UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A-1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
or
[ ] 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 Identification
Incorporation or Organization) No.)
3773 HOWARD HUGHES PARKWAY
SUITE 490 SOUTH
LAS VEGAS, NEVADA 89109
(Address of Principal Executive Offices)
Registrant's Telephone Number: (702) 567-7000
Securities registered pursuant to Section 12(b) of the Act:
NONE
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
(Title of Class)
<PAGE>PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Ameristar Casinos, Inc. ("Ameristar" or "ACI") owns and
operates casino-hotels through three wholly owned subsidiaries,
Cactus Pete's, Inc. ("CPI"), Ameristar Casino Vicksburg, Inc.
("ACVI") and Ameristar Casino Council Bluffs, Inc. ("ACCBI"). In
addition, Ameristar is developing a casino-hotel through a fourth
subsidiary, Ameristar Casino Las Vegas, Inc. ("ACLVI"), and holds
a majority interest in Nevada AG Air Ltd. ("NVAGAIR").
Collectively, Ameristar together with the aforementioned wholly
owned subsidiaries and NVAGAIR are referred to herein as the
"Company."
CPI owns and operates Cactus Petes Resort Casino ("Cactus
Petes") and The Horseshu Hotel and Casino (collectively, the
"Jackpot Properties"), two casino-hotels located in Jackpot,
Nevada at the Idaho border. ACVI owns and operates a riverboat-
themed dockside casino (the "Vicksburg Casino") and related land-
based facilities (collectively, "Ameristar Vicksburg") in
Vicksburg, Mississippi. ACCBI owns and operates a riverboat
casino (the "Council Bluffs Casino") and related land-based hotel
and other facilities (collectively, "Ameristar Council Bluffs")
in Council Bluffs, Iowa. The Council Bluffs Casino opened on
January 19, 1996, portions of the Main Street Pavilion opened on
June 17, 1996, the hotel opened on November 1, 1996, and the
remainder of Ameristar Council Bluffs opened in early 1997.
ACLVI will be the operating entity for The Reserve Hotel and
Casino ("The Reserve") under development in Henderson, Nevada at
the intersection of Interstate 515 and Lake Mead Drive. The
Company, through the merger of the initial developer of The
Reserve into ACLVI, acquired The Reserve on October 9, 1996.
ACLVI will complete construction of The Reserve, and will operate
the property upon its completion. Construction on The Reserve
has been suspended pending the availability of additional
financing. Uncertainties concerning the form and amount of
merger consideration payable in connection with the acquisition
of The Reserve caused the Company's bank lenders to cancel the
closing of an increased credit facility for the Company scheduled
to occur in late March 1997. See "Liquidity and Capital
Resources" below.
In connection with the acquisition of The Reserve, in July
1996 the Company established NVAGAIR, a limited liability
company, to hold certain aviation-related assets the Company
controls though its majority interest in NVAGAIR.
The Company's quarterly and annual operating results may be
affected by competitive pressures, the timing of the commencement
of new gaming operations, the amount of preopening costs incurred
by the Company, construction at existing facilities and general
weather conditions. Consequently, the Company's operating
results for any quarter or year may not be indicative of results
to be expected for future periods.
<PAGE>YEAR ENDED DECEMBER 31, 1996 VERSUS YEAR ENDED DECEMBER 31,
1995
SUMMARY
The opening of Ameristar Council Bluffs, beginning with the
Council Bluffs Casino in January 1996, brought a year of
significant growth in Ameristar's consolidated net revenues and
income from operations before preopening costs.
Consolidated net revenues increased over 50% from $123.9
million in 1995 to $188.4 million in 1996. Income from
operations rose to $24.7 million in 1996 before the $7.4 million
charge for preopening costs associated with the opening of
Ameristar Council Bluffs, a 36.5% increase over income from
operations of $18.1 million in the prior year. Income from
operations after preopening costs was $17.3 million in 1996.
Total operating expenses as a percentage of net revenues
were 90.8% in 1996 (86.9% before the Ameristar Council Bluffs
preopening costs) versus 85.4% in 1995. The increase reflects,
in addition to the preopening costs, a higher casino expenses to
casino revenues ratio in the new Council Bluffs Casino than at
the Company's other properties. See "Costs and Expenses" below.
On a year-to-year comparable basis (i.e., before preopening
costs in 1996 and an extraordinary charge in 1995), net income
increased $1.5 million to $10.6 million in 1996 from $9.1 million
in 1995, reflecting the positive impact of the opening of
Ameristar Council Bluffs. After preopening costs, net income for
the year ended December 31, 1996 was $5.9 million versus net
income for the year ended December 31, 1995 of $8.4 million.
Earnings per share before preopening costs were $.52 for 1996
($.29 after preopening costs). Earnings per share were $.42 for
1995 after an extraordinary charge of $.03 per share for the
refinancing of the Company's credit line.
REVENUES
During 1996, Ameristar Council Bluffs was one of the top
gaming revenue producers in the State of Iowa, while both
Ameristar Vicksburg and the Jackpot Properties remained market
share leaders in their areas.
With nearly a full year of casino operations and a partial
year of non-gaming operations, Ameristar Council Bluffs had total
net revenues of $70.3 million for 1996. Despite the opening of
land-based facilities in the middle and at the end of the year,
Ameristar Council Bluffs was the leader in both casino and total
revenues among the Company's four operating casino properties.
Net revenues for Ameristar Vicksburg were $66.1 million for
the year ended December 31, 1996 compared with $67.6 million for
the prior year. Though showing a slight decrease in revenues,
management believes Ameristar Vicksburg was able to maintain its
leading position in the Vicksburg market through effective
promotional strategies and by
<PAGE>continuing to provide customers with superior service and
quality gaming and nongaming products.
The Jackpot Properties produced net revenues of $51.6
million, a 7.7% decrease from the $55.9 million produced in 1995.
Management believes that the decrease is primarily the result of
additional competition for the traditional gaming customer base
of the Jackpot Properties. This competition has come from new
and renovated facilities in Jackpot, as well as the addition of
Native American and other casinos in the outer market, including
Washington, Oregon and Canada. The 1996 net revenues were also
affected by adverse weather conditions during the year and below-
average table games win percentages in the second quarter.
Management also believes that declines in the rates of population
and economic growth in southern Idaho have adversely affected the
Jackpot Properties. A decline in casino revenues of $2.8
million, combined with an increase in promotional allowances of
$0.5 million, account for the majority of the decline in net
revenues.
In an effort to improve their competitive position, the
Jackpot Properties have begun new direct mail programs to
outlying areas to develop new customers and retain current
customers. In addition, approximately 460 new state-of-the-art
slot machines with innovative layouts and improved sensory appeal
(including touch screens and enhanced signs, sounds and colors)
have been introduced to improve customers' entertainment
experiences and encourage repeat visits.
COSTS AND EXPENSES
As noted above, the Company's overall operating expense
ratio was higher in 1996 than in 1995, due primarily to the
Ameristar Council Bluffs preopening costs and to an expense-to-
revenue ratio in the Council Bluffs Casino that is significantly
higher than at the Vicksburg Casino or the Jackpot Properties.
Since 1996 was the first year of operations for the Council
Bluffs Casino, the higher operating expense ratio had the effect
of increasing the Company's overall operating expense ratio. The
higher casino expense ratio in the Council Bluffs Casino is
caused by a gaming tax rate in Iowa that is significantly higher
than in the other jurisdictions in which the Company operates, as
well as an admissions fee payable in Iowa that is not charged
against the Company's other operations. If the gaming tax rate
in Iowa was similar to the rate in Nevada or Mississippi,
operating expenses (excluding preopening costs) as a percentage
of net revenues would have shown a decrease in 1996, reflecting
the Company's efforts to contain controllable costs while still
providing an outstanding experience and value for its customers.
Without the Iowa admissions fee, the decrease in the expense
ratio would have been even more significant.
Casino costs and expenses increased $31.2 million in 1996
due to the opening of the Council Bluffs Casino in January 1996.
As a percentage of casino revenues, casino expenses increased to
46.9% in 1996 compared with 44.8% in 1995. While most of this
increase relates to the higher gaming tax rate and the admissions
fee in Iowa, an increase also occurred at the Jackpot Properties
from 40.4% to 43.2%. While casino revenues declined somewhat at
the Jackpot Properties, as previously discussed, the
corresponding casino expenses could not be
<PAGE>proportionally reduced, due to the Company's desire to
maintain high customer service standards. The Vicksburg Casino's
expense to revenue ratio in the casino department decreased from
47.4% in 1995 to 42.4% in 1996, reflecting the success of that
property's continued efforts to control costs.
The Company's food and beverage costs and expenses increased
$5.0 million in 1996 due to the opening of several dining
facilities at Ameristar Council Bluffs during the year. The
Company's food and beverage expense to revenue ratio increased
from 60.9% in 1995 to 69.2% in 1996. This increase reflects a
food and beverage expense ratio of 91.8% at Ameristar Council
Bluffs, caused mainly by the inefficiencies of restaurant start-
ups that accompanied the opening of the dining establishments
during the year.
Selling, general and administrative costs and expenses
increased $16.6 million or 81.7% from 1995 to 1996. This
significant increase accompanies the notable growth experienced
by the Company in 1996. The majority of the increase relates to
the opening of Ameristar Council Bluffs in 1996 and the
associated marketing, riverboat operations and other general and
administrative costs incurred during the year. Additionally,
corporate expenses increased due to the relocation of the
Company's executive offices to Las Vegas, Nevada in the third
quarter of 1996.
Utilities and maintenance expenses increased $2.1 million or
29.4% and depreciation and amortization expenses increased $4.4
million or 45.4% from 1995 to 1996. Absent the new Ameristar
Council Bluffs properties, both of these expense categories would
have seen moderate decreases in 1996.
Business development costs decreased slightly during the
year, reflecting Ameristar's concentration on current projects,
including the completion of Ameristar Council Bluffs and the
acquisition and development of The Reserve. Although the Company
continues to explore potential expansion opportunities in new and
existing jurisdictions, management does not anticipate
undertaking any expansion projects that would require a material
amount of capital expenditures by the Company until the Company
has obtained financing for the completion of Phase I of The
Reserve. Investments in expansion projects may be made through
wholly owned subsidiaries, joint ventures, partnerships or other
arrangements. No assurances can be given, however, that the
Company will commence gaming operations at any expansion project
undertaken or, if such operations are commenced, that they will
be profitable.
Preopening costs of $7.4 million were expensed during 1996
as construction of each significant component of Ameristar
Council Bluffs was completed and placed into service.
Interest expense, net of capitalized interest of $2.3
million in 1996 and $1.9 million in 1995, increased $4.3 million
or 109.8% from 1995. This increase primarily reflects the
additional debt outstanding to finance the Company's expansion.
In addition, as Ameristar Council Bluffs' facilities were
completed during 1996, the capitalization of interest on funds
borrowed to construct the project was discontinued and subsequent
interest costs were reflected as an expense on the income
statement rather than as an additional cost of the project on the
balance sheet.
<PAGE>The Company's average borrowing rate was 8.90% in 1996
compared to 8.21% in 1995. The Company expects to incur
increased interest expense in 1997 due to an increase in the
amount of debt, some of which will be capitalized as part of
construction costs.
The Company's effective federal tax rate on income was 36.5%
in both 1996 and 1995 versus the federal statutory rate of 35%,
due to the effects of certain expenses incurred by the Company
which are not deductible for federal income tax purposes.
YEAR ENDED DECEMBER 31, 1995 VERSUS YEAR ENDED DECEMBER 31, 1994
SUMMARY
The improvement in operating results for 1995 over 1994 was
primarily due to a full year of operations at the Ameristar
Vicksburg casino and the absence of any preopening costs in 1995.
Consolidated net revenues for 1995 were $123.9 million
compared with $114.4 million in 1994, an 8.3% increase. Income
from operations rose to $18.1 million in 1995. During 1994,
income from operations of $9.9 million reflected $5.4 million in
preopening costs amortization associated with the Ameristar
Vicksburg facility which commenced operations in February 1994.
Before the amortization of preopening costs in 1994, income from
operations rose 17.8% in 1995 due primarily to 3% revenue growth
at the Jackpot Properties and the two months of additional
operations at Ameristar Vicksburg.
Total operating expenses decreased as a percentage of net
revenues from 91.3% in 1994 to 85.4% in 1995. Excluding
Ameristar Vicksburg's preopening costs of $5.4 million, 1994's
total operating expenses as a percentage of net revenues were
86.6%.
Net income for the year ended December 31, 1995 was $8.4
million, which included an after tax extraordinary loss of
$657,000 related to the refinancing of the Company's bank credit
facility. Including the after tax effect of preopening costs
totaling $3.5 million, net income of $4.2 million was generated
in 1994. Earnings per share for 1995 were $.42 (after the
extraordinary loss of $.03 per share due to the refinancing
mentioned above) versus $.21 (after amortization of preopening
costs of $.17 per share) in 1994.
REVENUES
Both the Jackpot Properties and Ameristar Vicksburg were
market share leaders during 1995. The Jackpot Properties
produced record revenues of $55.9 million, an increase of $1.6
million or 3.0% over 1994. While slot revenues at the Jackpot
Properties increased only 0.7% from 1994, table game revenues
rose 15.8%. Ameristar Vicksburg had an average market share of
34% in 1995 due to aggressive promotional strategies. Revenues
for Ameristar Vicksburg were $67.6 million for the year ended
December 31, 1995 compared with $59.8 million for the 10 months
the facility was open in 1994.
<PAGE>Other revenues decreased $0.1 million or 2.0% from
1994 primarily due to a significant reduction in showroom
entertainment revenue at Ameristar Vicksburg. Due to low
attendance, the Company began utilizing the showroom on a more
strategic basis by opening it for weekend and special events
entertainment rather than having the showroom open on a full-time
basis as in 1994.
COSTS AND EXPENSES
Casino costs and expenses increased $4.2 million or 10.3%
from 1994 to 1995. This was due primarily to a full year of
operations at Ameristar Vicksburg in 1995. Food and beverage
costs and expenses decreased $0.7 million or 5.8% in 1995 from
1994 due primarily to cost containment measures implemented at
Ameristar Vicksburg. For the Jackpot Properties, costs and
expenses remained relatively constant between the two years.
Selling, general and administrative costs and expenses
decreased $0.2 million or 0.8% from 1994 to 1995. Utilities and
maintenance costs and expenses increased $0.6 million or 10.0%
from 1994 to 1995. Depreciation and amortization increased $2.7
million or 37.7%.
Business development costs increased $0.3 million or 17.8%
from 1994 to 1995. While the Company was unsuccessful in its bid
in 1995 to obtain a gaming license in Lawrenceburg, Indiana, the
Company continued to explore potential gaming opportunities in
other jurisdictions.
Interest expense, net of capitalized interest of $1.9
million in 1995 and $0.2 million in 1994, increased $0.6 million
or 17.1% from 1994. The Company's incremental borrowing rate was
8.21% in 1995 compared to 10.5% in 1994.
The Company's effective federal tax rate on income before
extraordinary loss was 37% in both 1995 and 1994 versus the
federal statutory rate of 35%, due to certain non-deductible
expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flow from operations was $33.2 million
for the year ended December 31, 1996, as compared to
$23.0 million for the year ended December 31, 1995. The Company
had unrestricted cash of approximately $10.7 million as of
December 31, 1996. The Company historically has funded its daily
operations through net cash provided by operating activities and
its significant capital expenditures through bank debt and other
debt financing. The Company's current assets decreased by
approximately $13.6 million from December 31, 1995 to
December 31, 1996, primarily as a result of expenditures related
to the completion and opening of Ameristar Council Bluffs,
including the application of an $11.5 million restricted security
deposit.
Ameristar, as borrower, and its principal operating
subsidiaries (including ACLVI), as guarantors, maintain a
Revolving Credit Facility with Wells Fargo Bank, NA (formerly
First Interstate Bank of Nevada, NA; "WFB") and a syndicate of
banks (the "Revolving Credit
<PAGE>Facility"). The maximum principal available at
December 31, 1996 was $99.0 million; however, the maximum
principal available reduced to $94.5 million on January 1, 1997,
pursuant to the terms of the Revolving Credit Facility. The
Company may not borrow under the Revolving Credit Facility in
excess of 3.5 times its rolling four quarter EBITDA ("Earnings
before Interest, Taxes, Depreciation and Amortization"). As of
December 31, 1996, 3.5 times the Company's rolling four quarter
EBITDA exceeded the maximum funds available under the Revolving
Credit Facility.
Borrowings under the Revolving Credit Facility bear interest
at a rate based either on LIBOR or WFB's prime rate, at the
election of the Company, and the ratio of the Company's
consolidated total debt to consolidated cash flow, as measured by
an EBITDA formula. As of December 31, 1996, the Company had
outstanding one $91.0 million LIBOR draw and two prime rate draws
totaling $2.5 million at an average interest rate of 8.56% per
annum. These borrowings have been used to repay pre-existing
borrowings of $44.8 million, to fund the continued development of
Ameristar Council Bluffs and to pay certain costs related to the
acquisition of The Reserve, including the repayment of
$11.5 million in indebtedness secured by The Reserve.
In connection with the acquisition of The Reserve, the bank
lenders under the Revolving Credit Facility gave their consent
for Ameristar to make capital contributions to ACLVI of up to
$0.5 million and to make loans to ACLVI of up to $16.0 million
(which intercompany loans may be funded out of borrowings under
the Revolving Credit Facility). Following the completion of
Ameristar Council Bluffs, the Revolving Credit Facility permits
draws under the Revolving Credit Facility to be used only for
general working capital purposes and the funding of permitted
intercompany loans to ACLVI.
The maximum borrowings available under the Revolving Credit
Facility reduce semi-annually commencing January 1, 1997 on a
sliding scale (ranging from $4.5 million to $7.1 million in
reductions) with a final principal payment of $42.0 million due
at maturity on December 31, 2001.
The Revolving Credit Facility is secured by liens on
substantially all of the real and personal property of the
Company and its subsidiaries other than The Reserve. The
Revolving Credit Facility prohibits any secondary liens on these
properties without the prior written approval of the lenders.
Certain changes in control of the Company may constitute a
default under the Revolving Credit Facility. The Revolving
Credit Facility also requires the Company to expend two percent
of consolidated revenues on capital maintenance annually. The
Revolving Credit Facility prohibits Ameristar from declaring or
paying any dividends on the Common Stock of Ameristar if such
declaration or payment would result in an event of default under
the Revolving Credit Facility or if the Company's total leverage
ratio (as defined) would be less than 2.00:1.00. The Revolving
Credit Facility binds the Company to a number of affirmative and
negative covenants, including promises to maintain certain
financial ratios within defined parameters. As of December 31,
1996, the Company was in compliance with these covenants.
<PAGE>In November 1996, the Company began negotiations with
WFB and other banks for the replacement of the Revolving Credit
Facility with a $175 million long-term credit facility (the "1997
Credit Facility"). The Company and the lenders had scheduled a
closing for the 1997 Credit Facility for late March 1997.
However, due to uncertainties related to the amount and form of
merger consideration payable to the former stockholders of Gem
Gaming, Inc. ("Gem") in connection with the acquisition of The
Reserve, the bank lenders cancelled the closing. See "Business --
Terms of the Merger Agreement; Dispute with Gem Stockholders."
Pending the availability of additional financing, the Company has
suspended construction on The Reserve. Although the Company is
exploring financing alternatives, there can be no assurance that
additional financing for the construction of The Reserve will be
available on terms acceptable to the Company or at all.
Pending the anticipated closing of the 1997 Credit Facility,
the Company obtained short-term unsecured loans from a private
lender totaling $12.0 million. The Company anticipated repaying
these short-term loans out of the initial draws under the 1997
Credit Facility. Following the cancellation of the closing of
the 1997 Credit Facility, the Company obtained a short-term loan
from WFB in the amount of $20.0 million, which matures on May 31,
1997. The proceeds of this loan have been used to repay the
prior short-term loans of $12.0 million, to pay the costs to
complete the redesign of The Reserve and certain construction
activities initiated prior to the suspension of construction of
The Reserve, and for other working capital purposes.
The Company, WFB and the other lenders under the Revolving
Credit Facility are negotiating the terms of an amendment to the
Revolving Credit Facility for the purpose of increasing the
maximum principal available to repay the $20.0 million short-term
loan from WFB, modifying the principal reduction schedule and
modifying certain covenants in the Revolving Credit Facility. If
by April 1, 1998, the dispute with the Gem Stockholders has not
been resolved through arbitration or settlement and the Company
has not restructured its long-term debt, management anticipates
that the Company would need to seek waivers of certain covenants
under the Revolving Credit Facility, and no assurance can be
given that a request for such waivers would be granted.
ACCBI entered into a preferred ship mortgage with General
Electric Credit Corp. ("GECC") on December 28, 1995 for the sum
of $11,511,000. The loan is secured by the Council Bluffs
Casino. The GECC loan is amortized over four years with the
first year's amortization calculated as if it were a 36-month
loan. Principal outstanding at the end of the first year is
amortized over the remaining 36 months of the loan. The monthly
principal payments were $320,000 for the first 12 months and
$213,000 for the remaining 36 months. The loan matures on
January 1, 2000. The interest rate is fixed at 9.12% for the
life of the loan.
Proceeds of $7,137,400 from an equipment loan entered into
by ACCBI with WFB on December 12, 1995, were used to finance
Ameristar Council Bluffs' slot machines, surveillance equipment
and property signage. The loan is secured by the equipment and a
preferred ship mortgage on the Council Bluffs Casino subordinate
to the GECC loan. The
<PAGE>loan amortizes over four years with monthly principal
payments of approximately $149,000. The interest rate on this
loan is equal to the LIBOR rate or base rate available from time
to time under the Revolving Credit Facility, as selected by
ACCBI. The final payment is due on December 12, 1999.
At December 31, 1996, the Company had other debt outstanding
of approximately $14.7 million (excluding a $34.3 million
obligation to the Gem Stockholders that has been recorded on the
Company's balance sheet pending the final determination of the
form and amount of merger consideration), with an average per
annum interest rate of 12.6%.
The Company intends that ACVI will borrow approximately
$7.0 million in 1997 for the purpose of funding a portion of the
construction costs of a 144-room hotel at Ameristar Vicksburg.
The balance of these construction costs (approximately
$2.0 million to $2.5 million) are expected to be funded out of
ACVI's operating cash flow. The Company is currently negotiating
with a private lender for a nonrecourse loan that would be
secured by the hotel. The Company anticipates that this loan
will have a maturity date of not earlier than June 1, 1998 and
require monthly or quarterly interest payments. However, no
assurance can be given that this or any other loan will be
obtained on these terms or other terms acceptable to the Company.
The Company currently intends to use the proceeds of the
anticipated loan to reduce the outstanding balance under the
Revolving Credit Facility and to reborrow funds under the
Revolving Credit Facility for the payment of construction costs
as they are incurred.
Capital expenditures in the year ended December 31, 1996,
were approximately $76.4 million (including approximately
$22.7 million expended by Gem prior to the Merger), compared to
approximately $64.8 million in the year ended December 31, 1995.
Of the 1996 expenditures, $46.3 million were related to the
development of Ameristar Council Bluffs and $29.2 million were
related to the development of The Reserve. The majority of the
1995 capital expenditures related to the development of Ameristar
Council Bluffs. The Company funded its capital expenditures in
1996 from net cash provided by operating activities, bank debt
(including the Revolving Credit Facility), purchase money
financing and short-term debt.
The Company anticipates making capital expenditures of
approximately $26.0 million in 1997, including approximately
$9.8 million for the development and construction of Phase I of
The Reserve, approximately $7.0 million for the development and
construction of a 144-room hotel at Ameristar Vicksburg
(including capitalized construction period interest),
approximately $6.5 million for the payment of the remaining costs
of completing Ameristar Council Bluffs and approximately
$2.7 million for maintenance of existing facilities and other
purposes. The anticipated amount of capital expenditure spending
in 1997 does not reflect any amounts that would be expended if
the Company is able to resume construction on The Reserve, which
was suspended following the cancellation of the closing of the
1997 Credit Facility. The total construction budget, including
capitalized construction period interest and preopening costs,
established by the Company for Phase I of The Reserve is $125.0
million, of which approximately $31.0 million had been incurred
as of March 31, 1997. This budget remains subject to change
based on design changes and refinements and changes in
construction bid amounts at the time construction recommences.
<PAGE>Management anticipates that the above-described
capital expenditure requirements will be funded out of short-term
borrowings intended to be replaced by an increase in the
Revolving Credit Facility, the proceeds of a loan for the
development of the Ameristar Vicksburg hotel, purchase money and
lease financing related to the acquisition of furniture, fixtures
and equipment (including gaming equipment) and operating cash
flow. Although no assurance can be given, the Company
anticipates that it will have sufficient funds to meet its
capital expenditure requirements in 1997. However, an adverse
change in the Company's operations or operating cash flow may
affect the Company's ability to meet its capital expenditure
requirements and/or maintain compliance with the terms of the
Revolving Credit Facility or other borrowings.
Additional capital resources will be required in order for
the Company to resume construction of The Reserve, if cost
overruns are incurred on any capital project or if any unforeseen
contingencies arise that are not covered by insurance or
otherwise reimbursable. The Company does not anticipate using
any material capital resources to pursue or develop any
additional expansion project until it has obtained financing for
the completion of Phase I of The Reserve. There can be no
assurance that sources of funding for any currently unanticipated
requirements would be permitted by restrictions included in the
Revolving Credit Facility or would be available on terms
acceptable to the Company.
Under the terms of the Merger Agreement, the Company may be
required to issue three-year 8% interest bearing promissory notes
(the "Gem Notes") to the Gem Stockholders. The Merger Agreement
provides for the Gem Notes to be in a principal amount equal to
7.5 million multiplied by the average closing price of
Ameristar's Common Stock during the last 10 trading days of May
1997, minus $4.0 million and certain other reductions. Although
the Company has commenced an arbitration proceeding against the
Gem Stockholders in which the Company has alleged it has been
excused from issuing the Gem Notes, no assurance can be given the
Company will not issue the Gem Notes. See "Business -- Terms of
the Merger Agreement; Dispute with Gem Stockholders."
The ability of the Company to meet its debt service
requirements and to comply with the covenants under the Revolving
Credit Facility and other indebtedness will be dependent upon
whether and in what amount the Gem Notes are issued, the terms of
the contemplated amendment to the Revolving Credit Facility and
the future performance of the Company, which is subject to
financial, economic, competitive, regulatory and other factors
affecting the Company, many of which are beyond its control. The
failure of the Company to satisfy these requirements could force
the Company to adopt one or more alternatives, such as reducing
or delaying any other planned expansions or capital expenditures,
selling or leasing assets, restructuring debt or obtaining
additional equity capital. There can be no assurance that any of
these alternatives could be effected on satisfactory terms or
within any particular time frame, and the adoption of one or more
of such alternatives could impair the Company's competitive
position and reduce its future cash flow.
Ameristar has not declared any dividends on its Common Stock
during the last two fiscal years, and the Company intends for the
foreseeable future to retain all earnings for use <PAGE>in the
development of its business instead of paying cash dividends. In
addition, as described above, the Revolving Credit Facility
obligates the Company to comply with certain financial covenants
that may restrict or prohibit the payment of dividends.
FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
This Report contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. Discussions containing such forward-looking statements
may be found in the material set forth above in this section and
under "Business" as well as within this Report generally. Also,
documents subsequently filed by the Company with the Securities
and Exchange Commission may contain forward-looking statements.
Actual results could differ materially from those anticipated in
the forward-looking statements as a result of various factors
described below and elsewhere in this Report that are beyond the
control of the Company. The Company cautions the reader,
however, that such factors may not be exhaustive, particularly
with respect to future filings. Among the factors to be
considered by current and prospective stockholders of the Company
are the following:
The Company currently does not have the financing necessary
to complete Phase I of The Reserve and construction has been
suspended. Due to the uncertain outcome of the pending
arbitration proceedings with the Gem Stockholders, no assurance
can be given as to when or if the Company will obtain additional
financing to complete Phase I of The Reserve.
The Company cannot estimate when the recently commenced
arbitration proceeding between the Company and the Gem
Stockholders will be completed or otherwise resolved or the
outcome of such proceeding. Management believes it is unlikely
that the Company will be able to pursue any expansion
opportunities until this proceeding is completed or settled
unless any such expansion opportunities do not require a material
amount of capital expenditures by the Company. In addition,
depending on the outcome of this proceeding, the expansion of the
Company may continue to be limited or restricted by its financial
or other obligations to the Gem Stockholders.
The Company's ability to satisfy its covenant and other
requirements under the Revolving Credit Facility and other long-
term indebtedness will be dependent upon the completion of the
contemplated amendment of the Revolving Credit Facility on
favorable terms and the future operating performance of the
Company. In addition, no assurance can be given that the Company
will be able to obtain waivers of covenant requirements under the
Revolving Credit Facility, which management believes will be
necessary by April 1, 1998, if the dispute with the Gem
Stockholders has not been resolved and the Company has not
restructured its long-term debt.
Some of the Company's known or future competitors in various
markets have or may have greater name recognition and financial
and marketing resources than the Company. In addition, each of
the Company's currently operating properties is subject to
changes in competitive conditions, including those resulting from
the legalization or expanded legalization
<PAGE>of gaming in jurisdictions in which the Company operates or
bordering jurisdictions, that could have a material adverse
effect on the Company. See "Business."
Construction and expansion projects of the Company entail
significant risks, including shortages of materials (including
slot machines or other gaming equipment) or skilled labor,
unforeseen construction scheduling, engineering, environmental or
geological problems, work stoppages, weather interference,
floods, fires, other casualty losses, and unanticipated cost
increases. No assurance can be given that any project will be
completed on time, if at all, or on budget.
The Company is dependent upon Craig H. Neilsen, the
Company's president and chief executive officer, who controls
approximately 86.9% of the outstanding shares of Common Stock of
Ameristar, and Mr. Neilsen's management team. The Company has
experienced and expects to continue to experience strong
competition in hiring and retaining qualified operating and
corporate management personnel. In addition, the death of Mr.
Neilsen could result in the need for his estate, heirs or
devisees to sell a substantial number of shares of the Common
Stock to obtain funds to pay inheritance tax liabilities.
The Company's riverboat and dockside facilities in
Mississippi and Iowa could be lost from service due to casualty,
mechanical failure, extended or extraordinary maintenance, floods
or other severe weather conditions. Cruises of the Council
Bluffs Casino are subject to risks generally incident to the
movement of vessels on inland waterways, including risks of
casualty due to river turbulence and severe weather conditions.
The loss of a riverboat or dockside facility from service for any
period of time likely would adversely affect the Company's
operating results and could result in the occurrence of an event
of a default under one or more credit facilities or contracts.
<PAGE>SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this amendment to be signed on its behalf by the undersigned,
thereunto duly authorized.
AMERISTAR CASINOS, INC.
(Registrant)
April 28, 1997 By: /s/ Thomas Steinbauer
Thomas Steinbauer
Sr. Vice President of Finance,
CFO