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Ameristar Casinos, Inc. (ASCA)

Q4 2008 Earnings Call

February 10, 2009 1:00 pm ET


Gordon R. Kanofsky - Chief Executive Officer and Vice Chairman

Thomas Steinbauer - Chief Financial Officer


Larry Klatzkin - Jefferies

David Katz - Oppenheimer & Co.

Dennis Forst - KeyBanc Capital Markets

Joseph Greff - JPMorgan

Ryan Worst - Brean Murray, Carret & Co.

Justin Sebastiano - Morgan Joseph & Co., Inc.

Steve Altebrando - Sidoti & Company

John Grassano - Buckingham Research

Dennis Farrell - Wachovia



Welcome to Ameristar's 2008 fourth quarter and year end earnings conference call. (Operator Instructions)

Before we get started, I would like to remind you that a slide presentation is available on Ameristar's website,, in the Investor Relations section under the Quarter Results Conference Calls. This presentation corresponds with comments that will be made in the call and provides additional useful information with regard to financial results.

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

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

It is no my pleasure to turn the call over to Gordon Kanofsky, Ameristar's CEO and Vice Chairman. Please go ahead.

Gordon R. Kanofsky

Thanks, [Julianne]. I'm joined here today by Tom Steinbauer, our Chief Financial Officer, and we're very pleased to have an opportunity to talk with you about our fourth quarter and year end financial results.

Turning to Slide 3, I'd say it's sort of table of contents for what we're going to cover today. I'm not going to read through it all there - I'm sure you all have the slides in front of you - and we'll get straight into Slide 4, which is a bit of our headline.

The big headline is our focus on efficiency is yielding demonstrable results. We're really pleased with what we've produced in the fourth quarter and the trend lines coming from there. We've also had obviously the success in the ballot initiatives in Missouri and Colorado, already seeing the growth there and Missouri yet to come - in Colorado, along with the hotel.

And also despite the strength of Ameristar's balance sheet, the economic softness that's present everywhere is obviously putting a little stress on the scheduled declines later this year in our senior leverage ratio covenant under our credit facility and we're actively seeking an amendment to resolve that, give us the breathing room that we need.

But let's focus mostly right now on the efficiency efforts that we have been implementing over the last six months. Several months before the severity of the recession kicked in and was comprehended by much of the country, we decided that we needed to position ourselves for any eventuality that could happen with the economy. And even though the economy actually turned out far worse than any of us had expected at that time and I think probably the same goes for all of you, we focused very much on implementing efficiencies from the operating standpoint as well as marketing, including our promotional spending, labor and other costs.

The good news is that's turned into real, tangible results. We had a $1.9 million improvement in adjusted EBITDA in the fourth quarter, notwithstanding a $9.1 million decline in net revenues. And embedded in those numbers of $2.6 million of severance costs in the fourth quarter, which makes the results even more outstanding.

As a result of what we've implemented so far in efficiency efforts, we're on track to generate $45 million in annualized savings. And we've done that, I think, without diminishing anything in the guest experience. Labor adjustments account for about half of that $45 million.

We've also taken a good whack at the promotional spending. Even though promotional allowances are up $2.3 million over the fourth quarter of 2007, most of that is related to the efforts to promote the St. Charles Hotel and on a trend line basis they're actually $12.4 million less than in the third quarter of 2008.

We've also implemented a lot of controls on the food and beverage operations as well as throughout the entirety of the operation. Every department at every property as well as at corporate has taken a very hard look at their business and made adjustment to allow us to operate more leanly and more efficiently.

We continue to look for additional ways to improve our margins.

Turning over to Slide 5, I think it says what we've accomplished even better than any words that I can use. This graph shows the year-over-year same-store quarterly changes in net revenue, adjusted EBITDA, and adjusted EBITDA margin, obviously on a same-store basis. East Chicago's excluded since we didn't own it for the full year in 2007.

As you can see as the quarters trudge along, the net revenue trends are very unfavorable, but we significantly improved our margins, resulting in a favorable adjusted EBITDA trend despite the recession, the Black Hawk smoking ban, and increased competition in two markets. We're really proud of these results and I applaud the entire operational team and everybody throughout the company for making them come through. And again, these results - since adjusted EBITDA includes severance costs - they're not netted out in here. If they're netted out, this graph would be even more impressive.

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