Solid management delivers solid quarter in soft environment



"The 2012 third quarter was one of Ameristar's most profitable quarters ever despite a slight decline in net revenues and Adjusted EBITDA,"


- Gordon Kanofsky, Ameristar's Chief Executive Officer




  • Had table game hold challenges in East Chicago.  Dialed back on the ineffective promotions introduced in 3Q.  Half of the decrease in EBITDA was due to low hold, and the other half was due to the promotional campaign.
  • The Cline Avenue bridge is being rebuilt over the next 2-3 years at no cost to ASCA.  It will be a toll road.
  • Kansas City and East Chicago attributed $3.5MM of the EBITDA decline in the quarter. 
  • Lake Charles project will allow for another hotel tower down the road if demand warrants it
  • Do not expect TX to legalize gaming in the near future. Gaming initiatives have never gotten out of the TX legislature. Texas legislature will meet again in 2013, even if it passes both houses, it would need to go to a vote - which would likely occur during an election year which isn't until 2016, and then it would take several more years to hand out any licenses.
  • Lake Charles will help them diversify dependence on Missouri, provide a 15% ROI, 
  • 4Q12 Outlook: 
    • Expect that 4Q will continue to be challenging with higher competition at KC, weakness in discretionary consumer spending, and closures at the 1-70 bridge near St. Charles
    • Stock comp: $3.3-4.3 (Q4); $16-17 (2012)
    • Tax rate: 40-42% rate for the 4Q and 27-28% for the year
    • $17MM on construction at Lake Charles in 4Q; capital spend for 4Q: $31.5-36.5MM
    • Net interest expense in Q4: $29MM
    • Corporate expense: ~$13MM
    • 4Q Weighted average share count: 33.5MM



  • East Chicago: Des Plaines has ramped up but other properties in the area increased promotional expenditures to compete
  • Springfield: There is talk that one or more proposals will go to the state level. There is some disconnect on Springfield making some decisions ahead of the state. Thinks that Jan/Feb will be when the city will negotiate agreements with host communities and then that would go to a city vote. Then, once they get a host community license, it will go up to the state.
  • Unclear whether they need financing in place or just show the ability to finance. 
  • Lapping the Kansas City property new competition:  when it laps, ASCA thinks that they will see a similar environment to what happened in St Louis. Doesn't think that the promotional activity will be too high - so it should be rational.
  • IL:  Government has indicated some interest in expansion
  • The 3Q was somewhat soft and the numbers reflect that.  Consumer cost of living likely increased more than consumer income increased. 
  • Springfield: If competitive conditions change, they will take that into account and will stick to their 15% hurdle   



  • "Our scale and diversification helped mitigate the impact from additional competition faced in two of our markets....our efficient operating model absorbed a $1.1 million year-over-year increase in development expenses in the third quarter, which were related to our Louisiana and Massachusetts projects."
  • "We will continue our pursuit of North American acquisitions and development projects that surpass our ROI hurdles and are within our risk tolerance, as well as other means to maximize long-term shareholder value, including debt reduction, dividends and stock repurchases."
  • "St. Charles overcame floor disruption from a slot system upgrade and street construction near our property. Both projects were completed in the third quarter of 2012. Maintenance on the I-70 bridge near our St. Charles property will commence in earnest in early November and is expected to negatively impact results for approximately one year, during which four of the bridge's 10 lanes will be closed."
  • "Jackpot's construction disruption related to a road repaving project on Highway 93 between Twin Falls, Idaho and Jackpot that concluded late in the third quarter and a hotel renovation affecting 21% of the Jackpot properties' rooms that was completed in late July 2012"
  • "New competition continued to impact Ameristar Kansas City"
  • "East Chicago's third quarter net revenues declined by $4.6 million (8.5%) year over year mostly as a result of low table games hold and increased competition in the Chicagoland market. A promotional program intended to counter East Chicago's new competitive environment contributed to an increase of $0.6 million (0.8%) in consolidated third quarter promotional allowances over the prior-year third quarter."
  • "Construction of Ameristar Casino Resort Spa Lake Charles began on July 20, 2012 and is progressing on schedule. The resort is being developed on a leased 243-acre site and will include a casino with approximately 1,600 slot machines and 60 table games, a hotel with approximately 700 guest rooms (including 70 suites). The cost of the project (including the purchase price) is expected to be between $560 million to $580 million, excluding capitalized interest and pre-opening expenses. We anticipate funding the project through a combination of cash from operations and borrowings under our revolving credit facility. We expect to open the resort in the third quarter of 2014."
  • "On October 23, 2012, we announced specific plans for our proposal to develop Ameristar Casino Resort Spa Springfield if we are awarded the license. Our plan includes a 150,000-square-foot casino featuring approximately 3,300 slot machines and 110 table games, including a poker room. Ameristar Springfield is expected to include a 500-room luxury hotel with 50 suites. We estimate the initial development cost of Ameristar Springfield would be approximately $910 million, which includes capitalized interest and pre-opening expenses and a license fee payment to the Commonwealth of Massachusetts. Ameristar's proposed budget also includes the $16.9 million paid earlier in 2012 to acquire the site and $58 million for planned traffic improvements to create easy access to the resort and alleviate current traffic problems in the area."
    • "The City of Springfield is currently conducting a process to select one or more casino proposals to be submitted to the gaming commission that is currently scheduled for completion during the first half of 2013. The gaming commission anticipates making decisions for the awarding of licenses in the first quarter of 2014"
  • Cash: $116.3MM; Debt: $1.9BN; Leverage: 5.01x
  • Capex: $34.4MM (including $15.2MM for Lake Charles)
  • "On Sept. 15, 2011, our Board of Directors approved the repurchase of up to $75 million of Ameristar common stock through Sept. 30, 2014. During the third quarter of 2012, we repurchased approximately 0.7 million shares of common stock at a total cost of approximately $11.1 million under the stock repurchase program. To date, we have repurchased approximately 1.0 million shares of common stock, or 3% of our outstanding stock, under the program at an average price of $16.67 per share, for a total cost of $16.7 million."
  • FY 12 Outlook: 
    • D&A: $106.6MM to $107.6MM
    • Interest, net of capitalized interest: $114.4MM to $115.4MM (includes $5.5MM non-cash interest)
    • Capex: $147-152MM, including $70MM for maintenance, "$31.9MM related to Lake Charles and construction costs, $29.8 million recorded for the fair value of a Lake Charles intangible asset and $16.9 million for the January 2012 Springfield, Mass. land purchase." 
    • Non-cash stock comp: $16-17MM
    • Corporate expense (ex. stock comp): $50.5-51.5MM


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