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Ameristar Casinos reports Q1 2012 results

2 May 2012

(PRESS RELEASE) -- Ameristar Casinos, Inc. (ASCA) today announced financial results for the first quarter of 2012.

"The first quarter of 2012 produced the best quarterly financial performance in our history," said Gordon Kanofsky, Ameristar's Chief Executive Officer. "Mild winter weather, highly efficient operations and leap year contributed to a quarter where we eclipsed $100 million in Adjusted EBITDA for the first time, as well as established all-time records for Adjusted EBITDA margin and Adjusted EPS. Additionally, we are excited about our recently announced plans to develop our ninth property -- a $500 million casino hotel spa project in Lake Charles, La. We intend to construct a high-quality property that will cater to patrons from southwest Louisiana and east Texas, including the Houston metropolitan area, which is one of the country's largest and most underserved gaming markets."

Consolidated net revenues for the first quarter improved year over year by $3.4 million, to $312.1 million. The majority of our properties improved year-over-year net revenues, with Black Hawk and Council Bluffs generating growth of 6.6% and 5.2%, respectively. Black Hawk established a first quarter net revenue record. Council Bluffs improved its net revenues over the prior-year quarter for the seventh consecutive quarter as it continued to benefit from market share growth in a strong market. For the quarter ended March 31, 2012, consolidated promotional allowances decreased $1.5 million (2.2%) from the prior-year first quarter. Promotional costs were reduced as a percentage of gross gaming revenues, from 22.1% in the first quarter of 2011 to 21.4% in the first quarter of 2012.

For the first quarter of 2012, consolidated Adjusted EBITDA improved over the prior-year first quarter by $5.6 million, or 5.8%, to $102.0 million. Consolidated Adjusted EBITDA outpaced the growth in net revenues for the fifth consecutive quarter. Six of our properties generated improved Adjusted EBITDA on a year-over-year basis, led by Council Bluffs (14.3%), Black Hawk (9.3%) and, despite a year-over-year decline in net revenues, East Chicago (9.3%). Three properties set first quarter Adjusted EBITDA records, including our Kansas City property, which extended its streak of year-over-year quarterly Adjusted EBITDA improvement to seven quarters, notwithstanding the entry of a new competitor in its market during the quarter.

Consolidated Adjusted EBITDA margin improved from 31.2% in the first quarter of 2011 to 32.7% in the current-year first quarter. The application of our efficient operating model contributed to year-over-year improvement in the Adjusted EBITDA margin at all of our properties except Jackpot. Notably, Council Bluffs delivered an Adjusted EBITDA margin improvement of 3.5 percentage points, while East Chicago and Kansas City improved by 2.4 and 1.9 percentage points, respectively. We generated operating income of $69.3 million in the first quarter of 2012, compared to $62.6 million in the same period in 2011. Prior-year operating income was adversely impacted by $3.6 million in non-operating professional fees.

For the quarter ended March 31, 2012, we reported net income of $41.4 million, compared to net income of $21.8 million for the same period in 2011. The year-over-year improvement in net income was mostly attributable to efficient revenue flow-through, a $15.7 million reduction in the income tax provision due to certain income tax elections and the absence of non-operational professional fees in the current period. We anticipate the tax elections will lower our quarterly blended tax rate by three to four percentage points for future quarters. Diluted earnings per share was $1.21 for the first quarter of 2012, compared to $0.37 in the prior-year first quarter. Adjusted EPS of $0.75 for the quarter ended March 31, 2012 represents an increase of $0.34 over Adjusted EPS for the 2011 first quarter. First quarter 2012 EPS calculations were favorably impacted by the reduction from the prior-year first quarter of approximately 25.4 million weighted-average number of diluted shares.

Creative Casinos of Louisiana Acquisition
On March 14, 2012, we entered into a definitive agreement to acquire all of the equity interests of Creative Casinos of Louisiana, L.L.C. ("Creative"). Creative is the developer of a proposed luxury casino resort in Lake Charles, La., which it planned to brand as Mojito Pointe. This is the last remaining riverboat gaming license available in Louisiana under current law. On March 15, 2012, the Louisiana Gaming Control Board approved an extension of the deadline to commence construction of the property to July 20, 2012 and approved certain scope changes that we believe will enhance the competitiveness of the property.

The purchase price payable upon closing of the acquisition is $32.5 million (inclusive of a $1.0 million deposit that we paid following approval of the construction extension). Closing of the purchase is subject to various customary conditions, including regulatory approval and certain third-party consents.

The Ameristar Lake Charles resort will be developed on a 242-acre leased site and, as currently planned, will include a casino with approximately 1,600 slot machines and 60 table games, a hotel with approximately 700 guest rooms (including 70 suites), a variety of food and beverage outlets, an 18-hole golf course, a tennis club, swimming pools, a spa and other resort amenities, and approximately 3,000 parking spaces, 1,000 of which will be in a garage. Our plans represent a significant expansion of Creative's design, which contemplated a 400-room hotel (including 30 suites) and a garage with 400 parking spaces. The license conditions as revised by the Louisiana Gaming Control Board require us to invest at least $500 million in the project. We anticipate funding the project through a combination of cash from operations and borrowings under our revolving credit facility. We expect to open the resort in mid-2014.

Additional Financial Information
Debt. At March 31, 2012, the face amount of our outstanding debt was $1.9 billion. After taking into consideration $29.8 million in first-quarter net repayments, we had $285.0 million available for borrowing under the revolving credit facility. At March 31, 2012, our Total Net Leverage Ratio (as defined in the senior credit facility) was required to be no more than 6.50:1. As of that date, our Total Net Leverage Ratio was 4.88:1, representing significant improvement over our pro forma Total Net Leverage Ratio as of March 31, 2011 of 5.95:1, which gives effect to our April 2011 debt refinancing.

On April 26, 2012, we issued $240.0 million principal amount of 7.50% Senior Notes due 2021. These notes were issued under the same indenture as the $800.0 million principal amount of 7.50% Senior Notes due 2021 that we issued in April 2011. The new notes were sold at a premium to the principal amount, resulting in a yield to maturity of 6.88%. The net proceeds from this offering were $244.0 million, of which $236.0 million was used to repay all the outstanding indebtedness under our revolving credit facility, which we may re-borrow from time to time. The balance of the net proceeds will be used for general corporate purposes. After applying the proceeds to the outstanding revolving credit facility, we had $496.0 million available for borrowing under the revolving credit facility.

Capital Expenditures. For the quarters ended March 31, 2012 and 2011, capital expenditures totaled $31.0 million and $10.9 million, respectively. In January 2012, we spent $16.9 million (including fees and commissions) to purchase approximately 40 acres of land in Springfield, Massachusetts as the site for a possible future casino resort.

Dividend. During the first quarter of 2012, our Board of Directors declared a cash dividend of $0.125 per share, which we paid on March 15, 2012. On April 27, 2012, the Board declared a cash dividend of $0.125 per share, payable on June 15, 2012.

Outlook

In the second quarter of 2012, we currently expect:

depreciation to range from $26.5 million to $27.5 million.

interest expense, net of capitalized interest, to be between $28.0 million and $29.0 million, including non-cash interest expense of approximately $1.3 million.

the combined state and federal income tax rate to be in the range of 39% to 41%.

capital spending of $20.0 million to $25.0 million, including approximately $5.0 million in design costs for the Lake Charles project.

non-cash stock-based compensation expense of $3.5 million to $4.0 million.

corporate expense, excluding corporate's portion of non-cash stock-based compensation expense, to be between $12.0 million and $13.0 million.

As a result of the planned construction of Ameristar Lake Charles and the recent debt offering, and based on current interest rates, we now expect full year 2012 interest expense, net of capitalized interest, to be between $109.0 million and $114.0 million, an increase from the previously announced range of $103.5 million to $108.5 million. We now anticipate $160.0 million to $165.0 million in capital spending for the full year 2012, including approximately $75.0 million related to the purchase price and design and construction costs for the Lake Charles project.

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