CASEY'S GENERAL STORES, INC. Overview
Casey's 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" or "Bucky's", as the "Company" or "Stores") throughout 17 states, over half of which are located inIowa ,Missouri andIllinois . All convenience stores carry a broad selection of food (including freshly prepared foods such as pizza, donuts, and sandwiches), beverages, tobacco and nicotine products, health and beauty aids, automotive products, and other nonfood items. In addition, all but three offer fuel for sale on a self-service basis. The Company derives its revenue primarily from the retail sale of fuel and the products offered in its stores. As ofOctober 31, 2021 , there were a total of 2,380 stores in operation. During the 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, drinks, tobacco products, and other essentials. However, such locations typically do not have a kitchen and have limited prepared food offerings. As ofOctober 31, 2021 , 17 stores operate under the "GoodStop" brand. Additionally, the Company is temporarily operating certain locations acquired from Buchanan Energy under the name, "Bucky's." The Company plans to eventually transition all "Bucky's" locations to either the "Casey's" or "GoodStop" brand. The Company also operates two stores selling primarily tobacco products, one grocery store, and one liquor store. Approximately 52% of our stores were opened in areas with populations of fewer than 5,000 persons, while approximately 23% of all stores were opened in communities with populations exceeding 20,000 persons. Three distribution centers are currently in operation (inAnkeny, Iowa adjacent to our corporate headquarters [which we refer to as our Store Support Center], inTerre Haute, Indiana , and inJoplin, Missouri ) from which certain grocery and general merchandise and prepared food and dispensed beverage items are supplied to our stores. As ofOctober 31, 2021 , the Company leased a combination of land and/or building at 86 locations. The Company reported diluted earnings per common share of$2.59 for the second quarter of fiscal 2022. For the same quarter a year-ago, diluted earnings per common share was$3.00 . The following table represents the roll forward of store growth through the second quarter of fiscal 2022: Store Count Total stores atApril 30, 2021 2,243 New store construction 7 Acquisitions 144 Acquisitions not opened (6) Prior acquisitions opened 4 Closed (12)
Total stores at
Acquisitions in the table above include, in part, 89 stores which were acquired from Buchanan Energy onMay 13, 2021 . The table excludes three sites that were included in the transaction, but were divested by the Company shortly after closing as part of a consent order with theFederal Trade Commission . Additionally, it includes 48 stores from theCircle K transaction that closed in June. For additional discussion, refer to Note 6 in the condensed consolidated financial statements. Throughout the first six months of fiscal 2022, the Company has generally seen an increase in guest traffic and sales of certain products compared to the same period a year ago as schools, businesses and the economy in general have gone through various stages of reopening from COVID-19. The Company has, however, also seen a recent increase in the number of COVID-19 cases reported amongst its team members and in certain areas of its operating territory, which in some instances has led to temporary store closures (which often times only last for a matter of hours) for COVID-19 cleaning protocols, labor challenges and the return of various locally imposed governmental restrictions, including but not limited to mask and social distancing mandates. In addition, onNovember 4, 2021 , theOccupational Safety and Health Administration (OSHA) announced a requirement that employers with 100 or more employees, which includes the Company, ensure their employees are fully vaccinated for COVID-19 or undergo regular testing. The original implementation date for the requirements wasJanuary 4, 2022 ; however, they have been temporarily enjoined by a federal appeals court andOSHA has temporarily suspended enforcement. Should these requirements eventually be put in place, they may have a material impact on the Company due to the costs and logistics of testing, the cost and impact of employees electing to leave the Company's workforce permanently, or the impact of and cost to attract prospective employees that may seek employment elsewhere, instead of being subject to the requirements. As such, the continued unpredictable nature of the COVID-19 pandemic, including case trends, severity of new 15 -------------------------------------------------------------------------------- Table of Contents variants, including Omicron, the efficacy of vaccines and the willingness of individuals to be vaccinated, further governmental restrictions or protections, and its effect on the Company's workforce and the economy as a whole, could again lead or contribute to additional disruptions, labor shortages and increased operating expenses for the foreseeable future. While COVID-19 continues to result in, and will continue to bring, significant challenges and uncertainty to our operating environment, we believe that our resilient business model and the strength of our brand and balance sheet position us well to navigate, and eventually emerge from, the pandemic. 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 both periods being presented. We exclude from the calculation any acquired stores and any stores that have been replaced with a new store, until such stores have been open during the full time of both periods being presented. Stores that have undergone a major remodel, had adjustments in hours of operation, added pizza delivery, or had other revisions to their operating format remain in the calculation. The second quarter results reflected a 2.5% increase in same-store fuel gallons sold, with an average fuel revenue less related cost of goods sold (exclusive of depreciation and amortization) of34.7 cents per gallon, compared to35.3 cents per gallon in the same quarter a year ago. Same-store gallons sold were positively impacted by higher guest traffic. The Company sold 4.2 million renewable fuel credits for$6.2 million during the quarter, compared to the sale of 6.1 million renewable fuel credits in the second quarter of the prior year, which generated$3.8 million . Same-store sales of grocery and general merchandise increased 6.8% and prepared food and dispensed beverage increased 4.1% during the second quarter. Note that we have changed the names of the "grocery and other merchandise" category to "grocery and general merchandise" and the "prepared food and fountain" category to "prepared food and dispensed beverage" to better reflect the composition of the category. There have been no changes to the makeup of the categories, and they remain directly comparable to prior periods. The increase in grocery and general merchandise same-store sales was primarily due to stronger sales of packaged beverages and grocery items, such as salty snacks and meat snacks. The increase in prepared food and dispensed beverage same-store sales was primarily attributable to continued momentum in pizza slices, driven in part by increased guest traffic inside the store. Prepared food and dispensed beverage same-store sales were adversely impacted by supply chain challenges in the quarter, notably in bakery and dispensed beverages. The Company also implemented selective price increases to offset inflationary pressures throughout the business. Three Months Ended October 31, 2021 Compared to Three Months Ended October 31, 2020 (Dollars and Amounts in Thousands) Prepared Grocery & Food & General Dispensed Three Months Ended October 31, 2021 Fuel Merchandise Beverage Other Total Revenue$ 2,048,831 $ 829,484 $ 309,504 $ 75,123 $ 3,262,942 Revenue less cost of goods sold (excluding depreciation and amortization)$ 231,883 $ 275,940 $ 187,498 $ 22,269 $ 717,590 11.3 % 33.3 % 60.6 % 29.6 % 22.0 % Fuel gallons 668,757 Prepared Grocery & Food & General Dispensed Three Months Ended October 31, 2020 Fuel Merchandise Beverage Other Total Revenue$ 1,193,491 $ 718,226 $ 288,822 $ 15,366 $ 2,215,905 Revenue less cost of goods sold (excluding depreciation and amortization)$ 204,154 $ 238,992 $ 173,661 $ 14,953 $ 631,760 17.1 % 33.3 % 60.1 % 97.3 % 28.5 % Fuel gallons 577,581 Total revenue for the second quarter of fiscal 2022 increased by$1,047,037 (47.3%) over the comparable period in fiscal 2021. Retail fuel sales increased by$855,340 (71.7%) as the average retail price per gallon increased 48.3%, and the number of gallons sold increased by 91,176 (15.8%). During this same period, retail sales of grocery and general merchandise increased by$111,258 (15.5%), due to operating 161 more stores than a year ago and strong sales of packaged beverages, salty snacks, and 16 -------------------------------------------------------------------------------- Table of Contents meat snacks. Prepared food and dispensed beverage sales increased by$20,682 (7.2%), due to operating 161 more stores than a year ago and continued momentum in pizza slices. The other revenue category historically has primarily consisted of lottery, which is presented net of applicable costs, and car wash. As a result of the Buchanan Energy acquisition, we acquired a dealer network of 81 stores where Casey's will manage 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. Other revenues increased$59,757 (388.9%) for the second quarter of fiscal 2022 compared to the prior year, driven primarily by activity related to the dealer network. Revenue less cost of goods sold (excluding depreciation and amortization) was 22.0% of revenue for the second quarter of fiscal 2022, compared to 28.5% for the comparable period in the prior year. Fuel revenue less related cost of goods sold (exclusive of depreciation and amortization) was 11.3% of fuel revenue during the second quarter of fiscal 2022, compared to 17.1% in the second quarter of the prior year, largely attributable to higher average retail price of fuel per gallon. Revenue per gallon less cost of goods sold per gallon (exclusive of depreciation and amortization) was34.7 cents in the second quarter of fiscal 2022, compared to35.3 cents for the comparable period in the prior year. Grocery and general merchandise revenue less related cost of goods sold (exclusive of depreciation and amortization) was consistent at 33.3% for the current year and prior year periods. The current year percentage was positively impacted by the private label program and procurement initiatives, offset by inflationary pressures. Prepared food and dispensed beverage revenue less related cost of goods sold (exclusive of depreciation and amortization) increased to 60.6% of revenue, compared to 60.1% for the comparable period in the prior year, primarily due to a resurgence in pizza slices and procurement initiatives, offset by inflationary pressures. Operating expenses increased$90,296 (22.0%) in the second quarter of fiscal 2022 from the comparable period in the prior year, primarily due to operating 161 more stores compared to the same period a year ago, higher wage rates, and a 35% increase in credit card fees from higher retail fuel pricing along with higher sales volume. Depreciation and amortization expense increased by 15.5% to$74,258 in the second quarter of fiscal 2022 from$64,294 for the comparable period in the prior year. The increase was primarily due to operating 161 more stores than a year ago and capital expenditures during the previous twelve months. Interest expense increased by$2,886 (27.1%), primarily attributable to a$300,000 draw on the Term Loan Facility to fund the acquisition ofBuchanan Energy during the first quarter. The effective tax rate increased to 25.0% in the second quarter of fiscal 2022 compared to 23.6% in the same period of fiscal 2021. The increase in the effective tax rate was primarily due to a decrease in favorable permanent differences. Net income decreased by$15,152 (13.5%) to$96,831 from$111,983 in the comparable period in the prior year. The decrease in net income was primarily attributable to increased fuel and merchandise contribution from improved guest traffic, offset by higher operating expenses and depreciation driven primarily from operating 161 more stores than a year ago and higher wage rates. 17
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Six Months Ended October 31, 2021 Compared to
Six Months Ended October 31, 2020
(Dollars and Amounts in Thousands)
Prepared
Grocery & Food &
General Dispensed
Six Months Ended October 31, 2021 Fuel Merchandise Beverage Other Total
Revenue $ 4,015,986 1,664,969 617,944 146,036 6,444,935
Revenue less cost of goods sold
(excluding depreciation and
amortization) 466,358 551,348 375,604 48,167 1,441,477
11.6 % 33.1 % 60.8 % 33.0 % 22.4 %
Fuel gallons 1,336,291
Prepared
Grocery & Food &
General Dispensed
Six Months Ended October 31, 2020 Fuel Merchandise Beverage Other Total
Revenue $ 2,279,472 $ 1,450,087 $ 559,588 $ 31,779 $ 4,320,926
Revenue less cost of goods sold
(excluding depreciation and
amortization) $ 414,184 $ 474,591 $ 335,309 $ 31,179 $ 1,255,263
18.2 % 32.7 % 59.9 % 98.1 % 29.1 %
Fuel gallons 1,127,089
Total revenue for the first six months of fiscal 2022 increased by $2,124,009
(49.2%) over the comparable period in fiscal 2021. Retail fuel sales increased
by $1,736,514 (76.2%) as the average retail price per gallon increased 48.6%,
and the number of gallons sold increased 209,202 (18.6%). During this same
period, retail sales of grocery and general merchandise increased by $214,882
(14.8%) due to operating 161 more stores than a year ago and strong sales of
packaged beverages, salty snacks, and meat snacks. Prepared food and dispensed
beverage sales increased by $58,356 (10.4%), due to operating 161 more stores
than a year ago and a resurgence in pizza slices.
The other revenue category historically has primarily consisted of lottery,
which is presented net of applicable costs, and car wash. As a result of the
Buchanan Energy acquisition, we acquired a dealer network of 81 stores where
Casey's will manage 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. These revenues increased $114,257
(359.5%) through the second quarter of fiscal 2022 compared to the prior year,
driven primarily by activity related to the dealer network.
Revenue less cost of goods sold (excluding depreciation and amortization) was
22.4% of revenue for the first six months of fiscal 2022, compared to 29.1% for
the comparable period in the prior year. Fuel revenue less related cost of goods
sold (exclusive of depreciation and amortization) was 11.6% of fuel revenue for
the first six months of fiscal 2022 compared to 18.2% for the first six months
of the prior year. Revenue per gallon less cost of goods sold per gallon
(exclusive of depreciation and amortization) was 34.9 cents for the first six
months of fiscal 2022 compared to 36.7 cents in the prior year.
Grocery and general merchandise revenue less related cost of goods sold
(exclusive of depreciation and amortization) increased to 33.1% of grocery and
general merchandise revenue, compared to 32.7% in the prior year. Grocery and
general merchandise revenue less related cost of goods sold (exclusive of
depreciation and amortization) was positively impacted by mix shift, including
gaining market share on the private label program, and procurement initiatives,
offset by inflationary pressures. Prepared food and dispensed beverage revenue
less related cost of goods sold (exclusive of depreciation and amortization)
increased to 60.8% of revenue, compared to 59.9% in the prior year, primarily
due to a resurgence in pizza slices and procurement initiatives, offset by
inflationary pressures.
Operating expenses increased by $183,136 (23.0%) in the first six months of
fiscal 2022 from the comparable period in the prior year, primarily due to
restoring store operation hours to pre-COVID levels, operating 161 more stores
compared to the same period a year ago, higher wage rates, a 37% increase in
credit card fees from higher retail fuel pricing along with higher sales volume,
and one-time deal and integration costs associated with the Buchanan Energy and
Circle K acquisitions.
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Depreciation and amortization expense increased 15.4% to $150,146 for the first
six months of fiscal 2022 from $130,114 for the comparable period in the prior
year. The increase was primarily due to operating 161 more stores than a year
ago and capital expenditures during the previous twelve months.
Interest expense increased by $3,209 (13.3%), primarily attributable to a
$300,000 draw on the Term Loan Facility to fund the acquisition of Buchanan
Energy during the first quarter.
The effective tax rate increased to 24.1% in the first six months of fiscal year
2022 compared to 23.7% in the same period of fiscal year 2021. The increase in
the effective tax rate was driven by a one-time expense to update the state
deferred tax rate following the Buchanan Energy and Circle K transactions offset
by an increase in excess tax benefits recognized on share-based awards.
Net income decreased by $16,585 (7.1%) to $215,990 from $232,575 in the prior
year. The decrease in net income was primarily attributable to increased fuel
and merchandise contribution from improved guest traffic, offset by higher
operating expenses and depreciation driven primarily from operating 161 more
stores than a year ago, an increase in store hours and higher wage rates.
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 considered GAAP measures, 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.
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,
assessing performance, and awarding incentive compensation.
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 three and six months ended October 31, 2021 and 2020:
Three months ended Six months ended
October 31, October 31, October 31, October 31,
2021 2020 2021 2020
Net income $ 96,831 $ 111,983 $ 215,990 $ 232,575
Interest, net 13,520 10,634 27,250 24,041
Federal and state income taxes 32,337 34,501 68,519 72,097
Depreciation and amortization 74,258 64,294 150,146 130,114
EBITDA $ 216,946 $ 221,412 $ 461,905 $ 458,827
Loss (gain) on disposal of assets and
impairment charges 63 1,819 (1,707) 2,159
Adjusted EBITDA $ 217,009 $ 223,231 $ 460,198 $ 460,986
For the three months ended October 31, 2021 , EBITDA and Adjusted EBITDA
decreased 2.0% and 2.8%, respectively, when compared to the same period a year
ago. For the six months ended October 31, 2021 , EBITDA increased 0.7% and
Adjusted EBITDA decreased 0.2%, compared to the same period a year ago. The
decreases in Adjusted EBITDA are primarily attributable to increased fuel and
merchandise contribution from improved guest traffic, offset by higher operating
expenses driven primarily from operating 161 more stores than a year ago and
higher wage rates.
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Critical Accounting Policies
Critical accounting policies are those accounting policies that management
believes are important to the portrayal of the Company's financial condition and
results of operations. The Company's critical accounting policies are described
in the Form 10-K for the year ended April 30, 2021 , and such discussion is
incorporated herein by reference. There have been no changes to these policies
in the six months ended October 31, 2021 .
Liquidity and Capital Resources
Due to the nature of the Company's business, cash provided by operations is the
Company's primary source of liquidity. The Company finances its inventory
purchases primarily from normal trade credit aided by the relatively rapid
turnover of inventory. This turnover allows the Company to conduct its
operations without large amounts of cash and working capital. As of October 31,
2021 , the Company's ratio of current assets to current liabilities was 0.99 to
1. The ratio at October 31, 2020 and April 30, 2021 was 1.30 to 1 and 1.18 to 1,
respectively. The decrease in the ratio is partially attributable to a decrease
in cash and cash equivalents associated with payments for the acquisitions of
Buchanan Energy and 48 stores from Circle K , offset by an increase in inventory
due to operating 161 more stores than a year ago and higher fuel pricing.
Additionally, current liabilities have increased primarily related to accounts
payable, due to increasing store count, higher fuel pricing, as well as an
effort to better utilize available payment terms.
Management believes that the Bank Line of $25,000 and the Revolving Facility of
$450,000 , combined with the 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 operations decreased $96,580 (17.5%) in the six months
ended October 31, 2021 from the comparable period in the prior year, due to
changes in inventories, accounts payable, and accrued expenses. Cash used in
investing in the six months ended October 31, 2021 increased $571,606 over prior
year, due primarily to cash paid for the acquisition of Buchanan Energy for
$571,725 and 48 Circle K stores for $41,416 , net of cash acquired. For
additional discussion, refer to Note 6 in the condensed consolidated financial
statements. Cash provided by financing increased $316,929 (456.7%), primarily
due to a $300,000 draw on the Term Loan Facility, also discussed in Note 4 and
Note 6.
Purchases of property and equipment and payments for acquisitions of businesses
typically represent the 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 the first six months of fiscal 2022, the Company expended $749,644 ,
compared to $158,815 for the comparable period in the prior year related to
these activities. The increase from the prior year is due to the Buchanan Energy
and Circle K acquisitions.
As of October 31, 2021 , the Company had long-term debt consisting of:
Finance lease liabilities 71,480
3.67% Senior notes (Series A) due in 7 installments beginning
150,000
3.75% Senior notes (Series B) due in 7 installments beginning
50,000
3.65% Senior notes (Series C) due in 7 installments beginning
50,000
3.72% Senior notes (Series D) due in 7 installments beginning
50,000
3.51% Senior notes (Series E) dueJune 13, 2025
150,000
3.77% Senior notes (Series F) dueAugust 22, 2028
250,000
2.85% Senior notes (Series G) dueAugust 7, 2030
325,000
2.96% Senior notes (Series H) dueAugust 6, 2032
325,000
Variable rate term loan facility, requiring quarterly installments endingJune 6, 2026 292,500 Less debt issuance costs (2,455) 1,711,525 Less current maturities (34,134) 1,677,391 20
-------------------------------------------------------------------------------- Table of Contents The Company has funded purchases of property and equipment and payments for acquisitions of businesses primarily from the issuance of debt, existing cash, and funds generated from operations. Future capital needs required to finance operations, improvements and the anticipated growth in the number of stores are expected to be met from cash generated by operations, the Revolving Facility, the Bank Line, and additional long-term debt or other securities as circumstances may dictate, and are not expected to adversely affect liquidity. Cautionary Statements This Form 10-Q, including the foregoing 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," "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 financial condition, liquidity 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, and the potential effects of 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 in the Company's Form 10-K for the fiscal year endedApril 30, 2021 : Business 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; our business and our reputation could be adversely affected by a data security incident or the failure to protect sensitive guest, Team Member or supplier data, or the failure to comply with applicable regulations relating to data security and privacy; food-safety issues and food-borne illnesses, whether actual or reported, or the failure to comply with applicable regulations relating to the transportation, storage, preparation or service of food, could adversely affect our business and reputation; 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 motor 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; 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 experience difficulties implementing and realizing the results of our long-term strategic plan; we may experience increased costs, disruptions or other difficulties with the integration of the Buchanan Energy acquisition; and, we may not be able to identify, acquire, and integrate new properties and stores, which could adversely affect our ability to grow our business. 21 -------------------------------------------------------------------------------- Table of Contents 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. 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. Item 3. Quantitative and Qualitative Disclosures about Market Risk. The Company's exposure to market risk for changes in interest rates relates primarily to our investment portfolio and certain long-term debt obligations. We place our investments with high-quality credit issuers and, by policy, limit the amount of credit exposure to any one issuer. Our first priority is to attempt to reduce the risk of principal loss. Consequently, we seek to preserve our invested funds by limiting default risk, market risk, and reinvestment risk. We attempt to mitigate default risk by investing in only high-quality credit securities that we believe to be low risk and by positioning our portfolio to respond appropriately to a significant reduction in a credit rating of any investment issuer or guarantor. The portfolio includes only marketable securities with active secondary or resale markets to ensure portfolio liquidity. We believe an immediate 100-basis-point move in interest rates affecting our floating and fixed rate financial instruments as ofOctober 31, 2021 would have not have a material effect on pretax earnings. We do from time to time, participate in a forward buy of certain commodities. These contracts are not accounted for as derivatives as they meet the normal purchases exclusion under derivative accounting. Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer of the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rule 240.13a-15(e)). Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company's current disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in theSEC's rules and forms and such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. We acquired Buchanan Energy, owner of Bucky's Convenience Stores onMay 13, 2021 and its total assets and revenues constituted approximately 12% and 7%, respectively, of the Company's consolidated total assets and revenues as shown on our condensed consolidated financial statements as of and for the six months endedOctober 31, 2021 . We will exclude Buchanan Energy's control over financial reporting from the scope of management's annual assessment of the effectiveness of the Company's controls and procedures. This exclusion is in accordance with the general guidance issued by the Staff of theSEC that an assessment of a recent business combination may be omitted from management's report on internal control over financial reporting in the first year of consolidation.
Changes in Internal Controls Over Financial Reporting
There have been no changes in the Company's internal control over financial
reporting during the quarter ended
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