- Completes St. Charles Hotel Expansion; Opens New Garage and Casino Expansion in Vicksburg One Month Early
- Rebrands Ameristar East Chicago
- Announces Workforce Reduction to Produce Annualized Savings of Approximately $20 million
LAS VEGAS, Aug. 4 /PRNewswire-FirstCall/ -- Ameristar Casinos, Inc.
(Nasdaq: ASCA) today announced financial results for the second quarter ended
June 30, 2008.
'Economic conditions continued to result in difficult year-over-year
comparisons,' said Gordon Kanofsky, Chief Executive Officer and Vice Chairman.
'On a same-store basis, net revenues were flat, while EBITDA declined
5.5 percent when compared to last year. In addition to the weakening economy,
increased promotional spending companywide and the impact from the Colorado
smoking ban contributed to lower margins.'
'New amenities that came on line in the second quarter, including
additional hotel rooms at St. Charles and the earlier than anticipated opening
of the parking garage and casino expansion at Vicksburg, helped to drive some
market share growth at those locations. Also, in late June, we completed the
rebranding of our East Chicago property to 'Ameristar.''
These projects, along with the Black Hawk hotel under construction, are
expected to help set the stage for future growth once the economy recovers.
In the meantime, our new senior management team has implemented a strategic
plan to improve efficiencies and reduce the Company's cost structure as weak
economic conditions continue to adversely impact business volumes.
As a result, we recently terminated 244 team members, or approximately
3 percent of our workforce. We have further reduced our workforce by the
equivalent of an additional 150 full-time positions through changes in
scheduling and staffing practices and attrition. These actions are expected
to produce annualized savings of approximately $20 million, which is 6 percent
of our compensation expense for the twelve months ended June 30, 2008. The
workforce reduction will result in a pre-tax charge to our third quarter 2008
earnings of approximately $2.0 million for severance costs.
'Regrettably, we have reduced our workforce as the economic downturn is
more prolonged than many economists expected,' noted Kanofsky. 'In response
to the weakness in the economy, we first attempted to drive incremental
profitable revenue through increased promotional activity in the first and
second quarters, which proved unsuccessful. Therefore, in addition to the
staffing adjustments, we began curtailing promotional spending in the third
quarter, and we plan to make more significant reductions beginning in the
fourth quarter compared to second quarter levels. These operating and
marketing initiatives will better align our costs with current consumer
spending trends, which we expect will ultimately improve our margins going
forward. We believe we can successfully manage our cost structure without
compromising on the high quality guest experience for which Ameristar has long
been known.'
Second Quarter 2008 Financial Results
For the second quarter of 2008, we had net revenues of $328.1 million
compared to $253.2 million in last year's second quarter. Included in 2008
results were net revenues of $74.5 million from the East Chicago property,
which we acquired on September 18, 2007.
Operating income for the second quarter of 2008 was $48.0 million,
compared to $43.3 million in the same 2007 period. Same-store operating
income in the 2008 second quarter was $40.0 million, a decrease of
$3.3 million, or 7.7 percent, from the 2007 second quarter.
Adjusted EBITDA for the second quarter of 2008 was $77.7 million, compared
to $67.2 million for the 2007 second quarter. Adjusted EBITDA for the 2008
second quarter represents EBITDA of $74.6 million, excluding:
-- transition and rebranding costs of $1.8 million related to the East
Chicago property;
-- pre-opening expenses of $1.1 million related to the St. Charles hotel;
and
-- pre-opening expenses of $0.2 million related to the Vicksburg casino
expansion and new garage.
For the quarter ended June 30, 2007, Adjusted EBITDA excludes $0.2 million
in pre-opening expenses associated with the St. Charles hotel. East Chicago,
which the Company did not own in the 2007 second quarter, accounted for
$13.1 million of Adjusted EBITDA in the 2008 second quarter.
Financial results were adversely impacted by a significant increase in
promotional spending. Same-store promotional allowances increased
29.7 percent over the prior-year second quarter as a result of the aggressive
companywide marketing program designed to capture profitable incremental
revenue and our efforts to introduce gaming customers to the new hotel and spa
in St. Charles.
Adjusted EBITDA margin declined 2.8 percentage points compared to the
second quarter of 2007; on a same-store basis, Adjusted EBITDA margin declined
1.0 percentage point. The inclusion of the East Chicago property negatively
impacts the consolidated margin due to the higher gaming tax rate in Indiana
compared to the other jurisdictions in which we operate. Additionally, lower
margins resulted from the impact of the weakening economy on our gaming
revenue and the increased promotional spending that we are now curtailing.
For the second quarter of 2008, we had net income of $17.0 million, or
$0.29 per share on a diluted basis. In last year's second quarter, we
reported net income of $17.3 million, or $0.30 per diluted share. Adjusted
EPS, representing diluted earnings per share excluding the after-tax impacts
of the transition and rebranding costs and pre-opening expenses, was $0.32 for
the quarter ended June 30, 2008, compared to $0.30 for the 2007 second
quarter.
More information on the non-GAAP financial measures EBITDA, Adjusted
EBITDA and Adjusted EPS can be found under the caption 'Use of Non-GAAP
Financial Measures' at the end of this release.
Property Highlights
St. Charles. At St. Charles, net revenues increased $3.6 million or
5.0 percent over the 2007 second quarter, primarily as a result of the
completion of the new 400-suite hotel. However, Adjusted EBITDA decreased
$0.7 million or 3.0 percent year over year due to higher costs associated with
operating the hotel and other recently added amenities. Market share
increased 1.0 percentage point to 29.3 percent from the first quarter of 2008.
Vicksburg. We substantially completed the casino expansion and the new
1,000-space parking garage at our Vicksburg property in late May, one month
ahead of schedule. As a result of this project, we further strengthened our
dominant market share position and achieved 50.6 percent market share in June,
an increase of 2.7 percentage points over our May market share.
A new VIP lounge was completed in July and two additional restaurants are
scheduled to open by this fall. Additionally, we are planning a limited
refurbishment of the existing casino that is expected to be completed later
this year at a cost of approximately $6 million.
Council Bluffs. Ameristar Council Bluffs increased net revenues and
EBITDA by 1.6 percent and 2.6 percent, respectively, over the prior-year
second quarter. The Council Bluffs market appears to be withstanding the
tough economy better than our other markets as evidenced by market growth of
2.4 percent over the 2007 second quarter without any change in the competitive
environment.
East Chicago. We rebranded our East Chicago property to 'Ameristar' on
June 24 following the completion of a number of enhancements to the property,
including improved food and beverage offerings in keeping with our commitment
to culinary excellence. The casino floor was remodeled to include a new
design and layout as well as an enhanced mix of games. We also introduced our
Ameristar Star Awards players' program to guests. The total cost of the
rebranding renovations and related promotional and other expenses is
approximately $30 million, of which approximately $2.8 million has been
expensed in 2008. Second quarter 2008 market share increased 1.8 percentage
points on a year-over-year basis and 0.3 percentage point compared to the
first quarter of 2008.
Black Hawk. The entire Colorado market, including Ameristar Black Hawk,
continues to be adversely impacted by the statewide smoking ban that became
effective for casinos on January 1, 2008. The smoking ban, high fuel prices
and the difficult economic conditions resulted in an 11.3 percent contraction
in the Black Hawk gaming market compared to second quarter of 2007.
Additional Second Quarter 2008 Financial Information
-- Corporate expense declined $0.8 million year over year, due mostly to
decreases in employee benefit costs and professional fees, which were
partially offset by a $1.8 million increase in severance pay primarily
associated with the recent senior management changes, as well as
expenses related to ballot initiatives in Missouri and Colorado that,
if successful, are expected to lead to substantial growth in 2009.
-- Stock-based compensation expense was $2.5 million, compared to
$2.9 million in the 2007 second quarter.
-- Net interest expense was $15.8 million compared to $11.1 million in the
second quarter of 2007, and capitalized interest was $4.2 million
compared to $4.6 million in the second quarter of 2007.
-- Capital expenditures for the quarter were $72.2 million, including:
-- Vicksburg expansion: $24.4 million
-- Black Hawk hotel: $24.1 million
-- Slot product: $7.9 million
-- St. Charles hotel and expansion: $5.7 million
-- East Chicago rebranding renovations: $4.4 million.
-- At June 30, 2008, total debt was $1.6 billion, a decrease of
$23.2 million from December 31, 2007. During the second quarter, net
borrowings were $3.0 million; in July, we borrowed an additional
$30.0 million under our revolving loan facility.
-- We entered into a two-year interest rate swap agreement, effective
July 18, 2008, to fix the interest rate on $500.0 million of
LIBOR-based borrowings under our senior revolving loan facility at
3.1975% plus the applicable margin, which is currently 1.75%.
