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Item 7. Management’s Discussion and Analysis

2022-06-24 compared with 2021-06-25 · 151 added, 112 removed, 191 unchanged (58% of the section changed)

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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” in 16 Midwestern states, primarily in Iowa, Illinois, and Missouri.

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 but three Casey's Stores offer fuel for sale on a self-serve basis and all 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.

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.

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

CMC operates three distribution centers, through which certain grocery and other merchandise, and prepared food and fountain items, are supplied to 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, 2022 relates 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 were opened in February 2016 in Terre Haute, Indiana and April 2021 in Joplin, Missouri.

At April 30, 2021, the Company owned the land at 2,216 store locations and the buildings at 2,225 locations, and leased the land at 27 locations and the buildings at 18 locations.

The Company’s business is seasonal, and generally the Company experiences higher sales and profitability during the first and second fiscal quarters (May-October), when guests tend to purchase greater quantities of fuel and certain convenience items such as beer, isotonics, water, soft drinks and ice.

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 roll forward of store growth throughout fiscal 2022:

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Stores at April 30, 2022 2,452

On May 13, 2021, Casey’s closed on the Buchanan Energy acquisition which included 92 retail sites.

The Company also

closed on the 48-store Circle K transaction in June.

In total, Casey’s expects to add 200 more stores next fiscal year.

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 K transaction 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 further general descriptive information on the Company’s business and operations, see Item 1, above, which is incorporated herein by reference.

Long-Term Strategic Plan

The Company announced an updated, long-term strategic plan in January 2020 focused on four strategic objectives:

reinvigorate hospitality and the guest experience;

reinvent hospitality and the guest experience;

be where the guest is by accelerating unit growth;

create capacity through best-in-class efficiencies;

create capacity through best-in-class efficienci es;

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.

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.

Despite the challenges caused by the COVID-19 pandemic, the Company made significant progress towards its strategic plan goals during the 2021 fiscal year, examples of which include the following:

• Introduced 100+ private label products and curbside pickup at all stores

• Updated our branding, including the introduction of a new logo

• Expanded our digital offerings and added 1.5 million Casey's Rewards members

• Developed and refined capabilities across the enterprise to drive efficiencies by launching centralized procurement and asset protection departments, opening a third distribution center in Joplin, Missouri, optimizing our transportation network, and enhancing price and product optimization

• Continued to add stores through a mixture of new store builds and acquisitions

• Added thirteen talented and diverse individuals to the extended leadership team

Since the fourth quarter of the Company’s 2020 fiscal year, the COVID-19 pandemic has generally led to decreased store traffic and lower demand for certain of our products.

Governmental and privately imposed restrictions, including those on travel, social, work and other gatherings, in-person schooling and other closures, and our guests’ behavior in response to such restrictions, have contributed to such declines, which have not fully recovered to pre-pandemic levels.

Overall, we saw a decrease in same-store fuel gallons of approximately 8.1% and same-store inside customer traffic of approximately 8.7%, compared to the prior year.

Additionally, as a result of these factors, the manner in which we served our guests required changes at many of our locations for a portion of the 2021 fiscal year, including restrictions on self-service food and beverages, reduced prepared food offerings, limiting guest traffic in our stores and social distancing measures.

Prepared food and fountain category saw a same-store sales decrease of 2.1%, compared to the prior year, due, in part, to many of these restrictions.

Despite these declines, throughout the 2021 fiscal year, due to the combination of COVID-19 fuel demand dynamics, other macroeconomic factors in the oil industry, and the efforts of our fuel team, we experienced record high fuel average revenue less cost of goods sold per gallon (excluding depreciation and amortization and credit card fees), leading to historically strong financial performance for the 2021 fiscal year, including record net income, record fuel gross profit and record diluted earnings per share.

Average revenue less cost of goods sold (excluding depreciation and amortization and credit card fees) per gallon increased by 30.2%, to 34.9 cents in fiscal 2021 from 26.8 cents in fiscal 2020.

While fuel gross profit margins continue to remain strong, and remain higher than historic averages, they are lower than the highs achieved during the pandemic, which we expect will gradually decline during the next fiscal year.

COVID-19 also resulted in increased operating expenses throughout the 2021 fiscal year, as we took significant proactive steps to protect the health and safety of our Team Members, guests and communities.

Our top priority throughout has been their health and well-being.

Examples of certain COVID-19 measures that we implemented at certain times during the 2021 fiscal year include the following:

• $50 bonus to Team Members upon their full COVID-19 vaccination

• provided additional compensation and operational bonuses for key field and support Team Members;

• provided additional paid leave for impacted Team Members;

• provided personal protective equipment for Team Members;

• installed Plexiglas shields at our cash registers;

• enhanced cleaning and hygiene practices;

• implemented health checks in all our distribution centers;

• designated exclusive shopping times for higher risk guests;

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

• provided free meals for all store and distribution center Team Members;

• implemented contact-less delivery.

In total, the Company spent approximately $38.4 million during the 2021 fiscal year for all COVID-19 health, safety and related measures.

As schools, businesses and the economy in general have slowly reopened, and vaccinations rates in our operating territory improve and new infections decline, we have continued to see improvements in store traffic numbers.

However, the unpredictable nature of the pandemic could again lead to closures, decreased traffic and demand, and increased COVID-19-

related operating expenses, for the foreseeable future.

While COVID-19 has resulted in, and will continue to bring, significant challenges and uncertainty to our operating environment, we believe that our resilient business model and the strength of our brand and balance sheet position us well to emerge from the pandemic.

For more information related to the additional risks to the Company related to the COVID-19 pandemic, and certain conditions that may affect future performance, please refer to the “Risk Factors” section above in Item 1A.

and “Forward-looking Statements” at the end of Item 7.

The Company made significant progress towards its strategic plan goals during the 2022 fiscal year.

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

and uncertainty to our operating environment, we believe that our resilient business model and the strength of our brand and balance sheet position us well to navigate the pandemic and its impacts.

Fuel Volatility

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 dollars per 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.

Electric Vehicles and Renewable Fuels

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 Compared with Fiscal 2021

Total revenue for fiscal 2021 decreased 5.1% ($468,107) to $8,707,189.

Retail fuel sales for the fiscal year were $4,825,466, a decrease of 12.5% primarily due to a 8.3% decrease in the price of fuel, which decreased fuel revenue by $458,722.

Fuel gallons sold decreased 4.9% to 2.2 billion gallons, which decreased fuel revenue by an additional $249,370.

The decrease in fuel revenue was offset by a $215,348 increase to $3,811,521 (6.0%) in grocery and other merchandise and prepared food and fountain, primarily due to operating 36 more stores than one year ago.

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 $534,106 increase 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 34.9 cents in fiscal 2021 from 26.8 cents in fiscal 2020, primarily as a result of COVID-19, combined with the efforts of our centralized fuel team coupled with procurement improvements.

The grocery and other merchandise revenue less related cost of goods sold (exclusive of depreciation and amortization) was consistent at 32.0% in fiscal 2021 and fiscal 2020.

The prepared food and fountain revenue less related cost of goods sold (exclusive of depreciation and amortization) decreased to 60.1% from 60.9% during fiscal 2021 compared to the prior year, due mainly to lower volume and higher waste in the morning day part.

Operating expenses increased 9.3% ($139,148) in fiscal 2021 primarily due to operating 36 more stores than one year ago, as well as incurring $38.4 million in COVID-related expenses and $30.7 million in incremental incentive compensation expense due to the strong performance of the company.

Fuel cents per gallon increased to 36.0 cents in fiscal 2022 from 34.9 cents in 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 million of 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 expense increased 14.5% ($38,346) to $303,541 in fiscal 2022 from $265,195 in fiscal 2021.

The increase was due primarily to capital expenditures made in fiscal 2021 and fiscal 2020.

The effective tax rate increased to 23.2% in fiscal 2021 from 22.9% in fiscal 2020.

The increase in the effective tax rate was due to a reduction in favorable permanent differences, offset by a decrease in state tax expense.

The increase was due primarily to acquisitions and capital expenditures made in fiscal 2022 and fiscal 2021.

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 $339,790 in fiscal 2022 from $312,900 in fiscal 2021.

The increase was primarily due to increased fuel contribution and operating 36 more stores than one year ago.

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 the Form 10-K related to the fiscal year ended April 30, 2021, filed on June 25, 2021, for comparison of Fiscal 2021 to Fiscal 2020.

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Fuel $ 8,312,038 $ 4,825,466 $ 5,517,412

Grocery and other merchandise 2,724,374 2,498,966 2,369,521

Prepared food and fountain 1,087,147 1,097,207 1,074,294

Grocery 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

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Fuel $ 928,868 $ 761,247 $ 614,847

Grocery and other merchandise 872,573 800,140 759,817

Prepared food and fountain 653,689 668,092 668,598

Grocery 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 Buchanan Energy 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.

INDIVIDUAL STORE COMPARISONS (1)

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(1) Individual store comparisons include only those stores that had been in operation for at least one full year and remained open on April 30 of the fiscal year indicated.

(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 federal and state income taxes, and Company operating expenses not attributable to a particular store.

(3) Inside sales is comprised of sales related to the grocery and other merchandise and prepared food and fountain categories.

it excludes interest, federal and state income taxes, and Company operating expenses not attributable to a particular store.

SAME STORE SALES BY CATEGORY (1)

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Fuel gallons (2) 4.4 % (8.1) % (5.1) %

Grocery and other merchandise 6.6 % 1.9 % 3.6 %

Prepared food and fountain (3) (2.1) % (1.5) % 1.9 %

Grocery and general merchandise (3) 6.3 % 6.6 % 1.9 %

Prepared food and dispensed beverage (3) 7.4 % (2.1) % (1.5) %

(1) Same-store sales is a common metric used in the convenience store industry.

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Newly constructed and acquired stores do not enter the calculation until they are open for each entire period being compared as well.

(2) The decline in fuel gallons in fiscal 2021 as compared to fiscal 2020 was primarily due to softer demand in due to the COVID-19 pandemic.

(3) The decline in same-store sales for prepared food and fountain for 2021 as compared to 2020 was primarily due to the COVID-19 pandemic and the related restrictions.

(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

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EBITDA $ 165,839 $ 134,684 $ 801,241 $ 719,244

Loss on disposal of assets and impairment charges 5,872 1,380 9,680 3,495

(Gain) loss on disposal of assets and impairment charges (333) 5,872 (1,201) 9,680

Adjusted EBITDA $ 165,506 $ 140,556 $ 800,040 $ 728,924

For the three months ended April 30, 2021, EBITDA and Adjusted EBITDA decreased 14.5% and 11.6% respectively, when compared to the same period a year ago.

The decrease was due primarily to unusually high fuel margin achieved last year via supply and demand shocks from COVID-19 and macroeconomic conditions in the oil industry.

For 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 primarily to higher fuel contribution and operating 36 more stores than the same period a year ago.

Critical Accounting Policies

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.

Critical 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.

Business Combinations

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.

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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.

Long-lived Assets

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Due to the nature of our business, cash provided by operations is our primary source of liquidity.

We finance our inventory purchases primarily from normal trade credit aided by relatively rapid inventory turnover.

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.

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The ratio at April 30, 2021 and at April 30, 2020 was 1.18 to 1 and 0.36 to 1, respectively.

The increase in the ratio is partially attributable to an increase in cash and cash equivalents associated with an increase in cash provided by operations and a decrease in cash used in investing.

Additionally, current liabilities decreased due to the refinancing of the 5.22% senior notes.

Refer to Note 3 of the consolidated financial statements for additional discussion.

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 K and 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 $450,000 unsecured revolving credit facility, our $25,000 unsecured 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 increased $299,774 (59.4%) for the year ended April 30, 2021, primarily due to an increase in accounts payable and accrued expenses, and an increase in net income, partially offset by an increase in inventories.

Cash used in investing activities in the year ended April 30, 2021 decreased $22,302 (4.8%) primarily due to a decrease in acquisition activity.

However, the Company did close on two large acquisitions during the first quarter of fiscal 2022.

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, 2022 increased $713,655 (160.6%) primarily due to cash paid for the acquisition of Buchanan Energy for $566,750, 48 Circle K stores 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 used in financing activities increased $78,785, primarily due to payments on the revolving credit facility during the period, offset by incremental proceeds on the Series G and Series H notes.

Capital expenditures represent the single largest use of Company funds.

We believe that by reinvesting in stores, we will be better able to respond to competitive challenges and increase operating efficiencies.

During fiscal 2021, we expended $450,608 for property and equipment, primarily for construction, acquisition, and remodeling of stores compared with $471,683 in the prior year.

In fiscal 2022, we anticipate spending approximately $500 million in capital expenditures, including store remodels for acquisitions, primarily from existing cash, funds generated by operations, and proceeds from long-term debt.

Cash flows provided by financing activities increased $293,065, primarily due to $450,000 in draws on the Company's term loan facilities, offset by $188,537 of payments long-term debt, including $167,500 of 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 $1,228,113 for property and equipment, primarily for construction, acquisition, and remodeling of stores compared with $450,608 in the prior year, primarily due to the acquisition activity discussed previously.

In fiscal 2023, we anticipate spending approximately $450-$500 million in capital expenditures, including approximately $135 million in one-time store remodel costs for recently acquired stores.

As of April 30, 2022, we had long-term debt and finance lease obligations consisting of:

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2.96% Senior notes (Series H) due August 6, 2032 325,000

Variable rate Term Loan Facilities, due January 6, 2026 265,625

Debt issuance costs (1,990)

Less current maturities 24,466

On December 23, 2020, the Company amended its existing credit agreement dated January 11, 2019, as amended June 30, 2020 to:

(a) increase the revolving commitments thereunder to an aggregate principal amount of $450 million;

and (b) provide for a senior unsecured delayed-draw term loan facility in an aggregate principal amount of up to $300 million.

The Amendment increased the total borrowing capacity of the revolving commitments by an aggregate principal amount of $150 million, from $300 million to $450 million.

The maturity date remains unchanged, at January 11, 2024.

The term loan facility may be drawn in a single borrowing for up to five months from the amendment date, and has a maturity date of January 6, 2026.

Proceeds of the term loan were used to finance the Buchanan Energy acquisition (see additional discussion at Note 11 of the condensed consolidated financial statements).

Refer to Note 3 of the consolidated financial statements for additional discussion on changes to the Company's debt agreements during the fiscal 2021.

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.

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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 $2,000 at 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 $167,500 on its term loan facilities.

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, the revolver, the bank line,

and additional long-term debt or other securities as circumstances may dictate.

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 $450,000 committed unsecured revolving credit facility, its additional $25,000 unsecured 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.

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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 required interest payments.

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.

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The total amount of accrued interest and penalties for such unrecognized tax benefits was $371 as of April 30, 2022.

Interest and penalties related to income taxes are classified as federal and state income taxes in our consolidated financial statements.

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.

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At this time, management believes it is reasonably possible the aggregate amount of unrecognized tax benefits will decrease by $2,100 within the next 12 months.

This expected decrease is due to the expiration of statute of limitations related to certain income tax filing positions.

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 $12,746 obligation for deferred compensation.

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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 $2,000 for auto liability and $1,000 for workers' compensation and general liability.

To facilitate this agreement, letters of credit approximating $24,000 and $21,526 were issued and outstanding at April 30, 2021 and 2020, respectively, on the insurance company’s behalf.

To facilitate this agreement, letters of credit approximating $5,492 were issued and outstanding at April 30, 2022, on the insurance company’s behalf.

We renew the letters of credit on an annual basis.

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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,” “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 needs, supply chain, results of operations and performance at our stores, business strategy, strategic plans, growth opportunities, integration of acquisitions, acquisition synergies, short-term and long-term business operations and objectives including our long-term strategic plan, and the potential effects of 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”:

The words “may,” “will,” "should," “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “continue,” and similar expressions are used to identify forward-looking statements.

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 Ukraine and 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;

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;

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;

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;

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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 motor fuel could cause disruptions and could expose to us potentially significant losses, costs or liabilities;

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;

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

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

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

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 :

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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 7. Management’s Discussion and Analysis