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On August 4, The Wall Street Transcript interviewed William J. Walljasper, Senior Vice President and Chief Financial Officer of Casey's General Stores, Inc. (CASY). Key excerpts follow:

TWST: We would like to begin with a brief historical sketch of the company and a picture of the things you are doing now.

Mr. Walljasper: We opened our first store back in 1968 and since then we have grown from one store in the State of Iowa to encompass a nine-state area of the states here in the Midwest. Currently, we have over 1,450 locations. We are really unique in the convenience store industry and with our business model, locating stores in smaller rural communities throughout the Midwest. The majority of our stores are in towns of 3,000-person population or less. We serve not only as the gas station but also in many cases the grocery store and restaurant. Some of the things that differentiate our company in the convenience store industry would be the fact that we do have a proprietary prepared food program. We make from scratch not only pizza, but donuts as well and offer a wide variety of other products. In fact, we are a top 10 retailer of pizza and donuts in the nation. We also own all of our assets, which is unique in the business, and self-distribute about 90% of the grocery products in our store; it comes out of our distribution center centrally located here at corporate headquarters.

TWST: Would you tell us more about the reasons for the company's success?

Mr. Walljasper: I think it all starts back when we actually opened our first store. The next two stores actually were in communities of smaller populations than our first. I think at that point we found a niche of servicing some of the smaller rural communities that haven't had this type of service before. So in that regard, being located in smaller communities, there is less competition not only from a convenience store perspective, but less competition from a quick-serve restaurant perspective, from an entry-level labor perspective, lower cost to build and even lower cost to purchase when we go under acquisition strategy. So it has been a nice, evolving product. We are very vertically integrated and we have stayed vertically integrated since the start of the company and I think that's a good reason for the success that we have. Also by nature the company has been what I will call relatively conservative and I think that's been a very positive thing for the company, not growing just for the sake of growing, but having to manage that growth plan. We have very low debt, a very strong balance sheet. In fact we would be considered investment grade. So I think all those components kind of rolled up sum up the success of our company.

TWST: I believe that you used to have a number of franchises. Why have you cut down on franchising?

Mr. Walljasper: That is correct. We currently, at least as of April 30, 2008, have 14 franchise locations. We used to have over 200 franchise locations. We started franchising back in the 1970s as a way to grow critical mass; we didn't have the capital to grow at that point. We haven't issued a new franchise since we went public back in 1983. Since that point, we have purchased many of those stores back and converted them over to corporate locations, and we will be out of the franchise business at the end of this calendar year. All remaining franchise agreements will expire by the end of the calendar year.

TWST: How is the price of gas  affecting you?

Mr. Walljasper: The price of gas certainly has been more of a challenging issue here recently. It's affecting us in several ways. First of all, gasoline consumption — it's no secret that gasoline consumption nationwide has been down over the last year, somewhere around 2% to 3%. Our same-store gallons over the most recent fiscal year we completed ending, April 30, 2008, were down 2%. We have seen some elasticity in demand with gas gallons.

However, given that, coupled with a little more challenging economic time nationwide, our same-store customer count continues to be very solid. People are still coming into our stores, they are still buying the soda or the cup of coffee or donut or a slice of pizza or whatever they are buying. They are continuing that process. They are filling up with fewer gallons per stop, which means they are coming back perhaps a little bit more often to our stores.

TWST: What are the main opportunities and challenges that lie ahead for you?

Mr. Walljasper: I think the opportunities for us stem from a comment I made earlier about the fragmented nature of our market area. Just to reiterate, about two-thirds of the convenience stores in our market area operate with 10 stores or less, which means they have a different critical mass than we do and a different infrastructure than we do.

We purchase direct from the vendors, we don't go through a food broker, which gives us some buying power in that regard. We also have a very strong balance sheet, which enables us to get very good credit and payable terms. For example, with gasoline, several years ago a load of gasoline would cost $10,000.  Now a load of gasoline is somewhere between $30,000 and $35,000. We turn our gasoline about every three days and our payment terms are 10 days. I am pretty confident that some of the smaller operators would not have that same type of payment term. It's been, quite frankly, a crunch on working capital for some of the smaller operators. So that creates an acquisition opportunity. Anytime there is pressure in our industry, I believe it creates opportunities to perhaps purchase some of the operators that don't have the same type of structure that we do. So the opportunities in that regard going forward from within are not only our nine-state market area, but we also did a warehouse expansion several years ago, which will enable us to add another 1,000 stores above the ones we currently have, which means that we may look to go into other states that border our current market areas, states such as Michigan, Ohio, Kentucky, Tennessee and Arkansas. Those are states that we are looking to penetrate and I think there are opportunities to be had in those states.

Source: Interview with Casey's General Stores CFO William Walljasper