Back to GetFilings.com

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K

For the transition period from __________ to __________

Commission file number: 0-22494

AMERISTAR CASINOS, INC.
(Exact Name of Registrant as Specified in Its Charter)

3773 Howard Hughes Parkway
Suite 490 South
Las Vegas, Nevada 89109
(Address of Principal Executive Offices)

Registrant’s Telephone Number, including area code: (702) 567-7000

Securities registered pursuant to Section 12(b) of the Act:
None
(Title of Class)

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [   ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes [X] No [   ]

The aggregate market value of the registrant’s common equity held by non-affiliates of the registrant as of June 28, 2002 (the last business day of the registrant’s most recently-completed second fiscal quarter) was approximately $308,704,903, based on the last reported sale price of the registrant’s Common Stock on the Nasdaq National Market System on such date.

As of March 12, 2003, 26,271,749 shares of Common Stock of the registrant were outstanding.

Portions of the registrant’s definitive Proxy Statement for its July 18, 2003 Annual Meeting of Stockholders (which has not been filed as of the date of this filing) are incorporated by reference into Part III.

-1-

Table of Contents

     Unless the context indicates otherwise, all references in this Annual Report on Form 10-K to “Ameristar” or “ACI” refer to Ameristar Casinos, Inc. and all references to the “Company,” “we,” “our,” “ours” or “us” refer to Ameristar and its consolidated subsidiaries. This Report contains certain forward-looking statements, including management’s plans and objectives for our business, operations and economic performance. These forward-looking statements generally can be identified by the context of the statement or the use of forward-looking terminology such as “believes,” “estimates,” “anticipates,” “intends,” “expects,” “plans,” “is confident that” or words of similar meaning, with reference to us or our management. Similarly, statements that describe our future plans, objectives, strategies, financial results, financial position, operational expectations or goals are forward-looking statements. Although management believes that the assumptions underlying the forward-looking statements are reasonable, these assumptions and the forward-looking statements are subject to various factors, risks and uncertainties, many of which are beyond our control. Accordingly, actual results could differ materially from those contemplated by any forward-looking statements. In addition to the other cautionary statements relating to certain forward-looking statements throughout this Report, attention is directed to “Item 1. Business — Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of some of the factors, risks and uncertainties that could materially affect the outcome of future results contemplated by forward-looking statements.

PART I

Item 1. Business

Introduction

     We are a leading multi-jurisdictional developer, owner and operator of casinos and related hotel and entertainment facilities in local markets. We own six properties in five markets located in Missouri, Iowa, Mississippi and Nevada catering to customers primarily residing within a 100-mile radius of our properties. Our properties enjoy leading positions in markets with significant barriers to entry, and all of our properties are high-quality assets. We continually evaluate the opportunity to increase our revenues, cash flow and earnings through internal growth initiatives, including the expansion of our existing properties, targeted marketing programs and the strategic acquisition or development of properties in attractive local gaming markets.

     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 emphasize slot machine play at our properties and invest on an ongoing basis in new slot equipment and technology to promote customer satisfaction and loyalty. We are an industry leader in the implementation of cashless slot technology and new-generation multi-coin nickel and penny denomination slot machines. All of our properties also offer table games such as blackjack, craps and roulette. In addition, Ameristar St. Charles, Ameristar Kansas City and Cactus Petes offer poker, keno and sports book wagering. We generally emphasize competitive minimum and maximum betting limits based on each market. We extend credit to our Mississippi and Nevada gaming customers only in limited circumstances and limited amounts

-2-

Table of Contents

on a short-term basis and in accordance with the credit restrictions imposed by gaming regulatory authorities. The Missouri and Iowa gaming statutes prohibit the issuance of casino credit.

     The following table presents selected statistical and other information concerning our properties as of March 24, 2003.

     Ameristar St. Charles. Ameristar St. Charles is located immediately north of the Interstate 70 bridge in the St. Louis metropolitan area, strategically situated to attract customers from the St. Charles and greater St. Louis area, as well as tourists from outside the region. The property is a master-planned gaming and entertainment facility located on approximately 52 acres and features an historic Missouri riverboat theme. Interstate 70 is a 10-lane, east-west freeway offering quick and easy accessibility to, and direct visibility of, the Ameristar St.

-3-

Table of Contents

     Charles site. The property features an elevated roadway and a 4,000-space, five-story parking structure located above the existing flood plain, providing improved access to the facility and allowing it to operate even when the Missouri River floods.

     The original casino at Ameristar St. Charles opened in 1994. Prior to the opening of the new facility, Ameristar St. Charles included approximately 45,000 square feet of gaming space, 1,900 slot machines and 30 table games. On August 6, 2002, we opened a new casino and entertainment complex that includes approximately 130,000 square feet of gaming space on two levels with approximately 3,330 slot machines and 95 table games, including a 12-table poker room. In addition, the new facility features a 74,000-square-foot porte cochere, an historical streetscape reminiscent of St. Charles’ past, a two-story fountain, seven diverse restaurants, a 300-seat VIP players’ club, live entertainment, a retail gift shop and a video game arcade, all of which significantly expanded the breadth of non-gaming amenities available to guests. The facility offers the following dining choices: the 360-seat Bottleneck Blues Bar, featuring Southern cuisine and live entertainment; the 200-seat 47 Port Street Grill steakhouse, featuring exhibition cooking with a 20-seat private dining room; the 47-seat King Cat Club, a martini bar; the 250-seat Amerisports Bar & Grill, which houses a 34-foot-long video wall and two high-tech, giant video screens; the 475-seat state-of-the-art Landmark Buffet with multiple serving stations; the 190-seat 24-hour Falcon Diner; and the eclectic southern-style 102-seat Pearl’s Oyster Bar.

     We invested approximately $210 million (excluding capitalized interest) in this project in addition to the $140 million the former owner had invested prior to suspending construction in 1997. We believe the new casino and entertainment complex at St. Charles is the premier gaming facility in the St. Louis area and is well-positioned to benefit from growth in this market. Ameristar St. Charles’ market share (based on gross gaming revenues) increased from 21.3% in July 2002, immediately prior to the opening of the new facility, to 29.7% in February 2003, which was approximately three percentage points ahead of its principal competitor. The new facility at Ameristar St. Charles was chosen as Best Casino by Riverfront Times in its 2002 Best of St. Louis issue. The property was also named “Most Improved Casino” in the March 2003 issue of Where magazine highlighting “The Ultimate St. Louis.”

     Ameristar Kansas City. Ameristar Kansas City is a fully-integrated gaming, dining, lodging and entertainment complex in a spacious, land-based atmosphere. Located seven miles from downtown Kansas City, Missouri, Ameristar Kansas City is specifically designed to attract customers from the greater Kansas City area, as well as strong visitor and overnight markets. The property is located on approximately 183 acres adjacent to the Interstate 435 bridge. Interstate 435 is a six-lane, north-south expressway offering quick and easy access to, and direct visibility of, Ameristar Kansas City.

     The casino, which opened in 1997, features an historic Missouri riverboat theme and is the newest and largest gaming facility in the Kansas City market. The property was awarded the Gold Award for Best Casino in 2002 by Ingram’s Best of Business Edition and voted Best Casino in the 2002 Kansas City Magazine’s “Best of Kansas City” readers’ poll. In addition, the Midwest Gaming and Travel readers’ poll voted Ameristar Kansas City

-4-

Table of Contents

“Favorite Casino in Missouri,” “Friendliest Dealers,” “Best Selection of Slots,” “Favorite Casino Hotel,” “Most Comfortable Rooms” and “Most Comfortable Pavilion.”

     The casino and entertainment complex currently includes a 130,000-square foot casino on two levels with approximately 2,990 slot and video poker machines and 95 table games (including poker), a 184-room hotel and other related facilities. Ameristar Kansas City currently has 7,150 parking spaces, including a new 2,650-space parking garage that was completed in July 2002. We believe the addition of the parking garage will improve our competitive position in the Kansas City market since Ameristar Kansas City had been the only property in the market without covered parking.

     Ameristar Kansas City provides a wide variety of dining and entertainment options, boasting nine food outlets ranging from upscale restaurants to express food outlets and nine bars/lounges. The 154-seat Bugatti’s Little Italy Café, which offers authentic and creative Italian cuisine, was recognized as “a Don’t Miss Dining Venue” in the Zagat Survey and was also voted “Best Italian” restaurant in the riverboat category by Casino Player Magazine readers in July 2001. The Star Pavilion seats 1,384 guests and plays host to a variety of headline entertainers and sporting events. Live entertainment is also offered at Depot No. 9, a saloon and stage that hosts local and regional bands and is connected to an historical Pullman railroad car. An 85-seat VIP players’ club, a state-of-the-art 18-screen movie theater complex, gift shop, video game arcade and Kids Quest activity center are also located at Ameristar Kansas City.

     To enhance the competitive position of Ameristar Kansas City and in line with our business strategies described below, we began a major renovation and enhancement project at Ameristar Kansas City in 2002. As part of Phase I of this project, we opened three new dining and entertainment venues in early January 2003: the 201-seat Great Plains Cattle Co. steakhouse; the 207-seat Falcon Diner, a 24-hour casual dining restaurant; and the 123-seat Depot No. 9 entertainment venue. Since opening, these dining venues have been very popular with our guests. We also constructed an open-seating food court, where we have leased space to three nationally known brands: Burger King, which opened in December 2002; Sbarro Pizza, which opened in February 2003; and Cold Stone Creamery, which is expected to open in the second quarter of 2003.

     Phase I of the project also includes a comprehensive renovation of the Kansas City casino, which has been substantially completed. We have opened up large sections of a wall dividing the casino floor, added escalators in the central portions of the casino floor to improve access to the second level, removed a large portion of the wall that separated the casino from the streetscape to improve visibility into the casino and replaced the carpet and other finishes throughout the casino. As part of Phase I of the project, we also plan to relocate and renovate the poker room and high-limit area. In addition, we will add slot machines to the half of the mezzanine level that was previously not being used, which will bring the total slot count up to approximately 3,150 machines. We expect these changes will substantially improve the layout and flow and enhance the overall excitement of the casino.

     We expect to begin construction of Phase II of the renovation and enhancement project at Ameristar Kansas City in the second quarter of 2003. We plan to convert the Hofbrauhaus Brewery into a 330-seat Amerisports Brew Pub featuring state-of-the-art video and audio technology. Amerisports will also feature two large video walls, another large

-5-

Table of Contents

projection television and a variety of menu items with exhibition cooking. The Brew Pub will retain the existing exhibition brewery where customers can observe the production of Ameristar’s private label beers. In addition, we plan to remodel Pearl’s Oyster Bar, construct a cabaret in the casino area and upgrade certain common areas throughout the Ameristar Kansas City property. We will take the necessary steps to isolate the construction areas in order to minimize disruption associated with Phase II of the project. We expect to complete Phase II of the project in August 2003.

     Ameristar Council Bluffs. Ameristar Council Bluffs is a riverboat casino and houses land-based hotel and other facilities located in Council Bluffs, Iowa on the bank of the Missouri River across from Omaha, Nebraska. The property is adjacent to the Nebraska Avenue exit on Interstate 29 immediately north of the junction of Interstate 29 and Interstate 80.

     Ameristar Council Bluffs features the largest riverboat in Iowa, which includes approximately 38,500 square feet of gaming space, approximately 1,550 slot machines and 42 table games. The Council Bluffs property also offers four restaurants and 444 hotel rooms. The 160-room hotel owned and operated by Ameristar Council Bluffs boasts the prestigious Four Diamond designation from the AAA. The property has undergone substantial expansion and renovation since it opened in 1996. In late 1999, we added a third level to the riverboat casino, and in early 2000, we added a 1,000-space parking garage. In the first quarter of 2001, we completed a renovation and enhancement project at the property that included enhancements to the land-based amenities and the total renovation of the two initial casino floors, including the installation of multimedia, high-definition plasma screens throughout the casino, the addition of new-generation slot machines and the installation of a cashless slot system designed to improve guest satisfaction.

     The Council Bluffs casino features a three-level, richly appointed cruising riverboat measuring 272 feet long by 98 feet wide (approximately 52,000 square feet). The high ceilings and width of the casino give it the spacious feel of a land-based facility. We are 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. Guests may enter the riverboat from shore via enclosed ramps from the Main Street Pavilion and the parking garage.

     The land-based facilities include the Ameristar Hotel and Main Street Pavilion, where guests will find the 75-seat VIP players’ club, the 188-seat Waterfront Grill steakhouse, the 304-seat Veranda Buffet, the recently renovated 395-seat Amerisports Bar and Cabaret and the 172-seat Prairie Mill Cafe & Bakery, a 24-hour specialty restaurant. The Waterfront Grill steakhouse was named one of the Omaha area’s top-10 restaurants by the Omaha World-Herald in 2002. The Council Bluffs property also features a children’s activity center, fitness facility, indoor pool and convention facilities, as well as the Star Arena, a 3,000-seat outdoor concert venue.

     Ameristar Vicksburg. Ameristar Vicksburg is located one-quarter mile north of Interstate 20 in Vicksburg, Mississippi and caters primarily to guests from the Vicksburg and Jackson, Mississippi and Monroe, Louisiana areas. Opened in 1994, Ameristar Vicksburg includes a riverboat-themed dockside casino, a 150-room hotel and other land-based facilities. The casino features approximately 42,000 square feet of gaming space, approximately 1,370 slot machines and 34 table games. The property’s restaurants provide casual dining and regionally influenced menu selections at affordable prices. In July 2001, we completed a capital improvement project at the property, including renovating and expanding the casino; installing new generation slot machines; adding a new VIP players’ lounge; replacing the showroom with the exciting Bottleneck Blues Bar, an authentic club featuring live entertainment and gaming; and adding

-6-

Table of Contents

new high-definition plasma screens for special event viewing. In addition, approximately 600 parking spaces were added during 1999, bringing the total number of guest parking spaces to approximately 1,700.

     Ameristar Vicksburg is significantly wider than typical riverboat casinos, giving the casino and restaurants the spacious feel of a land-based facility. The hotel at Ameristar Vicksburg has a Three Diamond rating from the AAA. 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.

     The Jackpot Properties. Our Jackpot properties, Cactus Petes Resort Casino and The Horseshu Hotel & Casino, are both located in Jackpot, Nevada, at the Idaho border. The Jackpot properties have been operating since 1956 and serve customers primarily from Idaho, Oregon, Washington, Montana, northern California and the southwestern Canadian provinces.

     Together, the Jackpot properties feature approximately 29,000 square feet of gaming space, approximately 1,020 slot machines, 37 table games (including poker), 420 hotel rooms (including 30 deluxe hot-tub suites), an Olympic-sized pool, a heated spa, a styling salon, lighted tennis courts, a recreational vehicle park, access to a nearby 18-hole golf course, a general store and a service station. The food and beverage operations at the Jackpot properties include a buffet, a fine dining restaurant, two 24-hour casual dining restaurants, a coffee shop, a snack bar, a showroom that features nationally known entertainment and cocktail lounges with entertainment. Cactus Petes and The Horseshu have achieved Four Diamond and Three Diamond ratings, respectively, from the AAA, and Cactus Petes was named “Best Hotel/Resort” in rural Nevada in 2000 and 2001 by Nevada Magazine.

Our Business Strategies

     Our key business strategy is to develop high-quality gaming properties that offer a diverse range of lodging, dining and entertainment options to create a complete entertainment experience for our guests. The quality of our properties derives from a variety of factors, including their design, size, location, gaming technology and amenities. We also emphasize courteous and efficient service that meets or exceeds the expectations of our guests. We believe that the continued pursuit of these strategies will generate attractive returns on our invested capital.

     Some of the key components of our operating strategies to be implemented in 2003 include the following:

     Leading Slot Technology

     We are an industry leader with respect to the implementation of cashless slot technology at our properties. As of March 11, 2003, approximately 47% of our slot machines provided cashless payouts utilizing ticket-in/ticket-out technology. We were the first operator to introduce this technology in Missouri and Iowa. As of March 11, 2003, the slot machines at the St. Charles, Kansas City, Council Bluffs, Vicksburg and Jackpot properties were 88%, 34%, 19%, 32% and 18% ticket capable, respectively. Based on comments made by a gaming equipment manufacturer in the February 2003 issue of Casino Journal, we believe that only

-7-

Table of Contents

approximately 10% of the slot machines in North America have ticketing capabilities. Our goal is to have approximately two-thirds of our slot machines operating with ticketing capabilities by the end of 2003, subject to the receipt of regulatory approvals by one of our equipment vendors. We are continuing to upgrade our slot machines and slot systems to facilitate the timely rollout of cashless technology in order to maintain and enhance our competitive position.

     We are also an industry leader with respect to the use of new generation multi-coin nickel and penny denomination slot machines. The implementation of these machines has generated a strong return on investment and has proven to be an extremely successful strategy. In addition, we are currently implementing an aggressive strategy to increase our higher denomination play. We continuously evaluate the appropriate mix of our slot product and invest in new slot products as appropriate to promote customer satisfaction and loyalty and generate maximum profitability.

     Profitable Use of Promotional Allowances

     We have consistently pursued a strategy of marketing and promoting our properties, including the targeted use of cash coupon offerings, in order to attract and retain valued customers. We believe our promotional allowances as a percentage of gross revenues on a consolidated basis are consistent with or lower than those of our principal competitors.1 We adjust the amount of our promotional offerings from time to time based on competitive conditions, such as during periods of construction disruption similar to that currently affecting Ameristar Kansas City and in order to promote our new and expanded facilities and develop long-term customer loyalty. This strategy proved successful during and following completion of the 2001 expansion projects at Vicksburg and Council Bluffs, as evidenced by the substantial improvement in operating performance at those properties from 2001 to 2002.

     Our strategy has also begun to produce profitable growth at Ameristar St. Charles as reflected by its assumption of the St. Louis market share lead following the opening of the new facility in August 2002 and steadily improving operating results since the opening of the property. In February 2003, Ameristar St. Charles led this five-property market with a 29.7% market share, approximately three percentage points ahead of its principal competitor. This competitor has an advantage over us since we do not currently have a hotel at the property and the competitor has 300 hotel rooms.

     We believe similar positive results will be achieved at the Kansas City property following the completion of the renovation of that property later in 2003.

Providing the Total Entertainment Experience

     In addition to providing the latest gaming technology for an exciting casino experience, our properties offer a wide variety of quality restaurants and entertainment options as an integral part of our casino marketing strategy. Some examples of our non-gaming amenities that have

-8-

Table of Contents

proven successful are our high-tech Amerisports Bars (Council Bluffs and St. Charles), our signature steakhouses (company-wide) and our unique Bottleneck Blues Bars (Vicksburg and St. Charles). In addition, we regularly present nationally known entertainers to perform at our properties, including, for example, Randy Travis, Michael Bolton, Paul Anka, Dionne Warwick, Julio Iglesias, Bob Newhart and Pat Benatar.

Future Expansion

     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 and expanding through continued growth at our existing properties. Although our preference is to own and operate each of our gaming properties, we also consider expansion opportunities involving management contracts or joint ventures.

     We continually evaluate the operating performance of each of our existing properties and the feasibility of enhancing their performance through capital expenditure programs. In doing so, we assess the anticipated relative costs and benefits of the projects under consideration, the availability of cash flows and debt financing to fund capital expenditures and competitive and other relevant factors. Currently, the only substantial expansion project under way is the renovation and enhancement project at Ameristar Kansas City that began in 2002. See “Ameristar Kansas City” above for further discussion.

Markets and Competition

St. Charles

     Market. For the twelve months ended December 31, 2002, the St. Louis gaming market reported gross gaming revenues of $804.9 million, an increase of 5.0% over $766.3 million for the twelve months ended December 31, 2001. Substantially all the growth in the St. Louis gaming market in 2002 is attributable to the opening of the new facility at Ameristar St. Charles in August 2002. 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 3.7 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 metropolitan St. Louis. Two of these competitors are located in Illinois. Unlike Missouri, Illinois does not impose a $500 per person loss limit, does not require a mandatory identification card to enter a casino and allows credit play. However, Illinois casinos are limited in the number of gaming positions allowed and are subject to a higher rate of gaming taxes than Missouri casinos. Our principal competition is a facility located in Maryland Heights, Missouri that opened in April 1997 and is located five miles from Ameristar St. Charles. Ameristar 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. Following Harrah’s acquisition of Players, Harrah’s consolidated both facilities into one operation. In addition, Harrah’s has announced its intention to add an additional hotel and parking garage at Maryland Heights, with a targeted completion date of mid- to late-2004. Gaming has also been approved by local voters in other cities and counties along the Mississippi and Missouri Rivers near St. Louis. In addition, the

-9-

Table of Contents

Missouri Gaming Commission is currently accepting applications for an additional gaming license in the St. Louis area, and the City of St. Louis and members of the Missouri Gaming Commission have expressed a desire for the replacement of the President Casino in downtown St. Louis with an improved facility. If an additional gaming license is granted or the President Casino is replaced or upgraded, Ameristar St. Charles would face additional competition.

Kansas City

     Market. The Kansas City gaming market reported $612.1 million of gross gaming revenues for the twelve months ended December 31, 2002, an increase of 5.2% over $582.0 million for the prior year. The Kansas City market consists of four casinos located in the Kansas City metropolitan area, including Ameristar Kansas City. A fifth casino is located approximately 50 miles north in St. Joseph, Missouri (the Kansas City gaming market data included herein does not give effect to this casino). The Kansas City market has over 1.4 million adults residing within a 50-mile radius and over 2.7 million adults within a 100-mile radius. This market is insulated from other gaming markets, with no significant competing markets within 100 miles. However, see “Risk Factors” for information concerning current proposals to legalize casino gaming in Kansas City, Kansas, which is in close proximity to Ameristar Kansas City.

     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 currently has one riverboat gaming operation.

     In June 2001, Harrah’s North Kansas City, located approximately five miles from Ameristar Kansas City and currently the closest operating casino to Ameristar Kansas City, completed an enhancement of its facilities and the consolidation of its gaming space from two vessels onto one expanded vessel. In addition, Argosy Casino is proceeding with its planned renovation project to replace its existing riverboat with a single-level 58,000 square foot barge-based facility, which will increase the number of gaming positions by 50%, and to renovate and enhance its other amenities. The renovation is expected to be completed by the end of 2003.

Council Bluffs

     Market. Council Bluffs forms part of the greater Omaha, Nebraska/Council Bluffs, Iowa metropolitan area, which has a population of approximately 720,000. 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. Based on available data, Council Bluffs is currently the largest gaming market in Iowa. Gross gaming revenues in the Council Bluffs gaming market for the twelve months ended December 31, 2002 were $383.8 million, an increase of 7.0% over $358.5 million for the twelve months ended December 31, 2001.

     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

-10-

Table of Contents

under these licenses are Harrah’s Council Bluffs, a riverboat casino, and Bluffs Run Casino, a dog track and slots-only, land-based casino, both of which compete with Ameristar Council Bluffs. In July 2001, Harrah’s acquired both of these properties through its acquisition of Harveys Casino Resorts. Since purchasing Harveys, Harrah’s has re-carpeted its casino floor, remodeled its VIP lounge and renovated its buffet in 2002. Harrah’s has announced its plans for an $8.5 million upgrade to renovate its hotel and public areas, with completion slated for the third quarter of 2003. In 2002, Bluffs Run Casino underwent renovations, including new carpeting within the casino, the reconfiguration of parking dedicated for VIP players and the construction of a VIP lounge.

     In addition, the State of Nebraska is currently considering various proposals to legalize gaming which if passed, could result in increased competition to Ameristar Council Bluffs. See “Risk Factors” below for further discussion on the Nebraska proposals.

Vicksburg

     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. The Vicksburg National Military Park, located within three miles of Ameristar Vicksburg, draws over 1 million registered visitors a year. Vicksburg, with a population of approximately 30,000, is located 45 miles west of Jackson, the capital of Mississippi. The Jackson and Vicksburg metropolitan areas have a total population of approximately 490,000 persons. Approximately 1.5 million people lived within a 100-mile radius of Vicksburg during 2001. Gross gaming revenues in the Vicksburg gaming market for the twelve-month reporting period ended December 31, 2002 were approximately $243.8 million, an increase of 4.8% over $232.7 million for the twelve months ended December 31, 2001.

     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 two casinos owned by a Native American tribe in Philadelphia, Mississippi, located about 70 miles east of Jackson and 115 miles east of Vicksburg. The Native American tribe opened its second gaming and hotel facility near its existing property in the third quarter of 2002, which in effect doubled the available gaming space and hotel room count. 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. Two developers recently announced their desire to develop new casinos in Vicksburg, but neither has yet taken any affirmative steps to proceed with its development. In addition, proposals have been made from time to time to develop Native American casinos in Louisiana and Mississippi, some of which could be competitive with the Vicksburg market if completed.

Jackpot

     Market. We believe that approximately 55% 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 primary markets are Twin Falls (located approximately 45 miles north of Jackpot), Boise and Eastern Idaho (both of which are approximately 150 miles from Jackpot). The balance of the Jackpot properties’ customers come primarily from Oregon, Washington, Montana, northern California and the southwestern Canadian provinces.

-11-

Table of Contents

     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). According to the Nevada State Gaming Control Board and other sources, as of December 31, 2002, the Jackpot properties accounted for approximately 56% of the lodging rooms, 63% of the slot machines and 67% of the table games in Jackpot. We believe Cactus Petes is the premier property in Jackpot, offering a more attractive environment and a broader and higher-quality range of gaming and leisure activities than those of its competitors. It has received designation by the AAA as a “Four Diamond” property since 1992. We are not aware of any other expansion plans by existing or potential competitors in Jackpot in the near future; however, 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. In November 2002, the electorate passed Proposition 1, which legalized specific ticket-pay gaming machines on Indian reservations in the state, along with a limited growth plan allowing an increase of 5% in machine count per year, not to exceed 25% over the next 10 years, with a subsequent renegotiation of compacts thereafter. A legal challenge to Proposition 1 has been filed and is currently pending. Litigation is also pending concerning the scope of gaming permitted under the compact between the State of Idaho and the Shoshone-Bannock tribes. 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.

Employees and Labor Relations

     As of March 18, 2003, we employed approximately 7,000 employees. None of our employees is employed pursuant to collective bargaining or other union arrangements. We believe our employee relations are good.

Risk Factors

The gaming industry is very competitive and increased competition could have a material adverse effect on our future operations.

     The gaming industry is very competitive and we face dynamic competitive pressures in each of our markets. Several of our competitors are larger than we are and have greater financial and other resources than we do. We may be required to take actions in response to competitors that may increase our marketing costs and other operating expenses.

     Our operating properties are located in jurisdictions that restrict gaming to certain areas or are adjacent to states that prohibit or restrict gaming operations. 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 or near a market area of one of our properties could have a material adverse effect on our business, financial condition and results of operations. Economic difficulties faced by state governments could lead to intensified political pressure for the expansion of legalized gaming.

-12-

Table of Contents

     From time to time, legislation and ballot measures have been unsuccessfully proposed in Kansas and Nebraska for the legalization of gaming, and the legislatures of these states are currently considering various proposals to legalize gaming that may be adopted. These proposals would authorize gaming in or near, among other places, Omaha, Nebraska and Kansas City, Kansas, in close proximity to our existing facilities in Council Bluffs, Iowa and Kansas City, Missouri, respectively. The legalization of gaming in these locations and the additional competition resulting from the subsequent development of competing gaming properties could have a material adverse affect on us. Even if the current proposals are unsuccessful, we expect similar proposals will be made in the future and may be adopted. In addition, the Missouri Gaming Commission is currently accepting applications for an additional gaming license in the St. Louis area. Members of the Missouri Gaming Commission have also stated that they would like to see a currently operating casino in downtown St. Louis improved or replaced. If an additional gaming license is granted or the competing facility in downtown St. Louis is improved, Ameristar St. Charles would face additional competition. In addition, two developers recently announced their desire to develop new casinos in Vicksburg, but neither has yet taken any affirmative steps to proceed with its development.

     In addition, the entry into our current markets of additional competitors could have a material adverse effect on 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. Native American gaming facilities in some instances operate under regulatory and financial requirements that are less stringent than those imposed on state-licensed casinos, which could provide them with a competitive advantage and lead to increased competition in our markets. Furthermore, increases in the popularity of, and competition from, Internet and other account wagering gaming services, which allow customers to wager on a wide variety of sporting events and play Las Vegas-style casino games from home, could have an adverse effect on our business, financial condition, operating results and prospects.

If the jurisdictions in which we operate increase gaming taxes and fees, our results could be adversely affected.

     State and local authorities raise a significant amount of revenue through taxes and fees on gaming activities. From time to time, legislators and government officials have proposed changes in tax laws, or in the administration of such laws, affecting the gaming industry. Periods of economic downturn and budget deficits such as currently exist in most states may intensify the efforts of state and local governments to raise revenues through increases in gaming taxes. In 2002, large gaming tax increases were enacted in Illinois and Indiana.

     The Governor of Missouri recently proposed a significant increase in gaming taxes and admission fees and the elimination of the existing $500 loss limit per two-hour “cruise,” although no bill has been introduced to date in the 2003 legislature. A similar tax proposal was defeated in the Missouri legislature in 2002. The Iowa Supreme Court ruled in 2002 that a differential in the gaming tax rate between slot operations at racetracks (currently 32%, increasing over time to 36%) and riverboat casinos (20%) violates the equal protection clauses of the Iowa and United States constitutions, and a lower state court subsequently ruled that the racetracks were due a refund of taxes paid in excess of a 20% rate for prior periods. The Iowa Supreme Court’s ruling is currently on appeal to the United States Supreme Court, which

-13-

Table of Contents

is expected to issue its decision by July 2003. If the Iowa Supreme Court decision is not reversed or a settlement is not reached with the Iowa racetracks, it is likely that the Iowa legislature will seek to increase gaming taxes on riverboat casinos in order to overcome the budgetary constraints resulting from this court decision.

     If the jurisdictions in which we operate were to increase gaming taxes or fees, depending on the magnitude of the increase and any offsetting factors (such as the elimination of the loss limit in Missouri), our financial condition and results of operations could be materially adversely affected.

Our business is subject to restrictions and limitations imposed by gaming regulatory authorities that could adversely affect us.

     The ownership and operation of casino gaming facilities are subject to extensive state and local regulation. The States of Missouri, Iowa, 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 Missouri Gaming Commission, the Iowa Racing and 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 Missouri, Iowa, Mississippi or Nevada subsidiaries, respectively, for any cause deemed reasonable by such licensing authority. Our licenses in Missouri need to be renewed every two years, our gaming license in Iowa must be renewed or continued every year, and our gaming license in Mississippi must be renewed every three years. 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 could have a material adverse effect on our business, financial condition and results of operations.

     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 licenses and related approvals are deemed to be privileges under Missouri, Iowa, Mississippi and Nevada law. We cannot assure that our existing licenses, permits and approvals will be maintained or extended. We also cannot assure that any new licenses, permits and approvals that may be required in the future will be granted to us.

Leverage may impair our financial condition and restrict our operations and we may incur significant additional debt.

     We have significant leverage and, in addition to our operating expenses, we have substantial fixed debt service obligations. The degree to which we are leveraged could have important adverse consequences to our business, including:

	•		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;

-14-

Table of Contents

	•		Requiring a substantial portion of our cash flows from operations for the payment of interest on our debt and reducing our ability to use our cash flows 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 less leveraged competitors.

     The terms of our senior credit facilities and the indenture governing our senior subordinated notes contain covenants that may restrict our ability to, among other things, borrow money, pay dividends and effect a consolidation, merger or disposal of substantially all of our assets. Although the covenants in our senior credit facilities and the indenture are subject to various exceptions that are intended to allow us to operate without undue restraint in certain anticipated circumstances, we cannot assure that these covenants will not adversely affect our ability to finance future operations or capital needs or to engage in other activities that may be in our best interest. In addition, our long-term debt requires 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. 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. In addition, our senior credit facilities are secured by first priority security interests on substantially all of our real and personal property, including the capital stock of our subsidiaries. If we are unable to pay all amounts declared due and payable in the event of a default, the lenders could foreclose on these assets.

Worsening economic conditions or geopolitical circumstances may adversely affect our business.

     Our business may be adversely affected by economic downturns and instability, as we are dependent on discretionary spending by our customers. Any worsening of current economic conditions could cause fewer people to spend money at our properties and could adversely affect our revenues. Other geopolitical events, such as the threat of terrorism, may deter customers from visiting our properties.

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 the Board and owns approximately 59% of our outstanding Common Stock. Accordingly, Mr. Neilsen has the ability to control our operations and affairs, including the election of the entire Board of Directors and, except as otherwise provided by law, other matters submitted to a vote of the stockholders, including a merger, consolidation or sale of assets. In addition, Mr. Neilsen’s substantial ownership affects the liquidity in the market for our Common Stock.

A change in control could result in the acceleration of our debt obligations.

     Certain changes in control could result in the acceleration of our senior credit facilities and our senior subordinated notes. This acceleration could be triggered in the event Mr. Neilsen

-15-

Table of Contents

sells a significant portion of his stock or upon his death if his estate, heirs and devisees must sell a substantial number of shares of our Common Stock to obtain funds to pay estate tax liabilities. We cannot assure that we would be able to repay any indebtedness that is accelerated as a result of a change in control, and this would likely materially adversely affect our financial condition.

Our business may be materially impacted by an act of terrorism or by additional security requirements that may be imposed on us.

     The U.S. Department of Homeland Security has stated that places where large numbers of people congregate, including hotels, are subject to a heightened risk of terrorism. An act of terrorism affecting one of our properties, whether or not covered by insurance, or otherwise affecting the travel and tourism industry in the United States, may have a material adverse effect on our business. Additionally, our business may become subject to increased security measures designed to prevent terrorist acts. Recently, the U.S. Coast Guard promulgated proposed regulations under the Maritime Transportation Security Act of 2002, which would apply to all facilities and vessels on or near navigable waterways. These regulations as currently proposed may, among other measures, require patrons of some or all of our casinos to undergo security screening and physical search and to produce photo identification. If these or similar regulations become effective and applicable to our facilities, compliance with the increased security measures would result in increased operating costs and may reduce customer visitation, which 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: (1) shortages of materials (including slot machines or other gaming equipment); (2) shortages of skilled labor or work stoppages; (3) unforeseen construction scheduling, engineering, environmental or geological problems; (4) weather interference, floods, fires or other casualty losses; (5) unanticipated cost increases; and (6) construction period disruption to existing operations.

     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, consultants and contractors. The cost of any construction project undertaken by us may vary significantly from initial 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 flows 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 that any project will be completed on time, if at all, 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.

     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

-16-

Table of Contents

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, all of which could have a material adverse effect on our business, financial condition and results of operations.

     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 earnings before interest, taxes, depreciation and amortization expense (“EBITDA”) 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 that our future consolidated EBITDA and the resulting availability of operating cash flows or borrowing capacity will be sufficient to allow us to undertake or complete current or 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 that, once completed, any development project will increase our operating profits or operating cash flows.

If our key personnel leaves us, our business will be significantly adversely affected.

     We depend on the continued performance of Craig H. Neilsen, our President, Chief Executive Officer and Chairman, and his management team. Thomas M. Steinbauer, Ameristar’s Senior Vice President of Finance, has announced his intention to leave us, and we are currently seeking a replacement for Mr. Steinbauer. If we lose the services of Mr. Neilsen, any of our other executive officers or our senior property management personnel and cannot replace such persons in a timely manner, it could have a material adverse effect on our business.

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 or at our corporate level, our results of operations could be materially adversely affected.

Adverse weather conditions in the areas in which we operate could have an adverse effect on our results of operations and financial condition.

     Adverse weather conditions, particularly flooding, heavy snowfall and other extreme conditions, can deter our customers from traveling or make it difficult for them to frequent our properties. If any of our properties were to experience prolonged adverse weather conditions, or if our Midwestern properties were to simultaneously experience adverse weather conditions, our results of operations and financial condition would be adversely affected.

-17-

Table of Contents

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, Iowa and Mississippi 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 vessel 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, U.S. Coast Guard regulations set limits on the operation of vessels and require that vessels be operated by a minimum complement of licensed personnel.

     The U.S. Coast Guard also requires all United States 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 St. Charles and Ameristar Vicksburg. The Ameristar Council Bluffs riverboat was due for its dry-dock inspection in November 2000, but we have been accepted into a U.S. Coast Guard program that has extended the dry-dock requirement to October 2005 by undergoing a thorough underwater inspection. If we are unable to continue to extend the dry-dock requirement by performing thorough underwater hull inspections, the Council Bluffs casino would be out of service for a substantial period of time for its dry-dock inspection. This could have a material adverse effect on Ameristar Council Bluffs and on our business, financial condition and results of operations. We cannot assure 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 requires periodic maintenance and improvements. Although in 1999 we 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 our credit agreement.

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, which could adversely affect our 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

-18-

Table of Contents

properties, we could face material remediation costs or additional development costs for future expansion activities.

Government Regulation

     The ownership and operation of casino gaming facilities are subject to extensive state and local regulation. 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.

     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 boats 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 thereafter. The gaming licenses at Ameristar Kansas City and Ameristar St. Charles are next subject to renewal in September 2004. 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 our wholly owned Missouri subsidiaries 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

-19-

Table of Contents

prior to such transfer, which restriction must be specifically included in the grant of a security interest.

     Under the Missouri Act, all members of our Board of Directors, 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 such persons 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 an 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 $1 million 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 $2 per gaming customer per two-hour “cruise” 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 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.

-20-

Table of Contents

     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 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 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 requires each licensee to post a bond or other security to guarantee that the licensee complies with its statutory obligations. The Missouri Act also 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.

     To promote safety, the Missouri Gaming Commission has required that gaming entertainment barges obtain annual certification from the American Bureau of Shipping.

     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

-21-

Table of Contents

granted by the commission to allow the holder to conduct gambling games on an excursion gambling boat and to operate an excursion gambling boat.

     Iowa. Ameristar’s Council Bluffs operations are conducted by our wholly owned subsidiary, Ameristar Casino Council Bluffs, Inc. (“ACCBI”), and are subject to Chapter 99F of the Iowa Code and the regulations promulgated thereunder. ACCBI’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 1 through October 31 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. ACCBI has satisfied the requirements of Iowa law for the conduct of off-season operations since 1997.

     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 Section 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 Iowa West Racing Association, a not-for-profit corporation organized for the purpose of facilitating riverboat gaming in Council Bluffs (the “Association”). The Association has 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”), and the Iowa Gaming Commission has approved this contract. The term of the Operator’s Contract runs until March 31, 2010.

     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, most recently reauthorized by referendum in 2002 the gambling games conducted by ACCBI, a reauthorization referendum must be submitted to the electorate in the general election to be held in 2010 and each eight years thereafter. Each such referendum requires the affirmative vote of a majority of the persons 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 ACCBI was January 27, 1995. In the event a reauthorization referendum is defeated in 2010 or thereafter, the licenses granted to the Association and ACCBI would not be subject to renewal and ACCBI would be required to cease conducting gambling games. After a referendum has been held which defeated a proposal to conduct gambling games on excursion gambling boats, another referendum on a

-22-

Table of Contents

proposal to conduct gambling games on excursion gambling boats may not be held for at least two years.

     Substantially all of ACCBI’s material transactions are subject to review and approval by the Iowa Gaming Commission. Written and oral contracts and business arrangements involving a related party or in which the term exceeds three years or the total value exceeds $100,000 are agreements that qualify for submission to and approval by the Iowa Gaming Commission (“Qualifying Agreements”). Qualifying Agreements are limited to: (1) obligations that expense, encumber or lend ACCBI assets to anyone other than a not-for-profit entity or a unit of government for the payment of taxes and utilities; (2) any disposal of ACCBI assets or the provision of goods and services at less than market value to anyone other than a not-for-profit entity or a unit of government; and (3) a previously approved Qualifying Agreement, if consideration exceeds the approved amount by the greater of $100,000 or 25%. Each Qualifying Agreement must be submitted to the Iowa Gaming Commission within 30 days of execution. Iowa Gaming Commission approval must be obtained prior to implementation, unless the Qualifying Agreement contains a written clause stating that the agreement is subject to Iowa Gaming Commission approval. Qualifying Agreements that are ongoing or open-ended need only be submitted on initiation, unless there is a material change in terms or noncompliance with the requirement that consideration be given to the use of Iowa resources, goods and services. 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 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 require ACCBI to provide a list of persons holding beneficial ownership interests in ACCBI of less than 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 5% of the first $1.0 million of annual adjusted gross receipts, 10% of the next $2.0 million of annual adjusted gross receipts and 20% of 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

-23-

Table of Contents

$0.50 per passenger. Under the Operator’s Contract, ACCBI also pays the Association a graduated fee equal to 5% of the first $30 million of annual adjusted gross receipts, 4% of the next $30 million of annual adjusted gross receipts, 3% of the next $30 million of annual adjusted gross receipts, 2% of the next $30 million of annual adjusted gross receipts and 0.5% of the next $30 million of annual adjusted gross receipts (up to $150,000,000 of annual adjusted gross receipts).

     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.

     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 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 state law, but they may not conflict with state law. The ABD and the local authorities have full power to suspend or revoke any license for the serving of alcoholic beverages.

     Mississippi. The ownership and operation of casino gaming facilities in the State of 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”) is similar to the Nevada Gaming Control Act. The Mississippi Commission has adopted regulations which are also similar in many respects to the Nevada gaming regulations.

     The laws, regulations and supervisory procedures of 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 the safeguarding of assets and revenues, providing for 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

-24-

Table of Contents

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 in each of the fourteen counties that border the Gulf Coast or the Mississippi River, but only if the voters in the county 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 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 made and if a sufficient number of signatures were to be gathered to place a legal initiative on the ballot, it would be possible for the voters of Mississippi to consider such a proposal in November 2004. While we are unable to predict whether such an initiative will appear on a ballot or the likelihood of such an initiative being approved by the voters, if such an initiative were approved and gaming were prohibited in Mississippi, it would have a significant adverse effect on us and our operations.

     As of March 1, 2003, dockside gaming was permissible in nine of the fourteen eligible counties in the state and gaming operations had commenced in seven 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. The Mississippi Act permits unlimited stakes gaming on permanently moored vessels on a 24-hour basis and does not restrict the percentage of space which may be utilized for gaming. The Mississippi Act permits substantially all traditional casino games and gaming devices.

     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. As the sole stockholder of Ameristar Casino Vicksburg, Inc. (“ACVI”), we are registered under the Mississippi Act as a publicly traded corporation (a “Registered Corporation”). As a Registered Corporation, we are required periodically to submit detailed financial and operating reports to the Mississippi Commission and furnish any other information which the Mississippi Commission may require. If we are unable to continue to satisfy the registration requirements of the Mississippi Act, we and any Mississippi Gaming Subsidiary cannot own or operate gaming facilities in Mississippi. 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 our ownership of ACVI.

     A 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. There are no limitations on the number of gaming licenses that may be issued in Mississippi. Gaming licenses require the payment of periodic fees and taxes, are not transferable, are issued for a three-year period (and may be continued for two additional three-yea