Good day, ladies and gentlemen and welcome to the Casey General Stores Second Quarter 2017 Earnings Conference Call. At this time all phone participants are in a listen-only mode. [Operator Instructions] Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, today's conference is being recorded. I'd now like to introduce your host for today's conference, Mr. Bill Walljasper, Chief Financial Officer. Sir, please go ahead.

Thank you. Good morning. And thank you for joining us to discuss Casey's results for the quarter ended October 31. I'm Bill Walljasper, Chief Financial Officer; Terry Handley, President and Chief Executive Officer is also here. Before we begin, I'll remind you that certain statements made by us during this investor call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include any statements relating to our possible or assumed future results of operations, business strategies, growth opportunities and performance improvements at our stores. There are a number of known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from any future results expressed or implied by those forward-looking statements, 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 Web site. Any forward-looking statements made during this call reflects our current views as of today with respect to future events and Casey disclaims any intention or obligation to update or revise forward-looking statements whether as a result of new information, future events or otherwise. We'll take a few minutes to summarize the results of the second quarter then afterwards we are open for questions about our results. Diluted earnings per share for the second quarter were $1.44 compared to $2 a year ago. The primary reason for the decrease was a fuel -- gallon margin as of over $0.06 gallon per lower than the period compared to the second quarter a year ago. This difference represented approximately $0.52 on diluted earnings per share. Year-to-date, diluted earnings per share were $3.14 compared to $3.57 in the same period last year. In the fuel category, an increase…

[Operator Instructions]. Our first question comes to light of Chuck Cerankosky with Northcoast Research. Your line is now open.

Good morning, Bill. Could you talk about the level of fuel retailer competition; has it intensified is? Is any of that though changed over -- say the previous 12 months?

I think that little competition has been relatively consistent in the last 12 months. As you may know, I mean in sense of fiscal 2008, we have definitely seen an uptake in the fuel margin activity. A lot of it has to do with what I would call more rational pricing environment, buyer competition, and it just kind of spur by some of the competitive pressures on gross profit dollars over that course of time. Those would range from obviously a minimum wage increases to increase taxation legislation on different products and then that's where it's being offset. So I would say it's been relatively rational in the same period of time.

And could you comment on the volatility of fuel pricing or fuel costs during the quarter and where it might be headed?

Yes. The fuel volatility was, when you compared to the same period a year ago, it was much lower in volatility. And so I think that certainly goes to the -- some of that disparity that we talk about at the onset of the call, that $0.06 margin differential. Obviously, volatility gives us an opportunity to spread margin. We are seeing quite the same volatility this quarter and compared to the second quarter a year ago.

Yes, are you saying that volatility, however, you measure it change as the third quarter begins?

Well we kind of -- chance for us to comment on that at this point. We only have a month into it. It really kind of consistent in the first part of November. Maybe a slight uptick here towards the end of November.

Okay. And where is the management's mindset right now on share repurchases?

Well, share repurchase for us, it's something that I can tell you Chuck, we've had a lot more external conversations regarding share repurchase and we've got a lot more internal conversations regarding share repurchase. It's one of those IMs that we look at on a regular basis to drive total shareholder return, it's something that we continue to look at and evaluate. And certainly it's one of those things as we look at our balance sheet and our debt-to-EBITDA ratio; it's one that's getting a little bit more attention internally. We don't have an authorization out there at this point, obviously when that does happen or if it does happen, certainly we'll notify everybody that.

All right Bill, thank you.

Our next question comes from Chris [ph] with Jefferies. Your line is now open.

Thanks for taking my question. So Bill, looking at your unit growth should we expect the 15 acquisition targets to close sometime in the back half of this year and just how robust is the potential pipeline going forward?

Yes, if I answer the first part, the answer is yes, you should anticipate those 15 sites of contracts will be completed and open up in the back half of the year. Obviously we've had much more acquisition activity this year, albeit it's not a tremendous amount but we had a lot more activity this year relative to a year ago. As we mentioned on this call as well as the last call, we've had definitely an increased dialogue and willingness to have conversations about the opportunity to purchase businesses. You know the valuation still -- we're very obviously concerned in that regard, we want to make sure that the valuation meet our expectations. So it's still little bit high, so our expectation is still little bit relative to our expectations. But nevertheless, we are encouraged as we move up further out our on our geography. As far as the sites that we have under contract, the new store construction, majority of those will certainly fall in the next fiscal year or kind of along that line so I do want to point out that we have taken steps over this past year to increase the number resources as I mentioned in our store development area, we are taking future steps to increase the number of resources in the upcoming year as well. I mean we are we are definitely making a push to try and have a sustained accelerated unit growth in regards to neutral construction. And I mean on top of that with acquisitions.

Okay, that's helpful. And just point of clarification here, so on the newbuilds, you had 39 stores under construction as of last quarter, the same number is for this quarter but you only managed to actually open 11 in the quarter itself. So I'm just trying to understand the actual number of new store openings that you expect, maybe in the back half of the year, as you mentioned the 84 under contract to a largely fallen fiscal '18?

Yes, yes, it is the fiscal year, we anticipate opening 50 new stores, right about 50 new store constructions, it maybe a little bit higher than or maybe a little bit lower but right about 50.

Okay. And then for your full year goals, can provide any update on the feasibility of hitting each -- obviously as you've discussed in the past, the prep food comps aren't likely to hit that 10.2% goal and imagine maybe even given the Q2 results that the grocery comp could be a bit of a stretch but any thoughts there would be appreciated. And although you won't maybe hit your goal on the prep food comp for the full year, do you think it may be possible that you could exit the year at a level similar to your goal? Maybe on a run rate if you will?

Yes, good question. Let me kind of frame both of those areas. I will start with prepared food and found the goal of 10.2% obviously and given the results for the six months, we will not be hitting that goal. I think we have a very good opportunity to accelerate our same-store comps and prepare food category relative to where they're currently are at. And will give us a little bit of optimism in that regard or a number of things; one is that as we mentioned on the call, the price increase, there was about 1% to 1.5% percent price increase that we took effective November 1. In addition to that we also have an acceleration of pizza delivery stores that I mentioned that will care will -- open up; the majority of those will open it in the third quarter. And then obviously the tailend in the fourth quarter. Until those who obviously lend itself to the same-store sales and prepared foods. But we do have easier comparisons, obviously in the back capital, relatively to first half. But also in addition to that, you know, we have certainly increased promotional activity that was what were trying to push forward in the prepared suite who category. We had a nice in November, I'll get a nice promotion November as well as well as some increase, the lawful digital advertise and to help push the online. I think you're seeing some of the benefits of that effort in the numbers that we put out. So with respect to the market prepared, obviously we are certainly on track, that margin. I think we're in good shape there. Excuse me, I'm sorry, go ahead.

No, I'm sorry. You can finish your thoughts there.

Yes, I was going to shift over the grocery and general merchandise category there. It will be very challenging for us to hit that goal, the annual goal but certainly again the same kind of theme here. We feel optimistic about having an acceleration in comps and a growth in general merchandising, the back half of the year, relative to where we're currently at. You know, some price increases that we have taken recently and plan on taking here later in Q3 in areas like beer, the 20 ounce soda, and then cigarettes. Also the major remodels that are back loaded this fiscal year will not only help to grow general merchandise but will also help the prepared food category as well. So there is just some thoughts around the multi-particular areas. Now on the margin side, we're only 20 basis points below our goal. So I think there is certainly realistic chance that we can hit that with obviously some of those price increases will have some margin enhancement opportunities.

Great, all very hopeful color. And the last one for me, on the RINs generation, the percentage of gallons was up a little bit this quarter as it was kind of in Q1 as well. How should we think about that on a percentage basis going forward, I know it's tough to maybe respond to this but do you have any updated view as it relates to the RFS mandate? Have any -- been any discussions internally after now having seeing that the attorney general, Pruitt [ph], has been nominated as the Head of EPA and what that could potentially do or any type of thought as it relates to what we should be assuming for RINs prices on a go-forward basis? Thanks.

Yes, I'll try to make sure I get all of those. In fact, I may not catch one of those, just went back to me to address -- with respect to the RINs volume, there are several things that are helping that volume kind of rise a little bit relative to prior periods. One would be obviously, we have a lower retail fuel environment and if that's encouraging increasing sure gallons and that's being part of that also -- you know, the fuel saver program that we have partnered with IV which is a regional grocery store chain here has done very well in the second quarter as well it did in the first quarter. So both of those things certainly are driving same-store gallons which then in turn drives a high RIN volume because a lot of that penetration happens to be in the State of Iowa where we happen to secure the RINs. Now on a go-forward basis, you know, retail fuel price continues to be at lower levels relative to a year ago; and so we are heavily correlated to miles -- U.S. DOT miles driven and that just came out here just recently and that continues to be a positive. So I think we have some opportunity to continue to have some same-store gallon on the positive side. With respect to the second or your question on the RFS, you know, I'm not sure we have necessarily a crystal ball and kind of where that's going. Obviously RIN values did that to the election slightly and have come up subsequent to that. The EPA certainly has made it clear that viewpoints on the point of obligation with respect to the RFS, albeit they did open that 60-day window for comments and through that it's too early for us to make any speculation as to where that might go. For us, we just happen to be able to -- we're fortunate I would say to be able to benefit from that as -- and due to our market, where we operate and the way we distribute our fuel. And we don't have any bulk storage tanks rather blinding any type of rents, just splash money as you know, Chris. So I hope that answers your questions?

It does. Thank you very much and best of luck in Q3.

Thanks, Chris.

Our next question comes from Kelly Bania with BMO Capital Markets. Your line is now open.

Hi, good morning. Thanks for taking my question. I wanted to ask a little about the -- the -- the wage increases, are changes following the minimum salary exemption, it sounds like you're moving forward with that. I guess that my question is, do you think that most of your competitors will also move forward with that decision?

Yes. While I'm not sure about all of our competitors, I'm not sure what their current wage structure is with respect to the levels within that minimum salary. I can tell you that most of the employers that have preceded forward are going to continue with their commitment. You know, that ruling was very late in the game type of ruling and so I think most employers feel that having made that comment would be very challenging to hold that back. From our perspective Kelly, I mean that's probably true by any employer. We want to be the employer of choice in our market area and so part of that for us is to have competitive wages at competitive benefits. And I think this is just kind of -- hear to that philosophy.

Got it. And then just -- you mentioned you're accelerating the pizza delivery; is that just kind of looking at the benefits from -- that you're getting? Is that pulling forward any from next year or is it -- is the decision there at all just related to kind of the environment and that's an initiative that you can press further onto kind of help drive that category or just what's behind the decision in accelerating that?

Good question. I don't necessarily think it's pulling forward site that we had planned in that fiscal year into this fiscal year. As we look at the success of the pizza delivery program, the primary success that we've had has been larger communities with that program. We've just recently started putting the pizza delivery into some smaller communities and have seen some relatively good success in that regard. And so moving forward we thought we had an opportunity to roll out additional pizza delivery stores at some of the small communities the we have not otherwise had contemplated. And so that's part of that. Again, it's one of those that's no [indiscernible] CapEx investment and that's more of an operational change and if we find that in certain stores it's not working as expected, we can certainly pull that back but we definitely think we have an opportunity there and so we thought we take the opportunity for this fiscal year.

Great. And then if I could just ask one more about that the grocery category; I think you mentioned some price increases coming up in some of the categories; and beer, and cigarettes, and -- I must thought that last quarter you were starting to see some deflation in beer, so it's just curious; do you think that would any price increases in there would be in line with your competition or you just not expect any volume response or just kind of some thought behind the process of…

Yes, definitely fair question. We find ourselves -- you know, quite -- as we look at our beer price in comparison to love our peers, we certainly think we have opportunities from the competitive landscape to increase certain aspects of the beer category and still be in the market, similar to what we did with prepared food here recently. We did select items that we thought we're under the market and increase those in the pizza -- prepared food category. So yes, there are certain things, that's 20 ounce -- so it is certainly is the past. We know some of this is passed through from cost pressures but some of its also incremental but beyond. And so we're going to take that opportunity. I mean we are always going to get competitive pricing, sort of let not keep products and we do that on a monthly basis and so -- I believe we're certainly well in-tune with our -- the landscape of particular store and market.

Great. And I don't normally ask kind of on quarter to-date trends for given that this November was a little bit different than most months. It's just curious -- have you seen any change in trend and traffic or consumer sentiment in your stores or just a broader trade down or any noticeable changes that you're willing to talk about in November?

You know, part of the reason that we got away from putting out monthly same-store sales, it was a little bit less focused on short-term results. So we're little hesitant at this point to come back that and start getting trend analysis on a one month basis. I don't have to say about November, from a whether perspective, it was probably the second warmest, November, on record in our marketing area here. So -- and also I think the DOT came out recently with their miles driven. And also I think the DoT came out recently with their miles driven, so that was another plus, whether that was weather related or one, but again, another positive I think was we move into the quarter.

Great, thank you.

Our next question comes from [indiscernible]. Your line is now open.

Thanks, good morning. So. focusing -- for refocusing on the prepared food and -- you know, you had your partial results that were released for the quarter and it looks like the balance of the quarter accelerated that to pull out that 4.9% quarter-to-date number to like a 5.1% number. And you also mentioned that you had some promotional activity around prepared food and fountain, I'm curious, is that something that took hold in October because it seems like a nice acceleration, particularly when considering the fact that you guys were going against from the compare of that 10.5% comp in October of last year?

Yes, well more the promotional activity that we discussed in that first fall really have come in the November. We had put out a new promotion, I wouldn't say it's new but it says promotional that we don't do on a regular basis in November, and certainly that's going very well for us. With respect to other promotional activity, we really focused and I kind of alluded to this will little bit earlier, we focused and increased on some of the digital environment with that online ordering and trying to really drive that piece of our business, and obviously that's -- obviously focused on prepared foods. And so I think you're seeing a little bit of benefit come through in that regard, and obviously we've had a nice uptick and a number of downloads in the online ordering. Is that a nice uptake and the contribution of pizza sales with respect to online or telephonic. I mean also the basket ring, we've seen an increase in the basket ring when you compare the telephonic with the online. So all the things are positive and I think in part at least has to the with some of the we have in that environment. And so yes, so basically from that -- to your first part of your question; that's disclosed, they never disclosure that was made at 4.9 obviously, things certainly improved, and slightly albeit only 20 basis points but nevertheless, we are pleased with at least that the prepared food comps in the second quarter were consistent with the first quarter and you probably know, we've had a deceleration over the prior three or four quarters. So that's certainly more encouraged by that.

Yes, and maybe just duck-telling [ph], your comment are on the digital piece, you should take it, moves up to -- now like a 20% differential versus telephonic. And you've obviously seen downloads pickup, I'm curious have you seen -- if you have this level of granularity in the detail, have you seen frequency of transactions with existing users pick up as well, it is the propensity for that -- that consumer that's moved to the digital platform such that maybe they would feel more comfortable in shifting all their orders there?

Yes, I mean not shifting all of their orders there but certainly we do have a higher volume of what I call repeat, principally with respect to the mobile app, repeat users. The mobile app certainly be -- seems to be more prevalent in some more of our populated areas. And so we're trying to do what we can to try to keep it -- to continue to drive that higher, as well as the rural environments higher as well. So it's going to take some time, you know, we just start off January but I think we're on-track with it.

Great. And then shifting gears, my last question here on margins in the prepared food category, in light of the pricing increases, just curious of the implications there on the margin that you foresee? And then, given the sort of inflationary commodity environment we've seen and I'm curious as to whether you guys have made any forward purchases or cheese or coffee or if you're still sort of monitoring the market there?

Yes, so on the price increases, you know, I'd -- with respect to gross and other merchandise, I mean I think we have some opportunity for some incremental margin gain there. Albeit not a significant amount but I think we do a little bit of opportunity there. On the prepared food category, certainly when we do a price increase -- I think we do have opportunities to drive margins as well as comps. And so I think that's the part of the benefit of that increase. In the cheese and coffee, you know, coffee is locked in right now through -- I'm going to say June or July of 2018. And so we are locked in that very favorable copy, written subsequent to our locking, so we're very pleased with that. We're currently looking at the futures market with respect to cheese that we have not committed any at this point on a future lot but just stay tuned in that area as we continue to monitor that area.

Okay, great. Best of luck, thanks.

Our next question comes from Shane Hagan with Deutsche Bank. Your line is now open.

Good morning and thanks for taking the questions. Bill, you guys are great gallon comps obviously in the quarter, and I know, you know fuel prices were obviously down, they went down quite as much as they were in the first quarter. You know, you called out the DOT numbers, miles driven, but can you talk about maybe -- you know, what else has been kind of driving strength in comp gallons? You know, the fuel saver program you mentioned but anything else and I believe you guys have the fuel saver with high V -- any other color you can give us about fuel gallons by geography, it would be great.

Yes, and so definitely the fuel saver program has been a nice partnership with high -- I mean for both of us, both [indiscernible]. And the fuel saver program has done well here in the past few quarters. And so when you look at our same-store gallons and perhaps even relative to some of our peers, you know, this is an area that certainly is helping drive that same-store movement. The lower fuel prices certainly is part of that as well and then the miles driven. Those are really -- those three factors are really driving the same-store gallon movement and so you can kind of get a sense for at least a couple of those going forward to try shortly, you might think our same-store gallons might be. So we're certainly positive about that, and with respect to the states and geography, so when we look at the fuel saver program, its going too dominated in few states. Right now we have roughly about 1,100 or so stores within the contract of that agreement but when you boil it down really does the state of Iowa, Missouri, are pretty predominant, you've get Kansas and Nebraska, pretty predominant states that really ride that same-store gallon movement coming from the fuel saver benefit. Missouri and Iowa happen to be about half of our store base.

Okay, great, that's really helpful. And then just looking to prepared food margins for the quarter, you know, that came in a bit lower than I was expecting given that you guys obviously benefiting little bit from the lower cheese cost and you had the May 1 price increase. Could you just kind of walk us through some of the puts and takes? You know, I realized obviously you guys look like you're on-track for taking your margin target for the year but just trying to understand what's going on there?

Yes, absolutely. We had some supply cost increases in the second quarter in the fountain [ph] bakery category, that was not offset through price increases. So we did absorb those and then not -- and neither probably all about equal contribution by the way. And so those two, they increased supply cost and found in the bakery category. We did had some increased promotional activity, we're going to talk a bit about that and so as we become a little bit more promotional, you know that does -- even just little bit into the margin. And then we have had a product mix shift in the bakery category. We've seen some of our higher margin items and perform probably not quite to expectation and as a part of mix shift changes there that will affect your margin as well.

And so you guys do still feel good about hitting that 62% to 62.5% of your target?

Yes, I think we have a great opportunity at that.

Great, thanks a lot.

Our next question comes from Ryan [ph] with Barclays. Your line is now open.

Hi, good morning. Thanks for taking the questions. I'm doing well, thanks. So I just have a quick follow-up to the answer you gave to Shane's question. So I get all the reasons that gallons are accelerating but can you talk about the divergence in trends between the gallons and inside the store?

Yes, this is -- that's an interesting, we had that question in the last call. It's just -- it's a fact, I'm not sure I have a complete answer for you, I mean we have had a nice uptick in same-store gallon movement but I think it circles back to an earlier comment that we made and we also made in the press release kind about -- kind of an heightened awareness of our consumer and their spending. One of the things that we have seen that -- that we haven't called out is the basket ring inside the store excluding fuel. That did step down sequentially from Q1 down to Q2. And so we are getting the traffic definitely at the pumps, just at this point I think we have a consumer consciousness that just is not pulling them into sort of buy other products. And so from our perspective, take away as you know, we needed to understand that and trying to drive some promotional activity to get them into the store. And so those are some of the things that we're working on here as we move forward in the back half of the fiscal year.

Got it. And so the -- it doesn't reflect changing your fuel pricing strategy, does it?

It does not.

Okay. And then I guess, could you just reconcile those comments with taking price increases inside the store? It seemed like there could be a risk to the comp there?

Yes, and we had -- we had this very much, this very concerned -- come with that prepared food category as consumer certainly are more aware of their spending. But we have found through our competitive pricing surveys you know that we certainly are below market on a few key products. And so we mentioned a couple of beer, the 20 ounce soda, also just to clarify, we just want to make sure that some portion of these price increases are pass-through from cost pressures but we also think at the same time we have an opportunity to maybe gain a little bit as we're doing that. And so we'll still be under the market and the items that we're talking about, necessarily are the ones that people might pull back from. But it will be very cautious and cognizant as we forward with that, no different than we did with the recent price increase in prepared foods that we took November 1.

That's helpful, thanks. And can you just remind us how many stories do you think are eligible for each of the three major initiatives?

I'm mean on go-forward basis?

Yes.

I'll give you kind of -- just a general roll up there. In the 24-hour, we're probably later in the game on that front more like [indiscernible]. We'll be fine the 24-hour conversions, they tend to be in more popular areas than to be more successful. Also before I leave the 24-hours, some of the ones that we are -- converting now and we will convert in the future are stores that already have modified hours. Our core hours used to be 6:00 P.M. and 11:00 P.M. and now we've made adjustments to many stores, maybe 5:00 A.M. to midnight. So when we convert those, obviously the contribution or the impact will probably build it less. So that's with the 24-hour format. When you look at the pizza delivery, this could be an interesting one going forward, I think a lot will depend on how some of these new rollouts perform in the smaller communities because when we first talked about pizza delivery in the first several years of that program, we were talking about more metropolitan areas for us or higher populated areas I guess as the target which is about half of our store base. And now we're rolling these our into smaller communities, so we are successfully, I think we have an opportunity to take that even little bit higher. So kind of putting baseball terms, being a Cubs fan, we're probably about a fifth inning on the pizza delivery and we're probably about a fifth inning on the major remodel program. And so I think we have had numerous more years of opportunities in all of those, especially the latter two.

That's really helpful, thank you. And just quickly, what were credit card fees?

Our credit card fees were about $28 million in the quarter.

Great, thank you.

Our next question comes from Ronald Bookbinder with Coker & Palmer. Your line is now open.

Good morning and thank you for taking questions. You started talking about traffic versus ticket. Could you break out on the merchandise comp as to what traffic was up versus ticket?

Yes, same-store traffic, we did -- as you kind of might have imagined, we did see a deceleration in our same-store transactions from sequentially and period over period. We are up just -- you know, little over 1% on the same-store customer account basis in the quarter. The ticket was down, that was down slightly, maybe a high single digit, right around 10% decrease.

Okay. And the ramp up in fuel gallons, due to the fuel saver program, that's been going on for a number of years now. Does IV continue to add new promotions or things to make it exciting to keep people buying into the program and continuing to ramp that?

Absolutely. Yes, they are constantly looking at opportunities within their stores to drive that program. And I'll do it in a number of different ways. They will have their promotions, periodically -- maybe on meat, they will have periodic promotions on private label brands within their store, this last spring they had a promotion, a significant promotion on changing or enticing the card users to switch to a different type of card. So there are some opportunities and as they become more promotional in that particular program, obviously we benefit from that as fuel points that increase.

And then the store growth, where are the majority of these new sites and is the environment any different from your legacy base?

Yes, well we go forward, especially in the next fiscal year and beyond. The penetration in some of the newer markets will definitely increase, so we can leverage, that's like a distribution center. So if you look at the sites that we have under contract that we talked about and all in the press release, you throw Indiana into that mix and then go Indiana, Tennessee, Kentucky, Arkansas, Oklahoma, roughly half of the stores that -- that the we have under contract are going to be in some of these newer markets and newer areas. And so we certainly want to leverage that distribution facility down [indiscernible]. Now having said that to the second part of your question, one of the challenges that we face when we go into newer markets and this is nothing different or new to us because we've been expanding our market for many years. Is the ramp up for prepared foods and having brand recognition and that; what we find typically in the gallons and the portion of the merchandize ramp up consistent with existing state. It's just that we're not quite as known as well or prepared food in those newer states. And so that kind of lends us back to an earlier comment we made on some increased promotional activity with advertising and a digital format that try to entice people to -- in that regard. So when you look at the OpEx, you know, part of the OpEx, even though it's in line with our commentary beginning in the fiscal year, part of that was increase in advertising with some of these newer markets trying to get to an increase or accelerated brand recognition, primarily prepared foods.

And you brought up that the new DC; how many stores are being shipped out of the new DC at this point?

Little over 600 stores right now are operating on as distribution center and growing.

And what do you -- what percent of capacity would you estimate that at?

It really -- it's going to depend on the number -- the volume of stores that we add to that, especially the prepared food volume but roughly or probably around that 50% capacity.

Okay, great. Thank you for taking the question. And good luck in the new quarter.

Thanks, Ron.

Our next question comes from Bob Summers with Mcquarie. Your line is now open.

Thank you. Good morning guys. So I want to try and triangulate a couple of comments that were made today and trying to figure out -- you know, what the conversion from the pump to the store is. So if traffic in the store is 1% and you traffic at the pump, let's call it somewhere between 2.5 to 3.5, trying to adjust for gallons per transaction, it seems that maybe there has been a slippage in the conversion rate but yet you're taking share at the pump and to me this could be powerful once the farm income hangover abates which is particularly interesting given that you DR raised their farm income expectation by about $8 billion two weeks ago. So I guess the question is, is there -- has there been a drop in the conversion rate from transaction at the pump to the store over the last one to three quarters?

Well, I might just want to clarify, that -- that little over 1% same-store customer track, we mentioned earlier, that's in totality. Those are measured by transactions. So that would include a pay-to-pump transaction. And so it's really challenging for us and quite honestly, we don't have -- I'm not sure anybody has the information to measure the conversion rate of people at the pump coming into the store to buy something. And the reason for that is, it's very, very common for somebody to come to one of our locations clear credit card transaction at the pump, that would be counted as one transaction. Come into the store and pay cash for other items like a coffee and a doughnut, that would be a second transaction. We have no way of connecting those two together. So I just wanted to make sure that was clear there. But definitely, I think we have opportunities to convert more albeit we may not be able to quantify but I think we have opportunities to convert more of our gas customers into the stores. So we're certainly looking at that. I appreciate your comments on the farm income.

Okay, great. Thank you.

Our next question comes from Anthony Lebiedzinski with Sidoti. Your line is now open.

Good morning and thank you for taking the questions. So first, you spoke very highly about the IV fuel saver program but they are only in a portion of your store base now. Are you perhaps looking to partner up with others and to have similar fuel saver programs in the state that IV is not in?

Yes, absolutely. And it's a good question Anthony. Because right now it's like we mentioned, roughly about 1,100 of the stores, it might be slightly more than that. Our part of the agreement with IV but in reality, 80% of the benefit we're getting from the fuel saver program and in the states that we mentioned earlier. And so as we are going to new markets, we are still looking for additional partners with respect to that fuel saver program, we have a few of those down in the Oklahoma area. Also we are looking at opportunities that we may be able to do ourselves and creating fuel saver type opportunity. And so especially if you're going to these newer markets where we don't have that high IV arrangement.

Got it, okay. And as far as the delivery of pizza, are you still looking to -- is it still the same type of menu or would you down the road consider delivering additional items?

Yes, currently it's the same type of product offering, it would be the pizza and what will -- but I would call some complementary items, the piece like breadstick or things like that. We have had some conversation internally about expanding that from a test perspective into other areas of prepared food, possibly and some grocery, that's still kind of being kind of kicked around. So that does come, we start asking that -- certainly we'll make that word everybody.

Got it, got it, okay. And you know, as far as the increased dialogue with acquisition targets, is that mostly because the fuel margins are down versus last year or what would you attribute that the increased dialogue?

Yes, it's really hard to gauge what that -- that's a result of but you know that could be one of the reasons. In many cases you have a second generation, third generation owner that's taken over the business recently and maybe doesn't have the same type of passion as the founder it's another reason. Well, there's some event in their life that would make them love -- look at other business, so it is hard really gained exactly what -- what it is. But I think all of those would be certain reasons for that.

Got it, okay. And then I -- I guess kind of the follow up on that with -- with the potentially lower tax rates coming next year, 2018 I mean would you say that, if that does come through that you could see an acceleration of that as people that are looking to sell their business, would try to sell it in -- sell their businesses that pay less taxes on their capital gains.

Certainly a possibility. I think there is certainly some wait and see here are around that particular concept.

Okay, thank you.

Thanks.

Our next question comes from Daniel O’Hare with Bank of America. Your line is now open. Daniel O’Hare: Hey, good morning, thanks for taking my question. Just to follow along with the tax cut commentary, particularly as it relates to the consumer. Is there any historical context you could provide that you know, maybe the last time that there was a big tax cut and how the consumer reacted, and if you guys are beneficiaries of that, and maybe if you thought about the potential you know, for that to happen, thanks.

That's a great question. I don't have any information surrounded at it time though, but certainly I will go back and take a look at that is the last major tax cut and see how kind of our business followed a subsequent to that. I think there's some merit in doing that. Daniel O’Hare: Got it, and then have you seen any changes in consumer sentiment postelection, you know some retailers are said that they saw slowdown in sales, possibly due to some of the election noise but then trends have improved postelection. I'm just wondering if you've seen any of that in -- in your customer, thanks.

Yes, it is a good question. And we -- as we were in the first quarter as well into the second quarter, we have -- we have put a lot of rhetoric around habitation or anxiety around the election. As a theme as far as their business, I can't necessary say how it affected us or affected us at all, but certainly it out there and have some anxiety into the election. And a lot of companies that you -- as you pointed out are reporting maybe a little bit of the I would say aside relate, but certainly not taken in their business. I guess in this point we wouldn't be able to extrapolating like that into our business but certainly I think that is logical thought process. Daniel O’Hare: Got it, thanks so much.

We have a follow-up question from a line of Chuck Cerankosky with Northcoast Research. Your line is now open.

Hey, Bill. A quick question about tobacco products, can you talk about the ad category of where it is going, relative margins and just how it performed in the most recent quarter. And outlook for the rest of the year.

Yes, cigarette we came into the fiscal year, yes we did make a comment that we anticipated cigarette to begin to moderate back towards the mid-single digit, we were in the high single digit for many years following the MLP rollout, or the Nokia patient or that marble leadership program. So having said that, we have seen a gradual shift here over the quarter, and the second quarter no exception. Customers moving away from carton purchasing and becoming more packed buyers, that obviously lower ring, it doesn't affect your same store sales, and in the grocery merchandise category, especially when it -- when it represent about 40% of the category. We also you know in Q1 we mentioned we also that he now over the last several quarters pull back in and full value merchandry, we quite see that here in the second quarter, but that may continue. So we did it deceleration and cigarette volume or sales in Q2 relatively Q1 that the reason for the deceleration in comps from that period time. I think -- I think it has to do more with kind of that consumer spending and tiding mindset -- that mindset that we talked about earlier. Going forward it is a decline category has been for quite some time, margins have been relatively stable here recently. We do have a price increase coming there, that will be relatively margin neutral, may be a slight uptick. Now if consumers continue to move toward pack purchasing and mortgaging airtight plan, that will -- that will benefit year margin in cigarette category. We'll keep you posted if we see those trends developed.

Thank you.

I am showing no further questions in queue at this time. I'd like to turn call back to Mr. Bill Walljasper for closing remarks.

I would like to thank everybody to join us, and have a great week and merry Christmas to all. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference, this concludes the program you may now disconnect. Have a great day.