UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K/A-2
(AS AMENDED BY 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>
******************************************************************
Explanatory Note
Ameristar Casinos, Inc. (the "Registrant" or "ACI") is filing
this amendment to its Form 10-K for the fiscal year ended
December 31, 1996, for the purpose of restating Note 11 to
the Registrant's Consolidated Financial Statement to include
updated information.
******************************************************************
PART IV
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K
The following are filed as part of this Report:
(a)1. Financial Statements
Report of Independent Public Accountants.
Consolidated Balance Sheets as of December 31,
1995 and 1996.
Consolidated Statements of Income for the years
ended December 31, 1994, 1995 and 1996.
Consolidated Statements of Stockholders'
Equity for the years ended December 31, 1994,
1995 and 1996.
Consolidated Statements of Cash Flows for the
years ended December 31, 1994, 1995 and 1996.
Notes to Consolidated Financial Statements.
(a)2. Financial Statement Schedules
All schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are not required under related
instructions or are inapplicable and therefore have been
omitted.
<PAGE>
(a)3. Exhibits
The following exhibits listed are filed or incorporated
by reference as part of this Report.
Exhibi
t Description of Exhibit Method of Filing
Number
2.1 Plan of Acquisition. See Exhibits 10.8(a)-(i).
See Exhibits 10.8(a)-(i).
3.1 Articles of Incorporation. Incorporated by reference
to Exhibit 3.1 to
Registration Statement on
Form S-1 filed by
Ameristar Casinos, Inc.
("ACI") under the
Securities Act of 1933,
as amended (File No. 33-
68936) (the "Form S-1").
3.2 Bylaws. Incorporated by reference
to Exhibit 3.2 to ACI's
Annual Report on Form 10-
K for the year ended
December 31, 1995 (the
"1995 10-K").
4.1 Specimen Common Stock Incorporated by reference
Certificate. to Exhibit 4 to Amendment
No. 2 to the Form S-1.
4.2 Long-Term Debt. See Exhibits 10.7(a) and
See Exhibits 10.7(a) and 10.8.
10.7(b).
* 10.1(a) Employment Agreement, dated Incorporated by reference
November 15, 1993, between to Exhibit 10.1(a) to
ACI and Thomas M. Steinbauer. ACI's Annual Report on
Form 10-K for the year
ended December 31, 1994
(the "1994 10-K").
* 10.1(b) Employment Agreement, dated Incorporated by reference
March 21, 1995, between ACI to Exhibit 10.1(c) to the
and John R. Spina, and 1994 10-K.
related letter agreement.
* 10.2 Ameristar Casinos, Inc. 1993 Incorporated by reference
Non-Employee Director Stock to Exhibit 10.2 to ACI's
Option Plan, as amended and Quarterly Report on Form
restated. 10-Q for the quarter
ended June 30, 1994.
<PAGE>
* 10.3 Ameristar Casinos, Inc. Incorporated by reference
Management Stock Option to Exhibit 10.3 to ACI's
Incentive Plan, as amended Quarterly Report on Form
and restated. 10-Q for the quarter
ended September 30, 1996
(the "September 1996 10-
Q").
* 10.4 Form of Indemnification Incorporated by reference
Agreement between ACI and to Exhibit 10.33 to
each of its directors and Amendment No. 2 to the
officers. Form S-1.
* 10.5 Housing Agreement, dated Incorporated by reference
November 15, 1993 between to Exhibit 10.17 to the
Cactus Pete's Inc. ("CPI") 1994 10-K.
and Craig H. Neilsen.
10.6 Plan of Reorganization, dated Incorporated by reference
November 15, 1993, between to Exhibit 2.1 to the
ACI and Craig H. Neilsen in 1994 10-K.
his individual capacity and
as trustee of the
testamentary trust created
under the last will and
testament of Ray Neilsen
dated October 9, 1963.
10.7(a) Credit Agreement, dated Incorporated by reference
June 1, 1995, among ACI, the to Exhibits 10.1 and 99.1
lenders listed therein and to ACI's Quarterly Report
Wells Fargo Bank, N.A., as on Form 10-Q for the
the successor to First quarter ended June 30,
Interstate Bank of Nevada, 1995.
N.A. ("WFB/FIB"), as agent,
together with a list
describing omitted schedules
and exhibits thereto.
10.7(b) Consent to Merger and Incorporated by reference
Increased Commitment to Exhibit 10.4 to the
Agreement, dated October 4, September 1996 10-Q.
1996, among ACI, the lenders
listed therein and WFB/FIB,
as agent.
10.8(a) Merger Agreement, dated as of Incorporated by reference
May 31, 1996, among Gem, ACI, to Exhibits 10.1 and 99.1
ACLVI, Steven W. Rebeil to ACI's Quarterly Report
("Rebeil") and Dominic J. on Form 10-Q for the
Magliarditi ("Magliarditi"), quarter ended June 30,
together with a list 1996 (the "June 1996 10-
describing omitted schedules Q").
and exhibits thereto.
10.8(b) First Amendment to Merger Incorporated by reference
Agreement, dated July 2, to Exhibit 10.5 to the
1996, among Gem, ACI, ACLVI, June 1996 10-Q.
Rebeil and Magliarditi.
<PAGE>
10.8(c) Second Amendment to Merger Incorporated by reference
Agreement, dated as of to Exhibits 10.3 and 99.1
September 27, 1996, among to ACI's Current Report
Gem, ACI, ACLVI, Rebeil and on Form 8-K filed on
Magliarditi, together with a October 24, 1996 (the
list describing omitted "October 1996 8-K").
schedules and exhibits
thereto.
10.8(d) Gem Individuals' Notes Escrow Incorporated by reference
Agreement and Escrow to Exhibit 10.4 to the
Instructions, dated as of October
September 27, 1996, among 1996 8-K.
ACI, Rebeil and Magliarditi.
10.8(e) Letter agreement, dated Incorporated by reference
October 3, 1996, between ACI to Exhibit 10.5 to the
and Magliarditi. October
1996 8-K.
10.8(f) Purchase Agreement, dated as Incorporated by reference
of June 30, 1996, between ACI to Exhibit 10.6 to the
and Gem Air, Inc. ("Gem June 1996 10-Q.
Air").
10.8(g) Aircraft Operating Agreement, Incorporated by reference
dated as of July 5, 1996, to Exhibit 10.4 to the
between ACI and Gem Air. June 1996 10-Q.
10.8(h) Operating Agreement of Nevada Incorporated by reference
AG Air, Ltd. ("NVAGAIR"), to Exhibit 10.2 to the
dated as of July 5, 1996. June 1996 10-Q.
10.8(i) Sublease, dated as of Incorporated by reference
June 30, 1996, between ACI to Exhibit 10.3 to the
and NVAGAIR. June 1996 10-Q.
10.9(a) Lease, dated September 8, Incorporated by reference
1992, between Magnolia Hotel to Exhibit 10.2 to the
Company and ACVI as the Form S-1.
assignee of Craig H. Neilsen.
10.9(b) First Amendment to Agreement, Incorporated by reference
dated July 14, 1993, between to Exhibit 10.2(b) to the
Magnolia Hotel Company and 1995 10-K.
ACVI as the assignee of Craig
H. Neilsen.
10.9(c) Second Amendment to Lease Incorporated by reference
Agreement, dated June 1, to Exhibit 10.2(c) to the
1995, between Magnolia Hotel 1995 10-K.
Company and ACVI.
10.10(a)Lease, dated September 18, Incorporated by reference
1992, between R.R. Morrison, to Exhibit 10.3 to the
Jr. and ACVI as the assignee Form S-1.
of Craig H. Neilsen.
10.10(b)First Amendment to Lease Incorporated by Reference
Agreement, dated June 1, to Exhibit 10.3 to the
1995, between R.R. Morrison & 1995 10-K.
Son, Inc. and ACVI.
<PAGE>
10.11(a)Lease, dated December 11, Incorporated by reference
1992, between Martha Ker to Exhibit 10.4 to the
Brady Lum et. al. and ACVI as Form S-1.
the assignee of Craig H.
Neilsen.
10.11(b)First Amendment to Lease Incorporated by reference
Agreement, dated June 1, to Exhibit 10.4(b) to the
1995, between Lawrence O. 1995 10-K.
Branyan, Jr., as trustee of
the Brady-Lum Family Trust
dated May 15, 1993 and ACVI.
10.12 Settlement, Use and Incorporated by reference
Management Agreement and DNR to Exhibit 10.12 to ACI's
Permit, dated May 15, 1995, Annual Report on Form 10-K
between the State of Iowa for the year ended
acting through the Iowa December 31, 1996 (the
Department of Natural "1996 10-K").
Resources and ACCBI as the
assignee of Koch Fuels, Inc.
See also Exhibit 99.1
10.13 Option Agreement, dated July Incoporated by reference
11, 1995, between Levy Realty to Exhibit 10.13 to the
Trust and ACLVI as the 1996 10-K.
successor to Gem Gaming, Inc.
("Gem").
10.14 Contract, dated December 19, Incorporated by reference
1995, between ACCBI and to Exhibit 10.16 to the
Perini-Andersen, a joint 1995 10-K.
venture.
10.15(a)AIA Standard Form of Incorporated by reference
Agreement between Owner and to Exhibit 10.1 to the
Contractor (Form No. A101- September 1996 10-Q.
1987) and First Addendum to
Contractor's Agreement (Hotel
Tower), dated October 25,
1995, between ACLVI (as the
successor to Gem) and Camco
Pacific Construction Company,
Inc. ("Camco Pacific").
10.15(b)AIA Standard Form of Incorporated by reference
Agreement between Owner and to Exhibit 10.2 to the
Contractor (Form No. A101- September 1996 10-Q.
1987) and First Addendum to
Contractor's Agreement
(Casino), dated October 25,
1995, between ACLVI (as the
successor to Gem) and Camco
Pacific.
<PAGE>
10.16 Excursion Boat Sponsorship Incorporated by reference
and Operations Agreement, to Exhibit 10.15 to the
dated September 15, 1994, 1995 10-K.
between Iowa West Racing
Association and ACCBI.
21.1 Subsidiaries of ACI. Incorporated by reference
to Exhibit 21.1 to the
1996 10-K.
23.1 Consent of Arthur Andersen Filed electronically
LLP. herewith.
27.1 Financial Data Schedule. Incorporated by reference
to Exhibit 27.1 to the
1996 10-K.
99.1 Agreement to furnish the Incorporated by reference
Securities and Exchange to Exhibit 99.1 to the
Commission omitted exhibits 1996 10-K.
and schedules to certain
exhibits and certain
instruments defining the
rights of holders of certain
long-term debt.
* Denotes a management contract or compensatory plan or
arrangement.
(b) Reports on Form 8-K
Form 8-K filed on October 24, 1996, reporting under
Item 2 the acquisition by the Company of The Reserve Hotel &
Casino, Henderson, Nevada, through the merger of Gem into
ACLVI.
Form 8-K/A (Amendment No. 1) filed on December 23,
1996, including under Item 7 (i) balance sheets of Gem as of
December 31, 1994 and 1995 and as of October 8, 1996, and
related statements of operations, stockholders' equity and
cash flows for the period from Gem's inception (March 9,
1994) to December 31, 1994, for the year ended December 31,
1995 and for the period from January 1, 1996 to October 8,
1996, and cumulative for the period from inception to
October 8, 1996, together with the related notes and audit
report of Arthur Andersen LLP, and (ii) pro forma balance
sheet of the Company as of September 30, 1996 and pro forma
statements of income of the Company for the nine months
ended September 30, 1996 and year ended December 31, 1995,
and related notes.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Ameristar Casinos, Inc.:
We have audited the accompanying consolidated balance sheets of
Ameristar Casinos, Inc. (a Nevada corporation) and subsidiaries as
of December 31, 1995 and 1996, and the related consolidated
statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Ameristar Casinos, Inc. and subsidiaries as of
December 31, 1995 and 1996, and the results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
February 14, 1997
(except with respect to the matters discussed in Note 11,
as to which the date is June 20, 1997)
<PAGE>
<TABLE>
AMERISTAR CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(Amounts in Thousands)
December 31,
1995 1996
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 14,787 $ 10,724
Restricted cash 256 418
Restricted security deposit 11,511 -
Accounts receivable, net 1,003 1,408
Income tax refund receivable 311 -
Inventories 2,273 2,385
Prepaid expenses 2,467 3,081
Deferred income taxes 1,199 2,138
-------- --------
Total current assets 33,807 20,154
-------- --------
PROPERTY AND EQUIPMENT, at cost:
Buildings and improvements 98,217 169,004
Building under capitalized lease 800 800
Furniture, fixtures and
equipment 34,741 53,857
Furniture, fixtures and equipment
under capitalized leases 1,029 1,029
-------- --------
134,787 224,690
Less: Accumulated depreciation and
amortization 42,716 56,253
-------- --------
92,071 168,437
Land 14,989 25,009
Land under capitalized leases 4,865 4,865
Construction in progress 51,292 27,159
-------- --------
163,217 225,470
-------- --------
PREOPENING COSTS 3,141 2,594
-------- --------
EXCESS OF PURCHASE PRICE OVER FAIR
MARKET VALUE OF NET ASSETS ACQUIRED - 19,043
-------- --------
DEPOSITS AND OTHER ASSETS 2,055 2,791
-------- --------
$202,220 $270,052
======== ========
The accompanying notes are an integral part of these consolidated
balance sheets.
</TABLE>
<PAGE>
<TABLE>
AMERISTAR CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
(Amounts in Thousands, Except Share Data)
December 31,
1995 1996
-------- --------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 3,767 $ 7,303
Construction contracts payable 7,838 5,336
Accrued liabilities 10,394 13,564
Current obligations under
capitalized leases 506 506
Current maturities of notes payable
and long-term debt 6,895 19,740
Federal income tax payable - 49
-------- --------
Total current liabilities 29,400 46,498
-------- --------
OBLIGATIONS UNDER CAPITALIZED
LEASES, net of current maturities 7,441 8,333
-------- --------
NOTES PAYABLE AND LONG-TERM DEBT,
net of current maturities 94,428 135,560
-------- --------
DEFERRED INCOME TAXES 5,904 8,446
-------- --------
MINORITY INTEREST - 271
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value:
Authorized - 30,000,000 shares;
Issued - None - -
Common stock, $.01 par value:
Authorized - 30,000,000 shares;
Issued and outstanding -
20,360,000 shares at
December 31, 1995 and 1996 204 204
Additional paid-in capital 43,043 43,043
Retained earnings 21,800 27,697
-------- --------
65,047 70,944
-------- --------
$202,220 $270,052
======== ========
The accompanying notes are an integral part of these consolidated
balance sheets.
</TABLE>
<PAGE>
<TABLE>
AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except Per Share Data)
Years ended December 31,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Casino $ 90,882 $ 99,364 $161,338
Food and beverage 17,494 19,303 24,250
Rooms 7,580 7,861 7,641
General Store 2,557 2,595 2,389
Other 5,265 5,161 5,371
-------- -------- --------
123,778 134,284 200,989
Less: Promotional
allowances 9,425 10,417 12,524
-------- -------- --------
Net revenues 114,353 123,867 188,465
-------- -------- --------
OPERATING EXPENSES:
Casino 40,347 44,503 75,685
Food and beverage 12,469 11,747 16,773
Rooms 2,249 2,404 2,368
General Store 2,213 2,292 2,108
Other 6,199 5,919 4,946
Selling, general and
administrative 20,549 20,237 36,872
Related party expenses 50 200 134
Business development 1,446 1,704 1,622
Utilities and maintenance 6,417 7,056 9,130
Depreciation and amortization 7,062 9,721 14,135
Preopening costs 5,408 - 7,379
-------- -------- --------
Total operating expenses 104,409 105,783 171,152
-------- -------- --------
Income from operations 9,944 18,084 17,313
OTHER INCOME (EXPENSE):
Interest income 86 205 354
Interest expense (3,379) (3,958) (8,303)
Other (5) - (77)
-------- -------- --------
INCOME BEFORE INCOME TAX
PROVISION 6,646 14,331 9,287
Income tax provision 2,426 5,236 3,390
-------- -------- --------
</TABLE>
<PAGE>
<TABLE>
AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Continued)
(Amounts in Thousands, Except Per Share Data)
Years ended December 31,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
INCOME BEFORE EXTRAORDINARY
LOSS $ 4,220 $ 9,095 $ 5,897
EXTRAORDINARY LOSS ON
EARLY RETIREMENT OF
DEBT, net of income tax
benefit of $354 - (657) -
-------- -------- --------
NET INCOME $ 4,220 $ 8,438 $ 5,897
======== ======== ========
EARNINGS PER SHARE:
Income before
extraordinary loss $ 0.21 $ 0.45 $ 0.29
Extraordinary loss - (0.03) -
-------- -------- --------
Net income $ 0.21 $ 0.42 $ 0.29
======== ======== ========
WEIGHTED AVERAGE SHARES
OUTSTANDING 20,360 20,360 20,360
======== ======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in Thousands, Except Number of Shares)
Capital Stock
------------------ Additional
No. of Paid-In Retained
Shares Balance Capital Earnings Total
---------- ------- ---------- -------- -------
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1993 20,360,000 $ 204 $43,043 $ 9,142 $52,389
Net income - - - 4,220 4,220
---------- ------- ---------- -------- -------
Balance,
December 31, 1994 20,360,000 204 43,043 13,362 56,609
Net income - - - 8,438 8,438
---------- ------- ---------- -------- -------
Balance,
December 31, 1995 20,360,000 204 43,043 21,800 65,047
Net income - - - 5,897 5,897
---------- ------- ---------- -------- -------
Balance,
December 31, 1996 20,360,000 $ 204 $43,043 $27,697 $70,944
========== ======= ========== ======== =======
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
Years ended December 31,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 4,220 $ 8,438 $ 5,897
-------- -------- --------
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization 7,062 9,721 14,135
Change in deferred income
taxes (1,513) 3,209 (181)
Net (gain) loss on
disposition of assets 5 - (56)
Amortization of debt
issuance costs 149 205 229
Amortization of preopening
costs 5,408 - 7,379
Extraordinary loss on early
retirement of debt - 1,011 -
Changes in current assets
and liabilities:
Restricted cash (130) (16) (162)
Receivables, net (1,185) 260 (94)
Inventories (559) (735) (112)
Prepaid expenses (729) (1,165) (468)
Accounts payable 1,136 10 3,524
Accrued liabilities 4,559 2,110 3,037
Income taxes payable - - 49
-------- -------- --------
Total adjustments 14,203 14,610 27,280
-------- -------- --------
Net cash provided by operating
activities 18,423 23,048 33,177
-------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures (26,521) (63,559) (43,087)
Increase (decrease) in
construction contracts
payable (3,986) 3,318 (4,791)
Proceeds from sale of assets 3 - 56
Increase in deposits and other
assets (3,529) (2,781) (5,924)
-------- -------- --------
Net cash used in investing
activities (34,033) (63,022) (53,746)
-------- -------- --------
</TABLE>
<PAGE>
<TABLE>
AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
(Amounts in Thousands)
Years ended December 31,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of long-
term debt $ 32,393 $ 75,839 $ 44,628
Debt issuance costs (413) (1,403) -
Restricted security deposit - (11,511) 11,511
Principal payments of long-
term debt and capitalized
leases (10,591) (17,333) (39,633)
-------- -------- --------
Net cash provided by financing
activities 21,389 45,592 16,506
-------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 5,779 5,618 (4,063)
CASH AND CASH EQUIVALENTS --
BEGINNING OF YEAR 3,390 9,169 14,787
-------- -------- --------
CASH AND CASH EQUIVALENTS -- END
OF YEAR $ 9,169 $ 14,787 $ 10,724
======== ======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<PAGE>
AMERISTAR CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of significant accounting policies
Principles of consolidation and basis of presentation
The consolidated financial statements of Ameristar Casinos,
Inc. ("ACI" or the "Company"), a Nevada corporation, include the
accounts of the Company and its wholly owned subsidiaries, Cactus
Petes, Inc. ("CPI"), Ameristar Casino Vicksburg, Inc. ("ACVI"),
Ameristar Casino Council Bluffs, Inc. ("ACCBI"), Ameristar Casino
Las Vegas, Inc. ("ACLVI"), and Ameristar Casino Lawrenceburg, Inc.
("ACLI"), as well as a majority interest in Nevada AG Air, Ltd.
("NVAGAIR").
CPI owns and operates two casino-hotels in Jackpot, Nevada --
Cactus Petes Resort Casino and The Horseshu Hotel and Casino. ACVI
owns and operates Ameristar Vicksburg, a riverboat-themed dockside
casino, and related land-based facilities in Vicksburg,
Mississippi. ACCBI owns and operates Ameristar Council Bluffs, a
riverboat casino and associated hotel and other land-based
facilities in Council Bluffs, Iowa. ACLVI owns and is developing
The Reserve Casino and Hotel ("The Reserve") in the Henderson-Green
Valley suburban area of Las Vegas, Nevada. ACLI was established to
pursue gaming opportunities in Indiana. However, in 1996, the
Company made a decision to discontinue such activity and has
dissolved this entity.
The gaming licenses granted to ACVI and ACCBI must be
periodically renewed by the respective state gaming authorities to
continue gaming operations.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Material intercompany accounts and transactions have been
eliminated from the accompanying consolidated financial statements.
Cash and cash equivalents
The Company considers all highly liquid investments with
maturities of three months or less when purchased to be cash
equivalents. Cash equivalents are carried at cost, which
approximates market, due to the short-term maturities of these
instruments.
<PAGE>
Accounts receivable
Gaming receivables are included as part of the Company's
accounts receivable balance. An allowance of $140,000 and $256,000
at December 31, 1995 and 1996, respectively, has been applied to
reduce receivables to amounts anticipated to be collected.
Inventories
Inventories are stated at the lower of cost or market. Cost
is determined principally on the weighted average basis. The value
of inventories associated with the General Store and Gift Shop
operations is determined by the retail method.
Depreciation and capitalization
Property and equipment is recorded at cost, including interest
charged on funds borrowed to finance construction. Interest of
$227,000, $1,850,000 and $2,313,000 was capitalized for the years
ended December 31, 1994, 1995 and 1996, respectively. Depreciation
is provided on both the straight-line and accelerated methods in
amounts sufficient to relate the cost of depreciable assets to
operations. Amortization of building and furniture, fixtures and
equipment under capitalized leases is provided over the shorter of
the estimated useful life of the asset or the term of the
associated lease (including lease renewal or purchase options the
Company expects to exercise). Depreciation and amortization is
provided over the following estimated useful lives:
Buildings and improvements 5 to 40 years
Building under capitalized lease 39 years
Furniture, fixtures and equipment 3 to 15 years
Furniture, fixtures and equipment
under capitalized leases 3 to 5 years
Betterments, renewals and repairs that extend the life of an
asset are capitalized. Ordinary maintenance and repairs are
charged to expense as incurred.
Dividends
The Company intends to retain future earnings for use in the
development of its business and does not anticipate paying any cash
dividends in the foreseeable future.
Gaming revenues and promotional allowances
In accordance with industry practice, the Company recognizes
as gaming revenues the net win from gaming activities, which is the
difference between gaming wins and losses. Gross revenues include
the retail value of complimentary food, beverage and lodging
services furnished to customers. The retail value of these
promotional allowances is deducted to compute net revenues. The
estimated departmental costs of providing such promotional
allowances are included in casino costs and expenses and consist of
the following:
<PAGE>
<TABLE>
Years ended December 31,
1994 1995 1996
-------- -------- --------
(Amounts in Thousands)
<S> <C> <C> <C>
Food and beverage $6,078 $7,999 $ 9,560
Room 544 438 732
Other 921 - 469
-------- -------- --------
$7,543 $8,437 $10,761
======== ======== ========
</TABLE>
Advertising
The Company expenses advertising costs the first time the
advertising takes place. Advertising expense included in selling,
general and administrative expenses was approximately $2,682,000,
$3,685,000 and $6,144,000 for the years ended December 31, 1994,
1995 and 1996, respectively.
Business development expenses
Business development expenses are general costs incurred in
connection with identifying, evaluating and pursuing opportunities
to expand into existing or emerging gaming jurisdictions. Such
costs include, among others, legal fees, land option payments and
fees for applications filed with regulatory agencies and are
expensed as incurred.
Preopening costs
Preopening costs primarily represent direct personnel and
other operating costs incurred prior to the opening of new
facilities. These costs are capitalized as incurred. Upon
commencement of operations, the Company expenses all such
preopening costs.
Federal income taxes
Income taxes are recorded in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes." SFAS No. 109 requires recognition
of deferred income tax assets and liabilities for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled.
Reclassifications
Certain reclassifications, having no effect on net income,
have been made to the prior periods' consolidated financial
statements to conform with the current year presentation.
<PAGE>
Note 2 - Accrued liabilities
Accrued liabilities consist of the following:
<TABLE>
December 31,
1995 1996
------- -------
(Amounts in Thousands)
<S> <C> <C>
Compensation and related
benefits $ 3,717 $ 5,496
Taxes other than income
taxes 2,292 2,623
Progressive slot machine
jackpots 897 916
Interest 835 939
Deposits and other
accruals 2,653 3,590
------- -------
$10,394 $13,564
======= =======
</TABLE>
Note 3 - Federal income taxes
The components of the income tax provision are as follows:
<TABLE>
Years ended December 31,
1994 1995 1996
-------- -------- --------
(Amounts in Thousands)
<S> <C> <C> <C>
Current $ 3,939 $ 2,027 $ 3,571
Deferred (1,513) 3,209 (181)
-------- -------- --------
Provision on income before
extraordinary item 2,426 5,236 3,390
Tax benefit of extraordinary item - (354) -
-------- -------- --------
$ 2,426 $ 4,882 $ 3,390
======== ======== ========
</TABLE>
The reconciliation of income tax at the federal statutory
rates to income tax expense is as follows:
<TABLE>
Years ended December 31,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Federal statutory rate 35% 35% 35%
Nondeductible expenses 2% 2% 2%
-------- -------- --------
37% 37% 37%
======== ======== ========
</TABLE>
Under SFAS No. 109, deferred income taxes reflect the net tax
effects of temporary differences between the carrying amount of
assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Significant components of
the Company's net deferred tax liability consisted of the
following:
<PAGE>
<TABLE>
December 31,
1995 1996
-------- --------
(Amounts in Thousands)
<S> <C> <C>
Deferred tax assets:
Preopening expenses $ 1,248 $ 2,940
Accrued book expenses not
currently deductible 976 1,269
Alternative minimum tax credit (1) 949 949
Project development costs 474 914
Asset reserves 76 90
Other 86 69
-------- --------
Total deferred tax assets 3,809 6,231
-------- --------
Deferred tax liabilities:
Tax depreciation in
excess of book depreciation (7,087) (9,107)
Book capitalized interest
in excess of tax (340) (325)
Tax book difference in
acquired land (2) - (1,784)
Other (1,087) (1,323)
-------- --------
Total deferred tax liabilities (8,514) (12,539)
-------- --------
Net deferred tax liability $ (4,705) $ (6,308)
======== ========
</TABLE>
_____________
(1) The excess of the alternative minimum tax over
regular federal income tax is a tax credit which
can be carried forward indefinitely to reduce
future federal income tax liabilities.
(2) In connection with the acquisition of Gem
Gaming, Inc. as described in Note 10, the
Company recognized a step-up in the basis of
land of $5.0 million which resulted in a
deferred tax liability of approximately $1.8
million computed at the statutory rate of 35
percent.
Note 4 - Supplemental cash flow disclosures
The Company made cash payments for interest, net of amounts
capitalized, of $3,175,000, $3,386,000 and $7,930,000 for the years
ended December 31, 1994, 1995 and 1996, respectively.
The Company made cash payments for federal income taxes of
$4,875,000, $1,220,000 and $2,900,000 for the years ended
December 31, 1994, 1995 and 1996, respectively.
The Company acquired assets through capitalized leases of
$696,000 and $1,083,000 during the years ended December 31, 1994
and 1995, respectively.
The Company acquired assets through the issuance of notes
payable of $6,112,000, $141,000 and $3,173,000 during the years
ended December 31, 1994, 1995 and 1996, respectively.
The Company retired the balance of $44,810,000 under the 1993
Revolving Credit Facility by entering into a new Revolving Credit
Facility (see Note 5) during the year ended December 31, 1995.
<PAGE>
The Company assumed a note payable of $311,000 and recognized
a minority interest of $271,000 in connection with the purchase of
certain aviation-related assets.
The following reflects the noncash components of the Company's
acquisition of Gem Gaming, Inc. (amounts in thousands):
<TABLE>
<S> <C>
Purchase price -- Notes payable
to former stockholders of
Gem Gaming, Inc. (net of
discount) $33,650
-------
Fair value of net assets
acquired:
Prepaid expenses 146
Property and equipment 29,546
Preopening costs 1,873
Accounts payable (12)
Construction contracts
payable (2,289)
Accrued liabilities (133)
Long-term debt (11,400)
Capitalized lease (1,340)
Deferred tax liability (1,784)
-------
14,607
-------
Excess of purchase price over
fair market value of net
assets acquired $19,043
=======
</TABLE>
Note 5 - Notes payable and long-term debt
Notes payable and long-term debt consist of the following:
<TABLE>
December 31,
1995 1996
-------- --------
(Amounts in Thousands)
<S> <C> <C>
Revolving Credit Facility (see
below). $80,000 $93,500
Note payable, with interest at 9.12
percent, collateralized by a
preferred ship mortgage, guaranteed
by ACI, due in monthly payments of
principal plus interest through
December 1999. 11,511 7,674
Note payable to bank, with variable
interest at a rate equivalent to
that required by the revolving
credit facility, collateralized by
certain equipment of ACCBI,
guaranteed by ACI, due in monthly
payments of $148,696 plus interest
through December 1999. 7,137 5,204
<PAGE>
Contracts payable for the purchase
of gaming equipment, with variable
interest at prime plus two percent
(10.5 percent at December 31,
1995), collateralized by gaming
equipment, due in monthly payments
of principal plus interest of
approximately $270,000 through
January 1996. 268 -
Mortgages payable to Farmers Home
Administration with variable
interest (effective rates of
approximately 4.5 and 3.8 percent
for the years ended December 31,
1995 and 1996, respectively),
collateralized by a first deed of
trust on certain apartment units
and land, due in variable monthly
payments of not less than $4,725,
including interest, through
November 2016 and October 2033. 1,421 1,378
Note payable to insurance finance
corporation, with interest at 6.9
percent, due in monthly principal
and interest payments totaling
$134,207 through August 1996 and at
6.9 percent, due in monthly
principal and interest payments
totaling $148,817 through June
1997. 918 846
Note payable to lender, with
interest at 15 percent, unsecured,
interest payable monthly, principal
due in April 1997. - 10,000
Notes payable to former stockholders
of Gem Gaming, Inc., noninterest-
bearing through May 31, 1997,
thereafter at 8 percent, interest
payable monthly, due May 31, 2000
(net of unamortized discount of
$1,120,000 for imputed interest
during the noninterest-bearing term
of the notes) (see Note 10). - 34,255
Note payable to financing company,
with interest at 10.75 percent,
collateralized by certain
equipment, due in monthly principal
and interest payments of $53,177
through January 1999. - 1,148
Note payable to equipment financing
company, with interest at 8.03
percent, collateralized by
aircraft, due in monthly principal
and interest payments of $10,326
through July 1998, with remaining
unpaid principal and interest due
in August 1998. - 643
<PAGE>
Note payable to bank, with interest
at 9.0 percent, collateralized by
certain aviation-related assets,
due in monthly principal and
interest payments of $3,875 through
January 1999, with remaining unpaid
principal and interest due in
February 1999. - 311
Other 68 341
-------- --------
101,323 155,300
Less: Current maturities 6,895 19,740
-------- --------
$ 94,428 $135,560
======== ========
</TABLE>
On October 5, 1993, CPI entered into a $50.0 million Reducing
Revolving Credit Facility (the "1993 Revolving Credit Facility")
with a syndicate of banks, with interest at Wells Fargo Bank's
(formerly First Interstate Bank) ("WFB") prime rate plus the
"applicable margin" (as defined), adjusted quarterly. The
applicable margin could range from 0.25 percentage points to 3.5
percentage points, based on the Company's funded debt to cash flow
ratio (as defined). The 1993 Revolving Credit Facility required
monthly interest payments and semi-annual principal payments.
On July 5, 1995, the Company, as borrower, and its principal
operating subsidiaries, as guarantors, entered into a new Revolving
Credit Facility (the "Revolving Credit Facility") with WFB and a
syndicate of banks. The maximum borrowings initially available was
$70.0 million, which increased to $94.5 million upon the Company
meeting certain loan conditions. The maximum principal available
was increased to $99.0 million in connection with the Company's
acquisition of The Reserve. In connection with the acquisition of
The Reserve, the lenders under the Revolving Credit Facility gave
their consent for ACI 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). As a result of the retirement of the
1993 Revolving Credit Facility, the Company incurred an
extraordinary pre-tax loss (related primarily to the write-off of
unamortized loan costs) of $1,011,000.
As of December 31, 1996, the Company had drawn $93.5 million
on the Revolving Credit Facility. These borrowings were used to
repay the 1993 Revolving Credit Facility of $44.8 million, to fund
the development of Ameristar Council Bluffs, and to pay certain
costs related to the acquisition of The Reserve, including the
repayment of indebtedness secured by The Reserve. Following the
completion of Ameristar Council Bluffs, the Revolving Credit
Facility permits additional draws under the Revolving Credit
Facility to be used only for general working capital purposes or
the funding of permitted intercompany loans to ACLVI.
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 from the Revolving
Credit Facility. The maximum amount available under the Revolving
Credit Facility reduces semi-annually commencing January 1, 1997 on
a sliding scale
<PAGE>
(ranging from $4.5 million to $7.1 million in reductions) with a
final reduction of $42.0 million at maturity on December 31, 2001.
Under the terms of the Revolving Credit Facility, concurrent
with each loan draw, the Company may select the interest rate based
on either the London Interbank Offering Rate ("LIBOR") or WFB's
prime interest rate. The maximum number of outstanding draws at
any time using a LIBOR rate is five, with a minimum draw amount of
$5.0 million per draw. A LIBOR draw can be for a one-, two-, three-
or six-month term with interest accruing monthly and due at the end
of the term, but in no event less frequently than quarterly. The
interest rate is fixed throughout the term of a LIBOR-based draw
and ranges from LIBOR plus 1.5 percentage points to LIBOR plus 3.5
percentage points. On a prime interest rate draw, the interest
rate is variable and ranges from a minimum of prime to a maximum of
prime plus 2.0 percentage points with interest payable monthly in
arrears. As of December 31, 1996, the Company has taken LIBOR and
prime draws totaling $93.5 million with an average interest rate of
approximately 8.6 percent per annum. The applicable margins for
both LIBOR draws and prime interest rate draws adjust semi-annually
based on the ratio of the Company's consolidated total debt to
consolidated cash flow, as measured by an EBITDA formula.
The Revolving Credit Facility is secured by liens on
substantially all of the real and personal property of the Company
and its subsidiaries. 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 binds the Company to a
number of other affirmative and negative covenants. These include
promises to maintain certain financial ratios within defined
parameters, not to engage in new businesses without lender approval
and to make certain reports to the lenders. As of December 31,
1996, the Company was in compliance with these covenants.
On December 28, 1995, ACCBI entered into a preferred ship
mortgage with General Electric Credit Corp. ("GECC"). Borrowing
totaled $11,511,000 and occurred on December 29, 1995. GECC
required the Company to maintain a cash security deposit (the
"Security Deposit") in the full amount of the borrowing until
certain conditions precedent were fulfilled, including having the
casino at Ameristar Council Bluffs fully operational and open to
the general public for gaming operations and satisfying all
licensing requirements within 30 days of the borrowing date. The
Security Deposit was released by GECC on January 19, 1996.
This borrowing is secured by Ameristar II, the riverboat
casino in Council Bluffs. The loan's principal will be repaid over
four years. Principal payments of approximately $320,000 per month
for the first 12 months and approximately $213,000 per month for
the remaining 36 months are required. The Company may prepay the
entire borrowing at a premium ranging from one percent to two
percent during the first 18 months of the loan. Thereafter until
maturity, the Company may prepay the loan without premium. ACI has
entered into an unconditional guaranty of prompt payment and
performance with respect to this borrowing.
Proceeds from an equipment loan entered into with WFB on
December 12, 1995 for $7,137,000 were used to finance slot
machines, surveillance equipment and property signage at ACCBI.
The loan is being amortized over four years with monthly principal
payments of
<PAGE>
approximately $149,000. The interest rate is equivalent to that
charged on the Revolving Credit Facility.
The mortgages payable to Farmers Home Administration provide
long-term financing for low income housing facilities constructed
by the Company. Monthly principal and interest payments are
determined by a formula based upon demographics of the tenants.
Interest rates on the mortgages may vary from 1.0 percent to 11.88
percent. Provisions of the loan agreements require that rents
received be used to fund operating and maintenance expenses, debt
service and reserve accounts.
In connection with the merger of Gem Gaming, Inc. into ACLVI,
the Company acquired a one-half interest in an aircraft owned by
Gem Air, Inc., an affiliate of Gem Gaming, Inc. In addition, the
Company and Gem Air, Inc. formed NVAGAIR to hold certain other
aviation-related assets. Certain aviation-related notes payable
were assumed by NVAGAIR or the Company as a result of these
transactions.
The book value of the Company's long-term debt approximates
fair value due to the predominantly variable-rate nature of the
obligations. Also, fixed rate obligations are at rates that
approximate the Company's incremental borrowing rate for debt with
similar terms and remaining maturities.
Maturities of the Company's borrowings for the next five years
as of December 31, 1996 are as follows (amounts in thousands):
<TABLE>
<S> <C>
1997 $ 19,740
1998 15,892
1999 15,865
2000 46,799
2001 13,845
Thereafter 43,159
--------
$155,300
========
</TABLE>
Note 6 - Leases
The Company has entered into capitalized lease agreements for
a restaurant, including associated furniture, fixtures and
equipment, and land on which Ameristar Vicksburg is situated. Such
leases contained initial terms for rental payments covering the
period of project development and were converted to the primary
lease terms (as defined below) upon the opening of the project.
Ameristar Vicksburg opened on February 27, 1994, at which time
the primary terms of the leases became effective. The primary
terms of the leases, expiring from 5 to 30 years from the opening
date, require total payments of approximately $655,000 per year.
Each lease contains a purchase option exercisable at various times
during the term of the lease generally in varying amounts based on
the time of exercise. The purchase options lapse in conjunction
with the expiration dates of the primary terms of the corresponding
leases. Assuming the Company defers the exercise of its purchase
option under each lease to the expiration of the purchase option,
As of December 31, 1996, the Company had drawn $93.5 million
2004 and approximately $480,000 in 2024 to purchase all of the
parcels. If the Company were to accelerate its exercise of the
purchase
<PAGE>
options to the earliest possible dates, the Company would pay
approximately $4,700,000 currently and $1,250,000 in 1999.
The Company generally may terminate each lease upon the
payment of termination penalties, the maximum aggregate amount of
which is $328,000. In addition, if the leases were terminated, the
Company may be required to restore certain parcels to their
condition prior to the lease commencement date, including the
removal of the cofferdam and other improvements lying below the
water. However, the Company has no plans to abandon the site.
ACVI has entered into a seven-year capitalized lease for
restaurant equipment, due in monthly payments totaling
approximately $118,000 per year, through April 2001. ACVI also
entered into a five-year capitalized lease for a computer system.
Quarterly payments are required totaling approximately $42,000 per
year through October 1998.
ACI has entered into two three-year capitalized lease
agreements for computer equipment on behalf of ACCBI. Monthly
payments are required totaling approximately $197,000 per year
through November 1998. ACCBI has entered into a five-year
capitalized lease agreement for telephone systems and related
equipment. Monthly payments totaling approximately $76,000 per
year will be required. Payments begin upon satisfactory
installation of all equipment, which is expected in April 1997.
ACLVI has entered into a ten-year capitalized lease agreement
for signage at The Reserve, with monthly payments totaling
approximately $260,000 per year through November 2007.
Future minimum lease payments required under capitalized
leases for the five years subsequent to December 31, 1996 are as
follows (amounts in thousands):
<TABLE>
<S> <C>
1997 $ 1,309
1998 1,267
1999 2,250
2000 928
2001 859
Thereafter 12,729
-------
19,342
Less: Amount representing interest 10,503
-------
Present value of net minimum
lease payments $ 8,839
=======
</TABLE>
ACCBI, as lessor, has leased a portion of the Ameristar
Council Bluffs site to an independent hospitality company which has
agreed to construct and operate a 140-room hotel on the property.
The lease is for a period of 50 years beginning March 1, 1996. The
lease requires the hospitality company to pay ACCBI base rent of
$5,000 per month and percentage rent equal to 5 percent of the
hotel's gross sales in excess of $2.0 million per year. The
agreement requires the hospitality company's hotel to be completed
on or before March 31, 1997.
ACI has leased office space located in Las Vegas, Nevada to
serve as its corporate offices. The office space is leased under
two operating lease agreements. The agreements require
aggregate monthly payments of approximately $32,000, plus the
Company's share of certain common area maintenance expenses.
Payments under the leases are subject to annual escalation
<PAGE>
clauses corresponding to increases in the cost of living. The
first lease agreement, covering approximately 90 percent of the
office space leased by the Company, contains two three-year
renewal options. The initial term of the first lease is through
November 2001. The second lease agreement, covering approximately
10 percent of the office space leased by the Company, contains two
two-year renewal options. The initial term of the second lease is
through January 1998. Rental expense of approximately $32,000 was
recorded under these leases in the year ended December 31, 1996.
Note 7 - Benefit plans
Profit-sharing plan
The Company had a qualified non-contributory profit-sharing
plan covering all employees with one or more years of service.
Effective September 30, 1995, the Company's profit-sharing plan was
discontinued. Company contributions were discretionary and were
set by the Board of Directors. The plan had a September 30 fiscal
year end. The Company's annual contributions to the plan were
$240,000 and $350,000 for the plan years ended September 30, 1994
and 1995, respectively.
401(k) plan
The Company instituted a defined contribution 401(k) plan in
March 1996 which covers all employees who meet certain age and
length of service requirements and allows an employer contribution
up to 50 percent of the first four percent of each participating
employee's compensation. Plan participants can elect to defer
before tax compensation through payroll deductions. These
deferrals are regulated under Section 401(k) of the Internal
Revenue Code. The Company's matching contribution was $373,000 for
the fiscal year ended December 31, 1996.
Insurance plan
The Company has a qualified employee insurance benefit trust
covering all employees on a regular basis who work an average of 32
hours or more per week. The amount of the Company's contribution
is determined by the Trust Committee. The plan also requires
contributions from eligible employees and their dependents. The
Company's contribution expense for the plan was approximately
$1,292,000, $2,113,000 and $2,258,000 for the years ended
December 31, 1994, 1995 and 1996, respectively.
Stock Option Plans
The Company has adopted a Management Stock Option Incentive
Plan ("Option Plan") which provides for the grant of options to
purchase Common Stock intended to qualify as incentive stock
options or non-qualified options. All officers, directors (other
than non-employee directors), employees, consultants, advisors,
independent contractors and agents are eligible to receive options
under the Option Plan, except that only employees may receive
incentive stock options. The maximum number of shares available
for issuance under the Option Plan is 1,000,000. No person
eligible to receive options under the Option Plan may receive
options for the purchase of more than an aggregate of 200,000
shares. The Option Plan is administered by the Board of
<PAGE>
Directors or, in its discretion, by a Committee of the Board of
Directors. In September 1996, the Board of Directors amended the
Option Plan, subject to stockholder approval, to increase the
number of shares issuable under the Option Plan to 1,600,000 and to
expand the eligibility provisions to include non-employee directors
of ACI.
The exercise price of incentive stock options granted under
the Option Plan must be at least equal to the fair market value of
the shares on the date of grant (110 percent of fair market value
in the case of participants who own shares possessing more than 10
percent of the combined voting power of the Company) and may not
have a term in excess of 10 years from the date of grant (five
years in the case of participants who are more than 10 percent
stockholders). With certain limited exceptions, options granted
under the Option Plan are not transferable other than by will or
the laws of descent and distribution.
In December 1995, certain stock options were amended to reduce
the per share exercise prices to $6.13 (the market price on the
date of amendment) from initial exercise prices ranging from $11.00
to $14.00.
The Company has also adopted a Non-Employee Director Stock
Option Plan ("Director Plan") which provides for the grant of non-
qualified options to purchase Common Stock to the non-employee
members of the Company's Board of Directors. The maximum number of
shares of Common Stock available for issuance under the Director
Plan is 100,000 shares. The Director Plan is administered by the
Board of Directors.
Under the Director Plan, each non-employee director is
automatically granted an initial option to purchase 1,000 shares of
Common Stock and will automatically be granted an option to
purchase an additional 1,000 shares of Common Stock on each
anniversary of such date if he remains a non-employee director on
that anniversary date. Options granted under the Director Plan
have an exercise price equal to the fair market value of the shares
on the date of grant and have a term of 10 years from the date of
grant. Options granted under the Director Plan become exercisable
one year from the date of grant and are not transferable other than
by will or the laws of descent and distribution. Upon stockholder
approval of the September 1996 amendments to the Option Plan, the
Director Plan will be terminated.
The Company accounts for its stock option plans under
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," under which no compensation cost has been
recognized. Had compensation cost for these plans been determined
consistent with SFAS No. 123, "Accounting for Stock-Based
Compensation," the Company's net income and earnings per share
would have been reduced to the following pro forma amounts:
<TABLE>
December 31,
1995 1996
-------- --------
(Amounts in Thousands,
Except Per Share Data)
<S> <S> <C> <C>
Net income: As reported $8,438 $5,897
Pro forma 8,371 5,708
Earnings per share: As reported $0.42 $0.29
Pro forma 0.41 0.28
</TABLE>
<PAGE>
The fair value of each option granted (or repriced during the
period for which SFAS 123 is effective) is estimated on the date of
grant (or repricing) using the Black-Scholes option pricing model
with the following weighted-average assumptions used for grants (or
repricings) in 1995 and 1996, respectively: risk-free interest
rates of 5.7 and 6.4 percent; expected volatility of 60 and 63
percent. The expected lives of the options are 5 years for both
1995 and 1996. No dividends are expected to be paid.
Because the SFAS No. 123 method of accounting has not been
applied to options granted prior to January 1, 1995, the resulting
pro forma compensation cost may not be representative of that to be
expected in future years.
Summarized information for the stock option plans is as
follows:
<TABLE>
1994 1995 1996
-------------- -------------- --------------
Wtd. Wtd. Wtd.
avg. avg. avg.
ex. ex. ex.
Shares price Shares price Shares price
------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year 226,500 $11.00 281,000 $11.74 548,000 $6.15
Granted 72,000 13.88 390,000 6.12 70,000 7.31
Exercised - - -
Canceled (17,500) 11.00 (123,000) 10.84 (52,000) 6.67
------- ------- -------
Options outstanding,
end of year 281,000 11.74 548,000 6.15 566,000 6.25
======= ======= =======
Options available for
grant 819,000 552,000 534,000
Options exercisable,
end of year 41,800 11.00 52,400 6.50 154,800 6.24
Weighted average fair
value of options
granted $3.49 $4.34
</TABLE>
At December 31, 1996, 541,500 of the 566,000 options
outstanding have exercise prices between $5.50 and $6.50, with a
weighted average exercise price of $6.09 and a weighted average
remaining contractual life of 8.4 years. 22,500 options
outstanding have exercise prices between $7.00 and $10.00, with a
weighted average exercise price of $9.11 and a weighted average
remaining contractual life of 9.5 years. The remaining 2,000
options have an outstanding exercise price of $16.00, with a
remaining contractual life of 7.4 years.
Note 8 - Commitments and contingencies
Development
In October, 1996, the Company acquired The Reserve, a casino-
hotel under construction in Henderson, Nevada. The Company has
redesigned The Reserve to expand the scope and size of the project.
Construction of The Reserve has been suspended due to uncertainties
concerning the form and amount of merger consideration payable in
connection with the acquisition of Gem Gaming, Inc., original
developers of The Reserve, that has adversely affected the
Company's ability to obtain financing for the completion of the
Project (see Notes 10 and 11). As redesigned, The Reserve is
planned to be constructed in two phases and will be opened upon the
completion of Phase I, subject to obtaining all regulatory
approvals. The Company has established a construction
<PAGE>
budget (including capitalized construction period interest and
preopening costs, excluding land) of approximately $120.0 million
for Phase I of The Reserve (including amounts incurred by Gem
Gaming, Inc. prior to the merger), of which approximately $26.1
million had been incurred as of December 31, 1996.
The Company is continuing the development of the Ameristar
Council Bluffs riverboat casino complex. The Ameristar 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, the sports bar on December 31, 1996, and the
remainder of Ameristar Council Bluffs opened in early 1997. The
total cost of the facilities, including the riverboat, buildings,
equipment and preopening costs is approximately $109.0 million. As
of December 31, 1996, approximately $105.4 million (including
preopening costs) had been incurred to develop the Ameristar
Council Bluffs riverboat casino complex.
In early 1997, the Company began constructing a 144-room hotel
at Ameristar Vicksburg expected to be completed in late 1997. In
connection with this construction, a 54-room budget motel that pre-
existed the development of Ameristar Vicksburg has been taken out
of service and will be demolished in connection with this
expansion. Based on preliminary design plans, management believes
that the development cost of the hotel will be between $9.0 and
$9.5 million, including capitalized construction period interest.
Management expects that a substantial portion of these development
costs will be funded through a short-term loan and the balance will
be funded out of ACVI's operating cash flow.
Litigation
The Company is engaged in several legal actions arising in the
ordinary course of business. With respect to these legal actions,
the Company believes that it has adequate legal defenses, insurance
coverage or indemnification protection and believes that the
ultimate outcome(s) will not have a material adverse impact on the
Company's financial position.
In September 1996, the Company received from the general
contractor of the Main Street Pavilion and the hotel for its
property in Council Bluffs, Iowa, a demand for arbitration
regarding amounts due under the contract. The demand does not
contain a plea for a specific amount of damages, and instead
requests an award for extra or changed work, delayed, disrupted and
accelerated work, together with inefficiencies and impacts
experienced on the project, along with unpaid retainage and certain
other costs. Based on a statement of damages filed in the
arbitration, management understands that the general contractor's
claims are for an amount of approximately $4.6 million, which
includes certain amounts due to subcontractors that have already
been paid by ACCBI. ACCBI submitted a counterclaim in the
arbitration for cost overruns in excess of the guaranteed maximum
price that ACCBI has had to pay, liquidated damages for delay and
certain other costs. ACCBI has submitted a statement of damages in
the arbitration proceeding seeking $7.1 million from the general
contractor.
Note 9 - Related party transactions
The Company engages Neilsen and Company to provide certain
construction and professional services, office space and other
equipment and facilities. Neilsen and Company is
<PAGE>
controlled by the principal stockholder and President of the Company.
Total payments to Neilsen and Company were $87,000, $110,000 and
$46,000 for the years ended December 31, 1994, 1995 and 1996,
respectively. The Company also leases office space from the Lynwood
Shopping Center which is controlled by the principal stockholder and
President of the Company. Total payments to the Lynwood Shopping
Center were $94,000 and $88,000 for the years ended December 31,
1995 and 1996, respectively. No such payments were made in 1994. In
management's opinion, at the time the above described transactions
were entered into, they were in the best interest of the Company
and on terms as fair to the Company as could have been obtained
from unaffiliated parties.
During 1995, ACVI purchased for approximately $211,000 a
residence from the President of the Company to be used for general
corporate purposes.
Note 10 - Gem Gaming, Inc. Merger
On October 9, 1996, Gem Gaming, Inc. ("Gem"), a Nevada
Corporation, was merged with and into ACLVI, pursuant to a merger
agreement entered into on May 31, 1996, as amended in July and
October, 1996 (the "Merger Agreement"). Gem was originally
established to develop The Reserve and has had no operations.
Activities relating to the development of The Reserve have been
included in the consolidated financial statements of the Company
since October 9, 1996. The merger of Gem into ACLVI was recorded
using the purchase method of accounting.
Under the amended Merger Agreement, all of the outstanding
shares of Gem common stock were cancelled at the merger closing and
were converted into the right for the former stockholders of Gem
(the "Gem Stockholders") to receive cash, subject to reduction,
equal to the amount of the net proceeds (after payment of
underwriter's discounts and commissions and certain other offering
expenses) in excess of $4.0 million from an underwritten public
offering of 7.5 million shares of the Company's Common Stock (the
"Post-Merger Offering"). If the Post-Merger Offering is not
concluded in whole or in part prior to June 1, 1997, the Company
will deliver to the Gem Stockholders promissory notes (the "Gem
Notes") in an aggregate principal amount equal to (i) the average
10-day closing price of the Common Stock as of June 1, 1997, (ii)
multiplied by 7.5 million (iii) minus $4.0 million and (iv) minus
one-half of any offering expenses. The Gem Notes would be
unsecured, would mature on June 1, 2000, and would accrue interest
at the rate of eight percent per annum. Interest would be payable
on a monthly basis.
To reflect the obligation to the Gem Stockholders upon the
closing of the merger, the Company recorded notes payable at
$35,375,000, the amount at which they would have been issued based
on the Company's stock price on the closing date of the merger,
less a discount of $1,725,000 to reflect imputed interest over the
noninterest-bearing term of the obligation. As of December 31,
1996, approximately $605,000 of the discount had been amortized to
interest expense. The amount recorded as notes payable exceeds the
fair market value of the net assets acquired by the Company in the
merger. The excess of purchase price over fair market value of net
assets acquired, recorded as a long-term asset on the Company's
consolidated balance sheet, will be amortized over the estimated
40-year depreciable life beginning in the period in which the
acquired property commences operations.
<PAGE>
The following unaudited supplemental pro forma information
shows estimated net income and earnings per share as though the
merger had occurred at the beginning of 1995 and 1996,
respectively. The pro forma amounts reflect the Company's actual
results combined with Gem's actual results for the periods
presented, adjusted to reflect additional interest expense as if
the Gem Notes had been issued at the beginning of the respective
period, and the associated income tax benefit at the federal
statutory rate of 35 percent. No pro forma revenues are disclosed
because Gem had no operations prior to the merger.
<TABLE>
Years ended December 31,
1995 1996
-------- --------
<S> <C> <C>
Pro forma net income before
extraordinary items (in
thousands) $8,639 $3,756
====== ======
Pro forma net income (in
thousands) $7,982 $3,756
====== ======
Pro forma earnings per share $0.39 $0.18
====== ======
</TABLE>
Note 11 - Subsequent event
In late March, 1997, the Company had scheduled the closing of
an increased bank credit facility that would provide a substantial
portion of the financing for the completion of Phase I of The
Reserve (see Note 8). Shortly before the loan closing, the bank
lenders advised the Company that they would not proceed with the
closing due to uncertainties concerning the amount and form of
merger consideration payable by the Company to the Gem
Stockholders. Pending the availability of additional financing,
the Company suspended construction of The Reserve. The Company
intends to resume construction upon obtaining the required
financing.
Following the cancellation of the closing of the increased
bank credit facility, the Company obtained a short-term loan from
WFB in the amount of $20.0 million which matures on July 31, 1997.
The Company expects to roll this loan into the increased bank
credit facility upon closing of the increased bank credit facility.
The proceeds of this loan will be used to repay prior short term
loans, to pay the costs to complete the redesign of The Reserve
and certain construction activities completed prior to suspension
of construction of The Reserve, and for other working capital
purposes.
On March 26, 1997, the Company commenced an arbitration
proceeding against the Gem Stockholders for breaches of the Merger
Agreement described in Note 10 and the implied covenant of good
faith and fair dealing related to the merger. The Company and the
Gem Stockholders entered into a settlement agreement dated as of
May 3, 1997, which became effective on June 19, 1997 upon its
approval by the Nevada Gaming Commission. In lieu of the merger
consideration provided for in the Merger Agreement, Ameristar will
pay $32,650,000 to the Gem Stockholders in installments, plus
interest, and reconvey to an affiliate of one of the Gem
Stockholders Ameristar's interest in certain aviation-related
assets acquired in July 1996. Ameristar made an initial payment
of $4.0 million to the Gem Stockholderson June 20, 1997 and has
issued subordinated unsecured promissory notes for the balance
of the cash consideration. The per annum interest rate on these
notes is 8 percent, subject to increase (up to a maximum of 18
percent per annum) following one or more failures to make payments
under the notes by schedules dates. Interest will be paid initially
on a quarterly basis and on a monthly bases after October 1998. The
notes will require annual principal payments of up to $3.0 million
commencing in November 1998 and will mature on December 31, 2004.
The Notes may be prepaid at any time without penalty and will be
subordinated to up to $250 million in senior indebtedness selected
by Ameristar.
Based on the merger consideration provided for in the settlement
agreement, the amounts recorded on the Company's consolidated
balance sheet as notes payable to the Gem Stockholders and the
excess of purchase price over fair market value of net assets
acquired will be adjusted to reflect the modified terms set
forth in the settlement agreement.
<PAGE>
SIGNATURES
Pursuant to the requirement 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)
June 24, 1997 By: /s/ Thomas Steinbauer
Thomas Steinbauer
Senior Vice President of Finance
and Chief Financial Officer
<PAGE>INDEX TO EXHIBITS
Exhibit Description of Exhibit Method of Filing
Number
2.1 Plan of Acquisition. See Exhibits 10.8(a)-(i).
See Exhibits 10.8(a)-(i).
3.1 Articles of Incorporation. Incorporated by reference
to Exhibit 3.1 to
Registration Statement on
Form S-1 filed by
Ameristar Casinos, Inc.
("ACI") under the
Securities Act of 1933,
as amended (File No. 33-
68936) (the "Form S-1").
3.2 Bylaws. Incorporated by reference
to Exhibit 3.2 to ACI's
Annual Report on Form 10-
K for the year ended
December 31, 1995 (the
"1995 10-K").
4.1 Specimen Common Stock Incorporated by reference
Certificate. to Exhibit 4 to Amendment
No. 2 to the Form S-1.
4.2 Long-Term Debt. See Exhibits 10.7(a) and
See Exhibits 10.7(a) and 10.8.
10.7(b).
* 10.1(a) Employment Agreement, dated Incorporated by reference
November 15, 1993, between to Exhibit 10.1(a) to
ACI and Thomas M. Steinbauer. ACI's Annual Report on
Form 10-K for the year
ended December 31, 1994
(the "1994 10-K").
* 10.1(b) Employment Agreement, dated Incorporated by reference
March 21, 1995, between ACI to Exhibit 10.1(c) to the
and John R. Spina, and 1994 10-K.
related letter agreement.
* 10.2 Ameristar Casinos, Inc. 1993 Incorporated by reference
Non-Employee Director Stock to Exhibit 10.2 to ACI's
Option Plan, as amended and Quarterly Report on Form
restated. 10-Q for the quarter
ended June 30, 1994.
* 10.3 Ameristar Casinos, Inc. Incorporated by reference
Management Stock Option to Exhibit 10.3 to ACI's
Incentive Plan, as amended Quarterly Report on Form
and restated. 10-Q for the quarter
ended September 30, 1996
(the "September 1996 10-
Q").
* 10.4 Form of Indemnification Incorporated by reference
Agreement between ACI and to Exhibit 10.33 to
each of its directors and Amendment No. 2 to the
officers. Form S-1.
* 10.5 Housing Agreement, dated Incorporated by reference
November 15, 1993 between to Exhibit 10.17 to the
Cactus Pete's Inc. ("CPI") 1994 10-K.
and Craig H. Neilsen.
10.6 Plan of Reorganization, dated Incorporated by reference
November 15, 1993, between to Exhibit 2.1 to the
ACI and Craig H. Neilsen in 1994 10-K.
his individual capacity and
as trustee of the
testamentary trust created
under the last will and
testament of Ray Neilsen
dated October 9, 1963.
10.7(a) Credit Agreement, dated Incorporated by reference
June 1, 1995, among ACI, the to Exhibits 10.1 and 99.1
lenders listed therein and to ACI's Quarterly Report
Wells Fargo Bank, N.A., as on Form 10-Q for the
the successor to First quarter ended June 30,
Interstate Bank of Nevada, 1995.
N.A. ("WFB/FIB"), as agent,
together with a list
describing omitted schedules
and exhibits thereto.
10.7(b) Consent to Merger and Incorporated by reference
Increased Commitment to Exhibit 10.4 to the
Agreement, dated October 4, September 1996 10-Q.
1996, among ACI, the lenders
listed therein and WFB/FIB,
as agent.
10.8(a) Merger Agreement, dated as of Incorporated by reference
May 31, 1996, among Gem, ACI, to Exhibits 10.1 and 99.1
ACLVI, Steven W. Rebeil to ACI's Quarterly Report
("Rebeil") and Dominic J. on Form 10-Q for the
Magliarditi ("Magliarditi"), quarter ended June 30,
together with a list 1996 (the "June 1996 10-
describing omitted schedules Q").
and exhibits thereto.
10.8(b) First Amendment to Merger Incorporated by reference
Agreement, dated July 2, to Exhibit 10.5 to the
1996, among Gem, ACI, ACLVI, June 1996 10-Q.
Rebeil and Magliarditi.
10.8(c) Second Amendment to Merger Incorporated by reference
Agreement, dated as of to Exhibits 10.3 and 99.1
September 27, 1996, among to ACI's Current Report
Gem, ACI, ACLVI, Rebeil and on Form 8-K filed on
Magliarditi, together with a October 24, 1996 (the
list describing omitted "October 1996 8-K").
schedules and exhibits
thereto.
10.8(d) Gem Individuals' Notes Escrow Incorporated by reference
Agreement and Escrow to Exhibit 10.4 to the
Instructions, dated as of October
September 27, 1996, among 1996 8-K.
ACI, Rebeil and Magliarditi.
10.8(e) Letter agreement, dated Incorporated by reference
October 3, 1996, between ACI to Exhibit 10.5 to the
and Magliarditi. October
1996 8-K.
10.8(f) Purchase Agreement, dated as Incorporated by reference
of June 30, 1996, between ACI to Exhibit 10.6 to the
and Gem Air, Inc. ("Gem June 1996 10-Q.
Air").
10.8(g) Aircraft Operating Agreement, Incorporated by reference
dated as of July 5, 1996, to Exhibit 10.4 to the
between ACI and Gem Air. June 1996 10-Q.
10.8(h) Operating Agreement of Nevada Incorporated by reference
AG Air, Ltd. ("NVAGAIR"), to Exhibit 10.2 to the
dated as of July 5, 1996. June 1996 10-Q.
10.8(i) Sublease, dated as of Incorporated by reference
June 30, 1996, between ACI to Exhibit 10.3 to the
and NVAGAIR. June 1996 10-Q.
10.9(a) Lease, dated September 8, Incorporated by reference
1992, between Magnolia Hotel to Exhibit 10.2 to the
Company and ACVI as the Form S-1.
assignee of Craig H. Neilsen.
10.9(b) First Amendment to Agreement, Incorporated by reference
dated July 14, 1993, between to Exhibit 10.2(b) to the
Magnolia Hotel Company and 1995 10-K.
ACVI as the assignee of Craig
H. Neilsen.
10.9(c) Second Amendment to Lease Incorporated by reference
Agreement, dated June 1, to Exhibit 10.2(c) to the
1995, between Magnolia Hotel 1995 10-K.
Company and ACVI.
10.10(a)Lease, dated September 18, Incorporated by reference
1992, between R.R. Morrison, to Exhibit 10.3 to the
Jr. and ACVI as the assignee Form S-1.
of Craig H. Neilsen.
10.10(b)First Amendment to Lease Incorporated by Reference
Agreement, dated June 1, to Exhibit 10.3 to the
1995, between R.R. Morrison & 1995 10-K.
Son, Inc. and ACVI.
10.11(a)Lease, dated December 11, Incorporated by reference
1992, between Martha Ker to Exhibit 10.4 to the
Brady Lum et. al. and ACVI as Form S-1.
the assignee of Craig H.
Neilsen.
10.11(b)First Amendment to Lease Incorporated by reference
Agreement, dated June 1, to Exhibit 10.4(b) to the
1995, between Lawrence O. 1995 10-K.
Branyan, Jr., as trustee of
the Brady-Lum Family Trust
dated May 15, 1993 and ACVI.
10.12 Settlement, Use and Incorporated by reference
Management Agreement and DNR to Exhibit 10.12 to ACI's
Permit, dated May 15, 1995, Annual Report on Form 10-K
between the State of Iowa for the year ended
acting through the Iowa December 31, 1996 (the
Department of Natural "1996 10-K").
Resources and ACCBI as the
assignee of Koch Fuels, Inc.
See also Exhibit 99.1
10.13 Option Agreement, dated July Incorporated by reference
11, 1995, between Levy Realty to Exhibit 10.13 to the
Trust and ACLVI as the 1996 10-K.
successor to Gem Gaming, Inc.
("Gem").
10.14 Contract, dated December 19, Incorporated by reference
1995, between ACCBI and to Exhibit 10.16 to the
Perini-Andersen, a joint 1995 10-K.
venture.
10.15(a)AIA Standard Form of Incorporated by reference
Agreement between Owner and to Exhibit 10.1 to the
Contractor (Form No. A101- September 1996 10-Q.
1987) and First Addendum to
Contractor's Agreement (Hotel
Tower), dated October 25,
1995, between ACLVI (as the
successor to Gem) and Camco
Pacific Construction Company,
Inc. ("Camco Pacific").
10.15(b)AIA Standard Form of Incorporated by reference
Agreement between Owner and to Exhibit 10.2 to the
Contractor (Form No. A101- September 1996 10-Q.
1987) and First Addendum to
Contractor's Agreement
(Casino), dated October 25,
1995, between ACLVI (as the
successor to Gem) and Camco
Pacific.
10.16 Excursion Boat Sponsorship Incorporated by reference
and Operations Agreement, to Exhibit 10.15 to the
dated September 15, 1994, 1995 10-K.
between Iowa West Racing
Association and ACCBI.
21.1 Subsidiaries of ACI. Incorporated by reference
to Exhibit 21.1 to the
1996 10-K.
23.1 Consent of Arthur Andersen Filed electronically
LLP. herewith.
27.1 Financial Data Schedule. Incorporated by reference
to Exhibit 27.1 to the
1996 10-K.
99.1 Agreement to furnish the Incorporated by reference
Securities and Exchange to Exhibit 99.1 to the
Commission omitted exhibits 1996 10-K.
and schedules to certain
exhibits and certain
instruments defining the
rights of holders of certain
long-term debt.
* Denotes a management contract or compensatory plan or
arrangement.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 10-K/A-2,
into the Company's previously filed Registration Statement on
Form S-8 (File No. 33-83378).
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
June 20, 1997
