Caseys General Stores, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to Casey's General Stores third quarter fiscal year 2020 earnings conference call. At this time, all participant lines are in a 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 then 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. I would now like to hand the conference over to your speaker today, Bill Walt Jasper, Chief Financial Officer. Please go ahead.

Good morning, and thank you for joining us to discuss Casey's results for the quarter ended January 31st. I'm Bill Walt Jasper, Chief Financial Officer. Darren Rebelez, Chief Executive Officer, is also here. Before we begin, I'll remind you that certain statements made by us during this investor call may constitute forelooking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forelooking statements include any statements relating 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 ability to execute on the strategic plan or to realize benefits from that strategic plan, as well as other risks, uncertainties, and factors which are described in our most recent annual report on Form 10-K and quarter reports on Form 10-Q as filed with the SEC and are 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 Descalines any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise. This morning, we will first take a few minutes to summarize the results of the third quarter and then open for questions about those results. I would now like to turn the call over to Darren to discuss those results.

Thanks, Bill, and good morning, everyone. As you've seen in the press release, diluted earnings per share for the third quarter were $0.91 per share, The results were impacted by a lower fuel margin versus the third quarter last year and higher operating expenses as we cycled over significant operating expense reductions in the prior year. We also experienced a timing shift in the approval of a performance target for equity compensation from the first quarter to the third quarter. Year-to-date diluted earnings per share are $5.43, up over 12% from the same period a year ago. 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 challenging demand environment while at the same time we were comparing against our strongest margin period from a year ago. We were pleased with our ability to leverage our current price optimization and procurement programs to navigate through this. These factors enable us to achieve an average fuel margin of 21.7 cents per gallon. Same store gallons sold were down 2% in the quarter. The average retail price of fuel during this period was $2.40 a gallon compared to $2.22 per gallon a year ago. Despite the decline in same store gallons, total gallons sold for the quarter were up 3.3% to 573 million gallons Due to the strong contribution from our new stores opened in the last 12 months. As a result, gross profit dollars increased 1.4% in the quarter in the fuel category. Same store gallons sold year to date were down 2% with an average fuel margin of 23 cents per gallon. Through the first nine months, gross profit dollars in the fuel category are up over 14% compared to the same period a year ago. Our effort in price optimization continues to have a positive effect on our overall profitability in the fuel category. During the quarter, we completed the full integration of this tool with our point of sale system. In addition to this, we also converted over 300 stores to digital price signage. We will be fully converted to digital price signage by the end of the fiscal year. This integration and sign conversion will provide us increased flexibility in adjusting retail prices to react more quickly to the rapidly changing fuel environment. We're also pleased with the progress we made in fuel procurement in the third quarter. Currently, our contracted fuel volume represents about 43% of our total fuel volume. We are on pace to have approximately half of our 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 third quarter, we continued to add new cardholders. To date, we now have over 3,100 accounts and approaching 20,000 cardholders. This, combined with our additional efforts in other types of fleet cards, has driven the Universal Fleet Card Program 9% in the third quarter. We remain optimistic about the potential of all these initiatives going forward. Same store gallons for February trended above our current annual guidance range excluding the benefit from the extra day in the month. Moving to inside the store, total sales in grocery and other merchandise category were up 7.1% to $582.4 million in the third quarter. Same store sales were up 3.5% during the quarter toward the upper end of our annual guidance. Excluding cigarettes, same store sales were up 5.2%. The average margin in the quarter was 32.9%, up 100 basis points from a year ago in the same period due primarily to a favorable product mix shift to higher margin items. Gross profit dollars for the quarter in the category were up 10.5% to $191.7 million. For the first nine months, same-store sales were up 3.2%, with an average margin of 32.5%. 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 was 32.8%, and gross profit dollars for the first nine months were up nearly 9% to $633.9 million. Same-store sales for February trended within the range of our annual guidance, excluding the benefit from the extra day in the month. During the third quarter, we continued to integrate our price optimization platform inside our stores. We completed the rollout of the beer and alcohol categories to this platform and are currently working on the integration of promotion forecasting. We still have limited data at this point, but we have seen early signs of margin expansion in several of these categories. We will continue to monitor our progress and update you as we move forward with this program. Given the recent regulatory changes in the tobacco area, We've delayed rolling this category into the platform as we evaluate this potential impact. In the prepared food and fountain category, total sales were up 6.8% to $273.6 million for the quarter. Same store sales accelerated each month throughout the quarter with gains in January above our annual guidance. This resulted in a same store sales increase of 2.8% for the quarter. Excluding the impact from accounting for deferred revenue due to our recently launched rewards program, same-store sales were up 3%. We were pleased with the acceleration in our comps throughout the quarter and the momentum we have gained heading into the fourth quarter. Although early, the recently launched rewards program is exceeding our expectations. At our investor day in January, we indicated that we were approaching 1 million active members. Thank you for joining us today. have rewards participation. We look forward for the opportunity to learn more about our guest preferences, which will allow us to engage and serve them even better. We believe that the combination of the new suite of digital platforms will continue to drive additional traffic. Year-to-date, same-store sales were up 2.1%, with an average margin of 61.1%. The average margin for the quarter was 60.2%. Both of these were down from the same periods a year ago, primarily due to higher cheese costs as well as the adverse impact from a special promotion we ran in November to launch our new coffee program. The average cost of cheese for the third quarter was $2.17 per pound compared to $1.86 per pound in the same quarter last year. With cheese costs trending down, we're currently monitoring the market closely looking for buying opportunities. For the quarter, Prepared Foods' gross profit dollars rose 3.2% to $164.8 million. Same-store sales in the prepared food and fountain category for February trended ahead of our annual guidance, excluding the benefit from the extra day in the month. We're excited about the acceleration we've experienced in prepared foods and remain 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.