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 March 31, 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 May 14, 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 March 31, 1998
(unaudited) and December 31, 1997 3 - 4
B. Condensed Consolidated Statements
of Income (unaudited) for the three
months ended March 31, 1998 and
1997 5
C. Condensed Consolidated Statements
of Cash Flows (unaudited) for the
three months ended March 31, 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 - 18
Item 3.Quantitative and Qualitative Disclosures
About
Market Risk 18
Part II. OTHER INFORMATION
Item 6.Exhibits and Reports on Form 8-K 19
SIGNATURE 20
<PAGE>PART I. FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
AMERISTAR CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<S> <C> <C>
March 31, December 31,
1998 1997
--------- ------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 23,113 $ 13,031
Restricted cash 157 153
Accounts receivable, net 1,618 2,051
Income tax refund receivable 638 2,103
Inventories 2,876 2,300
Prepaid expenses 4,578 4,125
Deferred income taxes 3,410 2,724
-------- --------
Total current assets 36,390 26,487
PROPERTY AND EQUIPMENT AND
LEASEHOLD INTERESTS, at cost,
less accumulated depreciation and
amortization of $73,956 and
$68,951, respectively 299,768 282,168
PREOPENING COSTS - 6,820
EXCESS OF PURCHASE PRICE OVER FAIR
MARKET VALUE OF NET ASSETS
ACQUIRED 15,342 15,408
DEPOSITS AND OTHER ASSETS 4,374 5,303
-------- --------
$355,874 $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>
March 31, December 31,
1998 1997
---------- -----------
(Unaudited)
CURRENT LIABILITIES:
Accounts payable $ 6,411 $ 4,772
Construction contracts payable 5,425 19,391
Accrued liabilities 23,129 21,549
Current obligations under
capitalized leases 2,214 875
Current maturities of notes
payable and
long-term debt 7,515 5,635
-------- --------
Total current liabilities 44,694 52,222
-------- --------
OBLIGATIONS UNDER CAPITALIZED
LEASES, net of current
maturities 14,701 9,600
-------- --------
NOTES PAYABLE AND LONG-TERM DEBT,
net of current maturities 214,722 183,513
-------- --------
DEFERRED INCOME TAXES 7,733 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 30,777 37,392
-------- --------
Total stockholders'
equity 74,024 80,639
-------- --------
$355,874 $336,186
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>AMERISTAR CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
Three Months
Ended March 31,
1998 1997
-------- --------
<S> <C> <C>
REVENUES:
Casino $ 51,345 $ 42,192
Food and beverage 10,506 7,208
Rooms 2,547 2,164
Other 2,076 1,848
-------- --------
66,474 53,412
Less: Promotional allowances 5,063 3,799
-------- --------
Net revenues 61,411 49,613
-------- --------
OPERATING EXPENSES:
Casino 24,591 19,661
Food and beverage 7,194 4,580
Rooms 1,063 716
Other 1,966 1,752
Selling, general and administrative 17,455 11,990
Depreciation and amortization 5,070 3,920
Preopening costs 10,611 -
-------- --------
Total operating expenses 67,950 42,619
-------- --------
Income (loss) from operations (6,539) 6,994
-------- --------
OTHER INCOME (EXPENSE):
Interest income 84 39
Interest expense (4,274) (3,154)
Other 311 106
-------- --------
INCOME (LOSS) BEFORE INCOME TAX
PROVISION (BENEFIT) (10,418) 3,985
Income tax provision (benefit) (3,803) 1,475
-------- --------
NET INCOME (LOSS) $ (6,615) $ 2,510
======== ========
EARNINGS (LOSS) PER SHARE
Basic $ (0.32) $ 0.12
======== ========
Diluted $ (0.32) $ 0.12
======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING 20,360 20,360
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>AMERISTAR CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
Three Months
Ended March 31,
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (6,615) $ 2,510
-------- --------
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 5,070 3,920
Amortization of debt costs 160 58
Change in deferred taxes (2,479) -
Net gain on disposition of assets - (143)
(Increase) decrease in other current
assets (1,285) 997
Increase in income tax refund
receivable 1,465 -
Increase in current taxes payable - 1,426
Increase (decrease) in other current
liabilities 3,218 (2,523)
-------- --------
Total adjustments 6,149 3,735
-------- --------
Net cash provided by operating activities (466) 6,245
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (15,934) (5,203)
Decrease in construction contracts
payable (13,965) (2,036)
Proceeds from sale of assets - 143
Decrease (increase) in deposits and
other non-current assets 7,589 (299)
-------- --------
Net cash used in investing activities: (22,310) (7,395)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable
and long-term debt 33,836 23,000
Principal payments of notes payable,
long-term debt and capitalized leases (978) (11,767)
-------- --------
Net cash provided by financing activities: 32,858 11,233
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 10,082 10,083
CASH AND CASH EQUIVALENTS - BEGINNING OF
PERIOD 13,031 10,724
-------- --------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 23,113 $ 20,807
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the period for interest
(net of amounts capitalized) $ - $ 3,307
======== ========
Assets purchased with long-term debt $ - $ 1,102
======== ========
Assets purchased with capitalized leases $ 6,671 $ -
======== ========
</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
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,
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, 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 March 31, 1998 was $86.0 million with a current
interest rate of approximately 8.6%.
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 March 31, 1998 include
notes payable 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 March 31, 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 loan bear interest at 15% per
annum, payable in periodic installments. The loan matures in July
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 $4.2 million at
March 31, 1998.
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 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
<PAGE>an income statement is presented. For the three months ended
March 31, 1998 and 1997, the Company had no material dilutive
securities outstanding.
Options to purchase 594,000 and 531,000 shares of common stock
were outstanding at March 31, 1998 and 1997, respectively, at
exercise prices of $5.06-$16.00 and $5.56-$16.00, 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 (collectively, "Ameristar Vicksburg") in Vicksburg,
Mississippi. ACVI is also developing a 150-room hotel at Ameristar
Vicksburg opening in June 1998. 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 on February 25 and the indoor
swimming pool and spa on March 3, 1997. 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>
Three Months Ended
Mar. 31,
1998 1997
-------- --------
<S> <C> <C>
Consolidated cash flow information:
Cash flow from operations $ (466) $ 6,245
Cash flow from investing (22,310) (7,395)
Cash flow from financing 32,858 11,233
Net revenues:
Jackpot Properties $ 12,414 $ 12,379
Ameristar Vicksburg 16,530 15,548
Ameristar Council Bluffs 24,113 21,686
The Reserve 8,354 -
-------- --------
Consolidated net revenues $ 61,411 $ 49,613
======== ========
Adjusted operating income (loss)(1):
Jackpot Properties $ 1,595 $ 2,222
Ameristar Vicksburg 3,480 2,916
Ameristar Council Bluffs 3,743 4,099
The Reserve (2,443) -
Corporate and other (2,303) (2,243)
-------- --------
Consolidated operating
income $ 4,072 $ 6,994
======== ========
Adjusted operating income (loss) margins (1):
Jackpot Properties 12.8% 17.9%
Ameristar Vicksburg 21.1% 18.8%
Ameristar Council Bluffs 15.5% 18.9%
The Reserve (29.2%) -
Consolidated operating
income margin 6.6% 14.1%
EBITDA (2):
Jackpot Properties $ 2,408 $ 2,841
Ameristar Vicksburg 5,039 4,498
Ameristar Council Bluffs 5,465 5,717
The Reserve (1,548) -
Corporate and other (2,222) (2,142)
-------- --------
Consolidated EBITDA $ 9,142 $ 10,914
======== ========
EBITDA Margins (2):
Jackpot Properties 19.4% 23.0%
Ameristar Vicksburg 30.5% 28.9%
Ameristar Council Bluffs 22.7% 26.4%
The Reserve (18.5%) -
Consolidated EBITDA margin 14.9% 22.0%
</TABLE>
(see following page for footnotes)
<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
quarter ended March 31, 1998 compared to the quarter ended
March 31, 1997. Consolidated net revenues for the quarter ended
March 31, 1998 showed a 23.8 percent increase to $61.4 million
compared to $49.6 million for the quarter ended March 31, 1997. Of
this increase, $8.4 million came from operations at The Reserve and
$3.4 million was generated by the Company's properties that were
operating during the 1997 first quarter.
Income from operations for the quarter ended March 31, 1998
was $4.1 million before preopening costs compared to $7.0 million
for the same quarter in 1997. Excluding The Reserve, income from
operations in the 1998 first quarter was $6.5 million. Total
operating expenses before preopening costs as a percentage of net
revenues increased to 93.4 percent for the first quarter of 1998
compared to 85.9 percent for the quarter ended March 31, 1997.
Loss from operations for the first quarter of 1998 after preopening
costs of $10.6 million was $6.5 million.
Net income for the quarter ended March 31, 1998 was $0.1
million before preopening costs, compared to net income of $2.5
million in the quarter ended March 31, 1997. After taking into
account the pretax write-off of $10.6 million in preopening costs
relating to The Reserve in the first quarter of 1998, the Company
had a net loss of $6.6 million for the quarter ended March 31,
1998.
Earnings per share for the quarter ended March 31, 1998 were
$0.01 before preopening costs compared to earnings per share of
$0.12 for the quarter ended March 31, 1997. After the write-off of
preopening costs for The Reserve, the Company had a net loss of
$0.32 per share for the first quarter of 1998.
Revenues and Operating Income by Property
Net revenues for Ameristar Council Bluffs were $24.1 million
for the quarter ended March 31, 1998, compared to $21.7 million for
the same quarter in 1997, an increase of $2.4 million or 11.1
percent. Most of this increase was in the casino and food and
beverage areas. The steak house, which opened in March 1997,
contributed a full quarter of operations compared to one month in
1997. Operating income decreased $356,000 or 8.7 percent in the
first quarter of 1998 compared to the same period in 1997. The
property's management is addressing increases in payroll, cost of
goods sold and promotional costs and
<PAGE>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
expects to improve the operating margin to a level more consistent
with historical performance by the end of the second quarter.
The Jackpot Properties were relatively stable with revenues of
$12.4 million for the first quarter in both 1997 and 1998.
Operating income decreased to $1.6 million in the first quarter of
1998 compared to $2.2 million for the same period in 1997,
primarily as a result of increases in expenses in most areas. The
Jackpot Properties are reevaluating the use of certain promotional
campaigns that were not as cost effective as had been anticipated.
Ameristar Vicksburg continued to be the gaming revenue market
leader in Warren County, Mississippi in the first quarter of 1998
with net revenues increasing by approximately 6.3 percent from
$15.5 million for the quarter ended March 31, 1997 to $16.5 million
for the quarter ended March 31, 1998. Overall, the Warren County
gaming revenues increased by approximately 4 percent in the first
quarter of 1998 compared to the same period in 1997. Operating
income for the first quarter of 1998 increased approximately 19.3
percent compared to the first quarter of 1997, from $2.9 million to
$3.5 million, a direct result of the higher revenues generated
during this period. In an effort to expand the market territory of
Ameristar Vicksburg and encourage longer visits, the Company is
constructing a 150-room hotel across from the main entrance to the
casino, which is expected to open in June 1998.
The Reserve, which opened on February 10, 1998, had net
revenues of $8.4 million for its first 49 days of operation.
Operating loss before preopening costs of $10.6 million was $2.4
million. Management attributes this loss in part to the normal
inefficiencies associated with the opening of a new property and is
adjusting labor and other expenditures to levels that are
appropriate for the current operational activity. Management is
also reviewing promotional and advertising campaigns to enhance The
Reserve's competitive position within the Henderson/Green Valley
market.
Consolidated Revenues and Expenses
On a consolidated basis for the quarter ended March 31, 1998
compared to the quarter ended March 31, 1997, casino revenues
increased $9.2 million or 21.7 percent, food and beverage revenues
increased $3.3 million or 45.8 percent, and rooms revenues
increased $0.4 million or 17.7 percent.
Casino expenses increased $4.9 million or 25.1 percent, food
and beverage expenses increased $2.6 million or 57.1 percent, and
rooms expenses increased $0.3 million or 48.5 percent for the
quarter ended March 31, 1998 compared to the 1997 first quarter. 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.
Selling, general and administrative expenses (including
utilities and maintenance and business development) increased $5.5
million or 45.6 percent for the quarter ended March 31, 1998
compared to the same quarter of the prior year, due primarily to
the commencement of operations at The Reserve, increased costs at
Ameristar Council Bluffs and other costs associated with the
Company's continued growth.
Depreciation expenses for the first quarter of 1998 increased
primarily due to the inclusion of The Reserve facilities in the
Company's depreciable asset base. Depreciation expenses at the
Jackpot Properties also contributed to the increase as a result of
slot machines purchased in the first quarter of 1997.
Interest expense was $4.3 million, net of capitalized interest
of $1.3 million, for the quarter ended March 31, 1998, an increase
of $1.1 million or 35.5 percent over the same quarter 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.
<PAGE>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Company's effective federal income tax rate for the
quarter ended March 31, 1998 was 36.5 percent, versus the federal
statutory rate of 35 percent. The excess of the effective rate
over the statutory rate is due to certain expenses deducted in the
current period for financial reporting purposes which are not
currently deductible for tax purposes.
Liquidity and Capital Resources
Cash flow used in operations was $466,000 for the quarter
ended March 31, 1998, as compared to cash flow provided by
operations of $6.2 million for the quarter ended March 31, 1997.
The Company had unrestricted cash of approximately $23.1 million as
of March 31, 1998. The increase in cash resulted from a net
increase in borrowings of $32.9 million for the first quarter of
1998 that was offset by capital expenditures of $15.9 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 $12.4 million from December 31, 1997 to March 31,
1998, primarily resulting from an increase in cash on hand, income
tax refund receivable, 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
$22.3 million for the three month period ended March 31, 1998
compared to $7.4 million for the same period in 1997. This was
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 $32.9
million in the first quarter of 1998 compared to $11.2 million for
the first quarter of 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
under construction at Ameristar Vicksburg, and a purchasing
subsidiary. At March 31, 1998, the outstanding principal balance
of the Revolving Credit Facility was $86.0 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 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 March
31, 1998, the average interest rate applicable to Revolving Credit
Facility borrowings was 8.6%.
<PAGE>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
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 March 31, 1998, the Company was in compliance
with these covenants.
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,
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);
<PAGE>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
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
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 31,
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 March 31, 1998, the outstanding balance on the loan was $4.2
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 March 31, 1998, the Company had other long-term
indebtedness in an aggregate principal amount of $16.8 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
<PAGE>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
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. It is possible that a failure to
satisfy one or more of these financial covenants could occur as
soon as the next covenant measure date, which is June 30, 1998.
Capital expenditures for the quarter ended March 31, 1998 were
approximately $22.6 million, including approximately $17.9 million
relating to development of The Reserve, $3.1 million relating to
the development of the Ameristar Vicksburg hotel and $1.6 million
in other normal capital improvement projects. The Company funded
these capital expenditures primarily from net cash provided by
operating activities and borrowings.
Among remaining capital expenditures anticipated for 1998, the
Company intends to make capital expenditures of approximately $7.0
million in connection with the completion of Phase I of The Reserve
and approximately $2.9 million in connection with the completion of
the Ameristar Vicksburg hotel. Management believes that the above-
described minimum capital expenditure requirements will be funded
from draws under the Revolving Credit Facility and the $7.5 million
loan facility for the development of the Ameristar Vicksburg hotel,
cash on hand, and operating cash flow.
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.
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 future operating performance of the Company's
properties, particularly the recently opened The Reserve, and the
ability of the Company to commit to capital expenditure projects.
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
<PAGE>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
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: May 14, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 23,113
<SECURITIES> 0
<RECEIVABLES> 1,618
<ALLOWANCES> 0
<INVENTORY> 2,876
<CURRENT-ASSETS> 36,390
<PP&E> 373,724
<DEPRECIATION> 73,956
<TOTAL-ASSETS> 355,874
<CURRENT-LIABILITIES> 44,694
<BONDS> 100,000
0
0
<COMMON> 204
<OTHER-SE> 73,820
<TOTAL-LIABILITY-AND-EQUITY> 355,874
<SALES> 61,411
<TOTAL-REVENUES> 61,411
<CGS> 0
<TOTAL-COSTS> 67,950
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,274
<INCOME-PRETAX> (10,418)
<INCOME-TAX> (3,803)
<INCOME-CONTINUING> 0
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