<PAGE> 1
EXHIBIT 99.1
STATION CASINOS, INC. MISSOURI OPERATIONS
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Combined Balance Sheets as of December 31, 1998, 1999, and
September 30, 2000 (unaudited)............................ F-3
Combined Statements of Operations for the year ended March
31, 1998, the nine months ended December 31, 1998 and the
year ended December 31, 1999.............................. F-4
Combined Statements of Operations for the nine months ended
September 30, 1999 and 2000 (unaudited)................... F-5
Combined Statements of Cash Flows for the year ended March
31, 1998, the nine months ended December 31, 1998 and the
year ended December 31, 1999.............................. F-6
Combined Statements of Cash Flows for the nine months ended
September 30, 1999 and 2000 (unaudited)................... F-7
Notes to Combined Financial Statements...................... F-8
</TABLE>
F-1
<PAGE> 2
STATION CASINOS, INC. MISSOURI OPERATIONS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Station Casinos, Inc.:
We have audited the accompanying combined balance sheets of Station
Casinos, Inc. Missouri Operations (the "Company") as presented on the basis as
described in Notes to Combined Financial Statements as of December 31, 1998 and
1999, and the related combined statements of operations and cash flows for the
year ended March 31, 1998, for the nine months ended December 31, 1998 and for
the year ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as presented on
the basis as described in Notes to Combined Financial Statements as of December
31, 1998 and 1999, and the results of its operations and its cash flows for the
year ended March 31, 1998, for the nine months ended December 31, 1998 and for
the year ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
August 24, 2000
(except with respect to the matter
discussed in Note 12, as to which
the date is November 29, 2000)
F-2
<PAGE> 3
STATION CASINOS, INC. MISSOURI OPERATIONS
COMBINED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- SEPTEMBER 30,
1998 1999 2000
-------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 19,390 $ 21,212 $ 21,564
Accounts and notes receivable, net................... 1,706 1,998 1,728
Inventories.......................................... 1,596 2,173 1,973
Prepaid expenses..................................... 1,905 2,063 3,006
Deferred income tax.................................. -- 760 1,182
-------- --------- ---------
Total current assets............................ 24,597 28,206 29,453
Property and equipment, net............................... 557,278 409,986 400,637
Deferred income tax, net.................................. 30,335 26,263 18,032
Other assets, net......................................... 20,826 17,602 18,406
-------- --------- ---------
Total assets.................................... $633,036 $ 482,057 $ 466,528
======== ========= =========
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Current portion of long-term debt.................... $ 7,546 $ 4,346 $ 3,146
Accounts payable..................................... 4,281 3,115 1,958
Accrued payroll and related.......................... 2,079 4,114 3,931
Construction contracts payable....................... 2,201 -- --
Accrued interest payable............................. 1,291 994 122
Accrued progressives................................. 2,157 1,416 3,244
Accrued gaming related............................... 1,503 1,771 1,537
Deferred income tax.................................. 211 -- --
Accrued expenses and other current liabilities....... 11,019 14,307 10,182
-------- --------- ---------
Total current liabilities....................... 32,288 30,063 24,120
Long-term debt, less current portion...................... 9,979 5,033 1,573
Long-term intercompany note payable, net.................. 672,503 664,106 642,371
-------- --------- ---------
Total liabilities............................... 714,770 699,202 668,064
Division equity........................................... (81,734) (217,145) (201,536)
-------- --------- ---------
Total liabilities and division equity........... $633,036 $ 482,057 $ 466,528
======== ========= =========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-3
<PAGE> 4
STATION CASINOS, INC. MISSOURI OPERATIONS
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE NINE FOR THE YEAR
ENDED MONTHS ENDED ENDED
MARCH 31, 1998 DECEMBER 31, 1998 DECEMBER 31, 1999
-------------- ----------------- -----------------
(SEE NOTE 1)
<S> <C> <C> <C>
Operating revenues:
Casino.................................. $231,477 $ 191,499 $ 278,554
Food and beverage....................... 35,682 25,094 31,916
Room.................................... 5,549 4,548 5,992
Other................................... 12,300 7,735 10,572
-------- --------- ---------
Gross revenues........................ 285,008 228,876 327,034
Promotional allowances.................. (12,326) (9,303) (12,386)
-------- --------- ---------
Net revenues.......................... 272,682 219,573 314,648
-------- --------- ---------
Operating costs and expenses:
Casino.................................. 140,300 110,411 153,791
Food and beverage....................... 23,754 16,963 21,238
Room.................................... 1,594 1,252 1,636
Other................................... 4,011 2,712 3,885
Selling, general and administrative..... 64,225 45,615 63,980
Depreciation and amortization........... 30,772 23,412 29,105
Impairment loss......................... -- 24,807 125,732
Preopening expenses..................... 133 -- --
-------- --------- ---------
264,789 225,172 399,367
-------- --------- ---------
Operating income (loss)...................... 7,893 (5,599) (84,719)
-------- --------- ---------
Other expense:
Interest expense, net................... (56,059) (40,740) (47,474)
Other................................... (2,468) (184) (117)
-------- --------- ---------
(58,527) (40,924) (47,591)
-------- --------- ---------
Loss before income taxes..................... (50,634) (46,523) (132,310)
Income tax (provision) benefit............... 13,176 3,010 (3,101)
-------- --------- ---------
Net loss..................................... $(37,458) $ (43,513) $(135,411)
======== ========= =========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-4
<PAGE> 5
STATION CASINOS, INC. MISSOURI OPERATIONS
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1999 2000
----------- -----------
(UNAUDITED)
<S> <C> <C>
Operating revenues:
Casino................................................. $208,620 $221,476
Food and beverage...................................... 24,306 22,063
Room................................................... 4,553 4,533
Other.................................................. 7,971 7,642
-------- --------
Gross revenues....................................... 245,450 255,714
Promotional allowances................................. (9,563) (7,997)
-------- --------
Net revenues......................................... 235,887 247,717
-------- --------
Operating costs and expenses:
Casino................................................. 115,709 119,519
Food and beverage...................................... 15,892 15,081
Room................................................... 1,175 1,122
Other.................................................. 2,900 1,941
Selling, general and administrative.................... 48,620 40,941
Depreciation and amortization.......................... 22,266 15,833
Missouri investigations and fines...................... -- 400
-------- --------
206,562 194,837
-------- --------
Operating income............................................ 29,325 52,880
-------- --------
Other income (expense):
Interest expense, net.................................. (35,603) (30,759)
Other.................................................. (228) 1,337
-------- --------
(35,831) (29,422)
-------- --------
Net income (loss) before income taxes and extraordinary
item...................................................... (6,506) 23,458
Income tax provision........................................ (2,321) (7,808)
-------- --------
Net income (loss) before extraordinary item................. (8,827) 15,650
Extraordinary item -- loss on early retirement of debt, net
of applicable income tax benefit.......................... -- (41)
-------- --------
Net income (loss)........................................... $ (8,827) $ 15,609
======== ========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-5
<PAGE> 6
STATION CASINOS, INC. MISSOURI OPERATIONS
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE
FOR THE MONTHS FOR THE
YEAR ENDED ENDED YEAR ENDED
MARCH 31, DECEMBER 31, DECEMBER 31,
1998 1998 1999
---------- ------------ ------------
(SEE NOTE 1)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................... $ (37,458) $(43,513) $(135,411)
--------- -------- ---------
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization.......................... 30,772 23,412 29,105
Amortization of debt discount and issuance costs....... 209 159 180
Impairment loss........................................ -- 24,807 125,732
Preopening expenses.................................... 133 -- --
Decrease (increase) in deferred income tax............. (13,176) (3,009) 3,101
Changes in assets and liabilities:
Increase in accounts and notes receivable, net....... (602) (47) (292)
(Increase) decrease in inventories and prepaid
expenses and other................................ (827) 1,010 (735)
Decrease in accounts payable......................... (5,124) (830) (1,421)
Increase in accrued expenses and other current
liabilities....................................... 5,310 2,442 4,486
Other, net........................................... 2,556 437 (399)
--------- -------- ---------
Total adjustments................................. 19,251 48,381 159,757
--------- -------- ---------
Net cash provided by (used in) operating
activities...................................... (18,207) 4,868 24,346
--------- -------- ---------
Cash flows from investing activities:
Capital expenditures................................... (58,044) (9,508) (6,207)
Proceeds from sale of property and equipment........... 644 1,658 1,530
Decrease in construction contracts payable............. (47,054) (7,802) (2,202)
Preopening expenses.................................... (190) -- --
Other, net............................................. (3,426) 54 (32)
--------- -------- ---------
Net cash used in investing activities............. (108,070) (15,598) (6,911)
--------- -------- ---------
Cash flows from financing activities:
Proceeds from notes payable............................ 15,731 -- --
Principal payments on notes payable.................... (8,795) (7,536) (8,146)
Intercompany, net...................................... 117,763 24,208 (7,467)
Debt issuance costs and other, net..................... (182) -- --
--------- -------- ---------
Net cash (used in) provided by financing
activities...................................... 124,517 16,672 (15,613)
--------- -------- ---------
Cash and cash equivalents:
Increase (decrease) in cash and cash equivalents....... (1,760) 5,942 1,822
Balance, beginning of year............................. 15,208 13,448 19,390
--------- -------- ---------
Balance, end of year................................... $ 13,448 $ 19,390 $ 21,212
========= ======== =========
Supplemental cash flow disclosures:
Cash paid for interest................................. $ 12,619 $ 10,138 $ 11,537
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-6
<PAGE> 7
STATION CASINOS, INC. MISSOURI OPERATIONS
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1999 2000
----------- -----------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................... $ (8,827) $ 15,609
-------- --------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 22,266 15,833
Amortization of debt discount and issuance costs....... 160 47
Loss on early retirement of debt....................... -- 63
Decrease in deferred income tax........................ 3,863 7,809
Changes in assets and liabilities:
Decrease in accounts and notes receivable, net....... 367 270
Increase in inventories and prepaid expenses and
other............................................... (1,103) (743)
Decrease in accounts payable......................... (3,078) (1,157)
(Decrease) increase in accrued expenses and other
current liabilities................................. 3,438 (3,586)
Other, net........................................... 228 (1,337)
-------- --------
Total adjustments................................. 26,141 17,199
-------- --------
Net cash provided by operating activities......... 17,314 32,808
-------- --------
Cash flows from investing activities:
Capital expenditures................................... (4,677) (7,538)
Proceeds from sale of property and equipment........... 533 2,391
Decrease in construction contracts payable............. (2,201) --
Other, net............................................. (366) (725)
-------- --------
Net cash used in investing activities............. (6,711) (5,872)
-------- --------
Cash flows from financing activities:
Principal payments on notes payable.................... (7,059) (4,660)
Intercompany, net...................................... (4,355) (21,735)
Debt issuance costs and other, net..................... -- (189)
-------- --------
Net cash used in financing activities............. (11,414) (26,584)
-------- --------
Cash and cash equivalents:
Increase (decrease) in cash and cash equivalents....... (811) 352
Balance, beginning of year............................. 19,390 21,212
-------- --------
Balance, end of year................................... $ 18,579 $ 21,564
======== ========
Supplemental cash flow disclosures:
Cash paid for interest................................. $ 8,022 $ 12,445
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-7
<PAGE> 8
STATION CASINOS, INC. MISSOURI OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Basis of Presentation and Organization
The accompanying combined financial statements include the Missouri
operations of Station Casinos, Inc. ("Station") to be sold to Ameristar Casinos,
Inc. ("Ameristar"), a Nevada Corporation pursuant to definitive agreements
entered into between Station and Ameristar on October 17, 2000. The Missouri
operations consists of two wholly-owned subsidiaries of Station, St. Charles
Riverfront Station, Inc. ("Station Casino St. Charles") and Kansas City Station
Corporation ("Station Casino Kansas City"), (collectively the "Company"). During
the period covered by these financial statements, the Company was under common
control operating as a subsidiary of Station. These financial statements have
been prepared from Station's historical accounting records and present
substantially all of the operations of businesses that will be owned and
operated by Ameristar as if the Company had been a separate entity for all
periods presented.
This sale is subject to certain customary contingencies, including the
purchaser's receipt of regulatory approvals and financing and is expected to
close late in the fourth quarter of 2000. The Board of Directors of Station has
approved the sale.
Change in Fiscal Year
On November 6, 1998, Station filed a Form 8-K announcing its change in
fiscal year end from March 31 of each year to December 31 of each year. This
change is effective for the nine month period ended December 31, 1998 (the
"Transition Period 1998"). Selected combined financial data for the twelve
months ended December 31, 1998 is presented below, for comparison purposes only
(amounts in thousands, unaudited).
<TABLE>
<S> <C>
Net revenues.............................................. $289,999
Operating loss............................................ (2,071)
Loss before income taxes.................................. (59,249)
Income tax benefit........................................ 4,887
Net loss.................................................. (54,362)
</TABLE>
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include investments purchased with an original
maturity of 90 days or less.
Inventories
Inventories are stated at the lower of cost or market; cost being
determined on a first-in, first-out basis.
F-8
<PAGE> 9
STATION CASINOS, INC. MISSOURI OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
are computed using the straight-line method over the estimated useful lives of
the assets or the terms of the capitalized lease, whichever is less. Costs of
major improvements are capitalized, while costs of normal repairs and
maintenance are charged to expense as incurred.
Debt Issuance Costs
Debt issuance costs incurred in connection with the issuance of long-term
debt are capitalized and amortized to interest expense over the terms of the
related debt agreements.
Revenues and Promotional Allowances
In accordance with industry practice, the Company recognizes as casino
revenues the net win from gaming activities, which is the difference between
gaming wins and losses. All other revenues are recognized as the service is
provided. Revenues include the retail value of accommodations and food and
beverage provided on a complimentary basis to customers. The estimated
departmental costs of providing such promotional allowances are included in
casino costs and expenses and consist of the following (amounts in thousands):
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED TRANSITION YEAR ENDED
MARCH 31, PERIOD DECEMBER 31,
1998 1998 1999
---------- ---------- ------------
<S> <C> <C> <C>
Food and beverage................................. $7,276 $5,303 $6,320
Room.............................................. 114 29 84
Other............................................. 1,838 1,145 1,736
------ ------ ------
Total................................... $9,228 $6,477 $8,140
====== ====== ======
</TABLE>
Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 requires companies
to classify items of other comprehensive income by their nature in a financial
statement and display the accumulated balance of other comprehensive income
separately from retained earnings, and is effective for financial statements
issued for fiscal years beginning after December 15, 1997. The Company has
adopted SFAS No. 130 as reflected in the accompanying combined financial
statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS No. 131 establishes additional
standards for segment reporting in financial statements and is effective for
fiscal years beginning after December 15, 1997. The Company currently operates
in only one segment.
Interim Period Financial Statements
The combined interim financial statements have been prepared without
audit. Certain information and footnote disclosures normally included in
financial statements presented in accordance with generally accepted accounting
principles have been condensed or omitted. The Company believes the disclosures
made are adequate to make the interim financial information presented not
misleading.
In the opinion of management, the accompanying combined interim financial
statements reflect all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial
F-9
<PAGE> 10
STATION CASINOS, INC. MISSOURI OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
position of the Company as of September 30, 2000 and the results of operations
and cash flows for the nine months ended September 30, 1999 and 2000.
2. ACCOUNTS AND NOTES RECEIVABLE
Components of accounts and notes receivable are as follows (amounts in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998 1999
------ ------
<S> <C> <C>
Casino..................................................... $ 562 $ 526
Hotel...................................................... 297 528
Other...................................................... 1,083 1,340
------ ------
1,942 2,394
Allowance for doubtful accounts............................ (236) (396)
------ ------
Accounts and notes receivable, net.................... $1,706 $1,998
====== ======
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of December 31, 1998
and 1999 (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
ESTIMATED LIFE (YEARS) 1998 1999
---------------------- -------- --------
<S> <C> <C> <C>
Land....................................... -- $ 5,114 $ 5,114
Buildings and leasehold improvements....... 31 - 45 248,157 222,906
Boats and barges........................... 20 - 45 100,086 67,010
Furniture, fixtures and equipment.......... 3 - 7 105,861 98,497
Construction in progress................... -- 172,096 105,630
-------- --------
631,314 499,157
Accumulated depreciation and
amortization............................. (74,036) (89,171)
-------- --------
Property and equipment, net........... $557,278 $409,986
======== ========
</TABLE>
At December 31, 1998 and 1999, substantially all property and equipment of
the Company is pledged as collateral for long-term debt.
Construction in Progress
In the fall of 1996, Station commenced an expansion project at Station
Casino St. Charles which included the building of a backwater basin containing
two new gaming vessels and a new retail and entertainment complex. Since
December 31, 1997, construction on the Station Casino St. Charles expansion
project has been halted. Included in construction in progress at December 31,
1999 is approximately $101.0 million related to the Station Casino St. Charles
expansion project (see Commitments and Contingencies -- New Legislation).
Asset Impairment
In accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," Station recorded
an impairment loss of $24.8 million in the Transition Period 1998 and $125.7
million in the fiscal year ended December 31, 1999 to adjust the carrying value
of its fixed assets and land held for development to their estimated fair value.
In the fiscal year ended December 31, 1999, approximately $125.2 million of the
impairment loss was related to Station
F-10
<PAGE> 11
STATION CASINOS, INC. MISSOURI OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
Casino St. Charles. In the fourth quarter of 1999, Station made a decision to
reconfigure the existing Station Casino St. Charles facility to a more efficient
layout in response to the new open boarding rules promulgated by the Missouri
Gaming Commission that began in September 1999 in the St. Louis market. All
gaming operations were moved to the existing barge during the first quarter of
2000. The existing riverboat was sold in June 2000. In accordance with SFAS No.
121, the riverboat and miscellaneous other fixed assets were written down by
approximately $15 million to their net realizable value.
In addition, Station performed an evaluation of the carrying values of the
remaining assets in St. Charles and determined a $110 million write-down of the
asset values was necessary. The write-down was deemed appropriate after a review
of the property's asset valuations relative to Station's near-term investment
objectives.
In the Transition Period 1998, the impairment loss principally involved
assets at the Station Casino St. Charles facility, including a riverboat
formerly used in the Missouri operations, capitalized project costs associated
with various parcels of land determined to have no value, and several parcels of
land within close proximity to the St. Charles, Missouri site that were being
held for future development. The fair value of the impaired assets was primarily
determined through the market's interest in riverboats and barges, and on the
comparable sales prices on parcels of land in the St. Charles area. The total
amount of the impairment loss in the Transition Period 1998 related to this
category of assets was approximately $23.4 million. The value of these parcels
was determined based on sales prices for comparable parcels of land on the
market.
4. LONG-TERM DEBT
Long-term debt consists of the following (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
-------- --------
<S> <C> <C>
Debt allocated by Station................................... $672,503 $664,106
Other long-term debt, collateralized by various assets,
including slot machines and furniture and equipment,
monthly installments including interest ranging from 7.83%
to 8.00% at December 31, 1999............................. 17,525 9,379
-------- --------
Total long-term debt.............................. 690,028 673,485
Current portion of long-term debt........................... (7,546) (4,346)
-------- --------
Total long-term debt, less current portion........ $682,482 $669,139
======== ========
</TABLE>
Debt allocated by Station represents net cash transfers from Station to
the Company. Station Casino Kansas City and Station Casino St. Charles are
borrowers on Station's Amended Bank Facility and are subject to certain
financial and other covenants. Station is in compliance with all covenants.
Interest was calculated based on Station's weighted average interest rate
of 9.8%, 9.5% and 9.0% for the fiscal year ended March 31, 1998, the Transition
Period 1998 and the fiscal year ended December 31, 1999, respectively. Interest
charged by Station to the Company was $53.2 million, $39.3 million and $45.6
million for the fiscal year ended March 31, 1998, the Transition Period 1998 and
the fiscal year ended December 31, 1999, respectively.
The estimated fair value of the Company's long-term debt at December 31,
1999, approximates the carrying amount of the debt due to the short-term
maturities of the individual components of the debt.
F-11
<PAGE> 12
STATION CASINOS, INC. MISSOURI OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
Scheduled maturities of other long-term debt are as follows (amounts in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
2000........................................................ $4,346
2001........................................................ 4,246
2002........................................................ 787
------
Total............................................. $9,379
======
</TABLE>
5. DIVISION EQUITY
Changes in division equity consisted of the following (amounts in
thousands):
<TABLE>
<CAPTION>
STATION STATION
CASINO CASINO
ST. CHARLES KANSAS CITY TOTAL
----------- ----------- ---------
<S> <C> <C> <C>
Balance, March 31, 1997......................... $ 16,916 $(17,679) $ (763)
Net loss........................................ (16,900) (20,558) (37,458)
--------- -------- ---------
Balance, March 31, 1998......................... 16 (38,237) (38,221)
Net loss........................................ (38,815) (4,698) (43,513)
--------- -------- ---------
Balance, December 31, 1998...................... (38,799) (42,935) (81,734)
Net income (loss)............................... (140,197) 4,786 (135,411)
--------- -------- ---------
Balance, December 31, 1999...................... (178,996) (38,149) (217,145)
Net income...................................... 3,761 11,848 15,609
--------- -------- ---------
Balance, September 30, 2000
(unaudited)................................... $(175,235) $(26,301) $(201,536)
========= ======== =========
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
Station Casino Kansas City Lease
Station Casino Kansas City has entered into a joint venture, which owns
the land on which the Station Casino Kansas City casino is located. At December
31, 1999, $3.0 million related to this investment is included in other assets,
net in the accompanying combined balance sheets.
In April 1994, Station Casino Kansas City entered into an agreement with
the joint venture to lease this land. Currently, the agreement requires monthly
payments of $96,632. Commencing April 1, 1998 and every anniversary thereafter,
the rent shall be adjusted by a cost of living factor of not more than 5% or
less than 2% per annum. The lease expires March 31, 2006, with an option to
extend the lease for up to eight renewal periods of ten years each, plus one
additional seven year period. In connection with the joint venture agreement,
Station Casino Kansas City received an option providing for the right to acquire
the joint venture partner's interest in this joint venture. Station Casino
Kansas City has the option to acquire this interest at any time after April 1,
2002 through April 1, 2011, for $11.7 million, however, commencing April 1,
1998, the purchase price will be adjusted by a cost of living factor of not more
than 5% or less than 2% per annum. At December 31, 1999, $2.6 million paid by
Station Casino Kansas City in consideration for this option is included in other
assets, net in the accompanying combined balance sheets.
F-12
<PAGE> 13
STATION CASINOS, INC. MISSOURI OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
Operating Leases
Station Casino Kansas City leases 171 acres of land used in its
operations. Leases on this land have terms expiring between March 2006 and
December 2006. Future minimum lease payments required under these operating
leases are as follows (amounts in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
2000........................................................ $1,260
2001........................................................ 1,283
2002........................................................ 1,307
2003........................................................ 1,330
2004........................................................ 1,355
Thereafter.................................................. 2,784
------
Total............................................. $9,319
======
</TABLE>
Rent expense totaled approximately $1.5 million, $1.2 million and $1.3
million for the fiscal year ended March 31, 1998, the Transition Period 1998 and
the fiscal year ended December 31, 1999, respectively.
New Legislation
New legislation has been passed in Missouri, giving the Missouri Gaming
Commission the authority to require gaming licensees to post a bond or other
form of surety to the state of Missouri to, among other things, guarantee the
completion of any expansion of a gaming facility within the later of a time
period determined by the Missouri Gaming Commission and the date that is three
years after enactment of the legislation. The failure to complete an approved
expansion project within the prescribed time period may, pursuant to the
Missouri legislation, constitute sufficient grounds for not renewing the gaming
license for that gaming facility. A failure to complete the proposed Station
Casino St. Charles expansion facility within the prescribed time period could
constitute sufficient grounds for the Missouri Gaming Commission to deny renewal
of gaming licenses at Station Casino St. Charles.
7. RELATED PARTY
Included in the combined financial statements are certain expenses, which
have been allocated from Station to the Company. Station allocates expenses for
such services as Human Resources, Information Technology, Advertising, Room
Reservations, Legal and various other centralized functions based on a specific
review to identify costs incurred for the benefit of the Company. Allocations
from Station were approximately $1.1 million, $0.9 million and $1.6 million for
the fiscal year ended March 31, 1998, the Transition Period 1998 and the fiscal
year ended December 31, 1999, respectively. The Company believes that this
represents a reasonable amount for such costs to support the operations of the
Company as a stand-alone entity.
8. BENEFIT PLANS
The employees of the Company participated in Station's defined
contribution 401(k) plan, which covers all employees who meet certain age and
length of service requirements and allows an employer contribution up to 50
percent of the first four percent of each participating employee's compensation.
Effective October 1, 1998, the employer contribution was increased from 25
percent of the first four percent of each participating employee's compensation.
Plan participants can elect to defer before tax compensation through payroll
deductions. These deferrals are regulated under Section 401(k) of the Internal
Revenue Code. Station's matching contribution was approximately $152,000,
$199,000 and $654,000 for the fiscal year ended March 31, 1998, the Transition
Period 1998 and the fiscal year ended
F-13
<PAGE> 14
STATION CASINOS, INC. MISSOURI OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999, respectively. The employees of the Company also participated
in Station's Stock Compensation Program.
9. EXECUTIVE COMPENSATION PLANS
The Company has employment agreements with certain of its executive
officers. These contracts provide for, among other things, an annual base
salary, supplemental long-term disability and supplemental life insurance
benefits in excess of the Company's normal coverage for employees.
10. INCOME TAXES
Income taxes are recorded in accordance with the provisions of Statement
of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
SFAS No. 109 requires recognition of deferred income tax assets and liabilities
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
The benefit (provision) for income taxes attributable to the net loss
consists of the following (amounts in thousands):
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED TRANSITION YEAR ENDED
MARCH 31, PERIOD DECEMBER 31,
1998 1998 1999
---------- ---------- ------------
<S> <C> <C> <C>
Current:
Federal.............................................. $ 22,262 $ 7,899 $ 2,140
State................................................ 4,221 1,484 392
-------- ------- -------
26,483 9,383 2,532
Deferred.................................................. (13,307) (6,373) (5,633)
-------- ------- -------
Total income taxes.............................. $ 13,176 $ 3,010 $(3,101)
======== ======= =======
</TABLE>
The Company will pay no income taxes for historical periods as these
payments of Station constitute liabilities pursuant to the agreements to
purchase Station Casino St. Charles and Station Casino Kansas City.
The income tax (provision) benefit differs from that computed at the
federal statutory corporate tax rate as follows:
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED TRANSITION YEAR ENDED
MARCH 31, PERIOD DECEMBER 31,
1998 1998 1999
---------- ---------- ------------
<S> <C> <C> <C>
Federal statutory rate............................ 35.0% 35.0% 35.0%
Valuation allowance -- federal.................... (11.3) (28.9) (36.7)
Other, net........................................ 2.3 0.4 (0.6)
----- ----- -----
Effective tax rate................................ 26.0% 6.5% (2.3)%
===== ===== =====
</TABLE>
F-14
<PAGE> 15
STATION CASINOS, INC. MISSOURI OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
The tax effects of significant temporary differences representing net
deferred tax assets and liabilities are as follows (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
-------- --------
<S> <C> <C>
Deferred tax assets:
Current:
Accrued vacation, bonuses and group insurance........ $ 896 $ 669
Other................................................ (480) 237
Valuation allowance.................................. (627) (146)
-------- --------
Total current.......................................... (211) 760
-------- --------
Long-term:
Preopening costs, net of amortization................ 7,933 5,396
FICA credits......................................... 457 565
Temporary differences related to property and
equipment........................................... -- 10,675
Net operating loss................................... 66,422 79,663
Valuation allowance.................................. (15,335) (70,036)
-------- --------
Total long-term........................................ 59,477 26,263
-------- --------
Total deferred tax assets.............................. 59,266 27,023
-------- --------
Deferred tax liabilities:
Long-term:
Temporary differences related to property and
equipment........................................... (29,142) --
-------- --------
Total deferred tax liabilities............................ (29,142) --
-------- --------
Net....................................................... $ 30,124 $ 27,023
======== ========
</TABLE>
Station Casino St. Charles and Station Casino Kansas City currently have a
net operating loss carryforward ("NOL") of $203.9 million. This NOL begins to
expire in year 2009 through year 2019. Station Casino St. Charles did record a
valuation allowance at December 31, 1999 and 1998 relating to recorded tax
benefits because all benefits are likely not to be realized.
Station Casino St. Charles and Station Casino Kansas City have been
included in the consolidated Federal income tax return of Station. The income
tax provision reflects the portion of Station's historical income tax provision
attributable to the operations of Station Casino St. Charles and Station Casino
Kansas City. Management believes the income tax provision, as reflected, is
comparable to what the income tax provision would have been if Station Casino
St. Charles and Station Casino Kansas City had filed a separate return during
the periods presented. The above deferred tax assets and liabilities are not
being sold by Station to Ameristar.
11. LEGAL MATTERS
The Company is a litigant in legal matters arising in the normal course of
business. In the opinion of management, all pending legal matters are either
adequately covered by insurance or, if not insured, will not have a material
adverse effect on the financial position or the results of operations of the
Company.
F-15
<PAGE> 16
STATION CASINOS, INC. MISSOURI OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
12. SUBSEQUENT EVENTS
On November 29, 2000 the Company entered into a settlement agreement with
the Missouri Gaming Commission (the "MGC"). The settlement addressed all
outstanding issues between the MGC and the Company. Included in the outstanding
issues were (1) allegations related to the activities of an attorney who
formerly represented the Company in Missouri, (2) other unrelated, pending
disciplinary actions which sought administrative penalties totaling $0.4
million; which was accrued as a liability by the Company at September 30, 2000.
Although denying any wrongdoing, the Company agreed to pay an administrative
penalty of $1.0 million to the MGC as part of the settlement after the closing
of the pending sale of the Missouri properties to Ameristar.
F-16
