10-QPeriod: Q1 FY2007

CASEYS GENERAL STORES INC Quarterly Report for Q1 Ended Jul 31, 2006

Filed September 8, 2006For Securities:CASY

Summary

Casey's General Stores, Inc. (CASY) reported its financial results for the fiscal quarter ended July 31, 2006. The company experienced a significant increase in net sales, driven primarily by a substantial rise in gasoline sales volume and price, alongside growth in grocery and prepared food offerings. Despite top-line growth, net earnings saw a decrease compared to the prior year's quarter. This reduction in profitability was mainly attributed to a compressed gross profit margin on gasoline sales and increased operating expenses, particularly credit card fees and costs associated with store expansion. The company continues to focus on strategic growth, highlighted by the planned acquisition of up to 33 HandiMart stores, which is expected to be funded through existing cash and debt financing. Management remains confident in the company's liquidity and ability to fund future operations and growth initiatives through operational cash flow and existing credit facilities, despite a slight decrease in the current ratio.

Key Highlights

  • 1Net sales increased by 28.3% to $1.10 billion, primarily driven by a 37.4% increase in retail gasoline sales due to higher gallons sold and a 34.8% increase in average retail price per gallon.
  • 2Gross profit margin on gasoline sales declined significantly from 5.8% to 3.6%, impacting overall profitability.
  • 3Prepared food and fountain sales showed strong growth of 14.5%, contributing positively to the gross profit dollars.
  • 4Operating expenses increased by 12.7%, largely due to a 46.9% rise in credit card fees and costs associated with expanding the store base.
  • 5Net earnings decreased by 19.1% to $16.9 million, primarily due to lower gasoline gross profit margins and higher operating expenses.
  • 6The company announced plans to acquire up to 33 HandiMart stores from Nordstrom Oil Company for up to $64.8 million, expected to close in the second fiscal quarter.
  • 7Cash used in investing activities decreased compared to the prior year, mainly due to lower capital expenditures on property and equipment.

Frequently Asked Questions

The primary driver of the significant increase in net sales was the retail gasoline segment. Net sales for gasoline rose by 37.4% due to a 1.9% increase in the number of gallons sold and a substantial 34.8% increase in the average retail price per gallon.

Net earnings decreased by 19.1% primarily due to a decline in the gross profit margin on gasoline sales, which fell from 5.8% in the prior year's quarter to 3.6%. Additionally, operating expenses increased by 12.7%, impacted by higher credit card fees and costs related to store expansion, which together outweighed the revenue growth.

Casey's General Stores plans to grow through strategic acquisitions and organic expansion. A significant planned growth initiative is the acquisition of up to 33 HandiMart stores from Nordstrom Oil Company, which is expected to close in the second fiscal quarter. The company also continues to invest in construction, acquisition, and remodeling of its own stores.

The company's primary source of liquidity is cash provided by operations. Management believes that its current bank line of credit, together with cash flow from operations, is sufficient to meet working capital needs. Capital expenditures are planned at approximately $125 million for fiscal 2007, to be funded primarily from existing cash and operational funds.