet customer
In fiscal 2008, we’ll refine efficiencies and
demand and make decisions that will
further improve the match between product
increase gross profit.
mix and customer demand at each Casey’s
store. We expect to extend the category’s
upward gross profit trend by increasing
same-store sales 4.3% and achieving an
average margin of 32.2%.
08GOAL
06
5.7 %
32.2 %
GROCERY & OTHER
MERCHANDISE
❚ increase in same-store sales
❚ margin
4.6 %
32.7 %
07
4.8 %
31.1 %
05
page 8
4.3 %32.2 % page 9
prepared food
& fountain
Fiscal 2007 total sales were up 17%, and
gross profit rose 15.1%. “The best thing
about this category is its consistent
improvement,” Handley said. “Gross
profit has risen 34% over the past three
fiscal years, and there’s still plenty of
growing to do.”
There are two keys to the remarkable
results we’re obtaining: Casey’s superior
proprietary prepared food program and
leaders at the corporate and store levels
who make this dynamic program work
wherever we implement it.
“Planning is vital in our business,” said
Darryl Bacon, Vice President–Food
Services, “but it counts for nothing if no
one executes. We have competent store
managers who are committed to making
the most of our proprietary food program,
and we give these managers lots of support.”
Executing our plans in the year just ended
gave us our third consecutive year of
double-digit sales growth. Same-store
sales were up 11%.
7.4 %
63.0 %
06
08GOAL
PREPARED FOOD & FOUNTAIN
❚ increase in same-store sales
❚ margin
11.0 %
62.0 %
07
8.4 %
60.4 %
05
page 10
8.4 %62.0 % Pizza and our other popular hot foods
sold and was the primary reason we fell
We’ve targeted an 8.4% same-store sales
accounted for 65% of prepared food &
short of our 63.4% margin goal at 62%.
increase in fiscal 2008 because we’re again
fountain sales. In fiscal 2007, we sold nearly
It was a small price to pay for the significant
expecting some leveling in the rate of
8.5 million made-from-scratch pizzas and
gains made in sales and gross profit.
growth we’ve achieved during the past
more fountain drinks than ever before. We
several years. Assuming we meet our sales
expanded our to-go-cup offerings to include
Bacon credits our POS technology for
mark, a 62% margin will produce the
pizza bites, systematically rotated product
improving the management of Casey’s
outstanding gross profit improvement
to meet seasonal demands and keep customer
kitchens: “Tracking daily sales counts tells
we’ve come to expect from this category.
interest high, made some price adjustments,
us what to stock our kitchens with and lets
and heightened prepared food & fountain’s
us know the inventory that should be on
As we did last year, we’ll work for
visibility inside our stores.
hand every hour of every day. We use the
continuous improvement in all three
same information to set work schedules.”
of our business categories. The more
Fountain sales—and ultimately total inside
Right now, we’re learning to apply the
complex our operations become, the
sales—benefited substantially from the dual
data to help store managers cut stales by
harder—and more exciting—it is to
cola program introduced at the end of fiscal
proactively adjusting their daily kitchen
achieve consistent gains. We’ll execute
2006. We attracted customers who wanted
plans in response to weather or other
for success because we’re Casey’s,
a Pepsi, Dr. Pepper, or Mountain Dew. They
local conditions that affect sales.
a convenience store and a whole lot more.
bought the drink and often a slice of pizza
or chicken tenders to go with it. Our sales
Certainly we’re relying on POS data to
growth is proving that if these customers
help us manage the recently acquired stores
try our prepared food once, they’ll be
that are in transition to the Casey’s system,
back for more.
especially where we’ve added kitchens.
Integrating our proprietary prepared food
As a result of adding new fountain
program with the menus of fast-food
products, we no longer benefited from our
restaurants already under contract at some
previous exclusivity arrangement with
of the HandiMart locations will require
Coca-Cola. This raised the cost of goods
new data and new applications.
page 11
store development
One of the ways Casey’s stands out a
We expect further acquisition activity
whole lot more is growing primarily by
within the industry during fiscal 2008
acquisition. Prior to fiscal 2003, we
for three reasons: Profit margins will be
achieved our growth by constructing
thinner for the prime items of gasoline
several new stores each year and by
and cigarettes, making it more difficult
purchasing a few of our franchise
for smaller operators to compete. There
stores—arguably a type of acquisition.
will be an increased drive toward
consolidation. Financing availability
Senior Vice President John Harmon, who
should be favorable.
leads our acquisition team, said, “In terms
of sales and profits, newly constructed
“Having our own distribution center is an
stores matured in three to five years.
enormous advantage for operating our
Acquired stores contribute much more
stores profitably,” Harmon stated, “and
quickly due to the existing customer base
we have the capacity to serve 1,000 more
and trained employees.”
stores out of our warehouse.” We believe
we’ll acquire those stores primarily in our
Our goal for fiscal 2007 was to acquire
nine-state marketing territory. The right
50 stores and build 10. We completed 8
kind of opportunity will lead us outside
new constructions and acquired 52 stores.
of the nine states. Concentration will be
“Foremost among them were the 33
the key.
HandiMart locations we purchased in
the second quarter,” said Harmon.
Our goal for fiscal 2008 is to acquire 50
stores and build 10 stores. As we pursue
We were in no rush to rebrand the
attractive acquisitions, we will adhere to
HandiMart stores because it was a strong
our business model of focusing on the
name in a concentrated area. Of course
small-town customer, the potential
we believe our own brand is stronger, and
contribution to earnings, and the
we will complete the brand transition
estimated return on invested capital.
as we add kitchens for our proprietary
prepared food program to the appropriate
During next year, we can be counted
locations in the coming months.
on to apply new efficiencies as we pursue
our acquisition goal. Hitting the exact
number counts less than making sure
our growth is disciplined growth.
15
67 06
08GOAL
STORE GROWTH
❚ new-store constructions
❚ acquisitions
8
52
07
12
29
05
37
98
90
10
413
371 60
104
280
total number of stores
1,463
page 12
1050 page 13
corporate finance
“We believe in setting quantifiable annual
goals and publishing quarterly progress
toward them as well as posting monthly
same-store sales data for our three
business categories,” stated investor
relations contact, Chief Financial Officer
Bill Walljasper. “We are as transparent
as possible.”
At April 30, 2007, cash and cash equivalents
totaled $107.1 million, a 42% increase
from the previous fiscal year-end. Our
long-term debt net of current maturities
increased $93 million to $199.5 million,
and the average total debt to average total
capital ratio rose to 27%. Shareholders’
equity grew 9.4% to $572.3 million.
The larger long-term debt and the
corresponding debt to capital ratio
are positive measures of us positioning
ourselves to take advantage of opportunities.
Walljasper stated, “In September of 2006,
we completed a $100 million private
placement to fund acquisition activity.
We used $50 million for the HandiMart
acquisition; the remaining $50 million
was part of a delayed drawdown we
FISCAL 2008 CAPITAL EXPENDITURES BUDGET
page 14
took in March to fund acquisitions in
fiscal 2008. The private placement
had a favorable rate of 5.72% and was
oversubscribed—a testament to Casey’s
financial strength and ability to fund
future operational activities. We still have
plenty of debt capacity should additional
opportunities arise.”
10.9 %
13.4 %
07
8.8 %
7.6 %
05
15.3 %
10.7 %
06
OPERATING EXPENSES
❚ gross profit increase
❚ operating expense increase
106.5
523.2
06
123.1
469.8
05
199.5
572.3
07
CAPITAL STRUCTURE (in millions)
❚ long-term debt
❚ equity
We’ve set our capital expenditure budget
remodels of the Gas ‘N Shop stores.”
of operational and marketing decisions
for fiscal 2008. We’re planning to spend
on the components over which we have
about $72 million for acquisitions and
CEO Bob Myers reported that we didn’t
the most control. We’ll save approximately
new-store constructions, approximately
achieve our goal of holding the percentage
$1 million by doing credit card clearing
$50 million on remodels and replacements,
increase in operating expenses to less than
in house.
and around $5 million each on technology
the percentage increase in gross profit.
and transportation updates.
Several factors had a negative impact: the
We will continue sharing the specifics of our
reduction in gross profit contribution from
financial performance with investors so
We know there’s great interest in the return
the gasoline category, the increased costs
they can track our evolving Company
on invested capital. Our ROIC for fiscal
for wages and utilities, and the significant
story. It’s one more way of being a
2007 was 9.4%, down from fiscal 2006’s
rise in operating expenses related to an
convenience store and a whole lot more.
due to the additional $100 million of debt,
$8.2 million jump in credit card fees.
the smaller gas margin, and a one-time
accounting adjustment under the SEC’s
Myers also said we have the same goal for
Staff Accounting Bulletin No. 108. “I’m
fiscal 2008: to hold the percentage increase
confident,” Walljasper said, “we’ll see
in operating expenses to less than the
incremental earnings growth in fiscal
percentage increase in gross profit. During
2008 from the kitchen additions to the
the year, we’ll concentrate on total inside
HandiMart stores and the finished
gross profit dollars to measure the effect
page 15
board of directors
Ronald M. Lamb
Chairman of Casey’s General Stores, Inc.
Donald F. Lamberti
Retired Chairman of Casey’s
General Stores, Inc.
Robert J. Myers
President & CEO of Casey’s
General Stores, Inc.
Kenneth H. Haynie
Of counsel to the law firm of
Ahlers & Cooney, P.C.
William C. Kimball*
Retired Chairman and CEO of Medicap
Pharmacy, Inc.
Johnny Danos*
President of the Greater Des Moines
Community Foundation
John R. Fitzgibbon*
Self-employed Financial and Operational
Consultant, Des Moines
Patricia Clare Sullivan*
Retired CEO & President of Mercy Health
Center, Central Iowa, Des Moines
Casey’s newest director, Diane C. Bridgewater, was
appointed by the Board on March 6, 2007 to serve
until she stands for election at the annual meeting.
She is CFO and Treasurer of Life Care Services, LLC,
a manager and developer of continuing care retirement
communities. Previously, she was with Pioneer Hi-Bred,
most recently (2006) as Vice President and CFO.
Diane C. Bridgewater*
* member of audit committee
Jack P. Taylor
We express a sense of loss at the death of Jack P. Taylor, a director
since 1993. Jack took pride in his role on the Board. As Chairman
and CEO of his own company, a Des Moines-based general
contractor, he shared a valued perspective on numerous aspects
of Casey’s. We’ll miss his insight and his energy.
page 16
investor information
common stock
Casey’s General Stores, Inc. common
stock trades on the Nasdaq Global
Select Market under the symbol CASY.
The 50.6 million shares of common stock
outstanding at April 30, 2007 had a market
value of $1.3 billion. As of that same date,
there were 2,551 shareholders of record.
common stock market prices
Calendar 2005 $ High $ Low
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
19.67
20.86
23.25
26.09
15.98
16.53
19.33
20.19
Calendar 2006 $ High $ Low
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
27.20
25.57
25.99
26.00
22.02
20.15
21.01
21.19
Calendar 2007 $ High $ Low
1st Quarter
2nd Quarter
26.70
29.46
23.49
24.76
On June 28, 2007, the last reported sales
price of the Company’s common stock was
$27.70 per share. On that same date, the
market cap was $1.4 billion.
dividends
The Company began paying cash dividends
investor inquiries
Current or prospective Casey’s General
during fiscal 1991. The dividends paid in
Stores, Inc. investors can receive annual
fiscal 2007 totaled $0.20 per share. At
reports, proxy statements, Forms 10-K
its June meeting, the Board of Directors
and 10-Q, and earnings announcements
increased the quarterly dividend to $0.065
at no cost by calling (515) 965-6107 or
per share. The dividend is payable on
sending written requests to the
August 15, 2007 to shareholders of
following address:
record on August 1, 2007.
dividend reinvestment
and stock purchase plan
This plan, introduced in the fall of 1998,
gives holders of Casey’s General Stores, Inc.
common stock a convenient and economical
way of purchasing additional shares at
market prices by reinvesting their dividends
in full or in part. Stockholders may also
take advantage of the cash payment option
to purchase additional shares. Those
wishing to enroll should contact the
transfer agent and registrar:
Securities Transfer Division
UMB Bank, n.a.
P.O. Box 410064
Kansas City, Missouri 64141
Casey’s General Stores, Inc.
One Convenience Blvd.
Ankeny, Iowa 50021
Corporate information, including
monthly same-store sales data for the
Company’s three business categories,
is also available at www.caseys.com.
Quarterly conference calls are broadcast
live over the Internet via the Investor
Relations Web page and made available
in archived format. Broadcast times for
the quarterly calls will be announced on
the Web page and in corresponding
press releases.
annual meeting
All shareholders and prospective
investors are cordially invited to attend
the annual meeting at 9:00 a.m.,
September 14, 2007 at the corporate
headquarters in Ankeny, Iowa.
page 17
page 17
FORM 10-K
TABLE OF CONTENTS
PART I
ITEM 1.
Business ..........................................................................................................................................3
ITEM 1A.
Risk Factors ....................................................................................................................................8
ITEM 1B. Unresolved Staff Comments ........................................................................................................12
ITEM 2.
Properties .....................................................................................................................................12
ITEM 3.
Legal Proceedings ........................................................................................................................12
ITEM 4.
Submission of Matters to a Vote of Security Holders .................................................................13
PART II
ITEM 5.
Market for Registrant’s Common Equity, Related Stockholder Matters,
and Issuer Purchases of Equity Securities....................................................................................13
ITEM 6.
Selected Financial Data ..............................................................................................................15
ITEM 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations ..........................................................................................16
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk .....................................................23
ITEM 8.
Financial Statements and Supplementary Data ..........................................................................24
ITEM 9.
Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure .....................................................................................47
ITEM 9A.
Controls and Procedures ..............................................................................................................47
ITEM 9B. Other Information .......................................................................................................................47
PART III
ITEM 10.
Directors, Executive Officers and Corporate Governance ..........................................................48
ITEM 11.
Executive Compensation .............................................................................................................48
ITEM 12.
Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters ...................................................................48
ITEM 13.
Certain Relationships and Related Transactions,
Directive Independence ...............................................................................................................48
ITEM 14.
Principal Accountant Fees and Services .......................................................................................48
PART IV
ITEM 15.
Exhibits and Financial Statement Schedules ...............................................................................49
page 18
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal Year Ended April 30, 2007
Commission File Number 0-12788
CASEY’S GENERAL STORES, INC.
(Exact name of registrant as specified in its charter)
IOWA
(State or other jurisdiction of
incorporation or organization)
42-0935283
(I.R.S. Employer
Identification Number)
ONE CONVENIENCE BLVD., ANKENY, IOWA
(Address of principal executive offices)
50021
(Zip Code)
(515) 965-6100
(Registrant’s telephone number, including area code)
Securities Registered pursuant to Section 12(b) of the Act
COMMON STOCK
(Title of Class)
COMMON SHARE PURCHASE RIGHTS
(Title of Class)
Securities Registered pursuant to Section 12(g) of the Act
NONE
page 1
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [X] No [ ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Exchange Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incor-
porated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant on June 14, 2007,
computed by reference to the closing sales price ($24.27 per share) as quoted on the NASDAQ Global Select Market on the last
business day of the registrant’s most recently completed second fiscal quarter (October 31, 2006), was $1,150,322,812.
Indicate the number of shares outstanding of each of the issuer’s class of common stock, as of the latest practicable date.
Class
Outstanding at June 14, 2007
________________________________
________________________________
Common Stock, no par value per share
50,613,712 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents, as set forth herein, are incorporated by reference into the listed Parts and Items of
this report on Form 10-K:
1.
Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Annual
Meeting of Shareholders to be held on September 14, 2007 (Item 5 of Part II and Items 10, 11, 12, 13, and 15 of Part III).
page 2
PART I
ITEM 1.
BUSINESS
The Company
Casey’s General Stores, Inc. and its wholly owned subsidiaries (the Company/Casey’s/we) operate convenience stores
under the name “Casey’s General Store” in 9 Midwest states, primarily Iowa, Missouri, and Illinois. The stores carry a broad
selection of food (including freshly prepared foods such as pizza, donuts, and sandwiches), beverages, tobacco products, health
and beauty aids, automotive products, and other nonfood items. In addition, all stores offer gasoline for sale on a self-service
basis. On April 30, 2007, there were a total of 1,463 Casey’s General Stores in operation, of which 1,448 were operated by the
Company (Corporate Stores) and 15 stores were operated by franchisees (Franchise Stores). There were 8 Corporate Stores
newly constructed and 52 acquired stores opened in fiscal 2007. There were no Franchise Stores newly opened in fiscal 2007.
We operate a central warehouse, Casey’s distribution center, adjacent to our corporate headquarters in Ankeny, Iowa, through
which we supply grocery and general merchandise items to Corporate and Franchise Stores.
Approximately 61% of all Casey’s General Stores are located in areas with populations of fewer than 5,000 persons,
while approximately 13% of all stores are located in communities with populations exceeding 20,000 persons. The Company
competes on the basis of price as well as on the basis of traditional features of convenience store operations such as location,
extended hours, and quality of service.
Casey’s, with executive offices at One Convenience Blvd., Ankeny, Iowa 50021-8045 (telephone 515-965-6100) was
incorporated in Iowa in 1967. Two of our subsidiaries, Casey’s Marketing Company (Marketing Company) and Casey’s Services
Company (Services Company), also operate from the corporate headquarters facility and were incorporated in Iowa in March
1995. A third subsidiary, Casey’s Retail Company, was incorporated in Iowa in 2004 and also operates from these facilities.
The Company’s Internet address is www.caseys.com. Each year we make available through our Web site current reports
on Form 8-K, quarterly reports on Form 10-Q , our annual report on Form 10-K, and amendments to those reports free of
charge as soon as reasonably practicable after they have been electronically filed with the Securities and Exchange Commission.
Additionally, you can go to our Web site to read our Financial Code of Ethics and Code of Conduct; we intend to post disclosure
of any waivers to the Codes to the extent such disclosure is legally required.
General
Casey’s General Stores seek to meet the needs of residents of small towns by combining features of both general
store and convenience store operations. Smaller communities often are not served by national-chain convenience stores. We have
succeeded at operating Casey’s General Stores in small towns by offering, at competitive prices, a broader selection of products
than does a typical convenience store.
In each of the past two fiscal years, we derived over 97% of our gross profits from retail sales by Corporate Stores. We
also derived income from continuing monthly royalties based on sales by Franchise Stores; wholesale sales to Franchise Stores;
sign and façade rental fees; and the provision of certain maintenance, transportation, and construction services to our franchisees.
Our sales historically have been strongest during the first and second fiscal quarters (May through October) and relatively
weaker during the third and fourth. In warmer weather, customers tend to purchase greater quantities of gasoline and certain
convenience items such as beer, soft drinks, and ice.
page 3
Corporate Subsidiaries
The Marketing Company and the Services Company were organized as Iowa corporations in March 1995, and both
are wholly owned subsidiaries of Casey’s. Casey’s Retail Company was organized as an Iowa corporation in April 2004 and is
also a wholly owned subsidiary of Casey’s.
Casey’s Retail Company operates Corporate Stores in Illinois, Kansas, Minnesota, Nebraska, and South Dakota; it
also holds the rights to the Casey’s trademark and trade name and serves as franchisor in connection with the operation of
Franchise Stores. The Marketing Company owns and has responsibility for the operation of Corporate Stores in Iowa, Missouri,
Wisconsin, and Indiana. The Marketing Company also has responsibility for all of our wholesale operations, including the
distribution center. The Services Company provides a variety of construction and transportation services for all Corporate Stores.
First Heartland Captive Insurance Company (First Heartland) was incorporated in April 2004 in Arizona and was a
wholly owned subsidiary of Casey’s until being dissolved December 2006. First Heartland operated as a single-parent deductible
reimbursement captive insurance company based in Phoenix, Arizona. First Heartland provided general liability, automobile
liability, and workers’ compensation insurance coverages to the Retail Company, the Marketing Company, and the Services Company.
Store Operations
Products Offered
Each Casey’s General Store typically carries over 3,000 food and nonfood items. The products offered are those
normally found in a supermarket, except that the stores do not sell produce or fresh meats and selection is generally limited to
one or two well-known brands of each item stocked. Most of our staple foodstuffs are nationally advertised brands. Stores sell
regional brands of dairy and bakery products, and approximately 88% of the stores offer beer. Our nonfood items include
tobacco products, health and beauty aids, school supplies, housewares, pet supplies, photo supplies, and automotive products.
All Casey’s General Stores offer gasoline or gasohol for sale on a self-service basis. The gasoline and gasohol generally
are sold under the Casey’s name, although some Franchise Stores sell gasoline under a major oil company brand.
It is our policy to experiment with additions to the Company’s product line, especially products with higher gross profit
margins. As a result, we had added various prepared food items to our product line over the years, facilitated by the installation
of snack centers, which now are in most Corporate Stores. The snack centers sell sandwiches, fountain drinks, and other items
that have gross profit margins higher than those of general staple goods. As of April 30, 2007, the Company was selling donuts
prepared on store premises in approximately 98% of its stores in addition to cookies, brownies, Danish rolls, cinnamon rolls, and
muffins. The Company installs donut-making facilities in all newly constructed stores.
We began marketing made-from-scratch pizza in 1984, expanding its availability to 1,381 Corporate Stores (95%) as
of April 30, 2007. Although pizza is our most popular prepared food offering, we continue to expand our prepared food product
line, which now includes ham and cheese sandwiches, pork and chicken fritters, sausage sandwiches, chicken tenders, popcorn
chicken, sub sandwiches, pizza bites, breakfast croissants and biscuits, breakfast pizza, hash browns, quarter-pound hamburgers
and cheeseburgers, hot dogs, and potato cheese bites.
The growth in our proprietary prepared food program reflects management’s strategy to promote high-margin products
that are compatible with convenience store operations. In the last three fiscal years, retail sales of nongasoline items have generated
about 30% of our retail sales, but they have resulted in approximately 75% of our gross profits from retail sales. Gross profit
margins on prepared food items averaged approximately 62% during the same thirty-six months—significantly higher than the
gross profit margin on retail sales of gasoline, which averaged approximately 5%.
page 4
Store Design
Casey’s General Stores are freestanding and, with a few exceptions to accommodate local conditions, conform to
standard construction specifications. During the fiscal year ended April 30, 2007, the aggregate investment in land, building,
equipment, and initial inventory for a typical newly constructed Corporate Store averaged approximately $1.4 million. The standard
building designed by the Company is a pre-engineered steel frame building mounted on a concrete slab. The current store design
measures 40 feet by 68 feet with approximately 1,300 square feet devoted to sales area, 500 square feet to kitchen space, and 500 square
feet to storage and 2 large public restrooms. Store lots have sufficient frontage and depth to permit adequate drive-in parking facilities
on one or more sides of each store. Each store typically includes 3 or 4 islands of gasoline dispensers and storage tanks with capacity for
24,000 to 36,000 gallons of gasoline. The merchandising display follows a standard layout designed to encourage a flow of customer
traffic through all sections of every store. All stores are air-conditioned and have modern refrigeration equipment. Nearly all the store
locations feature our bright red and yellow pylon sign and façade, both of which display Casey’s name and service mark.
All Casey’s General Stores remain open at least sixteen hours per day, seven days a week. Most store locations are open
from 6:00 a.m. to 11:00 p.m., although hours of operation may be adjusted on a store-by-store basis to accommodate customer
traffic patterns. We require that all stores maintain a bright, clean interior and provide prompt checkout service. It is our policy
not to permit the installation of electronic games or sale of adult magazines on store premises.
Store Locations
The Company traditionally has located its stores in small towns not served by national-chain convenience stores.
Management believes that a Casey’s General Store provides a service not otherwise available in small towns and that a convenience
store in an area with limited population can be profitable if it stresses sales volume and competitive prices. Our store site selection
criteria emphasize the population of the immediate area and daily highway traffic volume. Where there is no competing store, we
can often operate profitably at a highway location in a community with a population of as few as 500.
page 5
Gasoline Operations
Gasoline sales are an important part of our revenue and earnings. Approximately 72% of Casey’s net sales for the year
ended April 30, 2007 were derived from the retail sale of gasoline. The following table summarizes gasoline sales by Corporate
Stores for the three fiscal years ended April 30, 2007:
Number of gallons sold
Total retail gasoline sales
Percentage of net sales
Gross profit percentage
Average retail price per gallon
Average gross profit margin per gallon
Average number of gallons sold per
Corporate Store*
Year ended April 30,
2007
2006
2005
1,193,554,420
1,093,574,969
1,009,936,695
$
2,881,054,152
$
2,478,733,751
$
1,858,094,798
71.6%
4.3%
$2.41
10.40¢
821,057
71.0%
5.1%
$2.27
11.47¢
806,221
66.7%
5.9%
$1.84
10.78¢
781,930
_____________________________
*Includes only those stores in operation at least one full year before commencement of the periods indicated.
Retail prices of gasoline increased during the year ended April 30, 2007. The total number of gallons we sold during
this period also increased, primarily because of the higher number of Corporate Stores in operation and our efforts to price our
retail gasoline to compete in local market areas. For additional information concerning the Company’s gasoline operations, see
Item 7 herein.
Distribution and Wholesale Arrangements
The Marketing Company supplies all Corporate Stores and all Franchise Stores with groceries, food, health and beauty
aids, and general merchandise from our distribution center. The stores place orders for merchandise through a telecommunications
link-up to the computer at our headquarters in Ankeny, and we fill the orders with weekly shipments in Company-owned delivery trucks.
The Marketing Company charges Franchise Stores processing and shipping fees for each order our distribution center fills. All of our
existing and proposed stores are within the distribution center’s optimum efficiency range—a radius of approximately 500 miles.
The Marketing Company’s only wholesale sales are to Franchise Stores, to which it sells groceries; prepared sandwiches;
ingredients and supplies for donuts, sandwiches, and pizza; health and beauty aids; general merchandise; and gasoline. Although
we derive income from this activity, we provide these products, particularly gasoline, at narrow profit margins to promote
competitiveness and increase sales to Franchise Stores.
In fiscal 2007, we purchased directly from manufacturers approximately 90% of the food and nonfood items sold from
our distribution center. It is our practice, with few exceptions, not to contract with any of the suppliers of products sold by Casey’s
General Stores. We believe the practice is customary in the industry and enables us to respond flexibly to changing market conditions.
page 6
Franchise Operations
We have been franchising Casey’s General Stores since 1970. In addition to generating income, franchising historically
enabled us to obtain desirable store locations from owners who preferred to become franchisees rather than to sell or lease their
locations. Franchising also enabled us to expand our system of stores at a faster rate, thereby achieving operating efficiencies in
our warehouse and distribution system as well as stronger identification in our marketing territory. As the Company has grown and
strengthened its financial resources, franchising has become less advantageous for us. In recent years we have acquired a number of
Franchise Stores through lease or purchase. As of April 30, 2007, there were a total of 11 franchisees operating 15 Franchise Stores.
All franchisees currently pay us a royalty fee equal to 3% of gross receipts derived from total store sales excluding
gasoline, subject to a minimum monthly royalty of $300. We currently assess a royalty fee of $0.018 per gallon on gasoline sales,
although we have discretion to increase this amount to 3% of retail gasoline sales. In addition, franchisees pay Casey’s a sign
and façade rental fee. The franchise agreements do not authorize us to establish the prices to be charged by franchisees. Further,
except with respect to certain supplies and items provided in connection with the opening of each store, each franchisee has
unlimited authority to purchase supplies and inventory from any supplier, provided the products meet our quality standards.
Franchise agreements typically contain a noncompetition clause that restricts the franchisee’s ability to operate a
convenience-style store in a specified area for a period of two or three years following termination of the agreement.
Personnel
On April 30, 2007, we had 6,954 full-time employees and 10,182 part-time employees. We have not experienced any
work stoppages. There are no collective bargaining agreements between the Company and any of its employees.
Competition
Our business is highly competitive. Food, including prepared foods, and nonfood items similar or identical to those
sold by the Company are generally available from various competitors in the communities served by Casey’s General Stores. We
believe our stores located in small towns compete principally with other local grocery and convenience stores; similar retail outlets;
and, to a lesser extent, prepared food outlets, restaurants, and expanded gasoline stations offering a more limited selection of
grocery and food items for sale. Stores located in more heavily populated communities may compete with local and national
grocery and drug store chains, expanded gasoline stations, supermarkets, discount food stores, and traditional convenience stores.
Convenience store chains competing in the larger towns served by Casey’s General Stores include 7-Eleven, Quik Trip, Kwik
Trip, and regional chains. Some of the Company’s competitors have greater financial and other resources than we do. These
competitive factors are discussed further in Item 7 of this Form 10-K.
Service Marks
The name “Casey’s General Store” and the service mark consisting of the Casey’s design logo (with the words “Casey’s
General Store”) are our registered service marks under federal law. We believe these service marks are of material importance in
promoting and advertising the Company’s business.
page 7
Government Regulation
The United States Environmental Protection Agency and several states, including Iowa, have established requirements
for owners and operators of underground gasoline storage tanks (USTs) with regard to (i) maintenance of leak detection, corrosion
protection, and overfill/spill protection systems; (ii) upgrade of existing tanks; (iii) actions required in the event of a detected leak;
(iv) prevention of leakage through tank closings; and (v) required gasoline inventory recordkeeping. Since 1984, new Corporate
Stores have been equipped with noncorroding fiberglass USTs, including some with double-wall construction, overfill protection,
and electronic tank monitoring. We currently have 3,088 USTs, 2,621 of which are fiberglass and 467 are steel, and believe that
substantially all capital expenditures for electronic monitoring, cathodic protection, and overfill/spill protection to comply with the
existing UST regulations have been completed. Additional regulations or amendments to the existing UST regulations could result
in future expenditures.
Several states in which we do business have trust fund programs with provisions for sharing or reimbursing corrective
action or remediation costs incurred by UST owners. In each of the years ended April 30, 2007 and 2006, we spent approximately
$1,431,000 and $1,519,000, respectively, for assessments and remediation. Substantially all of these expenditures were submitted for
reimbursement from state-sponsored trust fund programs. As of April 30, 2007, approximately $10,019,000 has been received from
such programs since inception. The amounts are typically subject to statutory provisions requiring repayment of the reimbursed funds
for noncompliance with upgrade provisions or other applicable laws. At April 30, 2007, we had an accrued liability of
approximately $336,000 for estimated expenses related to anticipated corrective actions or remediation efforts, including relevant
legal and consulting costs. We believe we have no material joint and several environmental liability with other parties.
ITEM 1A.
RISK FACTORS
You should carefully consider the risks described in this report before making a decision to invest in our securities. The risks and uncertainties
described are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial could negatively
impact our results of operations or financial condition in the future. If any of such risks actually occur, our business, financial condition, and/or results of
operations could be materially adversely affected. In that case, the trading price of our securities could decline and you might lose all or part of your investment.
The convenience store industry is highly competitive.
Risks Related to Our Industry
The industry and geographic areas in which we operate are highly competitive and marked by ease of entry and
constant change in the number and type of retailers offering the products and services found in our stores. We compete with other
convenience store chains, gasoline stations, supermarkets, drugstores, discount stores, club stores, and mass merchants. In recent
years, several nontraditional retailers such as supermarkets, club stores, and mass merchants have affected the convenience store
industry by entering the gasoline retail business. These nontraditional gasoline retailers have obtained a significant share of the
motor fuels market, and their market share is expected to grow. In some of our markets, our competitors have been in existence
longer and have greater financial, marketing, and other resources than we do. As a result, our competitors may be able to respond
better to changes in the economy and new opportunities within the industry. To remain competitive, we must constantly analyze
consumer preferences and competitors’ offerings and prices to ensure we offer convenience products and services consumers
demand at competitive prices. We must also maintain and upgrade our customer service levels, facilities, and locations to remain
competitive and attract customer traffic. Major competitive factors include, among others, location, ease of access, gasoline brands,
pricing, product and service selections, customer service, store appearance, cleanliness, and safety.
page 8
The volatility of wholesale petroleum costs could adversely affect our operating results.
Over the past three fiscal years, our gasoline revenues accounted for approximately 70% of total revenue and our
gasoline gross profit accounted for approximately 23% of total gross profit. Crude oil and domestic wholesale petroleum
markets are marked by significant volatility. General political conditions, acts of war or terrorism, and instability in oil producing
regions, particularly in the Middle East and South America, could significantly affect crude oil supplies and wholesale petroleum
costs. In addition, the supply of gasoline and our wholesale purchase costs could be adversely affected in the event of shortage,
which could result from, among other things, lack of capacity at United States oil refineries or the absence of gasoline contracts
that guarantee an uninterrupted, unlimited supply of gasoline. Significant increases and volatility in wholesale petroleum costs
could result in significant increases in the retail price of petroleum products and in lower gasoline average margin per gallon.
Increases in the retail price of petroleum products could adversely affect consumer demand for gasoline. Volatility makes it
difficult to predict the impact that future wholesale cost fluctuations will have on our operating results and financial condition.
These factors could adversely affect our gasoline gallon volume, gasoline gross profit, and overall customer traffic, which in turn
would affect our sales of grocery and general merchandise and prepared food products.
Wholesale cost increases of tobacco products could affect our operating results.
Sales of tobacco products have averaged approximately 9% of our total revenue over the past three fiscal years, and our
tobacco gross profit accounted for approximately 12.6% of total gross profit for the same period. Significant increases in wholesale
cigarette costs, tax increases on tobacco products, and national and local campaigns to discourage smoking in the United States may
have an adverse effect on unit demand for cigarettes domestically. In general, we attempt to pass price increases on to our customers.
Due to competitive pressures in our markets, however, we may not always be able to do so. These factors could adversely affect our
retail price of cigarettes, cigarette unit volume and revenues, merchandise gross profit, and overall customer traffic.
Unfavorable weather conditions could adversely affect our business.
Risks Related to Our Business
All of our stores are located in the Midwest region of the United States, which is susceptible to thunderstorms, extended
periods of rain, ice storms, and heavy snow. Inclement weather conditions could damage our facilities or could have a significant
impact on consumer behavior, travel, and convenience store traffic patterns as well as our ability to operate our locations. In
addition, we typically generate higher revenues and gross margins during warmer weather months, which fall within our first
and second fiscal quarters. If weather conditions are not favorable during these periods, our operating results and cash flow from
operations could be adversely affected.
We may not be able to identify, acquire, and integrate new stores, which could adversely affect our ability to
grow our business.
An important part of our recent growth strategy has been to acquire other convenience stores that complement our existing
stores or broaden our geographic presence. From May 1, 2006 through April 30, 2007 we acquired 52 convenience stores. The
transactions included the acquisition of 32 HandiMart stores and a truck stop operated under the name “Just Diesel” in eastern
Iowa. We expect to continue pursuing acquisition opportunities.
Acquisitions involve risks that could cause our actual growth or operating results to differ materially from our
expectations or the expectations of securities analysts:
•
We may not be able to identify suitable acquisition candidates or acquire additional convenience stores on favorable
terms. We compete with others to acquire convenience stores. We believe this competition may increase and could result
in decreased availability or increased prices for suitable acquisition candidates. It may be difficult to anticipate the
timing and availability of acquisition candidates.
page 9
•
•
During the acquisition process we may fail or be unable to discover some of the liabilities of companies or businesses we
acquire. These liabilities may result from a prior owner’s noncompliance with applicable federal, state, or local laws.
Acquired convenience stores may not perform as we expect or we may not be able to obtain the cost savings and
financial improvements we anticipate.
We are subject to federal and state environmental and other regulations.
Our business is subject to extensive governmental laws and regulations that include but are not limited to environmental
and employment laws and regulations; legal restrictions on the sale of alcohol, tobacco, and lottery products; requirements
related to minimum wage, working conditions, public accessibility, and citizenship. A violation of or change in such laws and/or
regulations could have a material adverse effect on our business, financial condition, and results of operations.
Under various federal, state, and local laws, regulations, and ordinances, we may, as the owner/operator of our locations,
be liable for the costs of removal or remediation of contamination at these or our former locations, whether or not we knew of, or
were responsible for, the presence of such contamination. Failure to remediate such contamination properly may make us liable to
third parties and adversely affect our ability to sell or lease such property.
Compliance with existing and future environmental laws regulating underground storage tanks may require significant
capital expenditures and increased operating and maintenance costs. The remediation costs and other costs required to clean up
or treat contaminated sites could be substantial. We pay tank registration fees and other taxes to state trust funds established in
our operating areas in support of future remediation obligations.
These state trust funds are expected to pay or reimburse us for remediation expenses less a deductible. To the extent
third parties do not pay for remediation as we anticipate, we will be obligated to make these payments, which could materially
adversely affect our financial condition and results of operations. Reimbursements from state trust funds will be dependent on the
maintenance and continued solvency of the various funds.
In the future, we may incur substantial expenditures for remediation of contamination that has yet to be discovered
at existing locations or at locations we may acquire. We cannot assure you that we have identified all environmental liabilities at
all of our current and former locations; that material environmental conditions not known to us do not exist; that future laws,
ordinances, or regulations will not impose material environmental liability on us; or that a material environmental condition does
not otherwise exist at any one or more of our locations. In addition, failure to comply with any environmental laws, regulations,
or ordinances or an increase in regulations could adversely affect our operating results and financial condition.
State laws regulate the sale of al cohol, tobacco, and lottery products. A violation or change of these laws could adversely
affect our business, financial condition, and results of operations because state and local regulatory agencies have the power to
approve, revoke, suspend, or deny applications for and renewals of permits and licenses relating to the sale of these products or to
seek other remedies.
Any appreciable increase in income, overtime pay, or the statutory minimum wage rate or adoption of mandated healthcare
benefits would result in an increase in our labor costs. Such cost increase or the penalties for failing to comply with such statutory
minimum could adversely affect our business, financial condition, and results of operations.
page 10
Other Risks
Any issuance of shares of our common stock in the future could have a dilutive effect on
your investment.
We could issue additional shares for investment, acquisition, or other business purposes. Even if there is not an immediate
need for capital, we may choose to issue securities to sell in public or private equity markets if and when conditions are favorable. Raising
funds by issuing securities would dilute the ownership interests of our existing stockholders. Additionally, certain types of equity securities
we may issue in the future could have rights, preferences, or privileges senior to the rights of existing holders of our common stock.
The market price for our common stock has been and may in the future be volatile, which could cause the
value of your investment to decline.
Securities markets worldwide experience significant price and volume fluctuations. This market volatility could
significantly affect the market price of our common stock without regard to our operating performance. In addition, the price
of our common stock could be subject to wide fluctuations in response to these and other factors:
•
•
•
•
•
•
•
A deviation in our results from the expectations of public market analysts and investors.
Statements by research analysts about our common stock, company, or industry.
Changes in market valuations of companies in our industry and market evaluations of our industry generally.
Additions or departures of key personnel.
Actions taken by our competitors.
Sales of common stock by the Company, senior officers, or other affiliates.
Other general economic, political, or market conditions, many of which are beyond our control.
The market price of our common stock will also be affected by our quarterly operating results and quarterly comparable
store sales growth, which may be expected to fluctuate from quarter to quarter. The following are factors that may affect our
quarterly results and comparable store sales: general, regional, and national economic conditions; competition; unexpected costs;
changes in pricing, consumer trends, and the number of stores we open and/or close during any given period; costs of compliance
with corporate governance and Sarbanes-Oxley requirements. Other factors are discussed throughout Management’s Discussion
and Analysis of Financial Condition and Results of Operations. You may not be able to resell your shares of our common stock
at or above the price you pay.
Our charter documents include provisions that may have the effect of preventing or hindering a change in
control and adversely affecting the market price of our common stock.
Our articles of incorporation give the Company’s board of directors the authority to issue up to 1 million shares of preferred
stock and to determine the rights and preferences of the preferred stock without obtaining stockholder approval. The existence of this
preferred stock could make it more difficult or discourage an attempt to obtain control of the Company by means of a tender offer,
merger, proxy contest, or otherwise. Furthermore, this preferred stock could be issued with other rights, including economic rights, senior
to our common stock, thereby having a potentially adverse effect on the market price of our common stock. At present, we have no
plans to issue any preferred stock.
Other provisions of our articles of incorporation and bylaws and of Iowa law could make it more difficult for a third party to
acquire us or hinder a change in management, even if doing so would be beneficial to our stockholders. For example, Section 409.1110
of the Iowa Business Corporation Act prohibits publicly held Iowa corporations to which it applies from engaging in a business
combination with an interested stockholder for a period of three years after the date of the transaction in which the person became an
page 11
interested stockholder unless the business combination is approved in a prescribed manner. This provision could discourage others
from bidding for our shares and could, as a result, reduce the likelihood of an increase in our stock price that would otherwise
occur if a bidder sought to buy our stock.
These governance provisions could affect the market price of our common stock. We may, in the future, adopt other
measures that could have the effect of delaying, deferring, or preventing an unsolicited takeover, even if such a change in control
were at a premium price or favored by a majority of unaffiliated stockholders. These measures may be adopted without any
further vote or action by our stockholders.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2.
PROPERTIES
We own our corporate headquarters and distribution center. Located on a 45-acre site in Ankeny, Iowa, these
adjacent facilities and our vehicle service and maintenance center occupy a total of approximately 375,000 square feet. The
original complex was completed in February 1990 and placed in full service at that time. We recently added 98,000 square feet
to the distribution center, 20,000 square feet of office space, additional paving for truck parking, and necessary drainage and
landscaping improvements.
On April 30, 2007, we owned the land at 1,367 locations and the buildings at 1,377 locations and leased the land at
81 locations and the buildings at 71 locations. Most of the leases provide for the payment of a fixed rent plus property taxes and
insurance and maintenance costs. Generally, the leases are for terms of ten to twenty years with options to renew for additional
periods or options to purchase the leased premises at the end of the lease period.
ITEM 3.
LEGAL PROCEEDINGS
The Company is named as a defendant in five lawsuits (“hot fuel” cases) brought in the federal courts in Kansas and
Missouri against a variety of gasoline retailers. The complaints generally allege that the Company, along with numerous other
retailers, has misrepresented gasoline volumes dispensed at its pumps by failing to compensate for expansion that occurs when fuel
is sold at temperatures above 60°F. Fuel is measured at 60°F in wholesale purchase transactions and computation of motor fuel
taxes in Kansas and Missouri. The complaints all seek certification as class actions on behalf of gasoline consumers within those
two states, and one of the complaints also seeks certification for a class consisting of gasoline consumers in all states. The actions
generally seek recovery for alleged violations of state consumer protection or unfair merchandising practices statutes, negligent
and fraudulent misrepresentation, unjust enrichment, civil conspiracy, and violation of the duty of good faith and fair dealing;
several seek injunctive relief and punitive damages.
These actions are part of a number of similar lawsuits that have been filed in recent weeks in at least 21 states against
a wide range of defendants that produce, refine, distribute, and/or market gasoline products in the United States. On June 18,
2007, the Judicial Panel on Multidistrict Litigation ordered that all of the pending hot fuel cases be transferred to the District of
Kansas and assigned to the Honorable Kathryn H. Vratil for coordinated or consolidated pretrial proceedings, including rulings
on discovery matters, various pretrial motions, and class certification. We do not believe the Company is liable to the defendants
for the conduct complained of, and we intend to contest the matters vigorously.
On May 30, 2007, a complaint was filed against the Company in the United States District Court for the Northern
District of Iowa by two former employees, in which the claim is made that Casey’s failed to pay overtime compensation properly
to two or more of its assistant managers. Specifically, plaintiffs claim that the assistant managers were treated as nonexempt
employees entitled to overtime pay, but that the Company did not properly record all hours worked and failed to pay the
assistant managers overtime pay for all hours worked in excess of 40 per week. The action purports to be a collective action
under the Fair Labor Standards Act (essentially equivalent to a class action) brought on behalf of all “persons who are currently
page 12
or were employed during the three-year period immediately preceding the filing of [the] complaint as ‘Assistant
Managers’ at any Casey’s General Store operated by [the] Defendant (directly or through one of its wholly owned
subsidiaries), who worked overtime during any given week within that period, and who have not filed a complaint to
recover overtime wages.” The complaint seeks relief in the form of back wages owed all members of the class during the
three-year period preceding the filing of the complaint, liquidated damages, attorneys fees, and costs. We do not believe the
Company is liable to the plaintiffs for the conduct complained of, and we intend to contest the matter vigorously.
From time to time we are involved in other legal and administrative proceedings or investigations arising from the conduct
of our business operations: including contractual disputes; environmental contamination or remediation issues; employment or
personnel matters; personal injury and property damage claims; and claims by federal, state, and local regulatory authorities relating to
the sale of products pursuant to licenses and permits issued by those authorities. Claims for compensatory or exemplary damages
in those actions may be substantial. While the outcome of such litigation, proceedings, investigations, or claims is never certain, it
is our opinion, after taking into consideration legal counsel’s assessment and the availability of insurance proceeds and other
collateral sources to cover potential losses, that the ultimate disposition of such matters currently pending or threatened,
individually or cumulatively, will not have a material adverse effect on our consolidated financial position and results of operation.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS,
AND ISSUER PURCHASES OF EQUITY SECURITIES
Common Stock
Casey’s common stock trades on the Nasdaq Global Select Market under the symbol CASY. The 50,592,212 shares of
common stock outstanding at April 30, 2007 had a market value of $1.3 billion, and there were 2,551 shareholders of record.
Common Stock Market Prices
Calendar
2005
Q1
Q2
Q3
Q4
High
Low
$ 19.67
$ 15.98
20.86
23.25
26.09
16.53
19.33
20.19
Calendar
2006
Q1
Q2
Q3
Q4
High
Low
Calendar
2007
High
Low
$ 27.20
$ 22.02
Q1 $ 26.70 $ 23.49
25.57
25.99
26.00
20.15
21.01
21.19
page 13
Dividends
We began paying cash dividends during fiscal 1991.The dividends paid in fiscal 2007 totaled $0.20 per share. The
dividends paid in fiscal 2006 totaled $0.18 per share. Historically, we recorded dividends at the time of payment, which typically
followed by several weeks the date on which dividends were declared. On May 1, 2004, we began recording dividends as of the
date of declaration. As a result, Company records show two quarterly dividends paid in the first quarter of fiscal 2005, the first of
which ($0.035) was for the fourth quarter of fiscal 2004 and the second of which ($0.04) was for the first quarter of fiscal 2005.
The Board of Directors recently declared a quarterly dividend of $0.065, payable August 15, 2007 to shareholders of record on
August 1, 2007. The Board expects to review the dividend every year at its June meeting.
The cash dividends declared during the calendar years 2005-07 were as follows:
Calendar
2005
Q1
Q2
Q3
Q4
Cash dividend
Calendar
Cash dividend
Calendar
Cash dividend
declared
0.04
0.045
0.045
0.045
0.175
$
$
2006
Q1
Q2
Q3
Q4
declared
$ 0.045
0.05
0.05
0.05
$
0.195
2007
Q1
Q2
declared
$ 0.05
0.065
page 14
ITEM 6.
SELECTED FINANCIAL DATA
(In thousands, except per share amounts)
Statement of Income Data
Net sales
Franchise revenue
Cost of goods sold
Operating expenses
Depreciation and amortization
Interest, net
Earnings from continuing operations
before income taxes
Federal and state income taxes
Net earnings from continuing operations
Loss on discontinued operations, net of
tax benefit
Cumulative effect of accounting change,
net of tax benefit
Years ended April 30,
2007
2006
2005
2004
2003
$
4,023,330
$
3,491,795 $
2,786,473
$
2,310,034 $
2,101,721
680
4,024,010
3,440,725
410,459
63,895
11,184
97,747
34,205
63,542
1,651
--------
681
3,492,476
2,966,254
361,857
56,898
8,896
98,571
35,353
63,218
1,667
1,083
1,065
2,787,538
2,330,741
327,009
51,685
10,739
67,364
24,905
42,459
1,669
2,311,703
1,891,179
303,929
47,923
12,398
56,274
18,217
38,057
2,451
2,104,172
1,695,046
283,865
45,697
13,030
66,534
25,234
41,300
5,706
1,591
1,494
--------
--------
Net earnings
$
61,891
$
60,468 $
36,753
$
36,466 $
Basic
Earnings from continuing operations
Loss on discontinued operations
Cumulative effect of accounting
change, net of tax benefit
Net earnings
Diluted
Earnings from continuing operations
Loss on discontinued operations
Cumulative effect of accounting
change, net of tax benefit
Net earnings
$
$
$
$
1.26
.03
--------
1.23
1.25
.03
--------
1.22
$
$
$
$
1.25
.03
.02
1.20
1.24
.03
.02
1.19
$
$
$
$
.84
.11
--------
.73
.84
.11
--------
.73
$
$
$
$
.76
.03
--------
.73
.76
.03
--------
.73
$
$
$
$
Weighted average number of common
shares outstanding—basic
Weighted average number of common
shares outstanding—diluted
50,468
50,310
50,115
49,876
50,668
50,610
50,284
50,041
--------
39,806
.83
.03
--------
.80
.83
.03
-------
.80
49,643
49,720
Dividends paid per common share
$
0.20
$
0.18
$
0.195
$
0.13
$
0.10
Balance Sheet Data
Current assets
Total assets
Current liabilities
Long-term debt
Shareholders’ equity
Years ended April 30,
2007
2006
2005
2004
$
240,825
$
192,766
$ 143,140
$
147,193
$
1,129,271
234,267
199,504
572,264
988,899
245,056
106,512
523,190
871,619
170,837
123,064
469,137
834,972
146,226
144,158
439,794
2003
118,624
777,075
117,666
162,394
405,660
page 15
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands)
Please read the following discussion of the Company’s financial condition and results of operations in conjunction
with the selected historical consolidated financial data and consolidated financial statements and accompanying notes presented
elsewhere in this Form 10-K.
Overview
We derive our revenue from retail sales of food (including freshly prepared foods such as pizza, donuts, and sandwiches),
beverages, and nonfood products (including health and beauty aids, tobacco products, automotive products, and gasoline) by
Corporate Stores and wholesale sales of certain merchandise and gasoline to Franchise Stores. The Company generates relatively
minor revenues from continuing monthly royalties based on sales by Franchise Stores; sign and façade rental fees; and the
provision of certain maintenance, transportation, and construction services to the Company’s franchisees. A typical store
generally is not profitable in its first year of operation due to start-up costs and usually will attain representative levels of sales
and profits during its third or fourth year of operation.
We measure performance using trend analysis and same-store comparisons on net sales and gross profit applied to
the three business categories of our Corporate Stores: gasoline, grocery & other merchandise, and prepared food & fountain.
Comparisons are also made on operating expenses. Fluctuations in operating expenses are compared with the increase or
decrease in gross profit. Wages are the primary component of operating expenses, and we believe we have appropriately
aligned store manager compensation with store performance.
Store growth is a corporate priority. We evaluate the location of third-party purchases and sites for new construction
based on expected financial results and return on investment. We purchased 52 stores and built 8 in fiscal 2007.
Fiscal 2007 Compared with Fiscal 2006
Net sales for fiscal 2007 increased 15.2% to $4,023,330, primarily due to a 6.5% increase in gas prices, an increase in
the number of gallons sold, an increase in same-store sales, and the net addition of 54 Corporate Stores. Retail gasoline sales for
the fiscal year were $2,881,054, an increase of 16.2%, and gallons sold increased 9.1% to 1,193,554. Inside sales (grocery & other
merchandise and prepared food & fountain) increased 12.6% to $1,120,084.
Cost of goods sold as a percentage of net sales was 85.5% for fiscal 2007 compared with 84.9% for the prior year. The
increase was caused by a decrease in the gas margin to 4.3% in fiscal 2007 from 5.1% in fiscal 2006 due to the higher cost of
gasoline. The grocery & other merchandise margin increased to 32.7% in fiscal 2007 from 32.2% in fiscal 2006 due to a one-time
benefit of $4,800 related to cigarettes. The State of Iowa substantially increased the excise tax on cigarettes without implementing
an inventory floor tax. Without the one time benefit, the margin would have been 32.1%. The prepared food & fountain margin
decreased to 62% from 63% primarily due to our switch to a dual cola program.
Operating expenses increased 13.4% in fiscal 2007, driven by an increase in bank fees resulting from customers’ greater
use of credit cards and higher retail gasoline prices and an increase in the number of Corporate Stores. Higher gasoline prices
decreased the operating expense ratio to 10.2% of net sales in fiscal 2007 from 10.4% in the prior year.
The effective tax rate decreased 0.9% to 35% in fiscal 2007 from 35.9% in fiscal 2006. The decrease in the effective tax rate
was in part the result of the prior three years recovery of a permanent tax benefit related to deductions allowed for dividends paid into
the Company’s 401(k) plan. A recurring annual tax benefit will be realized going forward. The rate also decreased due to a ref i ned and
slightly downward rate application to the total net deferred tax liabilities, and a decrease in the tax contingency reserve.
page 16
Net earnings from continuing operations increased to $63,542 in fiscal 2007 from $63,218 in fiscal 2006. The
slight increase was due primarily to the increase in the number of gallons of gasoline sold, an increase in same-store sales
from the prior year, and an increase in the average margin on grocery & other merchandise sales. These increases were
partially offset by a decrease in the average margin on prepared food & fountain sales.
Fiscal 2007 discontinued operations resulted in a loss of $1,651 (net of $1,055 income tax benefit) compared with a loss
of $1,667 (net of $1,065 income tax benefit) in fiscal 2006. Discontinued stores had total revenues of $23,052 and $29,728 and
pretax operating losses of $688 and $1,170 for fiscal 2007 and 2006, respectively. Included were losses on disposal of $2,018 (net
of $787 tax benefit) for the year ended April 30, 2007 and $1,562 (net of $609 tax benefit) for the year ended April 30, 2006. The
losses on disposal for the years ended April 30, 2007 and 2006 included write-downs of stores to net realizable value as well as
gains and losses on sales of stores.
Fiscal 2006 Compared with Fiscal 2005
Net sales for fiscal 2006 increased 25.3% to $3,491,795, primarily due to a 23.2% increase in gas prices and the net addition
of 55 Corporate Stores. Retail gasoline sales for the fiscal year were $2,478,734, an increase of 33.4%, and gallons sold increased 8.3%
to 1,093,575. Inside sales (grocery & other merchandise and prepared food & fountain) increased 9.7% to $995,999.
Cost of goods sold as a percentage of net sales was 84.9% for fiscal 2006 compared with 83.6% for the prior year.
The increase was caused by a decrease in the gas margin to 5.1% in fiscal 2006 from 5.9% in fiscal 2005 due to the higher cost
of gasoline. The grocery & other merchandise margin increased to 32.2% in fiscal 2006 from 31.1% in fiscal 2005 due to the
enhancing of the point-of-sale technology. The prepared food & fountain margin increased to 63% from 60.4%, primarily
due to the relatively low cost of cheese during much of the year and the addition of profitable new products.
Operating expenses increased 10.7% in fiscal 2006, driven by an increase in bank fees resulting from customers’ greater
use of credit cards and higher retail gasoline prices and an increase in the number of Corporate Stores. Higher gasoline prices
decreased the operating expense ratio to 10.4% of net sales in fiscal 2006 from 11.7% in the prior year.
Depreciation and amortization expense increased 10.1% to $56,898 in fiscal 2006 from $51,685 in fiscal 2005. The
increase was due to capital expenditures made in fiscal 2006.
The effective tax rate decreased 1.1% to 35.9% in fiscal 2006 from 37.0% in fiscal 2005. The decrease in the effective
tax rate is primarily the result of the valuation of deferred tax assets relating to state income tax depreciation and utilizable net
operating losses, which exceeded an increase in the tax contingency reserve.
Net earnings from continuing operations increased to $63,218 in fiscal 2006 from $42,459 in fiscal 2005. The increase
was due primarily to the increase in the average margin per gallon of gasoline sold (to 11.47¢) from the prior year (10.78¢) and the
increase in average margin on both prepared food & fountain and grocery & other merchandise sales.
Discontinued operations for fiscal 2006 resulted in a loss of $1,667 (net of $1,065 income tax benefit) compared with a
loss of $5,706 (net of $3,648 income tax benefit) for fiscal 2005. Discontinued stores had total revenues of $29,728 and $60,020
and pretax operating losses of $1,170 and $2,524 for fiscal 2006 and 2005, respectively. Included were losses on disposal of
$1,562 (net of $609 tax benefit) for the year ended April 30, 2006 and $6,830 (net of $2,664 tax benefit) for the year ended
April 30, 2005. The losses on disposal for the years ended April 30, 2006 and 2005 included write-downs of stores to net
realizable value as well as gains and losses on sales of stores.
page 17
COMPANY NET SALES AND GROSS PROFITS
Net sales (1)
Gasoline
Grocery & other merchandise
Prepared food & fountain
Other
Gross profits (2)
Gasoline
Grocery & other merchandise
Prepared food & fountain
Other
Years ended April 30,
2007
2006
2005
$
2,881,054
$
2,478,734
$
1,858,095
$
$
852,812
267,273
22,191
4,023,330
124,094
278,650
165,764
14,097
$
582,605
767,474
228,525
17,062
3,491,795
125,443
247,024
144,036
9,038
$
$
704,040
204,014
20,324
2,786,473
108,897
219,145
123,154
4,536
525,541
$
455,732
$
$
$
INDIVIDUAL STORE COMPARISONS (3)
Corporate Stores
Average retail sales
Average retail inside sales
Average gross profit on inside items
Average retail sales of gasoline
Average gross profit on gasoline (4)
Average operating income (5)
Average number of gallons sold
Franchise Stores
Years ended April 30,
2007
2006
2005
$
2,763
$
2,568
$
2,144
778
302
1,985
84
102
821
742
284
1,826
91
107
806
706
260
1,438
83
92
782
35
Average franchise revenue (6)
$
38
$
36
$
(1) Net sales exclude franchise revenue and charges to franchisees for certain maintenance, transportation, and construction
services we provide.
(2) Gross profits represent net sales less cost of goods sold. Gross profit is given before charge for depreciation and amortization.
(3) Individual store comparisons include only those stores that had been in operation for at least one full year on April 30 of the
fiscal year indicated.
(4) Retail gasoline profit margins have a substantial impact on our net income. Profit margins on gasoline sales can be adversely
affected by factors beyond our control, including oversupply in the retail gasoline market, uncertainty or volatility in the
wholesale gasoline market, and price competition from other gasoline marketers. Any substantial decrease in profit margins
on retail gasoline sales or the number of gallons sold could have a material adverse effect on our earnings.
(5) Average operating income represents retail sales less cost of goods sold, including cost of merchandise, financing costs, and
operating expenses attributable to a particular store; it excludes federal and state income taxes, Company operating expenses
not attributable to a particular store, and our payments to the Company’s benefit plans.
(6) Average franchise revenue includes a royalty fee equal to 3% of gross receipts derived from store sales of nongasoline items,
a royalty fee of $0.018 per gallon on gasoline sales, and sign and façade rental fees.
page 18
Critical Accounting Policies
Critical accounting policies are those accounting policies that we believe are important to the portrayal of our
financial condition and results of operations and require management’s most difficult, subjective judgments, often because
of the need to estimate the effects of inherently uncertain factors.
Inventory
Inventories, which consist of merchandise and gasoline, are stated at the lower of cost or market. For gasoline, cost is
determined through the use of the first-in, first-out (FIFO) method. For merchandise inventories, cost is determined through the
use of the last-in, first-out (LIFO) method applied to inventory values determined primarily by the FIFO method for warehouse
inventories and the retail inventory method (RIM) for store inventories, except for cigarettes, beer, pop, and prepared foods, which
are valued at cost. RIM is an averaging method widely used in the retail industry because of its practicality.
Under RIM, inventory valuations are at cost and the resulting gross margins are calculated by applying a cost-to-retail
ratio to sales. Inherent in the RIM calculations are certain management judgments and estimates that could affect the ending
inventory valuation at cost and the resulting gross margins.
Vendor allowances include rebates and other funds received from vendors to promote their products. We often receive
such allowances on the basis of quantitative contract terms that vary by product and vendor or directly on the basis of purchases
made. Rebates are recognized as reductions of inventory costs when purchases are made; reimbursements of an operating
expense (e.g., advertising) are recorded as reductions of the related expense.
Long-lived Assets
The Company periodically monitors underperforming stores for an indication that the carrying amount of assets may not be
recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the assets, including goodwill
where applicable, an impairment loss is recognized. Impairment is based on the estimated fair value of the asset. Fair value is
based on management’s estimate of the amount that could be realized from the sale of assets in a current transaction between willing
parties. The estimate is derived from offers, actual sale or disposition of assets subsequent to year-end, and other indications of asset
value. In determining whether an asset is impaired, assets are grouped at the lowest level for which there are identifiable cash
flows that are largely independent of the cash flows of other groups of assets, which for us is generally on a store-by-store basis.
We had impairment charges of $1,475 in fiscal 2007, $600 in fiscal 2006, and $1,775 in fiscal 2005.
Self-insurance
We are primarily self-insured for workers’ compensation, general liability, and automobile claims. The self-insurance claim
liability is determined actuarially based on claims filed and an estimate of claims incurred but not yet reported. Actuarial projections of
the losses are employed due to the high degree of variability in the liability estimates. Some factors affecting the uncertainty of claims
include the development time frame, settlement patterns, litigation and adjudication direction, and medical treatment and cost trends.
The liability is not discounted. We increased our self-insurance reserve by $756 in fiscal 2007 and $1,096 in fiscal 2006.
Liquidity and Capital Resources
Due to the nature of our business, most sales are for cash; cash from operations is our primary source of liquidity. We f inance
our inventory purchases primarily from normal trade credit aided by relatively rapid inventory turnover. This turnover allows us to conduct
operations without large amounts of cash and working capital. As of April 30, 2007, the Company’s ratio of current assets to current
liabilities was 1.03 to 1. The ratio at April 30, 2006 and at April 30, 2005 was .79 to 1 and .84 to 1, respectively. We believe our current
$50,000 bank line of credit together with cash flow from operations will be sufficient to satisfy the working capital needs of our business.
Net cash provided by operations decreased $36,477 (24.7%) in the year ended April 30, 2007, primarily because of a decrease
in accounts payable and an increase in inventories. Accounts payable decreased primarily because there were only ten days of outstanding
gasoline invoices at April 30, 2007. Since April 30, 2006 was a Sunday, there were twelve days of gasoline invoices outstanding on that
date. Inventory increased primarily due to the increase in the cigarette excise taxes, the expanded distribution center capacity, and
an increase in the number of Corporate Stores. Cash used in investing in the year ended April 30, 2007 rose $51,135 (50.9%)
primarily due to the acquisition of a business. Cash flows from financing increased $96,968, primarily because of the proceeds
from long-term debt.
page 19
Capital expenditures represent the single largest use of Company funds. We believe that by reinvesting in Corporate
Stores, we will be better able to respond to competitive challenges and increase operating efficiencies. During fiscal 2007, we
expended $154,433 for property and equipment, primarily for the construction, acquisition, and remodeling of Corporate Stores
compared with $104,449 in the prior year. In fiscal 2008, we anticipate expending approximately $135,000, primarily from existing
cash and funds generated by operations, for construction, acquisition, and remodeling of Corporate Stores.
As of April 30, 2007, we had long-term debt of $199,504 consisting of $100,000 in principal amount of 5.72% senior
notes, series A and B; $30,000 in principal amount of 7.38% senior notes; $23,000 in principal amount of senior notes, series A
through series F, with interest rates ranging from 6.18% to 7.23%; $34,285 in principal amount of 7.89% senior notes, series A;
$2,826 of mortgage notes payable; and $9,393 of capital lease obligations.
Interest on the 5.72% senior notes series A and series B is payable on the 30th day of each March and September.
Principal of the senior notes series A and series B matures in various installments beginning September 30, 2012. We may prepay
the 5.72% senior notes series A and series B in whole or in part at any time in an amount of not less than $2,000 at a redemption
price calculated in accordance with the Note Agreement dated September 29, 2006 between the Company and the purchasers of
the 5.72% senior notes series A and series B.
Interest on the 7.38% senior notes is payable on the 29th day of each June and December. Principal of the 7.38%
senior notes matures in 21 semi-annual installments beginning December 29, 2010 with the remaining principal payable
December 29, 2020 at the rate of 7.38% per annum. We may prepay the 7.38% notes in whole or in part at any time in an
amount of not less than $1,000 or in integral multiples of $100 in excess thereof at a redemption price calculated in accordance
with the Note Agreement dated December 1, 1995 between the Company and the purchaser of the 7.38% notes.
Interest on the 6.18% to 7.23% senior notes series A through series F is payable on the 23rd day of each April and October.
Principal of the 6.18% to 7.23% senior notes series A through series F matures in various installments beginning April 23, 2004. We
may prepay the 6.18% to 7.23% senior notes series A through series F in whole or in part at any time in an amount of not less than
$1,000 or integral multiples of $100 in excess thereof at a redemption price calculated in accordance with the Note Agreement dated
April 15, 1999 between the Company and the purchasers of the 6.18% to 7.23% senior notes series A through series F.
Interest on the 7.89% series A senior notes is payable semi-annually the 15th day of May and November in each year
commencing November 15, 2000. The 7.89% senior notes mature May 15, 2010 with prepayments of principal commencing
on May 15, 2004 and each May 15 thereafter to and including May 15, 2009. The remaining principal is payable at maturity
on May 15, 2010. We may at any time prepay the 7.89% senior notes in whole or in part in an amount not less than $2,000 at a
redemption price calculated in accordance with the Note Purchase Agreement dated May 1, 2000 between the Company and the
purchasers of the 7.89% senior notes.
To date, we have funded capital expenditures primarily from the proceeds of the sale of common stock, issuance of
6.25% convertible subordinated debentures (converted into shares of common stock in 1994), the previously described senior
notes, a mortgage note and through funds generated from operations. Future capital required to finance operations, improvements,
and the anticipated growth in the number of Corporate Stores is expected to come from cash generated by operations, the bank
line of credit, and additional long-term debt or other securities as circumstances may dictate. We do not expect such capital needs
to adversely affect liquidity.
The table below presents our significant contractual obligations, including interest, at April 30, 2007:
Contractual Obligations
Payments due by period
Senior notes
Mortgage notes
Capital lease obligations
Operating lease obligations
Total
$
297,049
34,660
19,444
1,598
Total
$
352,751
Less than
1 year
29,445
30,632
1,264
597
61,938
1-3
years
51,200
1,970
2,142
768
56,080
3-5
years
36,210
1,153
949
160
38,472
More than
5 years
180,194
905
15,089
73
196,261
page 20
Included in mortgage notes payable in less than 1 year in the table above is $21,610 relating to the purchase of the
Gas ‘N Shop stores that may be paid in future years. The seller has an option at any time to make an immediate sale of any or
all of the stores or to lease any of the stores to us for a period of five years and an option at any time during that five-year period
to require the Company to purchase any leased store and pay the applicable purchase price within forty-five days of notice. The annual
lease payments are equal to 6% of the purchase price of the stores leased and are paid monthly during the term of the lease.
See Note 2 of Notes to Consolidated Financial Statements for additional information regarding the purchase of Gas ‘N Shop.
At April 30, 2007, we were partially self-insured for workers’ compensation claims in all 9 states of our marketing
territory; we also were partially self-insured for general liability and auto liability under an agreement that provides for annual
stop-loss limits equal to or exceeding approximately $1,000. To facilitate this agreement, letters of credit approximating $8,800
and $7,500 were issued and outstanding at April 30, 2007 and 2006, respectively, on the insurance company’s behalf. We renew
the letters of credit on an annual basis.
Forward-looking Statements
This Form 10-K contains various “forward-looking statements” within the meaning of Section 27A of the Securities Act
of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. Forward-looking statements represent our
expectations or beliefs concerning future events, including (i) any statements regarding future sales and gross profit percentages, (ii) any
statements regarding the continuation of historical trends, and (iii) any statements regarding the sufficiency of the Company’s cash
balances and cash generated from operations and financing activities for the Company’s future liquidity and capital resource needs. The
words believe, expect, anticipate, intend, estimate, project and similar expressions are intended to identify forward-looking statements.
We caution you that these statements are further qualified by important factors that could cause actual results to differ materially from
those in the forward-looking statements, including without limitations the factors described in this Form 10-K.
We ask you not to place undue reliance on such forward-looking statements because they speak only of our views as of
the statement dates. Although we have attempted to list the important factors that presently affect the Company’s business and
operating results, we further caution you that other factors may in the future prove to be important in affecting the Company’s
results of operations. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result
of new information, future events, or otherwise.
In addition to any assumptions and other factors referred to specifically in connection with such forward-looking
statements, factors that could cause the Company’s actual results to differ materially from those contemplated in any
forward-looking statements include, among others, the following:
Competition
Our business is highly competitive and marked by ease of entry and constant change in terms of the numbers and
type of retailers offering the products and services found in Corporate Stores. Many of the food (including prepared foods) and
nonfood items similar or identical to those we sell are generally available from a variety of competitors in the communities served
by Corporate Stores, and we compete with other convenience store chains, gasoline stations, supermarkets, drug stores, discount
stores, club stores, mass merchants, and fast-food outlets (with respect to the sale of prepared foods). Sales of nongasoline items
(particularly prepared food items) have contributed substantially to our gross profit on retail sales in recent years. Gasoline sales
are intensely competitive. We compete for gasoline sales with both independent and national brand gasoline stations, other
convenience store chains, and several nontraditional gasoline retailers such as supermarkets in specific markets. Some of these
other gasoline retailers may have access to more favorable arrangements for gasoline supply than do we or the firms that supply
our stores. Some of our competitors have greater financial, marketing, and other resources than we have and therefore may be
able to respond better to changes in the economy and new opportunities within the industry.
page 21
Gasoline Operations
Gasoline sales are an important part of our revenue and earnings, and retail gasoline profit margins have a substantial
impact on our net income. Profit margins on gasoline sales can be affected adversely by factors beyond our control, including the
supply of gasoline available in the retail gasoline market, uncertainty or volatility in the wholesale gasoline market, increases in
wholesale gasoline costs generally during a period, and price competition from other gasoline marketers. The market for crude oil
and domestic wholesale petroleum products is volatile and is affected by general political conditions and instability in oil producing
regions such as the Middle East and South America. The volatility of the wholesale gasoline market makes it extremely difficult
to predict the impact of future wholesale cost fluctuation on our operating results and financial conditions. These factors could
materially affect gasoline gallon volume, gasoline gross profit, and overall customer traffic levels at Corporate Stores. Any
substantial decrease in profit margins on gasoline sales or in the number of gallons sold by Corporate Stores could have a
material adverse effect on our earnings.
The Company purchases its gasoline from a variety of independent national and regional petroleum distributors. Although in
recent years suppliers have not experienced any difficulties in obtaining sufficient amounts of gasoline to meet our needs, unanticipated
national and international events could result in a reduction of gasoline supplies available for distribution. Any substantial curtailment in
our gasoline supply would reduce gasoline sales. Further, we believe a significant amount of our business results from the patronage of
customers primarily desiring to purchase gasoline; accordingly, reduced gasoline supplies could adversely affect the sale of nongasoline
items. Such factors could have a material adverse impact on our earnings and operations.
Tobacco Products
Sales of tobacco products represent a significant portion of our revenues. Significant increases in wholesale cigarette
costs and tax increases on tobacco products as well as national and local campaigns to discourage smoking in the United States
could have an adverse effect on the demand for cigarettes sold by Corporate Stores. We attempt to pass price increases on to our
customers, but competitive pressures in specific markets may prevent us from doing so. These factors could materially affect the
retail price of cigarettes, the volume of cigarettes sold by Corporate Stores, and overall customer traffic.
Environmental Compliance Costs
The United States Environmental Protection Agency and several of the states in which we do business have adopted
laws and regulations relating to underground storage tanks used for petroleum products. In the past, we have incurred substantial
costs to comply with such regulations, and additional substantial costs may be necessary in the future. Several states in which we
do business have trust fund programs with provisions for sharing or reimbursing corrective action or remediation costs. Any
reimbursements received in respect to such costs typically are subject to statutory provisions requiring repayment of the
reimbursed funds for any future noncompliance with upgrade provisions or other applicable laws. Although we regularly accrue
expenses for the estimated costs related to future corrective action or remediation efforts, there can be no assurance that the
accrued amounts will be sufficient to pay such costs or that we have identified all environmental liabilities at all of our current
store locations. In addition, there can be no assurance that we will not incur substantial expenditures in the future for remediation
of contamination or related claims that have not been discovered or asserted with respect to existing store locations or locations
that we may acquire in the future, that we will not be subject to any claims for reimbursement of funds disbursed to us under
the various state programs, and/or that additional regulations or amendments to existing regulations will not require additional
expenditures beyond those presently anticipated.
Seasonality of Sales
Company sales generally are strongest during its first two fiscal quarters (May–October) and weakest during the third
and fourth fiscal quarters (November–April). In the warmer months, customers tend to purchase greater quantities of gasoline
and certain convenience items such as beer, soft drinks, and ice. Difficult weather conditions (such as flooding, prolonged rain, or
snowstorms) in any quarter, however, may adversely reduce sales at affected Corporate Stores and may have an adverse impact on
our earnings for that period.
page 22
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company’s exposure to market risk for changes in interest rates relates primarily to our investment portfolio
and long-term debt obligations. We place our investments with high-quality credit issuers and, by policy, limit the amount of
credit exposure to any one issuer. Our first priority is to reduce the risk of principal loss. Consequently, we seek to preserve our
invested funds by limiting default risk, market risk, and reinvestment risk. We mitigate default risk by investing in only high-quality
credit securities that we believe to be low risk and by positioning our portfolio to respond appropriately to a significant reduction
in a credit rating of any investment issuer or guarantor. The portfolio includes only marketable securities with active secondary or
resale markets to ensure portfolio liquidity. We believe an immediate 100-basis-point move in interest rates affecting our floating
and fixed rate financial instruments as of April 30, 2007 would have no material effect on pretax earnings.
We have used a variety of derivative instruments such as options and futures to hedge against the volatility of gasoline
cost and are at risk for possible changes in the market value of these derivative instruments. It is anticipated that such risk would
be mitigated by price changes in the underlying hedged items. Market risks associated with all of the Company’s derivative
contracts are reviewed regularly by management. No derivative instruments were used during fiscal year 2007. See Note 1 to
the Consolidated Financial Statements included in this Form 10-K for additional information concerning our prior use of such
derivative instruments.
page 23
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Casey’s General Stores, Inc.:
We have audited the accompanying consolidated balance sheets of Casey’s General Stores, Inc. and subsidiaries as
of April 30, 2007 and 2006 and the related consolidated statements of income, shareholders’ equity, and cash flows for each
of the years in the three-year period ended April 30, 2007. These consolidated financial statements are the responsibility of
the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Casey’s General Stores, Inc. and subsidiaries as of April 30, 2007 and 2006 and the results of their operations and
their cash flows for each of the years in the three-year period ended April 30, 2007 in conformity with U.S. generally accepted
accounting principles.
As discussed in Note 1 to the Consolidated Financial Statements, Casey’s General Stores, Inc. changed its method
of accounting for stock based compensation effective May 1, 2006, and changed its method of quantifying errors in 2007. We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
effectiveness of the Company’s internal control over financial reporting as of April 30, 2007, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO), and our report dated June 28, 2007 expressed an unqualified opinion on management’s assessment of, and the
effective operation of, internal control over financial reporting.
Des Moines, Iowa
June 28, 2007
page 24
The Board of Directors and Shareholders
Casey’s General Stores, Inc.:
We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control
Over Financial Reporting appearing under Item 9A, that Casey’s General Stores, Inc. and subsidiaries (the Company) maintained
effective internal control over financial reporting as of April 30, 2007, based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s
management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s
assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness
of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, management’s assessment that Casey’s General Stores, Inc. and subsidiaries maintained effective
internal control over financial reporting as of April 30, 2007, is fairly stated, in all material respects, based on criteria established
in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting
as of April 30, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated balance sheets of Casey’s General Stores, Inc. and subsidiaries as of April 30, 2007 and 2006 and the related
consolidated statements of income, shareholders’ equity, and cash flows for each of the years in the three-year period ended
April 30, 2007, and our report dated June 28, 2007 expressed an unqualified opinion on those consolidated financial statements.
Des Moines, Iowa
June 28, 2007
page 25
CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
Assets
Current assets
Cash and cash equivalents
Receivables
Inventories (Note 1)
Prepaid expenses (Note 6)
Income taxes receivable
Total current assets
Property and equipment, at cost
Land
Buildings and leasehold improvements
Machinery and equipment
Leasehold interest in property and equipment (Note 7)
Less accumulated depreciation and amortization
Net property and equipment
Other assets, net of amortization (Note 1)
Goodwill
Total assets
Liabilities and Shareholders’ Equity
Current liabilities
Current maturities of long-term debt (Note 3)
$
47,566
$
Accounts payable
Accrued expenses
Property taxes
Self-insurance
Other (Note 10)
Total current liabilities
Long-term debt, net of current maturities (Note 3)
Deferred income taxes (Note 6)
Deferred compensation (Note 8)
Other long-term liabilities
Total liabilities
Shareholders’ equity (Note 4)
Preferred stock, no par value, none issued
Common stock, no par value, 50,592,212 and 50,368,662 shares
issued and outstanding at April 30, 2007 and 2006, respectively
Retained earnings
Total shareholders’ equity
134,375
13,097
16,391
22,838
234,267
199,504
105,724
9,016
8,496
557,007
--------
53,547
518,717
572,264
Total liabilities and shareholders’ equity
$
1,129,271
$
Commitments and contingencies (Notes 7, 9, and 10)
See accompanying Notes to Consolidated Financial Statements.
page 26
April 30,
2007
2006
$
107,067
$
13,432
109,702
7,891
2,733
240,825
233,887
501,470
620,620
15,452
75,369
11,032
96,255
7,063
3,047
192,766
211,910
469,070
577,209
6,924
1,371,429
1,265,113
538,121
833,308
8,550
46,588
$
1,129,271
$
490,288
774,825
6,894
14,414
988,899
51,628
146,121
11,418
15,635
20,254
245,056
106,512
99,929
7,236
6,976
465,709
--------
49,161
474,029
523,190
988,899
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
Net sales
Franchise revenue
Cost of goods sold (exclusive of depreciation,
shown separately below)
Operating expenses
Depreciation and amortization
Interest, net (Note 3)
Earnings from continuing operations before
income taxes
Federal and state income taxes
Net earnings from continuing operations
Loss on discontinued operations, net of tax benefit
of $1,055, $1,065 and $3,648
Cumulative effect of accounting change, net of tax
benefit of $692
Net earnings
Basic
Earnings from continuing operations
Loss on discontinued operations, net of tax benefit
Cumulative effect of accounting change
Net earnings per common share
Diluted
Earnings from continuing operations
Loss on discontinued operations, net of tax benefit
Cumulative effect of accounting change
Net earnings per common share
See accompanying Notes to Consolidated Financial Statements.
Years ended April 30,
2007
2006
2005
$
4,023,330
$
3,491,795
$
2,786,473
680
4,024,010
681
3,492,476
1,065
2,787,538
3,440,725
2,966,254
2,330,741
410,459
63,895
11,184
361,857
56,898
8,896
327,009
51,685
10,739
3,926,263
3,393,905
2,720,174
97,747
34,205
63,542
1,651
--------
98,571
35,353
63,218
1,667
1,083
61,891
$
60,468
$
$
$
$
1.26
0.03
--------
1.23
1.25
0.03
--------
1.22
$
1.25
0.03
0.02
1.20
1.24
0.03
0.02
1.19
$
$
$
$
$
$
$
$
$
67,364
24,905
42,459
5,706
--------
36,753
0.84
0.11
--------
0.73
0.84
0.11
--------
0.73
page 27
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, except share and per share amounts)
Balance at April 30, 2004
Net earnings
Payment of dividends
Proceeds from exercise of stock options
(173,950 shares)
Tax benefits related to nonqualified stock options
(Note 3)
Balance at April 30, 2005
Net earnings
Payment of dividends
Proceeds from exercise of stock options
(178,850 shares)
Tax benefits related to nonqualified stock options
(Note 3)
Balance at April 30, 2006
Net earnings
Payment of dividends
Proceeds from exercise of stock options
(223,550 shares)
Tax benefits related to nonqualified stock options
(Note 3)
Stock based compensation
Cumulative effect of adjustments resulting from the
adoption of SAB No. 108, (Note 1)
Common
stock
Retained
earnings
Total
$
44,155
$
395,639
$
439,794
--------
--------
1,893
468
36,753
(9,771)
36,753
(9,771)
--------
1,893
--------
468
$
46,516
$
422,621
$
469,137
--------
--------
2,139
506
60,468
(9,060)
60,468
(9,060)
--------
2,139
--------
506
$
49,161
$
474,029
$
523,190
--------
--------
2,941
919
526
61,891
(10,098)
61,891
(10,098)
--------
2,941
--------
--------
919
526
--------
(7,105)
(7,105)
Balance at April 30, 2007
$
53,547
$
518,717
$
572,264
See accompanying Notes to Consolidated Financial Statements.
page 28
--------
51,685
--------
--------
3,041
2,880
(2,054)
2,503
1,813
17,252
8,068
5,423
(3,507)
129,563
(95,447)
--------
2,452
(92,995)
--------
(28,999)
Years ended April 30,
2007
2006
2005
$
63,542
$
63,218
$
42,459
CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Cash flows from continuing operations
Net earnings from continuing operations
Adjustments to reconcile net earnings to net
cash provided by continuing operations
Cumulative effect of accounting change
Depreciation and amortization
Other amortization
Stock-based compensation
Loss on sale of property and equipment
Deferred income taxes
Changes in operating assets and liabilities, net of acquisitions
Receivables
Inventories
Prepaid expenses
Accounts payable
Accrued expenses
Income taxes receivable
Other, net
--------
63,895
482
526
3,076
(406)
(2,400)
(10,437)
(696)
(11,746)
4,681
1,233
(418)
(1,083)
56,898
1,871
--------
1,757
(2,110)
(2,841)
(20,863)
(2,384)
45,481
4,746
3,386
(267)
Net cash provided by continuing operations
111,332
147,809
Cash flows from investing
Purchase of property and equipment
Payments for acquisition of business
Proceeds from sales of property and equipment
Net cash used in investing activities
Cash flows from f inancing
Proceeds from long-term debt
Payments of long-term debt
Proceeds from exercise of stock options
Payments of cash dividends
Net cash provided by (used in) f inancing activities
Cash flows from discontinued operations
Operating cash flows
Investing cash flows
Net cash flows from discontinued operations
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
(87,704)
(66,729)
2,764
(151,669)
100,000
(22,814)
2,941
(10,098)
70,029
792
1,214
2,006
31,698
75,369
(99,913)
(4,536)
3,915
(100,534)
--------
(20,018)
2,139
1,893
(9,060)
(26,939)
518
5,464
5,982
26,318
49,051
(9,771)
(36,877)
2,621
852
3,473
3,164
45,887
Cash and cash equivalents at end of year
$
107,067
$
75,369
$
49,051
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid during the year for
Interest, net of amount capitalized
Income taxes
Noncash investing and f inancing activities
Property & equipment and goodwill acquired through
installment purchases or business acquisitions
Increase in common stock and increase in income taxes
receivable due to tax benef its related to nonqualif ied stock
options (Note 3)
See accompanying Notes to Consolidated Financial Statements.
$
12,417
$
10,657
$
11,811
31,271
32,995
11,303
11,744
27,458
7,197
919
506
468
page 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
1.
SIGNIFICANT ACCOUNTING POLICIES
Operations Casey’s General Stores, Inc. and its subsidiaries (the Company/Casey’s) operate 1,463 convenience stores
in 9 Midwest states. At April 30, 2007, the Company owned or leased 1,448 of these stores and 15 stores were owned or leased
by franchisees. The stores are located primarily in smaller communities, many with populations of less than 5,000. Retail sales in
2007 were distributed as follows: 72% gasoline, 21% grocery & other merchandise, and 7% prepared food & fountain. The
Company’s materials are readily available, and the Company is not dependent on a single supplier or only a few suppliers.
Principles of consolidation The consolidated financial statements include the financial statements of Casey’s General
Stores, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in
consolidation.
Use of estimates The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect 1) the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and 2) the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates.
Cash equivalents Cash equivalents consist of money market funds, corporate commercial paper securities, and
various tax-exempt instruments. We consider all highly liquid investments with a maturity at purchase of three months or less
to be cash equivalents.
Inventories Inventories, which consist of merchandise and gasoline, are stated at the lower of cost or market; in-store
inventory (excluding cigarettes, beer, pop, and prepared foods, which are stated at cost) is determined by the retail method (RIM).
Cost is determined using the first-in, first-out (FIFO) method for gasoline and the last-in, first-out (LIFO) method for merchandise.
Below is a summary of the inventory values at April 30, 2007 and 2006:
Gasoline
Merchandise
Fiscal 2007
Fiscal 2006
$ 46,577
$ 43,932
83,237
70,813
Merchandise LIFO reserve
(20,112)
(18,490)
Total inventory
$ 109,702
$ 96,255
Goodwill SFAS No. 142 Goodwill and Other Intangible Assets requires that goodwill and intangible assets with indefinite
lives no longer be amortized to earnings but be tested for impairment at least annually. As of April 30, 2007, there was $46,588
of goodwill, and management’s analysis of recoverability completed as of the fiscal year-end yielded no evidence of impairment.
page 30
Store closings and asset impairment The Company writes down property and equipment of stores it is closing to
estimated net realizable value at the time management commits to a plan to close such stores and begins active marketing of the
stores. The Company bases the estimated net realizable value of property and equipment on its experience in utilizing and/or
disposing of similar assets and on estimates provided by its own and/or third-party real estate experts. The results of operations
of certain stores are presented as discontinued operations in the accompanying consolidated statements of earnings in accordance with
the provisions of SFAS No. 144, Accounting of the Impairment or Disposal of Long-Lived Assets. Any such store is presented in discontinued
operations beginning in the quarter in which the asset qualifies as held for sale or is disposed of and no further involvement or benefit is
expected upon disposal. Operating results of discontinued operations include related write-downs of stores to estimated net realizable
value. The Company does not allocate interest expense to discontinued operations. Included in the loss on discontinued operations were
losses on disposal of $2,018 (net of $787 tax benefit) for the year ended April 30, 2007. Losses on disposal of $1,562 (net of $609 tax
benefit) were recorded for the year ended April 30, 2006; losses on disposal of $6,830 (net of $2,664 tax benefit) were recorded for the
year ended April 30, 2005. Assets held for sale at April 30, 2007 and 2006 were $2,900 and $1,225, respectively, and are included in net
property & equipment.
The Company periodically monitors underperforming stores for an indication that the carrying amount of assets may
not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the assets,
including goodwill where applicable, an impairment loss is recognized. Impairment is based on the estimated fair value of the
asset. Fair value is based on management’s estimate of the amount that could be realized from the sale of assets in a current
transaction between willing parties. The estimate is derived from offers, actual sale or disposition of assets subsequent to year-end,
and other indications of asset value. In determining whether an asset is impaired, assets are grouped at the lowest level for which
there are identifiable cash flows that are largely independent of the cash flows of other groups of assets, which for the Company is
generally on a store-by-store basis. The Company incurred impairment charges of $1,475 in fiscal 2007, $600 in fiscal 2006, and
$1,775 in fiscal 2005. Impairment charges are a component of operating expenses.
Depreciation and amortization Depreciation of property and equipment and amortization of capital lease assets are
computed principally by the straight-line method over the following estimated useful lives:
Buildings
Machinery and equipment
25-40 years
5-30 years
Leasehold interest in property and equipment
Leasehold improvements
Lesser of term of lease or life of asset
Lesser of term of lease or life of asset
Excise taxes Excise taxes approximating $423,000, $377,000, and $365,000 collected from customers on retail gasoline
sales are included in net sales for fiscal 2007, 2006, and 2005, respectively.
Income taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment date.
page 31
Revenue recognition The Company recognizes retail sales of gasoline, grocery & other merchandise, prepared food &
fountain, and commissions on lottery, prepaid phone cards, and video rentals at the time of the sale to the customer. Wholesale
sales to franchisees are recognized at the time of delivery to the franchise location. Franchise fees, license fees to franchisees, and
rent for franchise façades are recognized monthly when billed to the franchisees. Other maintenance services and transportation
charges are recognized at the time the service is provided.
Vendor allowances include rebates and other funds received from vendors to promote their products. The Company
often receives such allowances on the basis of quantitative contract terms that vary by product and vendor or directly on the
basis of purchases made. Vendor rebates in the form of rack display allowances are treated as a reduction in cost of sales and are
recognized incrementally over the period covered by the applicable rebate agreement. Vendor rebates in the form of billbacks are
treated as a reduction in cost of sales and are recognized at the time the product is sold. Reimbursements of an operating expense
(e.g., advertising) are recorded as reductions of the related expense.
Discontinued operations Sales from discontinued operations were $23,052, $29,728 and $60,020 for the years ended
April 30, 2007, 2006, and 2005, respectively. Losses from discontinued operations were $2,706 for the year ended April 30, 2007,
including a $2,018 pretax loss on disposal. Losses from discontinued operations were $2,732 and $9,354 for the years ended
April 30, 2006 and 2005, respectively. Losses from discontinued operations were net of tax benefits of $1,055, $1,065, and
$3,648 for the years ended April 30, 2007, 2006, and 2005, respectively.
The Company’s consolidated balance sheet as of April 30, 2007 included $2,900 in net property and equipment
classified as assets held for sale; there were no related liabilities pertaining to discontinued operations. The Company’s
consolidated balance sheet as of April 30, 2006 included $1,225 in net property and equipment and no related liabilities
pertaining to discontinued operations.
Earnings per common share Basic earnings per share have been computed by dividing net income by the weighted
average outstanding common shares during each of the years. Calculation of diluted earnings per share treats stock options
outstanding as potential common shares.
Environmental remediation liabilities The Company accounts for environmental remediation liabilities in accordance
with the American Institute of Certified Public Accountants’ Statement of Position (SOP) 96-1, Environmental Remediation Liabilities.
SOP 96-1 requires, among other things, environmental remediation liabilities to be accrued when the criteria of SFAS No. 5,
Accounting for Contingencies, are met.
Derivative instruments The Company periodically uses a variety of derivative instruments such as options and futures
to hedge against the volatility of gasoline cost. The Company is at risk for possible changes in the market value for these derivative
instruments. It is anticipated that such risk would be mitigated by price changes in the underlying hedged items. Market risks
associated with all of the Company’s derivative contracts are reviewed regularly by management.
There were no options or futures contracts during the year ended April 30, 2007 or 2006. At April 30, 2005, however,
the Company had accumulated net hedging losses before income taxes of $929 on closed options and futures contracts. The
amounts represented the fair value of the contracts as determined using various indices and dealer quotes. These derivative
contracts were not linked to specific assets or liabilities on the balance sheet or to forecasted transactions in an accounting hedge
relationship and therefore did not qualify for hedge accounting. The contracts were carried at fair value with any changes in fair
value recorded as part of cost of goods sold in the income statement.
page 32
Stock-based compensation Effective May 1, 2006, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 123 (revised 2004) (SFAS 123R), Share Based Payment using the “modified
prospective” transition method. SFAS 123R requires the measurement of the cost of employee services received in
exchange for an award of equity instruments based upon the fair value of the award on the grant date. The cost of the
award is recognized in the income statement over the vesting period of the award. Under the “modified prospective” transition
method, awards that are granted, modified or settled beginning at the date of adoption are measured and accounted for in
accordance with SFAS 123R. In addition, expense must be recognized in the income statement for unvested awards that were
granted prior to the date of adoption. The expense will be based on the fair value determined at the grant date. The impact of
net earnings as a result of the adoption of SFAS 123R was $526 in fiscal 2007.
Prior to May 1, 2006, the Company applied APB Opinion No. 25, Accounting for Stock Issued to Employees, in accounting
for its incentive stock option plan; accordingly, the financial statements recognized no compensation cost for stock options issued
at fair market value on the date of grant. The Company had elected the pro forma disclosure option of SFAS No. 123, Accounting
for Stock-Based Compensation. Pro forma net earnings and pro forma net earnings per common share have been provided as if SFAS
No. 123 were adopted for all stock-based compensation plans prior to May 1, 2006. Had the Company determined compensation
cost of its stock options based on the fair value at the grant date under SFAS No. 123, the Company’s net income would have
been reduced to the pro forma amounts shown in the following table:
Net income as reported
Deducted amount
Total stock-based employee compensation expense determined
by fair-value method for awards, net of related tax effects
Pro forma net income
Basic earnings per common share
As reported
Pro forma
Diluted earnings per common share
As reported
Pro forma
Years ended April 30,
2006
60,468
458
60,010
1.20
1.19
1.19
1.19
$
$
$
$
$
$
$
$
$
$
$
$
2005
36,753
302
36,451
0.73
0.73
0.73
0.72
The weighted average fair value of the stock options granted during 2006 and 2005 was $6.06 and $4.36 per share,
respectively, on the date of grant. Fair value was calculated using the Black Scholes option-pricing model with the following
weighted average assumptions: 2006—expected dividend yield of 0.87%, risk-free interest rate of 4.04%, estimated volatility
of 24%, and an expected life of 6.2 years; 2005—expected dividend yield of 0.95%, risk-free interest rate of 3.75%, estimated
volatility of 24%, and an expected life of 5.8 years.
page 33
Recent Accounting Pronouncements In June 2006, the FASB ratified the consensus reached by the Emerging Issues
Task Force on Issue No. 06-3, How Taxes Collected from Customers and Remitted to Governmental Authorities Should be Presented in the Income
Statement (That is, Gross versus Net Presentation). Issue No. 06-3 requires disclosure of either the gross or net presentation; and any
such taxes reported on a gross basis should be disclosed in the interim and annual financial statements. Issue No. 06-3 is effective
for financial periods beginning after December 15, 2006. The Company has not changed its presentation of such taxes, and is
providing the disclosure required by Issue No. 06-3.
In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an Interpretation of FASB
Statement No. 109 (FIN 48). FIN 48 clarifies the application of FASB Statement No. 109 by providing guidance on the recognition
and measurement of an enterprise’s tax positions taken in a tax return. FIN 48 additionally clarifies how an enterprise should
account for a tax position depending on whether the position is ‘more likely than not’ to pass a tax examination. The interpretation
provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure,
and transition. The Company will be required to adopt FIN 48 in the first quarter of fiscal 2008 and expects to reduce retained
earnings by approximately $650 due to the adoption of this interpretation.
In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements.
SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value
measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007
and interim periods within those fiscal years. The Company is currently evaluating SFAS No. 157 to determine the impact,
if any, on the financial statements.
In September 2006, the Securities and Exchange Commission (SEC) released Staff Accounting Bulletin No. 108 (SAB
No. 108), Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. SAB No.
108 addresses how the effects of prior-year uncorrected misstatements should be considered when quantifying misstatements in
current year financial statements. SAB No. 108 requires an entity to quantify misstatements using a balance sheet and income
statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant
quantitative and qualitative factors. The Company adopted SAB No. 108 in the fourth quarter of fiscal 2007.
The transition provisions of SAB No. 108 permit adjustment for the cumulative effect on retained earnings of errors
previously determined to be immaterial, but pursuant to the guidance in the SAB, would be considered material under the dual
method. SAB No. 108 also requires that adjustment of any prior quarterly financial statements within the fiscal year of adoption
be made for the effects of such errors on the quarters when the information is next presented. Such adjustments do not require
previously filed reports with the SEC to be amended.
Two techniques were identified as being used by companies in practice to accumulate and quantify misstatements—the
rollover approach and the iron curtain approach. The rollover approach, which is the approach Casey’s previously used, quantifies
a misstatement on the basis of the amount of the error originating in the current-year income statement. Accordingly, this approach
ignores the effects of correcting the portion of the current year balance sheet misstatement that originated in prior years. The iron
curtain approach quantifies a misstatement on the basis of the effects of correcting the misstatement existing in the balance sheet
at the end of the current year irrespective of the misstatement’s year(s) of origination. The primary weakness of the iron curtain
approach is that it does not consider the correction of prior-year misstatements in the current year to be errors.
Using the rollover approach resulted in an accumulation of misstatements to Casey’s balance sheets that were deemed
immaterial to the financial statements because the amounts that originated in each year were quantitatively and qualitatively
immaterial. The Company has elected, as allowed under SAB 108, to reflect the effect of initially applying this guidance by
adjusting the carrying amount of the impacted assets and liabilities as of the beginning of fiscal 2007 and recording an offsetting
adjustment to the opening balance of retained earnings in fiscal 2007. Casey’s recorded a cumulative adjustment to decrease
retained earnings by $7,105 for the adoption of SAB 108. The Company evaluated the impact of these adjustments on previous
periods presented in its consolidated financial statements, individually and in the aggregate, under the rollover method and
concluded that they were immaterial to those periods’ consolidated financial statements.
page 34
The following table presents a description of the individual adjustments included in the cumulative adjustment
to retained earnings. These adjustments were identified by management in the normal course of performing internal
control activities:
Deferred tax liability
Net property and equipment
Amount
Years Affected
$
$
6,201
904
7,105
1980s-2004
2002-2004
The deferred tax liability was understated primarily due to book vs. tax differences in depreciation and the
recording of leases that were capitalized for book purposes and treated as operating for tax purposes.
The property and equipment was overstated primarily due to the treatment of store replacements. Prior to May 1, 2004,
the fixed assets of the stores that were replaced were left on the fixed asset schedule and continued to be depreciated over their
original lives. Beginning in fiscal 2005, the entire remaining book value of the fixed assets was recorded as depreciation expense
at the time a store was replaced.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—
Including an amendment of FASB Statement No. 115 (SFAS No. 159). SFAS No. 159 permits entities to choose to measure financial
instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having
to apply complex hedge accounting provisions. SFAS No. 159 is effective for financial statements issued for fiscal years beginning
after November 15, 2007 and interim periods within those fiscal years. The Company is currently evaluating SFAS No. 159 to
determine the impact, if any, on the financial statements.
Reclassifications Certain amounts in the prior years’ financial statements have been reclassified to conform to the
current-year presentation. At April 30, 2006, unearned revenue of $1,360 was recorded as a reduction of receivables and is now
included in other accrued expenses. The sales and cost of goods sold were reduced by $8,574 and $4,744, respectively, in fiscal
2006 and fiscal 2005 for prepaid phone card and video rental commissions that were previously recorded as gross rather than as
net commissions.
2.
BUSINESS ACQUISITIONS
On October 3 and October 4, 2006, the Company acquired the assets comprising the HandiMart convenience store
chain that was owned by Nordstrom Oil Company and headquartered in Cedar Rapids, Iowa. The Company did not issue any
stock for the transaction or acquire any stock of the selling company. The trade name HandiMart is included in the assets purchased.
The chain acquired consisted of 32 HandiMart convenience stores and 1 truck stop operated under the name Just Diesel. The
convenience stores will continue to operate under the Handimart name for the present, though all have been converted to the
Company’s system of operation and Casey’s identifying signage is being incorporated into each of them. These stores were
acquired to increase Casey’s market presence within Eastern Iowa.
The HandiMart stores were valued using a discounted cash flow model that was done on a location by location basis.
The model projects future cash flows and calculates a return on investment after capital expenditures and the purchase price is
determined using a targeted rate of return. The Company also engaged several third-party valuation experts to assist in assessing
the fair market values of the tangible and intangible assets.
page 35
The acquisition was recorded by allocating the cost of the assets acquired, including intangible assets and liabilities
assumed, based on their estimated fair values at the acquisition date. The excess of the cost of the acquisition over the net of
amounts assigned to the fair value of the assets acquired and the liabilities assumed is recorded as goodwill.
Allocation of the purchase price of $66,729 is as follows:
Assets acquired
Inventories
Prepaid expenses
Land
Building
Equipment
Leasehold improvements
Total assets
Liabilities assumed
Accrued expenses
Total liabilities
Net tangible assets acquired, net of cash
Goodwill
Other intangible assets
$
3,010
132
11,400
12,250
9,806
1,250
37,848
(338)
(338)
37,510
29,149
70
Total consideration paid, net of cash acquired
$
66,729
As of April 30, 2007, the entire purchase price of $66,729 has been paid in full. The Company also assumed leases
of the real estate comprising 11 of the stores. The leases vary in the amount of rent to be paid, the length of the term, and the
options available to the Company. The Company has capitalized 5 of these leases with an aggregate present value of $8,383
that is included in leasehold interest in property and equipment and long-term debt. The remaining 6 leases are being treated as
operating leases.
The results of operations of the HandiMart stores from the dates of acquisition through April 30, 2007 are included in
the statement of earnings and statement of cash flows.
The following unaudited pro forma information presents a summary of the Company’s consolidated results of operations,
including the HandiMart convenience store chain acquired in October of 2006 as if the transaction occurred at the beginning of
the fiscal years (amounts in thousands, except per share data):
Year ended April 30,
Total revenues
Earnings from continuing operations before gain
or loss on discontinued operations and
cumulative effect of accounting change
Net earnings
Earnings per share
Basic
Diluted
2007
2006
4,111,366
$
3,676,090
64,413
62,762
1.24
1.24
$
$
$
$
65,433
62,683
1.25
1.24
$
$
$
$
$
page 36
Commencing January 5, 2006, the Company purchased 51 Gas ‘N Shop (GNS) convenience stores from a
single-owner, 66-store chain headquartered in Lincoln, NE. The stores were purchased to increase substantially the
Company’s presence in Nebraska. The Company issued no Casey’s stock nor did it acquire any GNS stock as part of the
transaction. The trade name Gas ‘N Shop was also acquired, but the stores not purchased in the transaction were allowed
to operate under that name for two years or until their sale to another third party, whichever is sooner. The Company began
rebranding the GNS stores to Casey’s General Stores immediately upon acquisition.
The GNS stores were valued using a discounted cash flow model that was applied on a location by location basis. The
model projects future cash flows and calculates a return on investment after capital expenditures for rebranding to Casey’s.
The purchase price was determined using a targeted rate of return.
The acquisition was recorded by allocating the cost of the assets acquired, including intangible assets and liabilities
assumed, based on their estimated fair values at the acquisition date. The excess of the cost of the acquisition over the net of
amounts assigned to the fair value of the assets acquired and the liabilities assumed was recorded as goodwill. The purchase
price of $29,194 was allocated as follows:
Land
Buildings
Equipment
Other assets
Goodwill
$ 4,575
13,444
2,400
101
8,674
As of April 30, 2007, principal payments of $7,584 had been paid and the remaining $21,610 had been recorded in
current maturities of long-term debt. The Asset Purchase Agreement allows the seller to make an immediate sale of any or all
of the stores or to lease any of the stores to the Company for a period of five years and grants to the seller an option at any time
during that five-year period to require the Company to purchase any leased store and pay the applicable purchase price within
forty-five days of notice. As of April 30, 2007, 18 stores had been purchased under the agreement and 33 were still being leased.
The annual lease payments are equal to 6% of the purchase price of the stores leased and are paid monthly during the term of
the lease. Lease payments of $1,309 and $345 were paid during the years ended April 30, 2007 and 2006, respectively, and were
recorded as interest expense. Any remaining principal balance must be paid by January 2011.
The results of operations of the GNS stores from the date of acquisition through April 30, 2007 and 2006 are included
in the statement of earnings and statement of cash flows. Disclosure of pro forma financial statements was considered
inconsequential for the periods under audit.
3.
FAIR VALUE OF FINANCIAL INSTRUMENTS AND LONG-TERM DEBT
A summary of the fair value of the Company’s financial instruments follows.
Cash and cash equivalents, receivables, and accounts payable The carrying amount approximates fair value due to the
short maturity of these instruments or the recent purchase of the instruments at current rates of interest.
Long-term debt The fair value of the Company’s long-term debt excluding capital lease obligations is estimated based
on the current rates offered to the Company for debt of the same or similar issues. The fair value of the Company’s long-term
debt excluding capital lease obligations was approximately $216,000 and $126,000, respectively, at April 30, 2007 and 2006.
Interest expense is net of interest income of $1,321, $1,308, and $649 for the years ended April 30, 2007, 2006, and
2005, respectively. Interest expense in the amount of $284, $398, and $323 was capitalized during the years ended April 30, 2007,
2006, and 2005, respectively.
page 37
The next table delineates the Company’s long-term debt at carrying value.
April 30,
2007
2006
Capitalized lease obligations discounted at 4.75% to 9.2% due in various monthly
installments through 2048 (Note 7)
$ 10,109
$ 1,964
Mortgage notes payable due in various installments through 2012 with interest at 6% to
7%
33,247
37,033
7.38% senior notes due in 21 semi-annual installments beginning in December 2010
30,000
30,000
Senior notes due in various installments from 2004 through 2019 with interest at 6.18%
to 7.23%
28,000
32,000
7.89% senior notes due in 7 annual installments beginning in May 2004
45,714
57,143
5.72% senior notes due in 14 installments beginning September 30, 2012 and ending
March 30, 2020
Less current maturities
100,000
247,070
--------
158,140
47,566
51,628
$ 199,504
$ 106,512
Various debt agreements contain certain operating and financial covenants. At April 30, 2007, the Company was
in compliance with all covenants. Listed below are the aggregate maturities of long-term debt, including capitalized lease
obligations, for the 5 years commencing May 1, 2007 and thereafter:
Years ended April 30,
2008
2009
2010
2011
2012
Thereafter
$
$
47,566
19,972
11,767
14,678
4,499
148,588
247,070
Included in current maturities for fiscal 2008 in the preceding tables is $21,610 relating to the purchase of the Gas ‘N
Shop chain, which may be paid in future years. The seller has an option at any time to make an immediate sale of any or all of
the stores or to lease any of the stores to the Company for a period of five years from the original acquisition date. The seller also
has an option at any time during that five-year period to require the Company to purchase any leased store and pay the applicable
purchase price within forty-five days of notice. The annual lease payments are equal to 6% of the purchase price of the stores
leased and are paid monthly during the term of the lease. See Note 2 for additional information regarding the purchase of
Gas ‘N Shop.
page 38
4.
PREFERRED AND COMMON STOCK
Preferred stock The Company has 1,000,000 authorized shares of preferred stock, none of which has
been issued.
Common stock The Company currently has 120,000,000 authorized shares of common stock. Dividends paid totaled
$0.20, $0.18, and $0.195 per share for the years ended April 30, 2007, 2006, and 2005, respectively. Historically, the Company
recorded dividends at the time of payment, which typically followed by several weeks the date on which dividends were declared.
On May 1, 2004, the Company began recording dividends as of the date of declaration. As a result, the Company’s records show
two quarterly dividends paid in the first quarter of fiscal 2005, the first of which ($0.035) was for the fourth quarter of fiscal 2004
and the second of which ($0.04) was for the first quarter of fiscal 2005.
Common share purchase rights On June 14, 1989, the Board of Directors adopted the shareholder Rights Plan,
providing for the distribution of one common share purchase right for each share of common stock outstanding. The rights
generally become exercisable ten days following a public announcement that 15% or more of the Company’s common stock has
been acquired or an intent to acquire has become apparent. The rights will expire on the earlier of June 14, 2009 or redemption
by the Company. Certain terms of the rights are subject to adjustment to prevent dilution. Further description and terms of the
rights are set forth in the amended Rights Agreement between the Company and UMB Bank, n.a., which serves as Rights Agent.
Stock option plans Under the Company’s stock option plans, options may be granted to non-employee directors, certain
officers, and key employees to purchase an aggregate of 4,560,000 shares of common stock. Options for 626,664 shares were
available for grant at April 30, 2007, and options for 729,500 shares (which expire between 2007 and 2016) were outstanding.
Any additional option share requirements in the future will require approval by the shareholders of the Company. Additional
information is provided in the Company’s 2007 proxy statement.
On June 6, 2003, stock options totaling 307,000 shares were granted to certain officers and key employees. These
awards were granted at no cost to the employee. These awards vested on June 6, 2006; subsequent to adoption of FAS 123R,
compensation expense was recognized ratably over the vesting period.
On July 5, 2005, stock options totaling 234,000 shares were granted to certain officers and key employees. These awards
were also granted at no cost to the employee. These awards will vest on July 5, 2010, and compensation expense is currently being
recognized ratably over the vesting period.
The 2000 Stock Option Plan grants employees options with an exercise price equal to the fair market value of the
Company’s stock on the date of grant and expire ten years after the date of grant. Vesting is generally over a three to five-year service
period. The non-employee Directors’ Stock Option Plan grants directors options with an exercise price equal to the average of the
last reported sale prices of shares of common stock on the last trading day of each of the twelve months preceding the award of the
option. The term of such options is ten years from the date of grant, and each option is exercisable immediately upon grant. The
aggregate number of shares of Common Stock that may be granted pursuant to the Director Stock Plan may not exceed 200,000
shares, subject to adjustment to reflect any future stock dividends, stock splits, or other relevant capitalization changes.
page 39
The following table shows the stock option activity during the periods indicated:
Balance at April 30, 2004
Granted
Exercised
Forfeited
Balance at April 30, 2005
Granted
Exercised
Forfeited
Balance at April 30, 2006
Granted
Exercised
Forfeited
Number of
shares
1,079,350
14,000
(173,950)
(11,000)
908,400
248,000
(178,850)
(16,500)
961,050
14,000
(223,550)
(22,000)
$
$
$
Weighted
average
exercise price
12.80
15.80
10.89
14.08
13.20
20.51
11.96
14.46
15.29
22.36
13.16
14.80
Balance at April 30, 2007
729,500
$
16.10
At April 30, 2007, all outstanding options had an aggregate intrinsic value of $6,602 and a weighted average remaining
contractual life of 5.7 years. The vested options totaled 498,500 shares with a weighted average exercise price of $13.98 per share and
a weighted average remaining contractual life of 4.5 years. The aggregate intrinsic value for the vested options as of April 30, 2007
was $5,569. The aggregate intrinsic value for the total of all options exercised during the year ended April 30, 2007 was $2,681,
and the total fair value of shares vested during the year ended April 30, 2007 was $1,232.
The fair value of the 2007 stock options granted was estimated utilizing the Black Scholes valuation model. The grant
date fair value for the May 1, 2006 options was $9.25. The significant assumptions follow:
Risk-free interest rate
Expected option life
Expected volatility
Expected dividend yield
May 1, 2006
4.88%
8.75 years
35%
1.17%
The option term of each award granted was based upon historical experience of employees’ exercise behavior. Expected
volatility was based upon historical volatility levels and future expected volatility of common stock. Expected dividend yield was
based on expected dividend rate. Risk-free interest rate reflects the yield on the 8.75 year zero coupon U.S. Treasury.
Total compensation costs recorded for the year ended April 30, 2007 were $526 for the stock option awards. No
compensation costs related to stock options had been recorded for the year ended April 30, 2006. As of April 30, 2007, there
was $897 of total unrecognized compensation costs related to the 2000 Stock Option Plan for stock options that are expected
to be recognized ratably through 2011.
page 40
At April 30, 2007, the range of exercise prices was $11.20–$22.36 and the weighted average remaining
contractual life of outstanding options was 5.7 years. The number of shares and weighted average remaining
contractual life of the options by range of applicable exercise prices at April 30, 2007 were as follows:
Range of exercise
prices
$
11.20 – 13.07
14.08 – 15.80
17.64 – 22.36
Number of shares
Weighted average
exercise price
Weighted average remaining
contractual life (years)
143,500
329,000
257,000
729,500
$
11.78
14.45
20.63
3.5
4.7
8.2
5.
EARNINGS PER COMMON SHARE
Computations for basic and diluted earnings per common share are presented below:
Basic
Earnings from continuing operations
Loss on discontinued operations
Cumulative effect of accounting change
Net earnings
Weighted average shares outstanding—basic
Earnings per common share from continuing operations
Loss per common share on discontinued operations
Cumulative effect of accounting change
Basic earnings per common share
Diluted
Earnings from continuing operations
Loss on discontinued operations
Cumulative effect of accounting change
Net earnings
Weighted-average shares outstanding—basic
Plus effect of stock options
Weighted-average shares outstanding—diluted
Earnings per common share from continuing operations
Loss per common share on discontinued operations
Cumulative effect of accounting change
Diluted earnings per common share
2007
2006
2005
63,542
$
63,218
$
1,651
--------
1,667
1,083
61,891
$
60,468
$
42,459
5,706
--------
36,753
50,467,739
50,309,929
50,114,695
1.26
$
1.25
$
.03
--------
.03
.02
1.23
$
1.20
$
63,542
$
63,218
$
1,651
--------
1,667
1,083
61,891
$
60,468
$
.84
.11
--------
.73
42,459
5,706
--------
36,753
50,467,739
200,159
50,667,898
50,309,929
300,335
50,610,264
50,114,695
169,488
50,284,183
1.25
$
1.24
$
.03
--------
.03
.02
1.22
$
1.19
$
.84
.11
--------
.73
$
$
$
$
$
$
$
$
page 41
6.
INCOME TAXES
Income tax expense attributable to earnings from continuing operations consisted of the following components:
Current tax expense
Federal
State
Deferred tax expense
Total income tax provision
Years ended April 30,
2007
2006
2005
$
$
31,917
2,788
34,705
(500)
34,205
$
35,649
$
15,402
3,641
39,290
(3,937)
2,192
17,594
7,311
$
35,353
$
24,905
The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax
liabilities were as follows:
Deferred tax assets
Accrued liabilities
Deferred compensation
Other
Total gross deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities
Excess of tax over book
depreciation
Other
Total gross deferred tax liabilities
Net deferred tax liability
$
Years ended April 30,
2007
2006
2005
$
7,414
$
6,373
$
5,047
3,589
982
11,985
(186)
11,799
(109,146)
(1,749)
(110,895)
(99,096)
3,073
1,523
10,969
(184)
10,785
2,551
351
7,949
--------
7,949
(103,094)
(1,484)
(104,578)
(93,793)
$
(104,754)
(1,614)
(106,368)
(98,419)
$
The deferred tax assets of $6,628 and $6,136 relating to accrued liabilities are current assets and are included with
prepaid expenses as of April 30, 2007 and April 30, 2006, respectively. At April 30, 2007, the Company has net operating loss
carryforwards for state income tax purposes of approximately $13,532, which are available to offset future taxable income. These
net operating losses expire during the years 2015 through 2018.
The valuation allowance for deferred tax assets as of April 30, 2007 and 2006 was $186 and $184, respectively. The net
change in the valuation allowance for the years ended April 30, 2007 and 2006 was an increase of $2 and $184, respectively. In
assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of the
deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected taxable income, and tax planning strategies in making this assessment. A valuation
allowance has been established for a portion of the amount of net operating loss carryovers—state taxes as of April 30, 2007 due
to the uncertainty of future recoverability. As time passes, management will be able to better assess the amount of tax benefit it
will realize from using the carryforwards.
page 42
Total reported tax expense applicable to the Company’s continuing operations varies from the tax that would
have resulted from applying the statutory U.S. federal income tax rates to income before income taxes.
Income taxes at the statutory rates
Federal tax credits
State income taxes, net of federal tax
benefit
Other
2007
35.0%
(0.8)
1.5
(0.7)
35.0%
Years ended April 30,
2006
35.0%
(0.7)
1.4
0.2
35.9%
2005
35.0%
(0.9)
2.5
0.4
37.0%
The income tax benefit from discontinued operations was $1,055, $1,065, and $3,648 for the years ended
April 30, 2007, 2006, and 2005, respectively. The income tax benefit from the cumulative effect of accounting change
was $692 for the year ended April 30, 2007.
7.
LEASES
The Company leases certain property and equipment used in its operations. Generally, the leases are for primary terms
of from five to twenty years with options either to renew for additional periods or to purchase the premises and call for payment
of property taxes, insurance, and maintenance by the lessee.
The following is an analysis of the leased property under capital leases by major classes:
Real estate
Equipment
Less accumulated amortization
Asset balances at April 30,
2007
9,949
5,503
15,452
7,114
8,338
$
$
2006
2,929
3,995
6,924
6,113
811
$
$
Future minimum payments under the capital leases and noncancelable operating leases with initial or remaining terms
of one year or more consisted of the following at April 30, 2007:
Years ended April 30,
2008
$
2009
2010
2011
2012
Thereafter
Total minimum lease payments
Less amount representing interest
Present value of net minimum lease payments
$
Capital
leases
Operating
leases
$
$
1,264
1,247
896
594
356
15,089
19,446
9,337
10,109
597
452
316
108
52
73
1,598
The total rent expense under operating leases was $634 in 2007, $564 in 2006, and $598 in 2005.
page 43
8.
BENEFIT PLANS
401(k) plan Effective April 30, 2003, the Company merged its former employee stock ownership plan with its defined
contribution 401(k) plan (Plan). The Plan covers all employees who meet minimum age and service requirements. The Company
contributions consist of matching amounts and are allocated based on employee contributions. Expense for the Plan was
approximately $2,456, $2,258, and $2,149 for the years ended April 30, 2007, 2006, and 2005, respectively.
On April 30, 2007, the Company had 6,954 full-time employees and 10,182 part-time employees, and 3,885 were
participants in the Plan. As of that same date, 2,012,319 shares of common stock were held by the trustee of the Plan in trust
for distribution to eligible participants upon death, disability, retirement, or termination of employment. Shares held by the
Plan are treated as outstanding in the computation of earnings per common share.
Supplemental executive retirement plan The Company has a nonqualified supplemental executive retirement plan
(SERP) for 3 of its executive officers, 1 of whom retired April 30, 2003. The SERP provides for the Company to pay annual
retirement benefits, depending on retirement dates, up to 50% of base compensation until death of the officer. If death occurs
within twenty years of retirement, the benefits become payable to the officer’s spouse until the spouse’s death or twenty years from
the date of the officer’s retirement, whichever comes first. The Company is accruing the deferred compensation over the expected
term of employment. The amount expensed in fiscal 2007, 2006, and 2005 was $763, $289, and $570, respectively.
9.
COMMITMENTS
The Company has entered into employment agreements with 3 of its executive officers. The agreements provide
that the 3 officers will receive aggregate base compensation of $1,500 per year exclusive of bonuses. These agreements also
provide for certain payments in the case of death or disability of the officers. The Company also has entered into employment
agreements with 12 other key employees, providing for certain payments in the event of termination following a change of
control of the Company.
10.
CONTINGENCIES
Environmental compliance The United States Environmental Protection Agency and several states have adopted laws
and regulations relating to underground storage tanks used for petroleum products. Several states in which the Company does
business have trust fund programs with provisions for sharing or reimbursing corrective action or remediation costs.
Management currently believes that substantially all capital expenditures for electronic monitoring, cathodic protection,
and overfill/spill protection to comply with existing regulations have been completed. The Company has an accrued liability at
April 30, 2007 and 2006 of approximately $336 and $200, respectively, for estimated expenses related to anticipated corrective
actions or remediation efforts, including relevant legal and consulting costs. Management believes the Company has no material
joint and several environmental liability with other parties. Additional regulations or amendments to the existing regulations could
result in future revisions to such estimated expenditures.
Legal matters The Company is a defendant in several lawsuits arising in the normal course of business. In the opinion
of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated
financial position and results of operations.
The Company is named as a defendant in five lawsuits (“hot fuel” cases) brought in the federal courts in Kansas and
Missouri against a variety of gasoline retailers. The complaints generally allege that the Company, along with numerous other
retailers, has misrepresented gasoline volumes dispensed at its pumps by failing to compensate for expansion that occurs when fuel
is sold at temperatures above 60°F. Fuel is measured at 60°F in wholesale purchase transactions and computation of motor fuel
taxes in Kansas and Missouri. The complaints all seek certification as class actions on behalf of gasoline consumers within those
two states, and one of the complaints also seeks certification for a class consisting of gasoline consumers in all states. The actions
generally seek recovery for alleged violations of state consumer protection or unfair merchandising practices statutes, negligent
page 44
and fraudulent misrepresentation, unjust enrichment, civil conspiracy, and violation of the duty of good faith and fair
dealing; and several seek injunction relief and punitive damages. These actions are part of a number of similar lawsuits
that have been filed in recent weeks in different states against a wide range of defendants that produce, refine, distribute,
and/or market gasoline products in the United States. On June 18, 2007, the Judicial Panel on Multidistrict Litigation
ordered that all of the pending hot fuel cases be transferred to the District of Kansas and assigned to the Honorable Kathryn
H. Vratil for coordinated or consolidated pretrial proceedings, including rulings on discovery matters, various pretrial motions,
and class certification. Management does not believe the Company is liable to the defendants for the conduct complained of and
intends to contest the matters vigorously.
On May 30, 2007, a complaint was filed against the Company in the United States District Court for the Northern
District of Iowa by two former employees against the Company, in which the claim is made that Casey’s failed to pay overtime
compensation properly to two or more of its assistant managers. Specifically, plaintiffs claim that the assistant managers were
treated as nonexempt employees entitled to overtime pay, but that the Company did not properly record all hours worked and
failed to pay the assistant managers overtime pay for all hours worked in excess of 40 per week. The action purports to be a
collective action under the Fair Labor Standards Act (essentially equivalent to a class action) brought on behalf of all “persons
who are currently or were employed during the three-year period immediately preceding the filing of [the] complaint as ‘Assistant
Managers’ at any Casey’s General Store operated by [the] Defendant (directly or through one of its wholly owned subsidiaries),
who worked overtime during any given week within that period, and who have not filed a complaint to recover overtime wages.”
The complaint seeks relief in the form of back wages owed all members of the class during the three-year period preceding the
filing of the complaint, liquidated damages, attorney fees, and costs. Management does not believe the Company is liable to the
plaintiffs for the conduct complained of and intends to contest the matter vigorously.
Other At April 30, 2007, the Company was partially self-insured for workers’ compensation claims in all 9 states of its
marketing territory and was also partially self-insured for general liability and auto liability under an agreement that provides for
annual stop-loss limits equal to or exceeding approximately $1,000. To facilitate this agreement, letters of credit approximating
$8,800 and $7,500 were issued and outstanding at April 30, 2007 and 2006, respectively, on the insurance company’s behalf.
The Company also has investments of approximately $211 in escrow as required by 1 state for partial self-insurance of workers’
compensation claims. Additionally, the Company is self-insured for its portion of employee medical expenses. At April 30, 2007
and 2006, the Company had $16,391 and $15,635, respectively, in accrued expenses for estimated claims relating to self-insurance.
page 45
11.
QUARTERLY FINANCIAL DATA (Dollars in Thousands) (Unaudited)
Net sales
Gasoline
Grocery & other merchandise
Prepared food & fountain
Other
Gross profit*
Gasoline
Grocery & other merchandise
Prepared food & fountain
Other
Net earnings from continuing operations
Loss (gain) on discontinued operations,
net of tax benefit (taxes)
Net earnings
Basic
Earnings from continuing operations
Loss on discontinued operations
Net earnings per common share
Diluted
Earnings from continuing operations
Loss on discontinued operations
Net earnings per common share
Net sales
Gasoline
Grocery & other merchandise
Prepared food & fountain
Other
Gross profit*
Gasoline
Grocery & other merchandise
Prepared food & fountain
Other
Net earnings from continuing operations
Loss on discontinued operations, net of tax benefit
Cumulative effect of accounting change, net of tax benefit
Net earnings
Basic
Earnings from continuing operations
Loss on discontinued operations
Cumulative effect of accounting change, net of tax benefit
Net earnings per common share
Diluted
Earnings from continuing operations
Loss on discontinued operations
Cumulative effect of accounting change, net of tax benefit
Net earnings per common share
$ 17,089
17,161
11,265
188
(11)
21
$ 16,901
17,172
11,244
Q1
$ 799,480
225,206
65,682
5,226
$1,095,594
$ 28,545
72,636
41,305
2,867
$ 145,353
$ 0.34
0.00
$ 0.34
$ 0.33
0.00
$ 0.33
Q1
$ 582,091
211,003
57,346
3,584
$ 854,024
$ 33,724
67,807
36,694
1,490
$ 139,715
$ 22,095
120
1,083
$ 20,892
$ 0.44
0.00
0.02
$ 0.42
$ 0.43
0.00
0.02
$ 0.41
Year ended April 30, 2007
Q3
645,062
201,726
66,854
5,597
919,239
Q2
714,810
216,336
69,063
5,568
1,005,777
Q4
721,702
209,544
65,674
5,800
1,002,720
28,492
70,632
42,539
3,515
145,178
32,148
62,112
41,498
3,627
139,385
34,909
73,270
40,422
4,088
152,689
18,027
1,453
16,574
0.36
0.03
0.33
0.36
0.03
0.33
0.34
0.00
0.34
0.34
0.00
0.34
0.22
0.00
0.22
0.22
0.00
0.22
Year ended April 30, 2006
Q3
558,827
174,941
56,049
5,088
794,905
Q2
700,140
197,810
57,807
3,847
959,604
Q4
637,676
183,720
57,323
4,543
883,262
38,900
66,215
37,345
1,685
144,145
24,543
54,763
35,064
3,241
117,611
22,460
267
--------
22,193
0.45
0.01
--------
0.44
0.45
0.01
--------
0.44
7,678
725
--------
6,953
0.15
0.01
--------
0.14
0.15
0.01
--------
0.14
28,276
58,239
34,933
2,622
124,070
10,985
555
--------
10,430
0.22
0.01
--------
0.21
0.22
0.01
--------
0.21
Year Total
2,881,054
852,812
267,273
22,191
4,023,330
124,094
278,650
165,764
14,097
582,605
63,542
1,651
61,891
1.26
0.03
1.23
1.25
0.03
1.22
Year Total
2,478,734
767,474
228,525
17,062
3,491,795
125,443
247,024
144,036
9,038
525,541
63,218
1,667
1,083
60,468
1.25
0.03
0.02
1.20
1.24
0.03
0.02
1.19
*Gross profit is given before charge for depreciation and amortization.
page 46
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
CONTROLS AND PROCEDURES
As of the end of the period covered by this report, an evaluation was performed under the supervision and with the
participation of the Company’s Chief Executive Officer and Chief Financial Officer of the effectiveness of the Company’s
disclosure controls and procedures. On the basis of that evaluation, the CEO and CFO have concluded that the Company’s
current disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in
reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported
within the time periods specified in Securities and Exchange Commission rules and forms.
There were no changes in the Company’s internal control over financial reporting that occurred during the fourth fiscal
quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.
Management of the Company is responsible for establishing and maintaining adequate internal control over financial
reporting. The Company’s internal control system was designed to provide reasonable assurance to the Company’s management
and Board of Directors regarding the preparation and fair presentation of published financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of
April 30, 2007. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) in Internal Control—Integrated Framework. On the basis of the prescribed criteria, management
believes the Company’s internal control over financial reporting was effective as of April 30, 2007.
KPMG, LLP, as the Company’s independent registered public accounting firm, has issued a report on its assessment of
the Company’s internal control over financial reporting. This report appears on page 25.
ITEM 9B.
OTHER INFORMATION
Not applicable.
page 47
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Those portions of the Company’s definitive Proxy Statement appearing under the captions “Election of Directors,”
“Governance of the Company,” “Section 16(a) Beneficial Ownership Reporting Compliance,” and “Executive Officers and Their
Compensation” to be filed with the Commission pursuant to Regulation 14A within 120 days after April 30, 2007 and to be used
in connection with the Company’s Annual Meeting of Shareholders to be held on September 14, 2007 are hereby incorporated
by reference.
The Company has adopted a Financial Code of Ethics applicable to its Chief Executive Officer and other senior financial
officers. In addition, the Company has adopted a general code of business conduct (known as the Code of Business Conduct
and Ethics) for its directors, officers, and all employees. The Financial Code of Ethics, the Code of Business Conduct and Ethics,
and other Company governance materials are available on the Company Web site at www.caseys.com. The Company intends to
disclose on this Web site any amendments to or waivers from the Financial Code of Ethics or the Code of Business Conduct and
Ethics that are required to be disclosed pursuant to SEC rules. To date, there have been no waivers of the Financial Code
of Ethics or the Code of Business Conduct and Ethics. Shareholders may obtain copies of any of these corporate governance
documents free of charge by downloading from the Web site or by writing to the Corporate Secretary at the address on the
cover of this Form 10-K.
ITEM 11.
EXECUTIVE COMPENSATION
That portion of the Company’s definitive Proxy Statement appearing under the caption “Executive Officers and Their
Compensation” to be filed with the Commission pursuant to Regulation 14A within 120 days after April 30, 2007 and to be used
in connection with the Company’s Annual Meeting of Shareholders to be held on September 14, 2007 is hereby incorporated
by reference.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
Those portions of the Company’s definitive Proxy Statement appearing under the captions “Shares Outstanding,”
“Voting Procedures,” and “Beneficial Ownership of Shares of Common Stock by Directors and Executive Officers” to be filed
with the Commission pursuant to Regulation 14A within 120 days after April 30, 2007 and to be used in connection with the
Company’s Annual Meeting of Shareholders to be held on September 14, 2007 are hereby incorporated by reference.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND
DIRECTOR INDEPENDENCE
That portion of the Company’s definitive Proxy Statement appearing under the caption “Certain Relationships and
Related Transactions” to be filed with the Commission pursuant to Regulation 14A within 120 days after April 30, 2007 and
to be used in connection with the Company’s Annual Meeting of Shareholders to be held on September 14, 2007 is hereby
incorporated by reference.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
That portion of the Company’s definitive Proxy Statement appearing under the caption “Independent Auditor Fees”
to be filed with the Commission within 120 days after April 30, 2007 and to be used in connection with the Company’s Annual
Meeting of Shareholders to be held on September 14, 2007 is hereby incorporated by reference.
page 48
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
Documents filed as a part of this report on Form 10-K
(1)
The following financial statements are included herewith:
Consolidated Balance Sheets, April 30, 2007 and 2006
Consolidated Statements of Income, Three Years Ended April 30, 2007
Consolidated Statements of Shareholders’ Equity, Three Years Ended April 30, 2007
Consolidated Statements of Cash Flows, Three Years Ended April 30, 2007
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
No schedules are included because the required information is inapplicable or is presented in the consolidated
financial statements or related notes thereto.
The following exhibits are filed as a part of this report:
(2)
(3)
Exhibit
Number
3.1(a)
3.2(a)
4.2
4.4
4.6
4.7
4.8
Description of Exhibits
Restatement of the Restated and Amended Articles of Incorporation (incorporated by reference from the Quarterly
Report on Form 10-Q for the fiscal quarter ended October 31, 1996)
Restatement of Amended and Restated By-laws (incorporated by reference from the Quarterly Report on Form 10-Q
for the fiscal quarter ended January 31, 1997) and Amendments thereto (incorporated by reference from the Quarterly
Reports on Form 10-Q for the fiscal quarters ended July 31, 1997 and July 31, 2000)
Rights Agreement between Casey’s General Stores, Inc. and UMB Bank, n.a. as Rights Agent, relating to
Common Share Purchase Rights (incorporated herein by reference from the Registration Statement on Form 8-A filed
June 19, 1989 (0-12788)) and amendments thereto (incorporated by reference from the Form 8 (Amendment No. 1
to the Registration Statement on Form 8-A filed June 19, 1989) filed September 10, 1990; the Form 8-A/A
(Amendment No. 3 to the Registration Statement on Form 8-A filed June 19, 1989) filed March 30, 1994; the Form
8-A12G/A (Amendment No. 2 to the Registration Statement on Form 8-A filed June 19, 1989) filed July 29, 1994,
the Current Report on Form 8-K filed May 10, 1999; and the Current Report on Form 8-K filed September 27, 1999)
Note Agreement dated as of December 1, 1995 between Casey’s General Stores, Inc. and Principal
Mutual Life Insurance Company (incorporated by reference from the Current Report on Form 8-K filed
January 11, 1996)
Note Agreement dated as of April 15, 1999 among the Company and Principal Life Insurance Company
and other purchasers of $50,000,000 Senior Notes, Series A through Series F (incorporated by reference from the
Current Report on Form 8-K filed May 10, 1999)
Note Purchase Agreement dated as of May 1, 2000 among the Company and the purchasers of $80,000,000
in principal amount of 7.89% Senior Notes, Series 2000-A, due May 15, 2010 (incorporated by
reference from the Current Report on Form 8-K filed May 23, 2000)
Note Purchase Agreement dated as of September 29, 2006 among the Company and the purchasers of
$100,000,000 in principal amount of 5.72% Senior Notes, Series A and Series B (incorporated by reference from
the Current Report on Form 8-K filed September 29, 2006)
page 49
10.19*
Casey’s General Stores, Inc. 1991 Incentive Stock Option Plan (incorporated by reference from the Registration
Statement on Form S-8 (33-42907) filed September 23, 1991) and amendment thereto (incorporated by reference from
the Quarterly Report on Form 10-Q for the fiscal quarter January 31, 1994)
10.21(a)*
Amended and Restated Employment Agreement with Donald F. Lamberti (incorporated by reference from the
10.22(a)*
10.24(a)*
10.27
Current Report on Form 8-K filed November 10, 1997) and First Amendment thereto (incorporated by reference from
the Current Report on Form 8-K filed April 2, 1998)
Amended and Restated Employment Agreement with Ronald M. Lamb (incorporated by reference from the Current
Report on Form 8-K filed November 10, 1997), First Amendment thereto (incorporated by reference from the Current
Report on Form 8-K filed April 2, 1998) and Second Amendment thereto (incorporated by reference from the Current
Report on Form 8-K filed July 17, 2006)
Amended and Restated Employment Agreement with John G. Harmon (incorporated by reference from the Current
Report on Form 8-K filed November 10, 1997), First Amendment thereto (incorporated by reference from the Annual
Report on Form 10-K405 for the fiscal year ended April 30, 2001), Second Amendment thereto (incorporated by
reference from the Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2004), and Third Amendment
thereto (incorporated by reference from the Current Report on Form 8-K filed July 17, 2006)
Non-Employee Directors’ Stock Option Plan (incorporated by reference from the Quarterly Report on Form 10-Q for the
fiscal quarter ended July 31, 1994) and related form of Grant Agreement (incorporated by reference from the Current
Report on Form 8-K filed May 3, 2005)
10.28(a)
Promissory Note delivered to UMB Bank, n.a. (incorporated by reference from the Current Report on Form 8-K filed
October 4, 2005)
10.29
Form of “change of control” Employment Agreement (incorporated by reference from the Quarterly Report on
Form 10-Q for the fiscal quarter ended January 31, 1997)
10.30*
Non-Qualified Supplemental Executive Retirement Plan (incorporated by reference from the Current Report on Form
8-K filed November 10, 1997) and Amendment thereto (incorporated by reference from the Current Report on Form 8-K
filed July 17, 2006)
10.31*
Non-Qualified Supplemental Executive Retirement Plan Trust Agreement with UMB Bank, n.a. (incorporated
10.32*
Severance Agreement with Douglas K. Shull (incorporated by reference from the Current Report on Form 8-K
by reference from the Current Report on Form 8-K filed November 10, 1997)
filed July 28, 1998)
10.33*
Casey’s General Stores, Inc. 2000 Stock Option Plan (incorporated by reference from the Annual Report on
Form 10-K405 for the fiscal year ended April 30, 2001) and related form of Grant Agreement (incorporated by
reference from the Current Report on Form 8-K filed July 6, 2005)
10.34*
Casey’s General Stores 401(k) Plan (incorporated by reference from the Annual Report on Form 10-K for the fiscal year
ended April 30, 2003)
10.35*
Trustar Directed Trust Agreement (incorporated by reference from the Annual Report on Form 10-K for the fiscal year
ended April 30, 2003)
10.37
Description of fiscal 2008 salary and bonus arrangements for Executive Officers (incorporated by reference from the
Current Report on Form 8-K filed June 14, 2007)
10.38*
21
23.1
31.1
31.2
32.1
32.2
______________________________
Executive Nonqualified Excess Plan Document and related Adoption Agreement dated July 12, 2006
Subsidiaries of Casey’s General Stores, Inc.
Consent of Independent Registered Public Accounting Firm
Certificate of Robert J. Myers under Section 302 of Sarbanes-Oxley Act of 2002
Certificate of William J. Walljasper under Section 302 of Sarbanes-Oxley Act of 2002
Certificate of Robert J. Myers under Section 906 of Sarbanes-Oxley Act of 2002
Certificate of William J. Walljasper under Section 906 of Sarbanes-Oxley Act of 2002
*Indicates management contract or compensatory plan or arrangement.
page 50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CASEY’S GENERAL STORES, INC.
(Registrant)
Date June 28, 2007
By
/s/ Robert J. Myers
Robert J. Myers, President and
Chief Executive Officer
(Principal Executive Officer and Director)
Date June 28, 2007
By
/s/ William J. Walljasper
William J. Walljasper
Senior Vice President and Chief Financial Officer
(Authorized Officer and Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date June 28, 2007
Date June 28, 2007
Date June 28, 2007
Date June 28, 2007
Date June 28, 2007
By
By
By
By
By
/s/ Robert J. Myers
Robert J. Myers
President and Chief Executive Officer, Director
/s/ Ronald M. Lamb
Ronald M. Lamb
Chairman of the Board, Director
/s/ Donald F. Lamberti
Donald F. Lamberti
Director
/s/ Kenneth H. Haynie
Kenneth H. Haynie
Director
/s/ John R. Fitzgibbon
John R. Fitzgibbon
Director
page 51
Date June 28, 2007
Date June 28, 2007
Date June 28, 2007
Date June 28, 2007
By
By
By
By
/s/ Johnny Danos
Johnny Danos
Director
/s/ Patricia Clare Sullivan
Patricia Clare Sullivan
Director
/s/ William C. Kimball
William C. Kimball
Director
/s/ Diane C. Bridgewater
Diane C. Bridgewater
Director
page 52
EXHIBIT INDEX
The following exhibits are filed herewith:
Exhibit No.
10.38
Description
Executive Nonqualified Excess Plan Document and related Adoption Agreement
dated July 12, 2006
21
23.1
31.1
31.2
32.1
32.2
Subsidiaries of Casey’s General Stores, Inc.
Consent of Independent Registered Public Accounting Firm
Certification of Robert J. Myers under Section 302 of the Sarbanes-Oxley Act of 2002
Certification of William J. Walljasper under Section 302 of the Sarbanes-Oxley Act of 2002
Certificate of Robert J. Myers under Section 906 of Sarbanes-Oxley Act of 2002
Certificate of William J. Walljasper under Section 906 of Sarbanes-Oxley Act of 2002
page 53
SUBSIDIARIES OF CASEY’S GENERAL STORES, INC.
Exhibit 21
1.
2.
3.
Casey’s Marketing Company, an Iowa corporation
Casey’s Services Company, an Iowa corporation
Casey’s Retail Company, an Iowa corporation
All such subsidiaries are wholly owned by Casey’s General Stores, Inc. and do business under the above names. Stores
operated by Casey’s Marketing Company and Casey’s Retail Company do business under the name “Casey’s General Stores.”
page 54
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.1
The Board of Directors
Casey’s General Stores, Inc.:
We consent to the incorporation by reference in the registration statements (No. 33-19179, 33-42907, and 33-56977) on
Form S-8 of Casey’s General Stores, Inc. of our reports dated June 28, 2007, with respect to the consolidated balance sheets of
Casey’s General Stores, Inc. and subsidiaries as of April 30, 2007 and 2006, and the related consolidated statements of income,
shareholders’ equity, and cash flows for each of the years in the three-year period ended April 30, 2007, and management’s
assessment of the effectiveness of internal control over financial reporting as of April 30, 2007 and the effectiveness of internal
control over financial reporting as of April 30, 2007, which reports appear in the April 30, 2007 Annual Report on Form 10-K of
Casey’s General Stores, Inc.
Our report dated June 28, 2007, notes that the Company adopted the provisions of Statement of Financial
Accounting Standards No. 123 (R) Share Based Payment and Securities and Exchange Commission Staff Accounting Bulletin
No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements during the
year ended April 30, 2007.
/s/KPMG LLP
Des Moines, Iowa
June 28, 2007
page 55
CERTIFICATION OF ROBERT J. MYERS
UNDER SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Robert J. Myers, certify that:
I have reviewed this annual report on Form 10-K of Casey’s General Stores, Inc.;
1.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted
accounting practices;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or
persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Dated June 28, 2007
/s/ Robert J. Myers
Robert J. Myers, President and
Chief Executive Officer
page 56
CERTIFICATION OF WILLIAM J. WALLJASPER
UNDER SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, William J. Walljasper, certify that:
I have reviewed this annual report on Form 10-K of Casey’s General Stores, Inc.;
1.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted
accounting practices;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or
persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Dated June 28, 2007
/s/ William J. Walljasper
William J. Walljasper
Senior Vice President and
Chief Financial Officer
page 57
Exhibit 32.1
CERTIFICATE PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Casey’s General Stores, Inc. (the Company) on Form 10-K for the fiscal year
ended April 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Robert J. Myers,
Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act
of 2002, that
(1)
(2)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934.
The information contained in the Report fairly presents, in all material respects, the financial condition
and result of operations of the Company.
/s/ Robert J. Myers
Robert J. Myers, President and
Chief Executive Officer
Dated June 28, 2007
page 58
Exhibit 32.2
CERTIFICATE PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Casey’s General Stores, Inc. (the Company) on Form 10-K for the fiscal year ended
April 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, William J. Walljasper,
Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act
of 2002, that
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934.
The information contained in the Report fairly presents, in all material respects, the financial condition and
result of operations of the Company.
(2)
/s/ William J. Walljasper
William J. Walljasper
Senior Vice President and Chief Financial Officer
Dated June 28, 2007
page 59
COMPARATIVE STOCK PERFORMANCE
The following Performance Graph compares the cumulative total share holder return on the Company’s Common Stock
for the last five fiscal years with the cumulative total return of (i) the Russell 2000 Index and (ii) a peer group index based on the
common stock of The Pantry, Inc. and Alimentation Couche Tard, Inc. (“Couche Tart”). Because the common stock of Couche
Tard trades only on the Toronto Stock Exchange, its returns have been calculated by taking its reported financial results and
converting them to U.S. currency equivalents, using the current exchange rate ($0.92 U.S. Dollars) on the date the Performance
Graph was prepared (May 24, 2007). The cumulative total shareholder return computations set forth in the Performance Graph
assume the investment of $100 in the Company’s Common Stock and each index on April 30, 2002, and reinvestment of all
dividends. The total shareholder returns shown are not intended to be indicative of future returns.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL
RETURN*
COMPARISON OF 5 YEAR CUMULATIVE TOTAL
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
RETURN*
Among Casey’s General Stores, Inc., The Russell 2000 Index
Among Casey's General Stores, Inc., The Russell 2000 Index
Among Casey's General Stores, Inc., The Russell 2000 Index
$1,000
$1,000
$900
$900
$800
$800
$700
$700
$600
$600
$500
$500
$400
$400
$300
$300
$200
$200
$100
$100
$0
4/02
$0
4/02
4/03
4/03
4/04
4/04
4/05
4/05
4/06
4/06
4/07
4/07
Casey's General Stores, Inc.
Casey's General Stores, Inc.
Russell 2000
Russell 2000
Peer Group
Peer Group
*$100 invested on 4/30/02 in stock or index-including reinvestment of dividends.
Fiscal year ending April 30.
* $100 invested on 4/30/02 in stock or index-including reinvestment of dividends.
Fiscal year ending April 30.
Casey’s
* $100 invested on 4/30/02 in stock or index-including reinvestment of dividends.
100.00
Fiscal year ending April 30.
100.30
129.39
133.13
170.08
201.61
4/30/02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4/30/03 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4/30/04 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4/30/05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4/30/06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4/30/07 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Russell 2000
100.00
79.24
112.53
117.83
157.27
169.59
Peer Group
100.00
149.81
342.33
517.26
911.59
793.67
page 60
we’re a convenience store
and a whole lot more
Casey’s and community
At Casey’s, we believe giving is important.
For us, generosity begins at home—in the
communities we serve day in and day out.
Our support is part of our approach to
store operations and reinforces our
commitment to our customers and our
desire to be part of their daily lives. In
2007, most of our donations went to
support thousands of local projects and
events across our marketing territory.
Sometimes we joined with other businesses
Our Web site at caseys.com is designed
Families are the heart of Iowa baseball,
to sponsor community improvement
to be a practical tool. Viewers can rely on
Midwest living, and Casey’s business.
projects—a new gazebo on the town
the complete nutritional information we
They were also at the center of our
square here, an updated baseball field
publish regarding every prepared food
television advertising campaign that
there, fresh plantings in a park somewhere
item we serve at our stores. We also use
features families enjoying great food
else. Often, we participated in local
the site to provide quick access to Casey’s
from a nearby Casey’s store.
fundraising efforts for student trips or
financial information, post job openings,
high school celebrations by serving up
and invite feedback from customers and
Whether we’re updating a local library,
Casey’s pizza and soft drinks for free or
shareholders. Our CEO Bob Myers reads
organizing a golf event for charity, or taping
at discounted prices.
and responds to every customer comment.
our latest television commercial, we’re
In addition to financial support, Casey’s
Casey’s is the 2007 official pizza maker of
We’ve learned we perform better—and
employees almost always contributed their
the Iowa Cubs, our home state’s minor
feel better—when we help our communities
own enthusiasm and personal time in
league baseball team; we’re in the stands
prosper. That’s why we’re Casey’s, a
support of their communities.
and at our kiosks for every home game.
convenience store and a whole lot more.
serving our shareholders’ interests.
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we’re a convenience store and a whole lot more
Casey’s General Stores, Inc.
One Convenience Blvd. | Ankeny, Iowa 50021-9437
07
annual
report