UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 November 12, 1999, 20,363,000 shares of Common Stock of the registrant
were issued and outstanding.
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<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 September 30, 1999
(unaudited) 3 - 4
B. Condensed Consolidated Statements of Operations
(unaudited) for the three and nine months ended
September 30, 1998 and 1999 5
C. Condensed Consolidated Statements of Cash Flows
(unaudited) for the nine months ended
September 30, 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 - 18
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 19
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 21
SIGNATURE 22
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
AMERISTAR CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
<S> <C> <C>
December 31, September 30,
1998 1999
----------- ------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 18,223 $ 15,513
Restricted cash 119 132
Accounts receivable, net 1,476 1,542
Income tax refund receivable 2,815 200
Inventories 3,614 3,364
Prepaid expenses 4,794 6,417
Deferred income taxes 3,906 3,649
-------- --------
Total current assets 34,947 30,817
PROPERTY AND EQUIPMENT AND LEASEHOLD INTERESTS,
at cost, less accumulated depreciation and
amortization of $92,708 and $108,545,
respectively 297,820 304,418
EXCESS OF PURCHASE PRICE OVER FAIR MARKET
VALUE OF NET ASSETS ACQUIRED 15,046 14,750
DEPOSITS AND OTHER ASSETS 3,924 3,904
-------- --------
$351,737 $353,889
======== ========
</TABLE>
The accompanying notes are an integral part
of these condensed consolidated financial statements.
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<PAGE>
<TABLE>
AMERISTAR CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
December 31, September 30,
1998 1999
----------- ------------
(Unaudited)
CURRENT LIABILITIES:
Accounts payable $ 6,324 $ 4,717
Construction contracts payable 913 5,411
Accrued liabilities 26,359 26,363
Current obligations under capitalized
leases 2,398 2,379
Current maturities of notes payable and
long-term debt 9,924 11,248
-------- --------
Total current liabilities 45,918 50,118
-------- --------
OBLIGATIONS UNDER CAPITALIZED LEASES, net of
current maturities 13,196 11,538
-------- --------
NOTES PAYABLE AND LONG-TERM DEBT,
net of current maturities 217,203 214,865
-------- --------
DEFERRED INCOME TAXES 7,496 8,491
-------- --------
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 25,630
-------- --------
Total stockholders' equity 67,924 68,877
-------- --------
$351,737 $353,889
======== ========
</TABLE>
The accompanying notes are an integral part
of these condensed consolidated financial statements.
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<PAGE>
<TABLE>
AMERISTAR CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<S> <C> <C> <C> <C>
Three Months Nine months
Ended September 30, Ended September 30,
1998 1999 1998 1999
-------- -------- -------- --------
REVENUES:
Casino $55,988 $63,414 $161,212 $184,363
Food and beverage 12,277 12,953 34,765 36,590
Rooms 4,499 5,026 10,804 13,587
Other 2,682 2,715 7,284 7,635
------- ------- -------- --------
75,446 84,108 214,065 242,175
Less: Promotional allowances 6,104 6,481 16,576 18,341
------- ------- -------- --------
Net revenues 69,342 77,627 197,489 223,834
------- ------- -------- --------
OPERATING EXPENSES:
Casino 26,748 29,615 78,364 85,794
Food and beverage 8,475 7,691 23,949 23,104
Rooms 1,673 1,817 4,229 5,102
Other 2,405 2,257 6,526 6,249
Selling, general and
administrative 19,447 23,590 55,958 65,079
Depreciation and amortization 6,147 5,922 17,243 18,095
Preopening costs - - 10,611 -
------- ------- -------- --------
Total operating expenses 64,895 70,892 196,880 203,423
------- ------- -------- --------
Income from operations 4,447 6,735 609 20,411
OTHER INCOME (EXPENSE):
Interest income 86 74 302 252
Interest expense (6,146) (6,221) (16,265) (18,468)
Other (62) (83) 53 (566)
------- ------- -------- --------
INCOME (LOSS) BEFORE INCOME TAX
PROVISION (BENEFIT) (1,675) 505 (15,301) 1,629
Income tax provision (benefit) (537) 218 (5,049) 676
------- ------- -------- --------
NET INCOME (LOSS) $(1,138) $ 287 $(10,252) $ 953
======= ======= ======== ========
EARNINGS (LOSS) PER SHARE:
Basic $ (0.06) $ 0.01 $ (0.50) $ 0.05
======= ======= ======== ========
Diluted $ (0.06) $ 0.01 $ (0.50) $ 0.05
======= ======= ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING 20,360 20,360 20,360 20,360
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part
of these condensed consolidated financial statements.
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<PAGE>
<TABLE>
AMERISTAR CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<S> <C> <C>
Nine months
Ended September 30,
1998 1999
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(10,252) $ 953
-------- --------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 17,243 18,095
Amortization of debt issue costs 494 501
Preopening costs 10,611 -
Change in deferred income taxes (5,049) 1,252
Net loss on disposition of assets - 445
Increase in other current assets (3,069) (1,452)
Decrease in income tax refund receivable 1,753 2,615
Increase (decrease) in other current
liabilities 5,924 (1,603)
-------- --------
Total adjustments 27,907 19,853
-------- --------
Net cash provided by operating activities 17,655 20,806
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (26,611) (25,898)
Increase (decrease) in construction
contracts payable (18,130) 4,498
Proceeds from sale of assets - 1,195
Increase in deposits and other
non-current assets (3,027) (576)
-------- --------
Net cash used in investing activities (47,768) (20,781)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable
and long-term debt 42,606 2,047
Principal payments of notes payable,
long-term debt and capitalized leases (3,320) (4,782)
-------- --------
Net cash provided by (used in) financing
activities 39,286 (2,735)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 9,173 (2,710)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 13,031 18,223
-------- --------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 22,204 $ 15,513
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest (net of amounts
capitalized) $ 18,064 $ 20,449
======== ========
Cash paid for income taxes $ 350 $ 200
======== ========
Assets purchased with long-term debt $ - $ 44
======== ========
Assets purchased with capitalized leases $ 6,671 $ -
======== ========
</TABLE>
The accompanying notes are an integral part
of these condensed consolidated financial statements.
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<PAGE>
AMERISTAR CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED 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 that owns and operates the Ameristar 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. 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, 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 periods' condensed consolidated financial statements to conform to
the current periods' 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/A 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. 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. As of September 30, 1999, the Company was in
compliance with all covenants.
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
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<PAGE>
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.
NOTE 3 - EARNINGS (LOSS) PER SHARE
In March 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share",
effective for fiscal years ending after December 15, 1997. The Company adopted
SFAS 128 for the year ended December 31, 1997. SFAS 128 requires the
computation and presentation of basic and diluted earnings per share for all
periods for which an income statement is presented. For the three and nine
months ended September 30, 1998 and 1999, the Company had no materially
dilutive securities outstanding.
Options to purchase 518,000 and 1,492,000 shares of common stock were
outstanding at September 30, 1998 and 1999, respectively, at exercise prices of
$3.56 - $16.00 for the 1998 period and $2.64 - $16.00 for the 1999 period.
These options were not included in pro forma computations of earnings per share
assuming dilution for the 1998 periods because the options' exercise prices
were greater than the average market price of the common shares during the
periods presented. For the 1999 periods, the outstanding options caused no
dilution of the reported earnings per share.
- 8 -
<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:
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<PAGE>
<TABLE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
<S> <C> <C> <C> <C>
Three Months Nine months
Ended September 30, Ended September 30,
1998 1999 1998 1999
-------- -------- -------- --------
Consolidated cash flow information:
Cash flow provided by operating
activities $ 1,798 $ 2,314 $ 17,655 $ 20,806
Cash flow used in investing
activities (7,602) (9,561) (47,768) (20,781)
Cash flow provided by (used in)
Financing activities 5,719 (519) 39,286 (2,735)
Net revenues:
Jackpot Properties $15,295 $15,948 $ 41,990 $ 44,286
Ameristar Vicksburg 17,675 20,079 50,593 58,464
Ameristar Council Bluffs 24,409 28,654 72,552 82,294
The Reserve 11,963 12,946 32,354 38,790
------- ------- -------- --------
Consolidated net revenues $69,342 $77,627 $197,489 $223,834
======= ======= ======== ========
Adjusted operating income
(loss) (1):
Jackpot Properties $ 3,661 $ 2,952 $ 8,234 $ 8,892
Ameristar Vicksburg 3,380 3,820 9,573 11,418
Ameristar Council Bluffs 4,707 5,782 12,668 15,883
The Reserve (4,838) (1,871) (12,097) (5,883)
Corporate and other (2,463) (3,948) (7,158) (9,899)
------- ------- -------- --------
Consolidated operating income $ 4,447 $ 6,735 $ 11,220 $ 20,411
======= ======= ======== ========
Adjusted operating income (loss)
margins (1):
Jackpot Properties 23.9% 18.5% 19.6% 20.1%
Ameristar Vicksburg 19.1% 19.0% 18.9% 19.5%
Ameristar Council Bluffs 19.3% 20.2% 17.5% 19.3%
The Reserve (40.4%) (14.5%) (37.4%) (15.2%)
Consolidated operating
income margin 6.4% 8.7% 5.7% 9.1%
EBITDA (2):
Jackpot Properties $ 4,468 $ 3,707 $ 10,666 $ 11,205
Ameristar Vicksburg 5,111 5,107 14,475 15,789
Ameristar Council Bluffs 6,503 7,652 17,946 21,402
The Reserve (3,108) 16 (7,713) (284)
Corporate and other (2,380) (3,826) (6,911) (9,607)
------- ------- -------- --------
Consolidated EBITDA $10,594 $12,656 $ 28,463 $ 38,505
======= ======= ======== ========
EBITDA margins (2):
Jackpot Properties 29.2% 23.2% 25.4% 25.3%
Ameristar Vicksburg 28.9% 25.4% 28.6% 27.0%
Ameristar Council Bluffs 26.6% 26.7% 24.7% 26.0%
The Reserve (26.0%) 0.1% (23.8%) (0.7%)
Consolidated EBITDA margin 15.3% 16.3% 14.4% 17.2%
</TABLE>
(see following page for footnotes)
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<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
(1) Adjusted operating income (loss) for the 1998 periods 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 posted record revenues for the three and nine months ended
September 30, 1999. Consolidated net revenues for the three months ended
September 30, 1999, increased to $77.6 million compared to $69.3 million for
the same quarter in 1998. Net revenues for the nine months ended September 30,
1999, were $223.8 million compared to $197.5 million in 1998. The majority of
these increases related to improved casino revenues resulting from new slot
product at certain of the properties and the additional 41 days of operation
for The Reserve in 1999 compared to 1998 for the nine-month period.
Income from operations for the quarter ended September 30, 1999, was $6.7
million compared to $4.4 million for the same quarter in 1998. Total operating
expenses as a percentage of net revenues decreased to 91.3 percent for the
third quarter of 1999 compared to 93.6 percent for the third quarter of 1998.
Income from operations for the nine months ended September 30, 1999, was $20.4
million compared to $11.2 million before preopening costs and the related tax
benefit for the same period in 1998. After the effect of preopening costs,
income from operations for the nine months ended September 30, 1998, was $0.6
million.
Net income for the quarter ended September 30, 1999, was $0.3 million
compared to a net loss of $1.1 million for the same period in 1998. For the
nine months ended September 30, 1999, net income was $1.0 million compared to a
net loss of $3.1 million before preopening costs and the related tax benefit
for the same period in 1998. The net loss was $10.3 million after preopening
costs for the nine months ended September 30, 1998.
Earnings per share for the quarter ended September 30, 1999, were $0.01
compared to a loss per share of $0.06 for the same quarter in 1998. Earnings
per share for the first nine months of 1999 were $0.05 compared to a loss per
share of $0.15 before preopening costs and $0.50 after preopening costs for the
first nine months of 1998.
Revenues and Operating Income by Property
Net revenues for Ameristar Council Bluffs were $28.7 million for the
quarter ended September 30, 1999, compared to $24.4 million for the same
quarter in 1998, an increase of $4.3 million or 17.6 percent. For the nine
months ended September 30, 1999, net revenues were $82.3 million compared to
$72.6 million for the same period in 1998, a 13.4 percent increase. Operating
income increased by $1.1 million or 22.8 percent for the three months and $3.2
million or 25.4 percent for the nine months ended
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<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
September 30, 1999, compared to the same periods in 1998.
These increases are attributed to the popularity
of, and the resulting increased revenues from, the new slot and video gaming
machines placed in service during the fourth quarter of 1998 and the first
quarter of 1999, as well as the continued growth in the gaming market.
The Jackpot Properties' net revenues increased to $15.9 million and $44.3
million for the three and nine months ended September 30, 1999, respectively,
compared to $15.3 million and $42.0 million for the same periods in 1998.
Operating income was $3.0 million and $8.9 million for the three and nine
months ended September 30, 1999, respectively, compared to $3.7 million and
$8.2 million for the same periods in 1998. Most of the revenue increase is
attributable to increased casino revenues generated by the enhanced slot
product and higher table games hold percentages. While cost-control measures
have improved the year-to-date operating efficiency of the Jackpot Properties
compared to the prior year, increases in marketing/advertising and general and
administrative expenses in the third quarter of 1999 account for the decrease
in operating income compared to the third quarter of 1998.
Ameristar Vicksburg continues to be the gaming revenue market leader in
Warren County, Mississippi with net revenues of $20.1 million for the third
quarter of 1999 and $58.5 million for the first nine months of 1999, compared
to $17.7 million and $50.6 million, respectively, for the same periods in 1998.
Operating income for the three and nine months ended September 30, 1999, was
$3.8 million and $11.4 million, respectively, compared to $3.4 million and $9.6
million for the same periods in 1998. The increase in net revenues was a
result of higher slot revenues due to the addition of 144 new, innovative slot
machines to the casino floor, a higher table games hold percentage, and the
June 1998 opening of the 150-room Ameristar Hotel Vicksburg. The increases in
revenues for the three and nine months were somewhat offset by increases in
operating costs. The primary increases in operating costs were in the payroll
and benefits, marketing/advertising, and general and administrative areas. The
hotel operations contributed $2.1 million in revenues and $1.0 million in
operating income during the first nine months of 1999.
The Reserve had net revenues of $12.9 million for the three-month period
ended September 30, 1999, compared to $12.0 million for the same period in the
prior year. For the nine months ended September 30, 1999, net revenues were
$38.8 million compared to $32.4 million for the 232 days from the property's
opening through September 30, 1998. The Reserve had an operating loss of $1.9
million for the quarter ended September 30, 1999, compared to an operating loss
of $4.8 million for the same quarter in 1998. For the nine months ended
September 30, 1999, the operating loss was $5.9 million, compared to an
operating loss of $12.1 million before preopening costs and the related tax
benefit from the property's opening through September 30, 1998. Along with
improving revenues, material reductions in labor and food cost percentages have
contributed to the improvements in the property's operating performance.
Consolidated Revenues and Expenses
On a consolidated basis for the quarter ended September 30, 1999, compared
to the quarter ended September 30, 1998, casino revenues increased $7.4 million
or 13.3 percent, food and beverage revenues increased $0.7 million or 5.5
percent, and rooms revenues increased $0.5 million or 11.7 percent. On a
consolidated basis for the nine months ended September 30, 1999, compared to
the nine months ended September 30, 1998, casino revenues increased $23.2
million or 14.4 percent, food and beverage revenues increased $1.8 million or
5.2 percent, and rooms revenues increased $2.8 million or 25.8 percent. These
increases are due to the improved casino results previously discussed,
increased prices and additional covers in the food and beverage outlets, and
the operation of the Ameristar Hotel in Vicksburg for a full nine months
through September 30, 1999, compared to only 117 days through September 30,
1998.
For the quarter ended September 30, 1999, compared to the same period in
1998, casino expenses increased $2.9 million or 10.7 percent, food and beverage
expenses decreased $0.8 million or 9.3 percent,
- 12 -
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
and rooms expenses increased $0.1 million or 8.6
percent. For the nine months ended September 30, 1999,
compared to the same period in 1998, casino expenses increased $7.4 million or
9.5 percent, food and beverage expenses decreased $0.8 million or 3.5 percent,
and rooms expenses increased $0.9 million or 20.6 percent. The increase in
casino expenses relates to increases in gaming taxes associated with the
increased casino revenues, as well as increases in casino complimentary
expenses and employee compensation and benefits. The decrease in food and
beverage expenses reflects an emphasis on cost controls in the food and
beverage departments. The increase in room expenses relates primarily to the
incremental expenses of the Vicksburg hotel being open for the full period in
1999 versus a partial period in 1998.
Selling, general and administrative expenses (including utilities and
maintenance and business development) increased $4.1 million or 21.3 percent
for the quarter ended September 30, 1999, compared to the same quarter of the
prior year. For the nine months ended September 30, 1999, selling, general and
administrative expenses increased $9.1 million or 16.3 percent compared to the
same period in 1998. These increases primarily represent the increased
overhead incurred as the Company continues its growth.
Depreciation expense for the first nine months of 1999 increased $0.9
million or 4.9 percent over the same period in 1998 primarily due to the
inclusion of The Reserve and the Vicksburg hotel in the Company's depreciable
asset base for the full nine months versus their inclusion for only part of the
first two quarters in the prior year. By the third quarter of 1998, these
facilities were included in the depreciable asset base for the full quarter,
making the third quarters of 1998 and 1999 more comparable. Also, certain five-
year assets in Vicksburg are now fully depreciated and no longer add to the
current period's depreciation expense. Therefore, depreciation expense
decreased by $0.2 million or 3.7 percent in the third quarter 1999 compared to
the same quarter of 1998.
Interest expense was $6.2 million and $18.5 million, respectively, for the
three and nine months ended September 30, 1999, compared to $6.1 million and
$16.3 million for the same periods in 1998. The increased interest expense for
the quarter reflects higher interest rates on the Company's variable rate debt.
The increase for the nine month period reflects the fact that interest costs
are being expensed during all of the nine months ended September 30, 1999,
whereas in the 1998 period, a portion of these costs were capitalized until the
February 10, 1998, opening of The Reserve, when the capitalization of interest
related to that project ceased.
The Company's effective federal income tax rate for the nine months ended
September 30, 1999, was 41.5 percent, versus the federal statutory rate of 34
percent. The difference between the effective rate and the statutory rate is
due to certain expenses deducted in the current period for financial reporting
purposes which are not deductible for tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities were $20.8 million for the nine
months ended September 30, 1999, compared to $17.7 million for the nine months
ended September 30, 1998. The majority of this increase resulted from improved
operations at all of the properties (particularly, The Reserve), offset
partially by higher corporate overhead expenses.
The Company had unrestricted cash of approximately $15.5 million as of
September 30, 1999, compared to $18.2 million as of December 31, 1998. The
decrease in unrestricted cash at September 30, 1999, results primarily from
capital expenditures and repayments of notes payable, long-term debt and
capitalized leases in amounts exceeding cash generated by operations during the
period. Capital expenditures of $25.9 million for the nine months primarily
relate to expansion projects at Vicksburg, Council Bluffs and The Reserve
($14.9 million), additional land purchased at The Reserve ($1.4 million),
- 13 -
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
the purchase of new slot machines ($3.5 million) and other equipment ($2.9
million) at each of the properties, and other maintenance capital expenditures.
The Company maintains a $125 million revolving credit facility (the
"Revolving Credit Facility") pursuant to a Credit Agreement among Ameristar and
its principal subsidiaries (the "Borrowers"), a syndicate of bank lenders and
Wells Fargo Bank, N.A. ("WFB") as Agent Bank, Arranger and Swingline Lender.
The Borrowers do not include AC Hotel Corp., a subsidiary of ACVI that owns the
hotel at Ameristar Vicksburg, and a purchasing subsidiary. At September 30,
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 September 30,
1999, the Borrowers have taken LIBOR draws totaling $90.0 million with an
average interest rate of approximately 9.4 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 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 nine months
ended September 30, 1999, the Company paid approximately $71,000 in additional
interest as a result of this agreement. The agreement terminates on
September 30, 2003, to coincide with the maturity of 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
5.25. As of September 30, 1999, borrowings under the Revolving Credit Facility
and the total funded debt of the Borrowers were approximately 1.9 times and 4.3
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 September 30, 1999.
As of September 30, 1999, the Company was in compliance with all covenants.
Based on the rolling four-quarter EBITDA (as defined) at September 30, 1999,
the amount available for additional borrowing on the Revolving Credit Facility
was approximately $35.0 million.
Ameristar issued $100 million in 10-1/2% Senior Subordinated Notes due
2004 (the "Senior Subordinated Notes") 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
- 14 -
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
would not result in the Consolidated Coverage Ratio (as defined) being less
than 2.0 to 1.0 on a rolling four-quarter basis. The Indenture also permits
Ameristar or a Restricted Subsidiary to incur Indebtedness without regard to
the Consolidated Coverage Ratio test in certain circumstances, including
borrowings of up to $140 million under the Revolving Credit Facility, as
amended or replaced from time to time, up to $15.0 million in recourse
furniture, fixtures and equipment financings, up to $7.5 million in borrowings
for the construction of the hotel at Ameristar Vicksburg and up to $5.0 million
of other Indebtedness.
The Indenture also includes certain covenants that, among other things,
limit the ability of Ameristar and its Restricted Subsidiaries to pay dividends
or other distributions (excluding dividends and distributions from a Restricted
Subsidiary to Ameristar or a Guarantor), make investments, repurchase
subordinated obligations or capital stock, create certain liens (except those
securing Senior Indebtedness), enter into certain transactions with affiliates,
sell assets, issue or sell subsidiary stock, create or permit restrictions on
distributions from subsidiaries or enter into certain mergers and
consolidations. The Company was in compliance with the covenants under the
Indenture at September 30, 1999.
At September 30, 1999, the Company had other indebtedness in an aggregate
principal amount of $50.0 million.
No assurance can be given that the Company will be able to satisfy, when
necessary, the financial covenants under the Revolving Credit Facility, the
Senior Subordinated Notes or other debt instruments for purposes of incurring
additional debt, including additional draws under the Revolving Credit
Facility. In addition, a failure to satisfy the financial covenants under the
Revolving Credit Facility could either require the Company to reduce the
outstanding balance of the Revolving Credit Facility, which requirements could
adversely affect or exceed the Company's liquidity, or result in an event of
default under one or more debt instruments. Adverse changes in the Company's
operations or operating cash flow may affect the ability of the Company to
satisfy these financial covenants.
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.
Consolidated capital expenditures during the first nine months of 1999
were approximately $25.9 million. Management is proceeding with several
capital expenditure projects at Ameristar Council Bluffs and Ameristar
Vicksburg and has completed remodeling certain dining and meeting room areas at
The Reserve. The projects in Council Bluffs include building an upper deck
onto the riverboat casino, which will add 375 gaming positions, and erecting a
1,000-space parking garage. The Council Bluffs projects have an estimated
budget of $24 million, a portion of which will be paid in 2000. Approximately
$10.4 million of the budgeted $24 million had been incurred as of September 30,
1999. In Vicksburg, capital projects include casino and restaurant remodeling
and other site improvements and maintenance that began in the third quarter of
1999. Of the approximately $10.2 million budgeted for the above Vicksburg
projects, some of which will be paid in 2000, approximately $5.0 million had
been incurred as of September 30, 1999.
The covenants under the Revolving Credit Facility limit the Company's
ability to make capital expenditures in excess of specific permissible amounts.
However, the lenders under the Revolving Credit Facility have waived the
maximum capital expenditure limitation under the Revolving Credit Facility
specifically for certain of the above-described projects at Ameristar Council
Bluffs, Ameristar Vicksburg and The Reserve. The waiver permits fiscal 1999
and 2000 capital expenditure projects, in addition to necessary capital
expenditures, totaling $43.3 million.
- 15 -
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Management currently estimates that total capital expenditures during 1999
will be approximately $37.0 million, including approximately $24.0 million on
the specified projects and approximately $13.0 million on other projects.
However, the amount of capital expenditures may vary based on budget
modifications, construction schedule changes or other factors.
The above-described capital expenditure requirements are expected to 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).
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 increases of $3.2 million in cash flows
from operations and $10.5 million in EBITDA during the nine months ended
September 30, 1999 over the same period 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 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 above, 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.
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.
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
- 16 -
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
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. The majority of the casino and hotel systems are Year 2000
compliant according to the vendors. Certain systems or software that were not
Year 2000 compliant have been replaced. The player's club system at Cactus
Petes will be upgraded with Year 2000 compliant software prior to December 15,
1999. The back-of-the-house accounting systems have been evaluated; the
payroll system and all financial software programs have been upgraded or are
now being upgraded to ensure Year 2000 compliance. This process will be
completed prior to December 1, 1999. Where important to the Company's
business, inquiries have also been made of third parties with whom the Company
does significant business, such as vendors and suppliers, as to their Year 2000
readiness and alternative plans have been made where deemed necessary.
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
are being 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
The estimated total hardware and software costs for replacing or upgrading
the back-of-the-house accounting systems will be approximately $750,000 on a
companywide basis. Additional costs totaling approximately $200,000 have been
or will be incurred by year end to upgrade additional systems and applications
to ensure Year 2000 compliance. Although other costs may need to be incurred
to address any unforeseen Year 2000 issues that may arise, the overall costs of
addressing Year 2000 issues 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
- 17 -
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
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 undertake and complete 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.
- 18 -
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Except for the Revolving Credit Facility, under which $90.0 million was
outstanding at September 30, 1999, and certain other long-term debt outstanding
at September 30, 1999, in the aggregate amount of $7.2 million (collectively,
the "Variable Rate Debt"), all of the Company's other long-term debt bears
interest at fixed rates. The Variable Rate Debt bears interest predominantly
based on 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 September 30, 1999, the average interest rate applicable to the
Variable Rate Debt was 9.3 percent. An increase of one percentage point in the
average interest rate applicable to the Variable Rate Debt outstanding at
September 30, 1999, would increase the Company's annual interest costs by
approximately $972,000. 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.
- 19 -
<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 Corporation ("HVC"), Riverboat
Corporation of Mississippi-Vicksburg ("RCMV"), and Deposit Guaranty National
Bank ("DGNB"). 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.
The trial in this case was held in October 1999, following which the jury
rendered joint and several verdicts in favor of the plaintiffs against ACI, HVC
and DGNB on the conspiracy count and against ACI and HVC on the restraint of
trade and tortious interference counts. RCMV settled with the plaintiffs prior
to trial, and the damage amounts have been reduced by the settlement amount
paid by RCMV. The net damages awarded to the plaintiffs total $3,792,000, of
which ACI's pro rata portion is $1,685,333. Judgment was entered on
November 8, 1999, and ACI intends to file various post-trial motions seeking
relief from the trial court. If the post-trial motions are not successful, ACI
intends to appeal the case to the Mississippi Supreme Court and otherwise to
vigorously defend against the plaintiffs' claims. Post-judgment interest on
the damages will accrue at the rate of 8 percent per annum, and if an appeal is
unsuccessful, the plaintiffs would also be entitled to a premium of 15% of the
damages amount.
Mr. Pennebaker has also filed a petition with the Mississippi Gaming
Commission requesting that the Mississippi Gaming Commission order ACI, HVC and
RCMV 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 5. OTHER INFORMATION
On October 28, 1999, Ameristar Casino St. Louis, Inc., a new wholly owned
subsidiary of ACI, filed an application with the Missouri Gaming Commission
seeking a gaming license for a site along the Mississippi River in Lemay,
Missouri, a community in South St. Louis County. ACI previously entered into a
letter of intent with the current lessee of the proposed site, and is currently
negotiating the definitive agreement for the assignment of the lease. This
project is in the preliminary stages and subject to numerous contingencies,
including, for example, the completion of definitive agreements with the
current lessee and various parties, due diligence concerning the proposed site,
the selection of the Company's application for investigation by the Missouri
Gaming Commission and various other licensing and regulatory approvals,
development and construction risks and obtaining financing for the project.
Accordingly, there can be no assurances concerning the success of the Company's
efforts to obtain a gaming license and to pursue the development of this
project.
- 20 -
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits filed as part of this report
10.1 Employment Agreement, dated as of August 23, 1999, between
Ameristar Casinos, Inc. and Gordon R. Kanofsky*
10.2 Amendment 1999-2 to Ground Lease, dated as of September 3, 1999,
between ACCBI and Council Bluffs Hotel Associates, L.C.
("Kinseth")
27 Financial Data Schedule
---------------
* Denotes a management contract or compensatory plan or arrangement
b. Reports on Form 8-K
None
- 21 -
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERISTAR CASINOS, INC.
Registrant
Date: November 15, 1999 /s/Thomas Steinbauer
Thomas Steinbauer
Senior Vice President of Finance and Treasurer
(Principal Financial Officer)
- 22 -
AMERISTAR CASINOS, INC.
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement is made and entered into as of the
18th day of August, 1999, by and between GORDON R. KANOFSKY ("Employee") and
AMERISTAR CASINOS, INC. ("Company"), a Nevada corporation.
WHEREAS, the Company has offered and the Employee has accepted a position
of employment as SENIOR VICE PRESIDENT OF LEGAL AFFAIRS;
NOW, THEREFORE, for good and valuable consideration and in consideration
of the mutual promises and mutual covenants contained herein, Company and
Employee agree as follows:
1. EMPLOYMENT TERM
This is a one (1) year Agreement commencing as of a date to be determined
but in no event later than October 1, 1999, and continuing for one year until
the 31st day of August, 2000, unless terminated as hereinafter provided in
Paragraphs 6-9. This Agreement shall automatically renew from year to year
unless either party gives written notice of its desire to terminate the
Agreement 30 days prior to the expiration of the then-present term.
As required by the Nevada Gaming Control Board and pursuant to Ameristar
Casinos, Inc. Compliance Program, Employee is advised that this employment
offer is subject to the satisfactory completion of an investigative process.
The Company hereby acknowledges the satisfactory completion of the Compliance
Program investigation.
2. DUTIES
Employee will perform the duties of the Senior VP of Legal Affairs in
accordance with the Company's bylaws and will perform such other duties and
services as, from time to time, are reasonably required by the Company's Chief
Executive Officer or Board of Directors. Employee will report directly to the
Chief Executive Officer of the Company. Employee's primary work location will
be in the greater Los Angeles, California metropolitan area at an office to be
established by the Company. Employee will travel to the Company's offices in
Las Vegas, Nevada, and otherwise, as reasonably necessary for the fulfillment
of Employee's duties. Employee will not be required to relocate his primary
work location out of the greater Los Angeles, California metropolitan area
without his consent.
EXECUTIVE EMPLOYMENT AGREEMENT
Page 1 of 12
/s/CHN by CW /s/GRK
Company's Initials Employee's Initials
<PAGE>
3. OTHER SERVICES AND ACTIVITIES
Employee will devote substantially all of his or her efforts to the
Company's business. During the term of this Agreement, Employee will not
engage in any other employment or business activity or hold any office or
position in other companies or organizations that would pose a conflict of
interest with the Company's business. Employee will obtain the express written
consent of the Company's Chief Executive Officer or Board of Directors before
engaging in any such activity.
Notwithstanding the foregoing, Employee may serve as Of Counsel to
Sanders, Barnet, Goldman, Simons & Mosk, A Professional Corporation ("SBGS&M"),
for a period of not more than 90 days following Employee's employment
commencement date with the Company, subject to the following conditions: (I)
Employee's services on behalf of SBGS&M will be incidental and limited to
fulfilling Employee's professional responsibilities to SBGS&M clients and
transitioning the work for such clients to other attorneys; and (II) Employee
will not receive any compensation from SBGS&M for such services.
4. COMPENSATION AND BENEFITS
Employee will be paid an annual salary of Two Hundred Fifty Two Thousand
Five Hundred Dollars ($252,500.00), payable in bi-weekly installments of Nine
Thousand Seven Hundred Eleven Dollars and 54/100th Dollars ($9,711.54).
Upon the initial commencement of Employee's employment, Employee will also
be paid a sign-on bonus in the amount of One Hundred Thousand Dollars
($100,000.00), less applicable employment taxes. Should Employee voluntarily
terminate his employment with the Company within one (1) year of the date upon
which Employee's employment commences, Employee shall immediately reimburse the
Company for the entire One Hundred Thousand Dollars ($100,000.00); provided,
however, that Employee shall not be required to so reimburse the Company if
Employee terminates his employment for "Good Reason" following a "Change in
Control of the Company" (each as defined below). Such reimbursement shall be
paid to the Company before Employee officially leaves the Company's premises.
In accordance with Company policy, all subsequent salary increases and/or
discretionary incentive bonuses will be based on Employee's merit performance
and the Company's financial performance. Based on merit, Employee will be
eligible for up to 50% of Employee's base salary for the discretionary
incentive bonus. This potential bonus for fiscal year 1999 is subject to a pro-
rated amount based on a deemed employment commencement date of September 1,
1999.
Employee shall also receive 100,000 stock options with an average price to
be determined by the Board of Directors' Compensation Committee. The grant
date of the stock options will be not later than September 1, 1999 and the
vesting schedule will be over five (5) years at the rate of 20% each year.
EXECUTIVE EMPLOYMENT AGREEMENT
Page 2 of 12
/s/CHN by CW /s/GRK
Company's Initials Employee's Initials
<PAGE>
In accordance with Company policy, Employee will be eligible to
participate in the Company's 401 (K) Plan.
In accordance with Company policy, Employee will be eligible to enroll in
the Company's Group Health Benefits program on Employee's starting employment
date. In addition, Employee and Employee's family will be enrolled in the Exec-
U-Care program, which will pay 100% of Employee's monthly premiums and 100% of
Employee's medical claims in accordance with Exec-U-Care guidelines, to include
orthodontics. The basic health benefits program also includes life insurance
at two (2) times Employee's annual base compensation, up to $600,000, and LTD
insurance which pays 60% of Employee's annual base compensation up to the age
of 65.
In accordance with Company policy, Employee will receive food and beverage
complimentary privileges for business and personal use and will be eligible for
complimentary use of the Company's condominiums in Sun Valley, Idaho.
Employee will be eligible to participate in such other health, welfare and
benefit plans, and incentive compensation programs or plans as Company may in
the future establish or maintain for senior executives of comparable stature.
Employee's previously planned vacation for the last week of October 1999
has been approved as a paid pre-employment agreement and will not be deducted
from Employee's accrued PTO balance.
5. ILLNESS OR DISABILITY OF EMPLOYEE
If Employee is unable to perform services for the Company for a period of
more than 90 consecutive days, Company may terminate this Agreement upon not
less than 30 days written notice to the Employee. In the event of such
termination, all of the Company's prospective obligations hereunder will
terminate immediately.
6. DEATH OF EMPLOYEE
This Agreement will terminate immediately upon the death of the Employee.
If Employee dies during the term of this Agreement, Company will pay to
Employee's estate the compensation that would otherwise be payable to Employee
through the end of the month of Employee's death.
7. TERMINATION FOR CAUSE
Company may terminate this Agreement and all of its prospective
obligations hereunder upon occurrence of any of the following events ("cause"):
(a) Employee's material breach of this Agreement; (b) Employee's gross
negligence or willful misperformance of his or her duties; (c) Employee's
conviction of a felony or any other crime involving moral turpitude or
dishonesty which, in the good faith opinion of the Company, would impair
Employee's ability to perform his or her duties or the
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Company's business reputation;
(d) Employee's failure or refusal to comply with Company policies,
standards or regulations; (e) Employee's unauthorized disclosure of Company
trade secrets and other confidential business information; (f) Employee's
breach of his or her duty of loyalty; or (g) Employee's act of fraud,
misrepresentation, theft or embezzlement or the misappropriation of corporate
assets. A termination for cause pursuant to clause (a) or (d) may be effected
by the Company only following the delivery of written notice and the lapse of
the 10-day period without cure of the breach, failure or refusal to comply, as
required by paragraph 12. The Company shall have the burden of proving cause
in any dispute proceeding between the Company and Employee.
8. TERMINATION WITHOUT CAUSE OR FOR GOOD REASON
(a) The Company may terminate Employee's employment at any time without
cause (as defined above), and, in the absence of cause, the exercise
by the Company of its right not to renew this Agreement as provided in
paragraph 1 above shall be deemed to be a termination of employment
without cause. Upon a termination by the Company of Employee's
employment without cause, Employee shall be entitled to the severance
benefits set forth in paragraph 8(c).
(b) Employee may terminate his employment by the Company for "Good Reason"
(as defined below) at any time within 18 months following the
occurrence of any "Change in Control of the Company" (as defined
below) upon 30 days' prior written notice to the Company. If the
Company disputes the existence of Good Reason, the Company shall have
the burden of proving the absence of Good Reason. Upon a termination
by Employee of Employee's employment for Good Reason, Employee shall
be entitled to the severance benefits set forth in paragraph 8(c).
(c) The severance benefits due to Employee following a termination of
Employee's employment without cause or for Good Reason, as provided
for in paragraphs 8(a) and (b), will be a lump sum payment, less
applicable employment withholding taxes, equal to one times the amount
of Employee's annual salary at the time of termination, or, in the
case of a termination by Employee for Good Reason, the amount of
Employee's annual salary immediately prior to the occurrence of the
applicable Change in Control of the Company, if it is greater than
Employee's annual salary at the time of termination. Any severance
payment due to Employee will be made not later than the termination
date of Employee's employment. It is expressly agreed by Employee
that no other severance compensation, benefits, or wages will be due
and owing to Employee.
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(d) As used in this Agreement, the term "Good Reason" means:
(i) the breach by the Company of any material obligation to Employee
hereunder or under any compensation or benefit plan in which Employee is a
participant;
(ii) a reduction in the amount of the base annual salary of
Employee, or the failure of the Company to award Employee an annual bonus
equal to at least 75% of the average amount of the annual bonus paid to
Employee for the last two (2) full years ended prior to the occurrence of
the applicable Change in Control of the Company;
(iii) a material reduction in the authority, titles or
responsibilities of Employee, including without limitation the appointment
of any person other than Employee as the principal legal affairs officer
of the Company;
(iv) the requirement that Employee report to any person other than
the Chief Executive Officer of the Company; or
(v) the assignment of significant or material duties inconsistent
with Employee's position.
(e) As used in this Agreement, the term "Change in Control of the
Company" means:
(i) individuals who, as of the date of this Agreement, constitute
the entire Board of Directors of the Company ("Incumbent Directors") cease
for any reason to constitute at least a majority of the Board of Directors
of the Company; PROVIDED, HOWEVER, that any individual becoming a director
subsequent to such date whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least a majority of
the then Incumbent Directors (other than an election or nomination of an
individual whose assumption of office is the result of an actual or
threatened election contest relating to the election of directors of the
Company), also shall be an Incumbent Director; or
(ii) the stockholders of the Company shall approve (A) any merger,
consolidation, or recapitalization of the Company (or, if the capital
stock of the Company is affected, any subsidiary of the Company) or any
sale, lease, or other transfer (in one transaction or a series of
transactions contemplated or arranged by any party as a single plan) of
all or substantially all of the assets of the Company (each of the
foregoing being an "Acquisition Transaction") where (1) the stockholders
of the Company immediately prior to such Acquisition Transaction would not
immediately after such Acquisition Transaction beneficially own, directly
or indirectly, shares representing in the aggregate more than fifty
percent (50%) of (a) the then outstanding common stock of the corporation
surviving or resulting from such merger, consolidation or recapitalization
or
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acquiring such assets of the Company, as the case may be (the
"Surviving Corporation" (or of its ultimate parent corporation, if any)
and (b) the Combined Voting Power (as defined below) of the then
outstanding Voting Securities (as defined below) of the Surviving
Corporation (or of its ultimate parent corporation, if any) or (2) the
Incumbent Directors at the time of the initial approval of such
Acquisition Transaction would not immediately after such Acquisition
Transaction constitute a majority of the Board of Directors of the
Surviving Corporation (or of its ultimate parent corporation, if any) or
(B) any plan or proposal for the liquidation or dissolution of the
Company; or
(iii) any Person (as defined below) other than a Permitted Holder
(as defined below) shall become the beneficial owner (as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), directly or indirectly, of securities of
the Company representing in the aggregate fifty percent (50%) or more of
either (i) the then outstanding shares of the Company Common Stock or
(ii) the Combined Voting Power of all then outstanding Voting Securities
of the Company; PROVIDED, HOWEVER, that notwithstanding the foregoing, a
Change of Control shall not be deemed to have occurred for purposes of
this clause (iii) solely as the result of:
(A) an acquisition of securities by the Company which, by
reducing the number of shares of the Company Common Stock or other
Voting Securities outstanding, increases (i) the proportionate number
of shares of the Company Common Stock beneficially owned by any
Person to fifty percent (50%) or more of the shares of the Company
Common Stock then outstanding or (ii) the proportionate voting power
represented by the Voting Securities beneficially owned by any Person
to fifty percent (50%) or more of the Combined Voting Power of all
then outstanding Voting Securities; or
(B) an acquisition of securities directly from the Company
except that this paragraph (B) shall not apply to:
(1) any conversion of a security that was not acquired directly
from the Company; or
(2) any acquisition of securities if the Incumbent Directors at
the time of the initial approval of such acquisition would
not immediately after (or otherwise as a result of) such
acquisition constitute a majority of the Board of Directors
of the Company.
For purposes of this paragraph 8(e):
(w) "Person" shall mean any individual, entity (including,
without limitation, any corporation, partnership, limited liability
company, trust, joint
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venture, association or governmental body) or
group (as defined in Section 13(d)(3) or 14(d)(2) of the Exchange Act
and the rules and regulations thereunder); provided, however, that
"Person" shall not include the Company, any of its subsidiaries, any
employee benefit plan of the Company or any of its majority-owned
subsidiaries or any entity organized, appointed or established by the
Company or such subsidiary for or pursuant to the terms of any such
plan;
(x) "Voting Securities" shall mean all securities of a
corporation having the right under ordinary circumstances to vote in
an election of the Board of Directors of such corporation;
(y) "Combined Voting Power" shall mean the aggregate votes
entitled to be cast generally in the election of directors of a
corporation by holders of then outstanding Voting Securities of such
corporation; and
(z) "Permitted Holder" shall mean (A) the Company or any
trustee or other fiduciary holding securities under an employee
benefit plan of the Company and (B) Craig H. Neilsen.
9. COVENANT NOT TO COMPETE
If the Company terminates Employee's employment without cause or if
Employee terminates Employee's employment for Good Reason and the Company
satisfies its obligations to pay severance to Employee as provided in
paragraph 8(c), then Employee shall not, for a period of one (1) year following
the date of termination of Employee's employment, directly or indirectly engage
in any business, or participate as an officer, director, employee or consultant
of any business, that operates casinos that target the Las Vegas locals market.
The parties agree that the restrictions and limitations contained in this
Paragraph are reasonable as to scope and duration and are necessary to protect
the Company's interests and to preserve for the Company the competitive
advantage derived from maintaining such information as secret. In the event
that any of the restrictions and limitations contained in this Paragraph are
deemed to exceed the time or geographic limitations permitted by Nevada law,
then such provisions of this Paragraph shall be reformed to the maximum time
and geographical limitations permitted by Nevada law.
10. CONFIDENTIAL INFORMATION
Employee agrees that he/she will not use or disclose (directly or
indirectly) any Confidential Information and Trade Secrets of the Company
whether in written, verbal, or model form, at any time or in any manner, except
as required and authorized by the Company in the course of employment with the
Company. The obligations of this Agreement are continuing and survive the
termination of Employee's employment
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relationship with the Company. Employee
acknowledges and agrees that such trade secrets and other confidential
information constitute the Company's sole and exclusive property. For purposes
of this Paragraph, the term "confidential information and trade secrets" refers
to any information that is not generally known to persons engaged in business
similar to that conducted or contemplated by the Company and includes, without
limitation: know how, trade secrets, business plans, copyrights, inventions,
patents, intellectual property, data, process, process parameters, methods,
practices, products, product design information, research and development data,
financial records, operational manuals, pricing, technical plans, computer
programs, customer information, customer lists, price lists, supplier lists,
marketing plans, financial information, and/or all other compilations of
information which relate to the business of the Company, and any other
propriety material of the Company, which have not been released by the Company
to the general public.
Upon termination of his or her employment, Employee shall turn over to the
Company the originals, plus all copies, of any and all files, Rolodex cards,
phone books, papers, notes, price lists, customer contracts, bids, customer
lists, files, notebooks, books, memoranda, drawings, or other documents made,
compiled by or delivered to him/her concerning any customer served by the
Company or any product, apparatus, or process manufactured, used, developed or
investigated by the Company or containing any Confidential Information or Trade
Secrets or otherwise relating to Employee's performance of duties under this
Agreement. Employee further acknowledges and agrees that all such documents
are the Company's sole and exclusive property.
11. INDEMNIFICATION
Each party will keep, save, protect, defend, indemnify and hold the other
harmless from and against any and all costs, claims, expenses, damages, or
deficiencies resulting from any misrepresentation, breach, default or non-
fulfillment of any agreement or covenant set forth in this Agreement. In
addition, concurrently herewith, the Company and Employee enter into an
Indemnification Agreement in the standard form for the Company's executive
officers and directors.
12. BREACH OF THE AGREEMENT
In the event of any claimed breach of this Agreement, the party claimed to
have committed the breach will be entitled to written notice of the alleged
breach and a period of 10 days in which to remedy such breach. Employee
acknowledges and agrees that a breach of any of the covenants contained in this
Agreement will result in irreparable and continuing harm to the Company for
which there will be no adequate remedy at law. The Company will be entitled to
preliminary and permanent injunctive relief to restrain Employee from violating
the terms and conditions of this Agreement in addition to other valuable
remedies, at law and in equity.
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13. DISPUTE RESOLUTION
Except for a claim by either Employee or Company for injunctive relief, any
dispute or difference of opinion between Employee and Company involving the
meaning, interpretation, and application of any provision of this Agreement
shall be adjusted exclusively through binding arbitration pursuant to the
National Rules for the Resolution of Employment Disputes. The arbitrator shall
have no authority, jurisdiction, or power to amend, modify, nullify, or add to
the provisions of this Agreement. The arbitrator shall have no authority to
award noneconomic damages or punitive damages except where such relief is
specifically authorized by an applicable state or federal statute which creates
a cause of action in the employment context. In such a situation, the
arbitrator shall specify in his or her award the specific statute under which
he or she has granted such relief. Costs shall be awarded to the prevailing
party by the arbitrator. Each party shall pay their own attorney's fees. No
request to arbitrate will be entertained or processed unless it is received in
writing by either party to this Agreement within one (1) year after the
occurrence of the event giving rise to the dispute. If the parties are unable
to mutually agree upon an arbitrator, the parties agree to have the Las Vegas
office of the American Arbitration Association furnish them a panel of seven
(7) arbitrators all of whom are members of the National Academy of Arbitrators
and who reside in Southern California or Southern Nevada from which an
arbitrator shall be selected between the parties by mutual strike.
14. NOTICES
Any notice required or desired to be given under this Agreement by either
party to the other shall be in writing and may be effected by personal delivery
or by registered or certified mail at the addresses listed below or at such
other addresses as either party may notify the other:
A. If to the Company, to:
Corporate Vice President of Human Resources,
or designee
Ameristar Casinos, Inc.
3773 Howard Hughes Parkway, Suite 490 S.
Las Vegas, Nevada 89109
B. If to the Employee, to:
Gordon R. Kanofsky
4273 Aleman Drive
Tarzana, California 91356-5405
Notices personally delivered will be deemed effective upon receipt. Notices
sent by registered or certified mail will be deemed effective three (3) days
after mailing.
15. ENFORCEMENT
This Agreement shall be construed in accordance with and governed for all
purposes by the laws of the State of Nevada. In case any one or more provisions
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contained in this Agreement shall, for any reason, be held to be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid, illegal, or unenforceable
provision had never been contained herein. If moreover, any one or more of the
provisions contained in this Agreement shall for any reason be held to be
excessively broad as to time, duration, geographical scope, activity or
subject, it shall be construed, by limiting and reducing it, so as to be
enforceable to the maximum extent compatible with the applicable law as it
shall then appear.
16. AMENDMENTS
This Agreement may be amended or modified only by a writing executed and
agreed upon by both parties.
17. WAIVER
Waiver by either party of any term or condition of this Agreement or any
breach hereof will not operate or be construed as a waiver of any other term or
condition or subsequent breach. No waiver shall be binding unless executed in
writing by the parties making the waiver.
18. ASSIGNMENT
Employee acknowledges that his or her services are unique and personal
and, accordingly, that Employee may not assign his or her rights or delegate
his or her duties and obligations under this Agreement. The Company's rights
and obligations under this Agreement will inure to the benefit of, and be
binding upon, the Company's successors and assigns.
19. MERGER
This Agreement constitutes the entire agreement of the parties and
supersedes all prior agreements, arrangements and communications between the
parties, whether oral or written.
20. HEADINGS
The headings of the Paragraphs of this Agreement are for convenience only
and shall not affect the construction or interpretation of any of its
provisions.
21. REVIEW/UNDERSTANDING OF AGREEMENT
Each party to this Agreement has reviewed the Agreement with legal counsel
of their choice and has had the opportunity to modify or eliminate any
ambiguous provisions. Therefore, it is agreed that each party hereto is
considered a drafter of this
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Agreement and that the contract interpretation
rule which holds ambiguities are to be interpreted against the original drafter
of a document is expressly waived by the parties.
22. COUNTERPARTS
This Agreement may be executed in any number of counterparts conformed by
facsimile signatures transmitted by telephone, each of which shall be deemed a
duplicate original.
COMPANY: EMPLOYEE:
AMERISTAR CASINOS, INC.
BY: /s/Craig H. Neilsen by Connie Wilson /s/Gordon R. Kanofsky
Craig H. Neilsen, President Gordon R. Kanofsky
and Chief Executive Officer
DATE: August 23, 1999 DATE: August 23, 1999
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On this 23rd day of August 1999, Craig H. Neilsen directed
Connie Wilson , in his presence as well as our own, to sign the
foregoing document as "Craig H. Neilsen." Upon viewing the signature as signed
by Connie Wilson , and in our presence, Craig H. Neilsen
declared to us that he adopted it as his own signature.
/s/John R. Sims,
Witness
/s/Susan Vicchairelli,
Witness
STATE OF NEVADA )
:ss
COUNTY OF CLARK )
I, Karen Ahmad , Notary Public in and for said
county and state, do hereby certify that Craig H. Neilsen personally appeared
before me and is known or identified to me to be the person whose name is
subscribed to the within instrument in his capacity as President and Chief
Executive Officer of Ameristar Casinos, Inc. Craig H. Neilsen, who being
unable due to physical incapacity to sign his own name or offer his mark, did
direct Connie Wilson , in his presence, as well as my own, to
sign the foregoing document as "Craig H. Neilsen." Craig H. Neilsen, after
viewing his name as signed by Connie Wilson , thereupon adopted
it as his own by acknowledging to me his intention to so adopt it as if he had
personally executed the same on behalf of Ameristar Casinos, Inc., and further
acknowledged to me that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this 23rd
day of August 1999.
/s/Karen Ahmad,
Notary Public
Residing at: Las Vegas, NV
My Commission Expires:
7/23/2002
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AMENDMENT 1999-2 TO GROUND LEASE
This Amendment 1999-2 to Ground Lease is made and entered into as of the
3rd day of September, 1999 by and between Ameristar Casino Council Bluffs,
Inc., an Iowa corporation, with an address of 2200 River Road, Council Bluffs,
Iowa 51501 ("Ameristar") and Council Bluffs Hotel Associates, L.C., an Iowa
limited liability company, with an address of 2 Quail Creek Circle, North
Liberty, Iowa 52317 ("Kinseth").
RECITALS
A. Ameristar, as ground lessor, and Kinseth Hotel Corporation, as the
original ground lessee, entered into an Amended and Restated Ground Lease
Agreement dated September 7, 1995 (the "Original Ground Lease"). Kinseth Hotel
Corporation assigned its interest in the Original Ground Lease to Kinseth.
Kinseth constructed and continues to operate a 140 room Holiday Inn franchise
hotel on the leased land (the "Hotel").
B. Kinseth desired to expand the Hotel by up to fifty (50) rooms, for a
total of up to 190 rooms, and requested Ameristar's consent for such expansion.
The expansion required an increase in the footprint of the leased land under
the Ground Lease, an increase in the amount of indebtedness that may be secured
by the leased land, and certain other changes to the Ground Lease.
C. Ameristar consented to such expansion, including an increase in the
leased land, and the parties entered into that certain Amendment to Ground
Lease dated as of May 21, 1999 (the Original Lease, as amended by all
subsequent amendments including the aforementioned Amendment to Ground Lease is
hereinafter referred to as the "Ground Lease" and all other capitalized terms
not otherwise defined herein shall have the meanings defined in the Ground
Lease).
D. In connection with obtaining the financing for the Hotel expansion,
Kinseth has discovered that a provision of the Ground Lease granting to
Ameristar the exclusive option to acquire the Leased Land from the Leasehold
Lender if the Leasehold Lender acquires Kinseth's interest in the Leased Land
by foreclosure or deed in lieu of foreclosure should have been amended to
reflect the increased amount of indebtedness that may be secured by the Leased
Land but such amendment was overlooked.
NOW THEREFORE, for and in consideration of the mutual covenants,
conditions and promises contained herein, Ameristar and Kinseth agree to
further amend the Ground Lease as follows:
1. AMENDMENT TO SECTION 4.2. Section 4.2 of the Ground Lease is hereby
amended by substituting $9,000,000 for $6,000,000 in the first place it appears
therein.
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2. AMENDMENT TO SECTION 4.5(f)(vii)(1). Section 4.5(f)(vii)(l) of the
Ground Lease is hereby amended by eliminating the paragraph in its entirety and
substituting the following:
(1) In the event Leasehold Lender acquires the Property
Interests (such capitalized term used here, and hereafter, shall
have the same meaning as set forth in Section 11.11 of this
Lease), or any portion thereof, by foreclosure or deed in lieu
of foreclosure, Ameristar shall have the exclusive option for a
period of sixty (60) days from such notice, but not the
obligation, to acquire such interests from Leasehold Lender for
the outstanding principal amount of the Leasehold Lien on the
Property Interests which was satisfied by the foreclosure or
deed in lieu of foreclosure (not to exceed the greater of x)
$9,000,000 or y) 70% of the appraised value of such Property
Interests (or portion thereof that has been acquired by
Leasehold Lender)), plus accrued interest and costs of
collection, including foreclosure costs attributable to the
Leasehold Lien on the Property Interests (the "Option Price").
3. AMENDMENT TO SECTION 4.5(f)(vii)(2). Section 4.5(f)(vii)(2) of the
Ground Lease is hereby amended by eliminating the paragraph in its entirety and
substituting the following:
(2) In the event Leasehold Lender shall commence a foreclosure
proceeding and at any time prior to the foreclosure sale and
provided Ameristar has acquired, forfeited or terminated all of
Kinseth's right, title and interest in the Property Interests,
or any portion thereof, then at any time prior to the
foreclosure sale and upon presentation to Leasehold Lender of
reasonable evidence that it has acquired, forfeited or
terminated Kinseth's interest in such Property Interests free of
any lien, adverse interest or claim including rights available
to Kinseth in bankruptcy, Ameristar shall have the right to
bring all defaults current, including cost of collection and
foreclosure costs attributable to the Leasehold Lien on such
Property Interests, and to assume the Leasehold Lien for its
then unpaid principal balance attributable to such Property
Interests, said principal balance not to exceed the Aggregate
Principal Amount, together with pro-rata interest, attorneys'
fees and costs of collection attributable to such Property
Interests. Ameristar, at its cost and expense, will execute
such "non-recourse" assumption documents as Leasehold Lender may
reasonably require to confirm the non-recourse assumption of the
Leasehold Lien and deliver to Leasehold Lender an endorsement to
Leasehold Lender's loan policy of title insurance insuring
Ameristar to be the owner of the leasehold interest in the
Ground Lease free of any lien, adverse interest or claim
including rights available to Kinseth in bankruptcy and
continuing the insured priority of the Leasehold Lien on such
Property Interests (to the extent constituting real estate or
interests in real estate and covered under the Leasehold
Lender's existing loan policy) free of any exceptions to
coverage other than as set forth in Leasehold Lender's existing
loan policy. To the extent the Leasehold Lien encumbers
property other than such Property Interests, upon such
assumption, Leasehold Lender agrees to bifurcate and separate
the Leasehold Lien documents into two separate sets of
documents, one encumbering and creating a security interest upon
such Property interests and the other encumbering and creating a
security interest in the other property and provided that the
amount of the Leasehold Lien on such Property Interests will not
exceed the Aggregate
2
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Principal Amount in principal indebtedness,
together with pro-rata interest, attorneys' fees and costs of
collection attributable to such Property Interests. The
bifurcated loan applicable to the Property interests shall have
the same interest rate, amortization period, and remaining
installment payment periods as under the Leasehold Lien. This
right is subject to Leasehold Lender receiving an opinion
satisfactory to it from Iowa counsel acceptable to Leasehold
Lender that such bifurcation may accomplish the aforementioned
results under Iowa law without affecting the Leasehold Lien
security (other than the bifurcation) and does not create any
impediment or obstacle to exercising the remedies available to
Leasehold Lender under the Leasehold Lien documents. This right
is personal only to Ameristar under the Ground Lease (and to
Ameristar's mortgage lender) and shall not benefit any other
party, including Kinseth, its successors and assigns.
4. AMENDMENT TO SECTION 8.2(g). Section 8.2(g) of the Ground Lease is
hereby amended by eliminating the paragraph in its entirety and substituting
the following:
(g) TERMINATE KINSETH WITH PAYOFF OR ASSUMPTION OF LEASEHOLD LIEN.
Terminate, forfeit or acquire Kinseth's interest in this Lease, the Leased
Land and those other Property Interests to which the Leasehold Lien
applies, free of any lien, adverse interest or claim including rights
available to Kinseth in bankruptcy, conditioned upon Ameristar
concurrently therewith doing one of the following:
(i) pay off in full Leasehold Lender for the then outstanding
aggregate principal amount of the Leasehold Lien attributable to
such Property Interests (not to exceed the greater of x)
$9,000,000.00 or .y) 70% of the appraised value of the Property
Interests to which the Leasehold Lien applies), plus accrued
interest and costs attributable to the Leasehold Lien on such
Property Interests; or
(ii) provided that Ameristar obtains an opinion of the Iowa
legal counsel acceptable to Leasehold Lender that no "merger" of
the leasehold interest in the Leased Land and such other
Property Interests will occur, novate and substitute Ameristar
itself as lessee under this Lease, and assume the Leasehold Lien
for its then unpaid principal balance attributable to the Leased
Land and those other Property Interests to which the Leasehold
Lien applies, said principal balance not to exceed the Aggregate
Principal Amount as defined in Section 4.2 above, together with
accrued interest, attorneys' fees and costs of collection
attributable to the Leasehold Lien on the Leased Land and such
Property Interests. In such event, Ameristar, at its cost and
expense, will execute such "nonrecourse" assumption documents as
Leasehold Lender may reasonably require to confirm the
nonrecourse assumption of the Leasehold Lien and deliver to
Leasehold Lender an endorsement to Leasehold Lender's loan
policy of title insurance insuring Ameristar to be the owner of
the leasehold interest in the Ground Lease free of any lien,
adverse interest or claim including rights available to Kinseth
in bankruptcy and continuing the insured priority of the
Leasehold Lien on such Property Interests (to the extent
constituting real estate or interests in real estate and covered
under the Leasehold Lender's existing loan policy) free of any
exceptions to coverage other than as set forth in Leasehold
Lender's existing loan policy. To the extent the Leasehold Lien
Encumbers property other than the Leased Land
3
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and such other
Property Interests, then upon such assumption, Leasehold Lender
agrees to bifurcate and separate the Leasehold Lien documents
into two separate sets of documents, one encumbering and
creating a security interest upon the Leased Land and such other
Property interests and the other encumbering and creating a
security interest in the other property, provided that the
amount of the Leasehold Lien on the Leased Land and such other
Property Interests will not exceed the Aggregate Principal
Amount in principal indebtedness, together with pro-rata
interest, attorneys' fees and costs of collection attributable
to such Property Interests. The bifurcated loan applicable to
the Property Interests shall have the same interest rate,
amortization period, and remaining installment payment periods
as under the Leasehold Lien. This right is subject to Leasehold
Lender receiving an opinion satisfactory to it from Iowa counsel
acceptable to Leasehold Lender that such bifurcation may
accomplish the aforementioned results under Iowa law without
affecting the Leasehold Lien security (other than the
bifurcation) and does not create any impediment or obstacle to
exercising the remedies available to Leasehold Lender under the
Leasehold Lien documents. This right is personal only to
Ameristar under the Ground Lease (and to Ameristar's mortgage
lender) and shall not benefit any other party, including
Kinseth, its successors and assigns. This right is personal
only to Ameristar under the Ground Lease (and to Ameristar's
mortgage lender) and shall not benefit any other party,
including Kinseth, its successors and assigns.
5. Continuing Effect. Except as specifically amended herein, the terms
of the Ground Lease shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
Ameristar: Kinseth:
Ameristar Casino Council Bluffs, Inc., Council Bluffs Hotel Associates, L.C.,
an Iowa corporation an Iowa limited liability company
By: /s/Thomas Steinbauer By: /s/Leslie B. Kinseth
--------------------------------- --------------------------------
Its Vice President Its Member
--------------------------------- --------------------------------
4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This data should be reviewed in conjunction with the financial statements and
notes included in this filing.
</LEGEND>
<CIK> 0000912145
<NAME> AMERISTAR CASINOS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 15,513
<SECURITIES> 0
<RECEIVABLES> 1,542
<ALLOWANCES> 0
<INVENTORY> 3,364
<CURRENT-ASSETS> 30,817
<PP&E> 412,963
<DEPRECIATION> 108,545
<TOTAL-ASSETS> 353,889
<CURRENT-LIABILITIES> 50,118
<BONDS> 100,000
0
0
<COMMON> 204
<OTHER-SE> 68,673
<TOTAL-LIABILITY-AND-EQUITY> 353,889
<SALES> 223,834
<TOTAL-REVENUES> 223,834
<CGS> 0
<TOTAL-COSTS> 203,423
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,468
<INCOME-PRETAX> 1,629
<INCOME-TAX> 676
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 953
<EPS-BASIC> 0.05
<EPS-DILUTED> 0.05
</TABLE>