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Ameristar reports Q3 results

26 October 2006

LAS VEGAS, Nevada – (PRESS RELEASE) -- Ameristar Casinos, Inc. (Nasdaq: ASCA) today announced 2006 third quarter financial results, which set all-time quarterly records for EBITDA, net income and diluted earnings per share and third quarter records for consolidated net revenues and operating income.


* Third quarter consolidated net revenues of $253.6 million, an increase of $15.0 million, or 6.3%, over the third quarter of 2005.

* Third quarter consolidated operating income of $46.3 million, an increase of $5.8 million, or 14.3%, from the prior-year third quarter.

* Third quarter consolidated EBITDA (a non-GAAP financial measure that is defined and reconciled with operating income below) of $69.6 million, representing an increase of $7.8 million, or 12.6%, from the third quarter of 2005. 2006 third quarter operating income and EBITDA were adversely impacted by $2.5 million of stock-based compensation expense. No such expense was recognized in 2005.

* Third quarter diluted earnings per share of $0.37, compared to $0.28 for the third quarter of 2005. Stock-based compensation expense negatively impacted diluted earnings per share in the third quarter of 2006 by $0.03. Analysts' latest consensus estimate for the third quarter of 2006, as reported by Thomson First Call, was $0.35. Our most recently issued earnings guidance for the third quarter of 2006 indicated a range of diluted earnings per share of $0.35 to $0.36, an increase from our original earnings guidance for the quarter of $0.27 to $0.29 per share.

* On August 15, 2006, our Board of Directors declared a quarterly cash dividend of $0.09375 per share, which was paid to stockholders of record as of August 30, 2006.

* On July 24, 2006, our Board of Directors approved the repurchase from time to time of up to 2.8 million shares of Ameristar common stock, representing approximately 5% of our outstanding common stock. During the third quarter of 2006, we repurchased approximately 0.4 million shares of common stock at a total cost of approximately $8.0 million under the stock repurchase program.

* On July 28, 2006, we hired John Boushy as President. Before joining Ameristar, Mr. Boushy served as Executive VP of Project Development, Design and Construction for Harrah's Entertainment. Previously, he was responsible for the successful integration of Caesars into Harrah's, while serving as its Chief Integration Officer. With his proven leadership acumen, Mr. Boushy is responsible for overseeing operations, finance, human resources, marketing, information technology, food and beverage, administration, communications and entertainment. He is also focusing on continuing to leverage the Ameristar brand, while participating in the Company's pursuit of development opportunities as we consider growth through acquisitions, building new properties and expansion.

Craig H. Neilsen, Chairman and CEO, stated: "We are very pleased with our record-setting third quarter financial performance. Our financial results reflect the strength of our operating strategies and our ability to continue to grow the Ameristar brand by providing the most complete entertainment experience for our guests while successfully managing costs. To date, we have improved margins without sacrificing our commitment to guest service, as evidenced by our recent guest satisfaction scores. We expect to continue the successful application of our cost management strategies for the foreseeable future."

Our record quarterly financial results were largely driven by the following four factors:

* Ameristar Black Hawk achieved all-time record financial results in every key performance measure during the third quarter of 2006. Our Black Hawk property has experienced significant growth in business volume and strong improvement in financial performance since its rebranding on April 1, 2006. We anticipate continued market share growth in the Denver gaming market as the property gains further momentum from the recently completed capital improvements and from the hotel, which we expect to be completed in December 2008. The Black Hawk property's financial results also benefited from reduced construction disruption following the completion of the initial phase of our expansion activities in the first quarter of 2006. Additionally, Ameristar Black Hawk was adversely affected during most of the third quarter of 2005 by the temporary closure of a principal highway connecting Black Hawk and Denver.

* Our Vicksburg property surpassed our expectations in the third quarter of 2006 with growth in all key financial performance indicators as we continue to benefit from reduced Mississippi Gulf Coast gaming capacity caused by Hurricane Katrina. We anticipate the increase in the property's business volume to diminish in the fourth quarter of 2006 now that a year has elapsed and several Gulf Coast casinos have reopened.

* Ameristar Council Bluffs' third quarter 2006 financial performance exceeded our expectations in the face of enhanced competition from the March 2006 major expansion and rebranding of a nearby land-based casino, which has increased its promotional spending since the rebranding. Recent trends indicate a partial recovery of our market share. Ameristar Council Bluffs' EBITDA and the related margin have increased $3.7 million and 5.5 percentage points, respectively, compared to the second quarter of 2006.

* We have successfully modified our cost structure to optimize operating income, EBITDA and margins through the implementation of cost- containment initiatives. During the third quarter of 2006, we began to see the positive impact from our efforts to utilize promotional allowances more efficiently. Our promotional allowances decreased as a percentage of gaming revenues compared to the prior-year third quarter, and we expect this trend to continue in the fourth quarter. In addition to more effective promotional spending, we are continuing to achieve further efficiencies through improved labor management practices. The successful application of these strategies was most notably evident at our St. Charles property where revenues declined from the prior-year third quarter while our margins and EBITDA improved.

Financial Results

The increase in consolidated net revenues for the third quarter of 2006 was primarily attributable to increases over the prior-year third quarter of 101.8% at Ameristar Black Hawk and 11.2% at Ameristar Vicksburg.

Consolidated casino revenues for the third quarter of 2006 increased $13.4 million over the 2005 third quarter, principally due to an $11.1 million (102.8%) increase in slot revenues at Ameristar Black Hawk, which now features an additional 600 slot machines on its expanded casino floor. We further believe consolidated casino revenues increased in part as a result of the continued successful implementation of our targeted marketing programs, as evidenced by an overall 7.0% increase in rated play at our properties from the third quarter of 2005.

Consolidated operating income and EBITDA were adversely affected by the $2.5 million in stock-based compensation expense we were required to recognize in the third quarter of 2006 as described above. Consolidated operating income was also impacted by a $2.0 million (9.4%) increase in depreciation and amortization expense over the third quarter of 2005, primarily due to $1.5 million in depreciation expense from the capital improvements placed in service as part of the Ameristar Black Hawk expansion.

Interest expense for the 2006 third quarter decreased $2.5 million from the third quarter of 2005. The decline was due primarily to a reduced average interest rate resulting from the November 2005 refinancing of our senior secured credit facility and the February 2006 redemption of our senior subordinated notes with borrowings under the new credit facility at a substantially lower interest rate. Capitalized interest for the quarter ended September 30, 2006 totaled $2.2 million, representing an increase of 37.9% over the prior-year third quarter.

During the third quarter of 2006, corporate expense increased $0.9 million, or 7.2%, compared to the 2005 third quarter. The increase is attributable to the recognition in the 2006 period of $1.8 million of stock-based compensation expense at the corporate level (the remaining $0.7 million of this expense was recognized at our various properties). The prior-year third quarter's financial results reflect a $1.0 million charge in connection with the discontinued pursuit of a casino license in Philadelphia, Pennsylvania.

Building for Future Growth

Capital expenditures for the 2006 third quarter totaled $63.2 million. These expenditures were mostly funded with cash from operations and, to a lesser extent, with the borrowings under our revolving loan facility. Capital expenditures during the third quarter included $26.1 million related to our expansion activities at Ameristar St. Charles described below, $12.0 million for capital improvement projects at Ameristar Black Hawk, $5.5 million for the acquisition of slot machines and $2.3 million for the construction of a new parking garage at Ameristar Vicksburg.

Construction continues to progress on schedule at Ameristar St. Charles on our 400-room, all-suite hotel with an indoor/outdoor swimming pool and a 7,000 square-foot full-service spa, and an additional 2,000-space parking garage. The 20,000 square feet of new meeting and conference facilities were completed and opened in the third quarter. The completion dates are projected to be the first quarter of 2007 for the initial 1,400 spaces of the parking garage and the fourth quarter of 2007 for the hotel and the remainder of the garage. We believe these planned improvements will allow us to further enhance our competitive position in the St. Louis market.

The construction of the hotel at Ameristar Black Hawk also remains on track. The 33-story tower's 536 well-appointed, oversized rooms will feature upscale furnishings and amenities. The tower will include a meeting center that will feature a main ballroom, a junior ballroom, break-out rooms, pre- function space, a business center and a boardroom. The tower will also have Black Hawk's only swimming pool and indoor and outdoor spas. Once completed, Ameristar Black Hawk will offer destination resort amenities and services never before seen in the Denver gaming market.

In Vicksburg, we have completed 65 percent of the garage, ordered steel for the casino expansion and plan to start casino foundation work in November 2006. Construction on the casino expansion, which will add 800 gaming positions to the property, a VIP club, retail and a parking garage, will be completed in the fourth quarter of 2007. These improvements will help to alleviate long-standing capacity constraints and improve convenience of access, which we believe will allow us to increase our market dominance in Vicksburg.

In addition to our internal capital expenditure projects, we continue to aggressively pursue external expansion opportunities in an attempt to further broaden our overall distribution channels and increase scale that can support our long-term growth plans. We are focusing primarily on the potential acquisition of existing cash flow producing casino-entertainment properties in the United States that can be improved through the implementation of our development and operational expertise. We also selectively consider new development opportunities in existing and emerging domestic and some international markets. Longer term, we contemplate larger scale development projects in major national and international markets.


Based on our preliminary results of operations in October 2006 and our outlook for the remainder of the quarter, we currently estimate operating income of $35 million to $37 million, EBITDA of $58 million to $60 million (given anticipated depreciation expense of $23 million), interest expense of $13 million and diluted earnings per share of $0.24 to $0.26 for the fourth quarter of 2006.

The above estimates of operating income, EBITDA and diluted earnings per share give effect to the recognition of stock-based compensation expense, which we anticipate will result in additional after-tax expense of $2.0 million and adversely impact diluted earnings per share by $0.03 for the fourth quarter of 2006.

We are revising our financial guidance for the full year 2006. We currently estimate operating income of $164 million to $166 million (increased from our most recent guidance of $154 million to $160 million), EBITDA of $257 million to $259 million (increased from our most recent guidance of $248 million to $254 million) and diluted earnings per share of $0.97 to $0.99 (increased from our most recent guidance of $0.86 to $0.92). We currently anticipate $94 million of depreciation expense, $51 million of interest expense and $10 million of stock-based compensation expense for the full year 2006.

Gaming regulatory authorities in Iowa, Mississippi and Missouri currently publish, on a monthly basis, gross gaming revenue, market share and other financial information with respect to the gaming facilities, including Ameristar's, that operate within their respective jurisdictions. Because various factors in addition to our gross gaming revenue (including changes in operating costs, promotional allowances and corporate and other expenses) influence our operating income, EBITDA and diluted earnings per share, such reported information, as it relates to Ameristar, may not accurately reflect the results of our operations for such periods or for future periods.

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