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Benjamin Spillman

Recession not limited to Vegas casinos

11 November 2008

LAS VEGAS, Nevada -- Recessions aren't just for Las Vegas casinos.

Ameristar Casinos Inc. posted an adjusted net revenue decline of 7.4 percent to $68.4 million thanks largely to reduced spending by gamblers in the Midwestern states where it operates.

The Nevada-based company spent about $5.8 million in the quarter supporting pro-gambling ballot measures that passed in Colorado and Missouri. The expenditures dragged down current earnings but could pay dividends in the future.

In the short-term, however, the news was bleak as layoffs of 244 people, about 3 percent of the work force, in the second quarter weren't enough to boost the third-quarter operating results above 2007 levels.

The Associated Press reported adjusted earnings of $14.3 million, or 25 cents per share, a decline of 28.5 percent from $20 million a year earlier.

Same-store net revenues fell 1.9 percent to $251.4 million. The addition of newly acquired Ameristar East Chicago to the results did boost overall revenue 21.1 percent to $321.4 million from $265.4 million.

"While (earnings per share) came in higher than expected, results at the property level were generally in line, or slightly better than our estimates," wrote analysts from Oppenheimer Equity Research.

Ameristar's earnings per share were 28 cents, above the 18 cents estimate from Oppenheimer and the 27 cents consensus estimate.

Overall revenue, which included the Chicago property, was above the Oppenheimer forecast of $314.4 million.

And there was other good news for Ameristar.

Voter approval for pro-gambling ballot initiatives in Missouri and Colorado will give the company a chance to create casino resorts in those states that better-replicate those in Nevada, Atlantic City and on American Indian reservations in places like California which have liberal gambling laws.

In Missouri, voters eliminated a $500 loss limit and placed a moratorium on new gambling licenses.

In Colorado, they voted to let towns such as Black Hawk hold their own local referendums on issues such as allowing round-the-clock operating hours, increasing bet limits up to $100 and adding roulette and craps.

"Gaming-related ballot initiatives in Missouri and Colorado should be positive for (Ameristar)," Deutsche Bank analyst Bill Lerner wrote.

Ameristar management, in a presentation to analysts, wrote that the Missouri vote "significantly enhances competitiveness with neighboring Illinois casinos."

In the upcoming quarter Ameristar plans to "identify other areas where we can improve margins without adversely impacting the guest experience."

Ameristar is based in Las Vegas, but doesn't own any casinos on the Strip or the Southern Nevada locals market. It does own two small casinos in Nevada near the Idaho border, but the bulk of its revenue comes from casinos in Missouri, Colorado, Indiana, Iowa and Mississippi.

Ameristar shares closed the day unchanged from the previous close on the Nasdaq National Market at $7.69.