Good day, ladies and gentlemen, and welcome to the Q1 2015 Casey's General Stores Earnings Conference Call. My name is Jasmine, and I will be your operator for today. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions). As a reminder this conference is being recorded for replay purposes. I’ll now like to turn the conference over to your host for today, Mr. Bill Walljasper. Please proceed.

Good morning and thank you for joining us to discuss Casey's results for quarter ended July 31st. I'm Bill Walljasper, Chief Financial Officer and Bob Myers, Chairman and Chief Executive Officer is also here. Before we begin I'll remind you 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 2013 Annual Report such forward-looking statements involve known and unknown risks, 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. We'll take a few minutes to summarize the results of the first quarter and then afterwards we will open it up for questions about our results and outlook. We are off to a good start towards achieving our goals in fiscal 2015. Diluted earnings per share for the first quarter were $1.34 compared to $1.43 for the same quarter a year ago. The primary reason for the shortfall in earnings is due to the reduction in the value of renewable fuel credits commonly known as RINs. Last year during this time RIN values reached record levels resulting in RINs sold in Q1 of fiscal 2014 to reach $12.9 million. During the first quarter of this fiscal year the value of RINs sold were $5.7 million. This reduction in value represented approximately $0.12 on diluted earnings per share. We were able offset a portion of this impact from strong sales gains throughout all categories. EBITDA for the quarter was up slightly to $129.9 million. Before we go over each category to get more detail on what is driving these results…

(Operator Instructions). And your first question comes from the line of Karen Short with Deutsche Bank. Please proceed.

Hi, how are you?

Good, how are you Karen?

Good, thanks. Just wanted to talk quickly about prepared, the prepared food margins, you gave us the dairy price or cheese price so I can kind of back in to what that impacts or how that impacts gross margins in the category. But I guess I am surprised it was down, as much as it was given that you've taken the price increases and may be you can talk a little bit more about that.

Yeah, absolutely. As I mentioned meat was also an issue for us in the quarter. When we look at meat supply increases for the quarter, they were up nearly $3.5 million from the first quarter a year ago, so that combined with the increased cost of cheese offset by the price increase will get you somewhere near the margin shortfall.

Okay, and what would the offset have been on the price increases.

Price increases about -- the price increase was about 2% price increase that we took.

Okay, and then I guess you had mentioned on the last call that you would give us an update, I guess on a couple things, the first would be Obama Care impact.

Yeah, you will probably see and we're going to defer that until the next conference call. So we don't have any details on the potential impact to that at this point.

Okay, and then any ability to give us an update on the new DC in terms of how it should impact operating expenses, I guess for this year and then the benefit into next year, any color you can give there?

I don't have any details for it at this time, Karen. I can tell you that we did break around on the distribution center here just last week. So that is on schedule for an early 2016 opening date. So as that starts to shape up we'll certainly give more color but at this point we're not in position to do that.

Okay, and then just the last question, I know there was some discussion at your Analyst Day on doing some analysis on whether you'd introduce your own fuel reward card, anything, any updates on that?

Well we continue to look into that. We don't have anything as far as moving forward with that. But we think there is opportunity with some of the outlying stakes where we don't have penetration in the Hy-Vee fuel saver program that we currently participate in. It won't be necessary to the magnitude that we have in the current fuel saver program but we have not implemented anything at this point.

Okay, thanks. I'll get back in the queue.

Thanks.

And your next question comes from the line of Chuck Cerankosky with Northcoast Research. Please proceed.

Good morning, Bill.

Good morning Chuck.

If you're looking at the price increases in prepared foods, how are customers responding to that? What changes do you see in their total purchases? Are you contemplating additional price increases over time to fully recover the cost inflation?

Good question. The price increase that we took May 1st, we have not seen any type of elasticity in that nor a push back from the customer. Obviously that's reflected in the same-store sales gains that we posted. Also the customers traffic in the quarter was also positive. Now as I mentioned in the narrative there we are anticipating to implement additional price increases later this fall, haven't decided exactly the time frame yet but sometime in November. Right now we're shooting for -- it will not offset the complete impact of the commodity pressures that I discussed but certainly we think it will help offset [Technical Difficulty]. We continually look at prices increases on a regular basis for opportunities to drive margin and this is certainly an offshoot of that.

So you are not saying that people buying one less slice of pizza or a smaller sized drink, anything like that as these have gone through?

Yeah, no, we’ve not experienced that at this point, yeah. You know we are still seeing that double-digit same store sales increase with respect to the entire category, and probably it is even higher than that in the pizza category specifically where a good proportion of the price increases have been taken.

All right and then switching to pizza delivery, have any more items been added to the menu that customers can have delivered?

Not at this point, Chuck. The primary delivery is the pizza. I mean we offer a couple of smaller products but we have doing that for -- since the onset.

All right, thanks, good quarter.

Thanks Chuck.

And your next question comes from the line of Steven Grambling with Goldman Sachs. Please proceed.

Hey, good morning.

Good morning Stephen.

Thanks for taking the question. So could you just talk about maybe the drivers of the 5% increase in in-store expenses. I think you said ex-initiatives and how are you thinking about that kind of run-rate going forward?

Yeah, that run rate’s been tracking somewhere between 4% and 5% Steve. I don’t necessarily see that changing dramatically. I will point out that, what we call the stores -- store base that is unchanged by operational initiatives, I will certainly point that even though there was 5% increase in operating expenses in that group of stores it also drove 6% same-store sales in Grocery and General Merchandise category and 9% in the Prepared Food category. So those are performing very well. And so with those types of increases in that store group you certainly would expect a little bit of the wage increase to offset some of that net increased volume plus utilities and credit card utilization. So all of those kind of go into that.

Okay, that’s helpful. And then it looks like fuel margins were a little bit better than expected even ex the RINS. Can you just talk about some of the industry dynamics there? I know that’s something that’s very difficult to forecast, but what do you think are some of the drivers of the better margin I guess more recently?

Well, I mean our industry, it’s a competitive industry and there is a lot of different pressures, not only from a competitive landscape but from a legislative landscape as well. And so, we believe -- and this has been going on I think since 2008 that to offset these pressures our competition is offsetting those in the margin aspect of the gasoline. And so I think what you experienced or what we experienced in the first quarter since we do price with our competition is that people were looking to offset a little bit margin with respect to the pressures in the industry. And so given what we see going forward with higher commodity costs being one of those pressures recently but also as Karen mentioned the Obama Care that will coming forward here in the near future, I think you will continue to see our margin level, I’m not what level that will be but certainly that’s the reason we think that we see [such] margin this quarter.

Okay, that’s helpful. And then I guess as a follow-up, with all the pressures that are facing the industry are you seeing anything changing in terms of the acquisition or M&A environment? And do you feel like you have the capacity both in terms of manpower given there is the -- you are breaking ground on a new DC and integrating another acquisition right now but also financially if there are opportunities out there? Thanks.

Yeah, to answer both of these, I would say yes, we have the ability to integrate, to continue to integrate acquisitions and certainly the financial capacity. I mean our debt-to-EBITDA ratio is relatively lower. We have sizeable capacity in the balance sheet, if the right opportunity presents itself. Now one of the things in our industry there have been a few transactions, not in our market area but in our industry that has some very high multiples associated with those and so that’s something that we are keeping our eye on so especially at some of the larger chains. We are seeing there are few higher expectations from a multiple standpoint but from the smaller acquisition that we normally do multiple still are keeping in line with that five to seven times trailing.

Great, thanks so much.

And your next question comes from the line of Kelly Bania with BMO Capital. Please proceed.

Hi, thanks. This is Kelly from -- Kelly Bania from BMO Capital. Just quick question on the margin in the Grocery category. I think you guys have called out the cigarettes, just curious if you could add a little more color there, was that just some ongoing voluntary investment in price in cigarettes or is that stemming from the manufacturers and was that regional or was that kind of broad-based? And then just your expectation for cigarette margins going forward?

Yeah, the competitive pricing pressure I alluded to was relatively broad-based in our market. I mean we certain see in some of our states like Missouri and Illinois be a little bit more competitive and it’s just more of a competitive move by our peers on pricing and we typically follow the pricing in that regard. And so that was an offshoot, it wasn't necessarily manufacturer situation there. And cigarettes are a competitive product and so we want to make sure that we are competitive. It is a destination product. So we did see margin decline in the cigarette category in Q1 but that was offset by margin gains in other categories like beer for instance, we saw a nice margin gain there.

Great and then -- yeah, that’s helpful. And then just any comment on the operational initiatives, you offered some of the numbers and how those are progressing with both sales and expenses relative to your expectations and relative to the others that have already been converted over the last couple of years?

We've seen we are gaining a little bit more traction on that front since the major remodels and we only have roughly 230 of those completed and only 25 slated for this fiscal year. But we certainly are seeing an uptick in the performance of those and a nice ROI gain. So that’s something we will be focused in future fiscal years. And the other operational initiatives are really coming in line with what we have seen in the past. The gains we have mentioned, the 20% or 30% gains in revenue. But there is an offshoot, I mean obviously the operating expenses will ramp up as well with those.

And what do you think is driving the uptick in the performance of the remodels?

Well I think, we are getting better I mean it's a situation we're getting better equipped to handle and choose the right fit for completing a remodel. And so I think we're choosing locations that are better suited for that. So we're seeing a little bit stronger uptick in that regard.

Got it, and then just wanted to check in on RIN prices and kind of what your expectation is for the rest of the year, I think as you guys are planning for kind of the low teens price for the year but it's obviously trending well above that. So just any change in your thoughts in forecasting that for the rest of the year?

Yeah certainly obviously with the performance of the RIN values in the first quarter the expectation for RINs have escalated from what we originally had coming into the fiscal year. We don't have a number to throw out your way but obviously it's going to be higher than what we anticipate. Right now as I mentioned they are trading around $0.50 to kind of put that in perspective. That could go in any direction but to put in perspective what we're comparing to last year in the second quarter RIN values averaged $0.65 and then it dropped in the third quarter $0.28 and then ticked back up to $0.47 in the fourth quarter. So that's the comparisons that we have to go against in that aspect of our business. So it will be interesting to see if EPA will come out and make any announcements with respect to any type of blend wall requirements here coming with later this fall.

Great, thank you.

And your next question comes from the line of Irene Nattel with RBC Capital markets. Please proceed.

Thanks and good morning everyone. Just on the cheese, from the tone of your commentary I am getting a sense that you are not currently hedged on a go-forward basis, is that correct?

That is correct, Irene.

So then presumably the magnitude of the price increases that you are thinking about in November will really be a reflection of what we see on pricing between now and then, is that also reasonable?

I think that's reasonably accurate, yes.

Okay, that's great. Thank you. And then the other question was really on the whole gas margin this year. It sounds as though putting aside whatever pluses or minuses that are due to gas price volatility the bias on underlying margins is likely to remain to the upside, is that the way you are kind of thinking about that?

Well, it will hard for me to predict future gas margins but given, I think it's reasonable that -- a reasonable thought process given the different challenges in our industry and the capacity for our peers to offset those, I think there is certainly opportunities in that line gas model. But again that's an ebb and flow thing, there is a lot of macro things that affect and so it's hard to make accurate predictions in that regard.

And just touch -- and then finally could you just talk a little bit about the performance of your stores in some of the newer geographies?

Yes, I am glad you brought that up, Irene. When we look at some of the newer states like Arkansas, Tennessee and Kentucky, I think those are the ones you're referring, South or North Dakota is a little bit early, since we don't have -- just took on that acquisition but the volumes that we see in those stores are significantly outpacing the volumes in our core states. We see gas volumes up 50% to 60% relative to the rest of the chain and we also see a nice uptick inside the store. Now obviously with that type of gallon movement in those new states we are taking market share from somebody and as I guess sort of consequence of that the -- we have seen the competitive landscape tighten with respect to the gas margin in those particular states. So the gas margin environment has been a little tight relative to the rest of our chain and consequently that's creating a little disconnect with respect to our earnings contribution from those stores relative to the operating expenses because operating expenses will ramp up immediately. And keep in mind over the past year, year and a half about two-thirds of the stores that we have opened, including these new states we have opened as 24 hour locations. So the operating expenses are even higher in those stores relative to some of the stores in the rest of our chain. So we're very optimistic about the volumes that we're seeing in the outlying states and we think that the gas margin will certainly moderate but doesn't necessarily deter us from those states. So -- but yeah we're continuing to plan expansion on those states. We'll certainly be more cognizant of maybe different pockets of margin within those states, where it might be little more competitive, but so that’s kind of a quick 30,000 foot overview for you, Irene.

Thanks, following up on that, Bill if you were to take similar size store, similar size trading areas, would you say that the inside volume or sales level of these stores in the newer markets is higher than in your other comparable stores, comparable markets, comparable maturation points?

If you look at total inside in the newer states and keep in mind we only have a few years of experience or data on this, so I will caveat that. But if you look at the average of those states in inside they are slightly above the average of the other core states, on inside sales and significantly higher on gas volumes.

That's great. Thank you.

Thank you.

And your next question comes from the line of Ben Brownlow with Raymond James. Please proceed.

Hi. Good morning. Thanks for taking the question.

You bet, Ben.

Just wondering if there was any update on the implementation of online pizza ordering system.

Yeah, really the update is October we are scheduled to start testing the online ordering. We'll roll that out to a series of stores at that point, test it and hopefully it will be successful and we'll continue that expansion but it's right on pace right now to roll out later this fall in the test mode.

All right. And just one more for me, I know you are going to release August trends or sales results for the month on Monday but any color you can give us on either the fuel margin or quarter-to-date what are you seeing in terms of demand.

I'll beg to defer that till Monday, Ben.

Okay, great.

Yeah, sorry Ben.

No problem. Thanks and congrats on the quarter.

Thanks.

(Operator Instructions). And your next question comes from the line of Anthony Lebiedzinski with Sidoti. Please proceed. Anthony Lebiedzinski - Sidoti & Co.: Yes, good morning. Just wondering about the beer category, can you talk about the same store sales that you are seeing for beer and also margins for the quarter and what your expectations are for the rest of the fiscal year.

Well, I won't be able to give you the specific margin of the beer category, I can tell you that it is up, I would say significantly in Q1 versus Q1 a year ago. As far as same store sales go with the beer category it's a high single digit number, same store sales. From a gross profit perspective beer is up in the double-digits Q1 over Q1. Anthony Lebiedzinski - Sidoti & Co.: Okay. That's good to hear. And also when I look at the number of RINs sold in this quarter, 12.5 million versus 12.6 million a year ago and this is despite you guys actually selling more gallons. So just wondering is there something that I should know and how should I also think about the rest of the fiscal year. Keep in mind there is seasonality in your business?

Yeah, I think the question I am going to paraphrase a little bit. You are looking for to the RIN -- the number of RINs sold going forward. Anthony Lebiedzinski - Sidoti & Co.: Right and also just explain like why you are -- the number of RINs was down slightly versus a year ago even though you did sell more fuel, your same-store gallons were up versus last year?

Yeah and keep in mind that same-store gallon is across the board where RINs predominantly are gathered to the State of Iowa and so really it comes down to pricing differentials between products and you may -- our gallons may be up and same-store gallons may be up but it needs to be an ethanol-based product for the RINs to be secured and then ultimately sold. And so that might be the disconnect that you are looking at. Now to answer your other question as far as RIN values, you are right there is some seasonality with gallon movement, typically in Q1 and Q2, we sell more gallons then in Q3 and Q4 just because of the seasonality and discretionary driving season. But going forward that 44 million to 46 million RINs in a year is probably a good number and the value though, that could go in any direction, we don’t have value. There may be a slight decrease in Q3 and Q4 relative to the first two quarters. But probably from a ratio standpoint it won't be too dissimilar to what we experienced in the last fiscal year. Anthony Lebiedzinski - Sidoti & Co.: Okay, all right. And then just a couple of housekeeping items here, can you just tell us please as far as the number of 24-hoour locations that you have right now and also the number of pizza delivery locations and that will do it for me?

Yeah 24-hours as I mentioned we added 100 more 24-hour locations in the first quarter. And so that brings us to about 825 24-hour locations in total. That doesn't mean that we converted that many, we converted about 650 stores to 24-hours. But obviously we opened stores 24-hours and we acquired stores as 24-hours. We added just 12 of those so right now we're about 365 roughly pizza delivery stores. Anthony Lebiedzinski - Sidoti & Co.: Okay, thanks very much.

You're welcome.

And your next question comes from the line of Ronald Bookbinder with Benchmark Company. Please proceed.

Hi, good morning.

Good morning Ron.

It seems with the double-digit cigarette comp you must be taking market share. Do you think maybe you're being overly competitive on margin or what drove the cigarette comp?

Well cigarette for us unit-unit certainly were up for us and in total sales cigarettes were up in double-digits and almost double-digit gross profit from the cigarette category from gross profit dollars. Now cigarettes for us Ron is a what we deem to be a key item and we will do pricing surveys on that product on a very regular basis. So I don't think it's a situation where we're out of market in that regard. I mean we are priced with our competition. They seem to be little bit more competitive in certain markets of our market territory. And so that's part of the reason that we have this margin shortfall but obviously made it up on unit volume.

And on fuel you've obviously been taking market share there also. Are your competitors installing a fuel saver type program, are they just letting you take this market share?

Well, I mean we are a relatively large player in the Midwest and certainly have an opportunity to provide nice partnership with somebody on the fuel saver program. We do see other fuel saver programs in our market area. I can't tell you that there has been recent ones opening up that are impacting us in response to what we have put in place nearly year and a half ago. But certainly fuel saver programs aren’t uncommon in our industry. We're certainly as I think Kevin asked a question early we are certainly looking to extend our fuel saver program in other markets as well. So hope that answers.

And lastly I think corn prices have been declining. Does that cause any sort of benefit to fuel margin and how could it impact the economics of your market?

It’s a good question, and we see the ebb and flows of corn prices and have quite some time. It can mean -- it could mean a number of things. Obviously with less expensive corn that equation to the ability for farmers to have lower cost of feed their livestock. So that may have an effect in the future on meat prices for instance, certainly effects however the farmer, the farmer’s income and but we don’t believe that’s going to have any type of necessarily dramatic impact. But if we could see a net positive out of the drop in corn prices relative to what I’ve just mentioned and corn goes into a number of other products too in the grocery category, it’s in the corn syrup.

Okay, thank you.

You bet.

And your next question comes from the line of Damian Witkowski with Gabelli. Please proceed. Damian Witkowski - Gabelli & Co.: Hi, Bill. Question on -- remind why your newer states do so much better on the gas fuel side then your core markets?

Well, I mean the stores that we put up in the newer states are a little bit larger populations that have a higher traffic count. And so consequently you are seeing a higher fuel volume because of that, relative to the core states that maybe be in a lower populated store, maybe a little less traffic count. We also have anywhere from six to eight comps or Islands in those stores. There could be a number of reasons. Damian Witkowski - Gabelli & Co.: And then again in those markets you are priced sort of -- you are not the lowest but middle of the way in terms of where you stack on the competitive side of things?

It’s the same pricing philosophy in those states as to our core states you know. What we do, we identify who we believe our competition is and then check that competition throughout the day and then price accordingly, changing our price accordingly so we will match competition in our market areas. Damian Witkowski - Gabelli & Co.: And has that competition where you can say the competition has it been changing a lot, I mean you know if I look at supermarkets they seem to be using fuel as a -- have been and I think continue to more aggressively use fuel as a traffic driver. And so is that changing a lot?

I would say in the new states we are seeing a response to our presence in those states and it’s a much more competitive retail pricing environment and therein lies part of the reason that we are seeing lower margin gas margin in those states relative to our other states. Damian Witkowski - Gabelli & Co.: Okay and then just based on your comments about -- and against it’s just what’s been happening but you know fewer fuel margin versus cigarette margins. I mean is it -- have cigarettes become a more important traffic driver than gas prices?

I would say that when you look at fuel, fuel is always going to be the number one destination item in a convenience store followed by cigarettes. I don’t think there is necessary flip flop at this point but there are two key items that you definitely need to be competitive on to get traffic coming to your store, obviously for those products and hopefully to see other products as well. Damian Witkowski - Gabelli & Co.: Okay, and then just lastly on -- you commented on M&A marketplace and said that smaller deals still sort of trade in the five to seven EBITDA range. Can you just sort of go deeper into why what is a larger deal and what kind of multiples are you seeing there versus historical?

Yeah, yeah and a larger deal, I mean for us I mean and I’ll try to try to explain that. Anytime that about larger deal, that be honestly it could be anywhere from as low as 12 stores and up where you have a broker involved, that is marketing those and as competition for those sites, we typically see a higher multiple driven by that. And so we typically see that and those tend to be in more metropolitan areas, larger sites which consequently have more competition. So and those multiples could run the gamut, but the smaller, the one-off or the smaller change still in that five to seven times. Damian Witkowski - Gabelli & Co.: Okay, but you don’t want to talk about -- I mean I was just curious on how much the larger change go forward, is it a low-double-digits or is it still just high single-digits?

Yeah, that will run the gamut, it could be very high single-digit to low-double-digit and you know certainly we are diligent about that process and we are not going to grow just for growth sakes. We want to make sure it has some thought process behind it. Damian Witkowski - Gabelli & Co.: All right. Thanks so much Bill.

Thanks Damian.

And your next question comes from the line of Keith Howlett with Desjardin. Please proceed.

Yes, just wondering how the e-cigarette trends are in your store?

It’s certainly gaining a bit of traction. I mean it's still a product that is relatively new to the C store space. We introduced them several years ago. It's a pretty small portion of our overall cigarette and tobacco area but they have stepped up a little bit. That whole category of e-cigarettes and vapor has stepped up a little bit and so we'll continue to watch it. I know there are some reports that think that particular area of cigarettes or tobacco will grow and if it does we're positioned very well to grow with it.

And in terms of who is selling cigarettes in your core markets, couple of the dollar chains have introduced cigarettes in the last couple of years and CVS is getting out of cigarettes. Is any of that factored into your strong volume or is it really not, none of that really is effective.

Not really the CVS. The CVS really are not in our market area even though they may have some locations within the states that we operate. They will be metropolitan locations with very little overlap with our stores. Predominantly cigarettes are sold by convenience stores in our market area. So that's our biggest competition. And Dollar General Stores have gotten into that and we have tracked that subsequent to that timeframe and really haven't seen any discernible change in our cigarette volumes in stores that overlap with those Family Dollar, Dollar General Stores.

And as you go into some of your new markets in Arkansas, Tennessee that are larger population areas, how does that affect you’re, the success of your pizza offering or does it affect it at all.

Well obviously when you get into new states where your brand isn’t as well-known, in this particular case our prepared food brand then there is a little bit longer process to get that product recognized by our customers. So that particular area of our business has ramped up a little slower than some of our core states when we opened new stores, but that is offset by a significant increase in the other aspect inside the store. So when you look at the four walls sales as we had talked about earlier those are higher than in the new states than the core states on new store openings. So we anticipate there is opportunity to continue to ramp up that prepared food presence in those states.

Thanks very much.

You bet.

And there are no remaining questions at this time. I would like to turn the call back over to Mr. Bill Walljasper for closing remarks.

I’d just like to thank everybody for joining us this morning and again just one last reminder that Monday we will release same store sales at 3 o'clock Central. Thank you and have a good week.