Q3 2022 Caseys General Stores Inc Earnings Call

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Good day.

Are you standing by and welcome to the Casey's General stores third quarter fiscal year 2022 earnings Conference call.

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After the speaker's presentation, there will be a question and answer session to ask a question. During this session you will need to press star one on your telephone please.

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I would now like to hand, the conference over to your Speaker today, Brian Johnson Senior Vice President of Investor Relations and business development. Please go ahead.

Good morning, and thank you for joining us to discuss the results from our third quarter ended January 31, 2022, I am Brian Johnson Senior Vice President Investor Relations and business development with me today are Dan <unk>, President and Chief Executive Officer, and Steve Bramlage, Chief Financial Officer.

Before we begin I'll remind you that certain statements made by us during this investor call may constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095.

These forward looking statements include any statements relating to expectations for future periods possible or assumed future results of operations financial conditions liquidity and related sources or needs the company's supply chain business and integration strategies plans and synergies.

Growth opportunities performance out of stores and the pension potential effects of COVID-19.

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 but not limited to the integration of recent acquisitions, our ability to execute on our strategic plan or to realize benefits from the strategic plan the impact and duration of Covid <unk>.

19 related governmental actions 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 or revise forward looking statements, whether as a result of new information future events or otherwise.

A reconciliation of non-GAAP to GAAP financial measures referenced in this call as well as the detailed breakdown of the operating expense increase for the third quarter can be found on our website at www Dot Casey's dot com under the Investor Relations link.

With that said I would now like to turn the call over to Darren to discuss our third quarter results Derrick.

Thanks, Brian and good morning, everyone. We're looking forward to sharing our results in a moment, but I'd like to start by thanking our 43000 cases team members for their tireless efforts as we continue to overcome the ongoing challenges with COVID-19, and the resulting supply chain issues as well as challenging weather conditions in our geography.

Our team members have done an outstanding job navigating through these difficult situations and the team's ability to perform under the circumstances.

I'm, especially proud of and grateful for.

Casey as our purpose is to make life better for our communities and guests every day as a rule Midwestern operator, we play a significant role in the towns. We operate in is a privilege and a responsibility we take to heart.

In February we once again activated our hunger campaign in partnership with feeding America.

This partnership raises funds to support 50 to local food banks and communities, where we operate.

Hunger continues to be a real issue in our communities.

We appreciate monster Energy's partnerships in this year's campaign and all our team members and guests who supported the effort.

The campaign raised over $500000 and we will fund over 5 million needles.

In the third quarter, we closed our third strategic acquisition of the year with a 40 pilot stores in the Knoxville, Tennessee market underscoring our commitment to accelerating unit growth.

These stores will help us further build out our footprint in Tennessee and will be supplied from our existing distribution center in Terre Haute, Indiana.

I would like to personally welcome those employees to the Casey's family.

Excited to become a part of the Knoxville community and appreciate your partnership as we integrate those stores into our network.

We're also excited about the strong progress we've made integrating our two previous strategic acquisitions of <unk> and circle K, which are on track to realize expected synergies.

Overall, we are highly confident in our ability to deliver on our strategic commitments and manage through the near term challenges presented by the current environment as evidenced by our third quarter results.

As you've seen in the press release, we delivered an outstanding third quarter.

Diluted earnings per share was a record breaking $1 71.

Up 64% from the prior year total gross profit dollars increased 124 million to $664 million compared to the prior year.

Net income was $64 million up 66% from the prior year.

Same store sales were strong for both inside sales and fuel as guest traffic continued to improve.

Inside same store sales were up seven 6%, while fuel gallons increased five 7%.

Our inside margin remained relatively flat versus the prior year, despite supply chain and price inflation issues.

And fuel margin increased over 38 cents per gallon, despite a volatile cost environment during the quarter.

I would now like to go over our results and share some of the details in each of the categories.

Inside same store sales were up seven 6% for the third quarter compared to the prior year with an average margin of 39, 4% same.

Same store grocery and general merchandise sales were up seven 7% and the average margin was 32% an increase of 130 basis points from the prior year same period a year ago.

We've been able to expand margin due to the great work. Our team has done navigating supply chain and inflation challenges by making price adjustments and leveraging strong supplier partner collaborations.

We performed well across all categories with non alcoholic beverages, and salty snacks continuing to perform exceptionally well.

Nonalcoholic beverages in total were up over 24% on a two year stack basis.

Alcohol same store sales were up mid single digits, despite challenging comparisons and remain up over 23% on a two year stack basis.

This growth is being driven by approximately 500 stores that sell hard alcohol.

We have significantly broadened our assortment of spirits in these stores and it shows in our results.

This scale and liquor licenses is a unique competitive advantage to casey's relative to the rest of the industry.

Same store prepared food and dispense beverage sales were up seven 4% in the quarter.

The average margin for the quarter was 58% down 260 basis points from a year ago.

Pizza slices continue to perform well up 24% for the quarter, while hot breakfast sandwiches were up close to 49% as part of the company's breakfast menu relaunch that began in September .

Margin has been adversely impacted by supply chain challenges and inflation, partially offset by menu price increases.

During the third quarter same store fuel gallons sold were up five 7% with a fuel margin of $38 three per gallon up approximately five four per gallon compared to the same period last year. The fuel team continues to do a tremendous job balancing fuel volume and margin to optimize the profitability.

<unk> of the category.

Fuel margins remained strong, which we view as a long term favorable trends as the industry remains reliant upon fuel margins to offset higher operating costs.

I would now like to turn the call over to Steve to go into some detail on the financials Steve.

Thank you Darren and good morning, before I jump into the financials I'd also like to take a minute to acknowledge the team given the strong performance throughout the entire business this quarter.

Company fired on all cylinders from operating the stores to managing fuel merchandising the floor generating momentum and guest engagement with our various marketing initiatives all the while strongly collaborating with our partners to manage the inflationary and supply chain challenged environment.

Total revenue for the quarter was approximately $3 billion, which is an increase of $1 billion or 52% from the prior year.

Inside sales rose 15, 4% from the prior year to $1 billion for.

For the quarter grocery and general merchandise sales increased by $108 million to $733 million.

An increase of 17, 3% and prepared food and dispense beverage sales rose by $29 million to $293 million, an increase of 10, 9%.

Please note the reported figures are favorably impacted by 9% more stores operated on a year over year basis.

I'll point out prepared food and dispense beverage.

Less favorably impacted due to the timing of kitchen installations that our recent acquisitions, we won't start selling our prepared food menu and these new acquisitions until we finished remodeling the stores.

Retail fuel sales were up $851 million in the third quarter driven by a 19, 9% increase of total gallon sold to 622 million gallons as well as a 48% increase in the average retail price per gallon.

The average retail price of fuel during this period was $3 14 per gallon and that compares to $2 12, a year ago.

As a reminder reported fuel results do not include the Buchanan energy wholesale fuel business, which is included in the other revenue category and is responsible for the vast majority of the $53 million increase we saw this quarter in this line item.

We define gross profit as revenue less cost of goods sold but excluding depreciation and amortization.

<unk> had gross profit of $664 million in the third quarter, an increase of $124 million or nearly 23% from the prior year. This was driven by higher inside gross profit of $52 $3 million or 14, 9% as well as an increase of $60.

Seven $4 million or 39, 6%.

Fuel gross profit.

Inside gross profit margin was 39, 4% down 20 basis points from a year ago. The merchandize team did a tremendous job offsetting cost increases the costs across all categories inside gross profit margin was also negatively impacted by 70 basis.

This points from a higher than normal LIFO charge. This noncash charge is a function of the higher cost of existing inventory and was particularly impactful score prepared food and dispensed beverage margins.

The grocery and general merchandise margin.

It's up 130 basis points to 32% from a year ago. The increase was driven by an improved product mix of single serve non alcoholic beverages and snack items as well as a favorable comparison to the merchandise discounts that were taken last year during our store resets.

Those resets have made a positive impact to inside sales and margin throughout the last 12 months.

Prepared food and beverage margin was 58% down 260 basis points from prior year. The decline was due to significant cost increases that occurred in our prepared food and.

Beverage ingredients and pizza toppings as well as an approximately 100 basis point impact from the higher than normal LIFO charge I previously mentioned.

<unk> team was able to partially offset the cost increases with a round of proactive menu price increases and a more significant round of increase is scheduled for mid March these increases should more than offset the adverse impact of higher cost of goods.

<unk> costs did not have any meaningful impact to margin. This quarter <unk> costs were $1 99 per pound and that compares to $2 per pound last year.

Our supply chain challenges have improved since the second quarter, notably in comps. The company is still experienced disruption within prepared food and dispense beverage bakery items, specifically, our popular glazed donuts continued to be an acute shortage supply as our vendor partners experienced COVID-19 related.

<unk>.

Fuel gross profit benefited by over $10 million from the sale of Rins all of Rins generated were sold in the quarter and there was no carryover from previous quarters, our grocery and general merchandise gross profit increased $42 $6 million, while prepared food and dispensed beverage gross profit increased $9 8 million.

We also saw a $4 $5 million lift in other gross profit. This is primarily due to the dealer network activities and car washes that we acquired from Buchanan and an energy acquisition.

Total operating expenses, excluding credit card fees were up 16, 6% to $443 million in the third quarter total reported operating expenses were up 18, 5% versus $77 million, which is consistent with our expectations and a reduction from our <unk>.

Second quarter growth rate by several hundred basis points.

Approximately 9% of the operating expense increase is due to unit growth as we operated 200 into more stores than in the prior year.

Approximately 4% of the Opex increase is due to same store employee expenses and that was offset by a 2% reduction in store hours worked.

Our store operations team has done a great job rising to the challenge to operate our stores more efficiently given the wage pressure impacting the industry.

Store level wage rates were up 10, 5% from the prior year.

Finally, due to the higher retail fuel prices mentioned earlier same store credit card fees also rose and thus accounted for another 2% of the operating expense increase in the quarter and finally, 2% of the increase is due to higher incentive compensation.

Depreciation in the quarter was up 15, 9% driven primarily by the store growth along with a new distribution center and placed in service at the start of our fiscal year.

Net interest expense was $14 4 million in the quarter and that compares to $11 $5 million in the prior year. The increase was due to the additional debt taken on to fund the <unk> and the pilot acquisitions.

The effective tax rate for the quarter was 23, 4% and that compares to 21, 3% in the prior year driven primarily by timing associated with the recognition of tax credits in the prior year.

Net income was up in the prior year versus the prior year to $64 million EBIT.

EBITDA for the quarter was $173 5 million compared to $125 7 million a year ago, an increase of 38%.

The Buchanan energy Circle, K and pilot acquisitions were all accretive to EBITDA in the third quarter as we expected.

Our balance sheet remains strong at January 31, cash and cash equivalents were $187 million and we have the full capacity of $475 million in lines of credit available, giving us ample liquidity of $662 million our leverage ratio remained at two four times.

Post the closing of the acquisitions and Thats consistent with the first and second quarters.

For the quarter net cash generated by operating activities of $81 million less purchases of property and equipment of $105 million resulted in the company using $24 million in cash flow.

This compares to generating $7 million in the prior year. Despite the decline in free cash flow quarter for the quarter, which is seasonally our lowest was primarily attributable to the payment of payroll taxes. We made this quarter that were temporarily deferred last year as part of the Federal Cares Act.

At the March meeting the board of directors voted to maintain a dividend of <unk> 35 per share unchanged from the second quarter. We will continue to remain balanced in our capital allocation going forward leaning into the many EBITDA and ROIC accretive growth related investment opportunities that we have but continuing to repay debt gradually.

Towards two times and consistently returning cash to shareholders through our dividend.

Our board recently approved an increased share repurchase authorization of $400 million and we will remain opportunistic in this regard.

So far this year. The company has opened 11, new stores and has acquired 191 stores.

The company is maintaining its fiscal 2022 outlook that was previously disclosed.

The fourth quarter is off to a good start and we expect that to continue through the end of the fiscal year.

Casey's expect the fourth quarter same store sales.

Up low single digits for fuel and up mid single digits for inside the store.

<unk> margins are currently trending in the low to mid thirties CPG quarter to date.

We continue to expect fourth quarter operating expenses to improve from prior quarters, an increase between 11% to 13% versus the prior year. There had been no changes in our expectations for operating expense items that we control. However, given current retail fuel prices, we are going to be at the high end of that.

The recent rise in retail prices of fuel from the conflicts in Ukraine should they continue at current levels have the potential to push us above the range as credit card fees would continue to rise regardless, we expect net earnings in the fourth quarter to be higher than the prior year I'll now turn the call back over to Darren.

Thanks, Steve.

You can see our business is really starting to take off as the country gets closer to normal in the wake of the pandemic.

Casey's has shown tremendous resiliency throughout COVID-19 , and we're positioned, especially well to deliver future value to our shareholders through our strategic plan.

As a reminder, the three pillars of our strategic plan are to reinvent the guest experience create capacity through efficiencies and be where the guest is via disciplined growth all.

All three pillars are supported by investing in and growing our talented team.

Our industry, leading prepared food program is poised to outperform this category was more heavily impacted by COVID-19 due to the disruption and daily commuter traffic patterns compared to the traditional convenience store items like bear in tobacco.

We believe the resurgence we've begun to experience this quarter as likely a sign of things to come.

Casey has rolled out a successful breakfast relaunch with innovative new items, such as our toe switch signature handheld loaded breakfast burrito and being the Cup coffee.

The result was a mid teen percentage lift in morning day part traffic and same store sales.

This was a great example of the kind of culinary innovation you can expect from cases moving forward.

In addition to our new products core menu items, such as pizza slices were up 25% for the year and are not showing any signs of slowing down.

Overall as guest traffic improves we are well positioned with our prepared food program to disproportionately benefit.

The progress we've made to reinvent the guest experience with our digital engagement will further bolster our business digital sales were up 11% in the third quarter on top of a 95% increase in the same quarter last year.

Our Casey's rewards enrollment continues to grow and now sits at $4 6 million members. We have never had a more accurate and efficient means of communicating personalized offers to our guests than we have right now.

Finally, with curbside pickup in all of our stores. In addition to our partnerships with third party Aggregators has never been more convenient for our guests to try our made from scratch pizza and other items. We now have over 4500 stores that offer some sort of delivery service for our guests.

Our private label program continues to grow and take market share.

Not only are the products high quality, but they are also a more affordable alternative for our guests seeking value.

Particularly relevant in the current inflationary environment that our guests are experiencing today.

We currently offer over 250 items and are confident in our ability to achieve our longer term goal of 10% penetration of the grocery and general merchandise category.

We're currently trending at our exit rate goal for the year of 5% mix and Casey's branded products with new items on the way.

Our efficient self distribution system has been instrumental in helping us navigate through one of the most difficult supply chain environment the country's experienced in decades.

Our new distribution center in Joplin, Missouri allows us to more efficiently support stores in our existing network, but will also enable us to expand our reach into new markets within our geography.

We believe that coupled with our proprietary prepared food program will help enable our goal to continue to deliver best in class margins inside the store.

Considering almost 65% of the convenience stores in America are operated by owners of 10 stores or less.

The capabilities I, just mentioned provide cases with a significant competitive advantage, particularly in the rural communities, we call home.

Larger operators envy, our prepared food program and smaller operators often don't have the scale to make investments in.

In digital customer engagement, omnichannel retail self distribution or private label brands.

Cases is in the fortunate position to leverage this advantage to be where the guest is and grow units organically via new store construction or as you've witnessed more recently through acquisitions.

Our dedicated M&A team has been busy executing on three significant acquisitions and is ready for more.

Income tax uncertainty labor shortages supply chain challenges and inflationary pressures brought about significant consolidation in our industry and cases is poised with an incredibly healthy balance sheet to take on many more deals to come.

Given that roughly 2000 of our stores are only in nine of our 16 states. We operate in we have tremendous white space to grow our business both within our current footprint and in contiguous markets.

Now none of this would've been possible without the incredibly talented leadership team we've assembled here at Casey's.

The team has a strategic plan that long term Casey's leadership and outside talent with a fresh perspective on the business.

Centralized procurement loss prevention and consumer insights are just some of the new capabilities. We've recently added to the business.

So as we begin to finally emerge from the pandemic and embraced the new normal I think youll find that the strength of our business model will really come to the forefront. We're incredibly excited about the future ahead and firmly believe we have the right strategy and team in place to achieve long term sustainable shareholder value, while also making a pause.

<unk> impact on the communities we serve.

We're now prepared to answer your questions.

Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.

Thank you please limit yourself to one question and one follow up.

Our first question comes from Karen short with Barclays. Your line is open.

Hi, Thanks very much.

Short term question, but I'm wondering if you could just first start off by giving a little color on.

Excellent.

In this quarter and then the impact of the comp this quarter and then the anticipated price increase that you will take I think you said in March.

How that will impact the comp and then I had one or two other bigger picture.

Yes, hi, good morning, Karin This is Steve I'll start with that.

We incurred about.

Kind of a 4% cost increase across.

Across the board if you think of our goods for resale and so over the course of the quarter.

We took about a comparable.

Percentage increase in price they didn't all occur on the first day of the quarter to be fair and it was kind of.

Layered in over the course of the quarter. So the net was a little bit less than that but we will roll into a 4% increase in then.

The price increases that I mentioned coming in March are going to be somewhere in the neighborhood of 5% to 6% on average across most of most of our prepared food Skus and again, those we won't absorb all of that in the current quarter, but annualized thats what that number will be.

Okay. So when we think about.

Margin decline in prepared foods.

So that would be FX.

Thank you.

Yeah.

Within grocery you would say that that was much more matched to the cause.

Maybe I'm just trying to understand how to think about gross margin.

Absolutely yes.

Yes, I think your assumption is correct we were.

I think lined up the price increase in the cost increase was more closely aligned in the grocery business because that business, primarily as contractual for us and so as we worked through annual contract renegotiations over the last couple of months with our supplier partners. We had a pretty good sense of where those were going to land.

And we're able to.

On on retail adjustments really about the same time the cost started coming through the prepared food business is much less contractual and much more commodity oriented in nature and so it's a little bit tougher for us to line that up exactly and hence tends to lag, but I would point out on the prepared food.

Syed.

A LIFO charge just mechanically was a much heavier.

Impact in the quarter on that particular side of the business just by the nature of how it how it works for us.

Thank you. Our next question comes from Ben <unk>.

With Steve Your line is open.

Hey, Thanks. Good morning, just following up on Karen's question, there as it relates to the prepared food margins.

Two part question one.

What was the LIFO charge and that you saw in the quarter is that isolated to that quarter would you expect to take any subsequent charges associated with LIFO expense and then.

Typically the prepared food margin.

Much seasonality, but it does have a pattern of declining sequentially from <unk> to <unk>.

Wondering if that would be the case again this year, just given that LIFO dynamic.

And then.

Just given kind of where we are on.

As you say that the commodity backdrop.

Yes, Ben this is Steve.

I'll start with that.

Mechanics of lifestyle.

We actually take LIFO charges, almost every quarter just the way that the accounting works.

And in a non inflationary environment, they tend to be de Minimis and we do.

Obviously talk about them very often because of the environment that we're in and because.

So much of our grocery business is on a calendar year.

Renegotiations, all really began on January one and so the way you do that as you take a charge when they come through and so hence that's a January one.

For us our most our most.

Typical LIFO item, we adjust would be tobacco, because we tend to get those more frequently but again, it's just it's more acute this year given the size of the inflation that comes through to your question on seasonality of margins for sure the third quarter.

Based on the weather in our geography tends to be our lowest margin business from our from our prepared foods standpoint fourth quarter is a little bit more of a blend right as we move into the warmer months at the end of our fourth quarter, that's going to be accretive to margins as a as a general rule.

Okay, Great. Thank you and then my second question is just related to.

You're taking pricing relative to any elasticity. If you are seeing from your customers that.

I know that the backdrop is changing rapidly kind of day by day and it's increasingly dynamic.

Are you seeing if anything with respect to price sensitivities from your customers' migration.

Cross category than the floor in the store.

Down et cetera, that'd be helpful to hear thank you.

Yes, Ben this is Darren I would say generally speaking.

We've seen we've.

We are seeing good momentum in the business as you can see from the inside sales.

And that is a blend of both increased velocity from a unit standpoint, as well as price so.

We're pretty balanced at this point in that respect, but one thing I would say is we have seen a ramp more recently with.

With the private brand products and you can see that mix start to shift a bit and so we probably are experiencing some trade down but that really accrues to our benefit because of the penny profit.

But private brand items is actually higher than in the national brands. So.

And that's per our strategy with private brands. So we actually we don't mind, saying that and like I mentioned earlier in the narrative that we.

Hit right around that 5% exit rate goal. So we're a couple of months ahead of schedule on that and that I think is in part from that mix shifting.

Yes.

Thank you. Our next question comes from Kelly Bania with BMO capital markets. Your line is open.

Yeah.

Hi, guys. This is Ben wood on for Kelly Danielle. Thank you for taking our question.

First wanted to dig in on store growth by our math, you'll need to add about 80 stores in 2023 to hit your 2023 coal, which is down significantly from the 225 stores this year.

Does the Lumpiness of acquisitions this year limit your ability to grow next year.

If not wondering how youre thinking about potential upside to target that target store number in 2023.

Another 200 stores possible in this environment.

Ben This is Darren.

I will start so to answer your second question I guess is no.

The acquisitions, we bought this year are going to impact our ability to do more deals or to grow the store base next year now we haven't given guidance for fiscal 'twenty three.

<unk>.

Our highly confident that we'll hit our three year commitment of 345 stores over there.

The three year period, so we don't have any concerns there.

And.

And so so really that's at risk.

With respect to could we do another 200 store growth here a lot of that has to do with acquisitions and in the timing of those things. So we're not the ones that ultimately control when somebody is for sale and at what price.

But we are very active in the market, we have a dedicated M&A team and they're having a lot of conversations right now and like I mentioned before this current current environment, it's just becoming more and more difficult for smaller operators to get through the day frankly, let alone to be able to effectively compete.

We see a.

Pretty frothy M&A market, but we're going to remain disciplined about where we buy the type of assets that we buy and what we pay for those assets. So this is one of the reasons, we like to have organic growth along with M&A capabilities. So we don't.

Forced ourselves into a box of having to buy assets that we wouldn't otherwise like or.

Overpay for those assets just to keep the growth rate moving in the right direction.

Okay. Thank you that's very helpful. And then just a quick one on the breakfast day part I know you guys mentioned, it a little bit but could you Where's the breakfast day part relative to 2019, just trying to figure out the 17% increase in same store sales.

Like how much of that is the new items from the new menu or how much of that is just guest traffic pattern recovery.

Well, what I would tell you is I think the guest traffic as a result of the menu.

The menu launch we've got we had new product news, we did put some media behind it and we have some unique items the toe.

Switch item is something that Leverages, our made from scratch pizza dough.

Really craveable is highly portable is value priced and its something unique that you can't get anywhere else.

We upgraded our coffee program at the same time, so when you put those comp that combination together, we started to see some improved traffic in the morning day part and then that that benefited the entire store because not not everybody gets a prepared food item, but we sold the toast, which sandwiches, we sold the low to <unk>.

Burritos and people will buy other items across the store to complement those food products. So I think that really accrue to our benefit like I said, we saw mid teens increase in.

In both traffic and sales during the morning day part.

Thank you. Our next question comes from Chuck Cerankosky with Northcoast Research. Your line is open.

Good morning, everyone great quarter.

I wanted to talk a little bit about the kitchens could do you have a schedule you can provide with us as you add kitchens to the acquired properties.

Chuck.

Schedule in front of me right now.

What I can share with you I mean, we can follow up on that but suffice it to say, where we put those kitchens in as soon as we can get permitting available and and contractors lined up that we've done.

Roughly <unk> 40 of the Buchanan and energy storage, so far and I will tell you we're really happy with what we're seeing in the performance of those kitchens. If you look at the Omaha market in particular.

We're budgeting.

I would tell you added.

What I would consider an above average prepared food program relative to the industry.

And we've already seen that were more than doubled the prepared food volume in those stores and Omaha, where our brand is more known now if you go out into the Chicago suburbs, where we're a little less known but we also have nearly doubled the prepared food volume in those stores just at a lower rate than what would I would expect our normal.

Run rate to be and so that continues to grow so we're having great success in those conversions, but it'll it'll be probably the bulk of this next calendar year, there will be remodeling kitchens in the in the circle K and in the in the pilot acquisition in particular to get all of those stores converted.

So you've got <unk> done out of all of the acquired stores is that a good way to look at it.

Yes.

Buchanan energy.

We're actually remodeling some of the circle K stores as we speak and then we just.

Lilly finished.

<unk> finished the change in control at the pilot stores recently so.

We really haven't got started on that process yet.

Thank you. Our next question comes from Bonnie Herzog with Goldman Sachs. Your line is open alright.

Alright. Thank you good morning, everyone.

Hi, Ann.

Wanted to ask you guys certainly about kilmartin switch have remained elevated and I think you mentioned, they're trending in the mid 30 CPG range quarter to date, but I think we look at the past few days crude has gone up very sharply and the outlets to Jos is going to keep going so just curious could you give us a sense.

As where fuel margins are trending honestly just even in the last few days or a couple of weeks.

And if in fact, they turn negative which I've seen in a few places so I'd be curious to hear that and then on fuel gallons given record levels of prices at the pump have you guys seen any evidence of consumers simply not filling up their tanks.

And then <unk> decrease conversion into your stores in the last couple of weeks.

Hey, Bobby this is Darren I'll try to unpack all of that.

I'd be curious to know.

Youre hearing about negative fuel margins, because that's certainly not anything that we're seeing are experiencing here.

What we've seen so far.

Kind of boxes over the last couple of days is that.

Certainly underlying cost of fuel has gone up precipitously. We've also been able to take price on the street.

Pretty aggressively.

And so we've been able to really balance that.

Margin out at this point.

And from a gallon standpoint, this will seem counterintuitive, but when when you see prices rapidly increasing like we have over the last week.

The consumer behavior tends to be more of aggressive buying as opposed to not aggressive buying because people are afraid its going to be 20, more gallon tomorrow than it is today and so we're actually seeing the opposite effect happened, where our gallons has increased.

Far beyond where our current trend line had been going prior to all this happening now at some point when it hit the peak people are going to have full gas. Thanks, and we will see a week or so lag of fuel.

Fuel volume and they will start to normalize again, so that's kind of the short term outlook, but I wanted to talk a little bit more broadly about this situation and put it into some into some context, because I think.

What we're seeing.

In the headlines everything else is is a little bit of hand, ringing and so when you think about $4 a gallon gas. It's been it's been a long time since we have $4 gallon retails in the U S.

Last time was in July of 2008.

Certainly that was during the financial crisis.

It peaked out at $4.06 a gallon by today's dollar.

By today's dollars that would be $5 30, a gallon.

No.

When we're talking about $4 a gallon gas all $4 arent created equal we're really.

We would need to get well over $5 a gallon before we start to see the same dynamic we saw in 2008 now in 2008, you did start to see some demand destruction, but there's also a pretty significant recession, taking place at the time unemployment at that time was 6% and rising ultimately getting to 10% when you look at.

When you compare that to the situation, we have today with three 8% unemployment and a labor shortage and people starting to bring people back to work company starting to bring people back to work.

Theres not a lot of that other structural impediment to growing fuel volume now there is a price at which people will start to change behavior, but we think that price is closer to $5. A gallon then it is the $4 a gallon right now and then the last point I'd make is the.

The national numbers really don't describe what goes on in the Midwest and so the national numbers for a retail price of fuel are heavily influenced by the northeast and the west coast, which are well over $4 a gallon as we sit here today in our market, we're sitting just under $4 a gallon across our 16 state geography in the Midwest.

It tends to be pretty low relative to others.

And part of that is because we've learned a lot of ethanol in ethanol right now is trading at about 70 or 80 cents below gasoline and so we just have some structural differences in art.

Foot print they are different than the rest of the country and allow us to maintain that retail at a lower price and.

Maintain the margins.

Thank you for that that's super helpful and great color and a lot of that makes sense I guess the only other consideration is the low income consumer this year to see how.

Is that trends as the year progresses, maybe one final question for me just maybe at a high level question on your next fiscal year, I know, you're not giving guidance, but given the expectations.

Expectations for crude to stay at elevated levels this year.

Do you guys feel about your ability to deliver top quintile EBITDA correctly for your fiscal <unk>.

Year 'twenty three.

Okay.

Yes.

Like you mentioned, we havent given any guidance, yet, but we're still very confident in our ability to deliver on that commitment.

Got a lot going on.

From a merchandising standpoint, and still I think.

This situation aside.

I do believe that's a little bit more of a short term situation when you look at.

And how crude oil is trading right now in the futures market. The market is backward dated pretty heavily which implies that the traders are believing that crude is actually going to come down and in the next several months versus go up so we'll have to see how all that plays out but I think.

The industry is still in a situation where the operating cost to run the business are just structurally higher.

Because of the fragmentation of the industry.

Still have to.

Okay extract higher margin to be able to offset higher operating costs and that that's going to happen through retail fuel pricing we've seen it over the course of the last several years with Covid, we've seen it in the extreme when demand destruction really accelerated at the height of Covid, we saw fuel margins accelerate it.

Aggressive rate. So we believe that those margins are going to persist and then we layer on everything else that we've got going on from a merchandising perspective, we're very confident in our ability to deliver those that type of growth in EBITDA over the next several years.

Thank you. Our next question comes from Anthony <unk> with Sidoti <unk> Company. Your line is open.

Good morning, and thank you for taking the question. So in terms of the operating expense guidance.

Certainly encouraging to see that you guys were able to reaffirm that guidance, even with the retail fuel pricing going up and likely to hurt the credit card fees. So whats driving that I know in the quarter. Just reported you had a 2% reduction in store hours is that expected to continue or are there any other factors at play as far as operating expense management.

Yeah, Anthony Good morning, This is Steve I'll start with that.

Nothing has changed on our end at all regarding our Opex expectation for things we control in the quarter. So we did a really good job.

Managing the hours within the stores.

Im confident we will continue to do a really good job managing hours in the store, there's a lot of focus on efficiency within the operating organization today, we naturally will expand.

Hours seasonally but we've incorporated that already we know what the wage rates that are prevailing in our markets are we're competitive in those markets I think we have a good.

A very good handle on what we're going to need to pay in that regard I'd remind you you know in the prior year, we did take some.

One off impairment charges associated with putting new equipment into the store et cetera, that's part of the reason.

Our percentage will tick down in the fourth quarter, so that that sort of thing that will not recur.

Anyways, and so I do believe the only real variable here relates to the relates to the credit card fees, which is associated with retail prices. So I think we're covered at a $4 a gallon number in our range and to the extent that would tick up.

Our credit card fees will pick up in your guests on that would be as good as ours, but.

I don't think Theres significant dollar risk.

Associated with it as we sit here today at this point in the quarter.

And Anthony I would just build on one of the things that Steve mentioned about the operations team.

In managing the hours.

Our labor productivity has really gone up a lot or we were.

From a gross profit dollar per labor hour perspective, we increased productivity by 14% in the quarter and so that team has really done a nice job and at the same time.

The sales growth in the traffic growth. So they were they were able to really manage the controllable and be very efficient and still deliver a great guest experience and deliver on the sales expectations. So very happy with that team and as Steve mentioned, we don't see any reason for that to backslide in and Thats. The most significant part of our Opex. So we.

Believe we have that well under control.

Got it thanks for that color and then switching over to just the prepared food side given how successful you have been with the breakfast menu changes are you planning to do any notable changes to the rest of your menu.

Yes, Anthony would absolutely.

We've got we've got a lot of different things in the works, we're not prepared to talk about any of those today and any sort of detail, but but absolutely the prepared food team and our culinary team in particular.

R.

Always looking at innovation and optimization as part of their mandate and so yes, we definitely have some things coming but not ready to talk about that at this point.

Thank you. Our next question comes from Cristina <unk> with Deutsche Bank. Your line is open.

Hey, good morning, guys and congrats on a good quarter I just wanted to start on fuel when we're looking at your price gaps versus peers and just thinking about the smaller operators that do have to raise their prices to offset the rising cost of the operation are you finding that your price gaps are stable or the widening in the current environment.

Could that be a net benefit for you.

Especially when we're thinking about.

Layering in your loyalty program to really communicate with the customer it stay top of mind.

Yes, Kristina when we look at that we look at our prices as.

As our differential to the low price in the market.

Two the high price and then the average price and so what we're seeing as well.

We are maintaining our our delta versus the low price in the market. So we are maintaining our competitive position, we are starting to see that differential versus the high price and the market starting to widen out a bit and that really.

Typically as a reflection of the smaller operators because they need to extract more margin and so they tend to do that so from that perspective, we would be able to gain some share from what we've seen.

Based on Opus data in from our public company peers is that we are gaining share or.

When we normalized our fourth quarter to a calendar quarter and look at our public company peers.

The other two the reported core down in same store gallons versus the prior year and we were up nearly 5%. So we believe that even among some of the larger operators. We are taking share in fuel certainly versus some of the smaller operators we are as well.

Got it Thats really helpful.

It sounds like you said really good about your business, but maybe just talk.

And if you could talk a little bit about the health of your core customer you implemented some price increases in January you said, another 5% to 6% coming in March.

How are they feeling financially.

And how are you planning your business for any kind of a potential pullback in spending from from the customer in response to some of the high inflation that we're seeing.

Yes, right now we think the consumer is in pretty good shape about 60% of our our guests make over $50000 a year end and a lot of those have seen some of that.

The most accelerated wage increases so the.

So they are actually making a lot more than they have historically now theyre also evidenced.

Having to spend more in an inflationary environment, but so far we haven't seen any dramatic shifts in it.

In behavior, among our core guests. So we think we're okay. There.

From a future looking perspective.

Theres a couple of things to keep in mind. One is that we do have our private label portfolio, which is really <unk>.

Sorry to take off and really provides a more affordable alternative for people they are seeking.

Deeper value the other thing that tends to happen in our industry in times like this is that we are the beneficiary of trade downs from higher are more expensive forms of retail. So in particular in prepared foods. So if you think about our prepared food offering today. It is already just naturally.

More value oriented relative to <unk> fast casual and certainly then in full service dining when you think about our specialty pizza as an example, a whole pie that could feed three to four people being at around $16 $50 $17. A pie that's a that's a really great value for.

Family.

Our breakfast menu you can get a breakfast very easily for under $5 and so when you compare that to <unk> and to other restaurant concepts.

Very much an affordable trade down options. So we have historically seen that our prepared food.

Platform benefits disproportionately in this kind of environment as consumers start to seek more value.

Yeah.

Thank you. Our next question comes from John Royall with Jpmorgan. Your line is open.

Hey, guys. Thanks for taking my questions.

I had a couple of questions on kind of.

Downside risks in the economy and things like that which I think you've mostly addressed.

I guess, the only remaining thing.

There are some out there a lot of commodity on with better.

Forecasting.

$20 oil levels too.

Persist for some time or even worse.

So.

Can you just go through how you would expect I think relatively unprecedented.

Prices levels.

<unk>.

That we haven't in the past.

How would you think that Youll business perform obviously we'd have.

<unk>.

What would you expect on the margin side with margins.

Sorry could come in a bit in that scenario, where you're starting to see demand come off.

On the consumer.

Yes, John again ill try to put the crude oil price in perspective like I do.

Did the gasoline business so <unk>.

In 2008, when when we hit that $4 <unk> peak in gasoline crude oil has actually at $140 a barrel.

And those dollars and so today's dollars that's about 183, so again.

We presented a $120 that's expensive, but not not nearly towards the peak from a historic perspective.

And I think more importantly from to answer your question on the margin.

Is.

Regardless of whether crude oils at 120 or 140 or 180.

Or not the structural situation we have in this industry isn't changing underlying costs operate this business is still going up it's still getting more expensive for the smaller operators to to continue to survive and so retail prices are going to support.

Expanded fuel margin to compensate for those costs.

Until the point in time, where we actually see some demand destruction I think that dynamic is not going to change and like I said before.

I believe that we're not going to get.

Any sort of meaningful demand destruction vis vis <unk>.

Retail prices until we get closer to $5 a gallon and maybe even then we have to take over that before we start to see any meaningful impact there.

Understood Thanks very much.

Thank you.

Thank you I'm currently showing no further questions I would like to turn the call back over to Dan for closing remarks.

Alright, Thank you and thanks for taking the time today to join US on the call I would also like to thank our team members. Once again for their efforts. This quarter, we've had a great year, so far and we look to close out fiscal 'twenty two on a high note.

Fortunately, we demonstrated our ability to deliver results on our long term strategic plan in fiscal year outlook and both normal times and during a global pandemic I am confident we will continue to drive long term shareholder value.

Thank you everyone and have a great morning.

This concludes today's conference call. Thank you for participating you may now disconnect.

[music].

[music].

[music].

Good day and thank you for standing by welcome to the Casey's General stores third quarter fiscal year 2022 earnings Conference call.

At this time all participants 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 one on your telephone please.

Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero.

I would now like to hand, the conference over to your Speaker today, Brian Johnson Senior Vice President Investor Relations and business development. Please go ahead.

Good morning, and thank you for joining us to discuss the results from our third quarter ended January 31, 2022, I am Brian Johnson Senior Vice President of Investor Relations and business development with me today are Denver, Dallas, President and Chief Executive Officer, and Steve Bramlage, Chief Financial Officer.

Before we begin I'll remind you that certain statements made by us during this investor call may constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095.

These forward looking statements include any statements relating to expectations for future periods possible or assumed future results of operations financial conditions liquidity and related sources or needs. The company supply chain business and integration strategies plans and the synergies and growth opportunities performance out of stores.

And the pension potential effects of COVID-19.

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 but not limited to the integration of recent acquisitions, our ability to execute on our strategic plan or to realize benefits from the strategic plan the impact and duration of Covid.

<unk> 19 related governmental actions 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 or revise forward looking statements, whether as a result of new information future events or otherwise.

A reconciliation of non-GAAP to GAAP financial measures referenced in this call as well as a detailed breakdown of the operating expense increase for the third quarter can be found on our website at www Dot Casey's dot com under the Investor Relations link.

With that said I would now like to turn the call over to Darren to discuss our third quarter results Derrick.

Thanks, Brian and good morning, everyone. We're looking forward to sharing our results in a moment, but I'd like to start by thanking our 43000 cases team members for their tireless efforts as we continue to overcome the ongoing challenges with COVID-19, and the resulting supply chain issues as well as challenging weather conditions in our geography.

Our team members have done an outstanding job navigating through these difficult situations and the team's ability to perform under the circumstances.

I'm, especially proud of and grateful for.

Hey cases, our purpose is to make life better for our communities and guests every day as a rule Midwestern operator, we play a significant role in the towns. We operate in is a privilege and a responsibility we take to heart.

In February we once again activated our hunger campaign in partnership with feeding America.

This partnership raises funds that support 50 to local food banks and communities, where we operate huggers.

<unk> continues to be a real issue in our communities.

We appreciate monster energy as partnerships in this year's campaign and all our team members and guests who supported the effort.

The campaign raised over $500000, and we will fund over $5 million meetings.

In the third quarter, we closed our third strategic acquisition of the year with a 40 pilot stores and the Knoxville, Tennessee market underscoring our commitment to accelerating unit growth. These stores will help us further build out our footprint in Tennessee, and we will be supplying from our existing distribution center in Terre Haute, Indiana.

I would like to personally welcome those employees to the Casey's family.

Cited to become a part of the Knoxville community and appreciate your partnership as we integrate those stores into our network.

We're also excited about the strong progress we've made integrating our two previous strategic acquisitions of <unk> and circle K, which are on track to realize expected synergies.

Overall, we're highly confident in our ability to deliver on our strategic commitments and manage through the near term challenges presented by the current environment as evidenced by our third quarter results.

As you've seen in the press release, we delivered an outstanding third quarter.

Diluted earnings per share was a record breaking $1 71.

Up 64% from the prior year.

Total gross profit dollars increased 124 million to $664 million compared to the prior year.

Net income was $64 million up 66% from the prior year.

Same store sales were strong for both inside sales and fuel as guest traffic continued to improve.

Inside same store sales were up seven 6%, while fuel gallons increased five 7%.

Our inside margin remained relatively flat versus the prior year, despite supply chain and price inflation issues in <unk>.

Fuel margin increased over 38 cents per gallon, despite a volatile cost environment during the quarter.

Yes.

I'd now like to go over our results and share some of the details in each of the categories.

Inside same store sales were up seven 6% for the third quarter compared to the prior year with an average margin of 39, 4%.

Same store grocery and general merchandise sales were up seven 7% and the average margin was 32% an increase of 130 basis points from the prior year same period a year ago.

We've been able to expand margin due to the great work. Our team has done navigating supply chain and inflation challenges by making price adjustments and leveraging strong supplier partner collaborations.

We performed well across all categories with non alcoholic beverages, and salty snacks continuing to perform exceptionally well.

Nonalcoholic beverages in total were up over 24% on a two year stack basis.

Alcohol same store sales were up mid single digits, despite challenging comparisons and remain up over 23% on a two year stack basis.

This growth is being driven by approximately 500 stores that sell hard alcohol.

We have significantly broadened our assortment of spirits in these stores and it shows in our results.

This scale and liquor licenses is a unique competitive advantage to cases relative to the rest of the industry.

Same store prepared food and dispense beverage sales were up seven 4% in the quarter.

The average margin for the quarter was 58% down 260 basis points from a year ago.

Pizza slices continue to perform well up 24% for the quarter, while hot breakfast sandwiches were up close to 49% as part of the Companys breakfast menu relaunch that began in September .

Margin has been adversely impacted by supply chain challenges and inflation, partially offset by menu price increases.

During the third quarter same store fuel gallons sold were up five 7% with a fuel margin of $38 three per gallon up approximately five four per gallon compared to the same period last year.

<unk> team continues to do a tremendous job balancing fuel volume and margin to optimize the profitability of the category.

Fuel margins remained strong, which we view as a long term favorable trends as the industry remains reliant upon fuel margins to offset higher operating costs.

I'd now like to turn the call over to Steve to go into some detail on the financials Steve.

Thank you Darren and good morning, before I jump into the financials I'd also like to take a minute to acknowledge the team given the strong performance throughout the entire business this quarter.

The company fired on all cylinders from operating the stores to managing fuel merchandising the floor generating momentum and guest engagement with our various marketing initiatives all the while strongly collaborating with our partners to manage the inflationary and supply chain challenged environment.

Total revenue for the quarter was approximately $3 billion, which is an increase of $1 billion or 52% from the prior year.

Inside sales rose 15, 4% from the prior year to $1 billion for the quarter grocery and general merchandise sales increased by $108 million to $733 million, an increase of 17, 3% and prepared food and dispense beverage sales rose.

By $29 million to $293 million, an increase of 10, 9%. Please note. The reported figures are favorably impacted by 9% more stores operated on a year over year basis.

I'll point out prepared food and dispense beverage.

It was less favorably impacted due to the timing of kitchen installations that our recent acquisitions.

I want to start selling our prepared food menu and these new acquisitions until we finished remodeling the stores reached.

Retail fuel sales were up $851 million in the third quarter driven by a 19, 9% increase of total gallon sold to 622 million gallons as well as a 48% increase in the average retail price per gallon.

Average retail price of fuel during this period was $3 14 per gallon and that compares to $2 12, a year ago.

As a reminder reported fuel results do not include the Buchanan energy wholesale fuel business, which is included in the other revenue category and is responsible for the vast majority of the $53 million increase we saw this quarter in this line item.

We define gross profit as revenue less cost of goods sold but excluding depreciation and amortization.

Casey's had gross profit of $664 million in the third quarter, an increase of $124 million or nearly 23% from the prior year. This was driven by higher inside gross profit of $52 $3 million were 14, 9% as well as an increase of 60.

Seven $4 million or 39, 6% in fuel gross profit in.

<unk> gross profit margin was 39, 4% down 20 basis points from a year ago. The merchandize team did a tremendous job offsetting cost increases the costs across all categories inside gross profit margin was also negatively impacted by 70 basis.

Points from a higher than normal LIFO charge. This noncash charge is a function of the higher cost of existing inventory and was particularly impactful to our prepared food and dispense beverage margins.

The grocery and general merchandise margin was up 130 basis points to 32% from a year ago. The increase was driven by an improved product mix of single serve non alcoholic beverages and snack items as well as a favorable comparison to the merchandise discounts that were taken last year during our store re.

Those resets have made a positive impact inside sales and margins throughout the last 12 months.

<unk> food and beverage margin was 58% down 260 basis points from prior year.

The decline was due to significant cost increases that occurred in our prepared food and dispense beverage ingredients and pizza toppings as well as an approximately 100 basis point impact from a higher than normal LIFO charge I previously mentioned.

The merchandize team was able to partially offset the cost increases with a round of proactive menu price increases and a more significant round of increases is scheduled for mid March these increases should more than offset the adverse impact of higher cost of goods.

Cheese costs did not have a meaningful impact to margin. This quarter. The quarter's costs were $1 99 per pound and that compares to $2 per pound last year.

While supply chain challenges have improved since the second quarter, notably in comps. The company is still experienced disruption within prepared food and dispense beverage bakery items, specifically, our popular glazed donuts continued to be an acute shortage supply as our vendor partners experienced COVID-19 related disruptions.

<unk>.

Fuel gross profit benefited by over $10 million from the sale of brands all of Rins generated were sold in the quarter and there was no carryover from previous quarters, our grocery and general merchandise gross profit increased $42 6 million.

While prepared food and dispensed beverage gross profit increased to $9 8 million.

We also saw a $4 $5 million lift in other gross profit. This is primarily due to the dealer network activities and car washes that we acquired from the Buchanan and energy acquisition.

Total operating expenses, excluding credit card fees were up 16, 6% to $443 million in the third quarter total reported operating expenses were up 18, 5% or $77 million, which is consistent with our expectations and a reduction from our <unk>.

Quarter growth rate by several hundred basis points.

Approximately 9% of the operating expense increase is due to unit growth as we operated 200 into more stores than in the prior year.

Approximately 4% of the Opex increase is due to same store employee expenses and that was offset by a 2% reduction in store hours worked are.

Store operations team has done a great job right into the challenge to operate our stores more efficiently given the wage pressure impacting the industry.

Store level wage rates were up 10, 5% from the prior year.

Finally, due to the higher retail fuel prices mentioned earlier same store credit card fees also rose unless accounted for another 2% of the operating expense increase in the quarter and finally, 2% of the increase is due to higher incentive compensation.

Depreciation in the quarter was up 15, 9% driven primarily by the store growth along with a new distribution center and placed in service at the start of our fiscal year net.

Net interest expense was $14 4 million in the quarter and that compares to 11 5 million in the prior year. The increase was due to the additional debt taken on to fund the <unk> and the pilot acquisitions the.

The effective tax rate for the quarter was 23, 4% and that compares to 21, 3% in the prior year driven primarily by timing associated with the recognition of tax credits in the prior year.

Net income was up in the prior year versus the prior year to $64 million EBITDA for the quarter was $173 5 million compared to $125 7 million a year ago, an increase of 38%.

The Buchanan Energy's circle, K and pilot acquisitions were all accretive to EBITDA in the third quarter as we expected.

Our balance sheet remained strong at January 31, cash and cash equivalents were $187 million and we have the full capacity of our $475 million in lines of credit.

Variable, giving us ample liquidity of $662 million, our leverage ratio remained at two four times post the closing of the acquisitions and Thats consistent with the first and second quarters.

For the quarter net cash generated by operating activities of $81 million less purchases of property and equipment of $105 million resulted in the company using $24 million in cash flow.

This compares to generating $7 million in the prior year despite decline in free cash flow quarter for the quarter, which is seasonally our lowest was primarily attributable to the payment of payroll taxes. We made this quarter that were temporarily deferred last year as part of the Federal Cares Act.

At the March meeting the board of directors voted to maintain the dividend of 35 per share unchanged from the second quarter. We will continue to remain balanced in our capital allocation going forward leaning into the many EBITDA and ROIC accretive growth related investment opportunities that we have but continuing to repay debt gradually.

Towards two times and consistently returning cash to shareholders through our dividend.

<unk> recently approved an increased share repurchase authorization of $400 million and we will remain opportunistic in this regard.

So far this year. The company has opened 11, new stores and has acquired 191 stores.

The company is maintaining its fiscal 2022 outlook that was previously disclosed.

The fourth quarter is off to a good start and we expect that to continue through the end of the fiscal year.

<unk> expects the fourth quarter same store sales.

Low single digits for fuel and up mid single digits for inside the store.

Fuel margins are currently trending in the low to mid thirties CPG quarter to date.

We continue to expect fourth quarter operating expenses to improve from prior quarters, an increase between 11% to 13% versus the prior year. There have been no changes in our expectations for operating expense items that we control. However, given current retail fuel prices, we are going to be at the high end of that range.

The recent rise in retail prices of fuel from the conflicts in Ukraine should they continue at current levels have the potential to push us above the range of credit card fees would continue to rise regardless, we expect net earnings in the fourth quarter to be higher than the prior year I'll now turn the call back over to Darren.

Thanks, Steve.

As you can see our business is really starting to take off as the country gets closer to normal in the wake of the pandemic.

<unk> has shown tremendous resiliency throughout COVID-19 , and we're positioned, especially well to deliver future value to our shareholders through our strategic plan.

As a reminder, the three pillars of our strategic plan are to reinvent the guest experience create capacity through efficiencies and being where the guest is via disciplined growth.

All three pillars are supported by investing in and growing our talented team.

Our industry, leading prepared food program is poised to outperform this category was more heavily impacted by COVID-19 due to the disruption and daily commuter traffic patterns compared to the traditional convenience store items like bear in tobacco.

We believe the resurgence we've begun to experience this quarter as likely a sign of things to come Casey.

<unk> rolled out a successful breakfast relaunch with innovative new items, such as our toe switch signature handheld loaded breakfast burrito and being the Cup coffee.

The result was a mid teen percentage lift in the morning day part traffic and same store sales.

This was a great example of the kind of culinary innovation you can expect from cases moving forward.

In addition to our new products core menu items, such as pizza slices were up 25% for the year and are not showing any signs of slowing down.

Overall as guest traffic improves we are well positioned with our prepared food program to disproportionately benefit.

The progress we've made to reinvent the guest experience with our digital engagement will further bolster our business digital sales were up 11% in the third quarter on top of a 95% increase in the same quarter last year.

Our Casey's rewards enrollment continues to grow and now sits at $4 6 million members. We have never had a more accurate and efficient means of communicating personalized offers to our guests than we have right now.

Finally, with curbside pickup in all of our stores. In addition to our partnerships with third party Aggregators has never been more convenient for our guests to try our made from scratch pizza and other items. We now have over 4500 stores that offer some sort of delivery service for our guests.

Our private label program continues to grow and take market share.

Not only on the products high quality, but there are also a more affordable alternative for our guests seeking value does.

This is particularly relevant in the current inflationary environment that our guests are experiencing today.

We currently offer over 250 items and are confident in our ability to achieve our longer term goal of 10% penetration of the grocery and general merchandise category.

We're currently trending at our exit rate goal for the year of 5% mix and Casey's branded products with new items on the way.

Our efficient self distribution system has been instrumental in helping us navigate through one of the most difficult supply chain environment. The country has experienced in decades.

Our new distribution center in Joplin, Missouri allows us to more efficiently support stores in our existing network, but will also enable us to expand our reach into new markets within our geography.

We believe that coupled with our proprietary prepared food program will help enable our goal to continue to deliver best in class margins inside of the store.

Considering almost 65% of the convenience stores in America are operated by owners of 10 stores or less.

The capabilities I, just mentioned provide cases with a significant competitive advantage, particularly in the rural communities, we call home.

Larger operators envy, our prepared food program the smaller operators often don't have the scale to make investments in.

In digital customer engagement, omnichannel retail self distribution or private label brands.

Casey This is in the fortunate position to leverage this advantage to be where the guest is and grow units organically via new store construction or as you've witnessed more recently through acquisitions.

Our dedicated M&A team has been busy executing on three significant acquisitions and is ready for more.

Income tax uncertainty labor shortages supply chain challenges and inflationary pressures brought about significant consolidation in our industry and cases is poised with an incredibly healthy balance sheet to take on many more deals to come.

Given that roughly 2000 of our stores are only in nine of our 16 states. We operate in we have tremendous white space to grow our business both within our current footprint and in contiguous markets.

None of this would have been possible without the incredibly talented leadership team we've assembled here at cases.

The team has a strategic plan that long term Casey's leadership and outside talent with a fresh perspective on the business.

Centralized procurement loss prevention and consumer insights are just some of the new capabilities. We've recently added to the business.

So as we begin to finally emerged from the pandemic and embraced the new normal I think youll find that the strength of our business model will really come to the forefront. We are incredibly excited about the future ahead and firmly believe we have the right strategy and team in place to achieve long term sustainable shareholder value, while also making a pause.

<unk> impact on the communities we serve.

We're now prepared to answer your questions.

Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.

Could you please limit yourself to one question and one follow up.

Our first question comes from Karen short with Barclays. Your line is open.

Hi, Thanks very much.

Short term question, but I'm wondering if you could just first start off by giving a little color on <unk>.

The actual percent price increase that you put in this quarter and then the impact to the comp this quarter and then the anticipated price increase that you will take I think you said in March.

How that will impact the comp and then I had one or two other bigger picture.

Yes, hi, good morning, Karin This is Steve I'll start with that.

We incurred about.

Kind of a 4% cost increase across.

Across the board if you think of our goods for resale and so over the course of the quarter.

We took about a comparable.

Percentage increase in price they didn't all occur on the first day of the quarter to be fair and it was kind of.

Layered in over the course of the quarter. So the net was a little bit less than that but we will roll into a 4% increase in them.

The price increases that I mentioned coming in March are going to be somewhere in the neighborhood of 5% to 6% on average across most of most of our prepared food Skus and again, those we won't absorb all of that in the current quarter, but annualized thats what that number will be.

Okay. So when we think about the gross margin decline in prepared foods.

So that would be FX.

Thank you.

Within grocery you would say that that was much more matched to the.

Carlson, please maybe I'm just trying to understand how to think about gross margin.

Yes.

Yes, I think your assumption is correct we were.

I think lined up the price increase in the cost increase was more closely aligned in the grocery business because that business, primarily as contractual for us and so as we worked through annual contract renegotiations over the last couple of months with our supplier partners. We had a pretty good sense of where those were going to lag.

And we're able to.

On on retail adjustments really about the same time the cost started coming through the prepared food business is much less contractual and much more commodity oriented in nature and so it's a little bit tougher for us to line that up exactly and hence tends to lag, but I would point out on the prepared food.

Syed.

A LIFO charge just mechanically was much heavier in.

Impact in the quarter on that particular side of the business just by the nature of how it how it works for us.

Thank you. Our next question comes from Ben <unk> with Stephens. Your line is open.

Hey, Thanks. Good morning, just following up on Karen's question, there as it relates to the prepared food margins.

Two part question one.

Was the the LIFO charge and that you saw in the quarter is that isolated to that quarter would you expect to take any subsequent charges associated with LIFO expense and then.

Typically the prepared food margin.

Much seasonality, but it does have a pattern of declining sequentially from <unk> to <unk>.

Wondering if that would be the case again this year, just given that LIFO dynamic.

And then.

Just given kind of where we are on.

You say that the commodity backdrop.

Yes, Ben this is this is Steve.

I'll start with that.

Mechanics of LIFO.

We actually take LIFO charges, almost every quarter just the way the accounting works.

And in a non inflationary environment, they tend to be de Minimis and we don't obviously talk about them very often because of the environment that we're in and because so much of our grocery business is on a calendar year.

Renegotiations, all really began on January one and so the way you do that as you take a charge when they come through and so handsets are January one.

Item for us are our most robust tipping.

Typical LIFO item, we adjusted would be tobacco, because we tend to get more frequently but again, it's just it's more acute this year given the size of the inflation that comes through to your question on seasonality of margins for sure the third quarter.

Based on the weather in our geography tends to be our lowest margin business from our from our prepared foods standpoint fourth quarter is a little bit more of a blend right as we move into the warmer months at the end of our fourth quarter thats going to be accretive to margins as a as a general rule.

Okay, Great. Thank you and then my second question is just related to.

You're taking pricing relative to any elasticity. If you are seeing from your customer set.

I know that the backdrop is changing rapidly kind of day by day and it's increasingly dynamic.

What are you seeing if anything with respect to price sensitivities from your customers' migration.

Ross category than the floor in the store training.

Trading down et cetera, that'd be helpful to hear thank you.

Yes, Ben this is Darren I would say generally speaking.

We've seen.

We're seeing good momentum in the business as you can see from the inside sales.

And that is a blend of both increased velocity from a unit standpoint, as well as price so.

We're pretty balanced at this point in that respect, but one thing I would say is we have seen a ramp more recently with.

With the private brand products and you can see that mix start to shift a bit and so we probably are experiencing some trade down but that really accrues to our benefit because of the penny profit and those private brand items is actually higher than in the national brands. So.

And thats for our strategy with private brands. So we actually we don't mind, saying that and like I mentioned earlier in the narrative.

Hit right around that 5% exit rate goal. So we're a couple of months ahead of schedule on that and that I think is in part from that mix shifting.

Yes.

Thank you. Our next question comes from Kelly Bania with BMO capital markets. Your line is open.

Yeah.

Hi, guys. This is Ben wood on for Kelly Danielle. Thank you for taking our question.

First wanted to dig in on store growth by our math, you'll need to add about 80 stores in 2023 to hit your 2023 coal, which is down significantly from the 225 stores. This year. So it does the Lumpiness of Atco Division this year limit your ability to grow next year.

If not wondering how youre thinking about potential upside to target that target store number in 2023.

Other 200 stores possible in this environment.

Ben This is darrin.

I'll start so to answer your second question I guess is no.

The acquisitions, we bought this year are going to impact our ability to do more deals are to grow the store base next year now we haven't given guidance for fiscal 'twenty three.

We're highly confident that we'll hit our three year commitment of 345 stores over the.

The three year period, so we don't have any concerns there.

And so so really thats it.

Perspective could we do another 200 store growth here.

A lot of that has to do with acquisitions and in the timing of those things. So we're not the ones that ultimately control when somebody is for sale and at what price.

But we are very active in the market, we have a dedicated M&A team and they're having a lot of conversations right now and like I mentioned before this incurred current environment, it's just becoming more and more difficult for smaller operators to get through the day frankly, let alone to be able to effectively compete.

We see a.

Pretty frothy M&A market, but we're going to remain disciplined about where we buy the type of assets that we buy and what we pay for those assets.

This is one of the reasons, we like to have organic growth along with M&A capabilities. So we don't.

Forced ourselves into a box of having to buy assets that we wouldn't otherwise like or.

Overpaying for those assets just to keep the growth rate moving in the right direction.

Okay. Thank you that's very helpful. And then just a quick one on the breakfast day part I know you guys mentioned, it a little bit but could you, whereas the breakfast day part relative to 2019, just trying to figure out the 17% increase in same store sales.

Like how much of that is the new items from the new menu or how much of that is just guest traffic pattern recovery.

Well, what I would tell you is I think the guest traffic as a result of the menu.

The menu launch we've got we had new product news, we did put some media behind it and we have some unique items the toast, which item is something that leverages. Our made from scratch pizza dough. Its highly craveable is highly portable is value priced and its something unique that you can't get anywhere else.

We upgraded our coffee program at the same time, so when you put those costs that combination together, we started to see some improved traffic in the morning day part and then that that benefited the entire store because not not everybody gets a prepared food item, but we sold the total switch sandwiches, we sold the loaded.

Burritos and people will buy other items across the store to complement those food products. So I think that really accrue to our benefit like I said, we saw mid teens <unk>.

<unk>.

In both traffic and sales during the morning day part.

Thank you. Our next question comes from Chuck Cerankosky with Northcoast Research. Your line is open.

Good morning, everyone great quarter.

I wanted to talk a little bit about the kitchens could do you have a schedule you can provide with us as you add kitchens to the acquired properties.

Chuck.

I have a schedule in front of me right now.

I can share with you I mean, we can follow up on that but.

<unk> to say, where we put those kitchens in as soon as we can get permitting available and and contractors lined up that we've done.

Roughly 40 of the Buchanan energy storage, so far and I'll tell you, we're really happy with what we're seeing in the performance of those kitchens. If you look at the Omaha market in particular.

We're budget I would tell you added.

What I would consider an above average prepared food program relative to the industry.

We've already seen there were more than doubled the prepared food volume in those stores and Omaha, where our brand is more known now if you go out into the Chicago suburbs, where we're a little less known but we also have nearly doubled the prepared food volume in those stores just at a lower rate than what what I would expect.

Our normal run rate to be and so that continues to grow. So we're having great success in those conversions, but it'll it'll be probably the bulk of this next calendar year, there will be remodeling kitchens in the in the circle K and in the in the pilot acquisition in particular to get all of those stores converted.

So you've got <unk> done out of all of the acquired stores is that a good way to look at it.

And the and the Buchanan energy.

We're actually remodeling some of the circle K stores as we speak and then we just.

Clearly.

Finish the change in control at the pilot stores recently, so we really haven't got started on that process yet.

Thank you. Our next question comes from Bonnie Herzog with Goldman Sachs. Your line is open.

Alright. Thank you good morning, everyone.

Hi, Ann.

Wanted to ask you guys certainly about kilmartin switch have remained elevated and I think you mentioned, they're trending in the mid 30 CPG range quarter to date, but as we look at the past few days crude has gone up very sharply and the outlook suggests it's going to keep going so just curious could you give us a sense.

Of where fuel margins are trending honestly just even in the last few days or a couple of weeks.

And if in fact, they turn negative which I've seen in a few places I'd be curious to hear that and then on fuel gallons given record levels of prices at the pump have you guys seen any evidence of consumers simply not filling up their tanks.

And then <unk> decrease conversion into your stores in the last couple of weeks.

Hey, Bobby this is Darren I'll try to unpack all of that.

I'd be curious to know.

Youre hearing about negative fuel margins, because that's certainly not anything that we're seeing are experiencing here.

What we've seen so far.

Just kind of boxes over the last couple of days is that.

Certainly the underlying cost of fuel has gone up precipitously. We've also been able to take price on the street.

Pretty aggressively.

And so we've been able to really balance that.

Margin out at this point.

And from a gallon standpoint, this will seem counterintuitive, but when when you see prices rapidly increasing like we have over the last week.

The consumer behavior tends to be more aggressive buying as opposed to not aggressive buying because people are afraid its going to be <unk> more gallon tomorrow than it is today and so we're actually seeing the opposite effect happened, where our gallons have increased.

Far beyond where our current trend line had been growing prior to all this happening now at some point when it hit the peak people are going to have full gas. Thanks, and we will see a week or so lag of fuel.

Fuel volume and they will start to normalize again, so that's kind of the short term outlook, but I wanted to talk a little bit more broadly about this situation and put it into some into some context, because I think.

What we're seeing.

In the headlines everything else is is a little bit of hand, ringing and so when you think about $4 a gallon gas. It's been it's been a long time since we have $4 a gallon retails in the U S.

Last time was in July of 2008.

Certainly that was during the financial crisis.

It peaked out at $4.06 a gallon by today's dollar.

By today's dollars that would be $5 30, a gallon.

No.

When we're talking about $4 a gallon gas all $4 arent created equal we're really.

We would need to get well over $5 a gallon before we start to see the same dynamic we saw in 2008 now in 2008, you did start to see some demand destruction, but there is also a pretty significant recession, taking place at the time unemployment at that time was 6% and rising ultimately getting to 10% when you look at.

You compare that to the situation, we have today with three 8% unemployment and a labor shortage and people starting to bring people back to work company starting to bring people back to work.

Theres not a lot of that other structural impediment to growing fuel volume now there is a price at which people will start to change behavior, but we think that price is closer to $5. A gallon then it is the $4 a gallon right now and then the last point I'd make is the.

The national numbers really don't describe what goes on in the Midwest and so the national numbers for our retail prices of fuel are heavily influenced by the northeast and the west coast, which are well over $4 a gallon as we sit here today in our market, we're sitting just under $4 a gallon across our 16 state geography in the Midwest.

It tends to be pretty low relative to others.

And part of that is because we blend a lot of ethanol in ethanol right now is trading at about 70 or 80 <unk> built.

Below gasoline and so we just have some structural differences in our footprint there are different than the rest of the country and allow us to maintain that retail at a lower price and maintain the margins.

Thank you for that that's super helpful and great color and a lot of that makes sense I guess the only other consideration is the low income consumer this year to see how.

That trend as the year progresses, maybe one final question for me just maybe at a high level question on your next fiscal year, I know youre, not giving guidance, but given the expectations for crude to stay at elevated levels. This year.

How do you guys feel about your ability to deliver top quintile EBITDA correctly for your fiscal year 'twenty three.

Okay.

Yes.

Like you mentioned, we havent given any guidance, yet, but we're still very confident in our ability to deliver on that commitment we've got a lot going on from.

From a merchandising standpoint, and still I think this situation aside.

I do believe Thats, a little bit more of a short term situation when you look at how.

Crude oil is trading right now in the futures market the mortgage backward dated pretty heavily which implies that the traders are believing that crude is actually going to come down and in the next several months versus go up so we'll have to see how all that plays out but I think.

The industry is still in a situation where the operating cost to run the business are just structurally higher and because of the fragmentation of the industry. They still have to okay.

Extract higher margin to be able to offset higher operating costs and that that's going to happen through retail fuel pricing we've seen it over the course of the last several years with Covid, we've seen it in the extreme when demand destruction really accelerated at the height of Covid, we saw fuel margins accelerate at a real.

Aggressive rate. So we believe that those margins are going to persist and then we layer on everything else that we've got going on from a merchandising perspective, we're very confident in our ability to deliver those that type of growth in EBITDA over the next several years.

Thank you. Our next question comes from Anthony <unk> with Sidoti <unk> Company. Your line is open.

Good morning, and thank you for taking the question. So in terms of the operating expense guidance.

Certainly encouraging to see that you guys were able to reaffirm that guidance, even with the retail fuel pricing going up and likely to hurt the credit card fees. So whats driving that I know in the quarter that you just reported you had a 2% reduction in store hours is that expected to continue or are there any other factors at play as far as operating expense management.

Yeah, Anthony Good morning, This is Steve I'll start with that.

Nothing has changed on our end at all regarding our Opex expectation for things we control in the quarter. So we did a really good job.

Managing the hours within the stores.

Im confident we will continue to do a really good job managing hours in the store, there's a lot of focus on efficiency within the operating organization today, we naturally will expand.

Hours seasonally but we've incorporated that already we know what the wage rates that are prevailing in our markets are we're competitive in those markets I think we have a good.

A very good handle on what we're going to need to pay in that regard I'd remind you in the prior year, we did take some.

One off impairment charges associated with putting new equipment into the store et cetera, that's part of the reason.

Our percentage will tick down in the fourth quarter, so that that sort of thing we will not recur.

Anyways, and so I do believe the only real variable here relates to the relates to the credit card fees, which is associated with retail prices. So I think we're covered it at.

$4, a gallon number in our range and to the extent that would tick up.

Our credit card fees will pick up in your guests on that would be as good as ours, but.

I don't think Theres significant dollar risk.

Associated with it as we sit here today at this point in the quarter.

And Anthony I would just build on one of the things that Steve mentioned about the operations team.

In managing the hours.

Our labor productivity has really gone up a lot or we were.

From a gross profit dollar per.

Per labor hour perspective, we increased productivity by 14% in the quarter and so that team has really done a nice job and at the same time you saw the sales growth in the traffic growth. So they were they were able to really manage the controllable and be very efficient and still deliver a great guest experience.

And deliver on our sales expectations, so very happy with that team and as Steve mentioned, we don't see any reason for that to backslide in and Thats. The most significant part of our Opex. So we believe we have that well under control.

Got it thanks for that color and then switching over to just the prepared food side. So given how successful you've been with the breakfast menu changes you're planning to do any notable changes to the rest of your menu.

Yes, Anthony would absolutely we've got we've got a lot of different things in the works, we're not prepared to talk about any of those today and any sort of detail, but but absolutely the prepared food team and the culinary team in particular.

R.

Always looking at innovation and optimization as part of their mandate and so yes, we definitely have some things coming but not ready to talk about that at this point.

Thank you. Our next question comes from Cristina <unk> with Deutsche Bank. Your line is open.

Hey, good morning, guys and congrats on a good quarter I just wanted to start on fuel when we're looking at your price gaps versus peers and just thinking about the smaller operators that you have to raise their prices to offset the rising cost of the operation are you finding that your price gaps are stable or the widening in the current environment.

Could that be a net benefit for you.

Especially when we're thinking about.

Layering in your loyalty program to really communicate with the customer to stay top of mind.

Yes, Kristina when we look at that we.

Look at our prices is.

As our differential to the low price in the market and to the high price and then the average price and so what we're seeing is we're maintaining our our delta versus the low price in the market. So we are maintaining our competitive position, we are starting to see that differential versus the high price and the <unk>.

<unk> starting to widen out a bit and that really typically is a reflection of.

The smaller operators because they need to extract more margin and so they tend to do that so.

That perspective, we would be able to gain some share from what we've seen.

Based on Opus data in from our public company peers is that we are gaining share.

When we normalized our fourth quarter to a calendar quarter and look at our public company peers.

The other two the reported core down in same store gallons versus the prior year and we were up nearly 5%. So we believe that even among some of the larger operators. We are taking share in fuel certainly versus some of the smaller operators we are as well.

Got it that's really helpful and just it sounds like you said really good about your business, but maybe just.

Tackling and if you could talk a little bit about the health of your core customer you implemented some price increases in January you said, another 5% to 6% coming in March.

How are they feeling financially.

And how are you planning your business for any kind of a potential pullback in spending from from the customer in response to some of the high inflation that we're seeing.

Yes, right now we think the consumers in pretty good shape about 60% of our our guests make over $50000 a year end and a lot of those have seen some of that.

The most accelerated wage increases.

<unk>.

So theyre actually making a lot more than they have historically now theyre also evidenced.

Having to spend more in an inflationary environment, but so far we haven't seen any dramatic shifts in <unk>.

In behavior, among our core guests. So we think we're okay. There from.

From a future looking perspective.

Theres a couple of things to keep in mind. One is that we do have our private label portfolio, which is really <unk>.

Sorry to take off and really provides a more affordable alternative for people. They are seeking deeper value. The other thing that tends to happen in our industry in times. Like this is that we are the beneficiary of trade downs from higher are more expensive forms of retail so in particular in prepared foods.

So if you think about our prepared food offering today. It is already just naturally more value oriented relative to <unk> fast casual and certainly then in full service dining when you think about our specialty pizza as an example, all tied in.

The 3% to four people being at around $16 $50 $17 a pie that's a that's a really great value for our family.

Our breakfast menu you can get a breakfast very easily for under $5 and so when you compare that to <unk> and to other restaurant concepts. We're very much an affordable trade down option. So we have historically seen that our prepared food.

Platform benefits disproportionately in this kind of environment as consumers start to seek more value.

Thank you. Our next question comes from John Royall with Jpmorgan. Your line is open.

Yes.

Hey, guys. Thanks for taking my questions.

I had a couple of questions on kind of.

Downside risks in the economy and things like that which I think you've mostly addressed.

I guess, the only remaining thing.

There are some out there a lot of commodity and with better.

Forecasting.

Third $20 oil levels too.

For some time or even worse.

So.

Can you just go through how you would expect.

Relatively unprecedented.

Prices levels.

<unk>.

That we have in the past.

How would you think that Youll business perform obviously we'd have.

Dan.

What would you expect on the margin side with margin.

Sorry could come in a.

A bit in that scenario, where you start to see demand come off.

Where the prices are too high.

Yes, John .

Again ill try to put the crude oil price in perspective.

Buckeye did the gasoline business so back in 2008, when when we hit that $4 <unk> peak in gasoline crude oil has actually at $140 a barrel.

And those dollars and so today's dollars that's about 183, so again if.

We presented a $120 that's expensive, but not not nearly towards the peak from a historic perspective, and I think more importantly from to answer your question on the margin is <unk>.

Regardless of whether crude oils at 120 or 140 or 180.

Or not the structural situation we have in this industry isn't changing underlying costs operate this business is still going up it's still getting more expensive for the smaller operators to to continue to survive and so retail prices are going to support.

Expanded fuel margin to compensate for those costs.

Until the point in time, where we actually see some demand destruction I think that dynamic is not going to change and like I said before.

I believe that we're not going to get.

Any sort of meaningful demand destruction vis vis <unk>.

Retail prices until we get closer to $5 a gallon and maybe even then we have to take over that before we start to see any meaningful impact there.

Understood Thanks very much.

Thank you.

Thank you I'm currently showing no further questions I would like to turn the call back over to Daryl for closing remarks.

Alright, Thank you and thanks for taking the time today to join US on the call I would also like to thank our team members. Once again for their efforts. This quarter, we've had a great year, so far and we look to close out fiscal 'twenty two on a high note.

Fortunately, we demonstrate our ability to deliver results on our long term strategic plan in fiscal year outlook and both normal times and during a global pandemic and I'm confident we will continue to drive long term shareholder value.

Everyone have a great morning.

This concludes today's conference call. Thank you for participating you may now disconnect.