10-QPeriod: Q3 FY2006

CASEYS GENERAL STORES INC Quarterly Report for Q3 Ended Jan 31, 2006

Filed March 13, 2006For Securities:CASY

Summary

Casey's General Stores, Inc. reported its financial results for the third quarter and the first nine months of fiscal year 2006, ending January 31, 2006. The company demonstrated significant top-line growth, with net sales increasing by 23% for the quarter and 26.3% for the nine-month period, largely driven by a substantial rise in gasoline sales due to both increased gallon volume and higher retail prices. Prepared food and fountain sales also saw robust growth, indicating successful product offerings and expansion. While overall revenue increased, the company faced margin pressures, particularly in gasoline. Gross profit margins on retail gasoline sales decreased, though the margin per gallon saw a slight increase for the nine-month period. The company also experienced an increase in operating expenses, partly due to higher bank fees from increased credit card usage and the expansion of corporate stores. Despite these challenges, net earnings saw a significant increase for both the quarter and the nine-month period, benefiting from strong prepared food margins, increased lottery ticket sales, and a prior year impairment charge. The company made a notable acquisition of 51 convenience stores in Nebraska, which is expected to expand its market presence.

Key Highlights

  • 1Net sales grew by 23% to $802.8 million for the third quarter and by 26.3% to $2.63 billion for the nine months ended January 31, 2006.
  • 2Gasoline sales increased significantly due to a 7.7% rise in gallons sold and a 20.1% increase in average retail price per gallon for the quarter.
  • 3Prepared food and fountain sales saw strong growth of 14.7% for the quarter and 11.8% for the nine months, driven by new products and store expansion.
  • 4Gross profit margin for retail gasoline decreased to 4.3% for the quarter, though the margin per gallon for the nine-month period increased to $0.1156.
  • 5The company acquired 51 convenience stores in Nebraska for $29.2 million, expanding its market presence.
  • 6Net earnings increased substantially by 182% for the quarter and 70.1% for the nine months, benefiting from improved prepared food margins and lottery sales, partially offset by lower gasoline margins.
  • 7Operating expenses as a percentage of net sales decreased due to higher average gasoline prices, despite an overall increase in dollar amount driven by higher bank fees and more corporate stores.

Frequently Asked Questions

The primary driver of revenue growth was a significant increase in gasoline sales, which rose by 23% for the quarter, fueled by both a 7.7% increase in the number of gallons sold and a 20.1% rise in the average retail price per gallon.

Casey's acquired 51 Gas N' Shop stores in Nebraska for $29.2 million, aiming to expand its market presence. The results of these stores from the acquisition date through January 31, 2006, are included in the company's financial statements. The acquisition was financed through a promissory note with a 6% interest rate.

The company experienced a decrease in the gross profit margin on retail gasoline sales, which fell to 4.3% for the quarter compared to 5.9% in the prior year. While the margin per gallon for the nine-month period increased slightly, management expects market conditions to stabilize and return to historical levels.

The company's primary source of liquidity is cash provided by operations. They also have a bank line of credit. Capital expenditures are significant, with approximately $100,000 anticipated for fiscal year 2006, funded primarily through operations and existing cash. Long-term debt was $110.7 million as of January 31, 2006.