Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

Casey’s General Stores, Inc.:

We have audited the accompanying consolidated balance sheets of Casey’s General Stores, Inc. and subsidiaries (the Company) as of April 30, 2013 and 2012, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years in the three-year period ended April 30, 2013. We also have audited the Company’s internal control over financial reporting as of April 30, 2013, based on criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A (Controls and Procedures). Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Casey’s General Stores, Inc. and subsidiaries as of April 30, 2013 and 2012, and the results of their operations and their cash flows for each of the years in the three-year period ended April 30, 2013, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 30, 2013, based on criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/KPMG LLP

Des Moines, Iowa

June 27, 2013

CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)


		April 30,
		2013			2012
Assets
Current assets
Cash and cash equivalents	$		41,271	$		55,919
Receivables			20,900			21,700
Inventories			189,514			170,794
Prepaid expenses			1,396			1,298
Deferred income taxes			9,916			13,143
Income taxes receivable			9,820			16,424

Total current assets			272,817			279,278

Property and equipment, at cost
Land			431,523			381,756
Buildings and leasehold improvements			904,732			807,795
Machinery and equipment			1,182,470			1,035,651
Leasehold interest in property and equipment			15,486			14,545

			2,534,211			2,239,747
Less accumulated depreciation and amortization			952,286			860,998

Net property and equipment			1,581,925			1,378,749

Other assets, net of amortization			14,485			12,403
Goodwill			114,791			104,385

Total assets	$		1,984,018	$		1,774,815


Liabilities and Shareholders’ Equity
Current liabilities
Notes payable to bank	$		59,100	$		-
Current maturities of long-term debt			15,810			10,737
Accounts payable			232,913			211,165
Accrued expenses
Wages and related taxes			16,221			15,010
Property taxes			20,229			19,111
Insurance			24,039			23,701
Other			29,436			26,917

Total current liabilities			397,748			306,641

Long-term debt, net of current maturities			653,081			667,930
Deferred income taxes			293,708			260,405
Deferred compensation			15,787			14,698
Other long-term liabilities			21,399			19,100

Total liabilities			1,381,723			1,268,774

Commitments and contingencies
Shareholders’ equity
Preferred stock, no par value, none issued			-			-
Common stock, no par value, 38,352,509 and 38,140,309 shares issued and outstanding at April 30, 2013 and 2012, respectively			23,119			12,199
Retained earnings			579,176			493,842

Total shareholders’ equity			602,295			506,041

Total liabilities and shareholders’ equity	$		1,984,018	$		1,774,815

See accompanying Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)


		Years ended April 30,
		2013			2012			2011
Total revenue	$		7,250,840	$		6,987,804	$		5,635,240
Cost of goods sold (exclusive of depreciation, shown separately below)			6,168,475			5,984,114			4,754,173

Gross profit			1,082,365			1,003,690			881,067
Operating expenses			760,365			688,431			607,628
Depreciation and amortization			111,823			96,552			82,355
Interest, net			35,048			35,192			28,497
Loss on early retirement of debt			-			-			11,350


Income before income taxes			175,129			183,515			151,237
Federal and state income taxes			64,504			66,724			56,614

Net income	$		110,625	$		116,791	$		94,623


Net income per common share
Basic	$		2.89	$		3.07	$		2.24


Diluted	$		2.86	$		3.04	$		2.22

See accompanying Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands, except per share and per share amounts)


		Common			Retained
		stock			earnings			Total
Balance at April 30, 2010	$		64,439	$		759,880	$		824,319
Net income			-			94,623			94,623
Dividends declared (50.5 cents per share)			-			(20,467)			(20,467)
Repurchase of common stock (13,157,894 shares)			(66,890)			(434,136)			(501,026)
Proceeds from exercise of stock options (184,441 shares)			3,733			-			3,733
Tax benefits related to nonqualified stock options			648			-			648
Stock based compensation			2,066			-			2,066


Balance at April 30, 2011	$		3,996	$		399,900	$		403,896
Net income			-			116,791			116,791
Dividends declared (60 cents per share)			-			(22,849)			(22,849)
Proceeds from exercise of stock options (159,600 shares)			3,249			-			3,249
Tax benefits related to nonqualified stock options			1,162			-			1,162
Stock based compensation			3,792			-			3,792


Balance at April 30, 2012	$		12,199	$		493,842	$		506,041
Net income			-			110,625			110,625
Dividends declared (66 cents per share)			-			(25,291)			(25,291)
Proceeds from exercise of stock options (198,200 shares)			4,721			-			4,721
Tax benefits related to nonqualified stock options			1,929			-			1,929
Stock based compensation			4,270			-			4,270


Balance at April 30, 2013	$		23,119	$		579,176	$		602,295

See accompanying Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)


		Years ended April 30,
		2013			2012			2011
Cash flows from operating activities
Net income	$		110,625	$		116,791	$		94,623
Adjustments to reconcile net income to net cash provided by operations
Depreciation and amortization			111,823			96,552			82,355
Other amortization			195			347			988
Stock-based compensation			4,270			3,792			2,066
Loss (gain) on sale of property and equipment			4,788			1,428			(80)
Deferred income taxes			36,530			54,589			60,861
Excess tax benefits related to stock option exercises			(1,929)			(1,162)			(648)
Loss on early retirement of debt			-			-			11,350
Changes in assets and liabilities
Receivables			800			(1,546)			(8,043)
Inventories			(16,222)			(8,647)			(26,527)
Prepaid expenses			(98)			(118)			(51)
Accounts payable			21,748			(4,510)			70,341
Accrued expenses			4,270			7,399			5,516
Income taxes receivable			9,969			29,508			(31,266)
Other, net			(441)			456			(42)

Net cash provided by operating activities			286,328			294,879			261,443
Cash flows from investing activities
Purchase of property and equipment			(305,301)			(240,874)			(214,573)
Payments for acquisition of businesses			(29,527)			(39,444)			(113,567)
Proceeds from sales of property and equipment			3,544			2,196			2,627

Net cash used in investing activities			(331,284)			(278,122)			(325,513)
Cash flows from financing activities
Proceeds from long-term debt			-			-			569,000
Payments of long-term debt			(10,757)			(1,372)			(69,172)
Net borrowing of short-term debt			59,100			(600)			600
Proceeds from exercise of stock options			4,721			3,249			3,733
Payments of cash dividends			(24,685)			(22,849)			(20,467)
Repurchase of common stock			-			-			(501,026)
Payments of prepayment penalties			-			-			(11,350)
Excess tax benefits related to stock option exercises			1,929			1,162			648

Net cash provided by (used in) financing activities			30,308			(20,410)			(28,034)

Net decrease in cash and cash equivalents			(14,648)			(3,653)			(92,104)
Cash and cash equivalents at beginning of year			55,919			59,572			151,676

Cash and cash equivalents at end of year	$		41,271	$		55,919	$		59,572



SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid (received) during the year for
Interest, net of amount capitalized	$		35,226	$		35,403	$		34,691
Income taxes			17,973			(17,973)			26,113
Noncash investing and financing activities
Property and equipment acquired through notes payable and capitalized lease obligations			981			191			689

See accompanying Notes to Consolidated Financial Statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

1. SIGNIFICANT ACCOUNTING POLICIES

Operations Casey’s General Stores, Inc. and its subsidiaries (the Company/Casey’s) operate 1,749 convenience stores in 14 Midwest states. The stores are located primarily in smaller communities, many with populations of less than 5,000. Retail sales in 2013 were distributed as follows: 72% gasoline, 20% grocery & other merchandise, and 8% prepared food & fountain. The Company’s materials are readily available, and the Company is not dependent on a single supplier or only a few suppliers.

Principles of consolidation The consolidated financial statements include the financial statements of Casey’s General Stores, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect 1) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and 2) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash equivalents Cash equivalents consist of money market funds. We consider all highly liquid investments with a maturity at purchase of three months or less to be cash equivalents.

Inventories Inventories, which consist of merchandise and gasoline, are stated at the lower of cost or market. For gasoline, 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 for financial and income tax reporting applied to inventory values determined primarily by our FIFO accounting system for warehouse inventories and the retail inventory method (RIM) for store inventories, except for cigarettes, beer, pop, and prepared foods, which are valued at cost. RIM is an averaging method widely used in the retail industry because of its practicality.

Under RIM, inventory valuations are at cost and the resulting gross margins are calculated by applying a cost-to-retail ratio to sales. Inherent in the RIM calculations are certain management judgments and estimates that could affect the ending inventory valuation at cost and the resulting gross margins.

The excess of current cost over the stated LIFO value was $44,792 and $41,805 at April 30, 2013 and 2012, respectively. There were no material LIFO liquidations during the periods presented. Below is a summary of the inventory values at April 30, 2013 and 2012:


	Fiscal 2013		Fiscal 2012
Gasoline		87,262		83,063
Merchandise		102,252		87,731

Total inventory		189,514		170,794

Vendor allowances include rebates and other funds received from vendors to promote their products. The Company often receives such allowances on the basis of quantitative contract terms that vary by product and vendor or directly on the basis of purchases made. Vendor rebates in the form of rack display allowances (RDAs) are funds that we receive from various vendors for allocating certain shelf space to carry their specific products or to introduce new products in our stores for a particular period of time. The RDAs are treated as a reduction in cost of sales and are recognized ratably over the period covered by the applicable rebate agreement. These funds do not represent reimbursements of specific, incremental, identifiable costs incurred by us in selling the vendor’s products. Vendor rebates in the form of billbacks are treated as a reduction in cost of sales and are recognized at the time the product is sold. Reimbursements of an operating expense (e.g., advertising) are recorded as reductions of the related expense.

Renewable Identification Numbers (RINs) are recorded as a reduction in cost of sales in the period when the Company commits to a price and agrees to sell all of the RINs earned during a specified period (currently the previous month).

Goodwill Goodwill and intangible assets with indefinite lives are tested for impairment at least annually. The Company assesses impairment annually at year-end using a market based approach to establish fair value. All of the goodwill assigned to the individual stores is aggregated into a single reporting unit due to the similar economic characteristics of the stores. As of April 30, 2013, there was $114,791 of goodwill, and management’s analysis of recoverability completed as of the fiscal year-end yielded no evidence of impairment.

Store closings and asset impairment The Company writes down property and equipment of stores it is closing to estimated net realizable value at the time management commits to a plan to close such stores and begins active marketing of the stores. The Company bases the estimated net realizable value of property and equipment on its experience in utilizing and/or disposing of similar assets and on estimates provided by its own and/or third-party real estate experts.

The Company monitors closed and underperforming stores for an indication that the carrying amount of assets may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the assets, an impairment loss is recognized to the extent carrying value of the assets exceeds their estimated fair value. Fair value is based on management’s estimate of the price that would be received to sell an asset in an orderly transaction between market participants. The estimate is derived from offers, actual sale or disposition of assets subsequent to year-end, and other indications of fair value, which are considered Level 3 inputs. In determining whether an asset is impaired, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets, which for the Company is generally on a store-by-store basis. The Company incurred impairment charges of $3,680 in fiscal 2013, $226 in fiscal 2012, and $348 in fiscal 2011. Impairment charges are a component of operating expenses.

Depreciation and amortization Depreciation of property and equipment and amortization of capital lease assets are computed principally by the straight-line method over the following estimated useful lives:


Buildings		25-40 years
Machinery and equipment		5-30 years
Leasehold interest in property and equipment		Lesser of term of lease or life of asset
Leasehold improvements		Lesser of term of lease or life of asset

The Company monitors stores and will accelerate depreciation if the expected life of the asset is reduced due to the operation of the store or the Company’s plans.

Excise taxes Excise taxes approximating $596,000, $527,000, and $495,000 on retail gasoline sales are included in total revenue and cost of goods sold for fiscal 2013, 2012, and 2011, respectively.

Income taxes The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company calculates its current and deferred tax provision based on estimates and assumptions that could differ from actual results reflected in income tax returns filed in subsequent years. Adjustments based on filed returns are recorded when identified.

Revenue recognition The Company recognizes retail sales of gasoline, grocery & other merchandise, prepared food & fountain, and commissions on lottery, prepaid phone cards, and video rentals at the time of the sale to the customer. Sales taxes collected from customers and remitted to the government are recorded on a net basis in the consolidated financial statements.

Net income per common share Basic earnings per share have been computed by dividing net income by the weighted average shares outstanding during each of the years. The calculation of diluted earnings per share treats stock options and restricted stock units outstanding as potential common shares to the extent they are dilutive.

Asset retirement obligations The Company recognizes the estimated future cost to remove underground storage tanks over the estimated useful life of the storage tank_._ The Company records a discounted liability for the fair value of an asset retirement obligation with a corresponding increase to the carrying value of the related long-lived asset at the time an underground storage tank is installed. The Company amortizes the amount added to other assets and recognizes accretion expense in connection with the discounted liability over the remaining life of the tank. The estimates of the anticipated future costs for removal of an underground storage tank are based on our prior experience with removal. Because these estimates are subjective and are currently based on historical costs with adjustments for estimated future changes in the associated costs, we expect the dollar amount of these obligations to change as more information is obtained.

There were no material changes in our asset retirement obligation estimates during fiscal 2013. The recorded asset for asset retirement obligations was $8,011 and $7,343 at April 30, 2013 and 2012, respectively, and is recorded in other assets, net of amortization. The discounted liability was $12,176 and $11,313 at April 30, 2013 and 2012, respectively, and is recorded in other long-term liabilities.

Self-insurance The Company is primarily self-insured for workers’ compensation, general liability, and automobile claims. The self-insurance claim liability is determined actuarially at each year end based on claims filed and an estimate of claims incurred but not yet reported. Actuarial projections of the losses are employed due to the high degree of variability in the liability estimates. Some factors affecting the uncertainty of claims include the development time frame, settlement patterns, litigation and adjudication direction, and medical treatment and cost trends. The liability is not discounted. The balance of our self-insurance reserves were $24,039 and $23,701 for the years ended April 30, 2013 and 2012, respectively.

Environmental remediation liabilities The Company accrues for environmental remediation liabilities when it is probable a liability has been incurred and the amount of loss can be reasonably estimated.

Derivative instruments There were no options or futures contracts as of or during the years ended April 30, 2013, 2012, or 2011. However, we do from time to time, participate in a forward buy of certain commodities, primarily cheese and coffee. These are not accounted for as derivatives under the normal purchase and normal sale exclusions under the applicable guidance.

Stock-based compensation Stock-based compensation is recorded based upon the fair value of the award on the grant date. The cost of the award is recognized ratably in the statement of income over the vesting period of the award.

Segment reporting As of April 30, 2013, we operated 1,749 stores in 14 states. Our stores offer a broad selection of merchandise, fuel and other products and services designed to appeal to the convenience needs of our customers. We manage the business on the basis of one operating segment and therefore, have only one reportable segment. Our stores sell similar products and services, use similar processes to sell those products and services, and sell their products and services to similar classes of customers. We make specific disclosures concerning the three broad merchandise categories of gasoline, grocery & other merchandise, and prepared food and fountain because it makes it easier for us to discuss trends and operational initiatives within our business and industry. Although we can separate gross margins within these categories (and further sub-categories), the operating expenses associated with operating a store that sells these products are not separable by these three categories.

Comprehensive income (loss) Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) refers to revenues, expenses, gains and losses that are not included in net income, but rather are recorded directly in shareholders’ equity. The Company did not have any other comprehensive income (loss) during the years ended April 30, 2013, 2012, or 2011.

2. ACQUISITIONS

During the year ended April 30, 2013, the Company acquired 34 stores through a variety of single store and multi-store transactions with several unrelated third parties. Of the 34 stores acquired, 26 were opened during the 2013 fiscal year, six were closed permanently and two will be opened during the 2014 fiscal year. The acquisitions meet the criteria to be considered business combinations. The acquisitions were recorded by allocating the cost of the assets acquired, including intangible assets and liabilities assumed, based on their estimated fair values at the acquisition date. The excess of the cost of the acquisition over the net amounts assigned to the fair value of the assets acquired and the liabilities assumed is recorded as goodwill. All of the goodwill associated with these transactions will be deductible for income tax purposes over 15 years.

Allocation of the purchase price for the transactions in aggregate is as follows (in thousands):


Assets acquired:
Inventories	$	2,498
Property and equipment		16,934

Total assets		19,432

Liabilities assumed:
Accrued expenses		310

Total liabilities		310

Net tangible assets acquired		19,122
Goodwill		10,405

Total consideration paid	$	29,527

The following unaudited pro forma information presents a summary of our consolidated results of operations as if the transactions referenced above occurred at the beginning of the fiscal year for each of the periods presented (amounts in thousands, except per share data):


		Years Ended April 30,
		2013		2012
Total revenue	$		7,321,715		7,119,777
Net income	$		112,161		119,729
Net income per common share
Basic	$		2.93		3.15
Diluted	$		2.90		3.12

3. FAIR VALUE OF FINANCIAL INSTRUMENTS AND LONG-TERM DEBT

A summary of the fair value of the Company’s financial instruments follows.

Cash and cash equivalents, receivables, and accounts payable The carrying amount approximates fair value due to the short maturity of these instruments or the recent purchase of the instruments at current rates of interest.

Long-term debt The fair value of the Company’s long-term debt and capital lease obligations is estimated based on the current rates offered to the Company for debt of the same or similar issues. The fair value of the Company’s long-term debt and capital lease obligations was approximately $721,000 and $691,000, respectively, at April 30, 2013 and 2012.

The next table delineates the Company’s long-term debt at carrying amount.


		As of April 30,
		2013		2012
Capitalized lease obligations discounted at 5.22% to 7.09% due in various monthly installments through 2048 (Note 7)	$		9,891		9,645

Mortgage notes payable due in various installments through January 2013 with interest at 6%			0		22

5.72% senior notes due in 14 installments beginning September 30, 2012 and ending March 30, 2020			90,000		100,000

5.22% senior notes due August 9, 2020			569,000		569,000

			668,891		678,667

Less current maturities			15,810		10,737


	$		653,081		667,930

At April 30, 2013, the Company had a bank line of credit arrangement consisting of three Promissory Notes, two in the principal amount of $50,000 and one in the amount of $25,000 (together, the “Notes”). The Notes evidenced a revolving line of credit in the aggregate principal amount of $125,000 and bear interest at variable rates subject to change from time to time based on changes in an independent index referred to in the Notes as the Federal Funds Offered Rate (the “Index”). The interest rate to be applied to the unpaid principal balance of the first Note was at a rate of 0.750% over the Index, resulting in a current rate of 0.910% per annum. The interest rate applicable to the second note is 1.000% over the Index, resulting in a current rate of 1.160% per annum. The interest rate applicable to the third Note was also 1.000% over the Index, resulting in a rate of 1.160% per annum. As described in Note 11, this third Note was cancelled on June 17, 2013. There was a $59,100 balance owed at April 30, 2013 with a weighted average interest rate of 0.95% and no balance owed at April 30, 2012.

Interest expense is net of interest income of $211, $208, and $360 for the years ended April 30, 2013, 2012, and 2011, respectively. Interest expense in the amount of $894, $674, and $406 was capitalized during the years ended April 30, 2013, 2012, and 2011, respectively.

The agreements relating to the above long-term debt contain certain operating and financial covenants. At April 30, 2013, the Company was in compliance with all such covenants. Listed below are the aggregate maturities of long-term debt, including capitalized lease obligations, for the 5 years commencing May 1, 2013 and thereafter:


Years ended April 30,
2014	$	15,810
2015		492
2016		15,334
2017		15,309
2018		15,327
Thereafter		606,619

	$	668,891

4.		PREFERRED AND COMMON STOCK

Preferred stock The Company has 1,000,000 authorized shares of preferred stock of which 250,000 shares have been designated as Series A Serial Preferred Stock. No shares have been issued.

Common stock The Company currently has 120,000,000 authorized shares of common stock.

Stock option plans The 2009 Stock Incentive Plan (the “Plan”), was approved by the Board of Directors in June 2009 and approved by the shareholders in September 2009. The Plan replaced the 2000 Option Plan and the Non-employee Director Stock Plan (together, the “Prior Plans”). There are 4,334,608 shares available for grant at April 30, 2013 under the Plan. Awards made under the Plan may take the form of stock options, restricted stock or restricted stock units. Each share issued pursuant to a stock option will be counted as one share, and each share issued pursuant to an award of restricted stock or restricted stock units will reduce the shares available for grant by two. Additional information regarding the Plan is provided in the Company’s 2009 Proxy Statement. At April 30, 2013, options for 854,809 shares (which expire between 2013 and 2021) were outstanding. All stock option shares issued are previously unissued authorized shares.

On June 23, 2010, restricted stock units with respect to a total of 14,000 shares were granted to the non-employee members of the Board. The fair value of the Company’s shares on the date of grant was $35.94. This award was also granted at no cost to the non-employee members of the Board. This award vested immediately and compensation expense was recognized at that time.

On March 22, 2011, restricted stock units with respect to a total of 14,000 shares were granted to the non-employee members of the Board. The fair value of the Company’s shares on the date of grant was $36.68. This award was also granted at no cost to the non-employee members of the Board. This award vested on May 1, 2011, and compensation expense was recognized ratably over the vesting period.

On June 10, 2011, restricted stock units with respect to a total of 9,198 shares were granted to certain employees under the annual incentive compensation program. The fair value of the Company’s shares on the date of grant was $40.49. These awards will vest on May 1, 2014 and compensation expense is being recognized ratably over the vesting period.

On June 23, 2011, stock options totaling 441,000 shares were granted to certain officers and key employees. These awards will vest on June 23, 2014, and compensation expense is being recognized ratably over the vesting period.

On June 23, 2011, restricted stock units totaling 15,000 shares were granted to the CEO. The fair value of the Company’s shares on the date of grant was $44.39. This award was also granted at no cost to the employee. This award will vest on June 23, 2014 and compensation expense is currently being recognized ratably over the vesting period.

On September 16, 2011, restricted stock units with respect to a total of 14,000 shares were granted to the non-employee members of the Board. The fair value of the Company’s shares on the date of grant was $47.59. This award was also granted at no cost to the non-employee members of the Board. This award vested on May 1, 2012 and compensation expense was recognized ratably over the vesting period.

On June 8, 2012, restricted stock units with respect to a total of 32,998 shares were granted to certain employees under the annual incentive compensation program. The fair value of the Company’s shares on the date of grant was $59.48. These awards will vest on June 8, 2015 and compensation expense is being recognized ratably over the vesting period.

On September 14, 2012, restricted stock units with respect to a total of 14,000 shares were granted to the non-employee members of the Board. The fair value of the Company’s shares on the date of grant was $58.93. This award was also granted at no cost to the non-employee members of the Board. This award will vest on May 1, 2013 and compensation expense is currently being recognized ratably over the vesting period.

The 2000 Stock Option Plan allowed the grant of options with an exercise price equal to the fair value of the Company’s stock on the date of grant that expired ten years after the date of grant. Vesting was generally over a three to five-year service period. The Non-employee Directors’ Stock Option Plan allowed the grant of options with an exercise price equal to the average of the last reported sale prices of shares of common stock on the last trading day of each of the twelve months preceding the award of the option. The term of such options was ten years from the date of grant, and each option is exercisable immediately upon grant. The aggregate number of shares of Common Stock that could have been granted pursuant to the Director Stock Plan was 200,000 shares, subject to adjustment to reflect any future stock dividends, stock splits, or other relevant capitalization changes. Shares issued as restricted stock units become unrestricted shares of common stock at the end of the vesting period.

The following table shows the restricted stock unit and the stock option activity during the periods indicated:


	Number of restricted stock units		Number of option shares			Weighted average option exercise price
Balance at April 30, 2010		-		959,550		$	22.78
Granted		28,000		-			0.00
Exercised		-		(184,441	)		20.24
Forfeited		-		-			0.00
Balance at April 30, 2011		28,000		775,109		$	23.38
Granted		38,198		441,000			44.39
Exercised		-		(159,600	)		20.36
Forfeited		-		(3,000	)		36.19
Balance at April 30, 2012		66,198		1,053,509		$	32.59
Granted		46,998		-			0.00
Exercised		-		(198,200	)		23.82
Forfeited		-		(500	)		14.08
Balance at April 30, 2013		113,196		854,809		$	34.64

At April 30, 2013, there were 42,000 vested restricted stock units and 71,196 unvested restricted stock units. At April 30, 2013, all outstanding options had an aggregate intrinsic value of $19,903 and a weighted average remaining contractual life of 6.6 years. The vested options totaled 424,809 shares with a weighted average exercise price of $24.74 per share and a weighted average remaining contractual life of 5.1 years. The aggregate intrinsic value for the vested options as of April 30, 2013 was $14,089. The aggregate intrinsic value for the total of all options exercised during the year ended April 30, 2013 was $6,828, and the total fair value of shares vested during the year ended April 30, 2013 was $2,928.

The grant date fair value for the June 23, 2011 options were $14.65, which was estimated utilizing the Black Scholes valuation model. The significant assumptions included:


Risk-free interest rate	2.14	%
Expected option life	6.11 years
Expected volatility	37	%
Expected dividend yield	1.58	%

Total compensation costs recorded for the years ended April 30, 2013, 2012 and 2011 were $4,270, $3,792, and $2,066, respectively, for the stock option and restricted stock awards. As of April 30, 2013, there was $4,141 of total unrecognized compensation costs related to the Plan and Prior Plans for stock options that are expected to be recognized ratably through 2015.

At April 30, 2013, the range of exercise prices for outstanding options was $14.08 – $44.39 and the weighted average remaining contractual life of outstanding options was 6.6 years. The number of shares and weighted average remaining contractual life of the options by range of applicable exercise prices at April 30, 2013 were as follows:


Range of exercise prices	Number of shares	Weighted average exercise price	Weighted average remaining contractual life (years)

$ 14.08 –17.64	20,500	$ 15.63	0.9
20.68 – 26.92	404,309	25.23	5.3
44.39	430,000	44.39	8.2

	854,809

5. NET INCOME PER COMMON SHARE

Computations for basic and diluted earnings per common share are presented below:


		Years ended April 30,
		2013			2012			2011
Basic
Net income	$		110,625	$		116,791	$		94,623


Weighted average shares outstanding-basic			38,297,083			38,068,001			42,284,664


Basic earnings per common share	$		2.89	$		3.07	$		2.24


Diluted
Net income	$		110,625	$		116,791	$		94,623


Weighted-average shares outstanding-basic			38,297,083			38,068,001			42,284,664
Plus effect of stock options and restricted stock units			322,993			323,703			281,913

Weighted-average shares outstanding-diluted			38,620,076			38,391,704			42,566,577


Diluted earnings per common share	$		2.86	$		3.04	$		2.22

Options to purchase shares of common stock that were not included in the computation of diluted earnings per share, because their inclusion would have been antidilutive, were 439,000 for fiscal 2012. All options were included for fiscal 2013 and fiscal 2011.

6. INCOME TAXES

Income tax expense attributable to earnings consisted of the following components:


		Years ended April 30,
		2013			2012			2011
Current tax expense
Federal	$		23,519	$		9,937	$		(6,171)
State			4,455			2,345			1,871

			27,974			12,282			(4,300)
Deferred tax expense			36,530			54,442			60,914

Total income tax provision	$		64,504	$		66,724	$		56,614

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:


		As of April 30,
		2013			2012			2011
Deferred tax assets
Accrued liabilities	$		9,916	$		13,143	$		10,405
Deferred compensation			6,050			5,663			5,325
Unrecognized tax benefits			3,128			2,638			2,135
State net operating loss			3,902			4,395			2,771
Other			1,016			611			656

Total gross deferred tax assets			24,012			26,450			21,292


Deferred tax liabilities
Excess of tax over book depreciation			(295,951)			(264,757)			(211,415)
Goodwill			(11,919)			(8,955)			(2,550)
Other			66			-			-

Total gross deferred tax liabilities			(307,804)			(273,712)			(213,965)

Net deferred tax liability	$		(283,792)	$		(247,262)	$		(192,673)

At April 30, 2013, the Company has net operating loss carryforwards for state income tax purposes of approximately $93,805, which are available to offset future taxable income. These net operating loss carryforwards expire during the years 2016 through 2033.

There was no valuation allowance for deferred tax assets as of April 30, 2013 and 2012. There was no net change in the valuation allowance for the years ended April 30, 2013 and 2012. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected taxable income, and tax planning strategies in making this assessment.

Total reported tax expense applicable to the Company’s continuing operations varies from the tax that would have resulted from applying the statutory U.S. federal income tax rates to income before income taxes.


	Years ended April 30,
	2013	2012	2011
Income taxes at the statutory rates	35.0%	35.0%	35.0%
Federal tax credits	-1.7	-2.1	-1.2
State income taxes, net of federal tax benefit	2.6	2.9	2.9
Other	0.9	0.6	0.7

	36.8%	36.4%	37.4%

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company had a total of $8,938 and $7,538 in gross unrecognized tax benefits at April 30, 2013 and 2012, respectively. Of this amount, $5,810 represents the amount of unrecognized tax benefits that, if recognized, would impact our effective tax rate. Unrecognized tax benefits increased $1,400 during the twelve months ended April 30, 2013, due primarily to the expiration of certain statute of limitations offset by a greater increase associated with income tax filing positions for the current year. This had the effect of increasing the effective tax rate during the fiscal year ending April 30, 2013.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


		2013			2012
Beginning balance	$		7,538	$		6,148
Additions based on tax positions related to current year			2,807			2,706
Additions for tax positions of prior years			-			142
Reductions for tax positions of prior years			(37)			(47)
Reductions due to lapse of applicable statute of limitations			(1,370)			(1,411)
Settlements			-			-

Ending balance	$		8,938	$		7,538

The total net amount of accrued interest and penalties for such unrecognized tax benefits was $286 and $249 at April 30, 2013 and 2012, respectively, and is included in other long-term liabilities. Net interest and penalties included in income tax expense for the twelve month period ended April 30, 2013 was an increase in tax expense of $37 and a increase of $4 for the year ended April 30, 2012. At this time, the Company’s best estimate of the reasonably possible change in the amount of the gross unrecognized tax benefits is a decrease of $1,491 during the next twelve months mainly due to the expiration of certain statute of limitations. The federal statute of limitations remains open for the years 2010 and forward. Tax years 2009 and forward are subject to audit by state tax authorities depending on open statute of limitations waivers and the tax code of each state.

7. LEASES

The Company leases certain property and equipment used in its operations. Generally, the leases are for primary terms of from five to twenty years with options either to renew for additional periods or to purchase the premises and call for payment of property taxes, insurance, and maintenance by the lessee.

The following is an analysis of the leased property under capital leases by major classes:


		Asset balances at April 30,
		2013			2012
Real estate	$		12,874	$		11,933
Equipment			2,612			2,612

			15,486			14,545
Less accumulated amortization			4,900			4,378

	$		10,586	$		10,167

Future minimum payments under the capital leases and noncancelable operating leases with initial or remaining terms of one year or more consisted of the following at April 30, 2013:


		Capital			Operating
Years ended April 30,		leases			leases
2014	$		1,352	$		910
2015			989			514
2016			814			231
2017			772			131
2018			773			131
Thereafter			12,675			350

Total minimum lease payments			17,375	$		2,267

Less amount representing interest			7,484

Present value of net minimum lease payments	$		9,891

The total rent expense under operating leases was $1,773 in 2013, $1,269 in 2012, and $674 in 2011.

8. BENEFIT PLANS

401(k) plan The Company provides employees with a defined contribution 401(k) plan. The 401(k) plan covers all employees who meet minimum age and service requirements. The Company contributions consist of matching amounts and are allocated based on employee contributions. Contributions to the 401(k) plan were $4,949, $3,681, and $3,049 for the years ended April 30, 2013, 2012, and 2011, respectively.

On April 30, 2013, 1,496,465 shares of common stock were held by the trustee of the 401(k) plan in trust for distribution to eligible participants upon death, disability, retirement, or termination of employment. Shares held by the 401(k) plan are treated as outstanding in the computation of net income per common share.

Supplemental executive retirement plan The Company has a nonqualified supplemental executive retirement plan (SERP) for 2 of its executive officers, 1 of whom retired April 30, 2003 and the other on April 30, 2008. The SERP provides for the Company to pay annual retirement benefits, depending on retirement dates, up to 50% of base compensation until death of the officer. If death occurs within twenty years of retirement, the benefits become payable to the officer’s spouse until the spouse’s death or twenty years from the date of the officer’s retirement, whichever comes first. The Company has accrued the deferred compensation over the term of employment. The amounts accrued at April 30, 2013 and 2012, respectively, were $6,457 and $6,611. The discount rates used were 4.0% and 4.6%, respectively, at April 30, 2013 and 2012. The amount expensed in fiscal 2013 was $471 and the Company expects to pay $625 per year for each of the next five years. Expense incurred in fiscal 2012 was $662.

9. COMMITMENTS

The Company has entered into an employment agreement with its chief executive officer. The agreement provides that the officer will receive aggregate base compensation of not less than $660 per year exclusive of bonuses. The agreement also provides for certain payments in the case of death or disability of the officer. The Company also has entered into employment agreements with eleven other key employees, providing for certain payments in the event of termination following a change of control of the Company.

10. CONTINGENCIES

Environmental compliance The United States Environmental Protection Agency and several states have adopted laws and regulations relating to underground storage tanks used for petroleum products. Several states in which the Company does business have trust fund programs with provisions for sharing or reimbursing corrective action or remediation costs.

Management currently believes that substantially all capital expenditures for electronic monitoring, cathodic protection, and overfill/spill protection to comply with existing regulations have been completed. The Company has an accrued liability at April 30, 2013 and 2012 of approximately $418 and $380, respectively, for estimated expenses related to anticipated corrective actions or remediation efforts, including relevant legal and consulting costs. Management believes the Company has no material joint and several environmental liability with other parties. Additional regulations or amendments to the existing regulations could result in future revisions to such estimated expenditures.

Legal matters As previously reported, the Company was named as defendant in four lawsuits (“hot fuel” cases) brought in the federal courts in Kansas and Missouri against a variety of gasoline retailers, which were consolidated in the U.S. District Court for the District of Kansas in Kansas City, Kansas as part of the multidistrict “Motor Fuel Temperature Sales Practices Litigation”. On November 20, 2012, the Court preliminarily approved the previously-reported settlement involving the Company, which when approved in final form by the Court following notice to the Class would result in the settlement and dismissal of all claims against Casey’s in the multidistrict litigation. The preliminarily approved settlement includes, but is not limited to, a commitment on the part of the Company to provide certain information on its gasoline pumps and make a monetary payment (which is not considered to be material in amount) to the plaintiff class

From time to time we are involved in other legal and administrative proceedings or investigations arising from the conduct of our business operations, including contractual disputes; employment or personnel matters; personal injury and property damage claims; and claims by federal, state, and local regulatory authorities relating to the sale of products pursuant to licenses and permits issued by those authorities. Claims for compensatory or exemplary damages in those actions may be substantial. While the outcome of such litigation, proceedings, investigations, or claims is never certain, it is our opinion, after taking into consideration legal counsel’s assessment and the availability of insurance proceeds and other collateral sources to cover potential losses, that the ultimate disposition of such matters currently pending or threatened, individually or cumulatively, will not have a material adverse effect on our consolidated financial position and results of operation.

Other At April 30, 2013, the Company was partially self-insured for workers’ compensation claims in all fourteen states of its marketing territory and was also partially self-insured for general liability and auto liability under an agreement that provides for annual stop-loss limits equal to or exceeding approximately $1,000. To facilitate this agreement, letters of credit approximating $15,500 and $15,000, respectively, were issued and outstanding at April 30, 2013 and 2012, on the insurance company’s behalf. The Company also has investments of approximately $223 in escrow

as required by one state for partial self-insurance of workers’ compensation claims. Additionally, the Company is self-insured for its portion of employee medical expenses. At April 30, 2013 and 2012, the Company had $24,039 and $23,701, respectively, in accrued expenses for estimated claims relating to self-insurance, the majority of which has been actuarially determined.

11. SUBSEQUENT EVENTS

Events that have occurred subsequent to April 30, 2013 have been evaluated through the filing date of this Annual Report on Form 10-K with the Securities and Exchange Commission. On June 17, 2013, the Company issued $150,000 principal amount of Series A 3.67% Senior Notes due 2028. On December 17, 2013, the Company will issue an additional $50,000 principal amount of Series B 3.75% Senior Notes due 2028. The Company also cancelled the $25,000 Promissory Note that is part of its line of credit on June 17, 2013, leaving an aggregate line of credit of $100,000. Further information is set forth in the Current Report on Form 8-K filed by the Company on June 18, 2013.

12. QUARTERLY FINANCIAL DATA (Dollars in thousands, except per share amounts) (Unaudited)


		Year ended April 30, 2013
Total revenue		Q1		Q2		Q3		Q4		Year Total
Gasoline	$		1,330,670		1,393,476		1,185,640		1,319,371		5,229,157
Grocery & other merchandise			386,129		362,662		329,657		340,263		1,418,711
Prepared food & fountain			142,709		146,540		137,033		138,642		564,924
Other			8,794		8,966		10,035		10,253		38,048

	$		1,868,302		1,911,644		1,662,365		1,808,529		7,250,840
Gross profit*
Gasoline	$		58,795		57,634		52,002		64,287		232,718
Grocery & other merchandise			128,834		121,206		104,660		107,963		462,663
Prepared food & fountain			90,565		91,515		83,011		83,902		348,993
Other			8,780		8,958		10,013		10,240		37,991

	$		286,974		279,313		249,686		266,392		1,082,365

Net earnings	$		39,031		32,859		15,463		23,272		110,625

Earnings per common share
Basic	$		1.02		0.86		0.40		0.61		2.89

Diluted	$		1.01		0.85		0.40		0.60		2.86


		Year ended April 30, 2012
Total revenue		Q1		Q2		Q3		Q4		Year Total
Gasoline	$		1,377,914		1,288,498		1,141,230		1,284,669		5,092,311
Grocery & other merchandise			365,171		357,816		311,199		330,809		1,364,995
Prepared food & fountain			123,843		128,838		118,750		128,281		499,712
Other			6,904		7,366		7,771		8,745		30,786

	$		1,873,832		1,782,518		1,578,950		1,752,504		6,987,804
Gross profit*
Gasoline	$		65,320		62,688		49,180		49,371		226,559
Grocery & other merchandise			118,729		116,221		99,099		109,196		443,245
Prepared food & fountain			75,843		76,658		72,714		77,944		303,159
Other			6,890		7,351		7,757		8,729		30,727

	$		266,782		262,918		228,750		245,240		1,003,690

Net earnings	$		39,391		37,632		16,699		23,069		116,791

Earnings per common share
Basic	$		1.04		0.99		0.44		0.61		3.07

Diluted	$		1.03		0.98		0.43		0.60		3.04

*Gross profit is given before charge for depreciation and amortization and credit card fees.

Previous: Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK · Next: Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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