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Ameristar Casinos, Inc. (NASDAQ:ASCA)

Q3 2008 Earnings Call

November 10, 2008 4:30 pm ET

Executives

Gordon R. Kanofsky - Chief Executive Officer and Vice Chairman

Thomas Steinbauer - Chief Financial Officer

Analysts

Larry Klatzkin - Jefferies

Dennis Forst - KeyBanc Capital Markets

Steve Altebrando - Sidoti & Company

Justin Sebastiano - Morgan Joseph & Co., Inc.

Operator

Welcome to Ameristar Casinos' 2008 third quarter earnings conference call. (Operator Instructions)

During the course of this conference call, the company will state beliefs and make projections or other forward-looking statements regarding future events and the future financial performance of the company. We wish to caution you that such statements are just projections and expectations and that actual results or events may differ materially. I refer you to the forward-looking statements section in both the slide presentation and in the news release issued earlier today about the company's third quarter financial results, which also is available on the company's website.

In addition, the company will discuss EBITDA, adjusted EBITDA, and adjusted EPS, which are non-GAAP financial measures. A definition and reconciliation of these measures to the most comparable GAAP financial measures are included in both the news release and the slide presentation.

It is now my pleasure to turn the call over to Gordon Kanofsky, Ameristar's CEO and Vice Chairman.

Gordon R. Kanofsky

Thanks, [Melissa] and thank you all for joining us today. I'm here, joined today by Tom Steinbauer, our Senior Vice President of Finance and Chief Financial Officer.

Going to Slide 3, you'll see the coverage that we intend to talk about today. We'll do a discussion on our ballot initiatives update and the success of them, I'll talk about our Q3 overview and some updates on our strategic plans. Tom will then go into more detail on the Q3 financial results and review them with you as well as our balance sheet and some outlook data, and I'll come back for a few concluding remarks and we'll open it up to Q&A.

So with that, turning over to Slide 4, I'm extremely pleased to announce the passage of Proposition A and Amendment 50 in the states of Missouri and Colorado. These were very long-term efforts for our company as well as others in the industry. A lot of planning, time and effort went into them. It was a very large team of people that were involved in a variety of different ways, but I really do want to single out our Government Affairs Department at corporate, Troy Stremming and Matt Block, who just did an outstanding job of staying focused and diligent on these things and were very steady hands on the wheel.

We spent about $9 million investing in the coalitions that led the efforts to adopt these initiatives. We think it's going to be one of the very best returning investments we've ever made. The ROI on it should be outstanding.

As you know, we have leading properties in three of the country's top 30 largest metropolitan areas that will allow us to leverage these reforms - St. Louis, Kansas City and Denver. Obviously, we're adjusting our operations and marketing to take advantage of the initiatives.

Turning over to Slide 5, get a little more detail about what went into effect with the passage by the voters. In Missouri, Proposition A became effective immediately. There was a little bit of confusion under some of the legal standards in Missouri that got resolved a couple of days after the election.

As a result of that, we moved very quickly, the Gaming Commission moved very quickly, and gave approval on Friday morning to proceed with the operational enhancements and we got those in place within just a matter of a couple of hours, both for slots and for tables. I think there were some press reports out over the weekend that it was going to take a longer time period to free up the slots. I can't speak for anybody else in the market, but ours were freed up within a couple of hours.

As you know, the Proposition A eliminated the $500 loss limit as well as the mandatory boarding card requirement. As a result, though, the taxes on gross gaming receipts has risen from 20% to 21% and there's also a moratorium on new gaming licenses beyond those that are already in operation and those that are under construction.

In Colorado Amendment 50 give permission to the three casino towns, including Black Hawk, to each hold a local referendum. The local referendum can ask voters to allow up to 24/7 operations. As you know, we currently can only operate 18 hours a day. We have to be closed from 2:00 a.m. to 8:00 a.m. We also can authorize to increase the bet limits from the current level of $5 up to $100, and add roulette and craps.

And also, comparable to other tax increases in the State of Colorado, they now have to be set by a statewide voter referendum and not at the discretion of the Commission. Previously they were set annually by the Commission and could go as high as 40%, so we're very pleased to have that locked down.

The timing of the local referendum in Black Hawk is not yet set. I hope that it'll occur in the early part of 2009. Regardless, though, the operational enhancements can't go into effect any earlier than July 1, but we'll be ready to go forward with them assuming the referendum passes. And we're very pleased in looking at the Gilpin County results, in which Black Hawk is located, that it approved Amendment 50 by an almost 70% margin.

Turning over to Slide 6, I want to demonstrate to you the absolute importance of the passage of Proposition A in Missouri for us. We get about 50% of our EBITDA from the State of Missouri. We have two resort destination quality properties in the market that have been constrained by the loss limits and boarding card requirements. They're in two of the largest metro areas, and this will allow us to market them more effectively to all of our guests and particularly to highend players locally and throughout the Midwest.

But I want to really emphasize that there's a convenience factor here for everybody. This is not just about high limit play; this is about removing a lot of lines and hassle and burdens for people, as well as some people who prefer to gamble anonymously that will now be able to do that.

This also significantly enhances our competitiveness with neighboring Illinois casinos. I think everyone would agree that the facilities in Missouri, most of them are superior to what's across the river in Illinois. Illinois limits gaming positions to no more than 1,200 per facility. There's a smoking ban that's been in place since January 1st on a statewide basis in Illinois casinos. There currently aren't any smoking bans in place in the St. Louis market in Missouri, so the only real advantage that Illinois still has at this point is that they're able to extend credit.

Over on the other side of the state, with Kansas approving gaming, this will certainly better position us to withstand any potential competition that may come from there.

The first weekend in Missouri with loss limits off obviously doesn't constitute a trend, but we're very encouraged. We've had business volumes over the weekend that we hadn't seen since early July. And as a reminder, you know our conversations about promotional spending, that our July business volumes were probably somewhat artificially high because of the promotional spending that we were doing to try to drive incremental net revenues.

The table games drop was especially strong, but we also saw some improvement in the slot machines and we're very encouraged by these early results. We think Proposition A is going to be a wonderful thing for our company.

Turning over to Slide 7, the impact of the Colorado initiative, assuming the local referendum passes. We get 8% of our EBITDA currently from Black Hawk, but we don't have our hotel open yet. With that 536-room hotel opening in the later part of 2009 - hopefully in the third quarter is what we're projecting now - it should really significantly enhance our potential to increase the market penetration as well as our market share. Our property really will be about the only one in the entire market surrounding Denver that will be of a resort destination class.

So the increase in the bet limits, the operating hours and addition of games, and our hotel and the overall asset quality that we've already got in place should make our property much more appealing to metropolitan Denver-area guests who currently are flying to Las Vegas.

Turning to Slide 8, I want to update you on our strategic plan and give you an overview of our third quarter. The economy continues to struggle; there's headlines, as all of you know, on a daily basis about the difficulties in the economy. We found efficiencies without compromising the guest experience and we will continue to do so. We're not acting in desperation; we're ensuring that the business is run soundly and that the guests are well taken care of.

And with that, as Tom's going to cover in a little more detail, one of the things we're especially proud of is that our cost efficiency moves have enabled us to improve our adjusted EBITDA margins in the third quarter over the second quarter and on a same-store basis, year-over-year. And we accomplished this even with incurring a $1.7 million severance charge that is not taken out through adjusted EBITDA. So we're really proud of our performance in that area and we look forward to continuing to work on our margins and hopefully improving them even further.

We had about a $5.6 million reduction in net income year-over-year, but that's approximately equal to the after-tax increases in interest and depreciation that primarily resulted from the East Chicago acquisition. So all in all, it's a tough quarter for the economy, tough quarter for us, but we're holding our own and we're doing quite well. I'm very pleased with the performance.

On the labor side, as you know in August we had a reduction in force that is producing annualized savings of about $20 million. In East Chicago, with the opening of the Horseshoe Hammond and some adjustments in the marketplace there, we've also adjusted employment levels at the East Chicago property to match business volumes, so we've eliminated another 83 positions there last month. We eliminated 41 at the property in August, so that adds another $2 million in annualized savings, bringing the total to $22 million.

On promotional allowances, obviously the decrease we've talked about really couldn't begin in earnest in the beginning of the third quarter; it took us into August to start beginning feeling the effects. We got some more positive movement in that in September; we're going to see a lot more movement in the fourth quarter. Nonetheless, in the third quarter we decreased promotional allowances $2.8 million compared to the prior quarter.

So we're going to continue to manage the balance sheet and our cash flow as carefully as possible, we're going to do our best to remain in compliance with our senior debt covenants, and we're very pleased with where the business is heading, particularly on the margin side.

Tom?

Thomas Steinbauer

Thank you, Gordy. I'd just like to reiterate what Gordy has said, that only the actions taken by management over the last couple of quarters are starting to reflect in the performance of the company, as you'll see as we go through the numbers.

On Slide 9, net revenues increased 21.1% over 2007. This includes a $70 million contribution from East Chicago compared to $9.2 million for the 13 days we owned that property in Q3 of '07. On a same-store basis, net revenues declined 1.9%, a result of the progressively worsening economy and increased competition in the St. Louis market and the smoking ban in Black Hawk.

After factoring out ballot initiative costs, transition and re-branding costs, and pre-opening expenses, adjusted EBITDA increased 15.5% year-over-year. East Chicago accounted for $11.9 million of adjusted EBITDA in the third quarter of 2008 compared to $1.2 million in Q3 of '07.

And speaking to what Gordy was talking about as far as performance, on a same-store basis, adjusted EBITDA increased 0.2%. Adjusted EBITDA margin declined 1.2 percentage points compared to Q3 of last year, but on a same-store basis adjusted EBITDA margin increased 0.6 percentage points this year.

Going to Slide 10, this slide shows our sequential performance. As Gordy previously mentioned, our adjusted EBITDA margin increased 1.4 percentage points in Q3 compared to Q2, which demonstrates that we're holding our own in these very difficult economic times. It also underscores Gordy's earlier comments about making promotional spending and work force reductions necessary to improve margins.

Covering some specific property highlights on Slide 11 and 12, we'll start with Vicksburg. Recently completed expansion drove market share to 51.3% in Q3. Net revenues and EBITDA increased year-over-year. We opened two new restaurants related to the expansion in Q3 which essentially complete that expansion project. Market dynamics have changed slightly because of the opening late last month of a competing $100 million 80-room casino hotel in Vicksburg, but we remain confident that our superior property will continue to dominate the market.

In St. Charles we saw a slight decline in market share. Market share decreased 0.7 percentage points in Q3 year-over-year because of the Q4 '07 opening of a competing hotel/casino in downturn St. Louis. Net revenues were up 2.8% over Q3 '07, primarily because of our new hotel and related amenities. However, adjusted EBITDA did fall 4.4% due to higher costs associated with operating the new facility.

The hotel, however, has enabled us to counter the impact of the new competition, but the struggling economy has kept us from realizing its full potential. We believe passage of last week's ballot initiative will enable us to market the hotel in the way we originally contemplated when we made the investment.

Going on to East Chicago, market share dropped because of a major expansion by our primary competitor in the third quarter. East Chicago contributed EBITDA of $9.7 million, adjusted EBITDA of $11.9 million in Q3 of '08. As Gordy mentioned, in response to increased competition we made additional labor reductions last month and anticipate annualized savings of approximately $2 million from this proactive action.

Moving on to Slide 12, I hit some Black Hawk highlights here. The market and our property continue to be hurt by the smoking ban and struggling economy. The market contracted by approximately 13% year-over-year. For Q3, net revenues decreased 12.5% at the property and EBITDA declined approximately 21.5% compared to the same period last year.

We are on schedule to open the 536-room hotel, rooftop pool and spa in Q3 of '09. Reinforcing what Gordy mentioned, assuming we are successful in our efforts to have the local referendum approved in Black Hawk, the new hotel and spa will make us the only true destination resort in the Denver gaming market. Also pictured on this slide is our 33-story hotel and the living room of one of our model suites. The hotel was topped off in the last week of October.

Moving to Slide 13, let's hit some of the key balance sheet statistics. Third quarter cash was $68.2 million. This is a $30 million decline from year end, which is reducing - our cash on the balance sheet has obviously our position in what we've had to borrow this year. Construction in progress decreased almost $216 million from year end in 2 '07 to almost $145 million. This was primarily due to the completion of the St. Charles and Vicksburg expansions.

Total debt decreased $30 million to approximately $1.62 billion at the end of the third quarter compared to 12/31 of '07. We saw an improvement on our senior leverage ratio at the end of the third quarter to 5.06. We're required to have a 5.25 senior leverage ratio. Our fixed charge coverage ratio was 2.37 versus a required ratio of 1.25. We expect to remain in compliance with all debt covenants in Q4. Subsequent to Q3 we borrowed an additional $30 million under our revolver.

Under certain circumstances, our debt facility permits us to incur subordinated debt of up to $500 million subject to maintenance of required leverage ratios. We are constantly monitoring the credit markets and intend to take action to improve our credit flexibility when the markets improved.

Our Board of Directors currently do not intend to declare a dividend in Q4 because the credit markets continue to remain tight. The Board of Directors will reevaluate in Q1 of '09, and the expectation is that the dividend suspension will be temporary.

We entered into another swap in October. This one is with U.S. Bancorp. It's for $600 million for a term of 21 months. This particular swap fixes our interest rate for the $600 million at 4.73% over the term. This assumes that our add on stays at 1.75%. We now have $1.1 billion of swap debt, all that matures in July of 2010 and gives us a weighted average interest rate on that $1.1 billion of 4.83% with the 175 basis point add on.

Going on to Slide 14, we're still estimating share-based compensation; federal and state taxes to be at the same level that we were looking at at the end of last quarter, excluding the effect of the East Chicago impairment that was taken in Q1 of '08.

We still continue to look at CapEx spending being in the $250 to $260 million range. This will include maintenance CapEx of approximately $35 to $40 million.

Net borrowings for the year are estimated to be in the range of $10 to $15 million.

And lastly, interest expense will be approximately $75 to $77 million for the year. This is down from previous estimates of $79 to $84 million because of the lower anticipated average borrowing interest rate and we have a lower-weighted outstanding debt balance at this point in time.

At this point I'll turn the call back over to Gordy for some more discussion on the outlook of the company.

Gordon R. Kanofsky

Thanks, Tom.

The economy, as we've talked about, is challenging the entire industry, including us. I think we've taken some very proactive steps to manage our business as efficiently as possible. We'll continue to look for other things where we can implement margin improving measures that will position us not only to get through this but also position us to have a very strong performance once the economy begins to improve.

I think the industry is sort of painted with a broad brush these days. There's a lot of companies that have very high debt levels and the like, and I think we are managing our balance sheet very prudently. We look to get through this downturn successfully. I hope that we will do so and believe that we can.

And we've got a lot of opportunities for continued growth with the recently passed ballot initiatives in Missouri and Colorado. Those three properties that we've talked about comprise approximately 60% of our current EBITDA, and we look forward to short-term as well as long-term growth from the Missouri one, and hopefully by the middle of next year and with the completion of the hotel in the third quarter of '09, see some very significant growth out of the Black Hawk property as well. And certainly with the permanent nature of these ballot initiatives, when the economy improves there should be some very strong growth for all three of those properties.

So we're very encouraged about what we see in our business. We do recognize the difficulties of the economy, but we think there's a lot of reasons to believe that we're going to be one of the successful ones to get through this and move ahead very successfully.

Before we open the call to questions, I do want to remind everybody that I'm here in my capacity as the CEO of the company and not as the co-executor of Craig Nielsen's estate, so we'll just be limited ourselves to questions directed to management.

And with that, we're happy to take your questions. Melissa?

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Larry Klatzkin - Jefferies.

Larry Klatzkin - Jefferies

A couple questions. One, [inaudible] interest rate swap, interest expense next year of like 78 after capitalized sound in the ballpark?

Thomas Steinbauer

Yes, I would say that's reasonable at this point in time based on what we know about the credit markets. I mean, Larry, obviously that could change if the high yield markets open up and we're able to do some sub debt, which would obviously be at a higher rate than we have on our senior facility right now.

Larry Klatzkin - Jefferies

How about CapEx next year - $140, $150?

Thomas Steinbauer

In that range. We intend to have about $80 to $90 million left on Black Hawk by year end. So I guess at this point in time, in that $40 to $50 million range of maintenance CapEx again for next year, obviously subject to change based on the economy.

Larry Klatzkin - Jefferies

And then as far as looking at Missouri, you had a couple of responses from your competitors. Harrah said it didn't really do anything for anybody and Pinnacle talked about how they're going to send people and hire marketing and spend the first quarter really ramping up, not have a lot of gains and then see some real gains second quarter on.

You guys, again, you're probably the two best facilities in the state. What's your feeling, what kind of revenue gains could we be looking at?

Gordon R. Kanofsky

Well, I don't think we're in a position at this point to try to quantify it, Larry, but we appreciate your compliment about the quality of our assets. I think Harrah's obviously did not participate in the funding of the campaign. You'll have to talk to them about their thinking about it. We think it's a very significant boost. And in terms of Pinnacle's approach, obviously they seem to be targeting the high end. We think there is significant high end play that can be generated from our properties in Missouri, both St. Louis and Kansas City.

But as we said during the direct remarks, this is a major convenience factor for all guests, no matter what their level of customer is. If you remember some of the earlier days where Iowa actually had the cruise and the boats went out or in Indiana, where there were limitations on when you could actually enter the vessel as well as there were earlier in Missouri, all of those things constrained the ease of the guests.

If you had a retail store that would only let guests in the first half an hour of every two-hour period, they're going to have worse revenues. And it's not just people buying furs and diamonds; its people buying daily staples, too. This is a major, major improvement in convenience for all guests in Missouri, and we think it's going to be a great boost for our company as well as everybody else in the state.

Larry Klatzkin - Jefferies

And the Vicksburg since the new competitor opened up, how's your market share been? You were 51.3 before it opened, but what are we looking at right now? I know it's early; it's only been open a couple weeks.

Gordon R. Kanofsky

It's only been open a couple of weeks. The data isn't published except on a monthly basis, and we actually can only determine in Mississippi what our market share is. We don't have the ability to determine what others in the market's market share is.

But I want to emphasize we were at the property. We had a Board meeting in Vicksburg last week, so we got to see all the competitors. Riverwalk's a decent facility, but the fact of the matter is the improvements that we've made at Vicksburg allow it to compete regionally, not just locally. So we're not only competing with the local casinos in Vicksburg; we're competing with the Gulf Coast, we're competing with Tunica, Shreveport, Bossier City, and we think our property there can certainly hold its own against all of those locations. And we expect that our property will continue to do quite well and that Riverwalk's impact will probably be disproportionately felt by some of the other local competitors in Vicksburg.

Larry Klatzkin - Jefferies

And the last question - housekeeping, Tom - what's for you a proper level of cash on hand at any time, realizing you may take it up at the year end?

Thomas Steinbauer

We can operate pretty much at $60 million if we have to.

Operator

Your next question comes from Dennis Forst - KeyBanc Capital Markets.

Dennis Forst - KeyBanc Capital Markets

I wanted to understand where some of these cost items are in the income statement. The severance of $1.7 million, is that at the property level?

Thomas Steinbauer

Yes, it is.

Dennis Forst - KeyBanc Capital Markets

And then the $5.2 million, the lobbying, is also split between Colorado and Missouri?

Thomas Steinbauer

No. The lobbying or the ballot initiative costs we charged to corporate. And the severance costs were split among all of the entities, and that also includes corporate.

Dennis Forst - KeyBanc Capital Markets

And then there's another $4 million for this quarter in lobbying, correct, that'll be part of corporate?

Thomas Steinbauer

It's a little less than $4 million. We had some of those costs in the second quarter.

Dennis Forst - KeyBanc Capital Markets

And what about severance in the fourth quarter, will it be smaller than the third quarter?

Thomas Steinbauer

Well, for the East Chicago adjustment, certainly it'll be a lot smaller, yes.

Dennis Forst - KeyBanc Capital Markets

Are there any other severance or layoffs planned, maybe in Missouri, where you don't need as many people to monitor the incoming and outgoing guests?

Thomas Steinbauer

Well, we still need to keep the guests happy, so I think a lot of those people that were doing functions related to filling out cards and the like, they'll now be able to focus on providing a higher level of guest service and doing more for our guests than just greeting somebody that's been standing in line for 45 minutes on a Saturday night to get a card.

We constantly are adjusting our costs to our business volumes, and we've done a lot of things, I think, that are unrelated to business volumes. A significant amount of the things that we have put in place since June have to do with looking at the business with some different eyes, some fresh eyes, kicking the tires a little harder and figuring out ways to operate a little smarter. So it's not just about the economy; there's some things that we've done that we think make us more nimble and more efficient. We certainly consolidated a lot of management functions at the properties as well as within corporate, which has speeded up our decision-making, empowered people and allows us to hold them more accountable.

Dennis Forst - KeyBanc Capital Markets

And then on re-branding, those costs are pretty much done now for East Chicago?

Thomas Steinbauer

Yes.

Dennis Forst - KeyBanc Capital Markets

So there won't be any more?

Thomas Steinbauer

Nothing measurable, no.

Dennis Forst - KeyBanc Capital Markets

And then the covenants, for covenant purposes, how do you define EBITDA? Do you get to back out these re-branding and pre-opening costs and things like that?

Thomas Steinbauer

One-time type expenditures are backed out of EBITDA for our calculation.

Dennis Forst - KeyBanc Capital Markets

Well, that would clearly be the impairment charge.

Thomas Steinbauer

Obviously, the impairment charge is not in there.

Dennis Forst - KeyBanc Capital Markets

Would lobbying or re-branding be considered one-time?

Thomas Steinbauer

Yes. Ordinary lobbying is not. The ballot initiative costs, which is not really lobbying per se but for tax purposes is treating as a lobbying expense, that certainly is one time.

Dennis Forst - KeyBanc Capital Markets

Would pre-opening qualify?

Thomas Steinbauer

Yes. Yes, pre-opening, integration, re-branding, ballot initiative, and especially since the two initiatives won, we obviously aren't going to be spending money on them in the future.

Dennis Forst - KeyBanc Capital Markets

And then lastly, on the dividend, you said in the presentation that it would be reevaluated the first quarter and it's only a temporary, but can you give us some of your thinking of why it was suspended and what it would take for you to reinstitute it?

Gordon R. Kanofsky

Well, Dennis there's a little bit of irrationality and complexity in the credit markets, as you know. And we were hopeful that we would be able to find a window over the last several months that would allow us to restructure some of the senior debt into subordinated debt and pay down the senior debt level, which would give us a much safer level of cushion against the ratio. We obviously have a decent amount of cushion right now; we want to maintain and enhance that.

None of us have crystal balls. Obviously, we just had an election. There's going to be a lot of change, as Obama has promised. We just thought it was kind of prudent at this point in time to tighten the belt one notch and take another two or three months and see how things look from there. We do expect it to be temporary. And we're cash flow positive; we do expect we'll be able to get the Black Hawk Hotel fully built and stay in compliance with the covenants, but we just wanted to be a little safe rather than perhaps a little sorry.

Dennis Forst - KeyBanc Capital Markets

Then in 2010, assuming things don't change dramatically, you'll be able to pay down some of that debt until you need to renegotiate the bank deal?

Thomas Steinbauer

Oh, we should be able to pay down $115 to $145 million of debt depending on how the economy turns around and that affects our EBITDA.

Operator

Your next question comes from Steve Altebrando - Sidoti & Company.

Steve Altebrando - Sidoti & Company

The corporate expense looks like, if you back out the referendum, was below $11 million. Is that kind of a sustainable rate?

Thomas Steinbauer

There are certain other costs in there that fluctuate that are somewhat driven by the economy related to benefit costs. So it's possible those could increase in the future again; they've declined here recently. But yes, I think that that's a fairly reasonable number for you to be looking at going forward.

Steve Altebrando - Sidoti & Company

And how about a GAAP tax rate of 2009 ex referendums?

Thomas Steinbauer

The GAAP tax rate?

Steve Altebrando - Sidoti & Company

Yes.

Thomas Steinbauer

Well, basically our rate is the federal rate of 35%, with about 7% to 8% from the states on a GAAP basis.

Steve Altebrando - Sidoti & Company

And then it looks like October numbers were out for Indiana and you didn't take too much of a hit in October. I just wanted to get a little color, if you were promoting to get there or that's just the way it fell out.

Gordon R. Kanofsky

We've not done anything extreme on the promotional side. As we've talked about, we're actually kind of ratcheting down from some of the levels that we had had earlier in the year when we were trying to drive people to the property and hoping to get them to open up their own wallets a little bit. That didn't work out too well, so we've made those adjustments.

I think what's happening is the people are sampling Harrah's or the Horseshoe and they're still realizing that there's some benefits and quality at the Ameristar property. And one of the other competitors in the market is struggling a bit more and I think they took a more significant hit than we did.

You know, Chicago's a very deep market and I think it's been, as I've said in the past, I think it's taken a little bit more of a whack than some of the other markets in this economy, and it's going to take a little bit more time, I think, there. We don't really know ultimately how it's going to shake out from the Horseshoe between market growth and adjusting in market share. We obviously think that in the short term there's probably been a little bit more market share adjustments than there has been growth in the market, but longer term we expect that to change.

So we're in there for the long haul and we've got a nice property and a competitive niche, and we'll continue to look to find ways to expand and enhance that in a rational way.

Operator

(Operator Instructions) Your next question comes from Justin Sebastiano - Morgan Joseph & Co., Inc.

Justin Sebastiano - Morgan Joseph & Co., Inc.

Most of the questions have been answered, but as far as, I guess, Kansas City and looking at the property level there, is there something in that EBITDA, an expense in that EBITDA number, or is that a true down 12% year-over-year, the $16.9 million?

Thomas Steinbauer

That's a true number. There's nothing abnormal - just severance, but that's not really that material an amount.

Justin Sebastiano - Morgan Joseph & Co., Inc.

Because it looks like Kansas City got hit probably more so than the other properties, I guess ex Black Hawk and East Chicago understandably. Did anything particularly go on in Kansas City there as far as promotions? I know you guys are cutting back on that, but did anything happen there specific to Kansas City?

Gordon R. Kanofsky

Well, you know, there are some dynamics in the marketplace from smoking bans that could be affecting things. The City of Kansas City, which affects both Ameristar and the Isle of Capri has a smoking ban effectively for the whole property except the casino floor. I think in North Kansas City there's a ban on smoking in restaurants, but over in Riverside there were no smoking bans at all. So there could be some adjustments in the market due to smoking.

Operator

Your next question comes from Dennis Forst - KeyBanc Capital Markets.

Dennis Forst - KeyBanc Capital Markets

A simple one on Black Hawk: What happened to Black Hawk's market share in the quarter, if you could just give us a number, a change year-over-year?

Gordon R. Kanofsky

It's relatively flat with what it was last quarter.

Dennis Forst - KeyBanc Capital Markets

Second quarter, you mean, or year ago quarter?

Gordon R. Kanofsky

No, second quarter.

Dennis Forst - KeyBanc Capital Markets

Okay, sequentially it was relatively flat.

Gordon R. Kanofsky

It was relatively flat.

Dennis Forst - KeyBanc Capital Markets

And I think that's somewhere in the mid-16s or something like that?

Gordon R. Kanofsky

Correct.

Thomas Steinbauer

Yes, that's correct, Dennis.

Operator

At this time there are no further questions. Are there any closing remarks?

Gordon R. Kanofsky

I'd just like to thank everybody for participating in the call, and we look forward to probably the end of January having a further conversation with everybody about our full year results and where we see things headed for 2009. Thank you and have a good day.

Thomas Steinbauer

Thank you.

Operator

Thank you for participating in today's conference call. You may now disconnect.

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Source: Ameristar Casinos, Inc. 3Q08 (Qtr End 9/30/08) Earnings Call Transcript
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