Casey's General Stores Inc Q2 2012 Earnings Conference Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Kelly Bania - BofA Merrill Lynch - Analyst : Thanks for all the color on the operating expenses. I was wondering if we could just dig in a little bit deeper on that topic. Because it looks like over the next couple of quarters, you start to lap some of those increases in the new stores based on the acquisitions rolling in in Q3 and Q4 last year. I was wondering if you could comment on kind of what you expect, how you expect that to play over the next couple of quarters. And then any more detail on the 24-hour locations? And how that's impacting operating expenses and any plans to maybe potentially roll more of those out or how those performing.

Question: Kelly Bania - BofA Merrill Lynch - Analyst : Thanks, and just one more follow-up on that. On the remodels of the acquired stores, how many of those are now complete and still yet to be done? And how are the results from those and the cost of those remodels differing from that of remodels of the existing stores?

Question: Kelly Bania - BofA Merrill Lynch - Analyst : Thanks a lot.

Question: Karen Short - BMO Capital Markets - Analyst : Just a quick question on housekeeping. What was the actual dollar amount for credit card fees this quarter?

Question: Karen Short - BMO Capital Markets - Analyst : Okay. And just looking at the acquisition environment, I guess one of your -- not direct competitors but peers commented that acquisitions, the acquisition pipeline albeit maybe robust, was not likely to materialize for them, because it was very high valuation, multiple expectations on the part of the seller. Can you maybe talk a little bit about what you're seeing on that?

Question: Karen Short - BMO Capital Markets - Analyst : And I guess if that were to come to fruition, how quickly do think you could accelerate your organic growth, your pipeline to maintain your unit growth goals? I realize it's not a 2012 problem, but I'm just curious.

Question: Karen Short - BMO Capital Markets - Analyst : Okay. And then just looking at the margin and the Prepared Food obviously it was, fees are rising commodity costs. What are you looking at in terms of taking on additional pricing increases or is that pressure abating?

Question: Karen Short - BMO Capital Markets - Analyst : Right, okay. Lastly, I don't know if you mentioned it, if you did I missed it, was traffic up this quarter?

Question: Karen Short - BMO Capital Markets - Analyst : Yes.

Question: Karen Short - BMO Capital Markets - Analyst : Great, thanks for taking my questions.

Question: Ben Brownlow - Morgan Keegan & Co., Inc. - Analyst : Can you update us, it may be a little too early but can you give us an update if you are seeing any sort of data points from the debit fee benefits? If that is kind of flowing through at all?

Question: Ben Brownlow - Morgan Keegan & Co., Inc. - Analyst : Okay, and just to follow-up on one of the prior previous questions, on the 24-hour planned conversions, was that 120 or 150 you said by January?

Question: Ben Brownlow - Morgan Keegan & Co., Inc. - Analyst : That's on top of the 70 to 80 that have all ready been converted?

Question: Ben Brownlow - Morgan Keegan & Co., Inc. - Analyst : Okay. And then just one last one, can you just update us on the -- you kind of touched on the remodel program, but just for qualitative sort of what you're seeing with opportunities to improve the returns there, and kind of what areas are gaining traction with that remodel program?

Question: Ben Brownlow - Morgan Keegan & Co., Inc. - Analyst : Yes.

Question: Ben Brownlow - Morgan Keegan & Co., Inc. - Analyst : Great, thank you. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Chuck Cerankosky - Northcoast Research - Analyst : Wanted to just ask you to go over one thing, Bill regarding the credit card fees. I just couldn't keep up with it. You said something was up 22.5%?

Question: Chuck Cerankosky - Northcoast Research - Analyst : Okay, versus 54% a year ago?

Question: Chuck Cerankosky - Northcoast Research - Analyst : All right. So big increase there. It is transactions versus the dollar sales. Okay. Looking at -- you touched on this a little bit but I just want to hear it again. The gas margins, November to date and the outlook, things that seem extremely rational, other work we've done suggests the same, how do you guys feel about that looking at the rest of November and even over the next year?

Question: Chuck Cerankosky - Northcoast Research - Analyst : Okay. Would you would be willing to hazard a guess including acquisitions, where your store count will be at the end of the fiscal year? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Chuck Cerankosky - Northcoast Research - Analyst : So that will be pretty much dependent on new construction?

Question: Chuck Cerankosky - Northcoast Research - Analyst : Got you. All right. And then talk about some of these new products and services you've been experimenting with, where we are at, maybe some new ones, I'm not aware. The car wash, pizza delivery stuff, where are you at on that?

Question: Chuck Cerankosky - Northcoast Research - Analyst : Okay. It seems that you like it. But I imagine it is not for every location.

Question: Chuck Cerankosky - Northcoast Research - Analyst : And looking at 24-hour stores, is there a middle ground where you might have extended hours on some of the stores? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Chuck Cerankosky - Northcoast Research - Analyst : When you're looking at the Prepared Foods and the current raw material cost pressure, clearly putting some pressure on your gross margins. Looking out over the course of the next several quarters, I imagine you're going to be talking about some price increases as that goes on. With an awareness of the customer sensitivity to them. Do you see margins fully recovering as you implement those and raws begins to back off? Should we expect that over say four quarters or a six quarter period?

Question: Chuck Cerankosky - Northcoast Research - Analyst : I agree with that. I'm just wondering about the dynamics here. And I guess another way to ask it is as if raws stay on the high side, maybe they abate some, do you think about gradually increasing prices? Or are you concerned that the customer would push back on those so that we end up seeing comps shrink, comps slowdown without margins fully recovering?

Question: Chuck Cerankosky - Northcoast Research - Analyst : All right, thank you very much. Great quarter.

Question: Anthony Lebiedzinski - Sidoti & Company - Analyst : Just a follow-up on the price increases. Once you identify -- once you make a decision to actually do a price increase, how fast can you move with that price increase to put that into your stores?

Question: Anthony Lebiedzinski - Sidoti & Company - Analyst : Got it, okay. In terms of the store remodels on the previous conference calls, you talked about eventually doing possibly another 400 of these major remodels. Is that still the case, or you're still evaluating that?

Question: Anthony Lebiedzinski - Sidoti & Company - Analyst : Okay. As far as store expansion, are you targeting any new markets? I know previously you had talked about entering some new states like

Question: Anthony Lebiedzinski - Sidoti & Company - Analyst : So in total, how many properties do you have in your land bank so to speak?

Question: Anthony Lebiedzinski - Sidoti & Company - Analyst : Okay, that is helpful. Thank you. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Kelly Bania - BofA Merrill Lynch - Analyst : You mentioned the competitive pricing continuing in the cigarette category, but as you lap that, the aggressive cost reductions there, that should start to get better, I'm wondering if it's possible that we could see margins in the grocery category up in the second half? I guess driven by that category. And then two, also curious if you've had a chance to evaluate the new incentive program out from Marlboro? I think it's called the Performance Options plan? Just any impact that you might expect or see impacting your competitors from that change.

Question: Kelly Bania - BofA Merrill Lynch - Analyst : Okay, thanks.