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.
The Company primarily operates convenience stores under the names "Casey's" and "
Casey's General Store" throughout 16 states, primarily in Iowa, Illinois, and Missouri. On April 30, 2022, there were a total of 2,452 stores in operation. All convenience stores carry a broad selection of food (including freshly prepared foods such as pizza, donuts and sandwiches), beverages, tobacco and nicotine products, health and beauty aids, automotive products and other non-food items. As of April 30, 2022, 212 store locations offered car washes. We derive our revenue from the retail sale of fuel and the products offered in our stores. During the fiscal year, the Company introduced certain stores branded or rebranded as "GoodStop (by Casey's)". Similar to most of our store footprint, the "GoodStop" locations offer fuel for sale on a self-serve basis, and a broad selection of snacks, beverages, tobacco products, and other essentials. However, these locations typically do not have a kitchen and have limited prepared food offerings. As of April 30, 2022, 46 stores operate under the "GoodStop" brand. The Company is also temporarily operating certain locations acquired from Buchanan Energy during the fiscal year under the name, "Bucky's." The Company is in the process of transitioning all "Bucky's" locations to either the "Casey's" or "GoodStop" brand. These locations typically have similar offerings to the "Casey's" branded stores. The Company also operates two stores selling primarily tobacco and nicotine products, one liquor-only store, and one grocery store. The Company acquired a dealer network from Buchanan Energy during the 2022 fiscal year. As of April 30, 2022, there were 76 dealer locations where Casey's manages fuel wholesale supply agreements to these stores. These locations are not operated by Casey's. Approximately 2% of total revenue for the year-ended April 30, 2022relates to this dealer network. Approximately 51% of all Casey's were opened in areas with populations of fewer than 5,000 people, while approximately 25% of all stores were opened in communities with populations of more than 20,000 persons. CMC operates three distribution centers, through which certain grocery and general merchandise, and prepared food and dispensed beverage items, are supplied to our stores. One is adjacent to the Store Support Center facility in Ankeny, Iowa. The other two distribution centers are located in Terre Haute, Indiana(opened in February 2016) and Joplin, Missouri(opened in April 2021). At April 30, 2022, the Company leased the combination of land and/or building at 114 locations. The Company's business is seasonal, and generally experiences higher sales and profitability during the first and second fiscal quarters (May-October), when guests tend to purchase greater quantities of fuel and certain convenience items such as beer, sports drinks, water, soft drinks and ice.
The following table represents the progression of store growth throughout fiscal 2022:
Table of Contents Store Count Stores at
April 30, 20212,243 New store construction 21 Acquisitions 207 Acquisitions not opened (3) Prior acquisitions opened 4 Closed (20) Stores at April 30, 20222,452 Acquisitions in the table above include, in part, 89 stores which were acquired from Buchanan Energy in May, 2021. The table excludes three sites that were included in the transaction, but were divested by the Company shortly after closing as part of a consent order with the Federal Trade Commission. Additionally, it includes 48 stores from the Circle Ktransaction that closed in June and 40 stores from the Pilot transaction that closed in December. For additional discussion, refer to Note 2 in the consolidated financial statements.
For more general descriptive information about the business and operations of the Company, see Section 1 above, which is incorporated herein by reference.
Long term strategic plan
The Company announced an updated, long-term strategic plan in
January 2020focused on four strategic objectives: reinvent hospitality and the guest experience; be where the guest is by accelerating unit growth; create capacity through best-in-class efficiencies; and, invest in our people and culture. The Company's plan is based on building on our proud heritage and distinct advantages to become more contemporary through new capabilities, technology, data, and processes. We believe this will best position the Company to address rapidly evolving shifts in consumer habits and other macro retail trends.
The Company has made significant progress towards the objectives of its strategic plan in fiscal year 2022. Examples include:
•Grew our store count through a number of strategic acquisitions, including 89 stores from Buchanan Energy, 48 stores from
Circle K, and 40 stores from Pilot, resulting in the largest unit growth year in the Company's history •Rolled out a successful breakfast menu relaunch with innovative new items and bean-to-cup coffee •Expanded our private label products by over 100 items and continued to expand the program's market share, exiting the fourth quarter at 5% sales penetration of the grocery and general merchandise category •Introduced a fuel wholesale network through the acquisition of Buchanan Energy, which is made up of 76 locations as of April 30, 2022•Stood up new fuel technology to optimize fuel procurement efforts •Continued to expand our digital offerings and have increased our Casey's Rewards enrollment to approximately 5 million members, an increase of 1.3 million during the fiscal year •Improved the efficiency of our distribution network with the new distribution center in Joplin, Missouri, which opened in the prior fiscal year
COVID-19 and related impacts
Throughout fiscal year 2022, the Company continued to adapt to the challenges caused or contributed to by COVID-19 and its new and unpredictable variants. In general, reported COVID-19 cases across our footprint were down, although we did see a slight uptick at the end of the fiscal year. Overall, this has led to fewer staffing challenges due to illness, temporary store closures and special cleaning costs. On the other hand, the ongoing challenges included, but were not limited to, a stressed labor market, as it became increasingly challenging to find, hire and retain store Team Members. In response, the Company held two large-scale hiring events during the year, each of which led to the onboarding of a significant number of Team Members to support our stores. In addition, the Company saw increasing wage pressure, as wages across the convenience store, restaurant and retail industries in general continued to rise, which directly contributes to increased operating expenses. The Company expects to see these labor challenges continue throughout the 2023 fiscal year. COVID-19 also continues to pressure our supply chain, and the supply chains of our suppliers. While the Company has been successful in hiring and retaining drivers, some supplier networks have been challenged by a lack of drivers, which in some cases has led to delays in deliveries to our distribution centers and stores. Other supply chain challenges have included the unavailability of certain products from our suppliers, which has led to these products being out of stock or not available at all. The Company also expects these issues to continue throughout the 2023 fiscal year. Finally, the initial onset of COVID-19 in early 2020 caused a significant decrease in store traffic across our entire footprint. While store traffic has markedly increased as the economy has reopened over the past two or so years, the Company has not seen a full return to store traffic levels experienced prior to the pandemic. The Company believes this is largely contributed to the increased prevalence and acceptance across all industries of working from home, a trend which the Company expects to continue into the foreseeable future. While COVID-19 will continue to bring challenges 20
and the uncertainty of our operating environment, we believe that our resilient business model and the strength of our brand and balance sheet positions us well to weather the pandemic and its impacts.
Since the beginning of the COVID-19 pandemic, the price of crude oil, and in turn the wholesale cost of fuel, has been volatile. Initially, at the outset of the pandemic, oil and fuel prices fell dramatically; however, as the economy in general began to emerge from the COVID-19 pandemic, prices began to modestly increase over time. More recently, during the end of the Company's 2022 fiscal year, and continuing thereafter, oil and fuel prices have seen a quick and dramatic increase, in part, as a result of the conflict in
Ukraine, as well as other macroeconomic conditions, which also directly impacts the retail price of fuel that we sell at our stores. Although the Company has not seen a material reduction in demand to-date, as the retail price of fuel increases to over four dollars, and in some instances, five dollarsper gallon, it is possible that the Company may begin to see demand decline for fuel or other discretionary items it sells inside its stores. In addition, since the beginning of the COVID-19 pandemic, the Company, and the fuel industry as a whole, has experienced historically high average revenue less cost of goods sold per gallon (excluding depreciation and amortization and credit card fees). Although this has remained relatively consistent since that time on a longer-term basis, this metric can fluctuate significantly, and sometimes unpredictably, in the short-term. While the Company believes that its average revenue less cost of goods sold per gallon (excluding depreciation and amortization and credit card fees) will remain elevated from pre-COVID-19 pandemic levels for the foreseeable future, it is possible that increased oil and fuel prices, rising interest rates, macroeconomic conditions and/or continuing conflicts or disruptions involving oil producing countries may materially impact the performance of this metric.
Casey's is in the early stages of developing a more robust electric vehicle ("EV") strategy and our management team remains committed to understanding if and how the increase demand for, and usage of, EVs impacts consumer behavior across our store footprint and beyond. The Company has installed 114 charging stations at 25 stores, across 8 states. Our current implementation strategy is designed to selectively install charging stations in locations within our footprint where we see higher levels of consumer EV usage. To date, consumer EV demand within our Midwest footprint has been comparatively lower than the levels along the coasts. As EV demand from our guests increases, we are prepared to integrate charging station options at our nearby stores. The Company also remains committed to offering renewable fuel options at our stores. Currently, 100% of our stores offer fuel with at least 10% of blended ethanol and 44% of our stores offer biodiesel. Every new store has the capability to sell higher blended ethanol, and we aim to continue growing sales of renewable fuels throughout our footprint. At the end of the 2022 fiscal year, the Biden administration announced plans for an emergency waiver to allow the sale of gasoline blended with 15% ethanol during the summer period and as a result, we expect to see an increase in the sales volumes of ethanol blended fuels compared to what we would generally expect during this period.
Fiscal 2022 vs. Fiscal 2021
Total revenue for fiscal 2022 increased 48.8% (
$4,245,405) to $12,952,594. Retail fuel sales for the fiscal year were $8,312,038, a increase of 72.3% primarily due to a 45.7% increase in the average price of fuel. Fuel gallons sold increased 18.3% to 2.6 billion gallons, which increased fuel revenue by an additional $1,282,871. Additionally, the Company saw a $534,106increase to $4,345,627(14.0%) in grocery and general merchandise and prepared food and dispensed beverage revenue, due to operating 209 more stores than one year ago, price increases responding to the rising cost of inputs, and improved sales in pizza slices, breakfast sandwiches, packaged beverages, and salty snacks. Total revenue less cost of goods sold (excluding depreciation and amortization) was 21.3% for fiscal 2022 compared with 27.1% for the prior year. Fuel cents per gallon increased to 36.0 centsin fiscal 2022 from 34.9 centsin fiscal 2021. The grocery and general merchandise revenue less related cost of goods sold (exclusive of depreciation and amortization) increased to 32.7% from 32.0% during fiscal 2022 compared to fiscal 2021. Grocery and general merchandise revenue less related cost of goods sold (exclusive of depreciation and amortization) was positively impacted by mix shift, including gaining market share on the private label program, procurement initiatives, and price increases, offset by inflationary pressures. The prepared food and dispensed beverage revenue less related cost of goods sold (exclusive of depreciation and amortization) decreased to 59.2% from 60.1% during fiscal 2022 compared to the prior year, primarily due to inflationary pressures. Operating expenses increased 19.8% ( $324,282) in fiscal 2022 primarily due to operating 209 more stores than one year ago inclusive of $15.0 millionof one-time deal and integration costs, as well as a 7.5% increase in same-store labor rates, and a 23% increase in same-store credit card fees driven by higher fuel pricing. The majority of all operating expenses are wages and wage-related costs.
Depreciation and amortization increased by 14.5% (
The effective tax rate decreased to 22.9% in fiscal 2022 from 23.2% in fiscal 2021. The decrease in the effective tax rate was driven by a one-time benefit from adjusting the Company's deferred tax assets and liabilities for state law changes enacted during the year, offset by a one-time expense to update the state deferred tax rate following the Buchanan Energy transaction. Net income increased to
$339,790in fiscal 2022 from $312,900in fiscal 2021. The increase was primarily due to increased fuel and grocery contribution attributable to increasing store traffic, operating 209 more stores than one year ago, offset by increased operating expenses and depreciation.
Please refer to Form 10-K for the fiscal year ended
TOTAL COMPANY REVENUE AND REVENUE LESS COST OF GOODS SOLD (EXCLUDING AMORTIZATION AND DEPRECIATION) BY CATEGORY (1)
Years ended April 30, 2022 2021 2020 Total revenue by category Fuel
$ 8,312,038 $ 4,825,466 $ 5,517,412Grocery and general merchandise 3,141,527 2,724,374 2,498,966 Prepared food and dispensed beverage 1,204,100 1,087,147 1,097,207 Other (2) 294,929 70,202 61,711 $ 12,952,594 $ 8,707,189 $ 9,175,296Revenue less cost of goods sold (excluding depreciation and amortization) by category Fuel $ 928,868 $ 761,247 $ 614,847Grocery and general merchandise 1,027,477 872,573 800,140 Prepared food and dispensed beverage 712,352 653,689 668,092 Other (2) 94,017 68,926 61,605 $ 2,762,714 $ 2,356,435 $ 2,144,684(1)Note that we have changed the names of the "grocery and other merchandise" category to "grocery and general merchandise" and the "prepared food and fountain" category to "prepared food and dispensed beverage" to better reflect the composition of the category. There have been no changes to the makeup of the categories, and they remain directly comparable to prior periods. (2)The 'Other' category historically has primarily consisted of lottery, which is presented net of applicable costs, and car wash. As a result of the BuchananEnergy acquisition, we acquired a dealer network where Casey's manages fuel wholesale supply agreements to these stores. The activity related to this dealer network is included in the 'Other' category and is presented gross of applicable costs.
COMPARISON OF INDIVIDUAL STORES (1)
Years ended April 30, 2022 2021 2020 Average retail sales
$ 5,206 $ 3,894 $ 4,203Average retail inside sales (2) 1,840 1,720 1,659
Average revenue less cost of goods sold (excluding depreciation and amortization) over internal sales (2)
723 655 647 Average retail sales of fuel 3,366 2,174 2,544
Average revenue less cost of goods sold (excluding depreciation and amortization) on fuel
363 338 280 Average operating income (3) 367 338 291 Average number of gallons sold 1,047 981 1,055
(1)Individual store comparisons only include stores that had been in operation for at least one full year and remained open on
22 -------------------------------------------------------------------------------- Table of Contents (2)Inside sales is comprised of sales related to the grocery and general merchandise and prepared food and dispensed beverage categories. (3)Average operating income represents retail sales less cost of goods sold and operating expenses attributable to a particular store; it excludes interest, federal and state income taxes, and Company operating expenses not attributable to a particular store.
COMPARABLE STORE SALES BY CATEGORY (1)
Years ended April 30, 2022 2021 2020 Fuel gallons (2) 4.4 % (8.1) % (5.1) % Grocery and general merchandise (3) 6.3 % 6.6 % 1.9 % Prepared food and dispensed beverage (3) 7.4 % (2.1)
(1)Same-store sales is a common metric used in the convenience store industry. We define same-store sales as the total sales increase (or decrease) for stores open during the full time of the periods being presented. The store must be open for each entire fiscal year being compared. Remodeled stores that remained open or were closed for just a very brief period of time (less than a week) during the period being compared remain in the same store sales comparison. If a store is replaced, either at the same location (razed and rebuilt) or relocated to a new location, it is removed from the comparison until the new store has been open for each entire period being compared. Newly constructed and acquired stores do not enter the calculation until they are open for each entire period being compared as well. (2)The increase in fuel gallons in fiscal 2022 as compared to fiscal 2021 was primarily due to increased demand as store traffic improved throughout the duration of the COVID-19 pandemic. (3)The increase in same-store sales for prepared food and dispensed beverage and grocery and general merchandise for 2022 as compared to 2021 was primarily due to increased demand as store traffic improved throughout the duration of the COVID-19 pandemic, price increases relating to inflationary pressures, as well as improved sales in pizza slices, breakfast items related to the breakfast menu relaunch, packaged beverages, and salty snacks.
Use of Non-GAAP Measures
We define EBITDA as net earnings before net interest expense, income taxes, and amortization. Adjusted EBITDA also adjusts EBITDA by excluding gain or loss on disposal of assets as well as impairment charges. Neither EBITDA nor Adjusted EBITDA is presented in accordance with GAAP.
We believe EBITDA and Adjusted EBITDA are useful to investors in evaluating our operating performance because securities analysts and other interested parties use such calculations as a measure of financial performance and debt service capabilities, and they are regularly used by management for internal purposes including our capital budgeting process, evaluating acquisition targets, and assessing store performance. EBITDA and Adjusted EBITDA are not recognized terms under GAAP and should not be considered as a substitute for net income, cash flows from operating activities or other income or cash flow statement data. These measures have limitations as analytical tools, and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP. We strongly encourage investors to review our financial statements and publicly filed reports in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, EBITDA and Adjusted EBITDA, as defined by us, may not be comparable to similarly titled measures reported by other companies. It therefore may not be possible to compare our use of these non-GAAP financial measures with those used by other companies.
The following table contains a reconciliation of net profit to EBITDA and Adjusted EBITDA for the three months and years ended
Table of Contents Three months ended Years ended April 30, 2022 April 30, 2021 April 30, 2022 April 30, 2021 Net income 59,777
$ 41,698 $ 339,790 $ 312,900Interest, net 15,291 11,168 56,972 46,679 Depreciation and amortization 77,866 69,897 303,541 265,195 Federal and state income taxes 12,905 11,921 100,938 94,470 EBITDA $ 165,839 $ 134,684 $ 801,241 $ 719,244(Gain) loss on disposal of assets and impairment charges (333) 5,872 (1,201) 9,680 Adjusted EBITDA $ 165,506 $ 140,556 $ 800,040 $ 728,924For the three months ended April 30, 2022, EBITDA and Adjusted EBITDA increased 23.1% and 17.8% respectively, when compared to the same period a year ago. For the year ended April 30, 2022, EBITDA and Adjusted EBITDA increased 11.4% and 9.8%, respectively. The increase was due to increased fuel and grocery contribution attributable to increasing store traffic, operating 209 more stores than one year ago, partially offset by increased operating expenses.
Significant Accounting Policies and Estimates
Critical accounting policies are those accounting policies that management believes 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.
The Company uses the acquisition method of accounting for transactions meeting the definition of a business combination. The acquisitions are recorded in the financial statements by allocating the purchase price to the assets acquired, including intangible assets, and liabilities assumed, based on their estimated fair values at the acquisition date as determined by both third party appraisals or internal estimates. The more significant assets acquired include buildings, equipment, and land. The Company primarily values buildings and equipment using the cost method and land using comparable land sales. The purchase price is determined based upon the fair value of consideration transferred to the seller. Fair values are typically determined using Level 3 inputs (see Note 3 to the consolidated financial statements). Given these estimates often are based upon unobservable inputs, the estimates require significant judgment when determining the overall value and actual results could differ from the estimates originally established. 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 if the acquisition is considered to be a business combination. During a one-year period from the acquisition date, amounts are allowed to be provisional for areas that are expected to be adjusted to their final amounts during the measurement period. These provisional adjustments are for when the buyer obtains additional information about the facts and circumstances that existed as of the acquisition date. Subsequent adjustments recorded to provisional balances within the measurement period are recorded in the period in which the adjustment is identified. Acquisition-related transaction costs are recognized as period costs as incurred.
Inventories, which consist of merchandise and fuel, are stated at the lower of cost or market. For fuel, 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. Inventory valued using the LIFO method of inventory requires judgement when making the determination of appropriate indices to be used for determining price level changes.
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 of the assets exceeds their 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 fair value, which are considered Level 3 inputs (see Note 3 to the consolidated financial statements). In determining whether an asset is impaired, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets, which for the Company is generally on a store-by-store basis. The Company incurred impairment charges of
$1,056in fiscal 2022, $3,846in fiscal 2021, and $1,177in fiscal 2020. Impairment charges are a component of operating expenses.
The Company is primarily self-insured for Team Member healthcare, workers' compensation, general liability, and automobile claims. The self-insurance claim liability for workers' compensation, general liability, and automobile claims is determined actuarially at each year-end based on claims filed and an estimate of claims incurred but not yet reported. Actuarial projections of the losses are employed due to the potential 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 balances of our self-insurance reserves were
$53,752and $50,526for the years ended April 30, 2022and 2021, respectively.
Recent accounting pronouncements
Refer to note 1 of the consolidated financial statements for a description of the new accounting standards applicable to the Company.
Cash and capital resources
Due to the nature of our business, cash provided by operations is our primary source of liquidity. The Company finances 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, 2022, the Company's ratio of current assets to current liabilities was 0.80 to 1. The ratio at April 30, 2021and at April 30, 2020was 1.18 to 1 and 0.36 to 1, respectively. The decrease in the ratio from the prior year is partially attributable to a decrease in cash and cash equivalents associated with payments for the acquisitions of Buchanan Energy, 48 stores from Circle Kand 40 stores from Pilot, offset by an increase in inventory due to operating 209 more stores than a year ago and higher fuel pricing. Additionally, current liabilities have increased partially related to accounts payable, due to increasing store count, an increase in fuel prices, as well as an effort to better manage payment terms. We believe our current $450,000unsecured revolving credit facility, our $25,000unsecured bank line of credit, current cash and cash equivalents, and the future cash flow from operations will be sufficient to satisfy the working capital needs of our business. Net cash provided by operating activities decreased $15,347(1.9%) for the year ended April 30, 2022, primarily due to increases in income tax receivable, inventories, and accrued expenses. Cash used in investing activities in the year ended April 30, 2022increased $713,655(160.6%) primarily due to cash paid for the acquisition of Buchanan Energy for $566,750, 48 Circle Kstores for $41,416, and 40 Pilot stores for $226,529, net of cash acquired. Refer to Note 2 of the consolidated financial statements for additional discussion. Cash flows provided by financing activities increased $293,065, primarily due to $450,000in draws on the Company's term loan facilities, offset by $188,537of payments long-term debt, including $167,500of prepayments due to strong free cash flow. Refer to Note 3 of the consolidated financial statements for additional discussion. Purchases of property and equipment and payments for acquisitions of businesses typically represent the single largest use of Company funds. Management believes that by acquiring, building, and reinvesting in stores, the Company will be better able to respond to competitive challenges and increase operating efficiencies. During fiscal 2022, we expended $1,228,113for property and equipment, primarily for construction, acquisition, and remodeling of stores compared with $450,608in the prior year, primarily due to the acquisition activity discussed previously. In fiscal 2023, we anticipate spending approximately $450-$500 millionin capital expenditures, including approximately $135 millionin one-time store remodel costs for recently acquired stores. 25
Finance lease liabilities (Note 7)
3.67% Senior Notes (Series A) maturing in 7 installments from
3.75% Senior Notes (Series B) maturing in 7 installments from
3.65% Senior Notes (Series C) maturing in 7 installments from
3.72% Senior Notes (Series D) maturing in 7 installments from
3.51% Senior notes (Series E) due
June 13, 2025
3.77% Senior notes (Series F) due
August 22, 2028
2.85% Senior notes (Series G) due
August 7, 2030
2.96% Senior notes (Series H) due
August 6, 2032
Variable rate Term Loan Facilities, due
January 6, 2026265,625 Debt issuance costs (1,990) 1,687,869 Less current maturities 24,466 1,663,403 Interest on the 3.67% Senior notes Series A and 3.75% Senior notes Series B is payable on the 17th day of each June and December. Principal on the Senior notes Series A and Series B is payable in various installments beginning June 17, 2022(Series A) and December 17, 2022(Series B) through December 2028. We may prepay the 3.67% and 3.75% Senior notes in whole or in part at any time in an amount of not less than $2,000at a redemption price calculated in accordance with the Note Agreement dated June 17, 2013, as amended, between the Company and the purchasers of the Senior notes Series A and Series B. Interest on the 3.65% Senior notes Series C is payable on the 2nd day of each May and November, while the interest on the 3.72% Senior notes Series D is payable on the 28th day of each April and October. Principal on the Senior notes Series C and Series D is payable in various installments beginning May 2, 2025(Series C) and October 28, 2025(Series D) through October 2031. We may prepay the 3.65% and 3.72% Senior notes in whole or in part at any time in an amount of not less than $2,000at a redemption price calculated in accordance with the Note Agreement dated May 2, 2016, as amended, between the Company and the purchasers of the Senior notes Series C and Series D. Interest on the 3.51% Senior notes Series E is payable on the 13th day of each June and December, while the interest on the 3.77% Senior notes Series F is payable on the 22nd day of each February and August. Principal on the Senior notes Series E and Series F is payable in full on June 13, 2025(Series E) and August 22, 2028(Series F), respectively. We may prepay the 3.51% and 3.77% Senior notes in whole or in part at any time in an amount of not less than $2,000at a redemption price calculated in accordance with the Note Agreement dated June 13, 2017, as amended, between the Company and the purchasers of the Senior notes Series E and Series F. Interest on the 2.85% Senior notes Series G and 2.96% Senior notes Series H is payable on the 7th day of each February and August. Principal on the Senior notes Series G and Series H is payable in full on August 7, 2030(Series G) and August 6, 2032(Series H), respectively. We may prepay the 2.85% and 2.96% Senior notes in whole or in part at any time in an amount of not less than $2,000at a redemption price calculated in accordance with the Note Purchase Agreement dated June 30, 2020, between the Company and the purchasers of the Senior notes Series G and Series H. Amounts borrowed under the Company's term loan facilities bear interest at variable rates based upon, at the Company's option, either: (i) the Adjusted LIBO Rate, plus a margin ranging from 1.55% to 2.60%; or (ii) the ABR, plus a margin ranging from 0.20% to 1.60%. The Company currently has elected the Adjusted LIBO Rate, and there is an option to elect either rate in subsequent interest periods. The applicable margins are dependent upon the Company's Consolidated Leverage Ratio, as defined in the credit agreement establishing the Company's term loan facilities as calculated quarterly. Interest is payable at the end of each calendar quarter. We have the right at any time to prepay all or a portion of the outstanding balance without premium or penalty, with prior notice given. During the fourth quarter of the fiscal year, the Company made prepayments of $167,500on its term loan facilities. 26
To date, we have funded capital expenditures primarily through funds generated from operations, the proceeds of the sale of common stock, issuance of debt, and existing cash. 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, its
$450,000committed unsecured revolving credit facility, its additional $25,000unsecured 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 sets out our main contractual obligations, including interest, as of
Contractual obligations Payments due by period Less than More than Total 1 year 1-3 years 3-5 years 5 years Senior notes (1)
$ 1,925,775 $ 64,362 $ 149,737 $ 577,894 $ 1,133,782Finance lease obligations 107,566 7,235 12,246 10,408 77,677
Operating lease obligations 153,277 7,875 14,997
14,527 115,878 Unrecognized tax benefits 10,259 - - - - Deferred compensation 14,156 - - - - Total
$ 2,211,033 $ 79,472 $ 176,980 $ 602,829 $ 1,327,337
(1) The senior notes portion of the table above excludes interest payments related to the Company’s term loan facilities, due to the variable nature of the interest payments required.
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 timing of the payment of the balances have not been reflected in the above "Payments due by period" table. At
April 30, 2022, the Company had a total of $10,259in gross unrecognized tax benefits. Of this amount, $8,105represents the amount of unrecognized tax benefits that, if recognized, would impact our effective tax rate. The total amount of accrued interest and penalties for such unrecognized tax benefits was $371as of April 30, 2022. 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 tax years 2018 and forward. Tax years 2012 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. The Company has no ongoing federal or state income tax examinations. At this time, management believes it is reasonably possible the aggregate amount of unrecognized tax benefits will decrease by $2,100within the next 12 months. This expected decrease is due to the expiration of statute of limitations related to certain federal and state income tax filing positions. Included in long-term liabilities on our consolidated balance sheet at April 30, 2022, was a $12,746obligation for deferred compensation. Additionally, $1,040was recognized in current liabilities as of April 30, 2022related to deferred compensation. As the specific payment dates for a portion of the deferred compensation outstanding are unknown due to the unknown retirement dates of many of the participants, the related timing of the payment of the balances have not been reflected in the above "Payments due by period" table. However, known payments of $10,418will be due during the next 5 years. At April 30, 2022, we were partially self-insured for workers' compensation claims in all 16 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 $2,000for auto liability and $1,000for workers' compensation and general liability. To facilitate this agreement, letters of credit approximating $5,492were issued and outstanding at April 30, 2022, on the insurance company's behalf. We renew the letters of credit on an annual basis.
This Form 10-K, including but not limited to the Management's Discussion and Analysis of Financial Condition and Results of Operations, contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. The words "may," "will," "should," "believe," "expect," "anticipate," "intend," "estimate," "project," "continue," and similar expressions are used to identify forward-looking statements. Forward-looking statements represent the Company's current expectations or beliefs concerning future events and trends that we believe may affect our financial condition, liquidity and related sources and needs, supply chain, results of operations and performance at our stores, business strategy, strategic 27
Table of Contents plans, growth opportunities, integration of acquisitions, acquisition synergies, short-term and long-term business operations and objectives including our long-term strategic plan, wholesale fuel, inventory and ingredient costs and the potential effects of the conflict in
Ukraineand COVID-19 on our business. The Company cautions 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 limitation, the following risk factors described more completely above in Item 1A entitled "Risk Factors": Business Operations; Our business and our reputation could be adversely affected by a cyber or data security incident or the failure to protect sensitive guest, Team Member or supplier data, or the failure to comply with applicable regulations relating to data security and privacy; food-safety issues and food-borne illnesses, whether actual or reported, or the failure to comply with applicable regulations relating to the transportation, storage, preparation or service of food, could adversely affect our business and reputation; pandemics or disease outbreaks, such as COVID-19, responsive actions taken by governments and others to mitigate their spread, and guest behavior in response to these events, have, and may in the future, adversely affect our business operations, supply chain and financial results; a significant disruption to our distribution network, to the capacity of the distribution centers, or timely receipt of inventory could adversely impact our sales or increase our transaction costs, which could have a material adverse effect on our business; we could be adversely affected if we experience difficulties in, or are unable to recruit, hire or retain, members of our leadership team and other distribution, field and store Team Members; any failure to anticipate and respond to changes in consumer preferences, or to introduce and promote innovative technology for guest interaction, could adversely affect our financial results; we rely on our information technology systems, and a number of third-party software providers, to manage numerous aspects of our business, and a disruption of these systems could adversely affect our business; increased credit card expenses could lead to higher operating expenses and other costs for the Company; our operations present hazards and risks which may not be fully covered by insurance, if insured; the dangers inherent in the storage and transport of fuel could cause disruptions and could expose to us potentially significant losses, costs or liabilities; consumer or other litigation could adversely affect our financial condition and results of operations; and, covenants in our senior notes and credit facility agreements require us to comply with certain covenants and meet financial maintenance tests and the failure to comply with these requirements could have a material impact to us. Governmental Actions, Regulations, and Oversight: Compliance with and changes in tax laws could adversely affect our performance; we are subject to extensive governmental regulations; governmental action and campaigns to discourage tobacco and nicotine use and other tobacco products may have a material adverse effect on our revenues and gross profit; and, wholesale cost and tax increases relating to tobacco and nicotine products could affect our operating results. Industry: General economic and political conditions that are largely out of the Company's control may adversely affect the Company's financial condition and results of operations; developments related to fuel efficiency, fuel conservation practices, climate change, and changing consumer preferences may decrease the demand for motor fuel; unfavorable weather conditions can adversely affect our business; the volatility of wholesale petroleum costs could adversely affect our operating results; and, the convenience store industry is highly competitive. Growth Strategies: We may experience difficulties implementing and realizing the results of our long-term strategic plan; and, we may not be able to identify, acquire, and integrate new properties and stores, which could adversely affect our ability to grow our business. Common Stock: The market price for our common stock has been and may in the future be volatile, which could cause the value of your investment to decline; any issuance of shares of our common stock in the future could have a dilutive effect on your investment; and, Iowalaw 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. 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 we have not identified may in the future prove to be important in affecting our business and results of operations. We ask you not to place undue reliance on any forward-looking statements because they speak only of our views as of the statement dates. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
© Edgar Online, source