The Henry Fund Henry B. Tippie School of Management Josh Vander Plaats [[email protected]]
Casey’s General Stores, Inc. (CASY) April 19, 2016 Consumer Staples – Food & Staples Retailing Stock Rating HOLD Investment Thesis Target Price $120 Henry Fund DCF $120.58 We are recommending a HOLD for Casey’s General Stores due to the potential Henry Fund DDM $107.81 for 8.5% upside without significant near-term downside risk. Casey’s is a Relative Multiple $105.59 growing convenience store chain with a successful prepared foods business Price Data that is poised to continue to add to shareholder value. Current Price $111.14
Drivers of Thesis 52wk Range $80.94 – 129.53 The Company has experienced strong growth, and with a new distribution Consensus 1yr Target $129.55 center will be able to expand its geographic reach, and we expect them to Key Statistics continue to have solid store growth over 55-65 stores a year in the next 3 Market Cap (B) $4.27 years. As the number of stores continues to grow and the industry Shares Outstanding (000) 39,051 consolidates, Casey’s has the opportunity to be the market leader for small Institutional Ownership 84.6% town convenience stores. Five Year Beta 0.707 Prepared Foods business is unmatched by competitors and will remain a Dividend Yield 0.8% competitive advantage for Casey’s in the near term. The Prepared Foods Est. 5yr Growth 7.7% business is a value-add to an already profitable underlying convenience Price/Earnings (TTM) 19.6 store business. Price/Earnings (FY1) 0.00 Management has shown the ability to provide responsible growth and Price/Sales (TTM) 0.6 expand profitability. Casey’s is expanding with a new distribution center, and our models show that even with modest store expansion expectations Price/Book (mrq) 4.1 of 40 new stores in each of the last three years of the model, the growth Profitability will drive strong shareholder value. Operating Margin 4.19% Profit Margin 2.33% Risks to Thesis Return on Assets (TTM) 7.58% Lower fuel prices help drive more traffic to Casey’s stores. If the price of Return on Equity (TTM) 22.65% gasoline were to increase dramatically, it would have negative effects for Casey’s. CASY PSX ATD/B Margins for fuel have been much wider than historically reported, margin 30 compression would have a negative impact on earnings. We have modeled 26.3 contracting fuel margins from 19.3 cents per gallon in FY 2015 to 16 cents 20 22.6 23.5 in 2017-2020, and then contracting to 15 cents at the end of the forecast 19.7 17.4 period. 10 12.0 11.4 8.8 8.0 Earnings Estimates 0 Year 2013 2014 2015 2016E 2017E 2018E P/E ROE ROA EPS $2.89 $3.50 $4.66 $5.79 $5.76 $6.65 Source: Bloomberg growth -5.9% 21.1% 33.1% 24.3% -0.5% 15.5% 12 Month Performance Company Description
50% CASY S&P 500 40% Casey’s General Stores operates convenience stores across 14 Midwest states, with over half of 30% its stores in Iowa, Illinois, and Missouri. It 20% operates a total of 1,878 stores offering self- 10% service gasoline along with groceries, Tabaco, and 0% alcohol along with the company’s own popular branded prepared foods. The company operates -10% the majority of its stores in towns with a -20% population of less than 5,000 people. AMJJASONDJFM Source: Yahoo Finance
Important disclosures appear on the last page of this report.
EXECUTIVE SUMMARY Revenue FY 2016 Est. The team is assigning a HOLD rating to Casey’s General Stores. Casey’s has provided impressive growth and has 1% Gasoline good pipeline for future growth. Casey’s largely serves small Midwestern towns and is one of few competitors in 12% Grocery and other the areas in which it operates. The business operates with merchandise large profit margins within the prepared foods and grocery 28% 59% Prepared Food and merchandise segments. The company is fueling growth in Fountain the prepared food segment by remodeling stores to highlight the prepared foods section, as well as moving Other most of the company stores to a 24-hour schedule and offering pizza delivery service for stores operating in more populous areas. Source: Company 10-K and FY 2016 Q3 earnings release The company is committed to expanding into new The amount of revenue attributed to gasoline sales varies markets through store acquisitions and new store builds, over time with the price of gasoline. As gasoline prices and our team believes that management is taking the right have fallen in the past couple of years, the amount of steps to ensure responsible growth. The company has also revenue coming from gasoline has gone from normal benefited recently from widening margins on gasoline averages near and above 70% to a projected 59% in FY sales. Though we expect to see some margin compression, 2016. especially if gas prices reverse their downward trend, we still believe that the company will continue to generate The company generates profits through the products that solid returns as it continues to expand its high margin are sold in the store, not at the pump. The chart below business segments. shows the share of gross profit that each segment has: COMPANY DESCRIPTION
Casey’s owns and operates convenience stores in the Gross Profit FY 2016 Est. Midwest region of the United States. The chain gets the Gas majority of its revenues from customers purchasing gasoline. The stores operate on a self-service model for 3% 23% Grocery and Other gasoline. While the customer fills their car with gasoline, 34% Merchandise the convenience store offers a wide range of products such Prepared Foods as packaged beverages and foods, health and beauty and Fountain products, automotive products, alcohol and tobacco 40% Other products, as well as other non-food items.
Casey’s is differentiated by its food service business that drives a large portion of the company profits. The store Source: Company 10-K and FY 2016 Q3 earnings release offers popular prepared food items such as made-from- scratch pizza, doughnuts, coffee, and more. The below The Prepared Food and Fountain segment of the business chart shows the share of revenue that Casey’s generates has grown in its contribution to total gross profit from 29% from each of its three business segments. in 2011 to 34% projected in 2016. As the company continues to invest in the segment we expect to see this share continue to increase.
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The numbers in the above picture are as April 30, 2015. FY 2016 Gross Margin Est. During FY 2015, the company opened 45 new stores and 70.00% acquired 36 new stores across the Midwest, also including 60.00% eight in Missouri, seven in Illinois, seven in Arkansas, six in 50.00% Oklahoma, and six in Tennessee. The chain also replaced 40.00% 27 existing stores. The company has also added a large 30.00% 20.00% distribution center in Terre Haute, IN. The company has 10.00% implemented a strategy of using their own distribution 0.00% centers to service their locations, so they have kept stores Gas Grocery and Prepared Foods within 500 miles of their distribution centers. Other and Fountain Merchandise Management believes that the new distribution center will allow the store to expand into new regions such as Michigan and Ohio. Source: Company Reports, Valuation Model Due to the cold weather location of most of the stores, it The chart above shows the breakdown of gross margin in amplifies the cyclicality of the business. Because of the the three large segments of the company. Gas margins are cold weather, customers stopping for gas will be more forecasted at 18.9 cents per gallon (8.79%) for FY 2016, likely to stay in their cars instead of going into the store. well above historical averages, due mostly to the decrease Volume of gallons of gas sold also decreases during second in the sale price of gas, but also larger than historical half of the fiscal year, as there is less travel in the winter margins. months. The company reported in FY 2015 that 57% of revenues occurred in the first two quarters (May-October As illustrated by the figures below, most of the 1,878 2015), and 74% of the profits were from the first half of stores are located in the Midwest, with the majority of the year. The chart below highlights the volume cyclicality. store located in Iowa and Illinois. The second figure shows a map of where the concentration of stores were as of the end of FY 2014. The stores are all located within the FY 2015 % of Revenue by distribution reach of the distribution center in central Quarter Iowa. 40%
30%
20%
10%
0% Q1 Q2 Q3 Q4
Source: Casey’s 2015 Annual Report Source: FY 2015 Report
Gasoline is a low margin item for the store, whereas the prepared foods segment of the store operates with over 60% gross profit margin. When customers stop for gas and by little or nothing else, it will have a negative effect on profits. The company is expanding south as well as east, establishing a larger presence in Oklahoma and Arkansas, and as these stores grow there could be some stronger profit contribution in the second half of the year by these stores. Our model forecasts 56 new stores for FY 2016 compared to 70 new stores opened in FY 2015, and store Source: 2014 Company Report
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growth remaining stable in FYs 2017 and 2018 with 65 new margin on each gallon of gas and models in margin stores, and growth slowing to 40 stores per year by the end compression to normal levels over the forecasted period. of the forecasting period1. Grocery and Other Merchandise Gasoline The Grocery and Other Merchandise segment comprises a Casey’s uses the self-service gasoline station model at all whole host of grocery items from basic grocery items such of its stores. The gasoline is sold at a small margin in hopes as bread and milk, snacks, alcoholic and non-alcoholic that customers who stop for gasoline will go into the store beverages, and Tabaco products. The company also sells and buy products from the other segments. Gasoline common auto products such as oil and antifreeze. The drives the majority of revenue for Casey’s but only a small company has reported 32.1% gross margins in this portion of gross profits. With the current lower fuel prices, segment in the past two fiscal years, and is able to sell their this segment is accounting for less share of total revenue, items at a higher price point relative to supermarkets and and the higher margin segments make up larger shares, big box stores due to traditional convenience store with has increased overall company margins2. advantages, such as location, ease of purchase, and extended hours. Due to the consistency, 32.1% was used The chain has historically made around 15 cents on each as the estimated margin in this category throughout the gallon of gasoline that they sell, but reported 19.3 cents forecasting period. per gallon in FY 2015 and projected 18.9 cents per gallon for FY 2016. Our model forecasts the margins squeezing Beer is sold in most of Casey’s stores. Convenience stores and remaining constant at 16 cents per gallon from FY account for nearly 30% of all beer sales in the US. Company 2017 on, as more stores are forced to compete on price. remodels are also showcasing much larger beer selection to accommodate changing consumer preferences to micro-brewers as opposed to the traditional staples Margin on Gallon of Gasoline usually found in American Convenience stores. Craft $0.25 Brewers’ have seen their share of the market double since $0.20 2011 from 5.7% to a reported 12.2% in 2015. Casey’s new $0.15 store format allows them to offer more selection to $0.10 customers looking for craft beer3. $0.05 $- Smoking Rates – Smokers are a targeted consumer for convenience stores, who offer an easy way for Tabaco users to purchase their product while they are filling their vehicle with gas. However, there is a significant downward Source: Company Reports trend in the percentage of Americans who are smokers, Due to gasoline’s impact on overall revenues, revenues and the trend is unlikely to reverse soon. The chart below declined from $7.84 billion to $7.76 billion from FY 2014 to shows exactly how quickly this rate has been declining, FY 2015, with an even steeper decline projected for this showing that a quarter of Americans were smokers in year. Despite the decrease in margin, the company is 1997, with most recent data showing that that number has seeing unit saw unit sales of gallons of gasoline increase by fallen to below 20%. over 9% in FY 2015 and is projected to have strong growth in the segment for FY 2016. Our model projects 8% volume growth in number of gallons sold in FY 2016, and more modest growth at 3-4% throughout the rest of the forecasting period. A significant increase in gasoline prices would push revenue numbers up and decrease overall company margins. If an increase in gas price is also coupled with margin compression on each gallon of gasoline sold, it would amplify the affect. The valuation model forecasts Source: IBIS World
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Due to less smokers visiting stores, convenience stores will discounts on gasoline with certain purchases in the grocery likely see declining revenues from the segment. IBIS world store. The program’s activity occurs in areas near a Hy- projects that for the convenience store industry, 35% of in Vee, due to the location of the grocery stores, but the store sales were from tobacco products. Expect the trend company could potentially and has a stated interest in of decreasing tobacco sales to continue as less and less of partnering with other local grocery stores in other the population uses the products. It will be key for operating areas with similar programs. Within the first convenience stores to adapt to changing consumer year of starting the program, Casey’s saw a dramatic preferences. Tobacco products have averaged around 9% increase in same-store-sales in areas with the program, of total sales for Casey’s in the past three fiscal years4. most likely due to new customers getting their gasoline from Casey’s for the first time. The program also provides Prepared Food and Fountain repeat customers. Customers who shop at Hy-Vee will be more likely to fill-up at gas stations that accept the rewards The Prepared Food and Fountain segment is what sets card7. Casey’s apart from its competitors and drives a large part of the investment thesis of this report. The segment has Company Analysis experienced tremendous growth for Casey’s. It includes Casey’s brand pizza, coffee, doughnuts, sandwiches and Casey’s is unique in that it offers the traditional more. Due to the popularity of the items, more and more convenience store with a tremendous value add of a of the company’s stores are being remodeled to highlight popular prepared food segment that can significantly this segment due to its growing popularity and positive contribute to the company’s bottom line. Casey’s is gross profit impact. expanding east through its new distribution network based in Indiana. The new distribution center, opened in Casey’s began selling pizza in 1984, and has grown so large February, will allow Casey’s to expand its reach and that Casey’s Pizza now ranks as the fifth largest pizza chain optimize its distribution network to reduce costs. in the United States by units sold. It sells more than 19 million pies and 62 million individual slices each year. The Casey’s has been investing heavily in its business to segment operates at near 60% gross margins. Casey’s capture what management sees as more growth offers pizza at 98% of its locations5. opportunities. Changing more stores to a 24-hour model will increase a convenience factor, major remodels should The margins in the Prepared Food space have benefited help optimize the product mix sold at each store, and pizza from lower commodity prices in 2015 and so far in 2016. delivery and online and mobile ordering will also help In 2015, the average price for a 40 pound block of cheese improve growth in the prepared foods segment. was $1.61, compared to $2.10 in 2014. An increase in input prices would have a negatively affect margins in the The company drives growth in three ways: Growth by segment. The DCF price reacts strongly to margin store expansion, growth by same store sales growth, and changes6. growth by margin growth.
Due to the success of the pizza business, along with its Growth by store expansion – Casey’s has been adding great profitability, the business is also offering delivery stores at a steady rate over the past five years, and service in more of its stores, mostly in more populous management has ambitious goals to continue to expand areas. The company has also released a mobile app that its reach. will allow users to order pizza without calling the store. The company believes that this investment will lead to Same Store Sales Growth -- Same store sales growth strong same store sales and stronger per store profits. measures how existing stores are growing their revenue. Due to the expansion of stores, this measure can give 8 Fuel Saver Program insight to how well individual stores are competing .
Casey’s partnered with Regional grocery chain Hy-Vee in The graph below shows the annual same store sales 2013 to offer the “fuel saver program”, with with reported numbers for each of Casey’s product categories. customers of the local grocery store would receive With gasoline, 2013 same store sales were flat (0.1%), and
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the boost in 2014 was due to the fuel saver program with below pace to achieve their goal. Casey’s has completed Hy-Vee. 31 new-store constructions and has another 22 new stores under construction. Management has stated that they have only acquired 3 stores in the fiscal years due to high Same Store Sales Growth price of acquisition. Management is unwilling to overpay 15% for new store growth, even if it means missing goals. Our 10% team believes that this is prudent as potential targets are benefiting from lower gasoline prices, and are less likely to 5% sell at a price that Casey’s is comfortable paying. As 0% conditions evolve, Casey’s will continue to look for 2014 2015 2016 E 2017 E 2018 E acquisitions that fit the company’s expansion plans.
Gasoline Grocery Prepared Food The new distribution facility in Terre Haute, Indiana is now operational, and Casey’s will now set sights on opening Source: Company Website stores in new geographic areas. It will be key to watch the success of the new stores in areas such as Ohio to see if The question is whether these numbers are sustainable. the adoption of the Casey’s brand will be strong enough to Forecasted throughout the model is a slow-down in warrant the initial investment. growth, due to competition across the industry in prepared foods and the uncertainty of success in the new Casey’s grows its store count by building new stores on markets that Casey’s is trying to enter. FY 2014 and 2015 undeveloped sites or from acquiring already existing saw prepared food same-store-sales growth of 13% and convenience stores and remodeling them under the 15%. The forecast for FY 2016 is 11%, with 9% same-store Casey’s brand. The chart below shows the number of new sales growth forecasted in FY 2018 and FY 2019. stores that has Casey’s has opened since 2010.
Margin Growth -- Optimizing the product mix to include more prepared food will boost margin. On top of that, they New Stores per Year have recently had help in margin growth due to lower fuel 120 prices. Fuel prices have been lower, and input prices to 100 prepared foods have been low allowing the gross margins 80 to be higher than historically reported. In FY 2015, the 60 company reported 18.5% gross margins compared to 40 15.75% in FY 2014. Further, FY 2016 projects even stronger 20 gross margins, the company reported over 23% gross 0 margins through Q3 2016. 2010 2011 2012 2013 2014 2015
Management Changes Coming -- After 26 years with Casey’s, CEO Robert Myers is retiring at the end of FY 2016 Company 10-K April 30, 2016. Current COO Terry Handley will take over after Mr. Myers retires. Handley is a 34-year veteran of the Growth company serving in many different functions. There is no Casey’s has performed well for our portfolio since its indication that management strategy will deviate from the addition in May of 2014 at $69.72. Casey’s has experienced current plan with Handley at the helm9. strong earnings growth in the past five years. Casey’s RECENT DEVELOPMENTS reported $2.24 EPS in FY 2011, and reported $4.66 in FY 2015. Below shows EPS estimates for the past couple of Expansion Plans years and the first part of the forecasted period. Our model forecasts $5.79 EPS for FY 2016, slightly above Casey’s had announced plans to add 75 to 113 stores in FY average analysts’ estimates of $5.73, and a forecasted FY 2016. However, as of the Q3 earnings report, they are 2017 in line with analysts’ estimates of $5.76, and in FY
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2018 our forecast calls for $6.65 EPS vs. analysts’ estimates the Stop-n-Go chain, and has even acquired stores from of $6.62. competitor Kum & Go. For FY 2015, Casey’s acquired 36 stores. Larger competitors develop economies of scale and are able to operate the stores more efficiently than Earnings Per Share independent operators. Casey’s management is looking 8.00 for acquisition targets but the pace has slowed in the past 7.00 year due to the high price required by the targets. 6.00 6.65 6.92 5.00 5.79 5.76 New Stores 4.00 4.66 60 3.00 3.50 50 2.00 2.89 1.00 40 0.00 30 2013 2014 2015 2016E 2017E 2018E 2019E 20
10 Source: Company Reports 0 Lottery 2012 2013 2014 2015 2016E 2017E 2018E New Store Builds Stores Acquired Convenience stores are one of the premier places that consumers can purchase lotter tickets. One interesting observation from this year was the effect that the Source: Company 10-k, Valuation Model increased Powerball jackpot may have had on same store Convenience store operator Alimentation Couche-Tard sales for Casey’s. January’s same store sales numbers were completed a merger with Pantry stores in 2015, taking noticeably down from prior months, as grocery and other control over 1,500 stores in 13 states in Southeastern merchandise saw only 5% growth compared to over 8% in United States11. the prior two months.
During January, the Powerball jackpot rose to over $1 Interchange Fees on the Rise Billion dollars. Analysts had hoped that the Powerball The gas station and convenience store industry is an jackpot interest would increase foot traffic in the store and increasingly cashless business. This requires the business cause a spike in sales, but it appears sales growth was to pay a fee to credit card payment processors with each weaker than normal months before. One explanation swipe. Though this cuts into margins, the ease of using a would be due to poor weather, but the lottery also seemed credit card to pay for small items may have a positive to have had a negative effect on the sales of grocery and impact on the consumer’s likelihood to purchase, and also prepared foods products. It could be that the long lines provides a more convenient way to pay for gas at the caused by the interest in the Powerball kept customers pump, moving people through the line faster. from purchasing other items in the store. Convenience stores are no longer convenient if you have to wait in a The downside of paying at the pump is that a customer long line in order to make your purchase10. does not need to enter the store to pay for the gasoline purchase. Any increase in this rate would cut into margins INDUSTRY TRENDS across the board, and especially on gasoline sales12. Acquisitions and Consolidation
A large part of Casey’s expansion strategy is to acquire targeted stores, whether they be independent operators or chains. In 2014, the company acquired 24 stores from
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Gasoline Prices Drops convenience stores for convenient locations, grab and go service, and variety and speed of transactions14. Average Annual Fuel Price Casey’s differentiates itself by operating the majority of their stores in small markets, with approximately 57% of $4.00 their stores in towns with a population of less than 5,000, $3.00 and only 18% of stores are in areas with over 20,000 people. Casey’s also benefits from operating in small rural $2.00 areas by being one of, if not the only game in town. There are towns in which Casey’s operates that it is not only the $1.00 only gas station, but also the only restaurant or grocery $- store. The company meets more of the community’s needs 2013 2014 2015 2016E2017E2018E2019E2020E by being a hybrid of a general store, convenience store, and restaurant. Casey’s makes their location decision by Source: EIA.gov population in the immediate area and daily traffic area. Management states that Casey’s can operate profitably in Fuel prices have been on a steady decline since 2014, and a highway town of just 40015. Casey’s has benefited from the drop. Lower fuel prices mean people travel more and buy more gasoline from the Most of Casey’s direct competitors are privately held, store. For the first part of 2016, consumers have paid their including Kum & Go, which operates in many of the same cheapest prices for a three month period in 12 years, locations as Casey’s stores, and 7-Eleven, which was taken paying an average of just $1.86 nationwide. Consumers private in 2005 and operates nationwide and holds a 30% saved nearly $10 Billion dollars in the quarter according to market share. Casey’s is unique in that it doesn’t use a Convenience Store News. Convenience stores hope that wholesaler to distribute it goods to stores, but instead when consumers realize the money saved at the gas owns and operates its own distribution centers. This station they are more willing to spend money in the allows Casey’s to better control inventory and be more store13. efficient in this warehouse to store model than they could be if they used wholesalers. However, this has limited how Interestingly, this decrease is fuel prices has allowed C- they could expand in recent years. Having a physical stores to widen their margin on gasoline. Casey’s for distribution center that all of your goods from keeps example, historically reported earning 15 cents or less per certain geographical areas out of your reach. Casey’s new gallon prior to 2014. As fuel prices dropped, it appears that distribution center in Indiana will expand its reach, but to retailers did not pass along all of the cost savings onto the continue to expand geographically they will have to build buyer. Casey’s reported earning just over 19 cents a gallon more distribution centers as long as they continue with the for FY 2015, a margin that looks to have held up through strategy of keeping all stores within 500 miles of a FY 2016. The price of gasoline is determined by each distribution center. individual store, and most gas stations competing for business in the same area also have the same price for gas. For 2011-2014, the industry average proportion of fuel It will be key to monitor if there is competitive pressure sales to total revenue was around 70%. Casey’s ended that will eat away at these margins. 2014 with a very similar proportion of fuel sales, and the lower reported numbers in FY 2015 and projected FY 2016 MARKETS AND COMPETITION numbers are due to lower fuel prices. Breaking down in- store sales, the below graph shows that the industry Peer Comparisons averaged nearly 85% of in-store sales attributed to grocery and merchandise, the other 15% being prepared foods. The US Convenience Store market is segmented with Over the same time period, Casey’s has seen grocery and independent operators and chains like Casey’s, 7-Eleven, other merchandise make up a much lower percentage of Kum & Go, Pilot Flying J, and KwikTrip. The industry is in store sales, around 70% in FY 2014 and we are projecting comprised over 151,000 stores and generates nearly $700 that number to continue to decrease as prepared food Billion dollars of revenue each year. Customers choose sales increase faster than grocery and other merchandise
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sales. This will help optimize the product mix, pushing showers and other services for long haul truckers that stop consumers towards high margin prepared foods, and off the interstate. helping individual store success16. Pizza Chains In-store sales (in billions) Casey’s operates a take-out pizza business that has been enormously successful, and is now the fifth largest pizza 250 chain in the country. There is large amount of competition 200 26 28 29 31 in this segment, from local independent pizza shops to 150 large national players such as Pizza Hut, Dominos, Papa 100 159 165 167 172 Johns, and more. However, Casey’s locations in smaller 50 towns likely do not have a large pizza chain to contend 0 with. 2011 2012 2013 2014 Chain no. of outlets Merchandise Food Service 1. Pizza Hut 6323
2. Domino's 4985 Source: Statista Market Research 3. Little Caesars 3889 4. Papa John's 3202 Convenience Stores 5. Casey's 1840 Source: Pizza Magazine Quarterly and Company Report Casey’s main competition comes from independent operators such as Kum & Go, Git-n-Go, QuikTrip, and Casey’s has seen large growth in the prepared foods more. Kum & Go is the most direct peer comparison, as segment largely attributable to the growth in the pizza they are also making a more concentrated push to expand business. Unlike most of its competitors, Casey’s is open in their prepared foods and grocery businesses. the mornings and offers breakfast pizza to go along with traditional pizza options. To increase its competitiveness The best public company to compare Casey’s to is in this space, Casey’s is offering delivery in select stores as Alimentation Couche-Tard, a Canadian based convenience well as online and mobile ordering. As of March 8, the store operator with over 10,000 corporate stores in the Casey’s mobile application had been downloaded over US, Europe, and Canada. In the US Couche-Tard operates 200,000 times18. under the brands Circle K, Statoil, Couche-Tard, Mac’s, Kangaroo, and Kangaroo Express. Below is a chart ECONOMIC OUTLOOK highlighting some of the operating metrics for Couche- Tard compared with Casey’s, noteworthy being the Fuel Prices- Fuel prices have been on a downward trend similarities in margins between the companies, but Casey’s since the beginning of 2014. The team expects that fuel has significantly higher same-store-sales17. prices will not recover much for the first part of the forecasting period. With lower fuel, we can expect that CASY ATD/B consumers will travel more, and will stop in to grab Gross Margin 19.0% 16.3% convenience items in the store. Also, if the price Net Margin 2.3% 2.7% Merchandise Same Store consumers pay at the pump is lower, they are more willing Sales 7.8% 3.9% to spend more in the store. Since fuel prices have almost Fuel Same Store Sales 2.6% 3.4% halved since 2012, consumers have more to spend on Source: FactSet and Company Reports products in the store.
Truck Stops Interest Rates – Due to the strategy of expansion in part by acquisition, and some of that acquisition fueled by debt, Casey’s also operates a number of stores that are located the rate that Casey’s receives on its debt will be important directly off of the interstate highway system. Though they to their expansionary activities. Currently, the company do not directly target truckers, Casey’s competes with has $853,543 in total long term debt and capital leases companies such as Flying J, Luvs, and Pilot for consumer with maturity dates on debt spanning from 2020 through business at these locations. Traditional truck stops offer
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2028. The Fed has kept the federal funds rate low for term and continue to contribute to Casey’s same store almost a decade. The largest drivers of the Fed’s monetary sales growth. Consumers that have more buying power policy are inflation and unemployment. Though there has also will be more willing to pay for convenience, instead of been little inflation in since the Fed lowered rates, the shopping around for the best price possible. unemployment rate is now below 5% and there are many hawks that are calling for rate hikes. The team expects to CATALYSTS FOR GROWTH see modest rate hikes as long as the jobs numbers continue to be favorable. 1. Store Expansion – The Company is expanding its reach and is looking for acquisition targets and Unemployment Rates -- Unemployment numbers also locations for new store builds. Acquisitions have have a specific affect for Casey’s. Working people are more been harder to come by in FY 2016, but and it will likely to pay for convenience, are likely to buy more gas, be key to monitor success of new store openings and make more stops at Casey’s. Below are the reported and acquisitions in new regions. unemployment rates for the states that Casey’s operates 2. Margin Growth -- If the company can continue to the largest amount of their stores. grow its Prepared Foods business, it will give a significant boost to the bottom line earnings. State # of stores unemployment % Optimizing the product mix can lead to more Iowa 505 3.70% growth. Illinois 422 6.40% 3. Same Store Sales – Same store sales have been a Missouri 326 4.20% little bumpy for Casey’s in FY 2016, it will be key to Source: US Department of Labor (As of 3/25/2016) monitor how individual Casey’s stores are growing, especially in the grocery and prepared Jobs numbers in the US have been solid in 2016, and the food segments. team expects to see continued positive signs in the near term. INVESTMENT POSITIVES
Since Casey’s operates largely in smaller communities, one • Impressive Growth Store that is still expanding – Casey’s of the biggest hurdles for single store operation is finding has experienced a tremendous amount of growth and is employees for the stores. If unemployment rates in a poised to continue growing. Management is looking for community are low, it could have a negative effect on new acquisition targets and new store development to store employment. It will also be key to watch minimum expand its reach. The new distribution center in Indiana wage legislation in the states in which Casey’s operates. should help Casey’s expand to new territories. Modest increases in the minimum wage are not likely to upset the cost structure much, but calls for an increase to • Prepared Foods is growing and making up more of the $15 minimum wage should be monitored, as a $15 wage revenue share, and as that continues, will have a positive floor would likely reset the equation for store operation impact on shareholder value. and acquisition in the near term. In the same line, adoption • Operating a convenience store is similar to operating a of stricter health care mandates in PPACA will have a concession stand at a sporting event. If the stands are full negative impact on operating expenses. To account for there is plenty of traffic, the goal then becomes to be the these factors, a 3% increase in per employee operating most attractive and efficient stand at the venue. With the cost is built into the DCF model. current strong economy, the stands are full, and we Consumer Spending – A key driver to the convenience believe that Casey’s has the most attractive stand to store business is per capita discretionary income. If people attract more traffic than its competitors. have more money in their pocket, they are more likely to purchase convenience store products, and more likely to INVESTMENT NEGATIVES travel and visit convenience stores. In the past 5 years, the • Current conditions seem to benefit Casey’s, an increase measure of per capita disposable income has increased at in competitive pricing or negative news affecting a 1.5% CAGR, and the team expects that consumer consumers spending could reduce outlook. spending will continue to report modest gains in the near
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• Acquisition slow down could signal that convenience prepared foods starting at 11% and slowing in growth stores are currently overvalued. The company has only throughout the forecasting period, ending at 3% as the acquired 3 new stores as of Q3 2016, significantly below model reaches continuing value. We followed the same the norm. thinking within the grocery segment, starting with 8% same-store-sales growth in FY 2016 and ending with a CV VALUATION growth rate of 1%.
Revenue Forecast -- An 8 year forecast window was used Operating Expenses -- For operating expenses, total for the DCF and DDM valuation methods. Casey’s FY 2016 employee numbers were used as a measuring stick to ends on April 30, 2016, so the revenue estimates used for forecast operating expenses for the model. Looking at the 2016 incorporate the already reported first 3 quarters of past 6 years of company financials, the operating expense the period as well as keeping revenue growth for Q4 in line per employee has stayed relatively constant, with minor with historical Q4 trends. After FY 2016, solid growth was increases in the per employee operating costs. During FY used to project top line revenue with the growth slowing 2015, The Company employed over 31,000 employees, as it goes in the forecasting period. with operating expense per employee being just above $30,000. Growing the cost per employee by 3% to account Revenue growth is derived in two ways from Casey’s, for wage inflation, along with making employee growth growth in the number stores and growth in the same store assumptions that would support the Company’s expansion sales growth. For the model, we used per store sales plans, yielded a usable number for operating expenses numbers with growth expectations in sales per store throughout the forecasted period. growth in each category along with store expansion projections. For FY 2016, we used the Q3 earnings release Estimated Margin -- Gasoline – Gasoline is the most to project a 56 store increase by April 30, 2016. For FY 2017 difficult business segment to estimate gross margins. and FY 2018, we kept the growth flat, with 55 new stores Traditionally, convenience stores make little on each per year, and used 65 for FY 2017 and FY 2018, getting gallon of gasoline sold. However, with the recent closer to management goals, and new stores slowing to 40 downturn in prices, it appears that there has been an per year throughout the rest of the forecasting period. If unspoken agreement to keep some of the benefit of the these numbers were to increase, that would mean that downturn in prices to themselves. In FY 2015, Casey’s Casey’s is finding new stores to acquire at prices that earned a gross margin of $0.193 a gallon on each $2.83 management is willing to pay and our price upside would gallon of gasoline. Comparing that to FY 2012 where increase. Casey’s earned just $0.153 on $3.45 per gallon gasoline. This margin expansion has been helpful for Net Income in Gasoline revenue is largely dependent on the sale price of this period, and if gas prices were to reduce the downward gasoline. Revenue from gasoline was down 7% in FY 2015 trend, there would likely be margin compression. The and is projected to decrease by 17% in FY 2016, despite a nominal price of gasoline is important in forecasting growing number of gallons sold. With the team’s demand, but margin is the driver behind forecasting net macroeconomic expectations in mind, projected gasoline income and share price. The margins are reported in cents prices were at $2.00 for FY’s 2017 and 2018, and then per gallon, which drives any change in free cash flows. As growing at a 1% pace through the end of the forecasting mentioned before, we modeled 16 cents per gallon margin period, ending at $2.40 per gallon in FY 2023. However, gas throughout the next 3 fiscal years of the forecast period prices have little effect on the overall DCF price, keeping (FY 2017-2020), and then contracting to normal levels of volume the same. 15 cents a gallon at the end of the forecasting period. As a part of the sensitivity analysis, we tested what would Continued growth in prepared food and fountain happen our DCF share price if the margin for gasoline were forecasted is attributed to continued store remodels and to go from start point of forecasting a margin of 16 cents a new store construction highlighting the segment, as well gallon, and found that this margin will be key to watch. If as the continued rollout of 24-hour stores and delivery the margin were to decrease from 16 cents to 13 cents services. It will be key to watch the level of same-store- throughout the entirety of the forecasting period, the DCF sales growth that the company reports every month. For fair value price would decrease from $120.28 to $78.66. our model, we forecasted same-store-sales growth in
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Each cent changes the model’s price nearly $15 holding all else constant. Capital Expenditures 500000.00 However, a decrease in margins could help stimulate acquisitions. The current fat margins on gasoline could be 400000.00 propping up otherwise inefficient operators. If margins 300000.00 were to contract to more normal levels, Casey’s could accelerate acquisitions closer to management targets of 200000.00 75+ per years. 100000.00
Grocery and Other Merchandise – Grocery and other 0.00 2013 2014 2015 2016E 2017E 2018E 2019E Merchandise margins have historically always been above 30%, with both FY 2014 and FY 2015 reported at 32.1%. Due to the relative consistency, the margins staying at Source: Company Reports and Valuation Model 32.1% throughout the forecasting period was appropriate. KEYS TO MONITOR Prepared Foods and Fountain – Prepared Foods and Fountain has operated with at least 60% gross margins Expansion Plans – The Company initially announced goals since FY 2009, going along with robust growth. The store to build or acquire 75 to 113 new stores in FY2016. As of continues to remodel stores to better promote this the end of Q3, they had only built or acquired 34 total segment, and for forecasting purposes, we forecasted stores. This is mostly due to only 3 acquisitions. It will be constant gross margin in line with historical numbers and key to monitor if this number picks up in Q4 and beyond growth that is slightly lower than what Casey’s has to see if Casey’s ambitious expansion plans can come into reported. fruition.
WACC -- Casey’s has one public debt issuance for $30 Margin Watch – With the drop in fuel prices, Casey’s has million that matures in 2020 from a bond issuance in 1995. been able to widen their margin on gasoline sales. If To calculate the cost of debt used for the model, the BBB competitive pressures force this margin to compress, it will corporate bond spread of 2.31% found on the St. Louis have a negative impact on earnings in the short term. As Federal Reserve database was used added to the risk free discussed, this could also help Casey’s acquire more stores rate used of 2.72%, giving a total pre-tax cost of debt of as operating conditions worsen. 4.93%. For equity, a Beta of .707 was used as the 5-yr Consumer Spending – Though fears of a recession have weekly average found on Bloomberg. The team is using a waned in since January, any downturn in the US economy 5% equity risk premium for analysis this year. The that leads to less consumer spending and higher proportion of equity is a little over 80%, and debt is about unemployment will hurt Casey’s topline revenue growth. 19%, giving a final weighted average cost of capital of 19 5.59% . Prepared Food Sales Growth – Without the Prepared Foods segment, Casey’s is very similar to any other Capital Expenditures -- Casey’s invests capital largely in convenience store that also sells gasoline. What separates new stores (by build or acquisition), and by remodeling old Casey’s is the success of its prepared foods. Declining stores. For our forecast, we project a decrease in capital growth rates in the segment would cause a need to spending for FY 2016 from FY 2015 levels due to reevaluate our position. management’s prudence with new store acquisitions. The chart below shows the forecasted capital expenditures throughout the model, with numbers increasing as Casey’s remodels more stores to highlight prepared foods and grocery and continues to expand store count.
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REFERENCES 21. Chapnick, Heidi. "Convenience Beyond Bricks & Mortar." Convenience Store News. N.p., 28 Mar. 1. Casey’s Annual Reports 2008-2015, sec.gov 2016. Web. 09 Apr. 2016. 2. “U.S. Energy Information Administration – EIA – 22. "The 2015 Pizza Power Report." PMQ. N.p., Dec. Independent Statistics and Analysis.” Gasoline and 2015. Web. 18 Apr. 2016. Diesel Fuel Update. N.p., 04 Apr. 2016. 3. "Small and Independent Brewers Continue to IMPORTANT DISCLAIMER Grow Double Digits - Brewers Association." Brewers Association. N.p., 22 Mar. 2016. Web. 09 Henry Fund reports are created by student enrolled in the Apr. 2016. Applied Securities Management (Henry Fund) program at 4. IBIS World Reports: Convenience Stores (44512) the University of Iowa’s Tippie School of Management. 5. “Casey’s Is Fifth Largest Pizza Chain in U.S.” Des These reports are intended to provide potential employers Moines Register. 15 Feb. 2016 and other interested parties an example of the analytical 6. "Cheddar Block/Barrel Price Averages Since 2001." skills, investment knowledge, and communication abilities Cheese Reporter. N.p., n.d. Web. 12 Apr. 2016. of Henry Fund students. Henry Fund analysts are not 7. “Fuel Saver.” hy-vee.com/perks registered investment advisors, brokers or officially 8. “Casey’s General Stores.” RBC Capital Markets. 15 licensed financial professionals. The investment opinion Mar. 2016 contained in this report does not represent an offer or 9. Casey’s CEO Robert J. Myers to Retire at End of solicitation to buy or sell any of the aforementioned Fiscal 2016; Board Names Casey’s President and securities. Unless otherwise noted, facts and figures COO Terry W. Handley as Successor." Casey’s CEO included in this report are from publicly available sources. Robert J. Myers to Retire at End of Fiscal 2016; This report is not a complete compilation of data, and its Board Names Casey’s President and COO Terry W. accuracy is not guaranteed. From time to time, the Handley as Successor. N.p., n.d. Web. 09 Apr. University of Iowa, its faculty, staff, students, or the Henry 2016. Fund may hold a financial interest in the companies 10. “Casey’s General Stores: Powerball Bust.” Seeking mentioned in this report. Alpha. N.p., 18 Feb. 2016. 11. "Couche-Tard, Pantry Complete Merger." CSPnet. N.p., n.d. Web. 19 Mar. 2016. 12. IBIS World Reports: Gas Stations with Convenience Stores (44711) 13. "Americans Saved Nearly $10B on Gas in Year's First Quarter." Convenience Store News. N.p., 31 Mar. 2016. Web. 09 Apr. 2016. 14. Fact Sheet. NACS, The Association for Convenience & Fuel Retailing. 15. “Casey’s General Stores: SWOT and Strategic Overview.” Global Data. Apr. 2016 16. "Convenience Stores in the U.S. - Statista Dossier | Statista." Statista. N.p., July 2014. Web. 9 Apr. 2016 17. “Alimentation Couch-Tard.” RBC Capital Markets. 15 Mar. 2016 18. "Casey’s at 200,000 App downloads and counting." Convenience Store News. N.p., 8 Mar. 2016. Web. 09 Apr. 2016. 19. “BofA Merrill Lynch US Corobate BBB Option- Adjusted Spread” research.stlouisfed.org 20. Mergent Online
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Casey's General Stores Revenue Decomposition
Fiscal Years Ending Apr. 30 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E
Gasoline 5229157.00 5554580.00 5144385.00 4223251.98 4101249.86 4276953.23 4645585.57 4894650.86 5360040.62 5723531.72 5855142.20 % Growth 2.69% 6.22% -7.38% -17.91% -2.89% 4.28% 8.62% 5.36% 9.51% 6.78% 2.30% Grocery and other merchandise 1418711.00 1583234.00 1794822.00 1996209.056 2182971.238 2389190.492 2544950.895 2722760.378 2814922.151 2894904.944 2976205.9 % Growth 3.94% 11.60% 13.36% 11.22% 10.00% 8.00% 8.00% 8.00% 7.00% 7.00% 7.00% Prepared Food and Fountain 564924.00 659176.00 780877.00 892619.7503 992739.0092 1107020.7 1224545.107 1352523.394 1418969.088 1488184.253 1552701.104 % Growth 13.05% 16.68% 18.46% 14.00% 13.00% 11.50% 11.50% 10.50% 10.50% 10.00% 10.00% Other 38048.00 43265.00 47122.00 52305.42 57535.962 62714.19858 68358.47645 74510.73933 81216.70587 88526.2094 96493.56825 % Growth 23.59% 13.71% 8.91% 11.00% 10.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% Total Revenue 7250840.00 7840255.00 7767216.00 7164386.21 7334496.07 7835878.62 8483440.05 9044445.37 9675148.56 10195147.12 10480542.78 % Growth 3.76% 8.13% -0.93% -7.76% 2.37% 6.84% 8.26% 6.61% 6.97% 5.37% 2.80%
Total Revenue minus gasonline 2021683.00 2285675.00 2622821.00 2941134.23 3233246.21 3558925.39 3837854.48 4149794.51 4315107.95 4471615.41 4625400.57 Growth 6.7% 13.1% 14.8% 12.1% 9.9% 10.1% 7.8% 8.1% 4.0% 3.6% 3.4% % of Total Revenue Gasoline 72.12% 70.85% 66.23% 58.95% 55.92% 54.58% 54.76% 54.12% 55.40% 56.14% 55.87% Grocery and other merchandise 19.57% 20.19% 23.11% 27.86% 29.76% 30.49% 30.00% 30.10% 29.09% 28.39% 28.40% Prepared Food and Fountain 7.79% 8.41% 10.05% 12.46% 13.54% 14.13% 14.43% 14.95% 14.67% 14.60% 14.82% Other 0.52% 0.55% 0.61% 0.73% 0.78% 0.80% 0.81% 0.82% 0.84% 0.87% 0.92% Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Average Revenue per Gallon $ 3.41 $ 3.33 $ 2.83 $ 2.15 $ 2.00 $ 2.00 $ 2.10 $ 2.15 $ 2.30 $ 2.40 $ 2.40 end of year # of stores 1749 1808 1878 1934 1999 2064 2114 2154 2194 2234 2274 growth in # of stores 50 59 70 56 65 65 50 40 40 40 40 sales per store 4145.71 4336.42 4135.90 3704.44 3669.08 3796.45 4012.98 4198.91 4409.82 4563.63 4608.86 gas revenue per store 2989.80 3072.22 2739.29 2183.69 2051.65 2072.17 2197.53 2272.35 2443.04 2562.01 2574.82 total number of gallons sold 1535140 1665600 1816596 1964303 2050625 2138477 2212184 2276582 2330452 2384805 2439643 volume growth total gallons 4.00% 8.50% 9.07% 8.13% 4.39% 4.28% 3.45% 2.91% 2.37% 2.33% 2.30% gas volume per store 878 921 967 1016 1026 1036 1046 1057 1062 1068 1073 same store sale growth 1.02% 4.96% 5.00% 5.00% 1.00% 1.00% 1.00% 1.00% 0.50% 0.50% 0.50% grocery per store 811.1555174 875.6825221 955.7092652 1032.17 1092.03 1157.55 1203.86 1264.05 1283.01 1295.84 1308.80 grocery growth per store 0.96% 7.95% 9.14% 8% 6% 6% 4% 5% 2% 1% 1% prepared foods per store 323.00 364.59 415.80 461.54 496.62 536.35 579.26 627.91 646.75 666.15 682.81 prepared food growth per store 9.82% 12.88% 14.05% 11% 8% 8% 8% 8% 3% 3% 3% employees per store 15.48 16.45 16.91 17.38 17.39 17.42 17.42 17.51 17.51 17.37 17.23
Margin Estimated $ 0.15 $ 0.17 $ 0.19 $ 0.19 $ 0.16 $ 0.16 $ 0.16 $ 0.16 $ 0.15 $ 0.15 $ 0.15 Gas 4.46% 5.05% 6.82% 8.79% 8.00% 8.00% 7.62% 7.44% 6.52% 6.25% 6.25% Grocery and Other Merchandise 32.60% 32.10% 32.10% 32.10% 32.10% 32.10% 32.10% 32.10% 32.10% 32.10% 32.10% Prepared Foods and Fountain 61.80% 61.10% 59.70% 61.00% 60.00% 60.00% 60.00% 60.00% 60.00% 60.00% 60.00% Other 98.96% 99.51% 98.93% 98.93% 98.93% 98.93% 98.93% 98.93% 98.93% 98.93% 98.93% Total Margin 14.93% 15.74% 18.54% 22.45% 22.92% 23.42% 23.26% 23.48% 22.58% 22.24% 22.41%
Gross Profit Estimated Gasoline 233088.52 280231.06 350836.15 371253.31 328099.99 342156.26 353949.38 364253.09 349567.87 357720.73 365946.39 % of Gross Profit 22% 23% 24% 23% 20% 19% 18% 17% 16% 16% 16% Grocery and Other Merchandise 462499.79 508218.11 576137.86 640783.11 700733.77 766930.15 816929.24 874006.08 903590.01 929264.49 955362.09 % of Gross Profit 43% 41% 40% 40% 42% 42% 41% 41% 41% 41% 41% Prepared Food and Fountain 349123.03 402756.54 466183.57 544498.05 595643.41 664212.42 734727.06 811514.04 851381.45 892910.55 931620.66 % of Gross Profit 32% 33% 32% 34% 35% 36% 37% 38% 39% 39% 40% Other 37653.66 43053.29 46617.42 51745.75 56920.33 62043.16 67627.04 73713.47 80347.69 87578.98 95461.09 % of Gross Profit 3% 3% 3% 3% 3% 3% 3% 3% 4% 4% 4% Total Gross Profit 1082365.00 1234259.00 1439785.00 1608280.22 1681397.49 1835341.98 1973232.72 2123486.68 2184887.02 2267474.75 2348390.23
COGS Estimated Gas 4996068.48 5274348.94 4793548.85 3851998.667 3773149.869 3934796.97 4291636.191 4530397.774 5010472.753 5365810.985 5489195.815 Grocery and Other Merchandise 956211.21 1075015.89 1218684.14 1355425.949 1482237.471 1622260.344 1728021.658 1848754.297 1911332.141 1965640.457 2020843.806 Prepared Fooda and Fountain 215800.97 256419.46 314693.43 348121.7026 397095.6037 442808.2802 489818.0429 541009.3576 567587.6353 595273.7012 621080.4416 Other 394.34 211.71 504.58 559.667994 615.6347934 671.0419248 731.435698 797.2649109 869.0187528 947.2304406 1032.48118 Total COGS 6168475.00 6605996.00 6327431.00 5556105.99 5653098.578 6000536.636 6510207.327 6920958.693 7490261.548 7927672.374 8132152.544
Operating Expenses Estimated Number of full time employees 10876.00 12098.00 13050.00 13964.00 14523.00 15104.00 15557.00 16024.00 16505.00 16670.00 16837.00 % growth 7.51% 11.24% 7.87% 7.00% 4.00% 4.00% 3.00% 3.00% 3.00% 1.00% 1.00% Number of part time employees 16203.00 17651.00 18716.00 19652.00 20242.00 20849.00 21266.00 21691.00 21908.00 22127.00 22348.00 % growth 10.90% 8.94% 6.03% 5.00% 3.00% 3.00% 2.00% 2.00% 1.00% 1.00% 1.00% Total Employees 27079.00 29749.00 31766.00 33616.00 34765.00 35953.00 36823.00 37715.00 38413.00 38797.00 39185.00 % growth 9.52% 9.86% 6.78% 5.82% 3.42% 3.42% 2.42% 2.42% 1.85% 1.00% 1.00% Operating Expense Total 760365.00 857297.00 960424.00 1046848.25 1115108.58 1187810.83 1253050.40 1321906.41 1386762.37 1442644.05 1500783.76 OE % Growth 10.45% 12.75% 12.03% 9.00% 6.52% 6.52% 5.49% 5.50% 4.91% 4.03% 4.03% OE per employee 28.08 28.82 30.23 31.14 32.08 33.04 34.03 35.05 36.10 37.18 38.30 Casey's General Stores Income Statement (in thousands, except per share data)
Fiscal Years Ending Apr. 30 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E Revenue By segment Gasoline 5229157.00 5554580.00 5144385.00 4223251.98 4101249.86 4276953.23 4645585.57 4894650.86 5360040.62 5723531.72 5855142.20 Grocery & Other Merchandise 1418711.00 1583234.00 1794822.00 1996209.06 2182971.24 2389190.49 2544950.90 2722760.38 2814922.15 2894904.94 2976205.90 Prepared Foods 564924.00 659176.00 780877.00 892619.75 992739.01 1107020.70 1224545.11 1352523.39 1418969.09 1488184.25 1552701.10 Other 38048.00 43265.00 47122.00 52305.42 57535.96 62714.20 68358.48 74510.74 81216.71 88526.21 96493.57 Total revenue 7250840.00 7840255.00 7767216.00 7164386.21 7334496.07 7835878.62 8483440.05 9044445.37 9675148.56 10195147.12 10480542.78 Cost of goods sold by segment Gasoline 4996068.48 5274348.94 4793548.85 3851998.67 3773149.87 3934796.97 4291636.19 4530397.77 5010472.75 5365810.99 5489195.82 Grocery & Other Merchandise 956211.21 1075015.89 1218684.14 1355425.95 1482237.47 1622260.34 1728021.66 1848754.30 1911332.14 1965640.46 2020843.81 Prepared Foods 215800.97 256419.46 314693.43 348121.70 397095.60 442808.28 489818.04 541009.36 567587.64 595273.70 621080.44 Other 394.34 211.71 504.58 559.67 615.63 671.04 731.44 797.26 869.02 947.23 1032.48 Total COGS 6168475.00 6605996.00 6327431.00 5556105.99 5653098.58 6000536.64 6510207.33 6920958.69 7490261.55 7927672.37 8132152.54 Gross profit (loss) 1082365.00 1234259.00 1439785.00 1608280.22 1681397.49 1835341.98 1973232.72 2123486.68 2184887.02 2267474.75 2348390.23
Operating expenses 760365.00 857297.00 960424.00 1046848.25 1115108.58 1187810.83 1253050.40 1321906.41 1386762.37 1442644.05 1500783.76 Depreciation & amortization 111823.00 131160.00 156111.00 157637.72 161146.05 180483.57 202141.60 226398.59 253566.42 283994.39 318073.72 Interest, net -35048.00 -39270.00 -41225.00 -45154.48 -48727.64 -51863.08 -55202.34 -58758.64 -62546.10 -66579.75 -70875.58 Gain (loss) on early retirement of debt - - - 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Income (loss) before income taxes 175129.00 206532.00 282025.00 358639.77 356415.23 415184.49 462838.38 516423.04 482012.13 474256.56 458657.17
Federal & state income taxes 64504.00 72018.00 101397.00 129110.32 128309.48 149466.42 166621.82 185912.29 173524.37 170732.36 165116.58 Net income (loss) 110625.00 134514.00 180628.00 229529.45 228105.75 265718.08 296216.57 330510.75 308487.76 303524.20 293540.59 0.015 0.017 0.023 0.032 0.031 0.034 0.035 0.037 0.032 0.030 0.028
Year end shares outstanding 38352.51 38507.39 38886.17 39664.91 40443.66 41222.40 42001.15 42779.89 42904.49 42904.49 42904.49 Earnings (loss) per share - continuing operations - basic - - - Earnings (loss) per share - basic 2.89 3.50 4.66 5.79 5.64 6.45 7.05 7.73 7.19 7.07 6.84 Earnings % growth -5.9% 21.1% 33.1% 24.2% -2.5% 14.3% 9.4% 9.5% -6.9% -1.6% -3.3% Dividends per share 0.66 0.72 0.80 0.88 0.97 1.06 1.17 1.29 1.42 1.56 1.71 Dividend Growth rate 10.0% 9.1% 11.1% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% payout ratio 22.8% 20.6% 17.2% 15.2% 17.2% 16.5% 16.6% 16.7% 19.7% 22.0% 25.1% Casey's General Stores Balance Sheet (in thousands)
Fiscal Years Ending Apr. 30 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E Current Assets Cash & cash equivalents 41271.00 121641.00 48541.00 -216800.99 -230362.29 -182152.85 -25953.41 132031.79 101363.53 56138.14 -47150.37 Receivables 20900.00 25841.00 22609.00 21841.70 22256.23 24075.49 25591.15 27522.65 29428.35 31028.31 31820.83 Fuel 87262.00 95004.00 69056.00 80473.54 81184.34 84841.88 89117.14 98660.14 104756.22 109770.93 112685.57 Merchandise 102252.00 109829.00 128275.00 102415.32 108037.90 116653.58 128157.63 133448.70 143866.51 151954.52 156254.04 Inventories 189514.00 204833.00 197331.00 182888.86 189222.24 201495.46 217274.77 232108.84 248622.74 261725.45 268939.61 Prepaid expenses 1396.00 1478.00 2025.00 2507.54 2567.07 2742.56 2969.20 3165.56 3386.30 3568.30 3668.19 Deferred income taxes 9916.00 11878.00 15531.00 17084.10 18792.51 20671.76 22738.94 25012.83 27514.11 30265.53 33292.08 Income taxes receivable 9820.00 12473.00 19223.00 13917.69 13500.48 15376.12 17434.46 17638.23 18886.48 20185.43 20796.69 Total current assets 272817.00 378144.00 305260.00 21438.91 15976.24 82208.54 260055.10 437479.89 429201.50 402911.15 311367.02
Fuel 431523.00 490005.00 549239.00 587685.73 628823.73 672841.39 719940.29 770336.11 824259.64 881957.81 943694.86 Buildings & leasehold improvements 904732.00 1004263.00 1136248.00 1272597.76 1425309.49 1596346.63 1724054.36 1861978.71 2010937.01 2171811.97 2345556.92 Machinery & equipment 1182470.00 1330697.00 1503079.00 1698479.27 1919281.58 2168788.18 2450730.64 2744818.32 3074196.52 3443100.10 3856272.11 Leasehold interest in property & equipment 15486.00 16278.00 16044.00 16204.44 16366.48 16530.15 16695.45 16862.41 17031.03 17201.34 17373.35 Property & equipment, at cost 2534211.00 2841243.00 3204610.00 3574967.20 3989781.28 4454506.35 4911420.74 5393995.55 5926424.19 6514071.22 7162897.25 Less accumulated depreciation & amortization 952286.00 1062278.00 1185246.00 1342883.72 1504029.76 1684513.34 1886654.94 2113053.53 2366619.95 2650614.35 2968688.07 Net property & equipment 1581925.00 1778965.00 2019364.00 2232083.48 2485751.52 2769993.02 3024765.81 3280942.02 3559804.24 3863456.87 4194209.18 CapEx 314999.00 328200.00 396510.00 370357.20 414814.08 464725.07 456914.39 482574.80 532428.65 587647.03 648826.03 Other assets, net of amortization 14485.00 15947.00 18295.00 20490.40 22949.25 25703.16 28787.54 32242.04 36111.09 40444.42 45297.75 Goodwill 114791.00 120406.00 127046.00 127046.00 127046.00 127046.00 127046.00 127046.00 127046.00 127046.00 127046.00 Total assets 1984018.00 2293462.00 2469965.00 2771415.99 3066537.09 3469675.78 3897568.84 4360284.75 4684591.48 5021505.47 5326745.98 Notes payable to bank 59100.00 - - 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Current maturities of long-term debt 15810.00 553.00 15398.00 18430.40 19888.83 21168.61 22531.57 23983.12 25529.02 27175.41 28928.81 Accounts payable 232913.00 250807.00 226577.00 214931.59 220034.88 235076.36 254503.20 271333.36 290254.46 305854.41 314416.28 Accrued wages & related taxes 16221.00 27411.00 32092.00 28657.54 29337.98 31343.51 33933.76 36177.78 38700.59 40780.59 41922.17 Accrued property taxes 20229.00 22572.00 23523.00 21697.33 22212.51 23730.94 25692.08 27391.09 29301.17 30875.99 31740.31 Accrued insurance 24039.00 28429.00 31389.00 28952.83 29640.29 31666.48 34283.42 36550.56 39099.37 41200.79 42354.14 Other accrued expenses 29436.00 33171.00 35910.00 35821.93 35205.58 37612.22 40720.51 43413.34 46440.71 48936.71 50306.61 Total current liabilities 397748.00 362943.00 364889.00 348491.63 356320.07 380598.12 411664.54 438849.24 469325.32 494823.89 509668.31
Capitalized lease obligations 9891.00 10195.00 9643.00 10000.00 10000.00 10000.00 10000.00 10000.00 10000.00 10000.00 10000.00 Mortgage notes payable 0.00 - - 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Senior notes 659000.00 844000.00 844000.00 911520.00 984441.60 1048430.30 1116578.27 1189155.86 1266450.99 1348770.31 1436440.38 Long-term debt before current maturities 668891.00 854195.00 853643.00 921520.00 994441.60 1058430.30 1126578.27 1199155.86 1276450.99 1358770.31 1446440.38 Less: current maturities 15810.00 553.00 15398.00 18430.40 19888.83 21168.61 22531.57 23983.12 25529.02 27175.41 28928.81 Long-term debt, net of current maturities 653081.00 853642.00 838245.00 903089.60 974552.77 1037261.70 1104046.71 1175172.74 1250921.97 1331594.90 1417511.57 Deferred income taxes 293708.00 317953.00 354973.00 387330.95 384928.45 448399.25 499865.45 557736.88 520573.10 512197.08 495349.75 Deferred compensation 15787.00 16558.00 17645.00 16275.53 16661.98 17800.98 19272.07 20546.52 21979.30 23160.60 23808.94 Other long-term liabilities 21399.00 22500.00 18984.00 17910.97 18336.24 19589.70 21208.60 22611.11 24187.87 25487.87 26201.36 Total liabilities 1381723.00 1573596.00 1594736.00 1673098.68 1750799.51 1903649.75 2056057.37 2214916.50 2286987.57 2387264.34 2472539.92
Common stock 23119.00 33878.00 56274.00 84737.98 113201.96 141665.94 170129.92 198593.90 203148.14 203148.14 203148.14 Retained earnings 579176.00 685988.00 818955.00 1013579.33 1202535.62 1424360.08 1671381.55 1946774.34 2194455.76 2431092.99 2651057.91 Total shareholders' equity 602295.00 719866.00 875229.00 1098317.31 1315737.58 1566026.03 1841511.47 2145368.24 2397603.91 2634241.13 2854206.05
Total Liabilities and Shareholders' Equity 1984018.00 2293462.00 2469965.00 2771415.99 3066537.09 3469675.78 3897568.84 4360284.75 4684591.48 5021505.47 5326745.98 Casey's General Stores Cash Flow Statement (in thousands)
Fiscal Years Ending Apr. 30 2013 2014 2015 Net income (loss) 110625 134514 180628 Loss from discontinued operations - - - Depreciation & amortization 111823 131160 156111 Other amortization 195 297 319 Stock-based compensation 4270 5600 7307 Loss (gain) on sale of property & equipment 4788 - - Loss on disposal of assets & impairment charges - 2846 2370 Deferred income taxes 36530 22283 44711 Excess tax benefits related to stock option exercises -1929 -1791 -3624 Loss (gain) on early retirement of debt - - - Receivables 800 -4941 3232 Inventories -16222 -13696 10365 Prepaid expenses -98 -82 -547 Accounts payable 21748 17894 -33290 Accrued expenses 4270 20930 -17544 Income taxes receivable 9969 -441 -7801 Other operating activities, net -441 -413 -555 Net cash flows from operating activities 286328 314160 341682 Purchase of property & equipment -305301 -308633 -360734 Payments for acquisition of businesses -29527 -31584 -41157 Proceeds from sales of property & equipment 3544 3328 2748 Net cash flows from investing activities -331284 -336889 -399143 Proceeds from long-term debt - 200000 - Payments of long-term debt -10757 -15865 -553 Net borrowing of short-term debt 59100 -59100 - Proceeds from exercise of stock options 4721 3368 11465 Payments of cash dividends -24685 -27095 -30175 Repurchase of common stock - - - Payments of prepayment penalties - - - Excess tax benefits related to stock option exercises 1929 1791 3624 Net cash flows from financing activities 30308 103099 -15639 Cash flows from discontinued operations - operating cash flows - - - Cash flows from discontinued operations - investing cash flows - - - Net cash flows from discontinued operations - - - Net increase (decrease) in cash & cash equivalents -14648 80370 -73100 Cash & cash equivalents at beginning of year 55919 41271 121641 Cash & cash equivalents at end of year 41271 121641 48541 Cash paid (received) during the year for interest, net of amount capitalized 35226 36923 41382 Cash paid (recieved) during the year for income taxes 17973 50031 64367 Casey's General Stores Cash Flow Statement (numbers in thousands)
Fiscal Years Ending Dec. 31 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E Cash Flows from Operations Net earnings 229529.45 228105.75 265718.08 296216.57 330510.75 308487.76 303524.20 293540.59 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation and amortization 157637.72 161146.05 180483.57 202141.60 226398.59 253566.42 283994.39 318073.72 Changes (increases or decreases) in working capital accounts Receivables 767.30 -414.53 -1819.26 -1515.66 -1931.50 -1905.70 -1599.96 -792.52 Inventories 14442.14 -6333.38 -12273.22 -15779.31 -14834.07 -16513.90 -13102.71 -7214.16 Prepaid expenses -482.54 -59.54 -175.48 -226.65 -196.35 -220.75 -182.00 -99.89 Deferred income taxes 30804.85 -4110.91 61591.56 49399.02 55597.54 -39665.07 -11127.43 -19873.89 Income taxes receivable 5305.31 417.22 -1875.64 -2058.33 -203.78 -1248.24 -1298.95 -611.26 Accounts payable -11645.41 5103.30 15041.48 19426.84 16830.16 18921.10 15599.96 8561.87 Accrued wages & related taxes -3434.46 680.44 2005.53 2590.25 2244.02 2522.81 2079.99 1141.58 Accrued property taxes -1825.67 515.18 1518.44 1961.14 1699.00 1910.08 1574.81 864.32 Accrued insurance -2436.17 687.45 2026.20 2616.94 2267.14 2548.81 2101.43 1153.35 Other accrued expenses -88.07 -616.35 2406.64 3108.29 2692.83 3027.38 2495.99 1369.90 Total Cash Flows from Operations 418574.45 385120.67 514647.87 557880.70 621074.33 531430.70 584059.72 596113.61
Cash Flows from Investing Activities Capital Expenses -370357.20 -414814.08 -464725.07 -456914.39 -482574.80 -532428.65 -587647.03 -648826.03 Other assets, net of amortization -2195.40 -2458.85 -2753.91 -3084.38 -3454.50 -3869.04 -4333.33 -4853.33 Total Cash Flows from Investing Activities -372552.60 -417272.93 -467478.98 -459998.77 -486029.31 -536297.69 -591980.36 -653679.36
Cash Flows from Financing Activities Long Term Debt, Net Current 64844.60 71463.17 62708.93 66785.01 71126.04 75749.23 80672.93 85916.67 Current maturities of long-term debt 3032.40 1458.43 1279.77 1362.96 1451.55 1545.90 1646.39 1753.40 Deferred compensation -1369.47 386.44 1139.00 1471.08 1274.45 1432.79 1181.30 648.34 Other long-term liabilities -1073.03 425.27 1253.46 1618.90 1402.51 1576.76 1300.00 713.49 Issuance of Common Stock 28463.98 28463.98 28463.98 28463.98 28463.98 4554.24 0.00 0.00 Dividend Payment -34905.12 -39149.46 -43893.61 -49195.10 -55117.95 -60806.34 -66886.97 -73575.67 Total Cash Flows from Financing Activities 58993.36 63047.84 50951.53 50506.84 48600.58 24052.57 17913.63 15456.23
Net increase / decrease in cash and cash equivalents 105015.21 30895.58 98120.43 148388.76 183645.61 19185.59 9993.00 -42109.52 Cash, Beginning of Year 48541.00 -216800.99 -230362.29 -182152.85 -25953.41 132031.79 101363.53 56138.14 Cash, End of Year -216800.99 -230362.29 -182152.85 -25953.41 132031.79 101363.53 56138.14 -47150.37 Casey's General Stores Common Size Income Statement
Fiscal Years Ending Apr. 30 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E Total revenue 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Cost of goods sold 85.07% 84.26% 81.46% 77.55% 77.08% 76.58% 76.74% 76.52% 77.42% 77.76% 77.59% Gross profit (loss) 14.93% 15.74% 18.54% 22.45% 22.92% 23.42% 23.26% 23.48% 22.58% 22.24% 22.41%
Operating expenses 10.49% 10.93% 12.37% 14.61% 15.20% 15.16% 14.77% 14.62% 14.33% 14.15% 14.32% Depreciation & amortization 1.54% 1.67% 2.01% 2.20% 2.20% 2.30% 2.38% 2.50% 2.62% 2.79% 3.03% Interest, net -0.48% -0.50% -0.53% -0.63% -0.66% -0.66% -0.65% -0.65% -0.65% -0.65% -0.68% Gain (loss) on early retirement of debt 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Income (loss) before income taxes 2.42% 2.63% 3.63% 5.01% 4.86% 5.30% 5.46% 5.71% 4.98% 4.65% 4.38%
Federal & state income taxes 0.89% 0.92% 1.31% 1.80% 1.75% 1.91% 1.96% 2.06% 1.79% 1.67% 1.58% Net income (loss) 1.53% 1.72% 2.33% 3.20% 3.11% 3.39% 3.49% 3.65% 3.19% 2.98% 2.80% Casey's General Stores Common Size Balance Sheet
Fiscal Years Ending Apr. 30 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E Current Assets Cash & cash equivalents 0.57% 1.55% 0.62% -3.03% -3.14% -2.32% -0.31% 1.46% 1.05% 0.55% -0.45% Receivables 0.29% 0.33% 0.29% 0.30% 0.30% 0.31% 0.30% 0.30% 0.30% 0.30% 0.30% Fuel 1.20% 1.21% 0.89% 1.12% 1.11% 1.08% 1.05% 1.09% 1.08% 1.08% 1.08% Merchandise 1.41% 1.40% 1.65% 1.43% 1.47% 1.49% 1.51% 1.48% 1.49% 1.49% 1.49% Inventories 2.61% 2.61% 2.54% 2.55% 2.58% 2.57% 2.56% 2.57% 2.57% 2.57% 2.57% Prepaid expenses 0.02% 0.02% 0.03% 0.04% 0.04% 0.04% 0.04% 0.04% 0.04% 0.04% 0.04% Deferred income taxes 0.14% 0.15% 0.20% 0.24% 0.26% 0.26% 0.27% 0.28% 0.28% 0.30% 0.32% Income taxes receivable 0.14% 0.16% 0.25% 0.19% 0.18% 0.20% 0.21% 0.20% 0.20% 0.20% 0.20% Total current assets 3.76% 4.82% 3.93% 0.30% 0.22% 1.05% 3.07% 4.84% 4.44% 3.95% 2.97%
Fuel 5.95% 6.25% 7.07% 8.20% 8.57% 8.59% 8.49% 8.52% 8.52% 8.65% 9.00% Buildings & leasehold improvements 12.48% 12.81% 14.63% 17.76% 19.43% 20.37% 20.32% 20.59% 20.78% 21.30% 22.38% Machinery & equipment 16.31% 16.97% 19.35% 23.71% 26.17% 27.68% 28.89% 30.35% 31.77% 33.77% 36.79% Leasehold interest in property & equipment 0.21% 0.21% 0.21% 0.23% 0.22% 0.21% 0.20% 0.19% 0.18% 0.17% 0.17% Property & equipment, at cost 34.95% 36.24% 41.26% 49.90% 54.40% 56.85% 57.89% 59.64% 61.25% 63.89% 68.34% Less accumulated depreciation & amortization 13.13% 13.55% 15.26% 18.74% 20.51% 21.50% 22.24% 23.36% 24.46% 26.00% 28.33% Net property & equipment 21.82% 22.69% 26.00% 31.16% 33.89% 35.35% 35.65% 36.28% 36.79% 37.90% 40.02% Other assets, net of amortization 0.20% 0.20% 0.24% 0.29% 0.31% 0.33% 0.34% 0.36% 0.37% 0.40% 0.43% Goodwill 1.58% 1.54% 1.64% 1.77% 1.73% 1.62% 1.50% 1.40% 1.31% 1.25% 1.21% Total assets 27.36% 29.25% 31.80% 38.68% 41.81% 44.28% 45.94% 48.21% 48.42% 49.25% 50.83%
Notes payable to bank 0.82% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Current maturities of long-term debt 0.22% 0.01% 0.20% 0.26% 0.27% 0.27% 0.27% 0.27% 0.26% 0.27% 0.28% Accounts payable 3.21% 3.20% 2.92% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% Accrued wages & related taxes 0.22% 0.35% 0.41% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% Accrued property taxes 0.28% 0.29% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% Accrued insurance 0.33% 0.36% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% Other accrued expenses 0.41% 0.42% 0.46% 0.50% 0.48% 0.48% 0.48% 0.48% 0.48% 0.48% 0.48% Total current liabilities 5.49% 4.63% 4.70% 4.86% 4.86% 4.86% 4.85% 4.85% 4.85% 4.85% 4.86%
Capitalized lease obligations 0.14% 0.13% 0.12% 0.14% 0.14% 0.13% 0.12% 0.11% 0.10% 0.10% 0.10% Mortgage notes payable 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Senior notes 9.09% 10.76% 10.87% 12.72% 13.42% 13.38% 13.16% 13.15% 13.09% 13.23% 13.71% Long-term debt before current maturities 9.23% 10.89% 10.99% 12.86% 13.56% 13.51% 13.28% 13.26% 13.19% 13.33% 13.80% Less: current maturities 0.22% 0.01% 0.20% 0.26% 0.27% 0.27% 0.27% 0.27% 0.26% 0.27% 0.28% Long-term debt, net of current maturities 9.01% 10.89% 10.79% 12.61% 13.29% 13.24% 13.01% 12.99% 12.93% 13.06% 13.53% Deferred income taxes 4.05% 4.06% 4.57% 5.41% 5.25% 5.72% 5.89% 6.17% 5.38% 5.02% 4.73% Deferred compensation 0.22% 0.21% 0.23% 0.23% 0.23% 0.23% 0.23% 0.23% 0.23% 0.23% 0.23% Other long-term liabilities 0.30% 0.29% 0.24% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% Total liabilities 19.06% 20.07% 20.53% 23.35% 23.87% 24.29% 24.24% 24.49% 23.64% 23.42% 23.59%
Common stock 0.32% 0.43% 0.72% 1.18% 1.54% 1.81% 2.01% 2.20% 2.10% 1.99% 1.94% Retained earnings 7.99% 8.75% 10.54% 14.15% 16.40% 18.18% 19.70% 21.52% 22.68% 23.85% 25.30% Total shareholders' equity 8.31% 9.18% 11.27% 15.33% 17.94% 19.99% 21.71% 23.72% 24.78% 25.84% 27.23%
Total Liabilities and Shareholders' Equity 27.36% 29.25% 31.80% 38.68% 41.81% 44.28% 45.94% 48.21% 48.42% 49.25% 50.83% Casey's General Stores Value Driver Estimation
Fiscal Years Ending Apr. 30 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E NOPLAT Computation Marginal Tax Rate Federal Statutory Tax Rate 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% Federal Tax Credits -1.80% -2.10% -1.70% -1.70% -1.70% -1.70% -1.70% -1.70% -1.70% -1.70% -1.70% State income taxes, net of federal benefit 2.40% 3.20% 3.10% 3.10% 3.10% 3.10% 3.10% 3.10% 3.10% 3.10% 3.10% Out of Period adjustments 0.00% -1.40% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Other 1.00% -0.20% -0.40% -0.40% -0.40% -0.40% -0.40% -0.40% -0.40% -0.40% -0.40% Marginal Tax Rate 36.60% 34.50% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00%
EBITA Net Sales 7250840.00 7840255.00 7767216.00 7164386.21 7334496.07 7835878.62 8483440.05 9044445.37 9675148.56 10195147.12 10480542.78 -Cost of Sales 6168475.00 6605996.00 6327431.00 5556105.99 5653098.58 6000536.64 6510207.33 6920958.69 7490261.55 7927672.37 8132152.54 -Depreciation & Amortization 111823.00 131160.00 156111.00 157637.72 161146.05 180483.57 202141.60 226398.59 253566.42 283994.39 318073.72 -Operating Expenses 760365.00 857297.00 960424.00 1046848.25 1115108.58 1187810.83 1253050.40 1321906.41 1386762.37 1442644.05 1500783.76 +Implied Interest on Operating Leases 98.46 138.73 149.76 157.25 165.11 173.36 182.03 191.13 200.69 210.72 221.26 EBITA 210275.46 245940.73 323399.76 403951.50 405307.97 467220.94 518222.75 575372.81 544758.92 541047.02 529754.01
Less: Adjusted Taxes Income tax provision (benefit) 64504.00 72018.00 101397.00 129110.32 128309.48 149466.42 166621.82 185912.29 173524.37 170732.36 165116.58 +Tax Benefit on Interest Expense 12827.57 13548.15 14841.00 16255.61 17541.95 18670.71 19872.84 21153.11 22516.60 23968.71 25515.21 +Tax Shield on Implied Interest 36.04 47.86 53.91 56.61 59.44 62.41 65.53 68.81 72.25 75.86 79.65 Total Adjusted Taxes 77367.60 85614.01 116291.91 145422.54 145910.87 168199.54 186560.19 207134.21 196113.21 194776.93 190711.44
Plus: Change in Deferred Tax Liabilities: Net Change in DT Liabilities 36530.00 22283.00 33367.00 30804.85 -4110.91 61591.56 49399.02 55597.54 -39665.07 -11127.43 -19873.89
NOPLAT NOPLAT: EBITA - Adj. Taxes + Change in DT 169437.85 182609.72 240474.84 289333.81 255286.19 360612.96 381061.58 423836.14 308980.64 335142.67 319168.68
Invested Capital Computation Current Operating Assets Normal Cash (2% of sales) 41271.00 121641.00 48541.00 143287.72 146689.92 156717.57 169668.80 180888.91 193502.97 203902.94 209610.86 Short-Term Receivables 20900.00 25841.00 22609.00 21841.70 22256.23 24075.49 25591.15 27522.65 29428.35 31028.31 31820.83 Inventories 189514.00 204833.00 197331.00 182888.86 189222.24 201495.46 217274.77 232108.84 248622.74 261725.45 268939.61 Income Taxes Receivable 9820.00 12473.00 19223.00 13917.69 13500.48 15376.12 17434.46 17638.23 18886.48 20185.43 20796.69 Prepaid Expenses 1396.00 1478.00 2025.00 2507.54 2567.07 2742.56 2969.20 3165.56 3386.30 3568.30 3668.19 Operating Current Assets 262901.00 366266.00 289729.00 364443.52 374235.94 400407.20 432938.38 461324.18 493826.83 520410.43 534836.17 Less Current Operating Liablilities Accounts Payable 232913.00 250807.00 226577.00 214931.59 220034.88 235076.36 254503.20 271333.36 290254.46 305854.41 314416.28 Accrued Expenses 60489.00 78412.00 87004.00 79307.71 81190.78 86740.94 93909.26 100119.43 107101.13 112857.37 116016.62 Operating Current Liabilities 293402.00 329219.00 313581.00 294239.30 301225.66 321817.30 348412.46 371452.79 397355.59 418711.78 430432.90
Net Operating Working Capital -30501.00 37047.00 -23852.00 70204.22 73010.28 78589.90 84525.92 89871.39 96471.24 101698.64 104403.27
Net PPE 1581925.00 1778965.00 2019364.00 2232083.48 2485751.52 2769993.02 3024765.81 3280942.02 3559804.24 3863456.87 4194209.18
PV of Operating Leases 1997.11 2814.01 3037.67 3189.56 3349.03 3516.49 3692.31 3876.93 4070.77 4274.31 4488.03 Other Assets 14485.00 15947.00 18295.00 20490.40 22949.25 25703.16 28787.54 32242.04 36111.09 40444.42 45297.75 Net Other Operating Assets 16482.11 18761.01 21332.67 23679.96 26298.28 29219.64 32479.85 36118.97 40181.86 44718.73 49785.77
Deferred Compensation 15787.00 16558.00 17645.00 16275.53 16661.98 17800.98 19272.07 20546.52 21979.30 23160.60 23808.94 Capitalized Leases 9891.00 10195.00 9643.00 10000.00 10000.00 10000.00 10000.00 10000.00 10000.00 10000.00 10000.00 Other Liabilities 21399.00 22500.00 18984.00 17910.97 18336.24 19589.70 21208.60 22611.11 24187.87 25487.87 26201.36 Net Other Operating Liabilities 47077.00 49253.00 46272.00 44186.50 44998.22 47390.68 50480.67 53157.63 56167.17 58648.47 60010.30
Invested Capital 1520829.11 1785520.01 1970572.67 2281781.16 2540061.87 2830411.88 3091290.90 3353774.74 3640290.17 3951225.78 4288387.93
Drivers
NOPLAT 169437.85 182609.72 240474.84 289333.81 255286.19 360612.96 381061.58 423836.14 308980.64 335142.67 319168.68 / Beginning Invested Capital 1347351 1520829 1785520 1970573 2281781 2540062 2830412 3091291 3353775 3640290 3951226 Return on Invested Capital (ROIC) 12.6% 12.0% 13.5% 14.7% 11.2% 14.2% 13.5% 13.7% 9.2% 9.2% 8.1%
NOPLAT 169437.85 182609.72 240474.84 289333.81 255286.19 360612.96 381061.58 423836.14 308980.64 335142.67 319168.68 -Change in Invested Capital 173477.80 264690.91 185052.66 311208.49 258280.70 290350.02 260879.02 262483.84 286515.42 310935.61 337162.15 Free Cash Flow (FCF) -4039.94 -82081.19 55422.18 -21874.68 -2994.51 70262.94 120182.56 161352.30 22465.22 24207.05 -17993.47
Beginning IC 1347351.31 1520829.11 1785520.01 1970572.67 2281781.16 2540061.87 2830411.88 3091290.90 3353774.74 3640290.17 3951225.78 x(ROIC-WACC) 7.0% 6.4% 7.9% 9.1% 5.6% 8.6% 7.9% 8.1% 3.6% 3.6% 2.5% Economic Profit (EP) 94132.33 97608.26 140679.41 179195.50 127753.96 218645.03 222865.55 251059.17 121533.05 131681.30 98328.64 Casey's General Stores Key Management Ratios
Fiscal Years Ending Apr. 30 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E
Cash Ratio (Cash+ST)/Current L 10.38% 33.52% 13.30% -62.21% -64.65% -47.86% -6.30% 30.09% 21.60% 11.35% -9.25% Current Ratio 68.59% 104.19% 83.66% 6.15% 4.48% 21.60% 63.17% 99.69% 91.45% 81.43% 61.09% Quick Ratio ((Cash+a/r)/CL) 15.63% 40.64% 19.50% -55.94% -58.40% -41.53% -0.09% 36.36% 27.87% 17.62% -3.01%
Activity or Asset-Management Ratios Asset Turnover Ratio (sales/avg assets) 3.86 3.67 3.26 2.73 2.51 2.40 2.30 2.19 2.14 2.10 2.03 Inventory Turnover Ratio (sales/total inv) 38.26 38.28 39.36 39.17 38.76 38.89 39.04 38.97 38.91 38.95 38.97 Receivables Turnover (sales/avg rec) 340.42 335.48 320.63 322.35 332.65 338.25 341.62 340.57 339.77 337.27 333.51 Fixed Asset Turnover (sales/avg PPE) 4.90 4.67 4.09 3.37 3.11 2.98 2.93 2.87 2.83 2.75 2.60
Financial Leverage Ratios Debt Ratio (total debt/total assets) 32.92% 37.22% 33.94% 32.59% 31.78% 29.90% 28.33% 26.95% 26.70% 26.52% 26.61% Debt/Equity Ratio (total debt/total equity) 118.24% 118.58% 95.77% 82.22% 74.07% 66.24% 59.95% 54.78% 52.17% 50.55% 49.66% Interest Coverage Ratio (operating income/interest expense) -5.00 -5.26 -6.84 -7.94 -7.31 -8.01 -8.38 -8.79 -7.71 -7.12 -6.47
Profitability Ratios ROA (NI/Avg Assets) 5.89% 6.29% 7.58% 8.76% 7.81% 8.13% 8.04% 8.00% 6.82% 6.25% 5.67% ROE (NI/Avg Equity) 19.96% 20.35% 22.65% 23.26% 18.90% 18.44% 17.39% 16.58% 13.58% 12.06% 10.70% EBIT Margin (EBIT/Sales) 2.63% 2.42% 2.63% 3.63% 5.01% 4.86% 5.30% 5.46% 5.71% 4.98% 4.65% Gross Margin (Rev-COGS)/Rev 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Payout Policy Ratios Payout Ratio (Div+repurchases)/NI 22.84% 20.57% 17.17% 15.21% 17.16% 16.52% 16.61% 16.68% 19.71% 22.04% 25.06% Casey's General Stores Weighted Average Cost of Capital (WACC) Estimation Cost of Equity 6.16% Weight of Equity 81.1% Cost of Debt 3.16% Weight of Debt 18.9% WACC 5.59%
Cost of Debt Equity Weight Pre-tax Cost of Debt 4.93% Market Cap $ 4,460,000.00 PV of Debt $ 838,245.00 Cost of Equity PV of Op Lease $ 3,037.67 Risk Free Rate 2.62% Beta: 5 year average (bloomberg) 0.707 Market Premium 5.00% Cost of Equity 6.16% Casey's General Stores Discounted Cash Flow (DCF) and Economic Profit (EP) Valuation Models
Key Inputs: CV Growth 3.00% CV ROIC 8.08% WACC 5.59% Cost of Equity 6.16%
Fiscal Years Ending Apr. 30 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E
DCF Model NOPLAT 289333.8 255286.2 360613.0 381061.6 423836.1 308980.6 335142.7 319168.7 Begin IC 1970572.7 2281781.2 2540061.9 2830411.9 3091290.9 3353774.7 3640290.2 3951225.8 Ending IC 2281781.2 2540061.9 2830411.9 3091290.9 3353774.7 3640290.2 3951225.8 4288387.9 Change in Invested Capital 311208.5 258280.7 290350.0 260879.0 262483.8 286515.4 310935.6 337162.1 Free Cash Flow -21874.7 -2994.5 70262.9 120182.6 161352.3 22465.2 24207.1 -17993.5 ROIC 14.7% 11.2% 14.2% 13.5% 13.7% 9.2% 9.2% 8.1%
Free Cash Flow -21874.7 -2994.5 70262.9 120182.6 161352.3 22465.2 24207.1 -17993.5 Continuing Value 7748941.2 PV of FCF -20716.8 -2685.9 59685.4 96686.1 122935.9 16210.4 16542.7 5295503.2
Value of Operating Assets 5584161.1 + Excess Cash 0.0 -Total Debt -838245.0 -PV of Operating Leases -3037.7 -PV of ESOP -302146.2 Value of Equity 4440732.3 Shares Outstanding 38886.2 Intrinsic Value (4/30/2015) 114.20 Price Today $ 120.58
EP Model NOPLAT 289333.8 255286.2 360613.0 381061.6 423836.1 308980.6 335142.7 319168.7 Beginning IC 1970572.7 2281781.2 2540061.9 2830411.9 3091290.9 3353774.7 3640290.2 3951225.8 ROIC 14.7% 11.2% 14.2% 13.5% 13.7% 9.2% 9.2% 8.1% Economic Profit 179195.5 127754.0 218645.0 222865.5 251059.2 121533.1 131681.3 98328.6 Continuing Value 3797715.4 PV of EP discounted by WACC 169710.1 114587.1 185729.8 179294.0 191284.4 87695.8 89988.9 2595298.3
PV of EP 3613588.5 +Beginning IC 1970572.7 Value of Operating Assets 5584161.1 +Excess Cash 0.0 -Total Debt -838245.0 -PV Operating Leases -3037.7 -PV of ESOP -302146.2 Value of Equity 4440732.3 Shares Outstanding 38886.2 Intrincis Value of Stock 114.20 Price Today $ 120.58 Casey's General Stores Dividend Discount Model (DDM) or Fundamental P/E Valuation Model
Fiscal Years Ending Apr. 30 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E
EPS $ 5.79 $ 5.64 $ 6.45 $ 7.05 $ 7.73 $ 7.19 $ 7.07 $ 6.84
Key Assumptions CV growth 3.00% CV ROE 10.28% Cost of Equity 6.16%
Future Cash Flows P/E Multiple (CV Year) 19.38 EPS (CV Year) 6.84 Future Stock Price 132.59 Dividends Per Share 0.88 0.97 1.06 1.17 1.29 1.42 1.56 1.71 Future Cash Flows 153.60
Discounted Cash Flows $ 0.829 $ 0.859 $ 0.890 $ 0.922 $ 0.956 $ 0.990 $ 102.137
Intrinsic Value $ 106.76
Price Today $ 107.81 Casey's General Stores Relative Valuation Models EPS EPS Ticker Company Price 2016E 2017E P/E 16 P/E 17 PSMT PriceSmart Inc $83.49 $3.17 $3.57 26.3 23.4 ATD.B Alimentation Couche-Tard $57.87 $3.06 $3.28 18.9 17.6 KR Kroger $38.32 $2.24 $2.46 17.1 15.6 SPTN Spartan Nash $28.74 $2.12 $2.23 13.6 12.9 CST CST Brands $38.37 $1.85 $2.17 20.7 17.7 MUSA Murphy USA, Inc $60.53 $4.21 $4.68 14.4 12.9 UNFI United Natural Foods $39.73 $2.38 $2.57 16.7 15.5 Average 18.2 16.5
CASY Casey's General Stores $111.14 $5.79 $5.64 19.2 19.7
Implied Value: Relative P/E (EPS15) $105.59 Relative P/E (EPS16) $ 93.12 Present Value of Operating Lease Obligations (2015) Present Value of Operating Lease Obligations (2014)
Operating Operating Fiscal Years Ending Apr. 30 Leases Fiscal Years Ending Apr. 30 Leases 2016 910 2015 872 2017 827 2016 630 2018 814 2017 547 2019 553 2018 539 2020 246 2019 378 Thereafter 87 Thereafter 261 Total Minimum Payments 3437 Total Minimum Payments 3227 Less: Interest 399 Less: Interest 413 PV of Minimum Payments 3038 PV of Minimum Payments 2814
Capitalization of Operating Leases Capitalization of Operating Leases
Pre-Tax Cost of Debt 4.93% Pre-Tax Cost of Debt 4.93% Number Years Implied by Year 6 Payment 1.0 Number Years Implied by Year 6 Payment 1.0
Lease PV Lease Lease PV Lease Year Commitment Payment Year Commitment Payment 1 910 867.2 1 872 831.0 2 827 751.1 2 630 572.2 3 814 704.6 3 547 473.5 4 553 456.2 4 539 444.6 5 246 193.4 5 378 297.2 6 & beyond 87 65.2 6 & beyond 261 195.5 PV of Minimum Payments 3037.7 PV of Minimum Payments 2814.0 Effects of ESOP Exercise and Share Repurchases on Common Stock Balance Sheet Account and Number of Shares Outstanding
Number of Options Outstanding (shares): 401,800 Average Time to Maturity (years): 5.16 Expected Annual Number of Options Exercised: 77,875
Current Average Strike Price: $ 36.55 Cost of Equity: 6.16% Current Stock Price: $111.14
2016E 2017E 2018E 2019E 2020E 2021E Increase in Shares Outstanding: 77,875 77,875 77,875 77,875 77,875 12,460 Average Strike Price: $ 36.55 $ 36.55 $ 36.55 $ 36.55 $ 36.55 $ 36.55 Increase in Common Stock Account: 2,846,398 2,846,398 2,846,398 2,846,398 2,846,398 455,424
Change in Treasury Stock 0 0 0 0 0 0 Expected Price of Repurchased Shares: $ 111.14 $ 117.98 $ 125.24 $ 132.95 $ 141.13 $ 149.82 Number of Shares Repurchased: ------
Shares Outstanding (beginning of the year) 3,888,617 3,966,491 4,044,366 4,122,240 4,200,115 4,277,989 Plus: Shares Issued Through ESOP 77,875 77,875 77,875 77,875 77,875 12,460 Less: Shares Repurchased in Treasury ------Shares Outstanding (end of the year) 3,966,491 4,044,366 4,122,240 4,200,115 4,277,989 4,290,449 VALUATION OF OPTIONS GRANTED IN ESOP
Ticker Symbol CASY Current Stock Price $111.14 Risk Free Rate 2.62% Current Dividend Yield 0.80% Annualized St. Dev. of Stock Returns 21.95%
Average Average B-S Value Range of Number Exercise Remaining Option of Options Outstanding Options of Shares Price Life (yrs) Price Granted Range 1 7,000 22.62 1.20 $ 88.16 $ 617,108 Range 2 159,600 25.61 3.80 $ 84.63 $ 13,506,939 Range 3 235,200 44.39 6.20 $ 68.41 $ 16,090,573 Range 4 $ - Range 5 $ - Range 6 $ - Range 7 $ - Range 8 $ - Range 9 $ - Range 10 $ - Range 11 $ - Range 12 $ - Range 13 $ - Range 14 $ - Total 401,800 $ 36.55 5.16 $ 79.27 $ 30,214,621 Sensitivity Analysis margin fuel prepared food margin $ 120.58 0.13 0.14 0.15 0.16 0.17 0.18 0.19 $ 120.58 57% 58% 59% 60% 61% 62% 63% 2.0% 68.50 79.32 90.13 100.95 111.76 122.58 133.39 2% 80.26 87.16 94.05 100.95 107.84 114.74 121.63 2.5% 72.66 84.83 97.00 109.17 121.35 133.52 145.69 2% 82.83 90.14 97.45 104.75 112.06 119.37 126.67 CV growth 3.0% 78.43 92.48 106.53 120.58 134.63 148.68 162.74 3% 85.82 93.61 101.39 109.17 116.96 124.74 132.53 3.5% 86.95 103.78 120.62 137.45 154.28 171.11 187.94 3% 89.33 97.68 106.03 114.38 122.72 131.07 139.42 4.0% 100.85 122.21 143.57 164.93 186.29 207.65 229.01 CV growth 3% 93.53 102.54 111.56 120.58 129.60 138.62 147.64 4.5% 127.49 157.54 187.59 217.64 247.68 277.73 307.78 3% 98.61 108.45 118.28 128.11 137.95 147.78 157.61 4% 104.92 115.76 126.60 137.45 148.29 159.13 169.97 4% 112.94 125.07 137.19 149.32 161.45 173.57 185.70 4% 123.48 137.30 151.11 164.93 178.74 192.55 206.37
grocery margin prepared food margin $ 120.58 29.1% 30.1% 31.1% 32.1% 33.1% 34.1% 35.1% $ 120.58 0.57 0.58 0.59 0.6 0.61 0.62 0.63 2.00% 60.44 73.94 87.44 100.95 114.45 127.95 141.46 0.12 37.32 46.34 55.36 64.38 73.39 82.41 91.43 2.25% 61.93 76.20 90.48 104.75 119.03 133.30 147.58 0.13 51.37 60.39 69.41 78.43 87.44 96.46 105.48 2.50% 63.66 78.83 94.00 109.17 124.35 139.52 154.69 0.14 65.42 74.44 83.46 92.48 101.50 110.51 119.53 2.75% 65.70 81.93 98.15 114.38 130.60 146.82 163.05 0.15 79.47 88.49 97.51 106.53 115.55 124.57 133.58 CV growth 3.00% 68.13 85.62 103.10 120.58 138.06 155.55 173.03 Gas margin 0.16 93.53 102.54 111.56 120.58 129.60 138.62 147.64 3.25% 71.09 90.10 109.10 128.11 147.12 166.13 185.14 0.17 107.58 116.60 125.61 134.63 143.65 152.67 161.69 3.50% 74.75 95.65 116.55 137.45 158.35 179.25 200.15 0.18 121.63 130.65 139.67 148.68 157.70 166.72 175.74 3.75% 79.40 102.71 126.01 149.32 172.62 195.93 219.24 0.19 135.68 144.70 153.72 162.74 171.75 180.77 189.79 4.00% 85.52 111.99 138.46 164.93 191.39 217.86 244.33 0.2 149.73 158.75 167.77 176.79 185.81 194.82 203.84
prepared food margin risk free rate $ 120.58 57% 58% 59% 60% 61% 62% 63% $ 120.58 2.32% 2.42% 2.52% 2.62% 2.72% 2.82% 2.92% 0.507 157.43 170.48 183.54 196.59 209.65 222.71 235.76 5.19% 151.05 151.03 151.02 151.00 150.99 150.97 150.96 0.557 136.53 148.27 160.01 171.74 183.48 195.22 206.95 5.29% 142.44 142.43 142.41 142.40 142.38 142.37 142.35 0.607 119.53 130.19 140.85 151.51 162.18 172.84 183.50 5.39% 134.56 134.55 134.53 134.52 134.50 134.49 134.47 0.657 105.42 115.19 124.96 134.73 144.50 154.27 164.04 5.49% 127.31 127.30 127.28 127.27 127.25 127.24 127.22 Beta 0.707 93.53 102.54 111.56 120.58 129.60 138.62 147.64 Wacc 5.59% 120.63 120.61 120.60 120.58 120.57 120.55 120.54 0.757 83.37 91.74 100.12 108.49 116.87 125.24 133.62 5.69% 114.44 114.42 114.41 114.39 114.38 114.36 114.35 0.807 74.59 82.41 90.22 98.04 105.86 113.68 121.50 5.79% 108.70 108.68 108.66 108.65 108.63 108.62 108.60 0.857 66.92 74.26 81.59 88.93 96.26 103.59 110.93 5.89% 103.35 103.34 103.32 103.30 103.29 103.27 103.26 0.907 60.18 67.08 73.99 80.90 87.80 94.71 101.62 5.99% 98.37 98.35 98.33 98.32 98.30 98.29 98.27
CV Gasoline Same Store Sales grocery margin $ 120.58 0.25% 0.50% 0.75% 1.00% 1.25% 1.50% 1.75% $ 120.58 29.1% 30.1% 31.1% 32.1% 33.1% 34.1% 35.1% 36 103.68 105.63 107.60 109.58 111.58 113.59 115.61 56% 32.06 49.54 67.03 84.51 102 119.5 137 37 106.42 108.38 110.35 112.33 114.33 116.35 118.37 57% 41.08 58.56 76.04 93.53 111 128.5 146 38 109.16 111.12 113.09 115.08 117.09 119.10 121.14 58% 50.1 67.58 85.06 102.54 120 137.5 155 39 111.89 113.86 115.84 117.83 119.84 121.86 123.90 59% 59.12 76.6 94.08 111.56 129 146.5 164 CV Store Growth 40 114.63 116.60 118.58 120.58 122.59 124.62 126.66 Prepared Foods margin 60% 68.13 85.62 103.1 120.58 138.1 155.5 173 41 117.37 119.34 121.33 123.33 125.35 127.38 129.43 61% 77.15 94.64 112.1 129.60 147.1 164.6 182 42 120.10 122.08 124.07 126.08 128.10 130.14 132.19 62% 86.17 103.7 121.1 138.62 156.1 173.6 191.1 43 122.84 124.82 126.82 128.83 130.86 132.90 134.95 63% 95.19 112.7 130.2 147.64 165.1 182.6 200.1 44 125.58 127.56 129.56 131.58 133.61 135.66 137.72 64% 104.2 121.7 139.2 156.65 174.1 191.6 209.1