ASCA Q1 PREVIEW AND YOUTUBE

We're below the Street for the Q and for the year. To some extent, ASCA is a victim of its own, early success in cutting costs.

 

 

ASCA reports earnings on Tuesday morning and we are projecting a $0.02 miss from the Consensus estimate of $0.26.  Our Q1 EBITDA estimate is $84.5 million of EBITDA, almost 4% below the Street.  For all of 2010 we are projecting EPS and EBITDA of $0.93 and $326 million, respectively, approximately 6% and 3% below the Street.  Given the Q1 positive surprises from PENN and PNK, a miss could be a disappointment.

 

ASCA maintains a portfolio of top notch and well run regional gaming assets.  Management cut expenses early and aggressively.  Unlike every other gaming operator, company-wide EBITDA margin actually expanded in 2009, by 340 bps.  That only makes further cost cuts more challenging, especially as the company is confronting new supply in St. Louis and a bridge closing in East Chicago.

 

The following is a "YouTube" from the Q4 earnings release and conference call.

 

GUIDANCE

  • "As you know, the Cline Avenue Bridge was closed by the Indiana Department of Transportation, it was indefinitely closed on November 13 due to the safety concerns. Probably, the earliest it can be, would be three to four years before there's a new roadway that would be opened up. Our best current estimate is there's probably an annualized EBITDA impact to the downside for the property (East Chicago) within the range of $10 million to $15 million from this."
  • "We anticipate a steady reduction of debt during 2010. As all of you know, we're generating substantial amounts of free cash flow from this point forward now that all of our major construction projects have been completed. We've obviously got to pay down the non-extended principal amount on the revolver later this year."
  • "Fixed charge coverage ratio has declined. This is a direct result of higher borrowing costs based on us restructuring our debt during 2009. We expect this ratio to continue to decline slightly in the first two quarters of '10. And then in July, the swaps that we currently have in place will expire and we anticipate seeing significantly lower interest rates if LIBOR stays in the range that it has for the last year, for the balance of this year."
  • "Capital spending for the first quarter will be $30 million to $35 million. We're weighting that what we'll spend in the year heavier in the first quarter. We still anticipate total capital spending to be somewhere in the $60 million to $65 million range for the year. "
    • Company clarifies during Q/A that the $60-$65 number is what they were going to put in place in 2010; the $70-$80 million forecast includes settlement costs on St. Charles and "little bit of payment left to our contractor in Black Hawk based on work done in 2009." 
  • On corporate expenditures, "we may see another slight increase in '10, but not material."
  • On Vicksburg market share, "with the way the economy is, the competitive environment, being in the 42% to 44% range is probably a reasonable ongoing expectation."
  • On Debt/EBITDA ratio, "By the end of the year, we would expect it to decrease by an additional 25 to 30 basis points for the current year."
  • "We're spending a little bit more in the first quarter because we're committed to keeping our assets fresh and a lot of our competitors are not doing what we're doing. We see it as a competitive advantage."
  • "Expectation is that dividends will remain flat, but as with all of the things where we spend our money, that continues to be a dynamically watched situation. Assuming that the business remains stable, I don't have any reason to think that the board won't continue to declare dividends at the same rate."

ASCA Q1 PREVIEW AND YOUTUBE - ASCA