ASCA 3Q CONF CALL NOTES

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

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

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more