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, 1999
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 14,1999, 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 December 31, 1998 and
March 31, 1999 (unaudited) 3 - 4
B. Condensed Consolidated Statements
of Operations (unaudited) for the
three months ended March 31, 1998
and 1999 5
C. Condensed Consolidated Statements
of Cash Flows (unaudited) for the
three months ended March 31, 1998
and 1999 6
D. Notes to Condensed Consolidated
Financial Statements 7 - 8
Item 2.Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9- 17
Item 3.Quantitative and Qualitative Disclosures
about
Market Risk 17- 18
Part II. OTHER INFORMATION
Item 1.Legal Proceedings 19
Item 6.Exhibits and Reports on Form 8-K 19
SIGNATURE 20
<PAGE>PART I. FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
AMERISTAR CASINOS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<S> <C> <C>
December 31, March 31,
1998 1999
------------ ---------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $18,223 $ 17,304
Restricted cash 119 125
Accounts receivable, net 1,476 1,407
Income tax refund receivable 2,815 2,465
Inventories 3,614 3,270
Prepaid expenses 4,794 4,789
Deferred income taxes 3,906 3,605
-------- -------
Total current assets 34,947 32,965
PROPERTY AND EQUIPMENT AND
LEASEHOLD INTERESTS, at cost,
less accumulated depreciation and
amortization of $92,708 and
$97,209, respectively 297,820 296,039
EXCESS OF PURCHASE PRICE OVER FAIR
MARKET VALUE OF NET ASSETS
ACQUIRED 15,046 14,947
DEPOSITS AND OTHER ASSETS 3,924 3,830
-------- --------
$351,737 $347,781
======== ========
</TABLE>
<PAGE>AMERISTAR CASINOS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
December 31, March 31,
1998 1999
------------ ---------
(Unaudited)
CURRENT LIABILITIES:
Accounts payable $ 6,324 $ 5,622
Construction contracts payable 913 733
Accrued liabilities 26,359 24,748
Current obligations under
capitalized leases 2,398 2,396
Current maturities of notes
payable and
long-term debt 9,924 10,586
------- -------
Total current liabilities 45,918 44,085
------- -------
OBLIGATIONS UNDER CAPITALIZED
LEASES, net of current
maturities 13,196 12,691
------- ------
NOTES PAYABLE AND LONG-TERM DEBT,
net of current maturities 217,203 216,059
------- -------
DEFERRED INCOME TAXES 7,496 7,135
------- -------
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 24,677 24,564
------- -------
Total stockholders'
equity 67,924 67,811
------- -------
$351,737 $347,781
======== ========
</TABLE>
<PAGE>AMERISTAR CASINOS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months
Ended March 31,
<TABLE>
1998 1999
<S> ------- --------
REVENUES: <C> <C>
Casino $51,345 $58,084
Food and beverage 10,506 11,392
Rooms 2,547 3,933
Other 2,076 2,323
------- -------
66,474 75,732
Less: Promotional allowances 5,063 5,724
------- -------
Net revenues 61,411 70,008
------- -------
OPERATING EXPENSES:
Casino 24,591 27,055
Food and beverage 7,194 7,344
Rooms 1,063 1,607
Other 1,966 1,963
Selling, general and administrative 17,455 19,491
Depreciation and amortization 5,070 6,280
Preopening costs 10,611 -
------- -------
Total operating expenses 67,950 63,740
------- -------
Income (loss) from operations (6,539) 6,268
OTHER INCOME (EXPENSE):
Interest income 84 60
Interest expense (4,274) (6,097)
Other 311 (404)
------- --------
LOSS BEFORE INCOME TAX BENEFIT (10,418) (173)
Income tax benefit (3,803) (60)
------- --------
NET LOSS $(6,615) $(113)
======== ========
LOSS PER SHARE:
Basic $ (0.32) $(0.01)
======== ========
Diluted $ (0.32) $(0.01)
WEIGHTED AVERAGE SHARES OUTSTANDING 20,360 20,360
======== ========
</TABLE>
<PAGE>
AMERISTAR CASINOS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Three Months
Ended March 31,
<TABLE>
1998 1999
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(6,615) $(113)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 5,070 6,280
Amortization of debt costs 160 167
Change in deferred taxes (2,479) (60)
Net loss on disposition of assets - 370
(Increase) decrease in other current
assets (1,285) 412
Decrease in income tax refund
receivable 1,465 350
Increase (decrease) in other current
liabilities 3,218 (2,313)
------- -------
Total adjustments 6,149 5,206
------- -------
Net cash (used in) provided by operating
activities (466) 5,093
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (15,934) (5,112)
Decrease in construction contracts
payable (13,965) (180)
Proceeds from sale of assets - 386
Decrease (increase) in deposits and
other non-current assets 7,589 (73)
-------- -------
Net cash used in investing activities: (22,310) (4,979)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable
and long-term debt 33,836 250
Principal payments of notes payable,
long-term debt and capitalized leases (978) (1,283)
-------- -------
Net cash provided by (used in) financing
activities: 32,858 (1,033)
-------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 10,082 (919)
CASH AND CASH EQUIVALENTS - BEGINNING OF
PERIOD 13,031 18,223
-------- --------
CASH AND CASH EQUIVALENTS - END OF PERIOD $23,113 $17,304
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the period for interest
(net of amounts capitalized) $7,737 $8,608
======== =======
Assets purchased with long-term debt $ - $ 44
======== =======
Assets purchased with capitalized leases $6,671 $ -
======== =======
</TABLE>
<PAGE>AMERISTAR CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. 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, 1998.
NOTE 2 - NOTES PAYABLE AND LONG-TERM DEBT
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. The Revolving
Credit Facility binds the Borrowers to a number of affirmative and
negative covenants, including promises to maintain certain
financial ratios and tests within defined parameters. The
covenants require a Minimum Tangible Net Worth (as defined) of
$50.0 million at March 31, 1999. As of March 31, 1999, the Company
was in compliance with all covenants.
<PAGE>
Ameristar issued $100 million in 10-1/2% Senior Subordinated
Notes due 2004 under an Indenture dated July 15, 1997 (the "Senior
Subordinated Notes"). 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.
<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 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. 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. 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>
Three Months Ended
March 31,
<TABLE> 1998 1999
<S> <C> <C>
Consolidated cash flow information:
Cash flow from operations $ (466) $5,093
Cash flow from investing (22,310) (4,979)
Cash flow from financing 32,858 (1,033)
Net revenues:
Jackpot Properties $12,414 $13,134
Ameristar Vicksburg 16,530 19,066
Ameristar Council Bluffs 24,113 25,372
The Reserve 8,354 12,436
------- -------
Consolidated net revenues $61,411 $ 70,008
======= ========
Adjusted operating income (loss) (1):
Jackpot Properties $ 1,595 $2,422
Ameristar Vicksburg 3,480 3,646
Ameristar Council Bluffs 3,743 4,642
The Reserve (2,443) (1,875)
Corporate and other (2,303) (2,567)
-------- --------
Consolidated operatingincome $4,072 $ 6,268
======== ========
Adjusted operating income margins (1):
Jackpot Properties 12.8% 18.4%
Ameristar Vicksburg 21.1% 19.1%
Ameristar Council Bluffs 15.5% 18.3%
The Reserve (29.2%) (15.1%)
Consolidated operating income margin
6.6% 9.0%
======= ========
EBITDA (2):
Jackpot Properties $ 2,408 $3,177
Ameristar Vicksburg 5,039 5,430
Ameristar Council Bluffs 5,465 6,453
The Reserve (1,548) (31)
Corporate and other (2,222) (2,481)
-------- --------
Consolidated EBITDA $ 9,142 $ 12,548
========= ========
EBITDA Margins (2):
Jackpot Properties 19.4% 24.2%
Ameristar Vicksburg 30.5% 28.5%
Ameristar Council Bluffs 22.7% 25.4%
The Reserve (18.5%) (0.2%)
Consolidated EBITDA margin 14.9% 17.9%
========= ========
</TABLE>
(see following page for footnotes)
<PAGE>
(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 months ended March 31, 1999 compared to the same period in
1998. Consolidated net revenues for the three months ended March
31, 1999, increased to $70.0 million compared to $61.4 million for
the same quarter in 1998. Each of the Company's properties
contributed to this increase in net revenues, with a $4.1 million
increase at The Reserve, a $2.5 million increase at Ameristar
Vicksburg, a $1.3 million increase at Ameristar Council Bluffs and
a $0.7 million increase at the Jackpot Properties.
Income from operations for the quarter ended March 31, 1999
was $6.3 million compared to $4.1 million (before the pre-tax write-
off of $10.6 million in preopening costs) for the same quarter in
1998. Total operating expenses as a percentage of net revenues
improved and were 91.0 percent of revenues for the three months
ended March 31, 1999 compared to 93.4 percent (before the write-off
of $10.6 million in preopening costs) for the same period in 1998.
Net loss for the quarter ended March 31, 1999 was $0.1 million
compared to net loss of $6.6 million for the same period in 1998.
The net loss for the quarter ended March 31, 1998 included
preopening costs for The Reserve of $10.6 million on a pre-tax
basis.
Loss per share for the quarter ended March 31, 1999 was $0.01
compared to loss per share of $0.32 for the same quarter in 1998.
Earnings per share for the quarter ended March 31, 1998 were $0.01
before preopening costs and the related tax benefit.
Revenues and Operating Income (Loss) by Property
Net revenues for Ameristar Council Bluffs were $25.4 million
for the quarter ended March 31, 1999, compared to $24.1 million for
the same quarter in 1998, an increase of $1.3 million or 5.4
percent. The revenue increase was attributable to an increase of
$1.2 million in slot revenue generated in part from the addition of
new slot product in the fourth quarter of 1998. Operating income
increased by $0.9 million or 24 percent for the three months ended
March 31, 1999 compared to the same period in 1998. Diligent cost
control measures have improved the operating margin to 18.3 percent
in the first quarter of 1999 as compared to 15.5 percent in the
same period in 1998.
<PAGE>
The Jackpot Properties had revenues of $13.1 million for the
three months ended March 31, 1999 compared to $12.4 million for the
same period in 1998, an increase of $0.7 million or 5.6 percent.
The revenue increase was attributable to increased casino revenues
due to a higher hold percentage in table games and enhanced slot
product. Operating income increased to $2.4 million for the first
quarter of 1999 compared to $1.6 million for the same period in
1998. The increase was due to the increased revenue coupled with
continued cost-control measures which improved operating efficiency
at the properties. The operating margin increased to 18.4 percent
in the first quarter of 1999 as compared to 12.8 percent for the
same period in 1998.
Ameristar Vicksburg continues to be the gaming revenue market
leader in Warren County, Mississippi with net revenues of $19.1
million for the first quarter of 1999 compared to $16.5 million for
the same period in 1998. Overall, the Warren County gaming
revenues increased by approximately 10.0 percent for the first
three months of 1999 compared to the same period in 1998. The
increase of $2.6 million in net revenues at Ameristar Vicksburg was
largely a result of increased casino revenues of $1.8 million
related to a higher table hold percentage and higher slot revenues
due to adding more machines to the floor, in addition to the $0.6
million hotel revenue generated from the new hotel, which opened on
June 5, 1998. Operating income for the three months ended March 31,
1999 was $3.6 million compared to $3.5 million in the same period
in 1998. The higher costs were associated with operating costs of
the new hotel, increased marketing costs, and other costs
associated with the increased revenue.
The Reserve, which opened on February 10, 1998, had net
revenues of $12.4 million for the first quarter of 1999 compared to
$8.4 million for its first 50 days of operation during the period
ended March 31, 1998. All departmental revenues increased during
the three months ended March 31, 1999 when compared to the 50 days
of operations ended March 31, 1998, largely because of the 40
additional days of operations. The Reserve generated an operating
loss of $1.9 million for the three months ended March 31, 1999,
which compares to an operating loss for the 50 days of operations
during the period ended March 31, 1998 of $13.0 million (or $2.4
million before $10.6 million in preopening costs). Depreciation
expense increased $0.9 million during the quarter ended March 31,
1999 as compared to the 50 days of operations during the period
ended March 31, 1998. In spite of the higher depreciation expense,
the operating expenses were $159,000 on a daily average as compared
to $216,000 per day before preopening expenses for the 50 days of
operations in the period ended March 31, 1998. This was
accomplished through reductions in labor costs and improved
operating efficiencies throughout the property. The Company has
continued to aggressively implement revenue-generating programs
including direct mail marketing and other promotions, as well as
controlling costs.
Consolidated Revenues and Expenses
On a consolidated basis, for the quarter ended March 31, 1999
compared to the same period in 1998, casino revenues increased $6.8
million or 13.0 percent, food and beverage revenues increased $0.9
million or 8.4 percent, and rooms revenues increased $1.4 million
or 54.4 percent. Of the $6.8 million in casino revenue increases,
$3.2 million of the increase resulted primarily from a full quarter
of operations at The Reserve, and $3.6 million resulted from casino
revenue improvements at each of the other properties.
Casino expenses increased $2.5 million or 10.0 percent, food
and beverage expenses increased $0.2 million or 2.1 percent, and
rooms expenses increased $0.5 million or 51.2 percent for the
quarter ended March 31, 1999 compared to the same period in 1998.
Of the $2.5 million in increased casino expenses, $1.2 million
related to a full quarter of operations at The Reserve and the
remaining increase related to expenses at the other properties
primarily associated with additional revenue.
<PAGE>
Selling, general and administrative expenses (including
utilities and maintenance and business development) increased $2.0
million or 11.7 percent for the quarter ended March 31, 1999
compared to the same quarter of the prior year. A full quarter of
operations at The Reserve was responsible for $0.7 million of the
increase. Ameristar Vicksburg experienced a $1.0 million or a 27.2
percent increase which included $0.4 in additional marketing costs
related to direct mail and advertising and an increase of $0.5
million in other general costs such as property maintenance,
salaries and legal expense. Corporate general expenses increased
$0.3 million or 11.7 percent as a result of higher professional
fees.
Depreciation expenses for the first quarter of 1999 increased
primarily due to the inclusion of The Reserve facilities and the
hotel at Vicksburg in the Company's depreciable asset base for a
full quarter.
Interest expense was $6.1 million for the three months ended
March 31, 1999, compared to $4.3 million for the same period in
1998. The increased interest expense relates primarily to
increased debt incurred to finance construction of The Reserve and
the hotel at Vicksburg, the cessation of capitalized interest for
those projects and a higher rate of interest related to the bank
line.
Liquidity and Capital Resources
Cash flow provided by operations was $5.1 million for the
three months ended March 31, 1999 compared to $0.5 million used in
operations for the three months ended March 31, 1998. Other current
liabilities decreased $2.3 million primarily as a result of the
$5.3 million payment of accrued bond interest on February 1, 1999.
The Company had unrestricted cash of approximately $17.3
million as of March 31, 1999, a decrease in cash of $0.9 million
from December 31, 1998. The decrease of $0.9 million in cash at
March 31, 1999 resulted primarily from capital expenditures of $5.2
million and $1.3 million in debt principal reductions. Capital
expenditures during the first quarter of 1999 primarily related to
the exercise of a option for the purchase of additional land at The
Reserve ($1.4 million), various capital improvement projects at The
Reserve ($1.3 million) and the purchase of new slot machines for
each of the properties ($1.2 million).
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 March 31,
1999, the outstanding principal balance of the Revolving Credit
Facility was $90.0 million.
Under the terms of the Revolving Credit Facility, concurrent
with each loan draw, the Borrowers may select the interest rate
based on either the London Interbank Offering Rate ("LIBOR") or
WFB's prime interest rate. The applicable margins for both LIBOR
draws and prime interest rate draws adjust semiannually based on
the ratio of the Company's consolidated total debt to consolidated
cash flows, as measured by an EBITDA formula. As of March 31,
1999, the Borrowers have taken LIBOR draws totaling $90.0 million
with an average interest rate of approximately 9 percent per annum.
The Company has entered into an interest rate collar agreement
with WFB to manage interest expense, which is subject to
fluctuation due to the variable-rate nature of the debt under the
Company's Revolving Credit Facility. Under the agreement, which
covers $50.0 million of the borrowings on the
<PAGE>Revolving Credit Facility, the Company has a LIBOR floor
rate of 5.39 percent and a LIBOR ceiling rate of 6.75 percent, plus
the applicable margin. For the three months ended March 31, 1999,
the Company paid approximately $57,000 in additional interest as a
result of this agreement. The agreement terminates on June 30,
2003 to coincide with the maturity of the Revolving Credit
Facility.
Under the Revolving Credit Facility, borrowings under the
Revolving Credit Facility may not exceed 2.75 times the Borrowers'
rolling four quarter EBITDA (as defined) and the Borrowers' total
funded debt may not exceed the Borrowers' rolling four-quarter
EBITDA (as defined), multiplied by a factor that varies over time
and which is currently 5.5 and will be 5.25 at June 30, 1999. As
of March 31, 1999, borrowings under the Revolving Credit Facility
and the total funded debt of the Borrowers were 2.2 and 5.1 times
the Borrowers' rolling four-quarter EBITDA (as defined),
respectively. 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 covenants require a Minimum Tangible
Net Worth (as defined) of $50.0 million at March 31, 1999. As of
March 31, 1999, the Company was in compliance with all covenants.
Based on the rolling four quarter EBITDA (as defined) at March 31,
1999, the amount available for additional borrowing on the
Revolving Credit Facility is approximately $16.1 million.
Ameristar issued $100 million in 10-1/2% Senior Subordinated
Notes due 2004 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.
The Indenture includes covenants that restrict the ability of
Ameristar and the Restricted Subsidiaries (as defined and which
includes all Guarantors) from incurring future Indebtedness (as
defined); provided, however, that Ameristar or any Guarantor may
incur Indebtedness if the incurrence thereof would not result in
the Consolidated Coverage Ratio (as defined) being greater than 2.0
to 1.0 on a rolling four-quarter basis. The Indenture also permits
Ameristar or a Restricted Subsidiary to incur Indebtedness without
regard to the Consolidated Coverage Ratio test in certain
circumstances, including borrowings of up to $140 million under the
Revolving Credit Facility, as amended or replaced from time to
time, up to $15.0 million in recourse furniture, fixtures and
equipment financings, up to $7.5 million in borrowings for the
construction of the hotel at Ameristar Vicksburg and up to
$5.0 million of other Indebtedness.
The Indenture also includes certain covenants that, among
other things, limit the ability of Ameristar and its Restricted
Subsidiaries to pay dividends or other distributions (excluding
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 was in compliance with the covenants under the Indenture at
March 31, 1999.
At March 31, 1999, The Company had other indebtedness in an
aggregate principal amount of $214.7 million.
No assurance can be given that the Company will be able to
satisfy, when necessary, the financial covenants under the
Revolving Credit Facility, the Senior Subordinated Notes or other
debt instruments for purposes of incurring additional debt,
including additional draws under the Revolving Credit Facility. In
<PAGE>addition, a failure to satisfy the financial covenants under
the Revolving Credit Facility could either require the Company to
reduce the outstanding balance of the Revolving Credit Facility,
which requirements could adversely affect or exceed the Company's
liquidity, or result in an event of default under one or more debt
instruments. Adverse changes in the Company's operations or
operating cash flow may affect the ability of the Company to
satisfy these financial covenants.
Additional information concerning the Revolving Credit
Facility, the Senior Subordinated Notes and the Company's other
indebtedness is set forth under "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources" in Ameristar's Report on 10-K/A
for the fiscal year ended December 31, 1998.
The Company intends to make the maximum capital expenditures
allowed under the covenants of the Revolving Credit Facility of
approximately $13.2 million in 1999 of which $5.2 million were made
during the first quarter. Management believes that the above-
described capital expenditure requirements will be funded out of
draws under the Revolving Credit Facility, cash on hand, operating
cash flow and purchase money and lease financing related to the
acquisition of furniture, fixtures and equipment (including gaming
equipment).
Management is currently considering several potential capital
expenditure projects at Ameristar Council Bluffs and Ameristar
Vicksburg and is presently remodeling certain dining and meeting
room areas at The Reserve. In evaluating these projects,
management intends to consider the operating performance of each of
the Company's properties, the anticipated relative costs and
benefits of the various projects, and competitive and other
relevant factors, including the availability of operating cash flow
and debt financing to fund capital expenditures. If the Company
decides that capital expenditures exceeding $13.2 million are
warranted, the Company must obtain a waiver under the Revolving
Credit Facility.
Because the amount of borrowings permitted to be drawn at any
time under the Revolving Credit Facility is determined in part by
the Company's rolling four-quarter EBITDA (as defined), the
Company's anticipated borrowings under the Revolving Credit
Facility to fund a portion of any capital expenditure project will
be dependent upon the level of the Company's aggregate operating
cash flow. The Company experienced an increase of $6.7 million in
cash flow from operations and $3.4 million in EBITDA during the
quarter ended March 31, 1999 over the same quarter in 1998. The
increases resulted largely from operating improvements at The
Reserve as well as improvements at all other properties.
Management anticipates that the operating improvements will
continue during the remainder of the year. However, no assurances
can be given with respect to the amount of operating cash flow or
EBITDA of the Company for any future period, whether the Company
will proceed with any of the capital expenditure projects currently
under consideration, or the timing, cost or scope of any project
undertaken by the Company. At the present time, the Company does
not anticipate undertaking capital expenditure projects during 1999
that could not be funded out of amounts anticipated to be available
through anticipated internally generated cash flow and the
Company's borrowing capacity under the Revolving Credit Facility.
Ameristar has not declared any dividends on its Common Stock
in the past and the Company intends for the foreseeable future to
retain all earnings for use in the development of its business
instead of paying cash dividends. In addition, as described below,
the Revolving Credit Facility and the Senior Subordinated Notes
obligate the Company to comply with certain financial covenants
that may restrict or prohibit the payment of dividends.
<PAGE>
YEAR 2000 READINESS DISCLOSURE
Background
In the past, many computer software programs were written
using two digits rather than four to define the applicable year.
As a result, date-sensitive computer software may recognize a date
using "00" as the year 1900 rather than the year 2000. This is
generally referred to as the "Year 2000 issue." If this situation
occurs, the potential exists for computer system failures or
miscalculations by computer programs, which could disrupt
operations.
Risk Factors
The Company is in many ways involved in a low-technology
business. Casino employees, for example, do not require computers
to deal blackjack or spin a roulette wheel. Likewise, a chef does
not require computers to prepare a meal and a maid does not require
a computer to clean and prepare a guest room. Slot machines are a
type of computer, but there is no date embodied in their basic
operation of choosing a random sequence and determining the
appropriate payout.
Nevertheless, the Company does use computers extensively to
assist its employees in providing good service to its guests and to
assist management in monitoring the Company's operations. The
Company's hotel front desks, for example, are highly computerized
so as to expedite check-in and check-out of guests. Similarly, the
Company uses computers in the back-of-the-house to facilitate
purchasing and maintaining inventory records. In the casino,
computers are used to monitor gaming activity and maintain customer
records, such as credit availability and points earned by members
of the Company's players clubs.
Computers on occasion fail, irrespective of the Year 2000
issue. For this reason, where appropriate, the Company maintains
paper and magnetic back-ups and the Company's employees are trained
in the use of manual procedures. When the front desk computer
fails, for example, the Company's employees continue to check
guests in and out using manual methods.
This is not to imply that there is no risk to the Company from
the Year 2000 issue. The risks could be substantial. Most of the
Company's guest rooms, for example, are easily accessed only by
elevator, and most elevators incorporate some computer technology.
Likewise, the Company's heating, ventilation, life safety and air
conditioning systems are highly computerized and, of course,
critical to the Company's operations. The Company is also exposed
to the risk that one or more of its vendors or suppliers could
experience Year 2000 problems that may impact their ability to
provide goods and services. Although this is not considered as
significant a risk with respect to the suppliers of goods due to
the availability of alternative suppliers, the disruption of
certain services, in particular utilities and financial services,
could, depending upon the extent of the disruption, have a material
adverse impact on the Company's operations.
Strategy
The Company has evaluated its front- and back-of-the-house
computer operations. Most of the casino and hotel systems are
already Year 2000 compliant according to the vendors. Those that
are not will be upgraded with Year 2000 compliant systems within
the next six months. The back-of-the-house accounting systems have
been evaluated and the payroll system and all financial software
programs will be upgraded within the next six months. Where
important to the Company's business, inquiries are also being made
of third parties with whom the Company does significant business,
such as vendors and suppliers, as to their Year 2000 readiness.
<PAGE>
The Company used Year 2000 compliance as one of its criteria
in choosing the computer systems for The Reserve. Some of these
same systems have been or will be installed at the Company's other
properties.
The Company has not developed a comprehensive contingency
plan, although as previously mentioned a number of its critical
hotel and casino systems are currently backed up by manual
procedures that have been utilized during times of system
malfunctions. The Company will continue to assess the need for a
comprehensive contingency plan as implementation of its corrective
action plan continues.
Costs
It is difficult to calculate the cost to the Company of
ensuring that its systems are Year 2000 compliant, in part because
there are many different solutions to various Year 2000 situations.
In the case of the Company's elevators, for example, the Company
has requested that the third parties with whom it contracts for its
elevator maintenance inspect each elevator system, as part of its
normal maintenance, for any Year 2000 issues.
The Company has estimated that total hardware and software for
the back-of-the-house accounting system could cost approximately
$750,000 on a companywide basis. The overall costs of addressing
the Year 2000 issue have not been and are not expected to be
material to the Company's financial condition or results of
operations.
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,
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 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/A
for the fiscal year ended December 31, 1998 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
Except for the Revolving Credit Facility, under which
$90.0 million was outstanding at March 31, 1999, and certain other
long-term debt outstanding at March 31, 1999 in the aggregate
amount of $6.9 million (collectively, the "Variable Rate Debt"),
all of the Company's other long-term debt bears
<PAGE>interest at fixed rates. The Variable Rate Debt bears
interest equal to the WFB prime interest rate or LIBOR in effect
from time to time, in each case plus an applicable margin
determined by the ratio of the Company's consolidated total debt to
consolidated cash flows, as measured by an EBITDA formula. At
March 31, 1999, the average interest rate applicable to the
Variable Rate Debt was 9.0 percent. An increase of one percentage
point in the average interest rate applicable to the Variable Rate
Debt outstanding at March 31, 1999, would increase the Company's
annual interest costs by approximately $969,300. The Company has
entered into an interest rate collar agreement with WFB to manage
the effects of fluctuations in the interest rate applicable to up
to $50.0 million in LIBOR draws under the Revolving Credit
Facility.
Although the Company manages its short-term cash assets with a
view to maximizing return with minimal risk, the Company does not
invest in market rate sensitive instruments for trading or other
purposes, including so-called derivative securities, and the
Company is not exposed to foreign currency exchange risks or
commodity price risks in its portfolio transactions.
<PAGE>PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
E. L. Pennebaker, Jr., et. al. v. ACI, et. al. On
February 23, 1998, E. L. Pennebaker, Jr. filed a complaint in the
Circuit Court of Pike County, Mississippi against ACI, Harrah's
Vicksburg, Inc., Riverboat Corporation of Mississippi-Vicksburg,
and Deposit Guaranty National Bank. The matter is pending as case
number 98-0047-B. The complaint was amended in February 1998, to
add James F. Belisle, Multi Gaming Management, Inc. and Multi
Gaming Management of Mississippi, Inc. as additional plaintiffs.
The complaint was further amended in March 1999 to modify the
specific claims alleged by the plaintiffs. The plaintiffs are
property owners or claim to have contract rights in a proposed
casino/racetrack development along the Big Black River in Warren
County, Mississippi. They allege they would have profited if the
Mississippi Gaming Commission had found suitable for a casino a
location along that river that was controlled by Horseshoe Gaming,
Inc. or its affiliates. The plaintiffs further allege that the
defendants entered into an agreement to hinder trade and restrain
competition in the gaming industry in violation of the antitrust
laws and the gaming laws of Mississippi. Specifically, the
plaintiffs allege the defendants conducted an aggressive campaign
in opposition to the application of Horseshoe Gaming, Inc. for a
gaming site on the Big Black River. The plaintiffs also allege
that the defendants tortiously interfered with the plaintiffs'
business relations. The plaintiffs allege compensatory damages of
$38 million and punitive damages of $200 million. ACI has answered
the complaint and is vigorously defending this suit.
Mr. Pennebaker has also filed a petition with the Mississippi
Gaming Commission requesting that the Mississippi Gaming Commission
order ACI, Harrah's Vicksburg, Inc., and Riverboat Corporation of
Mississippi-Vicksburg to stop opposing the approval and
construction of a casino on the Big Black River and for such other
corrective and punitive action that the Mississippi Gaming
Commission might find appropriate. ACI has been advised that no
action is required by it in connection with this petition unless
requested by the Mississippi Gaming Commission.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits filed as part 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, 1999 /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.
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