CASEYS GENERAL STORES INC (CASY) FY 2023 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(Dollars and gallons in thousands, except per share amounts)

Please read the following discussion of the Company’s financial condition and results of operations in conjunction with the selected historical consolidated financial data and consolidated financial statements and accompanying notes presented elsewhere in this Form 10-K.

Overview

As of April 30, 2023, Casey’s General Stores, Inc. and its direct and indirect wholly-owned subsidiaries operate convenience stores primarily under the names "Casey's" and "Casey’s General Store" (collectively, with the stores below referenced as "GoodStop", "Bucky's" or "Minit Mart", referred to as "Casey's" or the "Company") throughout 16 states, primarily in Iowa, Missouri, and Illinois. On April 30, 2023, there were a total of 2,521 stores in operation.

All convenience stores carry a broad selection of food items (including, but not limited to, freshly prepared foods such as regular and breakfast pizza, donuts, hot breakfast items, and hot and cold sandwiches), beverages, tobacco and nicotine products, health and beauty aids, automotive products, and other nonfood items. As of April 30, 2023, 217 store locations offered car washes. In addition, all but seven store locations offer fuel for sale on a self-service basis.

During the prior fiscal year, the Company introduced certain stores branded or rebranded as "GoodStop (by Casey’s)". Similar to most of our store footprint, the "GoodStop" locations offer fuel for sale on a self-serve basis, and a broad selection of snacks, beverages, tobacco products, and other essentials. However, these locations typically do not have a kitchen and have limited prepared food offerings. As of April 30, 2023, 43 stores operate under the "GoodStop" brand.

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

The Company has 76 dealer locations, where Casey’s manages fuel wholesale supply agreements to these stores. These locations are not operated by Casey's and are not included in our overall store count in the paragraph below. Approximately 1% of total revenue for the year-ended April 30, 2023 relates to this dealer network

Approximately 50% of all Casey’s were opened in areas with populations of fewer than 5,000 people, while approximately 26% of all stores were opened in communities with populations of more than 20,000 persons. CMC operates three distribution centers, through which certain grocery and general merchandise, and prepared food and dispensed beverage items, are supplied to our stores. One is adjacent to the Store Support Center facility in Ankeny, Iowa. The other two distribution centers are located in Terre Haute, Indiana (opened in February 2016) and Joplin, Missouri (opened in April 2021). At April 30, 2023, the Company leased the combination of land and/or building at 121 locations.

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

The following table represents the roll forward of store growth throughout fiscal 2023:

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Acquisitions in the table above include, in part, 26 stores which were acquired from Minit Mart LLC in April 2023. For additional discussion, refer to Note 2 in the consolidated financial statements.

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

Long-Term Strategic Plan

The Company announced a three-year strategic plan in January 2020 focused on four strategic objectives: reinvent hospitality and the guest experience; be where the guest is by accelerating unit growth; create capacity through best-in-class efficiencies; and, invest in our people and culture. The Company's plan was based on building on our proud heritage and distinct advantages to become more contemporary through new capabilities, technology, data, and processes. We believe this will best position the Company to address rapidly evolving shifts in consumer habits and other macro retail trends.

The Company closed out its strategic plan at the end of the fiscal year. Some of the key highlights from this past fiscal year include:

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

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

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

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

COVID-19 and Related Impacts

The onset of COVID-19 caused a significant decrease in store traffic across our entire footprint. While store traffic has markedly increased as the economy reopened over the past two or so years, the Company has not seen a full return to store traffic levels experienced prior to the pandemic. The Company believes this is largely contributed to by the increased prevalence and acceptance across all industries of working from home, a trend which the Company expects to continue into the foreseeable future.

While the ongoing impacts of COVID-19, in particular those related to governmental actions in response thereto, and those mentioned immediately above, will continue to bring challenges to our operating environment, we believe that our resilient business model and the strength of our brand and balance sheet position us well to navigate the impacts.

Fuel Volatility

Since early calendar 2020, the price of crude oil, and in turn the wholesale cost of fuel, has been volatile compared to historical averages. Initially, at the outset of the pandemic, oil and fuel prices fell dramatically; however, as the economy in general began to emerge from the COVID-19 pandemic, prices began to modestly increase over time. More recently, during the end of the Company’s 2022 fiscal year, oil and fuel prices saw a quick and dramatic increase, in part, as a result of the conflict in Ukraine, as well as other macroeconomic conditions, which also directly impacts the retail price of fuel that we sell at our stores. Generally, oil and fuel prices have decreased from levels seen throughout the past two years, but they remain elevated compared to historical levels. The Company expects these comparatively higher prices to remain into the 2024 fiscal year.

In addition, during the past three calendar years, the Company, and the retail fuel industry as a whole, has experienced historically high average revenue less cost of goods sold per gallon (excluding depreciation and amortization). Although this has remained relatively consistent since that time, on a longer-term basis, this metric can fluctuate significantly, and sometimes unpredictably, in the short-term. While the Company believes that its average revenue less cost of goods sold per gallon (excluding depreciation and amortization) will remain elevated from historical levels for the foreseeable future, it is possible that increased oil and fuel prices, rising interest rates, macroeconomic conditions and/or continuing conflicts or disruptions involving oil producing countries may materially impact the performance of this metric.

Electric Vehicles and Renewable Fuels

Casey's continues its process of developing a robust electric vehicle ("EV") strategy and our management team remains committed to understanding if and how the increased demand for, and usage of, EVs impacts consumer behavior across our store footprint and beyond. As consumer demand for alternative fuel options continues to grow, Casey’s has continued to add EV charging stations across our 16-state footprint. The Company has installed 138 charging stations at 29 stores, across 10 states. Our installation strategy is currently designed to selectively increase our charging stations at locations within our region where we see higher levels of consumer EV buying trends and demand for EV charging. To date, consumer EV demand within our Midwest footprint has been comparatively lower than the levels along the coasts. As EV demand from our guests increases, we are prepared to strategically integrate charging station options at select stores.

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

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almost all of our stores offer fuel with at least 10% of blended ethanol and 43% of our stores offer biodiesel. Every new store has the capability to sell higher blended ethanol, and we aim to continue growing sales of renewable fuels throughout our footprint

Fiscal 2023 Compared with Fiscal 2022

Total revenue for fiscal 2023 increased 16.5% ($2,141,881) to $15,094,475. Total revenue was impacted favorably by operating 69 more stores than a year ago, elevated retail fuel prices, and strategic retail price adjustments. Retail fuel sales for the fiscal year were $10,027,310, an increase of 20.6% primarily due to a 16.5% increase in the average price of fuel. Fuel gallons sold increased 3.6% to 2.7 billion gallons, which increased fuel revenue by an additional $349,451. Grocery and general merchandise revenue for the fiscal year was $3,445,777, an increase of 9.7% due to strong sales of packaged beverages, snacks, and candy. Prepared food and dispensed beverage revenue increased 9.8% to $1,322,560 due to increased sales of pizza slices, whole pies, and donuts.

Total revenue less cost of goods sold (excluding depreciation and amortization) was 20.4% for fiscal 2023 compared with 21.3% for the prior year. Fuel cents per gallon increased to 40.2 cents in fiscal 2023 from 36.0 cents in fiscal 2022. The grocery and general merchandise revenue less related cost of goods sold (exclusive of depreciation and amortization) increased to 33.6% from 32.7% during fiscal 2023 compared to fiscal 2022. Grocery and general merchandise revenue less related cost of goods sold (exclusive of depreciation and amortization) was positively impacted by mix shift to higher margin items like energy drinks, candy, and private label products, as well as retail price adjustments, offset by inflationary pressures. The prepared food and dispensed beverage revenue less related cost of goods sold (exclusive of depreciation and amortization) decreased to 56.6% from 59.2% during fiscal 2023 compared to the prior year, primarily due to higher ingredient costs, notably cheese, and higher levels of stales, which were partially offset by retail price adjustments.

Operating expenses increased 8.1% ($158,469) in fiscal 2023. A one-time payment of $15,297 was received from the resolution of a legal matter, which reduced operating expenses by approximately 1%. Approximately 3% of the increase is due to operating 69 more stores than a year ago. Approximately 2% of the increase was related to same-store operations. One percent of the increase was related to same-store credit card fees driven by higher retail fuel prices, retail price adjustments and strong inside sales. Approximately 1% of the change is related to an increase in variable incentive compensation due to strong financial performance. Same-store employee expense was flat as the increase in employee wage rate was offset by a 2% reduction in same-store labor hours. The majority of all operating expenses are wages and wage-related costs.

Depreciation and amortization expense increased 3.2% ($9,590) to $313,131 in fiscal 2023 from $303,541 in fiscal 2022. The increase was due primarily to acquisitions and capital expenditures made in fiscal 2023 and fiscal 2022, offset by a decrease in accelerated depreciation, which was recorded in the prior year on equipment replaced in remodels.

Interest, net decreased 9.1% ($5,157) to $51,815 in fiscal 2023 from $56,972 in fiscal 2022. The decrease was primarily attributable to an increase in interest income due to the increase in cash and cash equivalents and interest rates.

The effective tax rate increased to 24.0% in fiscal 2023 from 22.9% in fiscal 2022. The increase in the effective tax rate was driven by a decrease in excess tax benefits recognized on share-based awards and a decrease in favorable permanent differences.

Net income increased to $446,691 in fiscal 2023 from $339,790 in fiscal 2022. The increase was primarily attributable to higher profitability both inside the store and in fuel. This increase was partially offset by higher operating expenses, depreciation and amortization, and income tax expense. See discussion in the paragraphs above for the primary drivers for each of these increases.

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

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COMPANY TOTAL REVENUE AND REVENUE LESS COST OF GOODS SOLD (EXCLUDING DEPRECIATION AND AMORTIZATION) BY CATEGORY

(1)The 'Other' category historically has primarily consisted of lottery, which is presented net of applicable costs, and car wash. As a result of the Buchanan Energy acquisition in the prior fiscal year, we acquired a dealer network where Casey’s manages fuel wholesale supply agreements to these stores. The activity related to this dealer network is included in the 'Other' category and is presented gross of applicable costs.

INDIVIDUAL STORE COMPARISONS (1)

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

(2)Inside sales is comprised of sales related to the grocery and general merchandise and prepared food and dispensed beverage categories.

(3)Average operating income represents retail sales less cost of goods sold, operating expenses and depreciation and amortization attributable to a particular store; it excludes interest, federal and state income taxes, and Company operating expenses not attributable to a particular store.

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SAME STORE SALES BY CATEGORY (1)

(1)Same-store sales is a common metric used in the convenience store industry. We define same-store sales as the total sales increase (or decrease) for stores open during the full time of the periods being presented. The store must be open for each entire fiscal year being compared. Remodeled stores that remained open or were closed for just a very brief period of time (less than a week) during the period being compared remain in the same store sales comparison. If a store is replaced, either at the same location (razed and rebuilt) or relocated to a new location, it is removed from the comparison until the new store has been open for each entire period being compared. Newly constructed and acquired stores do not enter the calculation until they are open for each entire period being compared as well.

(2)The increase in grocery and general merchandise same-store sales was primarily due to strong sales of packaged beverages, snacks and candy. The increase in prepared food and dispensed beverage same-store sales was attributable to improved sales in pizza slices, whole pies, and donuts. Both categories were also impacted favorably by strategic retail price adjustments.

Use of Non-GAAP Measures

We define EBITDA as net income before net interest expense, income taxes, depreciation and amortization. Adjusted EBITDA further adjusts EBITDA by excluding the gain or loss on disposal of assets as well as impairment charges. Neither EBITDA nor Adjusted EBITDA are presented in accordance with GAAP.

We believe EBITDA and Adjusted EBITDA are useful to investors in evaluating our operating performance because securities analysts and other interested parties use such calculations as a measure of financial performance and debt service capabilities, and they are regularly used by management for internal purposes including our capital budgeting process, evaluating acquisition targets, and assessing store performance.

EBITDA and Adjusted EBITDA are not recognized terms under GAAP and should not be considered as a substitute for net income, cash flows from operating activities or other income or cash flow statement data. These measures have limitations as analytical tools, and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP. We strongly encourage investors to review our financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.

Because non-GAAP financial measures are not standardized, EBITDA and Adjusted EBITDA, as defined by us, may not be comparable to similarly titled measures reported by other companies. It therefore may not be possible to compare our use of these non-GAAP financial measures with those used by other companies.

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

For the year ended April 30, 2023, EBITDA and Adjusted EBITDA increased 18.9% and 19.9%, respectively. The increase was primarily attributable to higher profitability both inside the store and in fuel, which was partially offset by higher operating expenses due to operating 69 more stores than one year ago, an increase in store operations cost, as well as increased credit card fees resulting from increased revenue.

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Critical Accounting Policies and Estimates

Critical accounting policies are those accounting policies that management believes are important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective judgments, often because of the need to estimate the effects of inherently uncertain factors.

Business Combinations

The Company uses the acquisition method of accounting for transactions meeting the definition of a business combination. The acquisitions are recorded in the financial statements by allocating the purchase price to the assets acquired, including intangible assets, and liabilities assumed, based on their estimated fair values at the acquisition date as determined by third party appraisals or internal estimates. The more significant assets acquired include buildings, equipment, and land. The Company primarily values buildings and equipment using the cost method and land using comparable land sales. The purchase price is determined based upon the fair value of consideration transferred to the seller. Fair values are typically determined using Level 3 inputs (see Note 3 to the consolidated financial statements). Given these estimates often are based upon unobservable inputs, the estimates require significant judgment when determining the overall value and actual results could differ from the estimates originally established. The excess of the cost of the acquisition over the net amounts assigned to the fair value of the assets acquired and the liabilities assumed is recorded as goodwill if the acquisition is considered to be a business combination. During a one-year period from the acquisition date, amounts are allowed to be provisional for areas that are expected to be adjusted to their final amounts during the measurement period. These provisional adjustments are for when the buyer obtains additional information about the facts and circumstances that existed as of the acquisition date. Subsequent adjustments recorded to provisional balances within the measurement period are recorded in the period in which the adjustment is identified. Acquisition-related transaction costs are recognized as period costs as incurred.

Inventory

Inventories, which consist of merchandise and fuel, are stated at the lower of cost or market. For fuel inventories, cost is determined through the use of the first-in, first-out (FIFO) method. For merchandise inventories, cost is determined through the use of the last-in, first-out (LIFO) method. Inventory valued using the LIFO method of inventory requires judgement when making the determination of appropriate indices to be used for determining price level changes.

Long-lived Assets

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 (see Note 3 to the consolidated financial statements). 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 $3,500 in fiscal 2023, $1,056 in fiscal 2022, and $3,846 in fiscal 2021. Impairment charges are a component of operating expenses.

Self-insurance

The Company is primarily self-insured for Team Member healthcare, workers’ compensation, general liability, and automobile claims. The self-insurance claim liability for workers’ compensation, general liability, and automobile claims 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 potential 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 balances of our self-insurance reserves were $61,168 and $53,752 for the years ended April 30, 2023 and 2022, respectively.

Recent Accounting Pronouncements

Refer to Note 1 of the consolidated financial statements for a description of new accounting pronouncements applicable to the Company.

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Liquidity and Capital Resources

Due to the nature of our business, cash provided by operations is our primary source of liquidity. The Company finances our inventory purchases primarily from normal trade credit aided by relatively rapid inventory turnover. This turnover allows us to conduct operations without large amounts of cash and working capital. As of April 30, 2023, the Company’s ratio of current assets to current liabilities was 0.99 to 1. The ratio at April 30, 2022 and at April 30, 2021 was 0.80 to 1 and 1.18 to 1, respectively. The increase in the ratio from the prior year is partially attributable to an increase in cash and cash equivalents due to strong free cash flows, and a decrease in payments for acquisitions.

We believe our current $850,000 unsecured revolving credit facility, our $25,000 unsecured bank line of credit (subsequent to year-end this increased to $50,000, see discussion in Note 3), current cash and cash equivalents, and the future cash flow from operations will be sufficient to satisfy the working capital needs of our business.

Net cash provided by operating activities was $881,951 for the year ended April 30, 2023, compared to $788,741 for the year ended April 30, 2022. The increase in operating cash flows was partially attributable to an increase in net income adjusted for non-cash reconciling items (depreciation and amortization, amortization of debt issuance costs, stock-based compensation, and loss (gain) on disposal of assets and impairment charges) of approximately $132,873. Refer to “Fiscal 2023 Compared with Fiscal 2022” on page 21 for further details on the primary driver for these changes. This increase was partially offset by the changes in deferred income taxes and changes in components of assets and liabilities. Cash provided by operations can be impacted by variability in the timing of payments and receipts for certain assets and liabilities, as well as changes in commodity costs year-over-year. The impacts from changes in deferred income taxes decreased by $59,595, attributable to lower accelerated tax depreciation on acquisitions and capital expenditures made in the current fiscal year. Additionally, impacts from accounts payable decreased $175,376 due to higher fuel costs in the prior fiscal year and an effort to better utilize available payment terms introduced in the prior fiscal year. These decreases were partially offset by impacts from changes in income tax balances which increased $56,368, primarily attributable to the timing of tax payments across the last two fiscal years, and impacts from inventories which increased $100,820, attributable to higher fuel costs in the prior year.

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

Purchases of property and equipment and payments for acquisitions of businesses typically represent the single largest use of Company funds. Management believes that by acquiring, building, and reinvesting in stores, the Company will be better able to respond to competitive challenges and increase operating efficiencies. During fiscal 2023, we expended $562,137 for property and equipment, primarily for construction, acquisition, and remodeling of stores compared with $1,228,113 in the prior year. The decrease was primarily due to significant acquisition activity occurring in the prior year (see Note 2 for further discussion).

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

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As of April 30, 2023, we had long-term debt and finance lease obligations consisting of:

Interest on the 3.67% Senior Notes Series A and 3.75% Senior Notes Series B is payable on the 17th day of each June and December. Principal on the Senior Notes Series A and Series B is payable in various installments beginning June 17, 2022 (Series A) and December 17, 2022 (Series B) through December 2028. We may prepay the 3.67% and 3.75% Senior Notes in whole or in part at any time in an amount of not less than $2,000 at a redemption price calculated in accordance with the Note Agreement dated June 17, 2013, as amended, between the Company and the purchasers of the Senior Notes Series A and Series B.

Interest on the 3.65% Senior Notes Series C is payable on the 2nd day of each May and November, while the interest on the 3.72% Senior Notes Series D is payable on the 28th day of each April and October. Principal on the Senior Notes Series C and Series D is payable in various installments beginning May 2, 2025 (Series C) and October 28, 2025 (Series D) through October 2031. We may prepay the 3.65% and 3.72% Senior Notes in whole or in part at any time in an amount of not less than $2,000 at a redemption price calculated in accordance with the Note Agreement dated May 2, 2016, as amended, between the Company and the purchasers of the Senior Notes Series C and Series D.

Interest on the 3.51% Senior Notes Series E is payable on the 13th day of each June and December, while the interest on the 3.77% Senior Notes Series F is payable on the 22nd day of each February and August. Principal on the Senior Notes Series E and Series F is payable in full on June 13, 2025 (Series E) and August 22, 2028 (Series F), respectively. We may prepay the 3.51% and 3.77% Senior Notes in whole or in part at any time in an amount of not less than $2,000 at a redemption price calculated in accordance with the Note Agreement dated June 13, 2017, as amended, between the Company and the purchasers of the Senior Notes Series E and Series F.

Interest on the 2.85% Senior Notes Series G and 2.96% Senior Notes Series H is payable on the 7th day of each February and August. Principal on the Senior Notes Series G and Series H is payable in full on August 7, 2030 (Series G) and August 6, 2032 (Series H), respectively. We may prepay the 2.85% and 2.96% Senior Notes in whole or in part at any time in an amount of not less than $2,000 at a redemption price calculated in accordance with the Note Purchase Agreement dated June 30, 2020, between the Company and the purchasers of the Senior Notes Series G and Series H.

During the fourth quarter, the Company refinanced its existing credit agreement (dated January 11, 2019, as amended, by and among the Company, the lenders party thereto and Royal Bank of Canada, as administrative agent) which resulted in its termination and repayment, in full, and entry into a new credit agreement (dated April 21, 2023, by among the lenders thereto and Wells Fargo Bank, National Association, as administrative agent) to provide for (a) a $250 million unsecured term loan , and (b) an $850 million unsecured revolving credit facility (collectively, the “Credit Facilities”). See Note 3 for additional information related to the Credit Facilities (see “Prior Credit Agreement” and “New Credit Agreement” sections). Amounts borrowed under the Credit Facilities bear interest at variable rates based upon, at the Company’s option, either: (a) either Term SOFR or Daily Simple SOFR, in each case plus 0.10% (with a floor of 0.00%) for the interest period in effect, plus an applicable margin ranging from 1.10% to 1.70% or (b) an alternate base rate, which generally equals the highest of (i) the prime

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commercial lending rate announced by the Administrative Agent as its “prime rate”, (ii) the federal funds rate plus 1/2 of 1.00%, and (iii) Adjusted Daily Simple SOFR plus 1.00%, each plus an applicable margin ranging from 0.10% to 0.70% and each with a floor of 1.00%. The applicable margins are dependent upon the Company's quarterly Consolidated Leverage Ratio, as defined in the credit agreement. We have the right at any time to prepay all or a portion of the outstanding balance without premium or penalty, other than customary “breakage” costs with respect to Term SOFR-based borrowings, with prior notice given.

To date, we have funded capital expenditures primarily through funds generated from operations, the proceeds of the sale of common stock, issuance of debt or other bank financing, and existing cash. Future capital required to finance operations, improvements, and the anticipated growth in the number of stores is expected to come from cash generated by operations, its $850,000 committed unsecured revolving credit facility, its additional $25,000 unsecured bank line of credit, and additional long-term debt or other securities as circumstances may dictate. We do not expect such capital needs to adversely affect liquidity.

The table below presents our significant contractual obligations, including interest, at April 30, 2023:

(1)The long-term debt portion of the table above excludes interest payments related to the Company's term loan facility, due to the variable nature of the required interest payments.

Unrecognized tax benefits relate to uncertain tax positions and since we are not able to reasonably estimate the timing of the payments or the amount by which the liability will increase or decrease over time, the related timing of the payment of the balances have not been reflected in the above “Payments due by period” table.

At April 30, 2023, the Company had a total of $10,957 in gross unrecognized tax benefits. Of this amount, $8,656 represents the amount of unrecognized tax benefits that, if recognized, would impact our effective tax rate. The total amount of accrued interest and penalties for such unrecognized tax benefits was $386 as of April 30, 2023. Interest and penalties related to income taxes are classified as income tax expense in our consolidated statements of income. The federal statute of limitations remains open for the tax years 2019 and forward. Tax years 2013 and forward are subject to audit by state tax authorities depending on open statute of limitations waivers and the tax code of each state.

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 Company has no ongoing federal or state income tax examinations. At this time, management believes it is reasonably possible the aggregate amount of unrecognized tax benefits will decrease by $2,500 within the next 12 months. This expected decrease is due to the expiration of statute of limitations related to certain federal and state income tax filing positions.

Included in other long-term liabilities on our consolidated balance sheet at April 30, 2023, was a $11,534 obligation for deferred compensation. Additionally, $756 was recognized in current liabilities as of April 30, 2023 related to deferred compensation. As the specific payment dates for a portion of the deferred compensation outstanding are unknown due to the unknown retirement dates of many of the participants, the related timing of the payment of the balances have not been reflected in the above “Payments due by period” table. However, known payments of $8,777 will be due during the next 5 years.

At April 30, 2023, we were partially self-insured for workers’ compensation claims in all but two states of our operating territory. In North Dakota and Ohio, we are required to participate in an exclusive, state managed fund for all workers compensation claims. We were also partially self-insured for general liability and auto liability under an agreement that provides for annual stop-loss limits equal to or exceeding $2,000 for auto liability and $1,000 for workers' compensation and general liability.

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Forward-Looking Statements

This Form 10-K, including but not limited to the Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. The words “may,” “will,” "should," “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “continue,” and similar expressions are used to identify forward-looking statements. Forward-looking statements represent the Company’s current expectations or beliefs concerning future events and trends that we believe may affect our financial condition, liquidity and related sources and needs, supply chain, results of operations and performance at our stores, business strategy, strategic plans, growth opportunities, integration of acquisitions, acquisition synergies, short-term and long-term business operations and objectives including our long-term strategic plan, wholesale fuel, inventory and ingredient costs and the potential effects of the conflict in Ukraine and COVID-19 on our business.  The Company cautions that these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, including, without limitation, the following risk factors described more completely above in Item 1A entitled “Risk Factors”:

Business Operations; Our business and our reputation could be adversely affected by a cyber or data security incident or the failure to protect sensitive guest, Team Member or supplier data, or the failure to comply with applicable regulations relating to data security and privacy; food-safety issues and foodborne illnesses, whether actual or reported, or the failure to comply with applicable regulations relating to the transportation, storage, preparation or service of food, could adversely affect our business and reputation; we may be adversely impacted by increases in the cost of food ingredients and other related costs; a significant disruption to our distribution network, to the capacity of the distribution centers, or timely receipt of inventory could adversely impact our sales or increase our transaction costs, which could have a material adverse effect on our business; we could be adversely affected if we experience difficulties in, or are unable to recruit, hire or retain, members of our leadership team and other distribution, field and store Team Members; any failure to anticipate and respond to changes in consumer preferences, or to introduce and promote innovative technology for guest interaction, could adversely affect our financial results; we rely on our information technology systems, and a number of third-party software providers, to manage numerous aspects of our business, and a disruption of these systems could adversely affect our business; increased credit card expenses could lead to higher operating expenses and other costs for the Company; our operations present hazards and risks which may not be fully covered by insurance, if insured; the dangers inherent in the storage and transport of fuel could cause disruptions and could expose to us potentially significant losses, costs or liabilities; consumer or other litigation could adversely affect our financial condition and results of operations; pandemics or disease outbreaks, such as COVID-19, responsive actions taken by governments and others to mitigate their spread, and guest behavior in response to these events, have, and may in the future, adversely affect our business operations, supply chain and financial results; and, covenants in our Senior Notes and credit facility agreements require us to comply with certain covenants and meet financial maintenance tests and the failure to comply with these requirements could have a material impact to us.

Governmental Actions, Regulations, and Oversight: Compliance with and changes in tax laws could adversely affect our performance; we are subject to extensive governmental regulations; governmental action and campaigns to discourage tobacco and nicotine use and other tobacco products may have a material adverse effect on our revenues and gross profit; and, wholesale cost and tax increases relating to tobacco and nicotine products could affect our operating results.

Industry: General economic and political conditions that are largely out of the Company’s control may adversely affect the Company’s financial condition and results of operations; developments related to fuel efficiency, fuel conservation practices, climate change, and changing consumer preferences may decrease the demand for motor fuel; unfavorable weather conditions can adversely affect our business; the volatility of wholesale petroleum costs could adversely affect our operating results; and, the convenience store industry is highly competitive.

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

Common Stock: The market price for our common stock has been and may in the future be volatile, which could cause the value of your investment to decline; any issuance of shares of our common stock in the future could have a dilutive effect on your investment; and, Iowa law and provisions in our charter documents may have the effect of preventing or hindering a change in control and adversely affecting the market price of our common stock.

Although we have attempted to list the important factors that presently affect the Company’s business and operating results, we further caution you that other factors we have not identified may in the future prove to be important in affecting our business and results of operations. We ask you not to place undue reliance on any forward-looking statements because they speak only of our views as of the statement dates. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

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