10-QPeriod: Q3 FY2009

CASEYS GENERAL STORES INC Quarterly Report for Q3 Ended Jan 31, 2009

Filed March 11, 2009For Securities:CASY

Summary

Casey's General Stores, Inc. (CASY) reported its third quarter fiscal year 2009 results, ending January 31, 2009. Total revenue saw a significant decrease of 26.5% year-over-year for the quarter, largely driven by a 38.2% drop in retail gasoline sales due to a substantial decrease in average retail price per gallon, despite a 3.5% increase in gallons sold. This revenue decline was partially offset by growth in grocery and general merchandise sales (+7.7%) and prepared food and fountain sales (+10.4%). The company's gross profit margin on gasoline sales improved, but the margin per gallon decreased. Operating expenses for the quarter decreased in absolute terms, partly due to lower credit card fees and fuel expenses. For the nine-month period, total revenue increased by 5% compared to the prior year, with gasoline sales up 4.2% and merchandise and prepared food sales showing solid growth. However, the gross profit margin per gallon of gasoline declined, and operating expenses increased due to factors like credit card fees and impairment charges from flood-damaged stores. Net earnings for the nine months saw a slight decrease of 0.5%. The company continues to invest in new store construction and acquisitions, with capital expenditures significantly increasing year-over-year for property and equipment.

Key Highlights

  • 1Total revenue for Q3 FY2009 decreased by 26.5% to $848.8 million, primarily due to lower gasoline prices despite an increase in gallons sold.
  • 2Grocery and general merchandise sales increased by 7.7% and prepared food and fountain sales increased by 10.4% in Q3 FY2009.
  • 3Gross profit margin on retail gasoline sales improved to 5.7% in Q3 FY2009, but the gross profit per gallon decreased due to competitive pricing.
  • 4Operating expenses decreased by 1.4% in Q3 FY2009, attributed to lower credit card fees and fleet fuel expense.
  • 5For the nine-month period ended January 31, 2009, total revenue increased by 5% to $3.8 billion.
  • 6Capital expenditures for property and equipment significantly increased to $107.4 million in the first nine months of FY2009, up from $70.4 million in the prior year, indicating continued investment in growth.
  • 7The company continues to face potential litigation risks, including employment-related claims, which could adversely impact financial results.

Frequently Asked Questions

The substantial decrease in total revenue for the third quarter of fiscal year 2009 (down 26.5%) is primarily driven by a significant drop in retail gasoline sales, which fell by 38.2%. This decline is largely attributable to a 40.2% decrease in the average retail price per gallon of gasoline, even though the number of gallons sold increased by 3.5%. Lower gasoline prices in the market directly impact the reported revenue figure.

For the third quarter, operating expenses decreased by 1.4% compared to the prior year. This reduction was mainly due to a decrease in credit card fees, a result of lower gasoline prices, and a significant decline in fleet fuel expense. While the nine-month period saw an increase in operating expenses due to factors like credit card fees and flood-related impairment charges, the company has demonstrated some success in controlling expenses at the quarterly level.

Casey's General Stores is continuing to invest in growth. Capital expenditures for property and equipment significantly increased in the first nine months of fiscal year 2009 to $107.4 million, compared to $70.4 million in the prior year. This investment is primarily directed towards the construction, acquisition, and remodeling of new stores. The company plans to open 17 new store constructions by the end of the fiscal year and has an annual goal to increase the number of stores by 4%, indicating a commitment to expansion despite economic headwinds.

The company is facing several litigation risks, including employment-related claims such as overtime compensation disputes. These lawsuits, discussed in Note 6, could potentially lead to substantial damages or settlement costs that are not fully covered by insurance, which could materially and adversely affect the company's financial position, liquidity, and results of operations. Additionally, the company has an increasing amount of unrecognized tax benefits, which could impact its effective tax rate.