ASCA 1Q11 CONF CALL NOTES

Big quarter all around. Street margins and accretion from refinancing/buyback need to go higher going forward.

 

 

“The first quarter of 2011 produced our best overall financial performance in the last two years. We find it very encouraging that all our properties improved year over year in Adjusted EBITDA and Adjusted EBITDA margin."

 

- Gordon Kanofsky, Ameristar’s Chief Executive Officer

 

HIGHLIGHTS FROM THE RELEASE

  • "Consolidated Adjusted EBITDA margin improved ...to 31.2% in the current-year first quarter, representing the highest consolidated Adjusted EBITDA margin since our acquisition of the East Chicago property in September 2007."
  • “Ameristar St. Charles is weathering the new competition well, with improvements in net revenues and Adjusted EBITDA on a sequential basis for the third consecutive quarter."
  • Debt: $1.49BN
    • "Prior to the refinancing closing on April 14, 2011 described below, we repaid an additional $15.0 million of debt on a net basis in the second quarter of 2011."
  • [Interest rate decrease] "The decrease is due mostly to the July 2010 expiration of our two interest rate swap agreements and a lower overall debt balance."
  • Capex: $10.9MM
  • "The repurchase of 45% of our outstanding shares of common stock and an estimated increase of only $6 million in annualized interest expense at current interest rates is expected to provide immediate accretion to earnings per share and free cash flow per share, excluding certain one-time costs.”
  • 2Q11 Outlook:
    • D&A: $26-27MM
    • Interest expense: $25-26MM (includes non-cash interest expense of $1.7MM) 
    • Tax rate: 42-43%
    • Capex: $10-15MM
    • Non cash stock comp: $4.5-5MM
  • FY11 Interest expense: $104-109MM (includes non-cash interest expense of $7MM) 

 

CONF CALL NOTES

  • Think that top line growth came from efficiency, marketing effectiveness, and quality of their properties
  • East Chicago improvements are partly attributed to normalized table hold  in the quarter compared to low hold last year last year. Continue to speak to the state regarding the bridge closure.
  • Kansas City: Clearly seeing some cycling out of of the recession. Improved their market share.
  • Council Bluffs: Reached its highest quarterly market share (we believe 39.5%) since the re-opening and rebranding of a competitor in 2006
  • Have controlled costs well and have taken steps to reduce volatility in their table game play
  • Pleased with cost controls at Blackhawk, which resulted in one of their best margin quarters
  • Improvements in the quarter were achieved despite a decrease in their promotional allowances
  • Returned to normal table game hold this quarter
  • Leverage at 3/31: 4.46x and fixed charge coverage: 2.19x
    • Fixed charge coverage ratio goes away in the new facility
    • Pro-forma for the transaction of net leverage 5.9x
  • Used about 40% of their EBITDA for debt reduction
  • From a FCF standpoint the transaction is better than neutral given the dividend savings on the reduced number of shares outstanding
  • Current stock comp is elevated due to the transaction and Neilson's stock comp. Should return to $3.5-4.0MM by 3Q
  • Expiration of the swaps will save them $8MM
  • They should be able to pay down $40-45MM of debt in 2Q
  • Their plan is to delever quickly, assuming a stable stock multiple - the retirement of debt should add several dollars per share of stock value
  • They are more likely to favor acquisition vs. greenfield projects and prefer NA to international markets. They believe that their superior margin structure provides them with the unique capability to make accretive asset acquisitions

Q&A

  • Capex for the year: $65-70MM including the start of the KC hotel
  • Taken steps to make sure that table game hold remains more stable.  While they looked for economic growth they planned for economic weakness, and so they continued to cut things that don't impact guest or employee satisfaction. Obviously, they have been more efficient on promotional spending as well.
  • 1Q is always their strongest margin quarter, they don't know if they will maintain those margins per say but margins should be good for the rest of the year
  • Don't see impact from gas prices
  • There weren't any real one-time benefits in the quarter.
  • They are not planning on selling any assets given the pricing environment out there
  • Share count - at YE the share count will be a little over 40MM but 33.5-33.6 will be the total reduced number of shares
  • They are seeing slightly better play from their long term existing players
  • HET is losing share to them because of their inability to keep their properties fresh
  • The mid 30% Blackhawk margin is probably a pretty good margin for that property

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more