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Item 1. Business

2021-06-25 compared with 2020-06-26 · 97 added, 65 removed, 79 unchanged (67% of the section changed)

Casey’s General Stores, Inc.

(“Casey’s”) and its wholly-owned subsidiaries (Casey’s, together with its subsidiaries, are referred to herein as the “Company” or “we”) operate convenience stores under the names "Casey's" and “Casey’s General Store” (hereinafter referred to as “Casey’s Store” or “Stores”) in 16 Midwestern states, primarily in Iowa, Missouri, and Illinois.

As of April 30, 2021 Casey’s General Stores, Inc.

(“Casey’s”) and its direct and indirect wholly-owned subsidiaries (Casey’s, together with its subsidiaries, are referred to herein as the “Company” or “we”) operate convenience stores under the names "Casey's" and “Casey’s General Store” (hereinafter referred to as “Casey’s Store” or “Stores”) in 16 Midwestern states, primarily in Iowa, Missouri, and Illinois.

The Company also operates two stores under the name "Tobacco City", selling primarily tobacco and nicotine products, one liquor store, and one grocery store.

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On April 30, 2021, there were a total of 2,243 stores in operation.

There were 60 stores newly constructed in fiscal 2020 .

We closed 13 stores in fiscal 2020 .

We also acquired 18 additional stores in fiscal 2020 ;

11 of those stores were opened in fiscal 2020 , and seven will be opened during the 2021 fiscal year.

Finally, we opened three acquisitions purchased in the prior year.

Two distribution centers are in operation (in Ankeny, Iowa adjacent to the Store Support Center and in Terre Haute, Indiana) from which grocery and general merchandise items are supplied to our stores.

Additionally, the Company is currently constructing a third distribution center in Joplin, Missouri.

Casey’s, with the Store Support Center located at One SE Convenience Blvd., Ankeny, Iowa 50021-8045 (telephone 515-965-6100), was incorporated in Iowa in 1967.

There were 40 stores newly constructed in fiscal 2021, and we closed 11 stores in fiscal 2021.

We also acquired 5 stores in fiscal 2021;

2 of those stores were opened in fiscal 2021, and 3 will be opened during the 2022 fiscal year.

Finally, we opened 5 acquisitions purchased in the prior year.

Three distribution centers are in operation (in Ankeny, Iowa adjacent to our corporate headquarters, which we call the Store Support Center, in Terre Haute, Indiana and in Joplin, Missouri) from which certain grocery and general merchandise items are supplied to our stores.

Casey’s, with its principal business office, and Store Support Center located at One SE Convenience Blvd., Ankeny, Iowa 50021-8045 (telephone 515-965-6100), was incorporated in Iowa in 1967.

Approximately 55% of all our stores were opened in areas with populations of fewer than 5,000 persons, while approximately 19% of our stores were opened in communities with populations exceeding 20,000 persons.

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The Company’s internet address is www.caseys.com.

Each year we make available through our website all of our SEC filings, including 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, Corporate Governance Guidelines, Code of Conduct, and committee charters.

In the event of a waiver to the Code of Conduct, any required disclosure will be posted to our website.

We seek to meet the needs of residents of smaller towns through quality products at competitive prices with courteous service in clean stores at convenient locations.

Additionally, you can go to our website to read our Financial Code of Ethics for the CEO and Senior Financial Officers, Corporate Governance Guidelines, Code of Business Conduct and Ethics, and committee charters.

In the event of a waiver to the Code of Business Conduct and Ethics, any required disclosure will be posted to our website.

Casey's purpose is to make the lives of our guests and communities better every day.

Smaller communities often are not served by national-chain convenience stores.

We have succeeded at operating Casey’s Stores in smaller towns by offering, at competitive prices, a broader selection of products than does a typical convenience store.

We have succeeded in operating Casey’s 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 substantially all of our stores, both distribution centers, a construction and support services facility, and the Store Support Center facility.

We currently own most of our real estate, including substantially all of our stores, all three distribution centers, a construction and support services facility, and the Store Support Center facility.

The Company derives its revenue primarily from the retail sale of fuel and the products offered in our stores.

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Corporate Subsidiaries

Casey's Marketing Company (the "Marketing Company") and Casey's Services Company (the "Services Company") were organized as Iowa corporations in March 1995.

Casey’s Retail Company (the "Retail Company") was organized as an Iowa corporation in April 2004.

Casey's Marketing Company ("CMC") and Casey's Services Company ("CSC") were organized as Iowa corporations in March 1995.

Casey’s Retail Company ("CRC") was organized as an Iowa corporation in April 2004.

CGS Stores, LLC was organized in April 2019 as an Iowa limited liability company.

Heartland Property Company, LLC was organized in September 2019 as a Delaware limited liability company.

The Marketing Company, Services Company, and Retail Company are wholly-owned subsidiaries of Casey’s.

CGS Stores, LLC and Heartland Property Company, LLC are wholly-owned subsidiaries of the Marketing Company.

Casey’s Retail Company owns and operates stores in Illinois, Kansas, Minnesota, Nebraska, North Dakota, South Dakota and Michigan;

it also holds the rights to the Company's trademarks, service marks, trade names, and other intellectual property.

The Marketing Company owns and operates stores in Arkansas, Indiana, Iowa, Kentucky, Missouri, Ohio, Oklahoma, and

Wisconsin, and until May 2019, stores in Tennessee.

The Marketing Company also has responsibility for all of our wholesale operations, including both distribution centers.

As of May 2019, CGS Stores, LLC owns and operates stores in Tennessee.

The Services Company provides a variety of construction and transportation services for all stores.

CMC, CSC, and CRC are wholly-owned subsidiaries of Casey’s.

CGS Stores, LLC and Heartland Property Company, LLC are wholly-owned subsidiaries of CMC.

CRC owns and operates stores in Illinois, Kansas, Minnesota, Nebraska, North Dakota, South Dakota and Michigan, holds the rights to the Company's trademarks, service marks, trade names, and other intellectual property, and performs most “corporate” functions of the enterprise.

CMC owns and operates stores in Arkansas, Indiana, Iowa, Kentucky, Missouri, Ohio, Oklahoma, and Wisconsin, and is responsible for all of our wholesale operations, including all three distribution centers.

CGS Stores, LLC owns and operates stores in Tennessee.

CSC provides a variety of construction, maintenance and transportation services for all stores.

Store Operations

Products Offered

Each Casey’s 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 food products are nationally advertised brands, and we also have an assortment of Casey's proprietary branded products.

Stores sell regional brands of dairy and bakery products, and 1,887 ( 85.5% ) of the stores offer beer.

Our nonfood items include tobacco and nicotine products, health and beauty aids, school supplies, housewares, pet supplies, and automotive products.

All but three Casey’s Stores offer retail motor fuel products for sale on a self-service basis.

Gasoline and diesel fuel are sold under the Casey’s name.

Our focus at Casey’s is to design, develop and deliver value to guests through a differentiated product assortment where the right products are optimally placed, priced and aggressively promoted to drive traffic, revenue and profit.

It is our practice 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 kitchens, which now are in the majority of stores.

The kitchens sell sandwiches, fountain drinks, and other items that have gross profit margins higher than those of general staple goods.

As a result, we have added various prepared food items to our product line over the years, facilitated by the installation of kitchens, which now are in most stores.

We began selling handmade pizza in 1984, and it was available in 2,235 stores (99.6%) as of April 30, 2021.

Although pizza is our most popular prepared food offering, we continue to expand our prepared food product line, which currently includes made to order cheesy breadsticks, sandwiches/wraps, wings, popcorn chicken, chicken tenders, breakfast croissants and biscuits, breakfast pizza, breakfast burritos, hash browns, quarter-pound hamburgers and cheeseburgers, potato cheese bites and other seasonal items.

As of April 30, 2021, the Company was selling donuts in 2,236 (99.7%) of our stores in addition to cookies, brownies, and other bakery items.

The Company installs donut-making equipment in all newly constructed stores.

We began marketing made-from-scratch pizza in 1984, and it was available in 2,198 stores ( 99.6% ) as of April 30, 2020 .

Although pizza is our most popular prepared food offering, we continue to expand our prepared food product line, which currently includes ham and cheese sandwiches, pork, chicken, and sausage sandwiches, chicken tenders, pizza bites, popcorn chicken, breakfast croissants and biscuits, breakfast pizza, hash browns, quarter-pound hamburgers and cheeseburgers, potato cheese bites and other seasonal items.

1,553 ( 70.4% ) stores currently offer made-to-order sub sandwiches.

The growth in our proprietary prepared food program reflects management’s strategy to promote high-margin products that are compatible with convenience store operations.

The growth in our 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 nonfuel items have generated about 41% of our total revenue, but they have resulted in approximately 72% of our revenue less cost of goods sold (excluding depreciation and amortization).

Revenue less cost of goods sold (excluding depreciation and amortization) as a percentage of revenue on prepared food items averaged approximately 61% during the three fiscal years ended April 30, 2020 —substantially higher than the impact of retail sales of fuel, which averaged approximately 9% .

Revenue less cost of goods sold (excluding depreciation and amortization) as a percentage of revenue on prepared food items averaged approximately 61% for the three fiscal years ended April 30, 2021—substantially higher than the impact of retail sales of fuel, which averaged approximately 11%.

Each Casey’s store typically carries over 3,000 food and non-food items.

The selection is a blend of differentiated Casey’s Private Label products, as well as favored national and regional brands, many of which can be found in larger format stores.

Our assortment includes product across the following categories:

• Non-Alcoholic Beverages (Soft Drinks, Energy, Water, Sports Drinks, Juices, Coffee, Tea & Dairy)

• Alcoholic Beverages (Beer, Wine and Spirits)

• Packaged Foods (Snacks, Candy, Packaged Bakery & other food items)

• Tobacco & Nicotine Products

• Frozen Foods (Ice, Ice Cream, Meals & Appetizers)

• Non-Foods (Health & Beauty Aids, Automotive, Electronic Accessories, Housewares and Pet Supplies)

• Services (Lotto/Lottery & Prepaid Cards)

During fiscal 2021, Casey’s invested heavily in it’s Private Brand product portfolio to support the corporate re-branding that was unveiled in October.

We expanded our portfolio to over 175 Casey’s Brand items, more than doubling our product count from last year, bringing even more value to our guests.

We launched over 100 new or reformulated items which included significant packaging improvements .

All but three Casey’s Stores offer retail motor fuel products for sale on a self-service basis.

Gasoline and diesel fuel are sold under the Casey’s name.

Casey’s Stores are primarily freestanding and, with a few exceptions to accommodate local conditions, conform to standard construction specifications.

The current larger store design measures 46 feet by 130 feet with approximately 3,000 square feet devoted to sales area, 600 square feet to kitchen space, 400 square feet to storage, and 2 large public restrooms.

There is also a smaller store design that is generally designated for smaller communities that measures 39 feet by 86 feet, with approximately 1,550 square feet devoted to sales area with the remaining areas similar in size.

Store lots have sufficient frontage and depth to permit adequate drive-in parking facilities on one or more sides of each store.

The current larger store design measures approximately 2,900 square feet devoted to sales area, 550 square feet to kitchen space, 400 square feet to storage, and 2 large multi-stall public restrooms.

There is also a smaller store design that is generally designated for smaller communities that measures approximately 1,700 square feet devoted to sales area with the remaining areas similar in size, and 2 single user 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 5 to 10 islands of fuel dispensers and storage tanks with capacity for 60,000 to 70,000 gallons of fuel.

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All stores are air-conditioned and have modern refrigeration equipment.

Nearly all the store locations feature our bright red and yellow sign which displays Casey’s name and service mark.

Nearly all the store locations feature a bright sign which displays Casey’s name and trade/service marks.

All Casey’s Stores remain open at least sixteen hours per day, seven days a week.

Hours of operation may be adjusted on a store-by-store basis to accommodate guest traffic patterns.

As of April 30, 2020 , we operated 38 stores on a 24-hour basis, and another 307 that have expanded hours.

Store hours as of year-end reflect temporarily adjusted hours in response to the COVID-19 pandemic.

Prior to the COVID-19 pandemic, we operated 633 stores on a 24-hour basis and another 1,407 stores with expanded hours.

As of April 30, 2021, we operated 384 stores on a 24-hour basis, and another 1,640 have expanded hours.

Store hours have continued to shift back to pre-COVID 19 levels, as we temporarily reduced hours at many locations in response to the pandemic.

All stores maintain a bright, clean interior and provide prompt checkout service.

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The Company traditionally has located its stores in smaller towns not served by national-chain convenience stores.

Management believes that a Casey’s Store provides a service generally 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.

Management believes that a Casey’s Store provides a service generally 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.

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Year ended April 30,

2021 2020 2019

Number of gallons sold 2,180,772 2,293,609 2,296,030

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* Includes only those stores in operation at least one full year on April 30 of the fiscal year indicated.

Retail prices of fuel during the year decreased 5.5% from prior year.

Average retail prices of fuel during the year decreased 8.3% from prior year.

The total number of gallons we sold during this period decreased by 4.9%.

Over the course of the last year, the Company, as part of its evolving strategy around fuel price optimization, has been more proactive and balanced to grow profitability, which has partially contributed to higher fuel margins and lower same-store fuel gallons sold during that time.

Additionally, shelter in place restrictions due to the COVID-19 pandemic diminished overall demand during the last two months of the fiscal year.

Same-store gallons sold were impacted by softer demand due to the COVID-19 pandemic.

Average revenue less cost of goods sold (excluding depreciation and amortization and credit card fees) per gallon increased by 30.2%, which was influenced by COVID-19 demand dynamics, macroeconomic factors with regard to certain oil producing nations and the efforts of our centralized fuel team.

Our centralized fuel team, coupled with fuel procurement improvements, continues to grow profitability and has been instrumental in sustaining higher than normal average revenue less cost of goods sold per gallon (excluding depreciation and amortization and credit card fees).

Percentage of revenue less cost of goods sold (excluding depreciation and amortization and credit card fees) represents the fuel gross profit divided by the gross fuel sales dollars.

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Distribution and Wholesale Arrangements

The Marketing Company supplies all stores with groceries, food, health and beauty aids, and general merchandise from the distribution centers.

The stores place orders for merchandise electronically to the Store Support Center in Ankeny, and the orders are filled with shipments in Company-operated delivery trucks from one of the distribution centers, based on route optimization for the fleet network.

All of our existing and most of our proposed stores are within the two distribution centers' optimum efficiency range—a radius of approximately 500 miles around each distribution center.

CMC supplies all stores with groceries, food, health and beauty aids, and general merchandise from the distribution centers.

The stores place orders for merchandise electronically to the Store Support Center, and the orders are filled with shipments in Company-operated delivery trucks from one of the distribution centers, based on route optimization for the fleet

Most of our existing and proposed stores are within the three distribution centers' optimum efficiency range—a radius of approximately 500 miles around each distribution center.

In fiscal 2021, a majority of the food and nonfood items supplied to stores from the distribution centers were purchased directly from manufacturers.

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We believe the practice enables us to respond to changing market conditions with minimal impact on margins.

On April 30, 2020 , we had 17,282 full-time team members and 19,871 part-time team members.

We have not experienced any work stoppages.

There are no collective bargaining agreements between the Company and any of its team members.

Human Capital

Our employees, who we refer to as Team Members, are critical to our business operations and the success of the Company.

As of April 30, 2021, we had 17,960 full-time, and 19,245 part-time, Team Members.

Approximately 35,043 are store Team Members, approximately 242 are field management and related Team Members, approximately 387 work in and support our three distribution centers, approximately 436 are fuel or grocery drivers and approximately 1,097 work out of the Store Support Center, or perform Store Support Center functions which support the organization.

We are not a party to any collective bargaining agreements with our Team Members and believe the working relationship with our Team Members is good.

COVID-19 Response :

From the outset of the COVID-19 pandemic, the Company established a cross-functional task-force for the continuous monitoring of the impact of COVID-19 on our Team Members and business operations and to implement measures to manage Team Member and guest safety and other risks.

In addition, throughout the pandemic, our Team Members, who were designated as “essential workers”, safely and diligently ensured our distribution centers remained open and operational and that our guests continued to be served.

In response to COVID-19, the Company implemented a number of health, safety and other measures, in which it has invested over $38 million in fiscal 2021 ($50 million since the start of the pandemic), which at certain times throughout the past year have included the following:

increased all store and distribution center Team Member pay by an additional $2 per hour;

provided additional operational bonuses to key field support Team Members;

provided additional paid leave for impacted Team Members;

provided additional paid flextime;

mandated working remotely where possible;

implemented health checks intended to maintain well-being in all distribution centers;

provided personal protective equipment and implemented a store mask mandate;

offered a $50 vaccination bonus for fully vaccinated Team Members;

established 6-foot markings in stores to encourage social distancing;

installed plexiglass shields at cash registers;

designated exclusive shopping times for higher-risk guests;

implemented enhanced cleaning and hygiene practices throughout our stores, at our fuel dispensers, distribution centers, and the Store Support Center.

Total Rewards :

We believe that the future success of the Company depends in large part on our ability to attract, train, retain, and motivate qualified Team Members.

As such, we are committed to providing market-competitive pay and benefits for all positions and offer performance-based compensation opportunities to a large portion of our full-time Team Member base.

In addition, the Company offers a 401(k) plan to eligible employees, with a generous 6% match made in the form of Company stock, and all full-time and part-time associates are eligible for competitive health and welfare benefits, including medical, dental, vision, disability, life insurance and other benefits.

Diversity and Inclusion :

The Company is committed to building a diverse and inclusive workforce across the organization, which it believes is set by example with its Board of Directors and extended leadership team.

The Board consists of nine members, seven (or 78%) of which are diverse as to gender, race and/or ethnicity.

The extended leadership team consists of twenty-six members, of which thirteen (or 50%) are diverse as to gender, race and/or ethnicity.

We have a strict Anti Harassment and Discrimination Policy of which all Team Members are trained and expected to follow.

Additionally, we have several mechanisms, including an Ethics and Compliance Hotline, under which Team Members and guests can report incidents confidentially or anonymously and without fear of retaliation.

Education and Training :

The Company, including its established Learning and Development Department, which serves all levels of the organization, invests significant resources of time and money in educating and training Team Members by providing them with educational, development and leadership opportunities.

These opportunities are provided through a mix of formal onboarding training, safety training, in-person classes, virtual modules and “on-the-job” learning.

In addition, the Company has a formal leadership development program, which seeks to provide Team Members with skills necessary for leading their teams and advancing in their careers.

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 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 fuel 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, quick serve restaurants, expanded fuel stations, supermarkets, discount food stores, and traditional convenience stores.

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Trademarks and Service Marks

The names "Casey’s" and “Casey’s General Store” and the marks consisting of the Casey’s design logos (with the words “Casey’s General Store”) and the weathervane are registered trademarks and service marks under federal law.

The names "Casey’s" and “Casey’s General Store” and the marks consisting of the Casey’s design logos (with the words “Casey’s” and “Casey’s General Store”) and the weathervane are registered trademarks and service marks under federal law.

We believe these marks are of material importance in promoting and advertising the Company’s business.

The Company has a number of other registered and unregistered trademarks and service marks that are significant to the Company from an operational and branding perspective (e.g.

"Casey’s Pizza", "Casey's Famous for Pizza", "Casey's Here for Good", etc.).

"Casey’s Pizza", "Casey's Here for Good", “Casey’s Rewards”, “Casey’s Cash”, etc.).

Government Regulation (dollars in thousands)

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business