Casey's General Stores Annual Report 2009

Plain-text annual report

Table of Contents Message to Shareholders Management Team 2 5 Maintaining Excellent Fiscal Health 14 Corporate Finance Board of Directors 16 17 18 New Style, Familiar Substance 6 Store Operations Investor Information Growing According to Plan 12 Financial Information Store Development Meeting the Challenge By virtually any measure, ﬁscal 2009 was a difﬁcult economic year around the world. In business, however, difﬁculty can also create opportunity. In 2009, Casey’s General Stores, Inc., met the challenge of a trying economy, seized opportunity, and produced another record year. One of the brightest silver linings to weather the storm, it also allowed us among the dark economic clouds was to expand and modernize while other the conﬁrmation of Casey’s disciplined companies were scaling back capital projects. approach to business that has been a core characteristic of our Company since As we head into ﬁscal 2010, Casey’s will its founding in 1968. continue to make measured investments in new and remodeled stores, technology Not only did our prudent approach and upgrades and employee development that disciplined execution position Casey’s keep us positioned to meet future challenges. Earnings from Continuing Operations Before Income Taxes Financial Highlights 2009 2008 2007 $139.2 $134.0 $97.7 EPS from Continuing Operations 2009 2008 2007 $1.69 $1.68 $1.26 Total Revenue Cash Flow from Operations Net Earnings from Continuing Operations EPS from Continuing Operations EPS (Diluted) Shareholders of Record Employees # of Corporate Stores 2009 $4,687,895 $169,883 $85,744 $1.69 $1.68 2,329 18,780 1,478 2008 $4,828,793 $177,030 $84,973 $1.68 $1.67 2,444 17,983 1,454 Change -2.9% -4.0% 0.9% 0.6% 0.6% -4.7% 4.4% 1.7% 1 Message to Shareholders In ﬁscal year 2009, the global economy presented serious challenges to many businesses and consumers. Despite the diﬃcult times, Casey’s magazine for excellence, ethics and earnings from continuing operations transparency in our accounting and before income taxes rose 3.9% to $139.2 governance. Read more details of this million, and earnings per share from those accomplishment in the Corporate operations increased to $1.69 from $1.68 Finance section. in ﬁscal 2008. Fiscal 2009 validated our philosophies in Given our strong results, the word that several areas: comes to my mind for Casey’s ﬁscal 2009 is “validation.” n Smaller Community Focus — Focusing on locating stores in smaller Midwest Disciplined Approach Aﬃrmed communities means Casey’s relies heavily on repeat traﬃc from those Fiscal 2009 — perhaps like few other communities. That makes us less reliant years in Casey’s 41-year history — proved on transient traﬃc than some of our the wisdom of our long-held belief that a urban-focused competitors. During prudent, methodical approach to business times of higher retail gasoline prices and builds enduring success. lower discretionary spending, transient traﬃc tends to stay home, while local, Casey’s consistently receives praise for small-town traﬃc stays loyal. our disciplined approach to creating and executing our business plans. Our n Food Service Emphasis — Prepared shareholders are very pleased with the foods have always been a strength for results we achieved and maintained over Casey’s, and the category continued to the course of ﬁscal 2009. In April 2009, be a strong point in ﬁscal 2009. Over Casey’s was among 100 companies the course of the year, we found that nationwide acknowledged by Forbes customers are very resistant to altering 2 buying patterns for small, frequent Our average long-term debt-to-total- The response from customers and purchases like their coﬀee and a donut capital ratio is approximately 24% and employees, as well as others in our industry, in the morning. We also believe that declining. We also own most of our has been overwhelmingly positive. more families turned to Casey’s for assets, which maximizes control and Customers are excited about our new take-out pizza to replace more expensive minimizes ﬁnancial exposure. design and pleased with new features restaurant meals. n A Strong Balance Sheet — As many New Store Excitement such as made-to-order sub sandwiches, expanded cooler space and enhanced coﬀee options. Overall, we are very pleased Americans discovered last year, having In last year’s report, we talked about with early results from our new stores and money in the bank and the ability to the concept of our new store design. will continue to evaluate performance as take on debt are critical to withstanding We made those plans a reality in 2009 more data becomes available. economic turmoil and capitalizing on by constructing 16 new stores and opportunities that present themselves. incorporating the new design into another 14 replacement stores. 3 Goals for 2010 Staying the Course As you will learn in the balance of this To reach these goals, we will take the report, Casey’s did very well in all our same disciplined, data-driven, methodical traditional categories — Gasoline, approach that has served Casey’s well Grocery & Other Merchandise, and for more than four decades. With more Prepared Foods & Fountain. data streaming in every day, we plan to With that in mind, Casey’s will work store design into many of our stores toward these goals in 2010: company-wide through improved incorporate key features of the new n Expansion practices, remodeling, new construction and more. You will ﬁnd more speciﬁcs 4% unit growth through a combination about the 2010 outlook in each section of building and acquisition of this report. n Gasoline Finally — and most importantly — I 2% same-store gallon growth with an want to thank you for your investment average margin of 11 cents per gallon in Casey’s General Stores, Inc. We take our duties to shareholders very seriously n Grocery & Other Merchandise and we are always interested in your ideas 8.9% same-store sales growth and feedback. I am very optimistic about with an average margin of 33.9% the coming year, and by working together n Prepared Foods & Fountain heritage, Casey’s will continue to meet 7.5% same-store sales growth with the challenges of 2010 and beyond. and staying true to our disciplined an average margin of 62.0% Sincerely, Robert J. Myers President & Chief Executive Oﬃcer 4 Management Team First Row (left to right) Second Row (left to right) Third Row (left to right) Robert J. Myers President & CEO Darryl F. Bacon VP-Food Services Brian J. Johnson VP-Finance Terry W. Handley COO Jay F. Blair VP-Transportation & Distribution & Corporate Secretary William J. Walljasper Senior VP & CFO Hal D. Brown VP-Support Services Michael R. Richardson VP-Marketing Sam J. Billmeyer Senior VP-Logistics Robert C. Ford VP-Store Operations Russell D. Sukut VP-Treasurer & Acquisitions Julia L. Jackowski VP-Human Resources Eli J. Wirtz VP-Corporate Counsel 5 New Style, Familiar Substance Fiscal 2009 marked another evolution in the physical appearance of Casey’s General Stores, Inc., with the introduction of our 10th major store design. The ﬁrst new-look store opened in Greenup, Ill., in September 2008. A New Design Powered by an Old Notion: Return On Investment (ROI) beverage category and our prepared food and fountain oﬀerings. The extra 1,000 square feet in new stores is invested in Our new store design will play a key role more cooler space — expanding it from in ﬁscal 2010 and beyond. The design an average nine cooler-door set to a was the product of years of analysis and new 14 cooler-door set — and a larger evaluation aimed at maximizing return on kitchen area. More prepared food space this important investment. will allow a made-to-order sub sandwich program and expanded fountain and coﬀee The physical changes in the store are oﬀerings in many locations. quite striking. At approximately 3,700 square feet, it is our largest design yet, Data-Driven Remodeling Initiative some 1,000 square feet larger than our average store. Building materials While not every community can support and décor focus on wood grains and the new store design, many existing Same-Store Sales Gasoline (Gallons) GOAL 2010 2009 2008 -2.0% 2007 2.0% 1.0% 1.4% Grocery & Other Merchandise 2010 2009 2008 2007 GOAL 8.9% earth tones and create a more upscale Casey’s locations will still beneﬁt from 5.9% 7.3% 4.6% ambiance. The internal signage style this concept. Beginning in 2010, expanded adds to the overall contemporary feel, coolers and more extensive kitchens and traﬃc ﬂow is more eﬃcient. will drive a remodeling program. As we Prepared Food & Fountain gain more data, we will be equipped to 2010 GOAL 7.5% The new design was created in part to determine where remodeling makes the 9.1% 9.8% 11.0% help us capitalize on high-margin, most business sense. high-turning categories: the fast-growing 2009 2008 2007 6 Oﬀ to a Good Start Casey’s competitive advantages, prepared food oﬀerings. As we progress through While results continue to come in ﬁscal 2010, we will continue our tradition from the new stores, comments from of making changes and adjustments to employees and customers alike have been maximize the return on this investment overwhelmingly positive. Customers say over the long term. the design is aesthetically pleasing, serves their needs and helps emphasize one of 7 Store Operations category. They will also be extremely useful in assessing the new sub sandwich From our newest store to our oldest, ﬁscal and expanded coﬀee bar initiatives. Sales (In Millions) Gasoline (Gallons) 2009 2008 2007 1,242 1,215 1,194 Grocery & Other Merchandise 2009 2008 2007 $1,010 $943 $853 2009 was another banner year. Inside Sales FY 2009: n Same-Store Sales — up 6.7% n Total Inside Sales — up 8.1% n Gross Proﬁt — up 9.2% We normally report inside sales broken Grocery & Other Merchandise FY 2009: n Same-Store Sales — up 5.9% n Average Margin — 33.7% FY 2010 Goal: n Same-Store Sales — up 8.9% n Average Margin — 33.9% Prepared Food & Fountain out into two categories, Grocery & Our ﬁscal 2009 goal was to increase same- 2009 2008 2007 Margin $336 Other Merchandise and Prepared Food store sales 7% with an average margin of $302 & Fountain. Combined, the two posted 33.2%. For the year, same-store sales rose $267 impressive gains in 2009. Our investment 5.9% with an average margin of 33.7%, up in new stores and remodeling will help 60 basis points from a year ago. Grocery us continue to emphasize these important & Other Merchandise has consistently Gasoline (Per Gallon) categories. Of course, managing inside demonstrated excellent performance over 2009 2008 2007 12.9¢ 13.9¢ 10.4¢ Grocery & Other Merchandise 2009 2008 2007 33.7% 33.1% 32.7% Prepared Food & Fountain gross proﬁt dollars is always the the last several years and we are optimistic top priority for our company. that the trend will continue. We continue to capitalize on our Casey’s position as a seller of small, investments in point-of-sale systems by inexpensive items that people are reluctant using the data to make sound decisions to do without helped insulate this category that maximize store proﬁtability. These from the general economic downturn. systems will help analyze everything While we did note some “trading down” from the challenging cigarette sales by consumers switching to cheaper brands 61.4% environment brought on by new taxes and a trend toward buying packs instead 62.3% 62.0% to the constantly changing beverage of cartons in the cigarette category, most of our other items remained constant. The 2009 2008 2007 8 trend toward single-pack, higher-margin migration from carton sales to single-pack cigarette purchases was one of the factors sales in cigarettes, which should also help that lifted margins above the goal for pull margin up and help mitigate the We also continue to use our point-of-sale ﬁscal 2009. impact of tax increases on proﬁts. data to reﬁne preparation patterns to keep Fiscal 2010 Outlook Prepared Food & Fountain possible, thereby protecting quality while the product in the warmers as fresh as A federal excise tax increase that went into eﬀect on April 1, 2009, did slow cigarette unit sales and drive customers from the category. However, we expect the trend from more expensive carton purchases to cheaper, but higher-margin single-pack purchases to continue. We also saw increases in sales of smokeless FY 2009: n Same-Store Sales — up 9.1% n Average Margin — 61.4% FY 2010 Goal: n Same-Store Sales — up 7.5% n Average Margin — 62.0% minimizing waste. Most importantly, our complete control of our prepared foods program has helped us create year-after-year success that has built a brand that stands for high quality and high value. Sub Sandwiches on the Menu tobacco products in 2009 and will adjust Fiscal 2009 was a year of reaﬃrmation our product mix accordingly to meet the of Casey’s strategy of steady investment in In conjunction with our new store customer demand. the Prepared Foods & Fountain category initiative, we began rolling out a made-to- over the past 30 years. Today, prepared order sub sandwich program in September We are anticipating all categories will food generates nearly 29% of the gross 2008. Maintaining the same quality and continue to perform well into ﬁscal year proﬁt for the entire Company. value focus that made pizza and other 2010. The beverage category posted good results in 2009, with beer making exceptional gains and sales of sports High Control, High Quality, High Margin drinks, bottled water and energy drinks prepared oﬀerings so successful has made subs very popular with customers thus far. We continue to review data and perform other analysis to understand what types of remaining strong. Beverage categories Having our own proprietary prepared stores and communities would support a should beneﬁt from the expanded foods program allows greater control over successful sub program. cooler space in our new stores and the quality of our product. Plus, we realize incorporated in remodels where appropriate. an increased margin above the margins We anticipate increased sales of higher restaurants that are often co-branded in achieved by the typical quick-serve margin items, primarily in the beverage convenience stores. category. We also expect a continued Managing Through Commodity Price Changes One of the challenges of a prepared foods operation is managing through commodity price ﬂuctuations. The price 9 of cheese, especially, can signiﬁcantly mix and keep the right amount of food impact Casey’s performance given our in the warmers at the right time of day to substantial output of pizzas. We took maximize sales and minimize waste. price increases over the last two years to oﬀset commodity pressures in the category On the margin side of this category, we but still managed to increase unit sales, will beneﬁt in the ﬁrst two quarters from another testimony to the strength of our our forward buy of cheese that began in prepared foods brand. February. This should help lift the margin through the ﬁrst half of the year. Commodity prices were high in the ﬁrst half of the year and then fell oﬀ with the Gasoline economy in the third quarter. We took advantage of those lower prices to lock in our cheese needs through October 2009 and will continue to evaluate the FY 2009: n Same-Store Sales — up 1.0% n Average Margin — 12.9 cents market and lock in prices further out if per gallon opportunities present themselves. Fiscal 2010 Outlook Over the course of 2010, we anticipate rolling out 200 to 300 additional iced FY 2010 Goal: n Same-Store Sales — up 2.0% n Average Margin — 11.0 cents per gallon coﬀee machines to our stores as well as an The gasoline environment of ﬁscal 2009 additional 200 to 300 10-head fountain was unlike anything our Company has machines. This, along with the continued ever encountered. Typically, gasoline popularity of our prepared food oﬀerings, margins expand during a declining price will drive this category. While we don’t environment and tighten up when prices anticipate signiﬁcant price increases in are rising. In ﬁscal 2009, however, we 2010, we will continue to monitor the saw nearly the opposite. Retail prices competition and will react to competitive responded quickly to upward movements Gross Proﬁt (In Millions) Gasoline 2009 2008 2007 $159.8 $168.9 $124.2 Grocery & Other Merchandise 2009 2008 2007 $339.9 $312.0 $278.7 Prepared Food & Fountain 2009 2008 2007 10 $206.0 price ﬂuctuations as necessary. in wholesale cost, and our margins $188.0 $165.8 actually widened during periods of rising We will also continue to use our point- prices. Conversely, as the energy markets of-sale technology to better understand weakened in the third quarter we saw a customer buying patterns throughout decline in our retail margins. the day. That will help us adjust product The net result was an average gasoline of gasoline. Unfortunately, retail prices believe lower retail prices will be a leading margin that was 2.1 cents per gallon responded very quickly and caused an factor in creating positive same-store higher than our goal. This was likely due uncharacteristic decline in margin during that gallon growth in 2010. Even though gas to credit card fees and other economic falling price environment. We saw margins margins have been unusually favorable the pressures on the industry. Credit card fees return to normal once prices stabilized. last two years, we think the current retail are calculated based on a percentage of price environment is going to yield a more the retail price, and are included in our Same-store gasoline gallons sold were normal annual margin in 2010. operating expenses. When gas prices were adversely aﬀected by the high prices during at record highs, we believe the industry the ﬁrst half of ﬁscal 2009. Fortunately they Despite the volatility and ever-changing covered these high fees with a more began to improve later in the year as retail sales and margin trends, the one thing that rational gasoline pricing strategy. prices came oﬀ their record highs. will not change is our competitive pricing Our monthly average per-gallon retail Fiscal 2010 Outlook price ranged from $1.59 to $3.85 during ﬁscal 2009. In the third quarter, we saw a Gasoline is always the most diﬃcult signiﬁcant decline in the wholesale cost category of our business to forecast. We strategy. Casey’s will not be undersold on gasoline, and our customers will continue to appreciate the value we deliver. 11 Growing According to Plan Even with our new store design getting excellent reviews and generating encouraging numbers so far, it would not be the Casey’s way to leap into a massive new construction program without thorough analysis. There will be more new stores in 2010, but certainly no deviation from our prudent approach to development. Store Development Year End 2009: 1,478 corporate stores 2010 expectation: 4% unit growth, primarily through acquisition through acquisitions. There are several small to mid-sized chains in the Midwest that might be attractive as long as we can pay a reasonable price and the acquisition ﬁts with our long-term strategic plans. We believe the current economic challenges, along with the increased complexity of gasoline and cigarettes, will bring more acquisition opportunities. Like every form of real estate, convenience New Stores on the Horizon stores are naturally concerned with location. In 2010, Casey’s will continue We hope to build 20 to 25 new-design with our philosophy of making sure great stores in 2010. The store designs will be locations also make sense ﬁnancially slightly adjusted, primarily in terms of before we invest in them. exterior look, to ﬁt within neighborhoods Poised for Acquisition Opportunities Again, we will strongly resist any sort and to meet competitive pressures. of “if some is good, more is better” Our strong ﬁnancial position puts Casey’s temptation. As data comes in from our in the enviable position of being ready to existing new-design store, we will become 52 move quickly when the right acquisition smarter at thoroughly evaluating the opportunities arise. We expect the majority potential ROI for each proposed new of our 4% unit growth in 2010 to come store location. # of Stores per State 37 97 94 10 418 370 63 105 284 1,478 1,454 1,448 16 Corporate Stores 2009 2008 2007 Store Growth New Store Constructions 2009 2008 0 2007 8 Acquisitions 2009 2008 2007 16 12 12 Remodeling with Proﬁts in Mind In markets where replacing a store with a new structure does not make business sense, we will seriously consider remodeling to incorporate some of the proﬁt drivers from the new design. Remodeling can be signiﬁcantly more cost-eﬀective than a complete replacement, so smaller communities might present excellent opportunities when the existing location makes remodeling feasible. 13 Maintaining Excellent Fiscal Health A company’s ﬁnancial position is the best indication of its overall health and its ability to capitalize on growth opportunities when they come up. During ﬁscal year 2009, Casey’s met the challenge on both fronts. Corporate Finance conservative, and our low leverage could assist us in raising capital quickly should a Building the Balance Sheet large acquisition opportunity present itself. It’s challenging to grow a business in a Our long-term debt, net of current highly competitive environment while maturities, decreased $13.6 million to simultaneously building ample cash $167.9 million, and the average total debt reserves and paying down debt. to average total capital was approximately 24% and decreasing. Shareholders’ equity This has been accomplished by taking the grew 11.4% to $721 million. long view and always making ﬁnancial considerations part of the planning and decision-making process. This long-term focus of maintaining a responsible balance Beneﬁting from Falling Credit Card and Transportation Costs sheet kept us out of the credit markets in When gasoline prices made their historic ﬁscal 2009 when the ﬁnancial markets climb in ﬁscal 2009, they also increased Operating Expenses Increase 6.2% 2009 2008 2007 15.6% 13.4% Capital Structure (In Millions) were in turmoil. credit card fees and transportation costs (higher fuel prices meant higher costs to $721.0 $647.5 Over the last decade, Casey’s disciplined transport product to our stores). ﬁnancial approach has let us increase our dividend each year while meeting all the However, we also beneﬁted from shrinking challenges the economy has thrown our credit card fees and transportation costs $167.9 way. Going forward, lenders will be more as fuel prices plummeted late in the ﬁscal $181.4 year. For the ﬁscal year overall, credit card Equity 2009 2008 Long-Team Debt 2009 2008 14 Casey’s Named to Forbes.com 100 Most Trustworthy Companies In a year where many instances of corporate ﬁscal irresponsibility contributed directly to economic calamity, Casey’s General Stores, Inc., has been acknowledged by Forbes.com as consistently showing “transparent and conservative accounting practices and solid corporate governance and management.” Forbes.com went on to say the honored companies “do not play games with revenue and expense recognition, or with asset valuation.” Casey’s recognition came after the independent ﬁnancial analytics ﬁrm Audit Integrity studied the corporate ﬁnance practices of more than 8,000 companies traded on U.S. exchanges. The study placed Casey’s in the top 1% of all companies tracked by Audit Integrity. fees ended up with a 4% increase over We expect labor costs to continue along Our plans are to fund our store growth and ﬁscal 2008, after being down 20% moderate trends. The move to add construction activities with existing cash in the fourth quarter. The slowdown in additional assistant managers initiated in and cash ﬂows. That allows us to preserve fee increase is an encouraging sign for ﬁscal 2008 helped improve store manager our borrowing capacity for use if any ﬁscal 2010. retention. Labor costs will also be a key attractive acquisition or other expansion Regarding the rest of our operating the new store design. to say Casey’s is in “acquisition mode,” we factor in analyzing the performance of opportunities come along. While it’s fair costs, we will remain vigilant in our expense control, and use the current climate to scrutinize every line item on our income statement. Fiscal 2010 Outlook High on our priority list will be continuing to measure the overall performance of the new store design. While encouraged by early results, we will continue to closely analyze the execution to ﬁnd opportunities for improvement. remain prudent in our approach, only acting when we view the potential as favorable. Fiscal 2010 - Capital Expenditure Budget Acquisitions & New Store Construction Remodels & Replacements Technology Transportation Total Throughout ﬁscal 2010, we will report $90,000,000 in detail our progress toward our annual $58,000,000 $8,000,000 $9,000,000 $165,000,000 goals detailed in this report, as well as our monthly same-store sales data. We believe transparency is important, and rest assured that in the future we will continue our conservative approach to business that has enabled us to meet the challenge so far. 15 Board of Directors (*member of audit committee) Ronald M. Lamb 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 & CEO of Medicap Pharmacy, Inc. Johnny Danos* Director of Strategic Development, LWBJ, LLP Diane C. Bridgewater* CFO & Treasurer Life Care Services, LLC Jeffrey M. Lamberti* Shareholder in the law ﬁrm of Block, Lamberti and Gocke, P.C. Patricia Clare Sullivan* intends to retire from the Board of Directors at the Annual Shareholder’s Meeting in September, 2009. Sullivan joined the Board in 1996, and served on a variety of committees during her tenure, most recently as Chair of the Nominating & Corporate Governance Committee. She is the retired CEO and President of Mercy Health Center in Des Moines, Iowa. We appreciate her service to the Company and congratulate her on an outstanding career. 16 Richard A. Wilkey* was appointed on December 2, 2008, to ﬁll the vacancy created by the death of John R. Fitzgibbon. Wilkey’s background includes being a management and development consultant for various major companies in the Midwest. He is also a former City Manager of the City of Des Moines, and was previously employed by the Weitz Corporation as Executive Vice President of Administration and Finance and as President of Life Care Services Corporation, a major subsidiary of the Weitz Corporation. Investor Information COMMON STOCK DIVIDENDS INVESTOR INQUIRIES Casey’s General Stores, Inc. common The Company began paying cash Current or prospective Casey’s stock trades on the Nasdaq Global dividends during ﬁscal 1991. The General Stores, Inc. investors can receive Select Market under the symbol CASY. dividends paid in ﬁscal 2009 totaled annual reports, proxy statements, The 50.8 million shares of common stock $0.30 per share. At its June meeting, Forms 10-K and 10-Q, and earnings outstanding at April 30, 2009 had a the Board of Directors increased the announcements at no cost by calling market value of $1.4 billion. As of that quarterly dividend to $0.085 per (515) 965-6107 or sending written same date, there were 2,444 shareholders share. The dividend is payable on requests to the following address: of record. August 17, 2009 to shareholders of record on August 3, 2009. Casey’s General Stores, Inc. COMMON STOCK MARKET PRICES One Convenience Blvd. Calendar 2007 High Low DIVIDEND REINVESTMENT AND Ankeny, Iowa 50021 1st Quarter $ 26.70 $ 23.49 STOCK PURCHASE PLAN 2nd Quarter 29.46 24.84 This plan, introduced in the fall of Corporate information, including 3rd Quarter 29.88 23.02 1998, gives holders of Casey’s General monthly same-store sales data for the 4th Quarter 31.39 27.00 Stores, Inc. common stock a convenient Company’s three business categories, is and economical way of purchasing also available at www.caseys.com. Quarterly Calendar 2008 High Low additional shares at market prices by conference calls are broadcast live over 1st Quarter $ 29.65 $ 21.69 reinvesting their dividends in full or the Internet via the Investor Relations Web 2nd Quarter 26.30 19.97 in part. Stockholders may also take page and made available in archived 3rd Quarter 30.48 21.80 advantage of the cash payment option format. Broadcast times for the quarterly 4th Quarter 31.11 20.63 to purchase additional shares. Those calls will be announced on the Web page wishing to enroll should contact the and in corresponding press releases. Calendar 2009 High Low transfer agent and registrar: 1st Quarter $ 28.06 $ 18.32 ANNUAL MEETING 2nd Quarter 28.22 24.31 Computershare Trust Company, N.A. All shareholders and prospective 250 Royall Street investors are cordially invited to attend On July 7, 2009, the last reported Canton, MA 02021 the annual meeting at 9:00 a.m., sales price of the Company’s common Telephone 781-575-2000 September 18, 2009, at the corporate stock was $24.86 per share. On that same www.computershare.com headquarters in Ankeny, Iowa. date, the market cap was $1.3 billion. 17 FORM 10-K TABLE OF CONTENTS PART I ITEM 1. Business ...............................................................................................................................................................................3 ITEM 1A. Risk Factors .........................................................................................................................................................................8 ITEM 1B. Unresolved Staff Comments .............................................................................................................................................14 ITEM 2. Properties ..........................................................................................................................................................................14 ITEM 3. Legal Proceedings .............................................................................................................................................................14 ITEM 4. Submission of Matters to a Vote of Security Holders .......................................................................................................14 PART II ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities .......14 ITEM 6. Selected Financial Data .....................................................................................................................................................16 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .............................................17 ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk ...........................................................................................25 ITEM 8. Financial Statements and Supplementary Data ................................................................................................................26 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...........................................49 ITEM 9A. Controls and Procedures...................................................................................................................................................50 ITEM 9B. Other Information .............................................................................................................................................................50 PART III ITEM 10. Directors, Executive Ofﬁcers and Corporate Governance ...............................................................................................51 ITEM 11. Executive Compensation ..................................................................................................................................................51 ITEM 12. Security Ownership of Certain Beneﬁcial Owners and Management and Related Stockholder Matters ........................51 ITEM 13. Certain Relationships and Related Transactions and Director Independence ..................................................................51 ITEM 14. Principal Accountant Fees and Services ...........................................................................................................................51 PART IV ITEM 15. Exhibits and Financial Statement Schedules .....................................................................................................................52 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, 2009 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 42-0935283 (I.R.S. Employer incorporation or organization) 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 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such ﬁles). Yes [ ] No [ ] 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 incorporated 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, a non-accelerated ﬁler, or a smaller reporting company. Large accelerated ﬁler [X] Accelerated ﬁler [ ] Non-accelerated ﬁler [ ] Smaller reporting company [ ] Indicate by check mark whether the registrant is a shell company (as deﬁned in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] As of October 31, 2008, the aggregate market value of the registrant’s common stock held by non-afﬁliates of the registrant was approximately $1,460,633,086, based on the closing sales price ($30.20 per share) as quoted on the NASDAQ Global Select Market. 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 19, 2009 Common Stock, no par value per share 50,858,912 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 18, 2009 (Item 5 of Part II and Items 10, 11, 12, 13, and 15 of Part III). 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”, “HandiMart” and “Just Diesel” in nine Midwestern 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, 2009, there were a total of 1,478 Casey’s General Stores in operation. There were 16 stores newly constructed and 16 acquired stores opened in ﬁscal 2009. There were also 8 stores closed in ﬁscal 2009. 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 our stores. Approximately 61% of all our stores are located in areas with populations of fewer than 5,000 persons, while approximately 13% of our 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 a fourth subsidiary, CGS Sales Corp., was incorporated in 2008 and both also operate from these facilities. The Company’s Internet address is www.caseys.com. Each year we make available through our website 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 website 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 We seek to meet the needs of residents of smaller 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 smaller towns by offering, at competitive prices, a broader selection of products than does a typical convenience store. We have also succeeded in meeting the needs of residents in larger communities with these offerings. The Company derives its revenue primarily from the retail sale of gasoline and the products offered in our stores. 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. 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 CGS Sales Corp. was organized as an Iowa Corporation in 2008, and both are also wholly-owned subsidiaries of Casey’s. Casey’s Retail Company operates stores in Illinois, Kansas, Minnesota, Nebraska, and South Dakota; it also holds the rights to the Casey’s trademark and trade name. The Marketing Company owns and has responsibility for the operation of 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 stores. CGS Sales Corp. operates a store in Onawa, Iowa. Store Operations Products Offered Each Casey’s General Store typically carries over 3,000 food and nonfood items. Many of the products offered are those generally found in a supermarket. The 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. 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 have added various prepared food items to our product line over the years, facilitated by the installation of snack centers, which now are in most 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, 2009, the Company was selling donuts prepared on store premises in approximately 96% of our stores in addition to cookies, brownies, and Danish rolls. The Company installs donut-making facilities in all newly constructed stores. We began marketing made-from-scratch pizza in 1984, and it is now available in 1,384 stores (94%) as of April 30, 2009. 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, breakfast croissants and biscuits, breakfast pizza, hash browns, quarter-pound hamburgers and cheeseburgers, 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 27% of our total revenue, but they have resulted in approximately 75% of our gross proﬁts. Gross proﬁt margins on prepared food items averaged approximately 62% during the same thirty-six months—substantially higher than the gross proﬁt margin on retail sales of gasoline, which averaged approximately 5%. 4 Store Design Casey’s General Stores are freestanding and, with a few exceptions to accommodate local conditions, conform to standard construction speciﬁcations. The new store design measures 39 feet by 92 feet with approximately 2,300 square feet devoted to sales area, 500 square feet to kitchen space, 400 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 new store typically includes 4 to 8 islands of gasoline dispensers and storage tanks with capacity for 30,000 to 50,000 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 which displays 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 install electronic games or sell adult magazines on store premises. Store Locations The Company traditionally has located its stores in smaller 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. Gasoline Operations Gasoline sales are an important part of our revenue and earnings. Approximately 71% of Casey’s total revenue for the year ended April 30, 2009 was derived from the retail sale of gasoline. The following table summarizes gasoline sales for the three ﬁscal years ended April 30, 2009: Year ended April 30, Number of gallons sold Total retail gasoline sales Percentage of total revenue Gross proﬁt percentage (excluding credit card fees) Average retail price per gallon $ 2.68 $ Average gross proﬁt margin per gallon (excluding credit card fees) Average number of gallons sold per store* 12.87¢ 859,114 *Includes only those stores in operation at least one full year on April 30, of the ﬁscal year indicated. 2009 2008 2007 1,241,502,396 1,214,932,101 1,193,936,979 $ 3,321,548,694 $ 3,559,244,599 $ 2,881,991,316 70.9% 4.8% 73.7% 4.7% 2.93 13.90¢ 835,948 $ 71.6% 4.3% 2.41 10.40¢ 821,057 Retail prices of gasoline decreased during the year ended April 30, 2009. The total number of gallons we sold during this period increased, primarily because of the higher number of 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. 5 Distribution and Wholesale Arrangements The Marketing Company supplies all 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. All of our existing and most of our proposed stores are within the Distribution Center’s optimum efﬁciency range—a radius of approximately 500 miles. In ﬁscal 2009, 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 enter into long-term supply contracts 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. Franchise Operations In the early days of Casey’s existence, the Company offered private investors the opportunity to establish franchised Casey’s stores as a way to expand the Casey’s system at a rapid pace. The franchise owner (“franchisee”) was authorized to construct a Casey’s General Store according to the Company’s plans and speciﬁcations and to operate the store in accordance with the Company’s franchise agreement. Although each franchise store displayed the name and trademark of Casey’s, it was independently owned and operated by the franchisee. The largest number of stores owned by any one franchisee was thirteen. The ﬁrst franchised Casey’s store opened on July 1, 1970 in Waukee, Iowa. In the ensuing years, the increase in franchise stores almost equaled the growth of company stores. As of April 30, 1985, the Casey’s chain of 482 stores included 232 franchise stores. The Company discontinued active franchising in the mid-1980’s, though a few new franchise stores were built after 1990. However, the total number of franchise stores began to decline in the late 1980’s, as some franchisees took advantage of opportunities to sell or lease their stores to the Company. By January 1, 2000, there were 145 remaining franchise stores, compared to 1,084 company stores. The Company then began buying existing convenience stores as a primary means of growth, and purchased many of its franchisees’ stores during the early 2000s. A few franchise stores were sold to other owners or operated independently after their franchise agreements expired. By November 30, 2007, only 15 franchise stores remained. The last remaining franchise store, in Prophetstown, Illinois, closed on December 31, 2008, thus closing an important chapter in the history of Casey’s growth to 1,478 stores at April 30, 2009. Personnel On April 30, 2009, we had 7,740 full-time employees and 11,040 part-time employees. We have not experienced any work stoppages. There are no collective bargaining agreements between the Company and any of its employees. 6 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 smaller 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 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. 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 stores have been equipped with noncorroding ﬁberglass USTs, including some with double-wall construction, overﬁll protection, and electronic tank monitoring. We currently have 3,235 USTs, 2,724 of which are ﬁberglass and 511 are steel, and we 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 the years ended April 30, 2009 and 2008, we spent approximately $1,128,000 and $1,133,000, respectively, for assessments and remediation. Substantially all of these expenditures were submitted for reimbursement from state-sponsored trust fund programs. As of April 30, 2009, approximately $12,087,000 has been received from such programs since inception. The payments are typically subject to statutory provisions requiring repayment of the reimbursed funds for noncompliance with upgrade provisions or other applicable laws. No amounts are currently expected to be repaid. At April 30, 2009, we had an accrued liability of approximately $250,000 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. 7 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. Risks Related to Our Industry The convenience store industry is highly competitive. 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. The volatility of wholesale petroleum costs could adversely affect our operating results. Over the past three ﬁscal years, our gasoline revenues accounted for approximately 72% 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 a 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. 8 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 13% of total gross proﬁt for the same period. Signiﬁcant increases in wholesale cigarette costs or tax increases on tobacco products may have an adverse effect on unit demand for cigarettes domestically. Currently, major cigarette manufacturers offer rebates to retailers. We include these rebates as a component of our gross margin from sales of cigarettes. In the event these rebates are no longer offered or decreased, our wholesale cigarette costs will increase accordingly. 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. Future legislation and campaigns to discourage smoking may have a material adverse effect on our revenues and gross proﬁt. Future legislation and national, state and local campaigns to discourage smoking could have a substantial impact on our business, as consumers adjust their behaviors in response to such legislation and campaigns. Reduced demand for cigarettes could have a material adverse effect on sales of, and margins for, the cigarettes we sell. Future consumer or other litigation could adversely affect our ﬁnancial condition and results of operations. Our retail operations are characterized by a high volume of customer trafﬁc and by transactions involving a wide array of product selections. These operations carry a higher exposure to consumer litigation risk when compared to the operations of companies operating in many other industries. Consequently, we may become a party to individual personal injury, bad fuel, products liability and other legal actions in the ordinary course of our business. While these actions are generally routine in nature, incidental to the operation of our business and immaterial in scope, if our assessment of any action or actions should prove inaccurate, our ﬁnancial condition and results of operations could be adversely affected. Additionally, we are occasionally exposed to industry-wide or class-action claims arising from the products we carry or industry-speciﬁc business practices. For example, various petroleum marketing retailers, distributors and reﬁners are currently defending class-action claims alleging that the sale of unadjusted volumes of fuel at temperatures in excess of 60 degrees Fahrenheit violates various state consumer protection laws due to the expansion of the fuel with the increase of fuel temperatures. Certain claims asserted in these lawsuits, if resolved against us, could give rise to substantial damages. Our defense costs and any resulting damage awards or settlement amounts may not be fully covered by our insurance policies. Thus, an unfavorable outcome or settlement of one or more of these lawsuits could have a material adverse effect on our ﬁnancial position, liquidity and results of operations in a particular period or periods. General economic conditions that are largely out of the Company’s control may adversely affect the Company’s ﬁnancial condition and results of operations. Recessionary economic cycles, higher interest rates, higher fuel and other energy costs, inﬂation, increases in commodity prices, higher levels of unemployment, higher consumer debt levels, higher tax rates and other changes in tax laws or other economic factors that may affect consumer spending or buying habits could adversely affect the demand for products the Company sells in its stores. In addition, the recent turmoil in the ﬁnancial markets may have an adverse effect on the U.S. and world economy, which could negatively impact consumer spending patterns. There can be no assurances that government responses to the disruptions in the ﬁnancial markets will restore consumer conﬁdence. 9 Risks Related to Our Business Unfavorable weather conditions could adversely affect 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, ﬂooding, 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, 2008 through April 30, 2009 we acquired 16 convenience stores. 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. These risks include: (cid:202) (cid:202) (cid:202) (cid:202) (cid:202) (cid:202) (cid:202) (cid:202) (cid:202) (cid:202) (cid:85)(cid:202) (cid:47)(cid:133)(cid:105)(cid:202)(cid:136)(cid:152)(cid:62)(cid:76)(cid:136)(cid:143)(cid:136)(cid:204)(cid:222)(cid:202)(cid:204)(cid:156)(cid:202)(cid:136)(cid:96)(cid:105)(cid:152)(cid:204)(cid:136)(cid:118)(cid:222)(cid:202)(cid:62)(cid:152)(cid:96)(cid:202)(cid:62)(cid:86)(cid:181)(cid:213)(cid:136)(cid:192)(cid:105)(cid:202)(cid:195)(cid:213)(cid:136)(cid:204)(cid:62)(cid:76)(cid:143)(cid:105)(cid:202)(cid:195)(cid:136)(cid:204)(cid:105)(cid:195)(cid:202)(cid:62)(cid:204)(cid:202)(cid:62)(cid:96)(cid:219)(cid:62)(cid:152)(cid:204)(cid:62)(cid:125)(cid:105)(cid:156)(cid:213)(cid:195)(cid:202)(cid:171)(cid:192)(cid:136)(cid:86)(cid:105)(cid:195)(cid:198) (cid:85)(cid:202) (cid:10)(cid:156)(cid:147)(cid:171)(cid:105)(cid:204)(cid:136)(cid:204)(cid:136)(cid:156)(cid:152)(cid:202)(cid:136)(cid:152)(cid:202)(cid:204)(cid:62)(cid:192)(cid:125)(cid:105)(cid:204)(cid:105)(cid:96)(cid:202)(cid:147)(cid:62)(cid:192)(cid:142)(cid:105)(cid:204)(cid:202)(cid:62)(cid:192)(cid:105)(cid:62)(cid:195)(cid:198) (cid:85)(cid:202) (cid:12)(cid:136)(cid:118)(cid:119)(cid:86)(cid:213)(cid:143)(cid:204)(cid:136)(cid:105)(cid:195)(cid:202)(cid:96)(cid:213)(cid:192)(cid:136)(cid:152)(cid:125)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:62)(cid:86)(cid:181)(cid:213)(cid:136)(cid:195)(cid:136)(cid:204)(cid:136)(cid:156)(cid:152)(cid:202)(cid:171)(cid:192)(cid:156)(cid:86)(cid:105)(cid:195)(cid:195)(cid:202)(cid:136)(cid:152)(cid:202)(cid:96)(cid:136)(cid:195)(cid:86)(cid:156)(cid:219)(cid:105)(cid:192)(cid:136)(cid:152)(cid:125)(cid:202)(cid:195)(cid:156)(cid:147)(cid:105)(cid:202)(cid:156)(cid:118)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:143)(cid:136)(cid:62)(cid:76)(cid:136)(cid:143)(cid:136)(cid:204)(cid:136)(cid:105)(cid:195)(cid:202)(cid:156)(cid:118)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:76)(cid:213)(cid:195)(cid:136)(cid:152)(cid:105)(cid:195)(cid:195)(cid:105)(cid:195)(cid:202)(cid:204)(cid:133)(cid:62)(cid:204)(cid:202)(cid:220)(cid:105)(cid:202)(cid:62)(cid:86)(cid:181)(cid:213)(cid:136)(cid:192)(cid:105)(cid:198) (cid:85)(cid:202) 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to support our future growth; (cid:85)(cid:202) (cid:12)(cid:136)(cid:118)(cid:119)(cid:86)(cid:213)(cid:143)(cid:204)(cid:136)(cid:105)(cid:195)(cid:202)(cid:220)(cid:136)(cid:204)(cid:133)(cid:202)(cid:133)(cid:136)(cid:192)(cid:136)(cid:152)(cid:125)(cid:93)(cid:202)(cid:204)(cid:192)(cid:62)(cid:136)(cid:152)(cid:136)(cid:152)(cid:125)(cid:202)(cid:62)(cid:152)(cid:96)(cid:202)(cid:192)(cid:105)(cid:204)(cid:62)(cid:136)(cid:152)(cid:136)(cid:152)(cid:125)(cid:202)(cid:195)(cid:142)(cid:136)(cid:143)(cid:143)(cid:105)(cid:96)(cid:202)(cid:171)(cid:105)(cid:192)(cid:195)(cid:156)(cid:152)(cid:152)(cid:105)(cid:143)(cid:93)(cid:202)(cid:136)(cid:152)(cid:86)(cid:143)(cid:213)(cid:96)(cid:136)(cid:152)(cid:125)(cid:202)(cid:195)(cid:204)(cid:156)(cid:192)(cid:105)(cid:202)(cid:147)(cid:62)(cid:152)(cid:62)(cid:125)(cid:105)(cid:192)(cid:195)(cid:198) (cid:85)(cid:202) 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acquisitions; and (cid:85)(cid:202) (cid:10)(cid:133)(cid:62)(cid:143)(cid:143)(cid:105)(cid:152)(cid:125)(cid:105)(cid:195)(cid:202)(cid:62)(cid:195)(cid:195)(cid:156)(cid:86)(cid:136)(cid:62)(cid:204)(cid:105)(cid:96)(cid:202)(cid:220)(cid:136)(cid:204)(cid:133)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:86)(cid:156)(cid:152)(cid:195)(cid:213)(cid:147)(cid:147)(cid:62)(cid:204)(cid:136)(cid:156)(cid:152)(cid:202)(cid:62)(cid:152)(cid:96)(cid:202)(cid:136)(cid:152)(cid:204)(cid:105)(cid:125)(cid:192)(cid:62)(cid:204)(cid:136)(cid:156)(cid:152)(cid:202)(cid:156)(cid:118)(cid:202)(cid:62)(cid:152)(cid:222)(cid:202)(cid:118)(cid:213)(cid:204)(cid:213)(cid:192)(cid:105)(cid:202)(cid:62)(cid:86)(cid:181)(cid:213)(cid:136)(cid:195)(cid:136)(cid:204)(cid:136)(cid:156)(cid:152)(cid:176) 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. 10 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 alcohol, 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. State or federal lawmakers or regulators may also enact new laws or regulations applicable to us that may have a material adverse and potentially disparate impact on our business. The dangers inherent in the storage and transport of motor fuel could cause disruptions and could expose to us potentially signiﬁcant losses, costs or liabilities. We store motor fuel in storage tanks at our retail locations. Additionally, we transport a signiﬁcant portion of our motor fuel in our own trucks, instead of by third-party carriers. Our operations are subject to signiﬁcant hazards and risks inherent in transporting and storing motor fuel. These hazards and risks include, but are not limited to, ﬁres, explosions, trafﬁc accidents, spills, discharges and other releases, any of which could result in distribution difﬁculties and disruptions, environmental pollution, governmentally-imposed ﬁnes or clean-up obligations, personal injury or wrongful death claims and other damage to our properties and the properties of others. As a result, any such event could have a material adverse effect on our business, ﬁnancial condition and results of operations. We may incur costs or liabilities as a result of litigation or adverse publicity resulting from concerns over food quality, health or other issues that could cause customers to avoid our convenience stores. We may be the subject of complaints or litigation arising from food-related illness or injury in general which could have a negative impact on our business. Additionally, negative publicity, regardless of whether the allegations are valid, concerning food quality, food safety or other health concerns, employee relations or other matters related to our operations may materially adversely affect demand for our food and could result in a decrease in customer trafﬁc to our convenience stores. 11 It is critical to our reputation that we maintain a consistent level of high quality at our convenience stores. Health concerns, poor food quality or operating issues stemming from one store or a limited number of stores could materially adversely affect the operating results of some or all of our stores. Because we depend on our senior management’s experience and knowledge of our industry, we could be adversely affected were we to lose key members of our senior management team. We are dependent on the continued efforts of our senior management team. If, for any reason, our senior executives do not continue to be active in management, our business, ﬁnancial condition or results of operations could be adversely affected. We also rely on our ability to recruit qualiﬁed store managers, supervisors, district managers, regional managers and other store personnel. Failure to continue to attract these individuals at reasonable compensation levels could have a material adverse effect on our business and results of operations. We rely on our information technology systems to manage numerous aspects of our business, and a disruption of these systems could adversely affect our business. We depend on our information technology (IT) systems to manage numerous aspects of our business transactions and provide analytical information to management. Our IT systems are an essential component of our business and growth strategies, and a serious disruption to our IT systems could signiﬁcantly limit our ability to manage and operate our business efﬁciently. These systems are vulnerable to, among other things, damage and interruption from power loss or natural disasters, computer system and network failures, loss of telecommunications services, physical and electronic loss of data, security breaches and computer viruses. Any disruption could cause our business and competitive position to suffer and cause our operation results to be reduced. Also, our business continuity plan could fail. 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 shareholders. 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. 12 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: (cid:202) (cid:202) (cid:202) (cid:202) (cid:202) (cid:202) (cid:202) (cid:85)(cid:202) (cid:1)(cid:202)(cid:96)(cid:105)(cid:219)(cid:136)(cid:62)(cid:204)(cid:136)(cid:156)(cid:152)(cid:202)(cid:136)(cid:152)(cid:202)(cid:156)(cid:213)(cid:192)(cid:202)(cid:192)(cid:105)(cid:195)(cid:213)(cid:143)(cid:204)(cid:195)(cid:202)(cid:118)(cid:192)(cid:156)(cid:147)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:105)(cid:221)(cid:171)(cid:105)(cid:86)(cid:204)(cid:62)(cid:204)(cid:136)(cid:156)(cid:152)(cid:195)(cid:202)(cid:156)(cid:118)(cid:202)(cid:171)(cid:213)(cid:76)(cid:143)(cid:136)(cid:86)(cid:202)(cid:147)(cid:62)(cid:192)(cid:142)(cid:105)(cid:204)(cid:202)(cid:62)(cid:152)(cid:62)(cid:143)(cid:222)(cid:195)(cid:204)(cid:195)(cid:202)(cid:62)(cid:152)(cid:96)(cid:202)(cid:136)(cid:152)(cid:219)(cid:105)(cid:195)(cid:204)(cid:156)(cid:192)(cid:195)(cid:198) 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(cid:34)(cid:204)(cid:133)(cid:105)(cid:192)(cid:202)(cid:125)(cid:105)(cid:152)(cid:105)(cid:192)(cid:62)(cid:143)(cid:202)(cid:105)(cid:86)(cid:156)(cid:152)(cid:156)(cid:147)(cid:136)(cid:86)(cid:93)(cid:202)(cid:171)(cid:156)(cid:143)(cid:136)(cid:204)(cid:136)(cid:86)(cid:62)(cid:143)(cid:93)(cid:202)(cid:156)(cid:192)(cid:202)(cid:147)(cid:62)(cid:192)(cid:142)(cid:105)(cid:204)(cid:202)(cid:86)(cid:156)(cid:152)(cid:96)(cid:136)(cid:204)(cid:136)(cid:156)(cid:152)(cid:195)(cid:93)(cid:202)(cid:147)(cid:62)(cid:152)(cid:222)(cid:202)(cid:156)(cid:118)(cid:202)(cid:220)(cid:133)(cid:136)(cid:86)(cid:133)(cid:202)(cid:62)(cid:192)(cid:105)(cid:202)(cid:76)(cid:105)(cid:222)(cid:156)(cid:152)(cid:96)(cid:202)(cid:156)(cid:213)(cid:192)(cid:202)(cid:86)(cid:156)(cid:152)(cid:204)(cid:192)(cid:156)(cid:143)(cid:176) 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 retail 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 shareholder 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 shareholders. 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 shareholder for a period of three years after the date of the transaction in which the person became an interested shareholder 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 shareholders. These measures may be adopted without any further vote or action by our shareholders. 13 ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable. ITEM 2. PROPERTIES We own our corporate headquarters and distribution center. Located on an approximately 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. In ﬁscal 2007, we 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, 2009, we also owned the land at 1,433 store locations and the buildings at 1,442 locations and leased the land at 45 locations and the buildings at 36 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 information required to be set forth under this heading is incorporated by reference from Note 9, Contingencies, to the Consolidated Financial Statements included in Part II, Item 8. 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 50,842,712 shares of common stock outstanding at April 30, 2009 had a market value of $1.4 billion, and there were 2,329 shareholders of record. 14 Common Stock Market Prices High $ 26.70 29.46 29.88 31.39 Calendar Low 2008 $ 23.49 24.84 23.02 27.00 Q1 Q2 Q3 Q4 High $ 29.65 26.30 30.48 31.11 Low $ 21.69 19.97 21.80 20.63 Calendar 2009 Q1 High $ 28.06 Low $ 18.32 Calendar 2007 Q1 Q2 Q3 Q4 Dividends We began paying cash dividends during ﬁscal 1991.The dividends paid in ﬁscal 2009 totaled $0.30 per share. The dividends paid in ﬁscal 2008 totaled $0.26 per share. On June 10, 2009, the Board of Directors declared a quarterly dividend of $0.085 payable August 17, 2009 to shareholders of record on August 3, 2009. The Board expects to review the dividend every year at its June meeting. The cash dividends declared during the calendar years 2007-09 were as follows: Calendar 2007 Q1 Q2 Q3 Q4 Cash dividend Calendar Cash dividend Calendar Cash dividend declared $ 0.05 0.065 0.065 0.065 $ 0.245 2008 Q1 Q2 Q3 Q4 declared $ 0.065 0.075 0.075 0.075 $ 0.29 2009 Q1 Q2 declared $ 0.075 0.085 15 ITEM 6. SELECTED FINANCIAL DATA (In thousands, except per share amounts) Statement of Earnings Data Years ended April 30, Total revenue Cost of goods sold Gross proﬁt Operating expenses Depreciation and amortization Interest, net 2009 2008 2007 2006 2005 $ 4,687,895 $ 4,828,793 $ 4,025,435 $ 3,493,914 $ 2,788,816 3,964,513 4,142,552 3,441,964 2,967,491 2,331,828 723,382 504,181 69,406 10,626 686,241 474,794 67,651 9,792 583,471 410,673 526,423 362,070 456,988 327,227 63,944 11,184 97,670 34,175 63,495 1,604 -------- 56,947 8,896 98,510 35,330 63,180 1,629 1,083 51,734 10,739 67,288 24,875 42,413 5,660 -------- Earnings from continuing operations before income taxes 139,169 134,004 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 53,425 85,744 54 -------- 49,031 84,973 82 -------- Net earnings Basic $ 85,690 $ 84,891 $ 61,891 $ 60,468 $ 36,753 Earnings from continuing operations $ 1.69 $ 1.68 $ 1.26 $ 1.25 $ 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 $ $ -------- -------- -------- -------- .03 -------- .03 .02 1.69 $ 1.68 $ 1.23 $ 1.20 $ 1.68 $ 1.67 $ 1.25 $ 1.24 $ -------- -------- -------- -------- .03 -------- .03 .02 Net earnings $ 1.68 $ 1.67 $ 1.22 $ 1.19 $ .84 .11 -------- .73 .84 .11 -------- .73 Weighted average number of common shares outstanding—basic Weighted average number of common shares outstanding—diluted Dividends paid per common share Balance Sheet Data As of April 30, Current assets Total assets Current liabilities Long-term debt, net of current maturities Shareholders’ equity 16 50,787 50,681 50,468 50,310 50,115 50,917 50,859 50,668 50,610 50,284 $ 0.30 $ 0.26 $ 0.20 $ 0.18 $ 0.195 2009 2008 2007 2006 2005 $ 284,727 $ 313,256 $ 240,619 $ 192,766 $ 143,140 1,262,695 1,219,200 1,129,271 221,243 167,887 721,030 259,099 181,443 647,472 234,267 199,504 572,264 988,899 245,056 106,512 523,190 871,619 170,837 123,064 469,137 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 The Company operates convenience stores under the name “Casey’s General Store”, “HandiMart” and “Just Diesel” in nine Midwestern states, primarily Iowa, Missouri and Illinois. On April 30, 2009, there were a total of 1,478 stores in operation. All stores offer gasoline for sale on a self-serve basis and 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 non-food items. We derive our revenue from the retail sale of gasoline and the products offered in our 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. We operate a central warehouse, the Casey’s Distribution Center, adjacent to our Corporate Headquarters facility in Ankeny, Iowa, through which we supply grocery and general merchandise items to our stores. At April 30, 2009, the Company owned the land at 1,433 store locations and the buildings at 1,442 locations, and leased the land at 45 locations and the buildings at 36 locations. During the fourth quarter of ﬁscal 2009, the Company earned $0.31 in earnings per share from continuing operations compared to $0.28 per share for the same quarter a year ago. Fiscal 2009 basic earnings per share was $1.69 versus $1.68 for the prior year. The Company’s business is seasonal, and generally the Company experiences higher sales and proﬁtability during the ﬁrst and second ﬁscal quarters (May-October), when customers tend to purchase greater quantities of gasoline and certain convenience items such as beer and soft drinks. During the 2009 ﬁscal year, we acquired 16 convenience stores from other parties and completed 16 new store constructions. The fourth quarter results reﬂected a 1.2% increase in same-store gasoline gallons sold, with an average margin of approximately 12.1 cents per gallon. For the ﬁscal year, same-store gallons were up 1% with an average margin of 12.9 cents per gallon. The Company’s policy is to price to the competition, so the timing of retail price changes is driven by local competitive conditions. Same store sales of grocery and other merchandise and prepared foods and fountain also showed gains during the fourth quarter. Operating expenses increased in the fourth quarter due to a $9,100 pre-tax charge related to the previously disclosed settlement of two wage and hour lawsuits. The weakening U.S. economy and increased unemployment have generally had an adverse impact on consumer disposable income in the Midwest. These conditions have not lowered the over-all demand for gasoline and the merchandise sold in stores, but management expects to continue facing a challenging operating environment in the coming months. For further information concerning the Company’s operating environment and certain of the conditions that may affect future performance, see the “Forward-looking Statements” at the end of this Item 7. 17 Fiscal 2009 Compared with Fiscal 2008 Total revenue for ﬁscal 2009 decreased 2.9% to $4,687,895, primarily due to an 8.7% decrease in gas prices. That result was partially offset by an increase in the number of gallons sold and an increase in same-store inside sales (grocery & other merchandise and prepared food & fountain). Retail gasoline sales for the ﬁscal year were $3,321,549, a decrease of 6.7%, and gallons sold increased 2.2% to 1,241,502. Inside sales increased 8.1% to $1,345,605. Cost of goods sold as a percentage of total revenue was 84.6% for ﬁscal 2009 compared with 85.8% for the prior year. The gas margin increased to 4.8% in ﬁscal 2009 from 4.7% in ﬁscal 2008. The grocery & other merchandise margin increased to 33.7% in ﬁscal 2009 from 33.1% in ﬁscal 2008 due to the continued popularity of high-margin beverages and gains in the cigarette category. The prepared food & fountain margin decreased to 61.4% from 62.3% primarily due to the higher cost of cheese during ﬁscal 2009. Operating expenses increased 6.2% in ﬁscal 2009 primarily due to a $9,100 pre-tax charge related to the previously disclosed settlement of two wage and hour lawsuits and impairment charges of $2,553 related to the ﬁve stores damaged by the signiﬁcant ﬂooding in the upper Midwest in June 2008. Without the effect of the lawsuit settlements and ﬂood damages, operating expenses would have increased only 3.7%. Lower gasoline prices resulted in lower sales, which increased the operating expense ratio to 10.8% of total revenue in ﬁscal 2009 from 9.8% in the prior year. Lower gasoline prices also helped reduce our transportation costs and credit card fees during the second half of the year. Depreciation and amortization expense increased 2.6% to $69,406 in ﬁscal 2009 from $67,651 in ﬁscal 2008. The increase was due to capital expenditures made in ﬁscal 2009. The effective tax rate increased 1.8% to 38.4% in ﬁscal 2009 from 36.6% in ﬁscal 2008. The increase in the effective tax rate was primarily due to the increase to the deferred tax liability to reﬂect a correction to accumulated tax over book depreciation. Net earnings from continuing operations increased to $85,744 in ﬁscal 2009 from $84,973 in ﬁscal 2008. The slight increase was due primarily to an increase in same-store sales from the prior year, and an increase in the average margin on grocery & other merchandise sales. Fiscal 2009 discontinued operations resulted in a loss of $54 (net of $35 income tax beneﬁt) compared with a loss of $82 (net of $52 income tax beneﬁt) in ﬁscal 2008. Discontinued stores had total revenues of $2,630 and $14,466 and pretax operating losses of $96 and $223 for ﬁscal 2009 and 2008, respectively. Included were gains on disposal of $7 (net of $3 income tax expense) and $89 (net of $35 income tax expense) for the years ended April 30, 2009 and 2008, respectively. The gains on disposal for the years ended April 30, 2009 and 2008 resulted from the sale of stores previously impaired. Fiscal 2008 Compared with Fiscal 2007 Total revenue for ﬁscal 2008 increased 20% to $4,828,793, primarily due to a 21.4% increase in gas prices, an increase in the number of gallons sold, and an increase in same-store sales. Retail gasoline sales for the ﬁscal year were $3,559,245, an increase of 23.5%, and gallons sold increased 1.8% to 1,214,932. Inside sales increased 11.1% to $1,244,820. Cost of goods sold as a percentage of total revenue was 85.8% for ﬁscal 2008 compared with 85.5% for the prior year. The gas margin increased to 4.7% in ﬁscal 2008 from 4.3% in ﬁscal 2007. The grocery & other merchandise margin increased to 33.1% in ﬁscal 2008 from 32.7% in ﬁscal 2007 due to the growing popularity of high-margin beverages. In the prior year, the State of Iowa substantially increased the excise tax on cigarettes without implementing an inventory ﬂoor tax resulting in a one-time beneﬁt of $4,800. Without the one time beneﬁt, the margin would have been 32.1%. The prepared food & fountain margin increased to 62.3% from 62%. 18 Operating expenses increased 15.6% in ﬁscal 2008, driven by an increase in bank fees resulting from customers’ greater use of credit cards and higher retail gasoline prices, higher wages, and additional insurance claims. Higher gasoline prices decreased the operating expense ratio to 9.8% of total revenue in ﬁscal 2008 from 10.2% in the prior year. Depreciation and amortization expense increased 5.8% to $67,651 in ﬁscal 2008 from $63,944 in ﬁscal 2007. The increase was due to capital expenditures made in ﬁscal 2008. The effective tax rate increased 1.6% to 36.6% in ﬁscal 2008 from 35% in ﬁscal 2007. The increase in the effective tax rate was primarily due to the increase in the Financial Accounting Standards Board Interpretation No. 48 (FIN 48) tax contingencies and the stability in the applicable rate of the total net deferred tax liabilities. This increase was partially offset by the increase in federal tax credits. Net earnings from continuing operations increased to $84,973 in ﬁscal 2008 from $63,495 in ﬁscal 2007. The increase was due primarily to the increase in the gross proﬁt margin per gallon of gasoline sold, an increase in same-store sales from the prior year, and slight increases in the average margin on grocery & other merchandise sales and prepared food & fountain sales. Fiscal 2008 discontinued operations resulted in a loss of $82 (net of $52 income tax beneﬁt) compared with a loss of $1,604 (net of $1,025 income tax beneﬁt) in ﬁscal 2007. Discontinued stores had total revenues of $14,466 and $21,627 and pretax operating losses of $223 and $611 for ﬁscal 2008 and 2007, respectively. Included was a gain on disposal of $89 (net of $35 income tax expense) for the year ended April 30, 2008 and a loss on disposal of $2,018 (net of $787 income tax beneﬁt) for the year ended April 30, 2007. The gain and loss on disposal for the years ended April 30, 2008 and 2007 included write-downs of stores to net realizable value, as well as gains and losses on sales of stores. COMPANY TOTAL REVENUE AND GROSS PROFITS Years ended April 30, Total revenue Gasoline Grocery & other merchandise Prepared food & fountain Other Gross proﬁts (1) Gasoline Grocery & other merchandise Prepared food & fountain Other INDIVIDUAL STORE COMPARISONS (2) Years ended April 30, Average retail sales Average retail inside sales Average gross proﬁt on inside items Average retail sales of gasoline Average gross proﬁt on gasoline (3) Average operating income (4) Average number of gallons sold 2009 2008 2007 $ 3,321,549 $ 3,559,245 $ 2,881,991 1,010,018 335,587 20,741 943,118 301,702 24,728 853,215 267,353 22,876 $ 4,687,895 $ 4,828,793 $ 4,025,435 $ 159,787 $ 168,934 $ 339,933 205,954 17,708 311,959 188,002 17,346 $ 723,382 $ 686,241 $ 2009 2008 $ 3,228 $ 3,305 $ 928 373 2,301 108 146 859 856 340 2,449 115 136 836 124,151 278,731 165,808 14,781 583,471 2007 2,763 778 302 1,985 84 102 821 19 (1) Gross proﬁts represent total revenue less cost of goods sold. Gross proﬁt is given before charge for depreciation and amortization. (2) 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. (3) 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. (4) 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 plan. 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. 20 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, 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 future cash ﬂows to be generated and 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 recorded impairment charges of $1,262 in ﬁscal 2009, $450 in ﬁscal 2008, and $1,475 in ﬁscal 2007. 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. The balance of our self-insurance reserves were $14,910 and $14,179 for the years ended April 30, 2009 and 2008, respectively. 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 ﬁnance 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, 2009, the Company’s ratio of current assets to current liabilities was 1.29 to 1. The ratio at April 30, 2008 and at April 30, 2007 was 1.21 to 1 and 1.03 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 operating activities decreased $7,147 (4%) in the year ended April 30, 2009, primarily because of a large decrease in accounts payable. Accounts payable decreased primarily due to the low cost per gallon of gasoline. This result was partially offset by a large decrease in inventories and increases in deferred income taxes and accrued expenses. Cash used in investing in the year ended April 30, 2009 increased $55,445 (62.2%) primarily due to the increase in the purchase of property and equipment. Cash ﬂows from ﬁnancing decreased $7,345 (17.6%), primarily due to reduced repayments of long-term debt. Capital expenditures represent the single largest use of Company funds. We believe that by reinvesting in stores, we will be better able to respond to competitive challenges and increase operating efﬁciencies. During ﬁscal 2009, we expended $144,739 for property and equipment, primarily for the acquisition and remodeling of stores compared with $89,315 in the prior year. In ﬁscal 2010, we anticipate expending approximately $165,000, primarily from existing cash and funds generated by operations, for construction, acquisition, and remodeling of stores. As of April 30, 2009, we had long-term debt, net of current maturities, of $167,887 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; $17,000 in principal amount of senior notes, series A through series F, with interest rates ranging from 6.18% to 7.23%; $11,429 in principal amount of 7.89% senior notes, series A; $1,175 of mortgage notes payable; and $8,283 of capital lease obligations. 21 Interest on the 5.72% senior notes series A and series B is payable on the 30th day of each March and September. Principal on the senior notes series A and series B is payable 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 on the 7.38% senior notes is payable 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 on the 6.18% to 7.23% senior notes series A through series F is payable 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 on 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 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, 2009: Contractual Obligations Payments due by period Total Less than 1 year $ 239,390 22,985 15,632 958 178 -------- -------- 39,753 1-3 years 36,210 1,218 1,238 161 -------- -------- 38,827 3-5 years More than 5 years 56,765 23 1,224 89 -------- -------- 58,101 123,430 -------- 14,025 20 -------- -------- 137,475 16,873 17,445 448 6,621 11,085 291,862 Senior notes Mortgage notes Capital lease obligations Operating lease obligations Unrecognized tax beneﬁts Deferred compensation Total $ 22 Included in mortgage notes payable in less than 1 year in the table above is $8,521 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. Unrecognized tax beneﬁts relate to uncertain tax positions recorded under FIN 48, which we adopted on May 1, 2007. As we are not able to reasonably estimate the timing of the payments or the amount by which the liability will increase or decrease over time, the related balances have not been reﬂected in the “Payments Due by Period” section of the table. At April 30, 2009, the Company had a total of $6,621 in gross unrecognized tax beneﬁts. Of this amount, $4,967 represents the amount of unrecognized tax beneﬁts that, if recognized, would impact our effective tax rate. These unrecognized tax beneﬁts relate to the state income tax ﬁling positions and federal tax credits claimed for the Company’s corporate subsidiaries. The total amount of accrued interest and penalties for such unrecognized tax beneﬁts was $650 as of April 30, 2009. Interest and penalties related to income taxes are classiﬁed as income tax expense in our consolidated ﬁnancial statements. The federal statute of limitations remains open for the years 2005 and forward. Tax years 2003 and forward are subject to audit by state tax authorities depending on open statute of limitations waivers and the tax code of each state. A number of years may elapse before an uncertain tax position is audited and ultimately settled. It is difﬁcult to predict the ultimate outcome or the timing of resolution for uncertain tax positions. It is reasonably probable that the amount of unrecognized tax beneﬁts could signiﬁcantly increase or decrease within the next twelve months. These changes could result from the expiration of the statute of limitations, examinations or other unforeseen circumstances. As of April 30, 2009, the Company did not have any ongoing federal income tax examinations. Two states have examinations in progress. The Company did not have any outstanding litigation related to tax matters. At this time, management does not expect the aggregate amount of unrecognized tax beneﬁts to change signiﬁcantly within the next 12 months. Included in long-term liabilities on our consolidated balance sheet at April 30, 2009, was an $11,085 obligation for deferred compensation. As the speciﬁc payment dates for the deferred compensation are unknown due to the unknown retirement dates of many of the participants, the related balances have not been reﬂected in the “Payments Due by Period” section of the table. At April 30, 2009, we were partially self-insured for workers’ compensation claims in all nine 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 $10,000 and $8,800, respectively, were issued and outstanding at April 30, 2009 and 2008, 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. 23 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 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 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. 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 stores. Any substantial decrease in proﬁt margins on gasoline sales or in the number of gallons sold by 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. 24 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 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 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 stores and may have an adverse impact on our earnings for that period. 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, 2009 would have no material effect on pretax earnings. In the past, we have used derivative instruments such as options and futures to hedge against the volatility of gasoline cost and were at risk for possible changes in the market value of these derivative instruments. No such derivative instruments were used during ﬁscal year 2009, 2008, or 2007. However, we do from time to time, participate in a forward buy of certain commodities, primarily cheese and coffee. 25 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 (the Company) as of April 30, 2009 and 2008, and the related consolidated statements of earnings, shareholders’ equity and cash ﬂows for each of the years in the three-year period ended April 30, 2009. 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, 2009 and 2008 and the results of their operations and their cash ﬂows for each of the years in the three-year period ended April 30, 2009, in conformity with U.S. generally accepted accounting principles. As discussed in Note 1 to the Consolidated Financial Statements, the Company changed its method of accounting for stock based compensation effective May 1, 2006, and changed its method of quantifying errors effective in 2007. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over ﬁnancial reporting as of April 30, 2009, 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 29, 2009 expressed an unqualiﬁed opinion on the effectiveness of the Company’s internal control over ﬁnancial reporting. Des Moines, Iowa June 29, 2009 26 The Board of Directors and Shareholders Casey’s General Stores, Inc.: We have audited Casey’s General Stores, Inc. and subsidiaries (the Company) internal control over ﬁnancial reporting, as of April 30, 2009, 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, appearing under Item 9A. Our responsibility is to express an opinion on 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, assessing the risk that a material weakness exists, and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included 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, Casey’s General Stores, Inc. and subsidiaries maintained, in all material respects, effective internal control over ﬁnancial reporting as of April 30, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. 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, 2009 and 2008, and the related consolidated statements of earnings, shareholders’ equity and cash ﬂows for each of the years in the three-year period ended April 30, 2009, and our report dated June 29, 2009 expressed an unqualiﬁed opinion on those consolidated ﬁnancial statements. Des Moines, Iowa June 29, 2009 27 CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts) April 30, Assets Current assets Cash and cash equivalents Receivables Trade Other Inventories Prepaid expenses Deferred income taxes 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 Less accumulated depreciation and amortization Net property and equipment Other assets, net of amortization Goodwill Total assets Liabilities and Shareholders’ Equity Current liabilities Current maturities of long-term debt Accounts payable Accrued expenses Wages and related taxes Property taxes Insurance Other Total current liabilities Long-term debt, net of current maturities Deferred income taxes Deferred compensation Other long-term liabilities Total liabilities Commitments and contingencies Shareholders’ equity Preferred stock, no par value, none issued Common stock, no par value, 50,842,712 and 50,733,162 shares issued and outstanding at April 30, 2009 and 2008, respectively Retained earnings Total shareholders’ equity Total liabilities and shareholders’ equity 28 See accompanying notes to consolidated ﬁnancial statements. 2009 2008 $ 145,695 $ 154,523 7,888 3,000 106,528 1,394 11,895 8,327 284,727 273,406 568,366 711,090 17,924 16,662 -------- 124,503 1,419 8,398 7,751 313,256 249,842 523,748 655,270 15,194 1,570,786 1,444,054 652,376 918,410 8,582 50,976 595,316 848,738 8,898 48,308 $ 1,262,695 $ 1,219,200 $ 28,442 $ 115,436 23,155 14,156 19,111 20,943 221,243 167,887 125,536 11,085 15,914 541,665 34,383 163,343 13,816 13,877 18,265 15,415 259,099 181,443 105,959 10,201 15,026 571,728 -------- -------- 60,804 660,226 721,030 57,690 589,782 647,472 $ 1,262,695 $ 1,219,200 CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share amounts) Years ended April 30, Total revenue 2009 2008 2007 $ 4,687,895 $ 4,828,793 $ 4,025,435 Cost of goods sold (exclusive of depreciation, shown separately below) 3,964,513 4,142,552 3,441,964 Gross proﬁt 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 of $35, $52 and $1,025 Net earnings Basic Earnings from continuing operations Loss on discontinued operations, net of tax beneﬁt Net earnings per common share Diluted Earnings from continuing operations Loss on discontinued operations, net of tax beneﬁt Net earnings per common share See accompanying notes to consolidated ﬁnancial statements. 723,382 504,181 69,406 10,626 139,169 53,425 85,744 54 686,241 474,794 67,651 9,792 134,004 49,031 84,973 82 $ $ $ $ $ 85,690 $ 84,891 $ 1.69 $ 1.68 $ ----- ----- 1.69 $ 1.68 $ 1.68 $ 1.67 $ ----- ----- 1.68 $ 1.67 $ 583,471 410,673 63,944 11,184 97,670 34,175 63,495 1,604 61,891 1.26 .03 1.23 1.25 .03 1.22 29 CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In thousands, except share and per share amounts) Balance at April 30, 2006 Net earnings Payment of dividends (20 cents per share) Proceeds from exercise of stock options (223,550 shares) Tax beneﬁts related to nonqualiﬁed stock options Stock based compensation Common stock Retained earnings Total $ 49,161 $ 474,029 $ 523,190 -------- -------- 2,941 919 526 61,891 (10,098) -------- -------- -------- 61,891 (10,098) 2,941 919 526 Cumulative effect of adjustments resulting from the adoption of SAB No. 108 -------- (7,105) (7,105) Balance at April 30, 2007 Net earnings Payment of dividends (26 cents per share) Proceeds from exercise of stock options (156,950 shares) Tax beneﬁts related to nonqualiﬁed stock options Stock based compensation Remeasurement of income taxes upon adoption of FIN 48 Balance at April 30, 2008 Net earnings Payment of dividends (30 cents per share) Proceeds from exercise of stock options (93,550 shares) Tax beneﬁts related to nonqualiﬁed stock options Stock based compensation Balance at April 30, 2009 See accompanying notes to consolidated ﬁnancial statements. $ 53,547 $ 518,717 $ 572,264 -------- -------- 2,104 607 1,432 -------- 84,891 (13,180) -------- -------- -------- (646) 84,891 (13,180) 2,104 607 1,432 (646) $ 57,690 $ 589,782 $ 647,472 -------- -------- 1,346 512 1,256 85,690 (15,246) -------- -------- -------- 85,690 (15,246) 1,346 512 1,256 $ 60,804 $ 660,226 $ 721,030 30 CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Years ended April 30, Cash ﬂows from operating activities Net earnings 2009 2008 2007 $ 85,690 $ 84,891 $ 61,891 Adjustments to reconcile net earnings to net cash provided by operations Loss from discontinued operations Depreciation and amortization Other (accretion) amortization Stock-based compensation Loss on sale of property and equipment Deferred income taxes Excess tax beneﬁts related to stock option exercises Changes in assets and liabilities Receivables Inventories Prepaid expenses Accounts payable Accrued expenses Income taxes receivable Other, net Net cash provided by operating activities Cash ﬂows from investing activities 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 ﬁnancing activities Proceeds from long-term debt Payments of long-term debt Proceeds from exercise of stock options Payments of cash dividends Excess tax beneﬁts related to stock option exercises Net cash (used in) provided by ﬁnancing activities Cash ﬂows from discontinued operations Operating cash ﬂows Investing cash ﬂows Net cash ﬂows provided by discontinued operations Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 54 69,406 (192) 1,256 4,071 16,080 (512) 5,774 17,975 25 (47,907) 15,992 1,005 1,166 82 67,651 271 1,432 2,996 235 (607) (3,230) (14,801) (2,132) 28,968 9,047 1,146 1,081 1,604 63,944 482 526 3,076 (406) (919) (2,400) (10,437) (696) (11,746) 4,681 1,233 2,607 169,883 177,030 113,440 (147,407) (91,035) -------- 2,891 -------- 1,964 (90,729) (66,729) 2,764 (144,516) (89,071) (154,694) -------- (21,100) 1,346 (15,246) 512 (34,488) (16) 309 293 (8,828) 154,523 -------- (31,364) 2,104 (13,180) 607 (41,833) 71 1,259 1,330 47,456 107,067 100,000 (22,814) 2,941 (10,098) 919 70,948 790 1,214 2,004 31,698 75,369 $ 145,695 $ 154,523 $ 107,067 31 SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION Cash paid during the year for Interest, net of amount capitalized Income taxes Noncash investing and ﬁnancing activities 2009 2008 $ 13,142 $ 15,354 $ 34,229 47,710 2007 12,417 31,271 Property and equipment acquired through notes payable 1,603 120 11,744 and capitalized lease obligations See accompanying notes to consolidated ﬁnancial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 1. SIGNIFICANT ACCOUNTING POLICIES Operations Casey’s General Stores, Inc. and its subsidiaries (the Company/Casey’s) operate 1,478 convenience stores in nine Midwest states. The stores are located primarily in smaller communities, many with populations of less than 5,000. Retail sales in 2009 were distributed as follows: 71% gasoline, 22% 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. 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, beverages, and prepared foods, which are stated at cost) is determined by the retail inventory 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, 2009 and 2008: Fiscal 2009 Fiscal 2008 Gasoline Merchandise Merchandise LIFO reserve Total inventory $ $ 37,377 98,988 (29,837) 106,528 59,823 88,978 (24,298) 124,503 32 Goodwill Statement of Financial Accounting Standards (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. The Company assesses goodwill in the fourth quarter using a market based approach to establish fair value. As of April 30, 2009, there was $50,976 of goodwill, and management’s analysis of recoverability completed as of the ﬁscal year-end yielded no evidence of impairment. During ﬁscal 2009 and ﬁscal 2008, there were several individually immaterial business acquisitions that resulted in increases of goodwill of $2,668 and $1,720, respectively. Payments relating to these business acquisitions are included in purchase of property and equipment on the accompanying Consolidated Statements of Cash Flows. 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 gains on disposal of $7 (net of $3 income tax expense) and $89 (net of $35 income tax expense) for the years ended April 30, 2009 and 2008, respectively. Losses on disposal of $2,018 (net of $787 income tax beneﬁt) were recorded for the year ended April 30, 2007. Assets held for sale at April 30, 2009 and 2008 were approximately $250 and $1,650, respectively, and are included in net property & equipment in the accompanying Consolidated Balance Sheets. The Company 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, 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 $1,262 in ﬁscal 2009, $450 in ﬁscal 2008, and $1,475 in ﬁscal 2007. 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 Lesser of term of lease or life of asset Leasehold improvements Lesser of term of lease or life of asset 33 Excise taxes Excise taxes approximating $439,000, $414,000, and $423,000 collected from customers on retail gasoline sales are included in net sales for ﬁscal 2009, 2008, and 2007, 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. 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. Sales taxes collected from customers are recorded on a net basis in the ﬁnancial statements. 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 $2,630, $14,466, and $21,627 for the years ended April 30, 2009, 2008, and 2007, respectively. Losses from discontinued operations were $54 for the year ended April 30, 2009, including a $7 pretax gain on disposal. Losses from discontinued operations were $82 and $1,604 for the years ended April 30, 2008 and 2007, respectively. Losses from discontinued operations were net of tax beneﬁts of $35, $52, and $1,025, for the years ended April 30, 2009, 2008, and 2007, respectively. The Company’s consolidated balance sheets as of April 30, 2009 and 2008, respectively, included approximately $250 and $1,650 in net property and equipment classiﬁed as assets held for sale; there were 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. The calculation of diluted earnings per share treats stock options outstanding as potential common shares to the extent they are dilutive. 34 Asset retirement obligations The Company recognizes the estimated future cost to remove an underground storage tank over the estimated useful life of the storage tank in accordance with the provisions of SFAS No. 143, Accounting for Asset Retirement Obligations. The Company records a discounted liability for the fair value of an asset retirement obligation with a corresponding increase to the carrying value of the related long-lived asset at the time an underground storage tank is installed. The Company amortizes the amount added to other assets and recognizes accretion expense in connection with the discounted liability over the remaining life of the tank. The estimates of the anticipated future costs for removal of an underground storage tank are based on our prior experience with removal. The cost estimates are compared to the actual removal cost experienced on an annual basis, and when the actual costs exceed our original estimates, an additional liability for estimated future costs to remove the underground storage tanks will be recognized. Because these estimates are subjective and are currently based on historical costs with adjustments for estimated future changes in the associated costs, we expect the dollar amount of these obligations to change as more information is obtained. There were no material changes in our asset retirement obligation estimates during ﬁscal 2009. The fair value of the recorded asset was $6,210 and $6,199 at April 30, 2009 and 2008, respectively. The discounted liability was $8,642 and $8,823, respectively, at April 30, 2009 and 2008 and is recorded in other long-term liabilities. 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 occasionally has used derivative instruments such as options and futures to hedge against the volatility of gasoline cost, under which the Company was at risk for possible changes in the market value for these derivative instruments. There were no such options or futures contracts during the years ended April 30, 2009, 2008, or 2007. Stock-based compensation Effective May 1, 2006, the Company adopted the provisions of 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 on net earnings as a result of the adoption of SFAS 123R was $1,256, $1,432, and $526 for ﬁscal 2009, 2008, and 2007, respectively. Recent Accounting Pronouncements In July 2006, the Financial Accounting Standards Board (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 adopted FIN 48 in the ﬁrst quarter of ﬁscal 2008 and reduced retained earnings by $646 due to the adoption of this interpretation. 35 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. The following table presents a description of the individual adjustments included in the cumulative adjustment to retained earnings in ﬁscal 2007. 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 September 2006, the FASB issued SFAS 157, Fair Value Measurements (SFAS 157), which establishes a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. In February 2008, the FASB issued FSP FAS 157-2, Effective Date of FASB Statement 157 (FSP 157-2), which allows for the deferral of the adoption date of SFAS 157 for all nonﬁnancial assets and nonﬁnancial liabilities, except those that are recognized or disclosed at fair value in the ﬁnancial statements on a recurring basis. The Company elected to defer the adoption of SFAS 157 for the assets and liabilities within the scope of FSP 157-2. The Company will adopt FSP 157-2 on May 1, 2009. In October 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a Financial Asset in a Market That Is Not Active (FSP 157-3) which clariﬁes the application of SFAS 157 when the market for a ﬁnancial asset is inactive. The adoption of SFAS 157 for those assets and liabilities not subject to the deferral permitted by FSP 157-2 did not have a material impact on the Company’s consolidated ﬁnancial statements. 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 adopted SFAS No. 159 on May 1, 2008 and it did not have a material impact on the Company’s consolidated ﬁnancial statements. 36 In December 2007, the FASB issued SFAS No. 141 (revised 2007) Business Combinations SFAS No. 141R “Business Combinations” replaces SFAS No. 141, and establishes requirements for recognition and measurement of identiﬁable assets acquired, liabilities assumed, noncontrolling interest of the acquiree, goodwill acquired, and gain from bargain purchase. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the annual reporting period beginning on or after December 15, 2008. The Company will adopt SFAS No. 141R on May 1, 2009. In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51. SFAS No. 160 was issued to improve the relevance, comparability, and transparency of ﬁnancial information provided to investors by requiring all entities to report noncontrolling (minority) interest in subsidiaries as equity in the consolidated ﬁnancial statements. SFAS No. 160 is effective for ﬁscal years, and interim periods within those ﬁscal years, beginning on or after December 15, 2008. The Company will adopt SFAS No. 160 on May 1, 2009 and does not expect it to have a material impact on the Company’s consolidated ﬁnancial statements. In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133. SFAS No. 161 amends and expands disclosure requirements for derivative instruments in order to provide users of ﬁnancial statements with an enhanced understanding of (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133, and its related interpretations and (c) how derivative instruments and related hedged items affect an entity’s ﬁnancial position, ﬁnancial performance, and cash ﬂows. SFAS No. 161 is to be applied prospectively for the ﬁrst reporting period beginning on or after November 15, 2008. The Company adopted SFAS No. 161 on February 1, 2009. In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (SFAS No. 162) which reorganizes the generally accepted accounting principles (GAAP) hierarchy as detailed in the statement. The purpose of the new standard is to improve ﬁnancial reporting by providing a consistent framework for determining what accounting principles should be used when preparing U.S. GAAP ﬁnancial statements. SFAS No. 162 became effective on November 15, 2008. The adoption did not effect the ﬁnancial position, results of operations or cash ﬂows of the Company. In May 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS 165) which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before ﬁnancial statements are issued or are available to be issued. SFAS 165 applies prospectively to both interim and annual ﬁnancial periods ending after June 15, 2009. The Company will adopt SFAS 165 on May 1, 2009. Reclassiﬁcations Certain amounts in the prior years’ ﬁnancial statements have been reclassiﬁed to conform to the current-year presentation, primarily related to discontinued operations. 2. 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. 37 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 $173,000 and $195,000, respectively, at April 30, 2009 and 2008. The Company has a $50,000 line of credit with no balance owed at April 30, 2009 and 2008. Interest expense is net of interest income of $2,107, $5,125, and $1,321for the years ended April 30, 2009, 2008, and 2007, respectively. Interest expense in the amount of $367, $182, and $284 was capitalized during the years ended April 30, 2009, 2008, and 2007, respectively. The next table delineates the Company’s long-term debt at carrying value. As of April 30, Capitalized lease obligations discounted at 4.75% to 6% due in various monthly installments through 2048 (Note 7) Mortgage notes payable due in various installments through 2012 with interest at 5.5% to 6% 7.38% senior notes due in 21 semi-annual installments beginning in December 2010 Senior notes due in various installments from 2004 through 2019 with interest at 6.18% to 7.23% 7.89% senior notes due in 7 annual installments beginning in May 2004 5.72% senior notes due in 14 installments beginning September 30, 2012 and ending March 30, 2020 Less current maturities 2009 $ 8,758 2008 9,393 16,714 19,147 30,000 30,000 18,000 22,857 100,000 196,329 28,442 $ 167,887 23,000 34,286 100,000 215,826 34,383 181,443 Various debt agreements contain certain operating and ﬁnancial covenants. At April 30, 2009, 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, 2009 and thereafter: Years ended April 30, 2010 2011 2012 2013 2014 Thereafter $ $ 28,442 14,717 4,539 14,045 27,029 107,557 196,329 Included in current maturities for ﬁscal 2010 in the preceding tables is $8,521 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. 38 3. 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 $0.30, $0.26, and $0.20 per share for the years ended April 30, 2009, 2008, and 2007, respectively. Common share purchase rights On June 14, 2009, the shareholder Rights Plan, providing for the distribution of one common share purchase right for each share of common stock outstanding was allowed to expire under its own terms and was not extended. 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 5,260,000 shares of common stock. Options for 494,164 shares were available for grant at April 30, 2009, and options for 678,000 shares (which expire between 2009 and 2018) were outstanding. All stock option shares issued are previously unissued authorized shares. 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 2009 proxy statement. On June 6, 2003, stock options totaling 307,000 shares were granted to certain ofﬁcers and key employees. These awards vested on June 6, 2006; subsequent to adoption of FAS 123R, and 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 will vest on July 5, 2010, and compensation expense is being recognized ratably over the vesting period. On June 25, 2007, stock options totaling 246,000 shares were granted to certain ofﬁcers and key employees. These awards will vest on June 25, 2010, and compensation expense is being recognized ratably over the vesting period. The 2000 Stock Option Plan allows the grant of 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 allows the grant of 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. On May 1, 2009, stock options totaling 16,000 shares were granted to the members of the Board of Directors. 39 The following table shows the stock option activity during the periods indicated: Balance at April 30, 2006 Granted Exercised Forfeited Balance at April 30, 2007 Granted Exercised Forfeited Balance at April 30, 2008 Granted Exercised Forfeited Balance at April 30, 2009 Number of Weighted average shares exercise price 961,050 $ 14,000 (223,550) (22,000) 729,500 $ 260,000 (156,950) (49,000) 783,550 $ 12,000 (93,550) (24,000) 678,000 $ 15.29 22.36 13.16 14.80 16.10 26.77 13.40 23.16 19.74 26.51 14.39 23.80 20.45 At April 30, 2009, all outstanding options had an aggregate intrinsic value of $4,241 and a weighted average remaining contractual life of 5.8 years. The vested options totaled 270,000 shares with a weighted average exercise price of $15.20 per share and a weighted average remaining contractual life of 3.8 years. The aggregate intrinsic value for the vested options as of April 30, 2009 was $3,081. The aggregate intrinsic value for the total of all options exercised during the year ended April 30, 2009 was $1,151, and the total fair value of shares vested during the year ended April 30, 2009 was $100. The fair value of the 2009 stock options granted were estimated utilizing the Black Scholes valuation model. The grant date fair value for the May 1, 2008 options was $8.30. The signiﬁcant assumptions follow: Risk-free interest rate Expected option life Expected volatility Expected dividend yield May 1, 2008 4.3% 8.9 years 37% 1.7% The expected option life of each award granted was based upon historical experience of employees’ exercise behavior. Expected volatility was based upon historical volatility levels of the Company’s common stock over a similar length of time. Expected dividend yield was based on expected dividend rate. Risk-free interest rate reﬂects the yield of a zero coupon U.S. Treasury over the expected option life. Total compensation costs recorded for the years ended April 30, 2009, 2008 and 2007 were $1,256, $1,432, and $526, respectively, for the stock option awards. As of April 30, 2009, there was $955 of total unrecognized compensation costs related to the 2000 Stock Option Plan for stock options that are expected to be recognized ratably through 2011. 40 At April 30, 2009, the range of exercise prices was $11.20–$26.92 and the weighted average remaining contractual life of outstanding options was 5.8 years. The number of shares and weighted average remaining contractual life of the options by range of applicable exercise prices at April 30, 2009 were as follows: Range of Number of Weighted average Weighted average remaining exercise prices $ 11.20 – 13.07 14.08 – 17.64 20.68 – 26.92 shares 58,500 177,500 442,000 678,000 exercise price contractual life (years) $ 11.82 14.54 23.97 2.1 3.5 7.3 4. EARNINGS PER COMMON SHARE Computations for basic and diluted earnings per common share are presented below: Years ended April 30, Basic Earnings from continuing operations Loss on discontinued operations Net earnings Weighted average shares outstanding—basic Earnings per common share from continuing operations Loss per common share on discontinued operations Basic earnings per common share Diluted Earnings from continuing operations Loss on discontinued operations 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 Diluted earnings per common share 2009 2008 2007 $ $ $ $ $ $ $ $ 85,744 $ 84,973 $ 54 82 85,690 $ 84,891 $ 63,495 1,604 61,891 50,787,309 50,681,011 50,467,739 1.69 $ 1.68 $ -------- -------- 1.69 $ 1.68 $ 85,744 $ 84,973 $ 54 82 85,690 $ 84,891 $ 1.26 .03 1.23 63,495 1,604 61,891 50,787,309 50,681,011 50,467,739 130,170 177,746 200,159 50,917,479 50,858,757 50,667,898 1.68 $ 1.67 $ -------- -------- 1.68 $ 1.67 $ 1.25 .03 1.22 Options to purchase shares of common stock that were not included in the computation of diluted earnings per share, because their inclusion would have been antidilutive, were 224,500 for ﬁscal 2009 and ﬁscal 2008. All stock options outstanding were included in the computation of diluted earnings per share for ﬁscal 2007. 41 5. INCOME TAXES Income tax expense attributable to earnings from continuing operations consisted of the following components: Years ended April 30, Current tax expense Federal State Deferred tax expense Total income tax provision 2009 2008 2007 $ 31,801 $ 43,501 $ 5,480 37,281 16,144 6,705 50,206 (1,175) $ 53,425 $ 49,031 $ 31,889 2,786 34,675 (500) 34,175 The tax effects of temporary differences that gave rise to signiﬁcant portions of the deferred tax assets and deferred tax liabilities were as follows: As of April 30, 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 2009 2008 2007 $ 11,895 $ 8,398 $ 4,329 2,849 19,073 -------- 19,073 (129,541) (3,173) (132,714) 4,180 2,420 14,998 -------- 14,998 7,414 3,589 982 11,985 (186) 11,799 (110,452) (2,107) (112,559) (109,146) (1,749) (110,895) $ (113,641) $ (97,561) $ (99,096) At April 30, 2009, the Company has net operating loss carryforwards for state income tax purposes of approximately $18,652, which are available to offset future taxable income. These net operating losses expire during the years 2016 through 2019. There was no valuation allowance for deferred tax assets as of April 30, 2009 and 2008. There was no net change in the valuation allowance for the year ended April 30, 2009 and there was a decrease of $186 for the year ended April 30, 2008. 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 was 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. 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. Years ended April 30, Income taxes at the statutory rates Federal tax credits State income taxes, net of federal tax beneﬁt Other 2009 35.0% (1.1) 2.9 1.6 38.4% 2008 35.0% (1.1) 3.3 (0.6) 36.6% 2007 35.0% (0.8) 1.5 (0.7) 35.0% The income tax beneﬁt from discontinued operations was $35, $52, and $1,025 for the years ended April 30, 2009, 2008, and 2007, respectively. In July 2006, the FASB issued FIN 48. The Company adopted the provisions of FIN 48, effective May 1, 2007. This interpretation was issued to clarify the accounting for uncertainty in income taxes recognized in the ﬁnancial statements by prescribing a recognition threshold and measurement attribute for the ﬁnancial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company recognized additional tax liabilities of $646 with a corresponding reduction to beginning retained earnings as of May 1, 2007 as a result of the adoption of FIN 48. The total amount of gross unrecognized tax beneﬁts was $4,037 as of May 1, 2007, the date of adoption and $5,655 at April 30, 2008. At April 30, 2009, the Company had a total of $6,621 in gross unrecognized tax beneﬁts. Of this amount, $4,967 represents the amount of unrecognized tax beneﬁts that, if recognized, would impact our effective tax rate. Unrecognized tax beneﬁts were a net increase of $628 during the twelve months ended April 30, 2009 due to the increase associated with state income tax ﬁling positions offset by a lesser decrease due to the expiration of certain statute of limitations. This had the effect of increasing the effective state tax rate during the ﬁscal year ending April 30, 2009. These unrecognized tax beneﬁts relate to risks associated with state income tax ﬁling positions and federal tax credits claimed for the Company’s subsidiaries. A reconciliation of the beginning and ending amount of unrecognized tax beneﬁts is as follows: Balance at April 30, 200 Additions based on tax positions related to current year Additions for tax positions of prior years Reductions for tax positions of prior years Reductions due to lapse of applicable statute of limitations Settlements Balance at April 30, 2009 $ $ 5,655 1,318 324 ---- (676) ---- 6,621 The total net amount of accrued interest and penalties for such unrecognized tax beneﬁts was $548 at April 30, 2008 and is included in income taxes payable. Interest and penalties related to unrecognized tax beneﬁts are classiﬁed as income tax expense in our consolidated statements of earnings and was $650 for the year ended April 30, 2009. Net interest and penalties included in income tax expense for the twelve month period ended April 30, 2009 was an additional tax expense of $103 and an additional tax expense of $418 for the year ended April 30, 2008. At this time, the Company’s best estimate of the reasonably possible change in the amount of the gross unrecognized tax beneﬁts is a decrease of approximately $2,000 during the next twelve months mainly due to the expiration of certain statute of limitations. The federal statute of limitations remains open for the years 2005 and forward. Tax years 2003 and forward are subject to audit by state tax authorities depending on open statute of limitations waivers and the tax code of each state. 43 6. 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: Asset balances at April 30, Real estate Equipment Less accumulated amortization 2009 14,287 3,637 17,924 10,047 7,877 $ $ 2008 $ 11,716 3,478 15,194 7,132 $ 8,062 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, 2009: Years ended April 30, Capital leases Operating leases 2010 2011 2012 2013 2014 $ Thereafter Total minimum lease payments Less amount representing interest Present value of net minimum lease payments $ $ 958 659 579 614 610 14,025 17,445 $ 8,687 8,758 178 92 69 57 32 20 448 The total rent expense under operating leases was $596 in 2009, $688 in 2008, and $634 in 2007. 44 7. BENEFIT PLANS 401(k) plan The Company provides employees with a 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 $2,819, $2,682, and $2,456 for the years ended April 30, 2009, 2008, and 2007, respectively. On April 30, 2009, the Company had 7,740 full-time employees and 11,040 part-time employees; 3,340 were active participants in the Plan. As of that same date, 1,669,330 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 2 of its executive ofﬁcers, 1 of whom retired April 30, 2003 and the other on April 30, 2008. 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 has accrued the deferred compensation over the term of employment. The amounts accrued at April 30, 2009 and 2008, respectively, were $6,991 and $6,503. The discount rates used were 6.3% and 8%, respectively, at April 30, 2009 and 2008. The Company expects to pay $650 per year for each of the next ﬁve years. The amounts expensed in ﬁscal 2009, 2008, and 2007 were $488, $573 and $763, respectively. 8. COMMITMENTS The Company has entered into an employment agreement with its chief executive ofﬁcer. The agreement provides that the ofﬁcer will receive aggregate base compensation of $600 per year exclusive of bonuses. The agreement also provides for certain payments in the case of death or disability of the ofﬁcer. 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. 9. 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, 2009 and 2008 of approximately $250 and $259, 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. 45 Legal matters The Company is named as a defendant in four 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 60ºF. Fuel is measured at 60ºF 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 since November 2006 in 28 jurisdictions, including 26 states, Guam and the District of Columbia, against a wide range of defendants that produce, reﬁne, distribute, and/or market gasoline products in the United States. On June 18, 2007, the Federal Judicial Panel on Multidistrict Litigation ordered that all of the pending hot fuel cases (ofﬁcially, the “Motor Fuel Temperature Sales Practices Litigation”) be transferred to the U.S. District Court for the District of Kansas in Kansas City, Kansas, for coordinated or consolidated pretrial proceedings, including rulings on discovery matters, various pretrial motions, and class certiﬁcation. Discovery efforts by both sides are being pursued. Management does not believe the Company is liable to the defendants for the conduct complained of, and intends to contest the matters vigorously. In April 2009, the Company and ﬁve individual directors or ofﬁcers entered into settlement agreements with plaintiffs in two purported collective and class actions pending in the United States District Court for the Southern District of Iowa (Kristina Jones, et al. v. Casey’s General Stores, Inc., Robert J. Myers, Ronald M. Lamb, Terry W. Handley, Robert C. Ford, and Julia L. Jackowski, individually (“Jones action”) and Connie Wineland, et al. v. Casey’s General Stores, Inc., Robert J. Myers, Ronald M. Lamb, Terry W. Handley, Robert C. Ford, and Julia L. Jackowski (“Wineland action”)). The two actions are brought by plaintiffs seeking to represent approximately 7,800 current and former assistant managers (Jones action) and approximately 76,000 current and former non-management-level store employees (Wineland action). The plaintiffs generally sought back wages, liquidated damages, penalties, attorneys’ fees and costs, and equitable relief pursuant to various federal and state wage and hour laws and related common law causes of action. (For more information on these proceedings, please see Note 6 to the consolidated condensed ﬁnancial statements included in Part 1, Item 1 of the Company’s Quarterly Report on Form 10-Q for the ﬁscal quarter ended January 31, 2009). Under the settlement agreements, the Company has agreed to pay all putative plaintiffs and their counsel in both actions a total of $11.7 million (inclusive of plaintiffs’ attorneys fees and costs); the Company’s directors and ofﬁcers insurance carrier has agreed to pay $3.0 million of that amount on behalf of all defendants. The Company also has agreed to pay up to $400,000 in related settlement administration expenses. In exchange, the Company will be released from the state law claims of all putative plaintiffs who do not opt-out of the settlement for any covered claims arising since May 7, 2005 in the Jones action and since January 10, 2006 in the Wineland action. In addition, any plaintiffs who previously opted in to the putative collective actions will be releasing FLSA claims arising since November 1, 2004 in the Jones action and since April 15, 2005 in the Wineland action. Pursuant to the settlement agreements, the Company expressly denies any and all liability to the plaintiffs. The settlement agreements have been ﬁled with the Court as attachments to the parties’ joint motions for approval of the settlements, and a hearing on the joint motions was held on May 18, 2009. Following the hearing, the Court entered Orders granting preliminary approval of the settlement, approving the Notices of Class Action and Claim Forms to be distributed to class members, and setting October 9, 2009 as the date for a hearing on ﬁnal approval of the settlement. 46 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. Other At April 30, 2009, the Company was partially self-insured for workers’ compensation claims in all nine 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 $10,000 and $8,800 respectively, were issued and outstanding at April 30, 2009 and 2008, on the insurance company’s behalf. The Company also has investments of approximately $223 in escrow as required by one 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, 2009 and 2008, the Company had $14,910 and $14,179, respectively, in accrued expenses for estimated claims relating to self-insurance. 47 10. QUARTERLY FINANCIAL DATA (Dollars in thousands) (Unaudited) Year ended April 30, 2009 Q1 Q2 Q3 Q4 Year Total Total revenue Gasoline Grocery & other merchandise Prepared food & fountain Other Gross proﬁt* Gasoline Grocery & other merchandise Prepared food & fountain Other $ 1,200,360 1,031,267 274,194 265,235 85,601 6,147 87,883 5,362 531,891 231,337 81,048 4,556 558,031 3,321,549 239,252 1,010,018 81,055 4,676 335,587 20,741 $ 1,566,302 1,389,747 848,832 883,014 4,687,895 $ 49,600 93,325 51,824 4,353 43,495 89,839 53,211 4,462 30,573 76,147 50,077 4,320 36,119 78,824 50,842 6,371 159,787 338,135 205,954 19,506 $ 199,102 191,007 161,117 172,156 723,382 Net earnings from continuing operations $ 28,796 27,340 14,035 15,573 85,744 Loss on discontinued operations, net of tax beneﬁt 11 11 14 18 54 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 $ 28,785 27,329 14,021 15,555 85,690 $ $ $ $ 0.57 ----- 0.57 0.57 ----- 0.57 0.54 ----- 0.54 0.54 ----- 0.54 0.28 ----- 0.28 0.28 ----- 0.28 0.31 ----- 0.31 0.31 ----- 0.31 1.69 ----- 1.69 1.68 ----- 1.68 *Gross proﬁt is given before charge for depreciation and amortization. 48 Year ended April 30, 2008 Q1 Q2 Q3 Q4 Year Total Total revenue Gasoline Grocery & other merchandise Prepared food & fountain Other Gross proﬁt* Gasoline Grocery & other merchandise Prepared food & fountain Other Net earnings from continuing operations $ 938,326 259,914 75,463 6,095 854,322 250,272 79,169 6,009 860,015 214,843 73,421 6,221 906,582 3,559,245 218,089 73,649 6,403 943,118 301,702 24,728 $ 1,279,798 1,189,772 1,154,500 1,204,723 4,828,793 $ 49,494 88,322 46,551 4,039 $ 188,406 $ 29,946 42,580 82,756 49,899 3,947 179,182 27,685 9 40,183 68,541 46,686 4,659 36,677 72,340 44,866 4,701 160,069 158,584 168,934 311,959 188,002 17,346 686,241 84,973 82 14,455 49 14,406 84,891 0.28 ----- 0.28 0.28 ----- 0.28 1.68 ----- 1.68 1.67 ----- 1.67 12,887 (146) 13,033 0.26 ----- 0.26 0.26 ----- 0.26 Loss (gain) on discontinued operations, net of tax beneﬁt (expense) 170 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 $ 29,776 27,676 $ $ $ 0.59 ----- 0.59 $ 0.59 ----- 0.59 0.55 ----- 0.55 0.54 ----- 0.54 *Gross proﬁt is given before charge for depreciation and amortization. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 49 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 period 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, 2009. 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, 2009. KPMG, LLP, as the Company’s independent registered public accounting ﬁrm, has issued a report on its assessment of the effectiveness of the Company’s internal control over ﬁnancial reporting. This report appears on page 26. ITEM 9B. OTHER INFORMATION Not applicable. 50 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, 2009 and to be used in connection with the Company’s Annual Meeting of Shareholders to be held on September 18, 2009 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, 2009 and to be used in connection with the Company’s Annual Meeting of Shareholders to be held on September 18, 2009 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, 2009 and to be used in connection with the Company’s Annual Meeting of Shareholders to be held on September 18, 2009 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, 2009 and to be used in connection with the Company’s Annual Meeting of Shareholders to be held on September 18, 2009 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, 2009 and to be used in connection with the Company’s Annual Meeting of Shareholders to be held on September 18, 2009 is hereby incorporated by reference. 51 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) (1) Documents ﬁled as a part of this report on Form 10-K The following ﬁnancial statements are included herewith: Consolidated Balance Sheets, April 30, 2009 and 2008 Consolidated Statements of Income, Three Years Ended April 30, 2009 Consolidated Statements of Shareholders’ Equity, Three Years Ended April 30, 2009 Consolidated Statements of Cash Flows, Three Years Ended April 30, 2009 Notes to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (2) No schedules are included because the required information is inapplicable or is presented in the consolidated ﬁnancial statements or related notes thereto. (3) The following exhibits are ﬁled as a part of this report: Exhibit # Description of Exhibits 3.1(a) 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) 3.2(a) Second Amended and Restated By-laws (incorporated by reference from the Current Report on Form 8-K ﬁled June 16, 2009) 4.4 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) 4.6 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) 4.7 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) 4.8 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) 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 ended January 31, 1994) 10.21(a)* Amended and Restated Employment Agreement with Donald F. Lamberti (incorporated by reference from the 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) 52 10.22(a)* 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) 10.27 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 by reference from the Current Report on Form 8-K ﬁled November 10, 1997) 10.32* Severance Agreement with Douglas K. Shull (incorporated by reference from the Current Report on Form 8-K 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) 10.38* Executive Nonqualiﬁed Excess Plan Document and related Adoption Agreement dated July 12, 2006 (incorporated by reference from the Annual Report on Form 10-K for the ﬁscal year ended April 30, 2007) 10.39* Employment Agreement with Robert J. Myers (incorporated by reference from the Current Report on Form 8-K ﬁled March 21, 2007) 10.40* Severance Agreement with John G. Harmon (incorporated by reference from the Current Report on Form 8-K ﬁled January 17, 2008) 21 Subsidiaries of Casey’s General Stores, Inc. (incorporated by reference from the Annual Report on Form 10-K for the ﬁscal year ended April 30, 2007) 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 23.1 31.1 31.2 32.1 32.2 ______________________________ *Indicates management contract or compensatory plan or arrangement. 53 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 29, 2009 By /s/ Robert J. Myers Robert J. Myers, President and Chief Executive Ofﬁcer (Principal Executive Ofﬁcer and Director) Date: June 29, 2009 By /s/ William J. Walljasper William J. Walljasper Senior Vice President and Chief Financial Ofﬁcer (Authorized Ofﬁcer and Principal Financial and Accounting 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 29, 2009 By /s/ Robert J. Myers Robert J. Myers President and Chief Executive Ofﬁcer, Director Date: June 29, 2009 By /s/ Ronald M. Lamb Ronald M. Lamb Chairman of the Board, Director Date: June 29, 2009 By /s/ Kenneth H. Haynie Kenneth H. Haynie Director Date: June 29, 2009 By /s/ Johnny Danos Johnny Danos Director 54 Date: June 29, 2009 By /s/ William C. Kimball William C. Kimball Director Date: June 29, 2009 By /s/ Diane C. Bridgewater Diane C. Bridgewater Director Date: June 29, 2009 By /s/ Jeffrey M. Lamberti Jeffrey M. Lamberti Director Date: June 29, 2009 By /s/ Richard Wilkey Richard Wilkey Director EXHIBIT INDEX The following exhibits are ﬁled herewith: Exhibit # Description 23.1 31.1 31.2 32.1 32.2 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 55 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 29, 2009, with respect to the consolidated balance sheets of Casey’s General Stores, Inc. and subsidiaries (the Company) as of April 30, 2009 and 2008, and the related consolidated statements of earnings, shareholders’ equity and cash ﬂows for each of the years in the three-year period ended April 30, 2009, and the effectiveness of internal control over ﬁnancial reporting as of April 30, 2009, which reports appear in the April 30, 2009 Annual Report on Form 10-K of Casey’s General Stores, Inc. As discussed in Note 1 to the Consolidated Financial Statements, the Company changed its method of accounting for stock based compensation effective May 1, 2006 and changed its method of quantifying errors effective in 2007. Des Moines, Iowa June 29, 2009 56 Exhibit 31.1 CERTIFICATION OF ROBERT J. MYERS UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Robert J. Myers, certify that: 1. I have reviewed this annual report on Form 10-K of Casey’s General Stores, Inc.; 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 29, 2009 /s/ Robert J. Myers Robert J. Myers, President and Chief Executive Ofﬁcer 57 Exhibit 31.2 CERTIFICATION OF WILLIAM J. WALLJASPER UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, William J. Walljasper, certify that: 1. I have reviewed this annual report on Form 10-K of Casey’s General Stores, Inc.; 2. Based on my knowledge, this annual 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 29, 2009 /s/ William J. Walljasper William J. Walljasper Senior Vice President and Chief Financial Ofﬁcer 58 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, 2009 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) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934. (2) The information contained in the Report fairly presents, in all material respects, the ﬁnancial condition and result of operations of the Company. Dated June 29, 2009 /s/ Robert J. Myers Robert J. Myers, President and Chief Executive Ofﬁcer 59 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, 2009 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. (2) The information contained in the Report fairly presents, in all material respects, the ﬁnancial condition and result of operations of the Company. Dated June 29, 2009 /s/ William J. Walljasper William J. Walljasper Senior Vice President and Chief Financial Ofﬁcer 60 COMPARATIVE STOCK PERFORMANCE The following Performance Graph compares the cumulative total shareholder return on the Company’s Common Stock for the last ﬁve ﬁscal years with the cumulative total return of (i) the Russell 2000 Index (ii) an old peer group index based on the common stock of The Pantry, Inc. and Alimentation Couche Tard, Inc. and (iii) a new peer group index based on the common stock of the companies in the old peer group and Susser Holdings Corporation. 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, 2004, 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* Among Casey’s General Stores, Inc., the Russell 2000 index, a New Peer Group, and an Old Peer Group. * $100 invested on 4/30/04 in stock or index, including reinvestment of dividends. Fiscal year ending April 30. Casey’s Russell 2000 Old Peer Group New Peer Group 4/04. . . . . . . . . . . . . . . . . . . . . . 4/05. . . . . . . . . . . . . . . . . . . . . . 4/06. . . . . . . . . . . . . . . . . . . . . . 4/07. . . . . . . . . . . . . . . . . . . . . . 4/08. . . . . . . . . . . . . . . . . . . . . . 4/09. . . . . . . . . . . . . . . . . . . . . . 100.00 102.89 131.45 155.82 138.56 168.55 100.00 104.71 139.76 150.70 134.19 92.94 100.00 170.13 290.76 218.78 110.94 118.91 100.00 170.13 290.76 218.78 122.39 128.27 Casey’s General Stores, Inc. One Convenience Boulevard Ankeny, Iowa 50021 y p

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