CasinoCityTimes.com

Gurus
News
Newsletter
Search News Subscribe
Stay informed with the
NEW Casino City Times newsletter!
Newsletter Signup
Stay informed with the
NEW Casino City Times newsletter!

Gaming News

 

Ameristar reports record results

2 May 2007

LAS VEGAS, Nevada -- (PRESS RELEASE) -- Ameristar Casinos, Inc. (Nasdaq:ASCA) today announced results for the first quarter of 2007 that set all-time quarterly records across virtually all metrics, including consolidated net revenues, operating income, EBITDA(1), EBITDA margin, net income and diluted earnings per share.

    Highlights
    *  Diluted earnings per share were $0.41, exceeding the high end of our
       previously issued guidance by $0.05
    *  EBITDA increased 11.4 percent to $73.8 million, principally driven by a
       2.6 percentage point increase in EBITDA margin
    *  Announced definitive agreement to acquire Resorts East Chicago for
       $675 million in cash, executing on growth strategy

"Ameristar continues to deliver record financial performance as we begin 2007. After a record-setting performance in the third and fourth quarters of 2006, our first quarter in 2007 is our strongest quarter ever, significantly exceeding the top end of our guidance range," stated John Boushy, CEO and President. "This performance is largely due to two key drivers -- Ameristar's commitment to best-in-market quality facilities and our focus on operational excellence. Our results this quarter clearly demonstrate the effectiveness of this powerful one-two punch.

"The first key driver is demonstrated by the impressive performance of Ameristar Black Hawk, which is the most significant contributor to our growth in EBITDA. Our investment has transformed it to an Ameristar-class property, and now that investment is clearly paying off. Our market share has increased by 37 percent to 16 percent since our acquisition of the Black Hawk property, demonstrating strong guest preference for the Ameristar brand. This share increase is further evidence of the success of our business strategy, which is generating impressive returns for our shareholders."

"The second key driver of our success was the disciplined implementation of our growth in profitability strategies, which resulted in increased operating income and EBITDA margins at each and every Ameristar property during the quarter," Boushy continued. "This margin improvement was particularly remarkable given the severe weather conditions we faced in Iowa, Colorado and Missouri in January and February. Our ability to increase consolidated EBITDA margin by 10 percent while experiencing net revenue shortfalls in the early part of the quarter underscores the strength of our business strategy."

"Special thanks go to our 7,200 team members who consistently deliver outstanding guest service and build customer loyalty," concluded Boushy.

Ameristar remains focused on its goal of doubling EBITDA over the next three to five years and took a significant step towards achieving its growth objectives in early April when Ameristar agreed to acquire Resorts East Chicago. "Now that the due diligence phase is complete, we are even more enthusiastic about this property, which hits the bulls-eye of our acquisition criteria," said Gordon Kanofsky, Ameristar's Co-Chairman and Executive Vice President. "It allows us to enter an extremely attractive market, diversifies our cash flow and enhances our distribution channels. We believe there is substantial potential to grow this already well-positioned property, and we intend to leverage our proven management model, operational discipline and development expertise to capitalize on this tremendous opportunity, while achieving an appropriate return."

He added, "We also remain committed to the capital improvement projects currently underway at our properties, which will further enhance the attractiveness of our facilities and should deliver additional returns over the next several years. We remain confident in our ability to deliver on our goal of doubling EBITDA over the next three to five years."


    (1) The table at the end of this release reconciles EBITDA, a non-GAAP
        financial measure, to operating income, a GAAP financial measure.



                Consolidated Selected Quarterly Financial Data
                 (Dollars in Millions, Except Per Share Data)
                                 (Unaudited)

                                       Three Months Ended March 31,
                                           2007          2006        % Change


    Gross revenues                        $305.1        $310.0         (1.6%)
    Promotional allowances                 (46.0)        (53.9)       (14.7%)
    Net revenues                          $259.1        $256.1          1.2%

    Operating income                       $49.9         $43.7         14.3%
    Operating income margin                 19.3%         17.0%        13.5%

    Net income (1)                         $24.0          $2.6        814.9%

    Diluted earnings per share (1)         $0.41         $0.05        720.0%

    EBITDA                                 $73.8         $66.2         11.4%
    EBITDA margin                           28.5%         25.9%        10.0%

    Cash dividends declared per share    $0.1025      $0.09375          9.3%


    (1) For the quarter ended March 31, 2006, loss on early retirement of debt
        adversely impacted consolidated net income and diluted earnings per
        share by $17.1 million and $0.30, respectively.


First Quarter Summary

Our all-time quarterly financial results were largely driven by the following factors:

    *  Ameristar Black Hawk continued to experience momentum, as evidenced by
       significant growth in business volume and strong financial results
       since its rebranding on April 1, 2006.  The property's record financial
       results, which were a significant driver of our improved EBITDA
       year-over-year, also benefited from the absence of construction
       disruption that adversely impacted performance in the first quarter of
       2006.
    *  Operating income margins and EBITDA margins increased at every one of
       our properties in the first quarter due to our shift to focus on
       profitability versus market share leadership in the second quarter of
       2006.  The EBITDA impact of margin improvements was particularly
       significant at our Missouri properties.  Effective net revenue growth
       and efficient operations during the quarter helped drive our
       outstanding margin improvement.
    *  At Ameristar Vicksburg, business volumes remained higher relative to
       pre-Katrina periods (2005), and we expect this to continue throughout
       2007.  EBITDA increased year-over-year as a result of our profitability
       initiatives, despite a decline in revenue from the first quarter of
       2006 when several Gulf Coast casinos were closed in the aftermath of
       Hurricane Katrina.
    *  Ameristar Council Bluffs continues to compete effectively, based on its
       share of the gaming positions in the market, despite the primary
       competitor's larger land-based facility.  Even with the increased
       competition, we continued to exceed our fair share in the market, while
       improving operating margins.

Resorts East Chicago Acquisition

On April 3, 2007, we entered into a definitive agreement with Resorts International Holdings, LLC to acquire its subsidiary that owns and operates Resorts East Chicago for $675 million in cash. We completed due diligence on April 22, 2007.

The property is located in East Chicago, Indiana, an approximately 25-mile drive from downtown Chicago, Illinois, and is easily accessible from the entire Chicago metropolitan area. The Chicagoland market is the third largest commercial gaming market in the United States, generating more than $2.5 billion in gaming revenues annually and serving approximately 6.4 million adults. We believe this market is significantly underserved compared with other domestic regional gaming markets based on the number of adults per gaming position.

We intend to make a number of major capital improvements to Resorts East Chicago in order to capture the untapped demand within the dynamic Chicagoland market and maximize the property's profit opportunity. We have already begun integration planning in preparation for a closing during the fourth quarter of this year. In addition, we are rapidly developing our expansion plans to significantly improve the gaming experience, enhance access to the casino, build additional structured parking and upgrade the non-gaming amenities, all with the objective of creating best-in-class offerings and experiences consistent with the Ameristar brand. As a result of these capital expenditures and the implementation of our operational and marketing strategies, we expect to more than double EBITDA at the property within three to four years after the acquisition closes. We will provide further details regarding our expansion of Resorts East Chicago as we finalize our plans.

We expect to complete the acquisition of Resorts East Chicago in the fourth quarter of 2007, subject to the receipt of various regulatory approvals and the satisfaction of other customary closing conditions.

Internal Capital Expenditure Projects

Capital expenditures for the first quarter of 2007 totaled $58.8 million. These expenditures were mostly funded with cash from operations. Capital expenditures during the first quarter were primarily related to the expansion at Ameristar St. Charles ($29.5 million), the Ameristar Black Hawk hotel project ($7.8 million) and our expansion at Ameristar Vicksburg ($3.2 million).

Construction continues on the 400-room, all-suite hotel at Ameristar St. Charles. The hotel will have an indoor/outdoor swimming pool and a 7,000 square-foot full-service spa. This project also includes 19,200 square feet of meeting and conference facilities that were completed in the third quarter of 2006 and an additional 2,000-space parking garage, half of which was opened in February 2007. The remaining spaces are scheduled to be completed along with the hotel in December 2007. The project remains on budget ($265 million) and on schedule.

The $98.0 million casino and parking expansion project at Ameristar Vicksburg continues to progress. The project consists of dry-docking the vessel and adding 800 gaming positions, two new restaurants, a VIP club, retail space and a 1,000-space parking garage. The project is expected to be completed in March 2008, on schedule and on budget.

Construction is also proceeding on the 537-room, four-diamond-quality hotel at Ameristar Black Hawk, albeit at a reduced pace. We are addressing the unstable portions of the site, which must be corrected prior to progressing with the hotel tower. The project's estimated cost is $220.0 million, and it is scheduled for completion in the second half of 2009. As previously reported, the project may experience additional delays and/or cost increases due to unknown site conditions.

While we pursue our growth strategy to double Ameristar's EBITDA over the next three to five years, we intend to retain financial flexibility to pursue further acquisitions and development projects to achieve these growth objectives. We also remain confident in our ability to complete our ongoing internal capital projects, including our initiatives at St. Charles, Black Hawk and Vicksburg.

Outlook

Based on our preliminary results of operations in April 2007 and our outlook for the remainder of the quarter, we currently estimate operating income of $42 million to $44 million, EBITDA of $66 million to $68 million (given anticipated depreciation expense of $24 million), interest expense of $12 million and diluted earnings per share of $0.32 to $0.34 for the second quarter of 2007.

< Gaming News