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Item 7. Management’s Discussion and Analysis

2023-06-23 compared with 2022-06-24 · 103 added, 110 removed, 232 unchanged (48% 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” throughout 16 states, primarily in Iowa, Illinois, and Missouri.

As of April 30, 2023, Casey’s General Stores, Inc.

and its direct and indirect wholly-owned subsidiaries operate convenience stores primarily under the names "Casey's" and "Casey’s General Store" (collectively, with the stores below referenced as "GoodStop", "Bucky's" or "Minit Mart", referred to as "Casey's" or the "Company") throughout 16 states, primarily in Iowa, Missouri, and Illinois.

On April 30, 2023, there were a total of 2,521 stores in operation.

All convenience stores carry a broad selection of food (including freshly prepared foods such as pizza, donuts and sandwiches), beverages, tobacco and nicotine products, health and beauty aids, automotive products and other non-food items.

All convenience stores carry a broad selection of food items (including, but not limited to, freshly prepared foods such as regular and breakfast pizza, donuts, hot breakfast items, and hot and cold sandwiches), beverages, tobacco and nicotine products, health and beauty aids, automotive products, and other nonfood items.

As of April 30, 2023, 217 store locations offered car washes.

We derive our revenue from the retail sale of fuel and the products offered in our stores.

During the fiscal year, the Company introduced certain stores branded or rebranded as "GoodStop (by Casey’s)".

In addition, all but seven store locations offer fuel for sale on a self-service basis.

During the prior 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.

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As of April 30, 2023, 43 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.

The Company is also temporarily operating certain locations acquired from Buchanan Energy during the prior fiscal year under the name "Bucky's" and certain locations acquired from Minit Mart LLC during the current fiscal year under the name "Minit Mart." The Company is in the process of transitioning all "Bucky's" and "Minit Mart" locations to either the "Casey's" or "GoodStop" brand.

These locations typically have similar offerings to the "Casey’s" or "GoodStop" branded stores.

The Company has 76 dealer locations, where Casey’s manages fuel wholesale supply agreements to these stores.

These locations are not operated by Casey's and are not included in our overall store count in the paragraph below.

Approximately 1% of total revenue for the year-ended April 30, 2023 relates to this dealer network

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Stores at April 30, 2023 2,521

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.

Acquisitions in the table above include, in part, 26 stores which were acquired from Minit Mart LLC in April 2023.

For additional discussion, refer to Note 2 in the consolidated financial statements.

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Long-Term Strategic Plan

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

The Company announced a three-year strategic plan in January 2020 focused on four strategic objectives:

reinvent hospitality and the guest experience;

be where the guest is by accelerating unit growth;

create capacity through best-in-class efficienci es;

create capacity through best-in- class efficiencies;

and, invest in our people and culture.

The Company's plan is based on building on our proud heritage and distinct advantages to become more contemporary through new capabilities, technology, data, and processes.

The Company's plan was based on building on our proud heritage and distinct advantages to become more contemporary through new capabilities, technology, data, and processes.

We believe this will best position the Company to address rapidly evolving shifts in consumer habits and other macro retail trends.

The Company 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

The Company closed out its strategic plan at the end of the fiscal year.

Some of the key highlights from this past fiscal year include:

• Grew our store count through new store construction and a number of strategic acquisitions

• Diluted EPS of $11.91, up 30.8% over the prior year

• Private label penetration in the grocery and general merchandise category was over 9% on both units and gross profit for the year

• Casey's Rewards members grew to 6.4 million at year-end

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.

The onset of COVID-19 caused a significant decrease in store traffic across our entire footprint.

While store traffic has markedly increased as the economy 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 by 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 the ongoing impacts of COVID-19, in particular those related to governmental actions in response thereto, and those mentioned immediately above, will continue to bring challenges 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 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.

Since early calendar 2020, the price of crude oil, and in turn the wholesale cost of fuel, has been volatile compared to historical averages.

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).

More recently, during the end of the Company’s 2022 fiscal year, oil and fuel prices saw 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.

Generally, oil and fuel prices have decreased from levels seen throughout the past two years, but they remain elevated compared to historical levels.

The Company expects these comparatively higher prices to remain into the 2024 fiscal year.

In addition, during the past three calendar years, the Company, and the retail fuel industry as a whole, has experienced historically high average revenue less cost of goods sold per gallon (excluding depreciation and amortization).

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.

While the Company believes that its average revenue less cost of goods sold per gallon (excluding depreciation and amortization) will remain elevated from historical 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.

Casey's continues its process of developing a robust electric vehicle ("EV") strategy and our management team remains committed to understanding if and how the increased demand for, and usage of, EVs impacts consumer behavior across our store footprint and beyond.

As consumer demand for alternative fuel options continues to grow, Casey’s has continued to add EV charging stations across our 16-state footprint.

The Company has installed 138 charging stations at 29 stores, across 10 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.

Our installation strategy is currently designed to selectively increase our charging stations at locations within our region where we see higher levels of consumer EV buying trends and demand for EV charging.

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.

As EV demand from our guests increases, we are prepared to strategically integrate charging station options at select stores.

The Company also remains committed to offering renewable fuel options at our stores and continues to expand its alternative fuel options in response to evolving guest needs and as part of its environmental stewardship efforts.

almost all of our stores offer fuel with at least 10% of blended ethanol and 43% 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 2023 Compared with Fiscal 2022

Total revenue for fiscal 2023 increased 16.5% ($2,141,881) to $15,094,475.

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.

Total revenue was impacted favorably by operating 69 more stores than a year ago, elevated retail fuel prices, and strategic retail price adjustments.

Retail fuel sales for the fiscal year were $10,027,310, an increase of 20.6% primarily due to a 16.5% increase in the average price of fuel.

Fuel gallons sold increased 3.6% to 2.7 billion gallons, which increased fuel revenue by an additional $349,451.

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.

Grocery and general merchandise revenue for the fiscal year was $3,445,777, an increase of 9.7% due to strong sales of packaged beverages, snacks, and candy.

Prepared food and dispensed beverage revenue increased 9.8% to $1,322,560 due to increased sales of pizza slices, whole pies, and donuts.

Total revenue less cost of goods sold (excluding depreciation and amortization) was 20.4% for fiscal 2023 compared with 21.3% for the prior year.

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The grocery and general merchandise revenue less related cost of goods sold (exclusive of depreciation and amortization) increased to 33.6% from 32.7% during fiscal 2023 compared to fiscal 2022.

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.

Grocery and general merchandise revenue less related cost of goods sold (exclusive of depreciation and amortization) was positively impacted by mix shift to higher margin items like energy drinks, candy, and private label products, as well as retail price adjustments, offset by inflationary pressures.

The prepared food and dispensed beverage revenue less related cost of goods sold (exclusive of depreciation and amortization) decreased to 56.6% from 59.2% during fiscal 2023 compared to the prior year, primarily due to higher ingredient costs, notably cheese, and higher levels of stales, which were partially offset by retail price adjustments.

Operating expenses increased 8.1% ($158,469) in fiscal 2023.

A one-time payment of $15,297 was received from the resolution of a legal matter, which reduced operating expenses by approximately 1%.

Approximately 3% of the increase is due to operating 69 more stores than a year ago.

Approximately 2% of the increase was related to same-store operations.

One percent of the increase was related to same-store credit card fees driven by higher retail fuel prices, retail price adjustments and strong inside sales.

Approximately 1% of the change is related to an increase in variable incentive compensation due to strong financial performance.

Same-store employee expense was flat as the increase in employee wage rate was offset by a 2% reduction in same-store labor hours.

The majority of all operating expenses are wages and wage-related costs.

Depreciation and amortization expense increased 3.2% ($9,590) to $313,131 in fiscal 2023 from $303,541 in fiscal 2022.

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.

The increase was due primarily to acquisitions and capital expenditures made in fiscal 2023 and fiscal 2022, offset by a decrease in accelerated depreciation, which was recorded in the prior year on equipment replaced in remodels.

Interest, net decreased 9.1% ($5,157) to $51,815 in fiscal 2023 from $56,972 in fiscal 2022.

The decrease was primarily attributable to an increase in interest income due to the increase in cash and cash equivalents and interest rates.

The effective tax rate increased to 24.0% in fiscal 2023 from 22.9% in fiscal 2022.

The increase in the effective tax rate was driven by a decrease in excess tax benefits recognized on share-based awards and a decrease in favorable permanent differences.

Net income increased to $446,691 in fiscal 2023 from $339,790 in fiscal 2022.

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.

The increase was primarily attributable to higher profitability both inside the store and in fuel.

This increase was partially offset by higher operating expenses, depreciation and amortization, and income tax expense.

See discussion in the paragraphs above for the primary drivers for each of these increases.

Please refer to the Form 10-K related to the fiscal year ended April 30, 2022, filed on June 24, 2022, for comparison of Fiscal 2022 to Fiscal 2021.

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$ 3,072,406 $ 2,762,714 $ 2,356,435

(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.

(1) 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.

As a result of the Buchanan Energy acquisition in the prior fiscal year, 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.

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(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;

(3) Average operating income represents retail sales less cost of goods sold, operating expenses and depreciation and amortization attributable to a particular store;

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

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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 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.

(2) The increase in grocery and general merchandise same-store sales was primarily due to strong sales of packaged beverages, snacks and candy.

The increase in prepared food and dispensed beverage same-store sales was attributable to improved sales in pizza slices, whole pies, and donuts.

Both categories were also impacted favorably by strategic retail price adjustments.

Use of Non-GAAP Measures

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It therefore may not be possible to compare our use of these non-GAAP financial measures with those used by other companies.

The following table contains a reconciliation of net income to EBITDA and Adjusted EBITDA for the three months and years ended April 30, 2022 and 2021, respectively:

Three months ended Years ended

April 30, 2022 April 30, 2021 April 30, 2022 April 30, 2021

The following table contains a reconciliation of net income to EBITDA and Adjusted EBITDA for the years ended April 30, 2023 and 2022, respectively:

April 30, 2023 April 30, 2022

Net income $ 446,691 $ 339,790

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EBITDA $ 952,464 $ 801,241

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

Loss (gain) on disposal of assets and impairment charges 6,871 (1,201)

Adjusted EBITDA $ 959,335 $ 800,040

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, 2023, EBITDA and Adjusted EBITDA increased 18.9% and 19.9%, respectively.

The increase was due to increased fuel and grocery contribution attributable to increasing store traffic, operating 209 more stores than one year ago, partially offset by increased operating expenses.

The increase was primarily attributable to higher profitability both inside the store and in fuel, which was partially offset by higher operating expenses due to operating 69 more stores than one year ago, an increase in store operations cost, as well as increased credit card fees resulting from increased revenue.

Critical Accounting Policies and Estimates

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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.

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Inventories, which consist of merchandise and fuel, are stated at the lower of cost or market.

For fuel, cost is determined through the use of the first-in, first-out (FIFO) method.

For fuel inventories, cost is determined through the use of the first-in, first-out (FIFO) method.

For merchandise inventories, cost is determined through the use of the last-in, first-out (LIFO) method.

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The ratio at April 30, 2022 and at April 30, 2021 was 0.80 to 1 and 1.18 to 1, respectively.

The decrease in the ratio from the prior year is partially attributable to a decrease in cash and cash equivalents associated with payments for the acquisitions of Buchanan Energy, 48 stores from Circle 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 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 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.

The increase in the ratio from the prior year is partially attributable to an increase in cash and cash equivalents due to strong free cash flows, and a decrease in payments for acquisitions.

We believe our current $850,000 unsecured revolving credit facility, our $25,000 unsecured bank line of credit (subsequent to year-end this increased to $50,000, see discussion in Note 3), 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 was $881,951 for the year ended April 30, 2023, compared to $788,741 for the year ended April 30, 2022.

The increase in operating cash flows was partially attributable to an increase in net income adjusted for non-cash reconciling items (depreciation and amortization, amortization of debt issuance costs, stock-based compensation, and loss (gain) on disposal of assets and impairment charges) of approximately $132,873.

Refer to “Fiscal 2023 Compared with Fiscal 2022” on page 21 for further details on the primary driver for these changes.

This increase was partially offset by the changes in deferred income taxes and changes in components of assets and liabilities.

Cash provided by operations can be impacted by variability in the timing of payments and receipts for certain assets and liabilities, as well as changes in commodity costs year-over-year.

The impacts from changes in deferred income taxes decreased by $59,595, attributable to lower accelerated tax depreciation on acquisitions and capital expenditures made in the current fiscal year.

Additionally, impacts from accounts payable decreased $175,376 due to higher fuel costs in the prior fiscal year and an effort to better utilize available payment terms introduced in the prior fiscal year.

These decreases were partially offset by impacts from changes in income tax balances which increased $56,368, primarily attributable to the timing of tax payments across the last two fiscal years, and impacts from inventories which increased $100,820, attributable to higher fuel costs in the prior year.

As shown in the supplemental disclosures to the cash flow, cash paid for taxes increased $40,833, primarily attributable to an increase in taxable income (refer to “Fiscal 2023 Compared with Fiscal 2022” on page 21 for further details on the primary driver for these changes) during the year as impacts from changes in deferred tax liabilities and income tax receivable were offsetting.

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.

During fiscal 2023, we expended $562,137 for property and equipment, primarily for construction, acquisition, and remodeling of stores compared with $1,228,113 in the prior year.

The decrease was primarily due to significant acquisition activity occurring in the prior year (see Note 2 for further discussion).

Cash provided by financing decreased $308,513, primarily due to $450,000 in draws on the Company's term loan facility to finance acquisitions in the prior year, offset by prior year prepayments of $167,500 on the Company's term loan facility due to strong free cash flow.

As of April 30, 2023, 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

Variable rate term loan facility, requiring quarterly installments ending April 21, 2028 250,000

Debt issuance costs (1,698)

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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.

During the fourth quarter, the Company refinanced its existing credit agreement (dated January 11, 2019, as amended, by and among the Company, the lenders party thereto and Royal Bank of Canada, as administrative agent) which resulted in its termination and repayment, in full, and entry into a new credit agreement (dated April 21, 2023, by among the lenders thereto and Wells Fargo Bank, National Association, as administrative agent) to provide for (a) a $250 million unsecured term loan , and (b) an $850 million unsecured revolving credit facility (collectively, the “Credit Facilities”).

See Note 3 for additional information related to the Credit Facilities (see “Prior Credit Agreement” and “New Credit Agreement” sections).

Amounts borrowed under the Credit Facilities bear interest at variable rates based upon, at the Company’s option, either:

(a) either Term SOFR or Daily Simple SOFR, in each case plus 0.10% (with a floor of 0.00%) for the interest period in effect, plus an applicable margin ranging from 1.10% to 1.70% or (b) an alternate base rate, which generally equals the highest of (i) the prime

commercial lending rate announced by the Administrative Agent as its “prime rate”, (ii) the federal funds rate plus 1/2 of 1.00%, and (iii) Adjusted Daily Simple SOFR plus 1.00%, each plus an applicable margin ranging from 0.10% to 0.70% and each with a floor of 1.00%.

The applicable margins are dependent upon the Company's quarterly Consolidated Leverage Ratio, as defined in the credit agreement.

We have the right at any time to prepay all or a portion of the outstanding balance without premium or penalty, other than customary “breakage” costs with respect to Term SOFR-based borrowings, with prior notice given.

To date, we have funded capital expenditures primarily through funds generated from operations, the proceeds of the sale of common stock, issuance of debt or other bank financing, and existing cash.

Future capital required to finance operations, improvements, and the anticipated growth in the number of stores is expected to come from cash generated by operations, its $850,000 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.

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1 year 1-3 years 3-5 years More than

Senior notes (1) $ 1,925,775 $ 64,362 $ 149,737 $ 577,894 $ 1,133,782

Long-term debt (1) $ 1,845,788 $ 87,959 $ 329,559 $ 374,706 $ 1,053,564

Finance lease obligations 130,897 12,398 21,502 20,240 76,757

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Total $ 2,164,548 $ 108,497 $ 367,383 $ 411,032 $ 1,254,094

(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.

(1) The long-term debt portion of the table above excludes interest payments related to the Company's term loan facility, 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 $386 as of April 30, 2023.

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

Interest and penalties related to income taxes are classified as income tax expense in our consolidated statements of income.

The federal statute of limitations remains open for the tax years 2019 and forward.

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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.

Included in other long-term liabilities on our consolidated balance sheet at April 30, 2023, was a $11,534 obligation for deferred compensation.

Additionally, $756 was recognized in current liabilities as of April 30, 2023 related to deferred compensation.

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However, known payments of $8,777 will be due during the next 5 years.

At April 30, 2022, we were partially self-insured for workers’ compensation claims in all 16 states of our marketing territory;

we also were partially self-insured for general liability and auto liability under an agreement that provides for annual stop-loss limits equal to or exceeding $2,000 for auto liability and $1,000 for workers' compensation and general liability.

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.

At April 30, 2023, we were partially self-insured for workers’ compensation claims in all but two states of our operating territory.

In North Dakota and Ohio, we are required to participate in an exclusive, state managed fund for all workers compensation claims.

We were also 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.

Forward-Looking Statements

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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.

Forward-looking statements represent the Company’s current expectations or beliefs concerning future events and trends that we believe may affect our financial condition, liquidity and related sources and needs, supply chain, results of operations and performance at our stores, business strategy, strategic 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”:

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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;

food-safety issues and foodborne 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;

we may be adversely impacted by increases in the cost of food ingredients and other related costs;

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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consumer or other litigation could adversely affect our financial condition and results of operations;

and, covenants in our Senior Notes and credit facility agreements require us to comply with certain covenants and meet financial maintenance tests and the failure to comply with these requirements could have a material impact to us.

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Growth Strategies :

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

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

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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and, Iowa law and provisions in our charter documents may have the effect of preventing or hindering a change in control and adversely affecting the market price of our common stock.

Although we have attempted to list the important factors that presently affect the Company’s business and operating results, w e further caution you that other factors we have not identified may in the future prove to be important in affecting our business and results of operations.

Although we have attempted to list the important factors that presently affect the Company’s business and operating results, we further caution you that other factors we have not identified may in the future prove to be important in affecting our business and results of operations.

We ask you not to place undue reliance on any forward-looking statements because they speak only of our views as of the statement dates.

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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