##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


FORM 10-K

(Mark One)

|    |  |                                                                                     
|--- |  | ------------------------------------------------------------------------------------
|[X] |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

or

|     |  |                                                                                         
|---- |  | ----------------------------------------------------------------------------------------
|[  ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period
from__________ _to ____________

Commission file number: 0-22494

AMERISTAR CASINOS, INC.

(Exact Name of Registrant as Specified in Its Charter)


|                               |  |                                     
|------------------------------ |  | ------------------------------------
|Nevada                         |  | 88-0304799                          
|State or Other Jurisdiction of |  | (I.R.S. Employer Identification No.)
|Incorporation or Organization  |  |                                     

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 (§ 229.405 of this chapter) 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 [   ]

State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was last sold, or the average bid and asked price of such common equity,
as of the last business day of the registrants most recently-completed second
fiscal quarter: approximately $231,900,000, based on the last reported sale
price of the registrants Common Stock on the Nasdaq National Market on June
30, 2003.

As of March 8, 2004, 26,926,149 shares of Common Stock of the registrant were
outstanding.

Portions of the registrants definitive Proxy Statement for its July 16, 2004
Annual Meeting of Stockholders (which has not been filed as of the date of this
filing) are incorporated by reference into Part III.





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TABLE OF CONTENTS PagePART IItem 1. Business
    
    
    3Item 2. Properties
    
    
    36Item 3. Legal Proceedings
    
    
    37Item 4. Submission of Matters to a Vote of Security Holders
    
    
    37PART IIItem 5. Market for Registrants Common Equity and Related Stockholder Matters
    
    
    38Item 6. Selected Financial Data
    
    
    39Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    42Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    58Item 8. Financial Statements and Supplementary Data
    
    
    58Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    58Item 9A. Controls and Procedures
    
    
    58PART IIIItem 10. Directors and Executive Officers of the Registrant
    
    
    59Item 11. Executive Compensation
    
    
    59Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    59Item 13. Certain Relationships and Related Transactions
    
    
    59Item 14. Principal Accountant Fees and Services
    
    
    59PART
IVItem 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
    
    
    60SIGNATURES
    
    
    S-1Independent Auditors Report
    
    
    F-1Consolidated
Financial Statements
    
    
    F-2EXHIBIT 4.2(f)EXHIBIT 4.2(g)EXHIBIT 10.4(b)EXHIBIT 14EXHIBIT 21EXHIBIT 23EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32
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##### Table of Contents



Unless the context indicates otherwise, all references in this Report 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.

You should also be aware that while we communicate from time to time with
securities analysts, we do not disclose to them any material non-public
information, internal forecasts or other confidential business information.
Therefore, you should not assume that we agree with any statement or report
issued by any analyst, irrespective of the content of the statement or report.
To the extent that reports issued by securities analysts contain projections,
forecasts or opinions, those reports are not our responsibility.

PART I

Item 1. Business

Introduction

We are a leading developer, owner and operator of casinos and related
entertainment facilities in local and regional markets. Our six properties in
five markets exemplify high-quality design and construction and offer
outstanding dining, lodging and entertainment options along with the most
current gaming technology. Our strategy focuses on providing a dynamic total
casino-entertainment experience that has proven itself through our market share
leadership in each of our five markets.

Our casinos include the most spacious floors and the largest number of
games in each of our markets. Our properties emphasize slot play and feature
state-of-the-art slot machines, most of which incorporate convenient ticket-in,
ticket-out technology, and the newest multi-coin nickel and penny denomination
games. We also offer a wide range of popular table games, including blackjack,
craps and roulette, and live poker at some of our properties. We generally
emphasize competitive minimum and maximum betting limits based on each market.
Our gaming revenues are derived, and we expect them 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 Mississippi and Nevada gaming customers only in limited
circumstances and limited amounts on a short-term basis and

3



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in accordance with the credit restrictions imposed by gaming regulatory
authorities. The issuance of casino credit is prohibited in Missouri and Iowa.

We offer a greater variety of dining choices than the other casinos in our
markets. Our signature restaurant concepts include warm and intimate
steakhouses, elaborate buffets with interactive display cooking and 24-hour
casual dining restaurants. In addition, our dynamic sports bars feature the
most advanced audio-visual technology in their markets. The private Star Clubs
offer our select Star Awards members an exclusive and comfortable place to
relax at all Ameristar-branded properties.

Our total entertainment strategy includes a wide range of entertainment,
showcasing live local, regional and national talent. Our major venues feature
popular headliners in music and comedy, as well as professional boxing, while
our highly themed Bottleneck Blues Bars and other smaller venues set the stage
for national and regional bands. Cabaret stages energize each of our casino
floors with live entertainment.

The following table presents selected statistical and other information
concerning our properties as of March 1, 2004.

|                                |  |                                                         |           |                                                                                                                                                                              |  |                                                                                                                                                                                                            |           |                                                                                    |  |                                                                                                                                                                                                             |          |     |  |  |        |  |  |  |         |    
|------------------------------- |  | ------------------------------------------------------- | --------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------- | ---------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- | --- |  |  | ------ |  |  |  | ------- | ---
|                                |  | Ameristar                                               |           | Ameristar                                                                                                                                                                    |  | Ameristar                                                                                                                                                                                                  |           | Ameristar                                                                          |  | The Jackpot                                                                                                                                                                                                
|                                |  | St. Charles                                             |           | Kansas City                                                                                                                                                                  |  | Council Bluffs                                                                                                                                                                                             |           | Vicksburg                                                                          |  | Properties (1)                                                                                                                                                                                             
|                                |  |                                                         |           |                                                                                                                                                                              |  |                                                                                                                                                                                                            |           |                                                                                    |  |                                                                                                                                                                                                            
|Opening Date                    |  |                                                         | 1994      |                                                                                                                                                                              |  |                                                                                                                                                                                                            | 1997      |                                                                                    |  |                                                                                                                                                                                                             | 1996     |     |  |  | 1994   |  |  |  | 1956    |    
|Casino Square
Footage (approx.) |  |                                                         | 130,000   |                                                                                                                                                                              |  |                                                                                                                                                                                                            | 140,000   |                                                                                    |  |                                                                                                                                                                                                             | 38,500   |     |  |  | 42,000 |  |  |  | 29,000  |    
|Slot Machines
(approx.)         |  |                                                         | 3,205     |                                                                                                                                                                              |  |                                                                                                                                                                                                            | 2,930     |                                                                                    |  |                                                                                                                                                                                                             | 1,560    |     |  |  | 1,359  |  |  |  | 1,021   |    
|Table Games                     |  |                                                         | 83        | (2)                                                                                                                                                                          |  |                                                                                                                                                                                                            | 103       | (2)                                                                                |  |                                                                                                                                                                                                             | 37       |     |  |  | 36     |  |  |  | 28      | (2)
|Hotel Rooms                     |  |                                                         |          |                                                                                                                                                                              |  |                                                                                                                                                                                                            | 184       |                                                                                    |  |                                                                                                                                                                                                             | 444      | (3) |  |  | 150    |  |  |  | 420     |    
|Restaurants/Bars                |  |                                                         | 7/6       |                                                                                                                                                                              |  |                                                                                                                                                                                                            | 11/9      | (4)                                                                                |  |                                                                                                                                                                                                             | 4/4      |     |  |  | 3/3    |  |  |  | 5/4     |    
|Restaurant/Bar
Seating Capacity |  |                                                         | 1,636/147 |                                                                                                                                                                              |  |                                                                                                                                                                                                            | 1,820/480 | (4)                                                                                |  |                                                                                                                                                                                                             | 1,059/61 |     |  |  | 820/55 |  |  |  | 534/126 |    
|Guest Parking
Spaces (approx.)  |  |                                                         | 4,000     |                                                                                                                                                                              |  |                                                                                                                                                                                                            | 7,150     |                                                                                    |  |                                                                                                                                                                                                             | 3,000    |     |  |  | 1,700  |  |  |  | 1,130   |    
|Other Amenities                 |  | 300-Seat VIP Players Club;
Gift Shop;
Amusement
Arcade |           | 1,384-Seat Entertainment
Facility;
18-Screen Movie
Theater (5);
Gift Shop;
Amusement
Arcade;
Cigar Bar;
85-seat VIP
Players Club;
Kids Quest
Childrens
Activity
Center (5) |  | 2,850-Seat Outdoor Entertainment
Facility;
Meeting Space;
Indoor Swimming
Pool & Spa;
Exercise
Facility;
Gift Shop;
Amusement
Arcade;
75-seat VIP
Players Club;
Kids Quest
Childrens Activity
Center (5) |           | 3,200-Seat Outdoor Entertainment
Facility;
Swimming
Pool;
Meeting Space;
Gift Shop |  | 3,550-Seat Outdoor Entertainment
Facility;
356-Seat
Showroom;
Sports Book;
Meeting
Space;
RV Park;
Swimming Pool;
Gift Shop;
General Store;
Service Station;
Amusement
Arcade;
Styling Salon;
Tennis Courts

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---

|(1) |  | Includes the operations of Cactus Petes Resort Casino and The Horseshu
Hotel & Casino.                                                           
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes poker.                                                                                                                                  
|   
|(3) |  | Includes 284 rooms operated by affiliates of Kinseth Hospitality
Corporation and located on land owned by us and leased to affiliates of
Kinseth.
|   
|(4) |  | Includes a 52-seat food court and Arthur Bryants Barbeque restaurant
leased to and operated by third parties.                                   
|   
|(5) |  | Leased to and operated by a third party.                                                                                                         

Ameristar St. Charles.The 74,000 square-foot porte-cochere at Ameristar
St. Charles provides a stunning entry to this expansive facility. Once inside,
a dramatic laminar flow fountain welcomes guests to a historically-themed
streetscape that opens onto a complete casino entertainment experience.

The 130,000 square-foot casino floor ranks Ameristar St. Charles among the
15 largest casinos in the U.S. The two-level gaming area feels spacious and
open; it accommodates 3,205 slot and video poker machines and 83 tables games,
including a 12-table poker room.

Seven restaurants offer a range of choices, such as the upscale 47 Port
Street Grill steakhouse with exhibition cooking, chefs tables and a private
dining room; the chic King Cat Club martini bar; the
Landmark Buffet with its multiple serving stations and intimate dining rooms
named for local historic sites; and the Southern front-porch inspired Pearls
Oyster Bar. The 24-hour Falcon Diner recreates the American diner
with comfortable booths, a soda fountain and Art Deco architecture.
The Diner is complemented by a gourmet pastry and coffee bar. The Bottleneck Blues Bar features Southern cuisine as well as live
headline entertainment, set off by eclectic Delta blues club decor. Amerisports
Bar & Grill boasts a 34-foot-long video wall and two high-tech, giant video
screens, which complement the state-of-the-art audio-video system that includes
tables customized with personal screens and speakers.

Ameristar St. Charles was chosen as Best Casino by Riverfront Timesin
its 2003 and 2002 Best of St. Louis issues. The property also won 17 Best of
Casino Player Awards and six Best of Midwest Gaming Awards in 2003.

The property is located immediately north of the Interstate 70 bridge over
the Missouri River in the St. Louis metropolitan area, strategically situated
to attract patrons 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 easy accessibility to, and direct visibility of, the Ameristar St.
Charles site.

Ameristar Kansas City.Our largest property, Ameristar Kansas City, ranks
among the top 10 largest casino floors in the U.S. Over the past 18 months, a
$64 million investment in renovations and enhancements has created dramatic
improvements to this facility.

The 140,000 square-foot casino floor has been reconfigured to
substantially improve the layout and flow; it also now allows better visibility
from the streetscape and has new carpet and finishes. Further, the casino floor
boasts a newly renovated high-limit area and poker room, which is the largest
in the Midwest. The casino features 2,930 slot and video poker machines and 103
table games.

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Dining at Ameristar Kansas City reflects our strategy to offer more
choices: guests can select from 11 restaurants and nine bars/lounges. The Great
Plains Cattle Co. steakhouse has a unique Kansas-City inspired atmosphere.
Bugattis Little Italy Café is recognized as a Dont Miss Dining Venue in the
Zagat Survey. The 24-hour Falcon Diner
mirrors our Ameristar St. Charles diner and serves great American
favorites and desserts. At The Buffet, guests experience eight stations, from salad to dessert.
Casual dining options are available at an open-seating food court, where we
lease space to three national brands: Burger King, Sbarro Pizza, and Cold Stone
Creamery. The new Amerisports Brew Pub features state-of-the-art video and
audio technology on 41 screens. The Brew Pub also features an exhibition
brewery where customers can observe the production of Ameristars award-winning
private label beers and choose from a variety of menu items.

The property also features a wide scope of entertainment options. The Star
Pavilion seats 1,384 guests and showcases headline entertainers and
professional boxing. The distinctive Depot #9 Stage and Saloon, near the
porte-cochere entrance to the property and connected to a historic Pullman
railroad car, showcases local and regional bands. Finally, the casino cabaret
provides nightly entertainment on the gaming floor.

A 184-room hotel, as well as a state-of-the-art 18-screen movie theater
complex, gift shop, video game arcade and Kids Quest activity center, complete
the amenities at Ameristar Kansas City. All are easily accessible via ample
surface parking or a climate-controlled walkway from a 2,650-space parking
garage that was added in 2002.

The facility earned the 2002 and 2003 Gold Award for Best Casino in
Ingrams Best of Business Edition, Best Casino in the 2002 and 2003 Kansas
City MagazinesBest of Kansas City readers poll, and 2003 Favorite Casino
Hotel in Missouri in Midwest Gaming and Traveland Casino Player Magazine.

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 regional overnight guests. The property is in close proximity
to the Interstate 435 bridge. Interstate 435 is a six-lane, north-south
expressway offering easy access to, and direct visibility of, Ameristar Kansas
City.

Ameristar Council Bluffs.Ameristar Council Bluffs features the largest
riverboat and the most casino games in Iowa, comprising 38,500 square feet of
gaming space with 1,560 slot machines and 37 table games.

The Ameristar Hotel and Main Street Pavilion comprise the propertys
landside facilities. The luxurious 160-room hotel, including 40 whirlpool
guestrooms and suites, has earned the American Automobile Association Four
Diamond designation for the past five years. It was the first riverboat casino
hotel to earn this distinction, and it is currently the only AAA Four Diamond
hotel in greater Omaha. On land, guests will also find the exclusive Star Club
players lounge; the upscale Waterfront Grill steakhouse with its open
fireplace and intimate setting; the Veranda Buffet with its multiple cooking
stations; and the Prairie Mill Cafe & Bakery, a 24-hour specialty restaurant
and fresh bakery.

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The Amerisports Bar and Cabaret offers dining and live entertainment, as
well as 42 television screens, the largest of which is a 9 by 12 mega-screen.
Other entertainment venues are the casino cabaret and the Star Arena, a scenic
2,850-seat amphitheater  and the citys only outdoor riverfront entertainment
venue  on the banks of the Missouri River. Other amenities include a Kids
Quest activity center, fitness facility, indoor pool, gift shop, an ice cream
and sweet shop and convention space.

The Waterfront Grill steakhouse was named one of the Omaha areas top-10
restaurants by the Omaha World-Heraldin 2002 and 2003. The property won eight
Best of Casino Player Awards, as well as 12 Best of Midwest Gaming Awards,
in 2003.

Located across the Missouri River from Omaha, the property is adjacent to
the Nebraska Avenue exit on Interstate 29, immediately north of the junction of
Interstate 29 and Interstate 80.

Ameristar Vicksburg.Ameristar Vicksburg has been the long-time market
leader, attributable to its superior location, premier product quality and
outstanding dining and entertainment options.

The three-level dockside casino is significantly wider than typical
riverboat casinos, providing a spacious feel. The casino features 42,000 square
feet of gaming space, 1,359 slot machines and 36 table games.

In mid-2001, we completed a $15 million capital improvement project at the
property, including renovating and expanding the casino; installing
new-generation slot machines; creating a new Star Club players lounge; and
adding the Bottleneck Blues Bar, a Delta-style blues club featuring live
entertainment and gaming.

In December 2003, we completed a $9 million buffet and kitchen renovation,
re-branding the 400-seat venue as the Heritage Buffet, which features seven
specialty food stations. In the first quarter of 2004, we have added private
meeting facilities with audio/visual capabilities. The propertys restaurants
also include the upscale Waterfront Grill, overlooking the Mississippi River;
and the Bottleneck Blues Bar Express Café, with regionally influenced
quick-service menu selections.

The 150-room hotel at Ameristar Vicksburg earned a Three Diamond rating
from the American Automobile Association, and the property won eight Best of
Casino Player Awards in 2003.

Ameristar Vicksburg is located one-quarter mile north of Interstate 20 in
Vicksburg, Mississippi. The property is visible from the highway exit ramp and
is the closest casino to I-20, a major east-west thoroughfare that connects
Atlanta and Dallas. It caters primarily to guests from the Vicksburg and
Jackson, Mississippi and Monroe, Louisiana areas. The nearby Vicksburg National
Military Park attracts more than one million visitors annually.

The Jackpot Properties.Cactus Petes Resort Casino and The Horseshu Hotel
& Casino are both located in Jackpot, Nevada, just south of the Idaho border.
The Jackpot properties have been operating since 1956, and embody our
cornerstone values of superior product quality, premier amenities and exciting
entertainment.

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Together, the Jackpot properties feature approximately 29,000 square feet
of gaming space, 1,021 slot machines and 28 table games, including poker, as
well as a sports book.

The properties resort amenities including 420 hotel rooms, with 30 deluxe
hot-tub suites; an Olympic-sized pool and heated spa; a styling salon; lighted
tennis courts; a recreational vehicle park; and access to a nearby 18-hole golf
course. In addition, a general store and a service station serve guests and
regional travelers. Dining selections include an extensive buffet, The Plateau
Room gourmet restaurant, two 24-hour casual dining restaurants, a coffee shop
and a snack bar. Cactus Petes Gala Showroom brings in nationally known
entertainment.

Cactus Petes and The Horseshu have long held Four Diamond and Three
Diamond ratings, respectively, from the American Automobile Association; Cactus
Petes has been named Best Hotel/Resort in rural Nevada for three consecutive
years since 2000 by Nevada Magazine.

The properties are located on Nevada State Highway 93, a major regional
north-south route, and serve customers primarily from Idaho, and secondarily
from Oregon, Washington, Montana, northern California and the southwestern
Canadian provinces.

Our Business Strategies

Our key business strategies are to develop the highest quality facilities
in our markets, with a wide range of amenities, leading gaming technology and
efficient, centralized management. These strategies are designed to create a
complete entertainment experience and provide courteous and efficient service
that meets or exceeds our customers expectations.

The core components of our business strategies are as follows:

High Quality Facilities

We believe we have designed and built the highest quality state-of-the-art
facilities in each of the markets in which we operate. Inherent in our project
development process is the effective collaboration, coordination and
cooperation of our operations and design/construction teams. As a result, our
facilities are of superior quality and include cutting-edge technology, which
provides our guests with an exciting and complete entertainment experience.

Diverse Range of Amenities

We believe the size and diversity of our amenities is key to attracting
customers and developing repeat business. We seek to broaden our appeal by
offering more amenities than our competition. We believe that more choices
attract more types of customers. Our properties offer restaurants ranging from
casual to upscale, and customers can choose from entertainment options ranging
from cabaret lounges and sports bars to outdoor amphitheaters and multipurpose
entertainment pavilions. Some examples of our non-gaming amenities that have
proven successful are our high-tech Amerisports Bars (Council Bluffs, St.
Charles and Kansas City), our signature steakhouses (Company-wide) and our
unique Bottleneck Blues Bars (Vicksburg and St. Charles). In addition, our
properties regularly feature nationally known entertainers, including Paul
Anka, the Beach Boys, Pat Benatar, Michael Bolton, the Doobie Brothers, Heart,
Julio Iglesias, BB King, Lonestar, Martina McBride, Bob Newhart, LeAnn Rimes,
Kenny Rogers, Sinbad, Randy Travis and Dionne Warwick.

8



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Leading Gaming Technology

Slot machines are the core driver of our casino business. We believe that
leading our markets in slot machine trends is essential to our success. The
most significant innovation in slots today is ticket-in, ticket-out, which
creates a more convenient coinless gambling experience for our customers and
increases the revenue we earn on each machine. We led our markets in the
introduction of this technology and currently approximately 75% of the slot
machines at our Ameristar-branded properties have ticket-in, ticket-out
capability. We plan to increase this to approximately 100% by the end of 2004.
We were also the first operator in our markets to introduce a large supply of
new-generation nickel and penny video reel slot machines. Although many of our
competitors now offer these machines, we believe that we gained a significant
competitive advantage by leading this trend.

We also continue to focus on the most appropriate product mix. We
continually analyze slot utilization and slot machine win per unit and
determine the most profitable slot machine mix.

Marketing

Our marketing efforts are designed to support
each of our properties as the number one casino and entertainment
destination in
their respective markets. Our multi-tiered players clubs are designed to identify and
reward guests based on their level of play. Our best players receive enhanced
personalized service and additional benefits through our hosting and ambassador
teams. We communicate our entertainment and promotional activities to our
guests through targeted direct mail as well as traditional media channels
(television, print, radio and outdoor advertising).

Centralized Operations

Since the inception of the Company, we have developed a number of best
practice processes and strategies for our operations. We believe that we can
enhance our revenues and minimize our costs by standardizing these practices
across all properties. We have centralized operations in marketing, food and
beverage, hotel and gaming. In administration, we have centralized many aspects
of purchasing, accounts payable, human resources, information technology and
other departments. We build into these processes a high level of collaboration
and communication among our six casino properties and our corporate team.
Working together allows us to continually refine these processes and at the
same time efficiently manage our business.

Future Expansion

We continually evaluate opportunities to expand our operations through a
variety of means, including entering new North American markets created by the
legalization or expansion 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 may also
consider expansion opportunities involving management contracts or joint
ventures, including Native American gaming opportunities.

9



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We are also exploring expansion opportunities in the United Kingdom in
anticipation of the expected reform of that countrys casino gaming laws. Draft
legislation was published for comment by the government in late 2003 that would
allow large-scale modern casinos to be developed throughout the United Kingdom.
Government officials have announced intentions to introduce primary reform
legislation in late 2004 or early 2005, although no assurance has been given
that this schedule will be adhered to. The development of modern casinos would
further require the adoption of secondary gaming legislation, the adoption of
planning and tax policies conducive to attract development, the formation of a
new regulatory agency and the adoption of regulations.

We continually review the operating performance of each of our existing
properties and the feasibility of enhancing their performance through targeted
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. During 2004, we intend to add more coinless slot
machines at our properties, achieving a 100% installed base at each of our
Ameristar-branded properties, and begin a complete renovation of the hotel
rooms at Ameristar Council Bluffs and Ameristar Kansas City.

Markets

The following table presents a summary of the market characteristics and
market performance of our Ameristar-branded properties as of December 31, 2003.

|                                                  |  |             |       |             |  |                |       |             |  |   |       |   |  |   |       |   
|------------------------------------------------- |  | ----------- | ----- | ----------- |  | -------------- | ----- | ----------- |  | - | ----- | - |  | - | ----- | --
|                                                  |  | Ameristar   |       | Ameristar   |  | Ameristar      |       | Ameristar  
|                                                  |  | St. Charles |       | Kansas City |  | Council Bluffs |       | Vicksburg  
|                                                  |  |             |       |             |  |                |       |            
|Adult population -
within 50 miles                |  | 1.8 million |       | 1.4 million |  | 1.0 million    |       | 0.5 million
|Adult population -
within 100 miles               |  | 3.7 million |       | 2.7 million |  | 1.7 million    |       | 1.0 million
|No. of market participants                        |  |             | 5     |             |  |                | 4     |             |  |   | 3     |   |  |   | 4     |   
|2003 annual market gaming
revenue  $ in millions |  | $           | 842.4 |             |  | $              | 614.3 |             |  | $ | 388.1 |   |  | $ | 239.7 |   
|2003 market growth rate                           |  |             | 4.7   | %           |  |                | 0.4   | %           |  |   | 1.1   | % |  |   | (1.7  | %)
|2003 market share                                 |  |             | 31.3  | %           |  |                | 34.4  | %           |  |   | 39.2  | % |  |   | 40.7  | % 
|2002 market share                                 |  |             | 24.4  | %           |  |                | 34.2  | %           |  |   | 37.9  | % |  |   | 39.2  | % 
|2003 market share rank                            |  |             | #1    |             |  |                | #1    |             |  |   | #1    |   |  |   | #1    |   

Jackpot, Nevada is just across the border from the State of Idaho. The
primary market area for the Jackpot Properties is Twin Falls (located
approximately 45 miles north of Jackpot), Boise and eastern Idaho (both of
which are approximately 150 miles from Jackpot). The primary market area
comprises approximately 600,000 adults. The balance of the Jackpot properties
customers comes primarily from the northwestern United States and southwestern
Canada. As of December 31, 2003, the Jackpot properties had 63% of the slot
machines and 70% of the table games in the Jackpot market.

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Competition

St. Charles

Ameristar St. Charles competes with four other gaming operations located
in the metropolitan St. Louis area. Two of these competitors are located in the
State of Illinois. Unlike the State of 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 competitor is in the process
of completing a $75 million expansion, which includes an additional hotel
tower, with a targeted completion date of mid- to late-2004. There were no
other major capital improvements or expansions in the St. Louis market in 2003.

The St. Louis gaming market is currently insulated from other casino
gaming markets. The Missouri Gaming Commission has announced that it will
consider applications for additional gaming licenses in the St. Louis area, and
St. Louis city officials 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 one or more additional gaming licenses are
granted or the President Casino is replaced or upgraded, Ameristar St. Charles
would face additional competition. Illinois has one dormant gaming license
that it intends to reissue in the greater Chicago area. Accordingly, we do not
anticipate any new competition in the Illinois portion of the St. Louis market.

Kansas City

Ameristar Kansas City competes with three other gaming operations located
in and around Kansas City, Missouri. In December 2003, Argosy Casino, located
approximately 13 miles from Ameristar Kansas City, replaced its existing
three-level casino riverboat with a single-level 62,000 square foot barge-based
facility. Argosy increased its number of gaming positions by 50% and enhanced
its restaurant and land-based amenities. There were no other major capital
improvements or expansions by our Kansas City market competitors in 2003.

The Kansas City market is currently insulated from other casino gaming
markets, with no competing markets within 50 miles. However, see Risk Factors
for information concerning current proposals to legalize casino gaming in or
near Kansas City, Kansas, which is in close proximity to Ameristar Kansas City.

Council Bluffs

Ameristar Council Bluffs operates one of three gaming licenses issued for
the Council Bluffs gaming market pursuant to an operating agreement with Iowa
West Racing Association. The other competitors are operated by a single company
and consist of another riverboat casino and a slots-only pari-mutuel racetrack
casino. The operator of the competing riverboat casino recently completed an
$8.5 million upgrade of its hotel and public areas, along with remodeling the
steakhouse and opening a martini bar in 2003. In addition, the competing
facilities began increasing the number of coinless slots in their machine base
throughout 2003. The Iowa Racing and Gaming Commission recently approved the
addition of 250 slot machines at the competing

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racetrack casino. This competitor also plans to add a new buffet and
various other non-gaming amenities, with an expected completion date for the
project in the second quarter of 2005.

The Council Bluffs market is currently insulated from other casino gaming
markets, with the nearest competing gaming jurisdiction located approximately
90 miles away. However, the State of Nebraska is currently considering various
proposals to legalize casino gaming which, if passed, would likely result in
increased competition to Ameristar Council Bluffs. Further, the Iowa
legislature is considering a bill which, among other things, would permit the
operation of table games and video poker at pari-mutuel racetracks. See Risk
Factors for further discussion of these matters.

Vicksburg

Ameristar Vicksburg competes with three other gaming operations located in
Vicksburg. In October 2003, a change of ownership occurred at one of Ameristar
Vicksburgs competitors. We believe that, to date, the change in ownership has
benefited Ameristar Vicksburg. There were no major capital improvements or
expansions by our Vicksburg market competitors in 2003. The Vicksburg market
also faces regional 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. Vicksburg is also subject to competition from four
casinos and one slots-only racetrack in Shreveport and Bossier City, Louisiana,
located approximately 175 miles from Vicksburg.

Several potential gaming sites still exist in or near Vicksburg and from
time to time potential competitors have proposed the development of additional
casinos. In addition, proposals have been made from time to time to develop
additional Native American casinos in Louisiana and Mississippi, some of which
could be competitive with the Vicksburg market if completed.

Jackpot

The Jackpot properties compete with four other hotels and motels (three of
which also have casinos) in Jackpot. There were no major capital improvements
or expansions in the Jackpot market in 2003. 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 500 VLT machines that is operated by the
Shoshone-Bannock Tribes.

In November 2002, the Idaho electorate passed Proposition 1, which
legalized specific ticket-pay gaming machines on Native American 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 northeastern Oregon has been in operation for several years and
casinos also operate in Alberta, Canada.

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Employees and Labor Relations

As of March 1, 2004, we employed approximately 7,050 employees. None of
our employees is employed pursuant to collective bargaining or other union
arrangements. We believe our employee relations are good.

Incorporation

Ameristar was incorporated in Nevada in 1993.

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 result in a significant increase in
competition and have a material adverse effect on our business, financial
condition and results of operations. Economic difficulties faced by state
governments, as well as the increased acceptance of gaming as a leisure
activity, could lead to intensified political pressure for the expansion of
legalized gaming.

From time to time, legislation and ballot measures have been
unsuccessfully proposed in Kansas and Nebraska for the legalization of gaming.
In Nebraska, proponents of referenda that would legalize various forms of
casino gaming are soliciting signatures to place the referenda on the statewide
ballot in November 2004. In both Nebraska and Kansas, bills have been
introduced in the legislature for the legalization of casino gaming. 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 effect on us. Even if the current proposals are
unsuccessful, we expect similar proposals will be made in the future and may be
adopted.

The Missouri Gaming Commission has announced that it will consider
applications for additional gaming licenses in the St. Louis area. St. Louis
city officials and 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 one or more additional gaming licenses are issued in
the St. Louis area or the facility in downtown St. Louis improved, Ameristar
St. Charles would face additional competition.

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The Iowa Racing and Gaming Commission recently approved the addition of
250 slot machines for one of our competitors in Council Bluffs, and this
competitor also plans to add a new buffet and certain other non-gaming
amenities. Additionally, the Iowa legislature is currently considering a bill
that would, among other things, eliminate the cruising requirements currently
applicable to riverboat casinos and permit table games and video poker at
pari-mutuel racetracks (which are currently limited to slot machines). If
enacted, we believe that Ameristar Council Bluffs would be adversely affected
by the operation of table games and video poker at the competing racetrack
casino in Council Bluffs.

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. Recently, our
Jackpot properties have seen intensified competition from an Idaho Native
American facility that is closer to a portion of our market area.

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. Furthermore, increases in the
popularity of, and competition from, Internet and other account wagering and
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 a material
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 many 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. In 2003, Illinois enacted an additional large gaming tax
increase, the State of New Jersey increased various taxes on casinos and casino
patrons and the State of Nevada increased its tax on gross gaming revenues from
6.25% to 6.75%.

The Iowa Supreme Court ruled in 2002 that the differential in the maximum
gaming tax rate applicable to slot operations at racetracks (32%) 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. This decision was reversed by the United States Supreme Court in 2003
with respect to those portions of its decision that relied on federal law.
However, in February 2004, the Iowa Supreme Court reaffirmed its holding based
solely on state constitutional grounds. In order to overcome the budgetary
constraints resulting from this court decision, the Iowa legislature is
currently considering a bill which would, among other things, increase the
maximum gaming tax rate on riverboat casinos from 20% to 22%.

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Several bills have recently been introduced in the Missouri legislature
that would increase the gaming tax rate and eliminate the existing $500 loss
limit per two-hour cruise.

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 the laws of all the
jurisdictions in which we operate. 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.



| |  | Financial leverage may impair our financial condition and restrict our
operations.
| |  | ----------------------------------------------------------------------------------

Our leverage ratio (as defined in our senior credit facilities) has
improved from 4.55:1 as of December 31, 2002 to 3.49:1 as of December 31, 2003,
and our total indebtedness (including obligations under capital leases) has
decreased from $798.5 million as of December 31, 2002 to $716.9 million as of
December 31, 2003. However, 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;

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| |  |  | 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 you 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 terrorism or the threat of terrorism, may deter
customers from visiting our properties.



| |  | We have limited opportunities to grow our business.
| |  | ---------------------------------------------------

The casino gaming industry has limited growth opportunities. Most
jurisdictions in which casino gaming is currently permitted place numerical
and/or geographical limitations on the issuance of new gaming licenses.
Although a number of jurisdictions in the United States and foreign countries
are considering legalizing or expanding casino gaming, in some cases new gaming
operations may be restricted to specific locations, such as pari-mutuel
racetracks. Moreover, it is not clear whether the tax, land use planning and
regulatory structures that may be applicable to any new gaming opportunity
would make the development and operation of a casino financially acceptable. We
expect that there will be intense competition for any attractive new
opportunities that do arise, and many of the companies competing for such
opportunities will have greater resources than we do. Therefore, we cannot
assure you that we will be able to successfully expand our business.

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Craig H. Neilsen owns a majority of our common stock and controls our affairs.

Mr. Neilsen is our Chairman of the Board, President and Chief Executive
Officer, and he owns approximately 57% 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. As a result,
actions which may be supported by a majority of the other stockholders could be
blocked by Mr. Neilsen. 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 sells a significant portion of his stock or
upon his death if his estate, private foundation, heirs or devisees sell a
substantial number of shares of our Common Stock, which they might have to do
in order to pay estate tax liabilities or satisfy legal requirements applicable
to shareholdings by private foundations. We cannot assure you 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 regulations under the Maritime Transportation
Security Act of 2002 which apply to facilities and vessels on or near navigable
waterways. These regulations require, among other measures, patrons of such
facilities to undergo security screening and physical search and to produce
photo identification. However, we recently received approval from the Coast
Guard to utilize an alternative program that will allow us to avoid imposition
of many of the most intrusive measures of the new regulations. We do not
anticipate that the costs associated with the implementation of the alternative
program will be material.



| |  | 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

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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 you 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 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 you 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 you that, once
completed, any development project will increase our operating profits or
operating cash flows.



| |  | If any of our key personnel leaves us, our business may be significantly
affected.
| |  | ----------------------------------------------------------------------------------

We depend on the continued performance of Craig H. Neilsen, our Chairman,
President and Chief Executive Officer, and the rest of our management team. If
we lose the services of Mr. Neilsen, any of our other key executives 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.
| |  | -------------------------------------------------------------------------------------------------------

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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 visit 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.



| |  | Any loss from service of our riverboat and barge facilities for any reason
could materially adversely affect us.
| |  | ----------------------------------------------------------------------------------------------------------------

Our riverboat and barge facilities 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, other vessels
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 barges 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. We may be unable to further extend the dry-dock
requirement, and a dry-dock inspection would take the Council Bluffs casino out
of service for a substantial period of time. This could 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 geologic instability
that requires periodic maintenance and improvements. Although we reinforced the
cofferdam basin in which the vessel floats in 1999, 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 barge 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.

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| |  | 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 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 permanently moored (dockside) casinos, powered (excursion)
riverboat casinos and barges and to 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 within
1,000 feet of 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
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  | 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, 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,

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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 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, and open and continuous boarding is
permitted.

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 a time period determined by the Missouri Gaming
Commission.

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 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

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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. 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 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

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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 $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 has broad discretion to deny or revoke any occupational
license.

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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 that 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 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 2006. 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

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initiative were approved and gaming were prohibited in Mississippi, it
would have a significant adverse effect on us and our operations.

As of January 1, 2004, 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 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-year periods) and must be renewed periodically
thereafter. ACVI most recently was granted a renewal of its gaming license by
the Mississippi Commission on December 18, 2002.

Certain of our officers and employees and the officers, directors and
certain key employees of our Mississippi Gaming Subsidiary must be found
suitable or approved by the Mississippi Commission. We believe that we have
obtained, applied for or are in the process of applying for all necessary
findings of suitability with respect to such persons affiliated with Ameristar
or ACVI, 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 or ACVI 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. Moreover, changes in certain licensed
positions, including changes in any persons corporate position or title, must
be reported to the Mississippi Commission, and the Mississippi Commission has
jurisdiction to disapprove such changes. The Mississippi Commission has the
power to require us and any Mississippi Gaming Subsidiary to suspend or dismiss
officers, directors and other key employees or sever relationships with other
persons who refuse to file

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appropriate applications or whom the authorities find unsuitable to act in
such capacities. Determinations of suitability or questions pertaining to
licensing are not subject to judicial review in Mississippi.

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, as reported to the
Securities and Exchange Commission, 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 any 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. 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.

The Mississippi Commission generally has exercised its discretion to
require a finding of suitability of any beneficial owner of more than 5% of any
class of voting securities of a Registered Corporation. However, under certain
circumstances, an institutional investor, as defined in the Mississippi
Commissions regulations, which acquires more than 10% but not more than 15% of
the voting securities of a Registered Corporation may apply to the Mississippi
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 corporate charter, bylaws, management, policies or operations of the
Registered Corporation or any of its gaming affiliates, or any other action
which the Mississippi Commission finds to be inconsistent with holding the
voting securities for investment purposes only. Activities that are not deemed
to be inconsistent with holding voting securities for investment purposes
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 the
Registered Corporations management, policies or operations; and (3) such other
activities as the Mississippi Commission may determine to be consistent with
such investment intent.

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 Mississippi
Commission may be found unsuitable. The same restrictions apply to a record
owner of our securities 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 our securities beyond such time as the
Mississippi Commission prescribes may be guilty of a misdemeanor. 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 any
Mississippi Gaming Subsidiary owned by us, 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

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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 fair market value.

We may be required to disclose to the Mississippi Commission, upon
request, the identities of the holders of our debt or other securities. In
addition, under the Mississippi Act, the Mississippi Commission, in its
discretion, may require the holder of any debt security of a Registered
Corporation to file an application, be investigated and be found suitable to
own the debt security if the Mississippi Commission has reason to believe that
the holders ownership of such debt securities would be inconsistent with the
declared policies of the State.

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
instruments 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.

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.

Each Mississippi Gaming Subsidiary must maintain in Mississippi a current
ledger with respect to the ownership of its equity securities and we must
maintain in Mississippi a current list of our stockholders, which must reflect
the record ownership of each outstanding share of any class of our equity
securities. 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.
We 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. We have received from the Mississippi Commission a waiver of this
legend requirement. The Mississippi Commission has the power to impose
additional restrictions on the holders of our 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. A Registered Corporation may not
make a public offering of its 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

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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 with respect to public
offerings and private placements of securities, subject to certain conditions,
including the ability of the Mississippi Commission to issue a stop order with
respect to any such offering if the staff determines it would be necessary to
do so.

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 securities issued by an affiliated
company, without the prior approval of the Mississippi Commission. A 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 or its holding companies and agreements not
to encumber the securities of a holding company 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, but
we must obtain separate prior approvals from the Mississippi Commission for
pledges and stock restrictions imposed in connection with certain financing
transactions. Moreover, the regulations of the Mississippi Commission require
us to file a Loan to Licensees Report within 30 days following certain
financing transactions and the offering of certain debt securities. If the
Mississippi Commission were to deem it appropriate, the Mississippi Commission
could order such transactions rescinded.

Changes in control of us through merger, consolidation, acquisition of
assets, management or consulting agreements or any act or conduct by a person
by which he or she 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 also may 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 operators 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 (such as repurchases which treat holders differently) 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 the Registered Corporations board of directors in response to a

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tender offer made directly to the Registered Corporations stockholders
for the purpose of acquiring control of the Registered Corporation.

Neither we 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 us and our affiliates. We previously have
obtained a waiver of foreign gaming approval from the Mississippi Commission
for operations in other states in which we conduct 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 were to determine that we or ACVI had
violated a gaming law or regulation, the Mississippi Commission could limit,
condition, suspend or revoke our approvals and the license of ACVI, subject to
compliance with certain statutory and regulatory procedures. In addition, we,
ACVI and the persons involved could be subject to substantial fines for each
separate violation. Because of such a violation, the Mississippi Commission
could attempt to appoint a supervisor to operate the 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 of operations.

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 operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually. Gaming taxes are based
upon the following: (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 the current maximum tax rate imposed is 8% of all gaming receipts
in excess of $134,000 per month. The foregoing license fees we pay are allowed
as a credit against ACVIs Mississippi income tax liability for the year paid.
The gross revenues fee imposed by the City of Vicksburg equals approximately 4%
of 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. The Mississippi Commission later adopted amendments to the
regulation that would increase the infrastructure development requirement from
25% to 100% for new casinos (or upon the acquisition of a closed casino), but
would grandfather existing licensees. We believe that ACVI is in compliance
with the previously existing infrastructure requirement and is not subject to
the increased infrastructure requirement.

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, the

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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 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 owns and 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

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companies involved would have to sever all relationships with such person.
In addition, the Nevada Commission may require 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 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. An institutional
investor that has obtained a waiver may, in certain circumstances, hold up to
19% of a Registered Corporations voting securities and maintain its waiver for
a limited period of time. 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

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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 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 such 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 its jurisdiction.

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

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construct, acquire or finance gaming facilities in Nevada, or to retire or
extend obligations incurred for such purposes. On March 20, 2003, the Nevada
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 (Affiliate). 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
to place restrictions upon the transfer of, and enter into agreements not to
encumber the equity securities of, CPI. 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. 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
investment merits of the securities offered. Any representation to the contrary
is unlawful.

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 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 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. A live entertainment tax
is also paid by

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certain casino operations where entertainment is furnished in connection
with admission fees, 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 employ, contract with
or associate with a person in the foreign operation who has been denied a
license or finding of suitability in Nevada on the ground of unsuitability.

Other Jurisdictions.We expect to be subject to rigorous regulatory
standards, which may or may not be similar to the foregoing standards, in each
jurisdiction in which we may seek to conduct gaming operations. There can be no
assurance that statutes or regulations adopted or fees and taxes imposed by
other jurisdictions will permit us to operate profitably.

Federal Regulation of Slot Machines.We are required to make annual
filings with the U.S. Department of Justice in connection with the sale,
distribution or operation of slot machines. All requisite filings for the
current year have been made.

Non-Gaming Regulations.The sale of alcoholic beverages by us at our
Missouri properties is subject to licensing, control and regulation by the
Missouri Gaming Commission as described above and in Kansas City, Missouri by
Clay County. The sale of alcoholic beverages by us is subject to licensing,
control and regulation in Council Bluffs, Iowa by the Alcoholic Beverages
Division, in Vicksburg, Mississippi by both the City of Vicksburg and the
Alcoholic Beverage Control Division of the Mississippi State Tax Commission and
in Jackpot, Nevada by the Liquor Board of Elko County. In Missouri, the
applicable liquor laws allow us to serve alcoholic beverages in the casino from
8 a.m. to 3 a.m. and in our land-based facilities from 8 a.m. to 1 a.m. 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. 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. 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.

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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 Certificate of Inspection would preclude its use as a riverboat. Every
five years, United States 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 extended the dry-dock requirement to
October 2005 by undergoing a thorough underwater inspection. 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 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, food and beverage servers, change attendants and
security personnel, may be subject to the Jones Act, which, among other things,
exempts those employees from state limits on workers compensation awards.

Web Access to Periodic Reports

Our Internet website address is www.ameristarcasinos.com. We make
available free of charge through our website our Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments
to those reports as soon as reasonably practicable after such material is
electronically filed with or furnished to the Securities and Exchange
Commission.

Item 2. Properties

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 Kansas City.Ameristar Kansas City is located on approximately
183 acres of property 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, Missouri, may be
accessed via the Missouri Highway 210 exit on Interstate 435.

Ameristar Council Bluffs.Ameristar Council Bluffs is located on an
approximately 59-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 36 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 term expiring in 2045. We lease approximately one acre of the
Ameristar Council Bluffs site to affiliates of Kinseth Hospitality Corporation
for the operation of a 188-room limited service Holiday Inn Suites Hotel and a
96-room Hampton Inn Hotel.

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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 49 acres, of which we lease
approximately five acres for surface parking. In addition, we have developed a
23-acre mobile home park with 27 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 is
currently listed for sale.

The Jackpot Properties.We own approximately 116 acres in or around
Jackpot, Nevada, including the 35-acre site of Cactus Petes and the 25-acre
site of The Horseshu. The Cactus Petes and Horseshu sites are across from each
other on U.S. Highway 93. We also own 257 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 USDA housing projects are subject to
mortgage loans in favor of the USDA.

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.We lease approximately 48,000 square feet of office space in
various locations outside of our operating properties, including our executive
offices in Las Vegas, Nevada.

Substantially all of our real property collateralizes our obligations
under our senior credit facilities.

Item 3. Legal Proceedings

From time to time, we are a party to litigation, most of which arises in
the ordinary course of business. We are not currently a party to any litigation
that management believes would be likely to have a material adverse effect on
us.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

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PART II

Item 5. Market for Registrants Common Equity and Related Stockholder Matters

Ameristars Common Stock is traded on the Nasdaq National Market under the
symbol ASCA. The following table sets forth, for the fiscal quarters
indicated, the high and low sale prices of the Common Stock, as reported by
Nasdaq:

|               |  |      |       |     |  |   |       | 
|-------------- |  | ---- | ----- | --- |  | - | ----- | 
|               |  | High |       | Low
|               |  |      |       |    
|2003           |  |      |       |     |  |   |       | 
|First Quarter  |  | $    | 15.07 |     |  | $ | 7.78  | 
|Second Quarter |  |      | 21.60 |     |  |   | 10.76 | 
|Third Quarter  |  |      | 26.95 |     |  |   | 19.45 | 
|Fourth Quarter |  |      | 26.32 |     |  |   | 19.96 | 
|2002           |  |      |       |     |  |   |       | 
|First Quarter  |  | $    | 31.23 |     |  | $ | 23.28 | 
|Second Quarter |  |      | 33.94 |     |  |   | 22.51 | 
|Third Quarter  |  |      | 29.12 |     |  |   | 15.94 | 
|Fourth Quarter |  |      | 19.27 |     |  |   | 11.04 | 

As of March 1, 2004, there were approximately 158 holders of record of
Ameristars Common Stock.

We intend to utilize earnings to continue reducing debt and to invest in
future growth opportunities that diversify our revenues. Although we have never
paid dividends on our Common Stock, we are currently considering the payment of
dividends. Our senior credit facilities and senior subordinated notes obligate
us to comply with certain covenants that place limitations on the payment of
dividends. See Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations  Liquidity and Capital Resources and
Note 5  Notes payable and long-term debt of Notes to Consolidated Financial
Statements.

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Item 6. Selected Financial Data

The following data have been derived from our audited consolidated
financial statements and should be read in conjunction with those statements,
certain of which are included in this Report.

AMERISTAR CASINOS, INC.
CONSOLIDATED SELECTED FINANCIAL DATA

|                                                                                                                 |                                         |                          |         |                                  |         |      |         |                                               |         |      |         |         |         |   |         |         |         |   |         |         |         | 
|---------------------------------------------------------------------------------------------------------------- | --------------------------------------- | ------------------------ | ------- | -------------------------------- | ------- | ---- | ------- | --------------------------------------------- | ------- | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                                                                                                 |                                         |                          |         | For the years ended December 31,
|                                                                                                                 |                                         |                          |         |                                 
|Statement of operations data (1):                                                                                |                                         | 2003                     |         | 2002                             |         | 2001 |         | 2000                                          |         | 1999
|                                                                                                                 |                                         |                          |         |                                  |         |      |         |                                               |         |     
|                                                                                                                 |                                         |                          |         |                                  |         |      |         | (Amounts in Thousands, Except Per Share Data) |         |      |         |        
|REVENUES:                                                                                                        |                                         |                          |         |                                  |         |      |         |                                               |         |      |         |         |         |   |         |         |         |   |         |        
|                                                                                                                 | Casino                                  |                          | $       | 760,376                          |         |      | $       | 678,642                                       |         |      | $       | 568,259 |         |   | $       | 286,438 |         |   | $       | 247,416 |        
|                                                                                                                 | Food and beverage                       |                          |         | 103,176                          |         |      |         | 80,783                                        |         |      |         | 66,994  |         |   |         | 53,653  |         |   |         | 49,142  |        
|                                                                                                                 | Rooms                                   |                          |         | 25,136                           |         |      |         | 22,824                                        |         |      |         | 22,802  |         |   |         | 18,121  |         |   |         | 17,257  |        
|                                                                                                                 | Other                                   |                          |         | 21,557                           |         |      |         | 19,387                                        |         |      |         | 18,074  |         |   |         | 12,018  |         |   |         | 11,089  |        
|                                                                                                                 |                                         |                          |         |                                  |         |      |         |                                               |         |      |         |         |         |   |         |         |         |   |         |         |        
|                                                                                                                 |                                         |                          | 910,245 |                                  |         |      | 801,636 |                                               |         |      | 676,129 |         |         |   | 370,230 |         |         |   | 324,904 |        
|                                                                                                                 | Less: Promotional allowances            |                          |         | 128,278                          |         |      |         | 103,673                                       |         |      |         | 73,304  |         |   |         | 47,308  |         |   |         | 39,599  |        
|                                                                                                                 |                                         |                          |         |                                  |         |      |         |                                               |         |      |         |         |         |   |         |         |         |   |         |         |        
|                                                                                                                 | Net revenues                            |                          |         | 781,967                          |         |      |         | 697,963                                       |         |      |         | 602,825 |         |   |         | 322,922 |         |   |         | 285,305 |        
|                                                                                                                 |                                         |                          |         |                                  |         |      |         |                                               |         |      |         |         |         |   |         |         |         |   |         |         |        
|OPERATING EXPENSES:                                                                                              |                                         |                          |         |                                  |         |      |         |                                               |         |      |         |         |         |   |         |         |         |   |         |        
|                                                                                                                 | Casino                                  |                          |         | 349,845                          |         |      |         | 297,476                                       |         |      |         | 252,906 |         |   |         | 115,864 |         |   |         | 99,376  |        
|                                                                                                                 | Food and beverage                       |                          |         | 59,747                           |         |      |         | 53,963                                        |         |      |         | 46,169  |         |   |         | 35,135  |         |   |         | 33,207  |        
|                                                                                                                 | Rooms                                   |                          |         | 6,343                            |         |      |         | 6,826                                         |         |      |         | 7,921   |         |   |         | 6,944   |         |   |         | 6,372   |        
|                                                                                                                 | Other                                   |                          |         | 12,522                           |         |      |         | 13,962                                        |         |      |         | 11,813  |         |   |         | 12,257  |         |   |         | 10,203  |        
|                                                                                                                 | Selling, general and administrative     |                          |         | 149,292                          |         |      |         | 150,228                                       |         |      |         | 129,060 |         |   |         | 90,416  |         |   |         | 86,142  |        
|                                                                                                                 | Depreciation and amortization           |                          |         | 63,599                           |         |      |         | 48,711                                        |         |      |         | 40,101  |         |   |         | 27,784  |         |   |         | 24,460  |        
|                                                                                                                 | Impairment loss on assets held for sale |                          |         | 687                              |         |      |         | 5,213                                         |         |      |         |        |         |   |         | 57,153  |         |   |         |        |        
|                                                                                                                 | Preopening costs                        |                          |         |                                 |         |      |         | 6,401                                         |         |      |         |        |         |   |         |        |         |   |         |        |        
|                                                                                                                 |                                         |                          |         |                                  |         |      |         |                                               |         |      |         |         |         |   |         |         |         |   |         |         |        
|                                                                                                                 |                                         | Total operating expenses |         |                                  | 642,035 |      |         |                                               | 582,780 |      |         |         | 487,970 |   |         |         | 345,553 |   |         |         | 259,760 | 
|                                                                                                                 |                                         |                          |         |                                  |         |      |         |                                               |         |      |         |         |         |   |         |         |         |   |         |         |        
|INCOME (LOSS) FROM OPERATIONS                                                                                    |                                         |                          | 139,932 |                                  |         |      | 115,183 |                                               |         |      | 114,855 |         |         |   | (22,631 | )       |         |   | 25,545  |        
|OTHER INCOME (EXPENSE):                                                                                          |                                         |                          |         |                                  |         |      |         |                                               |         |      |         |         |         |   |         |         |         |   |         |        
|                                                                                                                 | Interest income                         |                          |         | 330                              |         |      |         | 174                                           |         |      |         | 522     |         |   |         | 161     |         |   |         | 300     |        
|                                                                                                                 | Interest expense, net                   |                          |         | (64,261                          | )       |      |         | (51,206                                       | )       |      |         | (64,931 | )       |   |         | (28,316 | )       |   |         | (24,449 | )      
|                                                                                                                 | Loss on early retirement of debt (2)    |                          |         | (701                             | )       |      |         |                                              |         |      |         |        |         |   |         | (6,560  | )       |   |         |        |        
|                                                                                                                 | Other                                   |                          |         | 288                              |         |      |         | (272                                          | )       |      |         | (776    | )       |   |         | (942    | )       |   |         | (851    | )      
|                                                                                                                 |                                         |                          |         |                                  |         |      |         |                                               |         |      |         |         |         |   |         |         |         |   |         |         |        
|Income (loss) before income tax provision
(benefit) and cumulative effect of change in
accounting principle      |                                         |                          | 75,588  |                                  |         |      | 63,879  |                                               |         |      | 49,670  |         |         |   | (58,288 | )       |         |   | 545     |        
|Income tax provision (benefit)                                                                                   |                                         |                          | 27,968  |                                  |         |      | 23,345  |                                               |         |      | 16,381  |         |         |   | (17,981 | )       |         |   | 340     |        
|                                                                                                                 |                                         |                          |         |                                  |         |      |         |                                               |         |      |         |         |         |   |         |         |         |   |         |         |        
|Income (loss) before cumulative effect of
change in accounting principle                                         |                                         |                          | 47,620  |                                  |         |      | 40,534  |                                               |         |      | 33,289  |         |         |   | (40,307 | )       |         |   | 205     |        
|                                                                                                                 |                                         |                          |         |                                  |         |      |         |                                               |         |      |         |         |         |   |         |         |         |   |         |         |        
|Cumulative effect of change in accounting
principle  adoption of SFAS No. 133, net
of income tax benefit of $73 |                                         |                          |        |                                  |         |      |        |                                               |         |      | (135    | )       |         |   |        |         |         |   |        |        
|                                                                                                                 |                                         |                          |         |                                  |         |      |         |                                               |         |      |         |         |         |   |         |         |         |   |         |         |        
|NET INCOME (LOSS)                                                                                                |                                         | $                        | 47,620  |                                  |         | $    | 40,534  |                                               |         | $    | 33,154  |         |         | $ | (40,307 | )       |         | $ | 205     |        
|                                                                                                                 |                                         |                          |         |                                  |         |      |         |                                               |         |      |         |         |         |   |         |         |         |   |         |         |        

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AMERISTAR CASINOS, INC.
CONSOLIDATED SELECTED FINANCIAL DATA(continued)

|                                          |                                                                          |         |  |                                  |        |      |  |                                               |        |      |  |   |        |   |  |   |        |   |  |   |        | 
|----------------------------------------- | ------------------------------------------------------------------------ | ------- |  | -------------------------------- | ------ | ---- |  | --------------------------------------------- | ------ | ---- |  | - | ------ | - |  | - | ------ | - |  | - | ------ | 
|                                          |                                                                          |         |  | For the years ended December 31,
|                                          |                                                                          |         |  |                                 
|STATEMENT OF OPERATIONS DATA (CONTINUED): |                                                                          | 2003    |  | 2002                             |        | 2001 |  | 2000                                          |        | 1999
|                                          |                                                                          |         |  |                                  |        |      |  |                                               |        |     
|                                          |                                                                          |         |  |                                  |        |      |  | (Amounts in Thousands, Except Per Share Data) |        |      |  |  
|EARNINGS PER SHARE (3):                   |                                                                          |         |  |                                  |        |      |  |                                               |        |      |  |   |        |   |  |   |        |   |  |  
|                                          | Income (loss) before cumulative effect
of change in accounting principle |         |  |                                  |        |      |  |                                               |        |      |  |   |        |   |  |   |        |   |  |   |       
|                                          |                                                                          | Basic   |  | $                                | 1.80   |      |  | $                                             | 1.55   |      |  | $ | 1.59   |   |  | $ | (1.98  | ) |  | $ | 0.01   | 
|                                          |                                                                          |         |  |                                  |        |      |  |                                               |        |      |  |   |        |   |  |   |        |   |  |   |        | 
|                                          |                                                                          | Diluted |  | $                                | 1.76   |      |  | $                                             | 1.50   |      |  | $ | 1.52   |   |  | $ | (1.98  | ) |  | $ | 0.01   | 
|                                          |                                                                          |         |  |                                  |        |      |  |                                               |        |      |  |   |        |   |  |   |        |   |  |   |        | 
|                                          | Cumulative effect of change in
accounting principle                      |         |  |                                  |        |      |  |                                               |        |      |  |   |        |   |  |   |        |   |  |   |       
|                                          |                                                                          | Basic   |  | $                                |       |      |  | $                                             |       |      |  | $ |       |   |  | $ |       |   |  | $ |       | 
|                                          |                                                                          |         |  |                                  |        |      |  |                                               |        |      |  |   |        |   |  |   |        |   |  |   |        | 
|                                          |                                                                          | Diluted |  | $                                |       |      |  | $                                             |       |      |  | $ | (0.01  | ) |  | $ |       |   |  | $ |       | 
|                                          |                                                                          |         |  |                                  |        |      |  |                                               |        |      |  |   |        |   |  |   |        |   |  |   |        | 
|                                          | Net income (loss)                                                        |         |  |                                  |        |      |  |                                               |        |      |  |   |        |   |  |   |        |   |  |   |       
|                                          |                                                                          | Basic   |  | $                                | 1.80   |      |  | $                                             | 1.55   |      |  | $ | 1.59   |   |  | $ | (1.98  | ) |  | $ | 0.01   | 
|                                          |                                                                          |         |  |                                  |        |      |  |                                               |        |      |  |   |        |   |  |   |        |   |  |   |        | 
|                                          |                                                                          | Diluted |  | $                                | 1.76   |      |  | $                                             | 1.50   |      |  | $ | 1.51   |   |  | $ | (1.98  | ) |  | $ | 0.01   | 
|                                          |                                                                          |         |  |                                  |        |      |  |                                               |        |      |  |   |        |   |  |   |        |   |  |   |        | 
|WEIGHTED AVERAGE SHARES
OUTSTANDING       |                                                                          |         |  |                                  |        |      |  |                                               |        |      |  |   |        |   |  |   |        |   |  |  
|                                          |                                                                          | Basic   |  |                                  | 26,423 |      |  |                                               | 26,107 |      |  |   | 20,906 |   |  |   | 20,401 |   |  |   | 20,362 | 
|                                          |                                                                          |         |  |                                  |        |      |  |                                               |        |      |  |   |        |   |  |   |        |   |  |   |        | 
|                                          |                                                                          | Diluted |  |                                  | 27,120 |      |  |                                               | 26,992 |      |  |   | 21,908 |   |  |   | 20,401 |   |  |   | 20,362 | 
|                                          |                                                                          |         |  |                                  |        |      |  |                                               |        |      |  |   |        |   |  |   |        |   |  |   |        | 

|                                                                                  |  |      |           |      |  |                        |           |      |  |              |         |  |  |   |         |  |  |   |         | 
|--------------------------------------------------------------------------------- |  | ---- | --------- | ---- |  | ---------------------- | --------- | ---- |  | ------------ | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                                                                  |  |      |           |      |  |                        |           |      |  | December 31, |         |  |  |   |         |  |  |  
|                                                                                  |  |      |           |      |  | (Amounts in Thousands) |           |      |  |             
|BALANCE SHEET AND OTHER DATA:                                                     |  | 2003 |           | 2002 |  | 2001                   |           | 2000 |  | 1999        
|                                                                                  |  |      |           |      |  |                        |           |      |  |             
|Cash and cash equivalents                                                         |  | $    | 78,220    |      |  | $                      | 90,573    |      |  | $            | 41,098  |  |  | $ | 36,245  |  |  | $ | 15,531  | 
|Total assets                                                                      |  |      | 1,155,250 |      |  |                        | 1,173,492 |      |  |              | 892,592 |  |  |   | 890,921 |  |  |   | 378,645 | 
|Total long-term debt and capitalized
lease obligations, net of current
maturities |  |      | 713,044   |      |  |                        | 760,665   |      |  |              | 624,255 |  |  |   | 780,475 |  |  |   | 242,890 | 
|Stockholders equity (4)                                                          |  |      | 255,843   |      |  |                        | 202,196   |      |  |              | 157,336 |  |  |   | 28,044  |  |  |   | 68,169  | 
|Capital expenditures                                                              |  |      | 69,219    |      |  |                        | 255,530   |      |  |              | 114,114 |  |  |   | 33,357  |  |  |   | 57,590  | 



---

|(1) |  | The expanded casino at Ameristar Council Bluffs opened in November 1999.
The Reserve Hotel Casino opened in February 1998 and was sold on January
29, 2001 pursuant to an agreement entered into in October 2000. The
Ameristar Vicksburg hotel opened in June 1998. The expanded casino at
Ameristar Vicksburg opened in December 1999. The Ameristar Kansas City and
Ameristar St. Charles properties were acquired on December 20, 2000. The
new Ameristar St. Charles facility opened on August 6, 2002.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | In 2000, the loss on early retirement of debt of $6,560 was previously
recorded as an extraordinary item; however, this amount has been
reclassified in the current year and is now reflected as a component of
Other Income (Expense).                                                                                                                                                                                                                                                                     
|   
|(3) |  | Weighted average basic and diluted shares outstanding are equal for 2000
and 1999 as stock options were anti-dilutive in 2000 and the dilution was
not material in 1999.                                                                                                                                                                                                                                                                                                                                    
|   
|(4) |  | No dividends were paid in 1999 through 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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AMERISTAR CASINOS, INC.
CONSOLIDATED SELECTED QUARTERLY FINANCIAL DATA

|                                   |  |                               |         |          |  |                                               |         |              |  |       |         |  |  |   |         |     |  |   |         | 
|---------------------------------- |  | ----------------------------- | ------- | -------- |  | --------------------------------------------- | ------- | ------------ |  | ----- | ------- |  |  | - | ------- | --- |  | - | ------- | 
|                                   |  | For the fiscal quarters ended
|                                   |  |                              
|                                   |  | March 31,                     |         | June 30, |  | September 30,                                 |         | December 31, |  |       |         | 
|                                   |  | 2003                          |         | 2003     |  | 2003                                          |         | 2003         |  | Total
|                                   |  |                               |         |          |  |                                               |         |              |  |      
|                                   |  |                               |         |          |  | (Amounts in Thousands, Except Per Share Data) |         |              |  |       |         |  |  |  
|Net revenues                       |  | $                             | 188,520 |          |  | $                                             | 194,826 |              |  | $     | 201,528 |  |  | $ | 197,093 |     |  | $ | 781,967 | 
|Income from operations             |  |                               | 35,031  | (1)      |  |                                               | 39,347  | (2)          |  |       | 34,196  |  |  |   | 31,358  | (3) |  |   | 139,932 | 
|Income before income tax provision |  |                               | 18,431  |          |  |                                               | 22,963  |              |  |       | 18,863  |  |  |   | 15,331  |     |  |   | 75,588  | 
|Net income                         |  |                               | 11,720  |          |  |                                               | 14,467  |              |  |       | 11,884  |  |  |   | 9,549   |     |  |   | 47,620  | 
|Basic earnings per share (4)       |  | $                             | 0.45    |          |  | $                                             | 0.55    |              |  | $     | 0.45    |  |  | $ | 0.36    |     |  | $ | 1.80    | 
|Diluted earnings per share (4)     |  | $                             | 0.44    |          |  | $                                             | 0.54    |              |  | $     | 0.44    |  |  | $ | 0.35    |     |  | $ | 1.76    | 

|                                       |  |                               |         |          |  |                                               |         |              |  |       |         |     |  |   |         |  |  |   |         | 
|-------------------------------------- |  | ----------------------------- | ------- | -------- |  | --------------------------------------------- | ------- | ------------ |  | ----- | ------- | --- |  | - | ------- |  |  | - | ------- | 
|                                       |  | For the fiscal quarters ended
|                                       |  |                              
|                                       |  | March 31,                     |         | June 30, |  | September 30,                                 |         | December 31, |  |       |         |    
|                                       |  | 2002                          |         | 2002     |  | 2002                                          |         | 2002         |  | Total
|                                       |  |                               |         |          |  |                                               |         |              |  |      
|                                       |  |                               |         |          |  | (Amounts in Thousands, Except Per Share Data) |         |              |  |       |         |     |  |  
|Net revenues                           |  | $                             | 162,795 |          |  | $                                             | 166,291 |              |  | $     | 187,258 |     |  | $ | 181,619 |  |  | $ | 697,963 | 
|Income from operations                 |  |                               | 35,416  | (5)      |  |                                               | 29,277  | (6)          |  |       | 25,369  | (7) |  |   | 25,121  |  |  |   | 115,183 | 
|Income before income tax provision (8) |  |                               | 24,775  |          |  |                                               | 19,911  |              |  |       | 11,139  |     |  |   | 8,055   |  |  |   | 63,879  | 
|Net income (8)                         |  |                               | 15,449  |          |  |                                               | 12,631  |              |  |       | 7,408   |     |  |   | 5,047   |  |  |   | 40,534  | 
|Basic earnings per share (4)           |  | $                             | 0.60    |          |  | $                                             | 0.48    |              |  | $     | 0.28    |     |  | $ | 0.19    |  |  | $ | 1.55    | 
|Diluted earnings per share (4)         |  | $                             | 0.57    |          |  | $                                             | 0.47    |              |  | $     | 0.28    |     |  | $ | 0.19    |  |  | $ | 1.50    | 



---

|(1) |  | Net of impairment loss on assets held for sale of $452.                                                                                                                                                                                                                                     
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Net of impairment loss on assets held for sale of $88.                                                                                                                                                                                                                                      
|   
|(3) |  | Net of impairment loss on assets held for sale of $147.                                                                                                                                                                                                                                     
|   
|(4) |  | Because earnings per share amounts are calculated using the weighted average number of common and dilutive common
equivalent shares outstanding during each quarter, the sum of the per-share amounts for the four quarters may not equal
the total earnings per share amounts for the year.
|   
|(5) |  | Net of preopening expense of $150.                                                                                                                                                                                                                                                          
|   
|(6) |  | Net of impairment loss on assets held for sale of $4,136 and preopening expense of $1,326.                                                                                                                                                                                                  
|   
|(7) |  | Net of impairment loss on assets held for sale of $1,077 and preopening expense of $4,925.                                                                                                                                                                                                  
|   
|(8) |  | The sum of the amounts for the four quarters does not equal the total for the year due to rounding.                                                                                                                                                                                         

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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with our
Consolidated Financial Statements and the Notes thereto included in this
Report. The information in this section and in this Report generally includes
forward-looking statements. See Item 1. Business  Risk Factors.

Overview

We develop, own and operate casinos and related hotel, food and beverage,
entertainment and other facilities, with six properties in operation in
Missouri, Iowa, Mississippi and Nevada. Our portfolio of casinos consists of:
Ameristar St. Charles (serving greater St. Louis, Missouri); Ameristar Kansas
City (serving the Kansas City, Missouri metropolitan area); Ameristar Council
Bluffs (serving Omaha, Nebraska and southwestern Iowa); Ameristar Vicksburg
(serving Jackson, Mississippi and Monroe, Louisiana); and Cactus Petes and the
Horseshu in Jackpot, Nevada (serving Idaho and the Pacific Northwest). We
acquired the Missouri properties in December 2000. We sold The Reserve Hotel
Casino in Henderson, Nevada (metropolitan Las Vegas) in January 2001.

Our financial results are dependent upon the number of patrons that we
attract to our properties and the amounts that patrons spend at our properties.
Management uses key metrics to evaluate these factors. Such metrics include:
market share, representing our share of gross gaming revenues in each of our
riverboat markets and our share of gaming devices in the Jackpot market (Nevada
does not publish separate gaming revenue statistics for this market);
admissions, representing the number of patrons admitted to our riverboat
casinos; and win per admission, representing the amount of gaming revenues we
retain per admission.

Our quarterly and annual operating results may be affected by, among other
things, competitive factors, gaming tax increases, the commencement of new
gaming operations, the amount of preopening costs, charges associated with debt
refinancing or property acquisition and disposition transactions, construction
at existing facilities and weather conditions affecting our properties.
Consequently, our operating results for any quarter or year are not necessarily
comparable and may not be indicative of future periods results.

During 2003 and 2002, the most significant factors and trends contributing
to our operating performance were:



| |  |  | New casino and entertainment facility at Ameristar St. Charles.We
opened the new casino and entertainment facility at Ameristar St.
Charles on August 6, 2002. The new facility features 130,000 square
feet of casino and entertainment space consisting of approximately
3,205 slot machines, 83 table games (including a 12-table poker room)
and a wide variety of dining and entertainment amenities.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Implementation of coinless slot technology.We are in the process
of implementing coinless slot technology across all properties. As of
December 31, 2003, approximately 75% of the slot machines at our
Ameristar-branded properties were coinless and we expect to have
approximately 100% of these slot machines coinless by the end of 2004.                                                           

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| |  |  | Renovations and enhancements at Ameristar Kansas City.In September
2003, we completed a substantial renovation and enhancement project at
Ameristar Kansas City, including a comprehensive renovation of the
casino area, the widespread implementation of ticket-in, ticket-out
slot machines, a 330-seat Amerisports Brew Pub with state-of-the-art
video and audio technology and seven new dining and entertainment
venues.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Renovations and enhancements at Ameristar Vicksburg.In December
2003, we completed a total renovation of the buffet and kitchen at
Ameristar Vicksburg, rebranding the venue as the Heritage Buffet.
During the first quarter of 2004, we have added meeting room facilities
and have enhanced certain common areas of the casino vessel.                                                                                      
|
| |  |  | United States economy.We believe the current economic recovery in
the United States began to positively impact our operations in the
fourth quarter of 2003.                                                                                                                                                                                                                                                                   

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Results of Operations

Selected Financial Measures by Property

The following table sets forth certain information concerning our
consolidated cash flows and the results of operations of our operating
properties:

|                                    |                                            |  |                          |         |      |  |      |          |   |  |   |         |  
|----------------------------------- | ------------------------------------------ |  | ------------------------ | ------- | ---- |  | ---- | -------- | - |  | - | ------- | -
|                                    |                                            |  | Years ended December 31,
|                                    |                                            |  |                         
|                                    |                                            |  | 2003                     |         | 2002 |  | 2001
|                                    |                                            |  |                          |         |      |  |     
|                                    |                                            |  | (Dollars in Thousands)  
|Consolidated Cash Flow Information: |                                            |  |                          |         |      |  |      |          |   |  |   |        
|                                    | Cash flows provided by operations          |  | $                        | 151,162 |      |  | $    | 126,618  |   |  | $ | 111,342 |  
|                                    | Cash flows used in investing               |  |                          | (83,379 | )    |  |      | (241,454 | ) |  |   | (31,970 | )
|                                    | Cash flows provided by (used in) financing |  |                          | (80,136 | )    |  |      | 164,311  |   |  |   | (74,519 | )
|                                    |                                            |  |                          |         |      |  |      |          |   |  |   |        
|Net Revenues (1):                   |                                            |  |                          |         |      |  |      |          |   |  |   |        
|                                    | Ameristar St. Charles                      |  | $                        | 256,594 |      |  | $    | 190,526  |   |  | $ | 139,318 |  
|                                    | Ameristar Kansas City                      |  |                          | 214,819 |      |  |      | 211,728  |   |  |   | 202,528 |  
|                                    | Ameristar Council Bluffs                   |  |                          | 156,673 |      |  |      | 145,357  |   |  |   | 124,256 |  
|                                    | Ameristar Vicksburg                        |  |                          | 95,048  |      |  |      | 90,960   |   |  |   | 75,068  |  
|                                    | Jackpot Properties                         |  |                          | 58,833  |      |  |      | 59,392   |   |  |   | 56,944  |  
|                                    | The Reserve (3)                            |  |                          |        |      |  |      |         |   |  |   | 4,711   |  
|                                    |                                            |  |                          |         |      |  |      |          |   |  |   |        
|                                    | Consolidated net revenues                  |  | $                        | 781,967 |      |  | $    | 697,963  |   |  | $ | 602,825 |  
|                                    |                                            |  |                          |         |      |  |      |          |   |  |   |        
|Operating Income (Loss):            |                                            |  |                          |         |      |  |      |          |   |  |   |        
|                                    | Ameristar St. Charles (2)                  |  | $                        | 61,257  |      |  | $    | 30,386   |   |  | $ | 40,986  |  
|                                    | Ameristar Kansas City (2)                  |  |                          | 40,351  |      |  |      | 41,451   |   |  |   | 43,447  |  
|                                    | Ameristar Council Bluffs                   |  |                          | 45,552  |      |  |      | 38,560   |   |  |   | 28,029  |  
|                                    | Ameristar Vicksburg                        |  |                          | 21,215  |      |  |      | 23,261   |   |  |   | 14,376  |  
|                                    | Jackpot Properties                         |  |                          | 8,022   |      |  |      | 9,834    |   |  |   | 9,344   |  
|                                    | The Reserve (3)                            |  |                          |        |      |  |      | (280     | ) |  |   | 67      |  
|                                    | Corporate and other (2)                    |  |                          | (36,465 | )    |  |      | (28,029  | ) |  |   | (21,394 | )
|                                    |                                            |  |                          |         |      |  |      |          |   |  |   |        
|                                    | Consolidated operating income (loss)       |  | $                        | 139,932 |      |  | $    | 115,183  |   |  | $ | 114,855 |  
|                                    |                                            |  |                          |         |      |  |      |          |   |  |   |        
|Operating Income Margins:           |                                            |  |                          |         |      |  |      |          |   |  |   |        
|                                    | Ameristar St. Charles (2)                  |  |                          | 23.9    | %    |  |      | 15.9     | % |  |   | 29.4    | %
|                                    | Ameristar Kansas City (2)                  |  |                          | 18.8    | %    |  |      | 19.6     | % |  |   | 21.5    | %
|                                    | Ameristar Council Bluffs                   |  |                          | 29.1    | %    |  |      | 26.5     | % |  |   | 22.6    | %
|                                    | Ameristar Vicksburg                        |  |                          | 22.3    | %    |  |      | 25.6     | % |  |   | 19.2    | %
|                                    | Jackpot Properties                         |  |                          | 13.6    | %    |  |      | 16.6     | % |  |   | 16.4    | %
|                                    | The Reserve (3)                            |  |                          |        |      |  |      |         |   |  |   | 1.4     | %
|                                    | Consolidated operating income margin       |  |                          | 17.9    | %    |  |      | 16.5     | % |  |   | 19.1    | %



---

|(1) |  | We previously recorded expenses associated with our targeted direct
mail coin coupon offerings as a casino department expense. These
charges totaling $24.0 million for the year ended December 31, 2001
have been reclassified and are now reported as promotional allowances.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Operating income for Ameristar St. Charles in 2002 includes
preopening expense of $5.8 million related to the new facility that
opened in August 2002 and impairment loss of $4.4 million on assets
held for sale. Corporate and other operating loss in 2002 includes $0.6
million of preopening expense associated with the new St. Charles
facility. Operating income for Ameristar Kansas City in 2003 includes
costs of $1.3 million to market, advertise and promote the All New
Ameristar Kansas City. Operating income at the Missouri properties
for 2003 includes a combined benefit of $1.2 million for sales and use
tax refunds. Corporate and other operating loss for 2003 includes
expenses of $0.9 million related to the unsuccessful pursuit of a
corporate acquisition.
|   
|(3) |  | Operating results for The Reserve are through January 29, 2001,
when we sold the property.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

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Year Ended December 31, 2003 Versus Year Ended December 31, 2002

Net Revenues

Consolidated net revenues for the year ended December 31, 2003 were $782.0
million compared to $698.0 million for 2002, an increase of 12.0%, led by
significant improvements at Ameristar St. Charles and Ameristar Council Bluffs.
Additionally, in 2003 we achieved the highest market share in each of the
markets in which we operate.

Net revenues at Ameristar St. Charles for 2003 were $256.6 million, up
$66.1 million, or 34.7%, over the prior year. We continue to experience revenue
growth in St. Charles as a result of the expanded facility completed in August
2002, the implementation of our targeted marketing programs and growth in the
overall St. Louis market. In 2003, we increased our market share to 31.3% from
24.4% in 2002. Casino revenues increased $68.1 million year-over-year, led by
improvements in slot revenues of $59.6 million, or 34.8%. We experienced
similar positive trends in food and beverage revenues, which increased $13.6
million, or 72.7%, in 2003 as a result of the additional restaurant capacity in
the new facility. Promotional allowances, which are reported as a reduction of
revenues, increased $17.0 million, or 67.4% in 2003 compared to 2002, in
substantial part due to a larger patron base generated by the expanded
facility.

Net revenues at Ameristar Kansas City improved by $3.1 million, or 1.5%,
year-over-year. Casino revenues increased modestly by $4.4 million, and were
negatively impacted by construction disruption for the first three fiscal
quarters of 2003. In September 2003, we completed the significant renovation
and enhancement projects and introduced the All New Ameristar Kansas City. We
have experienced positive trends in net revenues following the introduction of
the new facility and continue to earn the highest market share in Kansas City,
with a 34.4% share of the market in 2003 compared to 34.2% in 2002. The
construction disruption had less of an impact on our 2003 food and beverage
revenues since most of the dining outlets were renovated early in the year. As
a result, food and beverage revenues improved by $4.9 million, or 19.3%, from
2002. Promotional allowances increased $6.8 million, or 21.6%, in 2003 as a
result of growth in our patron base and increased competition in the market. We
continue to face increased competition from a competitor that recently
completed a major expansion of its facility and from increased promotional
spending by other operators.

At Ameristar Council Bluffs, we continued to see steady increases in net
revenues and market share. Net revenues in 2003 increased $11.3 million, or
7.8%, over 2002, driven by increases in casino revenues of $8.2 million, or
5.7%. The improvements in casino revenues were attributable to a higher win per
admission of $55.08 in 2003 compared to $50.01 in 2002, resulting from the
implementation of targeted marketing programs. Our market share also increased,
from 37.9% in 2002 to 39.2% in 2003.

At Ameristar Vicksburg, our net revenues increased $4.1 million, or 4.5%,
year-over-year, despite an overall decline in the market of 1.7%. Two factors
contributed to our revenue growth. Management believes that we benefited from a
change in ownership of one of our competitors in the market in October 2003.
Additionally, we continue to focus on the implementation of efficient and
effective promotional allowances. As a result, we increased our casino revenues
by $1.9 million year-over-year and at the same time decreased our promotional
allowances by $2.3 million. Our market share increased from 39.2% in 2002 to
40.7% in 2003.

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Our Jackpot properties net revenues declined slightly to $58.8 million in
2003 from $59.4 million in 2002. The Jackpot properties were impacted by
increased competition from a Native American gaming facility that is located
closer to a portion of our market and by adverse weather conditions in the
fourth quarter of 2003.

Operating Income

For 2003, consolidated operating income was $139.9 million, representing
an increase of $24.7 million, or 21.5%, from 2002, and operating income margin
improved to 17.9% from 16.5% in 2002.

Ameristar St. Charles generated $61.3 million of income from operations
during 2003, representing an increase of $30.9 million, or 101.6%, from 2002.
Operating income in 2002 includes $5.8 million of preopening expenses related
to the new St. Charles facility that opened in August 2002 and $4.4 million of
impairment loss associated with assets held for sale that were not utilized in
the new facility. Excluding these charges, operating income increased $20.7
million, or 68.1%, year-over-year. Operating income margin improved to 23.9%,
from 15.9% in 2002. Our operating income margin has improved steadily as a
result of labor management and other cost containment strategies that we
implemented following the opening of the new facility.

Operating income at Ameristar Kansas City declined from $41.5 million in
2002 to $40.4 million in 2003, representing a decrease of 2.7%. The decrease in
operating income is attributable to construction disruption related to the
significant enhancements and renovations and higher marketing and advertising
expense, including $1.3 million of costs incurred to open the new dining and
entertainment venues and to market and promote the All New Ameristar Kansas
City. Depreciation and amortization expense increased by $2.1 million from
2002 as a result of newly constructed assets being placed in service and
significant purchases of coinless slot technology. These increases were
partially offset by an improvement in our self-funded health insurance expense
of $1.1 million year-over-year as a result of a lower occurrence of claims and
a benefit of $1.1 million for sales and use tax refunds recorded in 2003.

Ameristar Council Bluffs reported operating income of $45.6 million, an
increase of 18.1% from 2002. Operating income margins also improved by 2.6
percentage points to 29.1% in 2003. The improvement in operating income margin
was the result of effective management of controllable costs during periods of
revenue growth. These improvements in our margin were partially offset by
increases in depreciation and amortization expense of $0.8 million, or 8.9%,
due to an increase in our depreciable asset base resulting primarily from
purchases of coinless slot technology during 2003. We will continue to focus on
margin improvement in 2004. As more fully described in Risk Factors, the Iowa
Supreme Court recently issued a ruling related to the gaming tax structure in
Iowa that we expect will negatively affect riverboat casino operators. If the
Iowa legislature increases gaming taxes on riverboat casinos or modifies
competitive conditions for racetrack casinos as a result of this decision, as
it is currently considering, our future financial results would be adversely
impacted.

Ameristar Vicksburgs operating income decreased to $21.2 million in 2003
from $23.3 million in 2002. Operating margins also declined from 25.6% to 22.3%
year-over-year, primarily due to increases in health insurance and legal
expenses. Our self-funded health insurance expense increased to $4.0 million in
2003 from $2.6 million in 2002 due to a significant increase in the number of
large claims.

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Operating income at our Jackpot properties declined by $1.8 million, or
18.4%, in 2003 and operating income margin declined to 13.6% in 2003 compared
to 16.6% in 2002. The operating results were negatively impacted in 2003 by
increases in health insurance expense of $0.3 million and inventory write-downs
of approximately $0.5 million.

Corporate expense increased $8.2 million, or 28.8%, in 2003 as a result of
the continued growth of the Company, the consolidation of certain management
functions at the corporate level, the addition of corporate staff to position
us for future expansion, higher management bonuses and costs incurred in 2003
related to the unsuccessful pursuit of a corporate acquisition.

Interest Expense

Consolidated interest expense, net of amounts capitalized, was $64.3
million in 2003 compared $51.2 million in 2002. Total interest cost in 2003 was
$65.9 million, a decrease of $3.2 million from $69.1 million in 2002. The
decrease reflects: (1) a lower average interest rate on our outstanding debt
due to a further decline in the LIBOR rate; (2) a reduction in interest cost as
a result of the expiration of our interest rate collar in June 2003; and (3) a
lower weighted average debt balance due to mandatory and accelerated principal
reductions in 2003. Capitalized interest decreased from $17.9 million in 2002
to $1.6 million in 2003. Capitalized interest in 2002 primarily related to
construction on the new St. Charles facility. In 2003, capitalized interest
related primarily to the significant enhancements and renovations at Ameristar
Kansas City.

Income Tax Expense

Our effective income tax rate was 37.0% in 2003 and 36.5% in 2002. The
federal income tax statutory rate was 35.0% in both years. The differences from
the statutory rate are due to state income taxes and the effect of certain
expenses we incurred which are not deductible for federal income tax purposes.

Net Income

Net income increased to $47.6 million for the year ended December 31, 2003
compared to $40.5 million in 2002 and diluted earnings per share increased to
$1.76 in 2003 from $1.50 in 2002. Our net income and diluted earnings per share
in 2003 increased as a result of revenue growth, which was partially offset by
increases in depreciation and amortization expense and interest expense
year-over-year.

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Year Ended December 31, 2002 Versus Year Ended December 31, 2001

Net Revenues

Consolidated net revenues for the year ended December 31, 2002 were $698.0
million compared to $602.8 million for 2001, an increase of $95.2 million, or
15.8%. The improvement in revenues is primarily attributable to increased
revenues at the new St. Charles facility, which opened on August 6, 2002, as
well as continued revenue growth at all other properties.

Net revenues at Ameristar St. Charles for 2002 were $190.5 million, up
$51.2 million, or 36.8%. The growth in net revenues is due mainly to the
opening of the new facility. Ameristar St. Charles market share grew from
19.9% in the first quarter of 2002 to 29.4% in the fourth quarter of 2002.

Ameristar Kansas Citys net revenues for 2002 were $211.7 million, up $9.2
million, or 4.5%. The increase is mainly the result of effective targeted
marketing programs and was achieved despite increased competition following the
June 2001 opening of a competitors newly renovated facility. Ameristar Kansas
City had a 34.2% market share in 2002, up from 32.8% in 2001.

Net revenues at Ameristar Council Bluffs for 2002 were $145.4 million,
representing an increase of $21.1 million, or 17.0%, over 2001. The property
continued to benefit from the ongoing refinement of targeted marketing
programs, the installation of new gaming equipment and the renovation project
that was completed in the first quarter of 2001. The propertys market share
also improved significantly, from 33.7% in 2001 to 37.9% in 2002.

Ameristar Vicksburgs net revenues for 2002 increased to $91.0 million
from $75.1 million in 2001, up 21.2%, due to the continuing refinement of
targeted marketing programs, the installation of new gaming product and the
renovation project that was completed in the second quarter of 2001. Ameristar
Vicksburg, the long-time market share leader in Vicksburg, improved its market
share to 39.2% in 2002, up from 32.7% in 2001.

The Jackpot properties generated $59.4 million of net revenues in 2002, an
increase of 4.3% compared to the same period in 2001. This improvement is
attributable primarily to more effective marketing programs in 2002.

Operating Income

Income from operations for the year ended December 31, 2002 improved
slightly to $115.2 million, up $0.3 million, or 0.3%, over income from
operations in 2001. Strong results at Ameristar Council Bluffs and Ameristar
Vicksburg contributed to this improvement while operating income at Ameristar
St. Charles and Ameristar Kansas City decreased and corporate expense increased
in 2002 compared to 2001. Income from operations in 2002 includes preopening
expense of $6.4 million related to the opening of the new St. Charles facility
and impairment loss of $5.2 million on assets held for sale, including the
former casino barge at Ameristar St. Charles and certain gaming equipment at
various properties. Our operating income margin decreased from 19.1% in 2001 to
16.5% in 2002.

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Ameristar St. Charles generated $30.4 million of income from operations
during 2002, representing a decrease of $10.6 million, or 25.9%, from the prior
year. In 2002, we incurred $5.8 million of preopening expenses related to the
new St. Charles facility that opened in August 2002 and $4.4 million of
impairment loss associated with certain assets held for sale, including the
casino barge and gaming equipment, that were not utilized after the new
facility opened. In addition, labor and marketing expenses increased by $15.8
million in the third and fourth quarter of 2002 compared to the same period in
2001, due to the increased size and the scope of amenities offered at the new
facility and initial operating inefficiencies associated with the opening of
the new facility. Depreciation expense increased by $7.0 million in the same
period as the result of the substantial increase in the base of depreciable
assets after the new facility opened. The operating income margin at Ameristar
St. Charles has steadily improved following the opening of the new facility in
August 2002. This improvement is largely attributable to improved operating
efficiencies through cost control measures which we implemented, especially in
the areas of labor and marketing, as well as the heightened customer awareness
of the scope and quality of the new facility.

Income from operations at Ameristar Kansas City declined from $43.4
million in 2001 to $41.5 million in 2002, representing a decrease of 4.6%. The
propertys results were adversely impacted by business disruption associated
with the ongoing construction of enhancements to the casino and entertainment
facilities that began in July 2002, and construction of the parking garage that
began in early 2002. In addition, higher labor and related costs primarily as a
result of increased health insurance costs, as well as additional expenses
directly related to increased revenues, including gaming taxes and other
expenses attributable to player development strategies, were principally
responsible for the increase in operating expenses. These increases were
partially offset by a decrease in depreciation and amortization expense as a
result of the absence of goodwill amortization expense in 2002 compared to $3.0
million recorded in the prior year. In accordance with Statement of Financial
Accounting Standards (SFAS) No. 142, which we adopted on January 1, 2002, we
no longer amortize goodwill.

Ameristar Council Bluffs reported income from operations of $38.6 million
for 2002 compared to $28.0 million in 2001, a 37.6% improvement. This
significant growth is primarily due to increased revenues as discussed above
and improved operating efficiencies as the result of a continued emphasis on
controlling costs.

Ameristar Vicksburgs income from operations of $23.3 million in 2002
represents an increase of $8.9 million, or 61.8%, compared to 2001. Similar to
Ameristar Council Bluffs, higher revenues due to the factors discussed above
and greater operating efficiencies contributed to the improvement in operating
results at Ameristar Vicksburg. The increase was partially offset by $0.5
million of impairment loss on gaming equipment held for sale.

The Jackpot properties reported income from operations of $9.8 million in
2002, a $0.5 million, or 5.2%, increase compared to 2001. This increase was due
to increased revenues as discussed above.

Corporate expense increased by $7.0 million, or 32.7%, in 2002 compared to
2001. This increase was mainly attributable to the increase in corporate
payroll as a result of our growth since the acquisition of the Missouri
properties in December 2000 as well as the consolidation of certain management
functions at the corporate level in order to achieve greater operating
efficiencies and consistency.

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Interest Expense

Consolidated interest expense, net of capitalized interest of $17.9
million in 2002 and $17.8 million in 2001, was $51.2 million in 2002 compared
to $64.9 million in 2001. This reduction reflects: (1) a lower average interest
rate on our outstanding debt due to a decline in the LIBOR rate, the amendment
of our senior credit facilities in May 2002 to reduce our borrowing cost and an
increase by Standard & Poors Ratings Services in September 2002 of the rating
on our senior secured debt to BB-, which further reduced the interest rate on a
portion of our senior credit facilities; (2) a $3.5 million write-off in the
first quarter of 2001 of unamortized interim credit facility loan fees and
prepayment premiums on retired senior debt; and (3) a $2.8 million decrease in
recorded interest expense from 2001 to 2002 associated with the fair value of
the interest rate collar agreement covering $50.0 million principal amount of
indebtedness under our senior credit facilities. These factors were partially
offset by a higher weighted-average outstanding debt level in 2002, as we
borrowed $157 million under the senior credit facilities to fund construction
projects and $14.0 million from a commercial bank to finance equipment
purchases for the new St. Charles facility during 2002.

After the opening of the new casino and entertainment facility at
Ameristar St. Charles in August 2002, we no longer capitalized the interest
payments associated with borrowings made to fund construction. As a result,
interest expense increased substantially. We recorded $16.4 million, $15.2
million and $0.5 million in capitalized interest associated with this project
during 2002, 2001 and 2000, respectively.

Income Tax Expense

Our effective federal income tax rate was 35.2% in 2002 and 31.5% in 2001.
The federal income tax statutory rate was 35% in both years. The differences
from the statutory rate are due to the effects of certain expenses incurred by
us which are not deductible for federal income tax purposes and other tax
credits. In 2001, we recorded $1.7 million of previously unrecognized tax
credits based on continued improvement in operating performance and our
expectation of generating significant taxable income in future years. These tax
credits directly reduced income tax expense. Income tax expense for the years
ended December 31, 2002 and 2001 include $0.9 million and $0.7 million,
respectively, of state income taxes. See Liquidity and Capital Resources
below for additional discussion regarding our available tax credits and
carryforwards.

Net Income

Net income of $40.5 million for the year ended December 31, 2002 included
$4.2 million (net of tax) of preopening expenses relating to the new St.
Charles facility ($0.15 per share on a diluted basis) and $3.4 million (net of
tax) of impairment loss on assets held for sale ($0.13 per share on a diluted
basis). Our diluted earnings per share for the year ended December 31, 2002
were $1.50.

Net income of $33.2 million for the year ended December 31, 2001 included
charges of $2.3 million (net of tax) relating to the amortization of interim
credit facility fees, prepayment premiums on retired senior debt and change in
accounting principles, which collectively reduced diluted earnings per share by
$0.11. Net income in 2001 benefited by $1.7 million, or $0.08 per

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share, from our recording of previously unrecognized tax credits. Our diluted
earnings per share for the year ended December 31, 2001 were $1.51.

Liquidity and Capital Resources

Cash flows from operating activities

Cash flows provided by operating activities were $151.2 million, $126.6
million, and $111.3 million for the years ended December 31, 2003, 2002 and
2001, respectively. The increase from 2002 to 2003 was mainly the result of the
contribution of operating income by Ameristar St. Charles as well as
improvements in operating income at Ameristar Council Bluffs. The increase was
also attributable to an income tax refund of $10.7 million received during
2003. The increase from 2001 to 2002 was due primarily to the improved
operations at Ameristar Council Bluffs and Ameristar Vicksburg.

Cash flows from investing activities

Cash flows used in investing activities were $83.4 million, $241.5 million
and $32.0 million for the years ended December 31, 2003, 2002 and 2001,
respectively. We incurred $69.2 million, $255.5 million and $114.1 million in
capital expenditures (including capitalized interest) in 2003, 2002 and 2001,
respectively. See Liquidity below for further discussion on capital
expenditures.

The sale of The Reserve in January 2001 generated $71.6 million in cash
flows from investing activities.

Cash flows from financing activities

Cash flows used in financing activities were $80.1 million and $74.5
million for the years ended December 31, 2003 and 2001, respectively. Cash
flows provided by financing activities were $164.3 million for the year ended
December 31, 2002. Cash flows used in or provided by financing activities were
significantly impacted by the following transactions in 2001, 2002 and 2003:



| |  |  | In 2003, we made principal payments of $82.2 million on our
long-term debt, including $35.0 million in prepayments on our senior
credit facilities, an $11.4 million prepayment on the St. Charles
equipment financing and $3.4 million in prepayments on other leases and
notes.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | In December 2002, we borrowed an additional $100 million under the
incremental term loan commitment provisions of our senior credit
facilities and repaid all $67.7 million of the outstanding debt under
the $75 million revolving credit facility.                             
|
| |  |  | In October 2002, we borrowed $14.0 million from a commercial bank
to finance equipment purchases for the new St. Charles facility.                                                                                                                                               
|
| |  |  | Between January and September 2002, we borrowed $124.7 million
under our senior credit facilities to fund various construction
projects.                                                                                                                                         

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| |  |  | In December 2001, we sold 4.9 million shares of our Common Stock in
an underwritten public offering and used the $94.2 million of proceeds,
net of underwriting discounts and related expenses, to repay term loans
under our senior credit facilities.                                                                    
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | In February 2001, we issued $380 million of senior subordinated
notes and used the proceeds to, among other things: (1) retire the $300
million senior subordinated credit facility; and (2) prepay and
permanently reduce term loans outstanding under our senior credit
facilities.                                      
|
| |  |  | In January 2001, we sold The Reserve for approximately $71.6
million and used the proceeds to, among other things: (1) prepay and
permanently reduce term loans B and C outstanding under our senior
credit facilities; and (2) repay amounts outstanding under the
revolving loan tranche of our senior credit facilities.

As a result of the 2003 transactions described above, our total long-term
debt outstanding (including current maturities) decreased from $796.3 million
at December 31, 2002 to $716.7 million at December 31, 2003.

Capital expenditures

Capital expenditures made in 2003 totaled $69.2 million (of which $1.6
million was capitalized interest) and included: (1) $24.8 million on the All
New Ameristar Kansas City project, which included a completely renovated
casino floor and the introduction of several new food and entertainment venues;
(2) $20.4 million related to the continued implementation of coinless slot
technology; (3) $6.6 million related to the total renovation of the buffet and
kitchen at Ameristar Vicksburg; and (4) $17.4 million related to general
capital maintenance at all of our properties.

We incurred $255.5 million in capital expenditures in 2002, which
consisted of the following: (1) $158.9 million on the new casino and
entertainment facility at Ameristar St. Charles completed in August 2002; (2)
$15.3 million on the 2,650-space parking garage at Ameristar Kansas City placed
in service in July 2002; (3) approximately $14.8 million on the All New
Ameristar Kansas City project; (4) capitalized interest of $17.9 million
primarily related to the above projects; and (5) $48.6 million on maintenance
capital expenditures at all of our properties.

Capital expenditures made during 2001 totaled $114.1 million and included:
(1) approximately $51.1 million on the new casino and entertainment facility at
Ameristar St. Charles; (2) approximately $8.6 million on the new parking garage
at Ameristar Kansas City; (3) $8.0 million on the renovation and enhancement
project at Ameristar Council Bluffs; (4) $9.5 million on the renovation and
enhancement project at Ameristar Vicksburg; (5) capitalized interest of $17.8
million primarily associated with the above projects; and (6) $19.1 million on
maintenance capital expenditures at all of our properties.

The senior credit facilities limit our aggregate capital expenditures in
each year. For the year ended December 31, 2003, our permitted consolidated
capital expenditures were limited to 9.5% of our consolidated gross revenues,
or $86.5 million. In addition, the senior credit facilities permit us to incur
up to certain additional amounts on specified projects. As of December 31,
2003, we were in compliance with all capital expenditure covenant requirements.

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Liquidity

Our principal long-term debt at December 31, 2003 consisted of $334.0
million of secured senior credit facilities and $380.0 million in aggregate
principal amount of 10.75% senior subordinated notes due 2009. At December 31,
2003, the senior credit facilities consisted of a $75 million revolving term
loan facility, term loan A and term loan B (which had $33.5 million, $13.7
million and $286.8 million outstanding, respectively), and a $75 million
revolving credit facility, $68.5 million of which was available for borrowing.

In February 2004, we amended the senior credit facilities. The primary
elements of the amendment include: (1) the consolidation of the revolving term
loan facility, term loan A and term loan B into a new term loan B-1, which
matures on December 20, 2006; (2) a 0.5% reduction in the applicable interest
rate margin on term loan B-1 compared to the former term loan B; (3) a revised
repayment schedule whereby we will make mandatory quarterly principal payments
of $0.8 million in 2004 and 2005 and mandatory quarterly principal payments of
$81.8 million in 2006; and (4) the ability to pay cash dividends on our Common
Stock in a total amount of up to $25 million.

All mandatory principal repayments have been made through December 31,
2003. Significant principal repayments will be required on term loan B-1 in
2004 through 2006. We expect to fund principal repayments from cash flows from
operating activities in 2004.

We are required to comply with various affirmative and negative financial
and other covenants under the senior credit facilities and the indenture
governing our senior subordinated notes. These covenants include, among other
things, restrictions on the incurrence of additional indebtedness, restrictions
on dividend payments and other restrictions, as well as requirements to
maintain certain financial ratios and tests. As of December 31, 2003, we were
in compliance with all applicable covenants.

We historically have funded our daily operations through net cash provided
by operating activities and our significant capital expenditures primarily
through operating cash flows, bank debt and other debt financing. We believe
that our cash flows from operations, cash and cash equivalents and availability
under our senior credit facilities will support our operations and liquidity
requirements, including current capital expenditure plans, for the foreseeable
future. Our ability to borrow funds under our senior credit facilities at any
time is primarily dependent upon the amount of our EBITDA, as defined for
purposes of our senior credit facilities, for the preceding four fiscal
quarters. As of December 31, 2003, in addition to the $68.5 million available
for borrowing under the senior credit facilities, we had $78.2 million of cash
and cash equivalents, approximately $45 million of which were required for
daily operations.

In January 2003, we received a $10.7 million federal income tax refund
related to the 2002 tax year as our actual taxable income for the year was
significantly lower than the estimates used to calculate quarterly
installments. Additionally, in 2003 we made federal and state tax payments, net
of $0.2 million in state tax refunds, of $2.3 million. In 2002, we paid $10.7
million in estimated federal income tax payments through quarterly
installments. We did not make any federal income tax payments in 2001. At
December 31, 2003, we had $92.9 million in net operating loss carryforwards,
which will reduce the amount of federal income tax cash payments that we are
required to make in 2004.

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We intend to utilize earnings to continue reducing debt, expand and
enhance existing facilities and invest in future growth opportunities that
diversify our revenues. We plan to reduce long-term debt by up to approximately
$80.0 million in 2004. Our capital expenditures in 2004 are expected to be
approximately $85.0 million, consisting of approximately $35.0 million for the
purchase of additional coinless slot machines, $15.0 million for hotel room
renovations at Ameristar Council Bluffs and Ameristar Kansas City and $35.0
million for other capital maintenance across all properties. Although we have
never paid dividends on our Common Stock, we are currently considering the
payment of dividends.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined in Item
303(a)(4)(ii) of Securities and Exchange Commission Regulation S-K.

Contractual and Other Commitments

The following table summarizes our material obligations and commitments to
make future payments under certain contracts, including long-term debt
obligations, capitalized leases, operating leases and certain construction
contracts.

|                                |  |                                       |        |           |  |           |         |            |  |       |       |  |  |   |         |  |  |   |         | 
|------------------------------- |  | ------------------------------------- | ------ | --------- |  | --------- | ------- | ---------- |  | ----- | ----- |  |  | - | ------- |  |  | - | ------- | 
|                                |  | Payments Due by Period (in Thousands)
|                                |  |                                      
|Contractual Obligations:        |  | 2004                                  |        | 2005-2006 |  | 2007-2008 |         | After 2008 |  | Total
|                                |  |                                       |        |           |  |           |         |            |  |      
|Long-term debt instruments      |  | $                                     | 3,885  |           |  | $         | 331,196 |            |  | $     | 284   |  |  | $ | 381,351 |  |  | $ | 716,716 | 
|Capital leases                  |  |                                       | 25     |           |  |           | 50      |            |  |       | 50    |  |  |   | 381     |  |  |   | 506     | 
|Operating leases                |  |                                       | 2,714  |           |  |           | 3,778   |            |  |       | 1,813 |  |  |   | 1,820   |  |  |   | 10,125  | 
|Material construction
contracts |  |                                       | 10,829 |           |  |           |        |            |  |       |      |  |  |   |        |  |  |   | 10,829  | 
|                                |  |                                       |        |           |  |           |         |            |  |       |       |  |  |   |         |  |  |   |         | 
|Total                           |  | $                                     | 17,453 |           |  | $         | 335,024 |            |  | $     | 2,147 |  |  | $ | 383,552 |  |  | $ | 738,176 | 
|                                |  |                                       |        |           |  |           |         |            |  |       |       |  |  |   |         |  |  |   |         | 

|                   |  |                                       |       |           |  |           |     |            |  |       |   |  |  |   |   |  |  |   |       | 
|------------------ |  | ------------------------------------- | ----- | --------- |  | --------- | --- | ---------- |  | ----- | - |  |  | - | - |  |  | - | ----- | 
|                   |  | Payments Due by Period (in Thousands)
|                   |  |                                      
|Other Commitments: |  | 2004                                  |       | 2005-2006 |  | 2007-2008 |     | After 2008 |  | Total
|                   |  |                                       |       |           |  |           |     |            |  |      
|Letters of credit  |  | $                                     | 6,294 |           |  | $         | 170 |            |  | $     |  |  |  | $ |  |  |  | $ | 6,464 | 

We were not required to make significant cash payments for federal income
taxes during the past three years due to the utilization of net operating loss
carryforwards. At December 31, 2003, available unused net operating loss
carryforwards that may be applied against future taxable income totaled
approximately $93.0 million. In addition, the alternative minimum tax credit of
approximately $2.0 million at December 31, 2003 can be carried forward
indefinitely to reduce future federal income tax liabilities. We anticipate
making increased cash tax payments in 2004. The Internal Revenue Service is
currently conducting an examination of our federal tax returns for 1998 through
2001. The amount of our cash tax payments required in 2004 will be determined
in part by the outcome of the IRS examination, which may result in a reduction
of the

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currently available net operating loss carryforwards. We do not expect
our cash tax payments in 2004 to exceed $20.0 million.

Another significant operating use of cash in 2004 is interest payments.
Our cash interest payments were $62.2 million, $63.3 million and $62.4 million
for the years ended December 31, 2003, 2002 and 2001, respectively. We expect
our cash interest payments to decrease in 2004 as a result of the February 2004
amendment to our senior credit facilities, which is described in Note 5 -
Notes payable and long-term debt of Notes to Consolidated Financial
Statements.

We routinely enter into operational contracts in the ordinary course of
our business, including construction contracts for minor projects that are not
material to our business or financial condition as a whole. Our commitments
relating to these contracts are recognized as liabilities in our consolidated
balance sheets when services are provided with respect to such contracts.

At December 31, 2003, we had outstanding letters of credit in the amount
of $6.5 million, which reduced the amount available to borrow under our senior
credit facilities. We do not have any other guarantees, contingent commitments
or other material liabilities that are not reflected on our consolidated
balance sheets. For more information, see Note 5  Notes payable and long-term
debt of Notes to Consolidated Financial Statements.

Critical Accounting Policies and Estimates

Managements discussion and analysis of our results of operations and
liquidity and capital resources are based on our consolidated financial
statements. To prepare our consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America, we
must make estimates and assumptions that affect the amounts reported in the
consolidated financial statements. We regularly evaluate these estimates and
assumptions, particularly in areas we consider to be critical accounting
estimates, where changes in the estimates and assumptions could have a material
impact on our results of operations, financial position and, generally to a
lesser extent, cash flows. Senior management and the Audit Committee of the
Board of Directors have reviewed the disclosures included herein about our
critical accounting estimates, and have reviewed the processes to determine
those estimates.

Property and Equipment

We have significant capital invested in our property and equipment, which
represents approximately 80% of our total assets. Judgments are made in
determining the estimated useful lives of assets, salvage values to be assigned
to assets and if or when an asset has been impaired. The accuracy of these
estimates affects the amount of depreciation expense recognized in our
financial results and whether we have a gain or loss on the disposal of the
asset. We assign lives to our assets based on our standard policy, which we
believe is representative of the useful life of each category of assets. We
review the carrying value of our property and equipment whenever events and
circumstances indicate that the carrying value of an asset may not be
recoverable from the estimated future cash flows expected to result from its
use and eventual disposition. The factors we consider in performing this
assessment include current operating results, trends and prospects, as well as
the effect of obsolescence, demand, competition and other economic factors.

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Excess of Purchase Price Over Fair Value of Net Assets Acquired

At December 31, 2003 we had approximately $80.8 million in goodwill and
other intangible assets on our consolidated balance sheet resulting from our
acquisition of the Missouri properties in December 2000. According to the
requirements of SFAS No. 142, which we adopted on January 1, 2002, we completed
our initial assessment and our annual assessment for impairment and determined
that no goodwill impairment existed. The assessment in both cases requires the
use of estimates about future operating results of each reporting unit to
determine its estimated fair value. Changes in forecasted operations can
materially affect these estimates.

Star Awards Program

Our customer reward program, Star Awards, allows customers to earn certain
point-based cash rewards or complimentary goods and services based on the
volume of the customers gaming activity. Customers can accumulate reward
points over time that they may redeem at their discretion under the terms of
the program. The reward credit balance is forfeited if a customer does not earn
any reward credits over any subsequent 12-month period. As a result of the
ability of the customer to bank the reward points, we accrue the expense of
reward points, after giving effect to estimated forfeitures, as they are
earned. At December 31, 2003 and 2002, $6.6 million and $5.1 million,
respectively, was accrued. The value of these point-based cash rewards or
complimentary goods and services are netted against revenue as a promotional
allowance.

Cash Coupons

Our former, current and future players may be awarded, on a discretionary
basis, cash coupons based, in part, on their play volume. The coupons are
redeemable within a short time period, generally seven days, and are redeemable
only on a return visit. There is no ability to renew or extend the offer. We
recognize a reduction in revenue as a promotional allowance for these coupons
when the coupons are redeemed.

Self-Funded Employee Health Care Insurance Program

Our employee health care benefits program is self-funded up to a maximum
amount per claim. Accruals are based on claims filed and estimates of claims
incurred but not reported. At December 31, 2003 and 2002, our estimated
liabilities for unpaid and incurred but not reported claims totaled $4.1
million and $3.6 million, respectively. We consider historical loss
experience and certain unusual claims in estimating these
liabilities, based upon statistical data provided
by the independent third party administrator of the health care
benefits program. We
believe the use of this method to account for these liabilities provides a
consistent and effective way to measure these highly judgmental accruals;
however, changes in health care costs, accident or illness frequency and
severity and other factors can materially affect the estimate for these
liabilities. We continually monitor the potential for changes in estimates,
evaluate our insurance accruals and adjust our recorded provisions.

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Income Taxes

We are subject to income taxes in the United States and in several states
in which we operate. We account for income taxes according to SFAS No. 109,
Accounting for Income Taxes. SFAS No. 109 requires the recognition of
deferred tax assets, net of applicable reserves, related to net operating loss
carryforwards and certain temporary differences. The standard requires
recognition of a future tax benefit to the extent that realization of such
benefit is more likely than not. Otherwise, a valuation allowance is applied.

At December 31, 2003, we had $50.2 million of deferred tax assets and
$105.7 million of deferred tax liabilities. We believe that it is more likely
than not that our deferred tax assets are fully realizable because of the
future reversal of existing taxable temporary differences and future projected
taxable income.

Our income tax returns are subject to examination by the Internal Revenue
Services and other tax authorities. We regularly assess the potential outcomes
of these examinations in determining the adequacy of our provision for income
taxes and our income tax liabilities. To determine necessary reserves, we must
make assumptions and judgments about potential actions by taxing authorities,
partially based on historical precedent. Our estimate of the potential outcome
of any uncertain tax issue is highly judgmental, and we believe we have
adequately provided for any reasonable and foreseeable outcomes related to
uncertain tax matters. When actual results of tax examinations differ from our
estimates, we adjust the income tax provision and our tax reserves in the
period in which the examination issues are settled.

Recently Issued Accounting Standards

In April 2003, the Financial Accounting Standards Board (FASB) issued
SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities. SFAS No. 149 amends and clarifies financial accounting and
reporting for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives) and
hedging activities under SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities. We adopted the provisions of SFAS No. 149 that relate
to SFAS 133 Implementation Issues on April 1, 2003. We adopted the provisions
related to contracts entered into or modified after June 30, 2003 on July 1,
2003, and there was no impact on our financial position, results of operations
or cash flows.

In June 2003, the Securities and Exchange Commission issued Release No.
33-8238, Managements Reports on Internal Control Over Financial Reporting and
Certification of Disclosure in Exchange Act Periodic Reports, pursuant to
Section 404 of the Sarbanes-Oxley Act of 2002. The Securities and Exchange
Commission rules require that we assess and report annually on our internal
control over financial reporting and that our independent public accountants
attest to our assessment. We will be required to issue our first report on
internal control over financial reporting in our Annual Report on Form 10-K for
the year ending December 31, 2004. We have developed a formal plan to achieve
compliance with these requirements and we have substantially completed the
implementation of this plan.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss arising from adverse changes in market
rates and prices, such as interest rates, foreign currency exchange rates and
commodity prices. Our primary exposure to market risk is interest rate risk
associated with our senior credit facilities. As of December 31, 2003, we had
$334.0 million outstanding under our senior credit facilities, bearing interest
at variable rates. Of this amount, $100 million is covered by an interest rate
swap agreement that fixes the interest rate thereon. This swap agreement
terminates on March 31, 2004. (See Note 5  Notes payable and long-term debt
of Notes to Consolidated Financial Statements for more discussion on derivative
instruments.) Other than the borrowings under the senior credit facilities and
$1.1 million in other long-term debt outstanding at December 31, 2003
(collectively, the Variable Rate Debt), all of our 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, 2003, the average
interest rate applicable to the Variable Rate Debt was 3.9%. An increase of one
percentage point in the average interest rate applicable to the Variable Rate
Debt outstanding at December 31, 2003 would increase our annual interest cost
by approximately $2.4 million. We continue to monitor interest rate markets and
may enter into interest rate collar or swap agreements or other derivative
instruments for additional amounts of principal under the senior credit
facilities as market conditions warrant.

Item 8. Financial Statements and Supplementary Data

The Report of Independent Public Accountants appears at page F-1 hereof,
and our Consolidated Financial Statements and Notes to Consolidated Financial
Statements appear at pages F-2 through F-22 hereof.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

(a)  Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation
of management, including our President and Chief Executive Officer and our
Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures as of the end of the period covered by
this Annual Report pursuant to Rule 13a-15 of the Securities Exchange Act of
1934, as amended. Based upon that evaluation, our President and Chief Executive
Officer and our Chief Financial Officer and other members of management
concluded that our disclosure controls and procedures are effective in timely
alerting them to material information relating to us (including our
consolidated subsidiaries) required to be included in our periodic filings with
the Securities and Exchange Commission.

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(b)  Changes in Internal Control Over Financial Reporting

No changes in our internal control over financial reporting have come to
managements attention during the last fiscal quarter that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.

PART III

Item 10. Directors and Executive Officers of the Registrant

The information required by this Item will be set forth under the captions
Proposal No. 1. Election of Directors and Section 16(a) Beneficial Ownership
Reporting Compliance in the definitive Proxy Statement for our 2004 Annual
Meeting of Stockholders (our Proxy Statement) to be filed with the Securities
and Exchange Commission on or about April 29, 2004 and is incorporated herein
by this reference.

Item 11. Executive Compensation

The information required by this Item will be set forth under the caption
Executive Compensation in our Proxy Statement and is incorporated herein by
this reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item will be set forth under the captions
Proposal No. 1. Election of Directors  Security Ownership of Certain
Beneficial Owners and Management and Executive Compensation  Equity
Compensation Plan Information in our Proxy Statement and is incorporated
herein by this reference.

Item 13. Certain Relationships and Related Transactions

The information required by this Item will be set forth under the caption
Certain Transactions in our Proxy Statement and is incorporated herein by
this reference.

Item 14. Principal Accountant Fees and Services

The information required by this Item will be set forth under the caption
Independent Public Accountants in our Proxy Statement and is incorporated
herein by this reference.

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PART IV Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K The following are filed as part of this Report: (a) 1. Financial Statements  Independent Auditors ReportConsolidated Balance Sheets as of December 31, 2003 and 2002Consolidated Statements of Operations for the years ended
December 31, 2003, 2002 and 2001Consolidated Statements of Stockholders Equity for the
years ended December 31, 2003, 2002 and 2001Consolidated Statements of Cash Flows for the years ended
December 31, 2003, 2002 and 2001Notes to Consolidated Financial Statements (a) 2. Financial Statement Schedules All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
related instructions or are inapplicable and therefore have been omitted. (a) 3. Exhibits The following exhibits 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 ACI 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 No. 0-22494. ExhibitNumber
    
    Description of Exhibit
    
    Method of Filing3(i)(a)
    
    Articles of Incorporation of ACI
    
    Incorporated by reference to
Exhibit 3.1 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(i)(b)
    
    Certificate of Amendment to
Articles of Incorporation of ACI
    
    Incorporated by reference to
Exhibit 3.1 to ACIs
Quarterly Report on Form 10-Q
for the quarter ended June
30, 2002.
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ExhibitNumber
    
    Description of Exhibit
    
    Method of Filing3(ii)
    
    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).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
Agreement) dated as of December
20, 2000 among ACI, the various
Lenders party thereto from time
to time, Wells Fargo 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)
    
    Incorporated by reference to
Exhibit 4.2(a) to ACIs
Annual Report on Form 10-K
for the year ended December
31, 2000 (the 2000 10-K).4.2(b)
    
    First Amendment to Credit
Agreement dated as of January
30, 2001 among ACI, the various
Lenders party to the Credit
Agreement, WFB, BSCLI, DBSI and
BTCo
    
    Incorporated by reference to
Exhibit 4.2(b) to the 2000
10-K.4.2(c)
    
    Second Amendment to Credit
Agreement dated as of May 31,
2002 among ACI, the various
Lenders party to the Credit
Agreement and Deutsche Bank
Trust Company Americas (f/k/a
Bankers Trust Company), as
Administrative Agent (DBTCA)
    
    Incorporated by reference to
Exhibit 4.1 to ACIs Current
Report on Form 8-K filed on
June 19, 2002.4.2(d)
    
    Third Amendment to Credit
Agreement dated as of November
22, 2002 among ACI, the various
Lenders party to the Credit
Agreement and DBTCA
    
    Incorporated by reference to
Exhibit 4.2 to ACIs Current
Report on Form 8-K filed on
December 4, 2002 (the
December 2002 8-K).4.2(e)
    
    First Incremental Commitment
Agreement dated as of December
2, 2002 among ACI, the
Incremental Lenders party
thereto, the Guarantors party
thereto and DBTCA
    
    Incorporated by reference to
Exhibit 4.1 to the December
2002 8-K.
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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit
    
    Method of Filing4.2(f)
    
    Fourth Amendment to Credit
Agreement dated as of December
19, 2003, among ACI, the various
Lenders party to the Credit
Agreement and DBTCA
    
    Filed electronically herewith.4.2(g)
    
    Fifth Amendment to Credit
Agreement dated as of February
27, 2004, among ACI, the various
Lenders party to the Credit
Agreement and DBTCA
    
    Filed electronically herewith.4.2(h)
    
    Guaranty made by each of ACIs
subsidiaries guaranteeing ACIs
obligations under the Credit
Agreement
    
    Incorporated by reference to
Exhibit 4.2(c) to the 2000
10-K.4.3
    
    Indenture dated as of February
2, 2001 among ACI, the
Guarantors (as defined therein)
and U.S. Bank Trust National
Association, as trustee
    
    Incorporated by reference to
Exhibit 4.4 to the 2000 10-K.*10.1(a)
    
    Employment Agreement dated
November 15, 1993 between ACI
and Thomas M. Steinbauer
    
    Incorporated by reference to
Exhibit 10.1(a) to ACIs
Annual Report on Form 10-K
for the year ended December
31, 1994 (the 1994 10-K).*10.1(b)
    
    Amendment No. 1 to Employment
Agreement dated as of October 5,
2001 between ACI and Thomas M.
Steinbauer
    
    Incorporated by reference to
Exhibit 10.2 to ACIs
Quarterly Report on Form 10-Q
for the quarter ended
September 30, 2001 (the
September 2001 10-Q).*10.1(c)
    
    Amendment No. 2 to Employment
Agreement dated as of August 15,
2002 between ACI and Thomas M.
Steinbauer
    
    Incorporated by reference to
Exhibit 10.2 to ACIs
Quarterly Report on Form 10-Q
for the quarter ended
September 30, 2002 (the
September 2002 10-Q).*10.1(d)
    
    Amended and Restated Executive
Employment Agreement dated as of
March 11, 2002 between ACI and
Gordon R. Kanofsky
    
    Incorporated by reference to
Exhibit 10.1(c) to ACIs
Annual Report on Form 10-K
for the year ended December
31, 2001 (the 2001 10-K).*10.1(e)
    
    Amendment to Amended and
Restated Executive Employment
Agreement dated as of August 16,
2002 between ACI and Gordon R.
Kanofsky
    
    Incorporated by reference to
Exhibit 10.3 to the September
2002 10-Q.
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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit
    
    Method of Filing*10.1(f)
    
    Executive Employment Agreement
dated as of March 13, 2002
between ACI and Peter C. Walsh
    
    Incorporated by reference to
Exhibit 10.1(d) to the 2001
10-K.*10.1(g)
    
    Amendment to Executive
Employment Agreement dated as of
August 16, 2002 between ACI and
Peter C. Walsh
    
    Incorporated by reference to
Exhibit 10.4 to the September
2002 10-Q.*10.1(h)
    
    Executive Employment Agreement
dated as of June 5, 2002 between
ACI and Angela R. Baker (now
known as Angela R. Frost)
    
    Incorporated by reference to
Exhibit 10.1(g) to ACIs
Annual Report on Form 10-K
for the year ended December
31, 2002 (the 2002 10-K).*10.2
    
    Ameristar Casinos, Inc. 1993
Non-Employee Director Stock
Option Plan, as amended and
restated
    
    Incorporated by reference to
Exhibit 10.2 to ACIs
Quarterly Report on Form 10-Q
for the quarter ended June
30, 1994.*10.3(a)
    
    Ameristar Casinos, Inc.
Management Stock Option
Incentive Plan, as amended and
restated
    
    Incorporated by reference to
Exhibit 10.3 to ACIs
Quarterly Report on Form 10-Q
for the quarter ended
September 30, 1996.*10.3(b)
    
    Amendment to Ameristar Casinos,
Inc. Amended and Restated
Management Stock Option
Incentive Plan
    
    Incorporated by reference to
Exhibit 10.3 to the September
2001 10-Q.*10.3(c)
    
    Second Amendment to Ameristar
Casinos, Inc. Amended and
Restated Management Stock Option
Incentive Plan
    
    Incorporated by reference to
Exhibit 10.3(c) to the 2002
10-K.*10.4(a)
    
    Ameristar Casinos, Inc. Amended
and Restated 1999 Stock
Incentive Plan, effective
January 24, 2003
    
    Incorporated by reference to
Appendix A to the definitive
Proxy Statement filed by ACI
under cover of Schedule 14A
on April 30, 2003.*10.4(b)
    
    Form of Stock Option Agreement
under Ameristar Casinos, Inc.
Amended and Restated 1999 Stock
Incentive Plan
    
    Filed electronically herewith.*10.5
    
    Ameristar Casinos, Inc. 2002
Non-Employee Directors Stock
Election Plan
    
    Incorporated by reference to
Appendix A to the definitive
Proxy Statement filed by ACI
under cover of Schedule 14A
on April 30, 2002 (the 2002
Proxy Statement).
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ExhibitNumber
    
    Description of Exhibit
    
    Method of Filing*10.6
    
    Ameristar Casinos, Inc.
Performance-Based Bonus Plan for
Craig H. Neilsen
    
    Incorporated by reference to
Appendix B to the 2002 Proxy
Statement.*10.7
    
    Form of Indemnification
Agreement between ACI and each
of its directors and executive
officers
    
    Incorporated by reference to
Exhibit 10.33 to Amendment
No. 2 to the Form S-1.10.8
    
    Plan of Reorganization, dated
November 15, 1993, between ACI
and Craig H. 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
    
    Incorporated by reference to
Exhibit 2.1 to the 1994 10-K.10.9
    
    Amended and Restated Excursion
Boat Sponsorship and Operations
Agreement dated October 7, 2002
between Iowa West Racing
Association and Ameristar Casino
Council Bluffs, Inc.
    
    Incorporated by reference to
Exhibit 10.1 to the September
2002 10-Q.10.10
    
    Settlement, Use and Management
Agreement and DNR Permit, dated
May 15, 1995, between the State
of Iowa acting through the Iowa
Department of Natural Resources
and ACCBI as assignee of Koch
Fuels, Inc.
    
    Incorporated by reference to
Exhibits 10.12 and 99.1 to
ACIs Annual Report on Form
10-K for the year ended
December 31, 1996.*10.11
    
    Ameristar Casinos, Inc. Deferred
Compensation Plan
    
    Incorporated by reference to
Exhibit 10.14 to the 2000
10-K.*10.12
    
    Master Trust Agreement for
Ameristar Casinos, Inc. Deferred
Compensation Plan, dated as of
April 1, 2001, between ACI and
Wilmington Trust Company
    
    Incorporated by reference to
Exhibit 10.15 to the 2002
10-K.14
    
    Ameristar Casinos, Inc. Code of
Ethics for the Chief Executive
Officer, Chief Financial Officer
and Chief Accounting Officer
    
    Filed electronically herewith.21
    
    Subsidiaries of ACI
    
    Filed electronically herewith.23
    
    Consent of Deloitte & Touche LLP
    
    Filed electronically herewith.
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ExhibitNumber
    
    Description of Exhibit
    
    Method of Filing31.1
    
    Certification of Craig H.
Neilsen, Chairman, President and
Chief Executive Officer,
pursuant to Rules 13a-14 and
15d-14 under the Securities
Exchange Act of 1934, as adopted
pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    Filed electronically herewith.31.2
    
    Certification of Thomas M.
Steinbauer, Senior Vice
President of Finance, Chief
Financial Officer and Treasurer,
pursuant to Rules 13a-14 and
15d-14 under the Securities
Exchange Act of 1934, as adopted
pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    Filed electronically herewith.32
    
    Certification of Chief Executive
Officer and Chief Financial
Officer pursuant to 18 U.S.C.
Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
    
    Filed electronically herewith.99
    
    Agreement to furnish the
Securities and Exchange
Commission certain instruments
defining the rights of holders
of certain long-term debt
    
    Incorporated by reference to
Exhibit 99.1 to the 2000
10-K.
   *
    
    Denotes a management contract or compensatory plan or arrangement. (b)     Reports on Form 8-K On October 29, 2003, we filed a Current Report on Form 8-K in which we
furnished, under Items 7, 9 and 12, a press release disclosing our financial
results for the third quarter of 2003. 65




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized. AMERISTAR CASINOS, INC.       
(Registrant)March 12, 2004
    
    By:
    
    /s/ Craig H.
Neilsen  by C. WilsonCraig H. NeilsenChairman of the Board, President andChief Executive Officer
 Pursuant to the requirements of the Securities Exchanges Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated. Signature
    
    Name and Title
    
    Date/s/ Craig
H. Neilsen by C. Wilson
    
    Craig H. Neilsen, Chairman of
the Board, President and Chief
Executive Officer (principal
executive officer)
    
    March 12, 2004/s/ Thomas M. Steinbauer
    
    Thomas M. Steinbauer, Senior
Vice President of Finance,
Chief Financial Officer and
Treasurer (principal financial
officer)
    
    March 12, 2004/s/ Thomas L. Malone
    
    Thomas L. Malone, Vice
President of Finance and
Controller (principal
accounting officer)
    
    March 12, 2004/s/ Larry A. Hodges
    
    Larry A. Hodges, Director
    
    March 12, 2004/s/ Joseph E. Monaly
    
    Joseph E. Monaly, Director
    
    March 12, 2004/s/ Leslie Nathanson Juris
    
    Leslie Nathanson Juris, Director
    
    March 12, 2004/s/ J. William Richardson
    
    J. William Richardson, Director
    
    March 12, 2004/s/ W. Bruce Turner
    
    W. Bruce Turner, Director
    
    March 12, 2004
 S-1




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##### Table of Contents



On
this 12th day of March, 2004, Craig H. Neilsen directed Connie Wilson,
in his presence as well as our own, to sign the foregoing document in two
places 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 signature. /s/ Janet CatronWitness/s/ Lisa K. NowakWitness
 STATE OF NEVADA
    
    )):ss.COUNTY OF CLARK
    
    )
 I,
Margene M. 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 in two places. 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
12th day of March, 2004. /s/
Margene M. OttenNotary Public
 My
Commission Expires:
    July 23, 2006Residing at: Las Vegas, NV
 S-2




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##### Table of Contents



INDEPENDENT AUDITORS REPORT 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 (the Company) as of
December 31, 2003 and 2002, and the related consolidated statements of
operations, stockholders equity and cash flows for each of the three years in
the period ended December 31, 2003. 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 of America. 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Ameristar Casinos, Inc. and
subsidiaries as of December 31, 2003 and 2002, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2003 in conformity with accounting principles generally accepted
in the United States of America. As described in Note 2 to the consolidated financial statements, the Company
adopted Statements of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities, and No. 138, Accounting for
Certain Derivative Instruments and Certain Hedging Activities  an Amendment of
FASB Statement No. 133, as of January 1, 2001, and adopted Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets,
as of January 1, 2002. DELOITTE & TOUCHE LLP Las Vegas, Nevada
March 10, 2004 F-1




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##### Table of Contents



AMERISTAR CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands, Except Share Data) December 31,2003
    
    2002ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    78,220
    
    
    $
    90,573Restricted cash
    
    
    2,677
    
    
    
    Accounts receivable, net
    
    
    5,234
    
    
    
    4,952Income tax refund receivable
    
    
    643
    
    
    
    11,614Inventories
    
    
    6,113
    
    
    
    6,585Prepaid expenses
    
    
    9,706
    
    
    
    9,413Deferred income taxes
    
    
    26,239
    
    
    
    24,730Assets held for sale
    
    
    235
    
    
    
    335Total current assets
    
    
    129,067
    

    
    
    148,202Property and Equipment, at cost:Buildings and improvements
    
    
    853,005
    
    
    
    820,057Furniture, fixtures and equipment
    
    
    246,615
    
    
    
    203,762Furniture, fixtures and equipment under capitalized leases
    
    
    
    
    
    
    5,6521,099,620
    
    
    
    1,029,471Less: Accumulated depreciation and amortization
    
    
    245,934
    
    
    
    186,986853,686
    
    
    
    842,485Land
    
    
    43,173
    
    
    
    43,173Construction in progress
    
    
    23,904
    
    
    
    30,719Total property and equipment, net
    
    
    920,763
    
    
    
    916,377Excess of purchase price over fair market value of net assets acquired
    
    
    80,816
    
    
    
    82,020Deposits and other assets
    
    
    24,604
    
    
    
    26,893TOTAL ASSETS
    
    $
    1,155,250
    
    
    $
    1,173,492LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    16,190
    
    
    $
    17,044Construction contracts payable
    
    
    10,599
    
    
    
    26,510Accrued liabilities
    
    
    66,311
    
    
    
    63,343Current obligations under capitalized leases
    
    
    4
    
    
    
    1,231Current maturities of notes payable and long-term debt
    
    
    3,885
    
    
    
    36,628Total current liabilities
    
    
    96,989
    
    
    
    144,756Obligations under capitalized leases, net of current maturities
    
    
    213
    
    
    
    953Long-term debt, net of current maturities
    
    
    712,831
    
    
    
    759,712Deferred income taxes and other long-term liabilities
    
    
    89,374
    
    
    
    65,875Commitments and contingenciesStockholders Equity:Preferred stock, $.01 par value: Authorized - 30,000,000 shares;
Issued  none
    
    
    
    
    
    
    Common stock, $.01 par value: Authorized - 60,000,000 shares;
Issued and outstanding - 26,611,214 shares at December 31, 2003
and 26,244,985 shares at December 31, 2002
    
    
    266
    
    
    
    262Additional paid-in capital
    
    
    150,382
    
    
    
    146,631Accumulated other comprehensive loss
    
    
    (688
    )
    
    
    (2,960
    )Retained earnings
    
    
    105,883
    
    
    
    58,263Total stockholders equity
    
    
    255,843
    
    
    
    202,196TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    1,155,250
    
    
    $
    1,173,492
 The accompanying notes are an integral part of these consolidated financial statements. F-2




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##### Table of Contents



AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Share Data) Years ended December 31,2003
    
    2002
    
    2001Revenues:Casino
    
    $
    760,376
    
    
    $
    678,642
    
    
    $
    568,259Food and beverage
    
    
    103,176
    
    
    
    80,783
    
    
    
    66,994Rooms
    
    
    25,136
    
    
    
    22,824
    
    
    
    22,802Other
    
    
    21,557
    
    
    
    19,387
    
    
    
    18,074910,245
    
    
    
    801,636
    
    
    
    676,129Less: Promotional allowances
    
    
    128,278
    
    
    
    103,673
    
    
    
    73,304Net revenues
    
    
    781,967
    
    
    
    697,963
    
    
    
    602,825Operating Expenses:Casino
    
    
    349,845
    
    
    
    297,476
    
    
    
    252,906Food and beverage
    
    
    59,747
    
    
    
    53,963
    
    
    
    46,169Rooms
    
    
    6,343
    
    
    
    6,826
    
    
    
    7,921Other
    
    
    12,522
    
    
    
    13,962
    
    
    
    11,813Selling, general and administrative
    
    
    149,292
    
    
    
    150,228
    
    
    
    129,060Depreciation and amortization
    
    
    63,599
    
    
    
    48,711
    
    
    
    40,101Impairment loss on assets held for sale
    
    
    687
    
    
    
    5,213
    
    
    
    Preopening expenses
    
    
    
    
    
    
    6,401
    
    
    
    Total operating expenses
    
    
    642,035
    
    
    
    582,780
    
    
    
    487,970Income from operations
    
    
    139,932
    
    
    
    115,183
    
    
    
    114,855Other Income (Expense):Interest income
    
    
    330
    
    
    
    174
    
    
    
    522Interest expense, net
    
    
    (64,261
    )
    
    
    (51,206
    )
    
    
    (64,931
    )Loss on early retirement of debt
    
    
    (701
    )
    
    
    
    
    
    
    Other
    
    
    288
    
    
    
    (272
    )
    
    
    (776
    )Income Before Income Tax Provision and Cumulative
Effect of Change in Accounting Principle
    
    
    75,588
    
    
    
    63,879
    
    
    
    49,670Income tax provision
    
    
    27,968
    
    
    
    23,345
    
    
    
    16,381Income Before Cumulative Effect of Change in
Accounting Principle
    
    
    47,620
    
    
    
    40,534
    
    
    
    33,289Cumulative effect of change in accounting
principle -
adoption of SFAS No. 133, net of income tax
benefit
of $73
    
    
    
    
    
    
    
    
    
    
    (135
    )Net Income
    
    $
    47,620
    
    
    $
    40,534
    
    
    $
    33,154Earnings Per Share:Income before cumulative effect of change in
accounting principle:Basic
    
    $
    1.80
    
    
    $
    1.55
    
    
    $
    1.59Diluted
    
    $
    1.76
    
    
    $
    1.50
    
    
    $
    1.52Cumulative effect of change in accounting principle:Basic
    
    $
    
    
    
    $
    
    
    
    $
    Diluted
    
    $
    
    
    
    $
    
    
    
    $
    (0.01
    )Net income:Basic
    
    $
    1.80
    
    
    $
    1.55
    
    
    $
    1.59Diluted
    
    $
    1.76
    
    
    $
    1.50
    
    
    $
    1.51
 The accompanying notes are an integral part of these consolidated financial statements. F-3




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##### Table of Contents



AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(in Thousands) Capital Stock
    
    Additional
    
    AccumulatedOther
    
    RetainedEarningsNumber of
    
    
    
    
    
    Paid-In
    
    Comprehensive
    
    (AccumulatedShares
    
    Amount
    
    Capital
    
    Loss
    
    Deficit)
    
    TotalBalance, December 31, 2000
    
    
    20,443
    
    
    $
    204
    
    
    $
    43,265
    
    
    $
    
    
    
    $
    (15,425
    )
    
    $
    28,044Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,154
    
    
    
    33,154Change in fair value of interest
rate swap agreement, net of
deferred tax of $1,052
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,953
    )
    
    
    
    
    
    
    (1,953
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,201Issuance of common stock, net of
offering costs
    
    
    4,900
    
    
    
    49
    
    
    
    94,179
    
    
    
    
    
    
    
    
    
    
    
    94,228Exercise of stock options
    
    
    516
    
    
    
    5
    
    
    
    1,994
    
    
    
    
    
    
    
    
    
    
    
    1,999Tax benefits of stock option
exercises
    
    
    
    
    
    
    
    
    
    
    1,864
    
    
    
    
    
    
    
    
    
    
    
    1,864Balance, December 31, 2001
    
    
    25,859
    
    
    
    258
    
    
    
    141,302
    
    
    
    (1,953
    )
    
    
    17,729
    
    
    
    157,336Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,534
    
    
    
    40,534Change in fair value of interest
rate swap agreement, net of
deferred tax of $470
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,007
    )
    
    
    
    
    
    
    (1,007
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,527Exercise of stock options
    
    
    386
    
    
    
    4
    
    
    
    1,819
    
    
    
    
    
    
    
    
    
    
    
    1,823Tax benefits of stock option
exercises
    
    
    
    
    
    
    
    
    
    
    3,510
    
    
    
    
    
    
    
    
    
    
    
    3,510Balance, December 31, 2002
    
    
    26,245
    
    
    
    262
    
    
    
    146,631
    
    
    
    (2,960
    )
    
    
    58,263
    
    
    
    202,196Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,620
    
    
    
    47,620Change in fair value of interest
rate swap agreement, net of
deferred tax of $1,224
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,272
    
    
    
    
    
    
    
    2,272Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,892Exercise of stock options
    
    
    366
    
    
    
    4
    
    
    
    2,130
    
    
    
    
    
    
    
    
    
    
    
    2,134Tax benefits of stock option
exercises
    
    
    
    
    
    
    
    
    
    
    1,621
    
    
    
    
    
    
    
    
    
    
    
    1,621Balance, December 31, 2003
    
    
    26,611
    
    
    $
    266
    
    
    $
    150,382
    
    
    $
    (688
    )
    
    $
    105,883
    
    
    $
    255,843
 The accompanying notes are an integral part of these consolidated financial statements. F-4




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##### Table of Contents



AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands) Years ended December 31,2003
    
    2002
    
    2001Cash Flows from Operating Activities:Net income
    
    $
    47,620
    
    
    $
    40,534
    
    
    $
    33,154Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    63,599
    
    
    
    48,711
    
    
    
    40,101Amortization of debt issuance costs and debt discounts
    
    
    4,978
    
    
    
    4,688
    
    
    
    7,365Loss on early retirement of debt
    
    
    701
    
    
    
    
    
    
    
    Change in value of interest rate collar agreement
    
    
    (1,013
    )
    
    
    886
    
    
    
    1,900Net increase in deferred compensation liability
    
    
    374
    
    
    
    2,686
    
    
    
    Impairment loss on assets held for sale
    
    
    687
    
    
    
    5,213
    
    
    
    Net loss (gain) on disposition of assets
    
    
    (289
    )
    
    
    341
    
    
    
    777Change in deferred income taxes
    
    
    24,100
    
    
    
    23,074
    
    
    
    14,560Increase in restricted cash
    
    
    (2,677
    )
    
    
    
    
    
    
    (Increase) decrease in accounts receivable, net
    
    
    (282
    )
    
    
    (1,299
    )
    
    
    7,668Decrease (increase) in income tax refund receivable
    
    
    10,971
    
    
    
    (11,614
    )
    
    
    125Decrease (increase) in inventories
    
    
    472
    
    
    
    (1,379
    )
    
    
    (771
    )Increase in prepaid expenses
    
    
    (293
    )
    
    
    (1,992
    )
    
    
    (2,071
    )Decrease (increase) in assets held for sale
    
    
    100
    
    
    
    (335
    )
    
    
    (Decrease) increase in accounts payable
    
    
    (854
    )
    
    
    6,713
    
    
    
    (2,793
    )Increase in accrued liabilities
    
    
    2,968
    
    
    
    11,695
    
    
    
    10,274(Decrease) increase in other long-term liabilities
    
    
    
    
    
    
    (1,304
    )
    
    
    1,053Total adjustments
    
    
    103,542
    
    
    
    86,084
    
    
    
    78,188Net cash provided by operating activities
    
    
    151,162
    
    
    
    126,618
    
    
    
    111,342Cash Flows from Investing Activities:Capital expenditures
    
    
    (69,219
    )
    
    
    (255,530
    )
    
    
    (114,114
    )(Decrease) increase in construction contracts payable
    
    
    (15,911
    )
    
    
    10,055
    
    
    
    11,962Proceeds from sale of The Reserve
    
    
    
    
    
    
    
    
    
    
    71,559Proceeds from sale of assets (other than The Reserve)
    
    
    836
    
    
    
    8,370
    
    
    
    28Decrease (increase) in deposits and other non-current assets
    
    
    915
    
    
    
    (4,349
    )
    
    
    (1,405
    )Net cash used in investing activities
    
    
    (83,379
    )
    
    
    (241,454
    )
    
    
    (31,970
    )Cash Flows from Financing Activities:Proceeds from issuance of notes payable and long-term debt
    
    
    
    
    
    
    246,038
    
    
    
    395,269Principal payments of long-term debt and capitalized leases
    
    
    (82,215
    )
    
    
    (81,996
    )
    
    
    (558,548
    )Debt issuance costs and amendment fees
    
    
    (55
    )
    
    
    (1,554
    )
    
    
    (7,467
    )Proceeds from stock offering
    
    
    
    
    
    
    
    
    
    
    94,228Proceeds from stock option exercises
    
    
    2,134
    
    
    
    1,823
    
    
    
    1,999Net cash provided by (used in) financing activities
    
    
    (80,136
    )
    
    
    164,311
    
    
    
    (74,519
    )Net (Decrease) Increase in Cash and Cash Equivalents
    
    
    (12,353
    )
    
    
    49,475
    
    
    
    4,853Cash and Cash Equivalents  Beginning of Year
    
    
    90,573
    
    
    
    41,098
    
    
    
    36,245Cash and Cash Equivalents  End of Year
    
    $
    78,220
    
    
    $
    90,573
    
    
    $
    41,098Supplemental Cash Flow Disclosures:Cash paid for interest, net of amounts capitalized
    
    $
    60,638
    
    
    $
    45,407
    
    
    $
    44,612Cash paid for federal and state income taxes (net of refunds
received)
    
    $
    (8,421
    )
    
    $
    1,391
    
    
    $
    1,065Non-cash Investing and Financing Activities:Acquisition of assets with notes payable
    
    $
    
    
    
    $
    
    
    
    $
    264
 The accompanying notes are an integral part of these consolidated financial statements. F-5




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##### Table of Contents



AMERISTAR CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1  Basis of presentation The accompanying condensed consolidated financial statements include the
accounts of Ameristar Casinos, Inc. (ACI) and its wholly owned subsidiaries
(collectively, the Company). Through its subsidiaries, the Company owns and
operates six casino properties in five markets. The Companys portfolio of
casinos consists of: Ameristar St. Charles (serving greater St. Louis,
Missouri); Ameristar Kansas City (serving the Kansas City, Missouri
metropolitan area); Ameristar Council Bluffs (serving Omaha, Nebraska and
southwestern Iowa); Ameristar Vicksburg (serving Jackson, Mississippi and
Monroe, Louisiana); and Cactus Petes and the Horseshu in Jackpot, Nevada
(serving Idaho and the Pacific Northwest). The Company views each property as
an operating segment and all such operating segments have been aggregated into
one reporting segment. All significant intercompany transactions have been
eliminated. Note 2  Summary of significant accounting policies Use of estimates The preparation of the consolidated financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to apply significant judgment in defining the appropriate
estimates and assumptions for calculating financial estimates. By their nature,
these judgments are subject to an inherent degree of uncertainty. The Companys
judgments are based in part on its historical experience, terms of existing
contracts, observance of trends in the gaming industry and information
available from other outside sources. Actual results could differ from those
estimates. 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. Restricted cash On September 2, 2003, the Company entered into a trust participation
agreement with an insurance provider. Pursuant to the terms of the trust
participation agreement, the Company deposited $2.6 million into the trust
account as collateral should the insurance provider require reimbursement. The
Company is permitted to invest the trust funds in certain short-term investment
vehicles with stated maturity dates not to exceed six months. Any interest or
other earnings will be disbursed to the Company. Accounts receivable Gaming receivables are included as part of the Companys accounts
receivable balance. At December 31, 2003 and 2002, an allowance of $0.4 million
and $0.3 million, respectively, has been applied to reduce total accounts
receivable to amounts anticipated to be collected. Inventories Inventories primarily consist of food and beverage items, gift shop and
general store retail merchandise, engineering and slot supplies, uniforms,
linens, china and other general supplies. F-6




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Inventories are stated at the lower of cost or market. Cost is determined
principally on the weighted average basis. Depreciation and capitalization Property and equipment are recorded at cost, including interest charged on
funds borrowed to finance construction. Interest of $1.6 million, $17.9 million
and $17.8 million was capitalized for the years ended December 31, 2003, 2002
and 2001, respectively. Betterments, renewals and repairs that extend the life
of an asset are capitalized. Ordinary maintenance and repairs are charged to
expense as incurred. Costs of major renovation projects are capitalized in
accordance with existing policies. Depreciation is provided on the straight-line method. 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 39 yearsFurniture, fixtures and equipment
    
    
    2 to 15 yearsFurniture, fixtures and equipment
under capitalized leases
    
    
    3 to 5 years
 Impairment of long-lived assets The Company reviews long-lived assets for impairment in accordance with
Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, which the Company adopted on
January 1, 2002. SFAS No. 144 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 and 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 adjusted 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. See
also Note 10  Impairment loss on assets held for sale. 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. The Company
expenses debt issuance costs ratably in connection with any early debt
retirements. For the year ended December 31, 2003, deferred debt issuance costs
totaling $0.7 million were expensed as a result of the early retirement of
debt. There were no early debt retirements during the years ended December 31,
2002 and 2001. Excess of purchase price over fair market value of net assets acquired In connection with the December 2000 acquisition of the Missouri
properties, the Company recorded an excess of purchase price over fair market
value of net assets acquired (goodwill). The Company accounts for goodwill in
accordance with SFAS No. 142, Goodwill and Other Intangible Assets, which the
Company adopted on January 1, 2002. Under SFAS No. 142, goodwill is no longer
amortized. F-7




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##### Table of Contents



Instead, goodwill must be reviewed for impairment using a fair value
assessment approach at least annually and more frequently if events or
circumstances indicate a possible impairment. The Company completed a review of
goodwill as of October 1, 2003, October 1, 2002 and January 1, 2001 and
determined that no impairment existed as of those dates. The Company will
continue to review goodwill annually as of October 1. See also Note 12 -
Excess of purchase price over fair market value of net assets acquired. Derivative instruments and hedging activities The Company seeks to manage interest rate risk associated with variable
rate borrowings through the use of derivative instruments designated as cash
flow hedges. The Company accounts for these derivative instruments in
accordance with SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, and SFAS No. 138, Accounting for Certain Derivative
Instruments and Hedging Activities  an Amendment of FASB Statement No. 133,
which the Company adopted on January 1, 2001. SFAS No. 133 requires that
derivative financial instruments be recognized as assets or liabilities, with
changes in fair value affecting net income or comprehensive income. See also
Note 5  Notes payable and long-term debt. Revenue recognition In accordance with industry practice, casino revenues consist of the net
win from gaming activities, which is the difference between amounts wagered and
amounts paid to winning patrons. Additionally, the Company recognizes revenue
upon the occupancy of its hotel rooms, upon the delivery of food, beverage and
other services, and upon performance for entertainment revenue. The retail
value of hotel accommodations and food and beverage items provided to customers
without charge is included in gross revenues and then deducted as promotional
allowances, to arrive at net revenues. Promotional allowances consist of the
retail value of complimentary food and beverage, rooms, progress towards
earning points for cash-based loyalty programs and targeted direct mail coin
coupons. The estimated departmental costs of providing complimentary food and
beverage, rooms and other are included in casino operating expenses and consist
of the following: Years ended December 31,2003
    
    2002
    
    2001(Amounts in Thousands)Food and beverage
    
    $
    34,965
    
    
    $
    30,266
    
    
    $
    22,632Rooms
    
    
    3,754
    
    
    
    3,416
    
    
    
    1,550Other
    
    
    6,170
    
    
    
    2,972
    
    
    
    3,638$
    44,889
    
    
    $
    36,654
    
    
    $
    27,820
 Advertising The Company expenses advertising costs the first time the advertising
takes place. Advertising expense included in selling, general and
administrative expenses was approximately $21.6 million, $19.0 million and
$17.6 million for the years ended December 31, 2003, 2002 and 2001,
respectively. Preopening expenses and business development expenses Preopening expenses primarily represent direct personnel and other
operating costs incurred prior to the opening of new facilities and are
expensed as incurred in accordance with American Institute of Certified Public
Accountants Statement of Position No. 98-5, Reporting on the Costs of
Start-up Activities, which became effective January 1, 1999 (SOP 98-5). In
August 2002, the Company opened F-8




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##### Table of Contents



its new casino and entertainment facility at Ameristar St. Charles and
incurred $6.4 million of related preopening expenses in 2002. These expenses
included, without limitation, payroll and related benefits, contract labor,
employee recruiting expense and general supplies. Business development expenses are general costs incurred in connection
with identifying, evaluating and pursuing opportunities to expand into existing
or new 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. During the years ended December 31, 2003, 2002 and
2001, the Company recorded $2.0 million, $0.4 million and $0.1 million,
respectively, in business development expenses. Income taxes Income taxes are recorded in accordance with 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 income tax bases. Deferred income 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. Recently issued accounting standards In April 2003, the Financial Accounting Standards Board (FASB) issued
SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities. SFAS No. 149 amends and clarifies financial accounting and
reporting for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives) and
hedging activities under SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities. The Company adopted the provisions of SFAS No. 149
that relate to SFAS 133 Implementation Issues on April 1, 2003. The Company
adopted the provisions related to contracts entered into or modified after June
30, 2003 on July 1, 2003, and there was no impact on its financial position,
results of operations or cash flows. Reclassifications Certain reclassifications, having no effect on net income, have been made
to the prior periods consolidated financial statements to conform to the
current periods presentation. Note 3  Accrued liabilities Major classes of accrued liabilities consist of the following as of
December 31: 2003
    
    2002(Amounts in Thousands)Compensation and related benefits
    
    $
    18,720
    
    
    $
    16,918Interest
    
    
    15,544
    
    
    
    16,899Taxes other than income taxes
    
    
    14,196
    
    
    
    13,460Players club rewards
    
    
    6,603
    
    
    

    5,112Progressive slot machine and related
accruals
    
    
    4,182
    
    
    
    4,740Deposits and other accruals
    
    
    7,066
    
    
    
    6,214$
    66,311
    
    
    $
    63,343
 F-9




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##### Table of Contents



Note 4  Federal and state income taxes The provision for income taxes consists of the following: Years ended December 31,2003
    
    2002
    
    2001(Amounts in Thousands)Taxes on income from continuing
operations:Federal income taxes
    
    $
    26,724
    
    
    $
    22,467
    
    
    $
    15,648State income taxes
    
    
    1,244
    
    
    
    878
    
    
    
    733Tax benefit from cumulative effect
of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    (73
    )$
    27,968
    
    
    $
    23,345
    
    
    $
    16,308
 The components of the income tax provision are as follows: Years ended December 31,2003
    
    2002
    
    2001(Amounts in Thousands)Current
    
    $
    2,963
    
    
    $
    (177
    )
    
    $
    733Deferred
    
    
    25,005
    
    
    
    23,522
    
    
    
    15,648$
    27,968
    
    
    $
    23,345
    
    
    $
    16,381
 The reconciliation of income tax at the federal statutory rate to income
tax expense is as follows: Years ended December 31,2003
    
    2002
    
    2001Federal statutory rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State income tax expense
    
    
    1.6
    
    
    
    0.9
    
    
    
    1.0Nondeductible political and lobbying costs
    
    
    0.5
    
    
    
    0.4
    
    
    
    0.3Nondeductible meals and entertainment
expenses
    
    
    0.1
    
    
    
    0.0
    
    
    
    0.1Other nondeductible expenses
    
    
    (0.2
    )
    
    
    0.2
    
    
    
    0.1Previously unrecognized credit
carryforwards
    
    
    
    
    
    
    
    
    
    
    (3.5
    )37.0
    %
    
    
    36.5
    %
    
    
    33.0
    %
 F-10




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##### Table of Contents



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 income tax liability
consist of the following: December 31,2003
    
    2002(Amounts in Thousands)Deferred income tax assets:Accrued expenses
    
    $
    4,212
    
    
    $
    4,329Alternative minimum tax credit
    
    
    2,109
    
    
    
    1,004Net operating loss carryforwards
    
    
    32,507
    
    
    
    27,997Impairment loss on assets held for sale
    
    
    2,660
    
    
    
    2,677Other
    
    
    8,714
    
    
    
    9,836Total deferred income tax assets
    
    
    50,202
    
    
    
    45,843Deferred income tax liabilities:Property and equipment
    
    
    (70,461
    )
    
    
    (69,259
    )Other
    
    
    (35,196
    )
    
    
    (9,548
    )Total deferred income tax liabilities
    
    
    (105,657
    )
    
    
    (78,807
    )Net deferred income tax liability
    
    $
    (55,455
    )
    
    $
    (32,964
    )
 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, 2003, the Company has available
$92.9 million of unused operating loss carryforwards that may be applied
against future taxable income. The unused operating loss carryforwards will
expire in 2018 through 2022. No valuation allowance has been provided against
deferred income tax assets as the Company believes it is more likely than not
that deferred income tax assets are realizable based on expected future taxable
income. F-11




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##### Table of Contents



Note 5 - Notes payable and long-term debt Notes payable and long-term debt consist of the following: December
31,2003
    
    2002(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 of the following facilities:Revolving term loan facility, at variable interest (3.6% at
December 31, 2003 and 4.4% at December 31, 2002),
through December 20, 2005
    
    $
    33,472
    
    
    $
    75,000Term loan A, at variable interest (3.7% at December 31, 2003
and 4.4% at December 31, 2002), principal due quarterly,
through December 20, 2005
    
    
    13,685
    
    
    
    30,027Term loan B, at variable interest (3.9% at December 31,
2003 and 4.1% at December 31, 2002), principal due
quarterly, through December 20, 2006
    
    
    286,844
    
    
    
    290,147Senior subordinated notes, unsecured, 10.75% fixed interest,
payable semi-annually, principal due February 2, 2009 (net of
$3,206 and $3,831 discount at December 31, 2003 and
2002, respectively)
    
    
    376,794
    
    
    
    376,169Equipment financing, secured, variable interest (4.13% at
December 31, 2002), payable monthly; principal paid in full in 2003
    
    
    
    
    
    
    13,180Other
    
    
    5,921
    
    
    
    11,817716,716
    
    
    
    796,340Less: Current maturities
    
    
    3,885
    
    
    
    36,628$
    712,831
    
    
    $
    759,712
 F-12




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##### Table of Contents



Maturities of the Companys borrowings for each of the next five years and
thereafter as of December 31, 2003 are as follows (amounts in thousands): Year
    
    Maturities2004
    
    $
    3,8852005
    
    
    3,6812006
    
    
    327,5152007
    
    
    1372008
    
    
    147Thereafter
    
    
    381,351$
    716,716
 Senior credit facilities In December 2000, the Company refinanced substantially all of its
long-term debt with $575 million of 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 May 2002, the Company amended the senior credit facilities. The primary
elements of the amendment include: (1) a reduction in the applicable interest
rate margin on all loans; (2) the consolidation of the term loan C into the
term loan B; (3) a further reduction in the applicable interest rate margin for
the term loan B upon an improvement in the Companys credit rating or if the
Companys leverage ratio falls below 3.50:1; (4) increased flexibility for
capital expenditures generally, including an increase in the basket applicable
to the Companys St. Charles facility to accommodate the expanded scope of that
project; (5) significant increases in various covenant allowances; and (6) the
extension of the approval to add up to $200 million of debt capacity if the
Company obtains additional financing commitments. The Company paid a fee to its
lenders of approximately $0.9 million in connection with the amendment, which
is being amortized over the remaining lives of the senior credit facilities. In November 2002, the Company further amended the senior credit facilities
to increase the capital expenditure basket applicable to the new facility at
Ameristar St. Charles from $180 million to $210 million and paid a $0.2 million
amendment fee to the lenders. On December 2, 2002, the Company borrowed an additional $100 million under
term loan B of the incremental term loan commitment provisions of the senior
credit facilities. The Company used the loan proceeds to repay all $67.7
million of the outstanding balance under the revolving credit facility and to
finance various capital improvements at its properties. The Company incurred
$0.3 million in loan fees associated with the borrowing. The Company amended the senior credit facilities in December 2003 to
increase allowable capital expenditures for 2003 from 7.0% to 9.5% of
consolidated gross revenues. At December 31, 2003 and before giving effect to the February 2004
amendment discussed below, the senior credit facilities consisted of a $75
million revolving credit facility with no outstanding debt and three term loans
(a $75 million revolving term loan facility, term loan A and term loan B)
aggregating $334.0 million in outstanding debt. At December 31, 2003, the
amount of the revolving credit facility available for borrowing was $68.5
million, after giving effect to $6.5 million of outstanding letters of credit.
Each of the facilities bears interest at a variable rate based, at the
Companys option, on LIBOR F-13




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##### Table of Contents



(Eurodollar loans) or the prime rate (base rate loans) plus an applicable
margin. For the revolving credit facility, the revolving term loan facility and
the term loan A, the interest rate margin fluctuates based on the Companys
leverage ratio, which is the ratio of consolidated debt to EBITDA (as defined)
for the most recent four full fiscal quarters, and ranges from 1.25% to 3.00%
in the case of Eurodollar loans and from 0.25% to 2.00% in the case of base
rate loans. For term loan B, the interest rate margin fluctuates based on the
Companys leverage ratio and ranges from 2.50% to 3.00% in the case of
Eurodollar loans and 1.50% to 2.00% in the case of base rate loans. In the case
of Eurodollar loans, the Company has the option of selecting a one-, two-,
three- or six-month interest period, with interest payable at the earlier of
three months from the borrowing date or upon expiration of the interest period
selected. All mandatory principal repayments have been made through December 31,
2003. In addition to making all required quarterly principal repayments under
the senior credit facilities, in 2003 and 2002 the Company prepaid and reduced
the senior credit facilities as follows:  
    
    In December 2003, the Company prepaid and permanently
reduced the revolving term loan facility by $10.4 million, the
term loan A by $4.2 million and the term loan B by $0.3 million.  
    
    In September 2003, the Company prepaid and permanently
reduced both the revolving term loan facility by $14.2 million
and the term loan A by $5.8 million; and  
    
    In December 2002, the Company repaid the outstanding
balance of the revolving credit facility of $67.7 million,
utilizing proceeds from the additional $100 million borrowing
under the term loan B; The senior credit facilities and the indenture governing the senior
subordinated notes require the Company to comply with various affirmative and
negative financial and other covenants, including restrictions on the
incurrence of additional indebtedness, restrictions on dividend payments and
other restrictions and requirements to maintain certain financial ratios and
tests. As of December 31, 2003, the Company was required to maintain a maximum
senior debt ratio, defined as senior debt divided by EBITDA, of no more than
2.25:1, and a maximum total debt ratio, defined as consolidated debt divided by
EBITDA, of no more than 4.25:1. As of December 31, 2003, the Companys senior
debt and total debt ratios were 1.63:1 and 3.49:1, respectively. As of December 31, 2003, the Company was required to maintain a minimum
fixed charge coverage ratio (EBITDA divided by fixed charges, as defined) of
1.75:1. As of December 31, 2003, the Companys fixed charge coverage ratio was
2.17:1. In addition, the senior credit facilities require the Company to
maintain a minimum of 1.50:1 adjusted fixed charge coverage ratio (EBITDA
divided by adjusted fixed charges, as defined). As of December 31, 2003, the
Companys adjusted fixed charge coverage ratio was 2.15:1. The senior credit facilities also limit the Companys aggregate capital
expenditures in each year. For the year ended December 31, 2003, the Companys
maximum permitted capital expenditures were 9.5% of its consolidated gross
revenues, or $86.5 million. In addition, the senior credit facilities permitted
the Company to incur up to certain amounts of capital expenditures on specified
projects. As of December 31, 2003, the Company was in compliance with the
capital expenditure covenant requirements. In February 2004, the Company amended the senior credit facilities. The
primary elements of the amendment include: (1) the consolidation of the
revolving term loan facility, term loan A and term loan B into a new term loan
B-1, which matures on December 20, 2006; (2) a 0.5% reduction in the applicable
interest rate margin on term loan B-1 compared to the former term
loan B; (3) a
revised repayment schedule whereby the Company will make mandatory quarterly
principal payments of $0.8 million in F-14




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##### Table of Contents



2004 and 2005 and $81.8 million in 2006; and (4) the ability to pay cash
dividends on the Companys common stock in a total amount of up to $25 million. Senior subordinated notes On February 2, 2001, the Company issued $380 million in aggregate
principal amount of 10.75% senior subordinated notes due 2009. The notes were
issued at a discount, resulting in an effective yield of 11.0%. The notes are
unsecured and rank junior to all of the Companys existing and future senior
debt, including borrowings under the senior credit facilities. All of ACIs current operating subsidiaries (the Guarantors) have
jointly and severally, and fully and unconditionally, guaranteed the senior
subordinated notes. Each of the Guarantors is a wholly owned subsidiary of ACI
and the Guarantors constitute substantially all of ACIs direct and indirect
subsidiaries. ACI 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 ACI in the form of cash dividends, loans or advances. Other debt In October 2002, the Company borrowed $14.0 million on a secured basis
from a commercial bank to finance equipment purchases for the new St. Charles
facility. In June 2003, the Company retired the debt in full with an $11.4
million prepayment. Additionally in 2003, the Company prepaid $2.6 million of
other equipment financing. Interest rate collar and swap agreements The Company seeks to manage interest rate risk associated with variable
rate borrowings through balancing fixed-rate and variable-rate borrowings and,
where appropriate, the use of derivative instruments designated as cash flow
hedges. Derivative financial instruments are recognized as assets or
liabilities, with changes in fair value affecting net income or comprehensive
income (loss). Under an interest rate collar agreement entered into in 1998, $50.0
million of LIBOR-based borrowings under the Companys previous revolving
credit/term loan facility and term loan A of the senior credit facilities had a
LIBOR floor rate of 5.39% and a LIBOR ceiling rate of 6.75%, plus the
applicable margin. In 2003 and 2002, the Company paid approximately $1.0
million and $1.8 million, respectively, in interest as a result of this
agreement. The collar agreement terminated on June 30, 2003. At December 31,
2003 and 2002, the value of the collar agreement was $0 and $1.0 million,
respectively. The value of the collar agreement was recorded in other long-term
liabilities as of December 31, 2002. Because the collar agreement was not a
highly effective hedge, any change in fair value was recorded as interest
expense. As a result, the Company reduced interest expense by $1.0 million and
$0.9 million during the years ended December 31, 2003 and 2002, respectively.
In 2001, the Company recognized $0.1 million, net of tax, as a cumulative
effect of change in accounting principle upon adoption of SFAS No. 133. In April 2001, the Company entered into an interest rate swap agreement
with Deutsche Bank to fix the interest rate on $100 million of LIBOR-based
borrowings under the senior credit facilities at 5.07% plus the applicable
margin. The interest rate swap agreement has been highly effective as a cash
flow F-15




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##### Table of Contents



hedging instrument and, therefore, the value of the swap agreement (net of
tax) has been recorded as accumulated other comprehensive loss as part of
stockholders equity. At December 31, 2003 and 2002, the value of the swap
agreement was $1.0 million and $4.5 million, respectively, and was recorded as
other long-term liabilities. The Company believes the interest rate swap
agreement will continue to be an effective cash flow hedge as it will have
sufficient LIBOR-based borrowings outstanding under the senior credit
facilities. As a result, the Company does not expect any reclassification from
accumulated other comprehensive loss to interest expense through March 31,
2004, when the agreement terminates. The Company paid $3.9 million and $3.2
million of additional interest expense in 2003 and 2002, respectively, as a
result of the interest rate swap agreement. Fair value of long-term debt The estimated fair value of the Companys long-term debt at December 31,
2003 was approximately $775.6 million, compared to its book value of $716.7
million, based on the quoted market price of the senior subordinated notes.
Primarily all other long-term debt carries variable interest rates. At December
31, 2002, the estimated fair value of the Companys long-term debt was
approximately $832.4 million, compared to its book value of $796.3 million. Note 6  Leases Operating leases The Company maintains operating leases for certain office facilities,
vehicles, office equipment, signage and land. Rent expense under operating
leases totaled $2.7 million, $3.2 million and $2.2 million for the years ended
December 31, 2003, 2002 and 2001, respectively. Future minimum lease payments required under operating leases for each of
the five years subsequent to December 31, 2003 and thereafter are as follows
(amounts in thousands): Year
    
    Payments2004
    
    $
    2,7142005
    
    
    1,9262006
    
    
    1,8522007
    
    
    1,6732008
    
    
    140Thereafter
    
    
    1,820$
    10,125
 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. 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 matches 50% of eligible participants deferrals that
do not exceed 4% of their salaries (subject to limitations imposed by the
Internal Revenue Code). The Companys matching contributions were $1.4 million,
$1.4 million and $1.1 million for the years ended December 31, 2003, 2002 and
2001, respectively. Neither the Companys 401(k) plan nor any other Company
benefit plan holds or invests in shares of the Companys common stock or
derivative securities based on the Companys common stock. F-16




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##### Table of Contents



Health insurance plan The Company maintains a qualified employee health insurance plan covering
all employees who work an average of 32 hours or more per week on a regular
basis. The plan, which is self-funded by the Company with respect to claims
below a certain maximum amount, requires contributions from eligible employees
and their dependents. The Companys contribution expense for the plan was
approximately $19.7 million, $18.8 million and $15.1 million for the years
ended December 31, 2003, 2002 and 2001, respectively. Deferred compensation plan On April 1, 2001, the Company adopted a deferred compensation plan for
certain highly-compensated employees. The Company matches up to 5% of
participants annual salary and bonus in each participants account. The
Companys obligation under the plan represents an unsecured promise to pay
benefits in the future and in the event of bankruptcy of the Company, assets of
the plan would be available to satisfy the claims of general creditors. To
increase the security of the participants deferred compensation plan benefits,
the Company has established and funded a grantor trust (known as a rabbi
trust). The rabbi trust is specifically designed so that assets are available
to pay plan benefits to participants in the event that the Company is unwilling
or unable to pay the plan benefits for any reason other than insolvency. As a
result, the Company is prevented from withdrawing or accessing assets for
corporate needs. Plan participants can choose to receive a return on their
account balances equal to the return on various investment fund options. The
Company currently invests plan assets in an equity-based life insurance product
of which the rabbi trust is the owner and beneficiary. As of December 31, 2003 and 2002, plan assets were $6.5 million and $2.9
million, respectively, and are reflected in other assets in the accompanying
consolidated balance sheets. The liabilities due the participants were $6.7
million and $2.7 million as of December 31, 2003 and 2002, respectively, and
are shown as other long-term liabilities. For the years ended December 31,
2003, 2002 and 2001, deferred compensation expense was $0.9 million, $0.3
million and $0, respectively. Stock incentive plans The Company has various stock incentive plans for directors, officers,
employees, consultants and advisers of the Company. The plans permit the grant
of options to purchase common stock intended to qualify as incentive stock
options or non-qualified stock options and also provide for the award of
restricted stock. The maximum number of shares available for issuance under the
plans is 5.5 million (net of options which terminate or are canceled without
being exercised), 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 2000, in connection with the Companys acquisition of the two
properties in Missouri, 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, resulting in compensation expense to be recognized over the vesting
period of the options. Options to purchase 270,000 shares vest equally over a
four-year period from January 1, 2002 through December 31, 2005. The remaining
options were to vest on December 31, 2007, with a portion of the options
subject to accelerated vesting each year from December 2001 through December
2005 based on the Missouri properties meeting certain annual performance
targets. The performance targets were to be established annually by the Board
of Directors or a committee thereof, resulting in a new F-17




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##### Table of Contents



measurement date for the options subject to acceleration. In 2002, two
members of the Missouri senior management team terminated their employment with
the Company. On July 23, 2002, the Company amended and restated the terms of
the stock options held by the two remaining members of the Missouri management
team. If the remaining two members of the management team were to leave the
employment of the Company prior to December 31, 2007, the Company would
recognize compensation expense of $1.6 million based on the spread between the
market price and exercise price of the stock options on the July 23, 2002
modification date. Compensation expense related to the options granted to the
management team totaled $0.3 million, $0.3 million and $0.1 million in 2003,
2002 and 2001, respectively. Summary information for stock option grants under the Companys plans is
as follows: Years ended December 31,2003
    
    2002
    
    2001Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    Average
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    Exercise
    
    
    
    
    
    ExerciseOptions
    
    Price
    
    Options
    
    Price
    
    Options
    
    PriceOutstanding at
beginning
of year
    
    
    2,807,880
    
    
    $
    11.72
    
    
    
    2,615,597
    
    
    $
    5.36
    
    
    
    3,223,979
    
    
    $
    4.05Granted
    
    
    600,340
    
    
    
    20.42
    
    
    
    1,264,220
    
    
    
    19.38
    
    
    
    448,450
    
    
    
    11.13Exercised
    
    
    (364,486
    )
    
    
    4.97
    
    
    
    (385,389
    )
    
    
    3.80
    
    
    
    (515,908
    )
    
    
    3.26Canceled
    
    
    (213,882
    )
    
    
    13.23
    
    
    
    (686,548
    )
    
    
    6.02
    
    
    
    (540,924
    )
    
    
    4.11Outstanding at end of
year
    
    
    2,829,852
    
    
    $
    14.26
    
    
    
    2,807,880
    
    
    $
    11.72
    
    
    
    2,615,597
    
    
    $
    5.36Options exercisable at
end of year
    
    
    795,387
    
    
    $
    10.08
    
    
    
    540,721
    
    
    $
    5.12
    
    
    
    502,001
    
    
    $
    3.54Options available for
grant at end of year
    
    
    1,329,402
    
    
    
    
    
    
    
    815,860
    
    
    
    
    
    
    
    1,393,532
 Following is a summary of the status of stock options outstanding at
December 31, 2003: Outstanding Options
    
    Exercisable OptionsWeighted
    
    Weighted
    
    
    
    
    
    WeightedAverage
    
    Average
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    Remaining
    
    Exercise
    
    
    
    
    
    ExercisePrice Range
    
    Number
    
    Life
    
    Price
    
    Number
    
    Price$2.64
    
    
    134,268
    
    
    
    4.7
    
    
    $
    2.64
    
    
    
    134,268
    
    
    $
    2.64$2.75-$4.59
    
    
    196,528
    
    
    
    5.9
    
    
    
    3.76
    
    
    
    91,924
    
    
    
    3.73$4.64
    
    
    145,393
    
    
    
    7.0
    
    
    
    4.64
    
    
    
    41,654
    
    
    
    4.64$4.72-$6.75
    
    
    392,371
    
    
    
    6.1
    
    
    
    5.07
    
    
    
    171,627
    
    
    
    4.96$7.54-$10.94
    
    
    179,450
    
    
    
    8.1
    
    
    
    9.32
    
    
    
    49,700
    
    
    
    8.54$12.12-$13.84
    
    
    195,000
    
    
    
    8.4
    
    
    
    13.05
    
    
    
    48,860
    
    
    
    12.94$13.94
    
    
    430,117
    
    
    
    8.8
    
    
    
    13.94
    
    
    
    86,577
    
    
    
    13.94$14.10-$18.56
    
    
    210,055
    
    
    
    8.6
    
    
    
    16.34
    
    
    
    38,667
    
    
    
    16.11$19.00-$23.61
    
    
    516,080
    
    
    
    9.5
    
    
    
    22.25
    
    
    
    26,710
    
    
    
    21.44$24.23-$29.80
    
    
    430,590
    
    
    
    8.0
    
    
    
    26.63
    
    
    
    105,400
    
    
    
    26.742,829,852
    
    
    
    7.9
    
    
    $
    14.26
    
    
    
    795,387
    
    
    $
    10.08
 F-18




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##### Table of Contents



Note 8  Earnings per share The Company calculates earnings per share in accordance with SFAS No. 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 reflects the additional dilution
from all potentially dilutive securities such as stock options. For 2003, 2002
and 2001, all outstanding options with an exercise price lower than the market
price have been included in the calculation of earnings per share. The weighted average number of shares of common stock and common stock
equivalents used in the computation of basic and diluted earnings per share
consists of the following: Years ended December 31,2003
    
    2002
    
    2001(Amounts in Thousands)Weighted average number of shares
outstanding-basic earnings per share
    
    
    26,423
    
    
    
    26,107
    
    
    
    20,906Dilutive effect of stock options
    
    
    697
    
    
    
    885
    
    
    
    1,002Weighted average number of shares
outstanding-diluted earnings per share
    
    
    27,120
    
    
    
    26,992
    
    
    
    21,908
 Note 9  Accounting for Stock-Based Compensation In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure-an Amendment of FASB
Statement No. 123. SFAS No. 148 amends SFAS No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition for a
voluntary change to the fair value-based method of accounting for stock-based
employee compensation. In addition, SFAS No. 148 amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual
and interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results and
specifies the form, content and location of those disclosures. The Company
adopted the disclosure requirements of SFAS No. 148 as of December 31, 2002. The Company does not currently plan to transition to the fair value-based
method and will continue to account for stock incentive plans in accordance
with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
to Employees (APB No. 25). Under SFAS No. 123, all employee stock option
grants are considered compensatory. SFAS No. 123 provides, among other things,
that companies may elect to account for employee stock options using APB No.
25. Had compensation cost for these plans been determined consistent with SFAS
No. 123, the Companys net income and earnings 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 options granted. The
model assumes no expected future dividend payments on the Companys common
stock for the options granted in 2003, 2002 and 2001. F-19




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##### Table of Contents



Years ended December 31,2003
    
    2002
    
    2001(Dollars in Thousands, Except Per Share Data)Net income:As reported
    
    $
    47,620
    
    
    $
    40,534
    
    
    $
    33,154Deduct: compensation expense under fair value
based method (net of tax)
    
    
    (3,383
    )
    
    
    (2,084
    )
    
    
    (978
    )Pro forma
    
    $
    44,237
    
    
    $
    38,450
    
    
    $
    32,176Basic earnings per share:As reported
    
    $
    1.80
    
    
    $
    1.55
    
    
    $
    1.59Pro forma (net of tax)
    
    $
    1.67
    
    
    $
    1.47
    
    
    $
    1.54Diluted earnings per share:As reported
    
    $
    1.76
    
    
    $
    1.50
    
    
    $
    1.51Pro forma (net of tax)
    
    $
    1.63
    
    
    $
    1.42
    
    
    $
    1.47Weighted-average assumptions:Expected stock price volatility
    
    
    51
    %
    
    
    52
    %
    
    
    54
    %Risk-free interest rate
    
    
    3.7
    %
    
    
    3.4
    %
    
    
    4.6
    %Expected option life (years)
    
    
    6
    
    
    
    7
    
    
    
    5Estimated fair value per share of options
granted
    
    $
    5.30
    
    
    $
    4.76
    
    
    $
    5.83
 Note 10  Impairment loss on assets held for sale In August 2002, the Company entered into an agreement to sell various
assets that were not utilized after the new Ameristar St. Charles facility
opened, including the existing casino barge, for $6.6 million (net of
expenses), in a transaction that closed in September 2002. The Company also
decided to sell 3,207 slot machines that were not being used at its various
properties as part of the Companys ongoing strategy to provide patrons with
the latest-technology gaming equipment. In accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, for the year
ended December 31, 2003, the Company recorded a $0.7 million impairment loss
relating to certain slot machines, and in 2002, the Company recorded a $5.2
million impairment loss on the former casino barge at Ameristar St. Charles and
various slot machines. The impairment loss is based on the assets estimated
realizable values, third-party offer prices or actual sales proceeds. Note 11  Opening of the new St. Charles facility and associated preopening
expenses The Company opened its new casino and entertainment facility at Ameristar
St. Charles on August 6, 2002. The Company acquired $140 million of
construction-in-progress in December 2000 and invested approximately $210
million in connection with the development of the new facility. In addition,
the Company capitalized $32.1 million in interest associated with this project
during the same period, which reduced interest expense accordingly. In accordance with SOP No. 98-5, Reporting on the Costs of Start-up
Activities, preopening expenses incurred prior to the opening of a new
facility must be expensed as incurred. During the year ended December 31, 2002,
the Company incurred $6.4 million of preopening expenses associated with the
opening of the new facility. These expenses included, without limitation,
payroll and related benefits, contract labor, employee recruiting expense and
general supplies. F-20




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##### Table of Contents



Note 12  Excess of purchase price over fair market value of net assets
acquired In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets. The primary impact on the Company is that the excess of purchase
price over fair market value of the net assets acquired in connection with the
acquisition of the Missouri properties in December 2000 is no longer being
amortized as of January 1, 2002. Instead, goodwill must be reviewed for
impairment at least annually and more frequently if events or circumstances
indicate a possible impairment. The Company completed a review of goodwill as
of January 1, 2002, October 1, 2002 and October 1, 2003 and determined that no
impairment existed as of those dates. The Company will continue to perform an
annual review of goodwill impairment as of October 1 of each year and will
review goodwill sooner if events or circumstances indicate a possible
impairment. Goodwill amortization expense was $2.2 million for the year ended December
31, 2001 and $0 for the years ended December 31, 2003 and 2002. As of December
31, 2003, the balance of goodwill was $80.8 million, which will continue to be
reduced through 2016 by annual tax benefits of $1.2 million resulting from
differences in the values assigned to certain purchased assets for financial
reporting and tax purposes. The unaudited pro forma data set forth below summarizes the Companys net
income and earnings per share as if SFAS No. 142 had been effective on January
1, 2001. Actual results for the years ended December 31, 2003 and 2002 are
shown for comparative purposes: Years ended December 31,2003
    
    2002
    
    2001(Amounts in Thousands)Income before cumulative change in
accounting principle:Reported income before cumulative
change in accounting principle
    
    $
    47,620
    
    
    $
    40,534
    
    
    $
    33,289Add back: goodwill amortization
expense (net of tax)
    
    
    
    
    
    
    
    
    
    
    1,435Income before cumulative change in
accounting principle
    
    $
    47,620
    
    
    $
    40,534
    
    
    $
    34,724Net income :Reported net income
    
    $
    47,620
    
    
    $
    40,534
    
    
    $
    33,154Add back: goodwill amortization
expense (net of tax)
    
    
    
    
    
    
    
    
    
    
    1,435Net income
    
    $
    47,620
    
    
    $
    40,534
    
    
    $
    34,589Basic earnings per share:Reported basic earnings per share
    
    $
    1.80
    
    
    $
    1.55
    
    
    $
    1.59Add back: goodwill amortization expense
    
    
    
    
    
    
    
    
    
    
    0.07Basic earnings per share
    
    $
    1.80
    
    
    $
    1.55
    
    
    $
    1.66Diluted earnings per share:Reported diluted earnings per share
    
    $
    1.76
    
    
    $
    1.50
    
    
    $
    1.51Add back: goodwill amortization expense
    
    
    
    
    
    
    
    
    
    
    0.07Diluted earnings per share
    
    $
    1.76
    
    
    $
    1.50
    
    
    $
    1.58
 In December 2000, the Company acquired proprietary marketing information
valued at $6.0 million as part of the purchase of the Missouri properties. This
asset was amortized over two years between December 2000 and December 2002.
During 2003, 2002 and 2001, the Company recognized $0, $3.0 million and $2.9
million, respectively, in amortization expense relating to this asset. F-21




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Note 13  Commitments and contingencies Litigation.
From time to time, the Company is a party to litigation, most of which
arises in the ordinary course of business. The Company is not currently a party
to any litigation that management believes would be likely to have a material
adverse effect on the Company. Self-Funded Employee Health Care Insurance Program.The Companys employee
health care benefits program is self-funded up to a maximum amount per claim.
Claims in excess of this maximum amount are fully insured through a stop-loss
insurance policy. Accruals are based on claims filed and estimates of claims
incurred but not reported, based on statistical data provided by the
independent third party administrator of the health care benefits
program. At December 31, 2003 and 2002, the Companys
liabilities for unpaid and incurred but not reported claims totaled $4.1
million and $3.6 million, respectively, and are included in accrued liabilities
in the accompanying consolidated balance sheets. While the total cost of claims
incurred depends on future developments, in managements opinion, recorded
reserves are adequate to cover the payments of future claims. Note 14  Related party transactions The Company engages Neilsen & Company, L.L.C., a company owned and
controlled by Craig H. Neilsen, the Companys Chairman of the Board, President
and Chief Executive Officer, to provide certain professional services, office
space and other equipment and facilities. The Company also leases from Neilsen
& Company two condominium units in Sun Valley, Idaho, which it makes available
for use by management personnel and certain business associates with the
objective of strengthening management morale and maintaining goodwill with
important business contacts. In 2003 and 2002, the Company reimbursed Neilsen &
Company for administrative and clerical support expenses reasonably incurred by
Mr. Neilsen on Company business matters, including nursing care expense and
additional costs incurred as a result of the use of his home for business
purposes. Total payments to Neilsen & Company were $343,000, $562,000 and
$69,000 for the years ended December 31, 2003, 2002 and 2001, respectively. In December 2001, the Company completed a public offering of 6.9 million
shares of its common stock at $20.50 per share. Of the shares sold, 4.9 million
were sold by the Company and 2 million were sold by Mr. Neilsen. The Company
incurred approximately $950,000 of expenses related to the stock offering,
including expenses (other than underwriting discounts and commissions) paid on
behalf of Mr. Neilsen as required pursuant to registration rights held by Mr.
Neilsen. F-22