LAS VEGAS, Nevada -- (PRESS RELEASE) -- Ameristar Casinos, Inc. today announced financial results for the third quarter of 2012.
"The 2012 third quarter was one of Ameristar's most profitable quarters ever despite a slight decline in net revenues and Adjusted EBITDA," said Gordon Kanofsky, Ameristar's Chief Executive Officer. "Ameristar's operating model and geographic diversification produced an Adjusted EBITDA margin equal to our third quarter record margin achieved in 2011. Several properties improved their key financial metrics on a year-over-year basis, including Ameristar Black Hawk, which had the best quarter in its history. Our scale and diversification helped mitigate the impact from additional competition faced in two of our markets. Additionally, our efficient operating model absorbed a $1.1 million year-over-year increase in development expenses in the third quarter, which were related to our Louisiana and Massachusetts projects.
"We look forward to further growing our company and diversifying our operations when we complete our luxury casino resort in Lake Charles, La., which is expected to open in the third quarter of 2014. Additionally, our proposal in Springfield, Mass. to develop a world-class luxury resort in a new geographic region serves as another example of our commitment to pursue growth opportunities. We will continue our pursuit of North American acquisitions and development projects that surpass our ROI hurdles and are within our risk tolerance, as well as other means to maximize long-term shareholder value, including debt reduction, dividends and stock repurchases."
Consolidated net revenues for the third quarter decreased year over year by $6.5 million (2.1%), to $298.0 million. Black Hawk improved net revenues by $2.3 million (5.7%) to an all-time quarterly record for the property of $42.4 million. Despite construction disruption affecting our St. Charles and Jackpot properties, each produced stable year-over-year net revenues and improved sequentially upon second quarter net revenues. St. Charles overcame floor disruption from a slot system upgrade and street construction near our property. Both projects were completed in the third quarter of 2012. Maintenance on the I-70 bridge near our St. Charles property will commence in earnest in early November and is expected to negatively impact results for approximately one year, during which four of the bridge's 10 lanes will be closed. Jackpot's construction disruption related to a road repaving project on Highway 93 between Twin Falls, Idaho and Jackpot that concluded late in the third quarter and a hotel renovation affecting 21% of the Jackpot properties' rooms that was completed in late July 2012.
As anticipated, new competition continued to impact Ameristar Kansas City, which had a year-over-year net revenue decline of $4.0 million (7.1%). Additionally, East Chicago's third quarter net revenues declined by $4.6 million (8.5%) year over year mostly as a result of low table games hold and increased competition in the Chicagoland market. A promotional program intended to counter East Chicago's new competitive environment contributed to an increase of $0.6 million (0.8%) in consolidated third quarter promotional allowances over the prior-year third quarter.
The majority of our properties produced higher Adjusted EBITDA on a year-over-year basis. Black Hawk established its all-time quarterly Adjusted EBITDA record of $16.1 million, a year-over-year increase of $1.4 million (9.2%), while Council Bluffs improved $0.8 million (5.1%) year over year. Despite the generally strong performance from several properties, consolidated Adjusted EBITDA decreased from the prior-year third quarter by $2.1 million (2.4%) to $88.1 million as a result of year-over-year declines of $2.0 million (21.6%) and $1.6 million (7.8%) at East Chicago and Kansas City, respectively.
Third quarter consolidated net revenues and Adjusted EBITDA improved on a year-over-year basis when excluding the financial results from our East Chicago and Kansas City properties. The combined operating results of our other six properties with stable competitive conditions in their respective markets reflect year-over-year increases in net revenues and Adjusted EBITDA of $2.1 million (1.1%) and $2.2 million (3.0%), respectively.
Through the efficiency of our operating model, third quarter consolidated Adjusted EBITDA margin held steady at a strong 29.6% year over year despite the revenue decline and increased non-capitalizable development expenses. We generated operating income of $57.4 million in the third quarter of 2012, compared to $61.1 million in the same period in 2011.
For the quarter ended Sept. 30, 2012, we reported net income of $16.1 million, compared to net income of $18.9 million for the same period in 2011. Diluted earnings per share were $0.48 for the third quarter of 2012, compared to diluted earnings per share of $0.56 in the prior-year third quarter. Adjusted EPS of $0.48 for the quarter ended Sept. 30, 2012 represents a decrease of $0.09 from Adjusted EPS for the 2011 third quarter.
Ameristar Casino Resort Spa Lake Charles
Construction of Ameristar Casino Resort Spa Lake Charles began on July 20, 2012 and is progressing on schedule. The resort is being developed on a leased 243-acre site and will include a casino with approximately 1,600 slot machines and 60 table games, a hotel with approximately 700 guest rooms (including 70 suites), a variety of food and beverage outlets, an 18-hole golf course, a tennis club, swimming pools, a spa and other resort amenities, and approximately 3,000 parking spaces, 1,000 of which will be in a garage.
The cost of the project (including the purchase price) is expected to be between $560 million to $580 million, excluding capitalized interest and pre-opening expenses. In establishing the scale, scope and budget for Ameristar Lake Charles, we have sought to maximize its return on investment potential based on our assessment of the market, which includes approximately 6.1 million adults within 150 miles, extending to the Houston, Tex. metropolitan area, and which we believe is underserved by the currently operating casinos in the market. We anticipate funding the project through a combination of cash from operations and borrowings under our revolving credit facility. We expect to open the resort in the third quarter of 2014.
Ameristar Casino Resort Spa Springfield
In January 2012, we purchased a 40-acre site just minutes from downtown Springfield, Mass. with the intent to apply for the sole casino license for western Massachusetts. On October 23, 2012, we announced specific plans for our proposal to develop Ameristar Casino Resort Spa Springfield if we are awarded the license. Our plan includes a 150,000-square-foot casino featuring approximately 3,300 slot machines and 110 table games, including a poker room. Ameristar Springfield is expected to include a 500-room luxury hotel with 50 suites. The property will feature indoor and outdoor resort swimming pools, a spa, a fitness center and retail amenities. There will be a diverse offering of nationally- and locally-recognized food and beverage venues, offering everything from upscale to casual dining. Also planned is a conference and entertainment center, along with garage parking for approximately 4,300 vehicles. The resort is master-planned to accommodate significant future expansions of the casino, hotel and parking garages.
We estimate the initial development cost of Ameristar Springfield would be approximately $910 million, which includes capitalized interest and pre-opening expenses and a license fee payment to the Commonwealth of Massachusetts. Ameristar's proposed budget also includes the $16.9 million paid earlier in 2012 to acquire the site and $58 million for planned traffic improvements to create easy access to the resort and alleviate current traffic problems in the area. As with our Lake Charles project currently under construction, we believe our proposed scale, scope and budget for Ameristar Springfield will allow us to strongly compete for the western Massachusetts license and maximize the return on investment potential in a market with approximately 2.5 million adults within a 50-mile radius.
The City of Springfield is currently conducting a process to select one or more casino proposals to be submitted to the gaming commission that is currently scheduled for completion during the first half of 2013. The gaming commission anticipates making decisions for the awarding of licenses in the first quarter of 2014.
We believe our proposal has several competitive advantages over the other two casino development proposals for Springfield, including:
A 12- to 18-month head start on development (and the creation of jobs and the flow of tax revenues) since Ameristar's site is the only one that is owned or controlled by the developer and is immediately ready for construction.
A site that is three to four times larger than either of the competing proposed sites, with a larger scale casino and hotel.
The lowest site acquisition, site development and infrastructure costs, which will allow us to maximize our investment in creating a world-class resort experience that we believe will attract more visitors to Springfield.
A traffic plan that we believe will create the easiest access with the least impact on local traffic.
Based on these factors, we believe Ameristar's proposal has the potential to maximize gaming and total revenues, gaming taxes, direct and indirect job creation and overall economic impact compared to any of the other announced proposals for Springfield or other locations in western Massachusetts.
Additional Financial Information
Cash and Cash Equivalents. At Sept. 30, 2012, total cash was $116.3 million, representing an increase of $30.6 million from total cash as of Dec. 31, 2011. The increase is attributable to accumulated cash flows from operations and no outstanding indebtedness subject to voluntary repayment under our revolving credit facility (as described below). In October 2012, we made the $39 million semi-annual interest payment related to the $1.04 billion principal amount of our 7.50% Senior Notes due 2021.
Debt. At Sept. 30, 2012, the face amount of our outstanding debt was $1.9 billion. Net repayments for the third quarter of 2012 totaled $2.5 million. At Sept. 30, 2012, our Total Net Leverage Ratio (as defined in the senior credit facility) was required to be no more than 6.50:1. As of that date, our Total Net Leverage Ratio was 5.01:1.
Capital Expenditures. For the quarters ended Sept. 30, 2012 and 2011, capital expenditures totaled $34.4 million and $19.1 million, respectively. Third quarter 2012 capital expenditures include $15.2 million associated with the Lake Charles construction project.
Stock Repurchase Program. On Sept. 15, 2011, our Board of Directors approved the repurchase of up to $75 million of Ameristar common stock through Sept. 30, 2014. During the third quarter of 2012, we repurchased approximately 0.7 million shares of common stock at a total cost of approximately $11.1 million under the stock repurchase program. To date, we have repurchased approximately 1.0 million shares of common stock, or 3% of our outstanding stock, under the program at an average price of $16.67 per share, for a total cost of $16.7 million.
Dividend. During the third quarter of 2012, our Board of Directors declared a cash dividend of $0.125 per share, which we paid on Sept. 14, 2012. On Oct. 26, 2012, the Board declared a cash dividend of $0.125 per share, payable on Dec. 14, 2012.
For the full year 2012, we currently expect:
depreciation to range from $106.6 million to $107.6 million.
interest expense, net of capitalized interest, to be between $114.4 million and $115.4 million, including non-cash interest expense of approximately $5.5 million.
the combined state and federal income tax rate to be in the range of 27% to 29%.
capital spending of $147.0 million to $152.0 million, including approximately $70.0 million for maintenance capital expenditures, $31.9 million related to Lake Charles design and construction costs, $29.8 million recorded for the fair value of a Lake Charles intangible asset and $16.9 million for the January 2012 Springfield, Mass. land purchase.
non-cash stock-based compensation expense of $16.0 million to $17.0 million.
corporate expense, excluding non-cash stock-based compensation expense, to be between $50.5 million and $51.5 million.
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