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Item 1A. Risk Factors

2021-06-25 compared with 2020-06-26 · 136 added, 138 removed, 77 unchanged (78% of the section changed)

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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

Pandemics or disease outbreaks, such as the novel coronavirus (“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.

Pandemics or disease outbreaks such as COVID-19 have, and may continue to have, adverse impacts on the Company’s business.

These include, but are not limited to, decreased store traffic and changed guest behavior, decreased demand for our fuel, prepared food and other convenience offerings, decreased or slowed unit/store growth, issues with our supply chain, including difficulties obtaining certain items sold at our stores or that our guests may demand, issues with respect to our team members’ health, working hours and/or ability to perform their duties, and increased costs to the Company in response to these changing conditions and to protect the health and safety of our team members and guests.

In addition, t he general economic and other impacts related to responsive actions taken by governments and others to mitigate the spread of COVID-19, including but not limited to “stay-at-home,” “shelter-in-place” and other travel restrictions,

social distancing requirements, limitations on certain businesses’ hours and operations, limits on public gatherings and other events, and restrictions on how certain products can be sold and offered to our guests, have, and may continue to, result in similar declines in store traffic and overall demand, increased operating costs, and decreased or slower unit/store growth.

Further, although the Company’s business has been deemed an “essential service” by many public authorities, allowing our operations to continue (in some cases in a modified manner), there are no guarantees the designation will continue, or be applied during a future pandemic or COVID-19 outbreak, which would require us to reduce our operations and potentially close stores for an undetermined period of time.

We cannot predict the extent and duration of the COVID-19 pandemic or the severity and duration of its impact to the general economy, our guests or our operating results;

however, its effects could be material and last for an extended period of time.

Risks Related to Our Business Operations

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.

Pandemics or disease outbreaks such as COVID-19 have had, and may continue to have, adverse impacts on the Company’s business.

supply chain including difficulties delivering products to our stores and obtaining certain items sold at our stores, issues with respect to our Team Members’ health, working hours and/or ability to perform their duties, and increased costs to the Company in response to these conditions and to protect the health and safety of our Team Members and guests.

In addition, t he general economic and other impacts related to responsive actions taken by governments and others to mitigate the spread of COVID-19, or in the future other pandemics or disease outbreaks, including but not limited to stay-at-home, shelter-in-place and other travel restrictions, social distancing requirements, mask mandates, limitations on certain businesses’ hours and operations, limits on public gatherings and other events, and restrictions on what, and in certain cases how, certain products can be sold and offered to our guests, have, and may continue to, result in similar declines in store traffic and overall demand, increased operating costs, and decreased or slower unit/store growth.

Further, although the Company’s business was deemed an “essential service” by many public authorities throughout the COVID-19 pandemic, allowing our operations to continue (in some cases in a modified manner), there are no guarantees the designation will continue, or be applied during a future pandemic or COVID-19 outbreak, which would require us to reduce our operations and potentially close stores for an undetermined period of time.

We cannot predict the extent and duration of the COVID-19 pandemic, the severity and duration of its impact to the general economy, our guests or our operating results;

however, its effects could continue to be material and last for an extended period of time.

Our business and our reputation could be adversely affected by a 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.

In the normal course of our business, we obtain and have access to large amounts of personal data, including but not limited to credit and debit card information, personally identifiable information and other data from and about our guests, team members, and suppliers.

While we invest significant resources and have engaged professional advisers in the protection of such data and information, our IT systems, and incident response programs, and maintain what we believe are adequate security controls, a compromise or a breach in our systems, or other data security or privacy incident that results in the loss, unauthorized release, disclosure or acquisition of such data or information, or other sensitive data or information, could nonetheless occur and have a material adverse effect on our reputation, operating results and financial condition.

In the normal course of our business, we obtain, are provided and have access to large amounts of personal data, including but not limited to credit and debit card information, personally identifiable information and other data from and about our guests, Team Members, and suppliers.

While we invest significant resources in the protection of such data and information, our IT systems, and incident response programs, and maintain what we believe are adequate security controls, a compromise or a breach in our systems, or another data security or privacy incident that results in the loss, unauthorized release, disclosure or acquisition of such data or information, or other sensitive data or information, could nonetheless occur and have a material adverse effect on our reputation, operating results and financial condition.

A data security or privacy incident of any kind could expose us to risk in terms of the loss, unauthorized release, disclosure or acquisition of sensitive guest, Team Member or supplier data, and could result in litigation or other regulatory action being brought against us and damages, monetary and other claims made by or on behalf of the payment card brands, guests, Team Members, shareholders, financial institutions and governmental agencies.

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Moreover, a data security or privacy incident could require that we expend significant additional resources on mitigation efforts and to further upgrade the security and other measures that we employ to guard against, and respond to, such incidents.

The convenience store industry is highly competitive.

The convenience store and retail fuel industries in which we operate are highly competitive and characterized 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 many other convenience store chains, gasoline stations, supermarkets, drugstores, discount stores, club stores, fast food outlets, and mass merchants, and a variety of other retail companies, including retail gasoline companies that have more extensive retail outlets, greater brand name recognition and established fuel supply arrangements.

Several non-traditional retailers such as supermarkets, club stores, and mass merchants have affected the convenience store industry by entering the retail fuel business.

These non-traditional fuel retailers have obtained a significant share of the motor fuels market, and their market share is expected to grow.

Certain of these non-traditional retailers may use more extensive promotional pricing or discounts, both at the fuel pump and in the store, to encourage in-store merchandise sales and gasoline sales.

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 have a greater ability to bear the economic risks inherent in our industry, and may be able to respond better to changes in the economy and new opportunities within the industry.

This intense competition could adversely affect our revenues and profitability, and have a material adverse impact on our business and results of operations.

The volatility of wholesale petroleum costs could adversely affect our operating results.

Our net income is significantly affected by changes in the margins we receive on our retail fuel sales.

Over the past three fiscal years, on average our fuel revenues accounted for approximately 61% of total revenue and our fuel revenue less cost of goods sold excluding depreciation and amortization accounted for approximately 25% of the total revenue less cost of goods sold excluding depreciation and amortization.

Crude oil and domestic wholesale petroleum markets are, and in the recent past have been, marked by significant volatility.

The overall economic impact of the COVID-19 pandemic, general political conditions, threatened or actual acts of war or terrorism, instability or other changes in oil producing regions, particularly in the Middle East and South America, and trade, economic or other disagreements between oil producing nations, can, and recently

have, significantly affected crude oil supplies and wholesale petroleum costs.

In addition, the supply of fuel and 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, in our case, the level of fuel contracts that we have that guarantee an uninterrupted, unlimited supply of fuel.

Increases in the retail price of petroleum products have resulted and could in the future adversely affect consumer demand for fuel.

This volatility makes it difficult to predict the impact that future wholesale cost fluctuations will have on our operating results and financial condition in future periods.

Any significant change in one or more of these factors could materially affect the number of fuel gallons sold, fuel revenue less cost of goods sold excluding depreciation and amortization and overall guest traffic, which in turn could have a material adverse effect on our business, financial condition and results of operations.

General economic conditions that are largely out of the Company’s control may adversely affect the Company’s financial condition and results of operations.

Current economic conditions, including those resulting from the COVID-19 pandemic, higher interest rates, higher fuel and other energy costs, inflation, increases or fluctuations in commodity prices such as cheese and coffee, higher levels of unemployment, higher consumer debt levels and lower consumer discretionary spending, higher tax rates and other changes in tax laws or other economic factors may affect input costs and consumer spending or buying habits, and could adversely affect the costs of the products we sell in our stores and the consumer demand for such products.

Unfavorable economic conditions, especially those affecting the agricultural industry, higher fuel prices, and unemployment levels can affect consumer confidence, spending patterns, and miles driven, and can cause guests to “trade down” to lower priced products in certain categories when these conditions exist.

These factors can lead to sales declines, and in turn have an adverse impact on our business, financial condition and results of operations.

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.

Congress has given the Food and Drug Administration (“FDA”) broad authority to regulate tobacco and nicotine products, and the FDA has enacted numerous regulations restricting the sale of such products.

These governmental actions, as well as national, state and local campaigns and regulations to discourage tobacco and nicotine use and limit the sale of such products, including but not limited to certain actions taken to increase the minimum age in order to purchase such products, have resulted or may in the future result in, reduced industry volume and consumption levels, and could materially affect the retail price of cigarettes, unit volume and revenues, gross profit, and overall guest traffic, which in turn could have a material adverse effect on our business, financial condition and results of operations.

Also, increasing regulations for e-cigarettes and vapor products could offset some of the revenue growth we have experienced from selling these types of products.

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.

Instances or reports of food-safety issues, such as food-borne illnesses, food tampering, food contamination or mislabeling, either during growing, manufacturing, packaging, transportation, storage, preparation or service, have in the past significantly damaged the reputations and impacted the sales of companies in the food processing, grocery, quick service and “fast casual” restaurant sectors, and could affect us as well.

Any instances of, or reports linking us to, food-borne illnesses or food tampering, contamination, mislabeling or other food-safety issues could damage the value of our brand and severely hurt sales of our prepared food products and possibly lead to product liability and personal injury claims, litigation (including class actions), government agency investigations and damages.

In addition, guest preferences and store traffic could be adversely impacted by food-safety issues, health concerns or negative publicity about the consumption of our products, which could cause a decline in demand for those products and adversely impact our sales.

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 rely on our distribution and transportation network, which includes our drivers and distribution center Team Members, and the networks of our direct store delivery partners, to provide products to our stores in a timely and cost-effective manner.

Products are either moved from supplier locations to our distribution centers or delivered directly to our stores.

Deliveries to our stores occur from the distribution centers or directly from our suppliers.

Any disruption, unanticipated or unusual expense or operational failure related to this process, including our inability, or that of our delivery partners, to hire and/or retain enough qualified drivers and distribution center Team Members to meet demand, could affect our store operations negatively.

We also depend on regular deliveries of products to and from our facilities and stores that meet our specifications.

In addition, we may have a single supplier or limited number of suppliers for certain products.

While we believe there are adequate reserve quantities and alternative suppliers available, shortages or interruptions in the receipt or supply of products caused by unanticipated demand, such as occurred during, and as the economy recovers from, the COVID-19 pandemic, problems in production or distribution, financial or other difficulties of suppliers, inclement weather or other economic conditions, including the availability of qualified drivers and distribution center Team Members, could adversely affect the availability, quality and cost of products, and our operating results.

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.

We are dependent on the continued knowledge and efforts of our leadership team and other key Team Members.

If, for any reason, our leadership team does not continue to be active in management, or we lose such persons, or other key Team Members, or we fail to identify and/or recruit for current or future leadership positions, our business, financial condition or results of operations could be adversely affected.

We also rely on our ability to recruit, hire and retain qualified drivers, distribution center Team Members, field management and store Team Members.

Difficulties and shortages in the general labor market for such individuals, and the failure to continue to attract and retain these individuals, especially at reasonable compensation levels, could have a material adverse effect on our business and results of operations.

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.

Our continued success depends on our ability to remain relevant with respect to consumer needs and wants, attitudes toward our industry, and our guests’ preferences for ways of doing business with us, particularly with respect to digital engagement, contactless delivery, curbside pick-up and other non-traditional ordering and delivery platforms.

We must continually work to develop, produce and market new products, maintain and enhance the recognition of our brands, offer a favorable mix of products, and refine our approach as to how and where we market, sell and deliver our products.

For example, the Company has recently invested a significant amount of resources and store shelf space to its expanded private label products, which if not well received by our guests, could lead to decreased consumer sentiment, lower sales inside our stores and smaller margins on similar alternative products.

This risk is compounded by the increasing use of digital media by consumers and the speed by which information and opinions are shared.

If we are unable to anticipate and respond to sudden challenges that we may face in the marketplace, trends in the market for our products and changing consumer demands and sentiment, it could have a material adverse effect on our business, financial condition and results of operations.

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.

We depend on our information technology (IT) systems, and a number of third-party software providers, to manage and operate numerous aspects of our business, develop our financial statements, provide analytical information to management and serve as a platform for our business continuity plan.

Our IT systems, and the software and other technology platforms provided by our vendors, are an essential component of our business operations and growth strategies, and a serious disruption to any of these 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, or loss of access to, data and information, security breaches or other security incidents, and computer viruses or attacks.

Any disruption could cause our business and competitive position to suffer and cause our operating results to be reduced.

Increased credit card expenses could lead to higher operating expenses and other costs for the Company.

A significant percentage of our sales are made with the use of credit cards.

Because the interchange fees we pay when credit cards are used to make purchases are based on transaction amounts, higher fuel prices at the pump, higher gallon movement and other increases in price and sales result in higher credit card expenses.

These additional fees increase operating expenses.

Higher operating expenses that result from higher credit card fees may decrease our overall profit and have a material adverse effect on our business, financial condition and results of operations.

Total credit card fees paid in fiscal 2021, 2020, and 2019, were approximately $147 million, $145 million, and $140 million, respectively.

In addition, credit card providers now mandate that any fraudulent activity and related losses at fuel dispensers that do not accept certain chip technology (referred to as EMV) be borne by the retailers accepting those cards.

While the Company has invested, and will continue to invest, a significant amount of resources in upgrading its fuel dispensers to accept EMV, and has implemented other fraud mitigation strategies, not all of its fuel dispensers have, or in the near future may, be upgraded to such technology.

As such, it is possible that credit card providers could attempt to pass the costs of certain fraudulent activity at the non-upgraded dispensers to the Company, which if significant, could have a material adverse effect on our business, financial condition and results of operations.

Our operations present hazards and risks which may not be fully covered by insurance, if insured.

The scope and nature of our operations present a variety of operational hazards and risks that must be managed through continual oversight and control.

As protection against hazards and risks, we maintain insurance against many, but not all, potential losses or liabilities arising from such risks.

Uninsured losses and liabilities from operating risks could reduce the funds available to us for capital and investment spending and could have a material adverse impact on the results of operations.

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, a significant portion of motor fuel is transported 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.

Consumer or other litigation could adversely affect our financial condition and results of operations.

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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.

Increased credit card expenses could increase operating expenses.

A significant percentage of our sales are made with the use of credit cards.

Because the interchange fees we pay when credit cards are used to make purchases are based on transaction amounts, higher fuel prices at the pump and higher gallon movement result in higher credit card expenses.

These additional fees increase operating expenses.

Higher operating expenses

that result from higher credit card fees may decrease our overall profit and have a material adverse effect on our business, financial condition and results of operations.

Total credit card fees paid in fiscal 2020 , 2019 , and 2018 , were approximately $145 million , $140 million , and $123 million , respectively.

Developments related to fuel efficiency, fuel conservation practices, climate change, and changing consumer preferences may decrease the demand for motor fuel.

Technological advances and consumer behavior in reducing fuel use and governmental mandates to improve fuel efficiency could lessen the demand for our largest revenue product, petroleum-based motor fuel, which may have a material adverse effect on our business, financial condition, and results of operation.

Changes in our climate, including the effects of greenhouse gas emissions in the environment, may lessen demand or lead to additional government regulation.

In addition, a shift toward electric, hydrogen, natural gas or other alternative fuel-powered vehicles, including driverless motor vehicles, could fundamentally change the shopping and driving habits of our guests or lead to new forms of fueling destinations or new competitive pressure.

Any of these outcomes could potentially result in fewer guest visits to our stores, decreases in sales revenue across all categories or lower profit margins, which could have a material adverse effect on our business, financial condition and results of operations.

Covenants in our senior notes and credit facility agreements require us to comply with certain covenants and meet financial maintenance tests.

Failure to comply with these requirements could have a material impact to us.

We are required to comply with certain financial and non-financial covenants under our existing senior notes and credit facility agreements.

A breach of any covenant could result in a default under such agreements, which could, if not timely cured, permit lenders to declare all amounts outstanding to be immediately due and payable, and to terminate such instruments, which in turn could have a material adverse effect on our business, financial condition and results of operation.

Risks Related to Governmental Actions, Regulations, and Oversight

Compliance with and changes in tax laws could adversely affect our performance.

We are subject to extensive tax liabilities imposed by multiple jurisdictions, including but not limited to state and federal income taxes, indirect taxes (excise, sales/use, and gross receipts taxes), payroll taxes, property taxes, and tobacco taxes.

Tax laws and regulations are dynamic and subject to change as new laws are passed and new interpretations of existing laws are issued and applied.

For example, in 2017, the Tax Cuts and Jobs Act (“Tax Reform”) was enacted on December 22, 2017, which resulted in lower federal income taxes for the Company.

However, the current administration has signaled a desire to roll-back certain tax rates provided by Tax Reform, which would result in higher federal income taxes for the Company.

In addition, as certain states face economic and other pressures, they may seek revenue in the form of additional state income, sales and other taxes and related fees.

These activities could result in increased expenditures for tax liabilities in the future.

Many of these liabilities are subject to periodic audits by the respective taxing authorities.

Subsequent changes to our tax liabilities as a result of these audits may subject us to interest and penalties.

We are subject to extensive governmental regulations.

Our business is subject to extensive governmental laws and regulations that include, but are not limited to, those relating to environmental protection and remediation;

the preparation, transportation, storage, sale and labeling of food;

minimum wage, overtime and other employment and labor laws and regulations;

compliance with the Patient Protection and Affordable Care Act and the Americans with Disabilities Act;

legal restrictions on the sale of alcohol, tobacco and nicotine products, money orders, lottery/lotto and other age-restricted products;

compliance with the Payment Card Industry Data Security Standards and similar requirements;

compliance with the Federal Motor Carriers Safety Administration regulations;

and, securities laws and Nasdaq listing standards.

These, and other laws and regulations, are dynamic and subject to change as new laws are passed, new interpretations of existing laws are issued and applied and as political administrations and majorities change over time.

In addition, during the COVID-19 pandemic, the Company was, and continues to be, subject to responsive actions taken by governments and others to mitigate the spread of COVID-19, which have resulted in decreased store traffic and certain changes to how we operate our stores and offer certain products for sale to our guests.

The effects created by these, including the costs of compliance with these laws and regulations, is substantial, and 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.

State laws regulate the sale of alcohol, tobacco and nicotine products, lottery/lotto products and other age-restricted 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 certain of these products or to seek other remedies.

Any appreciable increase in wages, overtime pay, or the statutory minimum salary requirements, minimum wage rate, mandatory scheduling or scheduling notification laws, or the adoption of additional mandated healthcare or paid-time-off benefits would result in an increase in our labor costs.

Such cost increases, or the penalties for failing to comply, 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.

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.

Congress has given the Food and Drug Administration (“FDA”) broad authority to regulate tobacco and nicotine products, including e-cigarettes and vapor products, and the FDA has enacted numerous regulations restricting the sale of such products.

These governmental actions, as well as national, state and local campaigns and regulations to discourage tobacco and nicotine use and limit the sale of such products, including but not limited to tax increases related to such products and certain actions taken to increase the minimum age in order to purchase such products, have resulted or may in the future result in, reduced industry volume and consumption levels, and could materially affect the retail price of cigarettes, unit volume and revenues, gross profit, and overall guest traffic, which in turn could have a material adverse effect on our business, financial condition and results of operations.

Wholesale cost and tax increases relating to tobacco and nicotine products could affect our operating results.

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These factors could adversely affect our retail price of cigarettes and related products, cigarette or related product unit volume and revenues, merchandise revenue less cost of goods sold excluding depreciation and amortization, and overall guest traffic, and in turn have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Business

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.

Our continued success depends on our ability to remain relevant with respect to consumer needs and wants, attitudes toward our industry, and our guests’ preferences for ways of doing business with us, particularly with respect to digital engagement, contactless delivery, curb-side pick-up and other non-traditional ordering and delivery platforms.

This risk is compounded by the increasing use of social and digital media by consumers and the speed by which information and opinions

We rely on our information technology systems, and a number of third-party vendor platforms, 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, and a number of third-party vendor platforms, to manage and operate numerous aspects of our business, provide analytical information to management and serve as a platform for our business continuity plan.

Our IT systems, and the technology platforms provided by our vendors, are an essential component of our business and growth strategies, and a serious disruption to these could significantly limit our ability to manage and operate our business efficiently.

Any disruption could cause our business and competitive position to suffer and cause our operating results to be reduced.

We rely on our distribution and transportation network, and the networks of our direct store delivery partners, to provide products to our stores in a timely and cost-effective manner.

Products are either moved from supplier locations to our distribution centers, or delivered directly to our stores.

Deliveries to our stores occur from the distribution centers or directly from our suppliers.

Any disruption, unanticipated or unusual expense or operational failure related to this process could affect our store operations negatively.

We also depend on regular deliveries of products to and from our facilities and stores that meet our specifications.

In addition, we may have a single supplier or limited number of suppliers for certain products.

While we believe there are adequate reserve quantities and alternative suppliers, shortages or interruptions in the receipt or supply of products caused by unanticipated demand, problems in production or distribution, financial or other difficulties of suppliers, inclement weather or other economic conditions could adversely affect the availability, quality and cost of products, and our operating results.

We may experience difficulties implementing and realizing the results of our strategic plan.

In January 2020, Casey’s unveiled an updated, long-term/strategic plan, centered around four strategic objectives:

Risks Related to Our 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.

General economic and political conditions, including those resulting from the COVID-19 pandemic and the unknown economic recovery and consumer behavior patterns as the pandemic subsides in the Unites States, social and political causes and movements, higher interest rates, higher fuel and other energy costs, inflation, increases or fluctuations in commodity prices such as cheese and coffee, higher levels of unemployment, unemployment benefits and related stimulus provided as a result of COVID-19, higher consumer debt levels and lower consumer discretionary spending, higher tax rates and other changes in tax laws or other economic factors may affect the operations of our stores, input costs, consumer spending, buying habits and labor markets generally, and could adversely affect the costs of the products we sell in our stores, the consumer demand for such products and the labor costs of transporting, storing and selling those products.

These factors can lead to sales declines, and in turn have an adverse impact on our business, 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.

Changes in our climate, including the effects of greenhouse gas emissions in the environment, may lessen demand or lead to additional government regulation.

Unfavorable weather conditions can adversely affect our business.

The vast majority of our stores are located in the central region of the United States, which is susceptible to tornadoes, thunderstorms, extended periods of rain or unseasonably cold temperatures, 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.

When weather conditions are not favorable during a particular period, our operating results and cash flow from operations could be adversely affected.

The volatility of wholesale petroleum costs could adversely affect our operating results.

Our net income is significantly affected by changes in the margins we receive on our retail fuel sales.

Over the past three fiscal years, on average our fuel revenues accounted for approximately 60% of total revenue and our fuel revenue less cost of goods sold excluding depreciation and amortization accounted for approximately 29% of the total revenue less cost of goods sold excluding depreciation and amortization.

Crude oil and domestic wholesale petroleum markets are, and in the recent past have been, marked by significant volatility.

In addition, the supply of fuel and wholesale purchase costs could be adversely affected in the event of a shortage, which could result from, among other things, severe weather events in oil producing regions, the lack of capacity at United States oil refineries or, in our case, the level of fuel contracts that we have that guarantee an uninterrupted, unlimited supply of fuel.

Increases in the retail price of petroleum products have resulted and could in the future adversely affect consumer demand for fuel.

This volatility makes it difficult to predict the impact that future wholesale cost fluctuations will have on our operating results and financial condition in future periods.

The convenience store industry is highly competitive.

Several non-traditional retailers such as supermarkets, club stores, and mass merchants have affected the convenience store industry by entering the retail fuel business.

These non-traditional fuel retailers have obtained a significant share of the motor fuels market, and their market share is expected to grow.

Certain of these non-traditional retailers may use more extensive promotional pricing or discounts, both at the fuel pump and in the store, to encourage in-store merchandise sales and gasoline sales.

In some of our markets, our competitors have been in existence longer and have greater financial, marketing, and other resources than we do.

This intense competition could adversely affect our revenues and profitability, and have a material adverse impact on our business and results of operations.

Risks Related to Our Growth Strategies

We may experience difficulties implementing and realizing the results of our long-term strategic plan.

In January 2020, the Company unveiled an updated, long-term/strategic plan, centered around four strategic objectives:

reinvigorate hospitality and the guest experience;

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Any such issues could adversely affect our operations and negatively impact our business, results of operations and financial condition.

Unfavorable weather conditions can adversely affect our business.

All of our stores are located in the central region of the United States, which is susceptible to tornadoes, thunderstorms, extended periods of rain or unseasonably cold temperatures, flooding, ice storms, and heavy snow.

In addition, we typically generate higher revenues and gross margins during warmer weather months, which fall within our first and second fiscal quarters.

When weather conditions are not favorable during a particular period, our operating results and cash flow from operations could be adversely affected.

Because we depend on our management’s and other team members’ experience and knowledge of our industry, we could be adversely affected were we to lose, or experience difficulty in recruiting and retaining, any such members of our team.

We are dependent on the continued knowledge and efforts of our management team and other key team members.

If, for any reason, our executives do not continue to be active in management, or we lose such persons, or other key team members, or we fail to identify and/or recruit for current or future positions of need, our business, financial condition or results of operations

could be adversely affected.

We also rely on our ability to recruit qualified drivers, store and field management 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 may experience increased costs, disruptions or other difficulties with the implementation, operation and functionality of our enterprise resource planning system.

We are engaged in a phased implementation of an enterprise resource planning (ERP) system, which will replace or enhance certain internal financial and operating systems that are critical to our business operations.

The implementation, operation, and functionality of the ERP system has and will continue to require a significant investment of human, technological, and financial resources.

While we have invested, and continue to invest, significant resources in planning, project management, consulting, and training, it is possible that significant implementation, operational, and functionality issues may arise during the course of implementing and utilizing the ERP system, and it is further possible that we may experience significant delays, increased costs, and other difficulties that are not presently contemplated.

Any significant disruptions, delays, deficiencies, or errors in the design, implementation, and utilization of the ERP system could adversely affect our operations, prevent us from accurately and timely reporting our financial results, and negatively impact our business, results of operations and financial condition.

Additionally, if we do not effectively implement and utilize the ERP system as planned or the system does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to assess it adequately could be delayed.

Control deficiencies could prevent us from accurately and timely reporting our financial results.

Our internal control over financial reporting constitutes a process, including controls, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S.

generally accepted accounting principles.

We have in the past and may in the future identify deficiencies in our internal control over financial reporting, including significant deficiencies and material weaknesses.

Failure to identify and remediate deficiencies in our internal control over financial reporting in a timely manner could prevent us from accurately and timely reporting our financial results, which could cause us to fail to meet our reporting obligations, lead to a loss of investor confidence and have a negative impact on the trading price of our common stock.

Our operations present hazards and risks which may not be fully covered by insurance, if insured.

The scope and nature of our operations present a variety of operational hazards and risks that must be managed through continual oversight and control.

As protection against hazards and risks, we maintain insurance against many, but not all, potential losses or liabilities arising from such risks.

Uninsured losses and liabilities from operating risks could reduce the funds available to us for capital and investment spending and could have a material adverse impact on the results of operations.

We may experience increased costs, disruptions or other difficulties with the integration of the Buchanan Energy acquisition.

On May 13, 2021, the Company closed on the acquisition of Buchanan Energy, owner of Bucky’s convenience stores, which included over 90 stores across five states, primarily in Nebraska and Illinois, and a dealer network of additional stores where the Company will manage fuel supply agreements to these stores.

While we have invested, and continue to invest, significant resources in due diligence, planning, integration and training of these stores, their systems and team members, it is possible that significant issues and potential unknown liabilities may arise during the course of the integration or future operation of the stores and systems, which may result in anticipated synergies or financial benefits of the acquisition not being realized, including but not limited to the potential inability to maintain or increase the growth rate, levels of revenue, earnings or operating efficiencies achieved by the applicable stores prior to the acquisition, and which may lead to increased costs and other difficulties that are not presently contemplated.

We may not be able to identify, acquire, and integrate new properties and stores, which could adversely affect our ability to grow our business.

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and, challenges associated with the consummation and integration of any future acquisition.

Covenants in our senior notes and credit facility agreements require us to comply with certain covenants and meet financial maintenance tests.

Failure to comply with these requirements could have a material impact to us.

We are required to comply with certain financial and non-financial covenants under our existing senior notes and credit facility agreements.

Compliance with and changes in tax laws could adversely affect our performance.

We are subject to extensive tax liabilities imposed by multiple jurisdictions, including but not limited to income taxes, indirect taxes (excise, sales/use, and gross receipts taxes), payroll taxes, property taxes, and tobacco taxes.

Tax laws and regulations are dynamic and subject to change as new laws are passed and new interpretations of existing laws are issued and applied.

The activity could result in increased expenditures for tax liabilities in the future.

Many of these liabilities are subject to periodic audits by the respective taxing authorities.

Subsequent changes to our tax liabilities as a result of these audits may subject us to interest and penalties.

We are subject to extensive governmental regulations.

Our business is subject to extensive governmental laws and regulations that include, but are not limited to, those relating to environmental protection and remediation;

the preparation, sale and labeling of food;

minimum wage, overtime and other employment laws and regulations;

compliance with the Patient Protection and Affordable Care Act and the Americans with Disabilities Act;

legal restrictions on the sale of alcohol, tobacco and nicotine products, money orders, lottery/lotto and other age-restricted products;

compliance with the Payment Card Industry Data Security Standards and similar requirements;

compliance with the Federal Motor Carriers Safety Administration regulations;

and, securities laws and Nasdaq listing standards.

In addition, during the COVID-19 pandemic, the Company was, and continues to be, subject to responsive actions taken by governments and others to mitigate the spread of COVID-19, which resulted in decreased store traffic and certain changes to how we operate our stores and offer certain products for sale to our guests.