- 1 -
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 JUNE 30, 2000
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 August 12, 2000, 20,400,934 shares of Common Stock of the
registrant were issued and outstanding.
AMERISTAR CASINOS, INC.
FORM 10-Q
INDEX
Page No(s).
Part I. FINANCIAL INFORMATION
Item 1.Financial Statements:
A. Condensed Consolidated Balance
Sheets at December 31, 1999 and
June 30, 2000 (unaudited) 3 - 4
B. Condensed Consolidated Statements
of Operations (unaudited) for the
three and six months ended June 30,
1999 and June 30, 2000 5
C. Condensed Consolidated Statements
of Cash Flows (unaudited) for the
six months ended June 30, 1999 and
June 30, 2000 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 - 15
Item 3.Quantitative and Qualitative Disclosures
about Market Risk 15
Part II. OTHER INFORMATION
Item 5.Other Information 16
Item 6.Exhibits and Reports on Form 8-K 16
SIGNATURE 16
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERISTAR CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
December 31, June 30,
1999 2000
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $15,531 $ 15,330
Restricted cash 142 156
Accounts receivable, net 2,080 1,605
Income tax refund receivable 1,450 2,358
Inventories 3,268 3,010
Prepaid expenses and other expenses 5,162 6,078
Deferred income taxes 3,717 3,480
------- -------
Total current assets 31,350 32,017
PROPERTY AND EQUIPMENT AND LEASEHOLD
INTERESTS, net of accumulated
depreciation and amortization of
$108,949 and $120,574, respectively 328,617 330,815
EXCESS OF PURCHASE PRICE OVER FAIR MARKET
VALUE OF NET ASSETS ACQUIRED 14,651 14,453
DEPOSITS AND OTHER ASSETS 4,027 3,352
------- -------
$ 378,645 $ 380,637
======= =======
<PAGE>AMERISTAR CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(CONTINUED)
(IN THOUSANDS)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, June 30,
1999 2000
(Unaudited)
CURRENT LIABILITIES:
Accounts payable $ 9,204 $ 6,522
Construction contracts payable 6,341 2,455
Accrued liabilities 29,539 29,219
Current obligations under
capitalized leases 2,413 2,330
Current maturities of notes payable
and long-term debt 10,615 9,803
------ ------
Total current liabilities 58,112 50,329
OBLIGATIONS UNDER CAPITALIZED LEASES,
net of current maturities 11,037 4,158
NOTES PAYABLE AND LONG-TERM DEBT,
net of current maturities 231,853 244,163
DEFERRED INCOME TAXES 9,474 11,481
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 -
20,375,264 shares at December 31,
1999 and 20,389,034 shares at
June 30, 2000 204 204
Additional paid-in capital 43,083 43,119
Retained earnings 24,882 27,183
------ ------
Total stockholders' equity 68,169 70,506
------- -------
$378,645 $380,637
======= =======
<PAGE>
AMERISTAR CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Six Months
Ended June 30, Ended June 30,
1999 2000 1999 2000
REVENUES:
Casino $62,865 $70,064 $120,949 $139,002
Food and beverage 12,286 13,328 23,708 26,321
Rooms 4,558 4,768 8,409 8,778
Other 2,628 3,120 5,014 5,766
------- ------- ------- -------
82,337 91,280 158,080 179,867
Less: Promotional allowances 6,109 7,159 11,815 14,054
------- ------- ------- -------
Net revenues 76,228 84,121 146,265 165,813
OPERATING EXPENSES:
Casino 29,097 33,241 56,028 64,499
Food and beverage 8,222 8,834 15,664 16,645
Rooms 1,631 1,816 3,154 3,385
Other 2,473 3,018 4,830 5,600
Selling, general and
administrative 21,543 24,054 40,814 44,261
Depreciation and amortization 5,893 7,155 12,173 14,086
------ ------ ------- -------
Total operating expenses 68,859 78,118 132,663 148,476
Income from operations 7,369 6,003 13,602 17,337
OTHER INCOME (EXPENSE):
Interest income 118 27 178 72
Interest expense (6,150) (6,429) (12,247) (13,147)
Other (40) (280) (409) (626)
----- ----- ------ ------
INCOME (LOSS) BEFORE INCOME
TAX PROVISION 1,297 (679) 1,124 3,636
Income tax provision (benefit) 518 (196) 458 1,335
----- ----- ----- -----
NET INCOME (LOSS) $ 779 $ (483) $ 666 $ 2,301
===== ===== ===== =====
EARNINGS (LOSS) PER SHARE:
Basic....................... $ 0.04 $ (0.02) $ 0.03 $ 0.11
Diluted..................... $ 0.04 $ (0.02) $ 0.03 $ 0.11
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic........................ 20,360 20,387 20,360 20,382
Diluted...................... 20,360 20,387 20,360 20,712
<PAGE>AMERISTAR CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Six Months
Ended June 30,
1999 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 666 $2,301
----- -----
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 12,173 14,086
Amortization of debt issue costs 334 334
Change in deferred income taxes 1,022 2,244
Net loss on disposition of assets 409 626
Decrease (increase) in other current
assets 200 (197)
Decrease (increase) in income tax refund
receivable 727 (908)
Increase (decrease) in other current
liabilities 2,961 (3,002)
------ -----
Total adjustments 17,826 13,183
------ ------
Net cash provided by operating activities 18,492 15,484
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (10,857) (18,472)
Decrease in construction contracts payable (913) (3,886)
Proceeds from sale of assets 694 1,798
(Increase) decrease in deposits and other
non-current assets (144) 341
------ ------
Net cash used in investing activities (11,220) (20,219)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable and
long-term debt 250 10,000
Principal payments of notes payable, long-
term debt and capitalized leases (2,466) (5,502)
Issuance of shares upon exercise of stock
options - 36
----- -----
Net cash (used in) provided by financing
activities (2,216) 4,534
----- -----
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 5,056 (201)
CASH AND CASH EQUIVALENTS - BEGINNING OF
PERIOD 18,223 15,531
------ ------
CASH AND CASH EQUIVALENTS - END OF PERIOD $23,279 $15,330
====== ======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest (net of amounts
capitalized) $12,034 $13,679
Assets purchased with long-term debt $ 44 $ 38
<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 Pete's, 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. ("ACFSI"), a purchasing subsidiary,
AC Hotel Corp. ("ACHC"), a wholly owned subsidiary of ACVI that
owns and operates the Ameristar Hotel in Vicksburg, Mississippi and
Ameristar Casino St. Louis, Inc. ("ACSLI"), a subsidiary organized
in connection with the Company's pursuit of a gaming license in
South St. Louis County, Missouri. 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.
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 Company's financial position and its results of
operations for the interim periods included therein. The interim
results reflected in the condensed consolidated financial
statements are not necessarily indicative of results to be expected
for the full fiscal year.
Certain reclassifications, having no effect on net income,
have been made to the prior period's condensed consolidated
financial statements to conform to the current period's
presentation.
The accompanying condensed consolidated financial statements
should be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1999.
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 ACFSI,
ACHC or ACSLI. 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. One of these covenants prohibits the Company
from investing more than $2 million in any subsidiary that is not a
Borrower under the Revolving Credit Facility. As of June 30, 2000,
the Company had invested approximately $2.47 million for ACSLI's
potential casino development in St. Louis County. The Company has
requested a waiver from the lenders for these expenditures, which
the Company believes will be granted. As of June 30, 2000, the
Company was in compliance with all of the Revolving Credit
Facility's other covenants.
<PAGE>Ameristar issued $100 million in 10-1/2% Senior
Subordinated Notes due 2004 under an Indenture dated July 15, 1997
(the "Senior Subordinated Notes"). All of Ameristar's current
subsidiaries other than ACSLI, which has no operations and no
material assets or liabilities (the "Guarantors"), have jointly and
severally, and fully and unconditionally, guaranteed the Senior
Subordinated Notes. Each of the Guarantors is a wholly owned
subsidiary of Ameristar, and the Guarantors constitute all of
Ameristar's direct and indirect subsidiaries other than ACSLI.
Ameristar is a holding company with no operations independent of
those of the Guarantors and no substantial 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 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.
On March 1, 2000, ACVI exercised its purchase option on one of
the parcels of the Ameristar Vicksburg site that had previously
been under lease. The purchase price for the parcel was
approximately $4.6 million and was paid for by ACVI entering into
two promissory notes in favor of the Seller of the parcels, one in
the principal amount of $250,000 and one in the principal amount of
approximately $4.3 million. The $250,000 promissory note bears
interest at the rate of 10.0% per annum, with principal and
interest payable in 12 equal monthly installments. The $4.3
million promissory note bears interest at the rate of 10.0% per
annum, with principal and interest payable in equal monthly
installments through February 1, 2024.
On May 1, 2000, ACVI exercised its purchase option on a second
parcel of the Vicksburg site that had previously been under lease.
The purchase price for this parcel was approximately $1.3 million,
of which ACVI paid $125,000 upon closing and executed a promissory
note for approximately $1.2 million. The promissory note matures
on May 1, 2010. Pursuant to the promissory note, ACVI must make
monthly principal and interest payments, with the interest rate
being reset each year at a rate equal to 1.0% above the prime rate
(as defined). The interest rate is currently 10.0%.
NOTE 3 - EARNINGS (LOSS) PER SHARE
The Company computes earnings per share in accordance with
Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
"Earnings Per Share." SFAS 128 requires the computation and
presentation of basic and diluted earnings per share for all
periods for which an income statement is presented. Outstanding
stock options issued by the Company represent the only dilutive
securities.
Options to purchase approximately 1,286,000 and 1,535,928
shares of common stock were outstanding at June 30, 1999 and June
30, 2000, respectively, at exercise prices ranging from $2.64 to
$16.00 for both of the periods. For the six months ended June 30,
2000, approximately 329,744 options were included in the
computation of diluted earnings per share for which the average
market price of the Company's common shares during the period
exceeded the options' exercise prices. For the three and six month
periods ended June 30, 1999, the outstanding shares did not cause
any material dilution of the earnings per share. For the three-
month period ended June 30, 2000, no outstanding options were
included in the computation of diluted loss per share because to do
so would have been anti-dilutive.
<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 Pete's, 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 (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 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.
Summary of Operating Results
Ameristar had record growth in revenues for the three and six
months ended June 30, 2000. Consolidated net revenues for the
three months ended June 30, 2000 increased to $84.1 million, an
increase of 10.4 percent compared to $76.2 million for the same
quarter in 1999. Net revenues for the six months ended June 30,
2000 were $165.8 million compared to $146.3 million in 1999. Each
of the Company's properties achieved increases in revenues in the
second quarter with Ameristar Council Bluffs and The Reserve
reporting the greatest percentage gains. The growth in revenues is
primarily the result of casino and parking expansions at the
Company's Iowa and Mississippi properties, the companywide
introduction of new technology slot machines and the strategic
implementation of enhanced marketing programs.
Income from operations for the three months ended June 30,
2000 was $6.0 million, a decrease of 18.5 percent compared to $7.4
million for the same period in 1999. The Company's operating
income margin (operating income as a percentage of net revenues)
decreased to 7.1 percent for the three months ended June 30, 2000
compared to 9.7 percent for the same period in 1999. Total
operating expenses as a percentage of net revenues increased to
92.9 percent for the second quarter of 2000 compared to 90.3
percent for the second quarter of 1999. The increase in operating
expenses, and corresponding decrease in income from operations and
operating income margin, resulted primarily from costs associated
with the Company's unsuccessful bid for a gaming license in St.
Louis County, Missouri, increased depreciation related to property
improvements and new gaming equipment and increased marketing
costs. The increased marketing costs resulted from the Company's
implementation of an aggressive marketing strategy at three of its
properties using a variety of concurrent marketing campaigns as
part of the successful effort to increase <PAGE>revenues and market
share. For the six months ended June 30, 2000, income from
operations reached an all time high of $17.3 million compared to
$13.6 million for the same period in 1999.
Net loss for the quarter ended June 30, 2000 was $0.5 million
compared to a net income of $0.8 million for the same period in
1999. For the six months ended June 30, 2000, net income was $2.3
million compared to $0.7 million for the first six months of 1999.
The Company had a loss per share for the quarter ended June 30,
2000 of $0.02 compared to earnings per share of $0.04 for the same
quarter in 1999. Earnings per share for the first six months of
2000 were $0.11 compared to $0.03 for the first six months of 1999.
Operating Results by Property
Ameristar Council Bluffs posted its third consecutive record
quarter for net revenues. Net revenues of $32.2 million for the
quarter ended June 30, 2000 were 13.8 percent higher than net
revenues of $28.3 million for the same quarter in 1999. For the
six months ended June 30, 2000, net revenues were $64.3 million
compared to $53.6 million for the same period in 1999, a 20.0
percent increase. The total Council Bluff's gaming market has
increased by 11.5% for the six months ended June 30, 2000 compared
to the same period in 1999. Operating income decreased by $0.2
million or 2.9 percent for the three months ended June 30, 2000 and
increased by $2.8 million or 28.0 percent for the six months ended
June 30, 2000 compared to the same periods in 1999. Strong slot
revenues resulting from the casino expansion and new technology
slot machine upgrades, combined with an aggressive marketing
strategy, were the primary factors contributing to record revenues
for the quarter. Operating income for the second quarter declined
in spite of the increased revenues due largely to increases in
marketing costs, payroll, benefits and depreciation expense
associated with the property's recent improvements and new gaming
equipment.
The Jackpot Properties' net revenues increased by 4.2 percent
to $15.8 million for the three months ended June 30, 2000 compared
to $15.2 million for the same period in 1999. For the six months
ended June 30, 2000, net revenues were $30.4 million compared to
$28.3 million for the same period in 1999, a 7.2 percent increase.
Operating income decreased to $2.4 million and $5.0 million,
respectively, for the second quarter and six-month period ended
June 30, 2000, compared to $3.5 million and $5.9 million for the
same periods in 1999. The increases in net revenues are attributed
primarily to increased play on slot machines and the property's
active promotional campaign. However, the increase in net revenues
was offset by an increase in operating expenses (primarily
increases in employee benefits, complimentary expenses and
marketing costs). Cost-control measures and increased labor
efficiencies continue at the Jackpot Properties in an effort to
increase the overall operating performance.
Ameristar Vicksburg maintained its position as the dominant
gaming revenue market leader in Warren County, Mississippi with net
revenues of $20.4 million for the second quarter of 2000 and $41.1
million for the first six months of 2000 compared to $19.3 million
and $38.4 million, respectively, for the same periods in 1999.
Operating income was $3.7 million for the second quarter of 2000
and $9.1 million for the six months ended June 30, 2000, compared
to $4.0 million and $7.6 million, respectively, for the same
periods in 1999. The revenue improvements were primarily
attributable to increased casino revenues from the expanded casino
and the upgraded slot product (an increase of 300 additional slot
machines or 35 percent) and improved marketing strategies.
Improved revenues were partially offset by increased operating
costs, including increases in marketing costs and increased
depreciation related to property improvements and new gaming
equipment.
The Reserve Hotel Casino experienced significant improvement
in operating results for the six months ended June 30, 2000,
compared to the six months ended June 30, 1999. During the second
quarter of 2000, management continued to initiate strategies to
drive revenues and capture market share. As a result of these
implementations, net revenues for the quarter ended June 30, 2000
increased 16.0 percent compared to the same period in 1999. Net
revenues for the six months ended June 30, 2000 were up 15.8
percent over the corresponding period in 1999. The Reserve's net
gaming revenues for the quarter ended June 30, 2000 <PAGE>increased
17.8 percent compared to an increase of 4.7 percent for the Boulder
Strip generally. The Reserve reduced its operating loss to $0.2
million for the quarter ended June 30, 2000 and $0.7 million for
the six months ended June 30, 2000 compared to its operating loss
of $2.1 million and $4.0 million, respectively, for the same
periods in 1999. The Company continues to seek further operating
improvements at The Reserve through enhanced revenues and cost
controls.
Consolidated Revenues and Expenses
On a consolidated basis for the quarter ended June 30, 2000
compared to the quarter ended June 30, 1999, casino revenues
increased $7.2 million or 11.5 percent. The increase is due
primarily to the improved casino results previously discussed. Food
and beverage revenues for the quarter ended June 30, 2000 increased
$1.0 million or 8.5 percent compared to the same period in 1999.
The improvement was due to increased prices and additional covers
in the food and beverage outlets. Room revenues for the quarter
ended June 30, 2000 increased $0.2 million or 4.6 percent compared
to the same period in 1999 as a result of an increase in hotel
occupancy and a slight increase in average rates.
For the quarter ended June 30, 2000, compared to the same
period in 1999, casino expenses increased $4.1 million or 14.2
percent. This increase relates to increases in gaming taxes
associated with the increased casino revenues, as well as increases
in player club cash payouts, cost of casino complimentaries and
employee compensation and benefits. Casino expenses increased $8.5
million or 15.1 percent for the six months ended June 30, 2000
compared to the same period in the prior year for the same reasons.
Food and beverage expenses for the quarter ended June 30, 2000
increased $0.6 million or 7.4 percent compared to the first quarter
in 1999 and increased by $1.0 million, or 6.3 percent, for the six
months ended June 30, 2000. The increase is due to the increased
cost of product associated with the increase in revenues. Rooms
expenses for the quarter ended June 30, 2000 increased by less than
$0.2 million or 11.3 percent compared to the first quarter in 1999
due to a slight increase in employee compensation.
Selling, general and administrative expenses (including
utilities and maintenance and business development) increased $2.5
million or 11.7 percent for the quarter ended June 30, 2000 and
increased $3.4 million or 8.4% for the six months ended June 30,
2000 compared to the same periods in 1999, respectively. This is
primarily the result of the development costs incurred in
connection with the Company's unsuccessful bid for a gaming license
in South St. Louis County, Missouri (described more fully below),
as well as increased marketing expenses associated with the
Company's implementation of an aggressive marketing strategy in the
second quarter of 2000. An increase in corporate overhead related
to increased corporate staffing levels and the greater
centralization of certain management functions also contributed to
this increase.
Depreciation expense for the three months ended June 30, 2000
and the six months ended June 30, 2000 increased $1.3 million, or
21.4 percent, and $1.9 million, or 15.7 percent, respectively,
over the same periods in 1999. This is primarily due to the
inclusion of new slot product and expansion projects at Ameristar
Council Bluffs and Ameristar Vicksburg in the Company's depreciable
basis for the current period, partially offset by certain assets in
Vicksburg that are now fully depreciated and are no longer included
in depreciation expense.
Development costs for the St. Louis County project were $1.4
million for the three months ended June 30, 2000 and $1.9 million
for the six months ended June 30, 2000 and had the effect of
reducing income from operations by these amounts for the respective
periods. These expenditures also had the effect of reducing
earnings per share (net of tax benefits) by $0.04 and $0.06 for the
three- and six-month periods ended June 30, 2000, respectively.
The St. Louis County expenses reduced the operating income margin
by 1.7 percent and 1.1 percent for the three- and six-month
periods, respectively.
Interest expense increased $0.3 million or 4.5 percent for the
three months ended June 30, 2000 and increased $0.9 million or 7.3
percent for the six months ended June 30, 2000 compared to the same
periods in <PAGE>1999. The increased interest expense for the
quarter reflects the additional debt incurred to finance the
Company's various expansion projects and higher interest rates on
those borrowings, offset by capitalization of interest in
connection with expansion projects.
The Company's effective federal income tax rate for the three
months ended June 30, 2000 and the six months ended June 30, 2000
was 28.9 percent and 36.7 percent, respectively, 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 provided by operating activities were $15.5 million
for the six months ended June 30, 2000 compared to $18.5 million
for the six months ended June 30, 1999. The majority of this
decrease is due to cash used to pay down trade payables.
Cash flows used in investing activities were $20.2 million for
the six months ended June 30, 2000 compared to $11.2 million for
the six months ended June 30, 1999. The increase is due primarily
to an increase in capital expenditures and a decrease in
construction contracts payable. Capital expenditures of $18.5
million for the six months ended June 30, 2000 primarily relate to
expansion projects at Ameristar Council Bluffs and Ameristar
Vicksburg ($7.8 million), the purchase of new slot machines at
Ameristar Vicksburg, the Jackpot Properties and The Reserve ($7.3
million) and other capital expenditures for equipment and
maintenance at each of the properties.
Cash flows provided by financing activities were $4.5 million
for the six months ended June 30, 2000 compared to $2.2 million of
cash flows used for the six months ended June 30, 1999. The
increase is due primarily to an increase in borrowings incurred to
finance the Company's various expansion projects.
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), a purchasing subsidiary or Ameristar Casino
St. Louis, Inc ("ACSLI"), a subsidiary organized in connection with
the Company's pursuit of a gaming license in South St. Louis
County, Missouri. At June 30, 2000, the outstanding principal
balance of the Revolving Credit Facility was $115.0 million. The
maximum available borrowings under the agreement at July 1, 2000,
was $115.0 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 June 30, 2000,
the Borrowers have taken LIBOR draws totaling $115.0 million with
an average interest rate of approximately 10.3 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 six months ended June 30, 2000, the Company did not incur
any additional interest as a result of this agreement. The
agreement terminates on June 30, 2003 to coincide with the maturity
of the Revolving Credit Facility.
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'
<PAGE>rolling four-quarter EBITDA (as defined), multiplied by a
factor that varies over time and which is currently 4.50. As of
June 30, 2000, borrowings under the Revolving Credit Facility and
the total funded debt of the Borrowers were approximately 2.12
times and 4.22 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 plus 90
percent of net income as of the end of each quarter. In addition,
one of these covenants prohibits the Company from investing more
than $2 million in any subsidiary that is not a Borrower under the
Revolving Credit Facility. As of June 30, 2000, the Company had
invested approximately $2.47 million for ACSLI's potential casino
development in St. Louis County. The Company has requested a
waiver from the lenders for these expenditures, which the Company
believes will be granted. As of June 30, 2000, the Company was in
compliance with all other covenants. At June 30, 2000, the maximum
amount available under the Revolving Credit Facility was $120.0
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 other than ACSLI
(the "Guarantors") are parties to the Indenture for the purpose of
guaranteeing (the "Guarantees") payments on the Senior Subordinated
Notes. Interest is payable semiannually on February 1 and
August 1, commencing February 1, 1998, at the per annum rate of
10.5%. The Senior Subordinated Notes and the Guarantees are not
secured and are subordinate to all existing and future Senior
Indebtedness (as defined), which includes the Revolving Credit
Facility.
The Indenture includes covenants that restrict the ability of
Ameristar and the Restricted Subsidiaries (as defined and which
includes all Guarantors) from incurring future Indebtedness (as
defined); provided, however, that Ameristar or any Guarantor may
incur Indebtedness if the incurrence thereof would not result in
the Consolidated Coverage Ratio (as defined) being 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
June 30, 2000.
On March 1, 2000, ACVI exercised its purchase option on one of
the parcels of the Ameristar Vicksburg site that had previously
been under lease. The purchase price for the parcel was
approximately $4.6 million and was paid for by ACVI entering into
two promissory notes in favor of the Seller of the parcels, one in
the principal amount of $250,000 and one in the principal amount of
approximately $4.3 million. The $250,000 promissory note bears
interest at the rate of 10.0% per annum, with principal and
interest payable in 12 equal monthly installments. The $4.3
million promissory note bears interest at the rate of 10.0% per
annum, with principal and interest payable in equal monthly
installments through February 1, 2024.
On May 1, 2000, ACVI exercised a second purchase option on one
of the parcels of the Ameristar Vicksburg site that had previously
been under lease. The purchase price for the parcel was
approximately <PAGE>$1.3 million, of which ACVI paid $125,000 upon
closing and executed a promissory note for approximately $1.2
million. The promissory note matures on May 1, 2010. Pursuant to
the promissory note, ACVI must make monthly principal and interest
payments, with the interest rate being reset each year at a rate
equal to 1.0% above the prime rate (as defined). The interest rate
is currently 10.0%.
At June 30, 2000, the Company had other indebtedness,
including obligations under capitalized leases, in an aggregate
principal amount of approximately $39.8 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" and Note 5 to the Company's
Audited Financial Statements in Ameristar's Annual Report on Form
10-K for the fiscal year ended December 31, 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 projects at Ameristar Council Bluffs,
Ameristar Vicksburg and The Reserve. The waiver permits fiscal
1999 and 2000 capital expenditure projects to exceed the limit by
approximately $43.3 million.
Consolidated capital expenditures during the first six months
of 2000 were $18.5 million. Management currently estimates that
total capital expenditures for the remaining six months of 2000
will be approximately $15 million. However, the amount of capital
expenditures may vary based on budget modifications, construction
schedule changes and other factors. The Company expects to fund
any such capital expenditures out of draws under the Revolving
Credit Facility, cash on hand, operating cash flows 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 decreases of $6.4 million in
cash flow from operations and $0.1 million in EBITDA during the
three months ended June 30, 2000 compared to the same period in
1999. As discussed above in "Results of Operations - Summary of
Operating Results" and "Results of Operations - Consolidated
Revenues and Expenses," this decrease resulted primarily from costs
associated with the Company's unsuccessful bid for a gaming license
in St. Louis County, Missouri, increased depreciation related to
property improvements and new gaming equipment and increased
marketing costs. 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 2000
that could not be funded out of amounts anticipated to be available
<PAGE>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.
FORWARD LOOKING STATEMENTS
This Report contains certain forward-looking statements,
including the plans and objectives of management for the business,
operations and economic performance of the Company. These forward-
looking statements generally can be identified by the context of
the statement or the use of words such as the Company or its
management "believes," "anticipates," "intends," "expects,"
"plans," or words of similar meaning. Similarly, statements that
describe the Company's future operating performance, financial
results, plans, objectives, strategies or goals are forward-looking
statements. Although management believes that the assumptions
underlying the forward-looking statements are reasonable, these
assumptions and the forward-looking statements are subject to
various factors, risks and uncertainties, many of which are beyond
the control of the Company, including but not limited to
uncertainties concerning operating cash flow in future periods, the
Company's borrowing capacity under the Revolving Credit Facility,
the future operating performance of the Company's properties, the
ability of the Company to undertake and complete capital
expenditure projects and regulatory restrictions that could affect
the Company. Accordingly, actual results could differ materially
from those contemplated by the forward-looking statements. In
addition to the other cautionary statements relating to certain
forward-looking statements throughout this Report, attention is
directed to "Item 1. Business - Risk Factors" in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1999 for a discussion of some of the factors, risks and
uncertainties that could affect the Company's future results.
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Except for the Revolving Credit Facility, under which $115.0
million was outstanding at June 30, 2000 and certain other long-
term debt outstanding at June 30, 2000, in the aggregate amount of
$2.4 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 June 30, 2000, the average
interest rate applicable to the Variable Rate Debt was 10.2
percent. An increase of one percentage point in the average
interest rate applicable to the Variable Rate Debt outstanding at
June 30, 2000 would increase the Company's annual interest costs by
approximately $1.2 million. The Company has entered into an
interest rate collar agreement with WFB to manage the effects of
fluctuations in the interest rate applicable to a maximum of $50.0
million in LIBOR draws under the Revolving Credit Facility.
Although the Company manages its short-term cash assets with a
view to maximizing return with minimal risk, the Company does not
invest in market rate sensitive instruments for trading or other
purposes, including so-called derivative securities, and the
Company is not exposed to foreign currency exchange risks or
commodity price risks in its portfolio transactions.
<PAGE>
PART II. OTHER INFORMATION
ITEM 5.OTHER INFORMATION
On July 26, 2000, the Company learned that the Missouri Gaming
Commission had selected a competing project for investigation for a
gaming license in the St. Louis, Missouri area, effectively ending
the Company's application process for a gaming license in South St.
Louis County for the foreseeable future.
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits filed as part of this report
27 Financial Data Schedule
b. Reports on Form 8-K
None
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: August 12, 2000 /s/ Thomas Steinbauer
Thomas Steinbauer
Senior Vice President of Finance
and Treasurer
(Principal Financial Officer)