SECURITIES AND EXCHANGE COMMISSION 	Washington, D.C. 20549 	FORM 10-Q 	Quarterly Report Under Section 13 or 15(d) 	of the Securities Exchange Act of 1934 	For the Fiscal Quarter Ended January 31, 1996 	Commission File Number 0-12788 	CASEY'S GENERAL STORES, INC. 	(Exact name of registrant as specified in its charter) 		 	IOWA 	 42-0935283 State or other jurisdiction of 	(I.R.S. Employer incorporation or organization)	 	 Identification Number) 	ONE CONVENIENCE BOULEVARD, ANKENY, IOWA 	(Address of principal executive offices) 	50021 	(Zip Code) 	 (515) 965-6100 	(Registrant's telephone number, including area code) 	NONE 	(Former name, former address and former fiscal year, 	 if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO _____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, No Par Value 	 26,128,706 shares 		(Class) 				(Outstanding at March 5, 1996) CASEY'S GENERAL STORES, INC. 	INDEX 												Page PART I - FINANCIAL INFORMATION 	Item 1.	Consolidated Financial Statements. 			Consolidated condensed balance sheets - 			January 31, 1996 and April 30, 1995		 3 			Consolidated condensed statements 			of income - three and nine months ended 				 January 31, 1996 and 1995				 5 			Consolidated condensed statements of 			cash flows - nine months ended 			January 31, 1996 and 1995				 6 			Notes to consolidated condensed 			financial statements					 7 	Item 2.	Management's Discussion and Analysis 		 	of Financial Condition and Results of 		 	Operations.							 8 PART II - OTHER INFORMATION 	Item 1.	Legal Proceedings.						 13 	Item 6.	Exhibits and Reports on Form 8-K.			 13 SIGNATURE									 		 15 PART I - FINANCIAL INFORMATION Item 1.	Financial Statements. 	CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES 	CONSOLIDATED CONDENSED BALANCE SHEETS 	(Unaudited) 							 January 31, 	 April 30, 							 1996 	 1995 							 ----------- --------- 	ASSETS Current assets: 	Cash and cash equivalents	 $ 8,834,452 	 5,477,784 	Short-term investments		 9,174,705	 1,300,700 	Receivables				 2,587,001 	 3,086,728 	Inventories				 29,868,305 	 27,343,033 	Prepaid expenses			 6,254,611 	 5,982,324 						 ----------- ---------- 		Total current assets	 56,719,074 	 43,190,569 						 ---------- ---------- Long-term investments			 3,851,352 	 6,445,934 Other assets					 1,362,393 	 1,030,856 Property and equipment, net of		 accumulated depreciation January 31, 1996, $128,156,983 April 30, 1995, $111,656,704	 324,306,591 294,491,313 							 ----------- ----------- 							$386,239,410 	345,158,672 					 ----------- ----------- See notes to consolidated condensed financial statements. CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES 	CONSOLIDATED CONDENSED BALANCE SHEETS 	(Unaudited) 	(Continued) 	LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: 	Notes payable			 	$ 13,950,000	 11,350,000 	Current maturities of 	 long-term debt			 8,272,719	 8,498,891 	Accounts payable			 28,368,247 	 39,860,843 	Accrued expenses			 15,615,070 	 15,716,412 	Income taxes payable		 3,069,638 1,544,909 					 ---------- ----------- 	 Total current liabilities	 69,275,674 	 76,971,055 						 ---------- ---------- Long-term debt, net of current maturities			 83,840,776 	 59,962,922 						 ---------- ---------- Deferred income taxes			 28,770,000 	 27,270,000 						 ---------- ---------- Deferred compensation			 1,591,423	 1,282,655 							 --------- --------- Shareholders' equity			 	 Preferred stock, no par value		 ---		 	--- Common Stock, no par value	 62,695,542	 61,342,992 Retained earnings			 140,065,995 	118,329,048 							 ----------- ----------- Total shareholders' equity		 202,761,537 	 179,672,040 						 ----------- ----------- 					 		$386,239,410 	345,158,672 						 ----------- ----------- See notes to consolidated condensed financial statements. CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES 	CONSOLIDATED CONDENSED STATEMENTS OF INCOME 	(Unaudited) 		 	 Three Months Ended Nine Months Ended 			 January 31, January 31, 		 1996 1995 1996 1995 				 ---- ---- ---- ---- Net sales	 		$221,607,765	 199,362,866 717,839,639 644,358,471 Franchise revenue	 1,262,368	 1,250,611 4,117,123 4,043,483 			 ----------- ----------- ----------- ----------- 				 222,870,133	 200,613,477 721,956,762 648,401,954 			 ----------- ----------- ----------- ----------- Cost of goods sold 	 170,203,976 	153,494,511 557,559,703	 503,412,570 Operating expenses 33,913,000 	 30,819,417 104,154,120	 92,250,902 Depreciation and amortization	 6,296,382	 5,685,473 18,264,319 16,455,623 Interest, net	 	 1,457,309 	 1,269,712 4,128,544 4,138,579 				 ----------- ----------- ----------- ----------- 				 211,870,667 	191,269,113 684,106,686 616,257,674 			 ----------- ----------- ----------- ----------- 				 10,999,466 	 9,344,364 37,850,076 32,144,280 Federal and state income taxes		 4,152,000	 3,621,000 14,288,000 12,456,000 				 ----------- ----------- ----------- ----------- Net income		 $ 6,847,466	 5,723,364 23,562,076 19,688,280 			 ----------- ----------- ----------- ----------- Earnings per common and common equivalent share	 $ .26	 .22 .90 .76 				 ----------- ----------- ----------- ----------- Weighted average number of common and common equivalent shares outstanding		 26,250,220 	 26,078,586 26,224,481 26,039,498 			 ----------- ----------- ----------- ----------- See notes to consolidated condensed financial statements. 	CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES 	CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS 	(Unaudited) 							 		 Nine Months Ended 						 	 January 31, 							 	 1996 1995 							 ---- ---- 	Cash flows from operations: 	 Net income 	 $23,562,076	 19,688,280 	 Adjustments to reconcile 	 net income to net cash 	 provided by operations: 	 Depreciation and amortization	 18,264,319	 16,455,623 	 Deferred income taxes	 1,500,000	 1,500,000 	 Changes in assets and liabilities: 	 Receivables	 499,727	 (228,691) 	 Inventories	 (2,525,272) 	(3,831,178) 	 Prepaid expenses	 (272,287)	 (248,034) 	 Accounts payable 	(11,492,596) 	(4,738,234) 	 Accrued expenses	 (101,342)	 700,798 	 Income taxes payable	 1,524,729 	 3,648,013 	 Other, net	 129,371	 719,850 		----------- ----------- 	Net cash provided by operations	 31,088,725 33,666,427 		----------- ----------- 	Cash flows from investing: 	 Purchase of property and equipment 	(48,241,164) (41,046,711) 	 Purchase of investments	 (10,253,779) (2,006,930) 	 Sale of investments	 4,983,784 12,903,611 	 	----------- ---------- 	Net cash used in investing activities	 (53,511,159) (30,150,030) 	 ----------- ----------		 	 	Cash flows from financing: 	 Proceeds from long-term debt	 30,000,000	 7,500,000 	 Payments of long-term debt	 (6,348,319) 	(3,175,055) 	 Net activity of short-term debt	 2,600,000 	(4,250,000) 	 Proceeds from exercise of stock 	 options	 1,352,550 	 128,125 	 Payment of cash dividends	 (1,825,129) 	(1,555,446) 		 --------- --------- 	Net cash provided by (used in) 	 financing activities	 25,779,102 	(1,352,376) 		 ---------- --------- 	Net increase in cash and cash 	 equivalents	 3,356,668	 2,164,021 	Cash and cash equivalents at 	 beginning of the year	 5,477,784 	 3,151,664 		 --------- --------- 	Cash and cash equivalents at 	 end of the quarter	 $ 8,834,452	 5,315,685 		 ---------- ---------- See notes to consolidated condensed financial statements. CASEY'S GENERAL STORES, INC. AND SUBSIDIARIES 	NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1.	The accompanying consolidated condensed financial statements (unaudited) include the accounts and transactions of the Company and its two wholly-owned subsidiaries, Casey's Marketing Company and Casey's Services Company. All material inter-company balances and transactions have been eliminated in consolidation. 2.	The accompanying consolidated condensed financial statements (unaudited) have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. Although management believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these interim consolidated condensed financial statements (unaudited) be read in conjunction with the Company's most recent audited financial statements and notes thereto. In the opinion of management, the accompanying consolidated condensed financial statements (unaudited) contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of January 31, 1996, and the results of operations for the three and nine months ended January 31, 1996 and 1995, and changes in cash flows for the nine months ended January 31, 1996 and 1995. 3.	Sales generally are strongest during the Company's first quarter (May-July) and weakest during its fourth quarter (February-April). In the warmer months customers tend to purchase greater quantities of gasoline and certain convenience items, such as beer, soft drinks and ice. Due to the continuing emphasis on high-margin, freshly prepared food items, however, the Company's net sales and net income (with the exception of the fourth quarter) have become somewhat less seasonal in recent years. 4. Retail gasoline profit margins have a substantial impact on the Company's net income. Profit margins on gasoline sales can be adversely affected by factors beyond the control of the Company, including over-supply in the retail gasoline market, uncertainty or volatility in the wholesale gasoline market (such as that experienced in fiscal 1991 as a result of the Persian Gulf crisis) and price competition from other gasoline marketers. Any substantial decrease in profit margins on retail gasoline sales or the number of gallons sold could have a material adverse effect on the Company's earnings. 5. In December 1995, the Company reclassified certain investments, with an amortized cost of $5,915,152, to available for sale as permitted by the implementation guide for SFAS 115. The financial statement impact was not material. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 	Financial Condition and Results of Operations 	Casey's derives its revenue from the retail sale of food (including freshly prepared foods such as pizza, donuts and sandwiches), beverages and non-food products such as health and beauty aids, tobacco products, automotive products and gasoline by Company stores and from the wholesale sale of certain grocery and general merchandise items and gasoline to franchised stores. The Company also generates revenues from continuing monthly royalties based on sales by franchised stores, sign and facade rental fees and the provision of certain maintenance, transportation and construction services to the Company's franchisees. A typical store is generally not profitable for its first year of operation due to start-up costs and will usually attain representative levels of sales and profits during its third year of operation. 	Due to the nature of the Company's business, most sales are for cash, and cash provided by operations is the Company's primary source of liquidity. The Company finances its inventory purchases primarily from normal trade credit aided by the relatively rapid turnover of inventory. This turnover allows the Company to conduct its operations without large amounts of cash and working capital. As of January 31, 1996, the Company's ratio of current assets to current liabilities was .82 to 1. The ratio at January 31, 1995 and April 30, 1995, was .54 to 1 and .56 to 1, respectively. Management believes that the Company's current $27,000,000 bank lines of credit (aggregate amount), together with cash flow from operations, will be sufficient to satisfy the working capital needs of its business. Net cash provided by operations decreased $2,577,702 (7.7%) in the nine months ended January 31, 1996 from the comparable period in the prior year, primarily as a result of a smaller increase in inventories and a decrease in accounts payable. Cash flows from investing and financing in the nine months ended January 31, 1996 increased, primarily as a result of the proceeds from long-term debt. Cash flows in the future are expected to decrease as a result of the anticipated growth in capital expenditures. 	Capital expenditures represent the single largest use of Company funds. Management believes that by reinvesting in Company stores, the Company will be better able to respond to competitive challenges and increase operating efficiencies. During the first nine months of fiscal 1996, the Company expended $48,241,164 for property and equipment, primarily for the construction and remodeling of Company stores, compared to $41,046,711 for the comparable period in the prior year. The Company anticipates expending approximately $55,000,000 in fiscal 1996 for construction, acquisition and remodeling of Company stores, primarily from funds generated by operations, existing cash and short-term investments and proceeds of the 7.70% Senior Notes due December 15, 2004 (the "7.70% Notes") and the 7.38% Senior Notes due December 28, 2020 (the "7.38% Notes"). 	As of January 31, 1996, the Company had long-term debt of $83,840,776, consisting of $24,000,000 in principal amount of 7.70% Notes, $30,000,000 in principal amount of 7.38% Notes, $13,646,061 of mortgage notes payable, $9,125,000 of unsecured notes payable and $7,069,715 of capital lease obligations. 	Interest on the 7.70% Notes is payable on the 15th day of each month at the rate of 7.70% per annum. Principal of the 7.70% Notes matures in forty quarterly installments beginning March 15, 1995. The Company may prepay the 7.70% Notes in whole or in part at any time in an amount of not less than $1,000,000 or integral multiples of $100,000 in excess thereof at a redemption price calculated in accordance with the Note Agreement dated as of February 1, 1993 between the Company and the purchasers of the 7.70% Notes. 	Interest on the 7.38% Notes is payable semi-annually on the twenty-eighth day of June and December in each year, commencing June 28, 1996, and at maturity, at the rate of 7.38% per annum. The 7.38% Notes mature on December 28, 2020, with prepayments of principal commencing December 28, 2010 and ending June 28, 2020, inclusive, with the remaining principal payable at maturity on December 28, 2020. The Company may prepay the 7.38% Notes in whole or in part at any time in an amount of not less than $1,000,000 or in integral multiples of $100,000 in excess thereof at a redemption price calculated in accordance with the Note Agreement dated as of December 1, 1995 between the Company and Principal Mutual Life Insurance Company, as the purchaser of the 7.38% Notes. 	To date, the Company has funded capital expenditures primarily from the proceeds of the sale of Common Stock, issuance of the 6-1/4% Convertible Subordinated Debentures (which were converted into 3,683,064 shares of Common Stock on March 28, 1994), the 7.70% Notes and the 7.38% Notes, a mortgage note, unsecured notes payable and through funds generated from operations. Future capital needs required to finance operations, improvements and the anticipated growth in the number of Company stores are expected to be met from cash generated by operations, existing cash, short-term and long-term investments and additional long-term debt or other securities as circumstances may dictate, and are not expected to adversely affect liquidity. 	The United States Environmental Protection Agency and several states, including Iowa, have established requirements for owners and operators of underground gasoline storage tanks (USTs) with regard to (i) maintenance of leak detection, corrosion protection and overfill/spill protection systems; (ii) upgrade of existing tanks; (iii) actions required in the event of a detected leak; (iv) prevention of leakage through tank closings; and (v) required gasoline inventory recordkeeping. Since 1984, new Company stores have been equipped with non-corroding fiberglass USTs, including many with double-wall construction, over-fill protection and electronic tank monitoring, and the Company has an active inspection and renovation program with respect to its older USTs. The Company currently has 1,663 USTs, of which 1,289 are fiberglass and 374 are steel. Management believes that its existing gasoline procedures and planned capital expenditures will continue to keep the Company in substantial compliance with all current federal and state UST regulations. 	Several of the states in which the Company does business have trust fund programs with provisions for sharing or reimbursing corrective action or remediation costs incurred by UST owners, including the Company. These programs, other than the State of Iowa, generally are in the early stages of operation and the extent of available coverage or reimbursement under such programs for costs incurred by the Company is not fully known at this time. In each of the years ended April 30, 1995 and 1994, the Company spent approximately $2,137,000 and $1,814,000, respectively, for assessments and remediation. During the nine months ended January 31, 1996, the Company expended approximately $678,000 for such purposes. Substantially all of these expenditures have been submitted for reimbursement from state-sponsored trust fund programs and as of January 31, 1996, approximately $3,900,000 has been received from such programs. The Company has accrued a liability at January 31, 1996 of approximately $3,300,000 for estimated expenses related to anticipated corrective actions or remediation efforts, including relevant legal and consulting costs. Management believes the Company has no material joint and several environmental liability with other parties. 	Management of the Company currently estimates that aggregate capital expenditures for electronic monitoring, cathodic protection and overfill/spill protection will approximate $1,000,000 in fiscal 1996 through December 23, 1998, in order to comply with the existing UST regulations. Additional regulations, or amendments to the existing UST regulations, could result in future revisions to such estimated expenditures. Such expenditures are expected to be funded as described above, and are not expected to adversely affect liquidity. 	THREE MONTHS ENDED JANUARY 31, 1996 COMPARED TO THREE MONTHS ENDED JANUARY 31, 1995 	Net sales for the third quarter of fiscal 1996 increased by $22,244,899 (11.2%) over the comparable period in fiscal 1995. Retail gasoline sales increased by $16,419,161 (15.2%) as the number of gallons sold increased by 16,611,987 (15.9%) while the average retail price per gallon decreased 0.6%. During this same period, retail sales of grocery and general merchandise increased by $5,864,992 (8.0%) due to the addition of 64 new Company Stores and a greater number of stores in operation for at least three years. 	Cost of goods sold as a percentage of net sales was 76.8% for the third quarter of fiscal 1996, compared to 77.0% for the comparable period in the prior year. The gross profit margins on retail gasoline sales increased (12.6%) during the third quarter of fiscal 1996 from the third quarter of the prior year (11.3%) due to the decrease in wholesale gasoline costs during the period. The gross profit margin per gallon also increased (to $.1294) in the third quarter of fiscal 1996 from the comparable period in the prior year ($.1171). These factors were offset by a decrease in gross profits on retail sales of grocery and general merchandise (to 41.9%) from the comparable period in the prior year (42.4%). 	Operating expenses as a percentage of net sales were 15.3% for the third quarter of fiscal 1996 compared to 15.5% for the comparable period in the prior year. The decrease in operating expenses as a percentage of net sales was caused primarily by an increase in the number of gasoline gallons sold and an increase in retail sales of grocery and general merchandise. 	Net income increased by $1,124,102 (19.6%). The increase in net income was attributable primarily to the increase in gross profit margins on retail sales of gasoline, an increase in the number of gallons of gasoline sold, and an increased number of stores in operation for at least three years. 	NINE MONTHS ENDED JANUARY 31, 1996 COMPARED TO NINE MONTHS ENDED JANUARY 31, 1995 	Net sales for the first nine months of fiscal 1996 increased by $73,481,168 (11.4%) over the comparable period in fiscal 1995. Retail gasoline sales increased by $51,470,879 (15.0%) as the number of gallons sold increased by 48,879,011 (15.2%) and the average retail price per gallon decreased 0.2%. During this same period, retail sales of grocery and general merchandise increased by $22,014,175 (9.1%) due to the addition of 64 new Company stores and a greater number of stores in operation for at least three years. 		 Cost of goods sold as a percentage of net sales was 77.7% for the first nine months of fiscal 1996 compared to 78.1% for the comparable period in the prior year. This result occurred because the gross profit margins on retail gasoline sales increased (11.4%) during the first nine months of fiscal 1996 from the comparable period in the prior year (9.5%) due to the decrease in wholesale gasoline costs during the period. The gross profit margin per gallon also increased in the first nine months of fiscal 1996 (to $.1213) from the comparable period in the prior year ($.1017). However, these factors were offset by a decrease in gross profits on retail sales of grocery and general merchandise (to 40.7%), from the comparable period in the prior year (41.4%). 	Operating expenses as a percentage of net sales were 14.5% for the first nine months of fiscal 1996 compared to 14.3% for the comparable period in the prior year. The slight increase in operating expenses as a percentage of net sales was caused primarily by lower wholesale gasoline costs. 	Net income increased by $3,873,796 (19.7%). The increase in net income was attributable primarily to the increase in gross profit margins on retail sales of gasoline, an increase in the number of gallons of gasoline sold, and an increased number of stores in operation for at least three years. 	PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. 	The Company from time to time is a party to legal proceedings arising from the conduct of its business operations, including proceedings relating to personal injury and employment claims, environmental remediation or contamination, disputes under franchise agreements and claims by state and federal regulatory authorities relating to the sale of products pursuant to state or federal licenses or permits. Management does not believe that the potential liability of the Company with respect to such proceedings pending as of the date of this Form 10-Q is material in the aggregate. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 	(a)	The following exhibits are filed with this Report or, if so indicated, incorporated by reference: 	EXHIBIT 	NO. 	DESCRIPTION -------- ----------- 	4.2	 Rights Agreement dated as of June 14, 1989 between Casey's General Stores, Inc. and United Missouri Bank of Kansas City, N.A., as Rights Agent(a) and amendments thereto (b),(c),(d) 4.3 Note Agreement dated as of February 1, 1993 between Casey's General Stores, Inc. and Principal Mutual Life Insurance Company and Nippon Life Insurance Company of America (e) and First Amendment thereto (f) 	4.4 	Note Agreement dated as of December 1, 1995 between Casey's General Stores, Inc. and Principal Mutual Life Insurance Company (f) 	11	 Statement regarding computation of per share earnings 27 	Financial Data Schedule ____________________ (a)	Incorporated by reference from the Registration Statement on Form 8-A (0-12788) filed June 19, 1989 relating to Common Share Purchase Rights. (b)	Incorporated by reference from the Form 8 (Amendment No. 1 to the Registration Statement on Form 8-A filed June 19, 1989) filed September 10, 1990. (c)	Incorporated by reference from the Form 8-A/A (Amendment No. 3 to the Registration Statement on Form 8-A filed June 19, 1989) filed March 30, 1994. (d)	Incorporated by reference from the Form 8-A12G/A (Amendment No. 2 to the Registration Statement on Form 8-A filed June 19, 1989) filed July 29, 1994. (e)	Incorporated by reference from the Current Report on Form 8-K filed February 18, 1993. (f)	Incorporated by reference from the Current Report on Form 8-K filed January 11, 1996. 	(b)	On January 11, 1996, the Company filed a report on Form 8-K concerning the issuance of the 7.38% Notes. There were no other reports on Form 8-K filed during the quarter for which this Report is filed. SIGNATURE 	Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 						CASEY'S GENERAL STORES, INC. Date: March 11, 1996 		By: /s/ Douglas K. Shull 					 -------------------- 					 Douglas K. Shull, Treasurer 					 (Authorized Officer and 						 Principal Financial Officer) EXHIBIT INDEX EXHIBIT NO.		 	DESCRIPTION	 				PAGE - ----------- ----------- ---- 	11	 			Statement regarding			 17 					computation of 					per share earnings				 	27		 		Financial Data Schedule		 18 							Exhibit 11 	CASEY'S GENERAL STORES, INC. 	Computation of Per Share Earnings 	 							 Three Months Ended 							 January 31, 1996 1995 						 ---- ---- [S] [C] [C] Weighted average number of common and common equivalent shares: Weighted average number of shares outstanding 26,125,906 25,930,706 Shares applicable to stock options			 124,314 147,880 						 ---------- ---------- 						 26,250,220 26,078,586 							 ---------- ---------- 		 Net income		 			$ 6,847,466 5,723,364 						 --------- --------- Earnings per common and common equivalent share $ .26 .22 						 ---------- --------- 							 Nine Months Ended 							 January 31, 1996 1995 							 ---- ---- Weighted average number of common and common equivalent shares: Weighted average number of shares outstanding 26,084,434 25,925,262 Shares applicable to stock options		 140,047 114,236 							 ---------- ---------- 						 26,224,481 26,039,498 							 ---------- ---------- Net income	 				$23,562,076 19,688,280 						 ---------- ---------- Earnings per common and common equivalent share $ .90 .76 						 ---------- ----------