CASEYS GENERAL STORES INC

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(Dollars in Thousands, Except Share and Per Share Amounts)

1. Presentation of Financial Statements

As of October 31, 2024, Casey’s General Stores, Inc. and its subsidiaries (hereinafter referred to as the "Company" or "Casey’s") operate 2,685 convenience stores in 17 states, primarily in the Midwest. Many of the stores are located in smaller communities, often with populations of less than 20,000.

The accompanying condensed consolidated financial statements include the accounts and transactions of Casey's General Stores, Inc. and its direct and indirect wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

2. Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position as of October 31, 2024 and April 30, 2024, the results of operations for the three and six months ended October 31, 2024 and 2023, and shareholders' equity and cash flows for the six months ended October 31, 2024 and 2023. Although management believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these interim condensed consolidated financial statements be read in conjunction with the Company’s most recent audited financial statements and notes thereto. Additionally, see the Form 10-K for the year ended April 30, 2024 for our consideration of new accounting pronouncements issued prior to this fiscal year.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40). The standard requires new financial statement disclosures regarding specified information about certain costs and expenses. The new standard is effective for the Company's annual periods beginning May 1, 2027, and interim periods beginning May 1, 2028, with early adoption permitted. The Company is currently evaluating ASU 2024-03 to determine its impact on our disclosures.

3. Revenue and Cost of Goods Sold

The Company recognizes retail sales of prepared food and dispensed beverage, grocery and general merchandise, fuel and other revenue at the time of the sale to the guest. Sales taxes collected from guests and remitted to the government are recorded on a net basis in the condensed consolidated statements of income.

A portion of revenue from sales that include points under our Casey’s Rewards program is deferred. The deferred portion of the sale represents the value of the estimated future redemption of the points. The amounts related to points are deferred until their redemption or expiration. Revenue related to the points issued is expected to be recognized less than one year from the original sale to the guest. As of October 31, 2024 and April 30, 2024, the Company recognized a contract liability of $59,077 and $52,934, respectively, related to the Casey's Rewards program, which is included in accrued expenses on the condensed consolidated balance sheets.

Gift card related revenue is recognized as the gift cards are used by the guest. Gift card breakage revenue is recognized based on the estimated gift card breakage rate over the pro rata usage of the card. As of October 31, 2024 and April 30, 2024, the Company recognized a liability of $16,731 and $17,985, respectively, related to outstanding gift cards, which is included in accrued expenses on the condensed consolidated balance sheets.

The Company often receives vendor allowances on the basis of quantitative contract terms that vary by product and vendor or directly on the basis of purchases made. Vendor allowances include rebates and other funds received from vendors to promote their products. These amounts are recognized in the period earned based on the applicable rebate agreement. Reimbursements of an operating expense (e.g., advertising) are recorded as reductions of the related expense.

Renewable identification numbers (“RINs”) are assigned to gallons of renewable fuels produced and are used to track compliance with the renewable fuel standard. At times, we purchase fuel components (ethanol, gasoline, biodiesel or diesel) and blend those components into a finished product in a fuel truck. This process enables the Company to take title to the RIN assigned to each gallon of ethanol or biodiesel produced. RINs are recorded as a reduction in cost of goods sold at the contracted sales price, in the period when the Company transfers the RIN. The Company does not record inventories on the balance sheet related to RINs, as they are acquired at no cost to the Company.

The Company includes in cost of goods sold the costs incurred to acquire fuel and merchandise, including excise taxes, less vendor allowances, vendor rebates and RINs. Warehousing costs are recorded within operating expenses on the condensed consolidated statements of income.

4. Long-Term Debt and Finance Lease Obligations, Lines of Credit and Fair Value Disclosure

The fair value of the Company’s long-term debt (including current maturities) is estimated based on the current rates offered to the Company for debt of the same or similar issuances. The fair value of the Company’s long-term debt was approximately $2,473,000 and $1,375,000 at October 31, 2024 and April 30, 2024, respectively. The fair value calculated excludes finance lease obligations of $108,641 and $101,818 outstanding at October 31, 2024 and April 30, 2024, respectively, which are included with long-term debt on the condensed consolidated balance sheets.

Interest, net on the condensed consolidated statements of income is net of interest income of $3,792 and $6,177, for the three and six months ended October 31, 2024, and $4,476 and $8,052, for the three and six months ended October 31, 2023. Interest, net is also net of interest capitalized of $489 and $908, for the three and six months ended October 31, 2024, and $686 and $1,480, for the three and six months ended October 31, 2023, respectively.

Series I and J Senior Notes

On October 4, 2024, the Company entered into a note purchase agreement with respect to the issuance of $250,000 aggregate principal amount of senior notes, consisting of: (i) $150,000 aggregate principal amount of 5.23% Senior Notes, Series I, due November 2, 2031; and (ii) $100,000 aggregate principal amount of 5.43% Senior Notes, Series J, due November 2, 2034 (collectively, the “Notes”). The Notes were issued on October 30, 2024. Interest on the Notes is payable semi-annually on May 2 and November 2 of each year. The Company used the proceeds of the Notes to partially fund the Fikes Wholesale acquisition, which closed subsequent to quarter end on November 1, 2024. For additional information on the Fikes Wholesale acquisition, please refer to Note 9. As of October 31, 2024, there was $250,000 outstanding on the Notes.

Amended Credit Agreement

The Company is party to a credit agreement, dated as of April 21, 2023 (the “Existing Credit Agreement”). On October 30, 2024, the Company entered into an amendment to the Existing Credit Agreement (the “Amendment” and, together with the Existing Credit Agreement, the “Credit Agreement”), pursuant to which the Company incurred an incremental term loan in an aggregate principal amount of $850,000 (the “Incremental Term Loan”). The outstanding principal balance of the Incremental Term Loan is required to be repaid in equal quarterly installments of $10,625 on the last business day of each March, June, September, and December, commencing March 31, 2025, with the remaining balance due on October 30, 2029. The proceeds of the Incremental Term Loan were used to partially fund the Fikes Wholesale acquisition, which closed subsequent to quarter end on November 1, 2024 (see further discussion of the Fikes Wholesale acquisition in Note 9). As of October 31, 2024, there was $850,000 outstanding on the Incremental Term Loan.

Amounts borrowed under the Credit Agreement, including the Incremental Term Loan and the Revolving Facility discussed immediately below, bear interest at variable rates based upon, at the Company’s option, either: (a) either Term SOFR or Daily Simple SOFR, in each case plus 0.10% (with a floor of 0.00%) for the interest period in effect, plus an applicable margin ranging from 1.10% to 1.70% or (b) an alternate base rate, which generally equals the highest of (i) the prime commercial lending rate announced by the Administrative Agent as its “prime rate”, (ii) the federal funds rate plus 1/2 of 1.00%, and (iii) Adjusted Daily Simple SOFR plus 1.00%, each plus an applicable margin ranging from 0.10% to 0.70% and each with a floor of 1.00%. The applicable margins and facility fee, in each case, are dependent upon the Company’s quarterly Consolidated Leverage Ratio, as defined in the credit agreement.

Revolving Facility

The Credit Agreement also provides for an $850,000 unsecured revolving credit facility (“Revolving Facility”). The Company had $0 outstanding under the Revolving Facility at October 31, 2024 and April 30, 2024.

Bank Line

The Company has an additional unsecured bank line of credit (the "Bank Line") with availability of up to $50,000. As of October 31, 2024, the availability under the Bank Line is encumbered by letters of credits totaling $308. The Bank Line bears interest at a variable rate subject to change from time to time based on changes in an independent index referred to in the Bank Line as the Federal Funds Offered Rate. There was $0 outstanding under the Bank Line at October 31, 2024 and April 30, 2024. The Bank Line is due upon demand.

5. Compensation Related Costs and Share-Based Payments

The 2018 Stock Incentive Plan (the “2018 Plan”) was approved by the Company's shareholders on September 5, 2018. Awards under the 2018 Plan may take the form of stock options, stock appreciation rights, restricted stock, restricted stock units and other equity-based and equity-related awards. Each share issued pursuant to a stock option and each share with respect to which a stock-settled stock appreciation right is exercised (regardless of the number of shares actually delivered) is counted asone share against the maximum limit under the 2018 Plan, and each share issued pursuant to an award of restricted stock or restricted stock units is counted astwo shares against the maximum limit. Restricted stock is transferred immediately upon grant (and may be subject to a holding period), whereas restricted stock units have a vesting period that must expire, and in some cases performance or market conditions that must be satisfied before the stock is transferred. At October 31, 2024, there were 950,954 shares available for grant under the 2018 Plan.

We account for share-based compensation by estimating the grant date fair value of time-based and performance-based restricted stock unit awards using the closing price of our common stock on the applicable grant date, or the date on which performance goals for performance-based units are established, if after the grant date. Forfeitures are recognized as they occur.

The time-based awards most commonly vest ratably over athree-year period commencing on the first anniversary of the grant date. The performance-based awards represent a “target” amount; the final amount earned is based on the satisfaction of certain performance measures over athree-year performance period and will range from 0% to 200% of “target." Additionally, if the Company's relative total shareholder return over the performance period is in the bottom or top quartile of the companies comprising the S&P 500, the performance-based shares included will be adjusted downward by 25%, or upward by 25%, respectively (the "TSR Modifier"). The fair value of the awards with the TSR Modifier is determined using a Monte Carlo simulation as of the date of the grant. For market-based awards, the share-based compensation expense will not be adjusted should the target awards vary from actual awards.

We recognize these amounts as an operating expense in our condensed consolidated statements of income ratably over the requisite service period using the straight-line method, as adjusted for certain retirement provisions, and updated estimates of shares to be issued under performance-based awards. All awards have been granted at no cost to the grantee.

Information concerning the unvested restricted stock units under the 2018 Plan is presented in the following table. No stock option awards have been granted under the 2018 Plan.

Total share-based compensation costs recorded for employees and non-employee directors for the six months ended October 31, 2024 and 2023 were $23,645 and $19,485, respectively, related entirely to restricted stock unit awards. As of October 31, 2024, there was $56,444 of unrecognized compensation costs related to restricted stock units which are expected to be recognized through fiscal 2028, with a weighted average remaining term of 1.3 years. The fair value of restricted stock unit awards vested for the six months ended October 31, 2024 was $64,615 as of the applicable vest date.

6. Commitments and Contingencies

From time to time we may be involved in legal or administrative proceedings or investigations arising from the conduct of our business operations, including, but not limited to, contractual or other general business disputes; employment, personnel, or accessibility matters; personal injury and property damage claims; claims by federal, state, and local regulatory authorities relating to the sale of products pursuant to licenses and permits issued by those authorities; and, other claims or proceedings. Claims for 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 operations.

The Company is named as a defendant in a lawsuit filed in the United States District Court for the Northern District of Indiana, titled McColley v. Casey’s General Stores, Inc., in which the plaintiff alleges that the Company misclassified its Store Managers as exempt employees under the Fair Labor Standards Act (FLSA). The complaint seeks unpaid wages, liquidated damages and attorneys’ fees for the plaintiff and all similarly situated Store Managers who worked at the Company from February 16, 2015, to the present. On March 31, 2021, the Court granted conditional certification, and to-date, approxim ately 1,400 current and/or former Store Managers remain opted-in to participate in the McColley lawsuit. The Company is also named in a related lawsuit filed in the Southern District of Illinois, titled Kessler v. Casey’s Marketing Company, et al., with substantially the same allegations and seeking the same relief, but instead for the plaintiff and all similarly situated Store Managers located in the state of Illinois from December 19, 2019, to the present. On October 13, 2023, the Court approved conditional certification, and to-date, approximately 550 current and/or former Store Managers remain opted-in to participate in the Kessler lawsuit. Discovery in the McColley case is currently underway. The Company believes that adequate provisions have been made for probable losses related to these matters, and that those, and the reasonably possible losses in excess of amounts accrued, where such range of loss can be estimated, are not material to the Company’s financial position, results of operations or cash flows. The Company believes that its Store Managers are properly classified as exempt employees under the FLSA and it intends to continue to vigorously defend these matters.

7. Unrecognized Tax Benefits

The total amount of gross unrecognized tax benefits was $12,328 and $10,747 at October 31, 2024 and April 30, 2024, respectively. If this unrecognized tax benefit were ultimately recognized, $9,739 is the amount that would impact our effective tax rate. The total net amount of accrued interest and penalties for such unrecognized tax benefits was $504 at October 31, 2024, and $350 at April 30, 2024. Net interest and penalties included in income tax expense for the six months ended October 31, 2024 and 2023 was a net expense of $154 and $129, respectively.

A number of years may elapse before an uncertain tax position is audited and ultimately settled. It is difficult to predict the ultimate outcome or the timing of resolution for uncertain tax positions. It is reasonably possible that the amount of unrecognized tax benefits could significantly increase or decrease within the next twelve months. These changes could result from the expiration of the statute of limitations, examinations or other unforeseen circumstances. The State of Illinois is currently examining tax years 2020 and 2021. The Company has no other ongoing federal or state income tax examinations. 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 $2,000 during the next twelve months mainly due to the expiration of certain statute of limitations.

The federal statute of limitations remains open for the tax years 2020 and forward. Tax years 2019 and forward are subject to audit by state tax authorities depending on open statute of limitations waivers and the tax code of each state.

8. Segment Reporting

As of October 31, 2024, we operated 2,685 stores in 17 states. Our convenience stores offer a broad selection of merchandise, fuel and other products and services designed to appeal to the convenience needs of our guests. We manage the business on the basis ofone operating segment and therefore, have onlyone 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 guests. We make specific disclosures concerning thethree broad categories of fuel, grocery and general merchandise, and prepared food and dispensed beverage because it allows us to more effectively discuss trends and operational initiatives within our business and industry. Although we can separate revenue and cost of goods sold 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.

9. Subsequent Events

Subsequent to quarter end, on November 1, 2024, the Company closed on the acquisition of Fikes Wholesale, owner of CEFCO Convenience Stores, and Group Petroleum Services (collectively “Fikes”) through an equity purchase agreement with an aggregate purchase price of $1,145,000, subject to post-closing adjustments. As part of the acquisition, the Company acquired 100% of the equity of Fikes. The transaction includes 198 retail locations, a fuel terminal, commissary, and dealer network, where the Company will manage fuel wholesale supply agreements to certain dealer locations. The acquisition will bring 148 additional stores to Texas, as well as 50 stores in Alabama, Florida, and Mississippi.

The Fikes acquisition was financed with the Incremental Term Loan of $850,000, the issuance of the Series I and J Notes in the amount of $250,000, and cash on hand. For further information, see Note 4.

The proceeds of the Incremental Term Loan and Series I and J Notes were received by the Company on October 30, 2024. However, the Fikes acquisition did not close until November 1, 2024, subsequent to quarter end. As such, as of October 31, 2024 the Company had $1,160,118 in a funding account governed by an escrow and disbursing agreement, primarily to use for the acquisition of Fikes, as well as other related adjustments and transaction costs. As a result, we have recognized this balance as restricted cash within long-term assets in the condensed consolidated balance sheets. The cash was subsequently paid on November 1, 2024, primarily to fund the acquisition.

Due to the proximity of the Fikes acquisition to the filing of our Form 10-Q, we have not yet completed the accounting for the business combination, including the opening balance sheet. Accordingly, the Company is unable to provide amounts recognized as of the acquisition dates for major classes of assets and liabilities. Moreover, we are unable to provide pro-forma financial information related to the combined entity. This information, at least on a provisional basis, will be available in the Form 10-Q to be filed for the quarter ended January 31, 2025.