Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)

Ameristar Casinos, Inc. (NASDAQ:ASCA)

Q2 2009 Earnings Call

August 05, 2009 11:00 PM ET

Executives

Gordon R. Kanofsky - Chief Executive Officer and Vice Chairman

Thomas M. Steinbauer - Senior Vice President of Finance, Chief Financial Officer, Secretary, Treasurer

Analysts

Larry Clapton - Chasterlane

Ryan Worst - Brean Murray, Carret & Co.

David Katz - Oppenheimer & Company

Dennis Forst - KeyBanc Capital Markets

Joseph Greff - J.P. Morgan

Stephen Altebrando - Sidoti & Company

Justin Sebastiano - Morgan Joseph & Co Inc

Jane Pedreira - Clear Sights Research LLC.

Operator

Welcome to Ameristar's 2009 Second Quarter Conference Call. I would like to remind you today that today's call is being recorded. All participants have been placed in a listen-only mode and that the floor will be open for questions following the presentation.

Before we get started, I would like to remind you that a slide presentation is available on Ameristar's website www.ameristar.com. It can be located by clicking on the About Ameristar link on the home page, then clicking on the Investor Relations link in the left hand column, and then clicking on the Presentation slideshow link under the quarterly results conference call section.

This presentation corresponds with comments that will be made in the call and provides additional useful information with regard to financial result. During the course of this conference call, the company will state beliefs and make projections or other forward-looking statements regarding the future events and the future financial performance of the company.

We wish to caution you that such statements are just projections and expectations, and the actual results or events may differ materially. I refer you to the forward-looking statements section, in both slide presentation and in the news release issued earlier today about the company's second quarter financial results, the latter of which is available on the company's website.

In addition, the company will discus 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. Please go ahead, sir.

Gordon R. Kanofsky

Thank you. And I'd like to welcome all of you to our second quarter 2009 earnings call. I'm going to start up with slide number three for those of you that are following the presentation. Kind of predictably the slide three covers what we're going to discuss today, and I don't think there's any real surprises of the topics that are on that slide.

So I'll start out with a few highlights, get into some of the details of second quarter financial results. I will talk about the early results from the regulatory reform in Colorado and give an update on our hotel that is opening there very soon.

Then I'll turn the call over to Tom Steinbauer, our CFO, who is here with me today to cover balance sheet and other financial data and details of our recent debt restructuring as well as some of the more granular estimates that we give typically each quarter for the following quarter. And then, we'll turn it over to you and hear what's on your mind and go to Q&A.

So turning over to slide four, I'll start with the highlights. Very pleased to report that we had a record second quarter adjusted EBITDA. We had a solid quarter with a definite improvement in year-over-year adjusted EBITDA margins. Five properties improved their adjusted EBITDA margins in the quarter. Four of them achieved particularly strong margin growth, those being Jackpot, Kansas City, East Chicago and Black Hawk. The remaining two properties maintained margin levels, just hit the volume all the way down.

So we got a second line here just in case we got interrupted. But it's giving us some feedback, so just trying to get that off.

Also, the early results since the July 2 implementation of regulatory enhancements in Colorado, we had a 27% year-over-year increase in gross gaming revenue during the month of July at Black Hawk. We think that gives us a lot of strengthening to build on when our hotel opens on September 29.

Also, as Tom will discuss, we have successfully restructured half of the outstanding revolving credit facility debt maturing in November 2010. We think we're well-positioned to address the rest of the balance for refinancing by the time of that maturity.

The financial markets, as all of you know, continue to show some strength and rebounding for financing capital, gives us a lot of confidence going forward there will be successful in our balance sheet plan.

So to get into some more of the details of the quarter. Turning over to slide five. As we've talked about in some of the recent calls, there is really four key metrics that we use in looking at our business and measuring our own success. The net revenues, adjusted EBITDA, adjusted EBITDA margin and adjusted earning per share. We continue to anticipate some decreases in market share in some quarters, based on the gross gaming revenues, not the net revenues.

As we've discussed in the second and third quarters of last year, we had pumped a lot of promotional spending to try to really keep people coming in the doors in the face of the weakening economy and the hopes that they would continue to spend their money in addition to the promotional dollars that we can sent them. As we reported to you before, those weren't terrible successful and they decreased profitability. We have since then ceased those. We've changed our whole marketing campaign in that regard, and it's led to increased profitability. So we're very happy with the result that we are getting.

Stripping out the promotional spending and getting into their net revenue line, we had 5.9% decline year-over-year. We think that's largely attributable to the recession and pretty much similar to what others are seeing in other markets. So in other properties.

But the good news is our adjusted EBITDA was up 6.5% year-over-year. That improvement is in large part attributable to the costs that we've stripped out of the business, about 45 to $55 million on an annualized basis. Those savings started to kick-in and ramp up beginning in the third quarter of '08. I think we're pretty fully seeing those in the second quarter of 2009.

Our adjusted EBITDA margin improved an impressive 3.1 percentage points year-over-year to 26.9%. And that's notwithstanding a 1 million charge that affected it, related to the termination of a management contract for a nightclub that we have at our St. Charles property that we're now operating ourselves.

So the strength of these results gives us a lot of confidence with the strategic initiative we've been putting in place over the last nine months are seriously going in the right direction and strengthening the company and improving the profitability.

Our adjusted EPS declined slightly year-over-year from $0.33 to $0.32. That's mainly because of the higher borrowing costs associated with the restructuring the debt to address the upcoming maturity of the revolving credit facility.

For the six month data, our adjusted EBITDA and adjusted EPS, both experienced double-digit percentage improvements. That's 13% roughly for the adjusted EBITDA number and 30% for the adjusted EPS. And that's despite the 4.3% decrease in net revenues.

So we had an adjusted EBITDA margin increase year-over-year for the six months of 4.4 points. I really think that our margins are leaders within the industry. We look at a lot of our competitors and how they perform, and obviously gaming taxes are variable from jurisdiction to jurisdiction. So it's not a true. You have to back out those to get a true metric. But I think that our margins are certainly, if not, the best in our peer group and peer competitors certainly right in there with the leader.

Turing over to slide six, we get our photo -- recent photo of our Black Hawk Hotel there, going up against the back of the casino. I know that's looks a little bit like a rendering to some of you. But it’s just a beautiful clear day in Colorado in the mountains and that's actually a photograph, not a rendering, and we are pleased with how the property is looking.

As I mentioned, we experienced a 27% increase in gross gaming revenues year-over-year during the month of July. Most of that impact is from the 24/7 ability to operate and increase in maximum bet limits to a $100 that went into effect from Amendment 50 in Colorado on July 2. The additional of craps and roulette have also been well-received. And we have also added more blackjack tables and have seen an increase in poker and slots played as well.

These initial results have actually exceeded the expectations that we had when we began the support for the (inaudible) initiative. And I think it's impressive to note that our 27% year-over-year increase is about seven points higher than what the Denver Post has predicted for the state-wide lift in a edition that they published on Sunday.

We're also very pleased with about 80% of our increased revenues have passed through to the EBITDA line. A lot of that is due to the gaming reform, but it's also very much due to operational efficiencies that we have put in place at the property. And I think that kind of a flow through shows that when the economy improves in our other markets, we actually see some huge upside in profitability. And we're hoping and gearing up for that and when the economy turns, we think we should be sitting very well.

Although, we're pleased with the initial results out of the regulatory reform in Colorado and we expect we'll continue to see strong performance, we don't necessarily expect to sustain this level of year-over-year percentage increase as we did in July.

In addition to other factors, such as sort of a honeymoon period from the adoption of the initiative, July is typically one of our best months in Black Hawk. So we don't think it would be reasonable for anybody to extrapolate the results of this first month over the next 11.

But we're very pleased and encouraged so far, and it bodes very well for the opening of our 536-room hotel next month on the 29th of September.

Let's look at a few pictures of the hotel, turning over to slide seven. This is a standard king room. The project remains on budget with approximately $235 million. We'll open it on September 29. Everything will open at that time, except the pool, which might lag a week to two weeks, but will certainly be open by the time of the grand opening on October 8.

The hotel is going to have 472 standard rooms and 64 suites. Every room and suite will feature a plasma-screen TV, separate tubs and showers, and marble foyers on the entries.

All of the suites will have whirlpool baths and views of the Rockies. About two-thirds of the suites will feature double-sided fireplaces, between the living room and the bedroom.

The other amenities that are coming into our Black Hawk property, include the Black Hawk's only hotel swimming pool. That'll be up on the rooftop of the hotel. The pool deck will be both indoor and outdoor, with the moveable windows. So we have flexibility for the climate. They'll be heated patios out there for the cooler weather. And we'll also have a full service day spa and fitness center, about 10,000 square feet of event and meeting space. And we'll be opening our new casual restaurant in the casino to round out the mix with the stake house, the buffet and the deli.

Turning over to slide eight, there are some pictures of two of our three kinds of suites. We got the spa suite and a mountain pine suite. There is about 40 of the spa suites, there're 900 square feet approximately. They have a very open design, with the living room and sleeping areas, there as you can see separated just by the fireplace. But that opens on the both ends.

The whirlpool bath is framed by an oversized window looking at over the Rockies. There's a wet bar in the foreground of that picture as you can see. We also have very beautiful bathrooms and the suite also has a powder room. It should be very pleasing to our guests. And there will be two 42-inch plasma-screen TVs, with high-definition programming.

In addition to the 40 spa suites, we have 22 mountain pine suites. These are a little bit larger, about 1100 square feet. And a sort of an open design they have actually separate living rooms and bedrooms, with oversized corner windows surrounding the whirlpool bath. We'll also have two presidential suites that are significantly larger and more luxurious than the rest of the suites.

So we're very encouraged about the hotel. We think it will do a great job in conjunction with the amendment 50 reforms of allowing Ameristar Black Hawk to achieve its true potential. Something we talked about in 2004, when we acquired the property. I'm very pleased now to be able to execute on the final stage of the --

Tom, over to you.

Thomas M. Steinbauer

Thanks Gordy.

Moving on to slide nine, give you some balance sheet data. We did finish the quarter out with $94 million and construction in progress increased 59 million. Again, we didn't incur any borrowing against the revolver during the second quarter to accommodate all of our expenditures. The CIP is now 235, almost all of its Black Hawk. Debt did increase 17.4 million, as a result of the bond offering we did in May of this year.

As Gordy mentioned, we recently refinanced half of the outstanding revolver credit facility raising $650 million on a gross basis in a private offering. The interest rate was 9.25, the maturity date's in 2014.

Of the total 500 million principal amount of the notes were sold at a price of 97.097 of the principal amount. And a 150 million principal amount of the notes were sold at par which is 9.25.

The net proceeds of 620 million were use to repay portion of the outstanding revolving loan from a reduced revolving loan commitment under the company's senior secured credit facility that matures in November of 2010.

At June 30, 2009 the face amount of our outstanding debt was $1.68 billion. That included about 647 million on the revolver. It does -- excluding the discount of approximately 14.2 million related to our senior unsecured notes, takes us down to balance of 1.666 billion basically. The repayment of a portion of the outstanding revolver resulted in a write-off loss. That's recorded in the income statement this quarter of 5.2 million on retirement of debt.

Debts restructuring provides significant improvement to our balance sheet. And I believe positions us well to address the remaining balance before November 2010 maturity.

Net borrowings, because of the new debt facility, did increase by $29 million. Leverage ratio was still below 5 at 4.91 times, which continues to allow us a reduction on the add-on to the revolver. Fixed charge coverage ratio was slightly over three times, well above what's required by our loan covenants.

We anticipate that our leverage ratio will continue and improve, as we move through the balance of the year. However, our fixed charge coverage ratio is expected to decline slightly due to the increase in interest payments resulting from the bond offering.

Moving to slide 10. Give you some information related to the third quarter. We anticipate non-cash stock-based compensation expense to be 2.5 to $3 million. The federal and state income tax rate should still be in 43, 44% range.

Total capital spending is anticipated to still be in 30 to 35 million dollar range, with probably around 18, 19 million of that going toward Black Hawk to wrap that up, as we as we approach the September 29 opening. Net interest expense in the third quarter of '09 will be higher than Q3 of last year because of the debt restructuring.

The anticipated average interest rate going forward will be approximately 7.5%, which is still relatively low despite the refinancing. Non-cash interest expense is expected to be 2 to $3 million for the third quarter.

There will continue to be some capitalized interest probably in the 3 to $4 million range in the third quarter, but that will end. And fourth quarter one that will be in a pure interest expense number, which will probably approach around 30 million of quarter going forward starting in the fourth quarter.

Our Board of Directors last month also declared a dividend $0.105 per share, which was based on July 27. We paid two dividends so far this year and anticipate the Board will authorize a total of four in 2009.

That concludes our formal presentation. Gordy and I are now happy to take any of your questions.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question is from the line of Larry Clapton with Chasterlane .

Larry Clapton - Chasterlane

Hey. I hope I won you guys a bet.

Gordon Kanofsky

Hi Larry. The new phone seems to work as well as the old one.

Larry Clapton - Chasterlane

Oh yeah, oh yeah. Couple of questions, one here. When you have the hotel and everything going in Colorado, what kind of potential do you see at that place? What would be your very happy number, as far as bottom-line for that property?

Thomas Steinbauer

Well, that's I mean, historically what we've talked about is a return on our investment is around 15-16% there. And if you look at our total investment with the project we're just completing at 235 million. We're approaching about 440 -- 430, $420 million of total investments. So I guess you could take those two numbers and kind of come up with your own number.

Larry Clapton - Chasterlane

Alright, now that's helpful. You've done a great job cutting expenses and bringing up margins. Do you guys have a lot more room to improve margins throughout the company or are we getting closer on that?

Gordon Kanofsky

I think it'll be a little bit more challenging in the third and fourth quarter, because some of the cost savings that we began to put in place last year in the third quarter will catch up to us on the comps. But there's always some seasonality to the margins.

First quarter is very much always the strongest. It’s just our strongest quarter overall. And so, we'll always see some fluctuation. It could be one, two or three points, depending upon the seasonality of the quarter. And then there's some things that we can't always control, like large claims in the health plan, the deferred compensation expense, largely as a function of what goes on in the stock market. I wish I could control that. But I don't.

Larry Clapton - Chasterlane

We want to keep it going up, up, up, right?

Gordon Kanofsky

Yeah. Not at a lot of expense, but it'll be a good thing for everybody I think. So those things can also cause some shifts of one or two percentage points. I think margins are just an incredibly difficult thing to predict.

If there is some seasonality trends as we said. But I think the thing to look at is what is our year-over-year performance doing? I think we're doing quite well and looking at us again some of the competitors. I mean I think we're seven to eight points perhaps, higher than some of our competitors. There's others that are right in there with us within a point or two and that some of that as I say can be just fluctuations in what the gaming tax rates are.

But I think we've got some of the strongest margins and we've got one of the -- therefore one of the strongest business plans in the industry to be able to execute on it. And I think the important thing to note Larry is, is the consistency of the margins that we deliver.

Yeah they do fluctuate from quarter-to-quarter. But if you back out all those things that we can't control and you back out the gaming tax rates, I think time-and-time again, we're generating extremely strong margins, some of the strongest in the industry.

Larry Clapton - Chasterlane

I fully agree.

Gordon Kanofsky

And we do that by being nimble and making adjustments all the time that are necessary that we think to keep the profitability going. Its -- revenues are, the consumer confidence right now and revenues will look little bit like an electrocardiogram. So it's a difficult environment. But I think we're managing it as well as we can.

Larry Clapton - Chasterlane

All right. Last question. Tom, timing of CapEx over the next few quarters? And how you might plan out as far as the amount?

Thomas Steinbauer

Well, I think what we've talked about for the third quarter is 30, 35 million that will pretty much wrap up Black Hawk other than the retainadge that we have sitting on the books. And then, you're probably able to cut that number roughly in half for the fourth quarter.

Larry Clapton - Chasterlane

Okay. And then, for next year is really not much of anything. Right?

Thomas Steinbauer

There are no major projects planned by the company at this point of time. So we're contemplating as maintenance CapEx only.

Larry Clapton - Chasterlane

Okay. And no plan for East Chicago at this point in time?

Thomas Steinbauer

Not right now.

Larry Clapton - Chasterlane

Alright. Thanks guys, you know, good improvement.

Gordon Kanofsky

Thanks Larry.

Operator

Your next question is from the line of Ryan Worst with Brean Murray.

Ryan Worst - Brean Murray, Carret & Co.

Thanks. Good morning, guys.

Gordon Kanofsky

Hi Ryan.

Thomas Steinbauer

Hi Ryan.

Ryan Worst - Brean Murray, Carret & Co.

Tom, I'm sorry if I missed this. But how much do you have remaining on the Black Hawk spending?

Thomas Steinbauer

Probably going to -- I mean in general numbers we're going to be 18, 19 million in the third quarter. There is roughly about 7 or 8 million of retention over and above that. So it’s probably all in with some roll over into the third quarter of somewhere in the neighborhood of about 30 million, little over 30 million.

Ryan Worst - Brean Murray, Carret & Co.

Okay. And then, looking at your corporate expense, it looked like it increased sequentially. Is that the good run rate going forward?

Thomas Steinbauer

I think it’s reasonable again a large portion of let's say our deferred comp expense rolls through our corporate department. So that creates some fluctuation.

Ryan Worst - Brean Murray, Carret & Co.

Okay. And then, with two full quarters behind you, I'd say St. Charles, could you talk about the impact the removal of the loss limits is having, and what you expect with that going forward? And then, is the $1 million termination charge of the management contract included in that St. Charles property level EBITDA?

Thomas Steinbauer

Yes, it is.

Ryan Worst - Brean Murray, Carret & Co.

Okay.

Gordon Kanofsky

I think we've certainly seen a lift from Proposition A or Initiative A in Missouri that removed the loss limits. We tend to look at some of the other markets in the Midwest and the decline in market revenues is while its still there in Missouri, its not as bad as it is in some of the other jurisdictions.

So it’s definitely provided a lift. But it would've been a lot better to come into a rising tide instead of a falling tide. But as we talked with Black Hawk, with 80% of the increased revenues flowing through to the bottom-line there, I mean, that's effectively nothing more than the tax rate impacting those revenues.

We're well-positioned at all of our properties, particularly the Missouri properties. So when the economy starts to kick into gear a little bit, and with the loss limits removed, we should see a very sizable lift, not only in revenues, but more importantly in profitability out of those properties.

Ryan Worst - Brean Murray, Carret & Co.

Okay, great. Thanks very much guys.

Gordon Kanofsky

You're welcome.

Operator

Your next question is from the line of David Katz with Oppenheimer & Co.

David Katz - Oppenheimer & Company

Hi, good morning. If I can just follow that Missouri question up. Are we saying that really it's just been the economy that's the primary reason why we haven't seen more out of the loss limit repeal?

Thomas Steinbauer

I believe that's the case at this point David. Based on what we had expected, based on what we used to see across the river, I think at this point its the economy and rising unemployment rate in that metropolitan area.

The major contributors to holding what should probably be improvement based on the changes in the rules somewhere down the road as the economy improves.

David Katz - Oppenheimer & Company

Now, I mean we did see some softness in the May and June revenue numbers, not just Missouri, but in a lot of the regional markets. And there was talk about stimulus efforts in prior year creating challenging comps. Are there any comps we should be thinking about, heading into the back half of this year that we may want to factor into our models that we might be overlooking?

Gordon Kanofsky

You mean from a revenue perspective ?

David Katz - Oppenheimer & Company

Yes.

Gordon Kanofsky

Well, we certainly had new competitor open in Vicksburg in November or October actually of last year. So there's a dynamic there in the Vicksburg market. And in the end of July, beginning of August, is when one of our competitors opened a significantly expanded facility in the East Chicago market. So there's certainly some factors at play there.

I don't think any of the other markets have any specific dynamics going on that would affect a year-over-year comparability other than just what's going on with the economy?

Thomas Steinbauer

And I can't see anything there either, other than what Gordy already mentioned earlier, like on the expense side where we started to do our reductions in the third and fourth quarter. So you're going to start to see year-over-year pay periods start to because more comparable on the expense side.

David Katz - Oppenheimer & Company

Right. Last question, and I know you talked a lot about this in -- I'm sorry if we're being repetitive. But just thinking about Black Hawk going into the next six quarters or so, there had been some pretty strong profitability performance. And then in most recent quarter kind of went the other way for a bit.

And you are giving us a little bit of data about July and revenue trends, whatever color you can give us about how you think and we'll come to our own revenue conclusion, but how you think profitability on flow through and flow for that will ramp up, would be helpful getting that dialed in?

Thomas Steinbauer

Well, I am not sure there can be much more ramp up than what Gordy mentioned related to July at 80% flow through.

David Katz - Oppenheimer & Company

Okay.

Thomas Steinbauer

Obviously, we had anticipated some improvement year-over-year because of what we've done on cost side in all of our markets, Black Hawk's no different. And there is a substantial kicker thrown in there with the change in the bet limit and the amount of hours that we're open.

I guess, you guys are going to have to kind of come to meeting of your minds what's what. But probably a good spot the start is about 50-50. And without unusual cost reductions, if you think about that market with a 20% tax rate and some additional expense obviously, because of the increase in the number of table games there, we increased our table game count right now from 12 to 18.

So we increased by 50%. So there is some additional labor overhead there. And expense is associated with that labor, but 20% tax rate, 15 to 20% from also an allowance rate and some additional costs that I think you're talking at least 50%. But you can play with number yourself.

David Katz - Oppenheimer & Company

I can play with those numbers. Thanks very much.

Thomas Steinbauer

Sounds good.

Operator

Your next question is from the line of Dennis Forst with KeyBanc.

Dennis Forst - KeyBanc Capital Markets

Good morning. I wanted to touch a little bit more on Black Hawk and talk about the hotel rooms. There is going to be over 500 rooms. What are you planning on charging for the standard rooms? And how are the bookings looking so far?

Gordon Kanofsky

It will obviously yield manage the rooms weekends are quite different from mid-week. But I think we're hoping to achieve an ADR in the 100, $110 range there.

Dennis Forst - KeyBanc Capital Markets

And would it change much in the winter?

Gordon Kanofsky

Yeah absolutely. I mean, Black Hawk is a market that experiences a higher degree of seasonality than many of our others.

Dennis Forst - KeyBanc Capital Markets

Okay. And what about the cash percentage versus comp. Is there going to be many cash paying room customers?

Gordon Kanofsky

We hope so. I mean it's going to -- it will, you are invited.

Dennis Forst - KeyBanc Capital Markets

My comp or my paying cash.

Gordon Kanofsky

Obviously, I think we're talking about cash here, Dennis. It will fluctuate particularly, in the early month, as we market the hotel and get a new kind of customer to understand what's available on Black Hawk, so probably at a higher level comping. We would hope that over time that that will migrate down some. I think I was very encouraged if you read the Denver Post article over the weekend, one of the people they interviewed was somebody who basically had said Well, I don't really have a lot of reason to go to Las Vegas anymore.

Well, that's exactly what we've been hoping for and exactly what we want to hear. It's music to our ears. So it’s going to take a little bit of time to get the broad market to understand that. But our marketing guys produced a very good campaign to introduce the hotel to the market and the product itself is the best advertisement, just we got to get people up the hill. As you could see from the pictures and the slide presentation, it's a first class hotel.

I know you've been at our St. Charles property and seen the hotel here. And I'd like to think it's one that you would say that you would love to stay in on every visit to St. Louis. So yeah, we're helping to accomplish the same thing. When people want to weekend away or a night away from Denver and the mountain road is about 30 to 45 minute drive into the heart of Denver.

So the opportunity to stay over is a good one. And I think we've seen at all of our -- use of all of our hotel rooms, when we get a gaming customer into the hotel room, we see a significant lift in the spend per visit. So the hotel room, it's the those hotel’s key to the overall profitability and maximization of the potential lof the property.

Dennis Forst - KeyBanc Capital Markets

Okay, some additional data for us. What percentage of the St. Charles Hotel rooms are comped? Is this, kind of give us a data point to work from?

Gordon Kanofsky

You know Dennis that's getting into the area of competitive information that we'd rather not share with some of the other ears that are on the phone.

Dennis Forst - KeyBanc Capital Markets

Okay. Then, on bookings. How have bookings been for the hotel?

Gordon Kanofsky

Which hotel?

Dennis Forst - KeyBanc Capital Markets

The new one. The one that's just going to open.

Gordon Kanofsky

Actually pretty good. Up to this point, and we've just started to sell it few months ago, but we're encouraged, especially this early on, some of the cash business that we booked.

Dennis Forst - KeyBanc Capital Markets

Okay, alright. Then... go ahead.

Gordon Kanofsky

I was going to say Dennis, as we've also increased the number of hotel rooms company-wide, we've increased some of the sophistication and use of technology and predictive modeling that we use.

So if we see some weakness in room reservations we have quick abilities with e-mail and phone calls and the way we manage our direct mail stuff, to really kind of make sure that we're getting bodies into those rooms. We're obviously going to want to fill that room on an profitable basis. But I think we're doing a better job than we have in the past of making sure we're filling the rooms with higher performing customers for us.

Dennis Forst - KeyBanc Capital Markets

Okay. And then lastly, on a totally different subject, looking at the property level EBITDA on the second quarter, certainly compares well with last year's second quarter. But when I look sequentially, I am a little surprised sequentially your revenues were down $7 million between the first and second quarter, yet the property EBITDA was down $13 million indicating that lower revenues, but higher operating costs. Can that all be explained the way with seasonality?

Thomas Steinbauer

For the most part. Are you talking about EBITDA or operating costs?

Dennis Forst - KeyBanc Capital Markets

Well, EBIT...

Thomas Steinbauer

Operating income, because obviously...

Dennis Forst - KeyBanc Capital Markets

No, no. Not operating income, EBITDA. So I'm ignoring depreciation. But I am looking at cash operating costs were up at the property levels about $5 million. Clearly, there was $1 million from St. Charles. So let's say up about $4 million in an environment where revenues were down $7 million.

Thomas Steinbauer

Well, we had a full quarter of Vicksburg this year, versus it just started thinking that...

Dennis Forst - KeyBanc Capital Markets

Just thinking that... no, I'm just looking sequentially, Tom. Just from the first quarter to the second quarter.

Thomas Steinbauer

It's basically seasonality.

Dennis Forst - KeyBanc Capital Markets

So even with the seasonality your operating costs would have gone up, from the first...

Thomas Steinbauer

Well, part of it I mean, we have the issue with the club in Missouri, which was a million dollars, and we had an issue related to property taxes in Black Hawk, which was another million dollars of that. So there is $2 million of unusual unrelated costs that are unrelated to like operation that we absorbed in the second quarter this year versus in comparison of the first quarter.

Dennis Forst - KeyBanc Capital Markets

Okay. So that's part of annual seasonality. Okay, thanks a lot.

Operator

Next question is from the line of Joe Greff with J.P. Morgan.

Joseph Greff - J.P. Morgan

Good morning, everyone. Just a follow-up on the margins in the second quarter looking at it relative to 1Q. The -- in terms of marketing or reinvestment dollars or comps, would you characterize that was part of the reason for where margins were in the second quarter?

Gordon Kanofsky

No.

Thomas Steinbauer

Not really.

Gordon Kanofsky

We really didn't change anything in those kind of expenditures. There weren't kind of aggressiveness or weakness in spending on promotional side, it’s been pretty steady.

Joseph Greff - J.P. Morgan

Great. And then, on Colorado the 27% increase in gross gaming revenues. For the month, how did the year-over-year change in net revenues compare to that 27%?

Thomas Steinbauer

I'm sorry. Say that again.

Joseph Greff - J.P. Morgan

The net revenue year-over-year growth rate in July in at Colorado, what was that?

Thomas Steinbauer

The net revenue growth rate in Colorado year-over-year?

Joseph Greff - J.P. Morgan

Yeah.

Thomas Steinbauer

We really don't usually give that, because we don't want people to know what our promotional costs are, in relationship to gross revenue.

Joseph Greff - J.P. Morgan

Okay. And then Tom -- well you mentioned that 15 to 20% would be promotional allowances. If we assume that's the case, I guess, are we seeing a bump up in net revenues? I guess, I'm just trying to get more granularity to trying to get to an EBITDA number.

Thomas Steinbauer

If you look at on it perspective of 80% flow through, if we heavily promoting we certainly incur a lot of operating expense to serve those guests playing with our own money. So you probably can interpolate a little bit...

Joseph Greff - J.P. Morgan

Yeah.

Thomas Steinbauer

80% flow through.

Joseph Greff - J.P. Morgan

Okay. And then my final question for you Tom is, I guess how warm are you or how close are you in terms of finalizing the refinancing over the credit facility? Should we expect news from you three months from now, when you're reporting third quarter results?

Thomas Steinbauer

We're still monitoring the market. Our senior unsecured that issued in May is trading well above par. I think yesterday we were like at 103, which is obviously making the return on doing additional add-on there attractive.

But we're still communicating with our banks on revolver side and working towards getting as much expended as possible, before we -- and then, see what basically is left. And then we'll resolve that. But, we obviously don't see any issues in resolving the maturity situation well before it becomes an issue.

Joseph Greff - J.P. Morgan

Okay. And then just couple of modeling question here. Fourth quarter depreciation so I'd just be looking at the third quarter and then looking at Colorado and depreciating that over 20 years.

And then maintenance CapEx for next year, I mean, should we just kind of look at this year as a reasonable proxy for what maintenance capital spending will be next year?

Thomas Steinbauer

On the depreciation side for Black Hawk that's close to being right. So yeah, I think you are talking maybe a little less in a million dollars a month increase in depreciation, once Black Hawk is up per month.

And on maintenance CapEx, we're not there yet on exactly what we intend to spend. But it’s going to be in the neighborhood, maybe plus just a little are going. We're obviously, now starting to maintain a larger Vicksburg facility, a much larger St. Charles facility with that hotel. And then, now with Black Hawk opening. So probably slightly higher than what we were going to average this year.

Joseph Greff - J.P. Morgan

Great. Thank you.

Operator

Your next question is from the line of Steve Altebrando with Sidoti & Company.

Stephen Altebrando - Sidoti & Company

Hi guys.

Gordon Kanofsky

Good morning.

Thomas Steinbauer

Hi.

Stephen Altebrando - Sidoti & Company

I just wondering at any color you could give in terms of what you are seeing in promotional environment, in terms of competitors?

Gordon Kanofsky

I think there are some people out there forging a little bit. I don't think there is any -- there's no -- it's a bit of a shotgun. I don't think there is any conclusion that we would draw. We obviously do our own testing and probing in there. We haven't seen a lot of reason yet to give us the indication that the consumer confidence is building to a point where tweaking in promotional spending upward would be a profitable adventure for us.

But as we said, we continue to probe and test them, and we will do it.

Stephen Altebrando - Sidoti & Company

Okay. And given the strength now of your balance sheet, is there any thought towards increasing spending towards slots, where a large competitors who cannot do that?

Gordon Kanofsky

We're staying -- we've always felt that we've led the market in that area. And we haven't changed our philosophy there. And as you just pointed out, we obviously have the balance sheet to stay number one in each market is from a competitive perspective on slots.

We're not going to go crazy in that direction we don't think we need to do it of the rest of our facility. And our players' club system and direct mail system, we're going to be reasonable, but continue to remain on the cutting edge ahead of competition.

Stephen Altebrando - Sidoti & Company

Okay. And last question Mississippi June numbers were pretty rough state-wide. Is that -- could you give any color on what you are seeing in July, if June was a bit of an anomaly?

Gordon Kanofsky

I think, as I said earlier in the call its right now those trends are moving around like electrocardiogram. I mean we look at the data constantly, some times we sort of think that there is opportunity for recovery building then there is other times think that the sky is falling.

But every time if we wait a week or wait 10 days, two weeks, we typically see something that causes to go in the opposite direction in our thinking. So we tend to try to take a little bit longer term view of things and look at longer term trend lines and it’s hard to see a pattern at this point.

I know some of our competitors in some of their earnings call they are seeing signs of rebounding, I hope they're right. We need to see a little bit more data before I think we could come to some conclusions about that.

Stephen Altebrando - Sidoti & Company

Okay. Thanks guys.

Operator

Your next question is from the line of Justin Sebastiano with Morgan Joseph.

Justin Sebastiano - Morgan Joseph & Co Inc

Thanks. Yeah, actually Steve stole a couple of my questions. So thank you.

Operator

Your next question is from the line of Jane Pedreira with Clear Sights Research LLC.

Jane Pedreira - Clear Sights Research LLC.

Hi, good morning.

Gordon Kanofsky

Hi, Jane. How are you doing?

Jane Pedreira - Clear Sights Research LLC.

Good, good. Thank you. Just a couple of quick questions. Do you still have the swaps in place for the credit facility? And if so, can you just give me a sense for what the rate would be, the implied rate would be on the credit facility given those swaps?

Thomas Steinbauer

The swaps are still in place. And with the swaps in place, our rate is about 6.07 on the revolver debt. If it wasn't, it would be about 2.5 on a 90 day LIBOR would obviously be about 2.25 points, less one month LIBOR would it be 2.75.

Jane Pedreira - Clear Sights Research LLC.

Okay. And so, we should just assume that you'll have those swaps in place until the facility matures I assume?

Thomas Steinbauer

They expire in July of next year, before the current maturity date, and well before what we anticipate will be extended maturity date on a majority the remaining portion of the revolver. When we did the senior unsecured debt we did retire about $75 million of one of them. But there's still basically instead of 1.1 billion swap, there's a $1.025 billion swap at this point in time.

Jane Pedreira - Clear Sights Research LLC.

Okay. And then, you indicated that there was about 2 to 3 million of non-cash interest expense. Is that just the accretion on the discount related to recent bond issue?

Thomas Steinbauer

Part of it and part of it's the fee that are amortized over the life of the loan.

Jane Pedreira - Clear Sights Research LLC.

Okay.

Thomas Steinbauer

We reduced obviously retiring the revolver fees, we eliminated 5.2 million of those, the costs related when the revolver was put in place. And there is obviously new cost put in place that we're amortizing over the life of the loan of the senior unsecured loan.

Jane Pedreira - Clear Sights Research LLC.

All right, got you. And then, on the dividends, have you made any statements regarding forward-looking on the dividends would, should we expect those to continue for the foreseeable future?

Thomas Steinbauer

I think in my presentation I indicated we anticipate the Board to end up approving four in 2009, we paid two at this point.

Jane Pedreira - Clear Sights Research LLC.

And you say four meaning what, four...

Thomas Steinbauer

Four payments. We've made two quarterly payments. We are anticipating the Board will approve another two prior to year-end.

Jane Pedreira - Clear Sights Research LLC.

Prior to year end. Oh, I got you. Okay, that's helpful. Okay. Thank you so much. Appreciate it.

Gordon Kanofsky

Sure. Thanks Jane.

Thomas Steinbauer

You are welcome.

Operator

(Operator Instructions). Your next question is a follow-up from the line of Dennis Forst with KeyBanc.

Dennis Forst - KeyBanc Capital Markets

Yeah. Most of the follow-ups have already been asked, but I thought I would just try and understand the $339 million of cash flow. I think it was in one year tables Tom. The last 12 months, defined EBITDA was $339 million, that excludes stock comp expense?

Thomas Steinbauer

The 339 million?

Dennis Forst - KeyBanc Capital Markets

Yeah, it's in a footnote on...

Thomas Steinbauer

Oh, in the footnote on slide number nine.

Dennis Forst - KeyBanc Capital Markets

Number nine, yeah.

Thomas Steinbauer

Right.

Dennis Forst - KeyBanc Capital Markets

So that takes -- so it takes property EBITDA, corporate expense, excluding stock comp, and a few other adjustments?

Thomas Steinbauer

Correct.

Gordon Kanofsky

The credit facility backs out stock compensation expense for the...

Thomas Steinbauer

For calculation, for non-cash.

Dennis Forst - KeyBanc Capital Markets

Any other material change from...

Thomas Steinbauer

No.

Dennis Forst - KeyBanc Capital Markets

Just the for the number you...

Thomas Steinbauer

No, based on this calculation, it's basically the EBITDA less that. I mean, would that add it back, I'm sorry.

Dennis Forst - KeyBanc Capital Markets

But, would it take out things like the St Charles million dollar charge for closing the rest.

Thomas Steinbauer

No. That was a cash expenditure. It would exclude, but which is not above the line, is like the $5.2 million of write-down of non-cash amortization.

Dennis Forst - KeyBanc Capital Markets

Right. But that's below the line.

Thomas Steinbauer

Those type of cash things, if there is specifically like that would be excluded.

Dennis Forst - KeyBanc Capital Markets

Okay, great. Thanks.

Operator

There are no further questions at this time. I'll now turn the conference back over to Mr. Kanofsky for any closing remark.

Gordon Kanofsky

Just like to thank you everybody for their participation in our call today. We said we're very proud and pleased with our performance in the first half of this year and look forward to finishing out the second half of the year, hopefully equally as strong. So thank you, all. Have a good day.

Operator

Thank you all for participating in today's Ameristar's 2009 second quarter conference call. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Ameristar Casinos Q2 2009 Earnings Transcript

Check out Seeking Alpha’s new Earnings Center »

This Transcript
All Transcripts