Is this the most underappreciated company in gaming?
“Ameristar had another record-breaking quarterly financial performance, with new high water marks hit for Adjusted EBITDA and Adjusted EPS in a third quarter and the best trailing 12-month Adjusted EBITDA in the Company’s history,”
Gordon Kanofsky, CEO
CONF CALL NOTES
- Had river flooding in the quarter at Council Bluff
- Excluding the buyback, their EPS would still have been up 11 cents or 52% YoY
- Reduced their promotional expenses significantly which has helped the flow-through at their properties
- Guided to a 25% tax rate last quarter which they weren't unable to take and it's unclear that they will be able to take them. Their tax rate this quarter was fairly normal.
- Retired $63MM of debt in the quarter
- Used 65% of their Adjusted EBITDA to buyback debt
- 3.83% interest rate at quarter end based on the leverage grid
- $10-11MM non-cash interest expenses in 4Q
- Will only make one mandatory principal repayment at 4Q given their seasonal FCF needs in the quarter
Q&A
- Corporate OH - why so high in the quarter and why is next quarter stock comp expense so high?
- Had some one time refinancing expenses and some personnel changes that occurred.
- 4Q stock comp expense is also at a higher than normal run rate. Board has made a decision to extend options from 7 years to 10 years which adds a $3MM charge in the 4Q. The board has also seen fit to establish a retirement program for options which also added $3MM of one time expense
- They have cut $60MM of expenses permanently from their cost structure and believe that is why they are seeing such good flowthrough. Have seen some modest net revenue growth.
- There are some hold changes that caused the volatility in East Chicago - the fact that the slot floor is fresh helps them. The new casino is 40 miles away.
- There are some "copycats" out there in regard to their marketing campaigns but it's clearly not impacting them. Having better and fresher product helps.
- Kansas City is 25 miles from their property - they haven't made comments on the anticipated impact from that opening
HIGHLIGHTS FROM THE RELEASE
- "The year-over year improvement in net income is mostly attributable to efficient revenue flow-through driven by operating and marketing initiatives."
- "Notably, Council Bluffs improved year-over-year Adjusted EBITDA by $1.7 million (11.1%) on net revenue growth of $1.9 million (4.9%) while overcoming some operational inconveniences from flood conditions."
- "Our East Chicago property achieved a 16.1% year-over-year increase in Adjusted EBITDA despite a new competitor opening in Des Plaines, Illinois during the quarter."
- Net Leverage was 5.15x
- 3Q Capex: $19.1MM
- Stock buyback: Repurchased $0.2MM shares at $2.7MM in the 3rd Q and $0.3MM shares for $5.1MM from 10/1-11/2
- Guidance for FY11:
- D&A: $104.2 to $105.2MM
- Interest expense, net of capitalized interest: $106.4 to $107.4MM (incl. non-cash expense of approx $6.3MM)
- Tax rate: 41-43% (also for the 4Q)
- Capex: $65-70MM (predominately maintenance)
- Non-cash stock-based compensation expense: $22.3 to $23.3MM
