CASEYS GENERAL STORES INC - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Under Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the Fiscal Quarter Ended October 31, 2004

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

incorporation or organization)

(I.R.S. Employer

Identification Number)

ONE CONVENIENCE BOULEVARD, ANKENY, IOWA

(Address of principal executive offices)

50021

(Zip Code)

(515) 965-6100

(Registrant’s telephone number, including area code)

NONE

(Former name, former address and former fiscal year,

if changed since last report)

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) YES x NO ¨

As of December 2, 2004, the registrant had outstanding 50,131,862 shares of Common Stock, no par value.

CASEY’S GENERAL STORES, INC.

INDEX


			Page
PART I - FINANCIAL INFORMATION

	Item 1. Consolidated Financial Statements.

		Consolidated condensed balance sheets - October 31, 2004 and April 30, 2004	2

		Consolidated condensed statements of income - three and six months ended October 31, 2004 and 2003	4

		Consolidated condensed statements of cash flows - six months ended October 31, 2004 and 2003	5

		Notes to consolidated condensed financial statements	7

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.		11

	Item 3. Quantitative and Qualitative Disclosure about Market Risk.		19

	Item 4. Controls and Procedures.		20

PART II - OTHER INFORMATION

	Item 1. Legal Proceedings.		21

	Item 4. Submission of Matters to a Vote of Security Holders.		21

	Item 6. Exhibits and Reports on Form 8-K.		22

SIGNATURE			24

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.

CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

(Dollars in Thousands)


	October 31, 2004		April 30, 2004
ASSETS
Current assets:
Cash and cash equivalents	$	59,476	45,887
Receivables		7,722	5,751
Inventories		78,365	77,895
Prepaid expenses		6,879	6,392
Income tax receivable		13,868	10,882

Total current assets		166,310	146,807

Other assets		1,195	1,154
Property and equipment, net of accumulated depreciation October 31, 2004, $432,815 April 30, 2004, $409,969		702,974	686,625

	$	870,479	834,586

See notes to unaudited consolidated condensed financial statements.

CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

(Continued)

(Dollars in Thousands)


	October 31, 2004		April 30, 2004
LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Current maturities of long-term debt	$	33,275	28,345
Accounts payable		97,159	83,388
Accrued expenses		38,685	34,107

Total current liabilities		169,119	145,840

Long-term debt, net of current maturities		127,473	144,158

Deferred income taxes		106,031	99,159

Deferred compensation		5,846	5,635

Total liabilities		408,469	394,792

Shareholders’ equity:
Preferred stock, no par value		—	—
Common Stock, no par		45,183	44,155
Retained earnings		416,827	395,639

Total shareholders’ equity		462,010	439,794

	$	870,479	834,586

See notes to unaudited consolidated condensed financial statements.

CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited)

(Dollars in Thousands, except per share amounts)


	Three Months Ended October 31,			Six Months Ended October 31,
	2004		2003	2004	2003
Net sales	$	717,027	611,103	1,451,508	1,220,858
Franchise revenue		302	463	630	966

		717,329	611,566	1,452,138	1,221,824

Cost of goods sold		600,664	493,634	1,211,316	988,874
Operating expenses		84,105	77,723	168,044	155,257
Depreciation and amortization		12,897	12,317	25,566	24,482
Interest, net		2,572	3,056	5,371	6,301

		700,238	586,730	1,410,297	1,174,914

Income before income taxes		17,091	24,836	41,841	46,910

Federal and state income taxes		6,085	9,066	14,896	17,123

Net income	$	11,006	15,770	26,945	29,787

Earnings per share

Basic	$	.22	.32	.54	.60

Diluted	$	.22	.32	.54	.60

See notes to unaudited consolidated condensed financial statements.

CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


	Six Months Ended October 31,
	2004			2003
Cash flows from operations:
Net income	$	26,945		29,787
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization		25,566		24,482
Loss on sale of property and equipment		1,783		543
Deferred income taxes		6,000		5,500
Changes in assets and liabilities:
Receivables		(1,971	)	529
Inventories		(470	)	(5,574	)
Prepaid expenses		(684	)	(681	)
Accounts payable		13,771		3,711
Accrued expenses		4,578		(1,924	)
Income taxes receivable		(1,917	)	4,459
Other, net		170		273

Net cash provided by operations		73,771		61,105

Cash flows from investing:
Purchase of property and equipment		(40,702	)	(40,854	)
Proceeds from sale of property and equipment		700		2,516

Net cash used in investing activities		(40,002	)	(38,338	)

CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(Continued)


	Six Months Ended October 31,
	2004			2003
Cash flows from financing:
Payments on long-term debt		(15,451	)	(4,246	)
Proceeds from exercise of stock options		1,028		1,678
Payment of cash dividends		(5,757	)	(2,985	)

Net cash used in financing activities		(20,180	)	(5,553	)

Net increase in cash and cash equivalents		13,589		17,214
Cash and cash equivalents at beginning of the period		45,887		40,544

Cash and cash equivalents at end of the period	$	59,476		57,758

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION


	Six Months Ended October 31,
	2004		2003
Cash paid during the year for Interest, net of amount capitalized	$	6,057	6,506
Income taxes		10,813	7,164

Noncash investing and financing activities
Property and equipment acquired through installment purchases or capitalized lease obligations		3,696	670

See notes to unaudited consolidated condensed financial statements.

CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED CONDENSED

FINANCIAL STATEMENTS

1.	The accompanying consolidated condensed financial statements include the accounts and transactions of the Company and its wholly-owned subsidiaries. All material inter-company balances and transactions have been eliminated in consolidation.

The accompanying consolidated condensed financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. Although management believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these interim consolidated condensed financial statements be read in conjunction with the Company’s most recent audited financial statements and notes thereto. In the opinion of management, the accompanying consolidated condensed financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of October 31, 2004, and the results of operations for the six and three months ended October 31, 2004 and 2003, and changes in the cash flows for the six months ended October 31, 2004 and 2003. Certain reclassifications were made to balances for the prior year to conform to current year presentation.

The Company recognizes retail sales of gasoline, grocery and general merchandise, and prepared food at the time of the sale to the customer. Wholesale sales to franchisees are recognized at the time of delivery to the franchise location. Franchise fees, license fees from franchisees, and rent for franchise signage and facades are recognized monthly when billed to the franchisees. Other maintenance services and transportation charges are recognized at the time the service is provided. 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.

The Company accounts for environmental contamination costs in accordance with the Emerging Issues Task Force (EITF) Issue No. 90-8, Capitalization of Costs to Treat Environmental Contamination. EITF No. 90-8 allows these costs to be capitalized if the costs extend the life of the asset or if the costs mitigate or prevent environmental contamination that has yet to occur. The Company also offsets these capitalized costs by any refunds received under the reimbursement programs described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition and Results of Operations” herein.

During the third quarter of fiscal 2004, the Company implemented a change in accounting principle from valuing retail gasoline inventories at the lower of cost or market utilizing the last-in, first-out (LIFO) method to valuing retail gasoline inventories at the lower of cost or market utilizing the first-in, first-out (FIFO) method. This change was adopted because the FIFO method better measures the current value of gasoline inventory, provides a more accurate reflection of the Company’s financial position and more closely matches the actual costs and revenues associated with the sale of gasoline. The six months ended October 31, 2003 Consolidated Statement of Operations and six month ended Consolidated Statement of Cash Flows have been restated to apply the new method retroactively. The three months ended October 31, 2003 Consolidated Statement of Operations and Consolidated Statement of Cash Flows was not restated due to the fact that there was no change during the quarter.


	*Six Months Ended* *October 31, 2003*
*(Dollars in thousands* *except per share amounts)*	As previously reported		As restated for LIFO to FIFO
Net income	$	29,597	29,787

Earnings per common share
Basic	$	.59	.60
Diluted	$	.59	.60

Weighted average shares outstanding
Basic		49,798,529
Diluted		49,966,033

The Company has elected the pro forma disclosure option of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. The Company will continue applying the accounting treatment prescribed by the provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees. Pro forma net earnings and pro forma net earnings per common share have been provided as if SFAS No. 123 were adopted for all stock-based compensation plans.

The Company applies APB Opinion No. 25 in accounting for its incentive stock option plan; accordingly, the financial statements recognize no compensation cost for stock options. Had the Company determined compensation cost of its stock options based on the fair value at the grant date under SFAS No. 123, the Company’s net income would have been reduced to the pro forma amounts shown in the following table:


	Three Months Ended October 31,			Six Months Ended October 31,
	*2004*		*2003*	*2004*	*2003*
Net income, as reported	$	11,006	15,770	26,945	29,787

Deducted amount
Total stock-based employee compensation expense determined by fair-value method for all awards, net of related tax effects		66	51	170	102

Pro forma net income	$	10,940	15,719	26,775	29,685

Basic earnings per share
As reported	$	.22	.32	.54	.60
Pro forma	$	.22	.32	.53	.60

Diluted earnings per share
As reported	$	.22	.32	.54	.60
Pro forma	$	.22	.31	.53	.59

The weighted average fair value of the stock options granted during the six months ended October 31, 2004 and 2003 was $4.36 and $3.98 per share, respectively, on the date of grant. Fair value was calculated using the Black Scholes option-pricing model with the following weighted average assumptions: for the quarter ended July 31, 2004 - expected dividend yield of 0.95%, risk-free interest rate of 3.8%, estimated volatility of 24%, and an expected life of 5.8 years; for the quarter ended July 31, 2003 - expected dividend yield of 0.89%, risk-free interest rate of 3.9%, estimated volatility of 24%, and an expected life of 5.8 years. There were no stock options granted during the second quarter of 2004 and 2003. For purposes of pro forma disclosures, the estimated fair value of options granted is amortized to expense over the options’ vesting periods.

7.	Computations for basic and diluted earnings per common share are presented below (in thousands, except share and per share amounts):


	*Three Months Ended* *October 31,*			*Six Months Ended* *October 31,*
	*2004*		*2003*	*2004*	*2003*
Basic earnings per share

Weighted average number of shares outstanding		50,086,529	49,832,912	50,061,695	49,798,529

Net income	$	11,006	15,770	26,945	29,787

Basic earnings per common share	$	.22	.32	.54	.60

Diluted earnings per share

Weighted average number of shares outstanding		50,086,529	49,832,912	50,061,695	49,798,529
Shares applicable to stock options		190,748	184,277	185,325	167,504

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