Bill Walljasper – Chief Financial Officer Robert Myers – President, Chief Executive Officer

Alex Bissen – FTN Midwest Ben Brownlow – Morgan, Keegan & Co, Inc. Anthony Lebiedzinski – Sidoti & Company, LLC Karen Short – Friedman, Billings, Ramsey & Co. [Stefan O’Brien – Logan Management] Adam Sindler – Deutsche Bank Karen Holland – Lehman Brothers

Good day ladies and gentlemen and welcome to the fourth quarter 2008 Casey’s General Stores earnings conference call. At this time all participants are in a listen-only mode. We will be facilitating a question-and-answer session at the end of today’s conference. (Operator Instructions) I will now turn the call over to Bill Walljasper, Chief Financial Officer. Please proceed.

Good morning and thank you for joining us to discuss Casey’s results for the fiscal year ended April 30. I’m Bill Walljasper, Chief Financial Officer. Bob Myers, President and Chief Executive Officer is also here. I hope all of you have already seen the press release. If you haven’t, please let me know and I’ll make sure a copy is forwarded to you. Before I begin, I’ll remind that you certain statements may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act from 1995. As discussed in the press release and the 2007 Annual Report, such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from future results expressed or implied by those statements. 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. I’ll take a few minutes to summarize the quarter and then open for questions. As most of you have seen our earnings per share from continuing operations in the fourth quarter were $0.28 compared to $0.36 a year ago. As some of you may recall the Company benefited in the fourth quarter last year when the Iowa cigarette tax went into effect. This one-time benefit amounted to $4.8 million or about $0.06 on earnings. Earnings from continuing operations for fiscal 2008 were $1.68 per share compared to $1.26 a year ago. The primary reason for the earnings increase was due to a higher than normal gasoline margin and solid improvement inside the store. We experienced a higher than normal gasoline margin in the fourth quarter due to a more responsive retail price environment related to rising wholesale costs to achieve a gas margin of $0.126 per gallon. This enabled us to obtain an annual margin of $0.139 per gallon which is well above our annual goal of $0.107 and significantly above last year’s margin of $.104 per gallon. Over the course of the year and in the fourth quarter we saw gasoline demand drop due to higher retail prices throughout our market area. The average retail price of gasoline for the quarter was $3.12 compared to $2.44 last year. For the fiscal year the average retail price was $2.93 per gallon compared to $2.41. Total gallons sold in the fourth quarter were down 1.8% to 290.8 million while annual gallons sold were up slightly to 1.2 billion. Same store gallons for the quarter were down 2.5% and for the year down 2%. Due to the higher gasoline margin, gross profit rose 36% in the year to nearly $168.9 million. The gasoline category is off to a good start for fiscal 2009 with same store gallons sold up 1.2% in May with an average margin above our 2009 annual goal. The average retail price this May was $3.65 per gallon compared to $3.10 in May a year ago. Despite unfavorable weather and a more challenging economic environment, sales continue to be solid inside our stores. In the grocery and other merchandise category total sales were up 4% to $218 million in the fourth quarter. Same store sales rose 3.6% with an average margin of nearly 33.2. Excluding the one-time benefit that occurred in the fourth quarter last year the margin was up nearly 50 basis points. The growth in this category in fiscal 2008 was related to continued efficiency and category management, increased sales and higher margin items primarily in the beverage area and stronger cigarette margins in part from more favorable pack contributions. For the year total sales were up 10.5% to $942.7 million and gross profit grew nearly 12% to $311.9 million. On an adjusted basis the average margin in fiscal 2008 was up about 90 basis points to 33.1%. Same store sales continue to be strong in May up 3.4%. The prepared food and fountain category continues to perform exceptionally well. Total sales in the fourth quarter were up 12.1% to $73.6 million while same store sales for the quarter were up 11.2% with an average margin of 60.9, down about 70 basis points from the fourth quarter a year ago. This is primarily due to the higher cost of cheese. Total sales for the year were up nearly 12.8% to $301.6 million with an average margin above goal at 62.3%. The lift in the sales in this category is mainly due to the continued popularity of our prepared food offerings and strategic price increases. The prepared food category is off to an excellent start in fiscal 2008 with same store sales in May up 15%. May same store sales continue to benefit from price increases taken in fiscal 2008 as well as the recent price increase we took effective May 1 in response to rising commodity costs. We are optimistic this category will have another solid year in fiscal 2009. With operating expenses our goal is to hold the percentage increase to no less than the percentage increase in gross profit. Gross profit for the year was up 17.6% while operating expenses were up 15.6%. Of this increase approximately 4% was related to a rise in credit card fees as customers utilize credit cards to purchase more expensive gasoline. Approximately 3% was due to increased bonuses related to the company’s performance and another 2% was related to the combination of increased insurance claims and higher fuel expense to operate our vehicles. Operating expenses for the fourth quarter were up 9.9%. On the income statement total revenue for the year was up almost 20% to $4.8 billion driven by higher retail gasoline prices and strong sales in the categories I mentioned previously. You may have noticed a change in the income statement with respect to franchise revenue. Due to the fact that franchise revenue is a nominal amount on the income statement in relationship to $4.8 billion in sales, it was combined into the total revenue line. The number of basic shares outstanding in the quarter was 50,681,011 and a diluted share count was 50,858,757. Our balance sheet continues to be strong. At April 30 cash and cash equivalents were at $154.5 million. Long-term debt net of current maturity decreased to $181.4 million and will continue to decrease as we pay down debt. At the end of the year our average long-term debt to average total capital ratio was about 27%. Shareholder’s equity rose to about $647.5 million. On the cash flow statement we generated $175.6 million in cash flow from operations, up from $111.3 million. At the end of the year capital expenditures were approximately 89.3 compared to $154.4 million a year ago. We expect capital expenditures to increase in fiscal 2009 as we increase our store growth. This quarter we did not open any new store constructions and completed six acquisitions. The acquisition environment has been slowed by higher than normal gas margins in the Midwest and we believe this robust environment has led to a disconnect between buyer and seller expectations. Our store count at the end of this quarter was 1,454 corporate locations and 14 franchise locations. That completes my review of the quarter. We’ll now take your questions. :

(Operator Instructions) Your first question comes from the line of Alex (Bissen) – FTN Midwest. Alex (Bissen) – FTN Midwest: I have a couple of questions here on your in store specifically the grocery category. Once, you’re looking for a little bit higher sales growth with the 7% comp so I’m curious what gives you confidence you’ll see an acceleration there? Secondly, on the margin you had a pretty strong margin in the quarter. A little more color on what brought you to the stronger margin and what gives you confidence you’ll see that stronger margin going forward?

I’ll try to repeat those questions together here and if I fail to remember one of the questions please remind me. First of all I believe your first question had to do with the goal for next year of 7% on a same store basis. That is actually a very aggressive goal. Actually that is substantially down from where we finished this fiscal year. But we believe we can continue the strong performance in the grocery and general merchandise category a number of ways. First of all we continue to see the popularity in some of the higher margin items that I discussed in my opening comments and we do not see that slowing. Those comments would be reflected towards energy drinks, sports drinks, bottled water and some of the flavored juices. They continue in popularity and they do have a higher margin than normal which is why we have a slightly higher goal in the grocery and general merchandise category for our margin. But also there are some other categories that are performing exceptionally well for us. Chewing tobacco, for instance, has gained tremendous popularity over the years and continues to gain traction. As that continues to unfold we believe that is going to add incrementally to the same store sales for next year. That combined with continued efficiency from the point of sale we think we are going to be able to achieve those goals. We’re off to a little bit slower of a start with May same store sales up only 3.4% but we have had some challenging weather and I would say some challenging economic environment here in the Midwest. I don’t know if you are aware but currently right now over half of the counties in the state of Iowa are declared emergency counties right now due to the flooding we are experiencing and it is not just in the state of Iowa it is in other states in which we operate such as the state of Missouri, Illinois and Indiana. So that combined with a cooler than normal spring which I believe held back some of the same store sales we believe we’re going to have a better comparison in that regard and we’re optimistic. I think the second part of your question had to do with the strong movement in the margin in grocery and general merchandise this fiscal year. It kind of ties back to my comments there, Alex, in that we did see substantial sales increase with respect to some higher margin items. Some of those which I mentioned previously. We did have a nice Q1 and Q2 from a weather perspective so we sold quite a bit of store strength, bottled water, ice and the popular energy drinks continued throughout the year. All of those carry higher margins significantly above the category as a whole and that is helping to lift the category. I also mentioned the pack, the carton distribution with respect to cigarettes. Right now we’re about 67% a pack compared to about 62% a year ago and that is really going to help drive the margin as well. Packs carry a significantly higher margin than cartons.

The next question comes from the line of Ben Brownlow – Morgan, Keegan & Co, Inc. Ben Brownlow – Morgan, Keegan & Co, Inc.: A question on the store openings. What gives you confidence in the openings there and can you talk about the split between what you expect from acquisitions and the ground up buildings?

You can see that and you probably picked up on the fact we changed the goal with respect to store growth. Instead of actually dissecting between new store construction and acquisitions we articulated a percentage growth. The reason we did that was we wanted to be opportunistic with respect to the opportunities that present themselves with respect to new store construction and acquisitions. I can tell you going forward probably expect somewhere in the neighborhood of 20-25 new store constructions in fiscal 2009 and the fill in above and beyond that is going to be the acquisitions. We are real excited about the new store design that we talked about briefly in the last conference call. We are beginning to roll that new store design out but also some of the new concepts with that new store design we’re pulling into some remodels and the replacement aspect of our business as well. You’re feeling a disconnect because as I mentioned in the 8K our margin is above the goal in May and continues that way in June thus far. We still believe there is a disconnect in the expectations of the sellers with respect to what we are trying to pay for those. I don’t want to be on a conference call a year from now trying to explain a purchase as to why we paid a premium and it didn’t work out. So we think that robust environment for margin will start to taper off perhaps and I think that activity will start to pick up. That’s kind of a break down. Ben Brownlow – Morgan, Keegan & Co, Inc.: On the new store builds I assume that is going to be back-half weighted. Are there any metrics you can give on those new stores in terms of productivity?

With the new store design it will be a little more challenging. The information I would be able to give you would be only on historical store design. We believe the new store design will ramp up a little quicker than our previous store. Some of our older stores to give you an idea would take about 3-4 years to fully get the maturation. At that point you’ll probably see a double-digit after tax cash flow. We believe the new store design will accelerate a little bit quicker than that. To answer your question or comment about of those 20-25 new stores where they will fall in with respect to the fiscal year more of them will be generally to the back half than the front half but certainly we have a number of those under construction currently and we’ll open those up in the first quarter but a little bit more weighted to the back half than the first half. Ben Brownlow – Morgan, Keegan & Co, Inc.: What on the prepared food and fountain what are you seeing in cheese prices in there?

Right now we’re not seeing any movement in cheese in our favor. It is still on a spot basis in that $1.90 to $2.00 per pound range. We’re anticipating that will continue throughout the year. But perhaps it might…it is a fluctuating commodity obviously. It may go up. It may go down. That is kind of a ballpark for you. Ben Brownlow – Morgan, Keegan & Co, Inc.: Last question. On the tax inventory management, could you just give an update there and how that is helping?

Obviously that is something we have been rolling out for a little while here and it continues to help us on inventory management with respect to assisting the store managers in how they order. For us what it does is it enables us to add another tool to the store managers to be able to manage their location to fit the customer demand. At the end of the day we are having less outs and being more efficient with respect to inventory management. That is where it is helping us out. It is more on the same store sales. We still think we will gain some traction on that.

The next question comes from the line of Anthony Lebiedzinski – Sidoti & Company. Anthony Lebiedzinski – Sidoti & Company: I had a couple of questions here. I don’t know if you guys can quantify, but some of the retailers out there have been talking about how the rebate checks have helped their recent sales. Do you guys have an estimate as to how much of a benefit you saw in May because of the rebate checks?

You know that is a tough one to quantify Anthony. Intuitively I think you could say any time our customer or anybody’s customer within their income has more income in their pocket and that is a good thing. However, I would hesitate to say that has had any significant impact at this point because there have been some pressures prior to that where that rebate check may have gone simply to pay off some prior debt that the consumer may have had. It would be very difficult for me to say it had an impact or didn’t have one. Anthony Lebiedzinski – Sidoti & Company: As far as the same store sales goals that you put out there for fiscal 2009 how much inflation impact have you assumed into those numbers?

There is going to be probably in the neighborhood at least 2-3% inflationary component. We believe with the rising commodity costs I touched on briefly in the narrative there that we are going to have an opportunity and probably have to raise some prices within our store not only in the prepared food category as I mentioned but also in the general merchandise. I can tell you in the prepared food category that 15% same store number in May of that probably 8-10% was due to price increases. We will cycle the series of price increases starting in July. We’ll cycle on in July. We’ll cycle on in September. Again we’ll cycle one in December. Then back again in May we’ll cycle the one we recently took. Anthony Lebiedzinski – Sidoti & Company: You are also assuming about 2-3 percentage points of inflation for grocery?

Yes. Anthony Lebiedzinski – Sidoti & Company: As far as the growth and plan to expand the store base by 4% how much capEx do you think it is going to require?

The K will come out later this month and there will be an articulation of capEx but to kind of give you a ballpark figure to get you through until that time if we do a 4% unit growth that is roughly just a little bit under 60 locations. If you take a look at the division of the stores I mentioned, the 20-25 new store constructions and the remainder being acquisitions, the new store design is going to be a little more expensive than existing stores probably in the neighborhood of $1.4 to $1.5 million so if you take that and multiply it by 25 stores you’ll kind of get a rough estimate on new stores. On the acquisition side we’re still averaging about $1.2 million or $1.25 million as an all-in cost for an acquisition. That includes the capEx to re-brand it. That should give you that piece of the pie. Transportation and information systems have been churning somewhere on $5-6 million on an annual basis. Then you have replacements. More than likely we’ll probably replace somewhere in the 20-25 stores. Those roughly average about $1 million to replace depending on if it is the same site or if it is a new site replacement. Then the remaining part of that would be generated towards store maintenance and remodeling and that has been tracking somewhere in that $30-40 million range. We’ll have more detail when the 10K comes out. I hope that helps. It will be above the $89 million capEx for fiscal 2008. Anthony Lebiedzinski – Sidoti & Company: In fiscal 2008 can you give us a sense of how much your credit card fees increased and what was the utilization rate for customers?

First I’ll take the utilization, Anthony. Utilization, of that $4.8 billion in sales I mentioned about 49% of that was purchased with credit cards. Anthony Lebiedzinski – Sidoti & Company: How does that compare to the prior year?

42%. From a growth standpoint credit card fees in the year were up about 30%. Credit card fees in the fourth quarter were up slightly over 26%. I think that is more of a function you are comparing against the retail comparison is a little bit better. On a base dollar amount credit card fee dollars for the year roughly about $46 million. Anthony Lebiedzinski – Sidoti & Company: On prior years you didn’t give a target for your operating expense. Perhaps you can just shed some light on how you view the growth of operating expenses? Last year they are up about 16%. I know you quantified some of that to being because of the credit card fees and bonus accruals and so forth. How should we think about that increase in operating expenses for fiscal 2009?

Great question. First of all before I tackle that part I want to make sure everyone understands not having a goal on operating expenses certainly does not mean we are not going to focus on operating expenses. We will continue to have prepared and dedicated operating expenses in every press release but we’ll inform the investment community of what components are moving in that category. The reason that we did not have a goal, or the same goal I should say, in operating expenses this year that we had last year is if you look at our $0.139 gasoline margin it is certainly generating in part a record gross profit contribution. Knowing that is very challenging to sustain a $0.139 gas margin this next year, having a similar goal not only would be very challenging but it would not be very meaningful to the investment community because of that. We didn’t find there was a commonality of our operating expense goals in our industry. To look on it on a basis of a percentage of revenue would be misleading because of the retail price of gas. If you look at it on a same store basis again that is misleading to the company as a whole because there are other expenses that go into that which are not accounted for. So, having said that I’ll shift over to the second part of that question in how should we look at it going forward in fiscal 2009 and I’ll break some of the component down for you and it should give you an idea. I’ll stop short of giving you any guidance necessarily. First of all I do not believe it is going to be anywhere near the 15.6% increase we experienced in fiscal 2008 and when you start breaking down some of the components you first start with wages that is the lion share of operating expenses representing about 50-60% of the overall operating expense line. We had some things in fiscal 2008 that I wouldn’t say they were mutual but on a comparative basis might be a little bit unusual. You mentioned bonus accruals Anthony. Certainly because of the record year we paid out more bonuses to core operations personnel which they are certainly deserving of that. Also bonus accruals to executive management and middle management here at the home office increased. We are comparing against fiscal 2007 to a number a year ago with respect to bonus accrual so the comparative seems to be quite high. Next year, as you know earnings consensus is down across the board so having said that intuitively you can expect core operations bonuses to be less in 2009 than they were in fiscal 2008. Also from a bonus accrual standpoint we will be comparing against a bonus that was paid in fiscal 2008 whereas 2008 and 2007 you were comparing against the zero in 2007. Also we did have some impact of some initiatives we took in fiscal 2008 that we probably won’t have at the same level in 2009. For instance, we implemented a second assistant manager in late fiscal 2007 but more of it came in fiscal 2008 in an effort to better serve and cut down on store manager turnover. Our store manager turnover has dropped about 20% in the fiscal year in part because of that. The other thing we did in some stores because we wanted to make sure we were meeting the demand of our customers so we actually extended the kitchen hours in roughly half of our locations over the course of the fiscal year. I think you can see the results of that coming through in prepared food categories. Having said that, those things won’t be as impactful in 2009 that were in 2008. Going to the credit card fees, I don’t know where the retail price of gasoline will go, Anthony, but if it goes higher than the $3.65 in May you should expect probably somewhere in the neighborhood of 25-30% in credit card fees next year. I gave you the base dollar number. However, we are off a little bit in the quarter and we’ll continue to report on that. From the insurance standpoint we had some unusual insurance activity in fiscal 2008 that we will be comparing to again. First of all if you recall in the first quarter operating expenses were up significantly last year and that in large part had to due with an excessive amount of high dollar claims that ran through our health insurer. Normally we see about half a dozen or so large dollar claims in a year. We saw about 16 of those that ran through the first quarter alone. I can’t tell you that’s not going to happen in fiscal 2009 but certainly we might have a much favorable comparison. Also as I mentioned in the last conference call that unusual tanker accident where it costs us about a penny on earnings. Not that we don’t have tanker accidents and not that we won’t have those necessarily in fiscal 2009 but the severity of that one would be unusual. So from a standpoint of comparatives basis we are sitting pretty good. Also we had initiatives in place and a strong emphasis on controlling budgeted hours going forward in fiscal 2009. I’m optimistic in the operating expense line. I know that was a long answer but I felt it was necessary to try to give you some color. Anthony Lebiedzinski – Sidoti & Company: My last question is I’m just curious how much were your diesel costs up for your transportation that I think flows through the opEx line?

For the year or for the quarter? Anthony Lebiedzinski – Sidoti & Company: Both if you have those.

For the quarter they were up about $1 million. For the year they were up about $2.5 million. You probably have an idea of where the diesel cost is. We’re going to start comparing against some of that high diesel but you might want to try to contemplate roughly $750,000 to $1 million increase every quarter. That is not unrealistic. That could change obviously if the cost structure changes over the course of the fiscal year.

The next question comes from the line of Karen Short – Friedman, Billings, Ramsey & Co. Karen Short – Friedman, Billings, Ramsey & Co.: Just a couple of housekeeping questions. On your tax rate could you give us some sense of where you think it will be in 2009 and I guess what contributed to the lower rate this quarter?

Sure. Going forward I would anticipate somewhere between 36.5% and 37% is a good number to use. Karen Short – Friedman, Billings, Ramsey & Co.: What was going on this quarter?

In the fourth quarter there were a couple of small items that probably brought it down a little bit. First of all in the fourth quarter we always have the tax return true up from the estimate to the actual. That had to do with a positive adjustment for us. Also, if you may recall last year we actually there was a staff accounting bill and staff accounting bill 108 that came out that enabled companies basically to clean up some hanging items that went through retained earnings. A portion of that was misallocated retained earnings last year and actually had been run through the tax provision this year. Those were really the two main things that came through in the fourth quarter. Karen Short – Friedman, Billings, Ramsey & Co.: On operating expenses in the fourth quarter I know you have given some guidance going forward. Thanks for that. I am wondering what drove the fourth quarter lower rate of increase because you obviously had a decent fourth quarter so I would assume bonuses would still have been high. It still seemed quite a bit lower.

Well actually because of the first three quarters of our business we were almost fully accrued for our bonuses through the 9 months so we didn’t have hardly any bonus accrual coming into the fourth quarter that would have been done in the prior quarter so that created a little bit of noise there on the wage side. Also we did have in the fourth quarter last year we changed our vacation policy last year. During the fourth quarter vacation payable running through the wage line was a little bit higher. If you remember the fourth quarter last year was up I believe a little over 17% on opEx. Kind of give you a little bit more flavor the fourth quarter opEx was up about $10.5 million. Credit card fees, as I mentioned on the last question, was up about 26-27% which is roughly about $2.5 million. Wages were up about 7.2% certainly off from what they have been trending and I think that will continue to be solid for us. Insurance was actually down slightly. As I had been talking about some unusual insurance activity. We just didn’t have that in the fourth quarter. With respect to utilities I know that was an issue in the third quarter. Utilities were flat. For the year they were up almost 10% but that was due to inclement weather that we had in the winter months. Fuel expenses I would imagine is up about $1 million. Karen Short – Friedman, Billings, Ramsey & Co.: Can you elaborate on what price increases you passed on May 1?

Most of them are in the pizza, the whole pies. That increase represented roughly about 4%. As I mentioned that 15% same store number in May when you coupled that new increase with prior increases we haven’t cycled it is about 8-10% and obviously once we cycle that one in July and then September the price increase effect will be less and less. Karen Short – Friedman, Billings, Ramsey & Co.: So what is a whole pie going for now?

$12.99 for a large single topping. Karen Short – Friedman, Billings, Ramsey & Co.: And are you seeing any impact…you obviously are not seeing any impact on traffic and the comps?

No. Our same store customer count continues to be positive. It is an area though Karen that we are going to watch closely because we did take a series of price increases last year in the prepared food category and specifically with the whole pie and here we are again roughly a year later taking another increase as these commodity cost pressures continue to be a challenge. One thing that we are concerned about and are watching is making sure we don’t offend our customers and our unit count continues to be positive. That is part of the reason we looked at our goal in the prepared food category and the same store sales at 6.8. Part of the reason we had such strong same store sales number in fiscal 2008 was due to price increases. We’re just not sure we can continue to do that without offending our customers but we’ll be cautious in that area. Karen Short – Friedman, Billings, Ramsey & Co.: On gas margins in general I think you have said in the past that basically the higher gas margins are a function of your competition being less aggressive on price to improve their margins or make up higher credit card fees. But obviously for the lateral months it has hurt your comps. I guess what do you think the psychology is now and why wouldn’t you think your gas margins would be higher going forward than the 10.8?

I’ll answer the question and then follow-up on your latter question on the 10.8 and the sustainability of that or higher level sustainability as you indicated. As I talked in my opening comments about a more responsive retail environment it is really two sided. Obviously as you are aware Karen the wholesale cost has risen over the fourth quarter. Typically in an environment like that there is a stickiness at the retail to move with it and our margins do come under pressure. But what we are seeing is a very fast response rate to the rising wholesale cost environment. Part of the reason is some of those swings can be very quick and very large I should say. But on the other side of the fence we have seen drops in the wholesale throughout the quarter albeit for a short period of time. But during that time we’re seeing a little more stickiness at the retail level to come down with that. In other words if you see a $0.10 or $0.15 drop in the wholesale you are not seeing the retail come down but maybe a couple of pennies because they know in today’s environment that wholesale is just going to go right back in the other direction. So that is the type of environment that we are seeing right now. Now, shifting over to your second question of can we sustain a higher level than 10.8 in fiscal 2009? Certainly we are off to a pretty good start in May. In the first part of July, as I indicated, the answer to that would be very possibly we could have a higher gasoline margin than 10.8. We’re just not willing at this point to come out and say that because we’d hate for the investor invest in our company based on a comment that we really don’t have a lot of data to back that. So as we get further in the year if these margins continue sustained at a higher level you may hear us talk about a higher level potential for the remaining part of the fiscal year. Karen Short – Friedman, Billings, Ramsey & Co.: But you’re still seeing E10 being artbitressed away, right? The savings are being passed on entirely?

For the most part that has been but we are experiencing a benefit from the E10 product here in the state of Iowa. There is still about a $0.13 spread on retail between the E10 and the clear product. What that is doing especially at the retail levels we are seeing is driving people to purchase the lower cost price, i.e. E10. Therefore our tax credits in the state of Iowa are higher than what they normally have been. That is about half a cent right there just because of the ethanol tax rate in the state of Iowa. Karen Short – Friedman, Billings, Ramsey & Co.: Is it blended company wide half a cent or is that Iowa half a cent?

That is blended company wide. That is the impact it is having on the margin of the overall company.

The next question comes from the line of [Stefan O’Brien – Logan Management]. [Stefan O’Brien – Logan Management]: First what was your cheese cost in the fourth quarter?

In the fourth quarter they were roughly about $2.00 a pound. That is what it has been tracking at on average during the fourth quarter. [Stefan O’Brien – Logan Management]: On the gasoline margin, I’m wondering why it wouldn’t be higher going forward. As I understand it credit card fees are based on price so you and your competitors each have to pay more per gallon on credit card fees and it would seem to keep the profitability the same the gross margin has to improve somewhat. So if we are at $3.50 to $4.00 per gallon versus $2.00 per gallon a couple of years ago the credit card fee goes up on a per gallon basis so shouldn’t the gross margin?

Are you talking cents per gallon or the… [Stefan O’Brien – Logan Management]: Cents per gallon.

To answer your question I think there is certainly a distinct possibility that the gas margins will be able to sustain a higher level. We’re just not willing to come out and say that. There is really two components. You talk about credit card fees. That, as you know, runs through our operating expense and isn’t offset to our margin. But certainly there are two components. One is you are obviously applying the interchange fee to a higher retail but also the utilization of credit cards has climbed dramatically. As I mentioned previously 49% of all of our sales are credit card sales. Last year it was 42%. Five years ago it was 22%. That is a very impactful number. I think your thought process is excellent in the fact that given the fact of credit card fees rising, given the fact that commodity pressure are affecting not just prepared food areas but grocery and general merchandise areas of our competition, there is a distinct possibility they are going to offset that in the low hanging fruit and that is going to be on the gasoline side. [Stefan O’Brien – Logan Management]: I was just thinking I know your credit card fees are on the operating expense. If you kind of think about an operating income then per gallon and people are trying to stabilize that if the credit card fees are going up because of price only it would seem like your margin of cents per gallon would have to offset that.

If that was the case that would be down the line. But keep in mind utilization is also going up and that is a strong component of what is driving some of those increased fees. So it’s not just the high retail.

The next question comes from the line of Adam Sindler – Deutsche Bank. Adam Sindler – Deutsche Bank: I was wondering real quickly if we could talk about your comments on gas margins and the impact on acquisitions. When you look at past environments we have seen margins spike for one reason or another. Clearly that has been the case over time. Have you done a study or are you aware of how long it takes them to come back to earth on expectations once the margin starts to move closer back to norm so you can maybe look at it as a pipeline or what the acquisition environment would look like going forward?

I see where you are going with that question and the answer would be no we have not. There would be so many other potential components that would drive a seller to sell their business, not just increased cash flow or decreased cash flow from the gas margin movement. I mean there are other things that would come into play so it would be difficult to articulate that. To try and give you a little bit of color, we do think that there is some disconnect with seller expectations and what we are willing to pay and in large part that has to do with the increased cash flow of the potential targets specifically related to a higher gas margin environment. Now at some point that will stabilize either at levels we were talking about now or come down to a more normalized level and I think you are going to see a little bit more of a robust environment for acquisition activities. We have looked at a lot of stores and to my knowledge outside of one small chain in Michigan that we looked at we have not been outbid on any acquisition. Adam Sindler – Deutsche Bank: Another thing, sort of more big picture, is do you give any credence to the fact that maybe margins have been above-average for a little bit and it could be due in part to the fact that the actual explosion in foreign based products in the U.S. in general is benefiting people in your region. Obviously the gallons are down and there is a certain segment of the population that is going to go for the lowest price. But do you think that could help the sustainability of margins going forward?

I’m not sure it will have an impact on the sustainability of the margin. I think the sustainability of the margin is going to be focused more on the impact of the environment as a whole to our competition. There is a lot of things that go into that. One component would be a more challenging gasoline environment to manage would be one of those factors. Increasing credit card fees eating into their bottom line that is already very thin. Their inability or ability to pass on some of those pressures not only from the credit card fee pressure but also the commodity cost. Commodities are still hitting every aspect of our business. It is not just the cheese cost. Anything with wheat, anything petroleum based, corn, meat, all those products are up substantially. If you look at the components like candy has corn, anything with corn syrup, all of those products have those things in it and we are seeing those cost pressures and for us we have the ability to pass those on not only in the grocery and general merchandise category but also in the prepared food category. You are well aware of our gas pricing philosophy that we will price with the competition so we are reaping the benefit of some of that effort by our peers.

The next question comes from the line of Karen Holland – Lehman Brothers. Karen Holland – Lehman Brothers: I was wondering if you could actually give an update on the acquisition strategy or your new store opening strategy given that the higher margins you guys have experienced obviously last year and thus far this year. When do you kind of decide okay this is the gas margin we are going to be able to generate so we now have to up our prices or prices are going to stay…expectations for prices are going to stay inflated so we have to grow more organically? Can you talk a little bit about how those decisions are made?

Excellent question by the way Karen. Right now I can tell you that our acquisition strategy with respect to some of the financial component side of it has not changed. We are still looking to purchase and make those accretive acquisitions and so far all of our have been accretive. The reason we are cautious in that regard is we certainly do not want to evaluate a potential target based upon an unsustainable gas margin and then a year or two years from now that margin actually drops several cents and when we purchased it based on perhaps a margin significantly higher than that. Your point is an excellent point. At some point there has to be a decision made. Is a higher level margin more sustainable now than it has been in prior years? The answer might be yes and if that is the case then we will adjust our financial model accordingly. But we certainly don’t want to jump into it and have egg on our face a year from now in that regard. But as you may recall from the last conference call and some of our press releases we do have new leadership in the acquisition area. Sam Billmeyer, one of our Senior Vice Presidents has been a 16 year veteran is an excellent individual, very analytical. He is going to take that in the right direction and we are very optimistic going forward in the store development area. Karen Holland – Lehman Brothers: Do you think it is maintained for the rest of the year at these higher gas margins do you think you would switch more towards more aggressively opening locations or continue to kind of grow organically at that 2% range and then wait for the acquisition environment to get better?

Well I think in part some of that will be due…as we start to open our new store design we will be watching that very closely and certainly point of sale helps us to evaluate that on a much quicker basis than we have in the past. If we see that the new stores aren’t giving the returns we think they are going to get you may see some acceleration in the organic growth. But again it could be opportunistic because when we identify a community that certainly fits our profile a corner may be empty so there is an opportunity to build even though there are other convenience stores in that community. So we are going to try to take a look at a community as a whole and what will serve that community the best and drive the highest return to the shareholder by way of either acquisition or new store construction. Karen Holland – Lehman Brothers: When do you expect the first of the new store formats to open?

The first will open here in the first quarter. The first one will be in Illinois that will open. Karen Holland – Lehman Brothers: Switching over to the grocery category. We have been hearing anecdotally in the marketplace and various publications from the NACS about how promotional people have to be to get people into their grocery to buy the grocery channel. I was wondering if you all are being more promotional on that or if just giving your recognition with pizza and other prepared foods you are not needing to be any more promotional there?

I don’t think we are necessarily any more promotional in the grocery and general merchandise category but we do have one component that is a little bit different than some of our peers and that would be that we do have a very strong and very well known brand recognition in our pizza and prepared food area. That is a destination item that draws customers to our stores so then we take advantage of that fact along with our other destination items to do some cross-promotional activity at the point of sale to drive some of the grocery items that you are alluding to. So it has just been very successful. Point of sale has been certainly instrumental in helping us make some of those cross-promotional activities. Karen Holland – Lehman Brothers: Within the grocery and general merchandise are there any categories that you have seen that have been particularly impacted by a weakened consumer?

I wouldn’t necessarily say a weakened consumer. Probably more related to adverse weather comparisons. For instance sports drinks are driven by more hot temperatures and so far in the fourth quarter and in May sports drinks are off what we normally would see during that time period because of the cooler temperatures. Things like that we would see more on a seasonal basis. To kind of give you color as to what is moving in the grocery and general merchandise category energy drinks continue with strong performance. I think as we head into Q1 and Q2 sports drinks will start to ramp back up to more normalized levels. The same with bottled water and ice. Chewing tobacco continues its strong performance. The lottery just continues to baffle me with continued strong performance. The other area we are seeing a lot of traction in right now is what I’ll call craft beers. Some people call them microbrewery beers. Some people call them premium beers. Whatever you call them those have gained in popularity in the industry and we are starting to see some benefits and store shelf allocations given to those products. Karen Holland – Lehman Brothers: So it sounds like you haven’t seen any sort of slow down in what would be considered to be some of the more discretionary purchases?

No. I would say that I have not seen that yet. Any slow down we have experienced is more weather related than anything.

Bill there are no more questions at this time.

Thanks J.D. I’d like to thank everyone for joining us on the conference call this morning. Have a good day and a good weekend.

Thank you for your participation. That does conclude today’s conference call. You may now disconnect.