Caseys General Stores Inc (CASY) 2004 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to your Q2, 2004 Casey's General Stores earnings conference call.

My name is Jean.

I'll be your conference coordinator today.

At this time, all lines are in a listen-only mode.

After our presentation, we'll open the call to questions.

Should you require operator assistance while on this call, key star, zero on your tone-dial phone and we'll be happy to assist you.

I'd like to advise you that this conference is being recorded for replay purposes.

Now I'd like to turn the call to hour host, Mr. Jim Shaffer, CFO.

Sir, please proceed.

Good morning and thank you for joining us on this call to discuss Casey's results for the second quarter, ended October 31st.

I'm Jim Shaffer.

Ron Lamb, CEO, John Harmon, Secretary/Treasurer, and Bill Walljasper, Vice President, Finance are also here.

I hope all of you have already seen the press release.

If you haven't, please let me know and I will fax or e-mail a copy to you.

My direct telephone number is 515-965-6107.

Before I begin, I will 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 2003 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, and then open for questions.

This was another solid quarter with progress made toward our annual goals.

We earned 32 cents a share, up from 27 cents in the second quarter last year.

We've been talking about initiatives for the last two years, and the results are now being reflected in our earnings.

I'll start with gasoline.

We are meeting our goal to increase gasoline gross profit.

Year to date, we are up $5 million, or 10.1%.

All aspects are positive.

Gallons are up 7.6%.

Same-store gallons are up 4.9%, and the margin is 10.8% per gallon.

We see some positive trends.

As we complete the satellite communications system, we are gaining delivery efficiency and we have put greater emphasis on each store responding to its market conditions.

Grocery and other merchandise sales are up 2.9%, and gross profit up $2.9 million, or 2.6%.

The strongest performance in the category are specialty and seasonal merchandise, bottled water, and new age drinks.

The most challenging is cigarettes.

Total number of packs sold is up slightly, but sales are down.

The average price per pack is down due to manufacturers' promotions, a consumer shift to lower-priced brands, and competition.

The manufacturers are moving away from traditional wholesale programs and retail display allowances and toward other discount programs, targeted at retail prices.

Looking forward, this offers us an opportunity for greater flexibility to target market by location and thus manage the inventory more efficiently, as well as add a fourth-tier product at an improved margin.

Same-store sales for grocery and merchandise were up very slightly year to date.

Without cigarettes, the number would be 4%.

Looking forward, we remain optimistic about the growth of both sales and margin for non-cigarette products, and improvement in cigarette gross profit as we target our markets.

This is an area where the point of sale data is extremely valuable.

Prepared food continues as our strongest category.

Sales are up, the margin is up, and gross profit increased 12% to $58.6 million.

The quality of the prepared food operation has differentiated Casey's from the competition for many years, and recent fine-tuning has taken the program to new levels.

On the sales side, we have introduced new products that have met with great success.

Those products carry attractive margins.

We have made strides in our cost and are now beginning to benefit from the point of sale data with more efficient production planning.

We now believe we can sustain a margin above 60 for this category.

Total inside sales, including both grocery or prepared food is up 3.9% year to date, and same-store sales up 1.1%.

Without cigarettes, same-store sales would be up 4%.

Gross profit is up $9.2 million, and the inside margin is 38.1, up 60 basis points.

We are meeting our goal to raise gross profit on inside sales.

The technology rollout has been important to Casey's.

We have effectively completed the pay-at-the-pump conversion and have a relatively small number remaining.

The POS rollout is going well, with 304 stores done and we're adding eight a week.

We have 1,000 stores operational on the satellite communications system, and should be chain-wide by next April.

That system is contributing to more efficient gasoline delivery, improved communication with the stores, and lower credit card processing costs.

We expect to save over $200,000 per quarter on credit card costs beginning this quarter.

We are on track with our technology goals.

We have continued to improve the relationship between operating expenses and gross profit.

Year to date, operating expenses increased 5.3%, and gross profit, 6.8%.

I believe this supports our improved efficiency and also demonstrates we are adding new stores at a manageable rate.

So far this year, we have opened 10 new stores and purchased seven.

We have five more stores under construction and agreements to purchase 13 more.

We are in various stages of negotiation and due diligence on several others.

We are gaining traction in store growth.

With this blend of growth, we are seeing improved performance from stores in early years.

We will continue to be aggressive in finding new opportunities.

At the recent meeting, the board of directors declared a quarterly dividend of 3.5 cents of share for shareholders of record February 2nd, payable February 16th.

The board also announced two promotions.

Julia Jackowski was promoted to Vice President, Human Resources.

Julia is an attorney and has served in Casey's legal department for nine years.

Bill Walljasper was promoted to Vice President, Finance.

Bill has a financial background and has been with Casey's over 13 years, serving in various capacities, including risk management, human resources, and has been involved in several financial special products.

In response to the opportunities in technology and acquisitions, the company has increased emphasis on finance, and this is the second high-quality addition to the financial team.

That concludes my remarks.

We will now take your questions.

Thank you, sir.

Ladies and gentlemen, if you'd like to ask a question or comment, key star, then one, on your tone-dial phone.

If you want to withdraw your question, key star, two.

Once again, key star, one for questions.

We'll pause for just a moment.

Please stand by for your first question.

We have a question from Dennis Telzrow of Stephens, Inc.

Please proceed.

Good morning, Jim, good quarter.

Thank you, Dennis.

A couple quick questions here.

You're talking about in the cigarette category doing target marketing and about a fourth tier.

Explain what you meant by fourth tier?

Well, a fourth tier would be kind of a super-discount product that would be the everyday low price product in the store.

And I think the fact that some of the programs are changing now offers us an opportunity to introduce such a product, and we are about to do so.

I think this will represent a much lower cost product for the consumer at an attractive margin for us.

We are now planning a major, company-wide rollout of a product yet this quarter.

So I think we're optimistic about the potential this offers us in the cigarette category going forward.

Just target marketing is, traditionally, we have had the same set in every store for cigarettes.

And the market demand is different for different products in different markets, and I think under some of our new programs now, we'll be able to target the products we offer in a particular store where there is a different demand for one product than in another location.

So this new super-discount product, this is different than the generics that you already carry?

Yes, this is a new product that we'll be introducing.

Is this being made just for you in a sense, or is it ...

No, no.

It's not just for us.

It's just a product we haven't had before and I think it's going to be a very attractive product for the consumer.

So, could you give me a rough idea of is this going to be priced below existing generics?

It will be under anything we have in our store right now.

OK.

And on the POS, we're at 304 I think you basically said.

I guess at eight a week, we've got the rest of the year left.

Maybe 450 or so by fiscal year end.

Any chance that number gets bumped up at some point in time, the rollout per week?

Yes, there's always some possibility of that.

I'm comfortable at the eight a week right now.

And nobody's really talking about accelerating that, but we accelerated it from six a week to eight a week late last summer, early this fall.

So there's always some possibility.

And capital spending this year, could you refresh my memory, or maybe update me on that this year?

Ballpark, we were talking $70 million capital expenditures this year.

That's based on an assumption that we will build 15 stores, which we will.

We're right on track on that.

And that was assuming we would buy about 25 -- we'd pick up 25 other acquisitions, and that's kind of a wildcard.

I think we're on track for that number right now based on what I see that we've done and what we have in the pipeline.

But there's a lot of estimate in that because they don't come at a predictable pace.

And last question, there seem to be a fair amount of convenience store stores for sale.

Any -- you've got this new group that's looking at stores.

Is there sort of a strategic number you're trying to get to next year, or is too early to tell?

Dennis, this is Bill Walljasper.

Hi, Bill.

Congratulations, by the way.

Why thank you.

Kind of answer your question, you know, Jim mentioned earlier that we're gaining tracks in this area.

I would be a tad more optimistic than that.

We actually a couple of months ago shored up our real estate store development area and added some staff to anticipate an increased activity in the acquisition area.

Literally, Dennis, we have hundreds and hundreds of opportunities identified.

Many of them are in various stages of due diligence.

We've actually gotten much better in our due diligence process and we look at it operationally, structurally and financially.

We're making extremely good decisions on our acquisitions, and I think we anticipate some increased activity in that area going forward than what you've seen in the past.

So the decision is more one of are we comfortable with what we're buying, not one of we're not afraid to pay to buy it.

Yes, I think that's a safe statement.

I think we're looking at every opportunity as it goes forward, and I think we're positioned very well for really any opportunity, whether it's kind of the onesy-twosies that we're doing currently.

I mean, if a larger chain becomes available, we certainly have the ability to take a look at that and act quickly if it meets our standards.

OK, thank you very much.

You're welcome.

Thanks, Dennis.

Again, star, one for questions.

As a reminder, if you'd like to ask a question, please key star, one on your touchtone phone.

At this time, I'm showing no questions, sir.

If there are no questions, thank you all very much for joining us on the call and we'll look forward to sharing our third quarter with you in March.

And hopefully we'll continue to have good news at that time.

So, again, thank you very much.

Ladies and gentlemen, thank you for joining us on today's conference.

You may now disconnect.