1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 18, 2001
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERISTAR CASINOS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 7999 88-0304799
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
3773 HOWARD HUGHES PARKWAY
SUITE 490 SOUTH
LAS VEGAS, NEVADA 89109
(702) 567-7000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
CRAIG H. NEILSEN
PRESIDENT, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
3773 HOWARD HUGHES PARKWAY
SUITE 490 SOUTH
LAS VEGAS, NEVADA 89109
(702) 567-7000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE OF PROCESS)
------------------------
WITH A COPY TO:
JONATHAN K. LAYNE, ESQ.
GIBSON, DUNN & CRUTCHER LLP
333 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071
(213) 229-7000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the exchange offer pursuant to the registration rights agreement
described in the enclosed prospectus have been satisfied or waived.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER SECURITY OFFERING PRICE(1) REGISTRATION FEE(1)
- --------------------------------------------------------------------------------------------------------------------------
10 3/4% Senior Subordinated Notes
Due 2009........................ $380,000,000 100% $386,650,000 $96,662.50
- --------------------------------------------------------------------------------------------------------------------------
Guarantees of the 10 3/4% Senior
Subordinated Notes Due 2009..... $380,000,000 None(2) None(2) None(2)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f) of the Securities Act of 1933, as amended.
(2) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate fee is
payable for the Guarantees.
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2
TABLE OF ADDITIONAL REGISTRANTS
Each of the following subsidiaries of Ameristar Casinos, Inc., and each
other subsidiary that is or becomes a guarantor of the securities registered
hereby, is hereby deemed to be a registrant.
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
PRIMARY STANDARD
STATE OF INDUSTRIAL I.R.S. EMPLOYER
INCORPORATION CLASSIFICATION IDENTIFICATION
NAME OR FORMATION NUMBER NUMBER
- ------------------------------------------------------------------------------------------------------------
Ameristar Casino Council Bluffs, Inc........ Iowa 7999 93-1151022
- ------------------------------------------------------------------------------------------------------------
Ameristar Casino Kansas City, Inc........... Missouri 7999 36-4401000
- ------------------------------------------------------------------------------------------------------------
Ameristar Casino St. Charles, Inc........... Missouri 7999 36-4401002
- ------------------------------------------------------------------------------------------------------------
Ameristar Casino St. Louis, Inc. ........... Missouri 7999 43-1879218
- ------------------------------------------------------------------------------------------------------------
A.C. Food Services, Inc. ................... Nevada 7999 86-0885736
- ------------------------------------------------------------------------------------------------------------
Ameristar Casino Las Vegas, Inc. ........... Nevada 7999 88-0360636
- ------------------------------------------------------------------------------------------------------------
Cactus Pete's, Inc. ........................ Nevada 7999 88-0069444
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
3
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
PROSPECTUS IS NOT AN OFFER TO SELL THESE NOTES NOR A SOLICITATION OF AN
OFFER TO BUY THESE NOTES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED APRIL 18, 2001
PROSPECTUS
$380,000,000
[AMERISTAR LOGO]
OFFER TO EXCHANGE
OUR 10 3/4% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2009
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR
ANY AND ALL OF OUR OUTSTANDING
10 3/4% SENIOR SUBORDINATED NOTES DUE 2009
(CUSIP NOS. 03070Q AD 3, U02677 AB 5, AND 03070Q AE 1)
We are offering to exchange our 10 3/4% Senior Subordinated Exchange Notes
Due 2009 (exchange notes) which have been registered under the Securities Act of
1933, as amended, for any and all of our outstanding 10 3/4% Senior Subordinated
Notes Due 2009 (old notes) in the aggregate principal amount of $380,000,000.
THE EXCHANGE NOTES
- The terms of the registered exchange notes to be issued are
substantially identical to the terms of the old notes, except for
transfer restrictions, registration rights and additional interest
provisions relating to the old notes which will not apply to the
exchange notes.
- Interest on the exchange notes will accrue at the rate of 10 3/4% per
year, payable in cash every six months on February 15 and August 15,
with the first payment on August 15, 2001.
- We may redeem the exchange notes at any time on or after February 15,
2006. In addition, until February 15, 2004, we may redeem up to 35% of
the exchange notes with the net proceeds of public equity offerings.
The exchange notes are subject to redemption requirements imposed by
state and local gaming laws and regulations. If we undergo a change of
control or sell certain of our assets, we may be required to offer to
purchase exchange notes from you.
- The exchange notes will be unsecured and subordinated to all of our
existing and future senior debt, including borrowings under our senior
credit facilities. Our subsidiaries on the issue date will guarantee
the exchange notes on an unsecured basis, subordinated to all senior
debt of those subsidiaries, including guarantees of borrowings under
our senior credit facilities.
- This prospectus includes additional information on the terms of the
exchange notes, including redemption and repurchase prices, covenants
and transfer restrictions.
- We do not intend to list the exchange notes on any securities
exchange.
MATERIAL TERMS OF THE EXCHANGE OFFER
- The exchange offer expires at 5:00 p.m., New York City time, on
, 2001, unless extended.
- All old notes that are validly tendered and not validly withdrawn will
be exchanged for an equal principal amount of exchange notes which are
registered under the Securities Act of 1933.
- Tenders of old notes may be withdrawn at any time prior to the
expiration of the exchange offer.
- The exchange offer is not subject to any minimum tender condition, but
is subject to the terms of the registration rights agreement that we
entered into on February 2, 2001 with the initial purchasers of the
old notes.
- We will not receive any proceeds from the exchange offer. We will pay
the expenses of the exchange offer.
FOR A DISCUSSION OF RISKS THAT SHOULD BE CONSIDERED BY HOLDERS IN DECIDING
WHETHER TO TENDER OLD NOTES IN THE EXCHANGE OFFER SEE "RISK FACTORS" BEGINNING
ON PAGE 14.
------------------------
NONE OF THE SECURITIES AND EXCHANGE COMMISSION, THE NEVADA GAMING
COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD, THE MISSISSIPPI GAMING
COMMISSION, THE MISSOURI GAMING COMMISSION, THE IOWA RACING AND GAMING
COMMISSION, NOR ANY STATE SECURITIES COMMISSION, OR OTHER GAMING AUTHORITY, HAS
PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS OR THE INVESTMENT MERITS
OF THE NOTES OFFERED HEREBY. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL WE ACCEPT SURRENDER FOR
EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE EXCHANGE
OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES
OR BLUE SKY LAWS OF SUCH JURISDICTION.
THE DATE OF THIS PROSPECTUS IS , 2001
4
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized any person to provide you
with any information or represent anything no contained in this prospectus, and
if given or made, any such information or representation should not be relied
upon as having been authorized by us.
TABLE OF CONTENTS
PAGE
----
Disclosure Regarding Forward-Looking Statements............. ii
Prospectus Summary.......................................... 1
Risk Factors................................................ 14
The Exchange Offer.......................................... 23
Use of Proceeds............................................. 32
Capitalization.............................................. 33
Unaudited Pro Forma Condensed Financial Statements.......... 34
Selected Financial and Other Data........................... 40
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 44
Business.................................................... 56
Government Regulations...................................... 68
Management.................................................. 82
Certain Relationships and Related Transactions.............. 85
Description of Existing Indebtedness........................ 87
Description of the Notes.................................... 89
Exchange Offer; Registration Rights......................... 126
Certain United States Federal Income Tax Considerations..... 128
Plan of Distribution........................................ 132
Legal Matters............................................... 132
Independent Auditors........................................ 132
Available Information and Incorporation by Reference........ 132
Index to Financial Statements............................... F-1
i
5
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
All statements other than statements of historical or current facts
included in this prospectus, including, without limitation, statements regarding
our future financial position, business strategy, budgets, projected costs and
plans and objectives of management for future operations, are forward-looking
statements. Forward-looking statements generally can be identified by the use of
forward-looking terminology such as "may", "will", "expect", "intend",
"estimate", "anticipate", "believe" or "continue" or the negative thereof or
variations thereon or similar terminology. Although we believe that the
expectations reflected in such forward-looking statements are reasonable, we can
give no assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from our
expectations ("cautionary statements") are disclosed under "Risk Factors" and
elsewhere in this prospectus, including, without limitation, in conjunction with
the forward-looking statements included in this prospectus. Currently known risk
factors include, but are not limited to, the following factors:
- We have a significant amount of debt, which could restrict our
future operating and strategic flexibility and expose us to the
risks of financial leverage.
- Our ability to meet our debt service obligations on the notes and
our other debt will depend on our future performance, which will be
subject to many factors that are beyond our control, including the
effects of weather and general economic conditions.
- We are subject to risks of competition from other casino operators
in our existing or future markets.
- Our ability to successfully complete our construction and
development projects as planned, including the completion of the St.
Charles expansion on schedule and on budget, depends on many
factors, some of which are beyond our control.
- We are subject to risks and limitations due to future changes in
gaming regulatory requirements and our ability to comply with gaming
regulatory requirements, as well as possible changes in governmental
and public acceptance of gaming, which could materially adversely
affect our business.
We urge you to review carefully the section "Risk Factors" in this
prospectus for a more complete discussion of the risks of participating in the
exchange offer. All subsequent written and oral forward-looking statements
attributable to us, or persons acting on our behalf, are expressly qualified in
their entirety by the cautionary statements.
ii
6
PROSPECTUS SUMMARY
This is only a summary of the prospectus. You should read the entire
prospectus, including the financial data and related notes, before making an
investment decision. Unless the context indicates otherwise, all references to
"Ameristar," "we," "our," "ours" and "us" refer to Ameristar Casinos, Inc. and
its consolidated subsidiaries and the information presented in this prospectus
gives effect to the transactions described under the headings "The Company" and
"The Transactions."
THE COMPANY
We are a leading multi-jurisdictional gaming company that owns and
operates casinos and related hotel and entertainment facilities. On December 20,
2000, we acquired substantially all the assets of two gaming and entertainment
facilities located in Kansas City, Missouri and St. Charles, Missouri from
subsidiaries of Station Casinos, Inc. (the "Acquisitions"). On January 29, 2001,
in a separate transaction, we sold substantially all the assets of The Reserve
Hotel and Casino, located in Henderson, Nevada, to a subsidiary of Station
Casinos (the "Disposition"). As a result of these transactions, we currently own
and operate six casino properties in five distinct markets. Pro forma for these
transactions, we would have generated $596.9 million of revenue and $142.5
million of pro forma EBITDA (as defined) for the year ended December 31, 2000.
The term "Transactions" refers to the Acquisitions, the Disposition and the
related financing transactions (other than the offering of the old notes).
The following table provides summary data giving effect to the
Transactions for our gaming properties as of, or for the year ended, December
31, 2000:
CASINO # OF
FACILITY YEAR SQUARE # OF TABLE HOTEL PARKING EBITDA
LOCATION TYPE OPENED FOOTAGE SLOTS GAMES ROOMS SPACES ($000S)
-------- ---------- ------ ------- ----- ----- ----- ------- -------
Kansas City, Missouri.................... Dockside 1997 140,000 3,294 161 184 5,000 $ 58,860
Council Bluffs, Iowa(1).................. Riverboat 1996 38,500 1,480 46 444(2) 3,000 32,053
St. Charles, Missouri(3)................. Dockside 1994 45,000 1,875 40 -- 4,000 26,781
Vicksburg, Mississippi................... Dockside 1994 39,000 1,200 50 150 1,700 22,945
Jackpot, Nevada(4)....................... Land-based 1956 28,500 1,028 29 420 1,030 14,215
------- ----- --- ----- ------ --------
Total............................ 291,000 8,877 326 1,198 14,730 $154,854(5)
======= ===== === ===== ====== ========
- -------------------------
(1) Located in the Omaha metropolitan area.
(2) Includes 248 rooms owned and operated by affiliates of Kinseth Hospitality
Corporation located on land owned by us and leased to affiliates of Kinseth.
(3) Located in the St. Louis metropolitan area.
(4) Includes the operations of Cactus Petes Resort Casino and The Horseshu Hotel
& Casino.
(5) Total property-level EBITDA excludes corporate overhead of $12.3 million.
1
7
BUSINESS STRATEGY AND STRENGTHS
Our business strategy is to: (1) emphasize quality dining, lodging,
entertainment and other non-gaming amenities at affordable prices to complement
and enhance our gaming operations, (2) promote our properties as entertainment
destinations, (3) construct and expand facilities appropriate to individual
markets, (4) emphasize courteous and responsive service to develop customer
loyalty and (5) utilize marketing programs to promote customer retention. In
selecting markets, we seek strong demographics and a favorable competitive
environment. Within markets, we look for sites with attractive, prominent
locations and ease of access that will support the size and scope of our
development plans. We believe the following strengths will enable us to
implement these strategies and position us for future growth.
High Quality Properties with Strong Market Share. Our casino properties
generally are leaders in their respective markets in terms of size, location and
quality of amenities and enjoy a strong market share position. Our Kansas City
property was recently named the top tourist attraction in Missouri by a local
Kansas City magazine, Ameristar Council Bluffs is the only riverboat property in
the country with a Four-Diamond rating from the AAA, and Cactus Petes, which is
also a AAA-rated Four-Diamond property, has been named "Best Hotel/Resort" in
rural Nevada by Nevada Magazine for the last two years. We believe the size,
location and quality of amenities of our properties position us to retain or
improve our current market positions and benefit from future market growth. At
Ameristar St. Charles, our current plans call for us to invest approximately
$110 million to complete an expansion of the property in which the former owner
invested approximately $169 million prior to the Acquisitions. We are also
considering an alternative design that would expand the casino, among other
enhancements. Upon the completion of the St. Charles expansion, which is
anticipated in mid-2002, we expect the property to be the premier gaming
facility in the St. Louis market.
Strong Presence in Attractive Gaming Markets. Our properties are
strategically located in attractive gaming markets with significant barriers to
entry for additional competitors. Our four Midwest properties are located near
major population centers with approximately 1.5 million or more people living
within a 100-mile radius of each property and are easily accessible from
well-traveled highways. Furthermore, the markets in which our Midwest properties
are located have historically generated strong year-over-year growth in gaming
revenues. For the three years ended November 30, 2000, gaming revenues for these
markets have grown at a weighted average compounded annual growth rate of 10.7%.
Stable and Growing Cash Flow. We generally emphasize slot play, cater to
local patrons and do not target high-end play. Our pro forma revenue has grown
at a 8.1% compounded annual growth rate between the year ended December 31, 1998
and the year ended December 31, 2000. In addition, pro forma combined EBITDA
margins at our properties before corporate overhead have improved from
approximately 19.8% to approximately 25.9% over the same period, further driving
our cash flow growth.
Geographic Diversity. We own and operate six gaming facilities in five
distinct markets in the United States. This diversity generally limits the
impact on our cash flow of adverse conditions in any one market. Pro forma for
the Transactions, approximately 37.5% of our total property-level EBITDA before
corporate overhead for the year ended December 31, 2000 would have been
generated by Ameristar Kansas City, and no other property would have accounted
for more than 20.9% of such EBITDA.
Experienced Management Team with Proven Track Record. Our senior
management team is an experienced group of industry veterans with an average
tenure in the gaming industry or applicable fields of expertise of more than 20
years. Our management team has developed a track record of success in the
operation and development of hotels and casinos, developing three casino
properties over the last seven years and overseeing a number of expansions at
our properties. In addition, we have retained the key managers of the Missouri
operations, including John Finamore, President of Missouri Operations.
Reinvestment in Our Properties. Our philosophy is to reinvest in our
properties in order to enhance and maintain their appeal to our current patrons
and to attract new customers. To this end, we reinvested approximately $100.1
million from January 1998 through December 2000 in the properties we owned
during such period. During 1999 and 2000, we added approximately 2,900 new
generation multi-coin slot
2
8
machines at the properties we owned during such period. We recently completed
approximately $28.2 million of upgrades to Ameristar Council Bluffs where we
added a third level to our riverboat and constructed a 1,000-space parking
garage. In 2001, we expect to complete an approximately $7.4 million renovation
and enhancement project at Ameristar Council Bluffs and an approximately $10.0
million renovation and enhancement project at Ameristar Vicksburg. In addition,
our current plans call for us to invest approximately $110 million to complete
an expansion at Ameristar St. Charles in mid-2002, which will expand the gaming
area to at least 70,000 square feet and create what we believe will be the
premier gaming facility in the St. Louis market. Furthermore, we are evaluating
the development of a covered parking facility at Ameristar Kansas City. We
expect these planned projects, in addition to the recently completed projects,
to continue to drive revenue growth at our properties and enhance our market
share positions.
THE TRANSACTIONS
Overview
On December 20, 2000, we consummated the acquisitions of two gaming and
entertainment facilities in Kansas City and St. Charles, Missouri from
subsidiaries of Station Casinos for an aggregate purchase price of approximately
$488 million. On January 29, 2001, in a separate transaction, we consummated the
disposition of The Reserve Hotel and Casino to a subsidiary of Station Casinos
for approximately $71.8 million. In connection with the Acquisitions, we
refinanced substantially all of our indebtedness, including the repayment and
termination of our previous $115 million revolving credit facility and the
repurchase through a tender offer of all $100 million of our 10.5% senior
subordinated notes due 2004. Upon consummation of the Disposition, we repaid
borrowings and permanently reduced commitments totalling $50 million under our
new senior credit facilities. As a result, we currently have $475 million in
senior credit facilities that dedicate up to $100 million to finance our
completion of the St. Charles expansion. Additionally, in connection with the
Acquisitions, we entered into a $300 million senior subordinated credit facility
that was refinanced with the proceeds of the offering of the old notes.
Transactions Rationale
The acquisition of Ameristar Kansas City and Ameristar St. Charles
strengthens our position as a leading developer, owner and operator of regional
gaming and entertainment facilities in the United States by allowing us to
continue to pursue our growth strategy and providing us with increased scale,
diversification and internal growth opportunities.
Attractive Properties and Purchase Price. We believe we acquired superior
gaming properties at an attractive price. We believe Ameristar Kansas City is
the premier riverboat gaming facility in the United States, with a Las
Vegas-style, high quality property and amenities that differentiate it from its
competitors. Upon completion of the expansion, we expect Ameristar St. Charles
to rival Ameristar Kansas City in asset quality. In addition, we believe the
Missouri gaming regulatory environment has become more favorable as a result of
recent legislative and regulatory changes, which now allow continuous boarding
and enhanced play, particularly on multi-coin slot machines, through the use of
electronic credits instead of tokens.
The purchase price for the Missouri properties represents an approximately
20% discount to the former owner's capital investment in the properties and
equates to a 5.5 times multiple of the Missouri properties' combined EBITDA for
the twelve months ended September 30, 2000. Our purchase price for Ameristar St.
Charles was $160 million. In addition to the currently operating facility at St.
Charles, the purchased assets include a partially completed expansion project in
which the former owner invested approximately $169 million, including the
purchase of a substantial portion of the construction materials, equipment and
fixtures necessary to complete the expansion.
Significant Growth Potential. Our current plans call for us to invest
approximately $110 million to complete the expansion at Ameristar St. Charles
begun by the former owner. Following the expansion,
3
9
Ameristar St. Charles will have at least 70,000 square feet of gaming space,
2,400 slot machines and 60 table games and will be similar in design to
Ameristar Kansas City. We are also considering an alternative design that would
further expand the casino, among other enhancements. We expect to complete the
expansion in mid-2002, creating what we believe will be the premier gaming
facility in the St. Louis market. We do not expect the property's current
operations to be disrupted during construction. Upon completion of the
expansion, Ameristar St. Charles will have available for future expansion up to
an additional 70,000 square feet of gaming space and approximately 65,000 square
feet of space in the land-based pavilion, each of which will require only
interior build-out for completion. A substantial portion of this future
expansion space has already been constructed by the former owner of the
property, and a substantial portion of the construction materials, equipment and
fixtures for the future casino expansion space has been purchased.
Ameristar Kansas City is the largest gaming facility in its market. As a
result of the property's size, quality and amenities, we believe Ameristar
Kansas City is well positioned to benefit from future market growth without
additional capital investment. In addition, the property is master-planned for
future expansions as warranted.
Similarity of Operations and Expected Ease of Integration. Ameristar
Kansas City and Ameristar St. Charles are similar to our other properties in
terms of quality, customer base and business model. We believe we currently have
the corporate staff and systems in place to successfully integrate the Missouri
properties. The key managers in charge of operations at the Missouri properties
have entered into long-term employment contracts with us and we retained
substantially all of the approximately 3,000 employees at the Missouri
properties. We are re-branding the Missouri properties as Ameristar properties.
We believe we will be able to obtain operating and marketing efficiencies
following integration and will have revenue enhancement opportunities through
cross-marketing our four Midwest properties.
Strategic Sale and Redeployment of Capital. The Disposition has allowed us
to exit the highly competitive Las Vegas locals market and focus on our core
Midwest gaming and entertainment facilities. The sales price of approximately
$71.8 million represented an attractive multiple of EBITDA for the twelve months
ended December 31, 2000 of approximately 11.7 times and provides us with the
opportunity to redeploy our capital into our newly acquired properties and
reduce indebtedness. In addition, the Disposition enables us to reduce our cash
tax burden over the next two years by approximately $18 million through tax
benefits from prior periods.
4
10
SUMMARY UNAUDITED PRO FORMA FINANCIAL AND OTHER DATA
The following summary unaudited pro forma financial and other data gives
effect to the Transactions, as well as the offering of the old notes. We derived
this information from our historical financial statements as well as the
historical financial statements of Station Casinos, Inc. Missouri Operations.
You should read this summary unaudited pro forma financial and other data in
conjunction with "Unaudited Pro Forma Condensed Financial Statements," which
includes the detailed adjustments and assumptions used to prepare this summary
information, as well as the historical financial statements included in this
prospectus.
While this pro forma information is based on adjustments we deem
appropriate and which are factually supported based on currently available data,
the pro forma information may not be indicative of what actual results would
have been, nor does this information purport to present our financial results
for future periods. As used in this prospectus, the term "pro forma EBITDA" has
the meaning set forth in footnote 2 below.
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 2000
-------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS AND FINANCIAL RATIOS)
PRO FORMA STATEMENT OF OPERATIONS DATA:
Net revenues........................................... $ 562,102 $596,919
Impairment loss(1)..................................... 125,732 --
Income (loss) from operations.......................... (55,245) 96,053
Income (loss) before extraordinary item................ (136,092) 15,917
Diluted earnings (loss) per share before extraordinary
item.................................................. (6.68) 0.78
PRO FORMA OTHER FINANCIAL DATA:
Pro Forma EBITDA(2).................................... $ 120,814 $142,559
Capital expenditures................................... 63,797 41,877
Depreciation and amortization.......................... 50,327 43,583
Interest expense, net(3)............................... 72,834 70,597
PRO FORMA CREDIT STATISTICS:
Ratio of total debt (including current maturities) to
pro forma EBITDA(4)................................... 5.1x
Ratio of pro forma EBITDA to interest expense,
net(3)................................................ 2.0x
Ratio of earnings to fixed charges(5).................. 1.3x
AS OF
DECEMBER 31,
2000
------------
PRO FORMA BALANCE SHEET DATA:
Cash and cash equivalents.............................. $ 33,500
Total assets........................................... 817,624
Total debt (including current maturities).............. 729,180
Stockholders' equity................................... 25,309
- -------------------------
See footnotes on following page.
5
11
(1) Impairment loss related to the St. Charles property.
(2) Pro forma EBITDA consists of income from operations plus depreciation,
amortization, preopening costs, impairment losses and costs of Missouri
investigations and fines incurred by the former owner of the Missouri
properties. For purposes of pro forma EBITDA above, approximately $1.9
million of development costs associated with our unsuccessful bid for a
gaming license in Lemay, Missouri are excluded from the EBITDA calculation
for the year ended December 31, 2000. Pro forma 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. Pro forma 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 our operating performance, or as
an alternative to cash flows from operating activities (as determined in
accordance with generally accepted accounting principles) as a measure of
liquidity. We have significant uses of cash flows, including capital
expenditures and debt principal repayments that are not reflected in pro
forma EBITDA. It should also be noted that not all gaming companies that
report EBITDA information calculate EBITDA in the same manner as us.
(3) Net of interest income and amortization of debt issuance costs and original
issue discount.
(4) The ratio of total debt to EBITDA for purposes of the indenture that governs
the old notes and the exchange notes was 4.8x at December 31, 2000.
(5) For purposes of computing the ratio of earnings to fixed charges, earnings
consists of income from continuing operations before income taxes and fixed
charges, excluding capitalized interest. Fixed charges consists of interest
expensed and capitalized, amortization of debt issuance costs and the
interest component of rent expense.
6
12
SUMMARY HISTORICAL FINANCIAL DATA OF AMERISTAR CASINOS, INC.
We have derived the following summary historical financial data for each
of the three years ended December 31, 2000 from our audited consolidated
financial statements. The summary data below should be read in conjunction with
"Selected Financial and Other Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the historical financial
statements included in this prospectus.
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1999 2000
---------- ---------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
AND FINANCIAL RATIOS)
STATEMENT OF OPERATIONS DATA:
Net revenues....................................... $264,682 $300,286 $ 342,006
Impairment loss(1)................................. -- -- 57,153
Income (loss) from operations...................... 3,338 25,545 (22,631)
Income (loss) before extraordinary item............ (12,715) 205 (33,747)
Net income (loss).................................. (12,715) 205 (40,307)
Diluted earnings (loss) per share.................. (0.62) 0.01 (1.98)
OTHER FINANCIAL DATA:
EBITDA(2).......................................... $ 38,140 $ 50,005 $ 62,306
Capital expenditures............................... 32,312 57,590 33,357
Depreciation and amortization...................... 24,191 24,460 27,784
Interest expense................................... 22,699 24,449 28,316
Ratio of earnings to fixed charges................. N/A(3) 1.00x N/A(3)
- -------------------------
(1) Impairment loss related to The Reserve for the year ended December 31, 2000.
(2) EBITDA consists of income from operations plus depreciation, amortization,
preopening costs and impairment losses. 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 our operating performance, or as an alternative to cash
flows from operating activities (as determined in accordance with generally
accepted accounting principles) as a measure of liquidity. We have
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 calculate
EBITDA in the same manner as us.
(3) Earnings were insufficient to cover fixed charges by $20.5 million for the
year ended December 31, 1998, including preopening costs of $10.6 million,
and $52.6 million for the year ended December 31, 2000, including an
impairment loss of $57.2 million.
7
13
SUMMARY HISTORICAL FINANCIAL DATA OF STATION CASINOS, INC. MISSOURI OPERATIONS
We have derived the following summary historical financial data for
Station Casinos, Inc. Missouri Operations for the fiscal year ended March 31,
1998, the nine months ended December 31, 1998 and the fiscal year ended December
31, 1999 from the audited combined financial statements of Station Casinos, Inc.
Missouri Operations. The summary data below should be read in conjunction with
"Selected Financial and Other Data," and the historical financial statements
included in this prospectus.
FOR THE FISCAL FOR THE NINE FOR THE
YEAR ENDED MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31, DECEMBER 31,
1998 1998 1999
-------------- ------------ ------------
(IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net revenues..................................... $272,682 $219,573 $314,648
Impairment loss(1)............................... -- 24,807 125,732
Income (loss) from operations.................... 7,893 (5,599) (84,719)
Net income (loss)................................ (37,458) (43,513) (135,411)
OTHER FINANCIAL DATA:
EBITDA(2)........................................ $ 38,798 $ 42,620 $ 70,118
Capital expenditures............................. 58,044 9,508 6,207
Depreciation and amortization.................... 30,772 23,412 29,105
Interest expense, net............................ 56,059 40,740 47,474
- -------------------------
(1) Impairment losses related to the St. Charles property.
(2) EBITDA consists of income from operations plus depreciation, amortization,
preopening costs, impairment losses and costs of Missouri investigations and
fines incurred by the former owner of the Missouri properties.
8
14
SUMMARY OF THE EXCHANGE OFFER
The following is a summary of the principal terms of the exchange offer. A
more detailed description is contained in the section "The Exchange Offer." The
term "old notes" refers to our outstanding 10 3/4 Senior Subordinated Notes due
2009, and the term "exchange notes" refers to our 10 3/4 Senior Subordinated
Exchange Notes due 2009. The term "indenture" refers to the indenture that
governs both the old notes and the exchange notes.
The Exchange Offer......... We are offering to exchange $1,000 principal amount
of our exchange notes, which have been registered
under the Securities Act of 1933, as amended, for
each $1,000 principal amount of our unregistered
old notes. We issued the old notes on February 2,
2001 in a private offering. The terms of the
exchange notes are substantially identical to the
terms of the old notes.
In order to exchange your old notes, you must
properly tender them before the expiration of the
exchange offer. All old notes that are validly
tendered and not validly withdrawn will be
exchanged. We will issue the exchange notes on or
promptly after the expiration of the exchange
offer.
You may tender your old notes for exchange notes in
whole or in part in integral multiples of $1,000
principal amount.
Registration Rights
Agreement.................. We sold the old notes on February 2, 2001 to a
group of initial purchasers. Simultaneously with
that sale, we entered into a registration rights
agreement relating to the old notes with the
initial purchasers, which requires us to conduct
the exchange offer.
You have the right under the registration rights
agreement to exchange your old notes for exchange
notes with substantially identical terms. This
exchange offer is intended to satisfy those rights.
After this exchange offer is complete, you will no
longer be entitled to any exchange or registration
rights with respect to your old notes.
For a description of the procedures for tendering
your old notes, see "The Exchange
Offer -- Procedures for Tendering Old Notes."
Expiration Date............ 5:00 p.m., New York City time, , 2001,
unless the exchange offer is extended, in which
case the expiration date will be the latest date
and time to which the exchange offer is extended.
See "The Exchange Offer -- Terms of the Exchange
Offer."
Consequences of Failure to
Exchange Your Old
Notes.................... If you do not exchange your old notes for exchange
notes in the exchange offer, you will still have
the restrictions on transfer provided in the old
notes and in the indenture. In general, the old
notes may not be offered or sold unless registered
or exempt from registration under the Securities
Act, or in a transaction not subject to the
Securities Act and applicable state securities
laws. We do not plan to register the old notes
under the Securities Act.
Conditions to the Exchange
Offer...................... The exchange offer is subject to customary
conditions described under "The Exchange
Offer -- Conditions to the Offer," some of which we
may waive in our sole discretion. The exchange
offer is not conditioned upon any minimum principal
amount of old notes being
9
15
tendered. We reserve the right in our sole and
absolute discretion, subject to applicable law, at
any time and from time to time:
- to delay the acceptance of the old notes for
exchange;
- to terminate the exchange offer if one or
more specific conditions have not been
satisfied;
- to extend the expiration date of the exchange
offer and retain all tendered old notes,
subject, however, to the right of the
tendering holders to withdraw their tendered
old notes; or
- to waive any condition or otherwise amend the
terms of the exchange offer in any respect.
See "The Exchange Offer -- Terms of the Exchange
Offer."
Procedures for Tendering
Old Notes.................. If you wish to tender your old notes for exchange
notes, you must:
- complete and sign a letter of transmittal in
accordance with the instructions contained in
the letter of transmittal; and
- forward the completed letter of transmittal
by mail, facsimile or hand delivery, together
with any other required documents, to the
exchange agent, either with the old notes to
be tendered or in compliance with the
specified procedures for guaranteed delivery
of such old notes.
Specified brokers, dealers, commercial banks, trust
companies and other nominees may also effect
tenders by book-entry transfer.
Letters of transmittal and certificates
representing old notes should not be sent to us.
Those documents should be sent only to the exchange
agent. The address, and telephone and facsimile
numbers, of the exchange agent are set forth in
"The Exchange Offer -- Exchange Agent" and in the
letter of transmittal.
Special Procedures for
Beneficial Owners.......... If your old notes are registered in the name of a
broker, dealer, commercial bank, trust company or
other nominee, we urge you to contact your nominee
holder promptly if you wish to tender such old
notes. See "The Exchange Offer -- Procedures for
Tendering Old Notes."
Withdrawal of Tenders...... You may withdraw the tender of your old notes at
any time on or prior to the expiration date by
delivering a written notice of withdrawal to the
exchange agent in conformity with the procedures
discussed under "The Exchange Offer -- Withdrawal
of Tenders."
Acceptance of Old Notes and
Delivery of Exchange
Notes.................... Upon consummation of the exchange offer, we will
accept any and all old notes that are properly
tendered in the exchange offer and not withdrawn
prior to 5:00 p.m., New York City time, on the
expiration date. The exchange notes issued pursuant
to the exchange offer will be delivered promptly
after acceptance of the tendered old notes. See
"The Exchange Offer -- Terms of the Exchange
Offer."
10
16
Resales of Exchange
Notes...................... We believe that you will be able to offer for
resale, resell or otherwise transfer exchange notes
issued in the exchange offer without compliance
with the registration and prospectus delivery
provisions of the federal securities laws, provided
that:
- you are acquiring the exchange notes in the
ordinary course of your business;
- you are not participating, and have no
arrangement or understanding with any person
to participate, in a distribution of the
exchange notes; and
- you are not an "affiliate" of Ameristar
Casinos, Inc., as the term is defined for the
purposes of Rule 144A under the Securities
Act.
Our belief is based on interpretations by the staff
of the Securities and Exchange Commission, as set
forth in no-action letters issued to third parties
unrelated to us. The staff of the Securities and
Exchange Commission has not considered this
exchange offer in the context of a no-action
letter, and we cannot assure you that the staff of
the Securities and Exchange Commission would make a
similar determination with respect to this exchange
offer.
If our belief is not accurate and you transfer an
exchange note without delivering a prospectus
meeting the requirements of the federal securities
laws or without an exemption from these laws, you
may incur liability under the federal securities
laws. We do not and will not assume, or indemnify
you against, this liability.
Each broker-dealer that receives exchange notes for
its own account in exchange for old notes that such
broker-dealer acquired as a result of market-making
or other trading activities must agree to deliver a
prospectus meeting the requirements of the federal
securities laws in connection with any resale of
the exchange notes. See "The Exchange
Offer -- Resales of the Exchange Notes."
Exchange Agent............. The exchange agent for the exchange offer is U.S.
Bank Trust National Association. The address,
telephone number and facsimile number of the
exchange agent are provided in "The Exchange
Offer -- Exchange Agent" and in the letter of
transmittal.
Use of Proceeds............ We will not receive any cash proceeds from the
issuance of the exchange notes. See "Use of
Proceeds."
Certain Federal Income Tax
Consequences............. Your acceptance of an exchange offer and the
related exchange of your old notes for exchange
notes will not be a taxable exchange for United
States federal income tax purposes. You should not
recognize any taxable gain or loss or any interest
income as a result of the exchange.
11
17
SUMMARY OF THE TERMS OF THE EXCHANGE NOTES
The following is a summary of the principal terms of the exchange notes. A
more detailed description is contained in the section "Description of the
Exchange Notes."
Issuer..................... Ameristar Casinos, Inc.
Securities Offered......... $380,000,000 principal amount of 10 3/4% Senior
Subordinated Exchange Notes due 2009.
Maturity................... February 15, 2009.
Interest Payment Dates..... Each February 15 and August 15, beginning on August
15, 2001. Interest will accrue from and including
February 2, 2001 or the last payment date upon
which interest on the old notes was paid.
Guarantees................. All of our subsidiaries have guaranteed the old
notes and on the issue date of the exchange notes
will guarantee the exchange notes. If we create or
acquire a new subsidiary, it will guarantee the
exchange notes unless we designate the subsidiary
as an "unrestricted subsidiary" under the indenture
or the subsidiary does not have significant assets.
Ranking.................... The exchange notes will:
- be unsecured senior subordinated obligations
of Ameristar; and
- rank junior to all of our existing and future
senior debt, including borrowings under our
senior credit facilities.
The guarantees by our subsidiaries will:
- be unsecured senior subordinated obligations
of each of our subsidiaries that guarantee
the exchange notes; and
- rank junior to all existing and future senior
debt of those subsidiaries, including
guarantees of borrowings under our senior
credit facilities.
As of December 31, 2000, pro forma for the
Disposition, the offering of the old notes and the
use of proceeds therefrom, we and our subsidiaries
would have had $354.2 million of senior debt with
approximately $130.7 million of unused availability
under our senior credit facilities.
Optional Redemption........ On or after February 15, 2006, we may redeem some
or all of the exchange notes at the redemption
prices listed in the "Redemption -- Optional
Redemption" subsection of "Description of the
Exchange Notes" plus accrued interest.
Optional Redemption After
Public Equity
Offerings................ At any time (which may be more than once) before
February 2, 2004, we can choose to redeem up to 35%
of the aggregate principal amount of the exchange
notes and the old notes with money that we raise in
one or more public equity offerings, as long as:
- we pay 110.75% of the face amount of the
exchange notes and the old notes, plus
interest,
- we redeem the exchange notes and the old
notes within 90 days of completing the public
equity offering, and
12
18
- at least 65% of the aggregate principal
amount of exchange notes and old notes
remains outstanding afterwards.
Redemption Based Upon
Gaming Laws................ The exchange notes are subject to redemption
requirements imposed by gaming laws and regulations
of gaming authorities in jurisdictions in which we
conduct gaming operations. See the "Redemption --
Redemption Based Upon Gaming Laws" subsection of
"Description of the Exchange Notes."
Change of Control Offer.... If a specific kind of change in control of
Ameristar occurs, we must give holders of the
exchange notes the opportunity to sell us their
exchange notes at 101% of their face amount, plus
accrued interest.
Asset Sale Proceeds........ If we or our subsidiaries engage in asset sales, we
generally must invest the net cash proceeds from
such sales in our business within a period of time,
prepay senior debt or make an offer to purchase a
principal amount of the exchange notes and the old
notes equal to the remaining excess net cash
proceeds. The purchase price of the exchange notes
and the old notes will be 100% of their principal
amount, plus accrued interest.
Certain Indenture
Provisions The indenture governing the exchange notes and the
old notes contains covenants limiting our (and most
or all of our subsidiaries') ability to:
- incur additional debt;
- pay dividends or make distributions on our
capital stock or repurchase our capital
stock;
- issue stock of subsidiaries;
- make certain investments,
- create liens on our assets to secure debt;
- enter into transactions with affiliates;
- merge or consolidate with another company;
and
- transfer and sell assets.
These covenants are subject to a number of
important limitations and exceptions.
Risk Factors............... See "Risk Factors" for a description of certain of
the risks you should consider before exchanging any
old notes for exchange notes.
13
19
RISK FACTORS
Before you participate in the exchange offer, you should carefully
consider the following factors in addition to the other information contained in
this prospectus and incorporated by reference in this prospectus.
RISKS RELATED TO THE EXCHANGE NOTES
THERE ARE CONSEQUENCES ASSOCIATED WITH FAILING TO EXCHANGE THE OLD NOTES FOR THE
EXCHANGE NOTES.
If you do not exchange your old notes for exchange notes in the exchange
offer, you will still have the restrictions on transfer provided in the old
notes and the indenture. In general, the old notes may not be offered or sold
unless registered or exempt from registration under the Securities Act, or in a
transaction not subject to the Securities Act and applicable state securities
laws. We do not plan to register the old notes under the Securities Act.
LEVERAGE MAY IMPAIR OUR FINANCIAL CONDITION AND WE MAY INCUR SIGNIFICANT
ADDITIONAL DEBT.
We have a substantial amount of debt. As of December 31, 2000, after
giving effect to the offering of the old notes (and the application of the
proceeds therefrom) and the Disposition, as if such transactions occurred on
December 31, 2000, our total consolidated debt would have been $729.2 million.
See "Capitalization" for additional information.
Our substantial debt could have important consequences for the holders of
the exchange notes, including:
- making it more difficult for us to satisfy our obligations with
respect to the exchange notes;
- increasing our vulnerability to general adverse economic and
industry conditions;
- limiting our ability to obtain additional financing to fund future
working capital, capital expenditures, acquisitions and other
general corporate requirements;
- requiring a substantial portion of our cash flow from operations for
the payment of interest on our debt and reducing our ability to use
our cash flow to fund working capital, capital expenditures,
acquisitions and general corporate requirements;
- limiting our flexibility in planning for, or reacting to, changes in
our business and the industry in which we operate; and
- placing us at a competitive disadvantage to other less leveraged
competitors.
Subject to specified limitations, the indenture permits us and our
subsidiaries to incur substantial additional debt. In addition, as of December
31, 2000, pro forma for the Disposition, the offering of the old notes and the
use of proceeds therefrom, our senior credit facilities would have permitted us
and our subsidiaries to borrow up to an additional $130.7 million and all of
those borrowings would be senior to the exchange notes. If new debt is added to
our and our subsidiaries' current debt levels, the related risks that we and
they now face could intensify. See "Description of Existing Indebtedness" for
additional information.
SERVICING OUR DEBT WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH, AND OUR ABILITY TO
GENERATE SUFFICIENT CASH DEPENDS ON MANY FACTORS, SOME OF WHICH ARE BEYOND OUR
CONTROL.
Our ability to make payments on and refinance our debt and to fund planned
capital expenditures depends on our ability to generate cash flow in the future.
To some extent, this is subject to general economic, financial, competitive,
legislative and regulatory factors and other factors that are beyond our
control. In addition, the ability to borrow funds under our senior credit
facilities in the future will depend on our meeting the financial covenants in
the agreements, including a fixed charge coverage test and
14
20
maximum senior and total leverage ratio tests. Under our senior credit
facilities, the $75 million revolving term facility and $25 million of the $75
million revolving credit facility are dedicated to finance the completion of the
Ameristar St. Charles expansion. After giving effect to the offering of the old
notes, the application of the proceeds therefrom and the Disposition, as if such
transactions occurred on December 31, 2000, approximately $30.7 million would
have been available for general corporate purposes under the revolving credit
facility. We cannot assure you that our business will generate cash flow from
operations or that future borrowings will be available to us under our senior
credit facilities in an amount sufficient to enable us to pay our debt or to
fund other liquidity needs. As a result, we may need to refinance all or a
portion of our debt on or before maturity. Our senior credit facilities mature
in stages between 2005 and 2007. We cannot assure you that we will be able to
refinance any of our debt on favorable terms, if at all. Any inability to
generate sufficient cash flow or refinance our debt on favorable terms could
have a material adverse effect on our financial condition.
COVENANT RESTRICTIONS UNDER OUR SENIOR CREDIT FACILITIES AND THE INDENTURE MAY
LIMIT OUR ABILITY TO OPERATE OUR BUSINESS.
Our senior credit facilities and the indenture governing the exchange
notes will contain, and certain of our other agreements regarding debt will
contain, among other things, covenants that may restrict our and the guarantors'
ability to finance future operations or capital needs or to engage in other
business activities. Our senior credit facilities and the indenture restrict,
among other things, our ability and the ability of the guarantors to: borrow
money; pay dividends or make distributions; purchase or redeem stock; make
investments and extend credit; engage in transactions with affiliates; engage in
sale-leaseback transactions; consummate certain asset sales; effect a
consolidation or merger or sell, transfer, lease, or otherwise dispose of all or
substantially all of our assets; and create liens on our assets.
In addition, our senior credit facilities will require us to maintain
specified financial ratios and satisfy certain financial condition tests which
may require that we take action to reduce our debt or to act in a manner
contrary to our business objectives. Events beyond our control, including
changes in general economic and business conditions, may affect our ability to
meet those financial ratios and financial condition tests. We cannot assure you
that we will meet those tests or that the lenders will waive any failure to meet
those tests. A breach of any of these covenants would result in a default under
our senior credit facilities and the indenture. If an event of default under our
senior credit facilities occurs, the lenders could elect to declare all amounts
outstanding thereunder, together with accrued interest, to be immediately due
and payable. See the "Description of Existing Indebtedness" and "Description of
the Exchange Notes" for additional information.
YOUR RIGHT TO RECEIVE PAYMENT ON THE EXCHANGE NOTES AND THE GUARANTEES IS JUNIOR
TO ALL OF OUR AND THE GUARANTORS' SENIOR DEBT.
The exchange notes will be general unsecured obligations, junior in right
of payment to all existing and future senior debt of Ameristar and each
guarantor, respectively, including obligations under our senior credit
facilities. The exchange notes will not be secured by any of our or the
guarantors' assets, and as such will be effectively subordinated to any secured
debt that we or the guarantors may have now or may incur in the future to the
extent of the value of the assets securing that debt.
In the event that Ameristar or a guarantor is declared bankrupt, becomes
insolvent or is liquidated or reorganized, any debt that ranks ahead of the
exchange notes and the guarantees will be entitled to be paid in full from our
assets or the assets of the guarantor, as applicable, before any payment may be
made with respect to the exchange notes or the affected guarantees. In any of
the foregoing events, we cannot assure you that we would have sufficient assets
to pay amounts due on the exchange notes. As a result, holders of the exchange
notes may receive less, proportionally, than the holders of debt senior to the
exchange notes and the guarantees. The subordination provisions of the indenture
will also provide that we can make no payment to you during the continuance of
payment defaults on our senior debt, and payments to you may be suspended for a
period of up to 180 days if a nonpayment default exists under our senior debt.
See "Description of the Exchange Notes -- Subordination" for additional
information.
15
21
At December 31, 2000, after giving effect to the offering of the old notes
(and the application of the proceeds therefrom) and the exchange offer and the
Disposition, as if such transactions occurred on December 31, 2000, the exchange
notes and the guarantees would have ranked junior to $354.2 million of senior
debt of Ameristar and our subsidiaries and an additional $130.7 million of
unused availability would have been available for borrowing under the senior
credit facilities. In addition, the indenture and our senior credit facilities
permit, subject to specified limitations, the incurrence of additional debt,
some or all of which may be senior debt. See "Description of the Exchange
Notes -- Certain Covenants" and "Description of Existing Indebtedness" for
additional information.
CRAIG H. NEILSEN OWNS A MAJORITY OF OUR COMMON STOCK AND CONTROLS OUR AFFAIRS.
Mr. Neilsen is our President, Chief Executive Officer and Chairman of our
Board of Directors and owns approximately 87% of our outstanding common stock.
Mr. Neilsen has the ability to control our operations and policies.
Circumstances may occur in which the interests of Mr. Neilsen, as the
controlling stockholder, could be in conflict with your interests as a
noteholder. In addition, Mr. Neilsen may have an interest in pursuing
acquisitions, divestitures or other transactions that, in his judgment, could
enhance his equity investment, even though such transactions might involve risks
to you.
THE GUARANTEES MAY NOT BE ENFORCEABLE BECAUSE OF FRAUDULENT CONVEYANCE LAWS.
The incurrence of the guarantees by the guarantors may be subject to
review under U.S. federal bankruptcy law or relevant state fraudulent conveyance
laws if a bankruptcy case or lawsuit is commenced by or on behalf of the
guarantors' unpaid creditors. Under these laws, if in such a case or lawsuit a
court were to find that, at the time such guarantor incurred a guarantee of the
exchange notes, such guarantor:
- incurred the guarantee of the exchange notes with the intent of
hindering, delaying or defrauding current or future creditors; or
- received less than reasonably equivalent value or fair consideration
for incurring the guarantee of the exchange notes and such
guarantor:
- was insolvent or was rendered insolvent;
- was engaged, or about to engage, in a business or transaction
for which its remaining assets constituted unreasonably small
capital to carry on its business; or
- intended to incur, or believed that it would incur, debts beyond
its ability to pay as such debts matured (as all of the
foregoing terms are defined in or interpreted under the relevant
fraudulent transfer or conveyance statutes);
then such court could avoid the guarantee of such guarantor or subordinate the
amounts owing under such guarantee to such guarantor's presently existing or
future debt or take other actions detrimental to you.
It may be asserted that the guarantors incurred their guarantees for the
benefit of Ameristar and they incurred the obligations under the guarantees for
less than reasonably equivalent value or fair consideration.
The measure of insolvency for purposes of the foregoing considerations
will vary depending upon the law of the jurisdiction that is being applied in
any such proceeding. Generally, a company would be considered insolvent if, at
the time it incurred the debt or issued the guarantee, either:
- the sum of its debts (including contingent liabilities) is greater
than its assets, at fair valuation, or
- the present fair saleable value of its assets is less than the
amount required to pay the probable liability on its total existing
debts and liabilities (including contingent liabilities) as they
become absolute and matured.
16
22
If a guarantee is avoided as a fraudulent conveyance or found to be
unenforceable for any other reason, you will not have a claim against that
obligor and will only be a creditor of Ameristar or any guarantor whose
obligation was not set aside or found to be unenforceable.
WE CANNOT ASSURE YOU THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE EXCHANGE
NOTES.
There is no established trading market for the exchange notes and we
cannot assure you that a market for the exchange notes will develop in the
future. If such a market were to develop, the exchange notes could trade at
prices that are higher or lower that the initial offering prices depending on
many factors, including the number of holders of the exchange notes, the overall
market for similar securities, our financial performance and prospects and
prospects for companies in our industry generally. The initial purchasers of the
old notes have informed us that they intend to make a market in the exchange
notes. However, the initial purchasers are not obligated to do so, and may cease
market-making activities at any time without notice. As a result, you cannot be
sure that an active trading market will develop for the exchange notes. We do
not intend to apply (and are not obligated to apply) for listing of the exchange
notes on any securities exchange or any automated quotation system.
YOU MUST COMPLY WITH THE PROCEDURES FOR THE EXCHANGE OFFER IN ORDER TO RECEIVE
THE EXCHANGE NOTES.
You are responsible for complying with all exchange offer procedures. You
will only receive exchange notes in exchange for your old notes if, prior to the
expiration date, you deliver the following to the exchange agent:
- certificate for the old notes or a book-entry confirmation of a
book-entry transfer of the old notes into the exchange agent's
account with the Depository Trust Company "DTC");
- the letter of transmittal (or facsimile thereof), properly completed
and duly executed by you, together with any required signature
guarantees; and
- and other documents required by the letter of transmittal.
You should allow sufficient time to ensure that the exchange agent
receives all required documents before the expiration date. Neither we nor the
exchange agent has any duty to inform you of defects or irregularities with
respect to the tender of your old notes for exchange notes. See "The Exchange
Offer."
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE
OF CONTROL OFFER REQUIRED BY THE INDENTURE.
Upon a change of control, we are required to offer to repurchase all
outstanding old notes and exchange notes at 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of repurchase.
The source of funds for any such purchase of notes will be our available
cash or cash generated from our subsidiaries' operations or other sources,
including borrowing, sales of assets or sales of equity. We cannot assure you
that sufficient funds will be available at the time of any change of control to
make any required repurchases of notes tendered. In addition, the terms of our
senior credit facilities limit our ability to purchase your notes in those
circumstances. Any of our future debt agreements may contain similar
restrictions and provisions. If the holders of the old notes and the exchange
notes exercise their right to require us to repurchase all of such notes upon a
change of control, the financial effect of this repurchase could cause a default
under our other debt, even if the change in control itself would not cause a
default. Accordingly, it is possible that we will not have sufficient funds at
the time of the change of control to make the required repurchase of old notes
and exchange notes or that restrictions in our senior credit facilities will not
allow such repurchases. See "Description of the Exchange Notes -- Change of
Control" and "Description of Existing Indebtedness" for additional information.
17
23
WE MAY REQUIRE YOU TO DISPOSE OF YOUR EXCHANGE NOTES OR REDEEM YOUR EXCHANGE
NOTES IF REQUIRED BY APPLICABLE GAMING REGULATIONS.
Gaming authorities in any jurisdiction in which we or any of our
subsidiaries are or may become subject have the power to investigate any of our
debt security holders, including holders of the exchange notes. These gaming
authorities may, in their discretion, require a holder of any of our debt
securities to file applications, be investigated and be found suitable to own
our debt securities, and the costs of the investigation of such finding of
suitability will be the responsibility of such holder. Any person who fails or
refuses to apply for a finding of suitability or a license within 30 days after
being ordered to do so by such gaming authorities may be found unsuitable. Under
certain circumstances, we have the right, at our option, to cause a holder to
dispose of its exchange notes or to redeem its exchange notes in order to comply
with gaming laws to which we are subject. See "Government Regulations" and the
"Redemption Based Upon Gaming Laws" subsection of "Description of the Exchange
Notes -- Redemption" for additional information.
RISKS RELATED TO OUR BUSINESS
IF WE CANNOT COMPETE SUCCESSFULLY WITH OTHER CASINO HOTEL OPERATORS, OUR FUTURE
OPERATIONS MAY BE MATERIALLY ADVERSELY AFFECTED.
Some of our existing competitors have greater name recognition and
financial and marketing resources than we have. Other companies with greater
name recognition and financial and marketing resources than we have could enter
our current markets and become competitors in the future. The entry into our
current markets of additional competitors could materially adversely affect our
business, financial condition and results of operations, particularly if a
competitor were to obtain a license to operate a gaming facility in a superior
location.
In addition, our operating properties are located in jurisdictions that
restrict gaming to certain areas and/or are adjacent to states that prohibit or
restrict gaming operations. While these restrictions and prohibitions provide
substantial benefits to our business and our ability to attract and retain
customers, the legalization or expanded legalization or authorization of gaming
within a market area of one of these properties could have a material adverse
effect on our business, financial condition and results of operations.
MANY FACTORS, SOME OF WHICH ARE BEYOND OUR CONTROL, COULD ADVERSELY AFFECT OUR
ABILITY TO SUCCESSFULLY COMPLETE OUR CONSTRUCTION AND DEVELOPMENT PROJECTS AS
PLANNED.
General Construction Risks -- Delays and Cost Overruns. Construction and
expansion projects for our properties entail significant risks. These risks
include:
- shortages of materials (including slot machines or other gaming
equipment);
- shortages of skilled labor or work stoppages;
- unforeseen construction scheduling, engineering, environmental or
geological problems;
- weather interference, floods, fires or other casualty losses; and
- unanticipated cost increases.
Our anticipated costs and construction periods for construction projects
are based upon budgets, conceptual design documents and construction schedule
estimates prepared by us in consultation with our architects and contractors.
The cost of any construction project undertaken by us may vary significantly
from initial current expectations, and we may have a limited amount of capital
resources to fund cost overruns on any project. If we cannot finance cost
overruns on a timely basis, the completion of one or more projects may be
delayed until adequate cash flow from operations or other financing is
available. The completion date of any of our construction projects could also
differ significantly from initial expectations for construction-related or other
reasons. We cannot assure you that any project will be completed, if at all, on
time or within established budgets. Significant delays or cost overruns on our
construction projects could have a material adverse effect on our business,
financial condition and results of operations.
18
24
We employ "fast-track" design and construction methods in some of our
construction and development projects. This involves the design of future stages
of construction while earlier stages of construction are underway. Although we
believe that the use of fast-track design and construction methods can reduce
the overall construction time, these methods may not always result in such
reductions, may involve additional construction costs than otherwise would be
incurred and may increase the risk of disputes with contractors.
Construction Dependent upon Available Financing and Cash Flows from
Operations. The availability of funds under our senior credit facilities at any
time will be dependent upon, among other factors, the amount of our consolidated
EBITDA (as defined in the credit agreement) during the preceding four full
fiscal quarters. Our future operating performance will be subject to financial,
economic, business, competitive, regulatory and other factors, many of which are
beyond our control. Accordingly, we cannot assure you that our future
consolidated EBITDA and the resulting availability of operating cash flow or
borrowing capacity will be sufficient to allow us to undertake or complete
future construction projects.
As a result of operating risks, including those described in this section,
and other risks associated with a new venture, we cannot assure you that, once
completed, any development project will increase our operating profits or
operating cash flow.
THE DEVELOPMENT AND CONSTRUCTION OF THE ST. CHARLES EXPANSION INVOLVES MANY
UNCERTAINTIES THAT COULD AFFECT THE FINAL COST AND TIME REQUIRED TO COMPLETE THE
PROJECT.
We have begun pre-construction work for the St. Charles and expect to
commence construction in the second quarter of 2001. Construction involves
significant risks that could affect the final cost and time of completion of the
project, including the following:
- greater than expected deterioration of the expansion site, exterior
structure or electrical systems;
- shortages of materials or skilled labor;
- delays in obtaining necessary permits from federal, state and local
governmental authorities;
- work stoppages, weather interference, fire, floods or other natural
disasters; and
- unanticipated cost increases.
Our anticipated costs and construction periods are based upon budgets,
conceptual design documents and construction schedule estimates prepared by us
in consultation with architects and a general contractor and assume that we will
be able to use most of the construction materials that were purchased in 1996
and 1997 by the former owner. We cannot be sure that the construction materials
that we acquired as part of the Acquisitions will be available for use in the
expansion project. If we are not able to use a significant portion of the
construction materials that we acquired the costs of the expansion could
increase materially.
Our estimated cost of completing the St. Charles expansion is based
primarily on the estimates provided in 1996 by the general contractor and
subcontractors to the former owner of the St. Charles property, adjusted to
reflect inflation experienced on construction costs in the St. Louis market from
1996 to 2000. We cannot be sure that our construction costs will not be higher
than the adjusted estimates and we have not received updated firm estimates for
the project. Furthermore, the existing plans for the St. Charles expansion
project may change, and the scope of the project may vary significantly from
what is currently anticipated. We also cannot be sure that we will not exceed
the budgeted costs of the expansion project or that the project will commence
operations within the contemplated time frame, if at all. Budget overruns and
delays with respect to the project could have a material adverse impact on our
results of operations, particularly in light of the requirement of the Missouri
Gaming Commission that we complete construction of the St. Charles expansion
prior to January 1, 2004 or face potential loss of our licenses to operate
Ameristar St. Charles.
19
25
Our senior credit facilities provide $100 million of borrowing capacity
specifically for the St. Charles expansion. We anticipate that the costs of
completing the expansion project as currently contemplated will be approximately
$110 million. Accordingly, we will be required to finance a portion of the
expansion project with cash from operations. We cannot be sure that our
financial performance will be sufficient to fund the expansion project. This
risk will become more significant if we have substantial cost overruns because
of greater than expected deterioration, budget overruns or changes in the
project. Under the terms of the indenture and our senior credit facilities, it
is not likely that we will be able to incur additional debt to fund the
expansion project if cash from operations and available borrowings under our
senior credit facilities are not sufficient to fund the construction.
WE MAY EXPERIENCE DIFFICULTIES INTEGRATING THE MISSOURI PROPERTIES INTO OUR
OPERATIONS.
We cannot assure you that we will be able to integrate the
recently-acquired Missouri properties into our existing operations without
encountering difficulties. These difficulties could include integrating
personnel with disparate business backgrounds and business strategies,
integrating different technology systems and managing relationships with other
business customers. Furthermore, the integration of the Missouri properties may
temporarily distract management from our day-to-day business. We may also lose
key personnel from the Missouri properties because of their sale to us. For
these reasons, we cannot assure you that we will be able to successfully
integrate the Missouri properties and our inability to do so could have a
material and adverse effect on our operations.
IF OUR KEY PERSONNEL LEAVES US, OUR BUSINESS WILL BE SIGNIFICANTLY ADVERSELY
AFFECTED.
We depend on the continued performance of Craig H. Neilsen, Ameristar's
President and Chief Executive Officer, and his management team. The loss of the
services of Mr. Neilsen or any of our other executive officers could have a
material adverse effect on our business. In addition, our ability to retain
management members hired in connection with the acquisition of the Missouri
properties will significantly impact our ability to successfully operate those
properties.
THE MARKET FOR QUALIFIED PROPERTY AND CORPORATE MANAGEMENT PERSONNEL IS SUBJECT
TO INTENSE COMPETITION.
We have experienced and expect to continue to experience strong
competition in hiring and retaining qualified property and corporate management
personnel. Recruiting and retaining qualified management personnel is
particularly difficult at Ameristar Vicksburg and the Jackpot Properties due to
local market conditions. If we are unable to successfully recruit and retain
qualified management personnel at our properties and at our corporate level, our
results of operations could be materially adversely affected.
RESTRICTIONS AND LIMITATIONS IMPOSED BY GAMING REGULATORY AUTHORITIES ADVERSELY
AFFECT OUR BUSINESS.
The ownership and operation of casino gaming facilities are subject to
extensive state and local regulation. The States of Iowa, Missouri, Mississippi
and Nevada and the applicable local authorities require various licenses,
findings of suitability, registrations, permits and approvals to be held by us
and our subsidiaries. The Iowa Racing and Gaming Commission, the Missouri Gaming
Commission, the Mississippi Gaming Commission and the Nevada Gaming Commission
may, among other things, limit, condition, suspend, revoke or not renew a
license or approval to own the stock of any of our Iowa, Missouri, Mississippi
or Nevada subsidiaries, respectively, for any cause deemed reasonable by such
licensing authority. Our gaming license in Mississippi must be renewed every
three years and our gaming license in Iowa must be renewed or continued every
year. If we violate gaming laws or regulations, substantial fines could be
levied against us, our subsidiaries and the persons involved, and we could be
forced to forfeit portions of our assets. The suspension, revocation or
non-renewal of any of our licenses or the levy on us of substantial fines or
forfeiture of assets would have a material adverse effect on our business,
financial condition and results of operations. We are also subject to
substantial gaming taxes and fees imposed by various governmental authorities,
which are subject to increase.
To date, we have obtained all governmental licenses, findings of
suitability, registrations, permits and approvals necessary for the operation of
our currently operating gaming activities. However, gaming
20
26
licenses and related approvals are deemed to be privileges under Iowa, Missouri,
Mississippi and Nevada law. We cannot assure you that our existing licenses,
permits and approvals will be maintained or extended. We also cannot assure you
that any new licenses, permits and approvals that may be required in the future
will be granted to us.
FAILURE OF LOCAL REAUTHORIZATION OF GAMING ACTIVITIES IN IOWA COULD HAVE A
MATERIAL ADVERSE EFFECT ON US.
Under Iowa law, a license to conduct gambling games may be issued in a
county only if the county electorate has approved such gambling games. Although
the electorate of Pottawattamie County, which includes the City of Council
Bluffs, approved by referendum the gambling games conducted at Ameristar Council
Bluffs, a reauthorization referendum must be submitted to the county electorate
in the general election to be held in 2002 and each eight years thereafter. Each
such referendum requires the vote of a majority of the persons voting. If any
such reauthorization referendum is defeated, Iowa law provides that any
previously issued gaming license will remain valid and subject to periodic
renewal for a total of nine years from the original issue unless otherwise
terminated by the Iowa Racing and Gaming Commission. The original issue date for
our Iowa gaming license was January 27, 1995. We cannot assure you that gaming
operations of the type we conduct at Ameristar Council Bluffs will continue to
be authorized in Pottawattamie County. Any failure of Pottawattamie County to
reauthorize gaming operations of the type we conduct at Ameristar Council Bluffs
would have a material adverse effect on our business, financial condition and
results of operations.
THE NATIONAL GAMBLING IMPACT STUDY COMMISSION'S RECOMMENDATIONS MAY ADVERSELY
AFFECT THE GAMING INDUSTRY AND OUR OPERATIONS.
A National Gambling Impact Study Commission was established by the U.S.
Congress to conduct a comprehensive study of the social and economic impact of
gaming in the U.S. On April 28, 1999, the National Commission voted to recommend
that the expansion of gaming be curtailed. In June 1999, the National Commission
issued a final report of its findings and conclusions, together with
recommendations for legislative and administrative actions. Below are highlights
of some of those recommendations:
- Legal gaming should be restricted to those at least 21 years of age.
- Betting on college and amateur sports should be banned.
- The introduction of casino-style gaming at pari-mutuel racing
facilities for the primary purpose of saving the pari-mutuel
facility financially should be prohibited.
- Internet gaming should be banned in the U.S.
- The types of gaming activities allowed by Native American tribes
within a given state should be consistent with the gaming activities
allowed to other persons in that state.
- State, local and tribal governments should recognize that casino
gaming provides economic development, particularly for economically
depressed areas. The National Commission differentiated casino
gaming from stand-alone slot machines (e.g., in convenience stores),
internet gaming and lotteries which the National Commission stated
do not provide the same economic development.
Any regulation of the gaming industry which may result from the National
Commission's report may have an adverse effect on the gaming industry and on our
financial condition or results of operations.
ANY LOSS FROM SERVICE OF OUR RIVERBOAT AND DOCKSIDE FACILITIES FOR ANY REASON
COULD MATERIALLY ADVERSELY AFFECT US.
Our riverboat and dockside facilities in Missouri, Mississippi and Iowa
could be lost from service due to casualty, mechanical failure, extended or
extraordinary maintenance, floods or other severe weather conditions. Cruises of
the Council Bluffs Casino are subject to risks generally incident to the
movement of vessels on inland waterways, including risks of casualty due to
river turbulence and severe weather conditions. In addition, United States Coast
Guard regulations set limits on the operation of vessels and require that
vessels be operated by a minimum complement of licensed personnel.
21
27
The United States Coast Guard also requires all U.S. flagged passenger
vessels operating exclusively in fresh water to conduct a thorough dry-dock
inspection of underwater machinery, valves and hull every five years. Less
stringent inspection requirements apply to permanently moored dockside vessels
like those at Ameristar Kansas City, Ameristar Vicksburg and Ameristar St.
Charles. The Ameristar Council Bluffs riverboat was due for its dry-dock
inspection in November 2000, but we have been accepted into a United States
Coast Guard program that has allowed us to extend the dry-dock requirement by
undergoing a thorough underwater inspection. This underwater inspection has been
completed and the Ameristar Council Bluffs riverboat has received a U.S. Coast
Guard Certificate of Inspection valid through October 19, 2001. The underwater
inspection program allows for an extension of the dry-dock requirement for up to
30 months. Based on the results of this inspection, Ameristar Council Bluffs has
applied to the U.S. Coast Guard for such an extension and the regional office of
the U.S. Coast Guard in St. Louis has recommended to the U.S. Coast Guard's
office in Washington, D.C. that the extension be granted. However, if we do not
obtain this further extension, the Council Bluffs Casino would be out of service
for a substantial period of time for its dry-dock inspection. This would have a
material adverse effect on Ameristar Council Bluffs and on our business,
financial condition and results of operations. We cannot assure you that we will
actually obtain any further extension of the dry-dock requirement or that
similar extensions will be obtained in the future.
The Ameristar Vicksburg site has experienced some instability that has
required periodic maintenance and improvements. Although we have reinforced the
cofferdam basin in which the vessel floats, further reinforcements may be
necessary. We are also monitoring the site to evaluate what further steps, if
any, may be necessary to stabilize the site to permit operations to continue. A
site failure would require Ameristar Vicksburg to limit or cease operations.
The loss of a riverboat or dockside facility from service for any period
of time likely would adversely affect our operating results and borrowing
capacity under our long-term debt facilities. It could also result in the
occurrence of an event of a default under one or more of our credit facilities
or contracts.
OUR PROPERTIES ARE SUBJECT TO THE RISK OF THEFT WHICH COULD ADVERSELY AFFECT OUR
OPERATIONS.
Given the nature of our operations, we entrust employees in various
positions to handle large amounts of cash and casino chips and tokens. Although
our internal controls and security and surveillance policies and procedures are
designed to limit our exposure to theft and the associated risk of loss, we
cannot assure you that such theft does not occur or that we will discover and
such theft promptly, if at all. In addition, we cannot assure you that we will
have adequate insurance coverage, if any, in the event of such theft. Any theft
by our employees or otherwise could have an adverse effect on our results of
operations.
WE COULD FACE SEVERE PENALTIES AND MATERIAL REMEDIATION COSTS IF WE FAIL TO
COMPLY WITH APPLICABLE ENVIRONMENTAL REGULATIONS.
As is the case with any owner or operator of real property, we are subject
to a variety of federal, state and local governmental regulations relating to
the use, storage, discharge, emission and disposal of hazardous materials.
Failure to comply with environmental laws could result in the imposition of
severe penalties or restrictions on operations by government agencies or courts
of law, which could adversely affect operations. We do not have environmental
liability insurance to cover most such events, and the environmental liability
insurance coverage we maintain to cover certain events includes significant
limitations and exclusions. In addition, if we discover any significant
environmental contamination affecting any of our properties, we could face
material remediation costs or additional development costs for future expansion
activities.
22
28
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the sale of the old notes, we entered into a
registration rights agreement with the initial purchasers of the old notes,
pursuant to which we agreed to file and to use our best efforts to cause to
become effective with the Securities and Exchange Commission a registration
statement with respect to the exchange of the old notes for exchange notes with
terms identical in all material respects to the terms of the old notes. A copy
of the registration rights agreement has been filed as an exhibit to the
registration statement of which this prospectus is a part. The exchange offer is
being made to satisfy our obligations under the registration rights agreement.
By tendering old notes for exchange notes, each holder represents to us
that:
- any exchange notes to be received by such holder are being acquired
in the ordinary course of such holder's business;
- such holder has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the Securities
Act) of exchange notes;
- such holder is not an "affiliate" of Ameristar Casinos, Inc., as the
term is defined in Rule 144A under the Securities Act;
- such holder has full power and authority to tender, exchange, sell,
assign and transfer the tendered old notes;
- we will acquire good, marketable and unencumbered title to the
tendered old notes, free and clear of all liens, restrictions,
charges and encumbrances; and
- the old notes tendered for exchange notes are not subject to any
adverse claims or proxies.
Each tendering holder also warrants and agrees that it will, upon request,
execute and deliver any additional documents deemed by us or the exchange agent
to be necessary or desirable to complete the exchange, sale, assignment and
transfer of the old notes tendered pursuant to the exchange offer. Each
broker-dealer that receives exchange notes for its own account in exchange for
old notes pursuant to the exchange offer, where such old notes were acquired by
such broker-dealer as a result of market-making or other trading activities,
must acknowledge that it will deliver a prospectus in connection with any resale
of such exchange notes. See "Plan of Distribution."
The exchange offer is not being made to, nor will we accept tenders for
exchange from, holders of old notes in any jurisdiction in which the exchange
offer or the acceptance of the exchange notes would be in violation of
securities or blue sky laws of that jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to
an exchange offer means any person in whose name the old notes are registered on
the books of Ameristar Casinos, Inc. or any other person who has obtained a
properly completed bond power from the registered holder, or any participant in
DTC whose name appears on a security position listing as a holder of old notes
(which, for purposes of the exchange offer, include beneficial interests in old
notes held by direct or indirect participants in DTC and old notes held in
definitive form).
TERMS OF THE EXCHANGE OFFER
We hereby offer, upon the terms and conditions described in this
prospectus and in the accompanying letter of transmittal, to exchange $1,000
principal amount of our 10 3/4 senior subordinated exchange notes due 2009 for
each $1,000 principal amount of our old 10 3/4 senior subordinated notes due
2009, properly tendered before the expiration date and not validly withdrawn
according to the procedures described below. Holders may tender their old notes
in whole or in part in integral multiples of $1,000 principal amount.
23
29
The form and terms of the exchange notes are the same as the form and
terms of the old notes, except that:
(1) the exchange notes have been registered under the Securities
Act and therefore are not subject to the restrictions on transfer
applicable to the old notes, and
(2) holders of the exchange notes will not be entitled to some of
the rights of holders of the old notes under the registration rights
agreement.
The exchange notes evidence the same indebtedness as the old notes (which
they replace) and will be issued pursuant to, and entitled to the benefits of,
the indenture.
The exchange offer is not conditioned upon any minimum principal amount of
old notes being tendered for exchange. We reserve the right in our sole
discretion to purchase or make offers for any old notes that remain outstanding
after the expiration date or, as described under "Conditions to the Exchange
Offer," to terminate the exchange offer and, to the extent permitted by
applicable law, purchase old notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers could
differ from the terms of the exchange offer. As of date of this prospectus,
$380.0 million principal amount of the old notes is outstanding.
Holders of the old notes do not have any appraisal or dissenters' rights
in connection with the exchange offer. Old notes that are not tendered for, or
are tendered but not accepted in connection with, the exchange offer will remain
outstanding. See "Risk Factors -- You must comply with the procedures for the
exchange offer in order to receive exchange notes."
If any tendered old notes are not accepted for exchange because of an
invalid tender, the occurrence of particular other events described in this
prospectus or otherwise, certificates for any such unaccepted old notes will be
returned, without expense, to the tendering holder thereof promptly after the
expiration date.
Holders who tender old notes in connection with the exchange offer will
not be required to pay brokerage commissions or fees or, subject to the
instructions in the letter of transmittal, transfer taxes with respect to the
exchange of the old notes in connection with the exchange offer. We will pay
certain charges and expenses, other than specified applicable taxes. See "Fees
and Expenses."
WE MAKE NO RECOMMENDATION TO THE HOLDERS OF THE OLD NOTES AS TO WHETHER TO
TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OLD NOTES IN THE
EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. HOLDERS OF THE OLD NOTES MUST MAKE THEIR OWN DECISION AS TO
WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER, AND, IF SO, THE AGGREGATE
AMOUNT OF OLD NOTES TO TENDER, AFTER READING THIS PROSPECTUS AND THE LETTER OF
TRANSMITTAL AND CONSULTING WITH THEIR ADVISORS, IF ANY, BASED ON THEIR FINANCIAL
POSITIONS AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The expiration date for the exchange offer is 5:00 p.m. New York City
time, on , 2001, unless we, in our sole discretion, extend
the exchange offer. If we do extend the exchange offer, the expiration date will
be the latest date and time to which the exchange offer is extended.
We expressly reserve the right, in our sole and absolute discretion,
subject to applicable law, at any time and from time to time:
- to delay acceptance of any old notes for exchange;
- to terminate the exchange offer (whether or not any old notes have
already been accepted for exchange) if we determine, in our sole and
absolute discretion, that any of the events or
24
30
conditions referred to under "Conditions to the Exchange Offer" has
occurred or exists or has not been satisfied;
- to extend the expiration date and retain all old notes tendered
pursuant to the exchange offer, subject, however, to the right of
holders of old notes to withdraw their tendered old notes as
described under "Withdrawal of Tenders"; and
- to waive any condition or otherwise amend the terms of the exchange
offer in any respect.
If we amended the exchange offer in a manner we determine constitutes a
material change, or if we waive a material condition of the exchange offer, we
will promptly disclose such material amendment by means of a prospectus
supplement that will be distributed to the registered holders of the affected
old notes, and we will extend the exchange offer to the extent required by Rule
14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as possible by oral or written notice to the exchange agent
(any such oral notice to be promptly confirmed in writing) and by making a
public announcement, and such announcement in the case of an extension will be
made no later than 9:00 a.m., New York City time, on the next business day after
the previously scheduled expiration date. Without limiting the manner in which
we may choose to make any public announcement, and subject to applicable laws,
we will have no obligation to publish, advertise, or otherwise communicate any
such public announcement, other than by making a timely release to an
appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the exchange offer, we
will exchange, and will issue to the exchange agent, exchange notes for old
notes validly tendered and not withdrawn (pursuant to the withdrawal rights
described under "Withdrawal of Tenders") promptly after the expiration date.
In all cases, delivery of exchange notes in exchange for old notes
tendered and accepted for exchange pursuant to the exchange offer will be made
only after timely receipt by the exchange agent of:
(1) old notes or a book-entry confirmation of a book-entry transfer
of old notes into the exchange agent's account at DTC;
(2) the letter of transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees; and
(3) any other documentation required by the letter of transmittal
Accordingly, the delivery of the exchange notes might not be made to all
tendering holders at the same time, and will depend upon when old notes,
book-entry confirmations with respect to old notes and other required documents
are received by the exchange agent.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of old notes into the exchange agent's account at DTC.
Subject to the terms and conditions of the exchange offer, we will be
deemed to have accepted for exchange, and thereby exchanged, old notes validly
tendered and not withdrawn as, if and when we give oral or written notice to the
exchange agent (and such oral notice to be promptly confirmed in writing) of our
acceptance of such old notes for exchange pursuant to the exchange offer. Our
acceptance for exchange of old notes tendered pursuant to any of the procedures
described above will constitute a binding agreement between the tendering holder
and us upon the terms and subject to the conditions of the exchange offer. The
exchange agent will act as agent for us for the purpose of receiving tenders of
old notes, letters of transmittal and related documents and transmitting
exchange notes to holders who have validly tendered old notes. Such exchange
will be made promptly after the expiration date of the exchange offer. If for
any reason the acceptance for exchange or the exchange of any old notes tendered
pursuant to the exchange offer is delayed (whether before or after our
acceptance for exchange of old notes), or we
25
31
extend the exchange offer or are unable to accept for exchange or exchange old
notes tendered pursuant to the exchange offer, then, without prejudice to our
rights set forth in this prospectus and in the letter of transmittal, the
exchange agent may, nevertheless, on our behalf and subject to Rule 14e-1(c)
under the Exchange Act, retain tendered old notes and such old notes may not be
withdrawn except to the extent tendering holders are entitled to withdrawal
rights as described under "Withdrawal of Tenders."
PROCEDURES FOR TENDERING OLD NOTES
VALID TENDER
Except as set forth below, in order for old notes to be validly tendered
pursuant to the exchange offer, either:
(1)(a) a properly completed and duly executed letter of transmittal
(or facsimile thereof), with any required signature guarantees and any
other required documents, must be received by the exchange agent at the
address set forth under "Exchange Agent" prior to the expiration date, and
(b) tendered old notes must be received by the exchange agent, or such old
notes must be tendered pursuant to the procedures for book-entry transfer
set forth below and a book-entry confirmation must be received by the
exchange agent, in each case prior to the expiration date; or
(2) the guaranteed delivery procedures set forth below must be
complied with.
If less than all of the old notes are tendered, a tendering holder should
fill in the amount of old notes being tendered in the appropriate box on the
letter of transmittal. The entire amount of old notes delivered to the exchange
agent will be deemed to have been tendered unless otherwise indicated.
If any letter of transmittal, endorsement, bond power, power of attorney
or any other document required by the letter of transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing. Unless waived by us, evidence
satisfactory to us of such person's authority to so act must also be submitted.
Any beneficial owner of old notes that are held by or registered in the
name of a broker, dealer, commercial bank, trust company or other nominee or
custodian is urged to contact such entity promptly if such beneficial holder
wishes to participate in the exchange offer.
The method of delivery of old notes, the letter of transmittal and all
other required documents is at the option and sole risk of the tendering holder.
Delivery will be deemed made only when actually received by the exchange agent.
Instead of delivery by mail, it is recommended that holders use an overnight or
hand delivery service. In all cases, sufficient time should be allowed to assure
timely delivery and proper insurance should be obtained. No letter of
transmittal or old notes should be sent to Ameristar Casinos, Inc. Holders may
request their respective brokers, dealers, commercial banks, trust companies or
nominees to effect these transactions for them.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with
respect to the applicable old notes at DTC for purposes of the exchange offer
within two business days after the date of this prospectus. Any financial
institution that is a participant in DTC's Book-Entry Transfer Facility system
may make book-entry delivery of the old notes by causing DTC to transfer the old
notes into the exchange agent's account via the ATOP system in accordance with
DTC's transfer procedure. Although delivery of old notes may be effected through
book-entry transfer into the exchange agent's account at DTC, the letter of
transmittal (or facsimile thereof), properly completed and duly executed, any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received or confirmed by the
26
32
exchange agent at its addresses in this prospectus prior to 5:00 p.m., New York
City time, on the expiration date, or the guaranteed delivery procedure set
forth below must be complied with.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE
DELIVERY TO THE EXCHANGE AGENT.
SIGNATURE GUARANTEES
Certificates for old notes need not be endorsed and signature guarantees
on a letter of transmittal or notice of withdrawal, as the case may be, are
unnecessary unless:
(1) a certificate for old notes is registered in the name other
than that of the person surrendering the certificate; or
(2) a registered holder completes the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the letter of
transmittal.
In the case of (1) or (2) above, such certificates for old notes must be
duly endorsed or accompanied by a properly executed bond power, with the
endorsement or signature on the bond power and on the letter of transmittal or
the notice of withdrawal, as the case may be, guaranteed by a firm or other
entity identified in Rule 17Ad-15 under the Exchange Act as an "eligible
guarantor institution," including (as such terms are defined therein): (a) a
bank, (b) a broker, dealer, municipal securities broker or dealer or government
securities broker or dealer, (c) a credit union, (d) a national securities
exchange, registered securities association or clearing agency, or (e) a savings
association that is a participant in a Securities Transfer Association. See
Instruction 1 to the letter of transmittal.
GUARANTEED DELIVERY
If a holder desires to tender old notes pursuant to an exchange offer and
the certificates for such old notes are not immediately available or time will
not permit all required documents to reach the exchange agent prior to the
expiration date, or the procedures for book-entry transfer cannot be completed
on a timely basis, such old notes may nevertheless be tendered, provided that
all of the following guaranteed delivery procedures are complied with:
(1) such tenders are made by or through an eligible guarantor
institution;
(2) prior to the expiration date, the exchange agent receives from
an eligible guarantor institution a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form accompanying the
letter of transmittal, setting forth the name and address of the holder of
the old notes and the amount of old notes tendered, stating that the
tender is being made thereby and guaranteeing that, within three business
days after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered old notes, in proper form for
transfer, or a book-entry confirmation, as the case may be, and any other
documents required by the letter of transmittal, will be deposited by the
eligible guarantor institution with the exchange agent. The Notice of
Guaranteed Delivery may be delivered by hand, or transmitted by facsimile
or mail to the exchange agent and must include a guarantee by an eligible
guarantor institution in the form set forth in the Notice of Guaranteed
Delivery; and
(3) the certificates (or book-entry confirmation) representing all
tendered old notes, in proper form for transfer, together with a properly
completed and duly executed letter of transmittal, with any required
signature guarantees and any other documents required by the letter of
transmittal, are received by the exchange agent within three business days
after the date of execution of the Notice of Guaranteed Delivery.
27
33
COMPANY DETERMINATIONS FINAL
All questions as to the form of documents, validity, eligibility,
including time of receipt, and acceptance for exchange of any tendered old notes
will be determined by us, in our sole and absolute discretion, which
determination will be final and binding on all parties. We reserve the absolute
right, in our sole and absolute discretion, to reject any and all tenders we
determine not to be in proper form or the acceptance for exchange of which may,
in the view of our counsel, be unlawful. We also reserve the absolute right,
subject to applicable law, to waive any of the conditions of the exchange offer
as set forth under "Conditions to the Exchange Offer" or any defect or
irregularity in any tender of old notes of any particular holder, whether or not
similar defects or irregularities are waived in the case of other holders.
Our interpretation of the terms and conditions of the exchange offer
(including the letter of transmittal and its instructions) will be final and
binding upon all parties. No tender of old notes will be deemed to have been
validly made until all defects or irregularities with respect to such tender
have been cured or waived. None of Ameristar, any of our affiliates, the
exchange agent or any other person will be under any duty to give any
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification.
RESALE OF THE EXCHANGE NOTES
Based on previous interpretations by the staff of the Securities and
Exchange Commission set forth in no-action letters issued to third parties, we
believe that the exchange notes issued in the exchange offer may be offered for
resale, resold and otherwise transferred without compliance with the
registration and prospectus delivery provisions of the Securities Act of 1933.
This would not apply, however, to any holder that is a broker-dealer that
acquired old notes as a result of market-making activities or other trading
activities or directly from us for resale under an available exemption under the
Securities Act. Also, resale would only be permitted for exchange notes that (1)
are acquired in the ordinary course of a holder's business, (2) where such
holder has no arrangement or understanding with any person to participate in the
distribution of such exchange notes, and (3) such holder is not an "affiliate"
of Ameristar Casinos, Inc. The staff of the Securities and Exchange Commission
has not considered the exchange offer in the context of a no-action letter, and
there can be no assurance that the staff of the Securities and Exchange
Commission would make a similar determination with respect to the exchange
offer. Each broker-dealer that receives exchange notes for its own account in
exchange for old notes, where the old notes were acquired by that broker-dealer
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
the exchange notes. See "Plan of Distribution." In order to facilitate the
disposition of exchange notes by broker-dealers participating in the exchange
offer, we have agreed, subject to specific conditions, to make this prospectus,
as it may be amended or supplemented from time to time, available for delivery
by those broker-dealers to satisfy their prospectus delivery obligations under
the Securities Act.
In the event that our belief regarding resale is inaccurate, those who
transfer exchange notes in violation of the prospectus delivery provisions of
the Securities Act and without an exemption from registration under the federal
securities laws may incur liability under these laws. We do not assume, nor will
we indemnify you against, this liability. The exchange offer is not being made
to, nor will we accept surrenders for exchange from, holders of old notes in any
jurisdiction in which the exchange offer or the acceptance thereof would not be
in compliance with the securities or blue sky laws of the particular
jurisdiction.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, tenders of old notes may
be withdrawn at any time prior to 5:00 p.m., New York City time, on the
expiration date.
28
34
In order to withdraw a tender of old notes in the exchange offer, a
written or facsimile transmission notice of withdrawal must be received by the
exchange agent at the address given under "The Exchange Agent" prior to 5:00
p.m., New York City time, on the expiration date. Any notice of withdrawal must:
- specify the name of the person having deposited the old notes to be
withdrawn;
- identify the old notes to be withdrawn, including the certificate
number or numbers and principal amount of the old notes;
- be signed by the depositor in the same manner as the original
signature on the letter of transmittal by tendering the old notes,
including any required signature guarantees, or be accompanied by
documents of transfer sufficient to permit the trustee of the old
notes to register the transfer of the old notes into the name of the
depositor withdrawing the tender; and
- specify the name in which any old notes are to be registered, if
different from that of the depositor.
Any old notes that have been properly withdrawn will not be deemed validly
tendered for purposes of the exchange offer, but may be retendered by following
one of the procedures described above under "Procedures for Tendering Old Notes"
at any time prior to the expiration date.
All questions as to the validity, form and eligibility, including time of
receipt, of any withdrawal notices will be determined by us, and will be final
and binding on all parties. Neither Ameristar, nor any of our affiliates, the
exchange agent or any other person will be under any duty to give any
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification. Any tendered old
notes that have been properly withdrawn will be returned to the holder promptly
after withdrawal.
INTEREST ON THE EXCHANGE NOTES
The exchange notes will bear interest from the issue date of the old notes
and will be paid with the first interest payment on the exchange notes. If
interest has not yet been paid, the exchange notes will bear interest from and
including February 2, 2001. Interest on the old notes accepted for exchange will
cease to accrue upon issuance of the exchange notes and will be superceded by
the interest accruing with respect to the exchange notes.
The exchange notes will bear interest at a rate of 10 3/4% per annum.
Interest on the exchange notes will be payable semi-annually, in arrears, on
each February 15 and August 15 following the consummation of the exchange offer.
Untendered old notes that are not exchanged for exchange notes pursuant to the
exchange offer will bear interest at a rate of 10 3/4% per annum after the
expiration date.
CONDITIONS TO THE OFFER
If any of the following conditions has occurred or exists or has not been
satisfied prior to the expiration date of the exchange offer, we will not be
required to accept for exchange any old notes and will not be required to issue
exchange notes in exchange for any old notes. In addition, we may, at any time
and from time to time, terminate or amend the exchange offer (whether or not any
old notes have already been accepted for exchange) or may waive any condition to
or amend the exchange offer.
- A change in the current interpretation by the staff of the
Securities and Exchange Commission that permits resale of exchange
notes as described under "Resales of Exchange Notes."
- Any action or proceeding is instituted or threatened in any court or
by or before any governmental agency or body with respect to the
exchange offer that, in our judgment, would reasonably be expected
to impair our ability to proceed with the exchange offer.
29
35
- Any law, statute, rule or regulation is proposed, adopted or
enacted, or any existing law, statute, rule or regulation is
interpreted by the staff of the Securities and Exchange Commission
in a manner that, in our judgment, would reasonably be expected to
impair our ability to proceed with the exchange offer.
- The issuance of a stop order is threatened by the Securities and
Exchange Commission, any state securities authority or any gaming
authority or is in effect for the registration statement that this
prospectus is a part of, or proceedings for the that purposes are
instituted.
- Failure to obtain any governmental approval that we consider
necessary for the consummation of the exchange offer as contemplated
hereby.
- Any change or development involving a prospective change in our
business or financial affairs that we think might materially impair
our ability to consummate the exchange offer.
If we determine in our sole and absolute discretion that any of the
foregoing events or conditions has occurred or exists or has not been satisfied
at any time prior to the expiration date, we may, subject to applicable law,
terminate the exchange offer (whether or not any old notes have already been
accepted for exchange) or may waive any such condition or otherwise amend the
terms of the exchange offer in any respect. If such waiver or amendment
constitutes a material change to the exchange offer, we will promptly disclose
such waiver or amendment by means of a prospectus supplement that will be
distributed to each registered holder of old notes, and we will extend the
exchange offer to the extent required by Rule 14e-1 under the Exchange Act.
EXCHANGE AGENT
U.S. Bank Trust National Association has been appointed as exchange agent
for the exchange offer. Delivery of the letter of transmittal and any other
required documents, questions, requests for assistance and requests for
additional copies of this prospectus or of the letter of transmittal should be
directed to the exchange agent addressed as follows:
BY MAIL, OVERNIGHT COURIER OR HAND DELIVERY:
U.S. Bank Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
ATTENTION: Specialized Finance Group
Telephone number: (800) 934-6802
Facsimile transmission: (651) 244-1537
DELIVERY TO OTHER THAN THE ABOVE ADDRESSES OR FACSIMILE NUMBER WILL NOT
CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
We will bear the expenses of soliciting tenders pursuant to the exchange
offer. The principal solicitation for tenders pursuant to the exchange offer is
being made by mail. Additional solicitations may be made by our officers and
regular employees and our affiliates in person, by telegraph or by telephone.
We have not retained any dealer-manager or similar agent in connection
with the exchange offer and will not make any payments to brokers, dealers or
other persons soliciting acceptances of the exchange offer. We will, however,
pay the exchange agent reasonable customary fees for its services and will
reimburse the exchange agent for its reasonable out-of-pocket expenses in
connection with this exchange offer. We may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses they
incur in forwarding copies of this prospectus, letters of transmittal and
related documents to the beneficial owners of the old notes and in handling or
forwarding tenders for exchange.
We will pay the fees and expenses incurred in connection with the exchange
offer for the exchange agent and the trustee, as well as our accounting and
legal services.
30
36
We will pay all transfer taxes, if any, applicable to the exchange of old
notes pursuant to the exchange offer. The amount of these transfer taxes,
whether imposed on the registered holder or any other persons, will be payable
by the tendering holder if:
- certificates representing exchange notes or old notes not tendered
or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the
registered holder of the old notes tendered;
- tendered old notes are registered in the name of any person other
than the person signing the letter of transmittal; or
- a transfer tax is imposed for any reason other than the exchange of
old notes pursuant to the exchange offer.
If satisfactory evidence of payment of, or exemption from, these taxes is
not submitted with the letter of transmittal, the amount of these transfer taxes
will be billed directly to the tendering holder.
ACCOUNTING TREATMENT
The exchange notes will be recorded at the same carrying value as the old
notes, which is face value, as reflected in our accounting records on the date
of the exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by us upon the consummation of the exchange offer. The expenses of
the exchange offer will be amortized by us over the term of the exchange notes
under generally accepted accounting principles.
31
37
USE OF PROCEEDS
The exchange offer is intended to satisfy certain of our obligations under
the registration rights agreement. We will not receive any proceeds from the
issuance of the exchange notes or the closing of the exchange offer.
In consideration for issuing the exchange notes as contemplated in this
prospectus, we will receive, in exchange, an equal number of old notes in like
principal amount. The form and terms of the exchange notes are identical in all
material respects to the form and term of the old notes, except as otherwise
described in "The Exchange Offer -- Terms of the Exchange Offer." The old notes
surrendered in exchange of the exchange notes will be retired and canceled and
cannot be reissued. The proceeds from the offering of the old notes have been
used (1) to repay the $300 million in principal amount outstanding under our
senior subordinated credit facility and accrued interest thereon, (2) to
partially repay and permanently reduce the term loan B and the term loan C under
our senior credit facilities by a total of $50 million, (3) to repay revolving
loans under our senior credit facilities (which may be reborrowed) and (4) for
working capital purposes. See "Prospectus Summary -- The Transactions" and
"Description of Existing Indebtedness" for additional information.
32
38
CAPITALIZATION
The following table sets forth our unaudited historical consolidated
capitalization as of December 31, 2000, our pro forma capitalization at such
date after giving effect to the Disposition and our pro forma capitalization as
adjusted for the offering of the old notes (and the application of the proceeds
therefrom), in each case as if such transactions occurred on December 31, 2000.
AS OF DECEMBER 31, 2000
------------------------------------------
PRO FORMA FOR PRO FORMA
ACTUAL THE DISPOSITION AS ADJUSTED
-------- --------------- -----------
(IN THOUSANDS)
Cash and cash equivalents............................... $ 36,245 $ 39,250 $ 33,500
======== ======== ========
Long-term debt (including current maturities):
Senior credit facilities(1)........................ 475,000 411,647 337,771
Senior subordinated credit facility................ 300,000 300,000 --
10 3/4% Senior Subordinated Notes due 2009, net of
original issue discount.......................... -- -- 374,976
Capitalized leases and other....................... 20,517 16,433 16,433
-------- -------- --------
Total long-term debt.......................... 795,517 728,080 729,180
Stockholders' equity.................................... 28,044 28,044 25,309
-------- -------- --------
Total capitalization.................................... $823,561 $756,123 $754,489
======== ======== ========
- -------------------------
(1) After giving effect to the Disposition and the application of the proceeds
from the offering of the old notes, we had $475 million in senior credit
facilities. The $75 million revolving term facility and $25 million of the
$75 million revolving credit facility are dedicated to finance the
completion of the Ameristar St. Charles expansion. Accordingly,
approximately $30.7 million would have been available under the revolving
credit facility for general corporate purposes.
33
39
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma condensed financial statements are based
on our historical financial statements and the historical financial statements
of Station Casinos, Inc. Missouri Operations and should be read in conjunction
with the historical financial statements included in this prospectus.
The pro forma financial statements reflect the following:
- The Acquisitions and related financing transactions;
- The Disposition and related application of proceeds;
- The issuance of $380 million aggregate principal amount of the old
notes.
Pro forma adjustments to historical financial statements include
adjustments which we deem appropriate, reflecting items of recurring
significance and which are factually supported based on currently available
information. It was assumed that the Acquisitions, the Disposition and the
issuance of the old notes occurred on January 1, 1999 for purposes of preparing
the pro forma condensed statements of operations and that the Disposition and
issuance of the old notes occurred on December 31, 2000 for purposes of
preparing the pro forma condensed balance sheet. The pro forma financial
statements may not be indicative of what actual results would have been, nor do
the pro forma financial statements purport to present our condensed financial
results for future periods.
34
40
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 2000
(IN THOUSANDS, EXCEPT SHARE DATA)
PRO FORMA
PRO FORMA ADJUSTMENTS
ADJUSTMENTS PRO FORMA FOR THE
AMERISTAR FOR THE FOR THE ISSUANCE OF PRO FORMA
HISTORICAL DISPOSITION DISPOSITION THE OLD NOTES AS ADJUSTED
---------- ----------- ----------- ------------- -----------
Current Assets:
Cash and cash equivalents............................ $ 36,245 $ 70,576(a)
(50,000)(a)
(4,218)(a)
(13,353)(a) $ 39,250 $ 368,626(c)
(374,376)(d) $ 33,500
Restricted cash...................................... 1,590 1,590 1,590
Accounts receivable, net............................. 9,731 9,731 9,731
Income tax refund receivable......................... 125 125 125
Inventories.......................................... 4,501 4,501 4,501
Prepaid expenses..................................... 5,350 5,350 5,350
Deferred income taxes................................ 2,502 2,502 2,502
Assets held for sale................................. 73,195 (73,195)(b) -- --
-------- -------- -------- --------- --------
Total current assets............................. 133,239 (70,190) 63,049 (5,750) 57,299
-------- -------- -------- --------- --------
Property and equipment and leasehold improvements, net... 642,105 642,105 642,105
Deferred income taxes.................................... -- -- --
Excess of purchase price over fair market value of net
assets acquired........................................ 86,384 86,384 86,384
Deposits and other assets................................ 29,193 29,193 7,950(f)
(5,307)(e) 31,836
-------- -------- -------- --------- --------
$890,921 $(70,190) $820,731 $ (3,107) $817,624
======== ======== ======== ========= ========
Current Liabilities:
Accounts payable..................................... $ 13,124 $ 13,124 $ 13,124
Construction contracts payable....................... 4,493 4,493 4,493
Accrued liabilities.................................. 41,374 41,374 41,374
Current obligations under capitalized leases......... 2,002 2,002 2,002
Current maturities of notes payable and long-term
debt............................................... 8,956 8,956 8,956
Liabilities related to assets held for sale.......... 6,837 (6,837)(b) -- --
-------- -------- -------- --------- --------
Total current liabilities........................ 76,786 (6,837) 69,949 -- 69,949
Obligations under capitalized leases, net of current
maturities............................................. 3,354 3,354 3,354
Notes payable and long-term debt, net of current
maturities............................................. 777,121 (50,000)(a)
(13,353)(a) 713,768 374,976(c)
(373,876)(d) 714,868
Deferred income taxes.................................... 5,616 5,616 (1,472)(e) 4,144
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 -- 20,442,963.......................... 204 204 204
Additional paid-in capital........................... 43,265 43,265 43,265
Retained earnings (accumulated deficit).............. (15,425) (15,425) (2,735)(e) (18,160)
-------- -------- -------- --------- --------
Total stockholders' equity....................... 28,044 -- 28,044 (2,735) 25,309
-------- -------- -------- --------- --------
$890,921 $(70,190) $820,731 $ (3,107) $817,624
======== ======== ======== ========= ========
35
41
NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
The following adjustments have been made to the unaudited pro forma
condensed balance sheet as of December 31, 2000:
(a) Reflects the proceeds and uses of proceeds related to the Disposition, as
follows (in thousands):
Sources:
Purchase price for the Disposition..................... $71,833
Less estimated net working capital adjustment (based on
assets and liabilities as of December 31, 2000)....... (184)
Less estimated transaction costs....................... (1,073)
-------
Net sources............................................ $70,576
=======
Uses:
Repayment and permanent reduction of available credit
under the revolving credit facility of the senior
credit facilities..................................... 25,000
Repayment and permanent reduction of available credit
under term loan A of the senior credit facilities..... 25,000
Repayment of capital leases............................ 4,218
Repayment of other existing indebtedness............... 13,353
Additional working capital............................. 3,005
-------
$70,576
=======
(b) Reflects the assets and liabilities to be sold in the Disposition.
(c) Reflects the proceeds of the $380 million of senior subordinated notes from
the offering, net of debt issuance costs and original issue discount. A
portion of the debt issuance costs related to the senior subordinated credit
facility and the senior credit facilities, as well as the prepayment fees
related to the two term loans (see Note (d)), were refunded upon completion
of this offering.
(d) Reflects the use of proceeds of the senior subordinated notes from the
offering to repay the senior subordinated credit facility, repay a portion
of two of the three term loans (including prepayment fees) and permanently
reduce these term loans, and repay a portion of the revolving credit
facility.
(e) Reflects (1) the extraordinary loss on the repayment of the senior
subordinated credit facility related to the write-off of unamortized debt
issuance costs, and (2) the prepayment fees related to the term loans,
including related tax effects at the 35% statutory tax rate. Debt issuance
costs have also been reduced for refunds of certain fees related to the
senior credit facilities.
(f) Reflects the debt issuance costs associated with the offering of the old
notes.
36
42
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
PRO FORMA
MISSOURI ADJUSTMENTS PRO FORMA FOR PRO FORMA
PROPERTIES FOR THE PRO FORMA ACQUISITIONS, ADJUSTMENTS
HISTORICAL ACQUISITIONS ADJUSTMENTS DISPOSITION FOR THE
AMERISTAR (TO DECEMBER AND RELATED FOR THE AND RELATED ISSUANCE OF THE
HISTORICAL 20, 2000) FINANCINGS DISPOSITION FINANCINGS OLD NOTES
---------- ------------- ------------ ----------- ------------- ---------------
Revenues:
Casino................. $286,438 $282,101 $ (47,145)(g) $521,394
Food and beverage...... 53,653 30,565 (15,746)(g) 68,472
Rooms.................. 18,121 8,794 (4,059)(g) 22,856
Other.................. 12,018 6,827 (1,556)(g) 17,289
-------- -------- -------- --------- -------- --------
370,230 328,287 -- (68,506) 596,919 --
Less: Promotional
allowances........... 28,224 11,330 (6,462)(g) 33,092
-------- -------- -------- --------- -------- --------
Net revenues........... 342,006 316,957 -- (62,044) 596,919 --
-------- -------- -------- --------- -------- --------
Operating Expenses:
Casino................. 134,948 152,756 (25,571)(g) 262,133
Food and beverage...... 35,135 27,349 (12,442)(g) 50,042
Rooms.................. 6,944 2,904 (1,608)(g) 8,240
Other.................. 12,257 3,047 (1,133)(g) 14,171
Selling, general and
administrative....... 90,416 48,746 (1,366)(a) (15,099)(g) 122,697
Depreciation and
amortization......... 27,784 17,923 (859)(b) (6,281)(g)
5,016(c) 43,583
Impairment loss on
assets held for
sale................. 57,153 -- (57,153)(g) --
-------- -------- -------- --------- -------- --------
Total operating
expenses......... 364,637 252,725 2,791 (119,287) 500,866 --
-------- -------- -------- --------- -------- --------
Income (loss) from
operations........... (22,631) 64,232 (2,791) 57,243 96,053 --
Other Income (Expense):
Interest income........ 161 -- 161
Interest expense....... (28,316) (40,742) (78,826)(d) 430(g)
25,319(e) 3,908(h)
40,742(f) (77,485) (40,595)(i)
42,950(j)
Other.................. (942) 1,294 482(g) 834
-------- -------- -------- --------- -------- --------
(29,097) (39,448) (12,765) 4,820 (76,490) 2,355
-------- -------- -------- --------- -------- --------
Income (loss) before income
tax provision (benefit)
and extraordinary item... (51,728) 24,784 (15,556) 62,063 19,563 2,355
Income tax provision
(benefit)............ (17,981) 6,875 (5,445)(k) 21,027(g)
701(k) 5,177 824(k)
-------- -------- -------- --------- -------- --------
Income (loss) before
extraordinary item....... $(33,747) $ 17,909 $(10,111) $ 40,335 $ 14,386 $ 1,531
======== ======== ======== ========= ======== ========
Earnings (loss) per share
before extraordinary
item:
Basic.................. $ (1.65) $ 0.71
======== ========
Diluted................ $ (1.65) $ 0.71
======== ========
Basic shares outstanding... 20,401 20,401
======== ========
Diluted shares
outstanding.............. 20,401 20,401
======== ========
PRO FORMA
AS ADJUSTED
-----------
Revenues:
Casino................. $521,394
Food and beverage...... 68,472
Rooms.................. 22,856
Other.................. 17,289
--------
596,919
Less: Promotional
allowances........... 33,092
--------
Net revenues........... 596,919
--------
Operating Expenses:
Casino................. 262,133
Food and beverage...... 50,042
Rooms.................. 8,240
Other.................. 14,171
Selling, general and
administrative....... 122,697
Depreciation and
amortization.........
43,583
Impairment loss on
assets held for
sale................. --
--------
Total operating
expenses......... 500,866
--------
Income (loss) from
operations........... 96,053
Other Income (Expense):
Interest income........ 161
Interest expense.......
(75,130)
Other.................. 834
--------
(74,135)
--------
Income (loss) before income
tax provision (benefit)
and extraordinary item... 21,918
Income tax provision
(benefit)............
6,001
--------
Income (loss) before
extraordinary item....... $ 15,917
========
Earnings (loss) per share
before extraordinary
item:
Basic.................. $ 0.78
========
Diluted................ $ 0.78
========
Basic shares outstanding... 20,401
========
Diluted shares
outstanding.............. 20,401
========
37
43
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
PRO FORMA
ADJUSTMENTS PRO FORMA FOR PRO FORMA
FOR THE PRO FORMA ACQUISITIONS, ADJUSTMENTS
MISSOURI ACQUISITIONS ADJUSTMENTS DISPOSITION FOR THE
AMERISTAR PROPERTIES AND RELATED FOR THE AND RELATED ISSUANCE OF THE PRO FORMA
HISTORICAL HISTORICAL FINANCINGS DISPOSITION FINANCINGS OLD NOTES AS ADJUSTED
---------- ---------- ------------ ----------- ------------- --------------- -----------
Revenues:
Casino................. $247,416 $ 278,554 $ (38,968)(g) $ 487,002 $ 487,002
Food and beverage...... 49,142 31,916 (13,987)(g) 67,071 67,071
Rooms.................. 17,257 5,992 (3,822)(g) 19,427 19,427
Other.................. 11,089 10,572 (1,435)(g) 20,226 20,226
-------- --------- ----------- ----------- --------- ----------- ---------
324,904 327,034 -- (58,212) 593,726 -- 593,726
Less: Promotional
allowances........... 24,618 12,386 (5,380)(g) 31,624 31,624
-------- --------- ----------- ----------- --------- ----------- ---------
Net revenues........... 300,286 314,648 -- (52,832) 562,102 -- 562,102
-------- --------- ----------- ----------- --------- ----------- ---------
Operating Expenses:
Casino................. 114,357 153,791 (23,122)(g) 245,026 245,026
Food and beverage...... 33,207 21,238 (11,313)(g) 43,132 43,132
Rooms.................. 6,372 1,636 (1,654)(g) 6,354 6,354
Other.................. 10,203 3,885 (929)(g) 13,159 13,159
Selling, general and
administrative....... 86,142 63,980 (1,118)(a) (15,387)(g) 133,617 133,617
Depreciation and
amortization......... 24,460 29,105 (883)(b) (7,515)(g)
5,160(c) 50,327 50,327
Impairment loss on
assets held for
sale................. -- 125,732 -- 125,732 125,732
-------- --------- ----------- ----------- --------- ----------- ---------
Total operating
expenses............. 274,741 399,367 3,159 (59,920) 617,347 -- 617,347
-------- --------- ----------- ----------- --------- ----------- ---------
Income (loss) from
operations........... 25,545 (84,719) (3,159) 7,088 (55,245) -- (55,245)
Other Income (Expense):
Interest income........ 300 -- 300 300
Interest expense....... (24,449) (47,474) (80,684)(d) 513(g)
21,421(e) 4,075(h)
47,474(f) (79,124) (42,307)(i)
43,800(j) (77,631)
Other.................. (851) (117) 205(g) (763) (763)
-------- --------- ----------- ----------- --------- ----------- ---------
(25,000) (47,591) (11,789) 4,793 (79,587) 1,493 (78,094)
-------- --------- ----------- ----------- --------- ----------- ---------
Income (loss) before income
tax provision (benefit)
and extraordinary item... 545 (132,310) (14,948) 11,881 (134,832) 1,493 (133,339)
Income tax provision
(benefit)............ 340 3,101 (5,232)(k) 3,328(g)
693(k) 2,230 523(k) 2,753
-------- --------- ----------- ----------- --------- ----------- ---------
Income (loss) before
extraordinary item....... $ 205 $(135,411) $ (9,716) $ 7,860 $(137,062) $ 970 $(136,092)
======== ========= =========== =========== ========= =========== =========
Earnings (loss) per share
before extraordinary
item:
Basic.................. $ 0.01 $ (6.73) $ (6.68)
======== ========= =========
Diluted................ $ 0.01 $ (6.73) $ (6.68)
======== ========= =========
Basic shares outstanding... 20,362 20,362 20,362
======== ========= =========
Diluted shares
outstanding.............. 20,362 20,362 20,362
======== ========= =========
38
44
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
The following pro forma adjustments have been made to the unaudited pro
forma condensed statements of operations for the year ended December 31, 2000
and the year ended December 31, 1999:
(a) Reflects the reduction to rent expense associated with land purchased
as part of the Acquisitions.
(b) Reflects adjustments to depreciation expense as a result in changes in
the carrying value of the Missouri properties' property and equipment
and leasehold improvements.
(c) Reflects the amortization of excess of purchase price over fair market
value of net assets acquired on a straight-line basis over an
estimated useful life of 40 years and the amortization of identified
intangible assets (primarily customer lists) on a straight-line basis
over an estimated useful life of two years. The excess purchase price
over fair market value of net assets acquired is deductible for tax
purposes and is amortized over a 15 year period.
(d) Reflects interest expense from the senior credit facilities and senior
subordinated credit facility, including amortization of debt issuance
costs.
(e) Reflects the reduction in interest expense from repaying and
terminating the $115 million revolving credit facility, repurchasing
the 10.5% senior subordinated notes and repaying other existing
indebtedness, including amortization of debt issuance costs.
(f) Reflects the reduction of the Missouri properties' historical interest
expense related to debt not being assumed in the Acquisitions.
(g) Reflects the historical results of The Reserve Hotel and Casino.
(h) Reflects the reduction in interest expense related to the permanent
reduction of certain borrowings under the senior credit facilities.
(i) Reflects interest expense on the offering of the old notes, including
amortization of debt issuance costs and original issue discount.
(j) Reflects the reduction of interest expense from repaying the senior
subordinated credit facility, including amortization of debt issuance
costs, repayment and permanent reduction of a portion of two of the
three term loans, and repayment of a portion of the revolving credit
facility.
(k) Reflects the tax effect of the pro forma adjustments using the 35%
statutory tax rate, excluding the actual tax effects of the historical
results of The Reserve Hotel and Casino referred to in Note (g).
39
45
SELECTED FINANCIAL AND OTHER DATA
AMERISTAR CASINOS, INC.
The selected consolidated financial and other data presented below as of
and for each of the five years ended December 31, 2000 have been derived from
our audited consolidated financial statements. The selected consolidated
financial and other data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements, and notes thereto,
included elsewhere in this prospectus (except for the consolidated financial
statements as of and for the years ended December 31, 1996 and 1997, which are
not included in this prospectus).
FOR THE YEARS ENDED DECEMBER 31, 1999
---------------------------------------------------------
1996 1997 1998 1999 2000
-------- -------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA
AND FINANCIAL RATIOS)
STATEMENT OF OPERATIONS(1):
Revenues:
Casino................................................ $161,338 $173,077 $216,319 $247,416 $ 286,438
Food and beverage..................................... 24,250 30,672 45,853 49,142 53,653
Rooms................................................. 7,641 9,685 14,201 17,257 18,121
Other................................................. 7,760 8,275 10,401 11,089 12,018
-------- -------- -------- -------- ---------
200,989 221,709 286,774 324,904 370,230
Less: Promotional allowances.......................... 12,524 15,530 22,092 24,618 28,224
-------- -------- -------- -------- ---------
Net revenues........................................ 188,465 206,179 264,682 300,286 342,006
Operating Expenses:
Casino................................................ 75,685 78,733 103,387 114,357 134,948
Food and beverage..................................... 16,773 19,784 31,698 33,207 35,135
Rooms................................................. 2,368 3,130 5,809 6,372 6,944
Other................................................. 7,054 7,546 10,044 10,203 12,257
Selling, general and administrative................... 47,758 51,958 75,604 86,142 90,416
Depreciation and amortization......................... 14,135 16,358 24,191 24,460 27,784
Impairment loss on assets held for sale............... -- 646 -- -- 57,153
Preopening costs...................................... 7,379 -- 10,611 -- --
-------- -------- -------- -------- ---------
Total operating expenses.......................... 171,152 178,155 261,344 274,741 364,637
Income (loss) from operations............................. 17,313 28,024 3,338 25,545 (22,631)
Other Income (Expense):
Interest income....................................... 354 445 296 300 161
Interest expense...................................... (8,303) (12,107) (22,699) (24,449) (28,316)
Other................................................. (77) (35) (13) (851) (942)
-------- -------- -------- -------- ---------
Income (loss) before income tax provision (benefit)....... 9,287 16,327 (19,078) 545 (51,728)
Income tax provision (benefit)........................ 3,390 5,959 (6,363) 340 (17,981)
-------- -------- -------- -------- ---------
Income (loss) before extraordinary loss................... 5,897 10,368 (12,715) 205 (33,747)
Extraordinary loss on early retirement of debt, net of
income taxes............................................ -- (673) -- -- 6,560
-------- -------- -------- -------- ---------
Net income (loss)......................................... $ 5,897 $ 9,695 $(12,715) $ 205 $ (40,307)
======== ======== ======== ======== =========
Earnings (loss) per share:
Income before extraordinary loss, basic and diluted... $ 0.29 $ 0.51 $ (0.62) $ 0.01 $ (1.65)
Net income (loss), basic and diluted.................. 0.29 0.48 (0.62) 0.01 (1.98)
OTHER FINANCIAL DATA:
EBITDA(2)............................................. $ 31,448 $ 45,028 $ 38,140 $ 50,005 $ 62,306
Cash flows from operating activities.................. 33,177 33,641 23,123 34,287 38,836
Cash flows from investing activities.................. (53,746) (63,417) (53,863) (50,048) (521,206)
Cash flows from financing activities.................. 16,506 32,083 35,918 13,083 503,084
Capital expenditures.................................. 43,087 72,932 32,312 57,590 33,357
Ratio of earnings to fixed charges(3)................. 1.66x 1.69x N/A(4) 1.00x N/A(4)
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents............................. $ 10,724 $ 13,031 $ 18,209 $ 15,531 $ 36,245
Total assets.......................................... 270,052 336,186 351,773 378,645 890,921
Total debt (including current maturities)............. 164,139 199,623 242,721 250,288 791,433
Stockholders' equity.................................. 70,944 80,639 67,924 68,169 28,044
- -------------------------
See footnotes on following page.
40
46
(1) The casino at Ameristar Council Bluffs opened in January 1996, portions of
the land-based facilities opened in June 1996 and the 160-room hotel opened
in November 1996. The remaining land-based facilities opened in February and
March 1997. The expanded casino opened in November 1999. The Reserve Hotel
and Casino opened in February 1998. The Ameristar Vicksburg hotel opened in
June 1998. The expanded casino opened in December 1999. Results for the year
ended December 31, 2000 include 11 days of operations at Ameristar Kansas
City and Ameristar St. Charles, which were acquired on December 20, 2000.
(2) EBITDA consists of income from operations plus depreciation, amortization,
preopening costs and impairment losses. 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 our operating performance, or as an alternative to cash
flows from operating activities (as determined in accordance with generally
accepted accounting principles) as a measure of liquidity. We have
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 calculate
EBITDA in the same manner as us.
(3) For purposes of computing the ratio of earnings to fixed charges, earnings
consists of income from continuing operations before income taxes and fixed
charges, excluding capitalized interest. Fixed charges consists of interest
expensed and capitalized, amortization of debt issuance costs and the
interest component of rent expense.
(4) Earnings were insufficient to cover fixed charges by $20.5 million for the
year ended December 31, 1998, including preopening costs of $10.6 million,
and $52.6 million for the year ended December 31, 2000, including an
impairment loss of $57.2 million.
41
47
STATION CASINOS, INC. MISSOURI OPERATIONS
The selected combined financial and other data of the Station Casinos,
Inc. Missouri Operations presented below as of and for the fiscal years ended
March 31, 1996, 1997 and 1998, the nine months ended December 31, 1998, and the
fiscal year ended December 31, 1999 have been derived from Station Casinos, Inc.
Missouri Operations' audited combined financial statements, except for the
fiscal years ended March 31, 1996 and 1997, which were based on unaudited
combined financial statements. The selected combined financial and other data
set forth below should be read in conjunction with the combined financial
statements, and notes thereto, included elsewhere in this prospectus (except for
the combined financial statements as of and for the fiscal years ended March 31,
1996 and 1997, which are not included in this prospectus).
FOR THE FISCAL YEARS ENDED FOR THE NINE FOR THE FISCAL
MARCH 31, MONTHS ENDED YEAR ENDED
--------------------------------- DECEMBER 31, DECEMBER 31,
1996 1997 1998 1998 1999
--------- --------- --------- ------------- --------------
(IN THOUSANDS)
STATEMENT OF OPERATIONS(1):
Revenues:
Casino............................................. $ 123,267 $ 174,873 $ 231,477 $191,499 $ 278,554
Food and beverage.................................. 7,136 19,605 35,682 25,094 31,916
Rooms.............................................. -- 1,158 5,549 4,548 5,992
Other.............................................. 2,727 8,958 12,300 7,735 10,572
--------- --------- --------- -------- ---------
133,130 204,594 285,008 228,876 327,034
Less: Promotional allowances....................... 3,252 6,763 12,326 9,303 12,386
--------- --------- --------- -------- ---------
Net revenues........................................... 129,878 197,831 272,682 219,573 314,648
Operating Expenses:
Casino............................................. 57,840 90,109 140,300 110,411 153,791
Food and beverage.................................. 4,009 13,115 23,754 16,963 21,238
Rooms.............................................. -- 423 1,594 1,252 1,636
Other.............................................. 1,691 3,301 4,011 2,712 3,885
Selling, general and administrative................ 26,711 40,203 64,225 45,615 63,980
Missouri investigations and fines.................. -- -- -- -- --
Restructuring charge............................... -- 277 -- -- --
Depreciation and amortization...................... 10,817 14,863 30,772 23,412 29,105
Preopening expenses................................ 752 31,245 133 -- --
Impairment loss.................................... -- -- -- 24,807 125,732
--------- --------- --------- -------- ---------
Total operating expenses............................... 101,820 193,536 264,789 225,172 399,367
Income (loss) from operations.......................... 28,058 4,295 7,893 (5,599) (84,719)
Other Income (Expense):
Interest expense, net.............................. (13,746) (22,044) (56,059) (40,740) (47,474)
Other.............................................. (24) (1,291) (2,468) (184) (117)
--------- --------- --------- -------- ---------
Income (loss) before income tax provision (benefit).... 14,288 (19,040) (50,634) (46,523) (132,310)
Income tax provision (benefit)..................... -- 13,939 13,176 3,010 (3,101)
--------- --------- --------- -------- ---------
Income (loss) before extraordinary item................ 14,288 (5,101) (37,458) (43,513) (135,411)
Extraordinary item -- loss on early retirement of debt,
net of applicable income tax benefit................. -- -- -- -- --
--------- --------- --------- -------- ---------
Net income (loss)...................................... $ 14,288 $ (5,101) $ (37,458) $(43,513) $(135,411)
========= ========= ========= ======== =========
OTHER FINANCIAL DATA:
EBITDA(2).......................................... $ 39,627 $ 50,403 $ 38,798 $ 42,620 $ 70,118
Cash flows from operating activities............... 26,857 37,613 (18,207) 4,868 24,346
Cash flows from investing activities............... (126,159) (341,829) (108,070) (15,598) (6,911)
Cash flows from financing activities............... 103,543 311,733 124,517 16,672 (15,613)
Capital expenditures............................... 121,013 354,164 58,044 9,508 6,207
BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 7,691 $ 15,208 $ 13,448 $ 19,390 $ 21,212
Total assets....................................... 249,718 625,483 665,856 633,036 482,057
Total debt (including current maturities).......... 241,017 548,657 673,356 690,028 673,485
Stockholders' equity (deficit)....................... 245 (763) (38,221) (81,734) (217,145)
- -------------------------
See footnotes on following page.
42
48
(1) The St. Charles property opened in May 1994. In March 2000, all gaming
operations at the St. Charles property were moved to the existing barge in
response to the new continuous boarding regulations. The Kansas City
property opened in January 1997.
(2) EBITDA consists of income from operations plus depreciation, amortization,
preopening costs, impairment losses and costs of Missouri investigations and
fines incurred by the former owner of the Missouri properties.
43
49
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the section "Selected Financial and Other Data" and the consolidated financial
statements and related notes included elsewhere in this prospectus.
OVERVIEW
We are a leading multi-jurisdictional gaming company that owns and
operates casinos and related hotel, food and beverage, entertainment and other
facilities. On December 20, 2000, we acquired substantially all the assets of
two gaming and entertainment facilities located in Kansas City, Missouri and St.
Charles, Missouri from subsidiaries of Station Casinos, Inc. On January 29,
2001, in a separate transaction, we sold substantially all the assets of The
Reserve Hotel and Casino, located in Henderson, Nevada, to a subsidiary of
Station Casinos. As a result of these transactions, we currently own and operate
six casino properties in five distinct markets through our wholly owned
subsidiaries. Our properties currently consist of the following:
Ameristar Kansas City, a casino and related hotel and other
facilities located seven miles from downtown Kansas City;
Ameristar Council Bluffs, a riverboat casino and related land-based
hotel and other facilities in Council Bluffs, Iowa across the Missouri
River from Omaha, Nebraska;
Ameristar St. Charles, a casino and related facilities located on
the Missouri River, situated immediately north of the Interstate 70 bridge
in the St. Louis metropolitan area;
Ameristar Vicksburg, a riverboat-themed dockside casino and related
land-based facilities, located in Vicksburg, Mississippi; and
Cactus Petes Resort Casino and The Horseshu Hotel & Casino, two
casino-hotels located in Jackpot, Nevada at the Idaho border. See
"Business" for additional information regarding our operating properties.
Certain of our operations are seasonal in nature. In particular, in
Jackpot, the months of March through October are the strongest. As a result, the
second and third calendar quarters typically produce a disproportionate amount
of the income from operations of the Jackpot Properties. In addition, adverse
weather conditions may adversely affect the business of the Jackpot Properties,
and operations during the winter months typically vary from year to year based
on the severity of the winter weather conditions in the northwestern United
States. To date, operations in Iowa and Missouri have experienced some
seasonality, with the winter months being the slower periods. To date,
operations at both Ameristar Vicksburg and The Reserve have not experienced any
material seasonality.
Our 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, charges associated with debt refinancing and/or
property acquisition and disposition transactions, construction at existing
facilities and general weather conditions. Consequently, our operating results
for any quarter or year are not necessarily comparable and may not be indicative
of results to be expected for future periods.
44
50
RESULTS OF OPERATIONS
The following table highlights the consolidated cash flow information and
results of operations of Ameristar's operating subsidiaries for its principal
properties:
YEAR ENDED DECEMBER 31,
---------------------------------
1998 1999 2000
-------- -------- ---------
(AMOUNTS IN THOUSANDS)
CONSOLIDATED CASH FLOW INFORMATION:
Cash flows provided by operations.................... $ 23,123 $ 34,287 $ 38,836
Cash flows used in investing......................... (53,863) (50,048) (521,206)
Cash flows provided by financing..................... 35,918 13,083 503,084
NET REVENUES:
Jackpot Properties................................... $ 54,671 $ 58,294 $ 60,314
Ameristar Vicksburg.................................. 68,538 76,930 82,555
Ameristar Council Bluffs............................. 97,672 112,047 124,631
The Reserve.......................................... 43,578 52,832 62,044
Ameristar Kansas City................................ -- -- 7,986
Ameristar St. Charles................................ -- -- 4,364
Corporate and other.................................. 223 183 112
-------- -------- ---------
Consolidated net revenues............................ $264,682 $300,286 $ 342,006
======== ======== =========
ADJUSTED OPERATING INCOME (LOSS)(1):
Jackpot Properties................................... $ 9,638 $ 10,619 $ 10,595
Ameristar Vicksburg.................................. 13,562 15,392 16,041
Ameristar Council Bluffs............................. 17,230 20,714 22,060
The Reserve.......................................... (16,092) (7,089) (168)
Ameristar Kansas City................................ -- -- 1,168
Ameristar St. Charles................................ -- -- 597
Corporate and other.................................. (10,389) (14,091) (15,771)
-------- -------- ---------
Consolidated operating income........................ $ 13,949 $ 25,545 $ 34,522
======== ======== =========
ADJUSTED OPERATING INCOME (LOSS) MARGINS(1):
Jackpot Properties................................... 17.6% 18.2% 17.6%
Ameristar Vicksburg.................................. 19.8% 20.0% 19.4%
Ameristar Council Bluffs............................. 17.6% 18.5% 17.7%
The Reserve.......................................... (36.9%) (13.4%) (.3%)
Ameristar Kansas City................................ -- -- 14.6%
Ameristar St. Charles................................ -- -- 13.7%
Consolidated operating income margin................. 5.3% 8.5% 10.1%
EBITDA(2):
Jackpot Properties................................... $ 13,163 $ 13,743 $ 14,215
Ameristar Vicksburg.................................. 20,231 21,092 22,945
Ameristar Council Bluffs............................. 24,322 28,430 32,053
The Reserve.......................................... (9,519) 426 6,146
Ameristar Kansas City................................ 1,459
Ameristar St. Charles................................ 715
Corporate and other.................................. (10,057) (13,686) (15,227)
-------- -------- ---------
Consolidated EBITDA.................................. $ 38,140 $ 50,005 $ 62,306
======== ======== =========
- -------------------------
See footnotes on following page.
45
51
YEAR ENDED DECEMBER 31,
------------------------
1998 1999 2000
------ ----- -----
(AMOUNTS IN THOUSANDS)
EBITDA MARGINS(2):
Jackpot Properties..................................... 24.1% 23.6% 23.6%
Ameristar Vicksburg.................................... 29.5% 27.4% 27.8%
Ameristar Council Bluffs............................... 24.9% 25.4% 25.7%
The Reserve............................................ (21.8%) 0.8% 9.9%
Ameristar Kansas City.................................. -- -- 18.3%
Ameristar St. Charles.................................. -- -- 16.4%
Consolidated EBITDA margin............................. 14.4% 16.7% 18.2%
- -------------------------
(1) Adjusted operating income is income from operations (as reported) before The
Reserve's preopening costs in 1998 and before the impairment loss on assets
held for sale in 2000.
(2) EBITDA consists of income from operations plus depreciation and amortization
and impairment loss on assets held for sale. EBITDA Margin is EBITDA as a
percentage of net revenues.
46
52
Year Ended December 31, 2000 Versus Year Ended December 31, 1999
Ameristar experienced an overall growth in net revenues and operating cash
flow for the twelve months ended December 31, 2000 compared to 1999. The results
of operations for the year ended December 31, 2000 have been significantly
impacted by the following events:
- We completed acquisitions of the Kansas City and St. Charles
properties in late December of 2000. The inclusion of 11 days of
operations at the two new Missouri properties resulted in an
increase to net revenues of $12.4 million for the year-ended
December 31, 2000.
- We also completed significant casino and parking expansions at the
Iowa and Mississippi properties in late 1999 and early 2000. In
addition, a number of new generation multi-coin slot machines have
been installed throughout our properties and the strategic
implementation of enhanced marketing programs has been introduced,
aimed at increasing revenues and profitability. Our philosophy of
reinvesting in our properties is continuing with ongoing renovation
and enhancement projects at Ameristar Council Bluffs and Ameristar
Vicksburg.
- We agreed on October 17, 2000 to sell substantially all of the
assets of The Reserve Hotel and Casino for approximately $71.8
million. The sale of The Reserve closed in late January 2001. The
sale resulted in an impairment loss of $57.2 million, which reduced
operating income for the year-ended December 31, 2000. As a result,
we reported a $22.6 million loss from operations for the year-ended
December 31, 2000 as compared to a $25.5 million income from
operations for 1999, despite increases in revenue and cash flows
from operations.
Net revenues for the year ended December 31, 2000 were $342.0 million
compared to $300.3 million for 1999, an increase of $41.7 million or 13.9
percent. This growth results from casino and parking expansions at our Iowa and
Mississippi properties, the introduction of new generation multi-coin slot
machines throughout our properties, the strategic implementation of enhanced
marketing programs and the additional revenues provided by the two new Missouri
properties. A significant amount of the increase in net revenues was due to the
previously mentioned acquisition of the Kansas City and St. Charles properties
on December 20, 2000, though each of our properties experiences an increase in
revenues.
Loss from operations (including the impairment loss) for the twelve months
ended December 31, 2000 was $22.6 million compared to income from operations of
$25.5 million for 1999. Excluding the impairment loss, operations produced an
increase in operating income of $9.0 million or 35.3 percent for the twelve
months ended December 31, 2000, as compared to the prior year. These increases
in operating income prior to the impairment loss resulted primarily from
increased revenues at all the properties, partially offset by operating expense
increases at the properties (particularly marketing costs) and development costs
related to our unsuccessful bid for a gaming license in South St. Louis County,
Missouri.
We incurred an extraordinary loss of $10.0 million ($6.6 million net of
tax) for the retirement of our $100 million subordinated notes in December 2000.
These notes were retired in connection with the refinancing for the purchase of
the Missouri properties.
We incurred a net loss of $40.3 million for the year-ended December 31,
2000, compared to net income of $0.2 million in 1999. The net loss was a result
of the $57.2 million impairment of assets ($37.1 million net of tax) and the
$10.0 million ($6.6 million net of tax) extraordinary loss on the retirement of
debt. Net income in 2000, prior to these unusual and non-recurring transactions,
was $3.4 million compared to net income of $0.2 million in 1999. Earnings per
share, prior to these unusual and non-recurring transactions, was $0.17 for 2000
compared to $0.01 for 1999.
Ameristar Council Bluffs had total net revenues of $124.6 million for the
year ended December 31, 2000 compared to $112 million in 1999, an increase of
$12.6 million and 11.3 percent. The increase was primarily driven by increased
slot revenues, offset slightly by lower table games revenues. The slot increase
of $13.9 million is attributable to the addition of the third deck of the boat
in late 1999 (which increased
47
53
the number of gaming positions by approximately 349), having the largest number
of new generation multi-coin slot machines in the market, having an aggressive
new cash-back program and overall continued growth in the Iowa gaming market.
The decrease in table win of $1.4 million from 1999 to 2000 was the result of a
1.6 percentage point decline in table games hold percentage, which more than
offset the increase in table drop of $0.9 million.
Net revenues at Ameristar Vicksburg for the year ended December 31, 2000
was $82.6 million compared to $76.9 million in 1999, an increase of $5.7 million
or 7.4 percent. The property experienced an increase in slot revenue of $5.5
million or 9.8 percent. The increase in net revenues is largely due to the
casino expansion in the fall of 1999, the implementation of new generation
multi-coin slot machines, an increase in slot machine count and improved
marketing strategies.
The Jackpot properties produced net revenues of $60.3 million for the year
ended December 31, 2000 compared to $58.3 million in 1999, an increase $2.0
million or 3.4 percent. The increased revenues are primarily attributable to
slot machine upgrades and improved marketing programs. Increased slot revenues
of $1.9 million over prior year were attributed to enhanced slot product, timely
slot conversions and effective marketing programs.
The Reserve had net revenues for the year ended December 31, 2000 of $62
million, an improvement of $9.2 million or 17.4 percent over the 1999 net
revenues of $52.8 million. Slot revenue was the primary component of net
revenues, comprising nearly 70 percent of the net revenues for the year. Slot
revenue of $43.1 million exceeded the prior year by $7.2 million, or 20.0
percent. This improvement is primarily attributable to the implementation of
various strategies to drive revenues and gain market share.
The company-wide operating expense ratio for 2000 improved to 89.9 percent
of net revenues (before the asset impairment loss of $57.2 million in connection
with the sale of The Reserve) compared to 91.5 percent of net revenues in 1999.
The improvement in this ratio is primarily the result of increased revenues,
partially offset by operating expense increases at the properties and corporate
office and $1.9 million in development costs related to our unsuccessful bid for
a gaming license in South St. Louis County, Missouri.
Casino costs and expenses for the year ended December 31, 2000 increased
$20.6 million or 18.0 percent, from $114.4 million in 1999 to $134.9 million in
2000. As a percentage of casino revenues, casino expenses increased to 47.1
percent in 2000 compared to 46.2 percent in 1999. The increase in casino
expenses as a percentage of casino revenues was due to an increase in cash back
to players and an aggressive marketing strategy implemented in the second
quarter of 2000. This cost increase was partially offset by other efficiencies
in casino operations.
Food and beverage costs and expenses increased $1.9 million to $35.1
million in 2000 compared to $33.2 million in 1999. Food and beverage
expense-to-revenue ratio decreased to 65.5 percent in 2000 compared to 67.6
percent in 1999. This improvement is primarily related to improved operational
efficiencies experienced during 2000.
Rooms expenses increased by $0.5 million to $6.9 million in 2000 from $6.4
million in 1999. Room expense-to-revenue ratio increased to 38.3 percent in 2000
compared to 37.0 percent in 1999. The increase is primarily related to increases
in payroll and benefits and the addition of the Kansas City property with a 184
room hotel for part of December.
Selling, general and administrative costs and expenses (including
utilities and maintenance and business development costs) increased $4.3 million
or 5.0 percent from prior year. The increase was due primarily to $1.9 million
in development costs related to our unsuccessful bid for a gaming license in
South St. Louis County, Missouri, increases in marketing costs associated with
the implementation of an aggressive marketing strategy in the second quarter of
2000, increases in corporate overhead related to increased corporate staffing
levels and increases in employee compensation at Ameristar Council Bluffs,
Ameristar Vicksburg and the Jackpot Properties, partially offset by a decrease
in such costs at The Reserve.
48
54
Depreciation expenses of $27.8 million for 2000 represented an increase of
$3.3 million over 1999. The increases are attributed to the addition of the
Missouri properties along with the new third deck and parking garage at Council
Bluffs and improvements at the Vicksburg facilities.
Interest expense, net of capitalized interest of $1.4 million in 2000 and
$0.6 million in 1999, was $28.3 million for the year ended December 31, 2000
compared to $24.4 million in 1999, an increase of $3.9 million or 15.8 percent.
The increased interest expense relates primarily to increased debt incurred to
finance construction of the third deck and parking garage at Council Bluffs and
the casino expansion at Vicksburg and the purchase of Kansas City and St.
Charles properties in December. In addition, our average borrowing rate was 10.6
percent in 2000 compared to 9.8 percent in 1999, reflective of higher interest
rates in the general economy throughout much of 2000. Interest was capitalized
on borrowings for construction related to Ameristar Vicksburg, Ameristar Council
Bluffs and Ameristar St. Charles after the December 20, 2000 acquisition.
Our effective tax benefit on losses was 34.8% in 2000 and the effective
tax rate on income was 62.4% in 1999 (versus the Federal statutory rate of 35%).
The differences from the statutory rates are due to the effects of certain
expenses incurred by us, which are not deductible for Federal income tax
purposes.
Year Ended December 31, 1999 Versus Year Ended December 31, 1998
Ameristar Council Bluffs had total net revenues of $112.0 million for the
year ended December 31, 1999 compared to $97.7 million in 1998, an increase of
14.7 percent. The increase is attributed to the popularity of, and the resulting
increased revenues from, the enhanced slot product placed in service during the
fourth quarter of 1998 and the first quarter of 1999, the completion of the
third level casino expansion in the fourth quarter of 1999, which increased the
number of gaming positions by approximately 400, as well as continued growth in
the gaming market.
Net revenues for Ameristar Vicksburg were $76.9 million for the year ended
December 31, 1999 compared with $68.5 million for the prior year, an increase of
12.2 percent. This increase in revenues in 1999 compared to 1998 is due
primarily to an increase in slot revenue and an increase in hotel revenue from a
full year of operating the new hotel facility. The hotel contributed $2.8
million in net revenues for 1999 compared to $1.3 million for 1998 when it was
opened for a partial year beginning in June 1998. Management believes Ameristar
Vicksburg will continue to experience growth due to its superior hotel, casino
and restaurant facilities relative to the competing properties in the Vicksburg
market.
The Jackpot Properties produced net revenues of $58.3 million for the year
ended December 31, 1999 compared to $54.7 million in the prior year, an increase
of 6.6 percent. The improvement was due primarily to an increase in casino
revenues resulting from a higher hold percentage on table games and upgrades to
the slot product.
The Reserve produced net revenues of $52.8 million for the year ended
December 31, 1999 compared to revenues of $43.6 million in the 325 days in 1998
following its opening, an increase of 21.2 percent. In addition to the
additional days open in 1999, the increase in revenue was attributable to
increased direct-mail marketing and other marketing programs. As a result of
these programs, The Reserve generated improved play from both slot machines and
table games and increased its hotel occupancy rate. We are continuing to seek
further operating improvement for additional revenue enhancement.
The company-wide operating expense ratio for 1999 improved to 91.5 percent
of net revenues compared to 98.7 percent of net revenues in 1998 (94.7 percent
before The Reserve preopening costs). The improvement in this ratio is primarily
the result of the improved operating performance at The Reserve, partially
offset by an increase in corporate overhead related to increased corporate
staffing levels and development costs, and the greater centralization of certain
management functions.
Casino costs and expenses for the year ended December 31, 1999 increased
by $11.0 million or 10.6 percent to $114.4 million from $103.4 million in 1998.
As a percentage of casino revenues, casino expenses decreased to 46.2 percent in
1999 compared to 47.8 percent in 1998. The decrease was due primarily to the
improved performance of The Reserve casino operations compared to the startup
49
55
operational inefficiencies experienced in the prior year, partially offset by a
slight increase in casino expenses at Ameristar Council Bluffs relating to
increases in employee compensation and benefits.
Food and beverage costs and expenses increased $1.5 million to $33.2
million in 1999 compared to $31.7 million in 1998 primarily due to increased
revenue. Food and beverage expense-to-revenue ratio decreased to 67.5 percent in
1999 compared to 69.1 percent in 1998. This improvement is primarily related to
the improved operational efficiencies experienced during 1999 at The Reserve.
Rooms expenses increased by $0.6 million to $6.4 million in 1999 from $5.8
million in 1998. The increase was primarily due to increases in costs resulting
from a full year of operations of the hotels in Vicksburg and at The Reserve,
compared to a partial year of operations at both properties in 1998.
Selling, general and administrative costs and expenses (including
utilities and maintenance and business development costs) increased $10.5
million or 13.9 percent from 1998 to 1999. The increase was due primarily to an
increase in corporate overhead related to increased corporate staffing levels
and future business development costs and increases in marketing costs and
employee compensation at Ameristar Council Bluffs, Ameristar Vicksburg and the
Jackpot Properties, partially offset by a decrease in such costs at The Reserve.
Depreciation expense increased $0.3 million or 1.1 percent from 1998 to
1999 as our depreciable base increased by including The Reserve and the
Ameristar Vicksburg hotel for the entire year, partially offset by certain
five-year assets in Vicksburg that are now fully depreciated and are no longer
included in depreciation expense in 1999.
Interest expense, net of capitalized interest of $1.4 million in 1998 and
$0.6 million in 1999, increased $1.8 million or 7.7 percent from 1998 to 1999.
This increase primarily reflects the additional debt incurred to finance our
various expansion projects (such as adding a third level to the casino at
Ameristar Council Bluffs, completing restaurant and meeting room enhancements at
The Reserve, and completing an expansion to the casino, remodeling restaurants
and completing other site improvements at Ameristar Vicksburg) and higher
interest rates on those borrowings. With the opening of The Reserve in February
1998 and the Ameristar Vicksburg Hotel in June 1998, the capitalization of
interest on funds borrowed to construct these projects was discontinued.
Interest was capitalized on borrowings for construction related to Ameristar
Vicksburg and Ameristar Council Bluffs improvements during 1999. Our average
borrowing rate was 9.8 percent in 1999 compared to 10.3 percent in 1998. The
borrowing rate decreased due to the favorable effect of lower interest rates
during the first half of 1999.
Our effective tax rate on income was 62.4% in 1999 and the tax benefit on
losses was 33.4% in 1998 versus the Federal statutory rate of 34% and 35%,
respectively. The differences from the statutory rates are due to the effects of
certain expenses incurred by us that are not deductible for Federal income tax
purposes. The total of these expenses did not vary significantly between
periods, however the lower absolute level of income before taxes in 1999 caused
a greater impact to the effective tax rate for 1999.
Year Ended December 31, 1998 Versus Year Ended December 31, 1997
Ameristar Council Bluffs had total net revenues of $97.7 million in 1998
compared to $87.8 million in 1997, an increase of 11.3 percent. This represents
growth in the market share of Ameristar Council Bluffs and in the Council Bluffs
gaming market in general.
Net revenues for Ameristar Vicksburg were $68.5 million for the year ended
December 31, 1998 compared with $64.0 million for the prior year, an increase of
7.0 percent. This increase in revenues in 1998 compared to 1997 is due to an
increase in casino revenue of $3.4 million and a $1.1 million increase in hotel
revenue due to the new hotel facility. Management believes Ameristar Vicksburg
maintained and will continue to hold its leading position in the Vicksburg
market through effective promotional strategies and by continuing to provide
customers with superior service and quality gaming and non-gaming products.
50
56
The Jackpot Properties produced stable net revenues of $54.7 million and
$54.5 million for the years ended December 31, 1998 and 1997, respectively. A
2.0 percent increase in casino revenue in 1998 was offset by minimal decreases
in food and beverage, rooms and other revenues.
The Reserve produced net revenues of $43.6 million from its opening on
February 10, 1998 to December 31, 1998.
The operating expense ratio for 1998 increased to 98.7 percent (94.7
percent before preopening) compared to 86.4 percent of net revenues in 1997. The
increase in this ratio is primarily a result of the initial operating
performance of The Reserve. Excluding the $34.6 million of revenues and $70.3
million in operating expenses at The Reserve, operating expenses were 86.4
percent of net revenue, which is comparable to 1997.
Casino costs and expenses increased by $24.7 million or 31.3 percent from
$78.7 million in 1997 to $103.4 million in 1998. As a percentage of casino
revenues, casino expenses increased to 47.8 percent in 1998 compared to 45.5
percent in 1997. The majority of the increase in expense ($19.4 million) was
associated with the opening of The Reserve and an increase of $4.6 million in
expenses at Ameristar Council Bluffs associated with additional gaming revenue
of $8.4 million.
Food and beverage costs and expenses increased $11.9 million in 1998
compared to 1997 primarily due to the opening of The Reserve and partially
offset by improvements in this area at the Jackpot Properties and Ameristar
Vicksburg. Food and beverage expense-to-revenue ratio increased to 69.1 percent
in 1998 compared to 64.5 percent in 1997. This increase is directly related to
the startup operational inefficiencies experienced in 1998 at The Reserve.
Rooms expenses increased by $2.7 million to $5.8 million in 1998 from $3.1
million in 1997. The increase was the result of seven months of operations of
the new hotel in Vicksburg and almost 11 months of operations at The Reserve.
Selling, general and administrative costs and expenses (including
utilities and maintenance and business development costs) increased $23.6
million or 45.5 percent from 1997 to 1998. Most of the increase was a result of
the opening of The Reserve and additional expenses associated with salaries,
marketing and professional fees at the corporate level.
Depreciation expense increased $7.8 million or 47.9 percent from 1997 to
1998 as our depreciable base increased with the opening of The Reserve and the
Ameristar Vicksburg hotel.
Preopening costs of $10.6 million were expensed during 1998 related to the
opening of The Reserve.
Interest expense, net of capitalized interest of $4.7 million in 1997 and
$1.4 million in 1998, increased $10.6 million or 87.5 percent from 1997. This
increase primarily reflects the additional debt outstanding to finance our
expansion and higher interest rates on those borrowings. With the opening of The
Reserve in February 1998 and the Ameristar Vicksburg Hotel in June 1998, the
capitalization of interest on funds borrowed to construct these projects was
discontinued. Subsequent interest costs were reflected as an expense on the
statement of operations rather than as an additional cost of the projects on the
balance sheet. Interest was capitalized on borrowings to construct The Reserve
and the Ameristar Vicksburg hotel during 1997 and 1998 until the projects
commenced operations. Our average borrowing rate was 10.3% in 1998 compared to
9.9% in 1997. The borrowing rate increased due to the issuance of $100 million
in 10.5% senior subordinated notes in mid-1997 and an increase in LIBOR.
Our effective tax rate on income was 36.5% in 1997 and the tax benefit on
losses was 33.4% in 1998 versus the Federal statutory rate of 35%. The
differences from the statutory rates are due to the effects of certain expenses
incurred by us that are not deductible for Federal income tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows provided by operating activities were $38.8 million, $34.3
million and $23.1 million for the years ended December 31, 2000, 1999 and 1998,
respectively. The increases in 2000 and 1999 were
51
57
due primarily to the increase in operating income from improved operations at
all of our properties. Cash flows used in investing activities were $521.2
million, $50.0 million and $53.9 million for the years ended December 31, 2000,
1999 and 1998, respectively. The acquisitions of Ameristar Kansas City and
Ameristar St. Charles in December 2000 utilized approximately $487 million in
cash.
During the year ended December 31, 2000, we made capital expenditures of
$33.4 million, comprised of $13.1 million related to expansion and remodeling
projects at Ameristar Council Bluffs (including the completion of the 1,000
space parking garage), $11.7 million in remodeling projects and equipment at
Ameristar Vicksburg, and other capital expenditures for equipment and
maintenance at each of our properties. Capital expenditures for the year ended
December 31, 1999 were approximately $57.6 million, consisting of approximately
$26.9 million at Ameristar Council Bluffs including adding a third deck to the
casino and constructing the parking garage, $16.6 million at Ameristar Vicksburg
including expanding the casino, remodeling restaurants and other site
improvements, and other capital expenditures for remodeling and land purchases
at The Reserve and maintenance projects at the Jackpot Properties. In 1998, we
made capital expenditures of $32.3 million, primarily related to the completion
of The Reserve and the hotel at Ameristar Vicksburg.
Cash flows provided by financing activities were $503.1 million, $13.1
million and $35.9 million for the years ended December 31, 2000, 1999 and 1998,
respectively. In December 2000, we refinanced substantially all of its long-term
debt and borrowed funds for the acquisitions of Ameristar Kansas City and
Ameristar St. Charles, as described more fully below. Cash flows from financing
activities decreased from $35.9 million in 1998 to $13.1 million in 1999 as a
result of a reduced amount of borrowings required to fund capital expenditure
projects. Borrowings in 1998 related primarily to the completion of The Reserve
and the hotel at Ameristar Vicksburg.
On December 20, 2000, we refinanced substantially all our long-term debt
through $575 million of new senior credit facilities with a group of lenders led
by affiliates of Deutsche Bank AG and a $300 million senior subordinated credit
facility with a group of lenders also led by affiliates of Deutsche Bank AG. In
connection with the refinancing, we repurchased $100 million in aggregate
principal amount of our 10.5% Senior Subordinated Notes due 2004 and repaid and
terminated our previous $115 million revolving credit facility and approximately
$30.2 million of other indebtedness.
On January 29, 2001, we completed the sale of The Reserve to Station
Casinos for $71.8 million. The proceeds of the sale were used (1) to partially
repay and permanently reduce the revolving loan commitment and the term loan A
under our senior credit facilities by a total of $50 million, (2) to repay
revolving loans under our senior credit facilities (which may be reborrowed),
and (3) to repay certain indebtedness associated with the assets sold in the
transaction. On February 2, 2001, we issued $380 million in aggregate principal
amount of our old 10 3/4% Senior Subordinated Notes due 2009. The net proceeds
of the offering of the old notes were used (1) to repay the $300 million in
principal amount outstanding under our senior subordinated credit facility and
accrued interest thereon, (2) to partially repay and permanently reduce the term
loan B and the term loan C under our senior credit facilities by a total of $50
million, (3) to repay revolving loans under our senior credit facilities (which
may be reborrowed) and (4) for working capital purposes. Thus, we currently have
$475 million of senior credit facilities as follows:
- $75 million revolving credit facility maturing in 2005 ($25 million
of which is dedicated to the completion of the St. Charles expansion
and will be available for general working capital purposes
thereafter);
- $75 million revolving credit/term loan facility maturing in 2005
(dedicated to the completion of the St. Charles expansion);
- $50 million term loan A maturing in 2005;
- $148.1 million term loan B maturing in 2006; and
- $126.9 million term loan C maturing in 2007.
52
58
The senior credit facilities bear interest at variable interest rates
based on LIBOR (for Eurodollar loans) or the prime rate (for base rate loans)
plus a margin. For the revolving credit facility, the revolving credit/term
facility and the term loan A, the margin is based on our leverage ratio, which
is the ratio of our consolidated debt to latest twelve months EBITDA, as
defined, and ranges from 1.50% to 3.25% in the case of Eurodollar loans and from
0.50% to 2.25% in the case of base rate loans. For the term loan B and the term
loan C, the margins are fixed at 3.75% and 4.00%, respectively, in the case of
Eurodollar loans, and at 2.75% and 3.00%, respectively, in the case of base rate
loans. The senior credit facilities contain certain affirmative and negative
covenants, including promises to maintain certain financial ratios and tests
within defined parameters, including a fixed charge coverage ratio test and
senior and total debt ratio tests, as defined.
We have entered into an interest rate collar agreement to manage interest
expense which is subject to fluctuation due to the variable-rate nature of the
debt under our senior credit facilities. Under the agreement, which covers $50.0
million of borrowings under the senior credit facilities, we have a LIBOR floor
rate of 5.39 percent and a LIBOR ceiling rate of 6.75 percent, plus the
applicable margin. In 1999, we paid approximately $49,000 in additional interest
as a result of this agreement. We did not incur any additional interest in
connection with this agreement in 2000. The agreement terminates on June 30,
2003. We continue to monitor interest rate markets and expect to enter into
interest rate collar or swap agreements for additional amounts of principal
under our senior credit facilities as market conditions warrant.
Our $380 million old 10 3/4% Senior Subordinated Notes due 2009 were
issued by Ameristar on February 2, 2001 and are guaranteed by each of our
subsidiaries. The old notes are unsecured senior subordinated obligations of
Ameristar and rank junior to all of our existing and future senior debt,
including borrowings under our senior credit facilities. The guarantees by our
subsidiaries are unsecured senior subordinated obligations of each of our
subsidiaries and rank junior to all existing and future senior debt of our
subsidiaries, including guarantees of borrowings under our senior credit
facilities. The old notes may be redeemed by us on or after February 15, 2006 in
accordance with their terms and include certain affirmative and negative
covenants, including limitations on our ability to incur additional debt.
The old 10 3/4% senior subordinated notes were issued by Ameristar, and
all of Ameristar's current subsidiaries (the "Guarantors") have jointly and
severally, and fully and unconditionally, guaranteed the old 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 or material assets independent of those of
the Guarantors, other than its investment in the Guarantors, and the aggregate
assets, liabilities, earnings and equity of the Guarantors are substantially
equivalent to our assets, liabilities, earnings and equity on a consolidated
basis. Separate financial statements and certain other disclosures concerning
the Guarantors are not presented because, in the opinion of management, such
information is 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.
We exercised purchase options on two parcels of land at the Ameristar
Vicksburg site in 2000. Both purchases were financed primarily with promissory
notes issued to the sellers totaling $5.8 million with principal repayments of
$250,000 in 2001, $1.2 million in 2010 and $4.3 million in 2024. Each promissory
note is payable in monthly installments and bears interest at various rates,
approximating 10.0% at December 31, 2000.
During the third quarter of 2000, we entered into four-year capital lease
agreements and purchase money financing arrangements to acquire slot machines in
the amounts of approximately $1.0 million at Cactus Petes and approximately $4.5
million at Ameristar Vicksburg at an interest rate of approximately 10.4%. In
addition, in the fourth quarter of 2000, we entered into purchase money
financing arrangements for slot machines and other equipment in the amount of
approximately $1.6 million at Ameristar Council Bluffs, approximately $0.6
million at Cactus Petes and approximately $0.4 million at Ameristar Vicksburg.
53
59
In addition to the capital requirements mentioned above, Ameristar St.
Charles will incur costs related to the expansion of the property. Our current
plans call for us to invest approximately $110 million to complete an expansion
at Ameristar St. Charles, in which the former owner invested approximately $169
million prior to our acquisition of the property. Following the completion of
the St. Charles expansion, the property will have available for future expansion
up to an additional 70,000 square feet of gaming space and approximately 65,000
square feet of additional space in the land-based pavilion, each of which will
require only interior build-out for completion. In 2001, we expect to complete
an approximate $7.4 million renovation and enhancement project at Ameristar
Council Bluffs and an approximately $10.0 million renovation and enhancement
project at Ameristar Vicksburg.
We historically have funded our daily operations through net cash provided
by operating activities and our significant capital expenditures primarily
through bank debt and other debt financing. We believe that our cash flow from
operations, cash and cash equivalents and availability under our senior credit
facilities will support our operations and liquidity requirements, including
capital expenditure plans, for the foreseeable future. While we have
availability under our senior credit facilities to fund up to $100 million of
the St. Charles expansion costs, we expect to finance a significant portion of
these costs from our cash flows from operations. As a result, we do not expect
to draw the full amount dedicated under our senior credit facilities to complete
the St. Charles expansion. At March 15, 2001, we had $123.6 million of available
borrowing capacity under our senior credit facilities, including the $100
million dedicated to the St. Charles expansion.
We have not declared any dividends on our common stock during the last
three fiscal years, and we intend for the foreseeable future to retain all
earnings for use in the development of our business instead of paying cash
dividends. In addition, as described above, the senior credit facilities include
covenants that may restrict or prohibit the payment of dividends.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which we will adopt in the first
quarter of 2001. Because of our limited use of derivative instruments to hedge
interest rate risk on a portion of our variable rate debt, the adoption of SFAS
No. 133 will not have a significant impact on our results of operations or
financial position. We continue to monitor interest rate markets and expect to
enter into interest rate collar or swap agreements for additional amounts of
principal under our senior credit facilities as market conditions warrant. We
will account for any such agreements in accordance with SFAS No. 133.
In November 2000, the Emerging Issues Task Force (EITF) of the FASB
reached a consensus on EITF 00-14, "Accounting for Certain Sales Incentives."
EITF 00-14 requires that discounts which result in a reduction in or refund of
the selling price of a product or service in a single exchange transaction be
recorded as a reduction of revenues. We will adopt EITF 00-14 in the second
quarter of 2001, including reclassifying prior period amounts for programs where
we offer customers "free plays" or coupons for gaming activity. The amount of
"free plays" and coupons to date has not been significant. Our accounting policy
related to free or discounted rooms, food and beverage and other services
already complies with EITF 00-14.
In February 2001, the EITF reached a partial consensus on EITF 00-22,
"Accounting for "Points' and Certain Other Time-Based or Volume-Based Sales
Incentive Offers, and Offers for Free Products or Services to be Delivered in
the Future." The consensus requires that vendors recognize the cash rebate or
refund obligation associated with time- or volume-based cash rebates as a
reduction of revenue based on a "systematic and rational allocation of the cost
of honoring rebates or refunds earned and claimed to each of the underlying
revenue transactions that result in progress by the customer toward earning the
rebate or refund." The liability for such obligations should be based on the
estimated amount of rebates or refunds to be ultimately earned, including an
estimation of "breakage" if it can be reasonably estimated. The consensus is
applicable beginning in the first quarter of 2001.
54
60
Our players' clubs allow customers to earn certain complimentary services
and/or cash rebates based on the volume of the customers' gaming activity. We
currently account for our players' clubs in accordance with EITF 00-22, except
that we record the charge for progress towards the complimentary services/cash
rebates as a casino department expense instead of a reduction of revenue. We
will change the classification for these charges, which totaled $7.9 million in
the year ended December 31, 2000, in the first quarter of 2001, including
reclassifying prior period amounts.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Except for certain long-term debt outstanding at December 31, 2000 in the
aggregate amount of $477.3 million (collectively, the "Variable Rate Debt"), all
of our other long-term debt bears interest at fixed rates. The Variable Rate
Debt bears interest equal to LIBOR (in the case of Eurodollar loans) or the
prime interest rate (in the case of base rate loans), plus an applicable margin.
At December 31, 2000, the average interest rate applicable to the Variable Rate
Debt was 12.1%. An increase of one percentage point in the average interest rate
applicable to the Variable Rate Debt outstanding at December 31, 2000, would
increase our annual interest costs by approximately $4.8 million. We 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 prorated under the revolving credit/term facility and the term loan A.
Although we manage our short-term cash assets with a view to maximizing
return with minimal risk, we do not invest in market rate sensitive instruments
for trading or other purposes and we are not exposed to foreign currency
exchange risks or commodity price risks in our portfolio transactions.
55
61
BUSINESS
We are a leading multi-jurisdictional gaming company that owns and
operates casinos and related hotel and entertainment facilities with six
properties in operation in Missouri, Iowa, Mississippi and Nevada. All of our
principal operations are conducted through wholly owned subsidiaries of
Ameristar. Our properties are:
Ameristar Kansas City: Ameristar Kansas City is a casino and related hotel
and other facilities located seven miles from downtown Kansas City. The casino
opened in 1997 and is the newest and largest gaming facility in the Kansas City
market. It features an historic Missouri riverboat theme, including a 184-room
hotel, approximately 140,000 square feet of gaming space, 3,294 slot machines
and 161 table games. Ameristar Kansas City offers a fully-integrated gaming,
dining, lodging and entertainment experience in a spacious, land-based
atmosphere specifically designed to attract customers from the greater Kansas
City area, as well as strong visitor and overnight markets. Ameristar Kansas
City was recently named the top tourist attraction in Missouri by a local Kansas
City magazine.
Ameristar Council Bluffs: Ameristar Council Bluffs is a riverboat casino
and related land-based hotel and other facilities located in Council Bluffs,
Iowa across the Missouri River from Omaha, Nebraska. We designed and operate
Ameristar Council Bluffs as a destination resort to serve as the entertainment
centerpiece for the region. The property currently features 444 hotel rooms,
approximately 38,500 square feet of gaming space, 1,480 slot machines and 46
table games. In 1999, Ameristar Council Bluffs was awarded the prestigious
Four-Diamond designation from the AAA and is the only riverboat property in the
nation to carry such designation.
Ameristar St. Charles: Ameristar St. Charles is a casino and entertainment
facility situated immediately north of the Interstate 70 bridge in the St. Louis
metropolitan area. The casino complex is strategically located to attract
customers from the St. Charles and greater St. Louis area. The casino opened in
1994 and features approximately 45,000 square feet of gaming space, 1,875 slot
machines and 40 table games. We intend to continue with a partially-completed
expansion of the property that will result in a casino and entertainment
facility with at least 70,000 square feet of gaming space, 2,400 slot machines
and 60 table games, as well as expanded entertainment facilities. This expansion
is expected to be completed in mid-2002.
Ameristar Vicksburg: Ameristar Vicksburg is a riverboat-themed dockside
casino and related hotel and other land-based facilities located in Vicksburg,
Mississippi. The casino is located one-quarter mile north of Interstate 20, the
main east-west thoroughfare connecting Atlanta and Dallas, approximately 45
miles west of Jackson, Mississippi. We opened Ameristar Vicksburg in 1994 and
recently completed a renovation and enhancement of the casino facilities in
which we added approximately 1,000 new generation multi-coin slot machines,
while also refurbishing much of the non-casino facilities. The property features
a 150-room hotel, approximately 39,000 square feet of gaming space, 1,200 slot
machines and 50 table games.
The Jackpot Properties: Cactus Petes Resort Casino and The Horseshu Hotel
& Casino are two casino-hotels located in Jackpot, Nevada at the Idaho border.
The Jackpot Properties have been operated since 1956 and serve customers
primarily from Idaho, Oregon, Washington, Montana, northern California and
southwestern Canadian provinces. Together, the Jackpot Properties feature 420
hotel rooms, approximately 28,500 square feet of gaming space, 1,028 slot
machines and 29 table games. We market the Jackpot Properties to three separate
markets: budget, quality and luxury and the properties offer hotel rooms, food
and other amenities at levels that are affordable for each of these customer
bases. Cactus Petes is rated a Four-Diamond property by the AAA and has been
named "Best Hotel/Resort" in rural Nevada by Nevada Magazine for the last two
years.
The Reserve: In addition to the six properties that we currently own,
until January 29, 2001, we owned The Reserve Hotel Casino in Henderson, Nevada,
a suburb of Las Vegas. The Reserve features an African safari and big game
reserve theme that includes statues of elephants, giraffes and other animals. On
January 29, 2001, we sold The Reserve to Station Casinos, Inc. for $71.8 million
in cash. See
56
62
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
BUSINESS AND MARKETING STRATEGIES
Our business strategy is to: (1) emphasize quality dining, lodging,
entertainment and other non-gaming amenities at affordable prices to complement
and enhance our gaming operations, (2) promote our properties as entertainment
destinations, (3) construct and expand facilities appropriate to individual
markets, (4) emphasize courteous and responsive service to develop customer
loyalty and (5) utilize marketing programs to promote customer retention. In
selecting markets, we seek strong demographics and a favorable competitive
environment. We believe this strategy will continue to distinguish us from our
competitors, many of whom outside of Las Vegas have not emphasized non-gaming
amenities in their operations to the same extent as us. Within markets, we look
for sites with attractive, prominent locations and ease of access that will
support the size and scope of our development plans.
Our properties emphasize slot machine play, and we invest on an ongoing
basis in new slot equipment to promote customer satisfaction and loyalty. To
this end, we added more than 1,000 new generation multi-coin slot machines to
our properties in 2000. All of our properties include table games such as
blackjack, craps and roulette. In addition, Cactus Petes, Ameristar Vicksburg
and the two Missouri properties offer poker and the Jackpot Properties offer
keno and sports book wagering. We generally emphasize competitive minimum and
maximum betting limits based on each market.
Our gaming revenues are derived and are expected to continue to be derived
from a broad base of customers, and we do not depend upon high-stakes players.
We extend credit to our Nevada and Mississippi gaming customers only in limited
circumstances and limited amounts on a short-term basis and in accordance with
the credit restrictions imposed by gaming regulatory authorities. The Iowa and
Missouri gaming statutes prohibit the issuance of casino credit.
Our marketing strategy is to develop a loyal customer base by promoting
the quality of our gaming, leisure and entertainment amenities that emphasize
high standards of service and customer satisfaction. We use players clubs at
each property to identify and retain preferred players and develop promotions
and special events to encourage increased gaming activity by these customers.
Our marketing programs also include a number of promotions, designed primarily
to increase the frequency of customer visits within local markets, as well as
tour and travel promotional packages in certain markets. We use direct mail
promotions and a variety of advertising media to market our properties,
including print, television, radio, outdoor and internet advertising.
EXPANSION PLANS
St. Charles Expansion
We intend to complete an expansion of Ameristar St. Charles that includes
a man-made protective basin containing two new gaming vessels, a new retail and
entertainment complex featuring an approximately 550-seat buffet, a
well-appointed steakhouse and an entertainment lounge. Our current plans provide
that upon completion of the expansion, the casino will have approximately 2,400
slot machines and 60 table games in a total of approximately 70,000 square feet
of gaming space located on two floors of the gaming vessel and will be similar
in design to Ameristar Kansas City. We are considering an alternative design
that would further expand the casino among other enhancements. The expansion
project will result in the opening of an entirely new gaming and entertainment
facility at our St. Charles location and allow us to sell the existing barge
facilities or utilize them for alternative purposes.
Prior to our acquisition of Ameristar St. Charles, the former owner
invested approximately $169 million in the expansion project and completed
building the protective basin, the porte cochere and the external physical
structure of the new gaming vessels and a majority of the structure of the new
restaurant and entertainment complex. In June 1997, the former owner of
Ameristar St. Charles halted construction on the St. Charles expansion project.
We estimate the remaining cost to complete the
57
63
construction of the expansion project, as currently planned, to be approximately
$110 million, including furniture, fixture and equipment costs that we estimate
to be approximately $20 million. A substantial portion of the construction
materials, equipment and fixtures for the St. Charles expansion were previously
purchased by the former owner. Following the completion of the St. Charles
expansion, the property will have available for future expansion up to an
additional 70,000 square feet of gaming space and approximately 65,000 square
feet of additional space in the land-based pavilion, each of which will require
only interior build-out for completion. A substantial portion of this future
expansion space has already been constructed by the former owner of the
property. In addition, a substantial portion of the construction materials,
equipment and fixtures for the future casino expansion space has been purchased.
The construction is not expected to disrupt current operations of the
casino gaming facilities because the currently operating gaming facilities are
separate from the expansion project. We intend to complete the St. Charles
expansion through a guaranteed maximum price construction contract. We plan to
finance the construction of the St. Charles expansion with cash flow from
operations and borrowings under our senior credit facilities. In connection with
the acquisition of the St. Charles property, we assumed the contract with the
general contractor for the St. Charles expansion and are negotiating to modify
this contract to reflect our design changes. Furthermore, substantially all of
the subcontracts for the expansion project remain in effect.
We believe the St. Charles expansion project fulfills a strategic need in
the St. Louis market and that, upon completion of the expansion, Ameristar St.
Charles will be the premier gaming facility in the St. Louis market. We
anticipate the expansion project will be completed in mid-2002.
General Expansion Strategy
We seek to expand our operations through a variety of means, including
entering new North American markets created by the legalization of casino
gaming, developing new casinos or buying existing casinos in established North
American casino gaming markets, expanding through continued growth at our
existing properties, and selectively pursuing expansion projects through Native
American reservations in North America. Although our preference is to own and
operate each of our gaming properties, we also consider expansion opportunities
involving management contracts or joint ventures.
Consistent with our expansion strategy, we recently acquired two
properties in Kansas City and St. Charles, Missouri, expanded the casino,
remodeled restaurants and added parking at Ameristar Vicksburg and added a third
deck to the casino and a parking garage at Ameristar Council Bluffs. We consider
enhancement projects for each property on an ongoing basis. In doing so, we
evaluate the operating performance of each property, the anticipated relative
costs and benefits of the projects under consideration, the availability of cash
flow and debt financing to fund capital expenditures and competitive and other
relevant factors.
We believe that our long-term success in our current markets and expanding
into new markets will depend in part on our ability to distinguish our
operations from those of our competitors. Our strategy of including quality
non-gaming amenities in our facilities, such as lodging, dining and
entertainment, is intended to provide these competitive distinctions. The scope
of non-gaming amenities to be offered at existing properties and future
expansion projects will be determined in part by competitive factors within a
particular market and the nature of our participation in a particular project.
In addition, we believe the selection of attractive expansion markets and
quality locations within those markets will continue to be important to our
growth. In selecting expansion opportunities, we seek a strong demographic
market with a favorable competitive environment and a site in the market with an
attractive, prominent location and ease of access that will support the size and
scope of our development plans.
58
64
PROPERTY PROFILES
The following table presents selected statistical and other information
concerning our properties as of March 15, 2001.
AMERISTAR AMERISTAR AMERISTAR AMERISTAR THE JACKPOT
KANSAS CITY COUNCIL BLUFFS ST. CHARLES VICKSBURG PROPERTIES
----------------- ----------------- ----------------- ----------------- -----------------
Opening Date.......... January 1997 January 1996 May 1994 February 1994 1956
Casino Square Footage
(approx.)........... 140,000 38,500 45,000 39,000 28,500
Slot Machines......... 3,294 1,480 1,875 1,200 1,028
Table Games........... 161 46 40 50 29
Hotel Rooms........... 184 444(1) -- 150 420
Restaurants/Bars...... 15/11 5/6 3/3 3/4 5/4
Restaurant/Bar Seating
Capacity............ 2,513/379 1,093/191 400/40 564/46 584/120
Guest Parking
Spaces.............. 5,000 3,000 4,000 1,700 1,030
Other Amenities....... Kids Quest Kids Quest Entertainment Entertainment 356-Seat
Children's Children's lounge; Gift shop lounge; Gift shop Showroom; Sports
Activity Activity Book; Keno;
Center(2); 1,400- Center(2); Meeting Space;
seat Meeting Space; Swimming Pool;
Entertainment Indoor Swimming Gift Shop;
Facility, Pool & Spa; General Store;
18-screen Movie Exercise Service Station;
Theater(2); Video Facility; Gift Amusement Arcade
Arcade; Gift Shop Shop; Amusement
Arcade
Operating
Subsidiary.......... Ameristar Casino Ameristar Casino Ameristar Casino Ameristar Casino Cactus Pete's,
Kansas City, Inc. Council Bluffs, St. Charles, Inc. Vicksburg, Inc. Inc. ("CPI")
("ACKCI") Inc. ("ACCBI") ("ACSCI") ("ACVI")
- -------------------------
(1) Includes 284 rooms operated by affiliates of Kinseth Hospitality Corporation
and located on land owned by us and leased to affiliates of Kinseth.
(2) Operated by a third party.
AMERISTAR KANSAS CITY
Ameristar Kansas City originally opened in January 1997 and we acquired
the property in December 2000. The property is a master-planned gaming and
entertainment destination facility featuring an historic Missouri riverboat
theme and is strategically located to attract customers from the greater Kansas
City area, as well as tourists from outside the region. The property is located
on approximately 183 acres immediately east of the heavily traveled Interstate
435 bridge, seven miles east of downtown Kansas City. Ameristar Kansas City's
marketing programs are specifically designed to effectively target and capture
repeat customer demand from the local customer base and also capture the strong
visitor and overnight markets. We believe that Ameristar Kansas City has
specific advantages relative to other gaming facilities in the region and that
it is the premier gaming facility in the Kansas City market. The site is
adjacent to the Interstate 435 bridge, which supports an average traffic flow of
approximately 88,000 cars per day. Interstate 435 is a six-lane, north-south
expressway offering quick and easy accessibility and direct visibility of the
site.
We believe the Ameristar Kansas City facility offers a full Las
Vegas-style gaming experience in the Midwest. The Ameristar Kansas City facility
features:
- two permanently docked gaming vessels situated in a man-made
protective basin with an historic Missouri riverboat theme,
- an approximately 140,000 square-foot gaming space with approximately
3,294 slot and video poker machines and 161 table games, including a
poker room,
59
65
- a land-based 184-room hotel and 5,000 parking spaces, and
- a land-based entertainment center with seven full-service
restaurants, several fast-food outlets, eleven bars and lounges, a
1,400-seat Grand Pavilion, a Kid's Quest child-care facility, an 18-
screen movie theater complex, a 5,700-square foot non-gaming video
arcade and a gift shop.
Ameristar Kansas City's restaurants offer a variety of high-quality food
at reasonable prices. Restaurants include an all-you-can-eat live action buffet
featuring Italian, Mexican, Chinese, barbecue, and traditional American fare, a
restaurant featuring fine Italian cuisine and a wine bar with an extensive
selection, a restaurant featuring southwestern foods, a restaurant featuring
fresh Louisiana style seafood, and a restaurant featuring a wide selection of
micro-brewed lagers and an assortment of American and Bavarian cuisine. In
addition, Ameristar Kansas City leases space to a well-known Kansas City
favorite, Arthur Bryant's Barbeque. Furthermore, among other awards and
distinctions, the property's restaurants were voted "Best of Kansas City" in
five different categories in Kansas City Magazine's 2000 Annual Readers Survey.
Market. The Kansas City gaming market is the twelfth largest in the United
States with gaming revenues for the year ended December 31, 2000 of $559
million. The Kansas City market consists of four casinos located in Kansas City,
including Ameristar Kansas City, and a fifth located approximately 50 miles
north in St. Joseph, Missouri. The Kansas City market has over 1.4 million
adults residing within a 50 mile radius and is insulated from other gaming
markets, with no significant competition within 100 miles.
In September 1999, Missouri began allowing continuous boarding on
riverboats in the St. Louis market and in November 1999, Missouri began allowing
continuous boarding on riverboats in the Kansas City market. Prior to this
policy change, casino patrons were permitted to board gaming facilities only
during the first 45 minutes of each two-hour period. In August 2000, Missouri
legislation became effective authorizing the use of slot machines that exchange
paper currency into electronic credit instead of tokens, so that patrons are not
required to manually deposit tokens into gaming machines. This change allows for
faster, more convenient play, especially on new generation, multi-coin slot
machines that have proven popular in other gaming jurisdictions without such
regulations.
Competition. Ameristar Kansas City competes primarily with three other
gaming operations located in and around Kansas City, Missouri. Gaming has been
approved by local voters in jurisdictions near Kansas City, including St.
Joseph, Missouri, which is located approximately 50 miles north of Kansas City
and currently has one riverboat gaming operation. Since the opening of Ameristar
Kansas City in 1997, Sam's Town, the closest casino to Ameristar Kansas City,
closed, and Boyd Gaming, the owner of Sam's Town, sold most of Sam's Town's
assets to Harrah's Entertainment Inc. Sam's Town has remained closed since its
acquisition by Harrah's, which has announced its intention to sell the property
with a covenant restricting its use to non-gaming purposes.
In June 2000, Isle of Capri purchased the Flamingo Hilton and commenced a
substantial renovation of the property, which was partially completed in the
first quarter of 2001 and is expected to be completed in the second quarter of
2001. We believe that during this construction period, Isle facility patrons
were displaced by the construction and many frequented Harrah's North Kansas
City.
In May 2000, Harrah's North Kansas City, located approximately five miles
from Ameristar Kansas City and currently the closest operating casino to
Ameristar Kansas City, announced plans for facilities enhancements including
consolidation of gaming space onto one expanded vessel. We cannot be sure what
effect, if any, this will have on our operations or our ability to compete in
the Kansas City market.
In April 2000, the Boonville City Council approved the Isle of Capri
riverboat gaming operation on a site that has received preliminary site and
development approval from the Missouri Gaming Commission and which is located
approximately 105 miles from Ameristar Kansas City. Boonville is located in an
area that is not currently served by Missouri gaming facilities.
60
66
AMERISTAR COUNCIL BLUFFS
We opened Ameristar Council Bluffs in January 1996 under one of three
gaming licenses currently issued for the Council Bluffs gaming market. Ameristar
Council Bluffs is located on the bank of the Missouri River across from Omaha,
Nebraska and is adjacent to the Nebraska Avenue exit on Interstate 29
immediately north of the junction of Interstate 29 and Interstate 80. We
designed Ameristar Council Bluffs as a destination resort intended to serve as
an entertainment centerpiece of the region. Ameristar Council Bluffs features
architecture reminiscent of a gateway river town in the late 1800s. The design
complements existing characteristics of Council Bluffs while giving the property
its own distinctive personality. Ameristar Council Bluffs opened in stages
during 1996 and early 1997. The approximately 50-acre Ameristar Council Bluffs
site is large enough to accommodate future land-based expansion. In 1999,
Ameristar Council Bluffs was awarded the prestigious Four-Diamond designation
from the AAA and the property is the only riverboat property in the nation to
carry this designation.
The Council Bluffs Casino is an approximately 52,000 square foot
three-level, cruising riverboat measuring 272 feet long by 98 feet wide with a
casino of approximately 38,500 square feet. The third level addition to the
riverboat was completed in November 1999, increasing the number of gaming
positions by approximately 400. By building the vessel with high ceilings and
making it 98 feet wide, the casino has the spacious feel of a land-based
facility. Escalators and an elevator connect all levels of the riverboat. The
casino is open 24 hours a day, seven days a week and is required to make a
two-hour cruise a minimum of 100 days per year during the "excursion season,"
which is defined as April 1 through October 31. If the riverboat fails to
satisfy this cruising requirement, it will not be allowed to operate during the
balance of the year. However, we believe that the Iowa Racing and Gaming
Commission would grant a waiver from this requirement should dangerous cruising
conditions preclude the riverboat from making the minimum number of cruises.
Guests enter the riverboat from shore via an enclosed ramp from the
68,000-square foot Main Street Pavilion and from the newly completed, fully
enclosed parking garage. The Main Street Pavilion is a self-contained complex
featuring an Ameristar hotel, restaurants and entertainment options for children
and adults. The interior of the Pavilion is designed to replicate a
Victorian-era main street. The main level of the Pavilion includes a buffet, a
24-hour coffee shop, a steak house and a sports bar cabaret, all of which are
operated by us. Rising above the Pavilion is a five-story, 160-room,
full-service Ameristar hotel that offers a panoramic view of the Missouri River
and the Council Bluffs Casino. The Main Street Pavilion also includes a
children's activity center operated by New Horizon Kids Quest, Inc. and owned by
a joint venture between that company and Ameristar Council Bluffs. A 1,000 space
parking garage, adjacent to the pavilion, was completed in Spring 2000.
In September 2000, Ameristar Council Bluffs completed the new 100-seat
Atrium restaurant adjacent to the casino entrance as well as an expanded and
enhanced VIP Lounge. In addition, as part of an approximately $7.4 million
capital improvement program, we are currently renovating and enhancing the first
two levels of the casino at Ameristar Council Bluffs, as well as refurbishing
the sports bar and converting the 24-hour coffee shop to a 24-hour bakery and
restaurant.
We have leased a portion of the Ameristar Council Bluffs site to an
affiliate of Iowa-based Kinseth Hospitality Corporation for a 188-room,
limited-service Holiday Inn Suites hotel that opened on March 31, 1997 and was
expanded during 1999. Kinseth developed and operates this hotel. The Holiday Inn
Suites hotel and the Main Street Pavilion are connected by a climate-controlled
walkway that also connects to the indoor pool and spa and the exercise room. We
have leased another portion of the Ameristar Council Bluffs site to another
affiliate of Kinseth for a 96-room Hampton Inn hotel. Kinseth developed and
operates this hotel, which is connected to the Holiday Inn Suites Hotel and the
Main Street Pavilion by climate-controlled walkways. The Hampton Inn hotel
opened on March 2, 2001.
Market. Council Bluffs has a population of approximately 54,000 people.
Council Bluffs forms part of the greater Omaha, Nebraska/Council Bluffs, Iowa
metropolitan area, which has a population of approximately 690,000.
Approximately 1.0 million people live within a 50-mile radius, and approximately
1.7 million people live within a 100-mile radius, of Council Bluffs. The median
household income of the
61
67
greater metropolitan area is approximately $42,000, with an unemployment rate of
approximately 2.1%. Based on available data, Council Bluffs is currently the
strongest gaming market in Iowa. Gaming revenues in the Council Bluffs gaming
market for the year ended December 31, 2000 were $347 million, an increase of
$20 million over 1999.
Competition. Three gaming licenses have been issued for the Council Bluffs
gaming market to Iowa West Racing Association. We operate our casino at
Ameristar Council Bluffs pursuant to an operating agreement with Iowa West
Racing Association. The other casinos operating under these licenses are Harveys
Casino Hotel, which operates a riverboat casino in close proximity to Ameristar
Council Bluffs, and Bluffs Run Casino, a year-round dog track and casino owned
by a subsidiary of Harveys Casino Resorts, the parent company of Harveys, which
acquired the property from Iowa West Racing Association in October 1999. Bluffs
Run's gaming license limits the casino to the operation of reel-style and video
slot machines that meet the definition of "games of chance" under the Iowa
statutes. Bluffs Run, which opened in March 1995, has approximately 1,500 slot
machines, a restaurant, a buffet, and lounge entertainment. We believe that
Bluffs Run will continue to provide significant competition due to its advantage
of being the only land-based facility in the market. Harveys, which opened in
1996, also provides serious competition for Ameristar Council Bluffs. Harveys
added a third level to its riverboat in early 1998, adding approximately 200
slot machines, and built a 1,600-space parking garage in 1999.
AMERISTAR ST. CHARLES
Ameristar St. Charles originally opened in May 1994 and we acquired the
property in December 2000. The property is a master-planned gaming and
entertainment destination facility featuring an historic Missouri riverboat
theme and is located on approximately 52 acres immediately north of the
Interstate 70 bridge in the St. Louis metropolitan area. The casino complex is
strategically located to attract customers from the St. Charles and greater St.
Louis area, as well as tourists from outside the region. Interstate 70 is a
10-lane, east-west freeway offering quick and easy accessibility to and direct
visibility of the Ameristar St. Charles site for the 188,000 vehicles, on
average, that use the highway per day.
In April 2000, a reconfiguration of the two gaming vessels at Ameristar
St. Charles was completed. In response to the new continuous boarding rules that
went into effect in the St. Louis market in September 1999, all of the gaming
operations of Ameristar St. Charles were moved to a barge which contains 45,000
square feet of gaming and entertainment space. Ameristar St. Charles features
approximately 1,875 slot and video poker machines and 40 table games, and
non-casino amenities including a 250-seat buffet, a distinctive steak house, a
deli, three bars, an entertainment lounge and a gift shop. As described above in
"-- Expansion Plans," our current plans call for us to invest approximately $110
million to complete an expansion at the property in mid-2002.
In May 1996, construction of an elevated roadway and a 4,000-space
five-story parking structure was completed. The parking facility is constructed
above the existing flood plain. The elevated roadway and parking structure
provide improved access to the gaming facilities and significantly diminish
Ameristar St. Charles' susceptibility to closure during the spring flooding
season.
Market. The St. Louis gaming market is the ninth largest in the United
States with gaming revenues for year ended December 31, 2000 of $684 million.
The St. Louis market, which overlaps two jurisdictions, Missouri and Illinois,
consists of five casinos, including Ameristar St. Charles. There are
approximately 1.8 million adults living within 50 miles and 2.7 million adults
living within 100 miles of St. Louis, making it the third largest gaming market
in the United States in terms of local population, and the St. Louis market is
insulated from other gaming markets.
Competition. Ameristar St. Charles competes primarily with four other
gaming operations located in and around St. Louis, Missouri. Two of these
competitors are located in Illinois, which does not impose the $500 loss limit
that is imposed by Missouri. One of the competitors is a facility located in
Maryland Heights that opened in April 1997 and is located five miles from
Ameristar St. Charles. Ameristar
62
68
St. Charles experienced a decline in revenues following the opening of the
Maryland Heights facility. Prior to Harrah's acquisition of Players
International, Inc. on May 22, 2000, Harrah's and Players operated separate but
adjacent facilities at Maryland Heights. Since Harrah's acquisition of Players,
Harrah's has been in the process of consolidating both facilities into one
operation. In addition, gaming has been approved by local voters in
jurisdictions and other cities and counties along the Mississippi and Missouri
Rivers near St. Louis, including two casinos in the outlying market area which
were approved but have not been opened. This increasing competition could have a
material adverse effect on Ameristar St. Charles' business.
AMERISTAR VICKSBURG
Ameristar Vicksburg, which opened in February 1994, represents our first
expansion project outside of Jackpot. Ameristar Vicksburg is a riverboat-themed
dockside casino and related land-based hotel and other facilities located in
Vicksburg, Mississippi. We believe Ameristar Vicksburg provides superior and
larger facilities than its current competitors in the Vicksburg area and has
competitive advantages by virtue of its close proximity to Interstate 20.
Nonetheless, Vicksburg is a competitive gaming market and Ameristar Vicksburg's
operations to date have been dependent to a substantial degree upon a continuous
casino marketing and promotional campaign.
The permanently moored, dockside casino is approximately 315 feet long and
approximately 120 feet wide. Due to the width of the Ameristar Vicksburg, the
casino and restaurants have the spacious feel of a land-based facility.
Ameristar Vicksburg has three levels, which are connected by escalators and
elevators. The casino is on the lower and middle levels and has wide aisles with
an open feel that provides a comfortable and inviting atmosphere. During 1999,
the casino floor was upgraded and expanded, with more than 250 new gaming
positions being added, including the installation of new generation multi-coin
slots and the replacement of 232 older slot machines. A $10.0 million renovation
and enhancement project is currently in progress that will refurbish the first
two levels of the casino, including new cages, lounges, players club and
promotions booths, and add a VIP slot area. This project also will replace the
showroom with a blues club featuring a saloon, entertainment and gaming.
Ameristar Vicksburg is open 24 hours a day, seven days a week.
Ameristar Vicksburg offers a variety of food and beverage options
including three restaurants and four bars. The restaurants include a new upscale
steakhouse, which opened in December 1999, a buffet and a 24-hour casual dining
restaurant which was remodeled during 1999. One of the bars offers live
cabaret-style entertainment. In addition, approximately 600 new parking spaces
were added during 1999, bringing the total number of guest parking spaces to
over 1,700.
We believe Ameristar Vicksburg's competitive advantages include its
location, the size and design of the project and the range and quality of its
amenities. The primary locational advantages of Ameristar Vicksburg are its
proximity to Interstate 20 and its ease of access. As discussed above, Ameristar
Vicksburg is significantly wider than typical riverboat casinos. As part of a
long-term plan to enhance Ameristar Vicksburg, we acquired 18 acres of raw land
across from the main entrance to the property for the future development of
additional improvements. We constructed a 150-room hotel, which opened in June
1998, on a portion of this parcel. In addition, we believe the overall range and
quality of the facilities, food service and entertainment at Ameristar Vicksburg
are superior to those available at its existing competitors.
Market. The primary market for Ameristar Vicksburg is residents of the
Jackson and Vicksburg, Mississippi and Monroe, Louisiana areas; tourists coming
to Vicksburg primarily to visit the Vicksburg National Military Park; and other
traffic traveling on Interstate 20, a major east-west thoroughfare that connects
Atlanta and Dallas.
Vicksburg, with a population of approximately 30,000 persons, is located
45 miles west of Jackson, the capital of Mississippi. According to the 1990 U.S.
Census, the Jackson and Vicksburg metropolitan areas had a total population of
approximately 460,000 persons. Approximately 1.5 million people live within a
100-mile radius of Vicksburg. The Vicksburg National Military Park, located
within three miles
63
69
of Ameristar Vicksburg, draws over 1.0 million registered visitors a year.
Interstate 20 (which connects Atlanta and Dallas) passes directly through
Vicksburg. According to the Mississippi Department of Transportation,
approximately 8.0 million vehicles drove across the Interstate 20 bridge at
Vicksburg during 1999. As of December 31, 2000, Vicksburg had approximately
1,900 lodging rooms. Gaming revenues in the Vicksburg gaming market for the 52
weeks ended December 31, 2000 were approximately $230.2 million.
Competition. Ameristar Vicksburg is subject to competition from three
local competitors and from casinos in Shreveport and Bossier City, Louisiana.
Ameristar Vicksburg is also subject to competition from a Native American casino
in Philadelphia, Mississippi, which recently announced plans to construct an
additional gaming and hotel facility near the existing property. Ameristar
Vicksburg has approximately 1,600 gaming positions. Several potential gaming
sites still exist in Warren County and Vicksburg and from time to time potential
competitors propose the development of additional casinos in or near Vicksburg,
including a current proposal to develop a Native American casino in Louisiana
near Vicksburg. We are currently involved in legal proceedings in which it is
alleged that we and certain other parties engaged in conduct to oppose the
development of a casino between Vicksburg and Jackson in violation of
Mississippi's antitrust and gaming regulatory laws. See "Item 3. Legal
Proceedings."
THE JACKPOT PROPERTIES
The Jackpot Properties, which have been operating since 1956, have been
designed and developed and are marketed to appeal to three separate markets:
budget, quality and luxury. We set prices for hotel rooms, food and other
non-gaming amenities at levels that are affordable to its separate customer
bases. Our objective is to be perceived by our customers as providing good value
and high quality for the price charged. We promote Cactus Petes as a destination
resort primarily in the northwestern United States and southwestern Canada. The
Jackpot Properties are open 24 hours a day, seven days a week.
Cactus Petes completed a major expansion project in 1991. In addition, we
substantially completed a remodeling of the casino at The Horseshu in late 1997.
Cactus Petes has received a Four-Diamond rating from the AAA annually since 1993
and The Horseshu Hotel has a Three-Diamond rating from the AAA. The food and
beverage operations at the Jackpot Properties include a buffet, a fine dining
restaurant, a 24-hour casual dining restaurant, a coffee shop and a snack bar, a
showroom that features nationally known entertainment, and cocktail lounges with
entertainment.
Market. We believe that approximately 50% of the customer base of the
Jackpot Properties consists of residents of Idaho who generally frequent the
properties on an overnight or turnaround basis. The balance of the Jackpot
Properties' customers come primarily from Oregon, Washington, Montana, northern
California and the southwestern Canadian provinces. Although many of the
customers from beyond southern Idaho are tourists traveling to other
destinations, a significant portion of these customers come to Jackpot as a
final destination.
Competition. We have developed a dominant share of the market capacity in
Jackpot. The Jackpot Properties compete with four other hotels and motels (three
of which also have casinos). As of December 31, 2000, the Jackpot Properties
accounted for approximately 55% of the lodging rooms, 62% of the slot machines
and 73% of the table games in Jackpot. We believe Cactus Petes offers a more
attractive environment and a broader and higher quality range of gaming and
leisure activities than those of its competitors. We are not aware of any
expansion plans by existing or potential competitors in Jackpot.
Casinos with video lottery terminals ("VLT") similar to slot machines are
operated on Native American land in Idaho, including one near Pocatello with
approximately 200 VLT machines that has been operated by the Shoshone-Bannock
Tribes (the "S-B Tribes"). The S-B Tribes recently entered into a compact with
the State of Idaho allowing gaming on the S-B Tribes' lands to the extent
permitted under Idaho law as to be determined by a federal court pursuant to
currently pending proceedings. The State is contending in this litigation that
VLT terminals are not permitted under Idaho law. A recent proposal to amend
Idaho law and compacts between the State of Idaho and three tribes with
reservations in Northern Idaho would permit these tribes to operate VLT
terminals but place limits on the expansion of gaming by
64
70
these tribes. The S-B Tribes are not covered by this proposal, but the outcome
of the litigation under the compact with the S-B tribes could be affected if
Idaho law is amended as has been proposed. The Idaho legislature did not approve
the bills to amend Idaho law or ratify the amended compacts with the other
tribes during the 2001 legislative session, but similar legislation may be
introduced in the future. In addition, casino gaming on Native American lands in
both western Washington and northeast Oregon has been in operation for several
years, and casinos also operate in Alberta, Canada. See "Risk Factors -- Risks
Related to Our Business."
EMPLOYEES
As of March 15, 2001, we employed approximately 6,400 employees. None of
our current employees is employed pursuant to collective bargaining or other
union arrangements. We believe our employee relations are good.
PROPERTIES
Ameristar Kansas City. Ameristar Kansas City is located on approximately
150 acres of property, approximately 33 acres of which we lease and the balance
of which we own. The site is east of and adjacent to Interstate 435 along the
north bank of the Missouri River. The site, which is approximately seven miles
east of downtown Kansas City, may be accessed via the Missouri Highway 210 exit
on Interstate 435. The leased property is under lease with the Birmingham
Drainage District for a 10-year initial term that commenced in 1995; the lease
grants us eight 10-year renewal options. Approximately 2.9 acres of the
Ameristar Kansas City site is ground leased by us for the use of a child care
facility.
Ameristar Council Bluffs. Ameristar Council Bluffs is located on an
approximately 50-acre site along the bank of the Missouri River and adjacent to
the Nebraska Avenue exit on Interstate 29 immediately north of the junction of
Interstates 29 and 80. We own approximately 27 acres of this site and have
rights to use the remaining portion of the site that is owned by the State of
Iowa for a 50-year term. We have leased 0.623 acres of the Ameristar Council
Bluffs site to an affiliate of Kinseth Hospitality Corporation for the
development and operation of a 188-room limited service Holiday Inn Suites Hotel
that opened on March 31, 1997 and was expanded during 1999. We have also leased
0.426 acres of the Ameristar Council Bluffs site to another affiliate of Kinseth
for the development and operation of a 96-room Hampton Inn hotel, which is
expected to open in March 2001. All of our interests in Ameristar Council Bluffs
serve as collateral for our obligations under the senior credit facilities.
Ameristar St. Charles. Ameristar St. Charles is located on approximately
52 acres which we own along the west bank of the Missouri River immediately
north of Interstate 70. Access to the property may be obtained via the Fifth
Street exit on Interstate 70.
Ameristar Vicksburg. In connection with the development of Ameristar
Vicksburg, we acquired eight parcels in Vicksburg along Washington Street near
Interstate 20. These parcels comprise approximately 48 acres, approximately 34
of which are developable. Substantially all of Ameristar Vicksburg's assets are
pledged to secure our obligations under the senior credit facilities. In
addition, we have developed a 20-acre mobile home park with 30 single- and 20
double-wide mobile homes. This mobile home park is located seven miles from
Ameristar Vicksburg and sites are available for rent by employees and other
persons. The mobile home park rental rates are competitive with the local
market.
The Jackpot Properties. Cactus Petes is located on a 35-acre site and The
Horseshu is located on a 30-acre site, both of which we own. The Cactus Petes
and The Horseshu sites are across from each other on U.S. Highway 93. We also
own 239 housing units in Jackpot, including 90 units in two apartment complexes
developed as United States Department of Agriculture Rural Economic and
Community Development Services Multi-Family Housing Program ("USDA") projects.
These housing units support the primary operations of the Jackpot Properties.
The Jackpot Properties are subject to deeds of trust securing our obligations
under the senior credit facilities, and the USDA housing projects are subject to
mortgage loans in favor of the USDA.
65
71
We own a gas station adjacent to Highway 93 in Jackpot, which we operate
under a franchise from Chevron. We believe that this facility is in material
compliance with applicable environmental and other regulatory requirements. We
have previously operated two other gas stations at the Jackpot Properties, one
of which was abandoned prior to the adoption of modern environmental abandonment
standards. Although management believes that all tanks for this gas station were
removed in the mid-1970s, we have not conducted tests for the presence of any
environmental contamination from this gas station. We believe that the
likelihood of a material unfavorable outcome with respect to potential
environmental liabilities relating to this former gas station is remote.
Other Properties. We lease approximately 29,400 square feet of office
space in various locations, including for our executive offices in Las Vegas,
Nevada.
LEGAL PROCEEDINGS
E.L. Pennebaker, Jr., et. al. v. Ameristar Casinos, Inc., et. al. On
February 23, 1998, E.L. Pennebaker, Jr. filed a complaint in the Circuit Court
of Pike County, Mississippi against Ameristar, 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 "Pennebaker case"). 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
Ameristar, HVC and DGNB on the conspiracy count and against Ameristar and HVC on
the restraint of trade and tortiously 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 Ameristar's pro rata portion is $1,685,333. These damages
are compensatory only as the court did not allow the jury to consider an award
of punitive damages. Judgment was entered on November 8, 1999, and we and the
other defendants have appealed the case to the Mississippi Supreme Court, and we
otherwise intend 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. Subsequent to the appeal being taken,
DGNB settled with the plaintiffs, and the judgment has been reduced accordingly.
Mr. Pennebaker has also filed a petition with the Mississippi Gaming
Commission requesting that the Mississippi Gaming Commission order Ameristar,
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. We have been advised that
no action is required by it in connection with this petition unless requested by
the Mississippi Gaming Commission.
Walter H. Gibbes, Jr. and Margaret S. Dozier v. Ameristar Casinos, Inc. et
al. On November 22, 1999, Mr. Gibbes and Ms. Dozier filed a complaint in the
Circuit Court of Pike County, Mississippi against Ameristar, HVC, Isle of Capri
Casinos, Inc. (the parent company of RCMV; "ICC") and DGNB. The matter is
pending as case no. 99-0157-B. We believe that the plaintiffs were partners with
66
72
Mr. Pennebaker in a partnership that held an option to a real estate parcel
along the Big Black River that is adjacent to the parcel that was the subject of
the Horseshoe Gaming, Inc. application. The allegations in the complaint are
substantially the same as those in the complaint in the case previously brought
by the plaintiffs in the Pennebaker case. The plaintiffs seek $4,567,500 in
actual damages and an unspecified amount of punitive damages.
The defendants have removed this case to the United States District Court
for the Southern District of Mississippi on diversity jurisdiction and federal
question grounds. The case is now pending in federal court as case no.
3:99cv911WS. The plaintiffs filed a motion to remand the case back to the Pike
County circuit court. Subsequent to the filing of this motion, ICC settled with
the plaintiffs, but the federal district court was not advised of the
settlement. Subsequently, the federal district court granted the plaintiffs'
motion to remand the case to state court on the grounds that ICC's citizenship
was not diverse. The other defendants have filed a motion seeking the federal
court to vacate its prior ruling, which motion is still pending. We intend to
continue to vigorously defend against this cause of action.
Other Legal Proceedings and Claims. From time to time, we are a party to
litigation which arises in the ordinary course of business. Except for the
matters described or referred to above, we are not currently a party to any
litigation that management believes would be likely to have a material adverse
effect on us.
67
73
GOVERNMENT REGULATIONS
The ownership and operation of casino gaming facilities are subject to
extensive state and local regulations. We are required to obtain and maintain
gaming licenses in each of the jurisdictions in which we conduct gaming. The
limitation, conditioning or suspension of gaming licenses could (and the
revocation or non-renewal of gaming licenses, or the failure to reauthorize
gaming in certain jurisdictions, would) materially adversely affect our
operations in that jurisdiction. In addition, changes in law that restrict or
prohibit our gaming operations in any jurisdiction could have a material adverse
effect on us.
NEVADA. The ownership and operation of casino gaming facilities in Nevada
are subject to: (1) the Nevada Gaming Control Act and the regulations
promulgated thereunder (collectively, "Nevada Act"); and (2) various local
regulations. Our operations are subject to the licensing and regulatory control
of the Nevada Gaming Commission ("Nevada Commission"), the Nevada State Gaming
Control Board ("Nevada Board"), and, in the case of the Jackpot Properties, the
Liquor Board of Elko County. The Nevada Commission, the Nevada Board and the
Liquor Board of Elko County are collectively referred to in this section as the
"Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things, (1) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (2) the establishment and maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, (3) providing reliable record keeping and requiring the filing of
periodic reports with the Nevada Gaming Authorities; (4) the prevention of
cheating and fraudulent practices; and (5) providing a source of state and local
revenues through taxation and licensing fees. Change in such laws, regulations
and procedures could have an adverse effect on our gaming operations.
Cactus Pete's, Inc. ("CPI"), which operates the Jackpot Properties, is
required to be licensed by the Nevada Gaming Authorities. The gaming licenses
require the periodic payment of fees and taxes and are not transferable.
Ameristar is registered by the Nevada Commission as a publicly traded
corporation (a "Registered Corporation") and has been found suitable to own the
stock of CPI, which is a corporate licensee (a "Corporate Licensee") under the
terms of the Nevada Act. As a Registered Corporation, Ameristar is required
periodically to submit detailed financial and operating reports to the Nevada
Commission and furnish any other information that the Nevada Commission may
require. No person may become a stockholder of, or receive any percentage of
profits from, a Corporate Licensee without first obtaining licenses and
approvals from the Nevada Gaming Authorities. Ameristar and CPI have obtained
from the Nevada Gaming Authorities the various registrations, findings of
suitability, approvals, permits and licenses currently required in order to
engage in gaming activities in Nevada.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, CPI or Ameristar in
order to determine whether such individual is suitable or should be licensed as
a business associate of a gaming licensee. Officers, directors and certain key
employees of CPI must file applications with the Nevada Gaming Authorities and
may be required to be licensed or found suitable by the Nevada Gaming
Authorities. Officers, directors and key employees of Ameristar who are actively
and directly involved in gaming activities of CPI may be required to be reviewed
or found suitable by the Nevada Gaming Authorities. The Nevada Gaming
Authorities may deny an application for licensing for any cause that they deem
reasonable. A finding of suitability is comparable to licensing, and both
require submission of detailed personal and financial information followed by a
thorough investigation. The applicant for licensing or a finding of suitability
must pay all the costs of the investigation. Changes in licensed positions must
be reported to the Nevada Gaming Authorities, and in addition to their authority
to deny an application for a finding of suitability or licensure, the Nevada
Gaming Authorities have jurisdiction to disapprove a change in a corporate
position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with CPI or Ameristar, the companies involved would have to sever
all relationships with such person. In addition, the Nevada Commission may
require
68
74
CPI or Ameristar to terminate the employment of any person who refuses to file
appropriate applications. Determinations of suitability or of questions
pertaining to licensing are not subject to judicial review in Nevada.
CPI and Ameristar are required to submit detailed financial and operating
reports to the Nevada Commission. Substantially all material loans, leases,
sales of securities and similar financing transactions by Ameristar and CPI must
be reported to, or approved by, the Nevada Commission.
If it were determined that the Nevada Act was violated by CPI, the gaming
licenses it holds or has applied for could be limited, denied, conditioned,
suspended or revoked, subject to compliance with certain statutory and
regulatory procedures. In addition, CPI, Ameristar and the persons involved
could be subject to substantial fines for each separate violation of the Nevada
Act at the discretion of the Nevada Commission. Further, a supervisor could be
appointed by the Nevada Commission to operate CPI's gaming properties and, under
certain circumstances, earnings generated during the supervisor's appointment
(except for the reasonable rental value of the premises) could be forfeited to
the State of Nevada. Limitation, conditioning or suspension of any gaming
license or the appointment of a supervisor could (and denial or revocation of
any gaming license would) materially adversely affect our gaming operations.
Any beneficial holder of Ameristar's voting securities, regardless of the
number of shares owned, may be required to file an application, be investigated,
and have his suitability as a beneficial holder of Ameristar's voting securities
determined if the Nevada Commission has reason to believe that such ownership
would otherwise be inconsistent with the declared policy of the State of Nevada.
The applicant must pay all costs of investigation incurred by the Nevada Gaming
Authorities in conducting any such investigation.
The Nevada Act requires any person who acquires beneficial ownership of
more than 5% of a Registered Corporation's voting securities to report the
acquisition to the Nevada Commission. The Nevada Act requires that beneficial
owners of more than 10% of a Registered Corporation's voting securities apply to
the Nevada Commission for a finding of suitability within thirty days after the
Chairman of the Nevada Board mails the written notice requiring such filing.
Under certain circumstances, an "institutional investor", as defined in the
Nevada Act, which acquires more than 10%, but not more than 15%, of a Registered
Corporation's voting securities may apply to the Nevada Commission for a waiver
of such finding of suitability if such institutional investor holds the voting
securities for investment purposes only. An institutional investor shall not be
deemed to hold voting securities for investment purposes unless the voting
securities were acquired and are held in the ordinary course of business as an
institutional investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the board of directors
of the Registered Corporation, any change in the Registered Corporation's
corporate charter, bylaws, management, policies or operations of the Registered
Corporation, or any of its gaming affiliates, or any other action which the
Nevada Commission finds to be inconsistent with holding the Registered
Corporation's voting securities for investment purposes only. Activities which
are not deemed to be inconsistent with holding voting securities for investment
purposes only include (1) voting on all matters voted on by stockholders; (2)
making financial and other inquiries of management of the type normally made by
securities analysts for informational purposes and not to cause a change in its
management, policies or operations; and (3) such other activities as the Nevada
Commission may determine to be consistent with such investment intent. If the
beneficial holder of voting securities who must be found suitable is a
corporation, partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners. The applicant is
required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Nevada Commission or
the Chairman of the Nevada Board, may be found unsuitable. The same restrictions
apply to a record owner if the record owner, after request, fails to identify
the beneficial owner. Any stockholder found unsuitable and who holds, directly
or indirectly, any beneficial ownership of the common stock of a Registered
Corporation beyond such period of time as may be
69
75
prescribed by the Nevada Commission may be guilty of a criminal offense.
Ameristar is subject to disciplinary action if, after it receives notice that a
person is unsuitable to be a stockholder or to have any other relationship with
Ameristar or CPI, Ameristar, (1) pays that person any dividend or interest upon
voting securities of Ameristar, (2) allows that person to exercise, directly or
indirectly, any voting right conferred through securities held by the person,
(3) pays remuneration in any form to that person for services rendered or
otherwise, or (4) fails to pursue all lawful efforts to require such unsuitable
person to relinquish his voting securities including, if necessary, the
immediate purchase of said voting securities by Ameristar, for cash at fair
market value. Additionally, the Liquor Board of Elko County has the authority to
approve all persons owning or controlling the stock of any corporation
controlling a gaming license within their jurisdictions.
The Nevada Commission may, at its discretion, require the holder of any
debt security of a Registered Corporation to file applications, be investigated
and be found suitable to own the debt security of a Registered Corporation if it
has reason to believe that such holder's acquisition of such ownership would
otherwise be inconsistent with the declared policy of the State of Nevada. If
the Nevada Commission determines that a person is unsuitable to own such
security, then pursuant to the Nevada Act, the Registered Corporation can be
sanctioned, including the loss of its approvals, if without the prior approval
of the Nevada Commission, it (1) pays to the unsuitable person any dividend,
interest, or any distribution whatsoever; (2) recognizes any voting right by
such unsuitable person in connection with such securities; (3) pays the
unsuitable person remuneration in any form; or (4) makes any payment to the
unsuitable person by way of principal, redemption, conversion, exchange,
liquidation or similar transaction.
Ameristar is required to maintain a current stock ledger in Nevada, which
may be examined by the Nevada Gaming Authorities at any time. If any securities
are held in trust by an agent or by a nominee, the record holder may be required
to disclose the identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds for finding the
record holder unsuitable. Ameristar is also required to render maximum
assistance in determining the identity of the beneficial owner. The Nevada
Commission has the power to require Ameristar stock certificates to bear a
legend indicating that the securities are subject to the Nevada Act. However, to
date, the Nevada Commission has not imposed such a requirement on Ameristar.
Ameristar may not make a public offering of its securities without the
prior approval of the Nevada Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. On March 22, 2001, the Nevada Gaming Commission granted us approval to
make public offerings for a period of two years, subject to specified conditions
(the "Shelf Approval"). The Shelf Approval also applies to any company we wholly
own that is a publicly traded corporation or would become a publicly traded
corporation pursuant to a public offering. The Shelf Approval also includes
approval for CPI to guarantee any security issued by, and to hypothecate its
assets to secure the payment or performance of any obligations evidenced by a
security issued by, us or an affiliate in a public offering. The Shelf Approval
also includes approval of Stock Restrictions. The Shelf Approval, however, may
be rescinded for good cause without prior notice upon the issuance of an
interlocutory stop order by the Chairman of the Nevada Board. In addition,
restrictions on the transfer of an equity security issued by a Corporate
Licensee, and agreements not to encumber such securities (collectively, "Stock
Restrictions") are ineffective without the prior approval of the Nevada
Commission. The Shelf Approval does not constitute a finding, recommendation or
approval by the Nevada Commission or the Nevada Board as to the accuracy or
adequacy of the prospectus or the investment merits of the securities offered.
Any representation to the contrary is unlawful. The exchange offer will be made
pursuant to the Shelf Approval.
Changes in control of Ameristar through merger, consolidation, stock or
asset acquisitions, management or consulting agreements, or any act or conduct
by a person whereby he obtains control, may not occur without the prior approval
of the Nevada Commission. Entities seeking to acquire control of a Registered
Corporation must satisfy the Nevada Board and Nevada Commission in a variety of
stringent standards prior to assuming control of such Registered Corporation.
The Nevada Commission may also require controlling stockholders, officers,
directors and other persons having a material relationship or
70
76
involvement with the entity proposing to acquire control, to be investigated and
licensed as part of the approval process relating to the transaction.
The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada Corporate Licensee gaming licensees, and Registered
Corporations that are affiliated with those operations, may be injurious to
stable and productive corporate gaming. The Nevada Commission has established a
regulatory scheme to ameliorate the potentially adverse effects of these
business practices upon Nevada's gaming industry and to further Nevada's policy
to (1) assure the financial stability of Corporate Licensees and their
affiliates; (2) preserve the beneficial aspects of conducting business in the
corporate form; and (3) promote a neutral environment for the orderly governance
of corporate affairs. Approvals are, in certain circumstances, required from the
Nevada Commission before the Registered Corporation can make exceptional
repurchases of voting securities above the current market price thereof and
before a corporate acquisition opposed by management can be consummated. The
Nevada Act also requires prior approval of a plan of recapitalization proposed
by the Registered Corporation's Board of Directors in response to a tender offer
made directly to the Registered Corporation's stockholders for the purposes of
acquiring control of the Registered Corporation.
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada licensee's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable monthly, quarterly or annually and are based upon either (1) a
percentage of the gross revenues received; (2) the number of gaming devices
operated; or (3) the number of table games operated. The license fee payable to
the State of Nevada is based upon "gaming receipts" (generally defined as gross
receipts less payouts to customers as winnings) and equals 3% of gaming receipts
of $50,000 or less per month, 4% of gaming receipts over $50,000 and less than
$134,000 per month, and 6.25% of gaming receipts over $134,000 per month. A
casino entertainment tax is also paid by casino operations where entertainment
is furnished in connection with the selling or serving of food and refreshments,
or the selling of merchandise.
Any person who is licensed, required to be licensed, registered, required
to be registered, or is under common control with such persons (collectively,
"Licensees"), and who proposes to become involved in a gaming venture outside of
Nevada is required to deposit with the Nevada Board, and thereafter maintain, a
revolving fund in the amount of $10,000 to pay the expenses of investigation of
the Nevada Board of their participation in such foreign gaming. The revolving
fund is subject to increase or decrease at the discretion of the Nevada
Commission. Thereafter, Licensees are required to comply with certain reporting
requirements imposed by the Nevada Act. Licensees are also subject to
disciplinary action by the Nevada Commission if they knowingly violate any laws
of the foreign jurisdiction pertaining to the foreign gaming operation, fail to
conduct the foreign gaming operation in accordance with the standards of honesty
and integrity required of Nevada gaming operations, engage in activities or
enters into associations that are harmful to the State of Nevada or its ability
to collect gaming taxes and fees, or employs, contracts with or associates with
a person in the foreign operation who has been denied a license or finding of
suitability in Nevada on the ground of unsuitability.
MISSOURI. The ownership and operation of riverboat and dockside gaming
facilities in Missouri are subject to extensive state and local regulation, but
primarily the licensing and regulatory control of the Missouri Gaming
Commission. The Missouri Riverboat Gaming Act (the "Missouri Act") provides for
the licensing and regulation of riverboat and dockside gaming operations on the
Mississippi and Missouri Rivers in the State of Missouri and the licensing and
regulation of persons who distribute gaming equipment and supplies to gaming
licensees.
The Missouri Gaming Commission has discretion to approve gaming license
applications for both permanently moored ("dockside") riverboat casinos and
powered ("excursion") riverboat casinos and determine the number, location and
type of excursion gambling boat allowed each licensee. Due to safety concerns,
all gaming vessels on the Missouri River are permitted to be moored in moats set
back from the river. Gaming licenses are initially issued for two one-year
periods and must be renewed every two years
71
77
thereafter. No gaming licensee may pledge or transfer in any way any license, or
any interest in a license, issued by the Missouri Gaming Commission. As a
result, the gaming licenses of Ameristar Casino Kansas City, Inc. and Ameristar
Casino St. Charles, Inc. were not pledged to secure our senior credit
facilities.
The issuance, transfer and pledge of ownership interests in a gaming
licensee are also subject to strict notice and approval requirements. Missouri
Gaming Commission regulations prohibit a licensee from doing any of the
following without at least 60 days prior notice to the Missouri Gaming
Commission, and during such period, the Missouri Gaming Commission may
disapprove the transaction or require the transaction be delayed pending further
investigation:
- any transfer or issuance of an ownership interest in a gaming
licensee that is not a publicly held entity or a holding company
that is not a publicly held entity, and
- any pledge or grant of a security interest in an ownership interest
in a gaming licensee that is not a publicly held entity or a holding
company that is not a publicly held entity;
provided that no ownership interest may be transferred in any way pursuant to
any pledge or security interest without separate notice to the Missouri Gaming
Commission at least 30 days prior to such transfer, which restriction must be
specifically included in the grant of a security interest.
Under the Missouri Act, certain members of our management and certain of
our employees associated with our gaming business are required to obtain and
maintain occupational licenses. Currently, all of our management required to
obtain occupational licenses have obtained them. The Missouri Gaming Commission
may deny an application for a license for any cause that it deems reasonable.
Substantially all loans, leases, sales of securities and similar financing
transactions by a gaming licensee must be reported to and approved by the
Missouri Gaming Commission. Missouri Gaming Commission regulations require a
licensee to notify the Missouri Gaming Commission of its intention to consummate
any of the following transactions at least 15 days prior to such consummation,
and the Missouri Gaming Commission may reopen the licensing hearing prior to or
following the consummation date to consider the effect of the transaction on the
licensee's suitability:
- any issuance of ownership interest in a publicly held gaming
licensee or a publicly held holding company, if such issuance would
involve, directly or indirectly, an amount of ownership interest
equaling 5% or greater of the ownership interest in the gaming
licensee or holding company after the issuance is complete,
- any private incurrence of debt equal to or exceeding one million
dollars by a gaming licensee or holding company that is affiliated
with the holder of a license,
- any public issuance of debt by a gaming licensee or holding company
that is affiliated with the holder of a license, and
- any significant related party transaction as defined in the
regulations.
The Missouri Gaming Commission may waive or reduce the 15-day notice
requirement.
The Missouri Act imposes operational requirements on riverboat operators,
including a charge of two dollars per gaming customer that licensees must pay to
the Missouri Gaming Commission, certain minimum payout requirements, a 20% tax
on adjusted gross receipts, prohibitions against providing credit to gaming
customers (except for the use of credit cards and cashing checks) and a
requirement that each licensee reimburse the Missouri Gaming Commission for all
costs of any Missouri Gaming Commission staff necessary to protect the public on
the licensee's riverboat. Licensees must also submit audited quarterly financial
reports to the Missouri Gaming Commission and pay the associated auditing fees.
Other areas of operation which are subject to regulation under Missouri rules
are the size, denomination and handling of chips and tokens, the surveillance
methods and computer monitoring of electronic games, accounting and audit
methods and procedures, and approval of an extensive internal control system.
The Missouri rules also require that all of an operator's purchases of chips,
tokens, dice, playing cards and electronic gaming devices must be acquired from
suppliers licensed by the Missouri Gaming Commission, or another person or
entity approved by the Missouri Gaming Commission. The Missouri Act provides for
a loss limit of $500 per person per two-hour "cruise". Although the Missouri Act
provides no limit on the amount of riverboat space that may be used for gaming,
the Missouri Gaming Commission can impose
72
78
space limitations through the adoption of rules and regulations. Additionally,
United States Coast Guard safety regulations could affect the amount of
riverboat space that may be devoted to gaming. The Missouri Act also includes
requirements as to the form of riverboats, which must resemble Missouri's
riverboat history to the extent practicable and include certain non-gaming
amenities. All nine licensees currently operating riverboat gaming operations in
Missouri are authorized to conduct all or a portion of their operations on a
dockside basis.
Missouri gaming regulations have been modified in recent years to benefit
gaming operations. In September 1999 the Missouri Gaming Commission began
allowing open and continuous boarding on the riverboats in the St. Louis market
and in November 1999 the Missouri Gaming Commission began allowing open and
continuous boarding on area riverboats in the Kansas City market. This change
eliminated the prior mandated two-hour simulated cruise times, which had limited
boarding at any gaming vessel to only 45 minutes at the beginning of each
two-hour period. The Missouri Act now authorizes the exchange of currency into
electronic credits so that patrons are no longer forced to manually feed tokens
into gaming machines at the start of play. This allows faster, more convenient
play, especially in multi-coin games which have proven popular in other gaming
jurisdictions.
The Missouri Act requires each licensee to post a bond or other surety to
guarantee that the licensee complies with its statutory obligations. In
addition, the Missouri Act gives the Missouri Gaming Commission the authority to
require gaming licensees to post a bond or other form of security to the State
of Missouri to, among other things, guarantee the completion of an expansion of
a gaming facility within the later of a time period determined by the Missouri
Gaming Commission or August 28, 2003. The failure to complete an approved
expansion project within the prescribed time period may, pursuant to the
Missouri Act, constitute sufficient grounds for not renewing the gaming license
for the gaming facility.
To promote safety, the Missouri Gaming Commission has required that gaming
entertainment barges obtain annual certification from the American Bureau of
Shipping. On January 8, 1999, the American Bureau of Shipping decertified the
gaming barges and other ancillary barges now operated by Ameristar St. Charles,
as a result of low water levels on the Missouri River and the build up of silt
and debris under these barges. At that time, the Missouri Gaming Commission
expressed concern regarding the effect of the low water level on the barges.
However, the Missouri Gaming Commission allowed the former owner to keep the St.
Charles property open because of steps taken to remedy the problem. The American
Bureau of Shipping subsequently recertified the St. Charles facility in November
1999. While the former owner previously took steps to reduce the possibility
that this will happen again, including additional dredging of materials from
under the barges, we cannot assure you that this condition will not recur and,
if so, require the closure of a property for a significant amount of time.
If the Missouri Gaming Commission decides that a gaming subsidiary
violated a gaming law or regulation, the Missouri Gaming Commission could limit,
condition, suspend or revoke the license of the gaming subsidiary. In addition,
a gaming subsidiary, its parent company and the persons involved could be
subject to substantial fines for each separate violation. Limitation,
conditioning or suspension of any gaming license could (and revocation of any
gaming license would) materially adversely affect Ameristar and our gaming
subsidiaries' gaming operations.
The Missouri Gaming Commission regulates the issuance of excursion liquor
licenses, which authorize the licensee to serve, offer for sale, or sell
intoxicating liquor aboard any excursion gambling boat or facility immediately
adjacent to and contiguous with the excursion gambling boat, which is owned and
operated, by the licensee. An excursion liquor license is granted for a one year
term by the Missouri Gaming Commission and is renewable annually. The Commission
can discipline an excursion liquor licensee for any violation of Missouri law or
the Missouri Gaming Commission's rules. Licensees are responsible for the
conduct of their business and for any act or conduct of any employee on the
premises that is in violation of the Missouri Act or the rules of the Missouri
Gaming Commission. Missouri Gaming Commission liquor control regulations also
include prohibitions on certain intoxicating liquor promotions and a ban on fees
accepted for advertising products. Only Class A licensees can obtain a liquor
license from the Missouri Gaming Commission. Class A licenses are licenses
granted by the commission to allow the holder to conduct gambling games on an
excursion gambling boat and to operate an excursion gambling boat.
73
79
MISSISSIPPI. The ownership and operation of casino facilities in
Mississippi are subject to extensive state and local regulation, but primarily
the licensing and regulatory control of the Mississippi Gaming Commission (the
"Mississippi Commission").
The Mississippi Gaming Control Act (the "Mississippi Act"), which
legalized dockside casino gaming in Mississippi, is similar to the Nevada Gaming
Control Act. The Mississippi Commission has adopted regulations that are also
similar in many respects to the Nevada gaming regulations.
The laws, regulations and supervisory procedures of Mississippi and the
Mississippi Commission are based upon declarations of public policy that are
concerned with, among other things, (1) the prevention of unsavory or unsuitable
persons from having direct or indirect involvement with gaming at any time or in
any capacity; (2) the establishment and maintenance of responsible accounting
practices and procedures; (3) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and safeguarding of assets and revenues,
providing reliable record keeping and requiring the filing of periodic reports
with the Mississippi Commission; (4) the prevention of cheating and fraudulent
practices; (5) providing a source of state and local revenues through taxation
and licensing fees; and (6) ensuring that gaming licensees, to the extent
practicable, employ Mississippi residents. The regulations are subject to
amendment and interpretation by the Mississippi Commission. We believe that our
compliance with the licensing procedures and regulatory requirements of the
Mississippi Commission will not affect the marketability of our securities.
Changes in Mississippi laws or regulations may limit or otherwise materially
affect the types of gaming that may be conducted and such changes, if enacted,
could have an adverse effect on us and our Mississippi gaming operations.
The Mississippi Act provides for legalized dockside gaming at the
discretion of the fourteen counties that border the Gulf Coast or the
Mississippi River, but only if the voters in such counties have not voted to
prohibit gaming in that county. In recent years, certain anti-gaming groups
proposed for adoption through the initiative and referendum process certain
amendments to the Mississippi Constitution, which would prohibit gaming in the
state. The proposals were declared illegal by the Mississippi courts on
constitutional and procedural grounds. The latest ruling was appealed to the
Mississippi Supreme Court, which affirmed the decision of the lower court. If
another such proposal were to be offered and if a sufficient number of
signatures were to be gathered to place a legal initiative on the ballot, it is
possible for the voters of Mississippi to consider such a proposal in November
2002.
As of March 15, 2001, dockside gaming was permissible in nine of the
fourteen eligible counties in the state and gaming operations had commenced in
Adams, Coahoma, Hancock, Harrison, Tunica, Warren and Washington counties. Under
Mississippi law, gaming vessels must be located on the Mississippi River or on
navigable waters in eligible counties along the Mississippi River or in the
waters lying south of the counties along the Mississippi Gulf Coast. In December
1996, the Mississippi Commission rejected an application for the development of
a casino on a site on the Big Black River in Warren County near Interstate 20
between Jackson and Vicksburg, which decision was appealed by an adjoining
landowner and the license applicant. In December 1997, a Mississippi circuit
court issued an order reversing the decision of the Mississippi Commission and
remanded the application to the Mississippi Commission for further proceedings.
The decision of the court was appealed by the Mississippi Commission to the
Mississippi Supreme Court and oral argument was heard by the Supreme Court on
March 6, 2000. The Mississippi Commission has also adopted a regulation that
prohibits gaming on the Big Black River, however, the Mississippi Commission has
taken the position that the Mississippi Commission may be prohibited from
applying the regulation to the existing applicant that appealed the initial
siting decision. In addition, Ameristar is involved in legal proceedings in
which it is alleged that Ameristar and certain other parties engaged in conduct
to oppose this application in violation of Mississippi's antitrust and gaming
regulatory laws. See "Item 3. Legal Proceedings."
The Mississippi Act permits unlimited stakes gaming on permanently moored
vessels on a 24-hour basis and does not restrict the percentage of space that
may be utilized for gaming. There are no limitations on the number of gaming
licenses that may be issued in Mississippi.
74
80
We and any subsidiary of ours that operates a casino in Mississippi (a
"Mississippi Gaming Subsidiary") are subject to the licensing and regulatory
control of the Mississippi Commission. Ameristar Casinos, Inc. is registered as
a publicly traded holding company (a "Registered Corporation") of Ameristar
Casino Vicksburg, Inc. ("ACVI") under the Mississippi Act. A Registered
Corporation is required periodically to submit detailed financial and operating
reports to the Mississippi Commission and furnish any other information that the
Mississippi Commission may require. If we are unable to continue to satisfy the
registration requirements of the Mississippi Act, we and our Mississippi Gaming
Subsidiaries cannot own or operate gaming facilities in Mississippi. Each
Mississippi Gaming Subsidiary must maintain a gaming license from the
Mississippi Commission to operate a casino in Mississippi. Such licenses are
issued by the Mississippi Commission subject to certain conditions, including
continued compliance with all applicable state laws and regulations.
Gaming licenses are not transferable, are issued for a three-year period
(and may be continued for two additional three-year periods) and must be renewed
periodically thereafter. ACVI was granted a renewal of its gaming license by the
Mississippi Commission on December 18, 1999. No person may become a stockholder
of or receive any percentage of profits from a Mississippi Gaming Subsidiary of
a Registered Corporation without first obtaining licenses and approvals from the
Mississippi Commission. We have obtained such approvals in connection with the
licensing of our Mississippi Gaming Subsidiary.
Certain of Ameristar's officers and employees and the officers, directors
and certain key employees of our Mississippi Gaming Subsidiary must be found
suitable or be licensed by the Mississippi Commission. We believe that we have
obtained or applied for all necessary findings of suitability with respect to
such persons associated with Ameristar or our Mississippi Gaming Subsidiary,
although the Mississippi Commission, in its discretion, may require additional
persons to file applications for findings of suitability. In addition, any
person having a material relationship or involvement with Ameristar may be
required to be found suitable, in which case those persons must pay the costs
and fees associated with such investigation. The Mississippi Commission may deny
an application for a finding of suitability for any cause that it deems
reasonable. Changes in certain licensed positions must be reported to the
Mississippi Commission. In addition to its authority to deny an application for
a finding of suitability, the Mississippi Commission has jurisdiction to
disapprove a change in a person's corporate position or title and such changes
must be reported to the Mississippi Commission. The Mississippi Commission has
the power to require any Mississippi Gaming Subsidiary or Ameristar to suspend
or dismiss officers, directors and other key employees or sever relationships
with other persons who refuse to file appropriate applications or whom the
authorities find unsuitable to act in such capacities.
At any time, the Mississippi Commission has the power to investigate and
require the finding of suitability of any record or beneficial stockholder of
Ameristar. The Mississippi Act requires any person who acquires more than 5% of
any class of voting securities of a Registered Corporation to report the
acquisition to the Mississippi Commission, and such person may be required to be
found suitable. Also, any person who becomes a beneficial owner of more than 10%
of a class of voting securities of a Registered Corporation, as reported to the
Securities and Exchange Commission, must apply for a finding of suitability by
the Mississippi Commission and must pay the costs and fees that the Mississippi
Commission incurs in conducting the investigation. The Mississippi Commission
has generally exercised its discretion to require a finding of suitability of
any beneficial owner of more than 5% of a class of a Registered Corporation's
voting securities. However, the Mississippi Commission has adopted a policy that
permits certain institutional investors to own beneficially up to 15% of a class
of a Registered Corporation's voting securities without a finding of
suitability. If a stockholder who must be found suitable is a corporation,
partnership or trust, it must submit detailed business and financial
information, including a list of beneficial owners.
Any person who fails or refuses to apply for a finding of suitability or a
license within thirty (30) days after being ordered to do so by the Mississippi
Commission may be found unsuitable. The same restrictions apply to a record
owner if the record owner, after request, fails to identify the beneficial
owner. Any person found unsuitable and who holds, directly or indirectly, any
beneficial ownership of such securities beyond such time as the Mississippi
Commission prescribes, may be guilty of a misdemeanor.
75
81
We may be subject to disciplinary action if, after receiving notice that a
person is unsuitable to be a stockholder or to have any other relationship with
us or our Mississippi Gaming Subsidiary, the company involved: (1) pays the
unsuitable person any dividend or other distribution upon such person's voting
securities; (2) recognizes the exercise, directly or indirectly, of any voting
rights conferred by securities held by the unsuitable person; (3) pays the
unsuitable person any remuneration in any form for services rendered or
otherwise, except in certain limited and specific circumstances; or (4) fails to
pursue all lawful efforts to require the unsuitable person to divest himself of
the securities, including, if necessary, the immediate purchase of the
securities for cash at a fair market value.
We may be required to disclose to the Mississippi Commission, upon
request, the identities of the holders of any of our debt or other securities.
In addition, under the Mississippi Act, the Mississippi Commission may, in its
discretion require the holder of any debt security of a Registered Corporation
to file applications, be investigated and be found suitable to own the debt
security if it has reason to believe that the ownership would be inconsistent
with the declared policies of the State of Mississippi. If the Mississippi
Commission determines that a person is unsuitable to own a debt security, then
the Registered Corporation may be sanctioned, including the loss of its
approvals, if without the prior approval of the Mississippi Commission it: (1)
pays to the unsuitable person any dividend, interest, or any distribution
whatsoever; (2) recognizes any voting right by the unsuitable person in
connection with those securities; (3) pays the unsuitable person remuneration in
any form; or (4) makes any payment to the unsuitable person by way of principal,
redemption, conversion, exchange, liquidation, or similar transaction. Although
the Mississippi Commission generally does not require the individual holders of
obligations such as notes to be investigated and found suitable, the Mississippi
Commission retains the discretion to do so for any reason, including but not
limited to, a default, or where the holder of the debt instrument exercises a
material influence over the gaming operations of the entity in question. Any
holder of debt securities required to apply for a finding of suitability must
pay all investigative fees and costs of the Mississippi Commission in connection
with such an investigation.
Each Mississippi Gaming Subsidiary must maintain in Mississippi a current
ledger with respect to ownership of its equity securities and each Registered
Corporation must maintain in Mississippi a current list of its stockholders,
which must reflect the record ownership of each outstanding share of any class
of equity security issued by such corporation. The ledger and stockholder lists
must be available for inspection by the Mississippi Commission at any time. If
any securities are held in trust by an agent or by a nominee, the record holder
may be required to disclose the identity of the beneficial owner to the
Mississippi Commission. A failure to make such disclosure may be grounds for
finding the record holder unsuitable. Ameristar must also render maximum
assistance in determining the identity of the beneficial owner.
The Mississippi Act requires that the certificates representing securities
of a Registered Corporation bear a legend indicating that the securities are
subject to the Mississippi Act and the regulations of the Mississippi
Commission. Ameristar has received from the Mississippi Commission a waiver from
this legend requirement. The Mississippi Commission has the power to impose
additional restrictions on the holders of securities at any time.
Substantially all material loans, leases, sales of securities and similar
financing transactions by a Registered Corporation or a Mississippi Gaming
Subsidiary must be reported to or approved by the Mississippi Commission. A
Mississippi Gaming Subsidiary may not make a public offering of its securities,
but may pledge or mortgage casino facilities. We may not make an issuance or a
public offering of our securities without the prior approval of the Mississippi
Commission if any part of the proceeds of the offering is to be used to finance
the construction, acquisition or operation of gaming facilities in Mississippi
or to retire or extend obligations incurred for those purposes. Such approval,
if given, does not constitute a recommendation or approval of the investment
merits of the securities subject to the offering. We have received a waiver of
the prior approval requirement for our securities offerings, subject to certain
conditions.
76
82
Under the regulations of the Mississippi Commission, a Mississippi Gaming
Subsidiary may not guarantee a security issued by an affiliated company pursuant
to a public offering, or pledge its assets to secure payment or performance of
the obligations evidenced by the security issued by the affiliated company,
without the prior approval of the Mississippi Commission. The pledge of the
stock of a Mississippi Gaming Subsidiary and the foreclosure of such a pledge
are ineffective without the prior approval of the Mississippi Commission.
Moreover, restrictions on the transfer of an equity security issued by a
Mississippi Gaming Subsidiary and agreements not to encumber such securities are
ineffective without the prior approval of the Mississippi Commission. We have
obtained approvals from the Mississippi Commission for such guarantees, pledges
and restrictions in connection with offerings of securities, subject to certain
restrictions.
Changes in control of Ameristar or our Mississippi Gaming Subsidiary
through merger, consolidation, acquisition of assets, management or consulting
agreements, or any act or conduct by a person by which such person obtains
control, may not occur without the prior approval of the Mississippi Commission.
Entities seeking to acquire control of a Registered Corporation must satisfy the
Mississippi Commission in a variety of stringent standards prior to assuming
control of the Registered Corporation. The Mississippi Commission may also
require controlling stockholders, officers, directors and other persons having a
material relationship or involvement with the entity proposing to acquire
control, to be investigated and licensed as part of the approval process
relating to the transaction.
The Mississippi legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and other corporate
defense tactics that affect corporate gaming licensees in Mississippi and
Registered Corporations may be injurious to stable and productive corporate
gaming. The Mississippi Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Mississippi's gaming industry and to further Mississippi's policy to (1) assure
the financial stability of corporate gaming operations and their affiliates; (2)
preserve the beneficial aspects of conducting business in the corporate form;
and (3) promote a neutral environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Mississippi
Commission before a Registered Corporation may make exceptional repurchases of
voting securities in excess of the current market price and before a corporate
acquisition opposed by management can be consummated. Mississippi's gaming
regulations also require prior approval by the Mississippi Commission of a plan
of recapitalization proposed by a Registered Corporation's Board of Directors in
response to a tender offer made directly to the Registered Corporation's
stockholders for the purpose of acquiring control of the Registered Corporation.
Neither Ameristar nor any Mississippi Gaming Subsidiary may engage in
gaming activities in Mississippi while also conducting gaming operations outside
of Mississippi without approval of the Mississippi Commission. The Mississippi
Commission may require determinations that, among other things, there are means
for the Mississippi Commission to have access to information concerning the out-
of-state gaming operations of Ameristar and our affiliates. We have previously
obtained a waiver of foreign gaming approval from the Mississippi Commission for
operations in other states in which Ameristar conducts gaming operations and
will be required to obtain the approval or a waiver of such approval from the
Mississippi Commission prior to engaging in any additional future gaming
operations outside of Mississippi.
If the Mississippi Commission determined that we violated a gaming law or
regulation, the Mississippi Commission could limit, condition, suspend or revoke
our approvals and the license of the Mississippi Gaming Subsidiary, subject to
compliance with certain statutory and regulatory procedures. In addition, we,
the Mississippi Gaming Subsidiary and the persons involved could be subject to
substantial fines for each separate violation. Because of such a violation, the
Mississippi Commission could seek to appoint a supervisor to operate our
Mississippi casino facilities. Limitation, conditioning or suspension of any
gaming license or approval or the appointment of a supervisor could (and
revocation of any gaming license or approval would) materially adversely affect
us, our gaming operations and our results from operations.
77
83
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Mississippi and to the
counties and cities in which a Mississippi Gaming Subsidiary's respective
operations are conducted. Depending upon the particular fee or tax involved,
these fees and taxes are payable either monthly, quarterly or annually and are
based upon (1) a percentage of the gross gaming revenues received by the casino
operation, (2) the number of gaming devices operated by the casino, or (3) the
number of table games operated by the casino. The license fee payable to the
State of Mississippi is based upon "gaming receipts" (generally defined as gross
receipts less payouts to customers as winnings) and equals 4% of gaming receipts
of $50,000 or less per month, 6% of gaming receipts over $50,000 and not in
excess of $134,000 per month, and 8% of gaming receipts in excess of $134,000
per month. The foregoing license fees are allowed as a credit against the
Mississippi Gaming Subsidiary's Mississippi income tax liability for the year
paid. The gross revenue fee imposed by the City of Vicksburg equals
approximately 4% of the gaming receipts.
The Mississippi Commission's regulations require as a condition of
licensure or license renewal that an existing licensed gaming establishment's
plan include a 500-car parking facility in close proximity to the casino complex
and infrastructure facilities which amount to at least 25% of the casino cost.
Ameristar believes that ACVI is in compliance with this requirement with the
opening of a 150-room hotel in June 1998. The Mississippi Commission adopted
amendments to the regulation that increase the infrastructure development
requirement from 25% to 100% for new casinos (or upon acquisition of a closed
casino), but grandfathered existing licensees.
IOWA. Ameristar's Council Bluffs operations are conducted by Ameristar
Casino Council Bluffs, Inc. ("ACCBI") and are subject to Chapter 99F of the Iowa
Code and the regulations promulgated thereunder. Ameristar's gaming operations
are subject to the licensing and regulatory control of the Iowa Racing and
Gaming Commission (the "Iowa Gaming Commission").
Under Iowa law, wagering on a "gambling game" is legal, when conducted by
a licensee on an "excursion gambling boat." An "excursion gambling boat" is a
self-propelled excursion boat. "Gambling game" means any game of chance
authorized by the Iowa Gaming Commission. The excursion season is from April 1st
through October 31st of each calendar year. The vessel must operate at least one
excursion each day for 100 days during the excursion season to operate during
the off season. Each excursion must consist of a minimum of two hours. The
Council Bluffs casino satisfied the requirements of Iowa law for the conduct of
off-season operations for the years of 1997 through 2000.
The legislation permitting riverboat gaming in Iowa authorizes the
granting of licenses to "qualified sponsoring organizations." A "qualified
sponsoring organization" is defined as a person or association that can show to
the satisfaction of the Iowa Gaming Commission that the person or association is
eligible for exemption from federal income taxation under sec. 501(c)(3), (4),
(5), (6), (7), (8), (10) or (19) of the Internal Revenue Code (hereinafter
"not-for-profit corporation"). The not-for-profit corporation is permitted to
enter into operating agreements with persons qualified to conduct riverboat
gaming operations. Such operators must be approved and licensed by the Iowa
Gaming Commission. On January 27, 1995, the Iowa Gaming Commission authorized
the issuance of a license to conduct gambling games on an excursion gambling
boat to the Iowa West Racing Association, a not-for-profit corporation organized
for the purpose of facilitating riverboat gaming in Council Bluffs, Iowa (the
"Association"). The Association entered into an agreement with ACCBI authorizing
ACCBI to operate riverboat gaming operations in Council Bluffs under the
Association's gaming license (the "Operator's Contract"). The Iowa Gaming
Commission approved this contract. The term of the Operator's Contract runs
until December 31, 2002, with two five-year renewal options. The current license
awarded by the Iowa Gaming Commission for the Ameristar Council Bluffs Casino
expires on March 31, 2002.
Under Iowa law, a license to conduct gambling games may be issued in a
county only if the county electorate has approved such gambling games. Although
the electorate of Pottawattamie County, which includes the City of Council
Bluffs, approved by referendum the gambling games conducted by ACCBI, a
reauthorization referendum must be submitted to the electorate in the general
election to be held in 2002 and each eight years thereafter. Each such
referendum requires the vote of a majority of the persons
78
84
voting thereon. If any such reauthorization referendum is defeated, Iowa law
provides that any previously issued gaming license will remain valid and subject
to periodic renewal for a total of nine years from the date of original
issuance, subject to earlier revocation as discussed below. The original
issuance date of the gaming license for Ameristar Council Bluffs was January 27,
1995.
Substantially all of ACCBI's material transactions are subject to review
and approval by the Iowa Gaming Commission. All contracts or business
arrangements, verbal or written, with any related party or in which the term
exceeds three years or the total value of the contract exceeds $50,000 must be
submitted in advance to the Iowa Gaming Commission for approval. Additionally,
contracts negotiated between ACCBI and a related party must be accompanied by
economic and qualitative justification.
ACCBI is required to notify the Iowa Gaming Commission of the identity of
each director, corporate officer and owner, partner, joint venturer, trustee or
any other person who has a beneficial interest of five percent (5%) or more,
direct or indirect, in ACCBI. The Iowa Gaming Commission may require ACCBI to
submit background information on such persons. The Iowa Gaming Commission may
request ACCBI to provide a list of persons holding beneficial ownership
interests in ACCBI of less than five percent (5%). For purposes of these rules,
"beneficial interest" includes all direct and indirect forms of ownership or
control, voting power or investment power held through any contract, lien,
lease, partnership, stockholding, syndication, joint venture, understanding,
relationship, present or reversionary right, title or interest, or otherwise.
The Iowa Gaming Commission may suspend or revoke the license of a licensee in
which a director, corporate officer or holder of a beneficial interest includes
or involves any person or entity which is found to be ineligible as a result of
want of character, moral fitness, financial responsibility, professional
responsibility or due to failure to meet other criteria employed by the Iowa
Gaming Commission.
ACCBI must submit detailed financial, operating and other reports to the
Iowa Gaming Commission. ACCBI must file weekly and monthly gaming reports
indicating adjusted gross receipts received from gambling games and the total
number and amount of money received from admissions. Additionally ACCBI must
file annual financial statements covering all financial activities related to
its operations for each fiscal year. ACCBI must also keep detailed records
regarding its equity structure and owners.
Iowa has a graduated wagering tax equal to five percent (5%) of the first
$1.0 million of annual adjusted gross receipts, ten percent (10%) on the next
$2.0 million of annual adjusted gross receipts and twenty percent (20%) on
annual adjusted gross receipts over $3.0 million. In addition, the state charges
other fees on a per customer basis. Additionally, ACCBI pays to the City of
Council Bluffs a fee equal to $0.50 per passenger.
Under the Operator's Contract, ACCBI also pays the Association an
admissions fee of $1.50 per passenger. ACCBI has interpreted the Operator's
Contract to mean that a person may leave and re-enter Council Bluffs Casino (for
example, to visit the restaurants at Ameristar Council Bluffs) without ACCBI
being obligated to pay an additional admissions fee to the Association. ACCBI
received a letter from the Association in August 1996 in which the Association
asserted that an additional fee is due each time a person enters the Council
Bluffs Casino, including re-entries. The Association has advised us that the
board of directors of the Association discussed a proposal to settle this
dispute at an October 1997 meeting but declined to take any action either to
approve the proposed settlement or to pursue the previously threatened claim.
Accordingly, the Association has advised ACCBI that it does not currently intend
to pursue this claim, but the Association has not formally waived or released
the claim.
All persons participating in any capacity at a gaming facility, with the
exception of certified law enforcement officers while they are working for the
facility as uniformed officers, are required to obtain occupational licenses
from the Iowa Gaming Commission. All such licenses require annual renewal. The
Iowa Gaming Commission had broad discretion to deny or revoke any occupational
license.
79
85
If the Iowa Gaming Commission decides that a gaming law or regulation has
been violated, the Iowa Gaming Commission has the power to assess fines, revoke
or suspend licenses or to take any other action as may be reasonable or
appropriate to enforce the gaming rules and regulations.
ACCBI is subject to licensure by the Alcoholic Beverages Division ("ABD")
of the Iowa Department of Commerce which administers and enforces the laws of
the State of Iowa concerning alcoholic beverages. Additionally, ACCBI is subject
to the liquor ordinances adopted by local authorities. A local authority may
adopt ordinances governing establishments which are located within their
jurisdiction. Local ordinances may be more restrictive than the state law, but
they may not conflict with the state law. The ABD and the local authorities have
full power to suspend or revoke any license for the serving of alcoholic
beverages.
OTHER JURISDICTIONS. We expect to be subject to similar rigorous
regulatory standards in each jurisdiction in which we seek to conduct gaming
operations. There can be no assurance that regulations adopted or taxes imposed
by other jurisdictions will permit profitable operations by us.
FEDERAL REGULATION OF SLOT MACHINES. We are required to make annual
filings with the U.S. Attorney General in connection with the sale, distribution
or operation of slot machines. All requisite filings for the most recent year
and the current year have been made.
NON-GAMING REGULATIONS. The sale of alcoholic beverages by us is subject
to the licensing, control and regulation in Jackpot by the Liquor Board of Elko
County, in Vicksburg by both the City of Vicksburg and the Alcoholic Beverage
Control Division of the Mississippi State Tax Commission, and in Council Bluffs
by the Alcoholic Beverage Division of the Iowa Department of Commerce. The sale
of alcoholic beverages by us at our Missouri properties is subject to the
licensing, control and regulation by the Missouri Gaming Commission as described
above and in Kansas City by Clay County. In Mississippi, Ameristar Vicksburg has
been designated as a special resort area, which allows ACVI to serve alcoholic
beverages on a 24-hour basis. In Nevada, the applicable liquor laws allow
24-hour service of alcoholic beverages without any additional permits. In Iowa,
the applicable liquor laws allow the sale of liquor during legal hours, which
are Monday through Saturday from 6 a.m. to 2 a.m. and Sunday from 8 a.m. to 2
a.m. All licenses are revocable and not transferable. The liquor license
authorities described above (the "Liquor License Authorities") have the full
power to limit, condition, suspend or revoke any such license or to place a
liquor licensee on probation with or without conditions. Any such disciplinary
action could (and revocation would) have a material adverse effect upon the
operations of our business.
Certain officers and managers of ACVI must be investigated by the
applicable Liquor License Authorities in connection with its liquor permit. The
applicable Liquor License Authorities must approve any changes in licensed
positions.
All cruising vessels operated by us must comply with U.S. Coast Guard
requirements as to safety and must hold a Certificate of Inspection. These
requirements set limits on the operation of the vessel and require that each
vessel be operated by a minimum complement of licensed personnel. Loss of the
vessel's Inspection Certificate would preclude its use as a riverboat. Every
five years, US flagged passenger vessels operating exclusively in fresh water
must conduct a thorough dry-dock inspection of underwater machinery, valves and
hull. The Ameristar Council Bluffs riverboat was due for its dry-dock inspection
in November 2000, but we have been accepted into a United States Coast Guard
program that has allowed us to extend the dry-dock requirement by undergoing a
thorough underwater inspection. This underwater inspection has been completed
and the Ameristar Council Bluffs riverboat has received a U.S. Coast Guard
Certificate of Inspection valid through October 19, 2001. The underwater
inspection program allows for an extension of the dry-dock requirement for up to
30 months. Based on the results of this inspection, Ameristar Council Bluffs has
applied to the U.S. Coast Guard for such an extension. Currently, Ameristar
Council Bluffs is the only one of our properties that operates a cruising vessel
subject to these requirements. Less stringent rules apply to permanently moored
vessels.
In order to comply with the federal Merchant Marine Act of 1936, as
amended, and the federal Shipping Act of 1916, as amended, and applicable
regulations thereunder, Ameristar's Bylaws contain
80
86
provisions designed to prevent persons who are not citizens of the United States
from holding, in the aggregate, more than 24.9% of Ameristar's outstanding
common stock.
All of our shipboard employees employed on U.S. Coast Guard-approved
vessels, even those who have nothing to do with the actual operations of the
vessel, such as dealers, waiters and security personnel, may be subject to the
Jones Act, which, among other things, exempts those employees from state limits
on workers' compensation awards.
81
87
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS. The table below sets forth information
about our directors and executive officers.
NAME AGE POSITION
---- --- --------
Chairman of the Board, President and Chief Executive
Craig H. Neilsen............... 59 Officer
Senior Vice President of Finance, Treasurer, Secretary and
Thomas M. Steinbauer........... 50 Director
Gordon R. Kanofsky............. 45 Senior Vice President of Legal Affairs
Paul I. Corddry................ 64 Director
Larry A. Hodges................ 52 Director
Craig H. Neilsen. Mr. Neilsen has been Chairman of the Board of Directors,
President and Chief Executive Officer of Ameristar Casinos, Inc. since its
inception in August 1993. Since May 1984, Mr. Neilsen has been the President and
Chairman of the Board of Directors of CPI. Mr. Neilsen has also been the
President and sole director of each of our other subsidiaries since its
inception. Mr. Neilsen has been actively involved in the development of all of
our properties for more than 15 years. Mr. Neilsen also owns a controlling
interest in several other closely held entities, most of which are engaged in
real estate development and management operations unrelated to the business of
Ameristar. Since 1987, Mr. Neilsen has devoted substantially all of his business
time to the affairs of Ameristar.
Thomas M. Steinbauer. Mr. Steinbauer has been Senior Vice President of
Finance of Ameristar Casinos, Inc. since 1995 and Treasurer and a Director since
its inception. Mr. Steinbauer was appointed as Secretary of Ameristar Casinos,
Inc. in June 1998. He served as Vice President of Finance and Administration and
Secretary of Ameristar Casinos, Inc. from its inception until 1995. Mr.
Steinbauer has more than 20 years of experience in the gaming industry in Nevada
and elsewhere. From April 1989 to January 1991, Mr. Steinbauer was Vice
President of Finance for Las Vegas Sands, Inc., the owner of the Sands Hotel &
Casino in Las Vegas. From August 1988 to April 1989, he worked for McClaskey
Enterprises as the General Manager of the Red Lion Inn & Casino, handling the
day-to-day operations of seven different hotel and casino properties in northern
Nevada. Mr. Steinbauer was Property Controller of Bally's Reno from 1987 to
1988. Prior to that time, Mr. Steinbauer was employed for 11 years by the Hilton
Corporation and rose from an auditor to be the Casino Controller of the Flamingo
Hilton in Las Vegas and later the Property Controller of the Reno Hilton. Mr.
Steinbauer holds Bachelor of Science degrees in Business Administration and
Accounting from the University of Nebraska -- Omaha.
Gordon R. Kanofsky. Mr. Kanofsky has been Senior Vice President of Legal
Affairs of Ameristar Casinos, Inc. since September 1999. Mr. Kanofsky was in
private law practice in Washington, D.C. and Los Angeles, California from 1980
to September 1999. While in private practice, Mr. Kanofsky represented Ameristar
as special securities counsel and outside general counsel since April 1993 and
April 1998, respectively. Mr. Kanofsky also represented several other gaming
industry clients while in private practice. Mr. Kanofsky is a graduate of the
Duke University School of Law and holds an undergraduate degree from Washington
University in St. Louis.
Paul I. Corddry. Mr. Corddry became a Director of Ameristar Casinos, Inc.
in March 1994. Mr. Corddry served for 28 years with H.J. Heinz Company, retiring
from his position as Senior Vice President -- Europe in August 1992. Prior to
that position, Mr. Corddry served as Senior Vice President in charge of several
Heinz domestic affiliates, President of Ore-Ida Foods, Inc., a wholly owned
subsidiary of Heinz, and General Manager of Product Marketing. Mr. Corddry was
also a member of the Board of Directors of Heinz from September 1986 until his
retirement. Prior to joining Heinz, Mr. Corddry held various brand management
positions with Procter & Gamble Co. Since 1987, Mr. Corddry has served as a
director of Albertson's, Inc., a major operator of grocery stores. He is also a
member of the Board of Trustees of the American University in Cairo, Swarthmore
College in Pennsylvania and the Corcoran Museum in Washington, D.C. Mr. Corddry
has previously served on the boards of numerous food industry-related
associations and educational, cultural and medical facilities, foundations and
associations among other organizations.
82
88
Larry A. Hodges. Mr. Hodges became a Director of Ameristar Casinos, Inc.
in March 1994. Mr. Hodges has more than 30 years experience in the retail food
business. In April 1994, he became President and Chief Executive Officer of Mrs.
Fields Inc., after serving as President of Food Barn Stores, Inc. from July 1991
to March 1994. He has been a director of Mrs. Fields since April 1993. From
February 1990 to October 1991, Mr. Hodges served as president of his own
company, Branshan Inc., which engaged in the business of providing management
consulting services to food makers and retailers. Earlier, Mr. Hodges was with
American Stores Company for 25 years, where he rose to the position of President
of two substantial subsidiary corporations. Mr. Hodges' first management
position was Vice President of Marketing for Alpha Beta Co., a major operator of
grocery stores in the West. Mr. Hodges is also a director of Coinstar, Inc., an
operator of automated, self-service coin counting and processing machines,
Successories Inc., a manufacturer or motivational home and office decor, Mrs.
Fields Original Cookies and the International Franchise Association.
KEY PERSONNEL. The table below sets forth information about key management
personnel, including persons hired in connection with our acquisition of the
Missouri properties.
NAME AGE POSITION
---- --- --------
David Albrecht............................ 45 Senior Vice President and General Manager
of the Jackpot Properties
Thomas P. Burke........................... 45 Senior Vice President and General Manager
of Ameristar Kansas City
John V. Finamore.......................... 43 President of Missouri Operations
Ray Neilsen............................... 37 Vice President of Brand Development and
Acting General Manager of Ameristar
Vicksburg
Anthony J. Raymon......................... 48 Senior Vice President and General Manager
of Ameristar St. Charles
Anthony Taeubel........................... 38 Senior Vice President and General Manager
of Ameristar Council Bluffs
David Albrecht. Mr. Albrecht has been our Senior Vice President and
General Manager of the Jackpot Properties since November 1999 and has more than
20 years of resort and management experience. Mr. Albrecht is a long-time member
of the Jackpot community, having served as the General Manager and Director of
Golf at the Jackpot Golf Club for 10 years. He has been named "Golf Professional
of the Year" and "Merchandiser of the Year" for the Rocky Mountain Section of
the Professional Golfers Association and has received the Horton Smith Award for
his work in providing educational outlets for PGA professionals. Mr. Albrecht
has also served as the President of the Rocky Mountain Section of the PGA of
America for four years.
Thomas P. Burke. Mr. Burke is our Senior Vice President and General
Manager of Ameristar Kansas City. Mr. Burke was formerly the Vice President and
General Manager of Station Casino Kansas City. Mr. Burke joined Station Casinos'
Midwest Operations team in November 1996 as Assistant General Manager of Station
Casino Kansas City and was promoted to Vice President and General Manager in
1999. Previously, he served as assistant general manager for the Majestic Star
Casino in Gary, Indiana, and before that he served in management positions for
American Gaming & Entertainment, the Trump Taj Mahal Casino Resort, the Trump
Castle Casino Resort and the Tropicana Hotel Resort, in Atlantic City, New
Jersey and Melbourne, Australia. Mr. Burke earned a Bachelor of Arts in
Economics from Rutgers University, New Brunswick, New Jersey, and a Masters in
Business Administration from Monmouth University in West Long Branch, New
Jersey.
John V. Finamore. Mr. Finamore is our President of Missouri Operations.
Mr. Finamore is responsible for overall operations of Ameristar Kansas City and
Ameristar St. Charles. Mr. Finamore formerly had similar responsibilities at
Station Casinos. Mr. Finamore joined Station Casinos' Midwest Operations staff
in 1997 as Vice President/General Manager of Station Casino Kansas City after
serving as Vice President of Operations at Palace Station Hotel and Casino, one
of Station Casinos' gaming and
83
89
entertainment properties in Las Vegas, Nevada. Mr. Finamore joined Station
Casinos in 1994 as Vice President of Operations for Boulder Station Hotel &
Casino during its successful first year of operations. In September 1995, he was
named Vice President/General Manager of Barley's Casino & Brewing Co., a
micro-brewery and casino property operated by Station Casinos in the
Henderson/Green Valley area of Las Vegas. Before joining Station Casinos he
served as General Manager of the Westin Hotel -- O'Hare in Chicago, Illinois.
Mr. Finamore earned a Bachelor of Science in Hotel Administration from the
Cornell University School of Hotel Administration in Ithaca, New York.
Ray Neilsen. Mr. Neilsen is currently our Vice President of Brand
Development and is the Acting General Manager at Ameristar Casino Vicksburg. Ray
Neilsen is the son of Craig Neilsen and has worked in several managerial
positions throughout Ameristar for the past 10 years and has over six years of
experience in key management positions. He has been instrumental in establishing
brand consistencies among the various Ameristar properties in a broad range of
areas such as guest service, service standards and brand identity and has served
in multiple jurisdictions for our company. As the General Manager of the Council
Bluffs property, Mr. Neilsen successfully implemented significant property
improvements including earning the prestigious Four Diamond rating from the
American Automobile Association. Mr. Neilsen earned an MBA in International
Management from the Monterey Institute of International Studies.
Anthony J. Raymon. Mr. Raymon is our Senior Vice President and General
Manager of Ameristar St. Charles. Mr. Raymon formerly held the same positions
for Stations Casinos and joined Station Casino St. Charles' executive staff in
1994 as Assistant General Manager for Station Casino St. Charles. A year later
he was promoted to Vice President/General Manager. He was promoted to his
current position in 1999. Prior to joining the Station Casino St. Charles, Mr.
Raymon served as Vice President of Operations for Fitzgerald's Hotel and Casino
in Reno, Nevada, where he was a member of the management team and helped opening
five casinos in different parts of the United States. He earned an associate
degree in information systems from Macomb County Community College in Warren,
Michigan.
Anthony Taeubel. Mr. Taeubel is the Senior Vice President and General
Manager of Ameristar Casino Council Bluffs and has 15 years of experience in the
gaming industry. A former regulator with the Nevada Gaming Control Board, Mr.
Taeubel has held positions in various areas of casino operations, including the
Race and Sportsbook, the Cage, Finance and Administration. He has been employed
by Ameristar for five years and assisted in opening the Council Bluffs property.
Mr. Taeubel earned a bachelor's degree in Psychology from the University of
Nevada, Reno and a Masters of Business from the University of Nevada, Las Vegas.
Mr. Taeubel has also been an instructor in the Gaming Management Series of
gaming education courses offered by the University of Nevada, Reno.
84
90
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Until March 31, 1997, we leased certain office space in Twin Falls, Idaho,
from Lynwood Shopping Center, a partnership in which Craig H. Neilsen has a
controlling equity interest. In 1998, we paid previously accrued rent of $15,573
related to this tenancy. In addition, in 1998, CPI paid $20,614 in rent to
Lynwood Shopping Center for CPI's readerboard sign (which was owned by Lynwood
Shopping Center) and space provided for CPI's dealer school. The readerboard
sign lease expired in July 1998, at which time CPI exercised an option to
purchase the sign for $22,989.
Commencing April 1, 1997, Neilsen & Company (a partnership in which Mr.
Neilsen owns a controlling equity interest) leased from Lynwood Shopping Center
certain of the office space previously leased by us. CPI concurrently subleased
from Neilsen & Company the right to use certain offices in this space and the
common areas through December 31, 2001. In 2000, CPI paid $19,825 to Neilsen &
Company for rent and expenses under this sublease in 2000 and 1999. There was no
balance outstanding for rent or expenses at December 31, 2000. In 1999, CPI paid
$16,775 to Neilsen & Company for rent and expenses under this sublease in 1998
and 1999. An additional $1,525 was accrued for rent and expenses under this
sublease in 1999 and was outstanding at December 31, 1999. In 1998, rent and
expenses under this sublease of $17,892 were accrued and paid, and accrued rent
and expenses for 1997 totaled $14,634, which was paid in February 1998. These
offices, and the readerboard sign and dealer school described above, support
CPI's casino-hotel operations in Jackpot, Nevada, at the Idaho border due south
of Twin Falls. The offices previously supported our executive offices, which are
now located in Las Vegas, Nevada.
We lease from Neilsen & Company two condominiums located in Sun Valley,
Idaho. These leases, which required us to pay an aggregate monthly rental rate
of $3,500 per month, expired on December 31, 1998. We have continued to lease
the two condominiums on a month-to-month basis since January 1, 1999 at an
aggregate monthly rental rate of $3,675 plus maintenance, supply and utility
costs (pending approval by our Board of Directors). The properties are made
available by us at no charge to management personnel and certain business
associates. We believe that the condominiums are a valuable asset in
strengthening management morale and maintaining goodwill with important business
contacts. We believe that the rental rates paid and proposed to be paid by us
are within the range of rates generally charged for such properties in Sun
Valley.
A portion of the services of one of our employees were provided to Neilsen
& Company until July 1, 1997, at which time this employee terminated service
with us and became an employee of Neilsen & Company. The total estimated amount
due to us for these services at December 31, 1998 was approximately $25,104
($13,104 for a portion of the 1996 services and $12,000 for 1997 services),
representing approximately half of the salary and additional payroll burden for
this employee. Payment of the outstanding balance has been deferred pending an
analysis of amounts due to Neilsen & Company from us for various services
performed by Neilsen & Company and amounts due to us from Neilsen & Company for
certain telephone expenses paid by us on behalf of Neilsen & Company. Among
others, the services provided by Neilsen & Company to us included assistance
with the relocation of our offices to Las Vegas, Nevada, litigation and
arbitration support services, licensing application assistance and accounts
payable assistance. In addition to the foregoing, Neilsen & Company provided
services to us during 1999 and 2000 in connection with our license application
for a potential casino project in South St. Louis County and provided services
in 2000 in connection with our license applications for the Acquisitions. In
April 2001, Neilsen & Company billed us $15,328 for the services that were
provided in 1999 and $15,098 for the services that were provided in 2000, which
amounts were based on the number of hours that employees of Neilsen & Company
spent in providing these services. Other than these license applications,
Neilsen & Company has provided only minimal services to us since 1997.
Mr. Neilsen is the president, director and sole stockholder of
Intermountain Express, Inc. ("Intermountain"), a transportation concern that
provided CPI with package delivery services between
85
91
Jackpot and Twin Falls, Idaho until mid-2000. Intermountain also contracted with
CPI for the use of CPI's drivers by Intermountain until mid-2000. In 2000, CPI
paid $29,975 to Intermountain for package delivery services in 1999 and 2000.
CPI charged Intermountain $9,754 in 2000 for contracted driver services and
miscellaneous fuel and van maintenance expenses provided by CPI in 2000. During
2000, Intermountain paid all of the amount charged together with $7,422 that was
outstanding at December 31, 1999 for such services performed in 1999. There was
no outstanding balance due from CPI to Intermountain or from Intermountain to
CPI at December 31, 2000. In 1999, CPI paid $35,475 to Intermountain for package
delivery services in 1998 and 1999. An additional $10,110 was accrued for
services provided in 1999 and was outstanding at December 31, 1999. CPI charged
Intermountain $28,491 in 1999 for contracted driver services and miscellaneous
fuel and van maintenance expenses provided by CPI in 1998 and 1999, of which
$7,422 remained outstanding at December 31, 1999. In 1998, CPI paid $54,198 to
Intermountain for package delivery services in 1997 and 1998. An additional
$3,755 was accrued for services provided in 1998 and was outstanding at December
31, 1998. CPI charged Intermountain $31,415 in 1998 for contracted driver
services and miscellaneous fuel and van maintenance expenses paid for or
provided by CPI in 1997 and 1998, of which $8,910 remained outstanding at
December 31, 1998. We believe that these relationships between CPI and
Intermountain have been beneficial to us.
In addition, Intermountain leased a van owned by CPI for use in connection
with the package delivery services provided by Intermountain to CPI.
Intermountain owed CPI $11,400 in van rental payments accrued at the rate of
$100 per week in 1993, 1994 and early 1995. Van rental payments were not accrued
since early 1995 pending the completion of discussions concerning the possible
sale of the van by CPI to Intermountain and the settlement of the outstanding
van rental balance. In January 1998, CPI and Intermountain reached an agreement
for the forgiveness by CPI of the accrued van rental amount in excess of $1,250
and a sale of the van by CPI to Intermountain for $500. Intermountain has paid
the $1,750 due to CPI. We believe that this transaction was fair to us based on
the condition of the van and the past services and payments received by CPI from
Intermountain.
We have adopted a policy requiring transactions with affiliates to be on
terms no less favorable to us than could be obtained from unaffiliated parties.
Each of the completed transactions described above has been approved by our
Board of Directors. In the opinion of management, the terms of the above
transactions were at least as fair to us as could have been obtained from
unaffiliated parties.
Ray Neilsen, our Vice President of Brand Development and Acting General
Manager at our Vicksburg property, is the son of Craig Neilsen, our President
and Chief Executive Officer. Ray Neilsen has held various other positions with
Ameristar for the past 10 years. In these various capacities, Ray Neilsen
received salary and bonus compensation of $157,000 in 2000, $155,000 in 1999 and
$150,000 in 1998, as well as perquisites and other employee benefits. We have
provided housing to Ray Neilsen since early 2000 when he temporarily relocated
to Vicksburg to become Acting General Manager of Ameristar Vicksburg. In
addition, we pay approximately $3,600 per month for Ray Neilsen's housing
related expenses in Las Vegas.
86
92
DESCRIPTION OF EXISTING INDEBTEDNESS
In December 2000, concurrently with the Acquisitions, we entered into a
$575 million senior credit agreement with a syndicate of lenders led by an
affiliate of Deutsche Bank AG as administrative agent. After the repayment of a
portion of the senior credit facilities with a portion of the proceeds from the
offering of the old notes and the Disposition, we currently have $475 million
senior credit facilities that consist of:
- a $75 million revolving credit facility maturing in 2005 ($25
million of which is dedicated to the completion of the St. Charles
expansion and will be available for general working capital purposes
thereafter);
- a $75 million revolving credit/term facility that revolves for two
years and then converts into a three year term loan maturing in 2005
(dedicated to the completion of the St. Charles expansion).
- a $50 million term loan A maturing in 2005;
- a $148.1 million term loan B maturing in 2006; and
- a $126.9 million term loan C maturing in 2007.
The following description summarizes the material provisions of the senior
credit agreement and is qualified in its entirety by reference to the agreement.
A copy of that agreement is available from us or the initial purchasers upon
request.
The senior credit facilities are guaranteed by all of our subsidiaries.
The senior credit facilities are secured by a first priority security interests
on substantially all of our and our subsidiaries' real and personal property,
including the capital stock of our subsidiaries.
The senior credit agreement requires us to meet specified financial tests
on an on-going basis, including minimum consolidated tangible net worth, maximum
leverage and senior leverage ratios, minimum consolidated gross and adjusted
fixed charge coverage ratios and minimum maintenance capital expenditures. In
addition, the senior credit agreement includes customary representations and
warranties, customary events of default, including a change of control, and
other customary covenants, including covenants that limit our and our
subsidiaries' ability to:
- prepay principal of or redeem or repurchase the exchange notes and
the old notes, including upon any asset sale, change of control or
similar event, or make certain modifications of the indenture
governing the exchange notes and the old notes;
- incur additional debt;
- make capital expenditures;
- create or become subject to liens;
- make asset sales;
- merge with other entities or make acquisitions;
- make investments or advances; and
- pay dividends or make distributions.
We obtained the senior credit facilities (together with the $300 million
senior subordinated credit facility repaid with proceeds of the old notes):
- to effect the Acquisitions;
- to retire our former credit facility and other outstanding debt,
including (through a tender offer completed in December 2000) all of
our 10.5% senior subordinated notes;
87
93
- to finance fees and expenses associated with the Transactions;
- to finance the completion of expansion of the Ameristar St. Charles
facilities; and
- for general corporate and working capital purposes.
We may use up to $15 million of the revolving credit facility for letters
of credit. As of December 31, 2000, pro forma for the Disposition, the offering
of the old notes and the use of the proceeds therefrom, we would have had $337.8
million of borrowings outstanding under our senior credit facilities. The senior
credit agreement includes provisions permitting an increase in the aggregate
amount of the revolving credit facility or the term loans by up to an aggregate
of $50 million, subject to certain conditions including the receipt from one or
more lenders, in their sole discretion, of the additional commitments that may
be requested.
Interest on outstanding balances under the senior credit agreement is
determined adding a margin to the Eurodollar or base rate existing for each
interest calculation date. For the revolving credit facility, the revolving term
facility and the term loan A, the margin is based on our leverage ratio, which
is the ratio of our consolidated debt to last twelve months EBITDA, as defined,
and ranges from 1.50% to 3.25% in the case of Eurodollar loans and from 0.50% to
2.25% in the case of base rate loans. For the term loan B and the term loan C,
the margins are fixed at 3.75% and 4.00%, respectively, in the case of
Eurodollar loans, and at 2.75% and 3.00%, respectively, in the case of base rate
loans. We also pay commitment fees on unused availabilities and agency fees in
connection with the senior credit agreement.
Under the senior credit agreement, we are required to prepay the term
loans (or if the term loans are fully repaid to repay and permanently reduce the
revolving credit facilities) with 100% of the net proceeds of sales of equity,
incurrence of certain debt (other than the exchange notes) and certain asset
sales and 75% of excess cash flow. We may also voluntarily prepay the loans. We
must pay a premium ranging from 1% to 2% in the event of any voluntary
prepayment of the term loan B or the term loan C during the first two years or
any prepayment of such loans out proceeds of the old notes.
In addition to our senior credit facilities and the old notes, as of
December 31, 2000, after giving effect to the Disposition, we had approximately
$16.4 million of other indebtedness outstanding. This includes approximately
$8.3 million of purchase money indebtedness and capital lease financing for
gaming equipment and other furniture, fixtures and equipment, $5.4 million of
first mortgage financing issued to the sellers of parcels of land in Vicksburg,
Mississippi and $2.7 million of other indebtedness.
88
94
DESCRIPTION OF THE NOTES
The Company will issue the exchange notes for the old notes under the
indenture that governs the old notes, dated as of February 2, 2001 (the
"Indenture"), among itself, the Guarantors and U.S. Bank Trust National
Association, as Trustee (the "Trustee"). The following is a summary of the
material provisions of the Indenture. It does not include all of the provisions
of the Indenture. We urge you to read the Indenture because it defines your
rights. The terms of the exchange notes and the old notes include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "TIA"). A copy of the Indenture may be
obtained from the Company or the Initial Purchaser. You can find definitions of
certain capitalized terms used in this description under "-- Certain
Definitions." For purposes of this section, references to the "Company" include
only Ameristar Casinos, Inc. and not its Subsidiaries. We refer to the exchange
notes and the old note (to the extent not exchanged for exchange notes) in this
section as the "Notes."
The Notes are unsecured obligations of the Company, ranking subordinate in
right of payment to all Senior Debt of the Company, pari passu in right of
payment to all senior subordinated Indebtedness of the Company and senior in
right of payment to all subordinated Indebtedness of the Company.
The Company will issue the exchange notes in fully registered form in
denominations of $1,000 and integral multiples thereof. The Trustee will
initially act as Paying Agent and Registrar for the Notes. The Notes may be
presented for registration or transfer and exchange at the offices of the
Registrar. The Company may change any Paying Agent and Registrar without notice
to holders of the Notes (the "Holders"). The Company will pay principal (and
premium, if any) on the Notes at the Trustee's corporate office in New York, New
York. At the Company's option, interest may be paid at the Trustee's corporate
trust office or by check mailed to the registered address of Holders. Any old
notes that remain outstanding after the completion of the Exchange Offer,
together with the exchange notes, will be treated as a single class of
securities under the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Company issued $380.0 million in aggregate principal amount of old
notes on February 2, 2001. The Notes will mature on February 15, 2009.
Additional Notes may be issued from time to time, subject to the limitations set
forth under "-- Certain Covenants -- Limitation on Incurrence of Additional
Indebtedness." Interest on the Notes will accrue at the rate of 10 3/4% per
annum and will be payable semiannually in cash on each February 15 and August 15
commencing on August 15, 2001, to the persons who are registered Holders at the
close of business on the February 1 and August 1 immediately preceding the
applicable interest payment date. Interest on the Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from and including February 2, 2001.
The Notes will not be entitled to the benefit of any mandatory sinking
fund.
REDEMPTION
Optional Redemption. Except as described below, the Notes are not
redeemable before February 15, 2006. Thereafter, the Company may redeem the
Notes at its option, in whole or in part, upon not less than 30 nor more than 60
days' notice, at the following redemption prices (expressed as percentages of
the principal amount thereof) if redeemed during the twelve-month period
commencing on February 15 of the years set forth below:
YEAR PERCENTAGE
---- ----------
2006........................................................ 105.375%
2007........................................................ 102.688%
2008 and thereafter......................................... 100.000%
In addition, the Company must pay accrued and unpaid interest on the Notes
redeemed.
89
95
Optional Redemption Upon Public Equity Offerings. At any time, or from
time to time, on or prior to February 15, 2004, the Company may, at its option,
use the net cash proceeds of one or more Public Equity Offerings (as defined
below) to redeem up to 35% of the principal amount of the Notes issued under the
Indenture at a redemption price of 110.75% of the principal amount thereof plus
accrued and unpaid interest thereon, if any, to the date of redemption; provided
that:
(1) at least 65% of the principal amount of Notes issued under the
Indenture on the Issue Date remains outstanding immediately after any such
redemption; and
(2) the Company makes such redemption not more than 90 days after
the consummation of any such Public Equity Offering.
"Public Equity Offering" means an underwritten public offering of
Qualified Capital Stock of the Company pursuant to a registration statement
filed with the Commission in accordance with the Securities Act.
Redemption Based Upon Gaming Laws. Notwithstanding any other provision of
the Indenture, if any Gaming Authority requires that a holder or beneficial
owner of Notes must be licensed, qualified, found suitable or otherwise obtain
any approval, consent, permit or finding under any applicable gaming law and
such holder or beneficial owner (i) fails to apply therefor within 30 days (or
such shorter period as may be required by the applicable Gaming Authority) after
being requested to do so by the Gaming Authority or (ii) is denied such license
or qualification or not found suitable or denied such other approval, consent,
permit or finding or otherwise fails to qualify under applicable Gaming
Regulations, the Company shall have the right, at its option:
(A) to require any such holder or beneficial owner to dispose of
its Notes within 30 days (or such earlier date as may be required by the
applicable Gaming Authority) of receipt of such notice or finding by such
Gaming Authority or other failure to qualify under applicable Gaming
Regulations, or
(B) to call for the redemption of the Notes of such holder or
beneficial owner at a redemption price equal to
(a) the least of:
(1) the principal amount thereof, together with accrued
interest and Additional Interest, if any, to the earlier of the
date of redemption or the date of the denial of license or
qualification or of the finding of unsuitability or of the
denial of such other approval, consent, permit or finding by
such Gaming Authority or other failure to qualify under
applicable Gaming Regulations,
(2) the price at which such holder or beneficial owner
acquired the Notes, together with accrued interest and
Additional Interest, if any, to the earlier of the date of
redemption or the date of the denial of license or
qualification or of the finding of unsuitability or of the
denial of such other approval, consent, permit or finding by
such Gaming Authority or other failure to qualify under
applicable Gaming Regulations, and
(3) the fair market value of the Notes to be redeemed on
the date of redemption;
or
(b) such other amount as may be required by applicable law or
order of such Gaming Authority.
The Company shall notify the Trustee in writing of any such redemption as
soon as practicable. The holder or beneficial owner applying for a license,
qualification or a finding of suitability, or for any
90
96
other approval, consent, permit or finding must pay all costs of the licensure
or investigation for such qualification or finding of suitability.
SELECTION AND NOTICE OF REDEMPTION
In the event that the Company chooses to redeem less than all of the
Notes, selection of the Notes for redemption will be made by the Trustee either:
(1) in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed; or,
(2) on a pro rata basis, by lot or by such method as the Trustee
shall deem fair and appropriate.
No Notes of a principal amount of $1,000 or less shall be redeemed in
part. If a partial redemption is made with the proceeds of a Public Equity
Offering, the Trustee will select the Notes only on a pro rata basis or on as
nearly a pro rata basis as is practicable (subject to DTC procedures). Notice of
redemption will be mailed by first-class mail at least 30 but not more than 60
days before the redemption date to each Holder of Notes to be redeemed at its
registered address. On and after the redemption date, interest will cease to
accrue on Notes or portions thereof called for redemption as long as the Company
has deposited with the Paying Agent funds in satisfaction of the applicable
redemption price.
SUBORDINATION
The payment of all Obligations on or relating to the Notes is subordinated
in right of payment to the prior payment in full in cash or Cash Equivalents of
all Obligations on Senior Debt of the Company (including the Obligations with
respect to the Credit Agreement). Notwithstanding the foregoing, payments and
distributions made relating to the Notes pursuant to the trust described under
"Legal Defeasance and Covenant Defeasance" or as required as described under
"Redemption -- Redemption Based Upon Gaming Laws" shall not be so subordinated
in right of payment.
The holders of Senior Debt will be entitled to receive payment in full in
cash or Cash Equivalents of all Obligations due in respect of Senior Debt
(including interest after the commencement of any bankruptcy or other like
proceeding at the rate specified in the applicable Senior Debt whether or not
such interest is an allowed claim in any such proceeding) before the Holders of
Notes will be entitled to receive any payment or distribution of any kind or
character with respect to any Obligations on, or relating to, the Notes in the
event of any distribution to creditors of the Company:
(1) in a liquidation or dissolution of the Company;
(2) in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to the Company or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshalling of the Company's assets and liabilities.
The Company also may not make any payment or distribution of any kind or
character with respect to any Obligations on, or relating to, the Notes or
acquire any Notes for cash or property or otherwise if:
(1) a payment default on any Senior Debt occurs and is continuing;
or
(2) any other default occurs and is continuing on Designated Senior
Debt that permits holders of the Designated Senior Debt to accelerate its
maturity and the Trustee receives a notice of such default (a "Payment
Blockage Notice") from the Representative of any Designated Senior Debt.
91
97
Payments on and distributions with respect to any Obligations on, or with
respect to the Notes may and shall be resumed:
(1) in the case of a payment default, upon the date on which such
default is cured or waived; and
(2) in case of a nonpayment default, the earliest of (x) the date
on which all nonpayment defaults are cured or waived (so long as no other
event of default exists), (y) 180 days after the date on which the
applicable Payment Blockage Notice is received or (z) the date on which
the Trustee receives notice from the Representative for such Designated
Senior Debt rescinding the Payment Blockage Notice, unless in any such
event the maturity of any Designated Senior Debt has been accelerated.
No new Payment Blockage Notice may be delivered unless and until 360 days
have elapsed since the effectiveness of the immediately prior Payment Blockage
Notice.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default shall have
been cured or waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of de livery of such initial
Payment Blockage Notice that in either case would give rise to a default
pursuant to any provisions under which a default previously existed or was
continuing shall constitute a new default for this purpose).
The Company must promptly notify holders of Senior Debt if payment of the
Notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above in the event
of a bankruptcy, liquidation or reorganization of the Company, Holders of the
Notes may recover less ratably than creditors of the Company who are holders of
Senior Debt or creditors of the Company whose obligations are not subordinated
to Senior Debt. See "Risk Factors -- Risks Related to the Notes -- Your right to
receive payment on the notes and the guarantees is junior to all of our and the
guarantors' senior debt."
After giving effect to the Disposition and offering of the Notes and the
application of the proceeds therefrom, on a pro forma basis, at December 31,
2000, the aggregate amount of Senior Debt outstanding would have been
approximately $354.2 million, and the Company would have had unused availability
of $130.7 million under the Credit Agreement.
GUARANTEES
The Guarantors jointly and severally guarantee the Company's obligations
under the Indenture and the Notes on a senior subordinated basis. Each Guarantee
is subordinated to Guarantor Senior Debt on the same basis as the Notes are
subordinated to Senior Debt. The obligations of each Guarantor under its
Guarantee are limited to support findings that the Guarantee will not constitute
a fraudulent conveyance or fraudulent transfer under applicable law.
Each Guarantor may consolidate with or merge into or sell its assets to
the Company or another Guarantor that is a Wholly Owned Restricted Subsidiary of
the Company without limitation, or with other Persons upon the terms and
conditions set forth in the Indenture. See "Certain Covenants -- Merger,
Consolidation and Sale of Assets." In the event of a sale or other disposition
of all of the properties and assets of any Guarantor, by way of merger,
consolidation or otherwise, the sale of all of the Capital Stock of a Guarantor,
whether by way of merger, consolidation or otherwise, in either case provided
that such sale or other disposition complies with the provisions set forth in
"Certain Covenants -- Limitation on Asset Sales" (other than provisions for
future application of the Net Cash Proceeds), or in the event of the designation
of any Guarantor as an Unrestricted Subsidiary in accordance with the applicable
provisions of the Indenture, the Guarantor's Guarantee will be released.
92
98
Each of the Guarantors is a Wholly Owned Restricted Subsidiary of the
Company, and the Guarantors constitute all of the Company's direct and indirect
subsidiaries. The Company is a holding company with no operations or material
assets independent of those of the Guarantors, other than its investment in the
Guarantors, and the aggregate net assets, earnings and equity of the Guarantors
and the Company are substantially equivalent to the net assets, earnings and
equity of the Company on a consolidated basis. Separate financial statements and
certain other disclosures concerning the Guarantors are not presented because
such Guarantors are jointly and severally liable with respect to the Company's
obligations pursuant to the Notes and because, in the opinion of management,
such information is not material to investors.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder will have the
right to require that the Company purchase all or a portion of such Holder's
Notes pursuant to the offer described below (the "Change of Control Offer"), at
a purchase price equal to 101% of the principal amount thereof plus accrued
interest to the date of purchase.
Within 30 days following the date upon which the Change of Control
occurred, the Company must send, by first class mail, a notice to each Holder,
with a copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state, among other things, the purchase date,
which must be no earlier than 30 days nor later than 60 days from the date such
notice is mailed, other than as may be required by law (the "Change of Control
Payment Date"). Holders electing to have a Note purchased pursuant to a Change
of Control Offer will be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third business day prior to the Change of Control Payment Date.
Holders will be entitled to withdraw their election if the Trustee or the
Company receives not later than the third business day prior to the Change of
Control Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Note which was
delivered for purchase by the Holder and a statement that such Holder is
withdrawing its election to have such Note purchased.
Prior to the mailing of the notice referred to above, but in any event
within 30 days following any Change of Control, the Company covenants to:
(1) repay in full and terminate all commitments under Indebtedness
under the Credit Agreement and all other Senior Debt the terms of which
require repayment upon a Change of Control or offer to repay in full and
terminate all commitments under all Indebtedness under the Credit
Agreement and all other such Senior Debt and to repay the Indebtedness
owed to each lender which has accepted such offer; or
(2) obtain the requisite consents under the Credit Agreement and
all other Senior Debt to permit the repurchase of the Notes as provided
below.
The Company shall first comply with the covenant in the immediately
preceding paragraph before it shall be required to repurchase Notes pursuant to
the provisions described below. The Company's failure to comply with the
covenant described in the immediately preceding paragraph may (with notice and
lapse of time) constitute an Event of Default described in clause (3) but shall
not constitute an Event of Default described in clause (2) under "Events of
Default" below.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be
93
99
delivered by Holders seeking to accept the Change of Control Offer. In the event
the Company is required to purchase outstanding Notes pursuant to a Change of
Control Offer, the Company expects that it would seek third party financing to
the extent it does not have available funds to meet its purchase obligations.
However, there can be no assurance that the Company would be able to obtain such
financing or that the terms of the Indenture would permit the incurrence of such
financing.
The Credit Agreement currently prohibits the Company from repurchasing any
Notes, and also provides that some change of control events with respect to the
Company would constitute a default under the Credit Agreement. Any future credit
agreements or other agreements relating to Senior Debt to which the Company
becomes a party are likely to contain similar restrictions and provisions. In
the event a Change of Control occurs at a time when the Company is prohibited
from purchasing Notes, the Company could seek the consent of its senior lenders
to the purchase of Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Company does not obtain such a consent or
refinance such borrowings, the Company will remain prohibited from purchasing
Notes. In such case, the Company's failure to purchase tendered Notes would
constitute an Event of Default under the Indenture which would, in turn,
constitute a default under such Senior Debt. In such circumstances, the
subordination provisions in the Indenture would likely restrict payments to the
holders of Notes.
Neither the Board of Directors of the Company nor the Trustee may waive
the covenant relating to a Holder's right to repurchase upon a Change of
Control. Restrictions in the Indenture described herein on the ability of the
Company and its Restricted Subsidiaries to incur additional Indebtedness, to
grant liens on its property, to make Restricted Payments and to make Asset Sales
may also make more difficult or discourage a takeover of the Company, whether
favored or opposed by the management of the Company. Consummation of any such
transaction in certain circumstances may require redemption or repurchase of the
Notes, and there can be no assurance that the Company or the acquiring party
will have sufficient financial resources to effect such redemption or
repurchase. While such restrictions cover a wide variety of arrangements which
have traditionally been used to effect highly leveraged transactions, the
definition of "Change of Control" is limited in scope and the Indenture may not
afford the Holders protection in all circumstances from the adverse aspects of a
highly leveraged transaction, reorganization, restructuring, merger or similar
transaction.
The definition of Change of Control includes a phrase relating to the
sale, lease or other disposition of "all or substantially all" of the assets of
the Company on a consolidated basis. Although there is a developing body of case
law interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the point at which a
holder of notes will be able to require the Company to repurchase its notes as a
result of a sale, lease or other disposition of less than all of the assets of
the Company on a consolidated basis to another Person or group is uncertain.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time of or as a consequence of the
incurrence of any such Indebtedness, the Company or any of its Restricted
Subsidiaries that is or,
94
100
upon such incurrence, becomes a Guarantor may incur Indebtedness (including,
without limitation, Acquired Indebtedness) and any Restricted Subsidiary of the
Company that is not or will not, upon such incurrence, become a Guarantor may
incur Acquired Indebtedness, in each case if on the date of the incurrence of
such Indebtedness, after giving effect to the incurrence thereof, the
Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.0 to
1.0.
Limitation on Restricted Payments. The Company will not, and will not
cause or permit any of its Restricted Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any distribution (other
than dividends or distributions payable in Qualified Capital Stock of the
Company) on or in respect of shares of the Company's Capital Stock to
holders of such Capital Stock;
(2) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any warrants, rights or options to
purchase or acquire shares of any class of such Capital Stock;
(3) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund
payment, any Indebtedness of the Company or a Guarantor that is
subordinate or junior in right of payment to the Notes (except for the
purchase, defeasance, redemption, prepayment or other acquisition of such
subordinate or junior Indebtedness in anticipation of satisfying a sinking
fund obligation, principal installment or final maturity, in each case due
within one year of the date of acquisition); or
(4) make any Investment (other than Permitted Investments)
(each of the foregoing actions set forth in clauses (1), (2), (3) and (4)
being referred to as a "Restricted Payment"); if at the time of such
Restricted Payment or immediately after giving effect thereto,
(i) a Default or an Event of Default shall have occurred and
be continuing; or
(ii) the Company is not able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional
Indebtedness" covenant; or
(iii) the aggregate amount of Restricted Payments (including
such proposed Restricted Payment) made subsequent to the Issue Date
shall exceed the sum of:
(v) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100%
of such loss) of the Company earned subsequent to December 31,
2000 and on or prior to the date the Restricted Payment occurs
(the "Reference Date") (treating such period as a single
accounting period); plus
(w) 100% of the aggregate net cash proceeds received by
the Company from any Person (other than a Subsidiary of the
Company) from the issuance and sale subsequent to the Issue
Date and on or prior to the Reference Date of Qualified Capital
Stock of the Company or warrants, options or other rights to
acquire Qualified Capital Stock of the Company (but excluding
any debt security that is convertible into, or exchangeable
for, Qualified Capital Stock and excluding any net cash
proceeds from a Public Equity Offering to the extent used to
redeem the Notes in compliance with the provisions set forth
under "Redemption-Optional Redemption Upon Public Equity
Offerings"); plus
(x) the aggregate principal amount (or accreted value,
if less) of Indebtedness of the Company issued since the Issue
Date (other than Indebtedness
95
101
issued to or held by a Subsidiary) that has been converted into
Qualified Capital Stock (other than Capital Stock issued or
sold to a Subsidiary);
(y) without duplication of any amounts included in
clause (iii)(w) above, 100% of the aggregate net cash proceeds
of any equity contribution received by the Company from a
holder of the Company's Capital Stock (excluding any net cash
proceeds from a Public Equity Offering to the extent used to
redeem the Notes in compliance with the provisions set forth
under "Redemption -- Optional Redemption Upon Public Equity
Offerings."); plus
(z) without duplication, the sum of:
(1) the aggregate amount returned in cash on or
with respect to Investments (other than Permitted
Investments) made subsequent to the Issue Date whether
through interest payments, principal payments, dividends
or other distributions or payments;
(2) the net cash proceeds received by the Company
or any of its Restricted Subsidiaries from the
disposition of all or any portion of such Investments
(other than to a Subsidiary of the Company); and
(3) upon redesignation of an Unrestricted
Subsidiary as a Restricted Subsidiary, the fair market
value of such Subsidiary; provided, however, that the sum
of clauses (1), (2) and (3) above shall not exceed the
aggregate amount of all such Investments made subsequent
to the Issue Date.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration of such dividend if the dividend would have been permitted on
the date of declaration;
(2) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any shares of Capital Stock of the Company,
either (i) solely in exchange for shares of Qualified Capital Stock of the
Company or (ii) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Company) of
shares of Qualified Capital Stock of the Company;
(3) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any Indebtedness of the Company that is
subordinate or junior in right of payment to the Notes either (i) solely
in exchange for shares of Qualified Capital Stock of the Company, or (ii)
through the application of net proceeds of a substantially concurrent sale
for cash (other than to a Subsidiary of the Company) of (a) shares of
Qualified Capital Stock of the Company or (b) Refinancing Indebtedness;
(4) if no Default or Event of Default exists or would result
therefrom, (A) the Company may pay amounts required for any repurchase,
redemption or other acquisition for value of any capital stock or options
to acquire capital stock of the Company held by any director, officer,
employee or consultant of the Company or any of its Subsidiaries pursuant
to any equity subscription agreement or stock option agreement or similar
agreement, or otherwise upon their death, disability, retirement or
termination of employment or departure from the board of directors of the
Company (provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired capital stock and options (other than
payments described in clause (4)(B)) shall not exceed (x) $2,000,000 in
any twelve-month period or (y) $5,000,000 in the aggregate from and after
the Issue Date) and (B) the Company may pay amounts required under the
Missouri Stock Option Agreements in effect on the Issue Date if the
trading market for the common stock of the Company is not sufficiently
liquid as provided therein in an aggregate amount not to exceed $3.75
million in each of the four calendar years commencing with calendar year
2001;
96
102
provided that unused amounts may be carried forward to succeeding years
through the maturity date of the Notes;
(5) the redemption or repurchase of any Capital Stock or
Indebtedness of the Company, including the Notes, if required by any
Gaming Authority or if determined, in the good faith judgment of the Board
of Directors, to be necessary to prevent the loss or to secure the grant
or reinstatement of any gaming license or other right to conduct lawful
gaming operations; and
(6) Restricted Payments in an amount not to exceed $10.0 million in
the aggregate.
In determining the aggregate amount of Restricted Payments made subsequent to
the Issue Date in accordance with clause (iii) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1), (2) (ii), (3)(ii)(a), (4),
(5) and (6) shall be included in such calculation. The amount of all Restricted
Payments (other than cash) shall be the fair market value on the date of the
Restricted Payment of the assets or securities proposed to be transferred or
issued by the Company or such Restricted Subsidiary, as the case may be,
pursuant to the Restricted Payment.
Limitation on Asset Sales. The Company will not, and will not cause or
permit any of its Restricted Subsidiaries to, directly or indirectly consummate
an Asset Sale unless:
(1) the Company or the applicable Restricted Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at
least equal to the fair market value of the assets or Capital Stock sold
or issued or otherwise disposed of (as determined in good faith by the
Company's Board of Directors);
(2) at least 75% of the consideration received by the Company or
the Restricted Subsidiary, as the case may be, from such Asset Sale shall
be in the form of cash or Cash Equivalents and is received at the time of
such disposition; provided that, for purposes of this clause (2) the
following will be considered "cash" or "Cash Equivalents":
(a) any Senior Debt or Guarantor Senior Debt that is assumed
by the transferee of any such assets, to the extent the Company or
such Restricted Subsidiary is released from any further liability;
and
(b) any securities, notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee that
are converted by the Company or such Restricted Subsidiary into cash
or Cash Equivalents (to the extent of the cash or Cash Equivalents
received) within 30 days after receipt; and
(3) upon the consummation of an Asset Sale, the Company shall
apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds
(excluding amounts received and considered as "cash" or "Cash Equivalents"
pursuant to clause (2)(a)) relating to such Asset Sale within 365 days of
receipt thereof either:
(a) to repay any Senior Debt or Guarantor Senior Debt and, in
the case of any Senior Debt or Guarantor Senior Debt under any
revolving credit facility, effect a permanent reduction in the
availability under such revolving credit facility;
(b) to make an investment in properties and assets that
replace the properties and assets that were the subject of such Asset
Sale, in the Capital Stock of a Person that becomes a Restricted
Subsidiary as a result of such investment and that is engaged
primarily in a Permitted Line of Business or in properties and assets
that will be used by the Company and its Restricted Subsidiaries in a
Permitted Business ("Replacement Assets"); and/or
(c) a combination of prepayment and investment permitted by
the foregoing clauses (3)(a) and (3)(b).
97
103
Pending the final application of any such Net Cash Proceeds, the Company
may temporarily reduce revolving credit borrowings or otherwise invest such Net
Cash Proceeds in any manner that is not prohibited by the Indenture. On the
366th day after an Asset Sale or such earlier date, if any, as the Board of
Directors of the Company or of such Restricted Subsidiary determines not to
apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses
(3)(a), (3)(b) and (3)(c) of the preceding paragraph (each, a "Net Proceeds
Offer Trigger Date"), such aggregate amount of Net Cash Proceeds which have not
been applied on or before such Net Proceeds Offer Trigger Date as permitted in
clauses (3)(a), (3)(b) and (3)(c) of the preceding paragraph (each a "Net
Proceeds Offer Amount") shall be applied by the Company or such Restricted
Subsidiary to make an offer (the "Net Proceeds Offer") to all holders of Notes
and, to the extent required by the terms of any Pari Passu Indebtedness, an
offer to purchase to all holders of such Pari Passu Indebtedness, on a date (the
"Net Proceeds Offer Payment Date") not less than 30 nor more than 60 days
following the applicable Net Proceeds Offer Trigger Date, from all Holders (and
holders of any such Pari Passu Indebtedness) on a pro rata basis, that amount of
Notes (and Pari Passu Indebtedness) equal to the Net Proceeds Offer Amount at a
price equal to 100% of the principal amount thereof to be purchased, plus
accrued and unpaid interest thereon, if any, to the date of purchase; provided,
however, that if at any time any non-cash consideration received by the Company
or any Restricted Subsidiary of the Company, as the case may be, in connection
with any Asset Sale is converted into or sold or otherwise disposed of for cash
(other than interest received with respect to any such non-cash consideration),
then such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
this covenant.
The Company may defer the Net Proceeds Offer until there is an aggregate
unutilized Net Proceeds Offer Amount equal to or in excess of $10.0 million
resulting from one or more Asset Sales (at which time, the entire unutilized Net
Proceeds Offer Amount, and not just the amount in excess of $10.0 million, shall
be applied as required pursuant to this paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "-- Merger, Consolidation
and Sale of Assets", which transaction does not constitute a Change of Control,
the successor corporation shall be deemed to have sold the properties and assets
of the Company and its Restricted Subsidiaries not so transferred for purposes
of this covenant, and shall comply with the provisions of this covenant (other
than the first paragraph of this covenant) with respect to such deemed sale as
if it were an Asset Sale. In addition, the fair market value of such properties
and assets of the Company or its Restricted Subsidiaries deemed to be sold shall
be deemed to be Net Cash Proceeds for purposes of this covenant.
Notwithstanding the first two paragraphs of this covenant, the Company and
its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent that:
(1) at least 75% of the consideration for such Asset Sale
constitutes Replacement Assets; and
(2) such Asset Sale is for fair market value; provided that any
consideration not constituting Replacement Assets received by the Company
or any of its Restricted Subsidiaries in connection with any Asset Sale
permitted to be consummated under this paragraph shall constitute Net Cash
Proceeds subject to the provisions of the first two paragraphs of this
covenant.
Each Net Proceeds Offer will be mailed to the record Holders as shown on
the register of Holders within 25 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set forth
in the Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may
elect to tender their Notes in whole or in part in integral multiples of $1,000
in exchange for cash. To the extent Holders properly tender Notes and holders of
Pari Passu Indebtedness properly tender such Indebtedness in an amount exceeding
the Net Proceeds Offer Amount, the tendered Notes and Pari Passu Indebtedness
will be purchased on a pro rata basis based on the aggregate amounts tendered
(and the Trustee shall select the tendered Notes of tendering Holders on a pro
rata basis (based on amounts of
98
104
Notes tendered)). A Net Proceeds Offer shall remain open for a period of 20
business days or such longer period as may be required by law. Holders will be
entitled to withdraw their tender if the Trustee or the Company receives not
later than the third business day prior to the purchase date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Note which was delivered for purchase by the Holder and
a statement that such Holder is withdrawing its election to have such Note
purchased. Upon completion of a Net Proceeds Offer (including payment of the
purchase price for Notes duly tendered) the Net Cash Proceeds that were the
subject of such offer shall cease to be Net Cash Proceeds and the Company or
Restricted Subsidiary that engaged in the Asset Sale, as applicable, may use the
remaining Net Cash Proceeds for general corporate purposes.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of the Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the "Asset Sale" provisions of the Indenture by virtue
thereof.
If the Company is required to make a Net Proceeds Offer, such offer may be
subject to restrictions arising out of the terms of outstanding Senior Debt or
Guarantor Senior Debt or other limitations comparable to the restrictions and
limitations that may apply to offers to purchase notes following a Change of
Control. See "Change of Control" and "Risk Factors -- Risks Related to the
Notes."
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to:
(1) pay dividends or make any other distributions on or in respect
of its Capital Stock;
(2) make loans or advances or to pay any Indebtedness or other
obligation owed to the Company or any other Restricted Subsidiary of the
Company; or
(3) transfer any of its property or assets to the Company or any
other Restricted Subsidiary of the Company,
except for such encumbrances or restrictions existing under or by reason
of:
(a) applicable law, including restrictions imposed by
applicable gaming laws or any applicable Gaming Authority;
(b) the Notes, the Guarantees and the Indenture;
(c) customary non-assignment provisions of any contract or any
lease governing a leasehold interest of any Restricted Subsidiary of
the Company;
(d) any instrument governing Acquired Indebtedness, which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person and its
Subsidiaries or the properties or assets of the Person so acquired;
(e) agreements existing on the Issue Date to the extent and in
the manner such agreements are in effect on the Issue Date, including
the Credit Agreement;
(f) the provisions of security or pledge agreements or
mortgages (or similar agreements) granting a Permitted Lien or
restricting transfers of the assets secured thereby;
(g) FF&E Financing, Purchase Money Indebtedness or Capitalized
Lease Obligations for property acquired in the ordinary course of
business that impose restrictions of the nature described in clause
(3) above on the property so acquired; or
99
105
(h) an agreement governing Indebtedness incurred to Refinance
the Indebtedness issued, assumed or incurred pursuant to an agreement
referred to in clause (b), (d), (e), (f) or (g) above; provided,
however, that the provisions relating to such encumbrance or
restriction contained in any such Indebtedness are not less favorable
to the Company in any material respect as determined by the Board of
Directors of the Company in their reasonable and good faith judgment
than the provisions relating to such encumbrance or restriction
contained in agreements referred to in such clause (b), (d), (e), (f)
or (g).
Limitation on Preferred Stock of Restricted Subsidiaries. The Company will
not permit any of its Restricted Subsidiaries that are not Guarantors to issue
any Preferred Stock (other than to the Company or to a Wholly Owned Restricted
Subsidiary of the Company) or permit any Person (other than the Company or a
Wholly Owned Restricted Subsidiary of the Company) to own any Preferred Stock of
any Restricted Subsidiary of the Company that is not a Guarantor.
Limitation on Liens. The Company will not, and will not cause or permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or permit or suffer to exist any Liens of any kind against or upon any
property or assets of the Company or any of its Restricted Subsidiaries whether
owned on the Issue Date or acquired after the Issue Date, or any proceeds
therefrom, or assign or otherwise convey any right to receive income or profits
therefrom unless:
(1) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Notes, the Notes are
secured by a Lien on such property, assets or proceeds that is senior in
priority to such Liens, in each case until such time as such Liens no
longer secure other Indebtedness or obligations; and
(2) in all other cases, the Notes are equally and ratably secured,
in each case until such time as such Liens no longer secure other
Indebtedness or obligations, except for:
(a) Liens existing as of the Issue Date to the extent and in
the manner such Liens are in effect on the Issue Date;
(b) Liens securing Senior Debt and Liens securing Guarantor
Senior Debt;
(c) Liens securing the Notes and the Guarantees;
(d) Liens of the Company or a Guarantor on assets of any
Restricted Subsidiary of the Company;
(e) Liens securing Refinancing Indebtedness which is incurred
to Refinance any Indebtedness which has been secured by a Lien
permitted under the Indenture and which has been incurred in
accordance with the provisions of the Indenture; provided, however,
that such Liens: (i) are not materially less favorable to the Holders
and are not materially more favorable to the lienholders with respect
to such Liens than the Liens in respect of the Indebtedness being
Refinanced; and (ii) do not extend to or cover any property or assets
of the Company or any of its Restricted Subsidiaries not securing the
Indebtedness so Refinanced; and
(f) Permitted Liens.
Prohibition on Incurrence of Senior Subordinated Debt. The Company will
not, and will not permit any Restricted Subsidiary that is a Guarantor to,
directly or indirectly incur or suffer to exist Indebtedness that by its terms
would rank senior in right of payment to the Notes or any Guarantee, as the case
may be, and would rank subordinate in right of payment to any other Indebtedness
of the Company or such Guarantor, as the case may be.
Merger, Consolidation and Sale of Assets. The Company will not, in a
single transaction or series of related transactions, consolidate or merge with
or into any Person, or sell, assign, transfer, lease, convey or otherwise
dispose of (or cause or permit any Restricted Subsidiary of the Company to sell,
assign, transfer, lease, convey or otherwise dispose of) all or substantially
all of the Company's assets (determined
100
106
on a consolidated basis for the Company and the Company's Restricted
Subsidiaries) whether as an entirety or substantially as an entirety to any
Person unless:
(1) either:
(a) the Company shall be the surviving or continuing
corporation; or
(b) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Company and of the
Company's Restricted Subsidiaries substantially as an entirety (the
"Surviving Entity"):
(x) shall be a corporation organized and validly
existing under the laws of the United States or any State
thereof or the District of Columbia; and
(y) shall expressly assume, by supplemental indenture
(in form and substance satisfactory to the Trustee), executed
and delivered to the Trustee, the due and punctual payment of
the principal of, and premium, if any, and interest on all of
the Notes and the performance of every covenant of the Notes,
the Indenture and the Registration Rights Agreement on the part
of the Company to be performed or observed;
(2) immediately after giving effect to such transaction and the
assumption contemplated by clause (1)(b)(y) above (including giving effect
to any Indebtedness and Acquired Indebtedness incurred or anticipated to
be incurred in connection with or in respect of such transaction), the
Company or such Surviving Entity, as the case may be, (a) shall have a
Consolidated Net Worth equal to or greater than the Consolidated Net Worth
of the Company immediately prior to such transaction and (b) shall be able
to incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the "-- Limitation on Incurrence of Additional
Indebtedness" covenant;
(3) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (1)(b)(y) above
(including, without limitation, giving effect to any Indebtedness and
Acquired Indebtedness incurred or anticipated to be incurred and any Lien
granted in connection with or in respect of the transaction), no Default
or Event of Default shall have occurred or be continuing; and
(4) the Company or the Surviving Entity shall have delivered to the
Trustee an officers' certificate and an opinion of counsel, each stating
that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture
comply with the applicable provisions of the Indenture and that all
conditions precedent in the Indenture relating to such transaction have
been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
The Indenture provides that upon any consolidation, combination or merger
or any transfer of all or substantially all of the assets of the Company in
accordance with the foregoing, in which the Company is not the continuing
corporation, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, lease or transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture and the Notes with the same effect as if such
surviving entity had been named as such, and the Company shall be released from
the obligations under the Notes and the Indenture except in the case of a lease
of the
101
107
Company's assets and except with respect to any obligations under the Notes and
the Indenture that arise from, or related to, such transaction.
No Guarantor (other than any Guarantor whose Guarantee is to be released
in accordance with the terms of the Guarantee and the Indenture in connection
with any sale of such Guarantor in a transaction complying with the provisions
of "-- Limitation on Asset Sales") will, and the Company will not cause or
permit any Guarantor to, consolidate with or merge with or into any Person other
than the Company or any other Guarantor unless:
(1) the entity formed by or surviving any such consolidation or
merger (if other than the Guarantor) or to which such sale, lease,
conveyance or other disposition shall have been made is a corporation
organized and existing under the laws of the United States or any State
thereof or the District of Columbia;
(2) such entity assumes by supplemental indenture all of the
obligations of the Guarantor on the Guarantee; and
(3) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing.
Any merger or consolidation of a Guarantor with and into the Company (with
the Company being the surviving entity) or another Guarantor that is a Wholly
Owned Restricted Subsidiary of the Company need only comply with clause (4) of
the first paragraph of this covenant.
Limitations on Transactions with Affiliates. The Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related transactions
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with, or for the benefit of, any of
its Affiliates (each an "Affiliate Transaction"), other than (x) Affiliate
Transactions permitted under the third paragraph of this covenant and (y)
Affiliate Transactions on terms that are no less favorable than those that might
reasonably have been obtained in a comparable transaction at such time on an
arm's-length basis from a Person that is not an Affiliate of the Company or such
Restricted Subsidiary.
All Affiliate Transactions (and each series of related Affiliate
Transactions which are similar or part of a common plan) involving aggregate
payments or other property with a fair market value in excess of $2.0 million
shall be approved by the Board of Directors of the Company or such Restricted
Subsidiary, as the case may be, such approval to be evidenced by a Board
Resolution stating that such Board of Directors has determined in its good faith
judgment that such transaction complies with the foregoing provisions. If the
Company or any Restricted Subsidiary of the Company enters into an Affiliate
Transaction (or a series of related Affiliate Transactions related to a common
plan) that involves an aggregate fair market value of more than $10.0 million,
the Company or such Restricted Subsidiary, as the case may be, shall, prior to
the consummation thereof, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to the Company or the relevant
Restricted Subsidiary, as the case may be, from a financial point of view, from
an Independent Financial Advisor and file the same with the Trustee.
The restrictions set forth in the first and second paragraphs of this
covenant shall not apply to:
(1) reasonable fees and compensation paid to, indemnity provided on
behalf of, and any benefits provided pursuant to any employee benefit plan
or any similar arrangement (including any option or stock purchase plan)
on behalf of, officers, directors, employees or consultants of the Company
or any Restricted Subsidiary of the Company as determined in good faith by
the Company's Board of Directors or senior management;
(2) transactions exclusively between or among the Company and any
of its Restricted Subsidiaries or exclusively between or among such
Restricted Subsidiaries; provided that such transactions are not otherwise
prohibited by the Indenture and; provided, further, in each case, that
102
108
no Affiliate of the Company (other than another Restricted Subsidiary or a
director owning qualifying shares) owns Capital Stock of any such
Restricted Subsidiary;
(3) any agreement as in effect as of the Issue Date or any
amendment thereto or any transaction contemplated thereby (including
pursuant to any amendment thereto) in any replacement agreement thereto so
long as any such amendment or replacement agreement is not more
disadvantageous to the Holders in any material respect than the original
agreement as in effect on the Issue Date;
(4) loans or advances to officers or employees of the Company or
any Restricted Subsidiary made in the ordinary course of business of the
Company or such Restricted Subsidiary in accordance with the past practice
of the Company; provided that any such loan in excess of $250,000 must be
approved by a majority of the members of the Board of Directors who are
disinterested in the transaction;
(5) Restricted Payments permitted by the Indenture; and
(6) the issuance of Qualified Capital Stock.
Additional Subsidiary Guarantees. If the Company or any of its Restricted
Subsidiaries transfers or causes to be transferred, in one transaction or a
series of related transactions, any property to any Restricted Subsidiary that
is not a Guarantor, or if the Company or any of its Restricted Subsidiaries
shall organize, acquire or otherwise invest in another Restricted Subsidiary
having total assets with a book value in excess of $500,000, then, such
transferee or acquired or other Restricted Subsidiary shall:
(1) execute and deliver to the Trustee a supplemental indenture in
form reasonably satisfactory to the Trustee pursuant to which such
Restricted Subsidiary shall unconditionally guarantee all of the Company's
obligations under the Notes and the Indenture on the terms set forth in
the Indenture; and
(2) deliver to the Trustee an opinion of counsel that such
supplemental indenture has been duly authorized, executed and delivered by
such Restricted Subsidiary and constitutes a legal, valid, binding and
enforceable obligation of such Restricted Subsidiary. Thereafter, such
Restricted Subsidiary shall be a Guarantor for all purposes of the
Indenture.
Conduct of Business. The Company and its Restricted Subsidiaries will not
engage in any businesses other than Permitted Lines of Business.
Reports to Holders. The Indenture provides that, whether or not required
by the rules and regulations of the Commission, so long as any Notes are
outstanding, the Company will furnish the Holders of Notes:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if the Company were required to file such Forms, including; (a) a
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" that describes the financial condition and results of
operations of the Company and its consolidated Subsidiaries (showing in
reasonable detail, either on the face of the financial statements or in
the footnotes thereto and in Management's Discussion and Analysis of
Financial Condition and Results of Operations, the financial condition and
results of operations of the Company and its Restricted Subsidiaries
separate from the financial condition and results of operations of the
Unrestricted Subsidiaries of the Company, if any), (b) information with
respect to net revenues, EBITDA and operating income for the Company's
principal operating subsidiaries and (c) with respect to the annual
information only, a report thereon by the Company's certified independent
accounts; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports,
in each case within the time periods specified in the Commission's rules
and regulations.
103
109
In addition, following the consummation of the exchange offer contemplated
by the Registration Rights Agreement, whether or not required by the rules and
regulations of the Commission, the Company will file a copy of all such
information and reports with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Company has agreed that, for so long as any Notes remain outstanding, it will
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
GAMING APPROVALS
Restrictions on the transfer of the Capital Stock of the Company's License
Subsidiaries licensed in Nevada, Missouri, Iowa, Mississippi or other
jurisdictions, and agreements not to encumber such Capital Stock, in each case,
in respect of the Notes, are not effective without the prior approval of the
applicable Gaming Authorities. No License Subsidiary shall be subject to such
restrictions until the earlier of such time (the "Applicable Date") as (1) prior
approval of such restrictions with respect to such License Subsidiary is
received from the applicable Gaming Authorities or (2) a registered public
offering of the notes is made pursuant to a prior approval of the applicable
Gaming Authorities of such offering that includes a prior approval of such
restrictions with respect to such License Subsidiary. Such prior approval has
been obtained with respect to the Company's Licensed Subsidiaries in Missouri,
Iowa and Mississippi as of the Issue Date. The Company shall use commercially
reasonable efforts to cause the Applicable Date to occur for each other License
Subsidiary at the earliest practicable time. For more information, see
"Government Regulations."
Each Holder of a Note, by accepting any Note, agrees to be bound by the
requirements imposed on holders of debt securities of the Company by the gaming
authority of any jurisdiction of which the Company or any of its Subsidiaries
conducts or proposes to conduct gaming activities. For a description of the
regulatory requirements applicable to the Company, see "Government Regulation"
herein.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(1) the failure to pay interest on any Notes when the same becomes
due and payable and the default continues for a period of 30 days (whether
or not such payment shall be prohibited by the subordination provisions of
the Indenture);
(2) the failure to pay the principal on any Notes, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer)
(whether or not such payment shall be prohibited by the subordination
provisions of the Indenture);
(3) a default in the observance or performance of any other
covenant or agreement contained in the Indenture which default continues
for a period of 30 days after the Company receives written notice
specifying the default (and demanding that such default be remedied) from
the Trustee or the Holders of at least 25% of the outstanding principal
amount of the Notes (except in the case of a default with respect to the
"Merger, Consolidation and Sale of Assets" covenant, which will constitute
an Event of Default with such notice requirement but without such passage
of time requirement);
(4) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Restricted Subsidiary of the
Company, or the acceleration of the final stated maturity of any such
Indebtedness (which acceleration is not rescinded, annulled or otherwise
cured within 20 days of receipt by the Company or such Restricted
Subsidiary of notice of any such acceleration) if the aggregate principal
amount of such Indebtedness, together with the principal amount of any
other
104
110
such Indebtedness in default for failure to pay principal at final
maturity or which has been accelerated (in each case with respect to which
the 20-day period described above has elapsed), aggregates $10.0 million
or more at any time;
(5) one or more judgments in an aggregate amount in excess of $10.0
million shall have been rendered against the Company or any of its
Restricted Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and non-appealable;
(6) certain events of bankruptcy affecting the Company or any of
its Significant Subsidiaries;
(7) any Guarantee of a Significant Subsidiary ceases to be in full
force and effect or any Guarantee of a Significant Subsidiary is declared
to be null and void and unenforceable or any Guarantee of a Significant
Subsidiary is found to be invalid or any Guarantor that is a Significant
Subsidiary denies its liability under its Guarantee (other than by reason
of release of a Guarantor in accordance with the terms of the Indenture);
or
(8) any gaming license of the Company or any of its Restricted
Subsidiaries is revoked, terminated or suspended or otherwise ceases to be
effective, resulting in the cessation or suspension of operation for a
period of more than 90 days of the casino business of any casino owned,
leased or operated directly or indirectly by the Company or any of its
Significant Subsidiaries (other than any voluntary relinquishment of a
gaming license if such relinquishment is, in the reasonable, good faith
judgment of the Board of Directors of the Company, evidenced by a
resolution of such Board, both desirable in the conduct of the business of
the Company and its Restricted Subsidiaries, taken as a whole, and not
disadvantageous in any material respect to the Holders of Notes).
If an Event of Default (other than an Event of Default specified in clause
(6) above with respect to the Company) shall occur and be continuing, the
Trustee or the Holders of at least 25% in principal amount of outstanding Notes
may declare the principal of and accrued interest on all the Notes to be due and
payable by notice in writing to the Company and the Trustee specifying the
respective Event of Default and that it is a "notice of acceleration" (the
"Acceleration Notice"), and the same:
(1) shall become immediately due and payable; or
(2) if there are any amounts outstanding under the Credit
Agreement, shall become immediately due and payable upon the first to
occur of an acceleration under the Credit Agreement or 5 business days
after receipt by the Company and the Representative under the Credit
Agreement of such Acceleration Notice but only if such Event of Default is
then continuing.
If an Event of Default specified in clause (6) above with respect to the
Company occurs and is continuing, then all unpaid principal of, and premium, if
any, and accrued and unpaid interest on all of the outstanding Notes shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Holder.
The Indenture provides that, at any time after a declaration of
acceleration with respect to the Notes as described in the preceding paragraph,
the Holders of a majority in principal amount of the Notes may rescind and
cancel such declaration and its consequences:
(1) if the rescission would not conflict with any judgment or
decree;
(2) if all existing Events of Default have been cured or waived
except nonpayment of principal or interest that has become due solely
because of the acceleration;
(3) to the extent the payment of such interest is lawful, interest
on overdue installments of interest and overdue principal, which has
become due otherwise than by such declaration of acceleration, has been
paid;
105
111
(4) if the Company has paid the Trustee its reasonable compensation
and reimbursed the Trustee for its expenses, disbursements and advances;
and
(5) in the event of the cure or waiver of an Event of Default of
the type described in clause (6) of the description above of Events of
Default, the Trustee shall have received an officers' certificate and an
opinion of counsel that such Event of Default has been cured or waived. No
such rescission shall affect any subsequent Default or impair any right
consequent thereto.
The Holders of a majority in principal amount of the Notes may waive any
existing Default or Event of Default under the Indenture, and its consequences,
except a default in the payment of the principal of or interest on any Notes.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture and under the TIA. Subject to the provisions of the
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the then outstanding Notes have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee.
Under the Indenture, the Company is required to provide an officers'
certificate to the Trustee promptly upon any such officer obtaining knowledge of
any Default or Event of Default (provided that such officers shall provide such
certification at least annually whether or not they know of any Default or Event
of Default) that has occurred and, if applicable, describe such Default or Event
of Default and the status thereof. If a Default or Event of Default exists and
is known to the Trustee, the Trustee must mail to each Holder notice of the
Default or Event of Default no later than 30 days after it is known to a trust
officer or written notice of it is received by the Trustee. Except in the case
of a Default or Event of Default in the payment of principal of or interest on
any Note, the Trustee may withhold notice if and so long as a committee of its
trust officers in good faith determines that withholding such notice is in the
interests of the Holders.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES OR STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Notes or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. No director, officer, employee,
incorporator or stockholder of any of the Guarantors, as such, shall have any
liability for any obligations of the Guarantors under the Guarantees or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes and Guarantees by accepting
a Note and a Guarantee waives and releases all such liabilities. The waiver and
release are part of the consideration for issuance of the Notes and the
Guarantees. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a waiver
is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations and the obligations of the Guarantors discharged with respect to the
outstanding Notes ("Legal Defeasance"). Such Legal Defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding Notes, except for:
(1) the rights of Holders to receive payments in respect of the
principal of, premium, if any, and interest on the Notes when such
payments are due;
106
112
(2) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost
or stolen Notes and the maintenance of an office or agency for payments;
(3) the rights, powers, trust, duties and immunities of the Trustee
and the Company's obligations in connection therewith; and
(4) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company released with respect to certain covenants that
are described in the Indenture ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or Event
of Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
reorganization and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders cash in U.S. dollars, non-callable
U.S. government obligations, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any,
and interest on the Notes on the stated date for payment thereof or on the
applicable redemption date, as the case may be;
(2) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that:
(a) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling; or
(b) since the date of the Indenture, there has been a change
in the applicable federal income tax law,
in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the Holders will not recognize income,
gain or loss for federal income tax purposes as a result of such
Legal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders will not
recognize income, gain or loss for federal income tax purposes as a result
of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Events of Default
from bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a default under the Indenture
or any other material agreement or instrument to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(6) the Company shall have delivered to the Trustee an officers'
certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company
or with the intent of defeating, hindering, delaying or defrauding any
other creditors of the Company or others;
107
113
(7) the Company shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with;
(8) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that:
(a) the trust funds will not be subject to any rights of
holders of Senior Debt, including, without limitation, those arising
under the Indenture; and
(b) assuming no intervening bankruptcy of the Company between
the date of deposit and the 91st day following the date of deposit
and that no Holder is an insider of the Company, after the 91st day
following the date of deposit, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally or, in the case
of Covenant Defeasance, will be subject to a first priority Lien in
favor of the Trustee for the benefit of the Holders; and
(9) certain other customary conditions precedent are satisfied.
Notwithstanding the foregoing, the opinion of counsel required by clause
(2) above with respect to a Legal Defeasance need not be delivered if all Notes
not theretofore delivered to the Trustee for cancellation (1) have become due
and payable or (2) will become due and payable on the maturity date within one
year under arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when:
(1) either:
(a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or
paid and Notes for whose payment money has theretofore been deposited
in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust) have
been delivered to the Trustee for cancellation; or
(b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has
irrevocably deposited or caused to be deposited with the Trustee
funds in an amount sufficient to pay and discharge the entire
Indebtedness on the Notes not theretofore delivered to the Trustee
for cancellation, for principal of, premium, if any, and interest on
the Notes to the date of deposit together with irrevocable
instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case
may be;
(2) the Company has paid all other sums payable under the Indenture
by the Company; and
(3) the Company has delivered to the Trustee an officers'
certificate and an opinion of counsel stating that all conditions
precedent under the Indenture relating to the satisfaction and discharge
of the Indenture have been complied with.
MODIFICATION OF THE INDENTURE
From time to time, the Company, the Guarantors and the Trustee, without
the consent of the Holders, may amend the Indenture for certain specified
purposes, including curing ambiguities, defects or inconsistencies. In
formulating its opinion on such matters, the Trustee will be entitled to rely on
such
108
114
evidence as it deems appropriate, including, without limitation, solely on an
opinion of counsel. Other modifications and amendments of the Indenture may be
made with the consent of the Holders of a majority in principal amount of the
then outstanding Notes issued under the Indenture, except that, without the
consent of each Holder affected thereby, no amendment may:
(1) reduce the amount of Notes whose Holders must consent to an
amendment;
(2) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any Notes;
(3) reduce the principal of or change or have the effect of
changing the fixed maturity of any Notes, or change the date on which any
Notes may be subject to redemption or reduce the redemption price
therefor;
(4) make any Notes payable in money other than that stated in the
Notes;
(5) make any change in provisions of the Indenture protecting the
right of each Holder to receive payment of principal of and interest on
such Note on or after the due date thereof or to bring suit to enforce
such payment (except a rescission of acceleration of the Notes by the
Holders of at least a majority in aggregate principal amount of the Notes
and a waiver of the payment default that resulted from such acceleration),
or permitting Holders of a majority in principal amount of Notes to waive
Defaults or Events of Default;
(6) after the Company's obligation to make an offer to purchase
Notes arises thereunder, amend, change or modify in any material respect
the obligation of the Company to make and consummate a Change of Control
Offer in the event of a Change of Control or make and consummate a Net
Proceeds Offer with respect to any Asset Sale that has been consummated
or, after such Change of Control has occurred or such Asset Sale has been
consummated, modify any of the provisions or definitions with respect
thereto;
(7) modify or change any provision of the Indenture or the related
definitions affecting the subordination or ranking of the Notes or any
Guarantee in a manner which adversely affects the Holders; or
(8) release any Guarantor that is a Significant Subsidiary from any
of its obligations under its Guarantee or the Indenture otherwise than in
accordance with the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it, the Notes and the Guarantees will be
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the law of another jurisdiction would be required
thereby.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it by the Indenture, and use the same
degree of care and skill in its exercise as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
Trustee will be permitted to engage in other transactions; provided that if the
Trustee acquires any conflicting interest as described in the TIA, it must
eliminate such conflict or resign.
109
115
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person existing at the
time such Person becomes a Restricted Subsidiary of the Company or at the time
it merges or consolidates with or into the Company or any of its Restricted
Subsidiaries or assumed in connection with the acquisition of assets from such
Person and in each case not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Restricted Subsidiary
of the Company or such acquisition, merger or consolidation.
"Additional Interest" has the meaning set forth in the registration rights
agreement relating to the Notes dated as of the Issue Date.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of the foregoing.
"Asset Acquisition" means (1) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (2) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person (other than
a Restricted Subsidiary of the Company) which constitute all or substantially
all of the assets of such Person or comprises any division or line of business
of such Person or any other properties or assets of such Person other than in
the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company, a Guarantor or a Wholly Owned Restricted
Subsidiary of the Company of: (1) any Capital Stock of any Restricted Subsidiary
of the Company; or (2) any other property or assets of the Company or any
Restricted Subsidiary of the Company other than in the ordinary course of
business; provided, however, that asset sales or other dispositions shall not
include: (a) a transaction or series of related transactions for which the
Company or its Restricted Subsidiaries receive aggregate consideration of less
than $2.0 million; (b) the sale, lease, conveyance, disposition or other
transfer of all or substantially all of the assets of the Company as permitted
under "Merger, Consolidation and Sale of Assets;" (c) any foreclosure sale of
FF&E pursuant to a FF&E Financing; (d) any Restricted Payment permitted by the
"Limitation on Restricted Payments" covenants or that constitutes a Permitted
Investment; and (e) leases or subleases of real or personal property in the
ordinary course of business on commercially reasonable terms to the extent that
the Company determines that such property is immaterial and no longer necessary
in the conduct of its business or such lease or sublease is to an operator of a
restaurant, store or other enterprise within or adjacent to a casino facility of
the Company or its Subsidiaries.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
110
116
"Capital Stock" means:
(1) with respect to any Person that is a corporation, any and all
shares, interests, participations or other equivalents (however designated
and whether or not voting) of corporate stock, including each class of
Common Stock and Preferred Stock of such Person; and
(2) with respect to any Person that is not a corporation, any and
all partnership, membership or other equity interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Cash Equivalents" means:
(1) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States Government or issued by any agency
thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof;
(2) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Ratings Group
("S&P") or Moody's Investors Service, Inc. ("Moody's");
(3) commercial paper maturing no more than one year from the date
of creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's;
(4) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than
$250.0 million;
(5) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clause (1) above
entered into with any bank meeting the qualifications specified in clause
(4) above; and
(6) investments in money market funds which invest substantially
all their assets in securities of the types described in clauses (1)
through (5) above.
"Change of Control" means the occurrence of one or more of the following
events:
(1) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all or substantially all of the
assets of the Company to any Person or group of related Persons for
purposes of Section 13(d) of the Exchange Act (a "Group"), together with
any Affiliates thereof (whether or not otherwise in compliance with the
provisions of the Indenture) other than to the Permitted Holders or a
Guarantor and other than a transaction where the holders of the Capital
Stock of the Company immediately prior to such transaction own, directly
or indirectly, not less than a majority of the Capital Stock of the
acquiring Person;
(2) the approval by the holders of Capital Stock of the Company of
any plan or proposal for the liquidation or dissolution of the Company
(whether or not otherwise in compliance with the provisions of the
Indenture);
(3) any Person or Group (other than the Permitted Holders) shall
become the owner, directly or indirectly, beneficially or of record, of
shares representing more than 35% of the aggregate ordinary voting power
represented by the issued and outstanding Capital Stock of the Company and
at such time (i) the Permitted Holders together do not beneficially own,
directly or
111
117
indirectly, a greater percentage of the aggregate ordinary voting power of
the Capital Stock of the Company than is beneficially owned by such other
Person or Group and (ii) the Permitted Holders do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors of the Company; or
(4) the replacement of a majority of the Board of Directors of the
Company over a two-year period from the directors who constituted the
Board of Directors of the Company at the beginning of such period, and
such replacement shall not have been approved by a vote of at least a
majority of the Board of Directors of the Company then still in office who
either were members of such Board of Directors at the beginning of such
period or whose election as a member of such Board of Directors was
previously so approved.
"Commission" means the Securities and Exchange Commission or any successor
agency.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of:
(1) Consolidated Net Income; and
(2) to the extent Consolidated Net Income has been reduced thereby:
(a) all income taxes of such Person and its Restricted
Subsidiaries paid or accrued in accordance with GAAP for such period
(other than income taxes attributable to extraordinary, unusual or
nonrecurring gains or losses or taxes attributable to sales or
dispositions outside the ordinary course of business);
(b) Consolidated Interest Expense;
(c) all preopening expenses of such Person and its Restricted
Subsidiaries paid or accrued in accordance with GAAP;
(d) Consolidated Non-cash Charges less any non-cash items
increasing Consolidated Net Income for such period, all as determined
on a consolidated basis for such Person and its Restricted
Subsidiaries in accordance with GAAP; and
(e) development costs associated with the Company's
unsuccessful bid for a gaming license in Lemay, Missouri and the
costs of Missouri investigations and fines in each case paid or
accrued prior to the Issue Date in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending prior to the date of the
transaction giving rise to the need to calculate the Consolidated Fixed Charge
Coverage Ratio for which financial statements are available (the "Transaction
Date") to Consolidated Fixed Charges of such Person for the Four Quarter Period.
In addition to and without limitation of the foregoing, for purposes of this
definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to:
(1) the incurrence or repayment of any Indebtedness of such Person
or any of its Restricted Subsidiaries (and the application of the proceeds
thereof) giving rise to the need to make such calculation and any
incurrence or repayment of other Indebtedness (and the application of the
proceeds thereof), other than the incurrence or repayment of Indebtedness
in the ordinary course of business for working capital purposes pursuant
to working capital facilities, occurring during the Four Quarter Period or
at any time subsequent to the last day of the Four Quarter Period and on
112
118
or prior to the Transaction Date, as if such incurrence or repayment, as
the case may be (and the application of the proceeds thereof), occurred on
the first day of the Four Quarter Period; and
(2) any Asset Sales or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as
a result of the Asset Acquisition) incurring, assuming or otherwise being
liable for Acquired Indebtedness and also including any Consolidated
EBITDA (including any pro forma expense and cost reductions calculated on
a basis consistent with Regulation S-X under the Exchange Act and
determined without giving effect to clause (3) of the proviso set forth in
the definition of Consolidated Net Income) attributable to the assets
which are the subject of the Asset Acquisition during the Four Quarter
Period) occurring during the Four Quarter Period or at any time subsequent
to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such Asset Sale or Asset Acquisition (including
the incurrence, assumption or liability for any such Acquired
Indebtedness) occurred on the first day of the Four Quarter Period. If
such Person or any of its Restricted Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the preceding sentence shall
give effect to the incurrence of such guaranteed Indebtedness as if such
Person or any Restricted Subsidiary of such Person had directly incurred
or otherwise assumed such guaranteed Indebtedness (as determined under
"Indebtedness").
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio":
(1) interest on outstanding Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will continue to be
so determined thereafter shall be deemed to have accrued at a fixed rate
per annum equal to the rate of interest on such Indebtedness in effect on
the Transaction Date; and
(2) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered
by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the
operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of:
(1) Consolidated Interest Expense; plus
(2) the product of (x) the amount of all dividend payments on any
series of Preferred Stock of such Person and, to the extent permitted
under the Indenture, its Restricted Subsidiaries (other than dividends
paid in Qualified Capital Stock) paid, accrued or scheduled to be paid or
accrued during such period times (y) a fraction, the numerator of which is
one and the denominator of which is one minus the then current effective
consolidated federal, state and local tax rate of such Person, expressed
as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication:
(1) the aggregate of the interest expense of such Person and its
Restricted Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP, including without limitation: (a) any
amortization of debt discount and amortization or write-off of deferred
financing costs; (b) the net costs under Interest Swap Obligations; (c)
all capitalized interest; and (d) the interest portion of any deferred
payment obligation; and
(2) the interest component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by such Person and its
Restricted Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP.
113
119
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom:
(1) after-tax gains from Asset Sales (without regard to the $2.0
million limitation set forth in the definition thereof) or abandonments or
reserves relating thereto;
(2) after-tax items classified as extraordinary or nonrecurring
gains;
(3) the net income of any Person acquired in a "pooling of
interests" transaction accrued prior to the date it becomes a Restricted
Subsidiary of the referent Person or is merged or consolidated with the
referent Person or any Restricted Subsidiary of the referent Person;
(4) the net income (but not loss) of any Restricted Subsidiary of
the referent Person to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is
restricted by a contract, operation of law or otherwise;
(5) the net income of any Person, other than a Restricted
Subsidiary of the referent Person, except to the extent of cash dividends
or distributions paid to the referent Person or to a Wholly Owned
Restricted Subsidiary of the referent Person by such Person;
(6) any restoration to income of any contingency reserve, except to
the extent that provision for such reserve was made out of Consolidated
Net Income accrued at any time following December 31, 2000;
(7) income or loss attributable to discontinued operations
(including, without limitation, operations disposed of during such period
whether or not such operations were classified as discontinued);
(8) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's
assets, any earnings of the successor corporation prior to such
consolidation, merger or transfer of assets; and
(9) non-cash charges relating to compensation expense in connection
with benefits provided under employee stock option plans, restricted stock
option plans and other employee stock purchase or stock incentive plans.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Capital Stock of such Person.
"Consolidated Non-cash Charges" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Restricted Subsidiaries reducing Consolidated Net Income of
such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (including amortization of goodwill
and other intangibles and excluding any such charges constituting an
extraordinary item or loss or any such charge which requires an accrual of or a
reserve for cash charges for any future period).
"Credit Agreement" means the Credit Agreement dated as of December 20,
2000, between the Company, the lenders party thereto in their capacities as
lenders thereunder and Bankers Trust Company, as administrative agent, together
with the related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder (provided that such
increase in borrowings is permitted by the "Limitation on Incurrence of
Additional Indebtedness" covenant above) or adding Restricted Subsidiaries of
the Company as additional borrowers or guarantors thereunder) all or any portion
of the Indebtedness under such agreement or any successor or replacement
agreement and whether by the same or any other agent, lender or group of
lenders.
114
120
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"Designated Senior Debt" means (1) Indebtedness under or in respect of the
Credit Agreement and (2) any other Indebtedness constituting Senior Debt which,
at the time of determination, has an aggregate principal amount (available or
committed) of at least $25.0 million and is specifically designated in the
instrument evidencing such Senior Debt as "Designated Senior Debt" by the
Company.
"Disqualified Capital Stock" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable at the option of the holder
thereof), or upon the happening of any event (other than an event which would
constitute a Change of Control), matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or is redeemable at the sole option
of the holder thereof (except, in each case, upon the occurrence of a Change of
Control) on or prior to the final maturity date of the Notes.
"Domestic Restricted Subsidiary" means a Restricted Subsidiary
incorporated or otherwise organized or existing under the laws of the United
States, any state thereof or any territory or possession of the United States.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"fair market value" means, with respect to any asset or property, the
price which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the Board of Directors of the Company acting
reasonably and in good faith whose determination shall be conclusive if
evidenced by a Board Resolution of the Board of Directors of the Company
delivered to the Trustee.
"FF&E Financing" means Indebtedness the proceeds of which will be used to
finance the acquisition or lease by the Company or its Restricted Subsidiaries
of furniture, fixtures or equipment ("FF&E") used in the operation of its
business and secured by a Lien on such FF&E.
"Futuresouth Royalty" means the royalty payments required to be made
pursuant to the Asset Purchase and Sale Agreement, dated as of February 15,
2000, by and between Futuresouth, Southboat Lemay, Inc., Southboat Limited
Partnership and Ameristar Casino St. Louis, Inc., as in effect on the Issue Date
and without giving effect to any subsequent amendment, modification and
supplement.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Gaming Authority" means any governmental authority with regulatory
oversight of, authority to regulate or jurisdiction over any gaming businesses
or enterprises, including but not limited to the Nevada State Gaming Control
Board, the Nevada Gaming Commission, the Mississippi Gaming Commission, the
Mississippi State Tax Commission, Missouri Gaming Commission, the Iowa Racing
and Gaming Commission, and any agency established by a federally recognized
Indian tribe to regulate gaming on such tribe's reservation with regulatory
oversight of, authority to regulate or jurisdiction over any gaming operation
(or proposed gaming operation) owned, managed or operated by the Company or any
Subsidiary.
"Gaming Regulations" shall mean the laws, rules, regulations and orders
applicable to the casino and gaming businesses or activities of the Company or
any of its Subsidiaries in any jurisdiction, as in effect from time to time,
including the policies, interpretations and administration thereof by the Gaming
Authorities.
115
121
"Guarantor" means: (1) each of the Company's existing Subsidiaries; and
(2) each of the Company's Restricted Subsidiaries that in the future executes a
supplemental indenture in which such Restricted Subsidiary agrees to be bound by
the terms of the Indenture as a Guarantor; provided that any Person constituting
a Guarantor as described above shall cease to constitute a Guarantor when its
respective Guarantee is released in accordance with the terms of the Indenture.
"Guarantor Senior Debt" means, with respect to any Guarantor: the
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on any Indebtedness of a Guarantor, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
Guarantee of such Guarantor. Without limiting the generality of the foregoing,
"Guarantor Senior Debt" shall also include the principal of, premium, if any,
interest (including any interest accruing sub sequent to the filing of a
petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing in respect of:
(x) all monetary obligations of every nature of such Guarantor
under, or with respect to, the Credit Agreement, including, without
limitation, obligations to pay principal and interest, reimbursement
obligations under letters of credit, fees, expenses and indemnities (and
guarantees thereof); and
(y) all Interest Swap Obligations (and guarantees thereof);
in each case whether outstanding on the Issue Date or thereafter incurred.
Notwithstanding the foregoing, "Guarantor Senior Debt" shall not include:
(1) any Indebtedness of such Guarantor to a Subsidiary of such
Guarantor;
(2) Indebtedness to, or guaranteed on behalf of, any shareholder,
director, officer or employee of such Guarantor or any Subsidiary of such
Guarantor (including, without limitation, amounts owed for compensation)
other than a shareholder who is also a lender (or an Affiliate of a
lender) under the Credit Agreement;
(3) Indebtedness to trade creditors;
(4) Indebtedness represented by Preferred Stock and Disqualified
Capital Stock;
(5) any liability for federal, state, local or other taxes owed or
owing by such Guarantor;
(6) that portion of any Indebtedness incurred in violation of the
Indenture provisions set forth under "Limitation on Incurrence of
Additional Indebtedness" (but, as to any such obligation, no such
violation shall be deemed to exist for purposes of this clause (6) if the
holder(s) of such obligation or their representative shall have received
an officers' certificate of the Company to the effect that the incurrence
of such Indebtedness does not (or, in the case of revolving credit
indebtedness, that the incurrence of the entire committed amount thereof
at the date on which the initial borrowing thereunder is made would not)
violate such provisions of the Indenture);
(7) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company; and
(8) any Indebtedness which is, by its express terms, subordinated
in right of payment to any other Indebtedness of such Guarantor.
116
122
"Indebtedness" means with respect to any Person, without duplication:
(1) all Obligations of such Person for borrowed money;
(2) all Obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments;
(3) all Capitalized Lease Obligations of such Person;
(4) all Obligations of such Person for the deferred purchase price
of property or services (other than, to the extent deferred in the
ordinary course of business, deferred payments in respect of services by
employees) which remain unpaid more than 120 days after the due date
therefor other than payments which are being contested in good faith;
(5) all Obligations for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction;
(6) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (1) through (5) above and clause (8)
below;
(7) all Obligations of any other Person of the type referred to in
clauses (1) through (6) which are secured by any lien on any property or
asset of such Person, the amount of such Obligation being deemed to be the
lesser of the fair market value of such property or asset or the amount of
the Obligation so secured;
(8) all Interest Swap Obligations of such Person; and
(9) all Disqualified Capital Stock issued by such Person with the
amount of Indebtedness represented by such Disqualified Capital Stock
being equal to the greater of its voluntary or involuntary liquidation
preference and its maximum fixed repurchase price at any time prior to its
stated repurchase date, but excluding accrued dividends, if any.
For purposes hereof, (1) the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock as if
such Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in good
faith by the Board of Directors of the issuer of such Disqualified Capital Stock
and (2) the principal amount of Indebtedness arising from royalty obligations
representing the deferred purchase price of property or services shall equal the
greater of (x) the principal amount thereof as determined in accordance with
GAAP and (y) the present value of the amounts the management of the Company
believes in good faith will be required to be paid under such royalty
obligation, provided that in the case of the Futuresouth Royalty, the principal
amount of such Indebtedness shall equal the present value of the greater of (x)
the minimum royalty payments and (y) the amount actually paid in respect of the
Futuresouth Royalty in respect of the most recently ended period.
"Independent Financial Advisor" means a firm: (1) which does not, and
whose directors, officers and employees or Affiliates do not, have any material
direct or indirect financial interest in the Company; and (2) which, in the good
faith judgment of the Board of Directors of the Company, is otherwise
independent and qualified to perform the task for which it is to be engaged.
"Interest Swap Obligations" means the obligations of any Person pursuant
to any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
117
123
"Investment" means, with respect to any Person, any direct or indirect
loan or other extension of credit (including, without limitation, a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude extensions of trade credit by the
Company and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. If the Company or any Restricted Subsidiary of
the Company sells or otherwise disposes of any Common Stock of any direct or
indirect Restricted Subsidiary of the Company such that, after giving effect to
any such sale or disposition, such Restricted Subsidiary is no longer a
Restricted Subsidiary of the Company, the Company shall be deemed to have made
an Investment on the date of any such sale or disposition equal to the fair
market value of the Common Stock of such Restricted Subsidiary not sold or
disposed of.
"Issue Date" means February 2, 2001.
"License Subsidiary" means each Subsidiary of the Company on the Issue
Date and any future Subsidiary, in either case that holds any gaming license
from any Gaming Authority requiring approval for the incurrence of Indebtedness
of such Subsidiary for the incurring of any Lien on the Capital Stock of such
Subsidiary.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"Missouri Stock Option Agreements" means the four Non-Qualified Stock
Option Agreements dated as of December 18, 2000 between the Company on the one
hand, and John Finamore, Troy Stremming, Thomas Burke and Anthony Raymon on the
other hand, in each case as in effect on the Issue Date and without giving
effect to any amendment, modification or supplement thereto.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest) received by
the Company or any of its Restricted Subsidiaries from such Asset Sale net of:
(1) reasonable out-of-pocket expenses and fees relating to such
Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions);
(2) taxes paid or payable after taking into account any reduction
in consolidated tax liability due to available tax credits or deductions
and any tax sharing arrangements;
(3) repayment of Indebtedness that is secured by the property or
assets that are the subject of such Asset Sale; and
(4) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve, in accordance
with GAAP, against any liabilities associated with such Asset Sale and
retained (or indemnified against) by the Company or any Restricted
Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, expenses, damages and other
liabilities payable under the documentation governing such obligation.
"Permitted Holders" shall mean and include (i) Craig H. Neilsen or Ray
Neilsen, their respective estates, spouses, heirs, ancestors, lineal
descendants, legatees, legal representatives or the trustee of any bona fide
trust of which no one other than the foregoing has any interest, (ii) any entity
controlled, directly or indirectly, by any of the foregoing referred to in the
previous clause (i), whether through the
118
124
ownership of voting securities, by contract or otherwise, and (iii) Craig H.
Neilsen or Ray Neilsen (a) in their respective capacity as a trustee under a
revocable trust of which no one other than the persons and entities listed in
the foregoing clause (i) has any interest, together with each successor trustee
thereof or (b) as the executor of the estate of Gwendolyn Anderson or of any
Person named in clause (i).
"Permitted Indebtedness" means, without duplication, each of the
following:
(1) Indebtedness under the Notes issued in the Offering, the
Indenture and the Guarantees in an aggregate principal amount not to
exceed $380.0 million;
(2) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed $475.0
million less the amount of all permanent repayments actually made (which
are accompanied by a corresponding permanent commitment reduction)
thereunder as a result of the application of the Net Cash Proceeds of any
Asset Sale;
(3) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually
paid or permanent reductions thereon;
(4) Interest Swap Obligations of the Company or any Restricted
Subsidiary of the Company covering Indebtedness of the Company or any of
its Restricted Subsidiaries; provided, however, that such Interest Swap
Obligations are entered into to protect the Company and its Restricted
Subsidiaries from fluctuations in interest rates on its outstanding
Indebtedness to the extent the notional principal amount of such In
Interest Swap Obligation does not, at the time of the incurrence thereof,
exceed the principal amount of the Indebtedness to which such Interest
Swap Obligation relates;
(5) Indebtedness of a Restricted Subsidiary of the Company to the
Company or a Guarantor for so long as such Indebtedness is held by the
Company or a Guarantor, in each case subject to no Lien held by a Person
other than the Company, a Guarantor or the agent acting on behalf of the
lenders under the Credit Agreement; provided that if as of any date any
Person other than the Company, a Guarantor or the agent acting on behalf
of the lenders under the Credit Agreement owns or holds any such
Indebtedness or holds a Lien in respect of such Indebtedness, such date
shall be deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by the issuer of such Indebtedness;
(6) Indebtedness of the Company to a Guarantor for so long as such
Indebtedness is held by a Guarantor, subject to no Lien held by any Person
other than a Guarantor or the agent acting on behalf of the lenders under
the Credit Agreement; provided that if as of any date any Person other
than a Guarantor or the agent acting on behalf of the lenders under the
Credit Agreement owns or holds any such Indebtedness or holds a Lien in
respect of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness by the Company;
(7) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; provided, however,
that such Indebtedness is extinguished within three business days of
notice of incurrence;
(8) Indebtedness of the Company or any of its Restricted
Subsidiaries in respect of bankers' acceptances, workers' compensation
claims, appeal bonds, payment obligations in connection with
self-insurance or similar obligations, deferred compensation to employees
and bank overdrafts (and letters of credit in respect thereof), in each
case, in the ordinary course of business;
(9) Indebtedness of the Company or any of its Restricted
Subsidiaries incurred solely in respect of performance, surety and similar
bonds or completion guarantees, to the extent that such incurrence does
not result in the incurrence of any obligation for the payment of borrowed
money of others;
119
125
(10) Indebtedness of the Company and its Restricted Subsidiaries
incurred in the ordinary course of business (including any refinancing
thereof) not to exceed $30.0 million in the aggregate at any one time
outstanding represented by (A) Capitalized Lease Obligations and (B) FF&E
Financing and Purchase Money Indebtedness;
(11) Refinancing Indebtedness;
(12) the guarantee by the Company or any Guarantors of Indebtedness
of the Company or a Restricted Subsidiary that was permitted to be
incurred by another provision of this covenant (other than Indebtedness
that is subordinate or junior in right of payment to the Notes);
(13) Indebtedness under the Futuresouth Royalty; and
(14) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $10.0 million
at any one time outstanding (which amount may, but need not, be incurred
in whole or in part under the Credit Agreement).
For purposes of determining compliance with the "Limitation on Incurrence
of Additional Indebtedness" covenant, in the event that an item of Indebtedness
meets the criteria of more than one of the categories of Permitted Indebtedness
described in clauses (1) through (14) above or is entitled to be incurred
pursuant to the Consolidated Fixed Charge Coverage Ratio provisions of such
covenant, the Company shall, in its sole discretion, classify (or later
reclassify) such item of Indebtedness in any manner that complies with this
covenant. Accrual of interest, accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of additional
Indebtedness with the same terms, and the payment of dividends on Disqualified
Capital Stock in the form of additional shares of the same class of Disqualified
Capital Stock will not be deemed to be an incurrence of Indebtedness or an
issuance of Disqualified Capital Stock for purposes of the "Limitations on
Incurrence of Additional Indebtedness" covenant.
"Permitted Investments" means:
(1) Investments by the Company or any Restricted Subsidiary of the
Company in any Person that is or will become immediately after such
Investment a Restricted Subsidiary of the Company engaged in a Permitted
Line of Business or that will merge or consolidate into the Company or a
Restricted Subsidiary of the Company engaged in a Permitted Line of
Business;
(2) Investments in the Company by any Guarantor;
(3) investments in cash and Cash Equivalents;
(4) loans and advances to employees and officers of the Company and
its Restricted Subsidiaries (or guarantees of third party loans to
employees and officers) in the ordinary course of business for bona fide
business purposes not in excess of $2.5 million at any one time
outstanding;
(5) Currency Agreements and Interest Swap Obligations entered into
in the ordinary course of the Company's or its Restricted Subsidiaries'
businesses and otherwise in compliance with the Indenture;
(6) Investments in entities engaged or to be engaged in Permitted
Lines of Business in an amount not to exceed $10.0 million in the
aggregate at any one time outstanding;
(7) Investments in securities of trade creditors or customers
received pursuant to any plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such trade creditors or customers in
good faith settlement of delinquent obligations of such trade creditors or
customers;
(8) Investments made by the Company or its Restricted Subsidiaries
as a result of consideration received in connection with an Asset Sale
made in compliance with the "Limitation on Asset Sales" covenant or in
connection with any disposition of assets not constituting an Asset Sale;
and
120
126
(9) the redemption, repurchase, retirement, defeasance or other
acquisition of any Senior Debt, any Guarantor Senior Debt or the Notes.
"Permitted Liens" means the following types of Liens:
(1) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required
pursuant to GAAP;
(2) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums that
not yet delinquent, are bonded or are or being contested in good faith, if
such reserve or other appropriate provision, if any, as shall be required
by GAAP shall have been made in respect thereof;
(3) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business consistent with industry
practice in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(4) judgment Liens not giving rise to an Event of Default;
(5) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(6) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(7) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(8) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(9) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of offset
and set-off;
(10) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(11) Liens securing Indebtedness permitted pursuant to clause
(10)(A) of the definition of "Permitted Indebtedness"; provided, however,
that the Indebtedness shall not be secured by any property or assets of
the Company or any Restricted Subsidiary of the Company other than the
property or assets subject to such initial Capitalized Lease Obligation.
(12) Liens securing Indebtedness permitted pursuant to clause
(10)(B) of the definition of "Permitted Indebtedness"; provided, however,
that (a) the Indebtedness shall not exceed the cost of such property or
assets and shall not be secured by any property or assets of the Company
or any Restricted Subsidiary of the Company other than the property and
assets so acquired installed, constructed or improved and (b) the initial
Lien securing such Indebtedness shall be created within
121
127
180 days of such acquisition, installation, construction or improvement
or, in the case of a refinancing of any such Indebtedness, within 180 days
of such refinancing; and
(13) Liens securing Refinancing Indebtedness permitted to be
incurred under the Indenture or amendments or renewals of Liens that were
permitted to be incurred, provided, in each case, that such Liens do not
extend to any additional property or asset that did not secure the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded or that did not secure the Indebtedness affected by such
amendment or renewal;
(14) Liens incurred in the ordinary course of business of the
Company or any Restricted Subsidiary with respect to obligations that do
not exceed $1,000,000 at any one time outstanding; and
(15) Liens securing Acquired Indebtedness incurred in accordance
with the "Limitation on Incurrence of Additional Indebtedness" covenant;
provided that:
(a) such Liens secured such Acquired Indebtedness at the time
of and prior to the incurrence of such Acquired Indebtedness by the
Company or a Restricted Subsidiary of the Company and were not
granted in connection with, or in anticipation of, the incurrence of
such Acquired Indebtedness by the Company or a Restricted Subsidiary
of the Company; and
(b) such Liens do not extend to or cover any property or
assets of the Company or of any of its Restricted Subsidiaries other
than the property or assets that secured the Acquired Indebtedness
prior to the time such Indebtedness became Acquired Indebtedness of
the Company or a Restricted Subsidiary of the Company and, when
considered as a whole, are not materially more favorable to the
lienholders than those securing the Acquired In Indebtedness prior to
the incurrence of such Acquired Indebtedness by the Company or a
Restricted Subsidiary of the Company.
"Permitted Lines of Business" means, with respect to any Person, any
casino gaming business of such Person (whether owned, leased or managed by such
Person) or any business that is related to, ancillary to or supportive of,
connected with or arising out of the gaming business of such Person (including,
without limitation, developing and operating lodging, dining, amusement, sports
or entertainment facilities, transportation services or other related activities
or enterprises and any additions or improvements thereto).
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"Purchase Money Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries incurred in the normal course of business for the
purpose of financing all or any part of the purchase price, or the cost of
installation, construction or improvement, of property or equipment.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional
122
128
Indebtedness" covenant (other than pursuant to clauses (2), (4), (5), (6), (7),
(8), (9), (12), (13) or (14) of the definition of Permitted Indebtedness), in
each case that does not:
(1) result in an increase in the aggregate principal amount of
Indebtedness of such Person as of the date of such proposed Refinancing
(plus the amount of any premium required to be paid under the terms of the
instrument governing such Indebtedness and plus the amount of reasonable
expenses incurred by the Company in connection with such Refinancing); or
(2) create Indebtedness with: (a) a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced; or (b) a final maturity earlier than the
final maturity of the Indebtedness being Refinanced; provided that (x) if
such Indebtedness being Refinanced is Indebtedness of the Company, then
such Refinancing Indebtedness shall be Indebtedness solely of the Company
and (y) if such Indebtedness being Refinanced is subordinate or junior to
the Notes, then such Refinancing Indebtedness shall be subordinate to the
Notes at least to the same extent and in the same manner as the
Indebtedness being Refinanced.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt in respect of any Designated Senior Debt.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether owned
by the Company or any Restricted Subsidiary at the Issue Date or later acquired,
which has been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such Property.
"Senior Debt" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the generality
of the foregoing, "Senior Debt" shall also include the principal of, premium, if
any, interest (including any interest accruing subsequent to the filing of a
petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing in respect of:
(1) all monetary obligations of every nature of the Company under,
or with respect to, the Credit Agreement, including, without limitation,
obligations to pay principal and interest, reimbursement obligations under
letters of credit, fees, expenses and indemnities (and guarantees
thereof); and
(2) all Interest Swap Obligations (and guarantees thereof);
in each case whether outstanding on the Issue Date or thereafter incurred.
Notwithstanding the foregoing, "Senior Debt" shall not include:
(1) any Indebtedness of the Company to a Subsidiary of the Company;
(2) Indebtedness to, or guaranteed on behalf of, any shareholder,
director, officer or employee of the Company or any Subsidiary of the
Company (including, without limitation,
123
129
amounts owed for compensation) other than a shareholder who is also a
lender (or an Affiliate of a lender) under the Credit Agreement;
(3) Indebtedness to trade creditors;
(4) Indebtedness represented by Preferred Stock and Disqualified
Capital Stock;
(5) any liability for federal, state, local or other taxes owed or
owing by the Company;
(6) that portion of any Indebtedness incurred in violation of the
Indenture provisions set forth under "Limitation on Incurrence of
Additional Indebtedness" (but, as to any such obligation, no such
violation shall be deemed to exist for purposes of this clause (6) if the
holder(s) of such obligation or their representative shall have received
an officers' certificate of the Company to the effect that the incurrence
of such Indebtedness does not (or, in the case of revolving credit
indebtedness, that the incurrence of the entire committed amount thereof
at the date on which the initial borrowing thereunder is made would not)
violate such provisions of the Indenture);
(7) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company; and
(8) any Indebtedness which is, by its express terms, subordinated
in right of payment to any other Indebtedness of the Company.
"Significant Subsidiary" with respect to any Person, means any Restricted
Subsidiary of such Person that satisfies the criteria for a "significant
subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the Exchange Act.
"Subsidiary" with respect to any Person, means:
(1) any corporation of which the outstanding Capital Stock having
at least a majority of the votes entitled to be cast in the election of
directors under ordinary circumstances shall at the time be owned,
directly or indirectly, by such Person; or
(2) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or
indirectly, owned by such Person.
"Unrestricted Subsidiary" of any Person means:
(1) any Subsidiary of such Person that at the time of determination
shall be or continue to be designated an Unrestricted Subsidiary by the
Board of Directors of such Person in the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary (including any newly
acquired or newly formed Subsidiary), other than Ameristar Casino Council
Bluffs, Inc., Ameristar Casino Vicksburg, Inc., Ameristar Casino Kansas City,
Inc., Ameristar Casino St. Charles, Inc., Cactus Pete', Inc. and (prior to the
sale of The Reserve Hotel) Ameristar Casino Las Vegas, Inc., to be an
Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or
owns or holds any Lien on any property of, the Company or any other Subsidiary
of the Company that is not a Subsidiary of the Subsidiary to be so designated;
provided that:
(1) the Company certifies to the Trustee that such designation
complies with the "Limitation on Restricted Payments" covenant; and
(2) each Subsidiary to be so designated and each of its
Subsidiaries has not at the time of designation, and does not thereafter,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to any Indebtedness pursuant to which the
lender has recourse to any of the assets of the Company or any of its
Restricted Subsidiaries.
124
130
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary only if:
(1) immediately after giving effect to such designation, the
Company is able to incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) in compliance with the "Limitation on
Incurrence of Additional Indebtedness" covenant; and
(2) immediately before and immediately after giving effect to such
designation, no Default or Event of Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be
evidenced to the Trustee by promptly filing with the Trustee a copy of the
Board Resolution giving effect to such designation and an officers'
certificate certifying that such designation complied with the foregoing
provisions.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any Wholly Owned
Subsidiary of such Person which at the time of determination is a Restricted
Subsidiary of such Person.
"Wholly Owned Subsidiary" of any Person means any Subsidiary of such
Person of which all the outstanding voting securities (other than in the case of
a foreign Subsidiary, directors' qualifying shares or an immaterial amount of
shares required to be owned by other Persons pursuant to applicable law) are
owned by such Person or any Wholly Owned Subsidiary of such Person.
125
131
EXCHANGE OFFER; REGISTRATION RIGHTS
Ameristar, the guarantors and the initial purchasers of the old notes
entered into a registration rights agreement, dated as of February 2, 2001 (the
"Registration Rights Agreement"), pursuant to which each of Ameristar and the
guarantors have agreed that they will, at their expense, for the benefit of the
holders of the notes (the "Holders"), (i) within 75 days after the issue date of
the old notes (the "Filing Date"), file a registration statement on an
appropriate registration form (the "Exchange Offer Registration Statement") with
respect to a registered offer (the "Exchange Offer") to exchange the notes for
notes (the "Exchange Notes") of Ameristar, guaranteed on a senior subordinated
basis by the guarantors, which Exchange Notes will have terms substantially
identical in all material respects to the notes (except that the Exchange Notes
will not contain terms with respect to transfer restrictions) and (ii) cause the
Exchange Offer Registration Statement to be declared effective under the
Securities Act within 145 days after the Issue Date. Upon the Exchange Offer
Registration Statement being declared effective, Ameristar will offer the
Exchange Notes (and the related guarantees) in exchange for surrender of the
notes. Ameristar will keep the Exchange Offer open for not less than 30 days (or
longer if required by applicable law) after the date notice of the Exchange
Offer is mailed to the Holders. For each of the notes surrendered to Ameristar
pursuant to the Exchange Offer, the Holder who surrendered such note will
receive an Exchange Note having a principal amount equal to that of the
surrendered note. Interest on each Exchange Note will accrue (A) from the later
of (i) the last interest payment date on which interest was paid on the note
surrendered in exchange therefor, or (ii) if the note is surrendered for
exchange on a date in a period which includes the record date for an interest
payment date to occur on or after the date of such exchange and as to which
interest will be paid, the date of such interest payment date or (B) if no
interest has been paid on such note, from February 2, 2001 (the "Issue Date").
Under existing interpretations of the Commission contained in several
no-action letters to third parties, the Exchange Notes and the related
guarantees will be freely transferable by holders thereof (other than affiliates
of Ameristar) after the Exchange Offer without further registration under the
Securities Act; provided, however, that each Holder that wishes to exchange its
notes for Exchange Notes will be required to represent (i) that any Exchange
Notes to be received by it will be acquired in the ordinary course of its
business, (ii) that at the time of the commencement of the Exchange Offer it has
no arrangement or understanding with any person to participate in the
distribution (within the meaning of Securities Act) of the Exchange Notes in
violation of the Securities Act, (iii) that it is not an "affiliate" (as defined
in Rule 405 promulgated under Securities Act) of Ameristar, (iv) if such Holder
is not a broker-dealer, that it is not engaged in, and does not intend to engage
in, the distribution of Exchange Notes and (v) if such Holder is a broker-dealer
(a "Participating Broker-Dealer") that will receive Exchange Notes for its own
account in exchange for notes that were acquired as a result of market-making or
other trading activities, that it will deliver a prospectus in connection with
any resale of such Exchange Notes. Ameristar will agree to make available,
during the period required by the Securities Act, a prospectus meeting the
requirements of the Securities Act for use by Participating Broker-Dealers and
other persons, if any, with similar prospectus delivery requirements for use in
connection with any resale of Exchange Notes.
If (i) because of any change in law or in currently prevailing
interpretations of the Staff of the Commission, Ameristar is not permitted to
effect the Exchange Offer, (ii) the Exchange Offer is not consummated within 175
days of the issuance of the Issue Date or (iii) in certain circumstances,
certain holders of unregistered Exchange Notes so request, or (iv) in the case
of any Holder that participates in the Exchange Offer, such Holder does not
receive Exchange Notes on the date of the exchange that may be sold without
restriction under state and federal securities laws (other than due solely to
the status of such Holder as an affiliate of Ameristar or within the meaning of
the Securities Act), then in each case, Ameristar will (x) promptly, but in any
event, no later than five business days after any of the events listed in
clauses (i) through (iv) above, deliver to the Holders and the Trustee written
notice thereof (a "Shelf Notice") and (y) at its sole expense, (a) as promptly
as practicable, file a shelf registration statement covering resales of the
notes (the "Shelf Registration Statement"), (b) use its best efforts to keep
effective the Shelf Registration Statement until the earlier of two years after
the Issue Date or such time as all of the applicable notes have been sold
thereunder. Ameristar will, in the event that a Shelf Registration Statement is
filed, provide to each Holder copies of the prospectus that is a part of the
Shelf
126
132
Registration Statement, notify each such Holder when the Shelf Registration
Statement for the notes has become effective and take certain other actions as
are required to permit unrestricted resales of the notes. A Holder that sells
notes pursuant to the Shelf Registration Statement will be required to be named
as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under Securities Act in connection with such sales and will be bound
by the provisions of the Registration Rights Agreement that are applicable to
such a Holder (including certain indemnification rights and obligations).
If Ameristar fails to meet the targets listed above, then additional
interest (the "Additional Interest") shall become payable in respect of the
notes as follows:
(i) if (A) neither the Exchange Offer Registration Statement nor
the Shelf Registration Statement is filed with the Commission on or prior
to 75 days after the Issue Date or on or prior to 75 days after delivery
of a Shelf Notice, respectively, or (B) notwithstanding that Ameristar has
consummated or will consummate the Exchange Offer, Ameristar is required
to file a Shelf Registration Statement and such Shelf Registration
Statement is not filed on or prior to the date required by the
Registration Rights Agreement, then commencing on the day after either
such lapsed filing date, Additional Interest shall accrue on the principal
amount of the notes at a rate of 0.50% per annum for the first 90 days
immediately following each such filing date, such Additional Interest rate
increasing by an additional 0.50% per annum at the beginning of each
subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration Statement nor a
Shelf Registration Statement is declared effective by the Commission on or
prior to 145 days after the Issue Date or (B) notwithstanding that
Ameristar has consummated or will consummate the Exchange Offer, Ameristar
is required to file a Shelf Registration Statement and such Shelf
Registration Statement is not declared effective by the Commission on or
prior to the date required by the Registration Rights Agreement, then,
commencing on the day after either such required effective date,
Additional Interest shall accrue on the principal amount of the notes at a
rate of 0.50% per annum for the first 90 days immediately following such
date, such Additional Interest rate increasing by an additional 0.50% per
annum at the beginning of each subsequent 90-day period; or
(iii) if (A) Ameristar has not exchanged Exchange Notes for all
notes validly tendered in accordance with the terms of the Exchange Offer
on or prior to the 175th day after the Issue Date or (B) if applicable,
the Shelf Registration Statement has been declared effective and such
Shelf Registration Statement ceases to be effective at any time prior to
the second anniversary of the Issue Date (other than after such time as
all notes have been disposed of thereunder), then Additional Interest
shall accrue on the principal amount of the notes at a rate of 0.50% per
annum for the first 90 days commencing on (x) the 176th day after the
Issue Date, in the case of (A) above, or (y) the day such Shelf
Registration Statement ceases to be effective, in the case of (B) above,
such Additional Interest rate increasing by an additional 0.50% per annum
at the beginning of each subsequent 90-day period;
provided, however, that the Additional Interest rate on the notes may not accrue
under more than one of the foregoing clauses (i) - (iii) at any one time and at
no time shall the aggregate amount of Additional Interest accruing exceed in the
aggregate 2.0% per annum; provided, further, however, that (1) upon the filing
of the Exchange Offer Registration Statement or a Shelf Registration Statement
(in the case of clause (i) above), (2) upon the effectiveness of the Exchange
Offer Registration Statement or a Shelf Registration Statement (in the case of
clause (ii) above), or (3) upon the exchange of Exchange Notes for all notes
tendered (in the case of clause (iii)(A) above), or upon the effectiveness of
the Shelf Registration Statement which had ceased to remain effective (in the
case of clause (iii)(B) above), Additional Interest on the notes as a result of
such clause (or the relevant subclause thereof), as the case may be, shall cease
to accrue.
Any amounts of Additional Interest due pursuant to clause (i), (ii) or
(iii) above will be payable in cash on the same original interest payment dates
as the old notes.
127
133
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of United States federal tax
consequences associated with the exchange of old notes for exchange notes and of
the ownership and disposition of the exchange notes by an initial beneficial
owner of the exchange notes. The discussion below is based upon current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable Treasury Regulations, judicial authority and administrative rulings
and practice, any of which may be altered with retroactive effect thereby
changing the federal tax consequences discussed below. The tax treatment of the
holders of the exchange notes may vary depending upon their particular
situations. In addition, certain other holders, including insurance companies,
tax exempt organizations, financial institutions and broker-dealers, may be
subject to special rules not discussed below. We will not seek a ruling from the
Internal Revenue Service (the "IRS") with respect to any of the matters
discussed in this prospectus and there can be no assurance that the IRS will not
challenge one or more of the tax consequences described below. PROSPECTIVE
INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE UNITED STATES
FEDERAL TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF EXCHANGE NOTES,
AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY FOREIGN,
STATE, LOCAL OR OTHER TAXING JURISDICTION AND THE POSSIBLE EFFECTS ON YOU OF
CHANGES IN U.S. FEDERAL OR OTHER TAX LAWS.
THE EXCHANGE OFFER
The exchange of old notes for exchange notes pursuant to this exchange
offer should not be treated as an "exchange" for United States federal income
tax purposes because the exchange notes will not be considered to differ
materially in kind or extent from the old notes. Rather, any exchange notes
received by you should be treated as a continuation of your investment in the
old notes. As a result, there should be no United States federal income tax
consequences to you resulting from the exchange offer. In addition, you should
have the same adjusted issue price, adjusted basis, and holding period in the
exchange notes as you had in the old notes immediately prior to the exchange.
NON-UNITED STATES HOLDERS
The following is a general discussion of United States federal income and
estate tax consequences of the acquisition, ownership, and disposition of the
exchange notes by an initial beneficial owner of the exchange notes that, for
United States federal income tax purposes, is not a "United States person" (a
"Non-United States Holder"). United States persons acquiring the exchange notes
are subject to different rules than those discussed below. For purposes of this
discussion, a "United States person" means a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in the
United States or under the laws of the United States or of any political
subdivision thereof, an estate whose income is includible in gross income for
United States federal income tax purposes regardless of its source or a trust,
if a United States court is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust. "United States"
refers to the United States of America, including the States and the District of
Columbia, and United States possessions, which include, Puerto Rico, the U.S.
Virgin Islands, Guam, American Samoa, Wake Island, and Northern Mariana Islands.
INTEREST
Generally, interest income of a Non-United States Holder that is not
effectively connected with a United States trade or business will be subject to
a United States federal income tax and withholding tax at a 30% rate, or, if
applicable, a lower rate as is prescribed by an income tax treaty between the
United States and your country of residence. However, interest paid on a note by
us or our paying agent to a Non-United States Holder will qualify for the
so-called "portfolio-interest exemption" and, therefore, will not be subject to
United States federal income tax or withholding tax provided that such interest
income is
128
134
not effectively connected with a United States trade or business of the
Non-United States Holder and provided that:
- the Non-United States Holder does not actually or constructively own
10% or more of the total combined voting power of all classes of stock
of our company that is entitled to vote;
- the Non-United States Holder is not
- a controlled foreign corporation related to our company actually or
constructively through the stock ownership rules under Section
864(d)(4) of the Code,
- a bank which acquired the note in consideration for an extension of
credit made pursuant to a loan agreement entered into in the
ordinary course of business, or
- a foreign tax exempt organization or a foreign private foundation
for United States federal income tax purposes;
- the interest paid to the Non-United States Holder is not considered
contingent interest under Section 871(h)(4) of the Code and the
regulations thereunder, and
- either
- the Non-United States Holder provides to our company or our
paying agent a Form W-8BEN, or suitable substitute form,
signed under penalties of perjury that includes its name and
address and certifies that the holder is not a United States
person, or
- the Non-United States Holder provides a Form W-8BEN, or a
suitable substitute form or other appropriate documentation,
signed under the penalties of perjury to a qualified
intermediary, such as a securities clearing organization,
bank, or other financial institution, which in turn provides
to us or our paying agent a Form W-8IMY. The certificates
described in this paragraph are effective only with respect to
payments of interest made to the certifying Non-United States
Holder after the issuance of the certificate, in the calendar
year of its issuance, and the two immediately succeeding
calendar years.
Except to the extent that an applicable treaty otherwise provides,
interest received by a Non-United States Holder that is effectively connected
with a United States trade or business conducted by such holder will be taxed at
the graduated rates applicable to United States persons. Effectively connected
interest received by a corporate Non-United States Holder may also, under
certain circumstances, be subject to an additional "branch profits tax" at a 30%
rate, or, if applicable, a lower treaty rate. Even though such effectively
connected interest will be subject to federal income tax, and possibly subject
to the branch profits tax, it will not be subject to withholding if the
Non-United States Holder delivers a properly executed IRS Form W-8ECI to us or
our agent.
GAIN ON DISPOSITION
A Non-United States Holder will generally not be subject to United States
federal income tax on gain realized on a sale, redemption or other disposition
of a note unless
- the gain is effectively connected with the conduct of a trade or
business within the United States by the Non-United States Holder,
or
- in the case of a Non-United States Holder who is a nonresident alien
individual and holds the note as a capital asset, such holder is
present in the United States for 183 or more days in the taxable
year and certain other requirements are met.
If a Non-United States Holder falls under clause (i) in the preceding
paragraph, the holder will be taxed on the net gain derived from the sale under
the graduated United States federal income tax rates that are applicable to
United States persons and, if the Non-United States Holder is a foreign
corporation,
129
135
it may also be subject to the branch profits tax described above. Even though
the effectively connected income will be subject to federal income tax, and
possibly subject to the branch profits tax, it will not be subject to
withholding if the Non-United States Holder delivers a properly executed IRS
Form W-8ECI to us or our agent. If an individual Non-United States Holder falls
under clause (ii) in the preceding paragraph, the holder generally will be
subject to United States federal income tax at a rate of 30% on the amount by
which the gain derived from the sale from sources within the United States were
to exceed such holder's capital losses allocable to sources within the United
States for the taxable year of the sale.
FEDERAL ESTATE TAXES
If interest on the notes is exempt from withholding of United States
federal income tax under the rules described above, the notes will not be
included in the estate of a deceased Non-United States Holder for United States
federal estate tax purposes.
BACKUP WITHHOLDING AND INFORMATION REPORTING
We will, when required, report to the IRS and to each Non-United States
Holder the amount of any interest paid on the exchange notes in each calendar
year, and the amount of tax withheld, if any, with respect to the payments.
Treasury Regulations provide that backup withholding and additional
information reporting will not apply to payments on the notes by us to a
Non-United States Holder if the holder certifies as to its status as a
Non-United States Holder under penalties of perjury or otherwise establishes an
exemption, provided that neither we nor our Paying Agent has actual knowledge
that the holder is a United States person or that the conditions of any other
exemption are not, in fact, satisfied.
The payment of the proceeds from the disposition of the notes to or
through the United States office of any broker, United States or foreign, will
be subject to information reporting and possible backup withholding at a rate of
31%, unless the owner certifies as to its status as a Non-United States Holder
under penalties of perjury or otherwise establishes an exemption, provided that
the broker does not have actual knowledge that the holder is a United States
person or that the conditions of any other exemption are not, in fact,
satisfied. The payment of the proceeds from the disposition of a note to or
through a non-United States office of a non-United States broker that is not a
United States related person will not be subject to information reporting or
backup withholding. In the case of the payment of proceeds from the disposition
of a note to or through a non-United States office of a broker that is either a
United States person or a United States related person, information reporting is
required on the payment unless the broker has documentary evidence in its files
that the owner is a Non-United States Holder and the broker has no actual
knowledge to the contrary. Backup withholding will not apply to payments made
through foreign offices of a broker that is a United States person or a United
States related person, absent actual knowledge that the payee is a United States
person. For purposes of this paragraph, a "United States related person" is
- a "controlled foreign corporation" for United States federal income
tax purposes,
- a foreign person 50% or more of whose gross income from all sources
for the three-year period ending with the close of its taxable year
preceding the payment, or for such part of the period that the
broker has been in existence, is derived from activities that are
effectively connected with the conduct of a United States trade or
business, or
- with respect to payments made after December 31, 2000, a foreign
partnership that, at any time during its taxable year, is 50% or
more, by income or capital interest, owned by United States persons
or is engaged in the conduct of a United States trade or business.
Recently adopted Treasury Regulations provide certain presumptions
under which a Non-United States Holder will be subject to backup
withholding and information reporting unless the Non-United States
Holder provides a certification as to its Non-United States Holder
status.
130
136
Any amounts withheld under the backup withholding rules from a payment to
a Non-United States Holder will be allowed as a refund or a credit against such
Non-United States Holder's United States federal income tax liability provided
that the requisite procedures are followed.
The Treasury Department recently promulgated final regulations regarding
the withholding and information reporting rules discussed above. In general,
these regulations do not significantly alter the substantive withholding and
information reporting requirements but rather unify current certification
procedures and forms and clarify reliance standards. In addition, these
regulations impose more stringent conditions on the ability of financial
intermediaries acting for a Non-United States Holder to provide certifications
on behalf of the holder, which may include entering into an agreement with IRS
to audit certain documentation with respect to such certifications. These
regulations are generally effective for payments made after December 31, 2000,
subject to certain transition rules. You should consult your own tax advisor to
determine the effects of the application of these regulations to your particular
circumstances.
THE FEDERAL TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING
THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
131
137
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of exchange notes received in
exchange for outstanding exchange notes where such outstanding exchange notes
were acquired as a result of market-making activities or other trading
activities.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such exchange notes. Any broker-dealer
that resells exchange notes that were received by it for its own account
pursuant to the exchange offer and any broker or dealer that participates in a
distribution of such exchange notes may be deemed to be an "underwriter" within
the meaning of the Securities Act, and any profit on any such resale of exchange
notes and any commissions or concessions received by such persons may be deemed
to be underwriting compensation under the Securities Act. The letter of
transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
We will promptly send additional copies of this prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the letter of transmittal. We have agreed to pay all expenses
incident to the exchange offer other than commissions or concessions of any
brokers or dealers and will indemnify original holders of the outstanding
exchange notes, including any broker-dealers, against certain liabilities,
including certain liabilities under the Securities Act.
We have not entered into any arrangements or understandings with any
person to distribute the exchange notes to be received in the exchange offer.
LEGAL MATTERS
Certain legal matters with regard to the validity of the exchange notes
will be passed upon for us by Gibson, Dunn & Crutcher LLP, Los Angeles,
California.
INDEPENDENT AUDITORS
The audited consolidated financial statements included in this prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
AVAILABLE INFORMATION AND INCORPORATION BY REFERENCE
We are subject to the periodic reporting and other information
requirements of the Exchange Act.
You may read and copy any document we file at the following Commission
public reference rooms:
Judiciary Plaza
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
500 West Madison Street
14th Floor
Chicago, IL 60661
7 World Trade Center
Suite 1300
New York, NY 10048
132
138
You may obtain information on the operation of the public reference room
in Washington, D.C. by calling the Commission at 1-800-SEC-0330.
We also file information electronically with the Commission. Our
electronic filings are available from the SEC's Internet site at
http://www.sec.gov, which contains reports, proxy and information statements and
other information regarding issuers that file electronically.
To request a copy of any or all of these documents, you should write or
telephone us at our principal executive office at the following address and
telephone number:
Ameristar Casinos, Inc.
3773 Howard Hughes Parkway
Suite 490 South
Las Vegas, Nevada 89109
(702) 567-7000
Attention: Financial Reporting Manager
This prospectus hereby incorporates by reference the following documents
previously filed with the Securities and Exchange Commission:
- Ameristar Casinos, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 2000.
All documents that we file pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this prospectus and prior to the
expiration date of the exchange offer will be deemed to be incorporated by
reference into this prospectus and to be part of this prospectus from their date
of filing.
Any statement contained in a document incorporated by reference in this
prospectus will be deemed to be modified or superseded for the purposes of this
prospectus to the extent that a statement contained in this prospectus or in any
other subsequently filed document that also is incorporated in this prospectus
modifies or replaces such statement. Any statement so modified or superseded
will not be deemed, except as so modified or superseded, to constitute a part of
this prospectus. We will provide without charge to each person to whom a copy of
this prospectus has been delivered, or who makes a written or oral request, a
copy of any and all of the documents incorporated by reference in this
prospectus (other than exhibits unless such exhibits are specifically
incorporated by reference into such documents). Requests should be submitted in
writing or by telephone to us at the above address or telephone number.
133
139
INDEX TO FINANCIAL STATEMENTS
PAGE
----
AMERISTAR CASINOS, INC. AND SUBSIDIARIES
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets as of December 31, 1999 and
2000...................................................... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1998, 1999, and 2000......................... F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1997, 1998, 1999, and 2000....... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1999, and 2000......................... F-6
Notes to Consolidated Financial Statements.................. F-7
STATION CASINOS, INC. MISSOURI OPERATIONS
Report of Independent Public Accountants.................... F-21
Consolidated Balance Sheets as of December 31, 1998 and
1999...................................................... F-22
Consolidated 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-23
Consolidated 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-24
Notes to Consolidated Financial Statements.................. F-25
F-1
140
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Ameristar Casinos, Inc.:
We have audited the accompanying consolidated balance sheets of Ameristar
Casinos, Inc. (a Nevada corporation) and subsidiaries as of December 31, 1999
and 2000, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 2000. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Ameristar
Casinos, Inc. and subsidiaries as of December 31, 1999 and 2000, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
February 28, 2001
F-2
141
AMERISTAR CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31,
--------------------
1999 2000
-------- --------
ASSETS
Current Assets:
Cash and cash equivalents............................... $ 15,531 $ 36,245
Restricted cash......................................... 142 1,590
Accounts receivable, net................................ 1,719 9,731
Income tax refund receivable............................ 1,450 125
Inventories............................................. 2,468 4,501
Prepaid expenses........................................ 5,059 5,350
Deferred income taxes................................... 3,716 2,502
Assets held for sale.................................... 129,822 73,195
-------- --------
Total current assets............................... 159,907 133,239
-------- --------
Property and Equipment, at cost:
Buildings and improvements.............................. 202,079 415,761
Building under capitalized lease........................ 800 --
Furniture, fixtures and equipment....................... 69,251 135,894
Furniture, fixtures and equipment under capitalized
leases................................................. 3,785 8,317
-------- --------
275,915 559,972
Less: Accumulated depreciation and amortization.... 95,918 115,921
-------- --------
179,997 444,051
Land.................................................... 15,210 43,173
Land under capitalized leases........................... 4,865 --
Construction in progress................................ 14,639 154,881
-------- --------
Total property and equipment....................... 214,711 642,105
-------- --------
Excess of Purchase Price Over Fair Market Value of Net
Assets Acquired........................................... -- 86,384
-------- --------
Deposits And Other Assets................................... 4,027 29,193
-------- --------
Total Assets....................................... $378,645 $890,921
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable........................................ $ 9,205 $ 13,124
Construction contracts payable.......................... 6,341 4,493
Accrued liabilities..................................... 27,725 41,374
Current obligations under capitalized leases............ 782 2,002
Current maturities of notes payable and long-term
debt................................................... 10,615 8,956
Liabilities related to assets held for sale............. 7,443 6,837
-------- --------
Total current liabilities.......................... 62,111 76,786
-------- --------
Obligations Under Capitalized Leases, net of current
maturities................................................ 7,038 3,354
-------- --------
Notes Payable and Long-Term Debt, net of current
maturities................................................ 231,853 777,121
-------- --------
Deferred Income Taxes....................................... 9,474 5,616
-------- --------
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 20,442,963 shares at December 31,
2000................................................... 204 204
Additional paid-in capital.............................. 43,083 43,265
Retained earnings (Accumulated deficit)................. 24,882 (15,425)
-------- --------
Total stockholders' equity......................... 68,169 28,044
-------- --------
Total Liabilities and Stockholders' Equity......... $378,645 $890,921
======== ========
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
142
AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 31,
--------------------------------
1998 1999 2000
-------- -------- --------
Revenues:
Casino................................................ $216,319 $247,416 $286,438
Food and beverage..................................... 45,853 49,142 53,653
Rooms................................................. 14,201 17,257 18,121
Other................................................. 10,401 11,089 12,018
-------- -------- --------
286,774 324,904 370,230
Less: Promotional allowances.......................... 22,092 24,618 28,224
-------- -------- --------
Net revenues..................................... 264,682 300,286 342,006
-------- -------- --------
Operating Expenses:
Casino................................................ 103,387 114,357 134,948
Food and beverage..................................... 31,698 33,207 35,135
Rooms................................................. 5,809 6,372 6,944
Other................................................. 10,044 10,203 12,257
Selling, general and administrative................... 75,604 86,142 90,416
Depreciation and amortization......................... 24,191 24,460 27,784
Preopening costs...................................... 10,611 -- --
Impairment loss on assets held for sale............... -- -- 57,153
-------- -------- --------
Total operating expenses......................... 261,344 274,741 364,637
-------- -------- --------
Income (loss) from operations.................... 3,338 25,545 (22,631)
Other Income (Expense):
Interest income....................................... 296 300 161
Interest expense...................................... (22,699) (24,449) (28,316)
Other................................................. (13) (851) (942)
-------- -------- --------
Income (Loss) Before Income Tax Provision (Benefit)........ (19,078) 545 (51,728)
Income tax provision (benefit)........................ (6,363) 340 (17,981)
-------- -------- --------
Income (Loss) Before Extraordinary Loss.................... (12,715) 205 (33,747)
Extraordinary Loss on Early Retirement of Debt, net of
income tax benefit of $3,479............................. -- -- 6,560
-------- -------- --------
Net Income (Loss).......................................... $(12,715) $ 205 $(40,307)
======== ======== ========
Earnings (Loss) per Share:
Income (loss) before extraordinary loss Basic and
diluted............................................. $ (0.62) $ 0.01 $ (1.65)
Net income (loss) Basic and diluted................... $ (0.62) $ 0.01 $ (1.98)
Weighted Average Shares Outstanding........................ 20,360 20,362 20,401
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
143
AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES)
CAPITAL STOCK RETAINED
--------------------- ADDITIONAL EARNINGS
NO. OF PAID-IN (ACCUMULATED
SHARES BALANCE CAPITAL DEFICIT) TOTAL
---------- ------- ---------- ------------ --------
Balance, December 31, 1997......... 20,360,000 $204 $43,043 $ 37,392 $ 80,639
Net loss...................... -- -- -- (12,715) (12,715)
---------- ---- ------- -------- --------
Balance, December 31, 1998......... 20,360,000 204 43,043 24,677 67,924
Net income.................... -- -- -- 205 205
Issuance of shares upon
exercise of stock options... 15,264 -- 40 -- 40
---------- ---- ------- -------- --------
Balance, December 31, 1999......... 20,375,264 204 43,083 24,882 68,169
---------- ---- ------- -------- --------
Net loss...................... -- -- -- (40,307) (40,307)
Issuance of shares upon
exercise of stock options... 67,699 -- 182 -- 182
---------- ---- ------- -------- --------
Balance, December 31, 2000......... 20,442,963 $204 $43,265 $(15,425) $ 28,044
========== ==== ======= ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
144
AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
YEARS ENDED DECEMBER 31,
---------------------------------
1998 1999 2000
-------- -------- ---------
Cash Flows from Operating Activities:
Net income (loss).................................... $(12,715) $ 205 $ (40,307)
-------- -------- ---------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization...................... 24,191 24,460 27,784
Change in deferred income taxes.................... (3,898) 2,166 (20,682)
Net loss on disposition of assets.................. 11 852 942
Amortization of debt issuance costs................ 661 668 734
Preopening costs................................... 10,611 -- --
Extraordinary loss on early retirement of debt..... -- -- 10,039
Impairment loss on assets held for sale............ -- -- 57,153
Changes in current assets and liabilities:
Restricted cash................................. 34 (24) (1,448)
Accounts receivable, net........................ 561 (590) (346)
Income taxes, net............................... (712) 1,365 1,325
Inventories..................................... (1,314) (231) (1,124)
Prepaid expenses................................ (669) (593) (451)
Accounts payable................................ 1,552 2,865 3,920
Accrued liabilities............................. 4,810 3,144 1,297
-------- -------- ---------
Total adjustments............................. 35,838 34,082 79,143
-------- -------- ---------
Net cash provided by operating activities................. 23,123 34,287 38,836
-------- -------- ---------
Cash Flows from Investing Activities:
Acquisition of Missouri properties, net of cash
acquired........................................... -- -- (486,800)
Capital expenditures................................. (32,312) (57,590) (33,357)
Increase (decrease) in construction contracts
payable............................................ (18,478) 5,444 (1,848)
Proceeds from sale of assets......................... -- 2,029 1,838
Decrease (increase) in deposits and other assets..... (3,073) 69 (1,039)
-------- -------- ---------
Net cash used in investing activities..................... (53,863) (50,048) (521,206)
-------- -------- ---------
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt............. $ 42,606 $ 19,047 $ 788,227
Debt issuance costs.................................. -- -- (20,838)
Principal payments of long-term debt and capitalized
leases............................................. (6,688) (6,004) (264,487)
Proceeds from exercise of stock options.............. -- 40 182
-------- -------- ---------
Net cash provided by financing activities................. 35,918 13,083 503,084
-------- -------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents...... 5,178 (2,678) 20,714
Cash and Cash Equivalents Beginning of Year............... 13,031 18,209 15,531
-------- -------- ---------
Cash and Cash Equivalents End of Year..................... $ 18,209 $ 15,531 $ 36,245
======== ======== =========
Supplemental Cash Flow Disclosures:
Cash paid for interest, net of amounts capitalized... $ 22,515 $ 23,474 $ 30,946
Income taxes paid (refunds received)................. 350 (3,192) (2,162)
Noncash Investing and Financing Activities:
Acquisition of assets with capital leases............ $ 7,180 $ 153 $ 4,531
Acquisition of assets with notes payable............. -- -- 3,641
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
145
AMERISTAR CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF PRESENTATION
The consolidated financial statements of Ameristar Casinos, Inc., a Nevada
corporation ("ACI" or the "Company"), include the accounts of the Company and
its wholly-owned subsidiaries, Cactus Pete's, Inc. ("CPI"), Ameristar Casino
Vicksburg, Inc. ("ACVI"), Ameristar Casino Council Bluffs, Inc. ("ACCBI"),
Ameristar Casino Las Vegas, Inc. ("ACLVI"), Ameristar Casino St. Louis, Inc.
("ACSLI"), Ameristar Casino St. Charles, Inc. ("ACSCI"), Ameristar Casino Kansas
City, Inc. ("ACKCI") and A.C. Food Services, Inc. ("ACFSI"). ACSCI and ACKCI
were formed in October 2000 to complete the acquisitions of two properties in
St. Charles and Kansas City, Missouri, as described more fully in Note 10. ACSLI
was formed in October 1999 to pursue a gaming license in South St. Louis County,
Missouri. On December 20, 2000, AC Hotel Corp, a wholly owned subsidiary of
ACVI, merged with and into ACVI and ceased to exist.
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 that serves the Council Bluffs and
Omaha, Nebraska metropolitan area. ACSCI owns a riverboat casino in St. Charles,
Missouri that serves the St. Louis metropolitan area. ACKCI owns a
master-planned gaming and entertainment facility in Kansas City, Missouri, which
features a casino, hotel, cinema multiplex and restaurants. ACLVI owned and
operated The Reserve Hotel Casino in Henderson, Nevada, in metropolitan Las
Vegas, until it sold the property in January 2001.
The gaming licenses granted to ACSCI, ACKCI, ACVI and ACCBI must be
periodically renewed by the respective state gaming authorities to continue
gaming operations. In addition, ACCBI's gaming operations are subject to a
county-wide reauthorizing referendum every eight years, commencing in 2002.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 could differ from those estimates. All
significant intercompany accounts and transactions have been eliminated from the
accompanying consolidated financial statements.
Cash and cash equivalents
The Company considers all highly liquid investments with maturities of
three months or less when purchased to be cash equivalents. Cash equivalents are
carried at cost, which approximates market, due to the short-term maturities of
these instruments.
Accounts receivable
Gaming receivables are included as part of the Company's accounts
receivable balance. An allowance of $731,000 and $629,000 at December 31, 1999
and 2000, respectively, has been applied to reduce receivables to amounts
anticipated to be collected.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
principally on the weighted average basis.
F-7
146
AMERISTAR CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Depreciation and capitalization
Property and equipment are recorded at cost, including interest charged on
funds borrowed to finance construction. Interest of $1,434,000, $561,000 and
$1,359,000 was capitalized for the years ended December 31, 1998, 1999 and 2000,
respectively. Betterments, renewals and repairs that extend the life of an asset
are capitalized. Ordinary maintenance and repairs are charged to expense as
incurred. For major renovation projects, assets to be disposed of are identified
and the Company writes down the value of these assets to realizable value when
disposed of. Costs of major renovation projects are capitalized in accordance
with existing policies.
Depreciation is provided on both the straight-line and accelerated methods
in amounts sufficient to relate the cost of depreciable assets to operations.
Amortization of building and furniture, fixtures and equipment under capitalized
leases is provided over the shorter of the estimated useful life of the asset or
the term of the associated lease (including lease renewal or purchase options
the Company expects to exercise). Depreciation and amortization is provided over
the following estimated useful lives:
Buildings and improvements.................................. 5 to 40 years
Building under capitalized lease............................ 39 years
Furniture, fixtures and equipment........................... 3 to 15 years
Furniture, fixtures and equipment under capitalized
leases.................................................... 3 to 5 years
Impairment of long-lived assets
The Company accounts for impairment of long-lived assets in accordance
with Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." SFAS No. 121 requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the book value of the
asset may not be recoverable. The Company reviews long-lived assets for such
events or changes in circumstances at each balance sheet date. If a long-lived
asset is to be held and used, the Company assesses recoverability based on the
future undiscounted cash flows of the related asset over the remaining life
compared to the asset's book value. If an impairment exists, the asset is
written down to fair value, based on quoted market prices or another valuation
technique, such as discounted cash flow analysis.
If a long-lived asset is to be sold, the asset is reported at the lower of
carrying amount or fair value less cost to sell, with fair value measured as
discussed above. The Company recognized an impairment loss related to the sale
of The Reserve in 2000, as discussed more fully in Note 11.
Debt issuance costs
Debt issuance costs are capitalized and amortized to interest expense
using the effective interest method or a method that approximates the effective
interest method over the term of the related debt instrument.
Excess of purchase price over fair market value of net assets acquired
The excess of purchase price over fair market value of net assets acquired
is amortized over its estimated useful life.
Gaming revenues and promotional allowances
In accordance with industry practice, the Company recognizes as gaming
revenues the net win from gaming activities, which is the difference between
gaming wins and losses. Gross revenues include the retail value of complimentary
food, beverage and lodging services furnished to customers. The retail value of
these promotional allowances is deducted to compute net revenues. The estimated
departmental costs of
F-8
147
AMERISTAR CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
providing such promotional allowances are included in casino costs and expenses
and consist of the following:
YEARS ENDED DECEMBER 31,
-----------------------------
1998 1999 2000
------- ------- -------
(AMOUNTS IN THOUSANDS)
Food and beverage......................................... $20,399 $20,189 $20,552
Room...................................................... 1,024 1,336 1,089
Other..................................................... 958 1,382 1,303
------- ------- -------
$22,381 $22,907 $22,944
======= ======= =======
Advertising
The Company expenses advertising costs the first time the advertising
takes place. Advertising expense included in selling, general and administrative
expenses was approximately $9,966,000, $10,690,000 and $11,564,000 for the years
ended December 31, 1998, 1999 and 2000, respectively.
Preopening costs and business development expenses
Preopening costs primarily represent direct personnel and other operating
costs incurred prior to the opening of new facilities. The Company changed its
method for accounting for preopening costs effective January 1, 1999 in
accordance with American Institute of Certified Public Accountants issued
Statement of Position No. 98-5 "Reporting on the Costs of Start-up Activities."
Prior to 1999, the Company capitalized preopening costs and expensed such costs
upon the commencement of operations. The adoption of SOP 98-5 did not have a
material impact on the Company's operations in 1999 or 2000 since the Company
was not developing any new facilities.
Business development expenses are general costs incurred in connection
with identifying, evaluating and pursuing opportunities to expand into existing
or emerging gaming jurisdictions. Such costs include, among others, legal fees,
land option payments and fees for applications filed with regulatory agencies
and are expensed as incurred.
Federal income taxes
Income taxes are recorded in accordance with SFAS 109, "Accounting for
Income Taxes." SFAS 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.
Earnings Per Share
The Company calculates earnings per share in accordance with SFAS 128,
"Earnings Per Share". Basic earnings per share are computed by dividing reported
earnings by the weighted average number of common shares outstanding during the
period. Diluted earnings per share reflect the additional dilution for all
potentially dilutive securities such as stock options. All outstanding stock
options were excluded from the calculation of diluted earnings per share for the
periods presented because the effect of including the options would have been
anti-dilutive in 1998 and 2000 and the dilutive effect was not significant in
1999.
F-9
148
AMERISTAR CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Reclassifications
Certain reclassifications, having no effect on net income, have been made
to the prior period's consolidated financial statements to conform to the
current period's presentation.
NOTE 3 -- ACCRUED LIABILITIES
Accrued liabilities consist of the following:
DECEMBER 31,
----------------------
1999 2000
------- -------
(AMOUNTS IN THOUSANDS)
Compensation and related benefits.................... $ 7,457 $12,643
Taxes other than income taxes........................ 5,822 8,089
Players' clubs....................................... 1,693 6,220
Progressive slot machine jackpots.................... 1,009 4,638
Interest............................................. 6,320 2,986
Deposits and other accruals.......................... 5,424 6,798
------- -------
$27,725 $41,374
======= =======
NOTE 4 -- FEDERAL INCOME TAXES
The provision (benefit) for income taxes consists of the following:
YEARS ENDED DECEMBER 31,
---------------------------
1998 1999 2000
------- ---- --------
(AMOUNTS IN THOUSANDS)
Income from continuing operations....................... $(6,363) $340 $(17,981)
Tax benefit from extraordinary item..................... -- -- (3,479)
------- ---- --------
$(6,363) $340 $(21,460)
======= ==== ========
The components of the income tax provision (benefit) are as follows:
YEARS ENDED DECEMBER 31,
------------------------------
1998 1999 2000
------- ------- --------
(AMOUNTS IN THOUSANDS)
Current.............................................. $(5,312) $(1,250) $ --
Deferred............................................. (1,051) 1,590 (21,460)
------- ------- --------
$(6,363) $ 340 $(21,460)
======= ======= ========
The reconciliation of income tax at the federal statutory rates to the
Company's effective tax rates is as follows:
YEARS ENDED DECEMBER 31,
--------------------------
1998 1999 2000
----- ---- -----
Federal statutory rate................................... (34.0)% 34.0% (35.0)%
Nondeductible political and lobbying costs............... 0.2 11.0 --
Nondeductible meals and entertainment.................... 0.1 4.2 0.1
Other nondeductible expenses............................. 0.3 13.2 0.2
----- ---- -----
(33.4)% 62.4% (34.7)%
===== ==== =====
F-10
149
AMERISTAR CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Under SFAS No. 109, deferred income taxes reflect the net tax effects of
temporary differences between the carrying amount of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's net deferred tax liability consisted of
the following:
DECEMBER 31,
----------------------
1999 2000
-------- --------
(AMOUNTS IN THOUSANDS)
Deferred tax assets:
Preopening costs....................................... $ 3,019 $ 1,691
Accrued book expenses not currently deductible......... 2,757 2,465
Alternative minimum tax credit......................... 2,882 2,045
Net operating loss carry forward....................... 10,433 20,710
Impairment loss on assets held for sale................ -- 20,004
Other.................................................. 1,252 739
-------- --------
Total deferred tax assets......................... 20,343 47,654
-------- --------
Deferred tax liabilities:
Temporary differences related to property and
equipment............................................ (22,937) (47,021)
Other.................................................. (3,163) (3,747)
-------- --------
Total deferred tax liabilities.................... (26,100) (50,768)
-------- --------
Net deferred tax liability.................................. $ (5,757) $ (3,114)
======== ========
The excess of the alternative minimum tax over regular federal income tax is a
tax credit which can be carried forward indefinitely to reduce future federal
income tax liabilities. At December 31, 2000, the Company has available
$60,264,000 of unused operating loss carryforwards that may be applied against
future taxable income. The unused operating loss carryforwards will expire in
2018 through 2020. No valuation allowance has been provided against deferred tax
assets as the Company believes it is more likely than not that deferred tax
assets are realizable based on expected future taxable income.
F-11
150
AMERISTAR CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 -- NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt consist of the following:
DECEMBER 31,
----------------------
1999 2000
--------- ---------
(AMOUNTS IN THOUSANDS)
Senior Credit Facilities, secured by first priority security
interest in substantially all real and personal property
assets of ACI and its subsidiaries, consisting the
following facilities:
Revolving Credit Facility, at variable interest (11.8
percent at December 31, 2000), with interest due at
two-week to six-month periods (as elected by the
Company), through December 20, 2005................... -- $ 75,000
Term Loan A, at variable interest (11.8 percent at
December 31, 2000), with interest due at two-week to
six-month periods (as elected by the Company),
principal due quarterly, through December 20, 2005.... -- 75,000
Term Loan B, at variable interest (12.3 percent at
December 31, 2000), with interest due at two-week to
six-month periods (as elected by the Company),
principal due quarterly, through December 20, 2006.... -- 175,000
Term Loan C, with variable interest (12.5 percent at
December 31, 2000), with interest due at two-week to
six-month periods (as elected by the Company),
principal due quarterly, through December 20, 2007.... -- 150,000
Senior Subordinated Credit Facility, unsecured, variable
interest (11.0 percent at December 31, 2000), payable
quarterly, principal due June 20, 2008.................... -- 300,000
Previous Revolving Credit Facility.......................... 107,000 --
10.5 percent Senior Subordinated Notes, interest only
payable semiannually, principal due August 2004........... 100,000 --
Notes payable to former stockholders of Gem Gaming, Inc.,
with interest at 8.0 percent, interest payable quarterly,
due December 2004......................................... 25,650 --
Other....................................................... 9,818 11,077
-------- --------
242,468 786,077
Less: Current maturities.................................... 10,615 8,956
-------- --------
$231,853 $777,121
======== ========
On December 20, 2000, the Company refinanced substantially all of its
long-term debt with new $575 million senior credit facilities provided by a
group of lenders led by affiliates of Deutsche Bank AG and a $300 million senior
subordinated credit facility provided by a group of lenders also led by
affiliates of Deutsche Bank AG. In connection with the refinancing, the Company
repurchased through a tender offer $100 million in aggregate principal amount of
its 10.5 percent senior subordinated notes due 2004 and repaid and terminated
its previous $115 million revolving credit facility and approximately $30.2
million of other indebtedness. As a result of the early repurchase of the 10.5
percent senior subordinated notes and the early termination of the Company's
previous revolving credit facility, the Company incurred an extraordinary charge
of $6,560,000 (net of associated tax benefit of $3,479,000), comprised of the
premium paid to the noteholders, unamortized discount on the notes and the
write-off of related loan costs and fees.
The Company's new senior credit facilities consist of a revolving credit
facility, a revolving credit/ term loan facility and term loans A, B and C. Each
of these facilities bears interest at a variable rate based on LIBOR or the
prime rate plus a margin. For the revolving credit facility, the revolving
credit/ term loan facility and the term loan A, the interest rate margin
fluctuates based on our leverage ratio, which is the ratio of our consolidated
debt to latest twelve months EBITDA, as defined, and ranges
F-12
151
AMERISTAR CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
from 1.50 percent to 3.25 percent in the case of Eurodollar loans and from 0.50
percent to 2.25 percent in the case of base rate loans. For term loans B and C,
the margins are fixed at 3.75 percent and 4.00 percent, respectively, in the
case of Eurodollar loans, and at 2.75 percent and 3.00 percent, respectively, in
the case of base rate loans.
The new senior credit facilities contain certain affirmative and negative
covenants, including restrictions on the incurrence of additional indebtedness,
restrictions on dividend payments and other restrictions, as well as promises to
maintain certain financial ratios and tests within defined parameters. As of
December 31, 2000 the Company was limited to a 3.25:1 senior debt ratio, defined
as senior debt divided by EBITDA (as defined). The Company was also limited to a
5.25:1 total debt ratio, defined as consolidated debt divided by EBITDA, as of
the same date. As of December 31, 2000, the Company's senior debt and total debt
ratios were 2.66 and 4.75, respectively.
As of December 31, 2000, the Company was required to maintain a minimum
fixed charge coverage ratio (EBITDA divided by fixed charges, as defined) of
1.50:1. As of December 31, 2000, the Company's fixed charge coverage ratio was
1.84. The senior credit facilities also limit the Company's aggregate capital
expenditures in each year. For the period from December 20, 2000 through
December 31, 2001, the Company is limited to a maximum of $26 million of capital
expenditures in addition to capital expenditures of $110 million in connection
with the St. Charles expansion project, $9.5 million in connection with the
ongoing renovation project at Ameristar Vicksburg and $8.0 million in connection
with the ongoing renovation project at Ameristar Council Bluffs. The senior
credit facilities also require the Company to maintain a consolidated tangible
net worth (as defined) of at least $23 million plus 50 percent of net income
(without any reduction for net losses) as of the end of each quarter plus net
proceeds of certain future equity offerings. As of December 31, 2000, the
Company's consolidated tangible net worth was $5.0 million more than required by
this covenant.
In 1997, the Company entered into an interest rate collar agreement with
Wells Fargo Bank to manage interest expense, which is subject to fluctuation due
to the variable-rate nature of the debt under the Company's senior credit
facilities. Under the agreement, which covered $50.0 million of the borrowings
under the previous credit facility and covers $50 million of the LIBOR
borrowings under the revolving credit/term loan facility and the term loan A,
the Company has a LIBOR floor rate of 5.39 percent and a LIBOR ceiling rate of
6.75 percent, plus the applicable margin. In 1999 and 2000, the Company paid
approximately $49,000 and $0, respectively, in additional interest as a result
of this agreement. The agreement terminates on June 30, 2003.
On February 2, 2001, the Company issued $380 million in aggregate
principal amount of 10 3/4% Senior Subordinated Notes due 2009. The notes were
issued at a discount to yield 11.0 percent. The net proceeds of the offering
were used (1) to repay the $300 million in principal amount outstanding under
the Company's senior subordinated credit facility and accrued interest thereon,
(2) to partially repay and permanently reduce the term loan B and the term loan
C under the Company's senior credit facilities by a total of $50 million, (3) to
partially repay the revolving credit facility under the Company's senior credit
facilities and (4) for working capital purposes. The 10 3/4% Senior Subordinated
Notes due 2009 are unsecured, and are guaranteed by each of the Company's
subsidiaries and rank junior to all of the Company's existing and future senior
debt, including borrowings under the Company's senior credit facilities.
Pursuant to the terms of a registration rights agreement, the Company expects to
offer to exchange the notes with notes having substantially identical terms that
have been registered with the Securities and Exchange Commission. The
unamortized debt issuance costs related to the senior subordinated credit
facility totaled $2.3 million at the date of that facility's termination and
will result in an extraordinary loss on extinguishment of debt in 2001.
The 10 3/4% Senior Subordinated Notes were issued by the Company, and all
of the Company's current subsidiaries (the "Guarantors") have jointly and
severally, and fully and unconditionally,
F-13
152
AMERISTAR CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
guaranteed the notes. Each of the Guarantors is a wholly owned subsidiary of the
Company, and the Guarantors constitute all of the Company's direct and indirect
subsidiaries. The Company is a holding company with no operations or material
assets independent of those of the Guarantors, other than its investment in the
Guarantors, and the aggregate assets, liabilities, earnings and equity of the
Guarantors are substantially equivalent to the assets, liabilities, earnings and
equity on a consolidated basis of the Company. Separate financial statements and
certain other disclosures concerning the Guarantors are not presented because,
in the opinion of management, such information is 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
the Company in the form of cash dividends, loans or advances.
At December 31, 2000, the book value of the Company's long-term debt
approximates fair value due to the predominantly variable-rate nature of the
obligations. Also, fixed rate obligations are at rates that approximate the
Company's incremental borrowing rate for debt with similar terms and remaining
maturities.
Maturities of the Company's borrowings for the next five years as of
December 31, 2000 are as follows (amounts in thousands):
2001........................................................ $ 8,956
2002........................................................ 11,801
2003........................................................ 19,409
2004........................................................ 26,842
2005........................................................ 104,733
Thereafter.................................................. 614,336
--------
$786,077
========
NOTE 6 -- LEASES
Capital leases
The Company has various capital leases for slot machines, restaurant
equipment, and computer and other equipment. These leases have interest rates
ranging from 5.1% to 11.7% and require aggregate monthly payments of $183,500 at
December 31, 2000.
Future minimum lease payments required under capitalized leases for the
five years subsequent to December 31, 2000 are as follows (amounts in
thousands):
2001........................................................ $2,442
2002........................................................ 1,459
2003........................................................ 1,396
2004........................................................ 786
2005........................................................ 25
Thereafter.................................................. 454
------
6,562
Less: Amount representing interest.......................... 1,206
------
Present value of minimum lease payments..................... $5,356
======
Operating leases
ACCBI, as lessor, has leased a portion of the Ameristar Council Bluffs
site to an affiliate of an independent hospitality company, which operates a
188-room hotel on the property. ACCBI has leased another portion of the
Ameristar Council Bluffs site to another affiliate of this independent
hospitality
F-14
153
AMERISTAR CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
company for the operation of a 96-room hotel on the property. Rental income
recognized in the years-ended December 31, 1998, 1999 and 2000 was $60,000,
$60,000 and $67,500, respectively.
ACI leases office space in Las Vegas, Nevada to serve as its corporate
offices. Monthly payments are approximately $63,000 plus the Company's share of
certain common area maintenance expenses. Payments under the leases are subject
to annual escalation clauses corresponding to increases in the cost of living.
The Company recorded rental expense of approximately $533,000, $552,000 and
$596,000 under these leases in the years ended December 31, 1998, 1999 and 2000,
respectively.
The Company entered into a three-year lease (with renewal options for an
additional 24 years) for land on which Ameristar Vicksburg is situated. The
lease initially requires quarterly payments of approximately $20,000. The lease
contains a purchase option exercisable at various times during the term of the
lease.
NOTE 7 -- BENEFIT PLANS
401(k) plan
The Company maintains a 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. 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. The Company's
matching contributions were $485,000, $585,000, and $586,000 for the fiscal
years ended December 31, 1998, 1999 and 2000 respectively.
Insurance plan
The Company has a qualified employee insurance plan covering all employees
who work an average of 32 hours or more per week on a regular basis. The plan
requires contributions from eligible employees and their dependents. The
Company's contribution expense for the plan was approximately $5.0 million, $7.5
million and $9.8 million for the years ended December 31, 1998, 1999 and 2000,
respectively.
Stock Option Plans
The Company has various stock incentive plans for directors, officers,
employees, consultants and advisers of the Company. The plans permit grants of
options to purchase common stock intended to qualify as incentive stock options
or non-qualified stock options and also provides for grants of restricted stock.
The maximum number of shares available for issuance under the plans is 4.6
million, subject to certain limitations. To date, the Company has not granted
any awards of restricted stock. The Compensation Committee of the Board of
Directors administers the plans and has broad discretion to establish the terms
of stock option awards, including without limitation the power to set the term
(up to 10 years), vesting schedule and exercise price of stock option awards.
In December 1998, certain stock options granted under the plans were
amended to reduce the per share exercise prices to $2.64 (the market price on
the date of amendment) from initial exercise prices ranging from $2.78 to $6.13.
No other terms of these stock options were amended.
In December 2000, in connection with the Company's acquisitions of two
properties in Missouri (see Note 10), the Company granted 675,000 options to
four members of the Missouri properties' senior management team. These options
have an exercise price of $4.64 per share and the market price on the date of
grant was $5.56 per share. Therefore, compensation expense of $623,000 will be
recognized over the vesting period of the options based on the difference
between the exercise price and fair market value. Options to purchase 270,000
shares vest equally over a four year period from January 1, 2002 through
December 31, 2005. The remaining options vest on December 31, 2007, subject to
acceleration through
F-15
154
AMERISTAR CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 2005 if the Missouri properties meet certain performance targets (as
established by the Board of Directors or, in its discretion, by a Committee of
the Board of Directors).
Summarized information for the Company's stock option plans is as follows:
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1998 1999 2000
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- -------- --------- -------- --------- --------
Outstanding at beginning of year.... 594,500 $6.12 1,140,110 $2.68 1,441,510 $2.99
Granted............................. 833,610 2.69 579,170 3.52 1,969,542 4.67
Exercised........................... -- -- (15,264) 2.64 (67,699) 2.69
Canceled............................ (288,000) 6.22 (262,506) 2.86 (119,374) 2.25
--------- ----- --------- ----- --------- -----
Outstanding at end of year.......... 1,140,110 $2.68 1,441,510 $2.99 3,223,979 $4.05
========= ===== ========= ===== ========= =====
Options exercisable at end of
year.............................. 184,300 $2.75 382,184 $2.78 608,632 $3.06
Options available for grant......... 467,890 1,158,490 1,293,058
Following is a summary of the status of options outstanding at December
31, 2000:
OUTSTANDING OPTIONS EXERCISABLE OPTIONS
------------------------------------------ -----------------------
WEIGHTED WEIGHTED WEIGHTED
EXERCISE AVERAGE AVERAGE AVERAGE
PRICE RANGE NUMBER REMAINING LIFE EXERCISE PRICE NUMBER EXERCISE PRICE
----------- --------- -------------- -------------- ------- --------------
$2.64 792,967 6.9 years $ 2.64 461,688 $ 2.64
$2.75 - $4.59 788,671 8.9 3.73 103,944 3.48
$4.64 675,000 10.0 4.64 -- --
$4.72 - $6.75 965,341 9.6 5.04 41,000 6.10
$16.00 2,000 3.2 16.00 2,000 16.00
--------- -------
3,223,979 608,632
========= =======
The Company accounts for its stock option plans under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"). Under SFAS No. 123, "Accounting for Stock-Based Compensation", all
employee stock option grants are considered compensatory. SFAS No. 123 is
effective for fiscal years beginning after 1995 and provides, among other
things, that companies may elect to account for employee stock options using APB
25. Had compensation cost for these plans been determined consistent with SFAS
No. 123, the Company's net income (loss) and earnings (loss) per share would
have been adjusted to the pro forma amounts in the following table. The table
also discloses the weighted average assumptions used in estimating the fair
value of each option grant on the date of grant using the Black-Scholes option
pricing model and the estimated weighted average fair value of the
F-16
155
AMERISTAR CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
options granted. The model assumes no expected future dividend payments on the
Company's common stock for the options granted in 1998, 1999 and 2000.
YEARS ENDED DECEMBER 31,
------------------------------
1998 1999 2000
-------- ------ --------
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA)
Net income (loss):
As reported..................................... $(12,715) $ 205 $(40,307)
Pro forma....................................... (13,002) (246) (40,989)
Basic and diluted earnings (loss) per share:
As reported..................................... $ (0.62) $ 0.01 $ (1.98)
Pro forma....................................... (0.64) (0.01) (2.01)
Weighted average assumptions:
Expected stock price volatility................. 58% 58% 54%
Risk-free interest rate......................... 4.5% 5.8% 5.6%
Expected option lives (years)................... 5 5 5
Estimated fair value of options granted......... $ 1.18 $ 1.94 $ 2.73
NOTE 8 -- COMMITMENTS AND CONTINGENCIES
Litigation
E.L. Pennebaker, Jr., et al. v. Ameristar Casinos, Inc., et al. On
February 23, 1998, E.L. Pennebaker, Jr. filed a complaint in the Circuit Court
of Pike County, Mississippi against the Company and other parties (the
"Pennebaker case"). 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 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 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, in violation of the antitrust laws and the gaming
laws of Mississippi. 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 the
Company and other defendants, on the conspiracy count and on the restraint of
trade and tortiously interference counts. The net damages awarded to the
plaintiffs total $3,792,000, of which the Company's pro rata portion is
$1,685,333. These damages are compensatory only as the court did not allow the
jury to consider an award of punitive damages. The Company and the other
defendants have appealed the case to the Mississippi Supreme Court, and the
Company otherwise intends 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 the Company
and the other defendants, to stop opposing the approval and construction of a
casino on the Big Black River. The Company has been advised that no action is
required by it in connection with this petition unless requested by the
Mississippi Gaming Commission.
F-17
156
AMERISTAR CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Walter H. Gibbes, Jr. and Margaret S. Dozier v. Ameristar Casinos, Inc. et
al. On November 22, 1999, Mr. Gibbes and Ms. Dozier filed a complaint in the
Circuit Court of Pike County, Mississippi against the Company and other
defendants. The Company believes that the plaintiffs were partners with Mr.
Pennebaker in a partnership that held an option to a real estate parcel along
the Big Black River that is adjacent to the parcel that was the subject of the
Horseshoe Gaming, Inc. application. The allegations in the complaint are
substantially the same as those in the complaint in the case previously brought
by the plaintiffs in the Pennebaker case. The plaintiffs seek $4,567,500 in
actual damages and an unspecified amount of punitive damages.
The defendants have removed this case to the United States District Court
for the Southern District of Mississippi on diversity jurisdiction and federal
question grounds. The plaintiffs filed a motion to remand the case back to the
Pike County circuit court, which was granted. The other defendants have filed a
motion seeking the federal court to vacate its prior ruling, which motion is
still pending. The Company intends to continue to vigorously defend against this
cause of action.
Other. The Company is engaged in several other legal actions arising in
the ordinary course of business. With respect to these legal actions, the
Company believes that it has adequate legal defenses, insurance coverage or
indemnification protection or otherwise believes that the ultimate outcome(s)
will not have a material adverse impact on the Company's financial position.
NOTE 9 -- RELATED PARTY TRANSACTIONS
The Company engages Neilsen and Company, a company that is owned and
controlled by Craig H. Neilsen, the Company's president, chief executive officer
and chairman, to provide certain construction and professional services, office
space and other equipment and facilities. Total payments to Neilsen and Company
were $33,000, $44,000 and $45,000 for the years ended December 31, 1998, 1999
and 2000, respectively.
The Company also leased office space from the Lynwood Shopping Center,
which until September 1999 was also controlled by Mr. Neilsen. Total payments to
the Lynwood Shopping Center were $69,000, $17,000 and $0 for the years ended
December 31, 1998, 1999 and 2000, respectively.
Mr. Neilsen is the president, director and sole stockholder of
Intermountain Express, Inc. ("Intermountain"), a transportation concern that
provides CPI with package delivery services between Jackpot, Nevada and Twin
Falls, Idaho. In 1998, 1999 and 2000, CPI paid $54,000, $35,000 and $26,000
respectively, for these services. CPI provided contracted driver services and
miscellaneous other supplies to Intermountain Express, Inc. and in 1998, 1999
and 2000, CPI was paid $23,000, $21,000 and $23,000, respectively, for these
services and supplies.
In management's opinion, at the time the above described transactions were
entered into, they were in the best interest of the Company and on terms as fair
to the Company as could have been obtained from unaffiliated parties.
NOTE 10 -- ACQUISITION OF MISSOURI PROPERTIES
On December 20, 2000, the Company, through two newly formed wholly owned
subsidiaries, completed its acquisitions of substantially all of the assets of
two gaming properties in St. Charles and Kansas City, Missouri from subsidiaries
of Station Casinos, Inc. (the "Acquisitions"). The total purchase price for the
Acquisitions, net of cash acquired, was $486.8 million. The Acquisitions were
financed with a portion of the proceeds from the Company's new senior credit
facilities and its senior subordinated credit facility, as described in Note 5.
The purchase price has been allocated to the fair market value of the
assets purchased and liabilities assumed, including identified intangible assets
consisting primarily of customer lists valued at
F-18
157
AMERISTAR CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
$6 million. The final purchase price is subject to change based on the results
of a working capital adjustment. The purchase price allocation is preliminary
and may be adjusted up to one year from the date of the Acquisitions. The excess
of the purchase price over fair market value of net assets acquired is being
amortized over 40 years.
The preliminary purchase price was allocated as follows (in thousands):
Purchase price, net of cash acquired........................ $486,800
--------
Fair value of net assets acquired:
Land................................................... $ 23,060
Other property and equipment........................... 392,236
Identified intangible assets........................... 6,000
Working capital, net of cash acquired.................. (2,892)
Deferred tax liability................................. (18,039)
--------
400,365
--------
Excess of purchase price over fair market value of net
assets acquired........................................... $ 86,435
========
The following unaudited pro forma data summarizes the Company's results of
operations for the periods indicated as if the Acquisitions had occurred at the
beginning of the periods presented:
DECEMBER 31,
-------------------------
1999 2000
----------- ----------
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
Revenues.............................................. $ 614,934 $659,346
Loss before extraordinary item(1)..................... (144,923) (37,807)
Net loss(1)........................................... (144,923) (44,430)
Basic and diluted loss per share before extraordinary
item(1)............................................. (7.12) (1.85)
Basic and diluted loss per share(1)................... (7.12) (2.18)
- -------------------------
(1) Includes an impairment loss on write-down of assets at the St. Charles
property of $125.7 million in 1999 and an impairment loss of $57.2 million
on The Reserve in 2000.
F-19
158
AMERISTAR CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 -- SALE OF THE RESERVE
On October 17, 2000, the Company, through ACLVI, agreed to sell
substantially all of the assets of The Reserve to a wholly owned subsidiary of
Station Casinos, Inc. On January 29, 2001, the Company completed its planned
sale of The Reserve for a total consideration of approximately $71.8 million.
The proceeds from the sale of The Reserve were used (1) to partially repay and
permanently reduce the revolving loan commitment and the term loan A under our
senior credit facilities by a total of $50 million, (2) to repay revolving loans
under our senior credit facilities (which remain available for future
borrowing), and (3) to repay certain indebtedness associated with the assets
sold in the transaction.
The sale of The Reserve resulted in a loss of approximately $57.2 million.
This impairment loss was recorded in the third quarter of 2000 as required by
SFAS No. 121. The assets and liabilities to be sold have been reclassified as
current assets and liabilities in the accompanying consolidated balance sheets.
The following table shows certain financial information of The Reserve for the
periods indicated:
DECEMBER 31,
-----------------------
1999 2000
--------- ----------
(AMOUNTS IN THOUSANDS)
Net revenues............................................ $52,832 $ 62,044
Loss from operations(1)................................. (7,089) (57,321)
- -------------------------
(1) Includes an impairment loss of $57.2 million for the year ended December 31,
2000.
F-20
159
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-21
160
STATION CASINOS, INC. MISSOURI OPERATIONS
COMBINED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
DECEMBER 31,
---------------------
1998 1999
-------- ---------
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 19,390 $ 21,212
Accounts and notes receivable, net..................... 1,706 1,998
Inventories............................................ 1,596 2,173
Prepaid expenses....................................... 1,905 2,063
Deferred income tax.................................... -- 760
-------- ---------
Total current assets.............................. 24,597 28,206
Property and equipment, net................................. 557,278 409,986
Deferred income tax, net.................................... 30,335 26,263
Other assets, net........................................... 20,826 17,602
-------- ---------
Total assets...................................... $633,036 $ 482,057
======== =========
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Current portion of long-term debt...................... $ 7,546 $ 4,346
Accounts payable....................................... 4,281 3,115
Accrued payroll and related............................ 2,079 4,114
Construction contracts payable......................... 2,201 --
Accrued interest payable............................... 1,291 994
Accrued progressives................................... 2,157 1,416
Accrued gaming related................................. 1,503 1,771
Deferred income tax.................................... 211 --
Accrued expenses and other current liabilities......... 11,019 14,307
-------- ---------
Total current liabilities......................... 32,288 30,063
Long-term debt, less current portion........................ 9,979 5,033
Long-term intercompany note payable, net.................... 672,503 664,106
-------- ---------
Total liabilities................................. 714,770 699,202
Division equity............................................. (81,734) (217,145)
-------- ---------
Total liabilities and division equity............. $633,036 $ 482,057
======== =========
The accompanying notes are an integral part of these combined statements.
F-22
161
STATION CASINOS, INC. MISSOURI OPERATIONS
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
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)
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)
======== ======== =========
The accompanying notes are an integral part of these combined statements.
F-23
162
STATION CASINOS, INC. MISSOURI OPERATIONS
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FOR THE NINE
FOR THE MONTHS FOR THE YEAR
YEAR ENDED ENDED ENDED
MARCH 31, DECEMBER 31, DECEMBER 31,
1998 1998 1999
---------- ------------ ------------
(SEE NOTE 1)
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
The accompanying notes are an integral part of these combined statements.
F-24
163
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).
Net revenues.............................................. $289,999
Operating loss............................................ (2,071)
Loss before income taxes.................................. (59,249)
Income tax benefit........................................ 4,887
Net loss.................................................. (54,362)
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-25
164
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):
FOR THE FOR THE
YEAR ENDED TRANSITION YEAR ENDED
MARCH 31, PERIOD DECEMBER 31,
1998 1998 1999
---------- ---------- ------------
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
====== ====== ======
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.
F-26
165
STATION CASINOS, INC. MISSOURI OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. ACCOUNTS AND NOTES RECEIVABLE
Components of accounts and notes receivable are as follows (amounts in
thousands):
DECEMBER 31,
----------------
1998 1999
------ ------
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
====== ======
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of December 31, 1998
and 1999 (amounts in thousands):
DECEMBER 31,
--------------------
ESTIMATED LIFE (YEARS) 1998 1999
---------------------- -------- --------
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
======== ========
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 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.
F-27
166
STATION CASINOS, INC. MISSOURI OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
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):
DECEMBER 31,
--------------------
1998 1999
-------- --------
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
======== ========
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-28
167
STATION CASINOS, INC. MISSOURI OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
Scheduled maturities of other long-term debt are as follows (amounts in
thousands):
YEAR ENDING DECEMBER 31,
------------------------
2000........................................................ $4,346
2001........................................................ 4,246
2002........................................................ 787
------
Total............................................. $9,379
======
5. DIVISION EQUITY
Changes in division equity consisted of the following (amounts in
thousands):
STATION STATION
CASINO CASINO
ST. CHARLES KANSAS CITY TOTAL
----------- ----------- ---------
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)
========= ======== =========
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-29
168
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):
YEAR ENDING DECEMBER 31,
------------------------
2000........................................................ $1,260
2001........................................................ 1,283
2002........................................................ 1,307
2003........................................................ 1,330
2004........................................................ 1,355
Thereafter.................................................. 2,784
------
Total............................................. $9,319
======
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
F-30
169
STATION CASINOS, INC. MISSOURI OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
$654,000 for the fiscal year ended March 31, 1998, the Transition Period 1998
and the fiscal year ended 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):
FOR THE FOR THE
YEAR ENDED TRANSITION YEAR ENDED
MARCH 31, PERIOD DECEMBER 31,
1998 1998 1999
---------- ---------- ------------
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)
======== ======= =======
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:
FOR THE FOR THE
YEAR ENDED TRANSITION YEAR ENDED
MARCH 31, PERIOD DECEMBER 31,
1998 1998 1999
---------- ---------- ------------
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)%
===== ===== =====
F-31
170
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):
DECEMBER 31,
--------------------
1998 1999
-------- --------
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
======== ========
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.
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
F-32
171
STATION CASINOS, INC. MISSOURI OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
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-33
172
- ------------------------------------------------------
- ------------------------------------------------------
ALL TENDERED OLD NOTES, EXECUTED LETTERS OF TRANSMITTAL AND OTHER RELATED
DOCUMENTS SHOULD BE DIRECTED TO THE EXCHANGE AGENT. QUESTIONS AND REQUESTS FOR
ADDITIONAL COPIES OF THIS PROSPECTUS, THE LETTER OF TRANSMITTAL AND OTHER
RELATED DOCUMENTS SHOULD BE ADDRESSED TO THE EXCHANGE AGENT AS FOLLOWS:
BY MAIL, OVERNIGHT COURIER OR HAND:
U.S. BANK TRUST NATIONAL ASSOCIATION
180 EAST FIFTH STREET
ST. PAUL, MINNESOTA 55101
ATTENTION: SPECIALIZED FINANCE GROUP
BY FACSIMILE:
(651) 244-1537
------------------------
CONFIRM BY TELEPHONE:
(800) 934-6802
------------------------
(ORIGINALS OF ALL DOCUMENTS SUBMITTED BY FACSIMILE SHOULD BE SENT
PROMPTLY BY HAND, OVERNIGHT COURIER, OR REGISTERED OR CERTIFIED MAIL)
NO BROKER DEALER OR OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY
OFFER MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, THE UNAUTHORIZED INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY NOR DOES IT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE
SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 2001 (90 DAYS FROM THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THIS EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
------------------------
PROSPECTUS
------------------------
$380,000,000
[AMERISTAR LOGO]
OFFER TO EXCHANGE
ALL OF OUR OUTSTANDING
10 3/4% SENIOR SUBORDINATED NOTES DUE 2009
FOR
10 3/4% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2009
APRIL , 2001
- ------------------------------------------------------
- ------------------------------------------------------
173
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.7502(1) of the General Corporation Law of Nevada, or the
"NGCL," provides that a Nevada corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the corporation, by reason
of the fact that such person is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding if he or she
acted in good faith and in a manner which he or she reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
Section 78.7502(2) of the NGCL provides that a Nevada corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth in subsection (1), against
expenses, including amounts paid in settlement and attorneys' fees actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if he or she acted under the standards set forth in
subsection (1), except that no indemnification may be made for any claim, issue
or matter as to which such person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to the
corporation or for amounts paid in settlement to the corporation, unless and
only to the extent that the court in which such action or suit was brought or
other court of competent jurisdiction determines upon application that in view
of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.
Section 78.7502(3) of the NGCL provides that to the extent a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections (1) and (2), or in defense of any claim, issue or matter therein,
the corporation shall indemnify such person against expenses, including
attorneys' fees, actually and reasonably incurred by him or her in connection
with the defense.
Section 78.751(1) of the NGCL provides that any discretionary
indemnification under Section 78.7502, unless ordered by a court or advanced
pursuant to subsection 2 of Section 78.751, may be made by the corporation only
as authorized in the specific case upon determination that indemnification of
such director, officer, employee or agent is proper in the circumstances. The
determination must be made (a) by the stockholders; (b) by the board of
directors by majority vote of quorum consisting of directors who were not
parties to the action, suit or proceeding; (c) if a majority vote of a quorum
consisting of directors who were not parties to the action, suit or proceeding
so orders, by independent legal counsel in a written opinion; or (d) if a quorum
consisting of directors who were not parties to the action, suit or proceeding
cannot be obtained, by independent legal counsel in a written opinion.
Section 78.751(2) of the NGCL provides that the articles of incorporation,
bylaws or an agreement made by the corporation may provide that the expenses of
officers and directors incurred in defending a civil or criminal action, suit or
proceeding must be paid by the corporation as they are incurred and in advance
of the final disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount if it
is ultimately determined by a court of competent jurisdiction that he or she is
not entitled to be indemnified by the corporation. Such provision does not
affect any rights to advancement of expenses to which corporate personnel other
than directors or officers may be entitled under any contract or otherwise by
law.
II-1
174
Section 78.752 of the NGCL provides that a Nevada corporation may purchase
and maintain insurance or make other financial arrangements on behalf of any
person who acted in any of the capacities set forth above for any liability
asserted against such person for any liability asserted against him or her and
liability and expenses incurred by him or her in any such capacity or arising
out of his or her status as such, whether or not the corporation has the
authority to indemnify him or her against such liabilities and expenses.
Our Amended Articles of Incorporation provides that none of our directors
or officers shall be personally liable to us or our stockholders for damages for
breach of fiduciary duty as a director. However, such provision does not
eliminate or limit the liability of a director or officer for any act or
omission which involves intentional misconduct, fraud or a knowing violation of
law, or the payment of distributions in violation of Section 78.300 of the NGCL.
In addition, our Amended Articles of Incorporation and Amended Bylaws provide
for indemnification of its directors and officers in accordance with the NGCL.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are part of this registration statement on Form
S-4 and are numbered in accordance with Item 601 of Regulation S-K. See Index to
Exhibits.
(b) The following financial statement schedules are part of this
registration statement on Form S-4. See Index to Consolidated Financial
Statements.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(b) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(c) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-2
175
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Las Vegas, State of
Nevada, on April 18, 2001.
AMERISTAR CASINOS, INC.,
a Nevada corporation
By: /s/ CRAIG H. NEILSEN
------------------------------------
Craig H. Neilsen
President, Chairman of the Board and
CEO
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ CRAIG H. NEILSEN President, Chief Executive April 18, 2001
- ----------------------------------------------------- Officer, Director and Chairman
Craig H. Neilsen of the Board
/s/ THOMAS M. STEINBAUER Senior Vice President of Finance April 18, 2001
- ----------------------------------------------------- (principal financial officer and
Thomas M. Steinbauer principal accounting officer)
and Director
/s/ PAUL I. CORDDRY Director April 18, 2001
- -----------------------------------------------------
Paul I. Corddry
/s/ LARRY A. HODGES Director April 18, 2001
- -----------------------------------------------------
Larry A. Hodges
II-3
176
On this 18th of April, 2001, 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 signatures as signed by Connie Wilson and in our
presence, Craig H. Neilsen declared to us that he adopted them as his own
signatures.
Victoria Vry
--------------------------------------
Witness
Susan Vichairelli
--------------------------------------
Witness
STATE OF NEVADA )
):ss.
COUNTY OF CLARK )
I, Margene Otten, 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 President and Chief Executive Officer of Ameristar
Casinos, Inc., the corporation that executed the within instrument or the person
who executed the instrument on behalf of said corporation. Craig H. Neilsen, who
being unable due to physical incapacity to sign his name or offer his mark, did
direct Connie Wilson, in his presence, as well as my own, to sign his name to
the foregoing document. Craig H. Neilsen, after viewing his name as signed by
Connie Wilson, thereupon adopted the signatures as his own by acknowledging to
me his intention to so adopt them as if he had personally executed the same both
in his individual capacity and on behalf of said corporation, and further
acknowledged to me that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this
18th day of April, 2001.
/s/ MARGENE OTTEN
--------------------------------------
Notary Public
My Commission Expires: July 23, 2002
Residing at: Las Vegas, NV
II-4
177
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints each of Craig H. Neilsen and Thomas M.
Steinbauer, as his true and lawful attorneys-in-fact and agent with full power
of substitution and resubstitution, for him in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement on Form S-4, and any other
Registration Statement relating to the same offering, and any and all amendments
thereto (including post-effective amendments) and to file the same with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the foregoing, as fully to all intents and
purposes as he might or could do in person, lawfully do or cause to be done by
virtue thereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ CRAIG H. NEILSEN President, Chief Executive April 18, 2001
- ----------------------------------------------------- Officer, Director and Chairman
Craig H. Neilsen of the Board
/s/ THOMAS M. STEINBAUER Senior Vice President of Finance April 18, 2001
- ----------------------------------------------------- (principal financial officer and
Thomas M. Steinbauer principal accounting officer)
and Director
/s/ PAUL I. CORDDRY Director April 18, 2001
- -----------------------------------------------------
Paul I. Corddry
/s/ LARRY A. HODGES Director April 18, 2001
- -----------------------------------------------------
Larry A. Hodges
II-5
178
On this 18th of April, 2001, 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 signatures as signed by Connie Wilson and in our
presence, Craig H. Neilsen declared to us that he adopted them as his own
signatures.
Victoria Vry
--------------------------------------
Witness
Susan Vichairelli
--------------------------------------
Witness
STATE OF NEVADA )
):ss.
COUNTY OF CLARK )
I, Margene Otten, 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 President and Chief Executive Officer of Ameristar
Casinos, Inc., the corporation that executed the within instrument or the person
who executed the instrument on behalf of said corporation. Craig H. Neilsen, who
being unable due to physical incapacity to sign his name or offer his mark, did
direct Connie Wilson, in his presence, as well as my own, to sign his name to
the foregoing document. Craig H. Neilsen, after viewing his name as signed by
Connie Wilson, thereupon adopted the signatures as his own by acknowledging to
me his intention to so adopt them as if he had personally executed the same both
in his individual capacity and on behalf of said corporation, and further
acknowledged to me that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this
18th day of April, 2001.
/s/ MARGENE OTTEN
--------------------------------------
Notary Public
My Commission Expires: July 23, 2002
Residing at: Las Vegas, NV
II-6
179
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Las Vegas, State of
Nevada, on April 18, 2001.
Ameristar Casino Council Bluffs, Inc.,
an Iowa corporation
By: /s/ CRAIG H. NEILSEN
------------------------------------
Craig H. Neilsen
President and Sole Director
By: /s/ THOMAS M. STEINBAUER
------------------------------------
Thomas M. Steinbauer
Vice President, Treasurer and
Secretary
(principal accounting officer and
principal financial officer)
II-7
180
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Thomas M. Steinbauer, as his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him in his name, place and stead, in any and all capacities,
to sign this Registration Statement on Form S-4 and any and all amendments
(including post-effective amendments) to this Registration Statement on Form
S-4, and any other Registration Statement relating to the same offering, and any
and all amendments thereto (including post-effective amendments) and to file the
same with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the foregoing, as fully to all
intents and purposes as he might or could do in person, lawfully do or cause to
be done by virtue thereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE
--------- -----
/s/ CRAIG H. NEILSEN Craig H. Neilsen, President and April 18, 2001
- --------------------------------------------------- Sole Director
II-8
181
On this 18th of April, 2001, 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 signatures as signed by Connie Wilson and in our
presence, Craig H. Neilsen declared to us that he adopted them as his own
signatures.
Victoria Vry
--------------------------------------
Witness
Susan Vichairelli
--------------------------------------
Witness
- -------------------------------------
STATE OF NEVADA
:ss.
COUNTY OF CLARK
- -------------------------------------
I, Margene Otten, 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 President and Sole Director of Ameristar Casino
Council Bluffs, Inc., the corporation that executed the within instrument or the
person who executed the instrument on behalf of said corporation. Craig H.
Neilsen, who being unable due to physical incapacity to sign his name or offer
his mark, did direct Connie Wilson, in his presence, as well as my own, to sign
his name to the foregoing document. Craig H. Neilsen, after viewing his name as
signed by Connie Wilson, thereupon adopted the signatures as his own by
acknowledging to me his intention to so adopt them as if he had personally
executed the same both in his individual capacity and on behalf of said
corporation, and further acknowledged to me that such corporation executed the
same.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this
18th day of April, 2001.
/s/ MARGENE OTTEN
--------------------------------------
Notary Public
My Commission Expires: July 23, 2002
Residing at: Las Vegas, NV
II-9
182
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Las Vegas, State of
Nevada, on April 18, 2001.
Ameristar Casino Kansas City, Inc.,
a Missouri corporation
By: /s/ CRAIG H. NEILSEN
------------------------------------
Craig H. Neilsen
President and Sole Director
By: /s/ THOMAS M. STEINBAUER
------------------------------------
Thomas M. Steinbauer
Vice President, Treasurer and
Secretary
(principal accounting officer and
principal financial officer)
II-10
183
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Thomas M. Steinbauer, as his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him in his name, place and stead, in any and all capacities,
to sign this Registration Statement on Form S-4 and any and all amendments
(including post-effective amendments) to this Registration Statement on Form
S-4, and any other Registration Statement relating to the same offering, and any
and all amendments thereto (including post-effective amendments) and to file the
same with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the foregoing, as fully to all
intents and purposes as he might or could do in person, lawfully do or cause to
be done by virtue thereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE
--------- -----
/s/ CRAIG H. NEILSEN Craig H. Neilsen, President and April 18, 2001
- --------------------------------------------------- Sole Director
II-11
184
On this 18th of April, 2001, 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 signatures as signed by Connie Wilson and in our
presence, Craig H. Neilsen declared to us that he adopted them as his own
signatures.
Victoria Vry
--------------------------------------
Witness
Susan Vichairelli
--------------------------------------
Witness
- -------------------------------------
STATE OF NEVADA
:ss.
COUNTY OF CLARK
- -------------------------------------
I, Margene Otten, 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 President and Sole Director of Ameristar Casino
Kansas City, Inc., the corporation that executed the within instrument or the
person who executed the instrument on behalf of said corporation. Craig H.
Neilsen, who being unable due to physical incapacity to sign his name or offer
his mark, did direct Connie Wilson, in his presence, as well as my own, to sign
his name to the foregoing document. Craig H. Neilsen, after viewing his name as
signed by Connie Wilson, thereupon adopted the signatures as his own by
acknowledging to me his intention to so adopt them as if he had personally
executed the same both in his individual capacity and on behalf of said
corporation, and further acknowledged to me that such corporation executed the
same.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this
18th day of April, 2001.
/s/ MARGENE OTTEN
--------------------------------------
Notary Public
My Commission Expires: July 23, 2002
Residing at: Las Vegas, NV
II-12
185
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Las Vegas, State of
Nevada, on April 18, 2001.
Ameristar Casino St. Charles, Inc.,
a Missouri corporation
By: /s/ CRAIG H. NEILSEN
------------------------------------
Craig H. Neilsen
President and Sole Director
By: /s/ THOMAS M. STEINBAUER
------------------------------------
Thomas M. Steinbauer
Vice President, Treasurer and
Secretary
(principal accounting officer and
principal financial officer)
II-13
186
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Thomas M. Steinbauer, as his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him in his name, place and stead, in any and all capacities,
to sign this Registration Statement on Form S-4 and any and all amendments
(including post-effective amendments) to this Registration Statement on Form
S-4, and any other Registration Statement relating to the same offering, and any
and all amendments thereto (including post-effective amendments) and to file the
same with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the foregoing, as fully to all
intents and purposes as he might or could do in person, lawfully do or cause to
be done by virtue thereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE
--------- -----
/s/ CRAIG H. NEILSEN Craig H. Neilsen, President and April 18, 2001
- --------------------------------------------------- Sole Director
II-14
187
On this 18th of April, 2001, 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 signatures as signed by Connie Wilson and in our
presence, Craig H. Neilsen declared to us that he adopted them as his own
signatures.
Victoria Vry
--------------------------------------
Witness
Susan Vichairelli
--------------------------------------
Witness
- -------------------------------------
STATE OF NEVADA
:ss.
COUNTY OF CLARK
- -------------------------------------
I, Margene Otten, 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 President and Sole Director of Ameristar Casino
St. Charles, Inc., the corporation that executed the within instrument or the
person who executed the instrument on behalf of said corporation. Craig H.
Neilsen, who being unable due to physical incapacity to sign his name or offer
his mark, did direct Connie Wilson, in his presence, as well as my own, to sign
his name to the foregoing document. Craig H. Neilsen, after viewing his name as
signed by Connie Wilson, thereupon adopted the signatures as his own by
acknowledging to me his intention to so adopt them as if he had personally
executed the same both in his individual capacity and on behalf of said
corporation, and further acknowledged to me that such corporation executed the
same.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this
18th day of April, 2001.
/s/ MARGENE OTTEN
--------------------------------------
Notary Public
My Commission Expires: July 23, 2002
Residing at: Las Vegas, NV
II-15
188
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Las Vegas, State of
Nevada, on April 18, 2001.
Ameristar Casino St. Louis, Inc.,
a Missouri corporation
By: /s/ CRAIG H. NEILSEN
------------------------------------
Craig H. Neilsen
President and Sole Director
By: /s/ THOMAS M. STEINBAUER
------------------------------------
Thomas M. Steinbauer
Vice President, Treasurer and
Secretary
(principal accounting officer and
principal financial officer)
II-16
189
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Thomas M. Steinbauer, as his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him in his name, place and stead, in any and all capacities,
to sign this Registration Statement on Form S-4 and any and all amendments
(including post-effective amendments) to this Registration Statement on Form
S-4, and any other Registration Statement relating to the same offering, and any
and all amendments thereto (including post-effective amendments) and to file the
same with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the foregoing, as fully to all
intents and purposes as he might or could do in person, lawfully do or cause to
be done by virtue thereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE
--------- -----
/s/ CRAIG H. NEILSEN Craig H. Neilsen, President and April 18, 2001
- --------------------------------------------------- Sole Director
II-17
190
On this 18th of April, 2001, 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 signatures as signed by Connie Wilson and in our
presence, Craig H. Neilsen declared to us that he adopted them as his own
signatures.
Victoria Vry
--------------------------------------
Witness
Susan Vichairelli
--------------------------------------
Witness
- -------------------------------------
STATE OF NEVADA
COUNTY OF CLARK
- -------------------------------------
:ss.
I, Margene Otten, 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 President and Sole Director of Ameristar Casino
St. Louis, Inc., the corporation that executed the within instrument or the
person who executed the instrument on behalf of said corporation. Craig H.
Neilsen, who being unable due to physical incapacity to sign his name or offer
his mark, did direct Connie Wilson, in his presence, as well as my own, to sign
his name to the foregoing document. Craig H. Neilsen, after viewing his name as
signed by Connie Wilson, thereupon adopted the signatures as his own by
acknowledging to me his intention to so adopt them as if he had personally
executed the same both in his individual capacity and on behalf of said
corporation, and further acknowledged to me that such corporation executed the
same.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this
18th day of April, 2001.
/s/ MARGENE OTTEN
--------------------------------------
Notary Public
My Commission Expires: July 23, 2002
Residing at: Las Vegas, NV
II-18
191
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Las Vegas, State of
Nevada, on April 18, 2001.
A.C. Food Services, Inc.,
a Nevada corporation
By: /s/ CRAIG H. NEILSEN
------------------------------------
Craig H. Neilsen
President and Sole Director
By: /s/ THOMAS M. STEINBAUER
------------------------------------
Thomas M. Steinbauer
Vice President, Treasurer and
Secretary
(principal accounting officer and
principal financial officer)
II-19
192
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Thomas M. Steinbauer, as his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him in his name, place and stead, in any and all capacities,
to sign this Registration Statement on Form S-4 and any and all amendments
(including post-effective amendments) to this Registration Statement on Form
S-4, and any other Registration Statement relating to the same offering, and any
and all amendments thereto (including post-effective amendments) and to file the
same with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the foregoing, as fully to all
intents and purposes as he might or could do in person, lawfully do or cause to
be done by virtue thereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE
--------- -----
/s/ CRAIG H. NEILSEN Craig H. Neilsen, President and April 18, 2001
- --------------------------------------------------- Sole Director
II-20
193
On this 18th of April, 2001, 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 signatures as signed by Connie Wilson and in our
presence, Craig H. Neilsen declared to us that he adopted them as his own
signatures.
Victoria Vry
--------------------------------------
Witness
Susan Vichairelli
--------------------------------------
Witness
- -------------------------------------
STATE OF NEVADA
COUNTY OF CLARK
- -------------------------------------
:ss.
I, Margene Otten, 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 President and Sole Director of A.C. Food Services,
Inc., the corporation that executed the within instrument or the person who
executed the instrument on behalf of said corporation. Craig H. Neilsen, who
being unable due to physical incapacity to sign his name or offer his mark, did
direct Connie Wilson, in his presence, as well as my own, to sign his name to
the foregoing document. Craig H. Neilsen, after viewing his name as signed by
Connie Wilson, thereupon adopted the signatures as his own by acknowledging to
me his intention to so adopt them as if he had personally executed the same both
in his individual capacity and on behalf of said corporation, and further
acknowledged to me that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this
18th day of April, 2001.
/s/ MARGENE OTTEN
--------------------------------------
Notary Public
My Commission Expires: July 23, 2002
Residing at: Las Vegas, NV
II-21
194
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Las Vegas, State of
Nevada, on April 18, 2001.
Ameristar Casino Las Vegas, Inc.,
a Nevada corporation
By: /s/ CRAIG H. NEILSEN
------------------------------------
Craig H. Neilsen
President and Sole Director
By: /s/ THOMAS M. STEINBAUER
------------------------------------
Thomas M. Steinbauer
Vice President, Treasurer and
Secretary
(principal accounting officer and
principal financial officer)
II-22
195
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Thomas M. Steinbauer, as his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him in his name, place and stead, in any and all capacities,
to sign this Registration Statement on Form S-4 and any and all amendments
(including post-effective amendments) to this Registration Statement on Form
S-4, and any other Registration Statement relating to the same offering, and any
and all amendments thereto (including post-effective amendments) and to file the
same with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the foregoing, as fully to all
intents and purposes as he might or could do in person, lawfully do or cause to
be done by virtue thereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE
--------- -----
/s/ CRAIG H. NEILSEN Craig H. Neilsen, President and April 18, 2001
- --------------------------------------------------- Sole Director
II-23
196
On this 18th of April, 2001, 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 signatures as signed by Connie Wilson and in our
presence, Craig H. Neilsen declared to us that he adopted them as his own
signatures.
Victoria Vry
--------------------------------------
Witness
Susan Vichairelli
--------------------------------------
Witness
- -------------------------------------
STATE OF NEVADA
COUNTY OF CLARK
- -------------------------------------
:ss.
I, Margene Otten, 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 President and Sole Director of Ameristar Casino
Las Vegas, Inc., the corporation that executed the within instrument or the
person who executed the instrument on behalf of said corporation. Craig H.
Neilsen, who being unable due to physical incapacity to sign his name or offer
his mark, did direct Connie Wilson, in his presence, as well as my own, to sign
his name to the foregoing document. Craig H. Neilsen, after viewing his name as
signed by Connie Wilson, thereupon adopted the signatures as his own by
acknowledging to me his intention to so adopt them as if he had personally
executed the same both in his individual capacity and on behalf of said
corporation, and further acknowledged to me that such corporation executed the
same.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this
18th day of April, 2001.
/s/ MARGENE OTTEN
--------------------------------------
Notary Public
My Commission Expires: July 23, 2002
Residing at: Las Vegas, NV
II-24
197
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Las Vegas, State of
Nevada, on April 18, 2001.
Cactus Pete's, Inc.,
a Nevada corporation
By: /s/ CRAIG H. NEILSEN
------------------------------------
Craig H. Neilsen
President and Sole Director
By: /s/ THOMAS M. STEINBAUER
------------------------------------
Thomas M. Steinbauer
Vice President, Treasurer and
Secretary
(principal accounting officer and
principal financial officer)
II-25
198
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Thomas M. Steinbauer, as his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him in his name, place and stead, in any and all capacities,
to sign this Registration Statement on Form S-4 and any and all amendments
(including post-effective amendments) to this Registration Statement on Form
S-4, and any other Registration Statement relating to the same offering, and any
and all amendments thereto (including post-effective amendments) and to file the
same with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the foregoing, as fully to all
intents and purposes as he might or could do in person, lawfully do or cause to
be done by virtue thereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE
--------- -----
/s/ CRAIG H. NEILSEN Craig H. Neilsen, President and April 18, 2001
- --------------------------------------------------- Sole Director
II-26
199
On this 18th of April, 2001, 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 signatures as signed by Connie Wilson and in our
presence, Craig H. Neilsen declared to us that he adopted them as his own
signatures.
Victoria Vry
--------------------------------------
Witness
Susan Vichairelli
--------------------------------------
Witness
- -------------------------------------
STATE OF NEVADA
COUNTY OF CLARK
- -------------------------------------
:ss.
I, Margene Otten, 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 President and Sole Director of Cactus Pete's,
Inc., the corporation that executed the within instrument or the person who
executed the instrument on behalf of said corporation. Craig H. Neilsen, who
being unable due to physical incapacity to sign his name or offer his mark, did
direct Connie Wilson, in his presence, as well as my own, to sign his name to
the foregoing document. Craig H. Neilsen, after viewing his name as signed by
Connie Wilson, thereupon adopted the signatures as his own by acknowledging to
me his intention to so adopt them as if he had personally executed the same both
in his individual capacity and on behalf of said corporation, and further
acknowledged to me that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this
18th day of April, 2001.
/s/ MARGENE OTTEN
--------------------------------------
Notary Public
My Commission Expires: July 23, 2002
Residing at: Las Vegas, NV
II-27
200
INDEX TO EXHIBITS
(a) EXHIBITS
The following exhibits listed are filed or incorporated by reference as
part of this Report. Certain of the listed exhibits are incorporated by
reference to previously filed reports of the registrant under the Securities
Exchange Act of 1934, as amended, including Forms 10-K, 10-Q and 8-K. These
reports have been filed with the Securities and Exchange Commission under file
number 0-22494.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT METHOD OF FILING
- -------- ---------------------- ----------------
3.1 Articles of Incorporation of Ameristar Incorporated by reference to Exhibit 3.1
Casinos, Inc. ("ACI"). to Registration Statement on Form S-1
filed by ACI under the Securities Act of
1933, as amended (File No. 33-68936)
(the "Form S-1").
3.2 Bylaws of ACI. Incorporated by reference to Exhibit 3.2
to ACI's Annual Report on Form 10-K for
the year ended December 31, 1995 (the
"1995 10-K").
3.3 Articles of Incorporation of Cactus Incorporated by reference to Exhibit 3.3
Pete's, Inc. ("CPI"). to Amendment No. 1, filed by ACI on
November 10, 1997, to the Registration
Statement on Form S-4 filed by ACI on
August 26, 1997 under the Securities Act
of 1933, as amended (File No. 333-34381)
(the "Form S-4").
3.4 Bylaws of CPI. Incorporated by reference to Exhibit 3.4
to Form S-4.
3.5 Articles of Incorporation of Ameristar Incorporated by reference to Exhibit 3.5
Casino Vicksburg, Inc. ("ACVI"). to Form S-4.
3.6 Bylaws of ACVI. Incorporated by reference to Exhibit 3.6
to Form S-4.
3.7 Articles of Incorporation of Ameristar Incorporated by reference to Exhibit 3.7
Casino Council Bluffs, Inc. ("ACCBI"). to Form S-4.
3.8 Bylaws of ACCBI. Incorporated by reference to Exhibit 3.8
to Form S-4.
3.9 Articles of Incorporation of Ameristar Incorporated by reference to Exhibit 3.9
Casino Las Vegas, Inc. ("ACLVI"). to Form S-4.
3.10 Bylaws of ACLVI. Incorporated by reference to Exhibit
3.10 to Form S-4.
3.11 Articles of Incorporation of A.C. Food Incorporated by reference to Exhibit
Services, Inc. ("ACFSI"). 3.11 to Form S-4.
3.12 Bylaws of ACFSI. Incorporated by reference to Exhibit
3.12 to Form S-4.
3.13 Articles of Incorporation of Ameristar Filed herewith.
Casino St. Louis, Inc. ("ACSLI").
3.14 Bylaws of ACSLI. Filed herewith.
3.15 Articles of Incorporation of Ameristar Filed herewith.
Casino Kansas City, Inc. ("ACKCI").
3.16 Bylaws of ACKCI. Filed herewith.
3.17 Articles of Incorporation of Ameristar Filed herewith.
Casino St. Charles, Inc. ("ACSCI").
3.18 Bylaws of ACSCI. Filed herewith.
201
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT METHOD OF FILING
- -------- ---------------------- ----------------
4.1 Specimen Common Stock Certificate Incorporated by reference to Exhibit 4
to Amendment No. 2 to the Form S-1.
4.2(a) Credit Agreement (the "Credit Incorporated by reference to Exhibit
Agreement") dated as of December 20, 4.2(a) to the ACI's Annual Report on
2000 among ACI, the Lenders party Form 10-K for the year ended December
thereto from time to time, Wells Fargo 31, 2000 (the "2000 10-K").
Bank, N.A., as Co-Arranger and
Syndication Agent ("WFB"), Bear Stearns
Corporate Lending Inc., as Documentation
Agent ("BSCLI"), Deutsche Bank
Securities Inc., as Lead Arranger and
Sole Book Manager ("DBSI"), and Bankers
Trust Company, as Administrative Agent
("BTCo").
4.2(b) First Amendment to Credit Agreement Incorporated by reference to Exhibit
dated as of January 30, 2001 among ACI, 4.2(b) to the 2000 10-K.
the Lenders party to the Credit
Agreement, WFB, BSCLI, DBSI and BTCo.
4.2(c) Guaranty made by each of ACI's Incorporated by reference to Exhibit
subsidiaries guaranteeing ACI's 4.2(c) to the 2000 10-K.
obligations under the Credit Agreement.
4.2(d) Interest Rate Collar Agreement dated Incorporated by reference to Exhibit
August 10, 1998 between ACI and Wells 4.2(b) to ACI's Annual Report on Form
Fargo Bank, N.A. 10-K for the year ended December 31,
1998.
4.3 Senior Subordinated Credit Agreement Incorporated by reference to Exhibit 4.3
dated as of December 20, 2000 by and to the 2000 10-K.
among ACI, the Guarantors named on the
signature pages thereto, the Lenders
named on the signature pages thereto,
Bankers Trust Company, as Agent for the
Lenders, and Bear Stearns Corporate
Lending Inc., as Documentation Agent for
the Lenders.
4.4 Indenture dated as of February 2, 2001 Incorporated by reference to Exhibit 4.4
among ACI, the Guarantors (as defined to the 2000 10-K.
therein) and U.S. Bank Trust National
Association, as trustee.
5.1 Opinion of Gibson, Dunn & Crutcher LLP, To be filed by an amendment.
dated , 2001, regarding the
validity of the exchange notes.
*10.1(a) Employment Agreement, dated November 15, Incorporated by reference to Exhibit
1993, between ACI and Thomas M. 10.1(a) to ACI's Annual Report on Form
Steinbauer. 10-K for the year ended December 31,
1994 (the "1994 10-K").
*10.1(b) Employment Agreement, dated as of August Incorporated by reference to Exhibit
23, 1999, between Ameristar Casinos, 10.1 to ACI's Quarterly Report on Form
Inc. and Gordon R. Kanofsky. 10-Q for the quarter ended September 30,
1999.
*10.2 Ameristar Casinos, Inc. 1993 Incorporated by reference to Exhibit
Non-Employee Director Stock Option Plan, 10.2 to ACI's Quarterly Report on Form
as amended and restated. 10-Q for the quarter ended June 30,
1994.
*10.3 Ameristar Casinos, Inc. Management Stock Incorporated by reference to Exhibit
Option Incentive Plan, as amended and 10.3 to ACI's Quarterly Report on Form
restated. 10-Q for the quarter ended September 30,
1996.
202
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT METHOD OF FILING
- -------- ---------------------- ----------------
*10.4(a) 1999 Stock Incentive Plan of Ameristar Incorporated by reference to Exhibit
Casinos, Inc. 10.6 to ACI's Quarterly Report on Form
10-Q for the quarter ended June 30,
1999.
*10.4(b) First Amendment to 1999 Stock Incentive Incorporated by reference to Exhibit
Plan of Ameristar Casinos, Inc. 10.4 to the 2000 10-K.
*10.5 Form of Indemnification Agreement Incorporated by reference to Exhibit
between ACI and each of its directors 10.33 to Amendment No. 2 to the Form
and officers. S-1.
*10.6 Housing Agreement, dated November 15, Incorporated by reference to Exhibit
1993 between CPI and Craig H. Neilsen. 10.17 to the 1994 10-K.
10.7 Plan of Reorganization, dated November Incorporated by reference to Exhibit 2.1
15, 1993, between ACI and Craig H. to the 1994 10-K.
Neilsen in his individual capacity and
as trustee of the testamentary trust
created under the last will and
testament of Ray Neilsen dated October
9, 1963.
10.8 Excursion Boat Sponsorship and Incorporated by reference to Exhibit
Operations Agreement, dated September 10.15 to the 1995 10-K.
15, 1994, between Iowa West Racing
Association and ACCBI.
10.9 Settlement, Use and Management Agreement Incorporated by reference to Exhibits
and DNR Permit, dated May 15, 1995, 10.12 and 99.1 to ACI's Annual Report on
between the State of Iowa acting through Form 10-K for the year ended December
the Iowa Department of Natural Resources 31, 1996.
and ACCBI as the assignee of Koch Fuels,
Inc.
10.10** Asset Purchase and Sale Agreement, dated Incorporated by reference to Exhibit
as of February 15, 2000, between 10.12 to ACI's Annual Report on Form
Futuresouth, Inc., Southboat Lemay, 10-K for the year ended December 31,
Inc., Southboat Limited Partnership and 1999.
Ameristar Casino St. Louis, Inc.
10.11 Asset Purchase Agreement dated as of Incorporated by reference to Exhibit
October 17, 2000 by and among Ameristar 10.1 to ACI's Quarterly Report on Form
Casino Kansas City, Inc., ACI, Kansas 10-Q for the quarter ended September 30,
City Station Corporation and Station 2000 (the "September 2000 10-Q").
Casinos, Inc. ("SCI").
10.12 Asset Purchase Agreement dated as of Incorporated by reference to Exhibit
October 17, 2000 by and among Ameristar 10.2 to the September 2000 10-Q.
Casino St. Charles, Inc., ACI, St.
Charles Riverfront Station, Inc. and
SCI.
10.13 Asset Purchase Agreement dated as of Incorporated by reference to Exhibit
October 17, 2000 by and among Lake Mead 10.2 to the September 2000 10-Q.
Station, Inc., SCI, Ameristar Casino Las
Vegas, Inc. and ACI.
*10.14 Ameristar Casinos, Inc. Deferred Incorporated by reference to Exhibit
Compensation Plan. 10.14 to the 2000 10-K.
21.1 Subsidiaries of ACI. Incorporated by reference to Exhibit
21.1 to the 2000 10-K.
23.1 Consent of Arthur Andersen LLP, dated Filed herewith.
April 13, 2001.
23.2 Consent of Gibson, Dunn & Crutcher LLP. Included in Exhibit 5.1 hereto.
24.1 Power of Attorney. Included on signature pages hereof.
25.1 Form T-1, Statement of Eligibility of To be filed by an amendment.
Trustee.
203
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT METHOD OF FILING
- -------- ---------------------- ----------------
99.1 Form of Letter of Transmittal for To be filed by an amendment.
Outstanding Senior Subordinated Notes
due 2009.
99.2 Form of Notice of Guaranteed Delivery To be filed by an amendment.
for Outstanding Senior Subordinated
Notes due 2009.
99.3 Form of Letter to Brokers, Dealers, To be filed by an amendment.
Commercial Banks, Trust Companies and
Other Nominees for Outstanding Senior
Subordinated Notes due 2009.
- -------------------------
* Denotes a management contract or compensatory plan or arrangement.
** Portions of this Exhibit have been deleted based on the Securities and
Exchange Commission's granting of confidential treatment pursuant to Rule
24b-2 promulgated under the Securities Exchange Act.
(b) REPORTS ON FORM 8-K
None.