CASY

Caseys General Stores, Inc. (CASY)

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Exchange: NASDAQ
Industry: Consumer Durables
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Casey’s General Stores, Inc. (CASY)

F1Q10 Earnings Call

September 9, 2009 10:30 am ET

Executives

William J. Walljasper – Chief Financial Officer & Senior Vice President

Robert J. Myers – President, Chief Executive Officer & Director

Analysts

Ivy Jack – Barclays Capital

Ben Brownlow – Morgan Keegan & Company

Alex Bison – North Coast Research

Karen Short – BMO Capital Markets

[Anthony Levinsinski] – Sidoti & Company

Michael Smith – Kansas City Capital

Presentation

Operator

Welcome to the first quarter 2010 Casey’s General Store earnings conference call. My name is Janetta and I will be your operator for today. At this time all participants are in a listen only mode. We will conduct a question and answer session towards the end of this conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Mr. Bill Walljasper, Chief Financial Officer.

William J. Walljasper

Thank you for joining us to discuss Casey’s results for the first quarter of fiscal 2010 ending July 31st. I am Bill Walljasper, Chief Financial Officer. Bob Myers, President and Chief Executive Officer is also here. I hope all of you had an opportunity to see the press release. If you haven’t, please let me know and I’ll make sure a copy is forwarded to you. Before I begin, I will remind you that certain statements may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

As discussed in the press release and the 2009 annual report, such forward-looking statements involve known and unknown risk, uncertainties and other factors that may cause actual results to differ materially from future results expressed or implied by those statements. Casey’s disclaims any intention or obligation to update or revise forward-looking statements whether as a result of new information, future events or otherwise.

I’ll take a few minutes to summarize the quarter and then open for questions. As most of you have seen, the company had a strong first quarter with earnings per share of $0.87 compared to $0.57 a year ago. This strong performance was anchored by a near record gas margin, margin improvement inside our stores and solid sales across all categories. In all three months of this quarter we experienced a gas margin significantly ahead of our annual goal of $0.11 per gallon. As a result, our gas margin for the quarter was $0.157 per gallon.

During the quarter the average retail price of gasoline was down nearly 38% to $2.35 per gallon compared to $3.70 per gallon a year ago. The lower retail price combined with softer comparisons from a year ago resulted in same store gallons up 3.2%. Total gallons sold were up 5.5% to 335.8 million. Gross profit in this category was up slightly to $52.7 million.

Over the course of the last two fiscal years, we’ve experienced a very favorable gas margin environment. Retailers in our market area have been much more responsive to upper movement in wholesaler cost which as mitigated the negative impact on our gas margins during a time when gas margins have traditionally come under pressure. At the same time, due to increased volatility in this area, we believe retailers have become more hesitant to move prices downwards when there are decreases in wholesale costs.

With this in mind, in eight out of the last nine quarters our gasoline margin has been above $0.12 per gallon. The gasoline margin environment in August continues to be above goal with positive same store gallon movement. Now, despite having one of the coolest summers on record, the grocery and general merchandise category still experienced solid gains. Total sales increased 8.4% to $297.4 million. Same store sales were up 6.4%. At the same time we were able to grow sales, we were also able to increase the margin 30 basis points to 34.3%.

With this in mind, gross profit rose 9.2% to $102 million. The margin improvement primarily was attributable to cigarettes related to increased profitability as a result of the federal excise tax increase that went in to effect April 1st. Gross profit dollars in the cigarette area increased approximately $5.5 million in this first quarter than the same quarter a year ago. We are pleased with the gains in the grocery and other merchandise category especially due to the difficult comparisons from last year, adverse weather and a more challenging economy. Overall, total inside gross profit increased nearly 12%.

In August, sales continue to be impacted by cooler weather and the shift in the labor day holiday weekend from August a year ago to September this year. The prepared food and fountain category continues to perform very well. Total sales were up 11.1% to $95.2 million. Same store sales were up 6.6%. The same store sales increase was on top of a 12.3% increase a year ago which makes the performance even more impressive. The increase was driven by the continued emphasis by having the right product available at the right time of day, strategic price increases and expansion in our coffee and fountain offerings.

We also continued to benefit from the lower cost of cheese which we have locked in through October. The prepared food margin was up about 330 basis points to 63.8%. We should continue to experience strong margin gains next quarter. Gross profit dollars in the quarter were up 17% and August sales continue to be positive.

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