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Here are our notes from meetings in Las Vegas last week

Costs:

  • It looks like they have some more room to cut costs, unlike most regional operators
  • They have room to cut/close food outlets – too many amenities
  • It wouldn't take long to implement cuts
  • We think this could be the focus of the Q3 earnings call

General commentary:

  • Last year Labor Day weekend fell in August so it’s a tough comp. September will be better - look at August and September combined to see a real trend. Labor Day is a big weekend
  • Unemployment first, then gas are the major economic inputs
  • They think that the agriculture business is going to be down 38% and the effects of this will hit them
  • Jackpot is having a record year
  • No chatter of Nebraska legalizing gaming
  • Business isn't really improving - bumping along the bottom.  It’s just not employment rate but also that people are working less hours and, therefore, receiving less pay. 17.5% is the real unemployment rate
  • Win per admission has gone up but the admissions are down. They have lost the bottom end - so the number is inflated because it’s also not an apple-to-apple customer
  • ASCA is the only operator that has seen win per admission increase – because they are just not marketing to the bottom customer

Missouri:

  • They think that table games would have been 10% better in Missouri – buoyed by the loss limit removal - if not for the economy

Colorado:

  • Black Hawk- July was a substantial boost, August not as strong (holiday weekend)
  • The hotel will open September 29th

Capex:

  • Colorado was the last of the big capex
  • Construction costs haven't really decreased. Labor has decreased slightly
  • Council bluffs and East Chicago were the only other projects they ever spoke about - but based on HET results - there is no way they would do it (Chicago).  In Council Bluffs they would spend 100mm but they can't construct anything for that little
  • $50-$60mm in maintenance capex for 2009
  • 2010 will include a little deferred maintenance so capex is expected to be somewhat more substantial that year

Credit facility:

  • They still need to extend the agreement
  • Penn was lower than they thought. So they will pursue one shortly

East Chicago:

  • The 10th license in IL is 45 miles away from ASCA’s nearest property. They think it will be an immaterial event to them
  • IL unemployment increased there much more than in their other markets
  • They think that the Horseshoe impact has already been felt

Investment opportunities

  • Kansas - they already have $400mm invested in the Kansas City market so they are not interested
  • The tax rate is too high in other new jurisdictions
  • There are a few local assets in Vegas that are interesting but not cheap enough
  • Fontainebleau doesn't make sense and will cost 1.5bn to finish. It’s also in the worst location on the strip.  No walk traffic (across from Circus Circus)
  • ASCA would only buy something that's immediately accretive
  • They don't buy into the cross marketing benefit so much (look at Harrah’s)
  • They also wouldn't do anything until City Center opens
  • ASCA took a look at Ohio - taxes and license fee too high
  • They wouldn't be building new projects now (à la PNK). Banks don't like lending south of 5x-ish. They need the multiple to increase to create money. Their problem is the issue of losing the license
  • ASCA would pay 6x EBITDA for an asset if they could improve that EBITDA

Balance Sheet:

  • ASCA can add $6 of value in debt reduction alone over the next few years.
  • Would like to get to 3.5x leverage - no sooner than end of 2011.

River City (PNK) impact:

  • Very few customers come to ASCA from South County – ASCA is the most isolated
  • ASCA thinks that River City will do only $25mm in EBITDA - pay a few hundred million at most for that opportunity, not $250 million.