UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(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, 1997
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)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 13, 1998, 20,360,000 shares of Common Stock of the
registrant were issued and outstanding. The aggregate market
value of the voting stock of the registrant held by non-
affiliates as of March 13, 1998 was approximately $14,131,000,
based on the Nasdaq-NMS closing price for the registrant's Common
Stock on such date.
Portions of the registrant's definitive Proxy Statement for its
June 9, 1998 Annual Meeting of Stockholders (which has not been
filed as of the date of this filing) are incorporated by
reference into Part III.
<PAGE>
This Report contains certain forward-looking statements,
including the plans and objectives of management for the
business, operations and economic performance of the Company.
These forward-looking statements generally can be identified by
the context of the statement or the use of words such as the
Company or its management "believes," "anticipates," "intends,"
"expects," "plans," or words of similar meaning. Similarly,
statements that describe the Company's future operating
performance, financial results, plans, objectives, strategies or
goals are forward-looking statements. Although management
believes that the assumptions underlying the forward-looking
statements are reasonable, these assumptions and the forward-
looking statements are subject to various factors, risks and
uncertainties, many of which are beyond the control of the
Company. Accordingly, actual results could differ materially
from those contemplated by the forward-looking statements. In
addition to the other cautionary statements relating to certain
forward-looking statements throughout this Report, attention is
directed to "Item 1.-- Business -- Cautionary Information
Regarding Forward-Looking Statements" below for discussion of
some of the factors, risks and uncertainties that could affect
the outcome of future results contemplated by forward-looking
statements.
PART I
ITEM 1. BUSINESS
INTRODUCTION
Ameristar Casinos, Inc. is a multi-jurisdictional gaming
company that owns and operates casinos and related hotel, food
and beverage, entertainment and other facilities, with five
properties in operation in Nevada, Mississippi and Iowa. All of
the Company's principal operations are conducted through wholly
owned subsidiaries. Unless otherwise indicated, or the context
otherwise requires, the term "Ameristar" or "ACI" refers to
Ameristar Casinos, Inc., a Nevada corporation, and the term the
"Company" refers to Ameristar and its subsidiaries. The
Company's properties are:
THE JACKPOT PROPERTIES -- Cactus Petes Resort Casino
("Cactus Petes") and The Horseshu Hotel & Casino ("The Horseshu";
and collectively with Cactus Petes, the "Jackpot Properties"),
were the Company's first two casino-hotels and are located on
U.S. Highway 93 in Jackpot, Nevada at the Idaho border.
AMERISTAR VICKSBURG -- Ameristar Casino Vicksburg is located
in Vicksburg, Mississippi, one-quarter mile north of Interstate
20, the main east-west thoroughfare connecting Atlanta and
Dallas, approximately 45 miles west of Jackson, Mississippi.
Ameristar Vicksburg includes a permanently-moored, dockside
casino (the "Vicksburg Casino") and related land-based
facilities, including a 150-room hotel currently under
construction (collectively, "Ameristar Vicksburg").
<PAGE>AMERISTAR COUNCIL BLUFFS -- Ameristar Casino Hotel
Council Bluffs is located near the Nebraska Avenue exit on
Interstate 29 in Council Bluffs, Iowa across the Missouri River
from Omaha, Nebraska. Ameristar Council Bluffs includes a
cruising riverboat casino (the "Council Bluffs Casino"), an
Ameristar hotel and other related land-based facilities
(collectively, "Ameristar Council Bluffs").
THE RESERVE -- The Reserve Hotel Casino ("The Reserve"),
featuring an African safari and big game reserve theme that
includes statues of elephants, giraffes and other animals, opened
on February 10, 1998 at the junction of Lake Mead Drive and
Interstate 515 in Henderson, Nevada, a suburb of Las Vegas.
BUSINESS AND MARKETING STRATEGIES
The Company's business strategy is to (i) emphasize quality
dining, lodging, entertainment and other non-gaming amenities at
affordable prices to complement and enhance its gaming
operations, (ii) promote its properties as entertainment
destinations, (iii) construct facilities appropriate to
individual markets, (iv) emphasize courteous and responsive
service to develop customer loyalty and (v) utilize marketing
programs to promote customer retention. The Company believes this
strategy will continue to distinguish the Company from its
competitors, many of whom outside of Las Vegas have not
emphasized non-gaming amenities in their operations to the same
extent as the Company.
The Company's properties emphasize slot machine play, and
the Company periodically invests in new slot equipment to promote
customer satisfaction and loyalty. Historically, slot revenues at
each property have exceeded 65% of total gaming revenue. All of
the Company's properties include table games such as blackjack,
craps and roulette. Cactus Petes, Ameristar Vicksburg and The
Reserve also offer poker. Keno and sports book wagering are also
offered at the Jackpot Properties and The Reserve. The Reserve
also offers bingo. The Company generally emphasizes competitive
minimum and maximum betting limits based on each market.
The Company's gaming revenues are derived and are expected
to continue to be derived from a broad base of customers, and
therefore the Company does not depend upon high-stakes players.
The Company extends credit to its Nevada and Mississippi gaming
customers only in limited circumstances and limited amounts on a
short-term basis and in accordance with the credit restrictions
imposed by gaming regulatory authorities. The Iowa gaming
statutes prohibit the issuance of casino credit.
The Company's marketing strategy is to develop a loyal
customer base by promoting the quality of the Company's gaming,
leisure and entertainment amenities that emphasize high standards
of service and customer satisfaction. The Company uses players
clubs at each property to identify and retain preferred players
and develop promotions and special events to encourage increased
gaming activity by these customers. Ameristar has introduced the
first self comping players club to the Las Vegas market at The
Reserve.
The Company's marketing programs also include a number of
promotions, designed primarily to increase the frequency of
customer visits within local markets particularly tied to
<PAGE>gaming activities, as well as tour and travel promotional
packages in certain markets. The Company uses a variety of
advertising media to market its properties, including print,
television, radio, outdoor and internet advertising and direct
mail promotions. The level of marketing and promotional efforts
varies among properties based on competitive and seasonal factors
in each market.
EXPANSION STRATEGY
The Company seeks to expand its operations through a variety
of means, including entering new North American markets created
by the legalization of casino gaming, developing new casinos or
buying existing casinos in established North American casino
gaming markets and expansion projects through Native American
reservations in North America. Although the Company's preference
is to own and operate each of its gaming properties, the Company
also considers expansion opportunities involving management
contracts or joint ventures.
The Company also seeks growth in its business through the
expansion and improvement of its existing properties. Management
has under consideration several projects for The Reserve,
Ameristar Council Bluffs and Ameristar Vicksburg, but the Company
has not committed to any of these projects as of the date of this
Report. Although previously the Company did not contemplate
undertaking any other material capital expenditure projects
pending the availability of adequate funds for the completion of
a planned Phase II of The Reserve, management is currently
reconsidering this position and in connection therewith intends
to evaluate the operating performance of each of the Company's
properties, the anticipated relative costs and benefits of
Phase II of The Reserve and other projects under consideration,
the availability of cash flow and debt financing to fund capital
expenditures and competitive and other relevant factors.
Management believes that the Company's long-term success in
its current markets and expanding into new markets will be
dependent in part upon the Company's ability to distinguish its
operations from those of its competitors. The Company's strategy
of including quality non-gaming amenities in its facilities, such
as lodging, dining and entertainment, is intended to provide
these competitive distinctions. The scope of non-gaming amenities
to be offered at existing properties and future expansion
projects will be determined in part by competitive factors within
a particular market and the nature of the Company's participation
in a particular project. In addition, management believes the
selection of attractive expansion markets and quality locations
within those markets will continue to be important to the growth
of the Company. In selecting expansion opportunities, the Company
seeks a strong demographic market with a favorable competitive
environment and a site in the market with an attractive,
prominent location and ease of access that will support the size
and scope of the Company's development plans.
The timing, cost and scope of any expansion or capital
improvement project of the Company will be dependent, among other
factors, on the Company's operating cash flow and the resulting
ability of the Company to apply operating cash flow to capital
expenditures and to incur additional indebtedness under the
Company's Revolving Credit Facility or other debt
<PAGE>instruments. See "Item 7. -- Management's Discussion and
Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
PROPERTY PROFILES
The following table presents selected statistical and other
information concerning the Company's properties as of March 13,
1998.
AMERISTAR AMERISTAR
CACTUS THE VICKSBURG COUNCIL THE
PETES HORSESHU (VICKSBUR BLUFFS RESERVE
(JACKPOT, (JACKPOT, G, MS) (COUNCIL
NV) NV) BLUFFS, (Henderso
IA) n, NV)
OPENING 1956 1956 Feb. 1994 Jan. 1996 Feb. 1998
DATE
CASINO
SQUARE 25,000 3,500 35,000 27,500 42,000
FOOTAGE
(APPROX.)
SLOT 803 137 983 1,057 1,426
MACHINES
TABLE 38 8 47 43 32
GAMES
HOTEL 299 120 150(1) 300(2) 224
ROOMS
NUMBER OF
RESTAURANT 4/3 1/1 2/4 4/4 4/3
S/BARS
RESTAURANT
/BAR 460/80 124/40 550/76 975/93 1,057/105
SEATING
CAPACITY
GUEST
PARKING 908 226 1,021 1,441 1,900
SPACES
OTHER 356-Seat Keno; 379-Seat Kids Quest Sports
AMENITIES Showroom; Swimming Showroom; Children's Book;
Sports Pool; Gift Shop Activity Keno;
Book(3); General Center(3); Swimming
Keno; Store; Meeting Pool;
Meeting Service Space; Bingo;
Space; Station Indoor Gift Shop
Swimming Swimming
Pool; Pool &
Gift Spa; Gift
Shop; Shop;
Amusement Amusement
Arcade Arcade
OPERATING Cactus CPI Ameristar Ameristar Ameristar
SUBSIDIARY Pete's, Casino Casino Casino
OR Inc. Vicksburg Council Las
SUBSIDIARI ("CPI") , Inc. Bluffs, Vegas,
ES ("ACVI") Inc. Inc.
and AC ("ACCBI") ("ACLVI")
Hotel
Corp.(4)
(1) The Company is developing a 150-room hotel at Ameristar
Vicksburg expected to be completed in June 1998.
(2) Includes a full service 160-room Ameristar hotel owned and
operated by the Company and a limited service 140-room Holiday
Inn Suites Hotel owned and operated by a third party under a
ground lease from the Company.
(3) Operated by a third party.
(4) AC Hotel Corp. is a wholly owned subsidiary of ACVI that owns
the hotel under construction at Ameristar Vicksburg.
<PAGE>THE JACKPOT PROPERTIES
The Jackpot Properties, which have been operating since
1956, have been designed and developed and are marketed to appeal
to three separate markets: budget, quality and luxury. The
Company sets its prices for hotel rooms, food and other non-
gaming amenities at levels that are affordable to its separate
customer bases. The Company's objective is to be perceived by its
customers as providing good value and high quality for the price
charged. Cactus Petes is promoted by the Company as a destination
resort primarily in the northwestern United States and
southwestern Canada.
Cactus Petes completed a major expansion project in 1991.
Since 1993, Cactus Petes has annually received a Four Diamond
rating from the AAA, the highest rating currently awarded to any
Nevada hotel. The Horseshu Hotel has a Three Diamond rating from
the AAA. The food and beverage operations at the Jackpot
Properties include a buffet, a fine dining restaurant, a 24-hour
restaurant, a coffee shop and a snack bar, a showroom that
features nationally known entertainment, and cocktail lounges
with entertainment.
In January 1997, the Company completed a renovation of its
slot gaming equipment at the Jackpot Properties, including the
introduction of 587 state-of-the-art slot machines in replacement
of older models, the linkage of all slot machines at the Jackpot
Properties to the Company's player tracking system and improved
sensory appeal, including touch screens and enhanced signage,
sounds and colors. In addition, the Company substantially
completed a remodeling of the casino at The Horseshu in late
1997. Management believes that these renovations have promoted
customer satisfaction and have improved the effectiveness of both
targeted marketing and general advertising programs.
Market. Management believes that approximately 50% of the
customer base of the Jackpot Properties consists of residents of
Idaho who generally frequent the properties on an overnight or
turnaround basis. The balance of the Jackpot Properties'
customers come primarily from Oregon, Washington, Montana,
northern California and the southwestern Canadian provinces.
Although many of the customers from beyond southern Idaho are
tourists traveling to other destinations, a significant portion
of these customers come to Jackpot as a final destination.
Competition. The Company has developed a dominant share of
the market capacity in Jackpot. The Jackpot Properties compete
with four other hotels and motels (three of which also have
casinos). As of March 13, 1998, the Jackpot Properties accounted
for approximately 56% of the lodging rooms, 79% of the slot
machines and 77% of the table games in Jackpot. Management
believes Cactus Petes offers a more attractive environment and a
broader and higher quality range of gaming and leisure activities
than those of its competitors. Some additional or renovated
facilities have been introduced in Jackpot by the Company's
competitors since early 1995. The Company is not aware of any
additional expansion plans by existing competitors in Jackpot.
<PAGE>At least two casinos with video lottery terminals
similar to slot machines are operated on Native American land in
Idaho, including one with approximately 200 VLT machines near
Pocatello that has been in operation for approximately three
years. Casino gaming began on Native American lands in both
western Washington and northeast Oregon in 1995, and casinos also
operate in Alberta, Canada. See "Item 1. -- Business --
Cautionary Information Regarding Forward-Looking Statements --
Competition -- The Jackpot Properties."
AMERISTAR VICKSBURG
Ameristar Vicksburg, which opened in February 1994,
represents the Company's first expansion project outside of
Jackpot. Management believes Ameristar Vicksburg provides
superior and larger facilities than its current competitors in
the Vicksburg area and has competitive advantages by virtue of
its close proximity to Interstate 20. Nonetheless, Vicksburg is a
competitive gaming market and the Ameristar Vicksburg's
operations there to date have been dependent to a substantial
degree upon a continuous casino marketing and promotional
campaign.
The permanently moored, dockside Vicksburg Casino is
approximately 315 feet long and approximately 120 feet wide. Due
to the width of the Vicksburg Casino, the casino, restaurants and
showroom have the spacious feel of a land-based facility. The
Vicksburg Casino has three levels, which are connected by
escalators and elevators. The casino is on the bottom and middle
levels and has wide aisles with an open feel that provides a
comfortable and inviting atmosphere. The Vicksburg Casino has
entrances on both the lower and middle levels, with the lower-
level entrance providing access from valet parking and the middle-
level entrance providing access from the self-parking area. The
Vicksburg Casino is open 24 hours a day.
The Vicksburg Casino has two restaurants, six bars (one of
which offers live cabaret-style entertainment) and a showroom
(which is used on an intermittent basis for entertainment and
players club promotions). Ameristar Vicksburg also includes the
Delta Point River Restaurant situated on a bluff overlooking the
Vicksburg Casino. This restaurant was closed in January 1998 for
renovation and is expected to reopen in September 1998.
Management believes Ameristar Vicksburg's competitive
advantages include its location, the size and design of the
project and the range and quality of its amenities. The primary
locational advantages of Ameristar Vicksburg are its proximity to
Interstate 20 and its ease of access. As discussed above, the
Vicksburg Casino is significantly wider than typical riverboat
casinos. In addition, management believes the overall range and
quality of the facilities, food service and entertainment at
Ameristar Vicksburg are superior to those available at its
existing competitors.
As part of a long-term plan to enhance Ameristar Vicksburg,
the Company acquired 18 acres across from the main entrance to
the Vicksburg Casino for the future development of additional
improvements. The Company is constructing a 150-room hotel on a
portion of this parcel and currently anticipates that
construction will be completed in June 1998. The Delta Point Inn,
a 54-room budget motel that pre-existed the development of
Ameristar Vicksburg,
<PAGE>has been taken out of service and demolished in connection
with this expansion. Management believes that the development
cost of the hotel will be approximately $10.3 million, including
capitalized construction period interest. Management expects that
a substantial portion of these development costs will be funded
out of draws under a $7.5 million short-term loan facility and
the balance will be funded out of operating cash flow. See "Item
7. -- Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."
Market. The primary market for Ameristar Vicksburg is
residents of the Jackson and Vicksburg, Mississippi and Monroe,
Louisiana areas; tourists coming to Vicksburg primarily to visit
the Vicksburg National Military Park; and other traffic traveling
on Interstate 20, a major east-west thoroughfare that connects
Atlanta and Dallas.
Vicksburg, with a population of approximately 26,000
persons, is located 45 miles west of Jackson, the capital of
Mississippi. According to the 1990 U.S. Census, the Jackson and
Vicksburg metropolitan areas had a total population of
approximately 440,000 persons. Approximately 800,000 people live
within Ameristar Vicksburg's 17-county primary market area. The
Vicksburg National Military Park, located within three miles of
Ameristar Vicksburg, draws approximately 900,000 registered
visitors a year. Interstate 20 (which connects Atlanta and
Dallas) passes directly through Vicksburg. According to the
Mississippi Department of Transportation, approximately 7.3
million vehicles drove across the Interstate 20 bridge at
Vicksburg during 1997. As of March 13, 1998, Vicksburg had
approximately 1,608 lodging rooms. The Vicksburg Chamber of
Commerce has estimated that the 1997 average hotel occupancy rate
in Vicksburg was approximately 70%. Gaming revenues in Warren
County, Mississippi for the 52 weeks ended December 20, 1997,
were approximately $189.7 million.
Competition. Ameristar Vicksburg is subject to competition
from three local competitors, from casinos in Shreveport and
Bossier City, Louisiana, and from a Native American casino in
Philadelphia, Mississippi. Ameristar Vicksburg has approximately
1,263 gaming positions or 32.1% of the total number of positions
in Warren County. Based on available data, Ameristar Vicksburg is
currently the market leader in Warren County and generated gaming
revenues in 1996 and 1997 representing approximately 33.1% and
32.9%, respectively, of the total market gaming revenues.
Management attributes Ameristar Vicksburg's leading market share
position to the effectiveness of the Company's marketing and
promotional strategy, the property's proximity to and visibility
from Interstate 20, its ease of access, the size and design of
the facility and the range and quality of the amenities offered.
Several potential gaming sites still exist in Warren County
and Vicksburg and from time to time potential competitors propose
the development of additional casinos in or near Vicksburg. In
August 1997, two companies announced the execution of an
agreement to form a joint venture to develop and operate a casino
facility near Ameristar Vicksburg, subject to certain
contingencies. In addition, the Company is involved in legal
proceedings in which it is alleged that the Company and certain
other parties engaged in conduct to oppose the development of a
casino between Vicksburg and Jackson in violation of
Mississippi's antitrust
<PAGE>and gaming regulatory laws. See "Item 1. -- Business
- -- Cautionary Information Regarding Forward-Looking Statements --
Competition -- Ameristar Vicksburg." and "Item 3. -- Legal
Proceedings."
AMERISTAR COUNCIL BLUFFS
The Company opened Ameristar Council Bluffs in January 1996
under one of three gaming licenses currently issued for
Pottawattamie County, Iowa. On the bank of the Missouri River
across from Omaha, Nebraska, Ameristar Council Bluffs is adjacent
to the Nebraska Avenue exit on Interstate 29 immediately north of
the junction of Interstate 29 and Interstate 80. The Company
designed Ameristar Council Bluffs as a destination resort
intended to serve as an entertainment centerpiece of the region.
Ameristar Council Bluffs features architecture reminiscent of a
gateway river town in the late 1800s. The design complements
existing characteristics of Council Bluffs while giving the
facility its own distinctive personality. The approximately 50-
acre Ameristar Council Bluffs site is large enough to accommodate
future land-based expansion should the Company deem it beneficial
for the success of the property. See "Item 7. -- Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
Ameristar Council Bluffs opened in stages during 1996 and
early 1997. The Council Bluffs Casino opened on January 19, 1996,
portions of the land-based Main Street Pavilion (including two
restaurants) opened on June 17, 1996, the Ameristar hotel opened
on November 1, 1996 and the sports bar cabaret opened on December
26, 1996. The Company's remaining land-based facilities, a steak
house and an indoor swimming pool and spa, opened on February 25
and March 3, 1997, respectively.
The Council Bluffs Casino is an approximately 40,000 square
foot, two-level riverboat measuring 272 feet long by 98 feet
wide. By building the vessel with only two levels that have high
ceilings and making it 98 feet wide, the casino has the spacious
feel of a land-based facility. Both levels of the riverboat are
connected by escalators and an elevator. The casino is open 24
hours a day and is required to make a two-hour cruise a minimum
of 100 days within the "excursion season," which is defined as
April 1 through October 31. If the riverboat fails to satisfy
this cruising requirement, it will not be allowed to operate
during the balance of the year.
Guests enter the riverboat from shore via an enclosed ramp
from the 68,000-square foot Main Street Pavilion. The Main Street
Pavilion is a self-contained complex featuring an Ameristar
hotel, restaurants and entertainment options for children and
adults. The interior of the Pavilion is designed to replicate a
Victorian-era main street. The main level of the Pavilion
includes a buffet, a 24-hour restaurant, a steak house and a
sports bar cabaret, all of which are operated by the Company.
Rising above the Pavilion is a five-story, 160-room, full-service
Ameristar hotel that offers a panoramic view of the Missouri
River and the Council Bluffs Casino. The Main Street Pavilion
also includes a children's activity center operated by New
Horizon Kids Quest, Inc. and owned by a joint venture between
that company and ACCBI.
<PAGE>The Company has leased a portion of the Ameristar
Council Bluffs site to an entity controlled by Iowa-based Kinseth
Hotel Corporation for a 140-room, limited-service Holiday Inn
Suites hotel that opened on March 31, 1997. The Kinseth entity
developed and operates this hotel. The Holiday Inn Suites hotel
and the Main Street Pavilion are connected by a climate-
controlled walkway that also connects to the indoor pool, spa and
an exercise room.
Market. Council Bluffs has a population of approximately
54,300 people. Council Bluffs forms part of the greater Omaha,
Nebraska/Council Bluffs, Iowa metropolitan area, which according
to the 1990 U.S. Census had a population of approximately
640,000. Approximately 1.1 million people live within a 50-mile
radius, and approximately 1.6 million people live within a 100-
mile radius, of Council Bluffs. The median household income of
the greater metropolitan area is approximately $40,000, with an
unemployment rate of approximately 2.4%. Based on available data,
Council Bluffs is currently the strongest gaming market in Iowa.
Gaming revenues in Pottawattamie County, Iowa for the 12 months
ended February 28, 1998, were $272.2 million.
Competition. Three gaming licenses have been issued for
Pottawattamie County, Iowa to Iowa West Racing Association. ACCBI
operates the Council Bluffs Casino pursuant to an operating
agreement with Iowa West Racing Association. The other casinos
operating under these licenses are Harveys Casino Resorts
("Harveys"), which operates a riverboat casino in close proximity
to Ameristar Council Bluffs, and Bluffs Run, a year-round dog
track owned by Iowa West Racing Association that has a gaming
license limited to the operation of a reel-style slots only
casino. Bluffs Run, which opened in March 1995, has approximately
1,200 slot machines, a restaurant, buffet and lounge
entertainment. The Company believes that Bluffs Run will continue
to provide significant competition due to its advantage of being
the only land-based facility in the market.
Management believes Harveys also provides serious
competition for Ameristar Council Bluffs. The Harveys casino
opened on January 1, 1996, and substantially all the other
Harveys facilities opened in May 1996, except for a restaurant
that opened in May 1997.
The average monthly market share of gaming revenues of
Ameristar Council Bluffs was approximately 28.8% during March
1997 through February 1998 (the first twelve months following the
completion of all of the land-based facilities at Ameristar
Council Bluffs), approximately 9.1 and 4.5 percentage points
behind Bluffs Run and Harveys, respectively. See also "Item 1. --
Business -- Cautionary Information Regarding Forward-Looking
Statements -- Competition -- Ameristar Council Bluffs."
THE RESERVE
The Reserve, featuring an African safari and big game
reserve theme that includes statues of elephants, giraffes and
other animals, opened on February 10, 1998 at the southeast
corner of the junction of Lake Mead Drive and Interstate 515 in
Henderson, Nevada. The Company acquired The Reserve under
construction on October 9, 1996. In connection with the
<PAGE>acquisition, the Company redesigned The Reserve to expand
and enhance the project. The redesign is intended to increase
revenues and to improve The Reserve's competitive position.
The Reserve includes approximately 42,000 square feet of
casino space (with approximately 1,426 slot machines and
approximately 32 table games (including poker), 224 hotel rooms,
four restaurants (a buffet, a 24-hour restaurant, a steak house
and an Italian restaurant), three bars and lounges, a sports
book, keno, bingo, approximately 1,900 surface parking spaces,
back-of-house facilities and a swimming pool. The current food
and beverage operations and back-of-house facilities will support
future expansion of The Reserve. The Company's total acquisition
and construction budget for The Reserve, including capitalized
construction period interest, preopening costs, design costs
(including those for a contemplated Phase II addition) and
acquisition costs was $125.0 million. As of December 31, 1997,
$40.3 million of this budget remained to be expended. The
ultimate master plan has been designed for phased expansions of
the gaming areas, additional hotel towers, multi-level parking,
and other amenities such as additional restaurants, meeting rooms
and a children's activity center. Under the Company's development
plan, Phase II construction at The Reserve would add 28,000
square feet of casino space, approximately 500 slot machines and
20 table games, a relocated and enhanced porte cochere, a 1,400-
space parking structure, enhancements to the swimming pool garden
area and sports book facilities, and possibly a live animal
habitat, at an estimated cost of $27.0 million. However, the
desirability, timing, scope and cost of an expansion of The
Reserve are currently under consideration by the Company. See
"Item 7. -- Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital
Resources" for additional information concerning the potential
expansion of The Reserve.
Market. The gaming market in the greater metropolitan Las
Vegas area includes segments for local residents and visitors,
and both segments of this market are subject to intense and
dynamic competition. The Company expects that The Reserve will
compete primarily for local customers in the Henderson-Green
Valley suburban community. The Company also markets The Reserve
to visitors, including persons driving to and from Arizona via
Interstate 515, persons driving between California and Lake Mead
and other visitors to the Las Vegas area who desire lodging in
Henderson-Green Valley.
According to the 1996 Las Vegas Perspective, the Las Vegas
metropolitan area was the fastest growing metropolitan area and
Henderson was the fastest growing city in the United States
during the first half of the 1990s, with population increases of
26% and 57%, respectively. In February 1997, the Nevada State
Demographer's Office estimated the population of Clark County,
Nevada was 1.1 million, and the population of Henderson and
Boulder City (a community south of Henderson) was 144,800. The
Henderson Building Department reports that building permits were
issued in 1996 for 5,720 new single and multi-family residential
housing units in Henderson. According to the Nevada Department of
Transportation, approximately 100,000 vehicles per day currently
pass through the junction of Interstate 515 and Lake Mead Drive,
the site of The Reserve. No assurance can be given that the Las
Vegas metropolitan area and Henderson-Green Valley will continue
to experience
<PAGE>population growth or that growth will continue for any
particular period of time or at the same rates as in the recent
past.
Competition. The Company expects The Reserve to face
significant competition in the Henderson-Green Valley market. In
June 1997, Station Casinos, Inc. opened Sunset Station, a casino-
hotel approximately 3.5 miles north of The Reserve site along
Interstate 515. Management believes that additional competing
casino-hotels will be developed in Henderson-Green Valley, and
plans have been announced for the development of two casino-
hotels within a 3.5 mile radius of The Reserve. In addition, The
Reserve competes to a lesser extent with a number of small,
limited service casinos that currently operate within a five-mile
radius and several other casino-hotels in the southeastern area
of metropolitan Las Vegas. Additional competition in this area is
anticipated over time. See "Item 1. -- Business -- Cautionary
Information Regarding Forward-Looking Statements -- Competition -
- - The Reserve."
EMPLOYEES
As of March 13, 1998, the Company employed approximately
4,005 full-time employees and 426 part-time employees. None of
the Company's current employees is employed pursuant to
collective bargaining or other union arrangements. Management
believes its employee relations are good.
CAUTIONARY INFORMATION REGARDING FORWARD-
LOOKING STATEMENTS
COMPETITION
General. The Company competes for customers primarily on
the basis of the location and quality of its properties, the
quality, range and pricing of non-gaming amenities such as
hotels, restaurants and entertainment and the strength of its
marketing and promotional campaigns. 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 located in a jurisdiction that restricts gaming to
certain areas and/or borders a state that prohibits or restricts
gaming operations, which restrictions and prohibitions provide
substantial benefits to the Company's business and its ability to
attract and retain customers. The legalization or expanded
legalization or authorization of gaming within a market area of
one of the Company's properties could have an adverse effect,
which may be material, on the Company's business, financial
condition and results of operations.
The Jackpot Properties. In addition to local casinos, the
Jackpot Properties are subject to existing and potentially
expanded competition from casinos in other portions of the
Pacific Northwest, including existing casinos on Native American
lands near Pocatello, Idaho and in western Washington,
northeastern Oregon and Alberta, Canada. Management believes that
the currently operating casinos in the outer market negatively
impacted the performance of the Jackpot Properties in 1996.
Although the Company responded to the increased competition by
renovating its slot equipment at the Jackpot Properties,
remodeling the casino at The Horseshu
<PAGE>and increasing marketing efforts, which steps management
believes have demonstrated initial success, no assurances can be
given with respect to the future competitive effects on the
Jackpot Properties of these casinos.
The expansion of casino gaming on Native American lands in
southern Idaho, eastern Oregon or eastern Washington could have a
material adverse effect on the Jackpot Properties and the
Company. Notwithstanding a 1992 Idaho constitutional amendment
that prohibits all forms of casino gaming and the Indian Gaming
Regulatory Act of 1988 ("IGRA"), which restricts gaming
operations on Native American land to those allowed under state
law, video lottery terminal ("VLT") casinos, including the one
near Pocatello, are currently being operated on Native American
lands in Idaho. While these VLT casinos may be in violation of
IGRA, federal officials have not taken any enforcement action
against these operations. The failure of the federal government
to take such enforcement action could lead to the expansion of
casino gaming on Native American lands in Idaho. The Shoshone-
Paiute Tribes are seeking a declaratory judgment to determine
what forms of gaming are legal and to negotiate a compact with
the State of Idaho based on that judgment.
Increased competition in Jackpot resulting from the
renovation or expansion of existing casinos or the development of
new casinos, none of which are currently contemplated by any
party to the knowledge of the Company, could also have a material
adverse effect on the Jackpot Properties and the Company.
Ameristar Vicksburg. Ameristar Vicksburg is subject to
competition from three local competitors, from casinos in
Shreveport and Bossier City, Louisiana, and from a Native
American casino in Philadelphia, Mississippi. Due to the
intensity of competition in the Vicksburg market, Ameristar
Vicksburg's business to date has been dependent upon continuous
and aggressive marketing and promotional efforts. Management
believes that competition from the casinos in Shreveport and
Bossier City, Louisiana and Philadelphia, Mississippi has
resulted in a recent shrinkage in the territorial size of the
Vicksburg gaming market, and it is possible that the Vicksburg
market will be subject to additional shrinkage due to
competition.
Several potential gaming sites still exist in Warren County
and Vicksburg, and from time to time potential competitors
propose the development of additional casinos in or near
Vicksburg. In August 1997, two companies announced the execution
of an agreement to form a joint venture to develop and operate a
casino facility on a site along the Mississippi River near
Ameristar Vicksburg, subject to certain contingencies.
Accordingly, no assurance can be given that additional
competitors will not enter the market. Additional competition in
Vicksburg could have a material adverse effect on Ameristar
Vicksburg and the Company.
In addition, the Company is aware of potential sites on the
Big Black River near Interstate 20 between Jackson and Vicksburg,
which, if developed, would provide a significant competitive
advantage over Ameristar Vicksburg and other gaming operations in
Warren County due to its closer proximity to Jackson. However,
there currently is no exit off Interstate 20 in the vicinity of
these sites, the area surrounding these sites is undeveloped and
lacks any
<PAGE>infrastructure and these sites may not meet the navigable
waterway requirements of Mississippi law for the development of a
casino. In December 1996, the Mississippi Gaming Commission
rejected an application for the development of a casino at one of
these sites, which denial was appealed by an adjoining landowner
and the license applicant. In December 1997, a Mississippi
circuit court issued an order reversing the decision of the
Mississippi Gaming Commission and remanded the application to the
Mississippi Gaming Commission for further proceedings. The
Mississippi Gaming Commission has appealed this court order. In
addition, the Company is involved in legal proceedings in which
it is alleged that the Company and certain other parties engaged
in conduct to oppose this application in violation of
Mississippi's antitrust and gaming regulatory laws. See "Item 3.
- -- Legal Proceedings." The development of a casino on the Big
Black River likely would have a material adverse effect on
Ameristar Vicksburg and the Company.
If Mississippi law were amended to permit gaming in Jackson,
the development of one or more casinos there would materially
impact Ameristar Vicksburg and the Company. Management is not
aware of any current proposals that would permit such an
expansion of gaming in Mississippi.
Ameristar Council Bluffs. Ameristar Council Bluffs
currently competes in Council Bluffs with two other casinos. One
of these casinos, at the Bluffs Runs dog-racing track, has a
significant competitive advantage as a land-based facility and
has been the local market leader in gaming revenues each month
through March 1998 despite operating under a license that limits
it gaming operations to reel-style slot machines. Management
believes that the other competitor in Council Bluffs, a riverboat
casino operated by Harveys Casino Resorts, also provides and will
continue to provide serious competition for Ameristar Council
Bluffs.
Currently, Iowa law does not limit the number of licenses
that can be issued in a county. While no assurances can be given
that additional licenses will not be issued in Pottawattamie
County, it is management's belief that the Iowa Racing and Gaming
Commission is concerned about market saturation and will not
issue additional licenses that would impair existing operations.
In addition, a bill is under consideration by the Iowa
legislature that, if adopted, would impose a moratorium on new
gaming licenses.
A ballot initiative was proposed in 1996 that would have
authorized slot machines and casino gaming at certain locations
in Nebraska, including Omaha, which is across the Missouri River
from Council Bluffs. This initiative was not placed on the ballot
due to the determination of the Nebraska Secretary of State that
an insufficient number of petition signatures were obtained.
Although no assurances can be given, management believes it is
unlikely that any further legislative action or voting referendum
that would authorize casino gaming in Nebraska will be acted upon
prior to 2000. The introduction of casino gaming in Nebraska,
especially in the Omaha area, likely would have a material
adverse effect on the Company.
The Reserve. The Company expects The Reserve to face
significant competition in the Henderson-Green Valley market. In
June 1997, Station Casinos, Inc. opened Sunset Station, a casino-
hotel approximately 3.5 miles north of The Reserve site along
Interstate 515. Sunset
<PAGE>Station is larger than The Reserve, and Station Casinos,
Inc. has operated casinos aimed at local Las Vegas residents for
many years. Plans have also been announced for the development of
a casino-hotel approximately 3.5 miles west of The Reserve, near
the junction of Interstate 215 and Lake Mead Drive. Management
believes that construction on this project could commence as
early as late 1998. Another competing casino-hotel with a 70,000-
square foot casino, 300 hotel rooms and other amenities is
proposed to be developed across from Sunset Station. This project
is in the design stage, and, if developed, management believes
that it would not open before early 2000.
Management is also aware of several additional sites in
Henderson-Green Valley that have been zoned for casino-hotel and
believes it is likely additional casino resorts ultimately will
be developed in Henderson-Green Valley and other portions of the
southeastern Las Vegas metropolitan area. Station Casinos, Inc.
has recently announced plans for the development of a local-
market casino-hotel approximately 8.5 miles north of The Reserve
near two existing casino-hotels.
SUBSTANTIAL LEVERAGE AND ABILITY TO SATISFY DEBT OBLIGATIONS
The Company has substantial fixed debt service in addition
to operating expenses. Such indebtedness requires substantial
annual debt-service payments, including some principal payments.
The degree to which the Company is leveraged could have important
consequences to the holders of its securities, including the
following: (i) the Company's ability to make scheduled payments
of principal of, or premium (if any) or interest on, or to
refinance, its indebtedness may be impaired, (ii) the Company's
ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions or other purposes may
be impaired, (iii) the Company's flexibility in planning for or
reacting to changes in market conditions may be limited and
(iv) the Company may be vulnerable in the event of a downturn in
its business. See "Item 7. -- Management's Discussion and
Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
The Company's principal long-term debt instruments contain,
and future long-term debt instruments may contain, certain
restrictive covenants including, among other things, limitations
on the ability of the Company to incur additional indebtedness,
to create liens and other encumbrances, to make certain payments
and investments, to enter into transactions with affiliates to
sell or otherwise dispose of assets and to merge or consolidate
with another entity. Although the covenants are subject to
various exceptions that are intended to allow the Company to
operate without undue restraint in certain anticipated
circumstances, there can be no assurance that such covenants will
not adversely affect the Company's ability to finance future
operations or capital needs or to engage in other activities that
may be in the interest of the Company. In addition, the
Company's long-term debt requires it to maintain certain
financial ratios and future credit facilities may contain similar
restrictions. The Company's ability to comply with such
provisions will be dependent upon its future performance, which
will be affected by prevailing economic conditions and financial,
business, competitive, regulatory and other factors, many of
which are beyond the Company's control. Accordingly, no
assurance can be given that the Company will maintain a level of
operating cash flow that
<PAGE>will permit it to service its obligations and to satisfy
applicable financial covenants. A breach of any of these
covenants or the inability of the Company to comply with the
required financial ratios could result in an inability to obtain
additional borrowings under existing debt facilities or a default
under one or more of the Company's long-term debt instruments.
CONSTRUCTION AND DEVELOPMENT RISKS; RISKS OF NEW VENTURES
General Construction and Development Risks. Construction
and expansion projects, such as the addition of a hotel at
Ameristar Vicksburg and various expansion and improvement
projects under consideration for this Company's other properties,
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. The anticipated costs and
construction periods for construction projects of the Company are
based upon budgets, conceptual design documents and construction
schedule estimates prepared by the Company in consultation with
its architects and contractors, and no assurance can be given
that any project will be completed on time, if at all, or on
budget or that the Company will be able to fund any budget
overrun amounts. Variances in construction time periods or
budgets could be substantial. The completion date of any
construction project of the Company may differ significantly from
initial expectations for construction-related or other reasons.
In connection with certain construction projects undertaken
by the Company, the Company employs "fast-track" design and
construction methods, which involve the design of future stages
of construction while earlier stages of construction are
underway. Although management believes that the use of fast-
track design and construction methods can reduce the overall
construction time, these methods may not always result in such
reductions, may involve additional construction costs than
otherwise would be incurred and may increase the risk of disputes
with contractors.
Construction Dependent upon Available Financing and
Operations. The availability of funds under the Company's
principal credit facility at any time is dependent upon the
amount of EBITDA (as defined) of Ameristar and its principal
subsidiaries during the preceding four full fiscal quarters.
Since the future operating performance of the Company will be
subject to financial, economic, business, competitive, regulatory
and other factors, many of which are beyond the control of the
Company, no assurances can be given with respect to the level of
the Company's future consolidated EBITDA or the resulting
availability of operating cash flow or borrowing capacity of the
Company to undertake or complete future construction projects,
including those currently under consideration for the expansion
of The Reserve and Ameristar Council Bluffs. See "Item 7. --
Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
Risks of Cost Overruns. The cost of any construction
project undertaken by the Company may vary significantly from
initial current expectations, and the Company may have a limited
amount of capital resources to fund cost overruns on any project.
If the Company
<PAGE>cannot finance such cost overruns on a timely basis, the
completion of one or more projects may be delayed until adequate
cash flow from operations or other financing is available.
General Risks of New Ventures. As a result of operating
risks, including those described in this section, and other risks
associated with a new venture, there can be no assurance that,
once completed, any development project will increase the
Company's operating profits or operating cash flow.
CONTROL BY CURRENT STOCKHOLDER AND EFFECTS OF CHANGE IN CONTROL;
DEPENDENCE ON KEY PERSONNEL
Craig H. Neilsen, the Company's president and chief
executive officer, controls approximately 86.9% of the
outstanding shares of Common Stock of Ameristar. As a result, Mr.
Neilsen has the power to control the management and daily
operations of the Company. The Company is dependent on the
continued performance of Mr. Neilsen and his management team. The
loss of the services of Mr. Neilsen or any other executive
officer of the Company may have a material adverse effect on the
Company. 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. Certain changes in control of the
Company could result in the acceleration of the Company's
principal long-term credit facilities.
AVAILABILITY OF OPERATING AND CORPORATE MANAGEMENT PERSONNEL
The Company has experienced and expects to continue to
experience strong competition in hiring and retaining qualified
operating and corporate management personnel. Management believes
that a number of factors have contributed to the Company's
difficulties in attracting and retaining qualified management
personnel, including the recent and continuing proliferation of
gaming facilities throughout the United States, the additional
burdens on the Company's existing management personnel due to the
lack of depth in other positions, the reluctance of the Company
to match or exceed compensation packages offered by some of its
competitors, and the locations of some of the Company's
operations (particularly Jackpot and Vicksburg).
GAMING LICENSING AND REGULATION
The ownership and operation of casino gaming facilities are
subject to extensive state and local regulation. The States of
Iowa, Mississippi and Nevada and the applicable local authorities
require various licenses, findings of suitability, registrations,
permits and approvals to be held by the Company and its
subsidiaries. The Iowa Racing and Gaming Commission, the
Mississippi Gaming Commission and the Nevada Gaming Commission
may, among other things, limit, condition, suspend, revoke or not
renew a license or approval to own the stock of any of
Ameristar's Iowa, Mississippi or Nevada subsidiaries,
respectively, for any cause deemed reasonable by such licensing
authority. Gaming licenses require periodic renewal currently
every two years in Mississippi, and annually in Iowa.
Substantial fines or forfeiture of assets for violations of
gaming laws or regulations may be levied against Ameristar, such
<PAGE>subsidiaries and the persons involved. The suspension,
revocation or non-renewal of any of the Company's licenses or the
levy on the Company of substantial fines or forfeiture of assets
would have a material adverse effect on the Company's business,
financial condition and results of operations. The Company is
subject to substantial gaming taxes and fees imposed by various
governmental authorities, which are subject to increase.
To date, the Company has obtained all governmental licenses,
findings of suitability, registrations, permits and approvals
necessary for the operation of its currently operating gaming
activities. However, gaming licenses and related approvals are
deemed to be privileges under Iowa, Mississippi and Nevada law,
and no assurances can be given that any new licenses, permits and
approvals that may be required in the future will be given or
that existing ones will be maintained or extended. In addition,
changes in law could restrict or prohibit gaming operations of
the Company in any jurisdiction, and certain jurisdictions,
including Iowa, require the periodic reauthorization of gaming
activities. No assurance can be given that gaming operations of
the type conducted by the Company will continue to be authorized
in any jurisdiction. Such a change in law or failure to
reauthorize gaming activities could substantially diminish the
value of the Company's assets in such a jurisdiction and
otherwise have a material adverse effect on the Company's
business, financial condition and results of operations. Various
proposals are currently under consideration by the Iowa
Legislature that, if adopted, would restrict the expansion of
existing gaming operations and otherwise have an adverse
financial impact on casino operations in the state. See "Item 1.
- --Business -- Government Regulations."
LOSS OF RIVERBOAT AND DOCKSIDE FACILITIES FROM SERVICE
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. In addition,
United States Coast Guard regulations set limits on the operation
of vessels, require that vessels be operated by a minimum
complement of licensed personnel and require a hull inspection at
a United States Coast Guard approved dry docking facility for all
cruising riverboats at five-year intervals. Less stringent
inspection requirements apply to permanently moored dockside
vessels like the Vicksburg Casino. The Council Bluffs Casino is
not scheduled for re-inspection by the United States Coast Guard
until November 2000. 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 borrowing capacity under its
long-term debt facilities and could result in the occurrence of
an event of a default under one or more credit facilities or
contracts.
ENVIRONMENTAL RISKS AND REGULATION
As is the case with any owner or operator of real property,
the Company is subject to a variety of federal, state and local
governmental regulations relating to the use, storage, discharge,
emission and disposal of hazardous materials. Failure to comply
with environmental
<PAGE>laws could result in the imposition of severe penalties or
restrictions on operations by government agencies or courts of
law which could adversely affect operations. The Company does not
have environmental liability insurance to cover most such events,
and the environmental liability insurance coverage it maintains
to cover certain events includes significant limitations and
exclusions. In addition, if the Company discovers any significant
environmental contamination affecting any of its properties, the
Company could face material remediation costs or additional
development costs for future expansion activities. See "Item 2. -
- - Properties."
GOVERNMENT REGULATIONS
The ownership and operation of casino gaming facilities are
subject to extensive state and local regulations. The Company is
required to obtain and maintain gaming licenses in each of the
jurisdictions in which the Company conducts gaming. The
limitation, conditioning or suspension of gaming licenses could
(and the revocation or non-renewal of gaming licenses, or the
failure to reauthorize gaming in certain jurisdictions, would)
materially adversely affect the operations of the Company in that
jurisdiction. In addition, changes in law that restrict or
prohibit gaming operations of the Company in any jurisdiction
could have a material adverse effect on the Company.
NEVADA. The ownership and operation of casino gaming
facilities in Nevada are subject to (i) the Nevada Gaming Control
Act and the regulations promulgated thereunder (collectively,
"Nevada Act"); and (ii) various local regulations. The Company's
operations are subject to the licensing and regulatory control of
the Nevada Gaming Commission ("Nevada Commission"), the Nevada
State Gaming Control Board ("Nevada Board"), and, in the case of
the Jackpot Properties, the Liquor Board of Elko County. The
Company's operations at The Reserve are subject to the licensing
and regulatory control of the City of Henderson. The Nevada
Commission, the Nevada Board, the City of Henderson and the
Liquor Board of Elko County are collectively referred to in this
section as the "Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the
Nevada Gaming Authorities are based upon declarations of public
policy which are concerned with, among other things, (i) the
prevention of unsavory or unsuitable persons from having a direct
or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of effective
controls over the financial practices of licensees, including the
establishment of minimum procedures for internal fiscal affairs
and the safeguarding of assets and revenues, (iii) providing
reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (iv) the prevention
of cheating and fraudulent practices; and (v) providing a source
of state and local revenues through taxation and licensing fees.
Change in such laws, regulations and procedures could have an
adverse effect on the Company's gaming operations.
CPI, which operates the Jackpot Properties, and ACLVI, which
operates The Reserve, are required to be licensed by the Nevada
Gaming Authorities. The gaming licenses require the periodic
payment of fees and taxes and are not transferable. Ameristar is
registered by the Nevada Commission as a publicly traded
corporation (a "Registered Corporation") and has
<PAGE>been found suitable to own the stock of CPI and ACLVI,
which are corporate licensees ("Corporate Licensee") under the
terms of the Nevada Act. As a Registered Corporation, Ameristar
is required periodically to submit detailed financial and
operating reports to the Nevada Commission and furnish any other
information which the Nevada Commission may require. No person
may become a stockholder of, or receive any percentage of profits
from, a Corporate Licensee without first obtaining licenses and
approvals from the Nevada Gaming Authorities. The Company, CPI
and ACLVI have obtained from the Nevada Gaming Authorities the
various registrations, findings of suitability, approvals,
permits and licenses currently required in order to engage in
gaming activities in Nevada.
The Nevada Gaming Authorities may investigate any individual
who has a material relationship to, or material involvement with,
CPI, ACLVI or Ameristar in order to determine whether such
individual is suitable or should be licensed as a business
associate of a gaming licensee. Officers, directors and certain
key employees of CPI and ACLVI must file applications with the
Nevada Gaming Authorities and may be required to be licensed or
found suitable by the Nevada Gaming Authorities. Officers,
directors and key employees of Ameristar who are actively and
directly involved in gaming activities of CPI or ACLVI may be
required to be reviewed or found suitable by the Nevada Gaming
Authorities. The Nevada Gaming Authorities may deny an
application for licensing for any cause which they deem
reasonable. A finding of suitability is comparable to licensing,
and both require submission of detailed personal and financial
information followed by a thorough investigation. The applicant
for licensing or a finding of suitability must pay all the costs
of the investigation. Changes in licensed positions must be
reported to the Nevada Gaming Authorities, and in addition to
their authority to deny an application for a finding of
suitability or licensure, the Nevada Gaming Authorities have
jurisdiction to disapprove a change in a corporate position.
If the Nevada Gaming Authorities were to find an officer,
director or key employee unsuitable for licensing or unsuitable
to continue having a relationship with CPI, ACLVI or Ameristar,
the companies involved would have to sever all relationships with
such person. In addition, the Nevada Commission may require CPI,
ACLVI or Ameristar to terminate the employment of any person who
refuses to file appropriate applications. Determinations of
suitability or of questions pertaining to licensing are not
subject to judicial review in Nevada.
CPI, ACLVI and Ameristar are required to submit detailed
financial and operating reports to the Nevada Commission.
Substantially all material loans, leases, sales of securities and
similar financing transactions by CPI and ACLVI must be reported
to, or approved by, the Nevada Commission.
If it were determined that the Nevada Act was violated by
CPI or ACLVI, the gaming licenses it holds or has applied for
could be limited, denied, conditioned, suspended or revoked,
subject to compliance with certain statutory and regulatory
procedures. In addition, CPI, ACLVI, Ameristar and the persons
involved could be subject to substantial fines for each separate
violation of the Nevada Act at the discretion of the Nevada
Commission. Further, a supervisor could be appointed by the
Nevada Commission to operate CPI's or ACLVI's gaming properties
and, under certain circumstances, earnings generated during the
supervisor's
<PAGE>appointment (except for the reasonable rental value of the
casinos) could be forfeited to the State of Nevada. Limitation,
conditioning or suspension of any gaming license or the
appointment of a supervisor could (and denial or revocation of
any gaming license would) materially adversely affect Ameristar's
gaming operations.
Any beneficial holder of Ameristar's voting securities,
regardless of the number of shares owned, may be required to file
an application, be investigated, and have his suitability as a
beneficial holder of Ameristar's voting securities determined if
the Nevada Commission has reason to believe that such ownership
would otherwise be inconsistent with the declared policy of the
State of Nevada. The applicant must pay all costs of
investigation incurred by the Nevada Gaming Authorities in
conducting any such investigation.
The Nevada Act requires any person who acquires more than 5%
of a Registered Corporation's voting securities to report the
acquisition to the Nevada Commission. The Nevada Act requires
that beneficial owners of more than 10% of a Registered
Corporation's voting securities apply to the Nevada Commission
for a finding of suitability within thirty days after the
Chairman of the Nevada Board mails the written notice requiring
such filing. Under certain circumstances, an "institutional
investor", as defined in the Nevada Act, which acquires more than
10%, but not more than 15%, of a Registered Corporation's voting
securities may apply to the Nevada Commission for a waiver of
such finding of suitability if such institutional investor holds
the voting securities for investment purposes only. An
institutional investor shall not be deemed to hold voting
securities for investment purposes unless the voting securities
were acquired and are held in the ordinary course of business as
an institutional investor and not for the purpose of causing,
directly or indirectly, the election of a majority of the members
of the board of directors of the Registered Corporation, any
change in the Registered Corporation's corporate charter, bylaws,
management, policies or operations of the Registered Corporation,
or any of its gaming affiliates, or any other action which the
Nevada Commission finds to be inconsistent with holding the
Registered Corporation's voting securities for investment
purposes only. Activities which are not deemed to be inconsistent
with holding voting securities for investment purposes only
include (i) voting on all matters voted on by stockholders; (ii)
making financial and other inquiries of management of the type
normally made by securities analysts for informational purposes
and not to cause a change in its management, policies or
operations; and (iii) such other activities as the Nevada
Commission may determine to be consistent with such investment
intent. If the beneficial holder of voting securities who must be
found suitable is a corporation, partnership or trust, it must
submit detailed business and financial information including a
list of beneficial owners. The applicant is required to pay all
costs of investigation.
Any person who fails or refuses to apply for a finding of
suitability or a license within 30 days after being ordered to do
so by the Nevada Commission or the Chairman of the Nevada Board,
may be found unsuitable. The same restrictions apply to a record
owner if the record owner, after request, fails to identify the
beneficial owner. Any stockholder found unsuitable and who holds,
directly or indirectly, any beneficial ownership of the common
stock of a Registered Corporation beyond such period of time as
may be prescribed by the Nevada Commission may be guilty of a
criminal offense. Ameristar is subject to disciplinary action if,
<PAGE>after it receives notice that a person is unsuitable to be
a stockholder or to have any other relationship with Ameristar,
CPI or ACLVI, Ameristar, (i) pays that person any dividend or
interest upon voting securities of Ameristar, (ii) allows that
person to exercise, directly or indirectly, any voting right
conferred through securities held by the person, (iii) pays
remuneration in any form to that person for services rendered or
otherwise, or (iv) fails to pursue all lawful efforts to require
such unsuitable person to relinquish his voting securities
including, if necessary, the immediate purchase of said voting
securities by Ameristar, for cash at fair market value.
Additionally, the Liquor Board of Elko County and the City of
Henderson have the authority to approve all persons owning or
controlling the stock of any corporation controlling a gaming
license within their jurisdictions.
The Nevada Commission may, at its discretion, require the
holder of any debt security of a Registered Corporation to file
applications, be investigated and be found suitable to own the
debt security of a Registered Corporation if it has reason to
believe that such holder's acquisition of such ownership would
otherwise be inconsistent with the declared policy of the State
of Nevada. If the Nevada Commission determines that a person is
unsuitable to own such security, then pursuant to the Nevada Act,
the Registered Corporation can be sanctioned, including the loss
of its approvals, if without the prior approval of the Nevada
Commission, it (i) pays to the unsuitable person any dividend,
interest, or any distribution whatsoever; (ii) recognizes any
voting right by such unsuitable person in connection with such
securities; (iii) pays the unsuitable person remuneration in any
form; or (iv) makes any payment to the unsuitable person by way
of principal, redemption, conversion, exchange, liquidation or
similar transaction.
Ameristar is required to maintain a current stock ledger in
Nevada which may be examined by the Nevada Gaming Authorities at
any time. If any securities are held in trust by an agent or by a
nominee, the record holder may be required to disclose the
identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds for
finding the record holder unsuitable. Ameristar is also required
to render maximum assistance in determining the identity of the
beneficial owner. The Nevada Commission has the power to require
Ameristar stock certificates to bear a legend indicating that the
securities are subject to the Nevada Act. However, to date, the
Nevada Commission has not imposed such a requirement on
Ameristar.
Ameristar may not make a public offering of its securities
without the prior approval of the Nevada Commission if the
securities or the proceeds therefrom are intended to be used to
construct, acquire or finance gaming facilities in Nevada, or to
retire or extend obligations incurred for such purposes. In
addition, restrictions on the transfer of an equity security
issued by a Corporate Licensee, and agreements not to encumber
such securities (collectively, "Stock Restrictions") are
ineffective without the prior approval of the Nevada Commission.
Any such approvals do not constitute a finding, recommendation or
approval by the Nevada Commission or the Nevada Board as to the
accuracy or adequacy of the prospectus or the investment merits
of the securities offered. Any representation to the contrary is
unlawful. The Company has obtained all such approvals required
to date.
<PAGE>Changes in control of Ameristar through merger,
consolidation, stock or asset acquisitions, management or
consulting agreements, or any act or conduct by a person whereby
he obtains control, may not occur without the prior approval of
the Nevada Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Nevada Board and Nevada
Commission in a variety of stringent standards prior to assuming
control of such Registered Corporation. The Nevada Commission may
also require controlling stockholders, officers, directors and
other persons having a material relationship or involvement with
the entity proposing to acquire control, to be investigated and
licensed as part of the approval process relating to the
transaction.
The Nevada legislature has declared that some corporate
acquisitions opposed by management, repurchases of voting
securities and corporate defense tactics affecting Nevada
Corporate Licensee gaming licensees, and Registered Corporations
that are affiliated with those operations, may be injurious to
stable and productive corporate gaming. The Nevada Commission has
established a regulatory scheme to ameliorate the potentially
adverse effects of these business practices upon Nevada's gaming
industry and to further Nevada's policy to (i) assure the
financial stability of Corporate Licensees and their affiliates;
(ii) preserve the beneficial aspects of conducting business in
the corporate form; and (iii) promote a neutral environment for
the orderly governance of corporate affairs. Approvals are, in
certain circumstances, required from the Nevada Commission before
the Registered Corporation can make exceptional repurchases of
voting securities above the current market price thereof and
before a corporate acquisition opposed by management can be
consummated. The Nevada Act also requires prior approval of a
plan of recapitalization proposed by the Registered Corporation's
Board of Directors in response to a tender offer made directly to
the Registered Corporation's stockholders for the purposes of
acquiring control of the Registered Corporation.
License fees and taxes, computed in various ways depending
on the type of gaming or activity involved, are payable to the
State of Nevada and to the counties and cities in which the
Nevada licensee's respective operations are conducted. Depending
upon the particular fee or tax involved, these fees and taxes are
payable either monthly, quarterly or annually and are based upon
either (i) a percentage of the gross revenues received; (ii) the
number of gaming devices operated; or (iii) the number of table
games operated. A casino entertainment tax is also paid by casino
operations where entertainment is furnished in connection with
the selling of food, refreshments or merchandise.
Any person who is licensed, required to be licensed,
registered, required to be registered, or is under common control
with such persons (collectively, "Licensees"), and who proposes
to become involved in a gaming venture outside of Nevada is
required to deposit with the Nevada Board, and thereafter
maintain, a revolving fund in the amount of $10,000 to pay the
expenses of investigation of the Nevada Board of their
participation in such foreign gaming. The revolving fund is
subject to increase or decrease at the discretion of the Nevada
Commission. Thereafter, Licensees are required to comply with
certain reporting requirements imposed by the Nevada Act.
Licensees are also subject to disciplinary action by the Nevada
Commission if they knowingly violate any laws of the foreign
jurisdiction pertaining to the
<PAGE>foreign gaming operation, fail to conduct the foreign
gaming operation in accordance with the standards of honesty and
integrity required of Nevada gaming operations, engage in
activities that are harmful to the State of Nevada or its ability
to collect gaming taxes and fees, or employ a person in the
foreign operation who has been denied a license or finding of
suitability in Nevada on the ground of personal unsuitability.
As a condition of receiving a gaming license for The
Reserve, Ameristar made a commitment to the Nevada Commission to
implement a Compliance Plan. ACI has drafted a plan and will
submit it to the Nevada Board for its review and approval during
the week of March 30, 1998. The purposes of the proposed plan
will be to (i) monitor compliance with gaming laws in Nevada and
other jurisdictions, (ii) advise the Board of Directors of any
gaming law compliance problems, (iii) provide reports to the
Nevada Board, (iv) perform due diligence regarding certain
proposed transactions and relationships of the Company, and (v)
receive input from the Nevada Gaming Authorities. As proposed,
the plan will be implemented by a Compliance Committee, which
will consist of four members: a new full time employee of the
Company to be known as the Compliance Officer, one outside
director, one inside director or executive officer, and one
person who is not affiliated with the Company who is familiar
with gaming generally. The members of the Committee will be
subject to approval of the Nevada Board. The identity of the
members of the Committee has not yet been determined
MISSISSIPPI. The ownership and operation of casino
facilities in Mississippi are subject to extensive state and
local regulation. Regulation is primarily effected through the
licensing and regulatory control of the Mississippi Gaming
Commission (the "Mississippi Commission") and the regulatory
control of the Mississippi State Tax Commission (collectively,
the "Mississippi Gaming Authorities").
The Mississippi Gaming Control Act (the "Mississippi Act"),
which legalized dockside casino gaming in Mississippi, is similar
to the Nevada Gaming Control Act. The Mississippi Commission
adopted regulations which are also similar in many respects to
the Nevada gaming regulations.
The laws, regulations and supervisory procedures of
Mississippi and the Mississippi Commission seek to (i) prevent
unsavory or unsuitable persons from having any direct or indirect
involvement with gaming at any time or in any capacity; (ii)
establish and maintain responsible accounting practices and
procedures; (iii) maintain effective control over the financial
practices of licensees, including establishing minimum procedures
for internal fiscal affairs and safeguarding of assets and
revenues, providing reliable record keeping and making periodic
reports to the Mississippi Commission; (iv) prevent cheating and
fraudulent practices; (v) provide a source of state and local
revenues through taxation and licensing fees; and (vi) ensure
that gaming licensees, to the extent practicable, employ
Mississippi residents. The regulations are subject to amendment
and interpretation by the Mississippi Commission. Changes in
Mississippi law or regulations could have an adverse effect on
the Company and the Company's Mississippi gaming operations.
<PAGE>The Mississippi Act provides for legalized dockside
gaming at the discretion of the 14 eligible counties that border
either the Mississippi Gulf Coast or the Mississippi River, but
only if the voters in such counties have not voted to prohibit
gaming in that county. As of March 24, 1998, dockside gaming was
permissible in nine of the 14 eligible counties in the State and
gaming operations had commenced in Adams, Coahoma, Hancock,
Harrison, Tunica, Warren and Washington counties. Under
Mississippi law, gaming vessels must be located on the
Mississippi River or on navigable waters in eligible counties
along the Mississippi River, or in the waters of the State of
Mississippi lying south of the State in eligible counties along
the Mississippi Gulf Coast. In December 1996, the Mississippi
Commission rejected an application for the development of a
casino on a site off the Big Black River in Warren County near
Interstate 20 between Jackson and Vicksburg, which was appealed
by an adjoining landowner and the license applicant. In December
1997, a Mississippi circuit court issued an order reversing the
decision of the Mississippi Commission and remanded the
application to the Mississippi Commission for further
proceedings. The decision of the court has been appealed by the
Mississippi Commission. The Mississippi Commission has also
proposed a regulation that, if adopted, would prohibit the
establishment of a casino on the Big Black River as an unlawful
site. In addition, the Company is involved in legal proceedings
in which it is alleged that the Company and certain other parties
engaged in conduct to oppose this application in violation of
Mississippi's antitrust and gaming regulatory laws. See "Item 3
- -- Legal Proceedings."
The law permits unlimited stakes gaming on permanently
moored vessels on a 24-hour basis and does not restrict the
percentage of space which may be utilized for gaming. The
Mississippi Act permits substantially all traditional casino
games and gaming devices and, on August 11, 1997, a Mississippi
lower court ruled that the Mississippi Act also permits race
books on the premises of licensed casinos. The Mississippi
Commission has stated its intention not to appeal that decision
and expects to begin soon the process to promulgate regulations
for race books.
Ameristar, and any subsidiary of Ameristar that operates a
casino in Mississippi (a "Gaming Subsidiary"), is subject to the
licensing and regulatory control of the Mississippi Gaming
Authorities. Ameristar is registered as a publicly traded holding
company of ACVI under the Mississippi Act. Ameristar is required
periodically to submit detailed financial and operating reports
to the Mississippi Commission and furnish any other information
which the Mississippi Commission may require. If Ameristar is
unable to continue to satisfy the registration requirements of
the Mississippi Act, Ameristar and its Gaming Subsidiaries cannot
own or operate gaming facilities in Mississippi. Each Gaming
Subsidiary must obtain a gaming license from the Mississippi
Commission to operate casinos in Mississippi. A gaming license is
issued by the Mississippi Commission subject to certain
conditions, including continued compliance with all applicable
state laws and regulations and physical inspection of the casinos
prior to opening. There are no limitations on the number of
gaming licenses which may be issued in Mississippi.
Gaming licenses are not transferable, are issued for a two-
year period and must be renewed periodically thereafter. ACVI was
granted a renewal of its gaming license by the
<PAGE>Mississippi Commission on December 18, 1997. The gaming
license for ACVI must be renewed in January of 2000. No person
may become a stockholder of or receive any percentage of profits
from a gaming licensee subsidiary of a holding company without
first obtaining licenses and approvals from the Mississippi
Commission. Ameristar has obtained such approvals in connection
with ACVI's gaming license.
Certain officers and employees of Ameristar and the
officers, directors and certain key employees of each Gaming
Subsidiary must be found suitable or be licensed by the
Mississippi Commission. The Company believes it has obtained or
applied for all necessary findings of suitability with respect to
such persons associated with Ameristar or ACVI, although the
Mississippi Commission, in its discretion, may require additional
persons to file applications for findings of suitability.
Employees associated with gaming must obtain work permits that
are subject to immediate suspension under certain circumstances.
In addition, any person having a material relationship or
involvement with the Company may be required to be found suitable
or licensed, in which case those persons must pay the costs and
fees associated with such investigation. The Mississippi
Commission may deny an application for a license for any cause
that it deems reasonable. Changes in certain licensed positions
must be reported to the Mississippi Commission. In addition to
its authority to deny an application for a license, the
Mississippi Commission has jurisdiction to disapprove a change in
a licensed position. The Mississippi Commission has the power to
require any Gaming Subsidiary or Ameristar to suspend or dismiss
officers, directors and other key employees or sever
relationships with other persons who refuse to file appropriate
applications or whom the authorities find unsuitable to act in
such capacities.
At any time, the Mississippi Commission has the power to
investigate and require the finding of suitability of any record
or beneficial stockholder of Ameristar. Mississippi law requires
any person who acquires more than 5% of Ameristar's common stock
to report the acquisition to the Mississippi Commission, and such
person may be required to be found suitable. Also, any person who
becomes a beneficial owner of more than 10% of Ameristar's common
stock, as reported to the Securities and Exchange Commission,
must apply for a finding of suitability by the Mississippi
Commission and must pay the costs and fees that the Mississippi
Commission incurs in conducting the investigation. The
Mississippi Commission has generally exercised its discretion to
require a finding of suitability of any beneficial owner of more
than 5% of a public company's common stock. However, the
Mississippi Commission has adopted a policy that permits certain
institutional investors to own beneficially up to 10% of a public
company's common stock without a finding of suitability. If a
stockholder who must be found suitable is a corporation,
partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners.
Any person who fails or refuses to apply for a finding of
suitability or a license within thirty (30) days after being
ordered to do so by the Mississippi Commission may be found
unsuitable. The same restrictions apply to a record owner if the
record owner, after request, fails to identify the beneficial
owner. Management believes that compliance by Ameristar with the
licensing procedures and regulatory requirements of the
Mississippi Commission will not affect the marketability of its
securities. Any person found unsuitable and who holds, directly
<PAGE>or indirectly, any beneficial ownership of the securities
of Ameristar beyond such time as the Mississippi Commission
prescribes, may be guilty of a misdemeanor. Ameristar is subject
to disciplinary action if, after receiving notice that a person
is unsuitable to be a stockholder or to have any other
relationship with Ameristar or its Gaming Subsidiaries,
Ameristar: (i) pays the unsuitable person any dividend or other
distribution upon the voting securities of Ameristar; (ii)
recognizes the exercise, directly or indirectly, of any voting
rights conferred by securities held by the unsuitable person;
(iii) pays the unsuitable person any remuneration in any form for
services rendered or otherwise, except in certain limited and
specific circumstances; or (iv) fails to pursue all lawful
efforts to require the unsuitable person to divest himself of the
securities, including, if necessary, the immediate purchase of
the securities for cash at a fair market value.
Ameristar may be required to disclose to the Mississippi
Commission, upon request, the identities of debt security
holders. In addition, the Mississippi Commission under the
Mississippi Act may, in its discretion, (i) require holders of
debt securities of Ameristar to file applications, (ii)
investigate such holders, and (iii) require such holders to be
found suitable to own such debt securities or receive
distributions thereon. If the Mississippi Commission determines
that a person is unsuitable to own such security, then the issuer
may be sanctioned, including the loss of its approvals, if
without the prior approval of the Mississippi Commission, it (i)
pays to the unsuitable person any dividend, interest, or any
distribution whatsoever; (ii) recognizes any voting right by such
unsuitable person in connection with such securities; (iii) pays
the unsuitable person remuneration in any form; or (iv) makes any
payment to the unsuitable person by way of principal, redemption,
conversion, exchange, liquidation, or similar transaction.
Although the Mississippi Commission generally does not require
the individual holders of obligations such as notes to be
investigated and found suitable, the Mississippi Commission
retains the discretion to do so for any reason, including but not
limited to, a default, or where the holder of the debt instrument
exercises a material influence over the gaming operations of the
entity in question. Any holder of debt securities required to
apply for a finding of suitability must pay all investigative
fees and costs of the Mississippi Commission in connection with
such an investigation.
ACVI must maintain a current stock ledger in its principal
office in Mississippi and Ameristar must maintain a current list
of stockholders in the principal office of ACVI which must
reflect the record ownership of each outstanding share of any
class of equity security issued by Ameristar. The stockholder
list may thereafter be maintained by adding reports regarding the
ownership of such securities that it receives from Ameristar's
transfer agent. The ledger and stockholder lists must be
available for inspection by the Mississippi Commission at any
time. If any securities of Ameristar are held in trust by an
agent or by a nominee, the record holder may be required to
disclose the identity of the beneficial owner to the Mississippi
Commission. A failure to make such disclosure may be grounds for
finding the record holder unsuitable. Ameristar must also render
maximum assistance in determining the identity of the beneficial
owner.
The Mississippi Act requires that the certificates
representing securities of a publicly traded corporation that has
a Gaming Subsidiary bear a legend to the general effect that such
<PAGE>securities are subject to the Mississippi Act and the
regulations of the Mississippi Commission. Ameristar has received
an exemption from this legend requirement from the Mississippi
Commission. The Mississippi Commission has the power to impose
additional restrictions on the holders of Ameristar's securities
at any time.
Substantially all loans, leases, sales of securities and
similar financing transactions by a Gaming Subsidiary must be
reported to or approved by the Mississippi Commission. A Gaming
Subsidiary may not make an issuance or a public offering of its
securities. Ameristar may not make an issuance or a public
offering of its securities without the prior approval of the
Mississippi Commission if any part of the proceeds of the
offering is to be used to finance the construction, acquisition
or operation of gaming facilities in Mississippi or to retire or
extend obligations incurred for one or more such purposes. Such
approval, if given, does not constitute a recommendation or
approval of the investment merits of the securities subject to
the offering. Any representation to the contrary is unlawful.
Under the regulations of the Mississippi Commission, a
Gaming Subsidiary may not guarantee a security issued by an
affiliated company pursuant to a public offering, or pledge its
assets to secure payment or performance of the obligations
evidenced by the security issued by the affiliated company,
without the prior approval of the Mississippi Commission. The
pledge of the stock of a Gaming Subsidiary and the foreclosure of
such a pledge is ineffective without the prior approval of the
Mississippi Commission. Moreover, restrictions on the transfer of
an equity security issued by a Gaming Subsidiary and agreements
not to encumber such securities (the "Stock Restrictions") are
ineffective without the prior approval of the Mississippi
Commission. The Company has obtained all such necessary approvals
required to date.
Changes in control of Ameristar through merger,
consolidation, acquisition of assets, management or consulting
agreements or any form of takeover, and certain recapitalizations
and stock repurchases by Ameristar, cannot occur without the
prior approval of the Mississippi Commission. Entities seeking to
acquire control of a registered corporation must satisfy the
Mississippi Commission in a variety of stringent standards prior
to assuming control of such registered corporation. The
Mississippi Commission may also require controlling stockholders,
officers, directors and other persons having a material
relationship or involvement with the entity proposing to acquire
control, to be investigated and licensed as part of the approval
process relating to the transaction.
The Mississippi legislature has declared that some corporate
acquisitions opposed by management, repurchases of voting
securities and other corporate defense tactics that affect
corporate gaming licensees in Mississippi and corporations whose
stock is publicly traded that are affiliated with those
licensees, may be injurious to stable and productive corporate
gaming. The Mississippi Commission has established a regulatory
scheme to ameliorate the potentially adverse effects of these
business practices upon Mississippi's gaming industry and to
further Mississippi's policy to (i) assure the financial
stability of corporate gaming operations and their affiliates;
(ii) preserve the beneficial aspects of conducting business in
the corporate form; and (iii) promote a neutral environment for
the orderly governance of corporate affairs. Approvals are, in
certain circumstances, required from the Mississippi Commission
before Ameristar may
<PAGE>make exceptional repurchases of voting securities above the
current market price of its common stock (commonly called
"greenmail") or before a corporate acquisition opposed by
management may be consummated. Mississippi's gaming regulations
will also require prior approval by the Mississippi Commission if
Ameristar adopts a plan of recapitalization proposed by its Board
of Directors opposing a tender offer made directly to the
stockholders for the purpose of acquiring control of Ameristar.
Neither Ameristar nor any subsidiary may engage in gaming
activities in Mississippi while also conducting gaming operations
outside of Mississippi without approval of the Mississippi
Commission or a waiver of such approval. The Mississippi
Commission may require determinations that, among others, there
are means for the Mississippi Commission to have access to
information concerning the out-of-state gaming operations of the
Company and its affiliates. Ameristar has previously obtained a
waiver of foreign gaming approval from the Mississippi Commission
for operations in Nevada and Iowa and will be required to obtain
the approval or a waiver of such approval from the Mississippi
Commission prior to engaging in any additional future gaming
operations outside of Mississippi.
If the Mississippi Commission decides that a Gaming
Subsidiary violated a gaming law or regulation, the Mississippi
Commission could limit, condition, suspend or revoke the license
of the Gaming Subsidiary. In addition, a Gaming Subsidiary,
Ameristar and the persons involved could be subject to
substantial fines for each separate violation. Because of such a
violation, the Mississippi Commission could seek to appoint a
supervisor to operate the casino facilities. Limitation,
conditioning or suspension of any gaming license or the
appointment of a supervisor could (and revocation of any gaming
license would) materially adversely affect Ameristar's and the
Gaming Subsidiary's gaming operations.
License fees and taxes, computed in various ways depending
on the type of gaming involved, are payable to the State of
Mississippi and to the counties and cities in which a Gaming
Subsidiary's respective operations will be conducted. Depending
upon the particular fee or tax involved, these fees and taxes are
payable either monthly, quarterly or annually and are based upon
(i) a percentage of the gross gaming revenues received by the
casino operation, (ii) the number of slot machines operated by
the casino or (iii) the number of table games operated by the
casino. The license fee payable to the State of Mississippi is
based upon "gaming receipts" (generally defined as gross receipts
less payouts to customers as winnings) and equals 4% of gaming
receipts of $50,000 or less per month, 6% of gaming receipts over
$50,000 and less than $134,000 per month, and 8% of gaming
receipts over $134,000 per month. The foregoing license fees are
allowed as a credit against the Company's Mississippi income tax
liability for the year paid. The gross revenue fee imposed by the
City of Vicksburg equals approximately 4% of the gaming receipts.
The Mississippi Commission's regulations require as a
condition of licensure or license renewal that a gaming
establishment's plan include a 500-car parking facility in close
proximity to the casino complex and infrastructure facilities
which will amount to at least 25% of the casino cost.
Notwithstanding the Company's belief that ACVI is in compliance
with this requirement, the Mississippi Commission has advised the
Company that it believes the expansion of non-gaming amenities by
ACVI and its competitors in the Vicksburg market is
<PAGE>necessary to maintain and expand this market. Management
agrees with this view, and the Company is constructing a 150-room
hotel at Ameristar Vicksburg which is expected to open in June
1998.
IOWA. The Company's Council Bluffs operations are conducted
by ACCBI and are subject to Chapter 99F of the Iowa Code and the
regulations promulgated thereunder. The Company's gaming
operations are subject to the licensing and regulatory control of
the Iowa Racing and Gaming Commission (the "Iowa Gaming
Commission").
Under Iowa law, wagering on a "gambling game" is legal, when
conducted by a licensee on an "excursion gambling boat." An
"excursion gambling boat" is a self-propelled excursion boat.
"Gambling game" means any game of chance authorized by the Iowa
Gaming Commission. The excursion season must be from April 1st
through October 31st of each calendar year. The vessel must
operate at least one excursion each day for 100 days during the
excursion season to operate during the off season. Each excursion
must consist of a minimum of two hours. The Council Bluffs Casino
satisfied the requirements of Iowa law for the conduct of off-
season operations during each of 1996 and 1997.
The legislation permitting riverboat gaming in Iowa
authorizes the granting of licenses to "qualified sponsoring
organizations." A "qualified sponsoring organization" is defined
as a person or association that can show to the satisfaction of
the Iowa Gaming Commission that the person or association is
eligible for exemption from federal income taxation under sec.
501(c)(3), (4), (5), (6), (7), (8), (10) or (19) of the Internal
Revenue Code (hereinafter "not-for-profit corporation"). The not-
for-profit corporation is permitted to enter into operating
agreements with persons qualified to conduct riverboat gaming
operations. Such operators must be approved and licensed by the
Iowa Gaming Commission. On January 27, 1995, the Iowa Gaming
Commission authorized the issuance of a license to conduct
gambling games on an excursion gambling boat to the Iowa West
Racing Association, a not-for-profit corporation organized for
the purpose of facilitating riverboat gaming in Council Bluffs,
Iowa (the "Association"). The Association entered into an
agreement with ACCBI authorizing ACCBI to operate riverboat
gaming operations in Council Bluffs under the Association's
gaming license (the "Operator's Contract"). This contract was
approved by the Iowa Gaming Commission. The term of the
Operator's Contract runs until December 31, 2002, with two five-
year renewal options. The current license awarded by the Iowa
Gaming Commission for the Council Bluffs Casino expires on March
31, 1998 and has been renewed to March 31, 1999.
Under Iowa law, a license to conduct gambling games may be
issued in a county only if the county electorate has approved
such gambling games. Although the electorate of Pottawattamie
County, which includes the City of Council Bluffs, approved by
referendum the gambling games conducted by ACCBI, a
reauthorization referendum must be submitted to the electorate in
the general election to be held in 2002 and each eight years
thereafter. Each such referendum requires the vote of a majority
of the persons voting thereon. If any such reauthorization
referendum is defeated, Iowa law provides that any previously
issued gaming license will remain valid and subject to periodic
renewal for a total of nine years from the date
<PAGE>of original issuance, subject to earlier revocation as
discussed below. The original issuance date of the gaming license
for Ameristar Council Bluffs was January 27, 1995.
Various bills affecting gaming are currently under
consideration in the Iowa legislature. One of these bills would
impose a moratorium on the issuance of any new gaming licenses,
which would positively impact the Company. Other proposed bills
would prohibit existing casinos from expanding their operations,
require the removal or relocation of automatic teller machines at
casino facilities and increase the amounts required to be
reimbursed by casinos to the State of Iowa for law enforcement
activities.
Substantially all of ACCBI's material transactions are
subject to review and approval by the Iowa Gaming Commission. All
contracts or business arrangements, verbal or written, with any
related party or in which the term exceeds three years or the
total value of the contract exceeds $50,000 must be submitted in
advance to the Iowa Gaming Commission for approval. Additionally,
contracts negotiated between ACCBI and a related party must be
accompanied by economic and qualitative justification.
The Subsidiary Guarantee of the Notes issued by ACCBI also
required the prior approval of the Iowa Gaming Commission, which
has been obtained. Such approval does not constitute a finding,
recommendation or approval by the Iowa Gaming Commission as to
the accuracy or adequacy of this Prospectus or the investment
merits of the Notes. Any representation to the contrary is
unlawful.
ACCBI is required to notify the Iowa Gaming Commission of
the identity of each director, corporate officer and owner,
partner, joint venturer, trustee or any other person who has a
beneficial interest of five percent (5%) or more, direct or
indirect, in ACCBI. The Iowa Gaming Commission may require ACCBI
to submit background information on such persons. The Iowa Gaming
Commission may request ACCBI to provide a list of persons holding
beneficial ownership interests in ACCBI of less than five percent
(5%). For purposes of these rules, "beneficial interest" includes
all direct and indirect forms of ownership or control, voting
power or investment power held through any contract, lien, lease,
partnership, stockholding, syndication, joint venture,
understanding, relationship, present or reversionary right, title
or interest, or otherwise. The Iowa Gaming Commission may suspend
or revoke the license of a licensee in which a director,
corporate officer or holder of a beneficial interest includes or
involves any person or entity which is found to be ineligible as
a result of want of character, moral fitness, financial
responsibility, professional responsibility or due to failure to
meet other criteria employed by the Iowa Gaming Commission.
ACCBI must submit detailed financial, operating and other
reports to the Iowa Gaming Commission. ACCBI must file monthly
gaming reports indicating adjusted gross receipts received from
gambling games and the total number and amount of money received
from admissions. Additionally ACCBI must file annual financial
statements covering all financial activities related to its
operations for each fiscal year. ACCBI must also keep detailed
records regarding its equity structure and owners.
<PAGE>Iowa has a graduated wagering tax equal to five
percent (5%) of the first one million dollars of adjusted gross
receipts, ten percent (10%) on the next two million dollars of
adjusted gross receipts and twenty percent (20%) on adjusted
gross receipts over three million dollars. In addition, the state
charges other fees on a per customer basis. Additionally, ACCBI
pays to the City of Council Bluffs a fee equal to $0.50 per
passenger.
Under the Operator's Contract, ACCBI also pays the
Association an admissions fee of $1.50 per passenger. ACCBI has
interpreted the Operator's Contract to mean that a person may
leave and re-enter Council Bluffs Casino (for example, to visit
the restaurants at Ameristar Council Bluffs) without ACCBI being
obligated to pay an additional admissions fee to the Association.
ACCBI received a letter from the Association in August 1996 in
which the Association asserted that an additional fee is due each
time a person enters the Council Bluffs Casino, including re-
entries. The Company has been advised by the Association that the
board of directors of the Association discussed a proposal to
settle this dispute at an October 1997 meeting but declined to
take any action either to approve the proposed settlement or to
pursue the previously threatened claim. Accordingly, the
Association has advised ACCBI that it does not currently intend
to pursue this claim, but the Association has not formally waived
or released the claim.
If the Iowa Gaming Commission decides that a gaming law or
regulation has been violated, the Iowa Gaming Commission has the
power to assess fines, revoke or suspend licenses or to take any
other action as may be reasonable or appropriate to enforce the
gaming rules and regulations.
REGULATORY REQUIREMENTS APPLICABLE TO OWNERS OF CERTAIN
NOTES. A record or beneficial owner of the promissory notes
issued by the Company in connection with the acquisition of The
Reserve (the "Gem Notes") could be required by one or more gaming
regulatory authorities to be found suitable, and such owner would
be required to apply for a finding of suitability within 30 days
after request of such gaming authority or within such other time
period prescribed by such gaming authority. If such a record or
beneficial owner is required to be found suitable and is not
found suitable by such gaming regulatory authority, such owner
may be required by law to dispose of the Gem Notes. If any gaming
regulatory authority determines that a person is unsuitable to
own the Gem Notes, then the Company may be subject to sanctions,
including the loss of its regulatory approvals, if, without the
prior approval of the applicable gaming regulatory authorities,
it (i) pays interest on the Gem Notes to the unsuitable person,
(ii) pays the unsuitable person remuneration in any form or (iii)
makes any payment to the unsuitable person by way of principal,
redemption, conversion, exchange, liquidation or similar
transaction. In denying applications for findings of suitability
for certain purposes in early 1997 submitted by the persons to
whom the Gem Notes were issued, the Nevada Commission did not
find either of them to be unsuitable to hold any debt obligations
of Ameristar, and, as of the date of this report, no gaming
regulatory authority has required either of such persons to apply
for a finding of suitability to own the Gem Notes. However, one
or more gaming regulatory authorities could require a holder of
the Gem Notes to submit such an application in the future.
<PAGE>These regulatory requirements are applicable with
respect to other debt securities issued by the Company, including
the Company's Senior Subordinated Notes. However, unlike the Gem
Notes, the Senior Subordinated Notes include provisions requiring
a holder who is found to be unsuitable to dispose of its Senior
Subordinated Notes. In certain circumstances, the Company is
permitted to redeem Senior Subordinated Notes of an unsuitable
holder.
OTHER JURISDICTIONS. The Company expects to be subject to
similar rigorous regulatory standards in each jurisdiction in
which it seeks to conduct gaming operations. There can be no
assurance that regulations adopted or taxes imposed by other
jurisdictions will permit profitable operations by the Company.
FEDERAL REGULATION OF SLOT MACHINES. The Company is
required to make annual filings with the U.S. Attorney General in
connection with the sale, distribution or operation of slot
machines. All requisite filings for the most recent year and the
current year have been made.
CURRENCY TRANSACTION REPORTING REQUIREMENTS. Pursuant to a
1985 agreement between the State of Nevada and the United States
Department of the Treasury (the "Treasury"), the Nevada
Commission and the Nevada Board have authority to enforce their
own cash transaction reporting laws applicable to casinos, which
substantially parallel the Federal Bank Secrecy Act. Under the
Money Laundering Suppression Act of 1994, which was passed by
Congress, the Secretary of the Treasury retained the ability to
permit states, including Nevada, to continue to enforce their own
cash transaction reporting laws applicable to casinos. The Nevada
Act and related regulations require most gaming licensees to file
reports with respect to various gaming-related and other cash
transactions if such transactions aggregate more than $10,000 in
a 24-hour period. Casinos are required to monitor receipts and
disbursements of currency in excess of $10,000 and report them to
the Treasury. Although it is not possible to quantify the full
impact of these requirements on the Company's business, the
changes are believed to have had some adverse effect on results
of operations since inception.
On November 28, 1994, the Treasury enacted amendments
(effective December 1, 1994) to the federal regulations under the
Bank Secrecy Act. The amendments require casinos subject to the
Bank Secrecy Act to implement written programs no later than June
1, 1995 to assure and monitor compliance with the Bank Secrecy
Act. Such programs must include "know your customer" and
suspicious transaction reporting components. Although Nevada
casinos are exempt from Title 31, the Nevada Commission has
recently adopted regulations under the Nevada Act that parallel
in several respects the amendments to the Bank Secrecy Act.
POTENTIAL CHANGES IN TAX AND REGULATORY REQUIREMENTS. From
time to time, federal and state legislators and officials have
proposed changes in tax law, or in the administration of such
laws, affecting the gaming industry. Recent proposals have
included a federal gaming tax and increases in state or local
gaming taxes. They have also included limitations on the federal
income tax deductibility of the cost of furnishing complimentary
promotional items to customers, as well as various measures which
would require withholding on amounts won by customers or on
negotiated discounts provided to customers on amounts owed to
gaming
<PAGE>companies. It is not possible to determine with certainty
the likelihood of possible changes in tax law or in the
administration of such law. Such changes, if adopted, could have
a materially adverse effect on the Company's financial results.
The United States Congress has passed legislation which
creates a national gaming study commission (the "National Gaming
Commission"). The National Gaming Commission will generally have
the duty to conduct a comprehensive legal and factual study of
gambling in the United States and existing federal, state and
local policies and practices with respect to the legalization or
prohibition of gambling activities, to formulate and propose
changes in such policies and practices and to recommend
legislation and administrative actions for such changes. It is
not possible to predict the future impact of these proposals on
the Company and its operations. Any such proposals could have a
material adverse affect on the Company's business.
NON-GAMING REGULATIONS. The sale of alcoholic beverages by
the Company is subject to the licensing, control and regulation
in Jackpot by the Liquor Board of Elko County, in Henderson by
the City of Henderson, in Vicksburg by both the City of Vicksburg
and the Alcoholic Beverage Control Division of the Mississippi
State Tax Commission, and in Council Bluffs by the Alcoholic
Beverage Division of the Iowa Department of Commerce
(collectively, the "Liquor License Authorities"). In Mississippi,
Ameristar Vicksburg has been designated as a special resort area,
which allows ACVI to serve alcoholic beverages on a 24-hour
basis. In Nevada, the applicable liquor laws allow 24-hour
service of alcoholic beverages without any additional permits. In
Iowa, the applicable liquor laws allow the sale of liquor during
legal hours which are Monday through Saturday from 6 a.m. to 2
a.m. and Sunday from 8 a.m. to 2 a.m. All licenses are revocable
and not transferable. The Liquor License Authorities have the
full power to limit, condition, suspend or revoke any such
license or to place a liquor licensee on probation with or
without conditions. Any such disciplinary action could (and
revocation would) have a material adverse effect upon the
operations of the Company's business.
Certain officers and managers of ACVI and ACLVI must be
investigated by the applicable Liquor License Authorities in
connection with ACVI's and ACLVI's liquor permits. Changes in
licensed positions must be approved by the applicable Liquor
License Authorities.
All cruising vessels operated by the Company must comply
with U.S. Coast Guard requirements as to safety and must hold a
Certificate of Inspection. These requirements set limits on the
operation of the vessel and require that each vessel be operated
by a minimum complement of licensed personnel. Loss of the
vessel's Inspection Certificate would preclude its use as a
riverboat. Every five years, vessels must be dry-docked for an
inspection of the outside of the hull resulting in a loss of
service that may have an adverse effect on the Company. Less
stringent rules apply to permanently moored vessels.
In order to comply with the federal Merchant Marine Act of
1936, as amended, and the federal Shipping Act of 1916, as
amended, and applicable regulations thereunder, the Company's
Bylaws contain provisions designed to prevent persons who are not
citizens of the
<PAGE>United States from holding, in the aggregate, more than
24.9% of the Company's outstanding common stock.
All shipboard employees of the Company employed on U.S.
Coast Guard-approved vessels, even those who have nothing to do
with the actual operations of the vessel, such as dealers,
waiters and security personnel, may be subject to the Jones Act,
which, among other things, exempts those employees from state
limits on workers' compensation awards.
The Company is also required to comply with various
environmental regulations. See "Item 2. -- Properties."
ITEM 2. PROPERTIES
JACKPOT. Cactus Petes is located on a 35-acre site and The
Horseshu is located on a 30-acre site. The Cactus Petes and The
Horseshu sites are across from each other on U.S. Highway 93.
The Company also owns 204 housing units in Jackpot, including 90
units in two apartment complexes developed as United States
Department of Agriculture Rural Economic and Community
Development Services Multi-Family Housing Program ("USDA")
projects. These housing units support the primary operations of
the Jackpot Properties. The Jackpot Properties are subject to
deeds of trust securing the Revolving Credit Facility, and the
USDA housing projects are subject to mortgage loans in favor of
the USDA.
The Company owns a gas station adjacent to Highway 93 in
Jackpot, which it operates under a franchise from Chevron.
Management believes that this facility is in material compliance
with applicable environmental and other regulatory requirements.
The Company has previously operated two other gas stations at the
Jackpot Properties, one of which was abandoned prior to the
adoption of modern environmental abandonment standards. Although
management believes that all tanks for this gas station were
removed in the mid-1970s, the Company has not conducted tests for
the presence of any environmental contamination from this gas
station. Management believes that the likelihood of a material
unfavorable outcome with respect to potential environmental
liabilities relating to this former gas station is remote.
VICKSBURG. In connection with the development of Ameristar
Vicksburg, the Company has acquired seven parcels in Vicksburg
along Washington Street near Interstate 20. These parcels
comprise approximately 43.4 acres, approximately 30 of which are
developable. Of the seven parcels, three have been acquired by
direct purchase and four have been acquired by lease. The
aggregate monthly rent under the leases at March 1, 1998 was
approximately $55,000. Each lease provides for the Company to be
responsible for all taxes, insurance premiums, utilities and
other ownership and operating costs associated with the property
during the entire term of the lease. Each lease includes options
for the Company to purchase the applicable parcels, for an
aggregate price which decreases over time from approximately $5.9
million to approximately $2.0 million. A substantial portion of
the purchase prices may be paid in installments with interest at
stated rates. The Company does not have any plans to exercise
any of these purchase options prior to this expiration.
<PAGE>The Vicksburg Casino, the Company's leasehold
interests relating to the Ameristar Vicksburg site and
substantially all of that portion of the Ameristar Vicksburg site
owned by the Company serve as collateral for the Company's
obligations under the Revolving Credit Facility. The hotel being
developed at Ameristar Vicksburg and the underlying property are
subject to a deed of trust securing a loan to fund a portion of
the hotel construction costs.
In addition, the Company has developed a 20-acre mobile home
park with 30 single- and 20 double-wide mobile homes. This
mobile home park is located seven miles from Ameristar Vicksburg
and sites are available for rent by employees and other persons.
The mobile home park rental rates are competitive with the local
market.
COUNCIL BLUFFS. Ameristar Council Bluffs is on an
approximately 50-acre site along the bank of the Missouri River
and adjacent to the Nebraska Avenue exit on Interstate 29
immediately north of the junction of Interstates 29 and 80. The
Company owns approximately 27 acres of this site and has rights
to use the remaining portion of the site that is owned by the
State of Iowa for a 50-year term. The Company has leased
approximately 0.623 acres of the Ameristar Council Bluffs site to
Kinseth Hotel Corporation for the development and operation by
Kinseth of a 140-room limited service Holiday Inn Suites Hotel
that opened on March 31, 1997. All of the Company's interests in
Ameristar Council Bluffs are subject to collateral security
instruments securing the Revolving Credit Facility and other
indebtedness.
THE RESERVE. The Reserve is at the southeastern corner of
the junction of Lake Mead Drive and Interstate 515 in Henderson,
Nevada on a site containing approximately 53 acres, of which
approximately 46 acres are developable. The Company currently
owns 28 acres of the site and has options to acquire the
remainder of the site. Each option exercise must be for at least
five acres and a minimum of five acres of the option land must be
acquired each year or the remaining options expire. The Company
exercised an option for five acres of the site in April 1997.
The option exercise prices, which increase at the rate of 8% per
annum from October 1, 1995, are $217,800 per acre for the first
17 acres and $152,460 per acre for each remaining acre, in each
case plus 8% per annum from October 1, 1995 through the date of
exercise. Construction of a contemplated second phase of The
Reserve would also require the Company to acquire additional
land, the area of which has not yet been determined.
The Reserve site was previously used for surface waste
disposal activities for approximately 50 years. Prior to 1994,
the site had large areas of debris, rubble and some stained soils
resulting from these waste activities. Site studies revealed
asbestos, lead and pesticide concentrations in the surface soils.
Following a surface remediation program by a third party in 1994,
the Nevada Division of Environmental Protection approved a
closure of the remediation and indicated that no further work was
required.
A 1995 Phase I environmental assessment on 23 acres of the
site now owned by the Company showed that some rubble remained on
portions of the property, but that all hazardous material had
been removed. A 1997 Phase I environmental assessment on the 30
acres of The Reserve site under option or subsequently acquired
by the Company indicated the property does not appear to have
been adversely impacted since the completion of the 1994
remediation
<PAGE>program. Phase I environmental assessments involve the
conduct of limited procedures and may not identify the existence
or extent of actual environmental conditions.
OTHER. The Company leases approximately 19,200 square feet
of office space in Las Vegas, Nevada for its executive offices,
which the Company occupied in March 1997.
ITEM 3. LEGAL PROCEEDINGS
Clothe H. James, et al. v. Ameristar Casinos, Inc.,
Ameristar Casino Vicksburg, Inc., et al. On January 18, 1996, the
plaintiffs commenced a lawsuit against the Company, ACVI, and
Riverboat Corporation of Mississippi, d/b/a Isle of Capri Casino.
The suit is filed in the Circuit Court of the First Judicial
District of Hinds County, Mississippi, as Civil Action No. 251-96-
54CN. The plaintiffs filed an amended complaint on February 6,
1996. The plaintiffs seek $5.0 million in actual damages and
$7.5 million in punitive damages. This case involves alleged
wrongful death and personal injuries to four persons. The
plaintiffs allege that ACVI and the Isle of Capri Casino each
negligently served alcohol to a visibly intoxicated person who
later crashed his vehicle. Two persons were killed and two
persons were severely injured. Ameristar and ACVI have answered
the complaint in which they have denied liability. Discovery is
ongoing, and Ameristar has filed a motion for summary judgment to
remove Ameristar as a defendant in the proceedings. However, the
court has not yet ruled on this motion. ACVI's general liability
insurance carriers have accepted the tender of the defense, but
have notified the Company that the insurers may not be
responsible for any punitive damages. Legal counsel has advised
the Company that Mississippi law generally does not preclude
punitive damage awards being covered by general liability
policies, although there is no Mississippi case on point with the
alleged facts of the James case.
Bryan K. and Dawn H. Hafen v. Steven W. Rebeil, et al. This
lawsuit was filed in the Clark County District Court as case
number A 347722. A named defendant in the amended complaint,
filed on January 29, 1996, action is Gem Gaming, Inc. ("Gem").
ACLVI is the successor-in-interest by merger to Gem. The case
arises out of the purchase of land in Mesquite, Nevada by Steven
W. Rebeil, a former Gem stockholder, pursuant to which a jointly
owned corporation was to develop real property contributed by the
plaintiffs as a hotel-casino. The plaintiffs allege that Gem's
former stockholders and their controlled entities (including Gem)
engaged in a conspiracy to defraud the plaintiffs in connection
with the plaintiff's contribution of the land and its subsequent
sale to a third party. The plaintiffs allege violations of
Nevada's racketeering statutes, fraud and unjust enrichment. The
complaint seeks an unspecified amount of damages, although the
plaintiffs have otherwise claimed total compensatory damages of
approximately $10 million. Gem's former stockholders are
contractually required to indemnify ACLVI against the claims in
the Hafen litigation.
E. L. Pennebaker, Jr., et. al. v. ACI, et. al. On February
23, 1998, E. L. Pennebaker, Jr. filed a complaint in the Circuit
Court of Pike County, Mississippi against ACI, Harrah's
Vicksburg, Inc., Riverboat Corporation of Mississippi-Vicksburg,
and Deposit Guaranty National Bank. The matter is pending as
case number 98-0047-B. The complaint was amended on February 27,
1998, to add James F. Belisle, Multi Gaming Management, Inc. and
<PAGE>Multi Gaming Management of Mississippi, Inc. as additional
plaintiffs. The plaintiffs are property owners or have rights to
acquire property along the Big Black River in Warren County,
Mississippi. They allege they would have profited if the
Mississippi Gaming Commission had found suitable for a casino a
location along that river that was controlled by plaintiffs
Belisle, Multi Gaming Management, Inc. and Multi Gaming
Management of Mississippi, Inc. The plaintiffs further allege
that the defendants entered into an agreement to hinder trade and
restrain competition in the gaming industry in violation of the
antitrust laws and the gaming laws of Mississippi. Specifically,
the plaintiffs allege the defendants conducted an aggressive
campaign in opposition to the application of Horseshoe Gaming,
Inc. for a gaming site on the Big Black River. The plaintiffs
allege compensatory damages of $38 million and punitive damages
of $200 million. ACI has not yet answered the complaint, but the
Company intends to vigorously defend this suit.
Mr. Pennebaker has also filed a petition with the
Mississippi Gaming Commission requesting that the Mississippi
Gaming Commission order ACI, Harrah's Vicksburg, Inc., and
Riverboat Corporation of Mississippi-Vicksburg to stop opposing
the approval and construction of a casino on the Big Black River
and for such other corrective and punitive action that the
Mississippi Gaming Commission might find appropriate. ACI has
been advised that no action is required by it in connection with
this petition unless requested by the Mississippi Gaming
Commission. See also "Item 1. -- Business -- Government
Regulations -- Mississippi."
Other Legal Proceedings and Claims. From time to time, the
Company is a party to litigation which arises in the ordinary
course of business. Except for the matters described or referred
to above, the Company is not currently a party to any litigation
that management believes would be likely to have a material
adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS.
None.
<PAGE>PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER
MATTERS
Ameristar's Common Stock is traded on the Nasdaq National
Market System ("Nasdaq-NMS") under the symbol "ASCA." The
following table sets forth, for the fiscal quarter indicated, the
high and low sale prices for the Common Stock, as reported by
Nasdaq:
High Low
1996
First Quarter $ 7.50 $ 6.00
Second Quarter 14.75 6.25
Third Quarter 13.13 5.25
Fourth Quarter 6.13 4.75
1997
First Quarter $ 7.25 $ 4.88
Second Quarter 6.25 4.63
Third Quarter 7.13 4.75
Fourth Quarter 5.88 4.75
On March 13, 1998, there were 306 holders of record of
Ameristar's Common Stock.
No dividends on Ameristar's Common Stock have been declared
during the last two fiscal years. The Company intends to retain
all earnings for use in the development of its business and does
not anticipate paying any cash dividends in the foreseeable
future. In addition, the Company's Revolving Credit Facility and
Senior Subordinated Notes obligate the Company to comply with
certain financial covenants that may restrict or prohibit the
payment of dividends. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
<PAGE>ITEM 6. SELECTED FINANCIAL DATA
The following data has been derived from the audited
financial statements of the Company and should be read in
conjunction with those statements, certain of which are included
in this Report.
<TABLE>
AMERISTAR CASINOS, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
<S> <C> <C> <C> <C> <C> <C>
For
For the For For For For
the three the the the the
year mos. year year year year
INCOME STATEMENT ended ended ended ended ended ended
DATA: 9/30/93 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
------- -------- -------- -------- -------- --------
(amounts in thousands, except per share data)
REVENUES:
Casino $ 32,285 $ 7,938 $ 90,882 $ 99,364 $161,338 $173,077
Food and beverage 10,164 2,521 17,494 19,303 24,250 30,672
Rooms 6,812 1,491 7,580 7,861 7,641 9,685
Other 5,747 1,517 7,822 7,756 7,760 8,275
-------- ------- -------- -------- -------- --------
55,008 13,467 123,778 134,284 200,989 221,709
Less: Promotional
allowances 4,982 1,308 9,425 10,417 12,524 15,530
-------- ------- -------- -------- -------- --------
Net revenues 50,026 12,159 114,353 123,867 188,465 206,179
-------- ------- -------- -------- -------- --------
COSTS AND EXPENSES:
Casino 13,067 3,310 40,347 44,503 75,685 78,733
Food and beverage 6,758 1,922 12,469 11,747 16,773 19,784
Rooms 1,971 312 2,249 2,404 2,368 3,130
Other 6,095 1,391 8,412 8,211 7,054 7,546
Selling, general
and administrative 10,070 2,712 28,462 29,197 47,758 51,958
Depreciation and
amortization 4,185 993 7,062 9,721 14,135 16,358
Abandonment loss - - - - - 646
Preopening costs - - 5,408 - 7,379 -
-------- ------- -------- -------- -------- --------
Total costs and
expenses 42,146 10,640 104,409 105,783 171,152 178,155
-------- ------- -------- -------- -------- --------
INCOME FROM
OPERATIONS 7,880 1,519 9,944 18,084 17,313 28,024
OTHER INCOME
(EXPENSE):
Interest income 43 9 86 205 354 445
Interest expense (750) (30) (3,379) (3,958) (8,303) (12,107)
Other 26 2 (5) - (77) (35)
-------- ------- -------- -------- -------- --------
Income before income
tax provision 7,199 1,500 6,646 14,331 9,287 16,327
Income tax provision 2,294 575 2,426 5,236 3,390 5,959
-------- ------- -------- -------- -------- --------
Income before
extraordinary loss
and cumulative effect
of a change in
accounting principle 4,905 925 4,220 9,095 5,897 10,368
Extraordinary loss on
early retirement of
debt, net of income
tax benefit
of $353 and $387,
respectively - - - (657) - (673)
<PAGE>AMERISTAR CASINOS, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
(CONTINUED)
For
For the For For For For
the three the the the the
year mos. year year year year
INCOME STATEMENT DATA ended ended ended ended ended ended
(CONTINUED): 9/30/93 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
(amounts in thousands, except per share data)
Cumulative effect of a
change in accounting
principle: Adoption
of SFAS 109
"Accounting for
Income Taxes" - 720 - - - -
-------- -------- -------- -------- -------- --------
NET INCOME $ 4,905 $ 1,645 $ 4,220 $ 8,438 $ 5,897 $ 9,695
======== ======== ======== ======== ======== ========
PRO FORMA NET INCOME
(unaudited):
Income before pro
forma income tax
provision $ 7,778
Pro forma income tax
provision 2,645
--------
Pro forma net income $ 5,133
========
EARNINGS PER SHARE:
Income before
extraordinary item
Basic and diluted $ 0.21 $ 0.45 $ 0.29 $ 0.51
Net Income
Basic and diluted $ 0.21 $ 0.42 $ 0.29 $ 0.48
PRO FORMA EARNINGS PER
SHARE (unaudited) $ 0.27 $ 0.08
======== =======
WEIGHTED AVERAGE
SHARES OUTSTANDING 20,360 20,360 20,360 20,360
======== ======== ======== ========
PRO FORMA WEIGHTED
AVERAGE SHARES
OUTSTANDING 18,444 19,971
======== =======
as of as of as of as of as of
BALANCE SHEET AND 9/30/93 12/31/94 12/31/95 12/31/96 12/31/97
OTHER DATA: ------- -------- -------- -------- ---------
Cash $ 2,853 $ 9,169 $ 14,787 $ 10,724 $ 13,031
Total assets 66,711 125,347 202,220 270,052 336,186
Total notes payable
and long-term debt,
net of current
maturities 24,686 45,399 101,869 143,893 193,113
Stockholders' equity 26,844 56,609 65,047 70,944 80,639
Capital expenditures 26,158 33,329 64,783 76,388 76,634
- --------------------
Financial data as of dates and for periods ending prior to
November 1993 reflect restated financial statements giving
retroactive effect to a corporate reorganization completed
immediately prior to the closing of the Company's initial public
offering. Pursuant to the reorganization, CPI and ACVI, then
companies under the common control of Craig H. Neilsen, became
wholly owned subsidiaries of the Company. In connection with
this reorganization and the initial public offering, the Company
elected to terminate its S corporation tax status effective
January 1, 1993. Net income for the year ended September 30,
1993 includes a pro forma income tax provision using a rate of
34% to reflect the estimated income tax expense the Company would
have incurred had it been subject to federal income taxes for the
year.
The Vicksburg Casino and certain other portions of Ameristar
Vicksburg opened in late February 1994. The remaining Ameristar
Vicksburg facilities were completed and opened through May 1994.
The Council Bluffs Casino opened in mid-January 1996.
<PAGE>Portions of the land-based facilities at Ameristar Council
Bluffs opened in June, November and December 1996. Ameristar
Council Bluffs' remaining land-based facilities opened in
February and March 1997.
No dividends were paid in 1994, 1995, 1996 and 1997. A $3.0
million dividend was paid to the Company's shareholder in
September 1993 prior to the Company's conversion from a
subchapter S corporation to a C corporation.
<PAGE>ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following information should be read in conjunction with
the Company's Consolidated Financial Statements and the Notes
thereto included in this Report. The information in this section
and in this Report generally includes forward-looking statements.
See "Item 1. -- Business -- Cautionary Information Regarding
Forward-Looking Statements."
OVERVIEW
Ameristar Casinos, Inc. ("Ameristar" or "ACI") owns and
operates five casino-hotels in four markets through its wholly
owned subsidiaries. Ameristar and its subsidiaries are
collectively referred to herein as the "Company." The Company's
properties consist of the following:
Cactus Petes Resort Casino and The Horseshu Hotel &
Casino (collectively, the "Jackpot Properties"), two casino-
hotels that have been operating in Jackpot, Nevada at the
Idaho border since 1956.
Ameristar Casino Vicksburg ("Ameristar Vicksburg"),
located in Vicksburg, Mississippi, a riverboat-themed
dockside casino and related land-based facilities, including
a hotel under construction that is expected to open in
July 1998. The remainder of Ameristar Vicksburg opened in
February and May 1994.
Ameristar Casino Hotel Council Bluffs ("Ameristar
Council Bluffs"), a riverboat casino and related land-based
hotel and other facilities in Council Bluffs, Iowa across
the Missouri River from Omaha, Nebraska. The casino opened
on January 19, 1996, portions of the land-based 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.
The Reserve Hotel Casino ("The Reserve"), in Henderson,
Nevada at the intersection of Interstate 515 and Lake Mead
Drive, which opened on February 10, 1998. The Company
acquired The Reserve on October 9, 1996 through a merger of
the initial developer of the property into a subsidiary of
Ameristar.
Certain of the Company's operations are seasonal in nature.
In particular, in Jackpot, the months of March through October
are the strongest. As a result, the second and third calendar
quarters typically produce a disproportionate amount of the
income from operations of the Jackpot Properties. In addition,
adverse weather conditions may adversely affect the business of
the Jackpot Properties, and operations during the winter months
typically vary from year to year based on the severity of the
winter weather conditions in the northwestern United States. To
date, operations in Vicksburg have experienced some seasonality,
with August and the winter months being the slower periods. To
date, operations at Ameristar
<PAGE>Council Bluffs have not experienced any material
seasonality, and management does not expect operations at The
Reserve to be subject to any significant seasonality.
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 are not necessarily comparable
and may not be indicative of results to be expected for future
periods.
In particular, management expects that interest expense and
depreciation and amortization in 1998 will increase significantly
from 1997 due primarily to the completion of The Reserve.
Construction period interest for The Reserve was capitalized on
the Company's balance sheet and did not affect interest expense
or net income in 1997. However, such interest expense relating
to the increased amounts of debt incurred to finance construction
of The Reserve will be reflected in the Company's Consolidated
Statement of Income for 1998. As a result of these increases and
the expensing of preopening costs for The Reserve in the first
quarter of 1998, management anticipates that the Company's net
income will decrease from 1997 to 1998 notwithstanding
management's expectations that operations at The Reserve and
generally stable operations at the Company's other properties
will produce an increase in the Company's EBITDA (earnings before
interest expense, taxes, depreciation and amortization) from 1997
to 1998.
The Vicksburg market experienced declines of approximately
1.0% and 0.4% in gaming revenues from 1995 to 1996 and from 1996
to 1997, respectively. Management attributes these declines to
increased gaming capacity in the Bossier City/Shreveport,
Louisiana and Philadelphia, Mississippi markets. Although
Ameristar Vicksburg has maintained its position as the market
share leader in Vicksburg, the declines in the size of the market
and the effects of local competition have resulted in decreases
in net revenues at Ameristar Vicksburg. In an effort to expand
the market territory and market share of Ameristar Vicksburg and
encourage longer visits, the Company is constructing a 150-room
hotel across the street from the main entrance to the casino,
which is expected to open in June 1998.
<PAGE>The following table highlights the consolidated cash
flow information and results of operations of Ameristar's
operating subsidiaries for its principal properties:
</TABLE>
<TABLE>
Twelve Months Ended
December 31,
<S> <C> <C> <C>
1995 1996 1997
Consolidated cash flow information:
Cash flow from operations $ 23,048 $ 33,177 $ 33,641
Cash flow from investing (63,022) (53,746) (63,417)
Cash flow from financing 45,592 16,506 32,083
Net revenues:
Jackpot Properties $ 56,222 $ 51,904 $ 54,455
Ameristar Vicksburg 67,625 66,190 63,961
Ameristar Council Bluffs 20 70,331 87,763
Corporate and other - 40 -
-------- -------- --------
Consolidated net revenues $123,867 $188,465 $206,179
======== ======== ========
Adjusted operating income (1):
Jackpot Properties $ 12,467 $ 9,124 $ 10,308
Ameristar Vicksburg 11,256 13,827 13,165
Ameristar Council Bluffs (300) 8,432 14,251
Corporate and other (5,339) (6,691) (9,054)
-------- -------- --------
Consolidated operating income $ 18,084 $ 24,692 $ 28,670
======== ======== ========
Adjusted operating income margins (1):
Jackpot Properties 22.2% 17.6% 18.9%
Ameristar Vicksburg 16.6% 20.9% 20.6%
Ameristar Council Bluffs - 12.0% 16.2%
Consolidated operating income margin 14.6% 13.1% 13.9%
EBITDA (2):
Jackpot Properties $ 15,640 $ 11,764 $ 13,208
Ameristar Vicksburg 17,758 20,287 19,350
Ameristar Council Bluffs (278) 13,296 21,090
Corporate and other (5,315) (6,520) (8,621)
-------- -------- ---------
Consolidated EBITDA $ 27,805 $ 38,827 $ 45,027
======== ======== =========
EBITDA Margins (2):
Jackpot Properties 27.8% 22.7% 24.3%
Ameristar Vicksburg 26.3% 30.6% 30.3%
Ameristar Council Bluffs - 18.9% 24.0%
Consolidated EBITDA margin 22.4% 20.6% 21.8%
</TABLE>
(1) Adjusted operating income is income from operations (as
reported) before Ameristar Council Bluffs preopening costs in
the data for the twelve months ended December 31, 1996 and an
abandonment loss at Ameristar Vicksburg in 1997 related to the
demolition of an existing budget motel for the construction of
a hotel.
<PAGE>(2) EBITDA consists of income from Adjusted operating
income plus depreciation and amortization. EBITDA Margin is
EBITDA as a percentage of net revenues. EBITDA information is
presented solely as a supplemental disclosure because
management believes that it is a widely used measure of
operating performance in the gaming industry and for companies
with a significant amount of depreciation and amortization.
EBITDA should not be construed as an alternative to income
from operations (as determined in accordance with generally
accepted accounting principles) as an indicator of the
Company's operating performance, or as an alternative to cash
flow from operating activities (as determined in accordance
with generally accepted accounting principles) as a measure of
liquidity. The Company has significant uses of cash flows,
including capital expenditures and debt principal repayments,
that are not reflected in EBITDA. It should also be noted
that not all gaming companies that report EBITDA information
calculate EBITDA in the same manner as the Company.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 VERSUS YEAR ENDED DECEMBER 31, 1996
SUMMARY
The completion of Ameristar Council Bluffs in early 1997
brought another year of record growth in Ameristar's consolidated
net revenues and income from operations before preopening costs.
Consolidated net revenues increased by 9.4% from $188.5
million in 1996 to $206.2 million in 1997. Income from
operations rose 13.5% to $28.0 million in 1997 compared to $24.7
million in 1996 before the $7.4 million charge for preopening
costs associated with the opening of Ameristar Council Bluffs.
Income from operations after preopening costs was $17.3 million
in 1996.
Total operating expenses as a percentage of net revenues
were 86.4% in 1997 versus 90.8% (86.9% before the Ameristar
Council Bluffs preopening costs) in 1996. This improvement is a
result of increased revenues in casino, food and beverage and
rooms due to the completion of Ameristar Council Bluffs combined
with a smaller increase in the expenses for these departments. A
slight decrease in operating expenses at the Jackpot Properties
was offset by a similar increase in operating expenses at
Ameristar Council Bluffs.
On a year-to-year comparable basis (i.e., before preopening
costs in 1996 and an extraordinary charge in 1997), net income
decreased $0.2 million to $10.4 million in 1997 from to $10.6
million in 1996. After preopening costs and extraordinary
charge, net income for the year ended December 31, 1997 was $9.7
million versus net income for the year ended December 31, 1996 of
$5.9 million. Earnings per share before preopening costs were
$0.52 for 1996 ($0.29 after preopening costs). Earnings per
share were $0.48 for 1997 after an extraordinary charge of $0.03
per share for the refinancing of the Company's credit line.
<PAGE>REVENUES
During 1997, Ameristar Council Bluffs was one of the top
riverboat gaming revenue producers in the State of Iowa, while
both Ameristar Vicksburg and the Jackpot Properties remained
market share leaders in their areas.
With a full year of casino operations and most of the non-
gaming operations, Ameristar Council Bluffs had total net
revenues of $87.8 million in 1997 compared to $70.3 million for
1996, an increase of 24.8%. Ameristar Council Bluffs was the
leader in both casino and total revenues among the Company's four
operating casino properties. In addition to the completion of
the Ameristar Council Bluffs facility, management attributes the
increased revenues to a 5.9% increase in the Council Bluffs'
gaming market from 1996 to 1997.
Net revenues for Ameristar Vicksburg were $64.0 million for
the year ended December 31, 1997 compared with $66.2 million for
the prior year, a decrease of 3.4%. Despite this decrease in
revenues, due in part to the decline in the size of the market
described above, management believes Ameristar Vicksburg was able
to maintain its leading position in the Vicksburg market through
effective promotional strategies and by continuing to provide
customers with superior service and quality gaming and non-gaming
products.
The Jackpot Properties produced net revenues of $54.5
million, a 4.9% increase from the $51.9 million produced in 1996.
Management believes that the increase is primarily the result of
the installation of approximately 587 state-of-the-art slot
machines, the renovation of the casino at The Horseshu, an
enhanced slot player tracking system and an aggressive marketing
strategy. The improvement is also due to harsher weather
conditions during 1996 and below-average table games win
percentages in the second quarter of 1996.
COSTS AND EXPENSES
The operating expense ratio for 1997 decreased to 86.4% from
86.9% in 1996 before preopening due to improved operating
performance during the second year of operations at Ameristar
Council Bluffs. The improvement in this area was partially
offset by increased corporate overhead related to the Company's
relocation of its executive office to Las Vegas and increased
corporate staffing levels.
Casino costs and expenses increased from $75.7 million in
1996 to $78.7 million in 1997. As a percentage of casino
revenues, casino expenses decreased from 46.9% in 1996 to 45.5%
in 1997. The majority of the increase in expense was associated
with Ameristar Council Bluffs, which had higher expenses but also
increased revenue, thus increasing the casino department's
overall profitability. An increase in casino expenses at the
Jackpot Properties was partially offset by a decrease in expenses
at Ameristar Vicksburg.
The Company's food and beverage costs and expenses increased
$3.0 million in 1997 mostly as a result of the opening of the
steak house at Ameristar Council Bluffs in March 1997. The
Company's food and beverage expense to revenue ratio decreased
from 69.2% in 1996 to 64.5% in 1997. This decrease is directly
related to the improved performance of the
<PAGE>Ameristar Council Bluffs restaurant operations in 1997
compared to the startup operational inefficiencies experienced in
1996.
Rooms expenses increased by $0.7 million from $2.4 million
in 1996 to $3.1 million in 1997. The increase was the result of
12 months of operations at the Ameristar Council Bluffs hotel in
1997 compared to two months in 1996, partially offset by the
demolition of the 54-room budget hotel at Ameristar Vicksburg
that was taken out of service in April 1997 for construction of
the new hotel.
Selling, general and administrative costs and expenses
(including utilities and maintenance and business development
costs) increased $4.2 million or 8.8% from 1996 to 1997. Most of
the increase was a result of higher property taxes at Ameristar
Council Bluffs and legal expenses related to the arbitration of a
contract dispute relating to the construction of Ameristar
Council Bluffs partially offset by reduced marketing expenses.
Expenses were also higher at the corporate level as additional
staffing and overhead expenses were incurred due to the growth
and relocation of the Corporate offices.
Depreciation expense increased $2.2 million or 15.7% from
1996 to 1997 as the Company's depreciable base increased with the
opening in stages of Ameristar Council Bluffs throughout 1996 and
early 1997.
No preopening costs were expensed during 1997.
Interest expense, net of capitalized interest of $2.3
million in 1996 and $4.7 million in 1997, increased $3.8 million
or 45.8% from 1996. This increase primarily reflects the
additional debt outstanding to finance the Company's expansion
and higher interest rates on those borrowings. 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. Interest
was capitalized on borrowings to construct The Reserve and the
Ameristar Vicksburg hotel during 1997.
The Company's average borrowing rate was 9.9% in 1997
compared to 8.9% in 1996. The borrowing rate increased due to the
issuance of $100 million in Senior Subordinated Notes. (See "--
Liquidity and Capital Resources.")
The Company's effective Federal tax rate on income was 36.5%
in both 1996 and 1997 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.
<PAGE>
YEAR ENDED DECEMBER 31, 1996 VERSUS YEAR ENDED DECEMBER 31, 1995
SUMMARY
The opening of Ameristar Council Bluffs, beginning with the
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 at Ameristar Council Bluffs 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 $0.52 for 1996
($0.29 after preopening costs). Earnings per share were $0.42
for 1995 after an extraordinary charge of $0.03 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 $66.2 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
<PAGE>leading position in the Vicksburg market through effective
promotional strategies and by continuing to provide customers
with superior service and quality gaming and nongaming products.
The Jackpot Properties produced net revenues of $51.9
million, a 7.7% decrease from the $56.2 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. As described above, the Company
has responded to this increased competition by making several
improvements at the Jackpot Properties and by a more aggressive
marketing campaign. 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 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.
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 a casino expense-
to-revenue ratio at Ameristar Council Bluffs that is
significantly higher than at the Vicksburg or the Jackpot
Properties. Since 1996 was the first year of operations for
Ameristar Council Bluffs, 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 proportionally
reduced, due to the Company's desire to maintain high customer
service standards. The expense to revenue ratio in the casino
department at Ameristar Vicksburg decreased from 47.4% in 1995 to
42.4% in 1996, reflecting the success of that property's
continued efforts to control costs.
<PAGE>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
(including utilities and maintenance and business development
costs) increased $18.6 million or 63.6% from 1995 to 1996.
Substantially all of this increase was due to the opening of
Ameristar Council Bluffs in 1996. The increases related to
Ameristar Council Bluffs were partially offset by a slight net
decrease in utilities and maintenance expenses and depreciation
at the Company's other properties. Business development costs
declined slightly.
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.
The Company's average borrowing rate was 8.90% in 1996
compared to 8.21% in 1995.
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.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flow from operations was $33.6 million
for the year ended December 31, 1997, as compared to $33.2
million for the year ended December 31, 1996. The Company had
unrestricted cash of approximately $13.0 million as of December
31, 1997 compared to $10.7 million at December 31, 1996. This
increase in cash resulted from a net increase in borrowings of
$36.9 million during the year and the $33.0 million of cash flow
from operations, partially offset by capital expenditures related
to The Reserve (including a $4.0 million installment payment in
connection with the acquisition of The Reserve), Ameristar
Council Bluffs and other capital improvement projects. The
Company's current assets increased by approximately $6.3 million
from December 31, 1996 to December 31, 1997, primarily resulting
from an increase in cash on hand, accounts receivable, income tax
refund receivable, deferred taxes and prepaid expenses. The
Company historically has funded its
<PAGE>daily operations through net cash provided by operating
activities and its significant capital expenditures primarily
through bank debt and other debt financing.
The Company's cash flow from investing activities decreased
$9.7 million from $63.4 million in 1997 compared to $53.7 million
in 1996. This was primarily a result of increased capital
expenditures related to the construction of The Reserve and the
hotel in Vicksburg.
Cash flow from financing activities increased from $16.5
million in 1996 to $32.1 million in 1997 as a result of the
refinancing of the Company's long-term debt as described below.
Until July 15, 1997, Ameristar, as borrower, and its
principal subsidiaries, as guarantors, maintained various long-
term debt facilities, including a Revolving Credit Facility with
Wells Fargo Bank, NA ("WFB") and a syndicate of banks (the "1995
Revolving Credit Facility"). On July 15, 1997, the Company
refinanced its long-term debt through a new $125 million
revolving bank credit facility (the "Revolving Credit Facility")
and the sale of $100 million aggregate principal amount of 10-
1/2% Senior Subordinated Notes due 2004 (the "Senior
Subordinated Notes").
The Revolving Credit Facility was entered into on July 8,
1997, pursuant to a Credit Agreement among Ameristar and its
principal subsidiaries (the "Borrowers"), a syndicate of bank
lenders and WFB as Agent Bank, Arranger and Swingline Lender. The
Borrowers do not include AC Hotel Corp., which owns the hotel
under construction at Ameristar Vicksburg, and a purchasing
subsidiary. The Borrowers made an initial draw of $114.5 million
under the Revolving Credit Facility on July 15, 1997, which was
used to repay $94.5 million in borrowings outstanding under the
1995 Revolving Credit Facility and a $20.0 million short-term
loan from WFB.
The Senior Subordinated Notes were issued by Ameristar at
par in a private placement to certain initial purchasers for
resale to qualified institutional buyers pursuant to the
exemption provided by Rule 144A of the Securities and Exchange
Commission. In December 1997, the Company completed the exchange
of the initial series of the Senior Subordinated Notes, which
were restricted securities, for a series of substantially
identical Senior Subordinated Notes that are not restricted
securities. The net proceeds from the sale of the Senior
Subordinated Notes were used to repay $82.4 million in borrowings
and interest under the Revolving Credit Facility, $13.1 million
in other indebtedness and $800,000 in loan fees for the Revolving
Credit Facility.
Following the application of the net proceeds from the sale
of the Senior Subordinated Notes, the Company made additional
draws under the Revolving Credit Facility during the remainder of
1997 of $22.0 million to fund a portion of the capital
expenditures for the development of The Reserve. At December 31,
1997, the outstanding principal balance of the Revolving Credit
Facility was $54.5 million.
Until Phase I of The Reserve was completed in February 1998,
draws under the Revolving Credit Facility could only be used to
fund construction of The Reserve and certain
<PAGE>other specified expenditures. Following the completion of
Phase I of The Reserve, the Revolving Credit Facility proceeds
may be used only for working capital purposes of the Borrowers
and funding ongoing capital expenditures for existing facilities.
Borrowings under the Revolving Credit Facility are
designated by the Borrowers on a quarterly basis as either base
rate or London Interbank Offered Rate ("LIBOR") borrowings. The
interest rate generally is equal to WFB's per annum prime rate in
effect from time to time or the per annum LIBOR, plus in each
case an applicable margin determined by reference to the
Borrowers' rolling four-quarter ratio of total funded debt to
EBITDA (as defined below). The range of the base rate margin is
from 0.25 percentage points to 2.25 percentage points, and the
range of the LIBOR margin is from 1.50 percentage points to 3.50
percentage points. At December 31, 1997, the average interest
rate applicable to Revolving Credit Facility borrowings was 8.4%.
The Revolving Credit Facility will mature on June 30, 2003.
Prior to maturity, the maximum principal available under the
Revolving Credit Facility will reduce semiannually (commencing on
July 1, 1999) by an aggregate of $50.0 million in increasing
increments ranging from $2.5 million to $10.0 million. The
Revolving Credit Facility includes covenants and conditions that
limit the Borrowers' outstanding borrowings under the Revolving
Credit Facility to not more than the lesser of the Borrowers'
rolling four-quarter EBITDA multiplied by 3.25 and the Borrowers'
total funded debt to not more than the Borrowers' rolling four-
quarter EBITDA multiplied initially by 5.0, which multiplier will
decline to 4.5 commencing March 31, 1999 and to 4.0 commencing
March 31, 2000. For purposes of the Revolving Credit Facility,
the Borrowers' EBITDA is generally defined as net income before
interest expense, income taxes, depreciation and amortization,
preopening costs and certain extraordinary and non-cash items.
The Revolving Credit Facility also includes covenants
requiring the Borrowers to maintain rolling four-quarter gross
fixed charge coverage and adjusted fixed charge coverage ratios
(as defined) of 1.5 to 1.0 and 1.1 to 1.0, respectively. For
purposes of these covenants, principal payments on the Gem Notes
(as defined below) will be included only to the extent actually
paid in the applicable period. The Revolving Credit Facility
prohibits Ameristar from making any dividend or other
distribution on its capital stock during any period in which the
Borrowers' rolling four-quarter ratio of total funded debt to
EBITDA is greater than 2.0 to 1.0.
The Revolving Credit Facility is secured by liens on
substantially all of the real and personal property of the
Borrowers. The Revolving Credit Facility prohibits any future
secondary liens on these properties without the prior written
approval of the lenders. Certain changes in control of Ameristar
may constitute a default under the Revolving Credit Facility.
The Revolving Credit Facility also requires the Borrowers to
expend 2% of their consolidated net revenues on capital
maintenance annually. The Revolving Credit Facility binds the
Borrowers to a number of additional affirmative and negative
covenants, including promises to maintain certain financial
ratios and tests within defined parameters. As of December 31,
1997, the Company was in compliance with these covenants.
<PAGE>The Borrowers paid various fees and other loan costs
upon the closing of the Revolving Credit Facility that will be
amortized over the term of the Revolving Credit Facility. In
addition, commencing on the first anniversary of the closing of
the Revolving Credit Facility, the Borrowers will be required to
pay quarterly commitment fees at an annual rate of 0.50% or
0.375% of the unused portion of the Revolving Credit Facility.
The 1995 Revolving Credit Facility was terminated early in
connection with entering into the Revolving Credit Facility. As
a result, the Company incurred a $1.1 million pre-tax non-cash
extraordinary charge ($673,000 or $0.03 per share on an after-tax
basis) during 1997 to reflect the accelerated write-off of
unamortized deferred financing costs.
The Senior Subordinated Notes were issued under an Indenture
dated July 15, 1997 (the "Indenture"). In addition to Ameristar
and the trustee, all of Ameristar's subsidiaries (the
"Guarantors") are parties to the Indenture for the purpose of
guaranteeing (the "Guarantees") payments on the Senior
Subordinated Notes.
The Senior Subordinated Notes will mature on August 1, 2004.
Interest is payable semiannually on February 1 and August 1,
commencing February 1, 1998, at the per annum rate of 10.5%. The
Senior Subordinated Notes and the Guarantees are not secured and
are subordinate to all existing and future Senior Indebtedness
(as defined), which includes the Revolving Credit Facility.
Ameristar may redeem the Senior Subordinated Notes, in whole
or in part, at any time on or after August 1, 2001, at redemption
prices that decline over time from 105.25% to 101.75%. Senior
Subordinated Notes may also be redeemed if the holder or
beneficial owner thereof is required to be licensed, qualified or
found suitable under applicable Gaming Laws (as defined) and is
not so licensed, qualified or found suitable. Ameristar may also
be required to redeem a portion of the Senior Subordinated Notes
in the event of certain asset sales or the loss of a material
gaming license, and each holder of the Senior Subordinated Notes
will have the right to require Ameristar to redeem such holder's
Senior Subordinated Notes upon a Change of Control (as defined)
of Ameristar. The Senior Subordinated Notes are not subject to
any mandatory redemption or sinking fund obligations.
The Indenture includes covenants that restrict the ability
of Ameristar and the Restricted Subsidiaries (as defined and
which includes all Guarantors) from incurring future Indebtedness
(as defined); provided, however, that Ameristar or any Guarantor
may incur Indebtedness if the incurrence thereof would not result
in the Consolidated Coverage Ratio (as defined) being greater
than 2.0 to 1.0 on a rolling four-quarter basis. The Indenture
also permits Ameristar or a Restricted Subsidiary to incur
Indebtedness without regard to the Consolidated Coverage Ratio
test in certain circumstances, including borrowings of up to
$140 million under the Revolving Credit Facility, as amended or
replaced from time to time, up to $15.0 million in recourse
furniture, fixtures and equipment financings, up to $7.5 million
in borrowings for the construction of the hotel at Ameristar
Vicksburg and up to $5.0 million of other Indebtedness.
The Indenture also includes certain covenants that, among
other things, limit the ability of Ameristar and its Restricted
Subsidiaries to pay dividends or other distributions (excluding
<PAGE>dividends and distributions from a Restricted Subsidiary to
Ameristar or a Guarantor), make investments, repurchase
subordinated obligations or capital stock, create certain liens
(except those securing Senior Indebtedness), enter into certain
transactions with affiliates, sell assets, issue or sell
subsidiary stock, create or permit restrictions on distributions
from subsidiaries or enter into certain mergers and
consolidations.
The Company is constructing a 150-room hotel at Ameristar
Vicksburg, which is expected to cost approximately $10.3 million,
including capitalized construction period interest and preopening
costs. The Company has obtained a nonrecourse loan facility for
$7.5 million with a private lender for the purpose of funding a
portion of the construction costs, with the balance expected to
be provided out of operating cash flow. The loan matures July 1,
1998 and requires periodic interest payments at the rate of 15%
per annum. The Company is required to pay a non-usage fee at the
rate of 3% per annum on the undrawn loan balance, and draws are
subject to the satisfaction of various conditions typically
applicable to construction loans. As of December 31, 1997, the
outstanding balance on the loan was $1.9 million.
On June 20, 1997 and as part of the consideration for the
acquisition of The Reserve, Ameristar issued unsecured
subordinated promissory notes to the former stockholders of Gem
Gaming, Inc., the original developer of the Reserve, in an
aggregate principal amount of $28.7 million (the "Gem Notes").
The per annum interest rate on the Gem Notes is 8%, subject to
increases up to a maximum of 18% per annum, following one or more
failures to make payments under the Gem Notes by scheduled dates.
Any interest not paid when scheduled will thereafter accrue
interest as principal. The Gem Notes require annual principal
reduction payments ranging from $2.0 million to $3.0 million
commencing in November 1998. The Gem Notes mature on December
31, 2004 and may be prepaid in whole or in part without penalty
at any time. The Gem Notes are not subject to acceleration or
other collection efforts upon failure to make a scheduled payment
prior to maturity, and the only remedy for such a failure to make
a scheduled payment is an increase in interest rate as described
above. The Gem Notes are subordinate to the Revolving Credit
Facility, the Senior Subordinated Notes and other long-term
indebtedness of Ameristar specified by Ameristar up to a maximum
of $250 million.
At December 31, 1997, the Company had other long-term
indebtedness in an aggregate principal amount of $14.6 million.
No assurance can be given that the Company will be able to
satisfy, when necessary, the financial covenants under the
Revolving Credit Facility, the Senior Subordinated Notes or other
debt instruments for purposes of incurring additional debt,
including additional draws under the Revolving Credit Facility.
In addition, a failure to satisfy the financial covenants under
the Revolving Credit Facility could either require the Company to
reduce the outstanding balance of the Revolving Credit Facility,
which requirements could adversely affect or exceed the Company's
liquidity, or result in an event of default under one or more
debt instruments. Adverse changes in the Company's operations or
operating cash flow may affect the ability of the Company to
satisfy these financial covenants.
<PAGE>Capital expenditures for the year ended December 31,
1997 were approximately $77.0 million, including approximately
$61.8 million relating to development of The Reserve, $4.3
million relating to the development of the Ameristar Vicksburg
hotel, approximately $2.7 million for casino equipment at the
Jackpot Properties, and approximately $4.5 million relating to
Ameristar Council Bluffs in addition to other normal capital
improvement projects. The Company funded these capital
expenditures primarily from net cash provided by operating
activities and borrowings.
Among other capital expenditures anticipated for 1998, the
Company intends to make capital expenditures of approximately
$40.0 million in connection with the completion and opening of
Phase I of The Reserve and approximately $6.0 million in
connection with the completion of the Ameristar Vicksburg hotel.
Management believes that the above-described minimum capital
expenditure requirements will be funded out of draws under the
Revolving Credit Facility and the $7.5 million loan facility for
the development of the Ameristar Vicksburg hotel, cash on hand,
operating cash flow and purchase money and lease financing
related to the acquisition of furniture, fixtures and equipment
(including gaming equipment). Subsequent to December 31, 1997,
the Company has drawn an additional $31.5 million on the
Revolving Credit Facility and $1.4 million on the Vicksburg hotel
loan. A $6.7 million lease has also been entered into for
financing of gaming equipment for The Reserve.
Management is currently considering several potential
capital expenditure projects at The Reserve, Ameristar Council
Bluffs and Ameristar Vicksburg, but the Company has not yet
committed to any of these projects. In evaluating these
projects, management intends to consider the operating
performance of each of the Company's properties, the anticipated
relative costs and benefits of the various projects, and
competitive and other relevant factors, including the
availability of operating cash flow and debt financing to fund
capital expenditures.
Because the amount of borrowings permitted to be drawn at
any time under the Revolving Credit Facility is determined in
part by the Company's rolling four-quarter EBITDA (as defined),
the Company's anticipated borrowings under the Revolving Credit
Facility to fund a portion of any capital expenditure project
will be dependent upon the level of the Company's aggregate
operating cash flow. Increases in operating cash flow are
anticipated to be primarily dependent upon the operating
performance of The Reserve. No assurances can be given with
respect to the amount of operating cash flow of the Company for
any future period, whether the Company will proceed with any of
the capital expenditure projects currently under consideration,
or the timing, cost or scope of any project undertaken by the
Company. At the present time, the Company does not anticipate
undertaking capital expenditure projects during 1998 that could
not be funded out of amounts anticipated to be available through
anticipated internally generated cash flow and the Company's
borrowing capacity under the Revolving Credit Facility.
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 in the
development of its business instead of paying cash dividends. In
addition, as described
<PAGE>above, the Revolving Credit Facility obligates the Company
to comply with certain financial covenants that may restrict or
prohibit the payment of dividends.
YEAR 2000 ISSUES
The Company is currently in the process of evaluating its
information technology infrastructure for Year 2000 issues (i.e.,
computer applications that use only two digits to identify a year
and could produce erroneous results after 1999). The Company
does not expect that the cost to modify its information
technology infrastructure to be Year 2000 compliant will be
material to its financial condition or results of operations.
The Company is seeking assurances from its software vendors with
respect to Year 2000 issues and does not anticipate any material
disruption in its operations.
ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
The Report of the Company's Independent Public Accountants
appears at page F-1 hereof, and the Consolidated Financial
Statements and Notes to Consolidated Financial Statements of the
Company appear at pages F-2 through F-30 hereof.
ITEM 8. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
No Applicable.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF
THE REGISTRANT
The information required by this Item is set forth under the
captions "Item 1 -- Election of Directors -- Information
Concerning the Nominees" and "-- Directors and Executive
Officers" in the Company's definitive Proxy Statement to be filed
with the Securities and Exchange Commission and is incorporated
herein by this reference as if set forth in full.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is set forth under the
caption "Executive Compensation" in the Company's definitive
Proxy Statement to be filed with the Securities and Exchange
Commission and is incorporated herein by this reference as if set
forth in full.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is set forth under the
caption "Item 1 -- Election of Directors -- Security Ownership of
Certain Beneficial Owners and Management" in the Company's
definitive Proxy Statement to be filed with the Securities and
Exchange Commission and is incorporated herein by this reference
as if set forth in full.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.
The information required by this Item is set forth under the
caption "Certain Transactions" in the Company's definitive Proxy
Statement to be filed with the Securities and Exchange Commission
and is incorporated herein by this reference as if set forth in
full.
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,
1996 and 1997.
Consolidated Statements of Income for the years
ended December 31, 1995, 1996 and 1997.
Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1995, 1996 and
1997.
Consolidated Statements of Cash Flows for the
years ended December 31, 1995, 1996 and 1997.
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. Certain of the listed exhibits
are incorporated by reference to previously filed reports of the
registrant under the Securities Exchange Act of 1934, as amended,
including Forms 10-K, 10-Q and 8-K. These reports have been
filed with the Securities and Exchange Commission under file
number 0-22494.
EXHIBI
T DESCRIPTION OF EXHIBIT METHOD OF FILING
NUMBER
3.1 Articles of Incorporation of Incorporated by reference
Ameristar Casinos, Inc. to Exhibit 3.1 to
("ACI"). Registration Statement on
Form S-1 filed by ACI
under the Securities Act
of 1933, as amended (File
No. 33-68936) (the
"Form S-1").
3.2 Bylaws of ACI. 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 Credit Agreement, dated as of Incorporated by reference
July 8, 1997, among ACI, to Exhibits 4.1 and 99.1
Cactus Pete's, Inc. ("CPI"), to the Current Report on
Ameristar Casino Vicksburg, Form 8-K of ACI filed on
Inc. ("ACVI"), Ameristar July 30, 1997 (the "July
Casino Council Bluffs, Inc. 1997 8-K").
("ACCBI") and Ameristar
Casino Las Vegas, Inc.
("ACLVI"), as Borrowers, the
Lenders named therein, and
Wells Fargo Bank, National
Association as Arranger,
Agent Bank and Swingline
Lender, together with a list
describing omitted schedules
and exhibits thereto.
4.3(a) Indenture, dated as of Incorporated by reference
July 15, 1997, among ACI, to Exhibit 4.2 to the
ACLVI, ACVI, A.C. Food July 1997 8-K.
Services, Inc. ("ACFSI"), AC
Hotel Corp. ("ACHC"), ACCBI
and First Trust National
Association, including the
forms of Notes and Subsidiary
Guarantees issued thereunder.
4.3(b) Registration Rights Incorporated by reference
Agreement, dated as of to Exhibit 4.3 to the
July 15, 1997, among ACI, July 1997 8-K.
ACCBI, ACFSI, ACHC, ACLVI,
ACVI, CPI, Bear, Stearns &
Co. Inc., BT Securities
Corporation and First Chicago
Capital Markets, Inc.
4.3(c) Supplemental Indenture, dated Incorporated by reference
as of October 24, 1997, among to Exhibit 4.1(c) to
ACI, CPI, ACLVI, ACVI, ACFSI, Amendment No. 1 to
ACHC, ACCBI and First Trust Registration Statement on
National Association. Form S-4 filed by ACI,
CPI, ACVI, ACCBI, ACLVI,
ACFSI and ACHC under the
Securities Act of 1933,
as amended (File No. 333-
34381) (the "Form S-4").
4.4 Other Long-Term Debt. See Exhibits 10.8(k)-(n)
See Exhibits 10.8(k)-(n) and and 99.1.
99.1.
*10.1( Employment Agreement, dated Incorporated by reference
a) 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( Employment Agreement, dated Incorporated by reference
b) 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 CPI to Exhibit 10.17 to the
and Craig H. Neilsen. 1994 10-K.
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 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.
10.8(a Merger Agreement, dated as of Incorporated by reference
) May 31, 1996, among Gem to Exhibits 10.1 and 99.1
Gaming, Inc. ("Gem"), ACI, to ACI's Quarterly Report
ACLVI, Steven W. Rebeil on Form 10-Q for the
("Rebeil") and Dominic J. quarter ended June 30,
Magliarditi ("Magliarditi"), 1996 (the "June 1996 10-
together with a list Q").
describing omitted schedules
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 1996 8-K.
September 27, 1996, among
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.
10.8(j Settlement Agreement, dated Incorporated by reference
) as of May 3, 1997, among ACI, to Exhibit 10.1 to ACI's
ACLVI, Rebeil, Magliarditi, Quarterly Report on Form
Gem Air, Inc. and NVAGAIR. 10-Q for the quarter
ended March 31, 1997.
10.8(k Promissory Note, dated as of Incorporated by reference
) June 1, 1997, made by ACI to Exhibit 10.8(k) to the
payable to the order of Form S-4.
Rebeil in the original
principal amount of
$13,232,146.
10.8(l Promissory Note, dated as of Incorporated by reference
) June 1, 1997, made by ACI to Exhibit 10.8(l) to the
payable to the order of Form S-4.
Magliarditi in the original
principal amount of $417,854.
10.8(m Non-Negotiable Promissory Incorporated by reference
) Note, dated as of June 1, to Exhibit 10.8(m) to the
1997, made by ACI payable to Form S-4.
the order of Rebeil in the
original principal amount of
$14,540,820.
10.8(n Non-Negotiable Promissory Incorporated by reference
) Note, dated as of June 1, to Exhibit 10.8(n) to the
1997, made by ACI payable to Form S-4.
the order of Magliarditi in
the original principal amount
of $459,180.
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( Lease, dated September 18, Incorporated by reference
a) 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( First Amendment to Lease Incorporated by reference
b) Agreement, dated June 1, to Exhibit 10.3 to the
1995, between R.R. Morrison & 1995 10-K.
Son, Inc. and ACVI.
10.11( Lease, dated December 11, Incorporated by reference
a) 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( First Amendment to Lease Incorporated by reference
b) 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 Exhibits 10.12 and
Permit, dated May 15, 1995, 99.1 to ACI's Annual
between the State of Iowa Report on Form 10-K for
acting through the Iowa the year ended
Department of Natural December 31, 1996 (the
Resources and ACCBI as the "1996 10-K").
assignee of Koch Fuels, Inc.
10.13 Option Agreement, dated July Incorporated by reference
11, 1995, between Levy Realty to the Exhibit 10.13 to
Trust and ACLVI as the the 1996 10-K.
successor to Gem.
21.1 Subsidiaries of ACI. Incorporated by reference
to Exhibit 21.1 to the
Form S-4.
23.1 Consent of Arthur Andersen Filed electronically
LLP. herewith.
27.1 Financial Data Schedule. Filed electronically
herewith.
99.1 Agreement to furnish Filed electronically
Securities and Exchange herewith.
Commission 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
None.
<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 report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AMERISTAR CASINOS, INC.
(Registrant)
March 30, 1998 By: /s/ Craig H. Neilsen
Craig H. Neilsen
President, Chairman of the
Board and CEO
Pursuant to the requirements of the Securities Exchanges Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
SIGNATURE NAME AND TITLE DATE
Craig H. Neilsen,
President, Chairman of
/s/ Craig H.Neilsen the Board and CEO March 30,1998
(principal executive
officer)
Thomas M. Steinbauer,
Senior Vice President of
Finance and
Administration
/s/ Thomas M. Steinbauer (principal financial March 30, 1998
officer and principal
accounting officer) and
Director
/s/ John R. Spina John R. Spina, Director March 30, 1998
/s/ Paul I. Corddry Paul I. Corddry, Director March 30, 1998
/s/ Larry A. Hodges Larry A. Hodges, Director March 30, 1998
/s/ Warren E. McCain Warren E. McCain, Direcotr March 30, 1998
<PAGE>On this 30th of March 1998, Craig H. Neilsen
directed Chris Hinton, in his presence as well as our own, to
sign the foregoing document as "Craig H. Neilsen." Upon viewing
the signatures as signed by Chris Hinton and in our presence,
Craig H. Neilsen declared to us that he adopted them as his own
signatures.
/s/Cheryl L. Atchison
Witness
/s/Donna Vido
Witness
STATE OF NEVADA )
):ss.
COUNTY OF CLARK )
I, Janice S. Lupton, Notary Public in and for said county
and state, do hereby certify that Craig H. Neilsen personally
appeared before me and is known or identified to me to be the
president and chief executive officer of Ameristar Casinos, Inc.
the corporation that executed the within instrument or the person
who executed the instrument on behalf of said corporation. Craig
H. Neilsen, who being unable due to physical incapacity to sign
his name or offer his mark, did direct Chris Hinton, in his
presence, as well as my own, to sign his name to the foregoing
document. Craig H. Neilsen, after viewing his name as signed by
Chris Hinton, thereupon adopted the signatures as his own by
acknowledging to me his intention to so adopt as if he had
personally executed the same both in his individual capacity and
in behalf of said corporation, and further acknowledged to me
that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal this 30th day of March 1998.
/s/Janice S. Lupton
Notary Public
My Commission Expires: October 23, 2000
Residing at: Las Vegas, NV
<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, 1996 and 1997, and the related consolidated
statements of income, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1997.
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, 1996 and 1997, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
February 23, 1998
<PAGE>
AMERISTAR CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(Amounts in Thousands)
<TABLE>
<S> <C> <C>
December 31,
1996 1997
-------- --------
CURRENT ASSETS:
Cash and cash equivalents $ 10,724 $ 13,031
Restricted cash 418 153
Accounts receivable, net 1,408 2,051
Income tax refund receivable - 2,103
Inventories 2,385 2,300
Prepaid expenses 3,081 4,125
Deferred income taxes 2,138 2,724
-------- --------
Total current assets 20,154 26,487
-------- --------
PROPERTY AND EQUIPMENT, at cost:
Buildings and improvements 169,004 171,942
Building under capitalized
lease 800 800
Furniture, fixtures and
equipment 53,857 54,024
Furniture, fixtures and equipment
under capitalized leases 1,029 7,531
-------- --------
224,690 234,297
Less: Accumulated depreciation and
amortization 56,253 68,951
-------- --------
168,437 165,346
Land 25,009 26,309
Land under capitalized leases 4,865 4,865
Construction in progress 27,159 85,648
-------- --------
225,470 282,168
-------- --------
PREOPENING COSTS 2,594 6,820
-------- --------
EXCESS OF PURCHASE PRICE OVER
FAIR MARKET VALUE OF NET ASSETS
ACQUIRED 19,043 15,408
-------- --------
DEPOSITS AND OTHER ASSETS 2,791 5,303
-------- --------
$270,052 $336,186
======== ========
The accompanying notes are an integral part of these consolidated
balance sheets.
</TABLE>
<PAGE>AMERISTAR CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
(Amounts in Thousands, Except Share Data)
<TABLE>
<S> <C> <C>
December 31,
1996 1997
-------- --------
CURRENT LIABILITIES:
Accounts payable $ 7,303 $ 4,772
Construction contracts payable 5,336 19,391
Accrued liabilities 13,564 21,549
Current obligations under
capitalized leases 506 875
Current maturities of notes payable
and long-term debt 19,740 5,635
Federal income tax payable 49 -
-------- --------
Total current liabilities 46,498 52,222
-------- --------
OBLIGATIONS UNDER CAPITALIZED
LEASES, net of current
maturities 8,333 9,600
-------- --------
NOTES PAYABLE AND LONG-TERM
DEBT, net of current maturities 135,560 183,513
-------- --------
DEFERRED INCOME TAXES 8,446 10,212
-------- --------
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, 1996
and 1997 204 204
Additional paid-in capital 43,043 43,043
Retained earnings 27,697 37,392
-------- --------
70,944 80,639
-------- --------
$270,052 $336,186
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
balance sheets.
<PAGE> AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except Per Share Data)
<TABLE>
<S> <C> <C> <C>
Years ended December 31,
1995 1996 1997
-------- -------- --------
REVENUES:
Casino $ 99,364 $161,338 $173,077
Food and beverage 19,303 24,250 30,672
Rooms 7,861 7,641 9,685
Other 7,756 7,760 8,275
-------- -------- --------
134,284 200,989 221,709
Less: Promotional
allowances 10,417 12,524 15,530
-------- -------- --------
Net revenues 123,867 188,465 206,179
-------- -------- --------
OPERATING EXPENSES:
Casino 44,503 75,685 78,733
Food and beverage 11,747 16,773 19,784
Rooms 2,404 2,368 3,130
Other 8,211 7,054 7,546
Selling, general and
administrative 29,197 47,758 51,958
Depreciation and
amortization 9,721 14,135 16,358
Abandonment loss - - 646
Preopening costs - 7,379 -
-------- -------- --------
Total operating
expenses $105,783 $171,152 $178,155
-------- -------- --------
Income from
operations 18,084 17,313 28,024
OTHER INCOME
(EXPENSE):
Interest income 205 354 445
Interest expense (3,958) (8,303) (12,107)
Other - (77) (35)
-------- -------- --------
INCOME BEFORE INCOME
TAX PROVISION 14,331 9,287 16,327
Income tax provision 5,236 3,390 5,959
-------- -------- --------
INCOME BEFORE EXTRAORDINARY
LOSS 9,095 5,897 10,368
EXTRAORDINARY LOSS ON EARLY
RETIREMENT OF DEBT, net of
income tax benefit of $354,
$0 and $387, respectively (657) - (673)
-------- -------- --------
NET INCOME $ 8,438 $ 5,897 $ 9,695
======== ======== ========
</TABLE>
<PAGE>
AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(CONTINUED)
(Amounts in Thousands, Except Per Share Data)
<TABLE>
<S> <C> <C> <C>
Years ended December 31,
1995 1996 1997
------ ------ ------
EARNINGS PER SHARE:
Income before
extraordinary loss
Basic and diluted $ 0.45 $ 0.29 $ 0.51
Net Income
Basic and diluted $ 0.42 $ 0.29 $ 0.48
WEIGHTED AVERAGE
SHARES OUTSTANDING 20,360 20,360 20,360
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in Thousands, Except Number of Shares)
<TABLE>
<S> <C> <C> <C> <C> <C>
Capital Stock Additional
No. of Paid-In Retained
Shares Balance Capital Earnings Total
---------- ------- ------- -------- --------
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
Net income - - - 9,695 9,695
---------- ------- ------- -------- --------
Balance,
December 31,
1997 20,360,000 $ 204 $43,043 $ 37,392 $ 80,639
========== ======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
<TABLE>
<S> <C> <C> <C>
Years ended December 31,
1995 1996 1997
-------- -------- --------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 8,438 $ 5,897 $ 9,695
-------- -------- --------
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 9,721 14,135 16,358
Change in deferred income
taxes 3,209 (181) 2,964
Net (gain) loss on
disposition of assets - (56) 505
Amortization of debt
issuance costs 205 229 424
Preopening costs - 7,379 -
Extraordinary loss on
early retirement of
debt 1,011 - 1,060
Changes in current assets
and liabilities:
Restricted cash (16) (162) 265
Accounts receivable,
net 260 (94) (643)
Income tax refund
receivable - - (2,103)
Inventories (735) (112) 85
Prepaid expenses (1,165) (468) (374)
Accounts payable 10 3,524 (2,531)
Accrued liabilities 2,110 3,037 7,985
Federal income taxes
payable - 49 (49)
-------- -------- --------
Total adjustments 14,610 27,280 23,946
-------- -------- --------
Net cash provided by operating
activities 23,048 33,177 33,641
-------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures (63,559) (43,087) (72,932)
Increase (decrease) in
construction contracts
payable 3,318 (4,791) 14,055
Proceeds from sale of
assets - 56 126
Increase in deposits and
other assets (2,781) (5,924) (4,666)
-------- -------- --------
Net cash used in investing
activities (63,022) (53,746) (63,417)
-------- -------- --------
</TABLE>
<PAGE>
AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(Amounts in Thousands)
<TABLE>
<S> <C> <C> <C>
Years ended December 31,
1995 1996 1997
-------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of
long-term debt $ 75,839 $ 44,628 $150,786
Debt issuance costs (1,403) - (4,439)
Minority interest income - - (16)
Restricted security deposit (11,511) 11,511 -
Principal payments of long-
term debt and capitalized
leases (17,333) (39,633) (114,248)
-------- -------- --------
Net cash provided by financing
activities 45,592 16,506 32,083
-------- -------- --------
NET INCREASE (DECREASE) IN
CASH
AND CASH EQUIVALENTS 5,618 (4,063) 2,307
CASH AND CASH EQUIVALENTS --
BEGINNING OF YEAR 9,169 14,787 10,724
-------- -------- --------
CASH AND CASH EQUIVALENTS --
END OF YEAR $ 14,787 $ 10,724 $ 13,031
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<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") and Ameristar
Casino Las Vegas, Inc. ("ACLVI"). ACI also operates A.C. Food
Services, Inc., a purchasing subsidiary. ACVI has a wholly owned
subsidiary, AC Hotel Corp., created for the purpose of
constructing and operating a hotel in Vicksburg, Mississippi.
Ameristar Casino Lawrenceburg, Inc. ("ACLI"), a wholly owned
subsidiary of ACI, was dissolved in 1996. ACI's majority
interest in Nevada AG Air, Ltd. ("NVAGAIR") was terminated in
1997.
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 operates The
Reserve Hotel Casino ("The Reserve") in the Henderson-Green
Valley suburban area of Las Vegas, Nevada which opened February
10, 1998. 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.
<PAGE>
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.
Accounts receivable
Gaming receivables are included as part of the Company's
accounts receivable balance. An allowance of $256,000 and
$464,000 at December 31, 1996 and 1997, 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.
Depreciation and capitalization
Property and equipment is recorded at cost, including
interest charged on funds borrowed to finance construction.
Interest of $1,850,000, $2,313,000 and $4,654,000 was capitalized
for the years ended December 31, 1995, 1996 and 1997,
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. The excess of the purchase price
over fair market value of net assets acquired related to the Gem
Gaming, Inc. acquisition (see Note 10) will be amortized over a
39-year period upon the opening of The Reserve.
<PAGE>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:
<TABLE>
<S> <C> <C> <C>
Years ended December 31,
1995 1996 1997
-------- -------- --------
(Amounts in Thousands)
Food and beverage $ 7,999 $ 9,560 $ 12,283
Room 438 732 708
Other - 469 644
-------- -------- --------
$ 8,437 $ 10,761 $ 13,635
======== ======== ========
</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
$3,685,000, $6,144,000, and $5,453,000 for the years ended
December 31, 1995, 1996 and 1997, 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
<PAGE>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.
Earnings Per Share
In 1997, the Company adopted SFAS No. 128 -- Earnings Per
Share ("SFAS No. 128"). SFAS 128 replaces previously reported
earnings per share with "basic" earnings per share and "diluted"
earnings per share. Basic earnings per share are computed by
dividing reported earnings by the weighted average number of
common shares outstanding during the period. Diluted earnings
per share reflect the additional dilution for all potentially
dilutive securities such as stock options. Basic and diluted
earnings per share are equal for the years ended December 31,
1995, 1996 and 1997 as the outstanding stock options were
antidilutive.
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.
NOTE 2 - ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<S> <C> <C>
December 31,
1996 1997
-------- --------
(Amounts in Thousands)
Compensation and related benefits $ 5,496 $ 5,255
Taxes other than income taxes 2,623 4,625
Progressive slot machine jackpots 916 959
Interest 939 6,129
Deposits and other accruals 3,590 4,581
-------- --------
$ 13,564 $ 21,549
======== ========
</TABLE>
<PAGE>
NOTE 3 - FEDERAL INCOME TAXES
The components of the income tax provision are as follows:
<TABLE>
<S> <C> <C> <C>
Years ended December 31,
1995 1996 1997
------ ------ ------
(Amounts in Thousands)
Current $2,027 $3,571 $2,371
Deferred 3,209 (181) 3,588
------ ------ ------
Provision on income
before extraordinary item 5,236 3,390 5,959
Tax benefit of extraordinary item (354) - (387)
------ ------ ------
$4,882 $3,390 $5,572
====== ====== ======
</TABLE>
The reconciliation of income tax at the Federal statutory
rates to income tax expense is as follows:
<TABLE>
<S> <C> <C> <C>
Years ended December 31,
1995 1996 1997
---- ---- ----
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>
December 31,
1996 1997
-------- --------
(Amounts in Thousands)
Deferred tax assets:
Preopening costs $ 2,940 $ 2,212
Accrued book expenses not
currently deductible 1,269 1,674
Alternative minimum tax credit(1) 949 2,409
Project development costs 914 1,118
Book loss in excess of tax loss - 202
Asset reserves 90 161
Other 69 161
-------- --------
Total deferred tax assets 6,231 7,937
-------- --------
Deferred tax liabilities:
Tax depreciation in excess of
book depreciation (9,107) (13,598)
Book capitalized interest in
excess of tax (325) (451)
Tax to book difference in
acquired land (2) (1,784) -
Other (1,323) (1,376)
-------- --------
Total deferred tax liabilities (12,539) (15,425)
-------- --------
Net deferred tax liability $ (6,308) $ (7,488)
======== ========
[/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., 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. During the
year ended December 31, 1997, the deferred
tax liability related to the step-up was
eliminated as a result of the Gem Settlement
Agreement. (See Note 10)
NOTE 4 - SUPPLEMENTAL CASH FLOW DISCLOSURES
The Company made cash payments for interest, net of amounts
capitalized, of $3,386,000, $7,930,000, and $8,223,000 for the
years ended December 31, 1995, 1996 and 1997, respectively.
The Company made cash payments for Federal income taxes of
$1,220,000, $2,900,000, and $4,760,000 for the years ended
December 31, 1995, 1996 and 1997, respectively.
<PAGE>The Company acquired assets through capitalized leases
of $1,083,000, $0 and $2,998,000 during the years ended
December 31, 1995, 1996 and 1997, respectively.
The Company acquired assets through the issuance of notes
payable of $141,000, $3,173,000, and $704,000 during the years
ended December 31, 1995, 1996 and 1997, respectively.
The Company retired the balance of $44,810,000 under the
1993 Revolving Credit Facility by entering into the 1995
Revolving Credit Facility (see Note 5) during the year ended
December 31, 1995.
The Company retired the balance of $94,500,000 under the
1995 Revolving Credit Facility by entering into a new Revolving
Credit Facility (see Note 5) during the year ended December 31,
1997.
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 in 1996.
The following reflects the noncash components of the
Company's acquisition of Gem Gaming, Inc. as of December 31, 1996
(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
========
<PAGE>Adjustments to the excess of purchase price over fair
market value of net assets acquired as of December 31, 1997 due
to the Gem Settlement Agreement (see Note 10) are as follows
(amounts in thousands):
Reduction in value of Gem Notes $ (2,725)
Deferred taxes on land purchase (1,784)
Dissolution of NVAGAIR subsidiary 418
Return of aviation asset 271
Miscellaneous receivables 185
--------
Total change in excess
purchase price $ (3,635)
========
</TABLE>
NOTE 5 -- NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt consist of the following:
<TABLE>
<S> <C> <C>
December 31,
1996 1997
-------- --------
(Amounts in Thousands)
1995 Revolving Credit Facility
(see below). $ 93,500 $ -
Revolving Credit Facility (see
below) - 54,550
10.5 percent Senior Subordinated
Notes, interest payable only semi-
annually, principal due August 1,
2004 - 100,000
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. 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. 5,204 -
Note payable to lender, with
interest at 15 percent, secured
by a deed of trust on the hotel
at ACVI, interest payable
quarterly, principal due in
July 1998. - 1,856
<PAGE>
Mortgages payable to United States
Department of Agriculture Rural
Economic and Community
Development Services Multi-
Housing Program with variable
interest (effective rate of
approximately 3.8 percent for the
years ended December 31, 1996 and
1997), 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. 1,378 1,335
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.
with interest at 8 percent up to
a maximum of 18 percent, interest
payable quarterly beginning July
1997 through October 1998 and
then monthly thereafter, periodic
principal payments of $2 million
to $3 million beginning November
1998, due December 31, 2004.
(See Note 10) - 28,650
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 1,431
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 1,187 1,326
-------- --------
155,300 189,148
Less: Current maturities 19,740 5,635
-------- --------
$135,560 $183,513
======== ========
</TABLE>
On October 5, 1993, CPI entered into a $50 million Reducing
Revolving Credit Facility (the "1993 Revolving Credit Facility")
with a syndicate of banks, led by Wells Fargo Bank (formerly
First Interstate Bank) ("WFB").
On July 5, 1995, the Company, as borrower, and its principal
operating subsidiaries, as guarantors, entered into a Revolving
Credit Facility (the "1995 Revolving Credit Facility") with WFB
and a syndicate of banks. The maximum borrowings initially
available were $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. As a result of
entering into the 1995 Revolving Credit Facility, the 1993
Revolving Credit Facility was retired at an extraordinary pre-tax
loss (related primarily to the write-off of unamortized loan
costs) of $1,011,000.
On July 8, 1997, the Company, as borrower, and its principal
operating subsidiaries, as guarantors, entered into a new $125
million Revolving Credit Facility (the "Revolving Credit
Facility") with WFB and a syndicate of banks. As a result of the
retirement of the 1995 Revolving Credit Facility, the Company
incurred an extraordinary pre-tax loss (related primarily to the
write-off of unamortized loan costs) of $1,060,000.
As of December 31, 1997, the Company had drawn $54.6 million
on the Revolving Credit Facility. These borrowings were used to
partially repay the 1995 Revolving Credit Facility and to fund
the development of The Reserve. The balance of the 1995
Revolving Credit Facility was repaid with proceeds from the
Senior Subordinated bond offering (See below).
The Company may not borrow under the Revolving Credit
Facility in excess of 3.25 times its rolling four quarter EBITDA
(earnings before interest, taxes, depreciation and amortization).
As of December 31, 1997, 3.25 times the Company's rolling four
quarter EBITDA exceeded the maximum funds available from the
Revolving Credit Facility. The<PAGE>Company is also limited to
borrowing no more than 5.0 times EBITDA in total debt as adjusted
per the Revolving Credit Facility. The maximum amount available
under the Revolving Credit Facility reduces semi-annually
commencing July 1, 1999 on a sliding scale (ranging from $2.5
million to $10.0 million in reductions) with a final reduction of
$75.0 million at maturity on June 30, 2003.
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 LIBOR 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 plus 0.25 percentage points to a maximum of prime plus 2.25
percentage points with interest payable monthly in arrears. As
of December 31, 1997, the Company has taken LIBOR and prime draws
totaling $54.6 million with an average interest rate of
approximately 8.4 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 flows, 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, 1997, the Company was in
compliance with these covenants.
On July 15, 1997, the Company completed an offering of
$100 million in principal amount of 10-1/2% Senior Subordinated
Notes due 2004 (the "Senior Subordinated Notes"). The Senior
Subordinated Notes have a coupon rate of 10.5 percent and were
sold at par. Interest is due semi-annually on February 1 and
August 1 of each year, and the maturity date is August 1, 2004.
Proceeds of the offering were used to retire and refinance
existing debt.
The indentures governing the Company's senior subordinated
notes (the "Indentures") contain certain customary financial and
other covenants, which among other things, govern the Company and
its subsidiaries ability to incur indebtedness (except, as
specifically allowed) unless after giving effect thereto, a 2.0
to 1.0 pro forma Consolidated Coverage Ratio (as defined in the
Indentures) has been met. As of December 31, 1997, the Company
was in compliance with these covenants.
<PAGE>The Senior Subordinated Notes were issued by ACI, and
all of ACI's current subsidiaries (the "Guarantors") have jointly
and severally, and fully and unconditionally, guaranteed the
Senior Subordinated Notes. Each of the Guarantors is a wholly
owned subsidiary of ACI, and the Guarantors constitute all of
ACI's direct and indirect subsidiaries. ACI is a holding company
with no operations or assets independent of those of the
Guarantors, other than its investment in the Guarantors, and the
aggregate assets, liabilities, earnings and equity of the
Guarantors are substantially equivalent to the assets,
liabilities, earnings and equity of the Company on a consolidated
basis. Separate financial statements and certain other
disclosures concerning the Guarantors are not presented because,
in the opinion of management, such information is not material to
investors. Other than customary restrictions imposed by
applicable corporate statutes, there are no restrictions on the
ability of the Guarantors to transfer funds to ACI in the form of
cash dividends, loans or advances.
In August 1997, AC Hotel Corp. entered into a loan agreement
providing for borrowings of up to $7.5 million for the purpose of
funding a portion of the construction costs of a 150-room hotel
at Ameristar Vicksburg. This nonrecourse loan from a private
lender is secured by a deed of trust on the hotel and the
underlying land senior in priority to the liens securing the
Revolving Credit Facility. Borrowings under this loan bear
interest at 15 percent per annum, payable in periodic
installments, and the loan matures in July 1998. The Company is
required to pay a non-usage fee at the rate of 3 percent per
annum on the undrawn loan balance, and draws are subject to the
satisfaction of various conditions typically applicable to
construction loans. As of December 31, 1997, the balance on this
loan was $1,856,000.
On December 28, 1995, ACCBI entered into a preferred ship
mortgage with General Electric Credit Corp. ("GECC"). Borrowings
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 was secured by the Council Bluffs casino. The loan's
principal was to 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 were
required. The Company had the right to 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 had the right to prepay the loan without
premium. ACI had entered into an unconditional guaranty of
prompt payment and performance with respect to this borrowing.
This borrowing was repaid in July 1997.
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 approximately $149,000. The interest rate
is equivalent to that charged on the Revolving
<PAGE>Credit Facility. This borrowing was repaid in July 1997
with proceeds from the Senior Subordinated Notes offering.
The mortgages payable to United States Department of
Agriculture Rural Economic and Community Development Services
Multi-Housing Program 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 are 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. NVAGAIR or the Company,
as a result of these transactions, assumed certain aviation-
related notes payable. These borrowings were removed from the
Company's obligations as part of the Gem Settlement. (See Notes
4 and 10)
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, 1997 are as follows (amounts in
thousands):
<TABLE>
<S> <C> <C>
1998 $ 5,635
1999 1,705
2000 2,400
2001 2,045
2002 3,045
Thereafter 174,318
--------
$189,148
========
</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
<PAGE>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, the Company will
pay $50,000 in 1999, approximately $1,500,000 in 2004 and
approximately $480,000 in 2024 to purchase all of the parcels.
If the Company were to accelerate its exercise of the purchase
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 had entered into two three-year capitalized lease
agreements for computer equipment on behalf of ACCBI. Monthly
payments were required totaling approximately $197,000 per year
through November 1998. ACCBI had entered into a five-year
capitalized lease agreement for telephone systems and related
equipment. This equipment was purchased as a result of the
Company's debt refinancing in July 1997.
CPI has entered into a four-year equipment lease for the
financing of the slot equipment at the facility. Monthly
principal payments of $44,000 plus interest are required through
May 2001 with a balloon payment in June 2001.
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 December 2006.
<PAGE>
Future minimum lease payments required under capitalized
leases for the five years subsequent to December 31, 1997 are as
follows (amounts in thousands):
<TABLE>
<S> <C> <C>
1998 $ 1,782
1999 2,931
2000 1,517
2001 1,636
2002 733
Thereafter 11,945
-------
20,544
Less: Amount representing
interest 10,069
-------
Present value of minimum
lease payments $10,475
=======
</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.
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 $52,500, plus the Company's
share of certain common area maintenance expenses. Payments
under the leases are subject to annual escalation 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. The Company recorded rental expense of
approximately $32,000 and $360,000 under these leases in the
years ended December 31, 1996, and 1997, respectively.
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 $350,000 for the plan year ended September 30, 1995.
<PAGE>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
contributions were $373,000 and $570,000 for the fiscal years
ended December 31, 1996, and 1997, respectively.
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 $2,113,000, $2,258,000 and $3,834,000 for the years
ended December 31, 1995, 1996 and 1997, 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
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.
<PAGE>
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. Stockholder approval of the September 1996
amendments to the Option Plan was given in June 1997 and the
Director Plan was terminated. As of December 31, 1997, 8,000
options remain outstanding under the Director Plan.
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>
<S> <C> <C> <C>
December 31,
1995 1996 1997
-------- -------- --------
(Amounts in Thousands, Except Per Share Data)
Net income: As reported $ 8,438 $ 5,897 $ 9,695
Pro forma 8,371 5,708 9,491
Basic and diluted
earnings per share:
As reported $ 0.42 $ 0.29 $ 0.48
Pro forma 0.41 0.28 0.47
</TABLE>
The fair value of each option granted (or repriced during
the period for which SFAS No. 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, 1996 and 1997,
respectively: risk-free interest rates of 5.7, 6.4 and 6.2
percent; expected volatility of 60, 63 and 63 percent. The
expected lives of the options are 5 years for 1995, 1996 and
1997. No dividends are expected to be paid.
<PAGE>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>
<S> <C> <C> <C>
1995 1996 1997
Wtd. avg. Wtd. avg. Wtd. avg.
Shares ex. price Shares ex. price Shares ex. price
-------- --------- ------- --------- ------ ---------
Options outstanding,
beginning of year 281,000 $11.74 548,000 $ 6.15 566,000 $ 6.25
Granted 390,000 6.12 70,000 7.31 150,000 5.32
Exercised - - -
Canceled (123,000) 10.84 (52,000) 6.67 (121,500) 9.57
-------- -------- --------
Options outstanding,
end of year 548,000 6.15 566,000 6.25 594,500 6.12
======== ======== ========
Options available
for grant 552,000 534,000 1,013,500
Options exercisable,
end of year 52,400 6.50 154,800 6.24 233,800 6.25
Weighted average
fair value
of options granted $ 3.49 $ 4.34 $ 3.14
</TABLE>
At December 31, 1997, 570,000 of the 594,500 options
outstanding have exercise prices between $5.06 and $6.50, with a
weighted average exercise price of $5.96 and a weighted average
remaining contractual life of 7.7 years. 22,500 options
outstanding have exercise prices between $7.13 and $9.96, with a
weighted average exercise price of $9.11 and a weighted average
remaining contractual life of 8.6 years. The remaining 2,000
options have an outstanding exercise price of $16.00, with a
remaining contractual life of 6.2 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. 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 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 $84.7 million had been incurred
as of December 31, 1997.
<PAGE>
In early 1997, the Company began constructing a 150-room
hotel at Ameristar Vicksburg expected to be completed in April
1998. 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 demolished in connection with this
expansion. Based on preliminary design plans, management
believes that the development cost of the hotel will be $10.3
million, including capitalized construction period interest.
Management is funding a substantial portion of these development
costs 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 did not
contain a plea for a specific amount of damages, and instead
requested 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 estimated that the general
contractor's claims were 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
submitted a statement of damages in the arbitration proceeding
seeking $7.1 million from the general contractor. As of December
31, 1996, $1,515,000 in cost overruns had been paid by the
Company. In addition, at December 31, 1996, $2,154,000 of the
Company's construction payables represented disputed general
contractor claims. On November 13, 1997, the three-member
arbitrator panel for the American Arbitration Association
increased the guaranteed maximum price under the construction
contract by approximately $690,000 to approximately $33.0 million
and required the general contractor to pay to ACCBI approximately
$825,000, plus interest, to compensate for cost overruns
previously paid by ACCBI as settlement of the arbitration. As a
result of this settlement, the Company was relieved of any
liability for the $2,154,000 in disputed claims.
On February 17, 1998, ACI received a petition that E. L.
Pennebaker, Jr. had filed with the Mississippi Gaming Commission.
In that petition Mr. Pennebaker requests that the Mississippi
Gaming Commission order ACI, Harrah's Vicksburg, Inc., and
Riverboat Corporation of Mississippi-Vicksburg to stop opposing
the approval and construction of a casino on the Big Black River
and for such other corrective and punitive action that the
Mississippi Gaming Commission might find appropriate.
<PAGE>On February 23, 1998, E. L. Pennebaker, Jr. filed a
complaint in the Circuit Court of Pike County, Mississippi
against ACI, Harrah's Vicksburg, Inc., Riverboat Corporation of
Mississippi-Vicksburg, and Deposit Guaranty National Bank. The
complaint was amended on February 27, 1998, to add James F.
Belisle, Multi Gaming Management, Inc. and Multi Gaming
Management of Mississippi, Inc. as additional plaintiffs. The
plaintiffs are property owners or have rights to acquire property
along the Big Black River in Warren County, Mississippi. They
allege they would have profited if the Mississippi Gaming
Commission had found suitable for a casino a location along that
river that was controlled by plaintiffs Belisle, Multi Gaming
Management, Inc. and Multi Gaming Management of Mississippi, Inc.
The plaintiffs further allege that the defendants entered into an
agreement to hinder trade and restrain competition in the gaming
industry in violation of the antitrust laws and the gaming laws
of the Mississippi Code. Specifically, the plaintiffs allege the
defendants conducted an aggressive campaign in opposition to the
application of Horseshoe Gaming, Inc. for a gaming site on the
Big Black River. The plaintiffs allege compensatory damages of
$38.0 million, and punitive damages of $200.0 million. ACI has
not yet answered the complaint.
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 controlled by
the principal stockholder and President of the Company. Total
payments to Neilsen and Company were $110,000, $46,000 and
$43,000 for the years ended December 31, 1995, 1996 and 1997,
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, $88,000 and $31,000 for
the years ended December 31, 1995, 1996 and 1997, respectively.
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.
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 established to
develop The Reserve. Activities relating to the development of
The Reserve, which commenced operations on February 10, 1998,
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.
<PAGE>Under the 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
was not concluded in whole or in part prior to June 1, 1997, the
Company was required to deliver to the Gem Stockholders
promissory 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. These
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 of
$35,375,000, the total amount that 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.
Due to certain disputes between the Gem stockholders and the
Company surrounding the Merger Agreement, an arbitration
proceeding brought by the Company was settled by mutual agreement
(the "Gem Settlement Agrement") in June 1997. The Gem Settlement
Agreement provides that the Company will pay to the Gem
Stockholders $32.7 million in installments, plus interest, in
lieu of the consideration provided for in the Merger Agreement.
The Company made an initial payment of $4.0 million to the Gem
Stockholders and issued unsecured subordinated promissory notes
for the balance of $28.7 million (the "Gem Notes" -- See Note 5).
The Gem Notes are subordinate to the Revolving Credit Facility,
the Senior Subordinated Notes and other long-term indebtedness of
ACI specified by ACI up to a maximum of $250 million. Pursuant
to the Gem Settlement Agreement, the Company has also reconveyed
to Gem Air, Inc. ("Gem Air"), an affiliate of one of the Gem
Stockholders, the Company's interests in certain aviation-related
assets acquired in July 1996. Gem Air has assumed certain
liabilities of the Company related to these assets and an
aircraft operating agreement and a sublease relating to these
assets (the "Gem Aviation Agreements") have been terminated.
The Gem Settlement Agreement includes mutual general
releases of the parties to the arbitration proceeding and certain
of their respective related parties with respect to all
obligations arising out of, based upon or relating to the Merger
Agreement and the Gem Aviation Agreements, except for certain
excluded claims. Among the excluded claims under the Gem
Settlement Agreement are claims against the Gem Stockholders with
respect to Excluded Liabilities (as defined in the Merger
Agreement) and certain indemnification obligations of the Gem
Stockholders under the Merger Agreement with respect to claims
asserted by third parties against the Company.
<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>
<S> <C> <C>
1995 1996
-------- --------
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>
EXHIBIT DESCRIPTION OF EXHIBIT METHOD OF FILING
NUMBER
3.1 Articles of Incorporation of Incorporated by reference
Ameristar Casinos, Inc. to Exhibit 3.1 to
("ACI"). Registration Statement on
Form S-1 filed by ACI
under the Securities Act
of 1933, as amended (File
No. 33-68936) (the
"Form S-1").
3.2 Bylaws of ACI. 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 Credit Agreement, dated as of Incorporated by reference
July 8, 1997, among ACI, to Exhibits 4.1 and 99.1
Cactus Pete's, Inc. ("CPI"), to the Current Report on
Ameristar Casino Vicksburg, Form 8-K of ACI filed on
Inc. ("ACVI"), Ameristar July 30, 1997 (the "July
Casino Council Bluffs, Inc. 1997 8-K").
("ACCBI") and Ameristar
Casino Las Vegas, Inc.
("ACLVI"), as Borrowers, the
Lenders named therein, and
Wells Fargo Bank, National
Association as Arranger,
Agent Bank and Swingline
Lender, together with a list
describing omitted schedules
and exhibits thereto.
4.3(a) Indenture, dated as of Incorporated by reference
July 15, 1997, among ACI, to Exhibit 4.2 to the
ACLVI, ACVI, A.C. Food July 1997 8-K.
Services, Inc. ("ACFSI"), AC
Hotel Corp. ("ACHC"), ACCBI
and First Trust National
Association, including the
forms of Notes and Subsidiary
Guarantees issued thereunder.
4.3(b) Registration Rights Incorporated by reference
Agreement, dated as of to Exhibit 4.3 to the
July 15, 1997, among ACI, July 1997 8-K.
ACCBI, ACFSI, ACHC, ACLVI,
ACVI, CPI, Bear, Stearns &
Co. Inc., BT Securities
Corporation and First Chicago
Capital Markets, Inc.
4.3(c) Supplemental Indenture, dated Incorporated by reference
as of October 24, 1997, among to Exhibit 4.1(c) to
ACI, CPI, ACLVI, ACVI, ACFSI, Amendment No. 1 to
ACHC, ACCBI and First Trust Registration Statement on
National Association. Form S-4 filed by ACI,
CPI, ACVI, ACCBI, ACLVI,
ACFSI and ACHC under the
Securities Act of 1933,
as amended (File No. 333-
34381) (the "Form S-4").
4.4 Other Long-Term Debt. See Exhibits 10.8(k)-(n)
See Exhibits 10.8(k)-(n) and and 99.1.
99.1.
*10.1( Employment Agreement, dated Incorporated by reference
a) 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( Employment Agreement, dated Incorporated by reference
b) 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 CPI to Exhibit 10.17 to the
and Craig H. Neilsen. 1994 10-K.
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 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.
10.8(a Merger Agreement, dated as of Incorporated by reference
) May 31, 1996, among Gem to Exhibits 10.1 and 99.1
Gaming, Inc. ("Gem"), ACI, to ACI's Quarterly Report
ACLVI, Steven W. Rebeil on Form 10-Q for the
("Rebeil") and Dominic J. quarter ended June 30,
Magliarditi ("Magliarditi"), 1996 (the "June 1996 10-
together with a list Q").
describing omitted schedules
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 1996 8-K.
September 27, 1996, among
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.
10.8(j Settlement Agreement, dated Incorporated by reference
) as of May 3, 1997, among ACI, to Exhibit 10.1 to ACI's
ACLVI, Rebeil, Magliarditi, Quarterly Report on Form
Gem Air, Inc. and NVAGAIR. 10-Q for the quarter
ended March 31, 1997.
10.8(k Promissory Note, dated as of Incorporated by reference
) June 1, 1997, made by ACI to Exhibit 10.8(k) to the
payable to the order of Form S-4.
Rebeil in the original
principal amount of
$13,232,146.
10.8(l Promissory Note, dated as of Incorporated by reference
) June 1, 1997, made by ACI to Exhibit 10.8(l) to the
payable to the order of Form S-4.
Magliarditi in the original
principal amount of $417,854.
10.8(m Non-Negotiable Promissory Incorporated by reference
) Note, dated as of June 1, to Exhibit 10.8(m) to the
1997, made by ACI payable to Form S-4.
the order of Rebeil in the
original principal amount of
$14,540,820.
10.8(n Non-Negotiable Promissory Incorporated by reference
) Note, dated as of June 1, to Exhibit 10.8(n) to the
1997, made by ACI payable to Form S-4.
the order of Magliarditi in
the original principal amount
of $459,180.
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( Lease, dated September 18, Incorporated by reference
a) 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( First Amendment to Lease Incorporated by reference
b) Agreement, dated June 1, to Exhibit 10.3 to the
1995, between R.R. Morrison & 1995 10-K.
Son, Inc. and ACVI.
10.11( Lease, dated December 11, Incorporated by reference
a) 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( First Amendment to Lease Incorporated by reference
b) 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 Exhibits 10.12 and
Permit, dated May 15, 1995, 99.1 to ACI's Annual
between the State of Iowa Report on Form 10-K for
acting through the Iowa the year ended
Department of Natural December 31, 1996 (the
Resources and ACCBI as the "1996 10-K").
assignee of Koch Fuels, Inc.
10.13 Option Agreement, dated July Incorporated by reference
11, 1995, between Levy Realty to the Exhibit 10.13 to
Trust and ACLVI as the the 1996 10-K.
successor to Gem.
21.1 Subsidiaries of ACI. Incorporated by reference
to Exhibit 21.1 to the
Form S-4.
23.1 Consent of Arthur Andersen Filed electronically
LLP. herewith.
27.1 Financial Data Schedule. Filed electronically
herewith.
99.1 Agreement to furnish Filed electronically
Securities and Exchange herewith.
Commission certain
instruments defining the
rights of holders of certain
long-term debt.
_________________________________
* Denotes a management contract or compensatory plan or
arrangement.
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report included in this 1997 Annual Report on Form 10-K, into the
Company's previously filed Registration Statements on Form S-8 (File Nos.
33-83378, 333-34313).
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
March 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This data should be reviewed in conjunction with the financial statements
included in this report.
</LEGEND>
<CIK> 0000912145
<NAME> AMERISTAR CASINOS, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 13,031
<SECURITIES> 0
<RECEIVABLES> 2,051
<ALLOWANCES> 0
<INVENTORY> 2,300
<CURRENT-ASSETS> 26,487
<PP&E> 351,119
<DEPRECIATION> 68,951
<TOTAL-ASSETS> 336,186
<CURRENT-LIABILITIES> 52,222
<BONDS> 100,000
0
0
<COMMON> 204
<OTHER-SE> 80,435
<TOTAL-LIABILITY-AND-EQUITY> 336,186
<SALES> 206,179
<TOTAL-REVENUES> 206,179
<CGS> 0
<TOTAL-COSTS> 178,155
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,107
<INCOME-PRETAX> 16,327
<INCOME-TAX> 5,959
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (673)
<CHANGES> 0
<NET-INCOME> 9,695
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
</TABLE>
EXHIBIT 99.1
EXHIBIT 99.1
SUPPLEMENTAL AGREEMENT OF AMERISTAR CASINOS, INC.
Ameristar Casinos, Inc. ("ACI") hereby agrees to furnish
supplementally to the Securities and Exchange Commission a copy
of any of the following instruments defining the rights of
holders of long-term debt issued by ACI or its subsidiaries:
Promissory Note, dated November 22, 1976, from Cactus
Pete's, Inc. ("CPI") to United States of America and related
Credit Agreement.
Promissory Note, dated October 7, 1983, from CPI to United
States of America and related Credit Agreements.
Credit Agreement, dated June 27, 1996, between ACCBI and PDS
Financial Corporation ("PDS"); Promissory Note from ACCBI to
PDS; related Security Agreement; and Guaranty from ACI to
PDS.
Premium Finance Agreement, Disclosure Statement and Security
Agreement, dated June 24, 1997, between ACI and A.I. Credit
Corp.
