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 October 31, 2005

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 incorporation or organization)	(I.R.S. Employer 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 at least the past 90 days.    YES  x    NO  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)    YES  x    NO  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    YES  ¨    NO  x

As of December 2, 2005, the registrant had outstanding 50,326,412 shares of Common Stock, no par value.

CASEY’S GENERAL STORES, INC.

INDEX

	Page
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.	1
Consolidated condensed balance sheets - October 31, 2005 and April 30, 2005	1
Consolidated condensed statements of earnings - three and six months ended October 31, 2005 and 2004	3
Consolidated condensed statements of cash flows - six months ended October 31, 2005 and 2004	5
Notes to consolidated condensed financial statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	11
Item 3. Quantitative and Qualitative Disclosure about Market Risk.	21
Item 4. Controls and Procedures.	22
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.	22
Item 4. Submission of Matters to a Vote of Security Holders.	22
Item 6. Exhibits.	23
SIGNATURE	25

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.

CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

(Dollars in Thousands)

	October 31, 2005		April 30, 2005
ASSETS
Current assets:
Cash and cash equivalents	$	54,643	49,051
Receivables		8,896	7,481
Inventories		82,696	75,392
Prepaid expenses		6,144	4,579
Income tax receivable		—	5,927
Total current assets		152,379	142,430
Other assets		7,256	5,567
Property and equipment, net of accumulated depreciation October 31, 2005, $465,948      April 30, 2005, $447,197		748,110	722,912
	$	907,745	870,909

See notes to unaudited consolidated condensed financial statements.

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CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

(Continued)

(Dollars in Thousands)

	October 31, 2005		April 30, 2005
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	28,999	27,636
Accounts payable		95,162	100,640
Accrued expenses		51,083	41,851
Income taxes payable		4,117	—
Total current liabilities		179,361	170,127
Long-term debt, net of current maturities		110,923	123,064
Deferred income taxes		101,280	102,039
Deferred compensation		6,889	6,542
Total liabilities		398,453	401,772
Shareholders’ equity
Preferred stock, no par value		—	—
Common Stock, no par value		48,113	46,516
Retained earnings		461,179	422,621
Total shareholders’ equity		509,292	469,137
	$	907,745	870,909

See notes to unaudited consolidated condensed financial statements.

2

CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS

(Unaudited)

(Dollars in Thousands, except per share amounts)

	Three Months Ended October 31,			Six Months Ended October 31,
	2005		2004	2005	2004
Net sales	$	967,654	705,625	1,828,412	1,429,023
Franchise revenue		175	302	360	630
		967,829	705,927	1,828,772	1,429,653
Cost of goods sold		823,307	590,710	1,544,034	1,191,840
Operating expenses		93,240	82,413	182,980	164,648
Depreciation and amortization		14,629	12,605	28,380	24,996
Interest, net		1,999	2,572	4,241	5,371
		933,175	688,300	1,759,635	1,386,855
Earnings from continuing operations before income taxes and cumulative effect of accounting change		34,654	17,627	69,137	42,798
Federal and state income taxes		12,292	6,277	24,660	15,237
Earnings from continuing operations before cumulative effect of accounting change		22,362	11,350	44,477	27,561
Loss on discontinued operations, net of tax benefit of $95, $191, $144, and $341		169	344	256	616
Cumulative effect of accounting change, net of tax benefit of $639		—	—	1,136	—
Net earnings	$	22,193	11,006	43,085	26,945

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CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS

(Unaudited)

(Continued)

(Dollars in Thousands, except per share amounts)

	Three Months Ended October 31,				Six Months Ended October 31,
	2005		2004		2005		2004
Basic
Earnings from continuing operations before cumulative effect of accounting change	$	.44	.23		.89		.55
Loss on discontinued operations		—	(.01	)	(.01	)	(.01	)
Cumulative effect of accounting change		—	—		(.02	)	—
Net earnings	$	.44	.22		.86		.54
Diluted
Earnings from continuing operations before cumulative effect of accounting change	$	.44	.23		.88		.55
Loss on discontinued operations		—	(.01	)	(.01	)	(.01	)
Cumulative effect of accounting change		—	—		(.02	)	—
Net earnings	$	.44	.22		.85		.54
Basic weighted average shares outstanding		50,298,912	50,086,529		50,268,529		50,061,695
Plus effect of stock options		194,969	190,748		175,450		185,325
Diluted weighted average shares outstanding		50,493,881	50,277,277		50,443,979		50,247,020

See notes to unaudited consolidated condensed financial statements.

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CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in Thousand)

	Six Months Ended October 31,
	2005			2004
Cash flows from operations:
Net earnings	$	43,085		26,945
Adjustments to reconcile net earnings to net cash provided by operations:
Depreciation and amortization		28,480		25,566
Loss on sale of property and equipment		1,502		1,783
Deferred income taxes		(759	)	6,000
Changes in assets and liabilities:
Receivables		(1,415	)	(1,971	)
Inventories		(7,304	)	(470	)
Prepaid expenses		(1,565	)	(684	)
Accounts payable		(5,478	)	13,771
Accrued expenses		9,232		4,578
Income taxes		10,044		(1,917	)
Other, net		(1,342	)	170
Net cash provided by operations		74,480		73,771
Cash flows from investing:
Purchase of property and equipment		(59,412	)	(40,702	)
Proceeds from sale of property and equipment		7,032		700
Net cash used in investing activities		(52,380	)	(40,002	)

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CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in Thousands)

(Continued)

	Six Months Ended October 31,
	2005			2004
Cash flows from financing:
Payments on long-term debt		(13,578	)	(15,451	)
Proceeds from exercise of stock options		1,597		1,028
Payments of cash dividends		(4,527	)	(5,757	)
Net cash used in financing activities		(16,508	)	(20,180	)
Net increase in cash and cash equivalents		5,592		13,589
Cash and cash equivalents at beginning of the period		49,051		45,887
Cash and cash equivalents at end of the period	$	54,643		59,476

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

	Six Months Ended October 31,
	2005		2004
Cash paid during the year for:
Interest, net of amount capitalized	$	5,387	6,057
Income taxes		15,895	10,813
Noncash investing and financing activities:
Property and equipment acquired through installment purchases		2,800	3,696

See notes to unaudited consolidated condensed financial statements.

6

CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED CONDENSED

FINANCIAL STATEMENTS

(Dollars in Thousands)

1. The accompanying consolidated condensed financial statements include the accounts and transactions of the Company and its wholly-owned subsidiaries. All material inter-company balances and transactions have been eliminated in consolidation.

2. The accompanying consolidated condensed financial statements 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 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 contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of October 31, 2005, and the results of operations for the three and six months ended October 31, 2005 and 2004, and cash flows for the six months ended October 31, 2005 and 2004. Certain reclassifications were made to balances for the prior year to conform to current year presentation.

3. The Company recognizes retail sales of gasoline, grocery and general merchandise, and prepared food at the time of the sale to the customer. Wholesale sales to franchisees are recognized at the time of delivery to the franchise location. Franchise fees, license fees from franchisees, and rent for franchise signage and facades are recognized monthly when billed to the franchisees. Other maintenance services and transportation charges are recognized at the time the service is provided. Vendor rebates in the form of rack display allowances are treated as a reduction in cost of sales and are recognized incrementally over the period covered by the applicable rebate agreement. Vendor rebates in the form of billbacks are treated as a reduction in cost of sales and are recognized at the time the product is sold.

4. The Company applies APB Opinion No. 25 in accounting for its incentive stock option plan; accordingly, the financial statements recognize no compensation cost for stock options. The Company has elected the pro forma disclosure option of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for

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Stock-Based Compensation. Pro forma net earnings and pro forma net earnings per common share have been provided as if SFAS No. 123 were adopted for all stock-based compensation plans. Had the Company determined compensation cost of its stock options based on the fair value at the grant date under SFAS No. 123, the Company’s net earnings would have been reduced to the pro forma amounts shown in the following table:

	Three Months Ended October 31,			Six Months Ended October 31,
	2005		2004	2005	2004
Net earnings, as reported	$	22,193	11,006	43,085	26,945
Deducted amount
Total stock-based employee compensation expense determined by fair-value method for all awards, net of related tax effects		112	66	265	170
Pro forma net earnings	$	22,081	10,940	42,820	26,775
Basic earnings per share
As reported	$	.44	.22	.86	.54
Pro forma	$	.44	.22	.85	.53
Diluted earnings per share
As reported	$	.44	.22	.85	.54
Pro forma	$	.44	.22	.85	.53

The weighted average fair value of the stock options granted during the six months ended October 31, 2005 and 2004 was $6.06 and $4.36 per share, respectively, on the date of grant. Fair value was calculated using the Black Scholes option-pricing model with the following weighted average assumptions: October 31, 2005 - expected dividend yield of 0.87%, risk-free interest rate of 4%, estimated volatility of 24%, and an expected life of 6.2 years; and October 31, 2004 - expected dividend yield of 0.95%, risk-free interest rate of 3.8%, estimated volatility of 24%, and an expected life of 5.8 years. There were no stock options granted during the second quarter of 2006 and 2005. For purposes of pro forma disclosures, the estimated fair value of options granted is amortized to expense over the options’ vesting periods.

5. The results of operations of owned stores are presented as discontinued operations beginning in the quarter in which management commits to a plan to close the related store and actively markets the store. The results of operations of a leased store are presented as discontinued operations beginning in the quarter

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in which the related store ceases operations. The results of operations include related writedowns of stores to estimated net realizable value. The Company does not allocate interest expense to discontinued operations. Amounts related to discontinued operations of prior periods have been reclassified to conform to discontinued operations of the current period in the accompanying condensed consolidated statements of earnings.

The stores presented as discontinued operations had total revenues and pretax loss as follows for the periods presented (in thousands):

	Three Months Ended October 31					Six Months Ended October 31
	2005			2004		2005		2004
Total revenue	$	1,492		11,403		5,007		22,485
Pretax loss		(264	)	(535	)	(400	)	(957	)

Included in the loss on discontinued operations is a loss on disposal of $221 for the six month period ending October 31, 2005 and $182 for the three-month period ended October 31, 2005. Included in property and equipment in the accompanying condensed consolidated balance sheets are $2,737 and $6,486 in assets held for sale as of October 31, 2005 and April 30, 2005, respectively.

6. In March 2005, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations. This interpretation clarifies that the term conditional asset retirement obligation as used in FASB Statement No. 143, Accounting for Asset Retirement Obligations, refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or method of settlement, which may be conditioned on a future event. Accordingly, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. The fair value of a liability for the conditional asset retirement obligation should be recognized when incurred — generally upon acquisition, construction, or development — or through the normal operation of the asset. Uncertainty about the timing and/or method of settlement should be factored into the measurement of the liability when sufficient information exists. Statement No. 143 acknowledges that in some cases, sufficient information may not be available to make a reasonable estimate of fair value of an asset retirement obligation and clarifies when an entity would have sufficient information to do so.

9

The Company adopted FASB Interpretation No. 47 on May 1, 2005 and recorded an estimated liability of $3,117 for the future cost of removal of the underground storage tanks in accordance with the provisions of SFAS No. 143 and will recognize the cost over the tank’s estimated useful life. A corresponding increase to the carrying value of the related long-lived assets of $1,343 was recorded at that time. The Company will amortize the amount added to property and equipment and recognize accretion expense for the discounted liability over the estimated remaining life of the tanks. The cumulative effect of this accounting change resulted in a one-time pre-tax charge of $1,774 ($1,136 net of tax benefit). Prior to May 1, 2005, the Company had recognized a retirement obligation for underground storage tanks that the Company knew would be removed in the future such as when a store replacement or closing had been planned. All remaining underground storage tanks were considered to have indeterminable lives when the Company adopted SFAS No. 143.

7. The Company’s financial condition and results of operations are affected by a variety of factors and business influences, certain of which are described in the Cautionary Statement Relating to Forward-Looking Statements filed as Exhibit 99 to the Annual Report on Form 10-K for the fiscal year ended April 30, 2005. These interim consolidated condensed financial statements should be read in conjunction with that Cautionary Statement.

10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Dollars in Thousands).

Overview

Casey’s General Stores, Inc. (“Casey’s”) and its wholly-owned subsidiaries (Casey’s, together with its subsidiaries, are referred to herein as the “Company”), operate convenience stores under the name “Casey’s General Store” in nine Midwestern states, primarily Iowa, Missouri and Illinois. All stores offer gasoline for sale on a self-serve basis and carry a broad selection of food (including freshly prepared foods such as pizza, donuts and sandwiches), beverages, tobacco products, health and beauty aids, automotive products and other non-food items. On October 31, 2005, there were a total of 1,366 Casey’s General Stores in operation, of which 1,347 were owned by the Company and 19 stores were operated by 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 or fourth year of operation.

The Company derives its revenue primarily from the retail sale of gasoline and the products offered in Company stores. The Company also generates a small amount of its revenues from the Company’s franchisees and from the wholesale sale of certain grocery and general merchandise items and gasoline to franchised stores.

Approximately 63% of all Casey’s General Stores are located in areas with populations of fewer than 5,000 persons, while approximately 11% of all stores are located in communities with populations exceeding 20,000 persons. The Company operates a central warehouse, the Casey’s Distribution Center, adjacent to its Corporate Headquarters facility in Ankeny, Iowa, through which it supplies grocery and general merchandise items to Company and franchised stores.

At October 31, 2005, the Company owned the land at 1,298 locations and the buildings at 1,311 locations, and leased the land at 49 locations and the buildings at 36 locations. Due to the insignificant number of leases, management feels that any interpretation of the lease accounting rules will not have a material impact on its financial statements.

Long-lived assets are reviewed quarterly for impairment or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company recorded no impairment charges during the six months ended October 31, 2005. The Company values the locations addressed above based on their expected resale value. The impairment charges are reported as a component of operating expenses when they occur.

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Three Months Ended October 31, 2005 Compared to Three Months Ended October 31, 2004 (Dollars and Amounts in Thousands)

Three months ended 10/31/05	Gasoline		Grocery & other merchandise		Prepared food & fountain		Other		Total
Sales	705,102		200,691		58,048		3,813		967,654
Gross profit	38,615		66,724		37,484		1,524		144,347
Margin	5.5	%	33.2	%	64.6	%	40.0	%	14.9	%
Gasoline Gallons	277,466
Three months ended 10/31/04	Gasoline		Grocery & other merchandise		Prepared food & fountain		Other		Total
Sales	462,352		184,735		53,119		5,419		705,625
Gross profit	24,832		57,238		32,138		707		114,915
Margin	5.4	%	31.0	%	60.5	%	13.0	%	16.3	%
Gasoline Gallons	243,874

Net sales for the second quarter of fiscal 2006 increased by $262,029 (37.1%) over the comparable period in fiscal 2005. Retail gasoline sales increased by $242,750 (52.5%) as the number of gallons sold increased by 33,592 (13.8%) while the average retail price per gallon increased 34%. During this same period, retail sales of grocery and general merchandise increased by $15,956 (8.6%) and prepared food and fountain sales increased by $4,929 (9.3%), due to the addition of 15 new Company Stores, the introduction of new products, selective price increases, and the continued rollout of lottery to Company stores.

The other sales category primarily consists of wholesale gasoline and grocery sales to franchise stores and lottery commissions received. These sales decreased $1,606 (29.6%) for the second quarter of fiscal 2006 primarily due to the reduction of franchise stores from 34 as of October 31, 2004 to 19 as of October 31, 2005. However, the gross profit margin increased $817 (115.6%) primarily due to the increase in lottery commissions of $865 (753.6%) from the comparable period in the prior year. The number of Company stores selling lottery tickets has increased to 1,343 (99.7%) as of October 31, 2005 from 261 (19.6%) stores as of October 31, 2004.

Cost of goods sold as a percentage of net sales was 85.1% for the second quarter of fiscal 2006, compared to 83.7% for the comparable period in the prior year. The gross profit margins on retail gasoline sales increased (to 5.5%) during the second quarter of fiscal 2006 from the second quarter of the prior year (5.4%). The gross profit margin per gallon also increased (to $.1392) in the second quarter of fiscal 2006 from the

12

comparable period in the prior year ($.1018). Although the Company achieved above average gross profit margins per gallon during the quarter, management expects market conditions to stabilize during the next two quarters and return to historical levels of 10 to 11 cents per gallon over the long term. The gross profits on retail sales of grocery and general merchandise increased (to 33.2%) from the comparable period in the prior year (31%), and the prepared food margin also increased (to 64.6%) from the comparable period in the prior year (60.5%). The increase in the prepared food margin was caused primarily by a better balance of product demand and controlling stale products and earlier price increases on selected items.

Operating expenses as a percentage of net sales were 9.6% for the second quarter of fiscal 2006 compared to 11.7% for the comparable period in the prior year. The decrease in operating expenses as a percentage of net sales was caused primarily by a increase in the average retail price per gallon of gasoline sold. Operating expenses increased 13.1% in the second quarter of 2006 from the comparable period in the prior year, primarily due to a 53.7% increase in bank fees resulting from customers’ greater use of credit cards to purchase more expensive gasoline, and the larger number of corporate stores.

Net earnings increased by $11,187 (101.6%). The increase in net earnings was attributable primarily to the increase in the gross profit margin per gallon of gasoline sold, the increases in the gross profit margins of grocery and other merchandise and prepared food and fountain, and the increased traffic generated from the continued rollout of lottery to Company stores.

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Six Months Ended October 31, 2005 Compared to Six Months Ended October 31, 2004 (Dollars and Amounts in Thousands)

Six months ended 10/31/05	Gasoline		Grocery & other merchandise		Prepared food & fountain		Other		Total
Sales	1,291,192		414,291		115,631		7,298		1,828,412
Gross profit	72,134		135,076		74,319		2,849		284,378
Margin	5.6	%	32.6	%	64.3	%	39.0	%	15.6	%
Gasoline Gallons	564,733
Six months ended 10/31/04	Gasoline		Grocery & other merchandise		Prepared food & fountain		Other		Total
Sales	935,707		377,507		104,709		11,100		1,429,023
Gross profit	55,459		117,736		62,447		1,541		237,183
Margin	5.9	%	31.2	%	59.6	%	13.9	%	16.6	%
Gasoline Gallons	502,380

Net sales for the second quarter of fiscal 2006 increased by $399,389 (27.9%) over the comparable period in fiscal 2005. Retail gasoline sales increased by $355,485 (38%) as the number of gallons sold increased by 62,353 (12.4%) while the average retail price per gallon increased 22.8%. During this same period, retail sales of grocery and general merchandise increased by $36,784 (9.7%) and prepared food and fountain sales increased by $10,922 (10.4%), due to the addition of 15 new Company Stores, the introduction of new products, selective price increases, and the continued rollout of lottery to Company stores.

The other sales category primarily consists of wholesale gasoline and grocery sales to franchise stores and lottery commissions received. These sales decreased $3,802 (34.3%) for the second quarter of fiscal 2006 primarily due to the reduction of franchise stores from 34 as of October 31, 2004 to 19 as of October 31, 2005. However, the gross profit margin increased $1,308 (84.9%) primarily due to the increase in lottery commissions of $1,570 (777.6%) from the comparable period in the prior year. The number of Company stores selling lottery tickets has increased to 1,343 (99.7%) as of October 31, 2005 from 261 (19.6%) stores as of October 31, 2004.

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Cost of goods sold as a percentage of net sales was 84.4% for the first six month of fiscal 2006, compared to 83.4% for the comparable period in the prior year. The gross profit margins on retail gasoline sales decreased (to 5.6%) during the first six months of fiscal 2006 from the comparable period in the prior year (5.9%). However, the gross profit margin per gallon increased (to $.1277) during the first six months of fiscal 2006 from the comparable period in the prior year ($.1104). Although the Company achieved above average gross profit margins per gallon during the six months, management expects market conditions to stabilize during the next six months and return to historical levels of 10 to 11 cents per gallon over the long term. The gross profits on retail sales of grocery and general merchandise increased (to 32.6%) from the comparable period in the prior year (31.2%), and the prepared food margin also increased (to 64.3%) from the comparable period in the prior year (59.6%). The increase in the prepared food margin was caused primarily by a better balance of product demand and controlling stale products and earlier price increases on selected items.

Operating expenses as a percentage of net sales were 10% for the first six months of fiscal 2006 compared to 11.5% 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 average retail price per gallon of gasoline sold. Operating expenses increased 11.1% in the first six months of 2006 from the comparable period in the prior year, primarily due to a 42.7% increase in bank fees resulting from customers’ greater use of credit cards to purchase more expensive gasoline, and the larger number of corporate stores.

Net earnings increased by $16,140 (59.9%). The increase in net earnings was attributable primarily to the increase in the gross profit margin per gallon of gasoline sold, the increases in the gross profit margins of grocery and other merchandise and prepared food and fountain, and the increased traffic generated from the continued rollout of lottery to Company stores.

Critical Accounting Policies

Critical accounting policies are those accounting policies that management believes are important to the portrayal of the Company’s financial condition and results of operations and require management’s most difficult, subjective judgments, often because of the need to estimate the effects of inherently uncertain factors.

Inventory. Inventories are stated at the lower of cost or market. Gasoline inventories are valued using the first-in, first-out (FIFO) method. Merchandise inventories are valued using the last-in, first-out (LIFO) method, applied to inventory values determined by the retail inventory method (RIM) for store inventories and the FIFO method for warehouse inventories. RIM is an averaging method widely used in the retail industry because of its practicality.

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Under RIM, inventory valuations are at cost and the resulting gross margins are calculated by applying a cost-to-retail ratio to sales. Inherent in the RIM calculations are certain management judgments and estimates, which could affect the ending inventory valuation at cost and the resulting gross margins.

Long-lived Assets. The Company periodically monitors under-performing stores for an indication that the carrying amount of assets may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the assets, including goodwill where applicable, an impairment loss is recognized. Impairment is based on the estimated fair value of the asset. Fair value is based on management’s estimate of the amount that could be realized from the sale of assets in a current transaction between willing parties. The estimate is derived from professional appraisals, offers, actual sale or disposition of assets subsequent to period end, and other indications of asset value. In determining whether an asset is impaired, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets, which for the Company is generally on a store-by-store basis. Management expects to continue its on-going evaluation of under-performing stores, and may periodically sell specific stores where further operational and marketing efforts are not likely to improve their performance.

Self-insurance. The Company is primarily self-insured for workers’ compensation, general liability, and automobile claims. The self-insurance claim liability is determined actuarially based on claims filed and an estimate of claims incurred but not yet reported. Actuarial projections of the losses are employed due to the high degree of variability in the liability estimates. Some factors affecting the uncertainty of claims include the time frame of development, settlement patterns, litigation and adjudication direction, and medical treatment and cost trends. The liability is not discounted.

Recent accounting pronouncements. In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections,” which applies to (i) all voluntary changes in accounting principle and (ii) all changes required by a new accounting pronouncement where no specific transition provisions are included. SFAS No. 154 replaces APB Opinion 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements.” SFAS No. 154 requires companies to apply the direct effects of a change in accounting principle retrospectively to prior periods’ financial statements unless impracticable. APB Opinion No. 20 required companies to recognize most voluntary changes in accounting principles by including the cumulative effect of the change in net earnings of the period in which the change was made. SFAS No. 154 redefines “restatement” as the revising of previously issued financial statements to reflect the correction of an error. SFAS No. 154 is effective for fiscal years beginning after December 15, 2005, with early adoption permitted for fiscal years beginning after June 1, 2005. The Company will adopt SFAS No. 154 effective May 1, 2006.

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In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment,” (“SFAS 123R”), which revises SFAS No. 123, “Accounting for Stock-Based Compensation,” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS 123R establishes standards for accounting for transactions in which an entity exchanges its equity instruments for goods or services. The primary focus of SFAS 123R is on employee services obtained in share-based payment transactions. SFAS 123R requires that all share-based payments to employees be recognized in the financial statements based on their fair values as determined by an option-pricing model as of the grant date of the award. The cost will be recognized over the period during which an employee is required to provide services in exchange for the award. The implementation guidance of SFAS 123R requires that a company elect a transition method to be used at the date of adoption. The transition methods include both prospective and retrospective options for adopting. The prospective method requires that compensation expense be recorded for all unvested awards at the beginning of the first period of adoption of SFAS 123R, while the retrospective methods require that compensation expense for all unvested awards be recorded beginning with the first period restated.

When SFAS 123R was issued in December 2004, its effective date for compliance was the first reporting period beginning after June 15, 2005. However, in April 2005, the Securities and Exchange Commission adopted a new rule that amends the effective date of SFAS 123R such that implementation will not be required until the first annual reporting period beginning after June 15, 2005.

The Company will adopt the provisions of SFAS 123R effective May 1, 2006. The ultimate amount of increased compensation expense will depend on, among other factors, whether the Company adopts SFAS 123R using the prospective or retrospective method; the number, timing and vesting period of option shares granted during the year; and the method used to calculate the fair value of the awards. Based on its currently outstanding option grants and its estimated option grants for 2006, the Company anticipates that adopting SFAS 123R will not have a material impact on its financial statements.

Liquidity and Capital Resources (Dollars in Thousands)

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 October 31, 2005, the Company’s ratio of current assets to current liabilities was .85 to 1. The ratio at October

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31, 2004 and April 30, 2005 was .98 to 1 and .84 to 1, respectively. Management believes that the Company’s current bank line of credit of $50,000 ($0 outstanding at October 31, 2005), together with cash flow from operations, will be sufficient to satisfy the working capital needs of its business.

Net cash provided by operations increased $709 (1%) in the six months ended October 31, 2005 from the comparable period in the prior year, primarily as a result of a larger net earnings and an increase in income taxes payable and accrued expenses. This result was partially offset by a large increase in inventories and a reduction in accounts payable. Cash used in investing in the six months ended October 31, 2005 increased due to the increase in the purchase of property and equipment. Cash used in financing decreased, primarily as a result of a reduction of long-term debt payments and lower dividend payments. Historically, the Company recorded dividends at the time of payment, which typically followed by several weeks the date on which dividends were declared. On May 1, 2004, the Company began recording dividends as of the date of declaration. As a result, the Company’s records show two quarterly dividends paid in the first quarter of fiscal 2005, the first of which ($0.035) was for the fourth quarter of fiscal 2004 and the second of which ($0.04) was for the first quarter of fiscal 2005.

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 six months of fiscal 2006, the Company expended $59,412 for property and equipment, primarily for the construction, acquisition and remodeling of Company stores, compared to $40,702 for the comparable period in the prior year. The Company anticipates expending approximately $95,000 in fiscal 2006 for construction, acquisition and remodeling of Company stores, primarily from existing cash and funds generated by operations.

As of October 31, 2005, the Company had long-term debt of $110,923, consisting of $30,000 in principal amount of 7.38% Senior Notes, $32,000 in principal amount of Senior Notes, Series A through Series F, with interest rates ranging from 6.18% to 7.23%, $45,714 in principal amount of 7.89% Senior Notes, Series A, $1,521 of mortgage notes payable, and $1,688 of capital lease obligations.

On October 1, 2005, the Company increased its revolving line of credit from $35,000 to $50,000. The Note is payable in full upon the Lender’s demand. The Company will make monthly payments of all unpaid accrued interest due, beginning November 1, 2005, at a variable rate of 0.75% over the Fed Funds Rate.

To date, the Company has funded capital expenditures primarily from the proceeds of the sale of Common Stock, issuance of 6 ¹/4% Convertible Subordinated Debentures (which were converted into shares of Common Stock in 1994), the above-described Senior Notes, a mortgage note, and through funds generated from operations. Future

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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, the bank line of credit, and additional long-term debt or other securities as circumstances may dictate, and are not expected to adversely affect liquidity.

Cautionary Statements (Dollars in Thousands)

The foregoing Management’s Discussion and Analysis of Financial Condition and Results of Operations contains various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements represent the Company’s expectations or beliefs concerning future events, including (i) any statements regarding future sales and gross profit percentages, (ii) any statements regarding the continuation of historical trends and (iii) any statements regarding the sufficiency of the Company’s cash balances and cash generated from operations and financing activities for the Company’s future liquidity and capital resource needs. The Company cautions that these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, including, without limitations, the following factors described more completely in the Form 10-K for the fiscal year ended April 30, 2005:

Competition. The Company’s business is highly competitive, and marked by ease of entry and constant change in terms of the numbers and type of retailers offering the products and services found in Company stores. Many of the food (including prepared foods) and non-food items similar or identical to those sold by the Company are generally available from a variety of competitors in the communities served by Company stores, and the Company competes with other convenience store chains, gasoline stations, supermarkets, drug stores, discount stores, club stores, mass merchants and “fast-food” outlets (with respect to the sale of prepared foods). Sales of such non-gasoline items (particularly prepared food items) have contributed substantially to the Company’s gross profits from retail sales in recent years. Gasoline sales are also intensely competitive. The Company competes with both independent and national brand gasoline stations in the sale of gasoline, other convenience store chains and several non-traditional gasoline retailers such as supermarkets in specific markets. Some of these other gasoline retailers may have access to more favorable arrangements for gasoline supply then do the Company or the firms that supply its stores. Some of the Company’s competitors have greater financial, marketing and other resources than the Company, and, as a result, may be able to respond better to changes in the economy and new opportunities within the industry.

Gasoline operations. Gasoline sales are an important part of the Company’s sales and earnings, and retail gasoline profit margins have a substantial impact on the Company’s net earnings. Profit margins on gasoline sales can be adversely affected by

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factors beyond the control of the Company, including the supply of gasoline available in the retail gasoline market, uncertainty or volatility in the wholesale gasoline market, increases in wholesale gasoline costs generally during a period and price competition from other gasoline marketers. The market for crude oil and domestic wholesale petroleum products is marked by significant volatility, and is affected by general political conditions and instability in oil producing regions such as the Middle East and Venezuela. The volatility of the wholesale gasoline market makes it extremely difficult to predict the impact of future wholesale cost fluctuation on the Company’s operating results and financial conditions. These factors could materially impact the Company’s gasoline gallon volume, gasoline gross profit and overall customer traffic levels at Company stores. Any substantial decrease in profit margins on gasoline sales or in the number of gallons sold by Company stores could have a material adverse effect on the Company’s earnings.

The Company purchases its gasoline from a variety of independent national and regional petroleum distributors. Although in recent years the Company’s suppliers have not experienced any difficulties in obtaining sufficient amounts of gasoline to meet the Company’s needs, unanticipated national and international events could result in a reduction of gasoline supplies available for distribution to the Company. Any substantial curtailment in gasoline supplied to the Company could adversely affect the Company by reducing its gasoline sales. Further, management believes that a significant amount of the Company’s business results from the patronage of customers primarily desiring to purchase gasoline and, accordingly, reduced gasoline supplies could adversely affect the sale of non-gasoline items. Such factors could have a material adverse impact upon the Company’s earnings and operations.

Tobacco Products. Sales of tobacco products represent a significant portion of the Company’s revenues. Significant increases in wholesale cigarette costs and tax increases on tobacco products, as well as national and local campaigns to discourage smoking in the United States, could have an adverse affect on the demand for cigarettes sold by Company stores. The Company attempts to pass price increases onto its customers, but competitive pressures in specific markets may prevent it from doing so. These factors could materially impact the retail price of cigarettes, the volume of cigarettes sold by Company stores and overall customer traffic.

Environmental Compliance Costs. 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

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monitoring. The Company currently has 2,692 USTs, of which 2,398 are fiberglass and 294 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. 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, 2005 and 2004, the Company spent approximately $1,414 and $1,827, respectively, for assessments and remediation. During the six months ended October 31, 2005, the Company expended approximately $919 for such purposes. Substantially all of these expenditures have been submitted for reimbursement from state-sponsored trust fund programs and as of October 31, 2005, approximately $8,650 has been received from such programs since their inception. Such amounts are typically subject to statutory provisions requiring repayment of the reimbursed funds for non-compliance with upgrade provisions or other applicable laws. The Company has an accrued liability at October 31, 2005 of approximately $200 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.

Although the Company regularly accrues expenses for the estimated costs related to its future corrective action or remediation efforts, there can be no assurance that such accrued amounts will be sufficient to pay such costs, or that the Company has identified all environmental liabilities at all of its current store locations. In addition, there can be no assurance that the Company will not incur substantial expenditures in the future for remediation of contamination or related claims that have not been discovered or asserted with respect to existing store locations or locations that the Company may acquire in the future, or that the Company will not be subject to any claims for reimbursement of funds disbursed to the Company under the various state programs or that additional regulations, or amendments to existing regulations, will not require additional expenditures beyond those presently anticipated.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

The Company’s exposure to market risk for changes in interest rates relates primarily to its investment portfolio and long-term debt obligations. The Company places its investments with high quality credit issuers and, by policy, limits the amount of credit exposure to any one issuer. As stated in its policy, the Company’s first priority is to reduce the risk of principal loss. Consequently, the Company seeks to preserve its invested funds by limiting default risk, market risk and reinvestment risk. The Company mitigates default risk by investing in only high quality credit securities that it believes to

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be low risk and by positioning its portfolio to respond appropriately to a significant reduction in a credit rating of any investment issuer or guarantor. The portfolio includes only marketable securities with active secondary or resale markets to ensure portfolio liquidity. The Company believes that an immediate 100 basis point move in interest rates affecting the Company’s floating and fixed rate financial instruments as of October 31, 2005 would have an immaterial effect on the Company’s pretax earnings.

Item 4. Controls and Procedures.

As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 240.13a-15(e)). Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company’s current disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Notwithstanding the foregoing, there can be no assurance that the Company’s disclosure controls and procedures will detect or uncover all failures of persons within the Company and its consolidated subsidiaries to disclose material information otherwise required to be set forth in the Company’s report.

There were no changes in the Company’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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 4. Submission of Matters to a Vote of Security Holders.

At the Annual Meeting of shareholders held on September 16, 2005, nine directors were elected for a term of one year. Each of the nominees so elected previously has served as a director of the Company.

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The votes cast or withheld for each nominee were as follows:

Name	Number of Shares Voting For	Number of Shares That Withheld Authority
Donald F. Lamberti	45,873,521	1,399,941
John R. Fitzgibbon	46,072,286	1,201,176
Ronald M. Lamb	46,133,032	1,140,430
Patricia Clare Sullivan	45,397,074	1,876,388
John G. Harmon	46,081,363	1,192,099
Kenneth H. Haynie	44,536,280	2,737,182
Jack P. Taylor	45,965,498	1,307,964
William C. Kimball	46,069,849	1,203,613
Johnny Danos	44,560,602	2,712,860

Item 6. Exhibits.

(a) The following exhibits are filed with this Report or, if so indicated, incorporated by reference:

Exhibit No.

Description

4.2

Rights Agreement between Casey’s General Stores, Inc. and United Missouri Bank of Kansas City, N.A., as Rights Agent (incorporated by reference from the Registration Statement on Form 8-A (0-12788) filed June 19, 1989 relating to Common Share Purchase Rights), and amendments thereto (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; the Form 8-A/A (Amendment No. 3 to the Registration Statement on Form 8-A filed June 19, 1989) filed March 30, 1994; the Form 8-A12G/A (Amendment No. 2 to the Registration Statement on Form 8-A filed June 19, 1989) filed July 29, 1994; the Current Report on Form 8-K filed May 10, 1999; and the Current Report on Form 8-K filed September 27, 1999.)

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4.4	Note Agreement dated as of December 1, 1995 between Casey’s General Stores, Inc. and Principal Mutual Life Insurance Company (incorporated by reference from the Current Report on Form 8-K filed January 11, 1996).
4.6	Note Agreement dated as of April 15, 1999 among the Company and Principal Life Insurance Company and other purchasers of the 6.18% to 7.23% Senior Notes, Series A through Series F (incorporated by reference from the Current Report on Form 8-K filed May 10, 1999).
4.7	Note Purchase Agreement dated as of May 1, 2000 among the Company and the purchasers of the 7.89% Senior Notes, Series 2000-A (incorporated by reference from the Current Report on Form 8-K filed May 23, 2000).
31.1	Certification of Ronald M. Lamb under Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of William J. Walljasper under Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certificate of Ronald M. Lamb under Section 906 of Sarbanes-Oxley Act of 2002
32.2	Certificate of William J. Walljasper under Section 906 of Sarbanes-Oxley Act of 2002

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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: December 6, 2005	By:	/s/ William J. Walljasper
		William J. Walljasper
		Vice President and Chief Financial Officer
		(Authorized Officer and Principal Financial Officer)

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EXHIBIT INDEX

The following exhibits are filed herewith:

Exhibit No.	Description
31.1	Certification of Ronald M. Lamb under Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of William J. Walljasper under Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certificate of Ronald M. Lamb under Section 906 of Sarbanes-Oxley Act of 2002
32.2	Certificate of William J. Walljasper under Section 906 of Sarbanes-Oxley Act of 2002

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