UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
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
incorporation or organization) identification no.)
3773 Howard Hughes Parkway
Suite 490 South
Las Vegas, Nevada 89109
(Address of principal executive offices)
(702) 567-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
As of November 13, 1998, 20,360,000 shares of Common Stock of the
registrant were issued and outstanding.
<PAGE>
AMERISTAR CASINOS, INC.
FORM 10-Q
INDEX
Page No.
Part I. FINANCIAL INFORMATION
Item 1.Financial Statements:
A. Condensed Consolidated Balance
Sheets at September 30, 1998
(unaudited) and December 31, 1997 3 - 4
B. Condensed Consolidated Statements
of Operations (unaudited) for the
three months and nine months ended
September 30, 1998 and 1997 5
C. Condensed Consolidated Statements
of Cash Flows (unaudited) for the
nine months ended September 30,
1998 and 1997 6
D. Notes to Condensed Consolidated
Financial Statements 7 - 9
Item 2.Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10 - 19
Item 3.Quantitative and Qualitative Disclosures
about
Market Risk 19
Part II. OTHER INFORMATION
Item 6.Exhibits and Reports on Form 8-K 20
SIGNATURE 21
<PAGE>PART I. FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
<TABLE>
AMERISTAR CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<S> <C> <C>
September 30, December 31,
1998 1997
----------- -----------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $22,204 $ 13,031
Restricted cash 140 153
Accounts receivable, net 1,837 2,051
Income tax refund receivable 350 2,103
Inventories 3,254 2,300
Prepaid expenses 6,467 4,125
Deferred income taxes 4,185 2,724
-------- -------
Total current assets 38,437 26,487
PROPERTY AND EQUIPMENT AND
LEASEHOLD INTERESTS, at cost,
less accumulated depreciation and
amortization of $85,909 and
$68,951, respectively 298,476 282,168
PREOPENING COSTS - 6,820
EXCESS OF PURCHASE PRICE OVER FAIR
MARKET VALUE OF NET ASSETS
ACQUIRED 15,145 15,408
DEPOSITS AND OTHER ASSETS 4,045 5,303
------- -------
$356,103 $336,186
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>AMERISTAR CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
September 30, December 31,
1998 1997
------------- ------------
(Unaudited)
CURRENT LIABILITIES:
Accounts payable $ 5,507 $ 4,772
Construction contracts payable 1,261 19,391
Accrued liabilities 26,739 21,549
Current obligations under
capitalized leases 2,311 875
Current maturities of notes
payable and
long-term debt 11,417 5,635
------- -------
Total current liabilities 47,235 52,222
------- -------
OBLIGATIONS UNDER CAPITALIZED
LEASES, net of current
maturities 13,408 9,600
------- -------
NOTES PAYABLE AND LONG-TERM DEBT,
net of current maturities 218,444 183,513
------- -------
DEFERRED INCOME TAXES 6,624 10,212
------- -------
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 204 204
Additional paid-in capital 43,043 43,043
Retained earnings 27,145 37,392
------- -------
Total stockholders'
equity 70,392 80,639
------- -------
$356,103 $336,186
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
</TABLE>
<PAGE>AMERISTAR CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<S> <C> <C>
Three Months Nine Months
Ended September 30,Ended September 30,
1998 1997 1998 1997
------- ------- ------- -------
REVENUES:
Casino $55,988 $44,852 $161,212 $130,501
Food and beverage 12,277 8,186 34,765 23,037
Rooms 4,499 2,843 10,804 7,509
Other 2,682 2,247 7,284 6,221
------- ------- ------- -------
75,446 58,128 214,065 167,268
Less: Promotional allowances 6,104 4,085 16,576 11,642
------- ------- ------- -------
Net Revenues 69,342 54,043 197,489 155,626
------- ------- ------- -------
OPERATING EXPENSES:
Casino 23,024 20,246 78,364 59,442
Food and beverage 11,699 4,977 23,949 14,462
Rooms 2,137 826 4,229 2,341
General store 604 617 1,603 1,647
Other 1,837 1,417 4,923 4,020
Selling, general and
administrative
19,447 13,644 55,958 38,231
Depreciation and amortization 6,147 3,977 17,243 12,049
Preopening costs - - 10,611 -
------- ------- ------- -------
Total operating expenses 64,895 45,704 196,880 132,192
------- ------- ------- -------
Income from operations 4,447 8,339 609 23,434
OTHER INCOME (EXPENSE):
Interest income 86 100 302 267
Interest expense (6,146) (3,404) (16,265) (9,288)
Other (62) (22) 53 (571)
------- ------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (1,675) 5,013 (15,301) 13,842
Income tax provision (benefit) (537) 1,793 (5,049) 5,060
------- ------- ------- -------
INCOME BEFORE EXTRAORDINARY ITEM (1,138) 3,220 (10,252) 8,782
Extraordinary item-loss on
early retirement of debt,
net of applicable income
tax benefit - (673) - (673)
------- ------- ------- ------
NET INCOME (LOSS) $(1,138) $ 2,547 $(10,252) $ 8,109
======= ======= ======= ======
WEIGHTED AVERAGE SHARES OUTSTANDING 20,360 20,360 20,360 20,360
======= ======= ======= ======
EARNINGS (LOSS) PER SHARE:
Basic before extra-
ordinary item $ (0.06) $ 0.16 $ (0.50) $ 0.43
======= ====== ======= =======
Basic $ (0.06) $ 0.13 $ (0.50) $ 0.40
======= ====== ======= =======
Diluted before extra-
ordinary item $ (0.06) $ 0.16 $ (0.50) $ 0.43
======= ====== ======= =======
Diluted $ (0.06) $ 0.13 $ (0.50) $ 0.40
======= ====== ======= =======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
</TABLE>
<PAGE>AMERISTAR CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
(UNAUDITED)
<S> <C> <C>
Nine Months
Ended September 30,
1998 1997
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(10,252) $8,109
------- -------
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 17,243 12,049
Extraordinary loss on early
retirement of debt - 1,060
Net loss on disposition of assets - 468
Deferred income taxes (5,049) 2,540
Amortization of debt issue costs 494 251
Increase in other current assets (3,069) (1,341)
Decrease (Increase) in income tax
refund receivable 1,753 (2,578)
Current tax payable - (65)
Increase (decrease) in other current
liabilities 5,924 2,558
------- -------
Total adjustments 17,296 14,942
------- -------
Net cash provided by operating activities 7,044 23,051
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (26,611) (25,021)
(Decrease) increase in construction
contracts payable (18,130) 2,978
Proceeds from sale of assets - 178
Increase (decrease) in deposits and
other non-current assets 7,584 (5,780)
------- -------
Net cash used in investing activities (37,157) (27,645)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable
and long-term debt 42,606 122,273
Principal payments of notes payable, long-
term debt and capitalized leases (3,320) (111,117)
------- -------
Net cash provided by financing
activities 39,286 11,156
------- -------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 9,173 6,562
CASH AND CASH EQUIVALENTS - BEGINNING OF
PERIOD 13,031 10,724
------- -------
CASH AND CASH EQUIVALENTS - END OF PERIOD $22,204 $17,286
======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the period for interest
(net of amounts capitalized) $18,064 $4,692
======= =======
Cash paid for income taxes $ 350 $4,760
======= =======
Assets purchased with long-term debt $ - $1,424
======= =======
Assets purchased with capitalized leases $ 6,671 $3,481
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>NOTE 1 - PRINCIPLES OF CONSOLIDATION AND BASIS OF
PRESENTATION
The accompanying condensed consolidated financial statements
include the accounts of Ameristar Casinos, Inc. ("Ameristar" or
"ACI") and its wholly owned subsidiaries (collectively, the
"Company"). The Company's principal subsidiaries, all of which are
wholly owned, are Cactus Petes, Inc. ("CPI"), Ameristar Casino
Vicksburg, Inc. ("ACVI"), Ameristar Casino Council Bluffs, Inc.
("ACCBI") and Ameristar Casino Las Vegas, Inc. ("ACLVI"). ACI also
owns A.C. Food Services, Inc., a purchasing subsidiary, and AC
Hotel Corp, a wholly owned subsidiary of ACVI created for the
purpose of constructing and operating a hotel in Vicksburg,
Mississippi. All significant intercompany transactions have been
eliminated.
CPI owns and operates two casino-hotels in Jackpot, Nevada -
Cactus Petes Resort Casino and The Horseshu Hotel and Casino
(collectively, the "Jackpot Properties"). ACVI owns and operates
Ameristar Vicksburg, a riverboat-themed dockside casino and related
hotel and other land-based facilities in Vicksburg, Mississippi.
ACCBI owns and operates Ameristar Council Bluffs, a riverboat
casino and related hotel and other land-based facilities in Council
Bluffs, Iowa. Ameristar Council Bluffs opened its steakhouse on
February 25, 1997 and its indoor swimming pool and spa on March 3,
1997, thereby completing its land-based facilities. ACLVI owns and
operates The Reserve Hotel Casino ("The Reserve") an African safari
and big game reserve themed facility in the Henderson-Green Valley
suburban area of Las Vegas, Nevada that opened on February 10,
1998.
The accompanying condensed consolidated financial statements
have been prepared by the Company, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission.
Accordingly, the condensed consolidated financial statements do not
include all of the disclosures required by generally accepted
accounting principles. However, the accompanying unaudited
condensed consolidated financial statements do contain all
adjustments that, in the opinion of management, are necessary to
present fairly the financial position and the results of operations
for the interim periods included therein. The interim results
reflected in the condensed consolidated financial statements are
not necessarily indicative of results to be expected for the full
fiscal year.
Certain reclassifications, having no effect on net income or
loss, have been made to the prior period's condensed consolidated
financial statements to conform to the current period's
presentation.
The accompanying condensed consolidated financial statements
should be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997.
NOTE 2 - NOTES PAYABLE AND LONG-TERM DEBT
In July 1997, the Company completed a refinancing of its long-
term debt through a new $125 million Revolving 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, CPI, ACVI, ACCBI and ACLVI, a syndicate of banks and
Wells Fargo Bank, National Association as Agent Bank ("WFB"),
Arranger and Swingline Lender. The Company's prior bank credit
facility (with a $94.5 million outstanding principal balance) was
terminated and repaid upon the funding of the initial draw under
the Revolving Credit Facility. The Senior Subordinated Notes were
issued by Ameristar at par in a private placement. 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.
<PAGE>
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 is secured by substantially all the real
and personal property of the Company. The balance on the Revolving
Credit facility at September 30, 1998 was $90.0 million with a
current interest rate of approximately 9.2%.
The Company and WFB amended the Revolving Credit Facility
effective June 30, 1998. The amendment limits the maximum
borrowings permitted under the Revolving Credit Facility to the
lesser of the Borrowers' rolling four-quarter EBITDA multiplied by
2.75 and the Borrowers' total funded debt to not more than the
Borrowers' rolling four-quarter EBITDA multiplied by a factor as
follows: 5.25 commencing June 30, 1998; 5.50 commencing
September 30, 1998; 5.25 commencing June 30, 1999; 4.75 commencing
December 31, 1999; 4.50 commencing March 31, 2000; and 4.00
commencing September 30, 2000. The amendment also increases the
maximum base rate margin to 2.75% and the maximum LIBOR margin to
4.00%. The amendment decreases the rolling four-quarter gross
fixed charge coverage ratio to 1.25 to 1.0 until September 30,
1999. The amendment also limits the Borrowers' aggregate capital
expenditures in each year to an amount equal to 5% of their
consolidated net revenue for the preceding year and will prohibit
the Borrowers from incurring any additional secured indebtedness
without the approval of the bank lenders.
As of September 30, 1998, the Company was in compliance with
all covenants under the Revolving Credit Facility as amended except
the net worth covenant with actual tangible net worth of $55.2
million versus a requirement of $56.0 million under the Revolving
Credit Facility for which a waiver will be sought.
The Senior Subordinated Notes were issued under an Indenture
dated July 15, 1997. The Senior Subordinated Notes will mature on
August 1, 2004, but are subject to earlier redemption in whole or
in part under certain circumstances. The Senior Subordinated Notes
are not secured and are subordinate to all existing and future
Senior Indebtedness (as defined), which includes the Revolving
Credit Facility. All of Ameristar'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 Ameristar, and the
Guarantors constitute all of Ameristar's direct and indirect
subsidiaries.
Ameristar is a holding company with no operations independent
of those of the Guarantors and no assets other than its investments
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 included in this
report because, in the opinion of management, they are not deemed
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 Ameristar in the
form of cash dividends, loans or advances.
Notes payable and long-term debt at September 30, 1998 include
notes issued to the former stockholders (the "Gem Stockholders") of
Gem Gaming, Inc. ("Gem"), for merger consideration in connection
with the October 9, 1996 acquisition of The Reserve. The
outstanding balance of these notes payable at September 30, 1998
was $28.7 million.
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
<PAGE>
loan bear interest at 15% per annum, payable in periodic
installments. The loan was scheduled to mature in July 1998, but
has been extended to November 30, 1998. 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. The balance
on this loan was $7.5 million at September 30, 1998. The Company is
continuing its efforts to find permanent funding for the Vicksburg
Hotel.
On February 12, 1998, ACLVI and Wells Fargo Leasing
Corporation entered into a four-year lease agreement for financing
slot equipment for The Reserve in the amount of $6.7 million.
Monthly principal payments of $111,000 plus interest are required
through February 2002 with a final payment of $1.4 million due
March 1, 2002.
NOTE 3 - EARNINGS (LOSS) PER SHARE
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
"Earnings Per Share", effective for fiscal years ending after
December 15, 1997. The Company adopted SFAS 128 for the year
ending December 31, 1997. SFAS 128 requires the computation and
presentation of basic and diluted earnings per share for all
periods for which an income statement is presented. For the three
months and six months ended June 30, 1998 and 1997, the Company had
no material dilutive securities outstanding.
Options to purchase 518,000 and 640,000 shares of common stock
were outstanding at September 30, 1998 and 1997, respectively, at
exercise prices of $3.56-$16.00 and $5.06-$16.00 as of September
30, 1998 and September 30, 1997, respectively. These options were
not included in a pro forma computation of earnings per share
assuming dilution because the options' exercise prices were greater
than the average market price of the common shares during the
respective periods presented.
<PAGE>
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
The Company
Ameristar Casinos, Inc. ("Ameristar" or "ACI") develops, owns
and operates casinos and related hotel, food and beverage,
entertainment and other facilities, with five properties in
operation in Nevada, Mississippi and Iowa. Ameristar's principal
operations are conducted through four 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"). Ameristar and its
wholly owned subsidiaries are collectively referred to herein as
the "Company."
CPI owns and operates Cactus Petes Resort Casino ("Cactus
Petes") and The Horseshu Hotel and Casino (collectively, the
"Jackpot Properties"), two casino-hotels located in Jackpot, Nevada
at the Idaho border. ACVI owns and operates a riverboat-themed
dockside casino (the "Vicksburg Casino") and related land-based
facilities including a 150-room hotel that opened on June 5, 1998
(collectively, "Ameristar Vicksburg") in Vicksburg, Mississippi.
ACCBI owns and operates a riverboat casino (the "Council Bluffs
Casino") and related land-based hotel and other facilities
(collectively, "Ameristar Council Bluffs") in Council Bluffs, Iowa
across the Missouri River from Omaha, Nebraska. Ameristar Council
Bluffs was opened in stages during 1996 and early 1997. The
Council Bluffs Casino opened on January 19, 1996, and most of the
land-based facilities opened during the second and fourth quarters
of 1996. The land-based facilities were completed during the first
quarter of 1997, with the opening of the steakhouse and the indoor
swimming pool and spa. ACLVI owns and operates The Reserve, ("The
Reserve") an African safari and big game reserve themed facility in
the Henderson-Green Valley suburban area of Las Vegas, Nevada. The
Reserve opened February 10, 1998.
The Company's quarterly and annual operating results may be
affected by competitive pressures, the timing of the commencement
of new gaming operations, the amount of preopening costs incurred
by the Company, construction at existing facilities and general
weather conditions. Consequently, the Company's operating results
for any quarter or year may not be indicative of results to be
expected for future periods.
The following table highlights the results of operations of
Ameristar's operating subsidiaries for its principal properties:
<PAGE>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
<TABLE>
<S> <C> <C>
Three months ended Nine months ended
September 30, September 30,
----------------- -----------------
1998 1997 1998 1997
------- ------- ------- -------
(unaudited)
Consolidated cash flow
information:
Cash flow from operations 1,798 10,050 $7,043 $23,051
Cash flow from investing (7,602) (12,314) (37,157) (27,645)
Cash flow from financing 5,719 6,928 39,287 11,156
Net revenues:
Jackpot Properties $15,295 $15,267 $41,990 $41,819
Ameristar Vicksburg 17,675 16,398 50,593 48,697
Ameristar Council Bluff 24,409 22,378 72,552 65,110
The Reserve 11,963 - 32,354 -
------- ------- ------- -------
Consolidated net revenues $69,342 $54,043 $197,489 $155,626
======= ======= ======= =======
Adjusted operating income
(loss)(1):
Jackpot Properties $ 3,661 $ 3,344 $ 8,234 $ 8,645
Ameristar Vicksburg 3,380 3,195 9,573 10,149
Ameristar Council Bluffs 4,707 3,844 12,668 11,255
The Reserve (4,838) - (12,097) -
Corporate and other (2,463) (2,044) (7,158) (6,615)
------- ------- ------- -------
Consolidated operating
income $ 4,447 $ 8,339 $11,220 $23,434
======= ======= ======= =======
Adjusted operating income (loss) margins (1):
Jackpot Properties 23.9% 21.9% 19.6% 20.7%
Ameristar Vicksburg 19.1% 19.5% 18.9% 20.8%
Ameristar Council Bluffs 19.3% 17.2% 17.5% 17.3%
The Reserve (40.4%) - (37.4%) -
------- ------- ------- -------
Consolidated operating
income margin 6.4% 15.4% 5.7% 15.1%
======= ======= ======= =======
EBITDA (2)
Jackpot Properties $ 4,468 $ 4,088 $10,666 $10,749
Ameristar Vicksburg 5,111 4,736 14,475 14,793
Ameristar Council Bluffs 6,503 5,430 17,946 16,164
The Reserve (3,108) - (7,713) -
Corporate and other (2,380) (1,938) (6,911) (6,223)
------- ------- ------ ------
Consolidated EBITDA $10,594 $12,316 $28,463 $35,483
======= ======= ======= =======
EBITDA Margins (2):
Jackpot Properties 29.2% 26.8% 25.4% 25.7%
Ameristar Vicksburg 28.9% 28.9% 28.6% 30.4%
Ameristar Council Bluffs 26.6% 24.3% 24.7% 24.8%
The Reserve (26.0%) - (23.8%) -
------- ------- ------- -------
Consolidated EBITDA margin 15.3% 22.8% 14.4% 22.8%
======= ======= ======= =======
(see following page for footnotes)
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(1) Adjusted operating income (loss) for the 1998 period is
calculated before the write off of $10.6 million in preopening
costs related to the opening of The Reserve on February 10, 1998.
(2) EBITDA consists of income from operations plus depreciation,
amortization and preopening costs. 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
may calculate EBITDA in the same manner as the Company.
Summary of Operating Results
Ameristar showed continuing overall growth in revenues for the
three and nine months ended September 30, 1998 compared to the same
periods in 1997. Consolidated net revenues for the three months
ended September 30, 1998 increased to $69.3 million compared to
$54.0 million for the same quarter in 1997. Of this increase,
$12.0 million came from operations at The Reserve and $3.3 million
was generated by the Company's other properties. Revenues for the
nine months ended September 30, 1998 were $197.5 million compared
to $155.6 million in 1997. Again, the majority of this increase
was related to The Reserve with $32.4 million in revenues for the
period and a $9.5 million increase in revenues from the other
properties.
Income from operations for the quarter ended September 30,
1998 was $4.4 million compared to $8.3 million for the same quarter
in 1997. Total operating expenses as a percentage of net revenues
increased to 93.6 percent for the three months ended September 30,
1998 compared to 84.6 percent for the same period in 1997. For the
nine-month periods ended September 30, 1998 and 1997, total
operating expenses as a percentage of net revenues before
preopening costs were 94.3 percent and 84.9 percent, respectively.
Income from operations before preopening costs for the nine months
ended September 30, 1998 was $11.2 million compared to $23.4
million for the same period in 1997. Income from operations for
the nine months ended September 30, 1998 after preopening costs of
$10.6 million was $0.6 million.
Net loss for the quarter ended September 30, 1998 was $1.1
million compared to net income of $2.5 million for the same period
in 1997. For the nine months ended September 30, 1998, the net
loss was $3.1 million before preopening costs and $10.3 million
after preopening costs, compared to net income of $8.1 million for
the first nine months of 1997.
Loss per share for the quarter ended September 30, 1998 was
$0.06 compared to earnings per share of $0.16 before an
extraordinary write off and $0.13 after that write off for the same
quarter in 1997. Loss per share before preopening costs was $0.15
and $0.50 after preopening costs for the first nine months of 1998
compared to earnings per share of $0.43 before the extraordinary
item and $0.40 after the extroardinary write off for the first nine
months of 1997.
<PAGE>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Revenues and Operating Income (Loss) by Property
Net revenues for Ameristar Council Bluffs were $24.4 million
for the quarter ended September 30, 1998, compared to $22.4 million
for the same quarter in 1997, an increase of $2.0 million or 9.1
percent. For the nine months ended September 30, 1998, net
revenues were $72.6 million compared to $65.1 million for the same
period in 1997, an 11.4 percent increase. All revenue areas had
increases for both the three and nine months ended September 30,
1998 compared to 1997. Operating income increased by $0.9 million
or 22.5 percent for the three months and $1.4 million or 12.6
percent for the nine months ended September 30, 1998 compared to
the same periods in 1997. Cost control measures instituted in the
second quarter brought expenses into line with management's
expectations for this property. The Council Bluffs market grew at
a 10.5 percentage rate for the first nine months of 1998 compared
to the same period in 1997.
The Jackpot Properties were relatively stable with revenues of
$15.3 million and $42.0 million, respectively, for the three and
nine months ended September 30, 1998 compared to $15.3 million and
$41.8 million, respectively, for the same periods in 1997.
Operating income increased to $3.7 million in the third quarter of
1998 compared to $3.4 million for the same quarter in 1997. The
increase in operating income for the third quarter was primarily a
result of a greater proportion of slot revenue in the month of
September as compared to the same month in 1997. For the nine-
month period ended September 30, 1998 operating income decreased to
$8.2 million compared to $8.6 million for the same periods in 1997.
The decline in operating income was the result of slightly higher
costs in all areas and a lower table game win percentage partially
offset by higher slot revenue.
Ameristar Vicksburg continues to be the gaming revenue market
leader in Warren County, Mississippi with net revenues of $17.7
million for the third quarter of 1998 and $50.6 million for the
first nine months of 1998 compared to $16.4 million and $48.7
million, respectively, for the same periods in 1997. Overall, the
Warren County gaming revenues increased by approximately 3.5
percent for the first nine months of 1998 compared to the same
period in 1997. Operating income for the three and nine months
ended September 30, 1998 was $3.4 million and $9.6 million,
respectively, compared to $3.2 million and $10.1 million in the
same periods in 1997. The quarterly increase in revenue and
operating income was due to higher slot volume. The decrease in
the nine month revenue was due primarily to a lower table game hold
percentage in 1998 compared to 1997. In an effort to expand the
market territory of Ameristar Vicksburg and encourage longer
visits, the Company opened a 150-room hotel across from the main
entrance to the casino on June 5, 1998. The hotel generated an
average daily room rate of approximately $59 with an occupancy rate
of 66.2 percent with limited advertising in its first four months
of operations.
The Reserve, which opened on February 10, 1998, had net
revenues of $12.0 million for the third quarter of 1998 and $32.4
million for its first 232 days of operation. Operating loss before
preopening costs of $10.6 million was $4.8 million and $12.1
million, respectively, for the three and nine months ended
September 30, 1998. While higher than anticipated, these losses
are due to lower than expected revenues in the intensely
competitive "locals" market in which The Reserve operates and the
normal inefficiencies associated with the opening of a new
property. Management is also reviewing promotional and advertising
campaigns to enhance The Reserve's competitive position within the
Henderson/Green Valley market, and subsequent to September 30,
1998, the property initiated a direct mail program that included a
new cash back program and a direct mail bounce back program. A new
slot advertising campaign began on June 19, 1998 and the results
were positive for this property.
<PAGE>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Consolidated Revenues and Expenses
On a consolidated basis for the quarter ended September 30,
1998 compared to the quarter ended September 30, 1997, casino
revenues increased $11.1 million or 24.8 percent, food and beverage
revenues increased $4.1 million or 50.0 percent, and rooms revenues
increased $1.7 million or 58.2 percent. On a consolidated basis
for the nine months ended September 30, 1998 compared to the nine
months ended September 30, 1997, casino revenues increased $30.7
million or 23.5 percent, food and beverage revenues increased $11.7
million or 50.9 percent, and rooms revenues increased $3.3 million
or 43.9 percent.
Casino expenses increased $2.8 million or 13.7 percent, food
and beverage expenses increased $6.7 million or 135.1 percent, and
rooms expenses increased $0.9 million or 103.1 percent for the
quarter ended September 30, 1998 compared to the 1997 third
quarter. For the nine-month period ended September 30, 1998
compared to the 1997 period, casino expenses increased $18.9
million or 31.8 percent, food and beverage expenses increased $9.5
million or 65.6 percent, and rooms expenses increased $1.4 million
or 61.0 percent. A significant portion of the increases in
revenues and expenses was the result of the commencement of
operations at The Reserve on February 10, 1998 and the opening of
the Vicksburg hotel on June 5, 1998.
Selling, general and administrative expenses (including
utilities and maintenance and business development) increased $6.3
million or 45.9 percent for the quarter ended September 30, 1998
and $18.2 million or 47.6 percent, for the comparable nine-month
period, due primarily to the commencement of operations at The
Reserve and the Vicksburg Hotel, increased costs at Ameristar
Council Bluffs and other costs associated with the Company's
continued growth.
Depreciation expenses for the third quarter of 1998 and first
nine months of 1998 increased primarily due to the inclusion of The
Reserve facilities in the Company's depreciable asset base.
Interest expense was $6.1 million and $16.3 million (net of
capitalized interest of $1.3 million), respectively, for the three
and nine months ended September 30, 1998, compared to $3.4 million
and $9.3 million for the same periods in 1997. The increased
interest expense relates primarily to increased debt incurred to
finance construction of The Reserve and the cessation of
capitalized interest for that project.
Liquidity and Capital Resources
Cash flow provided by operations was $7.0 million for the nine
months ended September 30, 1998 compared to $23.1 million for the
nine months ended September 30, 1997. The Company had unrestricted
cash of approximately $22.2 million as of September 30, 1998. The
increase in cash resulted from a net increase in borrowings of
$42.6 million for the period in 1998 that was offset by capital
expenditures of $26.6 million related primarily to The Reserve, the
Vicksburg hotel and other capital improvement projects and the
negative operating cash flow for the quarter. The Company's
current assets increased by approximately $12.0 million from
December 31, 1997 to September 30, 1998, primarily resulting from
an increase in cash on hand, inventories and prepaid expenses. The
Company historically has funded its 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 used in investing activities totaled
$37.2 million for the nine-month period ended September 30, 1998
compared to $27.6 million for the same period in 1997. This was
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
primarily a result of increased capital expenditures related to the
construction of The Reserve and the Vicksburg hotel.
Cash flow provided by financing activities totaled $39.3
million for the nine-month period ended September 30, 1998 compared
to $11.2 million for the same period in 1997 as a result of
additional borrowing on the Company's Revolving Credit Facility
described below. The Company maintains a $125 million revolving
credit facility (the "Revolving Credit Facility") pursuant to a
Credit Agreement among Ameristar and its principal subsidiaries
(the "Borrowers"), a syndicate of bank lenders and Wells Fargo
Bank, N.A. ("WFB") as Agent Bank, Arranger and Swingline Lender.
The Borrowers do not include AC Hotel Corp., a subsidiary of ACVI
that owns the hotel at Ameristar Vicksburg, and a purchasing
subsidiary. At September 30, 1998, the outstanding principal
balance of the Revolving Credit Facility was $90.0 million and
available borrowing capacity would have been $500,000. The
Revolving Credit Facility was amended effective June 30, 1998. The
following description of the Revolving Credit Facility summarizes
the terms of the Revolving Credit Facility as in effect prior to
the amendment. Following that discussion is a summary of the
amendment.
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 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
September 30, 1998, the average interest rate applicable to
Revolving Credit Facility borrowings was 9.2%.
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
<PAGE>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
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.
The Company and WFB amended the Revolving Credit Facility
effective June 30, 1998. The amendment limits the maximum
borrowings permitted under the Revolving Credit Facility to the
lesser of the Borrowers' rolling four-quarter EBITDA multiplied by
2.75 and the Borrowers' total funded debt to not more than the
Borrowers' rolling four-quarter EBITDA multiplied by a factor as
follows: 5.25 commencing June 30, 1998; 5.50 commencing
September 30, 1998; 5.25 commencing June 30, 1999; 4.75 commencing
December 31, 1999; 4.50 commencing March 31, 2000; and 4.00
commencing September 30, 2000. The amendment also increases the
maximum base rate margin to 2.75% and the maximum LIBOR margin to
4.00%. The amendment decreases the rolling four-quarter gross
fixed charge coverage ratio to 1.25 to 1.0 until September 30,
1999. The amendment also limits the Borrowers' aggregate capital
expenditures in each year to an amount equal to 5% of their
consolidated net revenue for the preceding year and will prohibit
the Borrowers from incurring any additional secured indebtedness
without the approval of the bank lenders.
As of September 30, 1998, the Company was in compliance with
all covenants under the Revolving Credit Facility as amended except
the net worth covenant with actual tangible net worth of $55.2
million versus a requirement of $56.0 million under the Revolving
Credit Facility for which a waiver will be sought.
The Company issued $100 million aggregate principal amount of
10-1/2% Senior Subordinated Notes due 2004 (the "Senior
Subordinated Notes") at par 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 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
<PAGE>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
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. As of September 30, 1998
Ameristar and the Restricted Subsidiaries Consolidated Coverage
Ratio was less 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
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 has constructed 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 to be provided
out of operating cash flow. The loan matured July 31, 1998 and has
been extended to November 30, 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. The Company
is currently seeking to obtain permanent financing to replace this
loan prior to its maturity. As of September 30, 1998, the
outstanding balance on the loan was $7.5 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.
<PAGE>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
At September 30, 1998, the Company had other long-term
indebtedness in an aggregate principal amount of $19.5 million,
including $6.7 million in lease financing incurred during the first
quarter of 1998 for slot equipment for The Reserve. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources" in the
Company's Annual Report on Form 10-K for the year ended December
31, 1997 for additional information relating to the Company's
borrowings.
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. A failure to improve the operating performance of The
Reserve or other adverse changes in the Company's operations or
operating cash flow are expected to adversely affect the ability of
the Company to satisfy these financial covenants.
Capital expenditures for the nine months ended September 30,
1998 were approximately $33.3 million, including approximately
$20.9 million relating to development of The Reserve, $7.2 million
relating to the development of the Ameristar Vicksburg hotel and
$5.2 million in other normal capital improvement projects. The
Company funded these capital expenditures primarily from net cash
provided by operating activities and borrowings.
The Company anticipates spending approximately $1.0 million on
normal capital expenditures during the fourth quarter of 1998.
Management is currently evaluating its proposed capital
expenditures and the Company's ability to fund those expenditures
as part of its 1999 budget process.
Management has under consideration several additional
potential capital expenditure projects at The Reserve, Ameristar
Council Bluffs and Ameristar Vicksburg. In evaluating these
projects, management is considering, among other factors, the
operating performance of each of the Company's properties, the
anticipated relative costs and benefits of the various projects,
competitive factors, and the availability of operating cash flow
and debt financing to fund capital expenditures. As discussed
above, availability of borrowing under the Revolving Credit
Facility is dependent upon the Company's rolling four-quarter
EBITDA (as defined). Accordingly, the ability of the Company to
commit to any capital improvement project, and the timing, scope
and cost of any such project, are expected to be dependent upon the
Company's operating performance generally and at The Reserve in
particular, as to which no assurances can be given. At the present
time, the Company does not anticipate undertaking any significant
capital expenditure projects during 1998 that could not be funded
out of amounts anticipated to be available through internally
generated cash flow and the Company's borrowing capacity under the
Revolving Credit Facility.
Year 2000 Issues
The Company has recently completed an initial evaluation of
its material 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).
This evaluation has included inquiries to the vendors of various
hardware and software products. Most of the Company's information
technology infrastructure is currently Year 2000 compliant, and the
Company has received assurances that it believes to be reasonable
<PAGE>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
from the vendors of material products used by the Company that
their products will be Year 2000 compliant in advance of
December 31, 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 currently in the process of evaluating material
non-information technology for Year 2000 compliance. Based on the
initial results of this evaluation, the Company has not identified
any Year 2000 issues that it believes will materially adversely
affect its results of operations or financial condition. The full
evaluation will be completed by December 31, 1998.
The Company and its results of operations and financial
condition could be materially and adversely affected by a failure
of one or more third parties with whom it does business to
satisfactorily address and resolve Year 2000 issues on a timely
basis. Although most of the goods and services used by the Company
are available from multiple sources, no assurance can be given that
the Company would be able to obtain necessary goods and services
from alternative vendors or providers if it experiences
difficulties in satisfying its requirements from its customary
sources due to Year 2000 compliance problems. In addition, Year
2000 difficulties, if any, experienced by public utilities, the
banking system, the postal system or other similar infrastructure
enterprises could adversely affect the Company. However, the
Company believes that the impact of any such problems on the
Company generally would be the same as on other businesses in the
same area or areas.
Recently Issued Accounting Pronouncements
The Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of
Position ("SOP") No. 98-5 "Reporting the Costs of St-up
Activities." The provisions of SOP 98-5 are effective for fiscal
years beginning after December 15, 1998, and require that the costs
associated with start-up activities (including preopening costs of
casinos) be expensed as incurred.
Factors Affecting Forward-Looking Information
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, including but not limited to
uncertainties concerning operating cash flow in future periods, the
Company's borrowing capacity under the Revolving Credit Facility
and otherwise, the ability of the Company to obtain waivers of
covenant and other requirements under the Revolving Credit Facility
or other debt instruments, the future operating performance of the
Company's properties, particularly the recently opened The Reserve,
the ability of the Company to commit to capital expenditure
projects and the ability of the Company and its vendors and service
providers to successfully and timely resolve Year 2000 issues.
Accordingly, actual results could differ materially from
<PAGE>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
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" in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997 for discussion of some of
the factors, risks and uncertainties that could affect the outcome
of future results contemplated by forward-looking statements.
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Not applicable.
<PAGE>PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits filed as port of this report
27. Financial Data Schedule
b. Reports on Form 8-K
None
<PAGE>SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AMERISTAR CASINOS, INC.
Registrant
Date: November 13, 1998 /s/Thomas Steinbauer
Thomas Steinbauer
Senior Vice President of Finance
and Treasurer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This data should be reviewed in conjunction with the financial statements
included in this filing.
</LEGEND>
<CIK> 0000912145
<NAME> AMERISTAR CASINOS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 22,204
<SECURITIES> 0
<RECEIVABLES> 1,837
<ALLOWANCES> 0
<INVENTORY> 3,254
<CURRENT-ASSETS> 38,437
<PP&E> 384,385
<DEPRECIATION> 85,909
<TOTAL-ASSETS> 356,103
<CURRENT-LIABILITIES> 47,235
<BONDS> 100,000
0
0
<COMMON> 204
<OTHER-SE> 70,188
<TOTAL-LIABILITY-AND-EQUITY> 356,103
<SALES> 197,489
<TOTAL-REVENUES> 197,489
<CGS> 0
<TOTAL-COSTS> 196,880
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,265
<INCOME-PRETAX> (15,301)
<INCOME-TAX> (5,049)
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