Caseys General Stores, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Q2 Fiscal 2020 Casey's General Stores Earnings Conference Call. At this time, while participant lines are in the listen-only mode, after the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. Bill Wall Jasper, Chief Financial Officer

may constitute forelooking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forelooking statements include any statements related to our possible or assumed future results of operations, business strategies, growth opportunities, and performance improvements at our stores. There are a number of known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from any future results expressed or implied by those forward-looking statements, including our abilities to execute on the Value Creation Plan or to realize benefits from the Value Creation Plan, as well as other risks, uncertainties, and factors which are described in our most recent annual report on Form 10-K and quarterly reports on Form 10-Q as filed with the SEC and available on our website. Any forward-looking statements made during this call reflect our current views as of today with respect to future events, and Casey's disclaims any intention or obligation to update will revise forward-looking statements, whether as a result of new information, future events, or otherwise. This morning will take a few minutes to summarize the results of the second quarter and then open for questions about those results. I would now like to turn the call over to Darren to discuss the results of the quarter.

Thanks, Bill, and good morning, everyone. As you've seen in the press release, diluted earnings per share from the second quarter were up 23% to $2.21 compared to $1.80 a year ago. The results were driven primarily by a stronger fuel margin versus the second quarter last year, continued operating expense control, and sales gains inside the store. Year-to-date, diluted earnings per share are $4.52, up over 22% from the same period a year ago. Excluding the one-time impact from tax reform, this quarter marks the sixth consecutive quarter of double-digit earnings growth per share compared to prior year quarters. We continue to execute on key elements of our long-term plan this past quarter, positioning us well for future growth. I would now like to go over our results and some of the details in each of the categories. During the quarter in the fuel category, we experienced a favorable fuel margin environment combined with our ability to leverage the implementation of price advantage, which is our fuel price optimization tool. These factors enable us to achieve an average fuel margin of 22.9 cents per gallon up nearly 3 cents per gallon from the same period last year. As a result, gross profit dollars increased nearly 19% in the quarter in the fuel category. Same-store gallons sold were down 1.8% in the quarter. This is primarily due to our efforts to optimize gross profit dollars in the category by striking the appropriate balance between gallon growth and fuel margin. The average retail price of fuel during this period was $2.47 a gallon Thank you for joining us. Gross profit dollars in the fuel category are up 20.5% compared to the same period a year ago. Our effort in price optimization continues to have a positive effect on our fuel margin gains. By the end of this quarter, we anticipate to have all of our stores fully integrated at the point of sale with the price advantage tool. We also currently have approximately 400 stores without a digital price sign. We are on schedule to have these converted to a digital format by the end of the fiscal year. This integration and sign conversion will allow us to increase flexibility in adjusting retail prices to react more quickly to the changing fuel environment. We are also pleased with the progress we've been able to make in fuel procurement in second quarter. Currently, our contracted fuel volume represents about 37% of our total fuel volume. As we continue to build out this team, we expect to have approximately half of our overall fuel volume under contract by the end of the fiscal year. Lastly, in the fuel category, we continue to gain traction in our fleet card program. Over the course of the second quarter, we added over 3,000 new cardholders. To date, we now have 2,500 accounts and 15,500 cardholders. This combined with our additional efforts in other types of fleet cards have driven the universal fleet program 8% in the second quarter. We remain optimistic about the potential of all these initiatives going forward. As a result of our efforts with price optimization and the expected opportunity of fuel procurement, we adjusted our fiscal year same-store gallon guidance range downward to minus 1% to a positive 0.5%, and moved our annual fuel margin guidance range up to 21 to 23 cents per gallon. Same store gallons are currently trending below our current annual guidance, while the average fuel margin is trending toward the upper end of our current annual guidance range. Moving to inside the store, total sales in the grocery and other merchandise category were up 6.8% to $660.6 million in the second quarter. Same-store sales were up 3.2% during the quarter in line with our annual guidance. Excluding cigarettes, same-store sales were up 5.8%. The average margin in the quarter was 33.3% of 90 basis points due primarily to a favorable product mix shift to higher margin items. Gross profit dollars for the quarter in the category were up nearly 10% to $220.1 million. For the first six months, same-store sales were up 3.1%, with an average margin of 32.3%. As you may recall, the year-to-date margin was adversely impacted by a $6.6 million one-time adjustment that occurred in the first quarter. Without that adjustment, the margin would have been 32.8%, and gross profit dollars for the first six months would have been up over 8% to $442 million. are currently trending ahead of our annual guidance. During the second quarter, we continue to integrate our price optimization platform inside our store. We completed the rollout of the center store products and are currently in the final stages of adding the beer and alcohol categories. As we move into the back half of the fiscal year, we will look to integrate cigarettes and prepared foods onto this platform as well as promotion analytics. with a limited amount of data at this point from the early rollout. We do not have any results to share, but should be in a position to update you at our next earnings call. In the prepared food and fountain category, total sales were up 5.2% to $297.8 million for the quarter. Same store sales were up 1.9%. Even though this was below our annual guidance, we were pleased with the acceleration in our comps towards the back half of the quarter resulting in a strong sequential increase in our two-year stacked comps for the month of October and for the quarter. We continue to gain traction in our digital engagement with our guests. As part of this digital engagement, we completed an employee pilot and recently rolled out a soft launch of our loyalty program at the beginning of this month. We currently have a planned global launch of the program at the start of the new calendar year. We believe that Casey's is at the heart of every community we serve with our purpose being to make life better for communities and guests every day. With that spirit in mind, we wanted to create a partnership opportunity with our guests through the loyalty program. The program will allow members to accumulate points for their purchases at Casey's that can be redeemed for in-store purchases or fuel discounts. Unique to Casey's, our rewards program also allows our guests to convert their points into cash that they can donate to their local schools. This concept tested extremely well with our guests, and we believe this will differentiate our rewards program from our competitors. We're excited about the opportunity to learn more about our guests' preferences, which will allow us to serve them even better. We believe that the combination of the new suite of digital platforms will increase our basket size and drive additional traffic. The average margin for prepared food in the quarter was down 150 basis points to 60.9% versus the second quarter a year ago, primarily due to the rise in cheese costs. The average cost of cheese for the second quarter was $2.18 per pound compared to $1.86 in the same quarter last year. Cheese cost is currently trending up. We are currently purchasing on the spot market and monitor this closely for buying opportunities. In the quarter, prepared food gross profit dollars rose 2.7% to $181.5 million. As you've seen in the press release, we adjusted our annual same-store sales guidance range for prepared foods downwards to 1.5 to 4%. Same-store sales are currently trending within our annual guidance. As many of you have seen already, we recently onboarded Tom Brennan as our new Chief Merchandising Officer who brings to Casey's a wealth of experience in the convenience store and restaurant industries. He's held leadership roles in merchandising, category management, store development, and operations, and I know that with his broad background and track record of success, he'll help us accelerate our prepared food program and overall merchandising strategy. We're also currently searching for a new head of food service to help with that acceleration. With the addition of these new leaders, the continued traction in our digital platform, including the upcoming launch of our loyalty program, we're optimistic about this category moving forward. I would now like to turn the call over to Bill to discuss operating expenses and the financial statements. Bill?