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Ameristar Casinos Inc. (NASDAQ:ASCA)

Q3 2007 Earnings Call

November 5, 2007, 5:15 PM ET

Executives

John M. Boushy - CEO and President

Thomas M. Steinbauer - Sr. VP, Finance and CFO

Gordon R. Kanofsky - Co-Chairman and EVP

Analysts

Lawrence Klatzkin - Jefferies and Company

Joseph Greff - Bear Stearns

Dennis Forst - KeyBanc Capital Markets

Ryan Worst - Brean Murray, Carret & Co

Adam Steinberg - Morgan Joseph and Co

Justin Sebastiano - Nollenberger Capital Partners

Nicholas Danna - Sterne, Agee & Leach

Presentation

Operator

Welcome to the Ameristar 2007 Third Quarter Earnings Conference Call. Today's call is being recorded. At this time, all participants have been placed in a listen-only mode and the floor will be opened for your questions following the presentation. Please note that there is a slide presentation available on the Ameristar website www.ameristar.com, which corresponds to the comments that will be made in the call and provide some additional and useful information with regard to our financial results.

I have been asked to read the following regarding forward-looking statements. This presentation contains certain forward-looking information that generally can be identified by the context of the statement of the use of forward-looking terminology such as beliefs, estimates, anticipates, intense, expects, plans, is confident that or words of similar meaning with reference to Ameristar or our management. Similarly statements that describe our future plans, objectives, strategies, financial results or position, operational expectations or goals are forward-looking statements. It is possible that our expectations may not be met due to various factors, many of which are beyond our control, and we therefore cannot give any assurance that such expectations will prove to be correct.

For a discussion of relevant factors, risks and uncertainties that could materially affect our future results, attention is directed to item 1A, risk factors and item 7, Management's discussion and analysis of financial conditions and results of operations, in our annual report on Form 10-K for the year ended December 31, 2006; and item 2, management's discussion and analysis of financial condition and results of operations in our quarterly report on Form 10-Q for the quarter ended June 30, 2007.

It is now my pleasure to turn the call over to Mr. John Boushy, Chief Executive Officer and President of Ameristar Casinos. Please go ahead, Sir.

John M. Boushy - Chief Executive Officer and President

Thank you, Henry. And thank you all for joining us today to discuss our third quarter results, review developments at our major properties, and go over our guidance for the fourth quarter.

Joining me today Gordy Kanofsky, our Co-Chairman and Executive Vice President as well as Tom Steinbauer; our Chief Financial Officer and Senior Vice President. I wanted to clarify that Gordy is joining us on the call in his capacity, as an officer of Ameristar and he will not be providing any comments as a representative of the estate of Craig Nielsen.

Turning to slide four, I’m very pleased to report that Ameristar’s third quarter financial results were at the high end of our guidance range. On an apples-to-apples basis, our results compare favorably to this quarter last year. We continue to maintain strong positions in all of our markets and we succeeded in positing solid EBITDA margins for each of our historical properties. All of this was accomplished in spite of construction related disruption at two properties. Our over results are a good indication of the strong guest appeal of the Ameristar’s properties, and they illustrate the continuing effectiveness of our disciplined strategy to drive greater profitability.

On a same-store sales basis, we posted net revenue growth at four of our six properties in the third quarter. The strong momentum led by our Black Hawk property continues and our Kansas City property achieved strong EBITDA growth. In mid-September, we entered the vast Chicagoland market with the completion of the Resorts East Chicago acquisition. And we continued progress on development projects that are important growth drivers for Ameristar’s future.

With that brief introduction, at this point, I would like to turn the call over to Tom Steinbauer, our Chief Financial officer, who will provide a more detailed overview of our third quarter results. Tom? Take it away.

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

Thank you, John.

Turning to slide five, net revenues were up 4.7% over the 2006 period. This number did include $9.2 million contribution from the Resorts East Chicago property. On a same-store basis, the revenues were up 1%. As we mentioned in the release, growth in some of our markets was slower than we had originally expected and our results for the period were impacted by disruption associated with expansion projects at St. Charles and Vicksburg.

To point out a couple of other items adjusted EBITDA was $70.1 million and it excludes the impact of integration and transition costs related to the East Chicago acquisition and pre-opening expenses associated with the hotel under construction at St. Charles. This is a slight improvement over 2006. Looking at our margins, on an apples-to-apples basis, consolidated adjusted EBITDA margin for our historical base of properties excluding stock-based compensation expense is running at about the same rate as last year which was 28.5%.

Now, just to highlight some of our key property performance metrics on slide six. Ameristar Black Hawk continues to demonstrate strong performance with six consecutive quarters of net revenue and EBITDA growth since its re-branding. This property is an excellent example of how we have been able to drive profitable growth through upgrades and improvements in service while plying our proven operational and marketing strategies. We are pleased to report that over the past 12 months we have achieved a 15.1% cash-on-cash return from our Black Hawk investor.

Net revenues at Ameristar Kansas City increased modestly as this has become a more competitive market with a competitor adding a hotel during the quarter. Nonetheless, we were able to post significant EBITDA growth as a result of our effective marketing programs and more efficient operations. Also we were pleased with our performance at Ameristar St. Charles in the light of pre-opening expenses and construction related disruption experienced at the property in the third quarter, as well as increased competition we face from a new casino vessel opened by an existing competitor in the market.

Turning to the balance sheet on slide seven. Total cash at the end of the third quarter was $113.4 million. Construction in progress increased $61 million to $343.5 million. Total debt increased $684 million during the period, during the quarter at approximately $1.6 billion in total debt. As you recall, we amended our existing credit facility during the quarter increasing the revolver by $600 million. This increased revolver was drawn upon to fund the acquisition of East Chicago. At the end of the third quarter, the borrowing capacity under our revolver was approximately $188 million. On a pro forma basis, at September 30, 2007, our total debt coverage ratio was approximately 4.7 times and our interest coverage 2.9 times. Our borrowing capacity along with expected operating cash flow is sufficient to fund all growth projects that we have announced.

Now, let’s turn to our guidance. On a same-store basis, our guidance for the year is unchanged from what we provided on August 1. 2007. Now that we have closed on Resorts East Chicago we are updating our guidance to reflect the impact of that operation on both the fourth quarter and the year.

Looking at slide eight. This clearly laid out the impact with East Chicago… as impact of East Chicago to our guidance for the current quarter and the full year which as you can see are significantly below our prior expectations. We now expect Resorts East Chicago 2007 EBITDA to be approximately $55 million before factoring in the impact of the increase in property taxes which we are assuming for Q4 guidance purposes to be between $1.5 million and $2 million. While this projection reflects a significant falloff in financial performance, we continue to see substantial growth potential for Ameristar at this location as we begin to leverage out proven operating and marketing strategy. Gordy will provide more on East Chicago in a few minutes.

Moving to slide nine. We are projecting consolidated EBITDA in the range of $64 million to $67 million, which includes a $9 million to $10 million contribution from Resorts East Chicago, and the impact of $3 million in stock-based compensation. This projection includes estimated depreciation of $26 million and interest expense of $24 million. Projected adjuster EBITDA excludes pre-opening expenses for the hotel in St Charles and additional integration expense related to a resource in Chicago.

Now turning to slide 10. For a full year 2007 guidance, our diluted EPS for the full year of $1.19 to $1.22 includes a net loss of $0.06 to $0.07 attributable to East Chicago. The St. Charles impact which will cost us $0.04 and another $0.04 related to the state tax adjustment we reported in Q2, which if you back out of our guidance range brings you to $1.33 to $1.36, which is comparable to our actual 2006 earnings per share, excluding the debt repurchase.

With that I will turn the call over to Gordy.

Gordon R. Kanofsky - Co-Chairman and Executive Vice President

Thanks Tom and good afternoon everyone. As Tom noted, we completed the Resorts East Chicago acquisition about 45 days ago. We are currently in the beginning stages of transitioning it to an Ameristar branded property as described on slide 11.

I visited at our newest property last week and two of the competitive landscape. From a management perspective, this has been a very smooth transition. Without exception the team members I met throughout the property were engaged and very pleased to be members of the Ameristar team. We are providing them with the training necessary to enable them to deliver the kind of service of Ameristar guest experience at our other properties. We have transferred to East Chicago seasoned veterans from other Ameristar properties with complementary skills and experience. They have taken the held of GM and assistant GM. As we do in all locations, the property management team is working closely with our corporate team. We are making initial improvements in virtually every aspect of the operation to improve our guest experiences.

In the back of the house, we are updating equipment and making changes to improve the quality of the food and beverage operations and progress is already evident. Our casinos operation team has begun making initial improvement to the casino floor. We are introducing new games to broaden our slot product as well as changing the slot machine mix and gaming layouts. We also see substantial upside in marketing. Historically, our REC revenues were derived from market programs that are vastly different from our own. We expect to achieve significant growth through the introduction of Ameristar proprietary marketing program that have been so critically important to our Company success.

The integration efforts underway reflect one of Ameristar’s key business strategies that are somewhat unique in our industry, our centralized hands on management approach. This collaborative effort among the corporate and property teams will allow us to quickly and efficiently implement our best practices at Resorts East Chicago.

Nonetheless, as Tom mentioned, we are facing a transition period of the property until we can elevate the guest experience and implement Ameristar’s marketing and promotional strategies to first stabilize and then increase the property’s revenue. We are confident in our ability to quickly turnaround the property and drive significant revenue growth and increase profitability. The East Chicago property gives Ameristar a tremendous opportunity to make its mark under Chicagoland market, which generates more than $2.5 billion in the annual gaming revenues. With that said, we are nonetheless closely monitoring the activity and the Illinois legislature regarding the gaming expansion in the Chicagoland area. As we have noted on pervious calls, we continue to believe the situation is difficult to predict and we can’t speculate as to what will happen within Illinois. In the meantime, we are focusing on improving and enhancing our newly acquired property in the market.

In closing, we are excited about the opportunities for growth in East Chicago and we look forward to keeping you apprised of our progress there as we work repay on property to Ameristar East Chicago by the third quarter of next year.

Now back to John.

John M. Boushy - Chief Executive Officer and President

Thanks Gordy. Earlier this year when we presented our 50-50 growth strategy, we described the plan to double our EBITDA over three to five years. This was based on a balanced combination of both internal growth projects and acquisitions.

Since Gordy just provided an update on our recent acquisition, I’ll cover the progress we are making in our expansion projects to fill future growth. Let’s look first on slide 12, that our St. Charles property where we have a collection of projects that are underway. The work we are doing on the main road that leads to Ameristar’s St. Charles is progressing well and is on schedule for completion next month. This beautifully landscape five lane boulevard will significantly improve traffic flow and synchronize the guest arrival experience with the high quality that Ameristar’s St. Charles has offered for many years.

Inside the casino, we have been enhancing the slot and table offerings at St. Charles. Also in the casino, we are creating a feature bar surrounded by dynamic table games, and we are adding a new state-of-the-art nightclub, which is position to attract a new demographic to our property. These improvements are slated to be completed in time for the holiday season this December. Of course, the cornerstone of the St. Charles expansion projects is our 25 storey 400 room all suite hotel, which is designed to deliver just the right balance between luxury and fun for the this Mid-America market. Previously, we’ve projected a December 2007 opening for our Ameristar St. Charles Hotel.

As we noted in today’s release, recent issues have been encountered on the project which we are addressing with our general contractor. We are working diligently to resolve any outstanding issues and it maybe possible to have a soft opening with approximately 200 rooms by the end of this year. All combined the various projects underway complement and reinforce each other establish Ameristar St. Charles as premier regional resort designation and position us for continued profitable growth in this important market.

Turning to slide 13, our capital improvement projects at Vicksburg will significantly alleviate the quality of this market dominant property, and provide much easier access for our guests. We see this as an important step in maintaining an extending our market leadership, in this position, in this location and we see it as an opportunity to grow the market and grow our market share. The casino expansion began during the third quarter this year after successfully dry docking the vessel. The expansion will add gaming positions, new food and beverage outlets, a VIP club, and retail space. The new 1,000 space parking garage will have direct access to the casino floor which will make it very convenient for guests to enter our property. In fact, we will be the only property in Vicksburg with convenient, covered parking as connected directly to our facility. Completion of this project is now scheduled for the second quarter of 2008 and our budget remains at $98 million. The hotel renovation project is expected to be finished in December of this year and also remains on budget.

The Council Bluffs expansion on slide 14 is in its early design stages and we will add 60,000 square feet, all on a single level. We continue to expect project completion in mid 2009 at a cost of approximately $100 million.

Moving on to Ameristar Black Hawk where we have our 536 room, four diamond quality hotel, and that’s shown on slide 15. The construction is progressing on schedule despite previously announced delays due to difficult geological site conditions. Thankfully, extensive rock excavation and removal is expected to be finished early this month. And when excavation is completed work will begin on the main portion of our 33 storeyed hotel tower. This project is scheduled to be completed in the second half of 2009. As some reported Ameristar has significant momentum in Black Hawk as evidenced by its operating results over the last six quarters. This expansion project promises to give us exceptional opportunity for profitable growth in a strong and growing market.

Turning to slide 16. Let me now summarize our outlook beyond the third quarter of 2007. Ameristar will continue to distinguish itself in all our markets by offering guests top quality gaming and entertainment complemented by high quality facilities. They offer a broad spectrum on high-end amenities and options. We remain focused on disciplined revenue growth that optimizes long-term profitability. We are confident that we will be able to leverage our proven marketing and operating strategies to achieve profitable growth at our current locations and especially in East Chicago. As we prepare for the expansions coming on line in 2008 we will continue to employ the strategies that have created our leading positions in every market and we can look forward to the growth our expansions should generate.

Before opening the call to questions I’d like to reiterate a portion of our press release of October 22, in that release we indicated that we would not further comment on the emended schedule 13 D that was filed by the estate of Craig Neilson. So contrary to rumors neither management nor the representatives of the estate will be addressing today any questions related to the 13 D file.

With that caveat, we're happy to take your questions on Ameristar’s strategies direction and performance. Henry We’d love for you to open up the floor for questions now.

Question and Answer

Operator

Certainly. [Operator Instructions].

Our first question is coming from Larry Klatzkin of Jefferies and company. Please go ahead.

Lawrence Klatzkin - Jefferies and Company

Gordy, I hope you won the bet. Couple of things. One are you guys still looking for acquisitions. Is that something that would still be amenable to get your cash flow to your objective?

John M. Boushy - President, Director and Chief Executive Officer

Gordy, do you want to take that?

Gordon R. Kanofsky - Co-Chairman and Executive Vice President

Sure, I’d be happy to John. Larry, we've announced earlier this year our strategy of growing double the size of the company over the next three to four, or five years, and doing it 50-50, half with internal projects and half with acquisition. Resorts East Chicago was a big step down the way. We’ll continue to look for attractive acquisitions. Right now we're primarily focused on integrating the one we just grabbed so but we will continue to have our eyes open and be opportunistic as we always have been.

Lawrence Klatzkin - Jefferies and Company

All right. Thank you. As far as the entrance roads to St. Charles, that should be done by the end of the year?

Gordon R. Kanofsky - Co-Chairman and Executive Vice President

Yes, we expect the roadway or I should call it a boulevard and a park way will be completed in December this year. And Larry I know you visited that property before. You will be absolutely amazed at the significant enhancement of the arrival experience that will occur as a result of changing that terrible two-lane road in to a beautiful five-lane boulevard. So, we can't wait to have that completed.

Lawrence Klatzkin - Jefferies and Company

All right. How about the Pinnacle opening, when is that expected to happen, is that still December?

Gordon R. Kanofsky - Co-Chairman and Executive Vice President

Well, actually I’ve heard it’s in that kind of time, but probably the best thing to do is check with Pinnacle to see if they have had any more delays.

Lawrence Klatzkin - Jefferies and Company

Okay. And then last thing the option expense what should we using for the next quarter and for next year?

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

So, it’s $3 million for the next quarter, Larry. And I would increase that to about $3.5 million to $3.75 million during each quarter next year.

Lawrence Klatzkin - Jefferies and Company

All right. And then, Council Bluffs, what is your feeling in that market? Is that just a little… getting adjusted to itself, I mean there results are little of bit disappointing. What do you except for the market?

Gordon R. Kanofsky - Co-Chairman and Executive Vice President

Yes, I think as we look at Council Bluffs over the long-term, it’s been a market that has some pretty healthy growth. I think it’s in a little bit of digestion period right now. What I was really please to see over the course of the last several years was as higher quality supply came into the market. It grew the market, and that is exactly what is behind our thought about the expansion that we announced earlier in Council Bluffs. We think we can significantly elevate the experience that I guess would have to improve the quality of the casino offerings in that market with our expansion all on a single level, and as a result of that not only help to grow the market, but in addition to that we capture the share that is… that we believe we can certainly do, once we have a great single level experience in Council Bluffs.

Lawrence Klatzkin - Jefferies and Company

All right. Great. Thanks guys. I appreciate it.

Gordon R. Kanofsky - Co-Chairman and Executive Vice President

Thanks Larry. Have a good day.

Operator

Thank you. Our next question is coming from Joseph Greff of Bear Stearns. Please go ahead.

Joseph Greff - Bear Stearns

Hey guys. As you look at Resorts East Chicago, what do you think net revenues and EBITDA will be for 2007? What’s complemented in your forecast?

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

As we indicated in the presentation that we are looking at EBITDA would be in that $55 million range. As we move forward, and for the year-on-revenues, we are starting… from our perspective, there is still going to be slightly over $300 million. We are looking at for us in the fourth quarter of about $69 million to $70 million in revenue.

Joseph Greff - Bear Stearns

As a net revenue number not a--?

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

As a net revenue number, yes.

Joseph Greff - Bear Stearns

Okay. And then, Tom, this not a major issue, but depreciation was a little bit lower than you are forecasting. I am kind of looking at the chart here, your consolidating operating income containing EBITDA and it was down from where we were, a decent amount of St. Charles, is there anything one-time there or anything that you care to elaborate on?

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

We had… yes, we opened up the new St. Charles facility five years ago. So, there was some five year depreciable value that went off the books in this quarter. We opened up the new St. Charles facility in August of 2002. So, basically what we opened within slot machine in particular they are fully depreciated during the third quarter. So, that was why there was that decline.

Joseph Greff - Bear Stearns

Got you. And maybe Gordy can just talk about how you are looking at gaming legislation in Illinois, maybe kind of what you are hearing the latest there?

Gordon R. Kanofsky - Co-Chairman and Executive Vice President

I think I said about as much as I can say in my direct remarks. Illinois continues to be a very unpredictable state legislatively. It's a very much leadership driven type government with very strong and dominant leadership faction that work out deals through negotiation. So, it’s an ongoing process. I think the states certainly have some difficult economic issues that they need to solve, particularly in terms of transportation and their capital development. They continue to be a lack what I have seen over the last several years of consensus on how gaming should play a role in solving those problems. So, we continue to watch it and

[Technical Difficulty]

John M. Boushy - Chief Executive Officer and President

…. Have an opportunity to stay in our rooms, have an outstanding experience because that’s what creates the reputation that we will live with for months and years into the future about this fabulous 400 rooms all suite hotel that we are building. So, we are working with our contractor to make sure that we get the right quality of hotel rooms in the first place and we make sure that we are able to make sure that our first guest that stays in those hotel rooms have just an outstanding experience in this luxurious and fun hotel.

Dennis Forst - KeyBanc Capital Markets

Can you give us some examples of why this is coming up a month before you are supposed to open and what will be the hurdles to… or the data points to go over before the hotel is open and when should all 400 rooms be open?

John M. Boushy - Chief Executive Officer and President

Well, I think in terms of when should all the 400 rooms be open. We certainly believe if there is a possibility to have about half of the hotel rooms open in December with the remaining half to be open in the first quarter of 2008 and I forgot the other part of your question Dennis?

Dennis Forst - KeyBanc Capital Markets

Just what things have to be done to get those rooms available? What hasn’t been done that you thought would be done and what does have to get completed and resolved with your contractor?

John M. Boushy - Chief Executive Officer and President

Well, I think it is important to make sure that the finishing sub contractors really have an opportunity to finish the rooms to the right degree of luxury and so that’s really what we are doing it is a little bit of schedule question associated with when the rooms are going to be available and how many rooms will be available and things like that. So, the great news is all the walls are standing up, all of the toilets work, all of the things that you would want to work in a hotel room. The drapes can open and close. The windows are in place, those kinds of things. It is really a matter of just absolutely making sure that since we can only open a hotel once that we’ve got a really fitted and finished in a way that we think it is important to be before we have our first guest staying in the hotel room.

Dennis Forst - KeyBanc Capital Markets

Are there any issues with budget or is there possibility that the contractor is going to have any penalties for being late?

John M. Boushy - Chief Executive Officer and President

I think at this point it will be probably ill advised for us to enter into answering directly those kinds of questions. I would say that our view isn’t from a budget standpoint. At this point, we do not expect an impact on the budget which is really why we have the comments about… without impacting schedule or cost on a material basis.

Dennis Forst - KeyBanc Capital Markets

Got you. Okay. Then on the New East Chicago property, who is the new GM and where does he come from.

John M. Boushy - Chief Executive Officer and President

Sure. Tim Wright is a veteran within our organization for a number of years. He was most recently Arkansas City and was the General Manager of Arkansas City for over a year. He has an extensive background and numerous operating responsibilities including food and beverage. Tim was identified to become the General Manager in advance of the close of the transaction, spent the prior year 30 days getting to know a lot of the team members in East Chicago including the Management Team and the Executive Team there at East Chicago. I think that he has been very well received by the team in Chicago and has been really welcomed well according to some of the observations that Gordy mentioned to me on his most recent trip to East Chicago and that goes exactly all of the things that I’ve seen in my three or four trips to East Chicago over the course of the last couple of months. Tim brings a great perspective not only about the Ameristar culture but also about how the hands on management approach that Gordy referred to and he has an excellent grasp of the corporate resources available to him to parachute into east Chicago or to ask for air cover to really help him make sure that we are doing all the things to rapidly get traction in East Chicago.

Dennis Forst - KeyBanc Capital Markets

Okay.

John M. Boushy - Chief Executive Officer and President

So we are very pleased with Tim’s leadership of the property and I think that it is in part because of his leadership coupled with the leadership that he has established with the remaining executive team there in East Chicago. We have a lot of confidence about how he will work through some of the challenges that we reported today and we are looking forward to seeing what 2008 brings us in East Chicago.

Dennis Forst - KeyBanc Capital Markets

Yes. So are we… I have got the East Chicago, the acquisition cost and the transition cost from the third quarter and the fourth quarter. Are those going to be in East Chicago or are those corporate expense items where will… like where do we find that $1.1 million of transition and integration cost?

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

$800,000 was a corporate prior to the take over and $300,000 for the third quarter was at the property going forward all the cost will be at the property level.

Dennis Forst - KeyBanc Capital Markets

Okay. Good. But $800,000 was incorporate term.

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

Correct.

Dennis Forst - KeyBanc Capital Markets

Okay. And then lastly what was cap interest in the quarter?

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

It was about… you wouldn’t have to ask me that one?

Dennis Forst - KeyBanc Capital Markets

Somebody was.

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

Somebody always ask me that one and then I have it here.

Dennis Forst - KeyBanc Capital Markets

Just a way of figuring out the gross interest expense.

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

How about if we get back to you on that?

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

Yes. You will have to. I don’t have it on top of my head.

Dennis Forst - KeyBanc Capital Markets

Okay. That’s fine. Thanks a lot.

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

Thank you.

John M. Boushy - Chief Executive Officer and President

Thank you, Dennis.

Dennis Forst - KeyBanc Capital Markets

Thank you.

Operator

Our next question is coming from Ryan Worst of Brean Murray. Please go ahead.

Ryan Worst - Brean Murray, Carret & Co

Thanks, good afternoon guys. Just one question on the construction process. Could you cater, that Tom, between the different projects here?

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

Construction on projects, between each project?

Ryan Worst – Brean Murray, Carret & Co

Yes, if you can.

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

Just a second here. Pickup that sheet.

John M. Boushy - Chief Executive Officer and President

As was reported in our earnings release, construction in progress would be fair for the third quarter.

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

St. Charles. The $69.355 million we spent at St. Charles, $66 million was spent at Black Hawk and $5.7 million was spent on Vicksburg.

Ryan Worst – Brean Murray, Carret & Co

Okay. Was in construction process $344 million?

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

That’s the cumulative construction on progress.

Ryan Worst – Brean Murray, Carret & Co

Okay.

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

Going back into last year.

Ryan Worst – Brean Murray, Carret & Co

Got it. And then on… how much do you expect to spend on the rebranding of East Chicago?

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

We are spending between $20 million and $25 million in capital and about and $5 million to $7 million on expense in order to upgrade the property and really establish it ready to re-brand to Ameristar. The capital expenditures will include things like significant enhancements in the food and beverage area, really stepping up the experience in various restaurants. As Gordy mentioned we are already doing a number of things in the back of the house to really improve the food quality, that’s beginning already then we will be upgrading some of the… some of the front house experiences. We will also be revising all of the casino layout and all public spaces to include new carpet and some minor refurbishment, some of the expenses will be things like cleaning the garage and painting various portions of the facility. We think that as we position the property to truly become Ameristar there in East Chicago but it’s important that we make sure that the facility is of the appropriate quality. Than we are used to in all of our other markets.

Ryan Worst – Brean Murray, Carret & Co

Great. Thank you.

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

You are welcome.

Operator

Thank you. Our next question is coming from Adam Steinberg of Morgan Joseph. Please go ahead.

Adam Steinberg – Morgan Joseph and Co

Hi guys. How are you doing?

John M. Boushy - Chief Executive Officer and President

Hi, Adam. How are you today?

Adam Steinberg – Morgan Joseph and Co

Fine. Tom, real quick, what was maintenance CapEx for the quarter?

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

Maintenance CapEx for the last quarter…I have to get that number for you.

Adam Steinberg – Morgan Joseph and Co

Okay.

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

Dennis, the capitalized interest for the third quarter was $5.4 million.

Adam Steinberg – Morgan Joseph and Co

Dennis that I could help you.

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

Okay.

Adam Steinberg – Morgan Joseph and Co

With regards to the Resorts East Chicago, are you expecting the kind of same ramp where you kind of got a little… the results kind of didn’t grow as quickly as people expected and you had to took off stuff like that first nine months to a year? Like you did in Black Hawk, are you expecting the same type of ramp for Resorts East Chicago?

John M. Boushy - Chief Executive Officer and President

Well I think far as the issue

in Black Hawk was, Black Hawk was experiencing some fairly major construction disruption, we are not particularly expecting that, we do expect through the operational approaches that were already in the midst of implementing and I think frankly as we have got to know the business more deeply and more broadly over the course of last 45 days. You know what? There really seems to be where a lot of the opportunity is beyond the operating and service environments and the improvement on the facilities side is going to be the implementation of our marketing approaches. What we benefited from because of our experience in other markets is that we have knowledge that we believe is very applicable to improve the competitiveness of how we market in that location. As we have looked at the database in East Chicago, as we will compare it to our databases as we looked at the marketing approaches that we typically employ throughout each of our properties and compare and contrast that to the marketing approaches that the Resorts East Chicago folks used prior to out taking over the property, we see vast difference in the way we delayed things and because of those differences we see some real opportunities and upsides related to where we see the revenue and the ability to really grow revenues on a very profitable basis so there in lies I think where we really are excited about getting the Ameristar operating and marketing strategies fully implemented. I think as Gordy mentioned, by the end of this year we will be executing with the Ameristar marketing model and we are really expecting that in combination with our service environment in combination with the improvement of the product quality and in combination with the stepping up the quality of the facility in 2008 will really bring together the kind of experience and the kind of offerings and the overall kind of way that we compete in all of our other markets and the end result of that we continue to see as much potential or more so if that will really help to drive a lot of our growth into 2008.

Adam Steinberg – Morgan Joseph and Co

Yes Gordy, when you talk about Resorts East Chicago, you mentioned some changes to the casino floor. Was that all change in the layout or was that changing of games as well?

Gordon R. Kanofsky - Co-Chairman and Executive Vice President

It’s both.

Adam Steinberg – Morgan Joseph and Co

What sort of changes are we talking about putting more or less participation in putting different manufacturers?

Gordon R. Kanofsky - Co-Chairman and Executive Vice President

John, you want to take that you're more knowledgeable about the specifics than I am.

John M. Boushy - Chief Executive Officer and President

Sure I think Adam those are all the things that you described. And I think in addition to that making sure that the games that are most popular for guests that play saw machines are an important component. This is a great example of one of the pieces of knowledge that we have from operating another market similar to Chicago land as we looked at the mix of the games and you all stayed a little bit away from whether its participation or not participation but frankly looking at the mix of games the denomination of games, the titles of games that our guests really enjoy playing. As we look at that we saw a tremendous opportunity to really improve the layout improve the mix and as a result we see some real upside opportunities so it is both making sure that we have the right number of games the right types of games and the right places based upon guest preference and the knowledge that we have in all of our other markets is really being well utilized as we implement the changes in East Chicago.

Adam Steinberg – Morgan Joseph and Co

From a capital perspective, will that be more purchases of the entire box or conversion kit?

John M. Boushy - Chief Executive Officer and President

I think it’s predominantly, I mean if we look at the number of games that we're purchasing. We were making actually more changes as a result of conversions and things like that than we are having to purchase new boxes. But, never the less we are making sure that we have the right games on the floor. But on balance it’s probably between 60 and two-thirds conversions and the remainder would be new games.

Adam Steinberg – Morgan Joseph and Co

Okay. Tom, in the $15 million incorporated expense, I got that 300 or 800,000 I think that was related to Resorts East Chicago. Was there any sort of non-recurring pre opening, integrating costs in that as well?

Thomas M. Steinbauer - Senior Vice President of Finance, Chief Financial Officer and Director

Incorporate?

Adam Steinberg – Morgan Joseph and Co

Yes.

Thomas M. Steinbauer - Senior Vice President of Finance, Chief Financial Officer and Director

No.

Adam Steinberg – Morgan Joseph and Co

Okay. Thank you.

Thomas M. Steinbauer - Senior Vice President of Finance, Chief Financial Officer and Director

You're welcome.

Operator

[Operator Instructions].

Our next question is coming from Justin Sebastiano of Nollenberger Capital. Please go ahead.

Justin Sebastiano - Nollenberger Capital Partners

Hey Guys.

John M. Boushy - Chief Executive Officer and President

Hi Justin.

Justin Sebastiano - Nollenberger Capital Partners

How are you doing? In Vicksburg, it looks like you guys delayed slightly. Could you maybe talk about that for a second?

Gordon R. Kanofsky - Co-Chairman and Executive Vice President

Sure. Our prior schedule expected that the Vicksburg casino expansion would be open on like March 30, or March 31, as a result of the fact of the dry-docking of the vessel took longer than expected as we worked through the schedule we're seeing that the casino expansion is slipping into the second quarter so that was the primary driver of that disclosure.

Justin Sebastiano - Nollenberger Capital Partners

Okay. And is that possibly in April kind of opening or is it more the middle of may possibly later?

Gordon R. Kanofsky - Co-Chairman and Executive Vice President

Yes, we're still making sure that we end up with the right date. But I think a good way to think about it would be mid second quarter. Or perhaps a little earlier than that but I think, yet from a model standpoint folks were to think about mid second quarter, that’s probably a reasonable estimate.

Justin Sebastiano - Nollenberger Capital Partners

And what is your share of the Black Hawk market now and kind of where you guys have come from since you entered that market?

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

Yes. I mean where we come from, from a share standpoint. In the third quarter of 2007 our share was 16.2% and prior to our re-branding our share was about 11.3% of the first quarter of 2006. So if we look at what's been happening in basically the second through the fourth quarter of 2006 we were running at about a 15% market share and in the first, second and third quarter’s of 2007 we were running at 16.2 % market share. I think along with capturing a greater share of the market we also see that we're a part of what's causing that market to grow. Year-to-date the Black Hawk market is grown a little over 4% in fact in all the markets in which we operate, it’s the market that has the strongest growth and we see what we have been doing in that market both through the introduction of a higher quality gaming experience and facility experience of the facility that we provide as well as the quality of the product that we are providing there with food and the gaming entertainment. That coupled with the marketing that we have in the greater Denver market we believe we're a part of what’s driving the growth in that market.

Justin Sebastiano - Nollenberger Capital Partners

Okay. And with the smoking band coming on in the first of the year in ’08. what type of marketing programs if any, are you expecting to possibly ramp up and maybe crimp margins a little bit possibly in the first quarter maybe?

Gordon R. Kanofsky - Co-Chairman and Executive Vice President

Yes, I think from my stand point rather than focus on the marketing programs that we intend to employ as a result of the smoking ban. First and foremost I think it’s important to note that all of the facilities in Black Hawk are going to be impacted similarly. So therefore from a level playing field stand point, we believe we will be in good shape vis-à-vis the rest of our competitors set. In addition to that what we are doing is making sure that guests that we have they come to play with us have a convenient accessible way to smoke if they wish to do that. You see Black Hawk has approved various plans in support of that and we intend to have up and operational approaches and enhancements to the property so that they will be able to easily have smoking areas that are covered from the elements especially given the fact that the winter will be a promise in Black Hawk. So, our view at this point is not to attack this with increased promotional expenses. We do believe that through our facility to our product quality through the way that we are anticipating the delivery of access to smoking areas they will be able to meet the needs of our guests.

Justin Sebastiano - Nollenberger Capital Partners

Okay. And do you maybe look at this as an opportunity to try to I think you are not going to increase marketing but perhaps out market some of the smaller players in Black Hawk in order to try to or maybe takeaway the customers there.

Gordon R. Kanofsky - Co-Chairman and Executive Vice President

Yes, I think that's part of how we grown our share from 11% or so up to 16%. I think that guests are choosing us more and more and I think that as others respond perhaps a little bit less to this dynamic and the Black Hawk market will continue to see improvements.

Justin Sebastiano - Nollenberger Capital Partners

Okay. Thank you, guys.

John M. Boushy - Chief Executive Officer and President

Thank you, Justin.

Operator

Thank you. Our next question is coming from Nick Danna of Sterne, Agee. Please go ahead. Nick Danna, your line is live. Please go ahead.

Nicholas Danna - Sterne, Agee & Leach

Hi, good afternoon, guys. Can you hear me?

Gordon R. Kanofsky - Co-Chairman and Executive Vice President

Hi, Nick. We can hear you now.

Nicholas Danna - Sterne, Agee & Leach

Okay. Great. Thanks. Sorry about that. Two questions, first was on East Chicago and the second one was on the guidance. Regarding East Chicago, you said for 2007 EBITDA would be about $55 million on revenues of $300 million. That… how was that change if the property taxes were included. Would that just be $16 million of the $55 million?

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

That is correct.

Nicholas Danna - Sterne, Agee & Leach

Okay. And so on a sort of go forward basis the run rate as it stands would be whatever 50 to 49ish, 47 to 49ish?

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

That is correct.

Nicholas Danna - Sterne, Agee & Leach

Okay. And is there any timeframe for the appeal on that?

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

No. I mean we’ve began the protest process but we have no time frame of how long it will take to work through all of the levels of the PL related to that.

Nicholas Danna - Sterne, Agee & Leach

Okay. And then you spoke a fair amount about the differences in marketing between the Ameristar marketing and what was done in resorts. Could you give us one or two examples of how the… of the differences there?

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

I think they are getting to…Go ahead John.

John M. Boushy - Chief Executive Officer and President

Yeah. I think I have to be careful about disclosing some of the proprietary aspects of our marketing. So if I said to say that as we look at the marketing approaches and our sources of revenue by segment and Ameristar’s properties and we compare and contrast that to the resort properties, we see a number of segments that have the tremendous opportunity for profitability. In addition to that the number of pieces of mail that Resorts East Chicago sends out on a monthly basis astounds us and we believe that there is real opportunity to not only have more effective marketing but also more efficient marketing and to delayer some of the marketing approaches that we see that are in place at East Chicago.

Nicholas Danna - Sterne, Agee & Leach

Okay.

John M. Boushy - Chief Executive Officer and President

So, I think the combination of both... making sure that we are communicating with guest that we can really drive growth in revenues in a profitable way coupled with becoming more efficient from a marketing standpoint really gives us.... really good feeling about where we can take the property as we start to get our Ameristar approaches in place in... later in 2007 and really turbo charging 2008.

Nicholas Danna - Sterne, Agee & Leach

Okay. That’s helpful. And let’s say on the guidance, does the fourth quarter guidance imply any EBITDA declines at your historical properties.

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

Our historical properties are consistent with the EBITDA guidance that we provided in August of 2007. So…

Gordon R. Kanofsky - Co-Chairman and Executive Vice President

And we prefer not to be specific to property as it relates to guidance but I don’t think I mean the trend view for the quarter would obviously indicate that the properties were on a run rate comparable to a year ago.

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

Yes, one of the things we really try to do in response to all of the growth that we have and the fact that there is a number of different moving pieces that tend to be non repeating and somewhat unusual items. The adjusted EBITDA is something that we thought would he helpful to begin to provide some visibility to and so as we think about the adjusted EBITDA for the fourth quarter we thought that it would be helpful to begin to provide some insights into wonder where we stand. In addition to that one of the things we do not include in adjusted EBITDA is the disruption that comes from construction in places like St. Charles and Vicksburg which we see as a on balance positive kind of thing because while we are having some disruption in the very short term, it is with the confidence that over the long term we will be able to really drive growth of both the market as well as our market share as a result of those enhancements that we are putting forward.

Nicholas Danna - Sterne, Agee & Leach

Okay. That’s helpful. Thanks a lot. Good afternoon.

John M. Boushy - Chief Executive Officer and President

Sure. Thanks Nick.

Operator

Our next question is a follow up from Dennis Forst of KeyBanc. Please go ahead.

Dennis Forst – KeyBanc Capital Markets

Yes, I wanted to ask a couple of things about Vicksburg. First, how much additional casino space are we talking about? You talked about a big expansion in casino space?

John M. Boushy - Chief Executive Officer and President

It’s roughly about 30,000-35,000 square feet.

Dennis Forst – KeyBanc Capital Markets

Okay. And how many positions might there be added in that?

John M. Boushy - Chief Executive Officer and President

I believe we have described in the past and we continue to look at it as roughly total of 440 positions, about 300 of those being slots and the remaining being table games.

Dennis Forst – KeyBanc Capital Markets

Okay. Great and lastly you already dominate that market, have close to a 50% market share can we get a double digit return on that $100 million investment, $98 million investment?

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

Well, that’s certainly our objective. We do believe that there is opportunity to first grow the market and because of the things we are doing that market because we are growing it, we would capture a disproportionate share of that market growth. As we do that we would think that our market share would increase so we are certainly moving forward under that scenario.

Dennis Forst – KeyBanc Capital Markets

The market share would go up it’s just a question of how much profit there is or how much market share you can add? When you are already at 50%.

John M. Boushy - Chief Executive Officer and President

Yes. We are pretty pleased with the EBITDA margin that we have at that part as well. Tom, I guess we are in the just below 40?

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

Sure. Right. Just below 40, 38.

John M. Boushy - Chief Executive Officer and President

So, I think we see some real opportunity Dennis to really be able to capitalize upon the leading position that we have and extend that leading position based upon having. I mean we already have the best location in the market we already have the best product in the market and now we're going to have an even better product in the market after this location with fabulous parking that’s directly connected to the casino, it’s covered parking as we all know, when it rains in Vicksburg it can kind of pour and so having covered parking in a parking garage that’s directly connected to the casino that we have there. We think really allows us to capture greater share of that market.

Dennis Forst – KeyBanc Capital Markets

And that’s by the end of this calendar year. You’ll have the parking there or next month--?

John M. Boushy - Chief Executive Officer and President

It’s in the second quarter of 2008.

Unidentified Company Representative

Underestimate the impact of the garage will have the Vicksburg property for those of you who haven’t seen it. Is built on a pretty sheer hillside and as a result the parking, the surface parking, its there now has to stretch out quite a distance from the property and we end up by not fully utilizing the casino as well as we can regardless of the expansion of the casino, because of some of the inconvenience of peak hours. The people experience in parking. The garage is going to solve that and it is a tremendous mover and shaker for the property as John mentioned.

Dennis Forst – KeyBanc Capital Markets

Okay. Great thanks a lot.

John M. Boushy - Chief Executive Officer and President

Dennis?

Dennis Forst – KeyBanc Capital Markets

Yes.

John M. Boushy - Chief Executive Officer and President

While you're on I’ll give you Adams answer. Maintenance CapEx is $10 million for the quarter

Dennis Forst – KeyBanc Capital Markets

I owed him that one.

John M. Boushy - Chief Executive Officer and President

Thanks for that.

Dennis Forst – KeyBanc Capital Markets

Thank you.

Operator

Our next question is a follow-up from Adam Steinberg of Morgan Joseph. Please go ahead.

Adam Steinberg - Morgan Joseph and Company

Real quickly with Resorts East Chicago. Tom you mentioned that the integration cost going forward can be at the property level. How are we having integration costs for this property?

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

Well I think we’ll have them probably some of them out through at least the first quarter of 2008.

John M. Boushy - Chief Executive Officer and President

Probably in the second quarter

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

Maybe a little bit into the second quarter based on where we are now with timing of things.

Adam Steinberg - Morgan Joseph and Company

Okay. And then with relation just to Vicksburg, has Riverwalk broken ground yet?

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

Yes. They have.

Adam Steinberg - Morgan Joseph and Company

And what about some of the other properties there, the other proposals, the lakes one, is that going to go forward?

Thomas M. Steinbauer - Senior Vice President, Finance and Chief Financial Officer

Your guess is as good as mine on that one.

Gordon R. Kanofsky - Co-Chairman and Executive Vice President

I have no new knowledge on that one Adam.

Adam Steinberg - Morgan Joseph & Company

Okay.

Gordon R. Kanofsky - Co-Chairman and Executive Vice President

What they are going to do there.

Adam Steinberg - Morgan Joseph & Company

Okay. All right. Thank you.

Gordon R. Kanofsky - Co-Chairman and Executive Vice President

Thank you.

John M. Boushy - Chief Executive Officer and President

Operator, Henry, we probably have time for one last question.

Operator

Sir, actually, at this time, there are no further questions. I just want to turn the floor over to Mr. Boushy for any closing remarks.

John M. Boushy - Chief Executive Officer and President

Okay. Great, Henry. We appreciate it. As we wrap up our call today, I would like to thank our almost 9,000 Ameristar team members, including our newest ones from East Chicago who tirelessly create great guest experiences each and everyday at everyone of our locations.

Once again, thank you for joining Ameristar’s third quarter conference call. Have a great evening.

Operator

Thank you. This concludes today’s call. You may now disconnect.

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