Casey’s General Stores, Inc.
One Convenience Boulevard
Ankeny, Iowa 5 0 021
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A Tradition of
Building Shareholder Value
2 010
annual report
Earnings Before
Income Taxes
Table of Contents
Board of Directors ....................1
Store Development .................13
Message to Shareholders ..........3
Corporate Finance ..................16
Management Team ...................4
Investor Information ..............17
Store Operations ......................7
Financial Information .............18
escalating new construction Learn about Casey’s efforts to replace, remodel
and expand across 10 states on page 14.
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6
1
8
1
$
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1
9
3
1
$
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9
3
3
1
$
08 09 10
Basic Earnings
Pe r Share
0
3
2
$
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9
6
1
$
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8
6
1
$
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08 09 10
Financial Highlights
To tal Revenue
Ca sh Flow from Ope rations
Net Earnings
EPS ( Diluted)
S hare holders of Rec ord
Employees
Numb er of Corporate Stores
2 0 0 9
2 010
% Change
$4,687,895
$169,883
$85,690
$1.68
2,329
18,780
1,478
$4,637,087
$214,100
$116,962
$2.29
2,165
19,434
1,531
-1.1%
25.5%
36.5%
36.3%
-7.0%
3.5%
3.6%
ronald M. l amb Chairman of Casey’s General Stores, Inc. > The entire Casey’s family extends our deepest
sympathies to the family and friends of Rona ld M. Lamb w ho died on June 11, 2010. Ron ser ve d C as ey’s
with distinction for 40 years in va rio us positions, ra nging f ro m store manager to President , C EO a nd
finally Chairman of the Board of Directors.
Ron’s exceptional character and integrity influenced the lives of many people. His tireless w or k e t hi c
and stron g leadership style are e mbedded into the culture o f our company. We will miss Ron’s fr i end shi p,
dedication and passion for serving others and creating opportunities for our Company and its employees
to grow and succeed.
c a s e y ’ s s u p p o r t s
h o n o r f l i g h t s
In fiscal year 2010, Casey’s supported
11 Honor Flights of World War II
veterans to Washington, D.C., to view the
war memorial and other monuments.
more to help fund 11 flights from our
market area. Casey’s also helped pay
for shirts, hats, photographers and
other associated expenses.
The Honor Flight program provides
free trips for hundreds of elderly
veterans who would not be able to
make the trip otherwise. Casey’s
donated $385,000 and our generous
customers contributed nearly $63,000
Casey’s is proud to help honor the
commitment and sacrifice of the 16
million Americans who served and
400,000 who died defending American
freedoms in World War II.
1 >
1 >
A t R A D i t i o n
o f Bu iL Di n g sH A ReHoL D
eR v A Lu e
How do you build shareholder value
potential. We plan to ramp up our major
over the long term? By combining the
remodeling initiative to build on the
best planning with the best people. In
momentum created by our high-performing
fiscal 2010, Casey’s again proved that it
new store design. We also plan to increase
takes both the art of management and
acquisition activity -- and we see a robust
the science of dollars and sense to create
pipeline of opportunities to do so. Most
a thriving business over the long term.
of all, we’ll continue to harness the power
of both smart systems and smart people
Heading into fiscal 2011, we could not
to add to our track record of building
be more excited about Casey’s growth
shareholder value.
Bo a rd of D irectors (left to right)
Ro ber t J . Myers Pres i dent & CEO of Casey’s Gen era l Stores, Inc. > Kenneth H. Haynie Of counsel to the law firm of Ahlers & Coo ney, P. C. >
Wi lliam C. Ki mball* Reti red Chairman & CEO of Medi ca p Pharmacy, Inc. > Johnny Danos* Directo r of Strategic Developmen t, LWBJ, L LP >
Diane C. Bridgewater* CFO & Treasurer Life Care Services, LLC > Jeffrey M. Lamberti* Shareholder in the law firm of Block, Lamberti and Gocke, P.C. >
Ric ha rd A. Wil key* Management & Development Con sul ta nt > H . Lynn Ho rak* Pa st Regiona l Chairman with Wells Fargo Re gion a l B an k in g
< 2
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M e s s A g e
t o s H A ReHoL D eRs
A n y o n e w h o r u n s a b u s i n e s s k n o w s t h e r e a r e
t w o v e r y b r o a d e l e m e n t s t o c r e a t i n g a n d
s u s t a i n i n g s u c c e s s — p l a n n i n g a n d p e o p l e .
I’m pleased to report in fiscal 2010 Casey’s
executing sound business plans. Fiscal year
delivered yet another record year. Casey’s
2010 was no different in that regard.
net earnings rose 36.5% to $117 million, and
basic earnings per share from those operations
But the best processes and plans are no good
increased to $2.30 from $1.69 in fiscal 2009.
without the right people to execute them.
That’s why the companies with the best people
Fiscal 2010 was our 5th consecutive record
stand out. Casey’s deep talent pool at every
year. Much of Casey’s history of building
level proved itself in 2010 through sound and
shareholder value comes from our methodical,
timely decisions which enabled us to overcome
best-practices approach to creating and
challenges and capitalize on opportunities.
Overcoming a Challenging
Business Climate
Examples of this included:
> Anticipating that the economy would cause
customers to move from carton to single-pack
In fiscal 2010, much of Casey’s operating area
cigarette purchases, and capturing more margin
was faced with a challenging business climate,
on those in-demand items.
in some cases both literally and figuratively. Many
of our markets were hit by the coldest summer
> Prudent decisions to lock in favorable long-
on record followed by one of the harshest winters
term cheese contracts months earlier helped
in history. Record snow fall and blizzards swept
boost gross profit in our prepared foods area.
across the region sometimes weekly, at times
making it impossible for both employees and
customers to reach our stores for days.
> Sound decisions made when designing our
new stores continued to pay dividends as
high-margin sales in prepared foods, fountain
The weather, combined with a continued
drinks and coffee — all emphasized in the
soft economy, held same-store sales across
new design — increased significantly.
all categories below our goals for fiscal 2010.
Despite those challenges, insightful short-term
adjustments and disciplined execution of
> Store operations did an exceptional job of
keeping Casey’s competitive as average
long-term plans helped Casey’s capitalize on
monthly fuel prices fluctuated from $2.00 to
higher-margin merchandise and compensate
$2.70 per gallon, while still yielding a strong
for the reduced sales.
gas margin.
Senior Management Team (l eft to r ig ht)
Robert J. Myers President & CEO > t erry W. H andley COO > William J. Walljasper Senior VP & CFO >
sam J. Billmeyer Senior VP-Logistics & Acquisitions > Julia L. Jackowski Senior VP-Corporate General Counsel
& Human Resources
< 4
5 >
More New Sto re s and a
Majo r Re modelin g Initiative
Goals for 2011
You’ll learn in the balance of this report how
Casey’s faired in all our traditional categories
Staying the Succ ess fu l C o urse
While continuing to build new stores,
— Gasoline, Grocery & Other Merchandise,
Casey’s will ramp up a major remodeling
and Prepared Foods & Fountain.
How will we meet these aggressive
effort in fiscal 2011. We’ll literally knock
goals? The same way we have since
down walls where possible to create
For fiscal year 2011, Casey’s has set
1968 — by continuing to stay both
cost-effective new spaces that leverage
these goals:
disciplined and flexible.
the biggest revenue drivers from our new
store design — increased cooler space
> Expansion
On behalf of my 19,434 fellow Casey’s
and expanded prepared food and coffee/
4% to 6% unit growth through a
General Store employees, thank you
fountain offerings.
combination of building and acquisition.
for your support and investment in
E xp a nd in g into Arkansas
> Gasoline
our Company. We continue to build
shareholder value because that remains
Powered by our success and a strong
average margin of 13.5 cents per gallon.
Together, I am confident we’ll maintain
balance sheet, Casey’s is positioned to add
our tradition of success.
1% same-store gallon growth with an
our goal day after day, year after year.
a tenth state — Arkansas — to our operating
> Grocery & Other Merchandise
area. We have acquired land in several
6% same-store sales growth with an
Sincerely,
locations in the state and will proceed to
average margin of 33.9%.
develop stores in the coming fiscal year.
We’re also actively looking to expand into
> Prepared Foods & Fountain
additional states adjacent to our current
8% same-store sales growth with an
Robert J. Myers
operating area in the coming fiscal years.
average margin of 63.1%.
President & Chief Executive Officer
Ma n a gem ent Team (left to right)
Darryl f. Bacon VP-Food Services > Jay f. Blair VP-Transportation & Distribution > Hal D. Brown VP-Support Services > Robert C. f ord VP-Store Operations >
Brian J. Johnson VP-Finance & Corporate Secretary > Michael R. Richardson VP-Marketing > Russell D. sukut VP-Treasurer
< 6
7 >
s t oRe op eR A t i o n s
C As e y ’ s H As tH Re e A ReAs o f s t oRe o p eR A t i o n s —
g R oCeR y & o tHeR M eR C H AnDi s e ,
p Re p A ReD f o o D
& f o u n t Ai n , AnD g As oLi n e — a n d w e ’ l l d i s c u s s o u r f i s c a l 2 010
r e s u l t s f o r e a c h i n d i v i d u a l l y. I m p o r t a n t l y , o u r b u s i n e s s m i x a m o n g t h e s e
t h r e e a r e a s p r o v i d e d s i g n i f i c a n t b e n e f i t s i n f i s c a l 2 010 , i l l u s t r a t i n g
h o w s o f t n e s s i n o n e a r e a c a n b e o f f s e t b y s t r e n g t h s i n a n o t h e r t o c r e a t e
a n o v e r a l l f a v o r a b l e r e s u l t .
t He WHoLe is gReA teR
than the sum of the pa r ts
ew Store Design Proves Itself
Inside Sales is a combination of Grocery &
Other Merchandise and Prepared Food &
With a full year of data from our new store
Fountain. Combining the categories helps
design in the books, we are pleased that
illustrate how we look at Inside Sales
the new design and its features have met
holistically and as individual categories.
our expectations.
Even though same-store sales in fiscal 2010
The new store we’re rolling out now is
were impacted by the weather and economic
Casey’s tenth significant new design in its
challenges, total gross profit rose by 8.8%.
history and also our biggest store ever built,
We didn’t sell as much total product as
at 3,700-square feet. The new design is more
anticipated, but what we did sell was higher-
aesthetically attractive by today’s customer
margin items, helping to make the result
standards. But our new design goes far beyond
very positive.
aesthetics. It combines both form and function.
Its function is to emphasize high-margin,
high-turning categories, specifically beverages
Grocery & Other Merchandise
and prepared foods and fountain offerings.
The increased shelf space in the new store
helped Casey’s capitalize on consumer demand
by allowing the stocking of products people
want to buy without taking all the shelf space
from steady performers. That flexibility was key
in fiscal 2010, and will continue to be vital as
we increase efforts to meet customers’ needs.
Inside Sales
F Y 2 010:
> Same-store sales — up 3.5%
> Total inside sales — up 6.9%
> Gross profit — up 8.8%
FY 2 010 :
> Same-store sales — up 3.3%
> Average margin — 33.6%
FY 2 011 Goal:
> Same-store sales — up 6%
> Average margin — 33.9%
Our fiscal 2010 goal was to increase same-store
sales 8.9% with an average margin of 33.9%.
For the year, same-store sales rose 3.3% with
an average margin of 33.6%.
Po sting Gross Profit Gain s
Weather and the challenging business climate
caused our margins to finish slightly below goal
in fiscal 2010. Although we benefited from a
higher margin in cigarettes due to an increased
contribution of pack purchases, the challenging
weather adversely impacted higher margin
products within the category. Ice, bottled water,
Prepared Food & Fountain
sports drinks and beer are heavily impacted by
weather. We also saw some trade down in beer
sales, with significant numbers of customers
migrating from premium to budget brands.
Utilizing our point-of-sale technology, we
were able to react quickly to the customers’
purchasing patterns and hold market share
in challenging circumstances.
Once again, our new store design proved its
FY 2 010:
> Same-store sales — 4.2%
> Average margin — 63.8%
FY 2 011 Goal:
> Same-store sales — up 8.0%
> Average margin — 63.1%
value by allowing us to generate increased
We achieved double-digit same-store increases
sales in these and other areas thanks to larger
in fountain and coffee sales driven by the rollout
cooler space and more flexible shelving options.
of 10-head fountain dispensers throughout
As we continue to roll out new construction
fiscal 2010, along with the completion of
and remodeling, we will incorporate the
numerous coffee bar remodels chain-wide,
high-performing elements of the new store
despite the adverse impact of weather on the
into more and more existing stores, helping
category. We also implemented price increases
to continue building shareholder value in fiscal
effective March 1, 2010, that will benefit same-
2011 and beyond.
store sales in the majority of fiscal 2011 by an
Fis ca l 2011 Outlook
We anticipate there will be continued
movement to trade down to less expensive
estimated 3% to 4%.
Lifting Revenue with
Every Cup and Sandwich
brands and more bulk purchasing next year,
In 2010, stores typically saw a 30% to 40%
primarily due to lingering economic stresses.
increase in coffee sales upon completion of
Customers are scrutinizing every purchase
an expanded coffee program. That’s proof
more closely than ever. Again, thanks to our
positive that investments in coffee products
combination of facilities, technology, smart
drive immediate returns, therefore those
planning and talented people, Casey’s remains
changes will feature prominently in our major
well positioned to make changes in our
remodeling program.
product mix and marketing executions to
meet customer demands into the future.
Likewise, Prepared Food and Fountain revenue
in the new store design was about 50% greater
We also anticipate continued migration to
than our average stores. The overall Prepared
pack purchases and increased sales of
Food & Fountain category remained an
higher-margin items in the beverage area
impressive income driver Company-wide in
driven by further implementation of what
fiscal 2010. We continue to strive to identify
we have learned in our new store design
the changing tastes of our customers and will
as we replace existing stores.
move quickly to satisfy those expectations.
< 8
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Same-St ore Sales
%
3
7
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%
9
5
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0
6
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%
3
3
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a
o
G
08 09 10 11
Groce ry &
Other Mercha ndi se
%
8
9
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%
1
9
.
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2
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0
8
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08 09 10 11
Prepare d Foo d
& Foun ta in
%
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.
10
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0
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.
l
a
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G
11
%
0
2
-
.
08
Ga soli ne
(Gallon s)
Industry Leading
Prepared Food & Fountain
Casey’s Prepared Food & Fountain area
continues to be a valuable differentiator for our
Company. Creating this powerful brand didn’t
Fiscal 2011 Outlook
happen overnight. It came from continuous
effort and improvement since we introduced
The data from our new store design provides
prepared food in the early 1980s.
valuable insight into changes that can drive the
most return on investment in existing stores. We
Our proprietary approach to prepared food —
plan to continue to aggressively look for ways
from ingredient buying and distribution to fresh,
to make those changes in an effort to enhance
in-store preparation — allows Casey’s to create
overall productivity.
the uniform quality vital to building a brand and
creating brand loyalty. It also lets us maximize
One of the best ways to lose an advantage in
profits on PF&F compared to the third-party
business is to become complacent. Therefore
vendor arrangements many competitors have.
while continuing to reinforce our powerful
prepared food brand of fresh, high-quality,
A few indications of the importance of Prepared
high-value products, we’ll develop new products
Food & Fountain to our Company...
and put new spins on old favorites to keep pace
with changing consumer trends.
> The category currently accounts for about
30% of Casey’s overall gross profits. That
percentage has increased continuously over
Gasoline
the last five years.
> Casey’s has sustained an average same-store
annual growth of more than 8% in PF&F for
the last five fiscal years.
> Based on the number of locations, Casey’s is a
top-ten retailer of pizza and donuts in the nation.
FY 2010:
> Same-store sales — down 0.1%
> Average margin — 13.9 cents per gallon
FY 2011 Goal:
> Same-store sales — up 1.0%
> Average margin —13.5 cents per gallon
Sales (In Millions)
4
7
0
1
$
,
0
1
0
1
$
,
6
6
3
$
6
3
3
$
6
4
9
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2
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2
4
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,
08 09 10
08 09 10
Grocery &
Other Merchandise
Prepared Food
& Fountain
08 09 10
Ga sol in e
(Gallon s)
We were pleased that gasoline prices in fiscal
year 2010 did not repeat the high volatility of
2009, which was unlike anything our Company
had encountered.
The monthly average retail price per-gallon
of gasoline in fiscal 2009 fluctuated from
$1.59 to $3.85, an unprecedented range.
The reason has to do with increasing credit
While fiscal 2010 was not a repeat of 2009,
card fees impacting overall gross profit of
the average monthly price in fiscal 2010
operators and a more challenging gasoline and
never dropped below $2 per gallon and
cigarette marketing environment. One of the
ranged as high as $2.70.
ways retailers try to offset some of these gross
profit challenges and make up for softness in
That meant the bulk of fiscal 2010 featured
other parts of their business is through a more
significantly higher gas prices compared to a
rational pricing strategy in the gasoline side of
year earlier, which adversely impacted sales.
their business.
However, gasoline margins finished at 13.9
cents per gallon, significantly higher than our
Fiscal 2011 Outlook
11-cent goal for fiscal 2010.
A Cha nge in Pa radigm
We anticipate market forces will continue to
put pressure on retailers in our area resulting
in sustaining high gasoline margins next
We may be seeing a paradigm shift in the
fiscal year. We will continue our gas pricing
way gasoline is priced and sold, which helps
philosophy to identify the competition around
explain increased margins. Retailers in our
each store, monitor their gas price daily
marketing area are much quicker to raise
and adjust our price accordingly. We want
prices in response to wholesale price hikes.
customers to have confidence that if they
They are also increasingly hesitant to pull
come to Casey’s, they will find the lowest gas
those prices down as wholesale prices fall.
price in the area.
%
7
3
3
.
%
6
3
3
.
%
1
3
3
.
Margin
%
8
3
6
.
%
3
2
6
.
%
4
1
6
.
.
¢
9
3
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.
¢
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.
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.
7
2
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.
4
0
6
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0
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.
Gross Profit (In Millions)
.
5
3
3
2
$
.
0
6
0
2
$
.
3
8
8
1
$
08 09 10
08 09 10
08 09 10
08 09 10
08 09 10
G roc e ry &
Othe r Mercha ndi se
Prepared Food
& Fountain
Gasoline
(Per Gallon)
Grocery &
Other Merchandise
Prepared Food
& Fountain
< 10
11 >
.
2
8
7
1
$
.
3
9
6
1
$
.
9
9
5
1
$
08 09 10
Ga soli ne
< 12
13 >
s t oRe D e v eL o p M e n t
g i v e n t H e p o s i t i v e D A t A f R o M o u R n e W
s t oRe D e s i g n , We WiL L Be t A Ki n g s t e p s
Co n s tRuCt i o n ,
t o i nC ReAs e n eW s t oRe
i n c l u d i n g m o v i n g i n t o o u r t e n t h s t a t e , w h i l e b u i l d i n g o n o u r
m a j o r r e m o d e l i n g i n i t i a t i v e C o m p a n y - w i d e .
sH ARin g WHA t W oRK s
addi ng Arkans as
e built 18 new stores in 2010 and
acquired 37 more. We also replaced 20 stores
Company-wide in fiscal 2011. We are confident
that our remodeling plans will deliver the same
revenue-lifting benefits we’ve seen in our new
store design at the most cost-effective price.
during the fiscal year. “Replace” means we
Co nnecti ng with the Comm uni ty
either tore down a store and rebuilt on the
same site, or closed a store and then built in
Casey’s has always been proud to be a part of
a different location within the same market,
the communities we serve, and we strive to
whichever made the most business sense.
create and maintain good relationships with
Escalating New Con struc ti on ,
Adding a New State
our customers and fellow business operators.
We understand that the success of our Company
is tied directly to the success of each community
we serve.
Over the course of fiscal 2011, we will accelerate
real estate purchases in anticipation of increased
We also understand that, at its core, business is
new store openings in the coming fiscal years.
a human endeavor, and it’s important for people
Among those new stores will be several in
to do what they can to help others in need.
Arkansas, which joins Iowa, Minnesota, Illinois,
That’s why Casey’s encourages employees at
South Dakota, North Dakota, Kansas, Missouri,
all levels to support community causes that fit
Wisconsin and Kansas in our family of states.
with their values.
We are actively looking at expanding into other
states contiguous to our current market as well.
Individual stores and Casey’s as a corporation
Major Remodeling Initiative
annually donate millions to local, regional and
national charitable causes. We also use store
locations to offer our customers opportunities
In many instances remodeling is a better, more
to support causes such as St. Jude’s Children’s
cost-effective way to increase profits than a new
Hospital and the Muscular Dystrophy Association.
store or a total replacement. “A major remodel”
entails knocking down walls and physically
Last year, through the generosity of our
increasing space to incorporate more cooler
customers, Casey’s was the largest contributor
and expanded prepared food areas — to include
to St. Jude’s in the nation. The element of
our made-to-order sub sandwich program and
serving a community is so important that
coffee bar — when possible. We expect major
CEO Robert Myers sits on the corporate
remodeling projects in about 20 or so stores
Contribution Committee that meets weekly.
< 14
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y eA R e nD 2 010: 1, 531 CoRp oR A t e s t oRe s
2 011 e x p e Ct A t i o n: 4 % t o 6 % u n i t gR o WtH,
pRiM A RiL y tH R o u gH A Cq u i s i t i o n
Number of Stores per State
Cor porate Stores
Stor e Grow th
97
10
436
37
104
377
65
1 09
296
Coming
Soon
1
3
5
1
8
7
4
1
4
5
4
1
08 09 10
8
1
6
1
7
3
6
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2
1
08 09 10
Acquisi tion s
0
08 09 10
New Store
Co nstructions
.
3
4
2
8
$
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4
1
8
1
$
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2
1
2
7
$
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5
7
4
6
$
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9
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6
1
$
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8
4
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08 09 10
Equi ty
08 09 10
Long-Term Debt
%
6
5
1
.
%
9
5
.
%
3
4
.
08 09 10
Ca p it al Str ucture (In Millions)
Operating Expenses Increase
Fiscal 2011 — Capital Expense Budget
New Stores & Acquisitions
Repla cements
Maintena nce & Remodels
Transportation & Information Syste ms
$108M
$37M
$26M
$18M
Positioned for Continued Growth
Casey’s traditionally strong balance sheet will power our
strategy of aggressive replacement, remodeling, acquisition
and new store construction for fiscal 2011 and beyond. The
Company’s prudent approach to corporate finance is the
foundation of our tradition of building shareholder value.
Corporate Finance
Cash and cash equivalents at fiscal 2010 year-end totaled
$151.7 million. Long-term debt decreased $13.1 million to
$154.8 million. Total debt to capital ratio declined to about
19.5%. Shareholder equity grew 14.3% to $824.3 million.
Staying Vigilant on Expenses
Casey’s continued its tradition of objective, ongoing review
and management of operating expenses in fiscal year 2010.
Operating expenses in the year grew by just 4.3% compared
to fiscal 2009.
New Store Return on Investment
Return on Invested Capital for fiscal 2010 was approximately
12.9%, which was above our expectations.
Data from our new-design stores shows that while they are
more expensive to operate, those higher expenses were offset
by impressive revenue gains. With solid proof that the new
store design is profitable, Casey’s will move more aggressively
to build new stores and remodel existing structures while
remaining true to our prudent approach to corporate finance.
Fiscal 2011 Outlook
As we did in fiscal 2010, Casey’s expects to fund remodeling,
new store constructions and acquisitions with existing cash
and cash flows. Our low debt-to-capital ratio also puts the
Company in a strong position to move quickly to capitalize
on any rapidly developing growth opportunities.
In fiscal year 2011, Casey’s will continue to focus on return on
investment for every planned expansion.
Above all, Casey’s will continue our tradition of making
decisions surrounding the operations and expansion of our
stores in the context of building shareholder value over the
long term. Keeping that goal at the forefront of Company
operations is the main reason Casey’s is positioned for
growth in fiscal 2011 and beyond.
corporate finance
investor
information
< 16
17 >
ca s e y ’ s br e a ks i n to t h e fo r t u n e 50 0 .
In April 2 010, C as ey ’s rea ch ed a n ot h er mi l esto n e i n
it s t ra ck record of bu ildi ng sh a re h ol d er v alu e. Casey ’s
General St ores, Inc. officia lly bec a m e n um be r 485 o n the
Fortu ne 5 0 0 lis t. We t hi nk the a ch ievem ent sp eaks w el l fo r
ou r execu t ion of pla ns for s us ta i na bl e, lon g- ter m gro w th.
Co mmo n S to ck
Casey’s General Stores, Inc. common stock trades on the Nasdaq
Global Select Market under the symbol CASY. The 50.9 million
shares of common stock outstanding at April 30, 2010 had a
market value of $2 billion. As of that same date, there were
2,165 shareholders of record.
Co mmo n S to ck Market Prices
Calendar 2008
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Calendar 2009
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Calendar 2010
1st Quarter
2nd Quarter
High
$ 29.65
26.30
30.48
31.11
High
$ 28.06
28.43
31.70
33.06
High
$ 32.38
39.50
Low
$ 21.69
19.97
21.80
20.63
Low
$ 18.32
23.58
24.47
29.10
Low
$ 29.03
31.54
On July 9, 2010, the last reported sales price of the Company’s
common stock was $35.84 per share. On that same date, the
market cap was $1.8 billion.
Divide nds
The Company began paying cash dividends during fiscal
1991. The dividends paid in fiscal 2010 totaled $0.34 per
share. At its June 10, 2010 meeting, the Board of Directors
increased the quarterly dividend to $0.10 per share. The
dividend is payable on August 16, 2010 to shareholders of
record on August 2, 2010.
Divid end Reinvestment and Sto ck Purc has e Pl an
This plan, introduced in the fall of 1998, gives holders of Casey’s
General Stores, Inc. common stock a convenient and economical
way of purchasing additional shares at market prices by reinvesting
their dividends in full or in part. Stockholders may also take
advantage of the cash payment option to purchase additional
shares. Those wishing to enroll should contact the transfer agent
and registrar:
Computershare Trust Company, N.A.
250 Royall Street | Canton, MA 02021
Telephone 781-575-2000 | www.computershare.com
Investor Inquiries
Current or prospective Casey’s General Stores, Inc. investors can
receive annual reports, proxy statements, Forms 10-K and 10-Q,
and earnings announcements at no cost by calling (515) 965-6107
or sending written requests to the following address:
Casey’s General Stores, Inc.
One Convenience Blvd. | Ankeny, Iowa 50021
Corporate information, including monthly same-store sales data
for the Company’s three business categories, is also available at
www.caseys.com. Quarterly conference calls are broadcast live
over the Internet via the Investor Relations Web page and made
available in archived format. Broadcast times for the quarterly
calls will be announced on the Web page and in corresponding
press releases.
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Part ii
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities . . . . . . . . . . . . . 15
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ITEM 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ITEM 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Part iii
ITEM 10. Directors, Executive Officers, and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ITEM 11.
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . 47
ITEM 13. Certain Relationships and Related Transactions and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ITEM 14.
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Part iv
ITEM 15.
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
< 18
1 >
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, 2010
commission file number 0-12788
casey’s GeneraL stores, inc.
(Exact name of registrant as specified in its charter)
ioWa 42-0935283
(State or other jurisdiction of
(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)
nasDaQ
(Name of Exchange on which Registered)
series a seriaL PreferreD stock Purchase riGhts
nasDaQ
(Title of Class) (Name of Exchange on which Registered)
securities registered pursuant to section 12(g) of the act
none
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 30, 2009, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately
$1,550,288,764, based on the closing sales price ($31.53 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 24, 2010
Common Stock, no par value per share
50,939,162 shares
DocuMents incorPorateD by reference
The information called for by Item 5 of Part II and Items 10, 11, 12, 13 and 15 of Part III is hereby incorporated by reference from the definitive
Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Annual Meeting of Shareholders, which will be
filed with the Securities and Exchange Commission not later than 120 days after April 30, 2010.
Part i
< 2
3 >
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. Our fiscal year runs from May 1 through April
30 of each year. On April 30, 2010, there were a total of 1,531 Casey’s General Stores in operation. There were 18 stores newly constructed and 37
acquired stores opened in fiscal 2010. There was also one store closed in fiscal 2010. 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 14% 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 Code 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. We currently own most of our real estate, including the Casey’s
Distribution Center and Corporate Headquarters facility.
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 (November through
April). In warmer weather, customers tend to purchase greater quantities of gasoline and certain convenience items such as beer, soft drinks, and ice.
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 continually make 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, 2010, the Company was selling donuts prepared on store premises in approximately 98% of our stores in addition
to cookies, brownies, and Danish rolls. The Company installs donut-making equipment in all newly constructed stores.
We began marketing made-from-scratch pizza in 1984, and it is available in 1,490 stores (97%) as of April 30, 2010. 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 29% of our total
revenue, but they have resulted in approximately 74% of our retail gross profits. Gross profit margins on prepared food items averaged
approximately 63% during the same thirty-six months—substantially higher than the gross profit margin on retail sales of gasoline, which
averaged approximately 5%.
< 4
5 >
store Design
Casey’s General Stores are freestanding and, with a few exceptions to accommodate local conditions, conform to standard construction
specifications. The most recent 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 400.
other information
On March 9, 2010, the Company received an unsolicited proposal from Couche-Tard to acquire all outstanding shares of common stock of
the Company at a price of $36 per share in cash. After careful consideration of the strategic, financial and legal aspects of the proposal and the
nature and timing of the proposal, the Company’s Board of Directors unanimously determined that the proposal was not in the best interests of
the Company and unanimously determined to reject the proposal. Couche-Tard made public its unsolicited proposal to acquire the Company on
April 9, 2010. Subsequently, on June 2, 2010, Couche-Tard and its indirect wholly owned subsidiary, ACT Acquisition Sub, Inc., commenced a tender
offer for all outstanding shares of common stock of the Company, together with the Rights, for $36 per share in cash. On the same date, Couche-Tard
also publicly announced, and notified the Company of, its intent to nominate and solicit proxies for the election of a slate of nine directors at the
2010 annual meeting of the Company’s shareholders. The Board of Directors thoroughly considered numerous factors regarding Couche-Tard’s
tender offer and, in consultation with its legal and financial advisors and senior management of the Company, determined that Couche-Tard’s
tender offer substantially undervalues the Company. Accordingly, the Board of Directors has recommended that the Company’s shareholders
reject the offer and not tender their shares. During the fourth quarter of fiscal 2010, the Company incurred $6.9 million in legal and advisory fees
related to the evaluation of the unsolicited tender offer and related actions by Couche-Tard. Responding to Couche-Tard’s unsolicited tender
offer and related actions is expected to result in the incurrence of additional expenses in fiscal 2011, which are expected to be material to the
Company’s financial position and results of operations.
Gasoline operations
Gasoline sales are an important part of our revenue and earnings. Approximately 69% of Casey’s total revenue for the year ended
April 30, 2010 was derived from the retail sale of gasoline. The following table summarizes gasoline sales for the three fiscal years ended
April 30, 2010:
Year ended April 30,
Number of gallons sold
Total retail gasoline sales
Percentage of total revenue
Gross profit percentage (excluding credit card fees)
2010 2009 2008
1,283,479,481
1,242,269,981
1,218,820,162
$ 3,177,489,872 $
3,323,616,288
$ 3,570,228,422
68.5%
5.6%
70.9%
4.8%
73.7%
4.7%
Average retail price per gallon
$ 2.48 $
2.68
$ 2.93
Average gross profit margin per gallon (excluding credit card fees)
Average number of gallons sold per store*
13.88¢
853,725
12.87¢
859,114
13.89¢
835,948
*Includes only those stores in operation at least one full year on April 30 of the fiscal year indicated.
Retail prices of gasoline decreased during the year ended April 30, 2010. 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.
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 2010, we purchased directly from manufacturers a majority 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 enables us to respond flexibly to changing market conditions.
Personnel
On April 30, 2010, we had 8,045 full-time employees and 11,389 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
7 >
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 3,431 USTs, 2,849 of which are fiberglass and 582 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, 2010 and 2009, we spent approximately $1,083,000 and $1,128,000, respectively, for
assessments and remediation. Substantially all of these expenditures were submitted for reimbursement from state-sponsored trust fund programs. As
of April 30, 2010, approximately $13,210,000 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, 2010, we had an accrued liability of approximately $187,000 for estimated expenses related to anticipated
corrective actions or remediation efforts, including relevant legal and consulting costs. We believe we have no material joint and several
environmental liability with other parties.
iteM 1a. risk factors
You should carefully consider the risks described in this report before making a decision to invest in our securities. The risks and
uncertainties described are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently
deem immaterial could negatively impact our results of operations or financial condition in the future. If any of such risks actually occur,
our business, financial condition, and/or results of operations could be materially adversely affected. In that case, the trading price of
our securities could decline and you might lose all or part of your investment.
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, on average our gasoline revenues accounted for approximately 71% 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
9 >
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.
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, 2009 through April 30, 2010 we acquired 37 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:
•
The inability to identify and acquire suitable sites at advantageous prices;
• Competition in targeted market areas;
• Difficulties during the acquisition process in discovering some of the liabilities of the businesses that we acquire;
• Difficulties associated with our existing financial controls, information systems, management resources and human resources needed
to support our future growth;
• Difficulties with hiring, training and retaining skilled personnel, including store managers;
• Difficulties in adapting distribution and other operational and management systems to an expanded network of stores;
• Difficulties in obtaining governmental and other third-party consents, permits and licenses needed to operate additional stores;
• Difficulties in obtaining the cost savings and financial improvements we anticipate from future acquired stores;
•
The potential diversion of our senior management’s attention from focusing on our core business due to an increased focus on
acquisitions; and
• Challenges associated with the consummation and integration of any future acquisition.
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; health care; 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
11 >
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.
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.
iowa law and provisions in our charter documents 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.
On April 16, 2010, the Board of Directors adopted a Rights Plan, providing for the distribution of one right (a “Right”) for each share of common
stock outstanding. Each Right entitles the holder to purchase one one-thousandth (1/1000th) of a share of Series A Serial Preferred Stock, no par
value per share, of the Company at a price of $95.00. Each Right also entitles the holder to purchase common shares in the surviving entity at
50% of the market price. The Rights generally become exercisable at the discretion of the Board of Directors following a public announcement
that 15% or more of the Company’s common stock has been acquired or an intent to acquire has become apparent. The Rights will expire on the
earlier of April 15, 2011 or redemption by the Company. Certain terms of the Rights are subject to adjustment to prevent dilution.
< 12
13 >
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. Further, Section 490.1108A of the Iowa Business Corporation Act permits a board of directors, in the context of a takeover
proposal, to consider not only the effect of a proposed transaction on shareholders, but also on a corporation’s employees, suppliers, customers,
creditors, and on the communities in which the corporation operates. These provisions 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.
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.
the unsolicited takeover attempt by alimentation couche-tard inc. (“couche-tard”) will likely require us to incur significant additional costs.
On March 9, 2010, the Company received an unsolicited proposal from Couche-Tard to acquire all outstanding shares of common stock of
the Company at a price of $36 per share in cash. After careful consideration of the strategic, financial and legal aspects of the proposal and the
nature and timing of the proposal, our Board of Directors unanimously determined that the proposal was not in the best interests of the Company and
unanimously determined to reject the proposal. Couche-Tard made public its unsolicited proposal to acquire the Company on April 9, 2010.
Subsequently, on June 2, 2010, Couche-Tard and its indirect wholly owned subsidiary, ACT Acquisition Sub, Inc., commenced a tender offer for all
outstanding shares of common stock of the Company, together with the Rights, for $36 per share in cash. On the same date, Couche-Tard also
publicly announced, and notified the Company of, its intent to nominate and solicit proxies for the election of a slate of nine directors at the 2010
annual meeting of the Company’s shareholders. Our Board of Directors thoroughly considered numerous factors regarding Couche-Tard’s tender
offer and, in consultation with its legal and financial advisors and senior management of the Company, determined that Couche-Tard’s tender offer
substantially undervalues the Company. Accordingly, our Board of Directors has recommended that the Company’s shareholders reject the offer and
not tender their shares.
During the fourth quarter of fiscal 2010, the Company incurred $6.9 million in legal and advisory fees related to the evaluation of the unsolicited
tender offer and related actions by Couche-Tard. Responding to Couche-Tard’s unsolicited tender offer and related actions is expected to result in the
incurrence of additional expenses in fiscal 2011, which are expected to be material to the Company’s financial position and results of operations.
couche-tard’s unsolicited takeover bid is disruptive to our business and may distract our management and employees and create uncertainty
that may adversely affect our business and results.
The review and consideration of the Couche-Tard tender offer and related actions by Couche-Tard, have been, and may continue to be, a
significant distraction for our management and employees and have required, and may continue to require, the expenditure of significant time and
resources by the Company. Couche-Tard’s tender offer and related actions have also created uncertainty for the Company’s employees, and this
uncertainty may adversely affect our ability to retain key employees and to hire new talent. Further, Couche-Tard’s tender offer and related actions
may create uncertainty for the Company’s current and potential business partners, which may cause them to terminate, or not to renew or enter into,
arrangements with the Company. In addition, if the Couche-Tard nominees are elected to our Board of Directors, the ability of management to work
effectively and efficiently with our Board of Directors with respect to the day to day operations and development of the Company may be restricted,
and as a result, the Company’s business may be harmed. These foregoing effects, alone or in combination, may harm the Company’s business and
have a material adverse effect on the Company’s results of operations.
the market price for our common stock has been and may in the future be volatile, which could cause the value of your investment
to decline.
Securities markets worldwide experience significant price and volume fluctuations. This market volatility could significantly affect the market
price of our common stock without regard to our operating performance. In addition, the price of our common stock could be subject to wide
fluctuations in response to these and other factors:
• A deviation in our results from the expectations of public market analysts and investors;
•
Statements by research analysts about our common stock, company, or industry;
• Changes in market valuations of companies in our industry and market evaluations of our industry generally;
• Additions or departures of key personnel;
• Actions taken by our competitors;
• Couche-Tard’s unsolicited tender offer and speculation concerning a potential sale of the Company;
•
Sales of common stock by the Company, senior officers, or other affiliates; and
• Other general economic, political, or market conditions, many of which are beyond our control.
The market price of our common stock will also be affected by our quarterly operating results and quarterly comparable store sales growth,
which may be expected to fluctuate from quarter to quarter. The following are factors that may affect our quarterly results and comparable store
sales: general, regional, and national economic conditions; competition; unexpected costs; changes in 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.
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, 2010, we also owned the land at 1,497 store locations and the buildings at 1,505 locations and leased the land at 34 locations
and the buildings at 26 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 10, Contingencies, to the Consolidated
Financial Statements included in Part II, Item 8.
< 14
15 >
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 50,926,162 shares of common stock outstanding
at April 30, 2010 had a market value of $2 billion, and there were 2,165 shareholders of record.
common stock Market Prices
High
Low
$ 29.65
$ 21.69
26.30
30.48
31.11
19.97
21.80
20.63
Calendar
2009
Q1
Q2
Q3
Q4
High
Low
$ 28.06
$ 18.32
28.43
31.70
33.06
23.58
24.47
29.10
Calendar
2010
Q1
High
Low
$ 32.38
$ 29.03
Calendar
2008
Q1
Q2
Q3
Q4
Dividends
We began paying cash dividends during fiscal 1991.The dividends paid in fiscal 2010 totaled $0.34 per share. The dividends paid in fiscal 2009
totaled $0.30 per share. On June 10, 2010, the Board of Directors declared a quarterly dividend of $0.10 payable August 16, 2010 to shareholders
of record on August 2, 2010. The Board expects to review the dividend every year at its June meeting.
The cash dividends declared during the calendar years 2008-10 were as follows:
Calendar
2008
Q1
Q2
Q3
Q4
Cash dividend
Calendar
Cash dividend
Calendar
Cash dividend
declared
$
0.065
0.075
0.075
0.075
$
0.29
2009
Q1
Q2
Q3
Q4
declared
$
0.075
0.085
0.085
0.085
$
0.33
2010
Q1
Q2
declared
$ 0.085
0.10
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
Earnings from continuing operations before income taxes
Federal and state income taxes
Net earnings from continuing operations
Cumulative effect of accounting change, net of tax benefit
Net earnings
Basic
2010
2009
2008
2007
2006
$ 4,637,087
$ 4,690,525
$ 4,843,259
$ 4,047,062
$ 3,522,204
3,844,735
3,966,919
4,155,493
3,461,613
2,992,763
792,352
723,606
687,766
585,449
529,441
526,291
504,449
73,546
10,933
181,582
64,620
116,962
--------
69,451
10,626
476,211
67,893
9,792
139,080
133,870
53,390
85,690
--------
48,979
84,891
--------
414,904
367,185
64,320
11,184
95,041
33,150
61,891
--------
57,521
8,896
95,839
34,288
61,551
1,083
$ 116,962
$
85,690
$
84,891
$
61,891
$
60,468
Earnings from continuing operations
$
2.30
$
1.69
$
1.68
$
1.23
$
Cumulative effect of accounting change, net of tax benefit
--------
--------
--------
--------
Net earnings
Diluted
$
2.30
$
1.69
$
1.68
$
1.23
$
Earnings from continuing operations
$
2.29
$
1.68
$
1.67
$
1.22
$
Cumulative effect of accounting change, net of tax benefit
--------
--------
--------
--------
Net earnings
$
2.29
$
1.68
$
1.67
$
1.22
$
1.22
.02
1.20
1.21
.02
1.19
Weighted average number of common
shares outstanding—basic
50,899
50,787
50,681
50,468
50,310
Weighted average number of common
shares outstanding—diluted
51,053
50,917
50,859
50,668
50,610
Dividends paid per common share
$
0.34
$
0.30
$
0.26
$
0.20
$
0.18
Balance Sheet Data
As of April 30,
Current assets
Total assets
Current liabilities
Long-term debt, net of current maturities
Shareholders’ equity
2010
2009
2008
2007
2006
$ 310,263
$ 284,727
$ 313,256
$ 240,619
$ 192,766
1,388,775
1,262,695
1,219,200
1,129,271
988,899
240,886
221,243
259,099
234,267
245,056
154,754
824,319
167,887
721,030
181,443
199,504
106,512
647,472
572,264
523,190
< 16
17 >
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, 2010, there were a total of 1,531 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 14% 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, 2010, the Company owned the land at 1,497 store locations and the buildings at 1,505 locations, and leased the land at 34 locations and
the buildings at 26 locations.
During the fourth quarter of fiscal 2010, the Company earned $0.43 in earnings per share compared to $0.31 per share for the same quarter a
year ago. The results include $6.9 million in legal and advisory fees related to the evaluation of the unsolicited offer and related actions by Alimentation
Couche-Tard. Without the effect of those fees, earnings would have been approximately $0.51 for the quarter. Fiscal 2010 basic earnings per share
were $2.30 versus $1.69 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 2010 fiscal year, we acquired 37 convenience stores from other parties and completed 18 new store constructions. The Company
also replaced 20 stores incorporating the new store design that includes a larger coffee and fountain offering, made-to-order sub sandwich program,
and expanded cooler capacity.
The fourth quarter results reflected a 0.2% increase in same-store gasoline gallons sold, with an average margin of approximately 13.1 cents per
gallon. For the fiscal year, same-store gallons were unchanged with an average margin of 13.9 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 increased 3.1% and prepared foods and fountain increased 5.3% during the fourth quarter.
The relatively weak 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 conditions that may affect future performance, see the “Forward-looking Statements” at the end of this Item 7.
unsolicited takeover attempt by couche-tard
On March 9, 2010, the Company received an unsolicited proposal from Couche-Tard to acquire all outstanding shares of common stock
of the Company at a price of $36 per share in cash. After careful consideration of the strategic, financial and legal aspects of the proposal
and the nature and timing of the proposal, the Board of Directors unanimously determined that the proposal was not in the best interests of
the Company and unanimously determined to reject the proposal. Couche-Tard made public its unsolicited proposal to acquire the Company
on April 9, 2010. Subsequently, on June 2, 2010, Couche-Tard and its indirect wholly owned subsidiary, ACT Acquisition Sub, Inc., commenced
a tender offer for all outstanding shares of common stock of the Company, together with the Rights, for $36 per share in cash. On the same
date, Couche-Tard publicly announced, and notified the Company of, its intent to nominate and solicit proxies for the election of a slate of nine
directors at the 2010 annual meeting of the Company’s shareholders. The Board of Directors thoroughly considered numerous factors regarding
Couche-Tard’s tender offer and, in consultation with its legal and financial advisors and senior management of the Company, determined that
Couche-Tard’s tender offer substantially undervalues the Company. Accordingly, the Board of Directors has recommended that the Company’s
shareholders reject the offer and not tender their shares.
Please see Note 10, Contingencies, to the Consolidated Financial Statements included in Part II, Item 8 for a discussion of certain litigation
commenced in respect of Couche-Tard’s tender offer and related actions.
fiscal 2010 compared with fiscal 2009
Total revenue for fiscal 2010 decreased 1.1% to $4,637,087, primarily due to a 7.5% decrease in average 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 $3,177,490, a decrease of 4.4%, and gallons sold increased 3.3% to 1,283,479. Inside sales
increased 6.9% to $1,439,301, primarily due to increases in the cigarette and fountain categories and a greater number of stores in operation.
Total gross profit margin was 17.1% for fiscal 2010 compared with 15.4% for the prior year. The gas margin increased to 5.6% in fiscal 2010
from 4.8% in fiscal 2009. The grocery & other merchandise margin decreased to 33.6% in fiscal 2010 from 33.7% in fiscal 2009. The prepared
food & fountain margin increased to 63.8% from 61.4% primarily due to the lower cost of cheese during fiscal 2010.
Operating expenses increased 4.3% in fiscal 2010 primarily due to a $6,862 pre-tax charge related to the evaluation of the unsolicited
offer and related actions by Alimentation Couche-Tard. The Company also received a $1,543 rebate of contractual amounts of credit card
transaction fees which should have been recorded in prior periods. When you eliminate the impact of those two items, as well as the impact
from the $9,100 legal settlement and $2,553 flood loss from a year ago, operating expenses would have increased 5.7% for the year. Lower
retail gasoline prices resulted in lower sales, which increased the operating expense ratio to 11.3% of total revenue in fiscal 2010 from 10.8% in
the prior year. Lower retail gasoline prices also helped reduce our transportation costs and credit card fees during the first half of the year.
Depreciation and amortization expense increased 5.9% to $73,546 in fiscal 2010 from $69,451 in fiscal 2009. The increase was due to
capital expenditures made in fiscal 2010.
The effective tax rate decreased 280 basis points to 35.6% in fiscal 2010 from 38.4% in fiscal 2009. The decrease in the effective tax rate
was primarily due to a tax benefit resulting from a change in an uncertain tax position relating to a refund of tax credits.
Net earnings increased to $116,962 in fiscal 2010 from $85,690 in fiscal 2009. The increase was due primarily to an increase in same-store
sales from the prior year, an increase in the average margin on prepared food & fountain sales, and an increase in the gross profit margin per
gallon on gasoline sold.
< 18
19 >
fiscal 2009 compared with fiscal 2008
Total revenue for fiscal 2009 decreased 3.2% to $4,690,525, 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 $3,323,616, a decrease of 6.9%, and gallons sold increased 1.9% to 1,242,270. Inside sales increased
7.8% to $1,346,161.
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 5.9% 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 losses 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 3.5%. 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 2.3% to $69,451 in fiscal 2009 from $67,893 in fiscal 2008. The increase was due to capital
expenditures made in fiscal 2009.
The effective tax rate increased 180 basis points 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 increased to $85,690 in fiscal 2009 from $84,891 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.
COMPANY TOTAL REVENUE AND GROSS PROFIT
Years ended April 30,
Total revenue
Gasoline
Grocery & other merchandise
Prepared food & fountain
Other
Gross profit (1)
Gasoline
Grocery & other merchandise
Prepared food & fountain
Other
2010
2009
2008
$
3,177,490
$
3,323,616
$
3,570,228
1,073,508
365,793
20,296
1,010,474
335,686
20,749
945,951
302,315
24,765
4,637,087
$
4,690,525
$
4,843,259
178,176
$
159,851
$
360,432
233,507
20,237
340,044
205,997
17,714
$
792,352
$
723,606
$
169,308
312,743
188,333
17,382
687,766
$
$
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
2010
2009
$
3,070
$
3,228
$
958
389
2,112
119
164
854
928
373
2,301
108
146
859
2008
3,305
856
340
2,449
115
136
836
(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 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 matching contribution
paid to the 401(k) 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.
< 20
21 >
Vendor allowances include rebates and other funds received from vendors to promote their products. We often receive such allowances on the
basis of quantitative contract terms that vary by product and vendor or directly on the basis of purchases made. Rebates are recognized as reductions of
inventory costs when purchases are made; reimbursements of an operating expense (e.g., advertising) are recorded as reductions of the related expense.
Long-lived assets
The Company periodically monitors closed and 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 to the extent
the carrying value of the assets are less than their estimated fair value. 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 $100 in fiscal 2010, $1,262 in fiscal 2009, and $450
in fiscal 2008.
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 $20,713 and $19,111 for the years ended April 30, 2010 and 2009, respectively.
Liquidity and capital resources
Due to the nature of our business, cash provided by 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, 2010, the Company’s ratio of current assets to current liabilities was 1.29 to 1. The ratio at April 30, 2009 and at
April 30, 2008 was 1.29 to 1 and 1.21 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 increased $43,444 (25.5%) in the year ended April 30, 2010, primarily because of large increases in
net earnings and accounts payable. Accounts payable increased primarily due to the higher cost per gallon of gasoline. This result was partially offset
by a large increase in inventories and a decrease in accrued expenses. Cash used in investing activities in the year ended April 30, 2010 increased
$28,188 (19.4%) primarily due to the increase in the store acquisitions from the prior year. Cash used in financing activities increased slightly $447
(1.3%), primarily due to an increase in dividends paid.
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 2010, we expended $174,921 for property and equipment,
primarily for the acquisition and remodeling of stores compared with $148,164 in the prior year. In fiscal 2011, we anticipate expending between
$189,000 and $243,000, primarily from existing cash and funds generated by operations, for construction, acquisition, and remodeling of stores.
As of April 30, 2010, we had long-term debt, net of current maturities, of $154,754 consisting of $100,000 in principal amount of 5.72% senior
notes, series A and B; $28,572 in principal amount of 7.38% senior notes; $16,000 in principal amount of senior notes, series A through series F, with
interest rates ranging from 6.18% to 7.23%; $503 of mortgage notes payable; and $9,679 of capital lease obligations.
Interest on the 5.72% senior notes series A and series B is payable on the 30th day of each March and September. Principal 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.
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, 2010:
Contractual obligations
Payments due by period
Total
Less than1 year
1-3 years
3-5 years More than 5 years
Senior notes
Mortgage notes
Capital lease obligations
Operating lease obligations
Unrecognized tax benefits
Deferred compensation
$
216,404
10,693
18,885
1,352
5,482
12,788
Total
$
265,604
23,443
10,177
1,194
325
---------
---------
35,139
35,110
516
2,344
704
---------
---------
38,674
43,353
---------
1,925
322
---------
---------
45,600
114,498
---------
13,422
1
---------
---------
127,921
Unrecognized tax benefits relate to uncertain tax positions and since 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.
< 22
23 >
At April 30, 2010, the Company had a total of $5,482 in gross unrecognized tax benefits. Of this amount, $3,572 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 $250 as of April 30, 2010. 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 2006 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 possible 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, 2010, the Company did not have any ongoing federal income tax examinations. One state
has an examination in progress. The Company did not have any outstanding litigation related to tax matters. At this time, management believes
it is reasonably possible the aggregate amount of unrecognized tax benefits will decrease by approximately $1,172 within the next 12 months
due to the finalization of a state tax examination.
Included in long-term liabilities on our consolidated balance sheet at April 30, 2010, was a $12,788 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. However, certain payments will be due during
the next 5 years.
At April 30, 2010, 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 $11,000 and $10,000, respectively, were issued and outstanding
at April 30, 2010 and 2009, on the insurance company’s behalf. We renew the letters of credit on an annual basis.
forward-looking statements
This Form 10-K contains various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 as amended and
Section 21E of the Securities Exchange Act of 1934 as amended. Forward-looking statements represent our expectations or beliefs concerning future
events, including (i) any statements regarding future sales and gross profit percentages, (ii) any statements regarding the continuation of historical
trends, and (iii) any statements regarding the sufficiency of the Company’s cash balances and cash generated from operations and financing activities
for the Company’s future liquidity and capital resource needs. The words believe, expect, anticipate, intend, estimate, project and similar expressions
are intended to identify forward-looking statements. We caution you that these statements are further qualified by important factors that could cause
actual results to differ materially from those in the forward-looking statements, including without limitations the factors described in this Form 10-K.
We ask you not to place undue reliance on such forward-looking statements because they speak only of our views as of the statement dates.
Although we have attempted to list the important factors that presently affect the Company’s business and operating results, we further caution you
that other factors may in the future prove to be important in affecting the Company’s results of operations. We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
In addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements, factors that
could cause the Company’s actual results to differ materially from those contemplated in any forward-looking statements include, among others,
the following:
competition
Our business is highly competitive and marked by ease of entry and constant change in terms of the numbers and type of retailers offering
the products and services found in 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 our 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.
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.
< 24
25 >
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.
unsolicited takeover attempt by couche-tard
During the fourth quarter of fiscal 2010, the Company incurred $6.9 million in legal and advisory fees related to the evaluation of the unsolicited
tender offer and related actions by Couche-Tard. Couche-Tard’s unsolicited takeover attempt will likely require the Company to incur significant
additional costs. In addition, Couche-Tard’s unsolicited takeover bid is disruptive to our business and may distract our management and employees
and create uncertainty that may adversely affect our business and results. Further, the unsolicited tender offer commenced by Couche-Tard may harm
the Company’s relationships with its customers, employees and suppliers. These factors as well as other risks resulting from Couche-Tard’s actions in
connection with its unsolicited tender offer may cause actual results to differ materially from those in the forward-looking statements. There can be no
assurance whether a transaction will occur with Couche-Tard or any other party, or at what price.
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, 2010 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 those derivative instruments. No such derivative instruments were used during fiscal year 2010, 2009, or
2008. However, we do from time to time, participate in a forward buy of certain commodities, primarily cheese and coffee.
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, 2010 and 2009, 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, 2010. 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, 2010 and 2009 and the results of their operations and their cash flows for each of the
years in the three-year period ended April 30, 2010, in conformity with U.S. generally accepted accounting principles.
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, 2010, based on criteria established in Internal Control—Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated June 28, 2010 expressed an unqualified
opinion on the effectiveness of the Company’s internal control over financial reporting.
Des Moines, Iowa
June 28, 2010
< 26
27 >
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, 2010,
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 the accompanying Item 9A (Controls and Procedures).
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, 2010, 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, 2010 and 2009, 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, 2010, and our report dated June 28, 2010
expressed an unqualified opinion on those consolidated financial statements.
Des Moines, Iowa
June 28, 2010
casey’s GeneraL stores, inc. anD subsiDiaries
CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts)
April 30,
assets
Current assets
2010
2009
Cash and cash equivalents
$
151,676
$
145,695
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, 50,926,162 and 50,842,712 shares
issued and outstanding at April 30, 2010 and 2009, respectively
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
See accompanying Notes to Consolidated Financial Statements.
12,111
--------
124,951
1,307
9,417
10,801
310,263
297,833
621,882
784,341
13,849
1,717,905
706,994
1,010,911
10,054
57,547
7,888
3,000
106,528
1,394
11,895
8,327
284,727
273,406
568,366
711,090
17,924
1,570,786
652,376
918,410
8,582
50,976
$
1,388,775
$
1,262,695
$
24,577
$
145,334
11,981
15,267
20,713
23,014
240,886
154,754
141,229
12,788
14,799
564,456
28,442
115,436
23,155
14,156
19,111
20,943
221,243
167,887
125,536
11,085
15,914
541,665
--------
--------
64,439
759,880
824,319
60,804
660,226
721,030
$
1,388,775
$
1,262,695
CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share amounts)
< 28
29 >
Years ended April 30,
Total revenue
Cost of goods sold (exclusive of depreciation, shown separately below)
Gross profit
Operating expenses
Depreciation and amortization
Interest, net
Earnings before income taxes
Federal and state income taxes
Net earnings
Earnings per common share
Basic
Diluted
2010
2009
2008
$
4,637,087
$
4,690,525
$
4,843,259
3,844,735
792,352
526,291
73,546
10,933
181,582
64,620
3,966,919
723,606
504,449
69,451
10,626
139,080
53,390
116,962
$
85,690
$
4,155,493
687,766
476,211
67,893
9,792
133,870
48,979
84,891
2.30
2.29
$
$
1.69
1.68
$
$
1.68
1.67
$
$
$
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In thousands, except share and per share amounts)
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
Net earnings
Payment of dividends (34 cents per share)
Proceeds from exercise of stock options (83,450 shares)
Tax benefits related to nonqualified stock options
Stock based compensation
Common stock
Retained earnings
Total
$
53,547
$
518,717
$
572,264
--------
--------
2,104
607
1,432
--------
84,891
(13,180)
--------
--------
--------
(646)
$
57,690
$
589,782
$
--------
--------
1,346
512
1,256
85,690
(15,246)
--------
--------
--------
$
60,804
$
660,226
$
--------
--------
1,239
365
2,031
116,962
(17,308)
--------
--------
--------
84,891
(13,180)
2,104
607
1,432
(646)
647,472
85,690
(15,246)
1,346
512
1,256
721,030
116,962
(17,308)
1,239
365
2,031
balance at april 30, 2010
$
64,439
$
759,880
$
824,319
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Years ended April 30,
cash flows from operating activities
Net earnings
Adjustments to reconcile net earnings to net cash provided by operations
Depreciation and amortization
Other amortization (accretion)
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 businesses
Proceeds from sales of property and equipment
Net cash used in investing activities
cash flows from financing activities
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 financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
2010
2009
2008
$
116,962
$
85,690
$
84,891
73,546
203
2,031
456
18,171
(365)
(1,223)
(15,886)
87
29,898
(6,567)
(3,649)
404
69,451
(192)
1,256
4,063
16,080
(512)
5,774
18,794
25
(47,907)
15,931
1,005
1,166
67,893
271
1,432
2,907
235
(607)
(3,230)
(14,405)
(2,132)
28,968
8,972
1,146
1,081
214,068
170,624
177,422
(129,233)
(45,688)
1,769
(173,152)
(19,231)
1,239
(17,308)
365
(34,935)
5,981
145,695
(136,351)
(11,813)
3,200
(144,964)
(21,100)
1,346
(15,246)
512
(34,488)
(8,828)
154,523
$
151,676
$
145,695
$
(82,498)
(8,858)
3,223
(88,133)
(31,364)
2,104
(13,180)
607
(41,833)
47,456
107,067
154,523
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid during the year for
Interest, net of amount capitalized
Income taxes
Noncash investing and financing activities
2010
2009
$
11,677
$
13,142
$
48,825
34,229
2008
15,354
47,710
Property and equipment acquired through notes payable and capitalized lease obligations
2,234
1,603
120
See accompanying Notes to Consolidated Financial Statements.
< 30
31 >
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 1,531 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 2010 were distributed as follows: 69%
gasoline, 23% grocery & other merchandise, and 8% 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, 2010 and 2009:
Gasoline
Merchandise
Merchandise LIFO reserve
Total inventory
fiscal 2010
Fiscal 2009
54,439
102,344
(31,832)
124,951
37,377
98,988
(29,837)
106,528
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.
Goodwill Goodwill and intangible assets with indefinite lives are tested for impairment at least annually. The Company assesses impairment
annually in the fourth quarter using a market based approach to establish fair value. All of the goodwill assigned to the individual stores is aggregated
into a single reporting unit due to the similar economic characteristics of the stores. As of April 30, 2010, there was $57,547 of goodwill, and
management’s analysis of recoverability completed as of the fiscal year-end yielded no evidence of impairment.
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 Company monitors closed and 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 to the
extent carrying value is less than estimated fair value. Fair value is based on management’s estimate of the price that would be received to sell
an asset in an orderly transaction between market participants. The estimate is derived from offers, actual sale or disposition of assets subsequent
to year-end, and other indications of asset value which are considered Level 3 inputs. 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 $100 in fiscal 2010, $1,262 in fiscal
2009, and $450 in fiscal 2008. 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
Excise taxes Excise taxes approximating $454,000, $439,000, and $414,000 collected from customers on retail gasoline sales are
included in net sales for fiscal 2010, 2009, and 2008, 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.
< 32
33 >
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.
Asset retirement obligations The Company recognizes the estimated future cost to remove underground storage tanks over the estimated
useful life of the storage tank. 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 2010. The recorded
asset for asset retirement obligations was $6,431 and $6,210 at April 30, 2010 and 2009, respectively, and is recorded in other assets, net of
amortization. The discounted liability was $9,067 and $8,642 at April 30, 2010 and 2009, respectively, and is recorded in other long-term liabilities.
Environmental remediation liabilities The Company accrues for environmental remediation liabilities when it is probable a liability has been
incurred and the amount of loss can be reasonably estimated.
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, 2010, 2009, or 2008.
Stock-based compensation Stock based compensation is recorded 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.
Recent accounting pronouncements Effective May 1, 2009, we adopted new guidance regarding business combinations. We established
requirements for the recognition and measurement of identifiable assets acquired, liabilities assumed, noncontrolling interest of the acquiree, goodwill
acquired, and gain from bargain purchase. This was applied prospectively to business combinations for which the acquisition date was after May 1, 2009.
Subsequent events Events that have occurred subsequent to April 30, 2010 have been evaluated through the filing date of this Annual Report
on Form 10-K with the Securities and Exchange Commission.
Reclassifications Certain amounts in the prior years’ financial statements have been reclassified to conform to the current-year presentation,
primarily related to discontinued operations and cash flows related to acquisitions. These changes were not considered material.
2. business acQuisitions
During the year ended April 30, 2010, the Company acquired 37 stores through a variety of single store and multi-store transactions with
several unrelated third parties. The acquisitions were recorded by allocating the cost of the assets acquired, including intangible assets and
liabilities assumed, based on their estimated fair values at the acquisition date. The excess of the cost of the acquisition over the net amounts
assigned to the fair value of the assets acquired and the liabilities assumed is recorded as goodwill. All of the goodwill associated with these
transactions will be deductible for income tax purposes over 15 years.
Allocation of the purchase price for the transactions in aggregate is as follows (in thousands):
Assets acquired:
Inventories
Property and equipment
Total assets
Liabilities assumed:
Accrued expenses
Total liabilities
Net tangible assets acquired, net of cash
Goodwill
Non-compete agreements
$
2,537
36,552
39,089
177
177
38,912
6,651
125
Total consideration paid, net of cash acquired
$
45,688
The following unaudited pro forma information presents a summary of our consolidated results of operations as if the transactions referenced
above occurred at the beginning of the fiscal year for each of the periods presented (amounts in thousands, except per share data):
Years Ended April 30,
2010
2009
Total revenues
Net earnings
Earnings per share
Basic
Diluted
$
$
$
$
4,750,366
4,810,347
119,379
88,002
2.35
2.34
1.73
1.73
During fiscal 2009, there were several individually immaterial business acquisitions that resulted in increases of goodwill of $2,668.
< 34
35 >
3. fair vaLue of financiaL instruMents anD LonG-terM Debt
A summary of the fair value of the Company’s financial instruments follows.
Cash and cash equivalents, receivables, and accounts payable The carrying amount approximates fair value due to the short maturity of these
instruments or the recent purchase of the instruments at current rates of interest.
Long-term debt The fair value of the Company’s long-term debt excluding capital lease obligations is estimated based on the current rates
offered to the Company for debt of the same or similar issues. The fair value of the Company’s long-term debt excluding capital lease obligations
was approximately $161,000 and $173,000, respectively, at April 30, 2010 and 2009. The Company has a $50,000 line of credit with no balance
owed at April 30, 2010 and 2009.
Interest expense is net of interest income of $300, $2,107, and $5,125 for the years ended April 30, 2010, 2009, and 2008, respectively. Interest
expense in the amount of $431, $367, and $182 was capitalized during the years ended April 30, 2010, 2009, and 2008, respectively.
The next table delineates the Company’s long-term debt at carrying value.
As of April 30,
2010
2009
Capitalized lease obligations discounted at 4.75% to 7.09% due in various monthly installments through 2048 (Note 7)
$
10,274
$
8,758
Mortgage notes payable due in various installments through 2012 with interest at 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
10,628
30,000
17,000
11,429
16,714
30,000
18,000
22,857
5.72% senior notes due in 14 installments beginning September 30, 2012 and ending March 30, 2020
100,000
100,000
Less current maturities
179,331
196,329
24,577
28,442
$ 154,754
$ 167,887
Various debt agreements contain certain operating and financial covenants. At April 30, 2010, 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, 2010
and thereafter:
Years ended April 30,
2011
2012
2013
2014
2015
Thereafter
$
24,577
4,976
14,513
27,532
3,207
104,526
$
179,331
4. PreferreD anD coMMon stock
Preferred stock The Company has 1,000,000 authorized shares of preferred stock of which 250,000 shares have been designated as
Series A Serial Preferred Stock. No shares have been issued.
Common stock The Company currently has 120,000,000 authorized shares of common stock. Dividends paid totaled $0.34, $0.30, and
$0.26 per share for the years ended April 30, 2010, 2009, and 2008, respectively.
Preferred share purchase rights On April 16, 2010, the Board of Directors adopted a Rights Plan, providing for the distribution of one right
for each share of common stock outstanding. Each right entitles the holder to purchase one one-thousandth (1/1000th) of a share of Series A
Serial Preferred Stock, no par value per share, of the Company at a price of $95.00. Each right also entitles the holder to purchase common
shares in the surviving entity at 50% of the market price. The rights generally become exercisable at the discretion of the Board of Directors
following a public announcement that 15% or more of the Company’s common stock has been acquired or an intent to acquire has become
apparent. The rights will expire on the earlier of April 15, 2011 or redemption by the Company. Certain terms of the rights are subject to adjustment
to prevent dilution. Further description and terms of the rights are set forth in the Rights Agreement between the Company and Computershare Trust
Company, N.A., which serves as Rights Agent.
Stock option plans The 2009 Stock Incentive Plan (the “Plan”), was approved by the Board of Directors in June 2009 and approved by
the shareholders in September 2009. The Plan replaced the 2000 Option Plan and the Non-employee Director Stock Plan (together, the “Prior
Plans”). All 5,000,000 shares allowed to be issued under the Plan were available for grant at April 30, 2010. Awards made under the Plan
may take the form of stock options, restricted stock or restricted stock units. Each share issued pursuant to a stock option will be counted as one
share, and each share issued pursuant to an award of restricted stock or restricted stock units will reduce the shares available for grant by two.
Additional information regarding the Plan is provided in the Company’s 2010 Proxy Statement. Under the Company’s Prior Plans, options could
have been granted to non-employee directors, certain officers, and key employees to purchase an aggregate of 5,260,000 shares of common
stock. At April 30, 2010, options for 959,550 shares (which expire between 2011 and 2019) were outstanding. All stock option shares issued are
previously unissued authorized shares. Additional information is provided in the Company’s 2010 proxy statement.
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 vested on
June 25, 2010, and compensation expense was recognized ratably over the vesting period.
On June 23, 2009, stock options totaling 361,000 shares were granted to certain officers and key employees. These awards will vest on
June 23, 2012, and compensation expense is being recognized ratably over the vesting period.
The 2000 Stock Option Plan allowed the grant of options with an exercise price equal to the fair market value of the Company’s
stock on the date of grant and expired ten years after the date of grant. Vesting was generally over a three to five-year service period. The
Non-employee Directors’ Stock Option Plan allowed the grant of 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 was ten years from the date of grant, and each option is exercisable immediately upon grant. The aggregate number of shares of
Common Stock that could have been granted pursuant to the Director Stock Plan was 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.
< 36
37 >
The following table shows the stock option activity during the periods indicated:
Number of shares
Weighted average
Balance at April 30, 2007
Granted
Exercised
Forfeited
Balance at April 30, 2008
Granted
Exercised
Forfeited
Balance at April 30, 2009
Granted
Exercised
Forfeited
balance at april 30, 2010
729,500
260,000
(156,950)
(49,000)
783,550
12,000
(93,550)
(24,000)
678,000
377,000
(83,450)
(12,000)
959,550
exercise price
$ 16.10
26.77
13.40
23.16
$ 19.74
26.51
14.39
23.80
$ 20.45
25.27
14.85
24.41
$ 22.78
At April 30, 2010, all outstanding options had an aggregate intrinsic value of $15,206 and a weighted average remaining contractual life of
6.8 years. The vested options totaled 202,550 shares with a weighted average exercise price of $16.16 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, 2010 was $4,552. The aggregate intrinsic value for
the total of all options exercised during the year ended April 30, 2010 was $1,137, and the total fair value of shares vested during the year ended
April 30, 2010 was $164.
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, 2009 and the June 23, 2009 options were $10.24 and $8.65, respectively. The significant assumptions include:
Risk-free interest rate
Expected option life
Expected volatility
Expected dividend yield
May 1, 2009
June 23, 2009
3.64%
2.76%
8.75 years
6.09 years
37%
1.92%
38%
1.74%
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, 2010, 2009 and 2008 were $2,031, $1,256, and $1,432, respectively, for the
stock option awards. As of April 30, 2010, there was $2,299 of total unrecognized compensation costs related to the 2000 Stock Option Plan for
stock options that are expected to be recognized ratably through 2013.
At April 30, 2010, the range of exercise prices was $11.20–$26.92 and the weighted average remaining contractual life of outstanding
options was 6.8 years. The number of shares and weighted average remaining contractual life of the options by range of applicable exercise
prices at April 30, 2010 were as follows:
Range of exercise prices
Number of shares
Weighted average exercise price Weighted average remaining
$ 11.20 – 13.07
14.08 – 17.64
20.68 – 26.92
41,250
117,300
801,000
959,550
5. earninGs Per coMMon share
$ 11.82
14.35
24.58
contractual life (years)
1.2
3.2
7.6
Computations for basic and diluted earnings per common share are presented below:
Years ended April 30,
basic
Net earnings
Weighted average shares outstanding—basic
Basic earnings per common share
Diluted
Net earnings
Weighted-average shares outstanding—basic
Plus effect of stock options
Weighted-average shares outstanding—diluted
Diluted earnings per common share
2010
2009
2008
$
$
$
116,962
$
85,690
$
84,891
50,899,370
50,787,309
50,681,011
2.30
$
1.69
$
1.68
116,962
$
85,690
$
84,891
50,899,370
50,787,309
153,803
130,170
50,681,011
177,746
51,053,173
50,917,479
50,858,757
$
2.29
$
1.68
$
1.67
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 356,000 for fiscal 2010 and 224,500 for fiscal 2009 and fiscal 2008.
6. incoMe taXes
Income tax expense attributable to earnings consisted of the following components:
Years ended April 30,
Current tax expense
Federal
State
Deferred tax expense
Total income tax provision
2010
2009
2008
$
41,632
$
31,771
$
43,456
4,794
46,426
18,194
5,475
37,246
16,144
6,698
50,154
(1,175)
$
64,620
$
53,390
$
48,979
The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:
< 38
39 >
As of April 30,
Deferred tax assets
Accrued liabilities
Deferred compensation
Other
Total gross deferred tax assets
Deferred tax liabilities
Excess of tax over book depreciation
Other
Total gross deferred tax liabilities
Net deferred tax liability
2010
2009
2008
$
9,417
$
11,895
$
4,941
3,759
18,117
(145,433)
(4,496)
(149,929)
4,329
2,849
19,073
(129,541)
(3,173)
(132,714)
8,398
4,180
2,420
14,998
(110,452)
(2,107)
(112,559)
$
(131,812)
$
(113,641)
$
(97,561)
At April 30, 2010, the Company has net operating loss carryforwards for state income tax purposes of approximately $23,494, 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, 2010 and 2009. There was no net change in the valuation allowance
for the years ended April 30, 2010 and 2009. There was a decrease in the valuation allowance 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.
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
2010
35.0%
(0.8)
2.1
(0.7)
35.6%
2009
35.0%
(1.1)
2.9
1.6
38.4%
2008
35.0%
(1.0)
2.8
(0.2)
36.6%
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized
income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement
are reflected in the period in which the change in judgment occurs. The Company had a total of $5,482 and $6,621 in gross unrecognized tax
benefits at April 30, 2010 and 2009, respectively. Of this amount, $3,572 represents the amount of unrecognized tax benefits that, if recognized,
would impact our effective tax rate. Unrecognized tax benefits were a net decrease of $1,139 during the twelve months ended April 30, 2010
due primarily to the expiration of certain statute of limitations offset by a lesser increase associated with state income tax filing positions. This had
the effect of decreasing the effective state tax rate during the fiscal year ending April 30, 2010. 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, 2009
$
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, 2010
6,621
1,430
184
--------
(2,753)
--------
$
5,482
The total net amount of accrued interest and penalties for such unrecognized tax benefits was $650 at April 30, 2009 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 $250 for the year ended April 30, 2010. Net interest and penalties included in income tax expense for the
twelve month period ended April 30, 2010 was a decrease in tax expense of $400 and additional tax expense of $103 for the year ended
April 30, 2009. 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 $1,172 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 2006 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.
7. Leases
The Company leases certain property and equipment used in its operations. Generally, the leases are for primary terms of from five to twenty years with
options either to renew for additional periods or to purchase the premises and call for payment of property taxes, insurance, and maintenance by the lessee.
The following is an analysis of the leased property under capital leases by major classes:
Asset balances at April 30,
2010
Real estate
Equipment
Less accumulated amortization
$
11,244
$
2,605
13,849
4,552
$
9,297
$
2009
14,287
3,637
17,924
10,047
7,877
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, 2010:
Years ended April 30,
Capital leases Operating leases
< 40
41 >
2011
2012
2013
2014
2015
Thereafter
$
1,194
$
1,194
1,149
1,145
780
13,423
325
423
281
249
73
1
Total minimum lease payments
Less amount representing interest
Present value of net minimum lease payments
$
18,885
$
1,352
8,611
10,274
The total rent expense under operating leases was $438 in 2010, $596 in 2009, and $688 in 2008.
8. 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 $2,964, $2,819, and $2,682 for the years ended April 30, 2010, 2009, and 2008, respectively.
On April 30, 2010, the Company had 8,045 full-time employees and 11,389 part-time employees; 3,260 were active participants in the Plan. As
of that same date, 1,650,595 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, 2010 and 2009, respectively,
were $6,955 and $6,991. The discount rates used were 5.8% and 6.3%, respectively, at April 30, 2010 and 2009. The Company expects to pay
$650 per year for each of the next five years. There was no expense incurred in fiscal 2010. The amounts expensed in fiscal 2009 and 2008 were
$488 and $573, respectively.
9. coMMitMents
The Company has entered into various financial and legal advisory agreements with third party specialists to assist the Company and its
Board of Directors in connection with its review of the unsolicited offer by Alimentation Couche-Tard Inc. (“Couche-Tard”) to purchase all of the
outstanding shares of common stock of the Company and other related matters. The Company has incurred related expenses of approximately
$6,900 at April 30, 2010 pursuant to the agreements which is included in operating expenses in the accompanying statement of earnings and
$6,400 is included in accrued liabilities in the accompanying balance sheet. The Company expects to incur additional expenses in fiscal 2011,
which are expected to be material to the Company’s financial position and results of operations, as it continues to review these matters and takes
action in response, or if certain events or transactions occur.
The Company also has entered into an employment agreement with its chief executive officer. The agreement provides that the officer will
receive aggregate base compensation of not less than $660 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.
10. continGencies
Environmental compliance The United States Environmental Protection Agency and several states have adopted laws and regulations
relating to underground storage tanks used for petroleum products. Several states in which the Company does business have trust fund programs
with provisions for sharing or reimbursing corrective action or remediation costs.
Management currently believes that substantially all capital expenditures for electronic monitoring, cathodic protection, and overfill/spill
protection to comply with existing regulations have been completed. The Company has an accrued liability at April 30, 2010 and 2009 of
approximately $187 and $250, respectively, for estimated expenses related to anticipated corrective actions or remediation efforts, including
relevant legal and consulting costs. Management believes the Company has no material joint and several environmental liability with other
parties. Additional regulations or amendments to the existing regulations could result in future revisions to such estimated expenditures.
Legal matters The Company is 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 among a total of 45 similar lawsuits that have been filed since November 2006 in 27 jurisdictions, including 25 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 were substantially completed during the ensuing months, and the plaintiffs filed motions for class certification in each of the
pending lawsuits.
< 42
43 >
In a Memorandum and Order entered on May 28, 2010, the Court ruled on the Plaintiffs’ Motion for Class Certification in two cases originally
filed in the U.S. District Court for the District of Kansas, American Fiber & Cabling, LLC v. BP West Coast Products, LLC, et.al, Case No. 07-2053,
and Wilson v. Ampride, Inc., et. al, Case No. 06-2582, in which the Company is a named Defendant. The Court determined that it could not certify
a class as to claims against the Company in the American Fiber & Cabling case, having decided that the named Plaintiff had no standing to assert
such claims. However, in the Wilson case the Court certified a class as to the liability and injunctive aspects of the Plaintiff’s claims for unjust enrichment
and violation of the Kansas Consumer Protection Act (KCPA) against the Company and several other Defendants. With respect to claims for unjust
enrichment, the class certified consists of all individuals and entities (except employees or affiliates of the Defendants) that, at any time between
January 1, 2001 and the present, purchased motor fuel at retail at a temperature greater than 60 degrees Fahrenheit, in the state of Kansas, from a
gas station owned, operated, or controlled by one or more of the Defendants. As to claims for violation of the KCPA, the class certified is limited to
all individuals, sole proprietors and family partnerships (excluding employees or affiliates of Defendants) that made such purchases.
The Court also ordered the parties to show cause in writing why the Wilson case and the American Fiber & Cabling case should not be consolidated
for all purposes. The matter is now under consideration by the court. No trial date has been set. Management does not believe the Company is liable
to the Plaintiffs for the conduct complained of, and intends to contest the matter vigorously.
The Company and members of its Board of Directors are defendants in an action brought in the Iowa District Court for Polk County (Mercier
v. Casey’s General Stores, Inc., et al.) on April 28, 2010. The suit is filed as a purported class action on behalf of all holders of Common Stock and
is brought in connection with the proposed acquisition of Casey’s by Couche-Tard for $36 per share. Plaintiff alleges that the individual defendants
breached their fiduciary duties through their refusal to properly consider and negotiate with Couche-Tard. Among other things, plaintiff seeks an
order maintaining the action as a class action and certifying plaintiff as class representative and plaintiff’s counsel as class counsel, an order requiring
the individual defendants to place the Company up for auction and/or to conduct a market check, and requiring defendants to make full and fair
disclosure of all material facts to the class before the completion of any such acquisition; a declaration that the individual defendants have breached
their fiduciary duties to plaintiff and the class; and an award of fees, expenses and costs. The Company believes the claims are without merit and
intends to defend against them vigorously.
In a separate action filed on June 11, 2010 in the United States District Court of the Southern District of Iowa (Casey’s General Stores, Inc. v.
Alimentation Couche-Tard, Inc.), the Company has brought suit against Couche-Tard alleging that Couche-Tard violated federal securities laws in
a market manipulation scheme in an attempt to acquire all outstanding shares of Casey’s stock at an artificially deflated price in connection with
Couche-Tard’s unsolicited tender offer to purchase all of Casey’s outstanding shares of $36 per share. On June 18, 2010, Couche-Tard filed its answer
and affirmative defenses to the complaint, and also asserted various counterclaims against Casey’s and its Board of Directors. Couche-Tard asserts
claims for breaches of the Board’s fiduciary duties in connection with Couche-Tard’s unsolicited offer; claims seeking declaratory judgment that certain
provisions of the Iowa Business Corporation Act are unconstitutional or preempted by federal law; and claims that Casey’s violated Section 14(e) of the
Securities Exchange Act of 1934 for allegedly making untrue and misleading statements in Casey’s Schedule 14D-9 filing. Couche-Tard seeks, among
other things, an order requiring the Board to redeem the rights that would be issued under the Shareholder Rights Plan or amend the agreement in respect
of those rights so as to make it inapplicable to the tender offer and to grant approval of Couche-Tard’s proposed acquisition under Iowa’s Business
Combination statute, and an injunction preventing the Board (or anyone working with the directors) from taking any steps to impede the ability of
Casey’s shareholders to accept the tender offer or otherwise impede Couche-Tard’s proposed acquisition. The Company believes the counterclaims
are without merit and intends to defend against them vigorously.
From time to time we are involved in other legal and administrative proceedings or investigations arising from the conduct of our business
operations, including contractual disputes; environmental contamination or remediation issues; employment or personnel matters; personal injury
and property damage claims; and claims by federal, state, and local regulatory authorities relating to the sale of products pursuant to licenses
and permits issued by those authorities. Claims for compensatory or exemplary damages in those actions may be substantial. While the outcome
of such litigation, proceedings, investigations, or claims is never certain, it is our opinion, after taking into consideration legal counsel’s assessment
and the availability of insurance proceeds and other collateral sources to cover potential losses, that the ultimate disposition of such matters
currently pending or threatened, individually or cumulatively, will not have a material adverse effect on our consolidated financial position and
results of operation.
Other At April 30, 2010, 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 $11,000 and $10,000 respectively, were
issued and outstanding at April 30, 2010 and 2009, 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, 2010 and 2009, the Company had $20,713 and $19,111, respectively, in accrued expenses
for estimated claims relating to self-insurance, the majority of which has been actuarially determined.
11. QuarterLy financiaL Data (Dollars in thousands) (Unaudited)
Year ended April 30, 2010
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
Earnings per common share
Basic
Diluted
$ 790,629
779,120
780,793
826,948
3,177,490
297,395
276,135
242,544
257,434
1,073,508
95,177
4,739
94,860
86,004
89,752
365,793
4,849
5,036
5,672
20,296
$ 1,187,940
1,154,964
1,114,377
1,179,806
4,637,087
$ 52,726
46,146
38,304
41,000
178,176
101,980
60,697
4,722
94,121
61,261
4,836
79,255
54,018
5,023
85,076
360,432
57,531
233,507
5,656
20,237
$ 220,125
206,364
176,600
189,263
792,352
$ 44,193
33,592
17,242
21,935
116,962
$
$
0.87
0.87
0.66
0.66
0.34
0.34
0.43
0.43
2.30
2.29
Year ended April 30, 2009
Q1
Q2
Q3
Q4
Year Total
< 44
45 >
Total revenue
Gasoline
Grocery & other merchandise
Prepared food & fountain
Other
Gross profit*
Gasoline
Grocery & other merchandise
Prepared food & fountain
Other
Net earnings
Earnings per common share
Basic
Diluted
$ 1,201,173
1,031,893
274,347
265,347
85,631
6,147
87,908
5,363
532,213
231,432
81,070
4,559
558,337
3,323,616
239,348
1,010,474
81,077
4,680
335,686
20,749
$ 1,567,298
1,390,511
849,274
883,442
4,690,525
$
49,635
93,346
51,831
4,354
43,505
89,874
53,223
4,464
$ 199,166
191,066
$
28,785
27,329
$
$
0.57
0.57
0.54
0.54
30,582
76,173
50,088
4,323
161,166
14,021
0.28
0.28
36,129
80,651
159,851
340,044
50,855
205,997
4,573
17,714
172,208
723,606
15,555
85,690
0.31
0.31
1.69
1.68
*Gross profit is given before charge for depreciation and amortization.
iteM 9. chanGes in anD DisaGreeMents With accountants on accountinG anD financiaL DiscLosure
None.
iteM 9a. controLs anD ProceDures
As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of the
Company’s Chief Executive Officer and Chief Financial Officer of the effectiveness of the Company’s disclosure controls and procedures. On the
basis of that evaluation, the CEO and CFO have concluded that the Company’s current disclosure controls and procedures are effective to ensure
that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms.
There were no changes in the Company’s internal control over financial reporting that occurred during the 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, 2010. 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, 2010.
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 27.
iteM 9b. other inforMation
Not applicable.
iteM 10. Directors, eXecutive officers, anD corPorate Governance
Part iii
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, 2010 and to be used in connection with the Company’s 2010 Annual
Meeting of Shareholders 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, 2010 and to be used in connection with the Company’s
2010 Annual Meeting of Shareholders is hereby incorporated by reference.
< 46
47 >
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, 2010 and to be used in connection with the Company’s 2010 Annual Meeting of Shareholders 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 captions “Certain Relationships and Related Transactions” and
“Governance of the Company” to be filed with the Commission pursuant to Regulation 14A within 120 days after April 30, 2010 and to be used in
connection with the Company’s 2010 Annual Meeting of Shareholders 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, 2010 and to be used in connection with the Company’s 2010 Annual Meeting of Shareholders is hereby
incorporated by reference.
Part iv
iteM 15. eXhibits anD financiaL stateMent scheDuLes
(a)
Documents filed as a part of this report on Form 10-K
(1) The following financial statements are included herewith:
Consolidated Balance Sheets, April 30, 2010 and 2009
Consolidated Statements of Earnings, Three Years Ended April 30, 2010
Consolidated Statements of Shareholders’ Equity, Three Years Ended April 30, 2010
Consolidated Statements of Cash Flows, Three Years Ended April 30, 2010
Notes to Consolidated Financial Statements
Reports 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
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) and Articles of Amendment thereto (incorporated by reference
from the Current Report on Form 8-K filed April 16, 2010, as amended by the Current Report on Form 8-K/A filed
April 19, 2010)
3.2(a)
Second Amended and Restated By-laws (incorporated by reference from the Current Report on Form 8-K filed June 16, 2009)
4.2
Rights Agreement between Casey’s General Stores, Inc. and Computershare Trust Company, N.A., relating to Series A Serial
Preferred Stock Purchase Rights (incorporated by reference from the Current Report on Form 8-K filed April 16, 2010)
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)
4.8
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)
10.21(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)
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)
< 48
49 >
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(a)
Form of “change of control” Employment Agreement (incorporated by reference from the Current Report on Form 8-K filed
June 2, 2010)
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 April 21, 2010)
10.40*
Severance Agreement with John G. Harmon (incorporated by reference from the Current Report on Form 8-K filed
January 17, 2008)
10.41*
Casey’s General Stores, Inc. 2009 Stock Incentive Plan (incorporated by reference from the Current Report on Form 8-K filed
September 23, 2009) and related form of Restricted Stock Units Agreement (Non-employee Directors)
21(a)
23.1
31.1
31.2
32.1
32.2
Subsidiaries of Casey’s General Stores, Inc.
Consent of Independent Registered Public Accounting Firm
Certificate of Robert J. Myers under Section 302 of Sarbanes-Oxley Act of 2002
Certificate of William J. Walljasper under Section 302 of Sarbanes-Oxley Act of 2002
Certificate of Robert J. Myers under Section 906 of Sarbanes-Oxley Act of 2002
Certificate of William J. Walljasper under Section 906 of Sarbanes-Oxley Act of 2002
______________________________
*Indicates management contract or compensatory plan or arrangement.
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.
siGnatures
CASEY’S GENERAL STORES, INC.
(Registrant)
Date: June 28, 2010
By
/s/ Robert J. Myers
Robert J. Myers, President and
Chief Executive Officer
(Principal Executive Officer and Director)
Date: June 28, 2010
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 28, 2010
By
/s/ Robert J. Myers
Robert J. Myers
President and Chief Executive Officer, Director
Date: June 28, 2010
By
/s/ Kenneth H. Haynie
Kenneth H. Haynie
Director
Date: June 28, 2010
By
/s/ Johnny Danos
Johnny Danos
Director
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Date: June 28, 2010
By
/s/ William C. Kimball
William C. Kimball
Director
Date: June 28, 2010
By
/s/ Diane C. Bridgewater
Diane C. Bridgewater
Director
Date: June 28, 2010
By
/s/ Jeffrey M. Lamberti
Jeffrey M. Lamberti
Director
Date: June 28, 2010
By
/s/ Richard Wilkey
Richard Wilkey
Director
Date: June 28, 2010
By
/s/ H. Lynn Horak
H. Lynn Horak
Director
eXhibit inDeX
The following exhibits are filed herewith:
Exhibit#
Description
10.41
21(a)
23.1
31.1
31.2
32.1
32.2
Form of Restricted Stock Units Agreement (Non-employee Directors)
Subsidiaries of Casey’s General Stores, Inc.
Consent of Independent Registered Public Accounting Firm
Certification of Robert J. Myers under Section 302 of the Sarbanes-Oxley Act of 2002
Certification of William J. Walljasper under Section 302 of the Sarbanes-Oxley Act of 2002
Certificate of Robert J. Myers under Section 906 of Sarbanes-Oxley Act of 2002
Certificate of William J. Walljasper under Section 906 of Sarbanes-Oxley Act of 2002
restricteD stock units aGreeMent
(nonemployee Directors)
EXHIBIT 10.41
This Restricted Stock Units Agreement (the “Agreement”) is made and entered into on ____________________ (the “Grant Date”), pursuant to
the Casey’s General Stores, Inc. 2009 Stock Incentive Plan (the “Plan”). The Committee administering the Plan has selected the party specified
on the execution page hereof (the “Participant”) to receive the following award (the “Award”) of Restricted Stock Units, each of which represents
the right to receive on the applicable settlement date described in Section 1 (each a “Settlement Date”) one (1) share of the Common Stock,
no par value (“Stock”) of Casey’s General Stores, Inc., an Iowa corporation (the “Company”), on the terms and conditions set forth below to
which Participant accepts and agrees:
1. award Granted.
Grant Date:
_______________, 20___
Number of Restricted Stock Units:
________________________
Vesting Date/Settlement Date:
For each Restricted Stock Unit, the date on which such unit becomes a Vested Unit in
accordance with Section 4 or Section 7 below.
2. Grant of units. On the Grant Date, the Participant shall acquire, subject to the provisions of this Agreement, the number of Restricted
Stock Units as specified in Section 1 above (the “Units”). Each Unit represents a right to receive on a date determined in accordance with this
Agreement one (1) share of Stock. This Award shall be governed by the terms of the Plan, which are incorporated herein by this reference.
The Participant acknowledges having received and read a copy of the Plan. Capitalized terms not otherwise defined by this Agreement will
have the meanings assigned to the Plan.
3. no Monetary Payment required. The Participant is not required to make any monetary payment (other than applicable tax withholding, if
any) as a condition to receiving the Units or shares of Stock issued upon settlement of the Units, the consideration for which shall be past
services actually rendered and/or future services to be rendered to the Company or for its benefit.
4. vesting of units. Subject to Participant’s continued services to the Company through the Vesting Date, the Units will vest and become
“Vested Units” as of _______ 1, 20___.
Despite any other provisions of this Agreement, if the Participant’s services to the Company terminate because of the death or disability
of the Participant, the Units that otherwise would not be vested as of the date of termination shall vest and become Vested Units as of
that date.
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5. settlement of the award.
a.
issuance of shares of stock. The Company shall issue to the Participant on the Settlement Date (that is, the date on which the Units
shall vest and become Vested Units) with respect to each Vested Unit to be settled on such date one (1) share of Stock. Shares of Stock issued
in settlement of Units shall not be subject to any restriction on transfer other than any such restriction as may be required pursuant to Section
5. c., Section 6 or the Company’s Insider Trading Policy. For purposes of this Section, “Insider Trading Policy” means the written policy of the
Company pertaining to the sale, transfer or other disposition of the Company’s equity securities by members of the Board, officers or other
employees who may possess material, non-public information regarding the Company, as in effect at the time of a disposition of any Shares.
b. certificate registration. A certificate for the shares as to which the Award is settled shall be registered in the name of the Participant,
or, if applicable, in the names of the heirs of the Participant designated in writing by the Participant on forms approved by the Company
for that purpose.
c. restrictions on Grant of the award and issuance of shares. The grant of the Award and issuance of shares of Stock upon settlement
of the Award shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities.
No shares of Stock may be issued hereunder if the issuance of such shares would constitute a violation of any applicable federal, state or
foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then
be listed.
d. restriction on transfer of shares. In addition, subject to Article 8 of the Plan, shares of Stocks issued upon settlement of the Award
on the Settlement Date shall not be transferrable by the Participant until the Participant ceases to be a member of the Company’s Board
of Directors or, if earlier, May 1, 2015.
6. tax Matters.
a. tax Withholding in General. At the time this Agreement is executed, or at any time thereafter as requested by the Company, the
Participant hereby authorizes withholding from any amounts payable to the Participant, and otherwise agrees to make adequate
provision for, any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company, if any,
which arise in connection with the Award or the issuance of shares of Stock in settlement thereof. The Company shall have no
obligation to deliver shares of Stock until the tax withholding obligations of the Company have been satisfied by the Participant.
b. assignment of sale Proceeds; Payment of tax Withholding by check. Subject to compliance with applicable law and the
Company’s Insider Trading Policy, the Participant shall satisfy the Company’s tax withholding obligations in accordance with procedures
established by the Company providing for delivery by the Participant to the Company or a broker approved by the Company of
properly executed instructions, in a form approved by the Company, providing for the assignment to the Company of the proceeds of a
sale with respect to some or all of the shares being acquired upon settlement of Units. Notwithstanding the foregoing, the Participant
may elect to pay by check the amount of the Company’s tax withholding obligations arising on any Settlement Date by delivering written
notice of such election to the Company on a form specified by the Company for this purpose at least thirty (30) days (or such other
period established by the Company) prior to such Settlement Date. By making such election, the Participant agrees to deliver a check for
the full amount of the required tax withholding to the Company on or before the third business day following the Settlement Date. If the
Participant elects to pay the required tax withholding by check but fails to make such payment as required by the preceding sentence,
the Company is hereby authorized at its discretion, to satisfy the tax withholding obligations through any other means authorized by
this Section 6, including by effecting a sale of some or all of the shares being acquired upon settlement of Units, withholding from
payroll and any other amounts payable to the Participant, or by withholding shares in accordance with Section 6.c.
c. Withholding in shares. The Company may, in its discretion, permit or require the Participant to satisfy all or any portion of the
Company’s tax withholding obligations by deducting from the shares of Stock otherwise deliverable to the Participant in
settlement of the Award a number of whole shares having a Fair Market Value, as determined by the Company as of the date
on which the tax withholding obligations arise, not in excess of the amount of such tax withholding obligations determined by the
applicable minimum statutory withholding rates.
7.
effect of change in control on award. In the event of a Change in Control, the Units that otherwise would not be vested shall vest
and become Vested Units immediately prior to (but conditioned upon the consummation of) the Change in Control, as described in Article 14
of the Plan.
8. adjustments for changes in capital structure. Subject to any required action by the stockholders of the Company, in the event of
any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization,
reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares,
exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the
stockholders of the Company in a form other than Stock (excepting normal cash dividends) that has a material effect on the fair market value
of shares of Stock, appropriate adjustments shall be made in the number of Units subject to the Award and/or the number and kind of shares
to be issued in settlement of the Award, in order to prevent dilution or enlargement of the Participant’s rights under the Award. Any fractional
share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number. Such adjustments shall be
determined by the Committee, and its determination shall be final, binding and conclusive.
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9. rights as a stockholder. The Participant shall have no rights as a stockholder with respect to any shares which may be issued in settlement of
this Award until the Settlement Date. No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to
the date such certificate is issued, except as provided in Section 8.
10. Legends. The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all
certificates representing shares of Stock issued pursuant to this Agreement.
11. Delivery of Documents and notices. Any document relating to participation in the Plan or any notice required or permitted hereunder shall
be given in writing and shall be deemed effectively given (except to the extent that this Agreement provides for effectiveness only upon actual
receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by the Company, or
upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, or with a nationally recognized overnight courier
service, with postage and fees prepaid, addressed to the other party at the address shown below that party’s signature to the Notice or at such
other address as such party may designate in writing from time to time to the other party.
12. Miscellaneous Provisions.
a. termination or amendment. The Committee may terminate or amend the Plan or this Agreement at any time; provided, however, that
(i) no such termination or amendment may adversely affect the Participant’s rights under this Agreement without the consent of the
Participant unless such termination or amendment is necessary to comply with applicable law or government regulation, and (ii) no such
amendment may alter or accelerate the time or form of distributions in violation of Section 409A of the Code, if applicable, including,
without limitation, any amendment that would violate the provisions of Section 409A of the Code requiring that any amendment to extend
the issuance of any shares of Stock after the Settlement Date may not take effect until at least twelve (12) months after the date on which
the new election is made, and, if the new election relates to a payment for a reason other than the death or disability of the Participant,
the new election must provide for the deferral of issuance of such shares of Stock for a period of at least five (5) years from the
Settlement Date such issuance of shares of Stock would otherwise have been made. No amendment or addition to this Agreement shall
be effective unless in writing.
b. nontransferability of the award. Prior the issuance of shares of Stock on the applicable Settlement Date, neither this Award nor
any Units subject to this Award shall be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of
descent and distribution. All rights with respect to the Award shall be exercisable during the Participant’s lifetime only by the
Participant or the Participant’s guardian or legal representative.
c.
further instruments. The parties hereto agree to execute such further instruments and to take such further action as may reasonably be
necessary to carry out the intent of this Agreement.
d. binding effect. This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the
restrictions on transfer set forth herein, be binding upon the Participant and the Participant’s heirs, executors, administrators,
successors and assigns.
e.
integrated agreement. This Agreement and the Plan, together with any service or other agreement between the Participant
and the Company referring to the Award, shall constitute the entire understanding and agreement of the Participant and the
Company with respect to the subject matter contained herein or therein and supersedes any prior agreements, understandings,
restrictions, representations, or warranties among the Participant and the Company with respect to such subject matter other than
those as set forth or provided for herein or therein. To the extent contemplated herein or therein, the provisions of this Agreement
shall survive any settlement of the Award and shall remain in full force and effect.
f.
severability. Should any term, covenant, provision, paragraph or condition of this Agreement be held invalid or illegal, such
invalidity or illegality shall not invalidate the whole Agreement, but it shall be construed as if not containing the invalid or illegal
part or parts and the rights and obligations of the parties shall be construed and enforced accordingly.
g. applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Iowa.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement, in the case of the Company by its duly authorized officer, as
of the date and year written above.
casey’s GeneraL stores, inc.,
an Iowa Corporation
By:
_________________________________________
Robert J. Myers
President and Chief Executive Officer
Address:
One Convenience Blvd.
Ankeny, Iowa 50021
ParticiPant
Signature:
_________________________________________
Print Name:
_________________________________________
Address:
_________________________________________
_________________________________________
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EXHIBIT 21(A)
subsiDiaries of casey’s GeneraL stores, inc.
1. Casey’s Marketing Company, an Iowa corporation
2. Casey’s Services Company, an Iowa corporation
3. Casey’s Retail Company, an Iowa corporation
4. CGS Sales Corp., an Iowa corporation
All such subsidiaries are wholly owned by Casey’s General Stores, Inc. and do business under the above names. Stores operated by Casey’s
Marketing Company, Casey’s Retail Company and CGS Sales Corp. do business under the name “Casey’s General Stores.”
consent of inDePenDent reGistereD PubLic accountinG firM
EXHIBIT 23.1
The Board of Directors
Casey’s General Stores, Inc.:
We consent to the incorporation by reference in the registration statements (No. 33-19179, 33-42907, and 33-56977) on Form S-8 of Casey’s
General Stores, Inc. of our reports dated June 28, 2010, with respect to the consolidated balance sheets of Casey’s General Stores, Inc. and
subsidiaries (the Company) as of April 30, 2010 and 2009, 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, 2010, and the effectiveness of internal control over financial reporting as of
April 30, 2010, which reports appear in the April 30, 2010 Annual Report on Form 10-K of Casey’s General Stores, Inc.
Des Moines, Iowa
June 28, 2010
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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 28, 2010
/s/ Robert J. Myers
Robert J. Myers, President and
Chief Executive Officer
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 28, 2010
/s/ William J. Walljasper
William J. Walljasper
Senior Vice President and Chief Financial Officer
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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, 2010 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.
/s/ Robert J. Myers
Robert J. Myers, President and
Chief Executive Officer
Dated June 28, 2010
____________________________________________________________________________________________________________________________________________________________
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, 2010 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.
/s/ William J. Walljasper
William J. Walljasper
Senior Vice President and Chief Financial Officer
Dated June 28, 2010
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) a peer group index based on the common stock of The Pantry, Inc.,
Alimentation Couche Tard, Inc. 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, 2005, 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 Peer Group.
$300
$225
$150
$75
$0
4/05
4/06
4/07
4/08
4/09
4/10
*$100 invested on 4/30/05 in stock or index, including reinvestment of dividends. Fiscal year ending April 30.
4/05
4/06
4/07
4/08
4/09
4/10
Casey’s
100.00
127.76
151.44
134.67
163.82
240.37
Russell 2000
100.00
133.47
143.92
128.15
88.75
132.20
Peer Group
100.00
170.88
128.53
71.90
75.30
83.90
Earnings Before
Income Taxes
Table of Contents
Board of Directors ....................1
Store Development .................13
Message to Shareholders ..........3
Corporate Finance ..................16
Management Team ...................4
Investor Information ..............17
Store Operations ......................7
Financial Information .............18
escalating new construction Learn about Casey’s efforts to replace, remodel
and expand across 10 states on page 14.
.
6
1
8
1
$
.
1
9
3
1
$
.
9
3
3
1
$
08 09 10
Basic Earnings
Pe r Share
0
3
2
$
.
9
6
1
$
.
8
6
1
$
.
08 09 10
Financial Highlights
To tal Revenue
Ca sh Flow from Ope rations
Net Earnings
EPS ( Diluted)
S hare holders of Rec ord
Employees
Numb er of Corporate Stores
2 0 0 9
2 010
% Change
$4,687,895
$169,883
$85,690
$1.68
2,329
18,780
1,478
$4,637,087
$214,100
$116,962
$2.29
2,165
19,434
1,531
-1.1%
25.5%
36.5%
36.3%
-7.0%
3.5%
3.6%
ronald M. l amb Chairman of Casey’s General Stores, Inc. > The entire Casey’s family extends our deepest
sympathies to the family and friends of Rona ld M. Lamb w ho died on June 11, 2010. Ron ser ve d C as ey’s
with distinction for 40 years in va rio us positions, ra nging f ro m store manager to President , C EO a nd
finally Chairman of the Board of Directors.
Ron’s exceptional character and integrity influenced the lives of many people. His tireless w or k e t hi c
and stron g leadership style are e mbedded into the culture o f our company. We will miss Ron’s fr i end shi p,
dedication and passion for serving others and creating opportunities for our Company and its employees
to grow and succeed.
c a s e y ’ s s u p p o r t s
h o n o r f l i g h t s
In fiscal year 2010, Casey’s supported
11 Honor Flights of World War II
veterans to Washington, D.C., to view the
war memorial and other monuments.
more to help fund 11 flights from our
market area. Casey’s also helped pay
for shirts, hats, photographers and
other associated expenses.
The Honor Flight program provides
free trips for hundreds of elderly
veterans who would not be able to
make the trip otherwise. Casey’s
donated $385,000 and our generous
customers contributed nearly $63,000
Casey’s is proud to help honor the
commitment and sacrifice of the 16
million Americans who served and
400,000 who died defending American
freedoms in World War II.
Casey’s General Stores, Inc.
One Convenience Boulevard
Ankeny, Iowa 5 0 021
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