e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
|
|
|
þ |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2009
OR
|
|
|
o |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from
to
Commission file number: 0-22494
AMERISTAR CASINOS, INC.
(Exact name of Registrant as Specified in its Charter)
|
|
|
Nevada
|
|
88-0304799 |
|
|
|
(State or other jurisdiction of
|
|
(I.R.S. employer |
incorporation or organization)
|
|
identification no.) |
3773 Howard Hughes Parkway
Suite 490 South
Las Vegas, Nevada 89169
(Address of principal executive offices)
(702) 567-7000
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the Registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the Registrant was required to submit and post such files). Yes
o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company.
See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
|
|
|
|
|
|
|
Large accelerated filer o |
|
Accelerated filer þ |
|
Non-accelerated filer o
(Do not check if a smaller reporting company) |
|
Smaller Reporting Company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
As of
May 5, 2009, 57,397,191 shares of Common Stock of the registrant were outstanding.
AMERISTAR CASINOS, INC.
FORM 10-Q
INDEX
- 1 -
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AMERISTAR CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands, Except Share Data)
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
|
|
|
2009 |
|
|
December 31, |
|
|
|
(Unaudited) |
|
|
2008 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
85,738 |
|
|
$ |
73,726 |
|
Restricted cash |
|
|
6,425 |
|
|
|
6,425 |
|
Accounts receivable, net |
|
|
8,383 |
|
|
|
12,635 |
|
Inventories |
|
|
7,611 |
|
|
|
7,926 |
|
Prepaid expenses |
|
|
13,818 |
|
|
|
8,029 |
|
Deferred income taxes |
|
|
1,552 |
|
|
|
10,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
123,527 |
|
|
|
119,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and Equipment, at cost: |
|
|
|
|
|
|
|
|
Buildings and improvements |
|
|
1,661,715 |
|
|
|
1,657,835 |
|
Furniture, fixtures and equipment |
|
|
510,506 |
|
|
|
510,843 |
|
|
|
|
|
|
|
|
|
|
|
2,172,221 |
|
|
|
2,168,678 |
|
Less: accumulated depreciation and amortization |
|
|
(676,485 |
) |
|
|
(655,422 |
) |
|
|
|
|
|
|
|
|
|
|
1,495,736 |
|
|
|
1,513,256 |
|
|
|
|
|
|
|
|
Land |
|
|
83,097 |
|
|
|
83,183 |
|
Construction in progress |
|
|
209,275 |
|
|
|
176,518 |
|
|
|
|
|
|
|
|
Total property and equipment, net |
|
|
1,788,108 |
|
|
|
1,772,957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill and other intangible assets |
|
|
254,833 |
|
|
|
255,170 |
|
Deferred income taxes |
|
|
2,404 |
|
|
|
16,219 |
|
Deposits and other assets |
|
|
71,964 |
|
|
|
61,678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
2,240,836 |
|
|
$ |
2,225,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
18,059 |
|
|
$ |
27,520 |
|
Construction contracts payable |
|
|
29,853 |
|
|
|
37,121 |
|
Income taxes payable |
|
|
445 |
|
|
|
3,563 |
|
Accrued liabilities |
|
|
118,280 |
|
|
|
116,313 |
|
Current maturities of long-term debt |
|
|
4,297 |
|
|
|
4,503 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
170,934 |
|
|
|
189,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of current maturities |
|
|
1,646,902 |
|
|
|
1,643,997 |
|
Deferred compensation and other long-term liabilities |
|
|
50,654 |
|
|
|
53,441 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity: |
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value: Authorized 30,000,000 shares; Issued None |
|
|
|
|
|
|
|
|
Common stock, $.01 par value: Authorized 120,000,000 shares; Issued 58,180,463 and
58,093,041 shares; Outstanding 57,378,184 and 57,300,719 shares |
|
|
582 |
|
|
|
581 |
|
Additional paid-in capital |
|
|
249,720 |
|
|
|
246,662 |
|
Accumulated other comprehensive loss |
|
|
(26,606 |
) |
|
|
(27,295 |
) |
Treasury stock, at cost (802,279 and 792,322 shares) |
|
|
(17,801 |
) |
|
|
(17,719 |
) |
Retained earnings |
|
|
166,451 |
|
|
|
136,551 |
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
372,346 |
|
|
|
338,780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |
|
$ |
2,240,836 |
|
|
$ |
2,225,238 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
- 2 -
AMERISTAR CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
Revenues: |
|
|
|
|
|
|
|
|
Casino |
|
$ |
322,878 |
|
|
$ |
331,757 |
|
Food and beverage |
|
|
37,964 |
|
|
|
40,370 |
|
Rooms |
|
|
14,676 |
|
|
|
10,940 |
|
Other |
|
|
8,199 |
|
|
|
9,577 |
|
|
|
|
|
|
|
|
|
|
|
383,717 |
|
|
|
392,644 |
|
Less: Promotional allowances |
|
|
(67,880 |
) |
|
|
(67,876 |
) |
|
|
|
|
|
|
|
Net revenues |
|
|
315,837 |
|
|
|
324,768 |
|
|
|
|
|
|
|
|
|
|
Operating Expenses: |
|
|
|
|
|
|
|
|
Casino |
|
|
144,344 |
|
|
|
155,543 |
|
Food and beverage |
|
|
16,505 |
|
|
|
18,978 |
|
Rooms |
|
|
2,232 |
|
|
|
2,530 |
|
Other |
|
|
3,392 |
|
|
|
6,075 |
|
Selling, general and administrative |
|
|
53,534 |
|
|
|
64,113 |
|
Depreciation and amortization |
|
|
26,472 |
|
|
|
25,520 |
|
Impairment loss on assets |
|
|
52 |
|
|
|
129,065 |
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
246,531 |
|
|
|
401,824 |
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
69,306 |
|
|
|
(77,056 |
) |
|
|
|
|
|
|
|
|
|
Other Income (Expense): |
|
|
|
|
|
|
|
|
Interest income |
|
|
143 |
|
|
|
227 |
|
Interest expense, net of capitalized interest |
|
|
(16,915 |
) |
|
|
(22,053 |
) |
Net (loss) gain on disposition of assets |
|
|
(5 |
) |
|
|
75 |
|
Other |
|
|
(445 |
) |
|
|
(852 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) Before Income Tax Provision (Benefit) |
|
|
52,084 |
|
|
|
(99,659 |
) |
Income tax provision (benefit) |
|
|
22,184 |
|
|
|
(38,729 |
) |
|
|
|
|
|
|
|
Net Income (Loss) |
|
$ |
29,900 |
|
|
$ |
(60,930 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) Per Share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.52 |
|
|
$ |
(1.07 |
) |
|
|
|
|
|
|
|
Diluted |
|
$ |
0.52 |
|
|
$ |
(1.07 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Dividends Declared Per Share |
|
$ |
|
|
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average Shares Outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
57,349 |
|
|
|
57,149 |
|
|
|
|
|
|
|
|
Diluted |
|
|
57,586 |
|
|
|
57,149 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
- 3 -
AMERISTAR CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2009 |
|
|
2008 |
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
29,900 |
|
|
$ |
(60,930 |
) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
26,472 |
|
|
|
25,520 |
|
Amortization of debt issuance and amendment costs |
|
|
800 |
|
|
|
528 |
|
Stock-based compensation expense |
|
|
2,549 |
|
|
|
3,050 |
|
Impairment loss on assets |
|
|
52 |
|
|
|
129,065 |
|
Net loss (gain) on disposition of assets |
|
|
5 |
|
|
|
(75 |
) |
Net change in deferred income taxes |
|
|
23,254 |
|
|
|
(49,539 |
) |
Excess tax benefit from stock option exercises |
|
|
(132 |
) |
|
|
(172 |
) |
Net change in fair value of swap agreements |
|
|
8 |
|
|
|
|
|
Net change in deferred compensation liability |
|
|
(2,167 |
) |
|
|
696 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
4,252 |
|
|
|
(640 |
) |
Income tax refunds receivable |
|
|
|
|
|
|
13,539 |
|
Inventories |
|
|
315 |
|
|
|
(138 |
) |
Prepaid expenses |
|
|
(5,789 |
) |
|
|
(4,002 |
) |
Accounts payable |
|
|
(9,461 |
) |
|
|
1,800 |
|
Income taxes payable |
|
|
(2,986 |
) |
|
|
6,411 |
|
Accrued liabilities |
|
|
1,967 |
|
|
|
6,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
69,039 |
|
|
|
71,926 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(41,820 |
) |
|
|
(63,100 |
) |
(Decrease) increase in construction contracts payable |
|
|
(7,268 |
) |
|
|
8,524 |
|
Proceeds from sale of assets |
|
|
140 |
|
|
|
760 |
|
Increase in deposits and other non-current assets |
|
|
(1,536 |
) |
|
|
(6,066 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(50,484 |
) |
|
|
(59,882 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
Debt borrowings |
|
|
24,000 |
|
|
|
|
|
Principal payments of debt |
|
|
(21,301 |
) |
|
|
(26,196 |
) |
Debt amendment costs |
|
|
(9,670 |
) |
|
|
|
|
Cash dividends paid |
|
|
|
|
|
|
(6,002 |
) |
Proceeds from stock option exercises |
|
|
378 |
|
|
|
383 |
|
Purchases of treasury stock |
|
|
(82 |
) |
|
|
|
|
Excess tax benefit from stock option exercises |
|
|
132 |
|
|
|
172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(6,543 |
) |
|
|
(31,643 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash and Cash Equivalents |
|
|
12,012 |
|
|
|
(19,599 |
) |
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents Beginning of Period |
|
|
73,726 |
|
|
|
98,498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents End of Period |
|
$ |
85,738 |
|
|
$ |
78,899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Disclosures: |
|
|
|
|
|
|
|
|
Cash paid for interest, net of amounts capitalized |
|
$ |
17,270 |
|
|
$ |
23,557 |
|
|
|
|
|
|
|
|
Cash paid (received) for federal and state income taxes, net of refunds received |
|
$ |
270 |
|
|
$ |
(10,000 |
) |
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
- 4 -
AMERISTAR CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1 Principles of consolidation and basis of presentation
The accompanying consolidated financial statements include the accounts of Ameristar Casinos,
Inc. (ACI) and its wholly owned subsidiaries (collectively, the Company). Through its
subsidiaries, the Company owns and operates eight casino properties in seven markets. The
Companys portfolio of casinos consists of: Ameristar Casino Resort Spa St. Charles (serving the
St. Louis, Missouri metropolitan area); Ameristar Casino Hotel East Chicago (serving the
Chicagoland area); Ameristar Casino Hotel Kansas City (serving the Kansas City metropolitan area);
Ameristar Casino Hotel Council Bluffs (serving Omaha, Nebraska and southwestern Iowa); Ameristar
Casino Hotel Vicksburg (serving Jackson, Mississippi and Monroe, Louisiana); Ameristar Casino Black
Hawk (serving the Denver, Colorado metropolitan area); and Cactus Petes and The Horseshu in
Jackpot, Nevada (serving Idaho and the Pacific Northwest). The Company views each property as an
operating segment and all such operating segments have been aggregated into one reporting segment.
All significant intercompany transactions have been eliminated.
The accompanying consolidated financial statements have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, the consolidated financial statements do not include all of the disclosures required
by generally accepted accounting principles. However, they do contain all adjustments (consisting
of normal recurring adjustments) that, in the opinion of management, are necessary to present
fairly the Companys financial position, results of operations and cash flows for the interim
periods included therein. The interim results reflected in these financial statements are not
necessarily indicative of results to be expected for the full fiscal year.
Certain of the Companys accounting policies require that the Company apply significant
judgment in defining the appropriate assumptions for calculating financial estimates. By their
nature, these judgments are subject to an inherent degree of uncertainty. The Companys judgments
are based in part on its historical experience, terms of existing contracts, observance of trends
in the gaming industry and information obtained from independent valuation experts or other outside
sources. There is no assurance, however, that actual results will conform to estimates. To
provide an understanding of the methodology the Company applies, significant accounting policies
and basis of presentation are discussed where appropriate in Item 2. Managements Discussion and
Analysis of Financial Condition and Results of Operations of this Quarterly Report. In addition,
critical accounting policies and estimates are discussed in Item 7. Managements Discussion and
Analysis of Financial Condition and Results of Operations and the notes to the Companys audited
consolidated financial statements included in its Annual Report on Form 10-K for the year ended
December 31, 2008.
The accompanying consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the
year ended December 31, 2008.
Note 2 Accounting pronouncements
Recently adopted accounting pronouncements
In March 2008, the Financial Accounting Standards Boards (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 161, Disclosures about Derivative Instruments and
Hedging Activities an amendment of FASB Statement No. 133. This statement requires enhanced
disclosures about a companys derivative and hedging activities. The provisions were effective for
the Company as of January 1, 2009. The new disclosures required by this statement are included in
Note 7 Derivative instruments and hedging activities.
- 5 -
In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations (SFAS
No. 141(R)). SFAS No. 141(R) significantly changes the accounting for business combinations.
Under SFAS No. 141(R), an acquiring entity is required to recognize all the assets acquired and
liabilities assumed in a transaction at the acquisition-date fair value, with limited exceptions.
SFAS No. 141(R) changes the accounting treatment for certain specific acquisition-related items,
including: (1) expensing acquisition-related costs as incurred; (2) valuing noncontrolling
interests at fair value at the acquisition date; and (3) expensing restructuring costs associated
with an acquired business. SFAS No. 141(R) also includes a substantial number of new disclosure
requirements. SFAS No. 141(R) was effective for the Company on January 1, 2009, and the Company
will apply SFAS No 141(R) prospectively to all business combinations subsequent to the effective
date. The Company expects SFAS No. 141(R) will have an impact on its accounting for future
business combinations, but the effect is dependent upon the acquisitions, if any, that are made in
the future.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, as amended in
February 2008 by FASB Staff Position (FSP) No. 157-2, Effective Date of FASB Statement No. 157.
SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally
accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157
clarifies how to measure fair value as permitted under other accounting pronouncements, but does
not require any new fair value measurements. FSP No. 157-2 delayed the effective date of SFAS No.
157 for all nonfinancial assets and liabilities, except those items recognized or disclosed at fair
value on an annual or more frequently recurring basis, until January 1, 2009. As such, the Company
partially adopted the provisions of SFAS No. 157 effective January 1, 2008, without any material
impact to the Companys financial position, results of operations or cash flows. The remaining
provisions of SFAS No. 157 that were adopted beginning in 2009 did not have a material impact on
the Companys financial position, results of operations or cash flows.
Recently issued accounting pronouncements
In April 2009, the FASB issued the following three new FSPs, all of which impact the
accounting and disclosure related to certain financial instruments:
|
§ |
|
FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not
Orderly, provides guidance regarding how to determine whether there has been a
significant decrease in the volume and level of activity for the asset or liability when
compared with normal market activity for the asset or liability. In such situations, an
entity may conclude that transactions or quoted prices may not be determinative of fair
value, and may adjust the transactions or quoted prices to arrive at the fair value of the
asset or liability. |
|
|
§ |
|
FSP FAS 115-2 and FAS 124-2, Recognition of Other-Than-Temporary Impairment, provides
additional guidance on the timing of impairment recognition and greater clarity about the
credit and noncredit components of impaired debt securities that are not expected to be
sold. This FSP also requires additional disclosures about impairments in interim and
annual reporting periods. |
|
|
§ |
|
FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial
Instruments, amends SFAS No. 107 to require disclosures about the fair value of financial
instruments on an interim basis in addition to the annual disclosure requirements. |
All three FSPs are required to be adopted for interim periods ending after June 15, 2009. The
Company does not expect adoption of these FSPs to have a material impact on its financial position,
results of operations or cash flows.
- 6 -
Note 3 Stockholders equity
Changes in stockholders equity for the three months ended March 31, 2009 were as follows:
|
|
|
|
|
|
|
(Amounts in Thousands) |
|
Balance at December 31, 2008 |
|
$ |
338,780 |
|
Net income |
|
|
29,900 |
|
Change in accumulated other comprehensive loss |
|
|
689 |
|
Stock-based compensation |
|
|
2,549 |
|
Proceeds from exercise of stock options |
|
|
378 |
|
Tax benefit from stock option exercises |
|
|
132 |
|
Restricted shares remitted for tax withholding |
|
|
(82 |
) |
|
|
|
|
Balance at March 31, 2009 |
|
$ |
372,346 |
|
|
|
|
|
Accumulated other comprehensive loss includes changes in the fair value of interest rate
swaps, which qualify for hedge accounting.
Note 4 Earnings (loss) per share
The Company calculates earnings (loss) per share in accordance with SFAS No. 128, Earnings
Per Share. Basic earnings (loss) per share are computed by dividing reported earnings (loss) by
the weighted-average number of common shares outstanding during the period. Diluted earnings per
share reflect the additional dilution from all potentially dilutive securities, such as stock
options and restricted stock units. For the three months ended March 31, 2009, all outstanding
options with an exercise price lower than the market price have been included in the calculation of
diluted earnings per share. For the three months ended March 31, 2008, diluted loss per share
excludes the additional dilution from all potentially dilutive securities.
The weighted-average number of shares of common stock and common stock equivalents used in the
computation of basic and diluted earnings (loss) per share consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
|
Ended March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(Amounts in Thousands) |
|
Weighted-average number of shares
outstanding basic earnings (loss) per share |
|
|
57,349 |
|
|
|
57,149 |
|
|
|
|
|
|
|
|
|
|
Dilutive effect of stock options |
|
|
237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares
outstanding diluted earnings (loss) per share |
|
|
57,586 |
|
|
|
57,149 |
|
|
|
|
|
|
|
|
For the three months ended March 31, 2009 and 2008, potentially dilutive stock options
excluded from the earnings (loss) per share computation, as their effect would be anti-dilutive,
were 4.5 million and 3.7 million, respectively.
Note 5 Goodwill and other intangible assets
As required under SFAS No. 142, the Company performs an annual assessment of its goodwill and
other indefinite-lived intangible assets to determine if the carrying value exceeds the fair value.
Additionally, SFAS No. 142 requires an immediate impairment assessment if a change in
circumstances can materially negatively
- 7 -
affect the fair value of the intangible assets. For the three months ended March 31, 2009,
there were no impairment charges relating to goodwill and indefinite-lived intangible assets.
During the first quarter of 2008, the Company assessed its intangible assets for impairment due to
a significant deterioration of the debt and equity capital markets, weakening economic conditions
and changes in the forecasted operations of Ameristar East Chicago that materially affected the
propertys fair value. As a result, the Company recorded a total of $129.0 million in impairment
charges relating to the goodwill and gaming license acquired in the purchase of the East Chicago
property. The impairment charges reduced goodwill by $77.0 million and the gaming license by $52.0
million in the first quarter of 2008. The Company will perform its annual review of goodwill and
indefinite-lived intangible assets in the fourth quarter of 2009.
Note 6 Long-term debt
The Companys debt structure primarily consists of a $1.8 billion senior secured credit
facility (the Credit Facility) that includes a $1.4 billion revolving loan facility maturing in
November 2010 and a $400.0 million term loan facility maturing in November 2012.
On March 13, 2009, the Company amended the Credit Facility to increase the maximum permitted
leverage and senior leverage ratios. Additionally, the amendment expanded the Companys ability to
incur unsecured debt and allowed it to request lenders to extend the maturity of their respective
portions of the revolving loan facility from November 10, 2010 to August 10, 2012. The amendment
also increased the interest rate add-on for term loan and revolving loan borrowings under the
Credit Facility by 125 basis points. In connection with the amendment, the Company paid one-time
fees and expenses totaling approximately $9.7 million,
substantially all of which was capitalized and
will be amortized over the remaining term of the Credit Facility.
As a result of the amendment, from and after March 16, 2009, the borrowing under the term loan
facility bears interest at the London Interbank Offered Rate (LIBOR) plus 325 basis points or the
base rate plus 225 basis points, at the Companys option. From and after March 16, 2009, the
revolving loan facilitys LIBOR margin is subject to adjustment between 200 and 300 basis points
and the base rate margin is subject to adjustment between 100 and 200 basis points, in each case
depending on the Companys leverage ratio, as defined. The commitment fee on the revolving loan
facility ranges from 25 to 50 basis points, depending on the leverage ratio. In the case of
LIBOR-based loans, the Company has the option of selecting a one-, two-, three- or six-month
interest period. The Company also has the option to select a nine- or 12-month interest period if
agreed to by all Credit Facility lenders. Interest is payable at the earlier of three months from
the borrowing date or upon expiration of the interest period selected. As a result of the Credit
Facility amendment, the Company expects a significant increase in interest expense compared to
2008.
At March 31, 2009, the Companys debt outstanding primarily consisted of $1.26 billion under
the revolving loan facility and $387.0 million under the term loan facility. All mandatory
principal repayments have been made through March 31, 2009. As of March 31, 2009, the amount of
the revolving loan facility available for borrowing was $133.4 million, after giving effect to $3.6
million of outstanding letters of credit.
The agreement governing the Credit Facility requires the Company to comply with various
affirmative and negative financial and other covenants, including restrictions on the incurrence of
additional indebtedness, restrictions on dividend payments and other restrictions and requirements
to maintain certain financial ratios and tests. As of March 31, 2009, the Company was required to
maintain a leverage ratio, defined as consolidated debt divided by EBITDA for the prior four full
fiscal quarters, of no more than 6.00:1, and a senior leverage ratio, defined as consolidated
senior debt divided by EBITDA for the prior four full fiscal quarters, of no more than 5.75:1. As
of March 31, 2009 and December 31, 2008, the Companys leverage ratio was 4.93:1 and 5.14:1,
respectively. The senior leverage ratio as of March 31, 2009 and December 31, 2008 was 4.93:1 and
5.14:1, respectively. As of March 31, 2009 and December 31, 2008, the Company was in compliance
with all applicable covenants.
- 8 -
Fair value of long-term debt
The fair value of the Companys long-term debt at March 31, 2009 and December 31, 2008
approximated its book value. Substantially all of the Companys outstanding debt consists of
borrowings under the Credit Facility, which carry variable interest rates over short-term interest
periods.
Note 7 Derivative instruments and hedging activities
Effective January 1, 2009, the Company adopted SFAS No. 161. SFAS No. 161 amends and expands
the disclosure requirements of SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, to provide users of financial statements with an enhanced understanding of (i) how and
why an entity uses derivative instruments, (ii) how derivative instruments and related hedged items
are accounted for under SFAS No. 133 and its related interpretations and (iii) how derivative
instruments and related hedged items affect an entitys financial position, results of operations
and cash flows.
On May 22, 2008, the Company entered into a forward interest rate swap with a commercial bank
to fix the interest rate on certain LIBOR-based borrowings under the Credit Facility for a period
of two years. The swap was designated as an effective hedge on June 2, 2008 and became effective
July 18, 2008. Pursuant to the interest rate swap agreement, the Company is obligated to make
quarterly fixed rate payments to the counterparty at an annual rate of 3.1975%, calculated on a
notional amount of $500.0 million, while the counterparty is obligated to make quarterly floating
rate payments to the Company based on three-month LIBOR on the same notional amount. The interest
rate swap effectively fixes the annual interest rate payable on $500.0 million of the Companys
borrowings under its senior revolving loan facility at 3.1975% plus the applicable margin, which is
currently 2.875%. The swap terminates on July 19, 2010.
Effective October 20, 2008, the Company entered into an additional forward interest rate swap
with another commercial bank to fix the interest rate on certain LIBOR-based borrowings under the
Credit Facility. The Company is obligated to make quarterly fixed rate payments to the
counterparty, calculated on a notional amount of $600.0 million, while the counterparty is
obligated to make quarterly floating rate payments to the Company based on three-month LIBOR on the
same notional amount. The interest rate swap effectively fixes the annual interest rate payable on
$600.0 million of the Companys borrowings under the senior revolving loan facility at 2.98% plus
the applicable margin. This swap transaction terminates on July 19, 2010.
The Company expects the swaps to be highly effective as cash flow hedges and, therefore, the
changes in the value of the swaps (net of tax) will be recorded as accumulated other comprehensive
income. With the two swap agreements, the Company has a total of $1.1 billion of its debt hedged
until July 2010 at a weighted-average fixed rate of 3.08% plus the applicable margin.
For a derivative such as an interest rate swap that is designated as a cash flow hedge, the
effective portion of changes in the fair value of the derivative is initially reported in
accumulated other comprehensive income on the consolidated balance sheet and the ineffective
portion of changes in the fair value of the derivative is recognized directly in earnings. To the
extent the effective portion of a hedge subsequently becomes ineffective, the corresponding amount
of the change in fair value of the derivative initially reported in accumulated other comprehensive
income is reclassified and is recognized directly in earnings. Accordingly, on a quarterly basis,
the Company assesses the effectiveness of each hedging relationship by comparing the changes in
fair value or cash flows of the derivative hedging instrument with the changes in fair value or
cash flows of a hypothetical designated hedged item or transaction. If the change in the actual
swap is greater than the change in the perfect hypothetical swap, the difference is referred to as
ineffectiveness and is recognized in earnings in the current period.
- 9 -
The Companys objective in using derivatives is to add stability to interest expense and to
manage its exposure to interest rate movements or other identified risks. To accomplish this
objective, the Company primarily uses interest rate swaps as part of its cash flow hedging
strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate
amounts in exchange for fixed-rate payments over the life of the agreements without exchange of the
underlying principal amount. The Company does not use derivatives for trading or speculative
purposes and currently does not have any derivatives that are not designated as hedges. The
Company may enter into additional swap transactions or other interest rate protection agreements
from time to time in the future.
The Company measures the fair value of its interest rate swaps on a recurring basis pursuant
to SFAS No. 157. SFAS No. 157 establishes a three-tier fair value hierarchy, which prioritizes the
inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs
such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in
active markets that are either directly or indirectly observable; and Level 3, defined as
unobservable inputs in which little or no market data exists, therefore requiring an entity to
develop its own assumptions. The Company categorizes these swap contracts as Level 2.
At March 31, 2009, the Companys interest rate swaps were valued as a $26.1 million liability
and were included in other long-term liabilities. Amounts reported in accumulated other
comprehensive income related to derivatives will be reclassified to interest expense as interest
payments are made on the Companys hedged variable-rate debt. For the three months ended March 31,
2009, the swaps increased the Companys interest expense by $3.5 million. During the first quarter
of 2009, the Company recorded a total of $0.1 million in other income in the consolidated statement
of operations as a result of hedge ineffectiveness on the $500.0 million swap and a change in the
fair value of the swap before it was designated as a hedge.
Note 8 Stock-based compensation
The Company accounts for its stock-based compensation in accordance with SFAS No. 123(R),
Share-Based Payment.
Stock-based compensation expense totaled $2.5 million and $3.1 million for the three months
ended March 31, 2009 and 2008, respectively. The associated future income tax benefit recognized
was $0.1 million and $0.2 million during the three months ended March 31, 2009 and 2008,
respectively. As of March 31, 2009, there was approximately $21.9 million of total unrecognized
compensation cost related to unvested share-based compensation arrangements granted under the
Companys stock incentive plans. This unrecognized compensation cost is expected to be recognized
over a weighted-average period of 2.8 years.
The weighted-average fair value at the grant date of options granted during the first quarter
of 2009 and 2008 was $5.06 and $6.09, respectively. The fair value of each option award is
estimated on the date of grant using the Black-Scholes-Merton option pricing model with the
following weighted-average assumptions for the three months ended March 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
March 31, |
|
|
2009 |
|
2008 |
Weighted average assumptions: |
|
|
|
|
|
|
|
|
Expected stock price volatility |
|
|
62.9 |
% |
|
|
46.4 |
% |
Risk-free interest rate |
|
|
1.5 |
% |
|
|
2.3 |
% |
Expected option life (years) |
|
|
4.2 |
|
|
|
4.2 |
|
Expected annual dividend yield |
|
|
1.9 |
% |
|
|
2.3 |
% |
- 10 -
Stock option activity during the quarter ended March 31, 2009 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
Weighted- |
|
Remaining |
|
Aggregate |
|
|
|
|
|
|
Average |
|
Contractual |
|
Intrinsic |
|
|
Options |
|
Exercise |
|
Term |
|
Value |
|
|
(In Thousands) |
|
Price |
|
(Years) |
|
(In Thousands) |
Outstanding at December 31, 2008 |
|
|
5,219 |
|
|
$ |
20.30 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
41 |
|
|
|
11.48 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(88 |
) |
|
|
4.45 |
|
|
|
|
|
|
|
|
|
Forfeited or expired |
|
|
(265 |
) |
|
|
22.28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2009 |
|
|
4,907 |
|
|
$ |
20.40 |
|
|
|
4.8 |
|
|
$ |
3,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at March 31, 2009 |
|
|
2,880 |
|
|
$ |
19.36 |
|
|
|
3.6 |
|
|
$ |
2,780 |
|
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value
that would have been realized by the option holders had all option holders exercised their options
on March 31, 2009. The intrinsic value of a stock option is the excess of the Companys closing
stock price on March 31, 2009 over the exercise price, multiplied by the number of in-the-money
options. The total intrinsic value of options exercised during the three months ended March 31,
2009 and 2008 was $0.4 million and $0.6 million, respectively.
The following table summarizes the Companys unvested stock option activity for the quarter
ended March 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
Average |
|
|
Shares |
|
Exercise Price |
|
|
(In Thousands) |
|
(per Share) |
Unvested at December 31, 2008 |
|
|
2,172 |
|
|
$ |
22.08 |
|
Granted |
|
|
41 |
|
|
|
11.48 |
|
Vested |
|
|
(89 |
) |
|
20.33 |
Forfeited |
|
|
(97 |
) |
|
|
23.40 |
|
|
|
|
|
|
|
|
|
|
Unvested at March 31, 2009 |
|
|
2,027 |
|
|
$ |
21.88 |
|
The following table summarizes the Companys unvested restricted stock, restricted stock unit
and performance share unit activity for the quarter ended March 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
Average Grant |
|
|
Shares/Units |
|
Date Fair Value |
|
|
(In Thousands) |
|
(per Share/Unit) |
Unvested at December 31, 2008 |
|
|
997 |
|
|
$ |
16.36 |
|
Granted |
|
|
41 |
|
|
|
5.71 |
|
Vested |
|
|
(37 |
) |
|
|
17.74 |
|
Forfeited |
|
|
(39 |
) |
|
|
16.92 |
|
|
|
|
|
|
|
|
|
|
Unvested at March 31, 2009 |
|
|
962 |
|
|
$ |
15.42 |
|
- 11 -
Note 9 Income taxes
At March 31, 2009 and December 31, 2008, unrecognized tax benefits totaled $16.2 million and
$16.1 million, respectively. The total amount of unrecognized benefits that would affect the
effective tax rate if recognized was $1.6 million at March 31, 2009 and December 31, 2008. As of
March 31, 2009, accrued interest and penalties totaled $3.0 million, of which $2.1 million would
affect the effective tax rate if recognized.
In connection with the impairment of intangible assets at Ameristar East Chicago, the Company
recorded a deferred tax benefit of $52.3 million during the three months ended March 31, 2008. The
tax effect of the impairment was reflected in the effective tax rate of 38.9% for the quarter ended
March 31, 2008.
The Company files income tax returns in numerous tax jurisdictions. The statutes of
limitations vary by jurisdiction with certain of these statutes expiring without examination each
year. With the normal expiration of statutes of limitations, the Company anticipates that the
amount of unrecognized tax benefits will decrease by $2.2 million within the next 12 months. With
few exceptions, the Company is no longer subject to examinations by federal or state taxing
authorities for years ended on or before December 31, 2004.
Note 10 Commitments and contingencies
Litigation. From time to time, the Company is a party to litigation, most of which arises in
the ordinary course of business. The Company is not currently a party to any litigation that
management believes would be likely to have a material adverse effect on the financial position,
results of operations or cash flows of the Company.
Self-Insurance Reserves. The Company is self-insured for various levels of general liability,
workers compensation and employee medical coverage. Insurance claims and reserves include
accruals of estimated settlements for known claims, as well as accrued estimates of incurred but
not reported claims. At March 31, 2009 and December 31, 2008, the estimated liabilities for unpaid
and incurred but not reported claims totaled $11.9 million and $12.3 million, respectively. The
Company utilizes actuaries who consider historical loss experience and certain unusual claims in
estimating these liabilities, based upon statistical data provided by the independent third party
administrators of the various programs. The Company believes the use of this method to account for
these liabilities provides a consistent and effective way to measure these highly judgmental
accruals; however, changes in health care costs, accident or illness frequency and severity and
other factors can materially affect the estimate for these liabilities.
- 12 -
Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
Overview
We develop, own and operate casinos and related hotel, food and beverage, entertainment and
other facilities, with eight properties in operation in Missouri, Indiana, Iowa, Mississippi,
Colorado and Nevada. Our portfolio of casinos consists of: Ameristar Casino Resort Spa St. Charles
(serving the St. Louis, Missouri metropolitan area); Ameristar Casino Hotel East Chicago (serving
the Chicagoland area); Ameristar Casino Hotel Kansas City (serving the Kansas City metropolitan
area); Ameristar Casino Hotel Council Bluffs (serving Omaha, Nebraska and southwestern Iowa);
Ameristar Casino Hotel Vicksburg (serving Jackson, Mississippi and Monroe, Louisiana); Ameristar
Casino Black Hawk (serving the Denver metropolitan area); and Cactus Petes and The Horseshu in
Jackpot, Nevada (serving Idaho and the Pacific Northwest).
Our financial results are dependent upon the number of patrons that we attract to our
properties and the amounts those patrons spend per visit. Additionally, our operating results may
be affected by, among other things, competitive factors, gaming tax increases, the commencement of
new gaming operations, charges associated with debt refinancing or property acquisition and
disposition transactions, construction at existing facilities, general public sentiment regarding
travel, overall economic conditions affecting the disposable income of our patrons and weather
conditions affecting our properties. We may experience significant fluctuations in our quarterly
operating results due to seasonality and other factors. Consequently, our operating results for
any quarter or year are not necessarily comparable and may not be indicative of future periods
results.
The following significant factors and trends should be considered in analyzing our operating
performance:
|
|
|
General Economic Conditions. The economic recession continues to adversely impact the
gaming industry and our Company. We believe our guests have reduced their discretionary
spending as a result of uncertainty and instability relating to employment and the credit,
investment and housing markets. |
|
|
|
|
Cost Efficiencies. In August 2008, we began to implement a strategic plan to improve
efficiencies and reduce our cost structure as weak economic conditions continued to
adversely impact business volumes. As part of this plan, we reduced our workforce costs
through position eliminations, adjusting staffing practices and attrition. We also
restructured the organization of our property and corporate management teams to be more
efficient and streamlined. As a result of the actions taken to date, operating income
margins at six of our seven gaming locations increased over the first quarter of 2008.
Additionally, corporate expense decreased $2.7 million, or 18.0%, from the prior-year first
quarter due mostly to the realized cost efficiencies and the absence of $0.8 million in
ballot initiative costs that adversely impacted the 2008 first quarter. For the quarter
ended March 31, 2009, consolidated operating income margin increased to 21.9%, representing
the highest quarterly operating income margin in our history. |
|
|
|
|
Missouri Properties. Net revenues at our St. Charles property increased 7.7% from the
2008 first quarter, driven primarily by the propertys hotel (which did not fully open
until the second quarter of 2008) and gains generated by regulatory reform that took effect
in November 2008. The regulatory reform eliminated the $500 buy-in limit and the
requirement for all casino guests to use player identification and tracking cards.
Additionally, the Missouri gaming reform raised taxes on gross gaming receipts from 20% to
21% and placed a moratorium on the issuance of new gaming licenses. Operating income at
our St. Charles and Kansas City properties increased 41.0% and 29.4%, respectively, from
the prior-year first quarter. The improvement in operating income at both properties was
mostly attributable to the aforementioned cost savings initiatives and regulatory reform.
The increase in Ameristar Kansas Citys operating income occurred despite a decline in net
revenues of 2.8% from the first quarter of 2008, due mostly to the economic recession and
improved financial performance by a competitor in that market. |
- 13 -
|
|
|
Ameristar Black Hawk. In Colorado, voters approved the extension of casino operating
hours from 18 hours daily to up to 24 hours daily, the increase in maximum bet limits from
$5 to up to $100 and the addition of roulette and craps. These regulatory changes will go
into effect on July 2, 2009. Also, we continue to progress toward a fall 2009 completion
of our 536-room luxury hotel and spa. We believe the regulatory changes, coupled with the
new hotel, will allow us to more effectively market our property to all guests. |
|
|
|
|
Ameristar Vicksburg. On October 28, 2008, a new competitor opened a $100 million
casino-hotel in Vicksburg. The additional competition has adversely affected the financial
performance of Ameristar Vicksburg and the other facilities operating in the market as our
propertys net revenues and operating income decreased 1.7% and 3.2%, respectively, from
the prior-year first quarter. We substantially completed a casino expansion and a new
1,000-space parking garage at our Vicksburg property in May 2008. We believe the expansion
has helped to offset the impact of the increased competition and the recessionary economic
conditions to date. |
|
|
|
|
Debt and Interest Expense. On March 13, 2009, we amended our senior credit facility to
provide us significant relief under our leverage ratio and senior leverage ratio covenants
for the foreseeable future (thereby improving our borrowing flexibility related to
currently available funds under our revolving loan facility). Additional financial
flexibility was created by provisions in the amendment that expand our ability to incur
unsecured debt and allow us to request lenders to extend the maturity of their respective
portions of the revolving loan facility from November 10, 2010 to August 10, 2012. We are in preliminary
discussions with certain of the lenders regarding an extension. We expect that any extension would require
us to pay higher interest rate add-ons for the extended portions, as well as possible additional fees. The
amendment also increased the interest rate add-on for term loan and revolving loan
borrowings under the senior credit facility by 125 basis points. Accordingly, we expect a
significant increase in interest expense for the remainder of 2009 compared to 2008. At
March 31, 2009, our leverage and senior leverage ratios (each as defined in the senior
credit facility) were required to be no more than 6.00:1 and 5.75:1, respectively. As of
that date, our leverage ratio and senior leverage ratio were each 4.93:1, which will result
in a 12.5 basis-point reduction beginning in early May in the interest rate add-on for the
revolving loan borrowings. |
|
|
|
|
Promotional Spending. For the quarters ended March 31, 2009 and 2008, promotional
allowances were flat at $67.9 million. In the second quarter of 2009, we expect
promotional spending to decrease from the corresponding 2008 quarter. Financial results
for the second and third quarters of 2008 were adversely impacted by a significant increase
in promotional spending as a result of an aggressive companywide marketing program designed
to capture profitable incremental revenue and our efforts to introduce gaming guests to the
hotel in St. Charles. However, the prior-year marketing program to capture profitable
incremental revenue was ineffective, and as a result we began to curtail promotional
spending commencing in the third quarter of 2008. |
- 14 -
Results of Operations
The following table sets forth certain information concerning our consolidated cash flows and
the results of operations of our operating properties:
AMERISTAR CASINOS, INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED FINANCIAL DATA
(Dollars in Thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
|
Ended March 31, |
|
|
|
2009 |
|
|
2008 |
|
Consolidated Cash Flow Information: |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
69,039 |
|
|
$ |
71,926 |
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
$ |
(50,484 |
) |
|
$ |
(59,882 |
) |
|
|
|
|
|
|
|
Net cash used in financing activities |
|
$ |
(6,543 |
) |
|
$ |
(31,643 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenues: |
|
|
|
|
|
|
|
|
Ameristar St. Charles |
|
$ |
77,172 |
|
|
$ |
71,683 |
|
Ameristar East Chicago |
|
|
67,627 |
|
|
|
75,352 |
|
Ameristar Kansas City |
|
|
60,169 |
|
|
|
61,928 |
|
Ameristar Council Bluffs |
|
|
42,250 |
|
|
|
45,511 |
|
Ameristar Vicksburg |
|
|
33,119 |
|
|
|
33,686 |
|
Ameristar Black Hawk |
|
|
20,396 |
|
|
|
20,273 |
|
Jackpot Properties |
|
|
15,104 |
|
|
|
16,335 |
|
|
|
|
|
|
|
|
Consolidated net revenues |
|
$ |
315,837 |
|
|
$ |
324,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss): |
|
|
|
|
|
|
|
|
Ameristar St. Charles |
|
$ |
21,956 |
|
|
$ |
15,572 |
|
Ameristar East Chicago |
|
|
12,537 |
|
|
|
(118,790 |
) |
Ameristar Kansas City |
|
|
16,597 |
|
|
|
12,824 |
|
Ameristar Council Bluffs |
|
|
12,719 |
|
|
|
12,036 |
|
Ameristar Vicksburg |
|
|
10,800 |
|
|
|
11,162 |
|
Ameristar Black Hawk |
|
|
3,875 |
|
|
|
2,815 |
|
Jackpot Properties |
|
|
3,269 |
|
|
|
2,498 |
|
Corporate and other |
|
|
(12,447 |
) |
|
|
(15,173 |
) |
|
|
|
|
|
|
|
Consolidated operating income (loss) |
|
$ |
69,306 |
|
|
$ |
(77,056 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss) Margins (1): |
|
|
|
|
|
|
|
|
Ameristar St. Charles |
|
|
28.5 |
% |
|
|
21.7 |
% |
Ameristar East Chicago |
|
|
18.5 |
% |
|
|
(157.6 |
)% |
Ameristar Kansas City |
|
|
27.6 |
% |
|
|
20.7 |
% |
Ameristar Council Bluffs |
|
|
30.1 |
% |
|
|
26.4 |
% |
Ameristar Vicksburg |
|
|
32.6 |
% |
|
|
33.1 |
% |
Ameristar Black Hawk |
|
|
19.0 |
% |
|
|
13.9 |
% |
Jackpot Properties |
|
|
21.6 |
% |
|
|
15.3 |
% |
Consolidated operating income (loss) margin |
|
|
21.9 |
% |
|
|
(23.7 |
)% |
|
|
|
(1) |
|
Operating income (loss) margin is operating income (loss) as a
percentage of net revenues. |
- 15 -
The following table presents detail of our net revenues:
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(In Thousands, Unaudited) |
|
Casino Revenues: |
|
|
|
|
|
|
|
|
Slots |
|
$ |
287,308 |
|
|
$ |
288,266 |
|
Table games |
|
|
31,752 |
|
|
|
38,985 |
|
Other |
|
|
3,818 |
|
|
|
4,506 |
|
|
|
|
|
|
|
|
Casino revenues |
|
|
322,878 |
|
|
|
331,757 |
|
|
|
|
|
|
|
|
|
Non-Casino Revenues: |
|
|
|
|
|
|
|
|
Food and beverage |
|
|
37,964 |
|
|
|
40,370 |
|
Rooms |
|
|
14,676 |
|
|
|
10,940 |
|
Other |
|
|
8,199 |
|
|
|
9,577 |
|
|
|
|
|
|
|
|
Non-casino revenues |
|
|
60,839 |
|
|
|
60,887 |
|
|
|
|
|
|
|
|
|
|
|
|
383,717 |
|
|
|
392,644 |
|
Less: Promotional Allowances |
|
|
(67,880 |
) |
|
|
(67,876 |
) |
|
|
|
|
|
|
|
Total Net Revenues |
|
$ |
315,837 |
|
|
$ |
324,768 |
|
|
|
|
|
|
|
|
Net Revenues
Consolidated net revenues for the quarter ended March 31, 2009 decreased $8.9 million from the
first quarter of 2008. The decrease in consolidated net revenues was mostly attributable to the
ongoing economic recession and increased competition that opened in the second half of 2008 in our
East Chicago and Vicksburg markets. First quarter net revenues declined on a year-over-year basis
at five of our seven gaming locations. Net revenues dropped 10.3% at Ameristar East Chicago, 7.5%
at the Jackpot Properties and 7.2% at Ameristar Council Bluffs, compared to the corresponding
prior-year quarter. Net revenues at our St. Charles property increased 7.7%, to $77.2 million from
$71.7 million in the prior-year first quarter, driven primarily by the propertys new hotel and the
beneficial impact from the regulatory reform in Missouri.
Operating Income (Loss)
In the first quarter of 2009, we posted an increase in consolidated operating income of $146.4
million, or 189.9%, over the 2008 first quarter. The increase is primarily attributable to the
previously mentioned implementation of operational and marketing efficiencies at all our properties
and the $129.0 million impairment charge relating to Ameristar East Chicagos intangible assets
that adversely impacted the first quarter of 2008. Additionally, consolidated operating income
benefited from the positive impact of the regulatory reform in Missouri. The consolidated
operating income margin increased 45.7 percentage points from the corresponding 2008 period as a result of
the factors mentioned above. Ameristar East Chicagos 2009 first quarter operating income margin
was 18.5%, representing a 176.2-percentage-point increase over the corresponding 2008 quarter. The
improvement in East Chicagos operating income margin was mostly due to the absence of an
impairment charge in 2009 and a $1.5 million net reduction in property taxes as a result of
settlement of a property tax appeal.
Consolidated operating income was adversely affected by a $1.0 million (3.7%) increase in
depreciation and amortization expense over the first quarter of 2008, principally resulting from
the completion of the St. Charles hotel and Vicksburg expansion projects in the second quarter of
2008.
- 16 -
Interest Expense
The following table summarizes information related to interest on our long-term debt:
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(Dollars in Thousands) |
|
|
|
(Unaudited) |
|
Interest cost |
|
$ |
19,137 |
|
|
$ |
28,320 |
|
Less: Capitalized interest |
|
|
(2,222 |
) |
|
|
(6,267 |
) |
|
|
|
|
|
|
|
Interest expense, net |
|
$ |
16,915 |
|
|
$ |
22,053 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest, net of amounts capitalized |
|
$ |
17,270 |
|
|
$ |
23,557 |
|
|
|
|
|
|
|
|
Weighted-average total debt balance outstanding |
|
$ |
1,667,486 |
|
|
$ |
1,645,664 |
|
|
|
|
|
|
|
|
Weighted-average interest rate |
|
|
4.8 |
% |
|
|
6.8 |
% |
|
|
|
|
|
|
|
For the quarter ended March 31, 2009, consolidated interest expense, net of amounts
capitalized, decreased $5.1 million (23.3%) from the 2008 first quarter. The decrease is due
primarily to a lower weighted-average interest rate, offset slightly by one-half month of increased
interest rate add-ons resulting from the credit facility amendment. Capitalized interest decreased
from $6.3 million for the first quarter of 2008 to $2.2 million in the 2009 first quarter, due
mostly to the 2008 completion of the St. Charles hotel and Vicksburg expansion projects. We expect
a significant increase in interest expense for the remainder of 2009 as a result of the amended
credit facilitys higher interest rate add-ons. Additionally, when we place the Black Hawk hotel
in service in the fall of 2009, we will no longer capitalize the interest on the associated
debt, which will cause our net interest expense to rise.
Income Taxes
For the quarter ended March 31, 2009, our income tax provision was $22.2 million, as compared
to an income tax benefit of $38.7 million for the three months ended March 31, 2008. For the
quarters ended March 31, 2009 and 2008, our effective income tax rates were 42.6% and 38.9%,
respectively. Excluding the impact of the intangible asset impairment at Ameristar East Chicago,
the effective tax rate for the three months ended March 31, 2008 would have been 46.0%.
Net Income (Loss)
For the three months ended March 31, 2009 and 2008, we reported net income of $29.9 million
and a net loss of $60.9 million, respectively. The increase is primarily due to the $129.0 million
East Chicago impairment charge in the prior-year quarter and the improvement in operating margins
as discussed above. The impairment charge affected net income in the 2008 quarter by $76.7
million. Diluted earnings per share were $0.52 in the quarter ended March 31, 2009, compared to a
loss per share of $1.07 in the corresponding prior-year quarter. The impairment charge affected
diluted earnings per share in the 2008 quarter by $1.34.
- 17 -
Liquidity and Capital Resources
Cash Flows Summary
Our cash flows consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(In Thousands, Unaudited) |
|
Net cash provided by operating activities |
|
$ |
69,039 |
|
|
$ |
71,926 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(41,820 |
) |
|
|
(63,100 |
) |
(Decrease) increase in construction contracts payable |
|
|
(7,268 |
) |
|
|
8,524 |
|
Proceeds from sale of assets |
|
|
140 |
|
|
|
760 |
|
Increase in deposits and other non-current assets |
|
|
(1,536 |
) |
|
|
(6,066 |
) |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(50,484 |
) |
|
|
(59,882 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Debt borrowings |
|
|
24,000 |
|
|
|
|
|
Principal payments of debt |
|
|
(21,301 |
) |
|
|
(26,196 |
) |
Debt amendment costs |
|
|
(9,670 |
) |
|
|
|
|
Cash dividends paid |
|
|
|
|
|
|
(6,002 |
) |
Proceeds from stock option exercises |
|
|
378 |
|
|
|
383 |
|
Purchases of treasury stock |
|
|
(82 |
) |
|
|
|
|
Excess tax benefit from stock option exercises |
|
|
132 |
|
|
|
172 |
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(6,543 |
) |
|
|
(31,643 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
$ |
12,012 |
|
|
$ |
(19,599 |
) |
|
|
|
|
|
|
|
For the three months ended March 31, 2009, net cash provided by operating activities decreased $2.9 million from
2008, mostly as a result of the changes in several of our working capital assets and liabilities in
2009 and our receipt of a $10.0 million federal income tax refund in 2008.
The construction of our luxury hotel is progressing at Ameristar Black Hawk. The 33-story
towers 536 well-appointed rooms will feature upscale furnishings and amenities. The tower will
include a versatile meeting and ballroom center and will also have Black Hawks only full-service
spa, an enclosed rooftop swimming pool and indoor/outdoor whirlpool facilities. Once completed,
Ameristar Black Hawk will offer destination resort amenities and services that are unequaled in the
Denver gaming market. The hotels completion date is expected to be in the fall of 2009, and the
cost of the hotel is expected to be approximately $235 million. During the first three months of
2009, capital expenditures related to the hotel project totaled $32.7 million.
Capital expenditures during the initial quarter of 2008 were primarily related to the hotel
projects at Ameristar Black Hawk ($15.9 million) and Ameristar St. Charles ($13.0 million), our
expansion at Ameristar Vicksburg ($9.1 million), the acquisition of slot product at all our
properties ($6.1 million) and a hotel refurbishment at Cactus Petes ($5.3 million).
On April 29, 2009, our Board of Directors reinstituted a cash dividend of $0.105 per share,
payable on May 19, 2009 to stockholders of record on May 11, 2009. We had previously suspended
dividend payments following the third quarter of 2008. During the quarter ended March 31, 2008,
the Board of Directors declared a quarterly cash dividend in the amount of $0.105 per share.
- 18 -
Our debt structure primarily consists of a $1.8 billion senior secured credit facility that
includes a $1.4 billion revolving loan facility maturing in November 2010 and a $400.0 million term
loan facility maturing in November 2012. As of March 31, 2009, the debt outstanding under the
senior credit facility consisted of $1.26 billion under the revolving loan facility and $387.0
million under the term loan facility. At March 31, 2009, the amount of the revolving loan facility
available for borrowing was $133.4 million (after giving effect to $3.6 million of outstanding
letters of credit). All mandatory principal repayments have been made through March 31, 2009.
The agreement governing the senior credit facility requires us to comply with various
affirmative and negative financial and other covenants, including restrictions on the incurrence of
additional indebtedness, restrictions on dividend payments and other restrictions and requirements
to maintain certain financial ratios and tests. As of March 31, 2009 and December 31, 2008, we
were in compliance with all applicable covenants.
On March 13, 2009, we amended our senior credit facility to increase the maximum permitted
leverage and senior leverage ratios (each as defined in the senior credit facility). Increases of
0.25:1 to 0.50:1 were made to the maximum permitted leverage ratio for each of our fiscal quarters
ending on and after September 30, 2009, and increases of 0.50:1 to 1.25:1 were made to the maximum
permitted senior leverage ratio for each of our fiscal quarters ending on and after March 31, 2009.
Additionally, the amendment increased the interest rate add-on for all revolving and term loan
borrowings under the senior credit facility by 125 basis points; reduced permitted annual dividends
from $40.0 million to $30.0 million beginning with the year ending December 31, 2009, with any
unused portion of such amount permitted to be carried over to future years; increased the aggregate
limit on capital expenditures by $100.0 million; and decreased the permitted amount of cumulative
stock repurchases, in addition to any amount available under the dividend basket, from $125.0
million to $50.0 million. The amendment also eliminated the $500.0 million limit on the future
issuance of subordinated debt and permits us to issue an unlimited amount of senior unsecured debt.
The amendment provides us significant relief under the leverage and senior leverage ratios for
the foreseeable future (thereby improving our borrowing flexibility related to our currently
available funds under the revolving loan facility). Additional financial flexibility was created
by the provisions in the amendment that expand our ability to incur unsecured debt and will allow
us to request (but not require) lenders to extend the maturity of their respective portions of the
revolving loan facility from November 10, 2010 to August 10, 2012.
In connection with the amendment, we paid certain one-time fees and expenses totaling
approximately $9.7 million, including an amendment fee to each lender that approved the amendment
of 50 basis points of the lenders outstanding term loans and/or revolving loan facility
commitments. Giving effect to the amortization of these fees and expenses and the increased
interest rate add-ons described above, the amendment will result in an increase in annual interest
expense of approximately $25.8 million on the principal amount of debt outstanding at March 31,
2009.
In addition to the availability under the senior credit facility, we had $85.7 million of cash
and cash equivalents at March 31, 2009, approximately $60.0 million of which were required for
daily operations.
Historically, we have funded our daily operations through net cash provided by operating
activities and our significant capital expenditures primarily through operating cash flows, bank
debt and other debt financing. If our existing sources of cash are insufficient to meet our
operations and liquidity requirements, we will be required to seek additional financing that would
be significantly more expensive than our senior credit facility and/or scale back our capital plans
or reduce other expenditures. Any loss from service of our properties for any reason could
materially adversely affect us, including our ability to fund daily operations and to satisfy debt
covenants.
- 19 -
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of
Securities and Exchange Commission Regulation S-K.
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in conformity with accounting principles
generally accepted in the United States. Certain of our accounting policies, including the
estimated useful lives assigned to our assets, asset impairment, health benefit reserves, purchase
price allocations made in connection with acquisitions, the determination of bad debt reserves and
the calculation of our income tax liabilities, require that we apply significant judgment in
defining the appropriate assumptions for calculating financial estimates. By their nature, these
judgments are subject to an inherent degree of uncertainty. Our judgments are based in part on our
historical experience, terms of existing contracts, observance of trends in the gaming industry and
information obtained from independent valuation experts or other outside sources. We cannot assure
you that our actual results will conform to our estimates. For additional information on critical
accounting policies and estimates, see Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations and the notes to our audited consolidated financial statements
included in our Annual Report on Form 10-K for the year ended December 31, 2008.
Forward-Looking Statements
This Quarterly Report contains certain forward-looking statements, including the plans and
objectives of management for our business, operations and economic performance. These
forward-looking statements generally can be identified by the context of the statement or the use
of forward-looking terminology, such as believes, estimates, anticipates, intends,
expects, plans, is confident that, should or words of similar meaning, with reference to us
or our management. Similarly, statements that describe our future operating performance, financial
results, financial position, plans, objectives, strategies or goals are forward-looking statements.
Although management believes that the assumptions underlying the forward-looking statements are
reasonable, these assumptions and the forward-looking statements are subject to various factors,
risks and uncertainties, many of which are beyond our control, including but not limited to
uncertainties concerning operating cash flow in future periods, our borrowing capacity under the
senior credit facility or any replacement financing, our properties future operating performance,
our ability to undertake and complete capital expenditure projects in accordance with established
budgets and schedules, changes in competitive conditions, regulatory restrictions and changes in
regulation or legislation (including gaming tax laws) that could affect us. Accordingly, actual
results could differ materially from those contemplated by any forward-looking statement. In
addition to the other risks and uncertainties mentioned in connection with certain forward-looking
statements throughout this Quarterly Report, attention is directed to Item 1A. Risk Factors and
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations of
our Annual Report on Form 10-K for the year ended December 31, 2008 for a discussion of the
factors, risks and uncertainties that could affect our future results.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of loss arising from adverse changes in market rates and prices, such
as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to
market risk is interest rate risk associated with our senior credit facility. The senior credit
facility bears interest equal to LIBOR (in the case of Eurodollar loans) or the prime interest rate
(in the case of base rate loans), plus an applicable margin, or add-on. As of March 31, 2009, we
had $1.65 billion outstanding under our senior credit facility, bearing interest at variable rates
based on LIBOR with maturities up to three months from that date. At March 31, 2009, the average
- 20 -
interest rate applicable to the senior credit facility outstanding, before giving effect to
interest rate hedging transactions in place on that date, was 4.0%.
During the second quarter of 2008, in order to hedge against increases in variable interest
rates, we entered into an interest rate swap agreement with a commercial bank counterparty,
effective July 18, 2008, pursuant to which we are obligated to make quarterly fixed rate payments
to the counterparty at an annual rate of 3.1975%, calculated on a notional amount of $500.0
million, while the counterparty is obligated to make quarterly floating rate payments to us based
on three-month LIBOR on the same notional amount. The interest rate swap effectively fixes the
annual interest rate on $500.0 million of borrowings under our senior revolving loan facility at
3.1975% plus the applicable margin. The swap agreement terminates on July 19, 2010.
Effective October 20, 2008, we entered into an additional interest rate swap transaction with
another commercial bank counterparty. We are obligated to make quarterly fixed rate payments to
the counterparty, calculated on a notional amount of $600.0 million, while the counterparty is
obligated to make quarterly floating rate payments to us based on three-month LIBOR on the same
notional amount. The swap transaction effectively fixes the annual interest rate on $600.0 million
of our revolving debt at 2.98% plus the applicable margin. The swap transaction terminates on July
19, 2010. Including this swap agreement, we have $1.1 billion of our variable rate debt hedged
until July 2010 at a weighted-average fixed rate of 3.08% plus the applicable margin. (See Note 7
Derivative instruments and hedging activities of Notes to Consolidated Financial Statements for
more discussion of the interest rate swaps.)
Assuming no change in our borrowing elections under our senior credit facility and giving
effect to the $1.1 billion of interest rate swap transactions in place on March 31, 2009, an
increase of one percentage point in LIBOR for all relevant maturities as of March 31, 2009 would
increase our annual interest cost (and decrease pre-tax earnings) by approximately $5.5 million.
The decisions to enter into the swap agreements were based on analyses of risks to the Company
presented by possible changes in interest rates and the financial instruments available to manage
those risks. We continue to monitor interest rate markets and, in order to control interest rate
risk, may enter into additional interest rate swap or collar agreements or other derivative
instruments as market conditions warrant. We may also refinance a portion of our variable rate
debt through the issuance of long-term fixed-rate securities. We do not use derivatives for
trading or speculative purposes.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the
Exchange Act), the Companys management, including our Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of
the end of the period covered by this Quarterly Report. Based on that evaluation, the Chief
Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective as of the end of
the period covered by this Quarterly Report.
(b) Changes in Internal Control over Financial Reporting
As required by Rule 13a-15(d) under the Exchange Act, the Companys management, including our
Chief Executive Officer and our Chief Financial Officer, has evaluated our internal control over
financial reporting to determine whether any changes occurred during the first fiscal quarter of
2009 that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting. Based on that evaluation, there has been no such change during
the first fiscal quarter of 2009.
- 21 -
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On March 31, 2009, we reached a settlement with the Lake County Assessor that reduced the
assessed value of our East Chicago real property to approximately $119.3 million for each of the
2006 and 2007 tax years.
There were no other material developments during the three months ended March 31, 2009
relating to the matters described in Item 3. Legal Proceedings of our Annual Report on Form 10-K
for the year ended December 31, 2008.
Item 1A. Risk Factors
We incorporate by reference the risk factors discussed in Item 1A. Risk Factors of our
Annual Report on Form 10-K for the year ended December 31, 2008.
Item 6. Exhibits
|
|
|
|
|
Exhibit |
|
|
|
|
Number |
|
Description of Exhibit |
|
Method of Filing |
|
|
4.1
|
|
Third Amendment to Credit
Agreement, dated as of
March 13, 2009, among ACI,
the various Lenders party
thereto and Deutsche Bank
Trust Company Americas, as
Administrative Agent.
|
|
Incorporated by reference to Exhibit
4.1 to ACIs Current Report on Form
8-K filed on March 16, 2009. |
|
|
|
|
|
31.1
|
|
Certification of Gordon R.
Kanofsky, Chief Executive
Officer and Vice Chairman,
pursuant to Rules 13a-14
and 15d-14 under the
Securities Exchange Act of
1934, as adopted pursuant
to Section 302 of the
Sarbanes-Oxley Act of
2002.
|
|
Filed electronically herewith. |
|
|
|
|
|
31.2
|
|
Certification of Thomas M.
Steinbauer, Senior Vice
President of Finance,
Chief Financial Officer
and Treasurer, pursuant to
Rules 13a-14 and 15d-14
under the Securities
Exchange Act of 1934, as
adopted pursuant to
Section 302 of the
Sarbanes-Oxley Act of
2002.
|
|
Filed electronically herewith. |
|
|
|
|
|
32
|
|
Certification of Chief
Executive Officer and
Chief Financial Officer
pursuant to 18 U.S.C.
Section 1350, as adopted
pursuant to Section 906 of
the Sarbanes-Oxley Act of
2002.
|
|
Filed electronically herewith. |
- 22 -
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
AMERISTAR CASINOS, INC.
Registrant
|
|
|
|
|
Date: May 11, 2009 |
By: |
/s/ Thomas M. Steinbauer
|
|
|
|
Thomas M. Steinbauer |
|
|
|
Senior Vice President of Finance, Chief
Financial Officer and Treasurer |
|
|
- 23 -