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Casey's General Stores (NASDAQ:CASY)

F3Q09 Earnings Call

March 10, 2009 10:30 am ET

Executives

William Walljasper – Chief Financial Officer

Analysts

[Megan O'Hara – Freedman, Billings, Ramsey]

Alex for Charles Cerankosky – Ftn Equity Capital Markets

Karen Howland – Barclays Capital

Michael Smith – Kansas City Capital

Ben Brownlow – Morgan Keegan

[Anthony Liebinsky – Sidoti & Company]

Operator

Welcome to the third quarter 2009 Casey's General Stores earnings conference call. (Operator Instructions) I would now like to turn the presentation Mr. Bill Walljasper, Chief Financial Officer.

William Walljasper

Good morning and thank you for joining us to discuss Casey's results for the third quarter of fiscal 2009 ended January 31. I'm Bill Walljasper, Chief Financial Officer. Bob Myers, Chief Executive Officer is also here. I hope all of you have had an opportunity to see the press release. If you haven't, please let me know. I'll make sure a copy is forwarded to you.

Before I begin I'll 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 2008 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.

I'll take a few minutes to summarize the quarter, then open for questions. As all of you have seen, the company had a record third quarter with earnings per share from continuing operations of $0.28 compared to $0.26 a year ago. Year to date earnings from continuing operations were $1.38 compared to $1.39 last year.

This strong earnings performance is driven by a decrease in operating expenses and solid gains inside our stores. I'll go over each category in more detail on what is driving these improvements.

In the first part of the quarter in gasoline, we experienced a rapid decrease in the cost of gasoline. Generally in a declining cost environment, there's an opportunity to expand the gasoline margin as retail prices tend to lag this downward movement. However, we experienced a rapid adjustment in retail prices in response to the sharp decline which put pressure on our margins.

Gasoline costs did begin to stabilize towards the end of the quarter which allowed margin improvement to partially offset the earlier pressure. The result was a third quarter margin of $0.909 per gallon compared to $0.135 a year ago in the same period. This margin differential would have represented about $0.14 decrease in earnings per share.

Year to date our gas margin is $0.131 per gallon compared to $0.143 during the first nine months of last year.

Total gallons sold in the quarter were up 3.5% to 307.4 million. Same store gallons sold in the quarter were up 2.1%. The average retail price of gasoline in the quarter decreased over 40% to $1.73 a gallon compared to $2.89 a year ago.

Same store gallons in February are flat to slightly positive. However, we are comparing to a month last year with an extra day due to leap year. This extra day represents approximately 3%. The margin in February is above our annual goal of $0.108 per gallon.

In the grocery and other merchandize category, sales continued to be solid and the overall margin is improving. For the third quarter, total sales were up 7.7% to $231.3 million with an average margin of 32.9%, up over 100 basis points from the same period last year. Same store sales in the quarter rose 6.5% while gross profit rose over 11% to $76.1 million.

Year to date same store sales are up 5.3% with an average margin of 33.6%, well ahead of our annual goal and up 60 basis points. The performance in this category is related to increased sales in higher margin items, primarily in the coolers. We are very pleased with the gains we've been able to achieve in this category, especially in light of the difficult economic conditions. Same store sales in February continue to be solid.

The prepared foods and fountain category continue to perform exceptionally well. Total sales in the quarter were up over 10.4% to $81 million and up 11.6% year to date. Same store sales in the third quarter were up 8.1% with an average margin of 61.8%, down from the record margin a year ago in the third quarter.

This is primarily due to increases in product costs that we were able to pass on to maintain gross profit dollars, but not margin. However, the margin did increase sequentially from the second quarter by about 120 basis points.

As the press release indicated, we were able to take advantage of lower commodity costs and lock in the price of cheese through October 2009. The average all in cost of this core buy of cheese is $1.68 per pound. Going forward, we anticipate to show margin improvement given the favorable cheese cost comparison.

Year to date, sales are up 11.6% while gross profit climbed to $155.1 million. Same store sales for the nine months rose 9.9%. The gains that we experienced are related to strong sales across the category and strategic price increases. Price increases represent approximately 4% of the same store sales reported. The strong same store sales trend continues in February.

For the quarter, operating expenses were down 1.4% to $118.9 million, driven by lower credit card fees, decreased fuel expense and lower insurance costs. Due to the lower retail gas prices and slowing credit card utilization, credit card fees dropped about $2.2 million in the quarter.

During the same period, the cost of diesel fuel decreased approximately 30% and insurance expense was down primarily due to the tanker accident we experienced last year in the third quarter. Given the lower gasoline price environment, we anticipate a continued favorable environment over the next several quarters.

Operating expenses for the year are up 5.9%. Without the unusual flood related charge that we incurred in the first quarter, operating expenses would be up approximately 5.1%.

Our balance sheet continues to be strong. At the end of the quarter, cash and cash equivalents were $127.5 million and shareholders equity rose to $708.7 million, up $61.3 million from the end of last fiscal year.

We continue to pay down debt. Long term debt net of maturities was down $12.3 million to $169.1 million. At the end of the quarter average long term debt to average total capital ratio was about 26%.

On the income statement, total revenue in the quarter was down 26.5% to $848.8 million due to a 40% decrease in retail price of gasoline from a year ago. As indicated previously, same store gallons were positive and sales inside the store remain strong.

The number of basic shares outstanding in the quarter was 50,809,645 and the diluted share count was 50,957,853.

We generated $102.8 million of cash flow from operations. Capital expenditures were $107.4 million, up from $70.4 million last year due to increased construction and store growth. This quarter we opened three new store constructions and completed three acquisitions. Year to date, we have seven new stores open and 14 acquisitions. Our store count at the end of this quarter was 1,469 corporate stores.

That completes my review of the quarter. We'll now go ahead and take questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from [Megan O'Hara – Freedman, Billings, Ramsey]

[Megan O'Hara – Freedman, Billings, Ramsey]

Hi. Congratulations on a great quarter. We were hoping you could comment on how gas margins are trending in the current quarter.

William Walljasper

I believe I might have made a quick comment on that in my narrative. So far in February, they are trending above our annual goal, and that's be the extent of how far I could give you any margin type of guidance.

[Megan O'Hara – Freedman, Billings, Ramsey]

Could you provide some color on current consumer behavior? Are you see any trading down within the stores?

William Walljasper

In certain products we are seeing a trade down or a shift. Certainly in the beer category we do see some trading down. It's just what I'll call some lower beer brands. We've also experienced it over the last several quarters with the cigarette category, that we have seen some people at the retail prices of cigarettes increases, we have seen some people trade down from the premium brands into the mid tier or lower tier brands of cigarette. But outside of that, we are still seeing some very nice same store sales movement within the store.

[Megan O'Hara – Freedman, Billings, Ramsey]

Also, we were hoping you could help us better understand the pending excise tax on cigarettes and what the impact will be on the gross profit line.

William Walljasper

That's a very common question. As everybody knows the Federal Excise Tax goes into effect April 1. It'd be a $0.61 per pack increase. I can tell you this, we've dealt with a number of tax increases over my 19 years with the company, but all of these have been State tax increases, so quite honestly we've never seen a tax increase of this magnitude across our operating area.

However, one of several things will probably happen in regards to this tax increase, and I somewhat alluded to that in an earlier question, but as the retail price of cigarettes increases, the consumer behavior will do one of several things. Either one, they'll give up smoking, so you'll see unit movement decrease, and that certainly is an option. They'll either trade down to a mid tier or lower tier brand of cigarettes or we have seen a shifting from some of our cigarette customers over to smokeless tobacco. So we are seeing a significant movement in that particular category.

With respect to the gross profit line that you mentioned, we're in a situation where about half of our stores are in fair trade states and the other half are obviously in non fair trade states, so we do have some states where there are state minimums that apply. So it may not be as impactful for us as maybe some of our peers that are in different states where they do have non fair trade.

So, in the State of Illinois, Missouri and Kansas, we'll have to kind of wait and see where the market takes those, and those are non fair trade states. So I don't believe it will be a significant impact to the gross profit. Unit volume certainly could be off in relationship to that.

I can tell you that through the first nine months of this fiscal year, our carton movement actually is positive, so we are somewhat bucking the trend with respect to that particular category. Hopefully that answers your questions.

[Megan O'Hara – Freedman, Billings, Ramsey]

In looking at credit card fees on an absolute dollar amount, we would have thought they'd be down more given the gas price decline. We calculated as you said the 40% year over year gas price decline. We're just wondering why we aren't seeing the same order of magnitude there with the credit card fees.

William Walljasper

Well you still have transactions. I mean its one thing to have the retail price of gasoline come off 40%, but transactions didn't go negative necessarily. We still have an increase in transactions, so that's probably creating a little bit of a disconnect in some of your calculations. The transactions, we look at it a couple of different ways.

First of all, if you take a look at that $850 million revenue line that we reported, roughly about 46% of the sales come through credit cards. That's down from 52% just in the first quarter. But if you look just at transactions, so people actually making a transaction at our store, we are now, that had de-accelerated quite a bit. It's still positive.

We're tracking in the upper single digits right now, and that has been down from as high as 20% to 30% transaction increases. So we're definitely headed in the right direction, and that's why you have a sense of optimism in my voice with respect to the favorable conditions and operating expenses over the next probably two to three quarters.

[Megan O'Hara – Freedman, Billings, Ramsey]

Just how should we think about the growth rate in wages in absolute dollar terms and then the other expenses line going forward?

William Walljasper

Well, obviously barring no other changes in our business going forward, operating expenses really is in several buckets. We talked about credit card fees already, but the major bucket is going to be the wage line. It represents a little over half of our total operating expense. We've been tracking around 4% to 4.5% same store wages for quite some time.

I would probably consider that to be a relatively good run rate, somewhere in that 4% to 4.5%, and then any type of unit growth above that, certainly you're going to have to factor that in into your OpEx calculations going forward.

But fuel expense, I mentioned that in my opening comments. It also was mentioned in the press release, going forward certainly we are going to be in a much more favorable comparison with diesel fuel costs, and that's for our fleet, our expense to operate our fleet.

This should give you a few points of data here with respect to diesel. Q4 of 2008 that we're comparing against currently, the average cost of diesel was about $3.80 a gallon last year. We're tracking roughly about $2.18 right now. In Q1 of 2009 it was $4.31. In Q2 of 2009, about $3.50. So you can see that going forward the next three quarters, we are in a much more favorable comparison.

Operator

Your next question comes from Charles Cerankosky – Ftn Equity Capital Markets.

Alex for Charles Cerankosky – Ftn Equity Capital Markets

First of all, congratulations on a great quarter. As the price of gasoline has come down dramatically, how has that affected the consumer's willingness to fill up their tanks?

William Walljasper

When I look at the average gallons per transaction, I'll go back to the middle of the summer when gas retail price was very high. We've actually seen a significant uptick in the amount of gallons per transaction with the lower retail. That does several things. Obviously in my mind, it creates a little bit greater consumer confidence with lower retails.

Certainly it frees up some discretionary income that they may utilize inside the store, and I think that's somewhat reflected by the same store sales reported earlier. But the other thing certainly, they fill up more gas per transaction. For that particular destination, it may be longer in between their fill ups, so actually same store customer count was off slightly in the quarter, but people are still when they're at the store filling up, they're still coming inside and buying their normal products that they normally buy whether that's a cup of coffee, donut, cigarettes, or whatever the case may be. But we are definitely seeing an uptick in gallons per transaction.

Alex for Charles Cerankosky – Ftn Equity Capital Markets

I guess one thing no one has touched on so far is the acquisition environment. So maybe if you could just briefly discuss that.

William Walljasper

Absolutely. Certainly we're behind our goal in the acquisition arena. I'll kind of take that in a couple of different directions. First of all, we never did articulate a specific acquisition goal. It was a unit growth goal which would be a combination obviously of the new stores with acquisitions.

And roughly by the end of the year, we should have somewhere around 17 new stores open and operational, and then we'll probably have several, maybe somewhere in the area of four to six filter over into early part of the first quarter of next fiscal year.

But the acquisition environment certainly is slow. We are seeing, I do have some cautious optimism in regards to acquisitions. We are seeing multiples come down from the period of roughly about six months ago, so I'm encouraged by that. We have quite a few numbers that we're looking at under review.

When I say quite a few, certainly that is, we've never given that number out so I don't want to give any numbers specifically, but I'm encouraged by the number. Put it that way. And when I under review, what I mean by that would be that these are acquisition targets that have a willingness to have conversations with us and share their financials and to the point some of those are under negotiations.

So I do have some optimism. I think that there are significant long term opportunities there as long as we're patient. I mean we certainly have a return on invested capital goal that we need to be cognizant of and don't want to necessarily go out and jeopardize that goal. So that's about the extent that I could report on that.

Alex for Charles Cerankosky – Ftn Equity Capital Markets

A couple of questions on the tobacco category. Obviously with the sharp increases in taxes, there's going to be, I would suspect there will be some distortion in your monthly sales trends.

William Walljasper

I think that's pretty intuitive. I think you're right on point there. Typically what we see by tax increases on the State is, I think will certainly transfer over to the Federal tax is, the consumers out there that smoke know it's going to go into effect April 1. You may see a what I'll call a filling of the pantry so to speak, that they'll go out and try to load up on cigarettes prior to that tax increase coming forward.

So that may SKU some results in that regard. You're exactly right. And certainly if they do, I'll call that out in the next conference call to try to normalize that for everybody.

Alex for Charles Cerankosky – Ftn Equity Capital Markets

Any sense of the magnitude?

William Walljasper

No, I really don't because we've never really been through a tax increase of this magnitude across our marketing area, so it would be a guess at best in this regard.

Alex for Charles Cerankosky – Ftn Equity Capital Markets

How important is the tobacco category as a destination item?

William Walljasper

It's certainly arguably the number two destination item of our business and probably the number two destination of most convenience stores, gasoline obviously being the number one. Certainly that creates some thoughts internally that you know, represents roughly somewhere of 8% to 10% of the total revenue depending on what the retail price of gas is.

But so it's a big category for us, and obviously when they come in to buy cigarettes they're buying other products in the store as well. As I mentioned previously we are fortunate that we are actually seeing positive unit movement through the first nine months. That could come off and we anticipate that coming off as that Federal tax increase flushes out.

So it certainly is something that we're keeping our eye on.

Operator

Your next question comes from Karen Howland – Barclays Capital.

Karen Howland – Barclays Capital

If I could just go into a little bit more on the cigarettes and the tax impact. You said 8% to 10% of your total sales, but that's about 35% to 40% of your grocery sales, right?

William Walljasper

That's, right. That's about right. Now inside the store if you blend in prepared foods, cans, it's about 30%. But you're right on point.

Karen Howland – Barclays Capital

And so just thinking about how between comps and the margin on the grocery, presumably if 40% of your sales are seeing, it'll see a 15% increase in comp.

William Walljasper

Yes.

Karen Howland – Barclays Capital

If I assume the average pack costs $4.00 and you're adding $0.61 on top of that.

William Walljasper

You're right on point, kind of right along what Alex was talking about. When you look at same store sales going forward, there will be a little bit of a SKU factor with respect to that, and that's something that we would plan on flushing out to kind of normalize what part of that same store sale increase that we experience going forward would be from the tax increase.

Karen Howland – Barclays Capital

Would you expect to flush that out on a monthly basis, or just on a quarterly report?

William Walljasper

The initial thought was going to be on a quarterly report, but I tell you what we'll do. We'll certainly have conversation internally and flush that out. I don't think there should be any reason that we shouldn't be able to flush that out on a monthly. It might be a little misleading because of some of the timing issues associated with when we report same store sales in relationship to the tax increase when it goes into effect. That's why we're leaning towards the quarter.

Karen Howland – Barclays Capital

Then if I think about the cheese impact, just going back to that, that will completely net out in the gross profit, right? So you shouldn't expect to make and additional gross profit dollars on that.

William Walljasper

Here's kind of a way to look at the cheese.

Karen Howland – Barclays Capital

I'm sorry, I apologize. I meant on the tax increase on grocery. It will be an increase to dollars, decrease to margins so net net gross profit dollars will be, assuming there's no impact of volume, flat.

William Walljasper

Yes.

Karen Howland – Barclays Capital

And then on the cheese side of things, I think you said it was locked in at $1.68. Can you remind us what the cheese price you experienced this past year was?

William Walljasper

What period of time you looking for? In the third quarter it was about $1.79. Here a way to look at it. Here's what I think is a good way to look at it. Going forward, at least through October, the average cost of cheese all in includes transportation and processing is about $1.68 a pound. What we'll be comparing against going forward in Q4 will be about $2.09 from a year ago. $2.25 a pound in Q1 of 2009 and $2.10 in Q2 of 2009.

And roughly we purchased about 11 million pounds on an annual basis of cheese and the impact of about a $0.10 swing is about 30 to 35 basis points in the overall prepared food margin. I think that should be the metrics to get you kind of what the margin potential impact will be.

Karen Howland – Barclays Capital

If I could ask about the acquisition environment, it seems like the past seven, eight quarters now we've been talking about how the acquisition environment is not particularly favorable for various reasons. When do you think you'll actually switch the focus from acquisition, because I think from earlier it was your stated growth vehicle, to more new store openings if the acquisition environment remains to second multiples or for whatever reason.

William Walljasper

Here's how I'd answer that. Right now we are currently in the capital budgeting process for fiscal 2010, and that's part of that thought process. For us, I think we're going to need to have maybe a few more data points behind us with respect to the new O style store that we just started opening back last fall.

Also, when we replace stores, we're replacing stores with this new store design concept, and also we are looking to have a what I'll call a major remodel program with respect to this new store concept. So I think when we get a few more data points behind us that would give us confidence that this new store design is certainly a significant driver of return of invested capital, and I think that would be the trigger point for us.

So you may see an acceleration of new stores next year in relationship to what we have in the past several years, but we want to be cautious about that because this new design is not going to work everywhere and we certainly don't want to make a mistake of any magnitude and find out at some later date that perhaps this new store design doesn't work in certain types of communities. So we're proceeding there very diligently in that regard.

Karen Howland – Barclays Capital

How many centers do you have done in the new store design?

William Walljasper

By the end of the fiscal year, we're going to have roughly 35 to 40 of these locations up an operational. That will include new store construction, the replacement and also the remodels. So as we head into the what I'll call the heavy season for our business, the Q1 and Q2, that should give us better information on how these stores will do on a seasonal basis because keep in mind that one of the changes we had in the new store design was going from roughly a nine door cooler set to a 14 door cooler set.

And some of those items in the cooler are heavy sales items within Q2 and Q2 so we just want to make sure that that concept is going to work going forward. We're encouraged by the preliminary results however.

Operator

Your next question comes from Michael Smith – Kansas City Capital.

Michael Smith – Kansas City Capital

Can you go into the margin on the food a little bit more? For instance, I understand part of it was probably cheese, but you mentioned I think in your prepared remarks new products?

William Walljasper

Not new products but product cost increases. So when you look at the margin, yes we were down about 120 basis points from the third quarter a year ago. I mean a little bit of that was the cheese cost, but not very much. We actually had a pretty good January to bring the actual average cheese down in the third quarter. So a little bit of that differential is due to cheese cost.

A little bit had to do with stale factor, but what happened was, we had such a significant increase in cost over the last year, we were able to take price increases to offset those from a gross profit dollar, but just not enough price increases to offset and maintain the margin.

And these product costs, it ran the gamut in the category. It wasn't necessarily segregated into one particular sub category. It was weighted a little more to the pizza line, but you also include supplies into that as well. You have your cups and your boxes and your straws, and we had that cost increases that we had back when the diesel fuel costs were so high.

Michael Smith – Kansas City Capital

The other question I had kind of goes back to your new 4,000 square foot variety. What moved you to more urban areas or will there be a change as a result of the box is bigger by requirement, a wider area to draw from?

William Walljasper

That's exactly what we're trying to get our arms around here, because I'm not sure that that particular design will work in every location. And when I say every location that would be ranging from populations of 500 to 600 people up to 60,000 to 70,000 people. So it's hard to say at this time whether there will be a gravitation towards more urban locations versus rural.

We have placed those stores in a wide variety of different populations. Some of those are on interstate locations, and some of those are in more resort style areas, trying to get a better sense of where this will work and where it's most efficient. And then once we have our arms around that, we'll certainly start drilling down on that and accelerating that activity, assuming again it meets the return of invested capital that we're looking to see.

Michael Smith – Kansas City Capital

I want to make sure I understand this right. Are you opening 17 new stores, new constructed stores this year?

William Walljasper

In total, at the end of the fiscal year, we'll have roughly about 17 new store constructions open.

Michael Smith – Kansas City Capital

And you've acquired seven.

William Walljasper

Year to date, correct.

Michael Smith – Kansas City Capital

I guess it's fair to project that you will fall short of your square footage desires this year.

William Walljasper

Unless one of those acquisitions that I kind of peripherally touched on earlier comes to fruition very quick, that would be correct.

Operator

Your next question comes from Ben Brownlow – Morgan Keegan.

Ben Brownlow – Morgan Keegan

Can you talk a little bit about what you're seeing chain wide and the differences between the smaller and the larger markets, say less than 5,000 people and greater than 12,000 people kind of markets?

William Walljasper

When you say changes, just overall changes or specific area?

[Ben Brownlow – Morgan Keegan]

I guess the overall performance, not as much the changes as the overall performance and the differences you're seeing there in the markets.

William Walljasper

Actually, when you look at some of the small communities that we operate in, in relationship to some of the larger populated areas, there's not necessarily, it's not like an 80/20 rule per se that is driving the bus. We see some very strong movement in both sides of that. So I don't think I can honestly say that there is a stronger performance of our higher populated stores and the lower populated stores.

We've gone through this exercise just very recently and did not see a correlation by population. We're very cognizant of traffic patterns when we construct a store or buy a store. We're very cognizant of census data, competition. What we're trying to accomplish is setting that store up to be as successful as possible.

We certainly don't want to build or acquire a store and we're behind the eight ball already because traffic patterns are going to pull that store back. So I'm very cognizant of that, so they're all performing very well.

Obviously there are some strong performances in both categories in there, and some weaker performances in both categories.

[Ben Brownlow – Morgan Keegan]

And what are you seeing in some of the other cost components? You were kind of touching on comps and coffee and others, but what are you seeing there and have you thought about locking in other commodities like coffee?

William Walljasper

We lock in coffee on a periodic basic. I don't believe we're current in a forward buy of coffee. We were last fall. That's probably, when we look at commodities that would have an impact, for instance in the prepared food category, cheese certainly would be the big one for us. Coffee would fall second behind that.

You may look at some meat in some cases, but that's a smaller cost item in the overall. So right now, we continue to look at it but we're not currently locked in on the price of coffee.

Operator

Your next question comes from [Anthony Liebinsky – Sidoti & Company]

[Anthony Liebinsky – Sidoti & Company]

Your new store design has also an expanded coffee program. Can you touch on how that's doing and any kind of color you can give would be helpful.

William Walljasper

I can give some anecdotal color for you. You're exactly right. One of the changes in the new store design was an expanded prepared food area. Part of that expanded prepared food area included an expanded coffee bar. Most of our stores just have a couple of flavor profiles that would regular and decaf.

But the new concept certainly has a wide variety of flavor profile, multi head cappuccino machines. Ice coffee is a new product now that we have rolling out. That seems to be gaining a little bit more popularity with our consumers.

We also have expanded fountain machines and slushy machines in some of those stores as well. Specifically to your question with respect to the coffee bar, we actually started that program prior to the new store design in some of the remodels where we expanded that particular area of the store, and we are seeing some very solid results, very encouraged by that particular category.

I don't think we necessarily have enough data points out there to give any strong information. As we start heading into the next fiscal year, I think we will have some data points to maybe give you some numbers associated with some of those comments. But we're very encouraged by what we're seeing in the coffee area.

[Anthony Liebinsky – Sidoti & Company]

As far as the cheese prices, when exactly did you lock in that price?

William Walljasper

Roughly about the first of February.

[Anthony Liebinsky – Sidoti & Company]

And also, as far as the fleet expense, I saw the diesel prices. I know you mentioned the numbers and I don't know if you said the exact dollar amount, how much was that lower in the quarter?

William Walljasper

For fuel expense, about $940,000. That was the decrease.

[Anthony Liebinsky – Sidoti & Company]

As far as the credit card utilization, how much was that this quarter versus a year ago?

William Walljasper

Do you want the actual dollars or the downward movement?

[Anthony Liebinsky – Sidoti & Company]

Well both if you have those.

William Walljasper

This year it was about $9 million in the third quarter compared to about $11.2 million roughly in the third quarter of last year, so about a $2.2 million decrease.

[Anthony Liebinsky – Sidoti & Company]

And as far as a percentage of those transactions, are people actually using credit cards less often now that actually gas prices have come down, or what are you seeing there?

William Walljasper

We are seeing a pull back in credit card utilization. There's no question. It's probably a combination of several things. One would be the lower retail prices, but also I think the credit crisis that the United States is in is certainly playing into that as well. I think people may have some challenges in that regard and paying more with cash.

But certainly it's coming down. When I look at it from a percentage on the revenue, that $850 million revenue number that we reported in the third quarter, about 46% of that revenue was done on credit cards. That's down from 52% in the first quarter this year, but probably more significantly was the actual transaction of a credit card.

We are now slowing that down into a high single digit increase. It used to be tracking at about a 20% to 30% increase in transactions, so certainly that's headed in the right direction for us and given the lower fuel environment, assuming that can stay in the general area where it's at now for the next several quarters, again we should be in a very favorable comparison.

Operator

Your next question comes from Michael Smith – Kansas City Capital.

Michael Smith – Kansas City Capital

Are you going to open seven new constructed stores in the fourth quarter?

William Walljasper

We have seven year to date through the first nine. So we're going to open 10 additional stores in the fourth quarter to bring the total to 17 by the end of the year.

Operator

There are no further questions. I would now like to turn the conference back to Mr. Bill Walljasper for final closing remarks.

William Walljasper

As a reminder, same store sales for February will be released March 16. I'd like to thank everyone for joining us today and have a great day.

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Source: Casey's General Stores F3Q09 (Qtr End 1/31/09) Earnings Call Transcript
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