2007 Annual Report - Ameristar Casinos, Inc.

The following table presents detail of our net revenues:Years ended December 31,2007 2006 2005(Amounts in Thousands)Casino Revenues:Slots ................................................................................................... $ 963,137 $ 897,728 $ 860,948Table games....................................................................................... 120,243 110,583 113,230Casino revenues ............................................................................. 1,083,380 1,008,311 974,178Non-Casino Revenues:Food and beverage............................................................................. 136,471 131,795 125,918Rooms................................................................................................ 30,844 27,972 25,355Other .................................................................................................. 30,387 29,082 26,041Non-casino revenues...................................................................... 197,702 188,849 177,3141,281,082 1,197,160 1,151,492Less: Promotional Allowances............................................................ (200,559) (196,862) (190,134)Total Net Revenues.............................................................................. $ 1,080,523 $ 1,000,298 $ 961,358Year Ended December 31, 2007 Versus Year Ended December 31, 2006Net RevenuesConsolidated net revenues for the year ended December 31, 2007 increased $80.2 million (8.0%) over 2006. Theincrease was primarily attributable to East Chicago’s contribution of $73.6 million in net revenues following itsSeptember 18, 2007 acquisition. Additionally, our Black Hawk and Jackpot properties increased net revenues by18.7% and 6.6%, respectively, over the prior year. In 2007, slot revenues increased $4.8 million at the Jackpotproperties and our Black Hawk property benefited from a full year of operating results following its April 2006rebranding. In addition, the Black Hawk property benefited from reduced construction disruption following thecompletion of the initial phase of our expansion activities in the first quarter of 2006. The increases were partiallyoffset by decreases from 2006 net revenues at our Vicksburg, Council Bluffs and Kansas City properties. AmeristarVicksburg’s 3.5% decline in net revenues was mostly attributable to the business recapture by the Gulf Coastcasinos that continued throughout 2007, significant construction-related disruption at the property and generaleconomic weakness in the region. In Council Bluffs, net revenues decreased 1.9% from 2006 primarily due to theopening of a competitor’s property in the first quarter of 2006 and the softer market conditions.Consolidated casino revenues for 2007 increased $75.1 million over the prior year. Excluding East Chicago’scontribution of $79.7 million, consolidated casino revenues decreased $4.7 million from 2006. Our Black Hawk andJackpot properties increased casino revenues while the remaining properties posted declines compared to 2006primarily as a result of the factors indicated above and improved efficiencies in targeting our promotional activities.For the years ended December 31, 2007 and 2006, promotional allowances as a percentage of casino revenues were18.5% and 19.5%, respectively.Operating IncomeIn 2007, consolidated operating income increased $2.2 million (1.3%) over 2006, while consolidated operatingincome margin decreased by 1.0 percentage point from the prior year. The growth in operating income wassubstantially attributable to Ameristar Black Hawk’s strong financial performance and East Chicago’s contributionof $5.4 million. For the year ended December 31, 2007, consolidated operating income and the related margin werenegatively impacted by a $3.9 million increase in impairment losses relating to discontinued expansion projects,$2.8 million in St. Charles hotel pre-opening expenses and $2.1 million in costs associated with the acquisition,integration and rebranding of the East Chicago property. Consolidated operating income was also adversely affectedby stock-based compensation expense, which increased from $7.8 million in 2006 to $12.0 million in 2007.Additionally, 2007 consolidated operating income was negatively impacted by $1.5 million in additional propertytax expense in the fourth quarter of 2007 for the East Chicago property, which was the result of a significantincrease in the assessed valuation of the real property issued by the county assessor in July 2007. While we haveappealed the new tax assessment, we expect to continue to recognize significantly higher than anticipated propertytax expense at East Chicago in 2008 and future years.43