##### 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, 2001
 
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
Incorporation or Organization) |  | (I.R.S. Employer Identification No.)

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

Registrants Telephone Number: (702) 567-7000

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

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

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

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

As of March 8, 2002, 25,984,665 shares of Common Stock of the registrant were
issued and outstanding. The aggregate market value of the voting stock of the
registrant held by non-affiliates as of March 8, 2002 was approximately
$273,442,814, based on the Nasdaq-NMS closing price for the registrants Common
Stock on such date.

Portions of the registrants definitive Proxy
Statement for its June 7, 2002
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



|                |                                                                                               |  |  |  |  |  |  | 
|--------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I         
|                | Item 1. Business                                                                             
|                | Item 2. Properties                                                                           
|                | Item 3. Legal Proceedings                                                                    
|                | Item 4. Submission of Matters to a Vote of Security Holders.                                 
|PART II        
|                | Item 5. Market for the Registrants Common Equity and Related Stockholder Matters            
|                | Item 6. Selected Financial Data                                                              
|                | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                          
|                | Item 8. Financial Statements and Supplementary Data                                          
|                | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
|PART III       
|                | Item 10. Directors and Executive Officers of the Registrant                                  
|                | Item 11. Executive Compensation                                                              
|                | Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|                | Item 13. Certain Relationships and Related Transactions                                      
|PART IV        
|                | Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K                     
|SIGNATURES     
|EXHIBIT 10.1(c)
|EXHIBIT 10.1(D)
|EXHIBIT 23.1   
|EXHIBIT 99.2   



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Unless the context indicates otherwise, all references in this Annual
Report on Form 10-K to Ameristar refer to Ameristar Casinos, Inc. and all
references to the Company, we, our, ours and 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 words such as our management or we believe, anticipate, intend,
expect, plan, or words of similar meaning. Similarly, statements that
describe our future operating performance, financial results, plans,
objectives, strategies or goals are forward-looking statements. Although
management believes that the assumptions underlying the forward-looking
statements are reasonable, these assumptions and the forward-looking statements
are subject to various factors, risks and uncertainties, many of which are
beyond our control. Accordingly, actual results could differ materially from
those contemplated by the forward-looking statements. In addition to the other
cautionary statements relating to certain forward-looking statements throughout
this Report, attention is directed to Item 1. Business  Risk Factors below
for a discussion of some of the factors, risks and uncertainties that could
affect the outcome of future results contemplated by forward-looking
statements.




PART I




Item 1. Business

Introduction

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

Our gaming revenues are derived, and are expected to continue to be
derived, from a broad base of customers, and we do not depend upon high-stakes
players. We emphasize slot machine play at our properties, and we invest on an
ongoing basis in new slot equipment to promote customer satisfaction and
loyalty. All of our properties include table games such as blackjack, craps
and roulette. In addition, Ameristar Kansas City, Ameristar St. Charles,
Ameristar Vicksburg and Cactus Petes offer poker and the Jackpot properties
offer keno and sports book wagering. We generally emphasize competitive minimum
and maximum betting limits based on each market. We extend credit to our
Mississippi and Nevada gaming customers only in limited circumstances and
limited amounts on a short-term basis and in accordance with the credit
restrictions imposed by gaming regulatory authorities. The Missouri and Iowa
gaming statutes prohibit the issuance of casino credit.



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The following table presents selected statistical and other information
concerning our properties as of March 5, 2002.

|                                |  |             |                                                                                                                                      |             |  |                |                                 |           |  |                |                                                                                                                                                               |  |  |  |                                         |  |  |  |                                                                                                                          | 
|------------------------------- |  | ----------- | ------------------------------------------------------------------------------------------------------------------------------------ | ----------- |  | -------------- | ------------------------------- | --------- |  | -------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | --------------------------------------- |  |  |  | ------------------------------------------------------------------------------------------------------------------------ | 
|                                |  | Ameristar   |                                                                                                                                      | Ameristar   |  | Ameristar      |                                 | Ameristar |  | The Jackpot   
|                                |  | Kansas City |                                                                                                                                      | St. Charles |  | Council Bluffs |                                 | Vicksburg |  | Properties (1)
|                                |  |             |                                                                                                                                      |             |  |                |                                 |           |  |               
|Opening Date                    |  |             | 1997                                                                                                                                 |             |  |                | 1994                            |           |  |                | 1996                                                                                                                                                          |  |  |  | 1994                                    |  |  |  | 1956                                                                                                                     | 
|Casino Square
Footage (approx.) |  |             | 115,000                                                                                                                              |             |  |                | 45,000                          |           |  |                | 38,500                                                                                                                                                        |  |  |  | 42,000                                  |  |  |  | 28,500                                                                                                                   | 
|Slot Machines                   |  |             | 2,886                                                                                                                                |             |  |                | 1,900                           |           |  |                | 1,510                                                                                                                                                         |  |  |  | 1,267                                   |  |  |  | 1,034                                                                                                                    | 
|Table Games                     |  |             | 111                                                                                                                                  |             |  |                | 30                              |           |  |                | 46                                                                                                                                                            |  |  |  | 41                                      |  |  |  | 38                                                                                                                       | 
|Hotel Rooms                     |  |             | 184                                                                                                                                  |             |  |                |                                |           |  |                | 444(2)                                                                                                                                                        |  |  |  | 150                                     |  |  |  | 420                                                                                                                      | 
|Restaurants/Bars                |  |             | 14/11                                                                                                                                |             |  |                | 3/3                             |           |  |                | 4/6                                                                                                                                                           |  |  |  | 3/5                                     |  |  |  | 5/4                                                                                                                      | 
|Restaurant/Bar                  |  |             |                                                                                                                                      |             |  |                |                                 |           |  |                |                                                                                                                                                               |  |  |  |                                         |  |  |  |                                                                                                                          | 
|Seating Capacity                |  |             | 1,759/485                                                                                                                            |             |  |                | 400/40                          |           |  |                | 945/191                                                                                                                                                       |  |  |  | 494/54                                  |  |  |  | 584/120                                                                                                                  | 
|Guest Parking Spaces            |  |             | 4,500                                                                                                                                |             |  |                | 4,000                           |           |  |                | 3,000                                                                                                                                                         |  |  |  | 1,700                                   |  |  |  | 1,134                                                                                                                    | 
|Other Amenities                 |  |             | Kids Quest
Childrens
Activity
Center(3);
1,370-Seat
Entertainment
Facility;
18-Screen
Movie
Theater(3);
Gift Shop;
Amusement Arcade |             |  |                | Entertainment
lounge;
Gift Shop |           |  |                | Kids Quest
Childrens
Activity
Center(3);
Meeting Space;
Indoor
Swimming
Pool & Spa;
Exercise
Facility;
Gift Shop;
3,500-Seat Outdoor
Stage;
Amusement
Arcade |  |  |  | Gift Shop;
Swimming
Pool;
Meeting
Space |  |  |  | 356-Seat
Showroom;
Sports Book;
Meeting
Space;
Swimming Pool
Gift Shop;
General Store;
Service
Station;
Amusement
Arcade | 



---

|(1) |  | Includes the operations of Cactus Petes Resort Casino and The Horseshu
Hotel & Casino.                                                           
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Includes 284 rooms operated by affiliates of Kinseth Hospitality
Corporation and located on land owned by us and leased to affiliates of
Kinseth.
|   
|   
|   
|   
|(3) |  | Leased to and operated by a third party.                                                                                                         

Ameristar Kansas City.Ameristar Kansas City is a fully-integrated
gaming, dining, lodging and entertainment complex in a spacious, land-based
atmosphere. Located seven miles from downtown Kansas City, Ameristar Kansas
City is specifically designed to attract customers from the greater Kansas City
area, as well as strong visitor and overnight markets. The property is located
on approximately 183 acres adjacent to the Interstate 435 bridge, which
supports an average traffic flow of approximately 88,000 cars per day.
Interstate 435 is a six-lane, north-south expressway offering quick and easy
access to, and direct visibility of, the Ameristar Kansas City property.

The casino, which opened in 1997, features an historic Missouri riverboat
theme and is the newest and largest gaming facility in the Kansas City market.
Ameristar Kansas City was named the number one attraction in Kansas City for
2001 by The Business Journalserving metropolitan Kansas City. In 2001,
Ameristar Kansas City was named the top tourist attraction in Missouri by
Ingramsmagazine. Due to recent favorable regulatory changes in Missouri, in
August 2001 we consolidated two contiguous but separate casinos into a single
casino at minimal cost and made some modifications to the layout of the casino
floor with the objectives of increasing revenues, improving operating
efficiencies and generating higher



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customer satisfaction. The casino and
entertainment complex currently includes a 115,000-square foot casino with
approximately 2,886 slot and video poker machines and 111 table games,
including a poker room, a 184-room hotel and other related facilities. An
additional 25,000 square feet of space on the second level of the gaming floor
(formerly utilized for gaming) is now available for meetings and special
events. Ameristar Kansas City currently has 4,500 parking spaces, and
construction is underway on a 2,650-space parking garage expected to be
completed in July 2002. We expect the parking garage to improve our competitive
position in the Kansas City market since Ameristar Kansas City is currently the
only property in the market without a parking garage.

Ameristar Kansas City also provides a wide variety of dining and
entertainment options, boasting 15 food outlets ranging from upscale
restaurants to express food outlets and 11 bars/lounges. The Grand Pavilion
seats more than 1,300 guests, and plays host to a variety of headline
entertainers and sporting events. Live entertainment is also offered at the
Horseshoe Saloon which seats 165. A state-of-the-art 18-screen movie theater
complex, gift shop, video arcade and Kids Quest activity center are also
located at Ameristar Kansas City. Among other awards and distinctions,
Ameristar Kansas City was named Best Casino and Best Buffet in Kansas City
Magazines2001 Annual Readers Survey and its restaurants were named Best of
Gaming 2001 among U.S. riverboats in three different categories in Casino
Player Magazine.

Ameristar St. Charles.Ameristar St. Charles is located immediately north
of the Interstate 70 bridge in the St. Louis metropolitan area, strategically
situated to attract customers from the St. Charles and greater St. Louis area.
The property is a master-planned gaming and entertainment facility located on
approximately 52 acres and features an historic Missouri riverboat theme.
Interstate 70 is a 10-lane, east-west freeway offering quick and easy
accessibility to, and direct visibility of, the Ameristar St. Charles site for
the 188,000 vehicles, on average, that use the highway per day. The property
features an elevated roadway and a 4,000-space, five-story parking structure
located above the existing flood plain, providing improved access to the
facility and allowing it to operate even when the Missouri River floods.

The casino at Ameristar St. Charles opened in 1994 and currently features
approximately 45,000 square feet of gaming space, 1,900 slot machines and 30
table games. We are in the process of constructing a new casino and
entertainment complex that will contain approximately 115,000 square feet of
gaming space consisting of 3,000 slot machines and 104 table games, including a
12-table poker room. As described below in  Expansion Plans, our current
plans call for us to invest approximately $170 million to complete the
construction of a new casino and entertainment complex at the property in
mid-2002. We believe the new casino and entertainment complex at St. Charles
will be the premier gaming facility in the St. Louis area, will be
well-positioned to benefit from growth in this dynamic market, and will provide
a foundation for Ameristar St. Charles to increase its market share in the St.
Louis market.

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



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Ameristar Council Bluffs features 444 hotel rooms, approximately 38,500
square feet of gaming space, 1,510 slot machines, 46 table games and five
restaurants. Ameristar Council Bluffs boasts the prestigious Four Diamond
designation from the AAA and is the only riverboat property in the nation to
carry this designation. Ameristar Council Bluffs has undergone substantial
expansion and renovation since it opened in 1996. In late 1999, we added a
third level to the riverboat casino, and in early 2000, we constructed a
1,000-space parking garage. In the first quarter of 2001, we completed a
renovation and enhancement project at the property that included enhancements
to the land-based amenities and the total renovation of the
two initial casino
floors, including the installation of multimedia, high-definition plasma
screens throughout the casino, the addition of new generation slot machines and
the installation of the EZ-Pay system, a cashless ticket system designed to
improve guest satisfaction.

The Council Bluffs casino is situated on an approximately 52,000-square
foot, three-level, richly appointed cruising riverboat measuring 272 feet long
by 98 feet wide. By constructing the vessel with high ceilings and making it
98 feet wide, the casino has the spacious feel of a land-based facility. We
are required to make a two-hour cruise a minimum of 100 days per year during
the excursion season, which is defined as April 1 through October 31. Guests
may enter the riverboat from shore via an enclosed ramp from the Main Street
Pavilion and from the fully enclosed parking garage.

The land-based facilities include the majestic Ameristar Hotel and Main
Street Pavilion, where guests will find four restaurants, including the
Waterfront Grill steakhouse, the buffet, the recently renovated sports bar and
grill and the Prairie Mill Cafe & Bakery, a 24-hour specialty restaurant. The
Council Bluffs property also features a childrens activity center, fitness
facility, indoor pool and convention facilities, as well as the Star Arena, a
3,500-seat outdoor concert venue. The approximately 50-acre Ameristar Council
Bluffs site is also large enough to accommodate future land-based expansion.

Ameristar Vicksburg.Ameristar Vicksburg is located one-quarter mile
north of Interstate 20 in Vicksburg, Mississippi and caters to guests from the
Vicksburg and Jackson, Mississippi and Monroe, Louisiana markets. Opened in
1994, Ameristar Vicksburg includes a riverboat-themed dockside casino, a
150-room hotel and other land-based facilities. The casino features
approximately 42,000 square feet of gaming space, 1,267 slot machines and 41
table games. The propertys restaurants provide casual dining and regionally
influenced menu selections at affordable prices. In July 2001, we
completed a capital improvement project at the property including
renovating and expanding the casino; installing new generation slot machines;
adding a new VIP players lounge; replacing the showroom with the exciting new
Bottleneck Blues Bar, an authentic club featuring live entertainment and
gaming; and adding new high-definition plasma screens for special event
viewing. In addition, approximately 600 parking spaces were added during 1999,
bringing the total number of guest parking spaces to approximately 1,700.

Ameristar Vicksburg is significantly wider than typical riverboat casinos,
giving the casino and restaurants the spacious feel of a land-based facility.
The hotel at Ameristar Vicksburg has a Three Diamond rating from the AAA. We
believe the overall range and quality of the facilities, food service and
entertainment at Ameristar Vicksburg are superior to those available at its
existing competitors.



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

Together, the Jackpot properties feature approximately 28,500 square feet
of gaming space, 1,034 slot machines, 38 table games, 420 hotel rooms
(including 30 deluxe hot-tub suites), an Olympic-sized pool, a heated spa,
lighted tennis courts, a recreational vehicle park and access to a nearby
18-hole golf course. The food and beverage operations at the Jackpot
properties include a buffet, a fine dining restaurant, a 24-hour casual dining
restaurant, a coffee shop, a snack bar, a showroom that features nationally
known entertainment, and cocktail lounges with entertainment. We completed a
major expansion project at Cactus Petes in 1991 and a remodeling of the casino
at Horseshu in late 1997. Cactus Petes and Horseshu have Four Diamond and
Three Diamond ratings, respectively, from the AAA, and Cactus Petes has been
named Best Hotel/Resort in rural Nevada for the last two years by Nevada
Magazine.

Our Business Strategies

Our growth strategy is to pursue the expansion and development of our
existing properties and to selectively acquire or develop new properties in
attractive, local gaming markets. In implementing our strategy, we emphasize a
total entertainment experience through high-quality gaming, dining, lodging and
other non-gaming amenities to complement and enhance our gaming operations. We
seek to promote customer retention through various targeted marketing and
value-added loyalty programs and by delivering superior customer service.

Our marketing strategy is to develop a loyal customer base by promoting
the quality of our gaming, leisure and entertainment amenities that emphasize
high standards of service and customer satisfaction. We use players clubs at
each property to identify and retain preferred players and develop promotions
and special events to encourage increased gaming activity by these customers.
Our marketing programs also include a number of promotions designed primarily
to increase the frequency of customer visits within local markets, as well as
tour and travel promotional packages in certain markets. We use direct mail
promotions and a variety of advertising media to market our properties,
including print, television, radio, outdoor and internet advertising.

Expansion Plans

We seek to expand our operations through a variety of means, including
entering new North American markets created by the legalization of casino
gaming, developing new casinos or buying existing casinos in established North
American casino gaming markets and expanding through continued growth at our
existing properties. In the event that deteriorating economic conditions cause
state or local governments to legalize gambling in other jurisdictions, we
believe we are well-positioned to enter into new markets created by such an
expansion given our operating history and experience with obtaining new gaming
licenses. Although our preference is to own and operate each of our gaming
properties, we also consider expansion opportunities involving management
contracts or joint ventures.



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We continually evaluate the operating performance of each of our existing
properties and the feasibility of enhancing their performance through capital
expenditure programs. In doing so, we assess the anticipated relative costs
and benefits of the projects under consideration, the availability of cash flow
and debt financing to fund capital expenditures, and competitive and other
relevant factors.

We believe that our long-term success in our current markets and expanding
into new markets will depend, in part, on our ability to distinguish our
operations from those of our competitors. Our strategy of including quality
non-gaming amenities in our facilities, such as lodging, dining and
entertainment, is intended to provide these competitive distinctions. The scope
of non-gaming amenities to be offered at existing properties and future
expansion projects will be determined in part by competitive factors within a
particular market and the nature of our participation in a particular project.
In addition, we believe the selection of attractive expansion markets and
quality locations within those markets will continue to be important to our
growth strategy. In selecting expansion opportunities, we seek a strong
demographic market with a favorable competitive environment and a site in the
market with an attractive, prominent location and ease of access that will
support the size and scope of our development plans.

New Casino and Entertainment Facility at Ameristar St. Charles

We believe there is an opportunity to significantly expand the scope of
our gaming operations at our St. Charles property. The former owner of the
property invested approximately $169 million in the construction of a new
casino and entertainment complex before suspending construction in 1997. We
made substantial changes to the design of the uncompleted portions of the
project and recommenced construction on the new casino and entertainment
facility in May 2001. Our plans for the project include: a 115,000 square-foot
casino with approximately 3,000 slot machines and 104 table games, including a
12-table poker room, and a VIP players lounge; an historical streetscape
reminiscent of St. Charles past extending from the entryway at the porte
cochere through the pavilion; an approximately 450-seat, state-of-the-art
buffet with multiple serving stations; a 262-seat sports bar and grill, with a
40-foot video wall and several other large screens; a 154-seat steakhouse
featuring exhibition cooking with a 46-seat lounge and a 20-seat private dining
room; a 211-seat casual dining restaurant; a 106-seat oyster bar; a 306-seat
Bottleneck Blues Bar, an intricately themed blues club environment with live
entertainment and dining; a video game arcade; and a gift shop. We expect the
costs for the completion of construction of the project as currently
contemplated (including purchases of furniture, fixtures and equipment) to be
approximately $170 million. Upon its opening, we believe the new casino and
entertainment facility at Ameristar St. Charles will be the premier gaming
facility in the St. Louis area, will be well-positioned to take advantage of
growth in this dynamic market and will provide a foundation for Ameristar St.
Charles to increase its market share in the St. Louis market.

This project includes a single casino on two adjoining gaming vessels,
which lie in a man-made protective basin in the Missouri River. We intend to
complete the interior of both vessels, with the mezzanine level of the
second
vessel being used to host special VIP-related events and remaining available to
further expand the casino floor by up to 25,000 square feet based on market
conditions simply by adding gaming equipment. The expanded entertainment center
will allow the property to accommodate the dining and entertainment needs of
the



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customers drawn to the larger casino. In addition to the amenities expected
to open initially in mid-2002, approximately 150,000 square feet of space in
the entertainment center will remain available for future expansion, requiring
only interior finishes to complete.

Parking Garage at Ameristar Kansas City

In connection with the June 2001 approval of the Missouri Gaming
Commission to consolidate the two casinos at Ameristar Kansas City into a
single casino, we committed to construct a parking garage at the property. We
began construction of a 2,650-space parking garage in October 2001. The
structure will feature five parking levels with an enclosed climate-controlled
walkway connecting it to the casino and entertainment facility. We expect the
parking garage to be completed in July 2002 at a construction cost of
approximately $23 million.

Markets and Competition

Kansas City

Market.The Kansas City gaming market is the twelfth largest in the
United States with gaming revenues for the twelve months ended December 31,
2001 of approximately $582.0 million. The Kansas City market consists of four
casinos located in the Kansas City metropolitan area, including Ameristar
Kansas City. A fifth casino is located approximately 50 miles north in St.
Joseph, Missouri (the Kansas City gaming market data included herein does not
give effect to this casino). The Kansas City market has over 1.4 million adults
residing within a 50-mile radius and over 1.7 million adults within a 100-mile
radius. This market is insulated from other gaming markets, with no significant
competing markets within 100 miles.

Competition.Ameristar Kansas City competes primarily with three other
gaming operations located in and around Kansas City, Missouri. Gaming has been
approved by local voters in jurisdictions near Kansas City, including St.
Joseph, Missouri, which currently has one riverboat gaming operation. Since the
opening of Ameristar Kansas City in 1997, Sams Town, the closest casino to
Ameristar Kansas City, closed, and Boyd Gaming, the owner of Sams Town, sold
most of Sams Towns assets to Harrahs Entertainment Inc. Sams Town has
remained closed since its acquisition by Harrahs, which recently sold the
property with a covenant restricting its use to non-gaming purposes.

In June 2001, Harrahs North Kansas City, located approximately five miles
from Ameristar Kansas City and currently the closest operating casino to
Ameristar Kansas City, completed its previously announced facilities
enhancements and consolidation of its gaming space onto one expanded vessel.
In addition, Argosy Casino has announced its intention to replace its existing
riverboat with a single-level 58,000 square foot barge-based facility,
increasing the number of gaming positions by 50%, and renovate and enhance its
other amenities.

In 2000, the Flamingo Casino was purchased by Isle of Capri and the
property was substantially renovated in the second quarter of 2001 to re-theme
it into an Isle of Capri casino. We believe that during the construction
period, the Isle facility patrons were displaced by the construction and many
frequented Harrahs North Kansas City, the next closest casino. With



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the
completion of construction, Isles property has regained its market share from
Harrahs without a material impact on our market share.

St. Charles

Market.The St. Louis gaming market is the ninth largest in the United
States with gaming revenues for the twelve months ended December 31, 2001 of
$766.3 million, an increase of 12.1% over $683.5 million for the twelve months
ended December 31, 2000. The St. Louis market, which overlaps two
jurisdictions, Missouri and Illinois, consists of five casinos, including
Ameristar St. Charles. There are approximately 1.8 million adults living within
50 miles and 3.7 million adults living within 100 miles of St. Louis, making it
the third largest gaming market in the United States in terms of local
population, and the St. Louis market is insulated from other gaming markets.

Competition.Ameristar St. Charles competes primarily with four other
gaming operations located in metropolitan St. Louis. Two of these competitors
are located in Illinois, which unlike Missouri does not impose the $500 per
person loss limit that is imposed by Missouri, does not require a mandatory
identification card to enter a casino and allows credit play. Our principal
competition is a facility located in Maryland Heights, Missouri that opened in
April 1997 and is located five miles from Ameristar St. Charles. Ameristar St.
Charles experienced a decline in revenues following the opening of the Maryland
Heights, Missouri facility. Prior to Harrahs acquisition of Players
International, Inc. on May 22, 2000, Harrahs and Players operated separate but
adjacent facilities at Maryland Heights. Following Harrahs acquisition of
Players, Harrahs consolidated both facilities into one operation. In addition,
Harrahs has recently announced its intention to add an additional hotel and
parking garage at Maryland Heights. Gaming has also been approved by local
voters in other cities and counties along the Mississippi and Missouri Rivers
near St. Louis. In addition, the Missouri Gaming Commission is currently
considering whether to accept applications for an additional gaming license in
the St. Louis area. If an additional gaming license is granted, Ameristar St.
Charles would face additional competition.

Council Bluffs

Market.Council Bluffs forms part of the greater Omaha, Nebraska/Council
Bluffs, Iowa metropolitan area, which has a population of approximately
717,000. Approximately 1.0 million people live within a 50-mile radius, and
approximately 1.7 million people live within a 100-mile radius of Council
Bluffs. Based on available data, Council Bluffs is currently the largest gaming
market in Iowa. Gaming revenues in the Council Bluffs gaming market for the
twelve months ended December 31, 2001 were $358.5 million.

Competition.Three gaming licenses have been issued for the Council
Bluffs gaming market to Iowa West Racing Association. We operate our casino at
Ameristar Council Bluffs pursuant to an operating agreement with Iowa West
Racing Association. The other casinos operating under these licenses are
Harrahs Council Bluffs, a riverboat casino, and Bluffs Run Casino, a dog track
and slots-only, land-based casino, both of which compete with Ameristar Council
Bluffs. In July 2001, Harrahs Entertainment, Inc. acquired both of these
properties through its acquisition of Harveys Casino Resorts. Although
Ameristar Council Bluffs has increased its market share since Harrahs
acquisition of these properties, we cannot predict the long-term



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effects the
Harrahs acquisition will have on our operations or our ability to compete in
the Council Bluffs market.

Vicksburg

Market.The primary market for Ameristar Vicksburg is residents of the
Jackson and Vicksburg, Mississippi and Monroe, Louisiana areas; tourists coming
to Vicksburg primarily to visit the Vicksburg National Military Park; and other
traffic traveling on Interstate 20, a major east-west thoroughfare that
connects Atlanta and Dallas. Vicksburg, with a population of approximately
30,000, is located 45 miles west of Jackson, the capital of Mississippi. The
Jackson and Vicksburg metropolitan areas have a total population of
approximately 490,000 persons. Approximately 1.5 million people live within a
100-mile radius of Vicksburg. The Vicksburg National Military Park, located
within three miles of Ameristar Vicksburg, draws over 1.0 million registered
visitors a year. Interstate 20 (which connects Atlanta and Dallas) passes
directly through Vicksburg. According to the Mississippi Department of
Transportation, approximately 8.0 million vehicles drove across the Interstate
20 bridge at Vicksburg during 1999. Gaming revenues in the Vicksburg gaming
market for the twelve month reporting period ended December 2001 were
approximately $232.7 million.

Competition.Ameristar Vicksburg is subject to competition from three
local competitors and from casinos in Shreveport and Bossier City, Louisiana.
Ameristar Vicksburg is also subject to competition from a casino in
Philadelphia, Mississippi owned by a Native American tribe, which is
constructing an additional gaming and hotel facility near its existing
property. Several potential gaming sites still exist in Warren County and
Vicksburg and from time to time potential competitors propose the development
of additional casinos in or near Vicksburg. This includes proposals raised from
time to time to develop Native American casinos in Louisiana and Mississippi,
some of which could be competitive with the Vicksburg market if completed.

Jackpot

Market.We believe that approximately 50% of the customer base of the
Jackpot properties consists of residents of Idaho who generally frequent the
properties on an overnight or turnaround basis. The balance of the Jackpot
properties customers come primarily from Oregon, Washington, Montana, northern
California and the southwestern Canadian provinces. Although many of the
customers from beyond southern Idaho are tourists traveling to other
destinations, a significant portion of these customers come to Jackpot as a
final destination.

Competition.We have developed a dominant share of the market capacity in
Jackpot. The Jackpot properties compete with four other hotels and motels
(three of which also have casinos). According to the Nevada Gaming Control
Board and other sources, as of December 31, 2001, the Jackpot properties
accounted for approximately 55% of the lodging rooms, 62% of the slot machines
and 71% of the table games in Jackpot. We believe Cactus Petes offers a more
attractive environment and a broader and higher quality range of gaming and
leisure activities than those of its competitors. We are not aware of any
expansion plans by existing or potential competitors in Jackpot, however,
casinos with video lottery terminals (VLT) similar to slot machines are
operated on Native American land in Idaho, including one near Pocatello with
approximately 200 VLT machines that has been operated by the



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Shoshone-Bannock
Tribes (the S-B Tribes). The S-B Tribes recently entered into a compact with
the State of Idaho allowing gaming on the S-B Tribes lands to the extent
permitted under Idaho law as to be determined by a federal court pursuant to
currently pending proceedings. The State of Idaho is contending in this
litigation that VLT terminals are not permitted under Idaho law. A recent
proposal to amend Idaho law and compacts between the State of Idaho and three
tribes with reservations in Northern Idaho (the Northern Tribes) would permit
these tribes to operate VLT terminals but place limits on the expansion of
gaming by these tribes. The S-B Tribes are not covered by this proposal, but
the outcome of the litigation under the compact with the S-B Tribes could be
affected if Idaho law is amended as has been proposed. The Idaho legislature
did not approve bills to amend Idaho law or ratify the amended compacts with
the Northern Tribes during the 2001 or 2002 legislative sessions, but similar
legislation may be introduced in the future. The Northern Tribes intend to
seek to place a referendum on the November 2002 ballot that would amend Idaho
law and sanction amended compacts that also could adversely affect the outcome
of the pending litigation between the State and the S-B Tribes. In addition,
casino gaming on Native American lands in both western Washington and northeast
Oregon has been in operation for several years, and casinos also operate in
Alberta, Canada.

Employees

As of March 15, 2002, we employed approximately 6,400 employees. None of
our current employees is employed pursuant to collective bargaining or other
union arrangements. We believe our employee relations are good.

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 competitive pressures
in a variety of areas. Our operating properties are located in jurisdictions
that restrict gaming to certain areas and/or are adjacent to states that
prohibit or restrict gaming operations. These restrictions and prohibitions
provide substantial benefits to our business and our ability to attract and
retain customers. The legalization or expanded legalization or authorization of
gaming within or near a market area of one of our properties could have a
material adverse effect on our business, financial condition and results of
operations. Economic difficulties faced by state governments could lead to
intensified political pressures for the legalization of gaming.

From time to time, legislation and ballot measures have been
unsuccessfully proposed in Kansas and Nebraska for the legalization of gaming,
and the legislatures of these states are currently considering proposals to
legalize gaming that may be adopted. Even if the current proposals are
unsuccessful, we expect similar proposals will be made in the future and may be
adopted. In such a case, our properties in Kansas City and Council Bluffs could
face additional competition from adjacent states. In addition, the Missouri
Gaming Commission is currently considering whether to accept applications for
an additional gaming license in the St. Louis area. If an additional gaming
license is granted, Ameristar St. Charles would face additional competition.
Also, litigation is currently pending before the Mississippi Supreme Court



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relating to the site of a proposed new casino close to Jackson, Mississippi,
which is the principal market for our Vicksburg property.

In addition, the entry into our current markets of additional competitors
could have a material adverse effect on our business, financial condition and
results of operations, particularly if a competitor were to obtain a license to
operate a gaming facility in a superior location. Native American gaming
facilities in some instances operate under regulatory requirements that are
less stringent than those imposed on state-licensed casinos, which could
provide them with a competitive advantage and lead to increased competition in
our markets. Furthermore, increases in the popularity of, and competition from,
Internet and other account wagering gaming services, which allow their
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.

| |                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Many factors, some of which are beyond our control, could adversely affect our
ability to successfully complete our construction and development projects as
planned.

General Construction Risks  Delays and Cost Overruns.Construction and
expansion projects for our properties entail significant risks. These risks
include: (1) shortages of materials (including slot machines or other gaming
equipment); (2) shortages of skilled labor or work stoppages; (3) unforeseen
construction scheduling, engineering, environmental or geological problems; (4)
weather interference, floods, fires or other casualty losses; (5) unanticipated
cost increases; and (6) construction period disruption to existing operations.

Our anticipated costs and construction periods for construction projects
are based upon budgets, conceptual design documents and construction schedule
estimates prepared by us in consultation with our architects, consultants and
contractors. The cost of any construction project undertaken by us may vary
significantly from initial expectations, and we may have a limited amount of
capital resources to fund cost overruns on any project. If we cannot finance
cost overruns on a timely basis, the completion of one or more projects may be
delayed until adequate cash flow from operations or other financing is
available. The completion date of any of our construction projects could also
differ significantly from initial expectations for construction-related or
other reasons. We cannot assure you that any project will be completed 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 EBITDA (as defined in the credit



12



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agreement) during the preceding
four full fiscal quarters. Our future operating performance will be subject to
financial, economic, business, competitive, regulatory and other factors, many
of which are beyond our control. Accordingly, we cannot assure you that our
future consolidated EBITDA and the resulting availability of operating cash
flow or borrowing capacity will be sufficient to allow us to undertake or
complete 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 flow.

| |                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------
| | The costs of our development and construction of the new casino and
entertainment facility at Ameristar St. Charles may exceed our current
estimates.

Construction is underway on our new casino and entertainment facility at
Ameristar St. Charles. Our estimated cost of completing the St. Charles project
is based on construction contracts we have signed, contract bids and estimates
prepared by us. Due to typical construction uncertainties associated with any
project, we cannot be sure that our construction costs will not be higher than
the estimated cost of completion. We also cannot be sure that we will not
exceed the budgeted costs of the project or that the project will commence
operations within the contemplated time frame, if at all.

| |                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our ability to complete the construction of the new casino and entertainment
complex at Ameristar St. Charles as currently contemplated depends on our
receipt of a waiver from our lenders.

Our senior credit facilities currently limit the amount that we can spend
on the project to $110 million plus otherwise allowable capital expenditures,
but we expect the cost of the project to exceed this amount. While we are not
currently in violation of any of the provisions of our senior credit
facilities, we will need to obtain a waiver of this limit from our lenders. We
expect to request a waiver from the lenders under our senior credit facilities
during the second quarter of 2002, but we cannot be sure that our lenders will
grant our request. If we do not receive the waiver, our completion of the
project will be significantly delayed.

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



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Mr. Neilsen is our President, Chief Executive Officer and Chairman of our
board of directors and owns approximately 60% of our outstanding common stock.
Accordingly, Mr. Neilsen has the ability to control our operations and affairs,
including the election of the 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 the stock of the company. 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, heirs and devisees must sell a substantial number
of shares of our common stock to obtain funds to pay inheritance tax
liabilities. 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.

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

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



| |  |  | Increasing our vulnerability to general adverse economic and industry
conditions;                                                                                                                                                                     
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Limiting our ability to obtain additional financing to fund future
working capital, capital expenditures, acquisitions and other general
corporate requirements;                                                                                      
|
| |  |  | Requiring a substantial portion of our cash flow from operations for
the payment of interest on our debt and reducing our ability to use our
cash flow to fund working capital, capital expenditures, acquisitions
and general corporate requirements;
|
| |  |  | Limiting our flexibility in planning for, or reacting to, changes in
our business and the industry in which we operate; and                                                                                                                           
|
| |  |  | Placing us at a competitive disadvantage to 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



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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.

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

We depend on the continued performance of Craig H. Neilsen, our President,
Chief Executive Officer and Chairman, and his management team. Thomas M.
Steinbauer, Ameristars Senior Vice President of Finance, has announced his
intention to leave us sometime after mid-2002, and we are currently seeking a
replacement for Mr. Steinbauer. In addition, we are currently seeking to fill
the open General Manager position at Ameristar Council Bluffs. If we lose the
services of Mr. Neilsen, any of our other executive officers or our senior
property management personnel, and cannot replace such persons in a timely
manner, it could have a material adverse effect on our business.

| |                                                                                                        
| | -------------------------------------------------------------------------------------------------------
| | The market for qualified property and corporate management personnel is
subject to intense competition.

We have experienced and expect to continue to experience strong
competition in hiring and retaining qualified property and corporate management
personnel. Recruiting and retaining qualified management personnel is
particularly difficult at Ameristar Vicksburg and the Jackpot properties due to
local market conditions. If we are unable to successfully recruit and retain
qualified management personnel at our properties and 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 a
material adverse effect on our results of operations and financial condition.

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



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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 will need to
be renewed in December 2002 and every two years thereafter. 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 would have a material adverse
effect on our business, financial condition and results of operations. We are
also subject to substantial gaming taxes and fees imposed by various
governmental authorities, which are subject to increase.

To date, we have obtained all governmental licenses, findings of
suitability, registrations, permits and approvals necessary for the operation
of our currently operating gaming activities. However, gaming licenses and
related approvals are deemed to be privileges under Missouri, Iowa, Mississippi
and Nevada law. We cannot assure you that our existing licenses, permits and
approvals will be maintained or extended. We also cannot assure you that any
new licenses, permits and approvals that may be required in the future will be
granted to us.

| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | 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
officials have proposed changes in tax laws, or in the administration of such
laws, affecting the gaming industry. In addition, worsening economic conditions
could intensify the efforts of state and local governments to raise revenues
through increases in gaming taxes. If the jurisdictions in which we operate
were to increase gaming taxes and fees, our results from operations could be
adversely affected. Various legislative proposals have been introduced in the
Missouri legislature during 2002 that would substantially increase gaming taxes
in Missouri. Although some of these bills include provisions that would remove
the $500 loss limit and mandatory boarding card requirements that could lead to
increased revenues, an increase in taxes could materially adversely affect our
results of operations in Missouri.

| |                                                                 
| | ----------------------------------------------------------------
| | Worsening economic conditions 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.

| |                                                                                                          
| | ---------------------------------------------------------------------------------------------------------
| | Failure of local reauthorization of gaming activities in Iowa could have a
material adverse effect on us.

Under Iowa law, a license to conduct gambling games may be issued in a
county only if the county electorate has approved such gambling games. Although
the electorate of Pottawattamie County, which has a population of approximately
88,000 and includes the City of Council Bluffs, approved by referendum the
gambling games conducted at Ameristar Council Bluffs, a



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reauthorization
referendum must be submitted to the county electorate in the general election
to be held in November 2002 and each eight years thereafter. Each such
referendum requires the vote of a majority of the persons voting. If any such
reauthorization referendum is defeated, Iowa law provides that any previously
issued gaming license will remain valid and subject to periodic renewal for a
total of nine years from the original issue unless otherwise terminated by the
Iowa Racing and Gaming Commission. The original issue date for our Iowa gaming
license was January 27, 1995. We cannot assure you that gaming operations of
the type we conduct at Ameristar Council Bluffs will continue to be authorized
in Pottawattamie County. Any failure of Pottawattamie County to reauthorize
gaming operations of the type we conduct at Ameristar Council Bluffs would have
a material adverse effect on our business, financial condition and results of
operations.

| |                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------
| | The National Gambling Impact Study Commissions recommendations may adversely
affect the gaming industry and our operations.

The National Gambling Impact Study Commission (the National Commission)
was established by the U.S. Congress to conduct a comprehensive study of the
social and economic impact of gaming in the United States. On April 28, 1999,
the National Commission voted to recommend that the expansion of gaming be
curtailed. In June 1999, the National Commission issued a final report of its
findings and conclusions, together with recommendations for legislative and
administrative actions. Highlights of some of those recommendations include:
(1) legal gaming should be restricted to those at least 21 years of age; (2)
betting on college and amateur sports should be banned; (3) the introduction of
casino-style gaming at pari-mutuel racing facilities for the primary purpose of
saving pari-mutuel facilities that otherwise may not be financially viable for
the purpose of competing with other forms of gaming should be prohibited; (4)
Internet gaming should be banned in the United States; (5) the types of gaming
activities allowed by Native American tribes within a given state should be
consistent with the gaming activities allowed to other persons in that state;
and (6) state, local and tribal governments should recognize that casino gaming
provides economic development, particularly for economically depressed areas
and casino gaming as opposed to stand-alone slot machines (e.g., in convenience
stores), Internet gaming and lotteries do not provide the same economic
development. Any regulation of the gaming industry which may result from the
National Commissions report may have an adverse effect on the gaming industry
and on our financial condition and results of operations.

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

Our riverboat and dockside facilities in Missouri, Iowa and Mississippi
could be lost from service due to casualty, mechanical failure, extended or
extraordinary maintenance, floods or other severe weather conditions. Cruises
of the Council Bluffs casino are subject to risks generally incident to the
movement of vessels on inland waterways, including risks of casualty due to
river turbulence and severe weather conditions. In addition, U.S. Coast Guard
regulations set limits on the operation of vessels and require that vessels be
operated by a minimum complement of licensed personnel.

The U.S. Coast Guard also requires all United States flagged passenger
vessels operating exclusively in fresh water to conduct a thorough dry-dock
inspection of underwater machinery,



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valves and hull every five years. Less
stringent inspection requirements apply to permanently moored dockside vessels
like those at Ameristar Kansas City, Ameristar St. Charles and Ameristar
Vicksburg. The Ameristar Council Bluffs riverboat was due for its dry-dock
inspection in November 2000, but we have been accepted into a U.S. Coast Guard
program that has extended the dry-dock requirement to May 2003 by undergoing a
thorough underwater inspection. Upon the formal adoption of regulations
relating to this program by the U.S. Coast Guard, we may be able to extend the
dry-dock requirement further, to November 2005. If we are unable to continue to
extend the dry-dock requirement by performing thorough underwater hull
inspections, the Council Bluffs casino would be out of service for a
substantial period of time for its dry-dock inspection. This could have a
material adverse effect on Ameristar Council Bluffs and on our business,
financial condition and results of operations. We cannot assure you that we
will actually obtain any further extension of the dry-dock requirement or that
similar extensions will be obtained in the future.

The Ameristar Vicksburg site has experienced some instability that
requires periodic maintenance and improvements. Although in 1999 we reinforced
the cofferdam basin in which the vessel floats, further reinforcements may be
necessary. We are also monitoring the site to evaluate what further steps, if
any, may be necessary to stabilize the site to permit operations to continue. A
site failure would require Ameristar Vicksburg to limit or cease operations.

The loss of a riverboat or dockside facility from service for any period
of time likely would adversely affect our operating results and borrowing
capacity under our long-term debt facilities. It could also result in the
occurrence of an event of a default under one or more of our credit facilities
or contracts.

| |                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------
| | We could face severe penalties and material remediation costs if we fail to
comply with applicable environmental regulations.

As is the case with any owner or operator of real property, we are subject
to a variety of federal, state and local governmental regulations relating to
the use, storage, discharge, emission and disposal of hazardous materials.
Failure to comply with environmental laws could result in the imposition of
severe penalties or restrictions on operations by government agencies or courts
of law, which could adversely affect operations. We do not have environmental
liability insurance to cover most such events, and the environmental liability
insurance coverage we maintain to cover certain events includes significant
limitations and exclusions. In addition, if we discover any significant
environmental contamination affecting any of our properties, we could face
material remediation costs or additional development costs for future expansion
activities.

Government Regulations

The ownership and operation of casino gaming facilities are subject to
extensive state and local regulations. We are required to obtain and maintain
gaming licenses in each of the jurisdictions in which we conduct gaming. The
limitation, conditioning or suspension of gaming licenses could (and the
revocation or non-renewal of gaming licenses, or the failure to reauthorize
gaming in certain jurisdictions, would) materially adversely affect our
operations in that jurisdiction. In addition, changes in law that restrict or
prohibit our gaming operations in any jurisdiction could have a material
adverse effect on us.



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Missouri.The ownership and operation of riverboat and dockside gaming
facilities in Missouri are subject to extensive state and local regulation, but
primarily the licensing and regulatory control of the Missouri Gaming
Commission. The Missouri Riverboat Gaming Act (the Missouri Act) provides for
the licensing and regulation of riverboat and dockside gaming operations on the
Mississippi and Missouri Rivers in the State of Missouri and the licensing and
regulation of persons who distribute gaming equipment and supplies to gaming
licensees.

The Missouri Gaming Commission has discretion to approve gaming license
applications for both permanently moored (dockside) riverboat casinos and
powered (excursion) riverboat casinos and determine the number, location and
type of excursion gambling boat allowed each licensee. Due to safety concerns,
all gaming vessels on the Missouri River are permitted to be moored in moats
set back from the river. Gaming licenses are initially issued for two one-year
periods and must be renewed every two years thereafter. No gaming licensee may
pledge or transfer in any way any license, or any interest in a license, issued
by the Missouri Gaming Commission. As a result, the gaming licenses of
Ameristar Casino Kansas City, Inc. and Ameristar Casino St. Charles, Inc. were not
pledged to secure our senior credit facilities.

The issuance, transfer and pledge of ownership interests in a gaming
licensee are also subject to strict notice and approval requirements. Missouri
Gaming Commission regulations prohibit a licensee from doing any of the
following without at least 60 days prior notice to the Missouri Gaming
Commission, and during such period, the Missouri Gaming Commission may
disapprove the transaction or require the transaction be delayed pending
further investigation:



| |  |  | any transfer or issuance of an ownership interest in a gaming
licensee that is not a publicly held entity or a holding company that is
not a publicly held entity, and              
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | any pledge or grant of a security interest in an ownership interest
in a gaming licensee that is not a publicly held entity or a holding
company that is not a publicly held entity;

provided that no ownership interest may be transferred in any way pursuant to
any pledge or security interest without separate notice to the Missouri Gaming
Commission at least 30 days prior to such transfer, which restriction must be
specifically included in the grant of a security interest.

Under the Missouri Act, 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, except for Joseph E. Monaly and W. Bruce Turner, each a director
of Ameristar. Mr. Monaly has applied for but not yet received a license, and
Mr. Turner is completing his license application. 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



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prior to such
consummation, and the Missouri Gaming Commission may reopen the licensing
hearing prior to or following the consummation date to consider the effect of
the transaction on the licensees suitability:



| |  |  | any issuance of ownership interest in a publicly held gaming licensee
or a publicly held holding company, if such issuance would involve,
directly or indirectly, an amount of ownership interest equaling 5% or
greater of the ownership interest in the gaming licensee or holding
company after the issuance is complete,
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | any private incurrence of debt equal to or exceeding one million
dollars by a gaming licensee or holding company that is affiliated with
the holder of a license,                                                                                                                                                           
|
| |  |  | any public issuance of debt by a gaming licensee or holding company
that is affiliated with the holder of a license, and                                                                                                                                                                                                    
|
| |  |  | any significant related party transaction as defined in the
regulations.                                                                                                                                                                                                                                                    

The Missouri Gaming Commission may waive or reduce the 15-day notice
requirement.

The Missouri Act imposes operational requirements on riverboat operators,
including a charge of two dollars per gaming customer 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 purchases of chips, tokens, dice, playing cards and
electronic gaming devices must be acquired from suppliers licensed by the
Missouri Gaming Commission, or another person or entity approved by the
Missouri Gaming Commission.

The Missouri Act provides for a loss limit of $500 per person per two-hour
cruise. Although the Missouri Act provides no limit on the amount of
riverboat space that may be used for gaming, the Missouri Gaming Commission can
impose space limitations through the adoption of rules and regulations.
Additionally, United States Coast Guard safety regulations could affect the
amount of riverboat space that may be devoted to gaming. The Missouri Act also
includes requirements as to the form of riverboats, which must resemble
Missouris riverboat history to the extent practicable and include certain
non-gaming amenities. All licensees currently operating riverboat gaming
operations in Missouri are authorized to conduct all or a portion of their
operations on a dockside basis.

Missouri gaming regulations have been modified in recent years to benefit
gaming operations. In September 1999 the Missouri Gaming Commission began
allowing open and continuous boarding on the riverboats in the St. Louis market
and in November 1999 the



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Missouri Gaming Commission began allowing open and
continuous boarding on area riverboats in the Kansas City market. This change
eliminated the prior mandated two-hour simulated cruise times, which had
limited boarding at any gaming vessel to only 45 minutes at the beginning of
each two-hour period. The Missouri Act now authorizes the exchange of currency
into electronic credits so that patrons are no longer forced to manually feed
tokens into gaming machines at the start of play. This allows faster, more
convenient play, especially in multi-coin games which have proven popular in
other gaming jurisdictions.

The Missouri Act requires each licensee to post a bond or other surety to
guarantee that the licensee complies with its statutory obligations. In
addition, the Missouri Act gives the Missouri Gaming Commission the authority
to require gaming licensees to post a bond or other form of security to the
State of Missouri to, among other things, guarantee the completion of an
expansion of a gaming facility within the later of a time period determined by
the Missouri Gaming Commission or August 28, 2003. The failure to complete an
approved expansion project within the prescribed time period may, pursuant to
the Missouri Act, constitute sufficient grounds for not renewing the gaming
license for the gaming facility.

To promote safety, the Missouri Gaming Commission has required that gaming
entertainment barges obtain annual certification from the American Bureau of
Shipping. On January 8, 1999, the American Bureau of Shipping decertified the
gaming barges and other ancillary barges now operated by Ameristar St. Charles,
as a result of low water levels on the Missouri River and the build up of silt
and debris under these barges. At that time, the Missouri Gaming Commission
expressed concern regarding the effect of the low water level on the barges.
However, the Missouri Gaming Commission allowed the former owner to keep the
St. Charles property open because of steps taken to remedy the problem. The
American Bureau of Shipping subsequently recertified the St. Charles facility
in November 1999. While the former owner previously took steps to reduce the
possibility that this will happen again, including additional dredging of
materials from under the barges, we cannot assure you that this condition will
not recur and, if so, require the closure of a property for a significant
amount of time.

If the Missouri Gaming Commission decides that a gaming subsidiary
violated a gaming law or regulation, the Missouri Gaming Commission could
limit, condition, suspend or revoke the license of the gaming subsidiary. In
addition, a gaming subsidiary, its parent company and the persons involved
could be subject to substantial fines for each separate violation. Limitation,
conditioning or suspension of any gaming license could (and revocation of any
gaming license would) materially adversely affect Ameristar and our gaming
subsidiaries gaming operations.

The Missouri Gaming Commission regulates the issuance of excursion liquor
licenses, which authorize the licensee to serve, offer for sale, or sell
intoxicating liquor aboard any excursion gambling boat or facility immediately
adjacent to and contiguous with the excursion gambling boat, which is owned and
operated, by the licensee. An excursion liquor license is granted for a one
year term by the Missouri Gaming Commission and is renewable annually. The
Commission can discipline an excursion liquor licensee for any violation of
Missouri law or the Missouri Gaming Commissions rules. Licensees are
responsible for the conduct of their business and for any act or conduct of any
employee on the premises that is in violation of the Missouri Act or the rules
of the Missouri Gaming Commission. Missouri Gaming Commission liquor control
regulations also include prohibitions on certain intoxicating liquor



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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 Ameristar
Casino Council Bluffs, Inc. (ACCBI) and are subject to Chapter 99F of the
Iowa Code and the regulations promulgated thereunder. Ameristars gaming
operations are subject to the licensing and regulatory control of the Iowa
Racing and Gaming Commission (the Iowa Gaming Commission).

Under Iowa law, wagering on a gambling game is legal, when conducted by
a licensee on an excursion gambling boat. An excursion gambling boat is a
self-propelled excursion boat. Gambling game means any game of chance
authorized by the Iowa Gaming Commission. The excursion season is from April
1st through October 31st of each calendar year. The vessel must operate at
least one excursion each day for 100 days during the excursion season to
operate during the off season. Each excursion must consist of a minimum of two
hours. The Council Bluffs casino satisfied the requirements of Iowa law for the
conduct of off-season operations for the years of 1997 through 2001.

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 the Iowa West Racing Association, a not-for-profit corporation
organized for the purpose of facilitating riverboat gaming in Council Bluffs,
Iowa (the Association). The Association entered into an agreement with ACCBI
authorizing ACCBI to operate riverboat gaming operations in Council Bluffs
under the Associations gaming license (the Operators Contract). The Iowa
Gaming Commission approved this contract. The term of the Operators Contract
runs until December 31, 2002, with two five-year renewal options. If either
party desires not to renew the Operators Contract, it must provide written
notice to the other party not later than six months prior to the expiration of
the term (the Renewal Deadline). ACCBI has notified the Association and the
Iowa Gaming Commission of its intention to seek an amendment of the terms of
the Operators Contract prior to the Renewal Deadline. If ACCBI is unable to
reach mutually acceptable terms for an amended Operators Contract with the
Association prior to the Renewal Deadline, ACCBI may elect not to renew the
Operators Contract and instead seek an agreement with another suitable
qualified sponsoring organization. Since the current license awarded to the
Association by the Iowa Gaming Commission for the Ameristar Council Bluffs
Casino extends through March 31, 2003, the ability of ACCBI to operate its
casino after December 31, 2002 is currently uncertain if ACCBI and the
Association cannot reach mutual agreement on an amendment by that time.



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Under Iowa law, a license to conduct gambling games may be issued in a
county only if the county electorate has approved such gambling games. Although
the electorate of Pottawattamie County, which includes the City of Council
Bluffs, approved by referendum the gambling games conducted by ACCBI, a
reauthorization referendum must be submitted to the electorate in the general
election to be held in 2002 and each eight years thereafter. Each such
referendum requires the vote of a majority of the persons voting thereon. If
any such reauthorization referendum is defeated, Iowa law provides that any
previously issued gaming license will remain valid and subject to periodic
renewal for a total of nine years from the date of original issuance, subject
to earlier revocation as discussed below. The original issuance date of the
gaming license for Ameristar Council Bluffs was January 27, 1995.

Substantially all of ACCBIs material transactions are subject to review
and approval by the Iowa Gaming Commission. All contracts or business
arrangements, verbal or written, with any related party or in which the term
exceeds three years or the total value of the contract exceeds $50,000 must be
submitted in advance to the Iowa Gaming Commission for approval. Additionally,
contracts negotiated between ACCBI and a related party must be accompanied by
economic and qualitative justification.

ACCBI is required to notify the Iowa Gaming Commission of the identity of
each director, corporate officer and owner, partner, joint venturer, trustee or
any other person who has a beneficial interest of five percent (5%) or more,
direct or indirect, in ACCBI. The Iowa Gaming Commission may require ACCBI to
submit background information on such persons. The Iowa Gaming Commission may
request ACCBI to provide a list of persons holding beneficial ownership
interests in ACCBI of less than five percent (5%). For purposes of these rules,
beneficial interest includes all direct and indirect forms of ownership or
control, voting power or investment power held through any contract, lien,
lease, partnership, stockholding, syndication, joint venture, understanding,
relationship, present or reversionary right, title or interest, or otherwise.
The Iowa Gaming Commission may suspend or revoke the license of a licensee in
which a director, corporate officer or holder of a beneficial interest includes
or involves any person or entity which is found to be ineligible as a result of
want of character, moral fitness, financial responsibility, professional
responsibility or due to failure to meet other criteria employed by the Iowa
Gaming Commission.

ACCBI must submit detailed financial, operating and other reports to the
Iowa Gaming Commission. ACCBI must file weekly and monthly gaming reports
indicating adjusted gross receipts received from gambling games and the total
number and amount of money received from admissions. Additionally ACCBI must
file annual financial statements covering all financial activities related to
its operations for each fiscal year. ACCBI must also keep detailed records
regarding its equity structure and owners.

Iowa has a graduated wagering tax equal to five percent (5%) of the first
$1.0 million of annual adjusted gross receipts, ten percent (10%) on the next
$2.0 million of annual adjusted gross receipts and twenty percent (20%) on
annual adjusted gross receipts over $3.0 million. In addition, the state
charges other fees on a per customer basis. Additionally, ACCBI pays to the
City of Council Bluffs a fee equal to $0.50 per passenger.

Under the Operators Contract, ACCBI also pays the Association an
admissions fee of $1.50 per passenger. ACCBI has interpreted the Operators
Contract to mean that a person



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may leave and re-enter Council Bluffs Casino
(for example, to visit the restaurants at Ameristar Council Bluffs) without
ACCBI being obligated to pay an additional admissions fee to the Association.
ACCBI received a letter from the Association in August 1996 in which the
Association asserted that an additional fee is due each time a person enters
the Council Bluffs Casino, including re-entries. The Association has advised us
that the board of directors of the Association discussed a proposal to settle
this dispute at an October 1997 meeting but declined to take any action either
to approve the proposed settlement or to pursue the previously threatened
claim. Accordingly, the Association has advised ACCBI that it does not
currently intend to pursue this claim, but the Association has not formally
waived or released the claim.

All persons participating in any capacity at a gaming facility, with the
exception of certified law enforcement officers while they are working for the
facility as uniformed officers, are required to obtain occupational licenses
from the Iowa Gaming Commission. All such licenses require annual renewal. The
Iowa Gaming Commission had broad discretion to deny or revoke any occupational
license.

If the Iowa Gaming Commission decides that a gaming law or regulation has
been violated, the Iowa Gaming Commission has the power to assess fines, revoke
or suspend licenses or to take any other action as may be reasonable or
appropriate to enforce the gaming rules and regulations.

ACCBI is subject to licensure by the Alcoholic Beverages Division (ABD)
of the Iowa Department of Commerce which administers and enforces the laws of
the State of Iowa concerning alcoholic beverages. Additionally, ACCBI is
subject to the liquor ordinances adopted by local authorities. A local
authority may adopt ordinances governing establishments which are located
within their jurisdiction. Local ordinances may be more restrictive than the
state law, but they may not conflict with the state law. The ABD and the local
authorities have full power to suspend or revoke any license for the serving of
alcoholic beverages.

Mississippi.The ownership and operation of casino gaming facilities in
Mississippi are subject to extensive state and local regulation, but primarily
the licensing and regulatory control of the Mississippi Gaming Commission (the
Mississippi Commission).

The Mississippi Gaming Control Act (the Mississippi Act), which
legalized dockside casino gaming in Mississippi, is similar to the Nevada
Gaming Control Act discussed below. The Mississippi Commission has adopted
regulations which are also similar in many respects to the Nevada gaming
regulations.

The laws, regulations and supervisory procedures of Mississippi and the
Mississippi Commission are based upon declarations of public policy that are
concerned with, among other things, (1) the prevention of unsavory or
unsuitable persons from having direct or indirect involvement with gaming at
any time or in any capacity; (2) the establishment and maintenance of
responsible accounting practices and procedures; (3) the maintenance of
effective controls over the financial practices of licensees, including the
establishment of minimum procedures for internal fiscal affairs and
safeguarding of assets and revenues, providing 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



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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 the Mississippi courts on constitutional and procedural
grounds. The latest ruling was appealed to the Mississippi Supreme Court, which
affirmed the decision of the lower court. If another such proposal were to be
offered and if a sufficient number of signatures were to be gathered to place a
legal initiative on the ballot, it is possible for the voters of Mississippi to
consider such a proposal in November 2003. While we are unable to predict
whether such an initiative will appear on a ballot or the likelihood of such an
initiative being approved by the voters, if such an initiative were passed and
gaming were prohibited in Mississippi it would have a significant adverse
effect on us and our Mississippi gaming operations.

As of March 1, 2002, 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. In December 1996, the Mississippi Commission rejected
an application for the development of a casino on a site on the Big Black River
in Warren County near Interstate 20 between Jackson and Vicksburg, which
decision was appealed by an adjoining landowner and the license applicant. In
December 1997, a Mississippi circuit court issued an order reversing the
decision of the Mississippi Commission and remanded the application to the
Mississippi Commission for further proceedings. The decision of the court was
appealed by the Mississippi Commission to the Mississippi Supreme Court. Oral
argument was heard by the Supreme Court on March 6, 2000, but the court has not
yet rendered its decision. The Mississippi Commission has also adopted a
regulation that prohibits gaming on the Big Black River; however, the
Mississippi Commission has taken the position that the Mississippi Commission
may be prohibited from applying the regulation to the existing applicant that
appealed the initial siting decision.

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



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reports to the Mississippi Commission and furnish any other
information which the Mississippi Commission may require. If we are unable to
continue to satisfy the registration requirements of the Mississippi Act, we
and any Mississippi Gaming Subsidiary cannot own or operate gaming facilities
in Mississippi. No person may become a stockholder of or receive any
percentage of profits from a Mississippi Gaming Subsidiary of a Registered
Corporation without first obtaining licenses and approvals from the Mississippi
Commission. We have obtained such approvals in connection with the licensing of
our Mississippi Gaming Subsidiary.

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 was granted a renewal of its gaming license by the Mississippi
Commission on December 18, 1999.

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 or applied for all necessary findings of suitability with respect to
such persons associated 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 us may be required to be found
suitable, in which case those persons must pay the costs and fees associated
with such investigation. The Mississippi Commission may deny an application for
a finding of suitability for any cause that it deems reasonable. Changes in
certain licensed positions must be reported to the Mississippi Commission. In
addition to its authority to deny an application for a finding of suitability,
the Mississippi Commission has jurisdiction to disapprove a change in a
persons corporate position or title and such changes must be reported to the
Mississippi Commission. The Mississippi Commission has the power to require 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 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 five
percent 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 ten
percent 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. The Mississippi Commission
generally has exercised its discretion to require a finding of suitability of
any beneficial owner of more than five percent of any class of voting
securities of a Registered Corporation. However, the Mississippi Commission
has adopted a policy that



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permits certain institutional investors to own
beneficially up to fifteen percent of a class of voting securities of a
Registered Corporation without a finding of suitability. If a stockholder who
must be found suitable is a corporation, partnership or trust, it must submit
detailed business and financial information, including a list of beneficial
owners. Any record or beneficial stockholder required to apply for a
finding of suitability must pay all investigative fees and costs of the Mississippi
Commission in connection with such investigation.

Any person who fails or refuses to apply for a finding of suitability or a
license within thirty (30) days after being ordered to do so by the Mississippi
Commission may be found unsuitable. The same restrictions apply to a record
owner if the record owner, after request, fails to identify the beneficial
owner. Any person found unsuitable and who holds, directly or indirectly, any
beneficial ownership of such securities beyond such time as the Mississippi
Commission prescribes, may be guilty of a misdemeanor. We may be subject to
disciplinary action if, after receiving notice that a person is unsuitable to
be a stockholder or to have any other relationship with us or our Mississippi
Gaming Subsidiary, the company involved: (1) pays the unsuitable person any
dividend or other distribution upon such persons voting securities; (2)
recognizes the exercise, directly or indirectly, of any voting rights conferred
by securities held by the unsuitable person; (3) pays the unsuitable person any
remuneration in any form for services rendered or otherwise, except in certain
limited and specific circumstances; or (4) fails to pursue all lawful efforts
to require the unsuitable person to divest himself of the securities,
including, if necessary, the immediate purchase of the securities for cash at a
fair market value.

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

Although the Mississippi Commission generally does not require the
individual holders of obligations such as notes to be investigated and found
suitable, the Mississippi Commission retains the discretion to do so for any
reason, including but not limited to, a default, or where the holder of the
debt instrument exercises a material influence over the gaming operations of
the entity in question. Any holder of debt securities required to apply for a
finding of suitability must pay all investigative fees and costs of the
Mississippi Commission in connection with such an investigation.

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 ownership of its equity securities and we must maintain
in Mississippi a current list



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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 from
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 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 our 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 the security issued by the
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 and agreements not to encumber such
securities are ineffective without the prior approval of the Mississippi
Commission. We have obtained approvals from the Mississippi Commission for such
guarantees, pledges and restrictions in connection with offerings of
securities, subject to certain restrictions.

Changes in control of us through merger, consolidation, acquisition of
assets, management or consulting agreements, or any act or conduct by a person
by which such person obtains control, may not occur without the prior approval
of the Mississippi Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Mississippi Commission in a variety of
stringent standards prior to assuming control of the Registered Corporation.
The Mississippi Commission may also require controlling stockholders, officers,
directors and other persons having a material relationship or involvement with
the entity



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proposing to acquire control, to be investigated and licensed as
part of the approval process relating to the transaction.

The Mississippi legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and other corporate
defense tactics that affect corporate gaming licensees in Mississippi and
Registered Corporations may be injurious to stable and productive corporate
gaming. The Mississippi Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Mississippis gaming industry and to further Mississippis policy to (1) assure
the financial stability of corporate gaming operations and their affiliates;
(2) preserve the beneficial aspects of conducting business in the corporate
form; and (3) promote a neutral environment for the orderly governance of
corporate affairs.

Approvals are, in certain circumstances, required from the Mississippi
Commission before a Registered Corporation may make exceptional repurchases of
voting securities (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
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 have previously
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 determined that we or ACVI 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 seek
to appoint a supervisor to operate our Mississippi casino facilities.
Limitation, conditioning or suspension of any gaming license or approval or the
appointment of a supervisor could (and revocation of any gaming license or
approval would) materially adversely affect us, our gaming operations and our
results 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 respective
operations are conducted. Depending upon the particular fee or tax involved,
these fees and taxes are payable either monthly, quarterly or annually and are
based upon (1) a percentage of the gross gaming revenues received by the casino
operation, (2) the number of gaming devices operated by the casino, or (3) the
number



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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 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 revenue fee
imposed by the City of Vicksburg equals approximately 4% of the gaming
receipts.

The Mississippi Commissions regulations require as a condition of
licensure or license renewal that an existing licensed gaming establishments
plan include a 500-car parking facility in close proximity to the casino
complex and infrastructure facilities which amount to at least twenty-five
percent of the casino cost. Ameristar believes that ACVI is in compliance with
this requirement with the opening of a 150-room hotel in June 1998. The
Mississippi Commission later adopted amendments to the regulation that increase
the infrastructure development requirement from twenty-five percent to one
hundred percent for new casinos (or upon acquisition of a closed casino), but
grandfathered existing licensees.

Nevada.The ownership and operation of casino gaming facilities in Nevada
are subject to: (1) the Nevada Gaming Control Act and the regulations
promulgated thereunder (collectively, Nevada Act); and (2) various local
regulations. Our operations are subject to the licensing and regulatory control
of the Nevada Gaming Commission (Nevada Commission), the Nevada State Gaming
Control Board (Nevada Board), and the Liquor Board of Elko County. The Nevada
Commission, the Nevada Board and the Liquor Board of Elko County are
collectively referred to in this section as the Nevada Gaming Authorities.

The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things, (1) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (2) the establishment and maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, (3) providing reliable record keeping and requiring the filing of
periodic reports with the Nevada Gaming Authorities; (4) the prevention of
cheating and fraudulent practices; and (5) providing a source of state and
local revenues through taxation and licensing fees. Change in such laws,
regulations and procedures could have an adverse effect on our gaming
operations.

Cactus Petes, Inc. (CPI), which operates the Jackpot properties, is
required to be licensed by the Nevada Gaming Authorities. The gaming licenses
require the periodic payment of fees and taxes and are not transferable.
Ameristar is registered by the Nevada Commission as a publicly traded
corporation (a Registered Corporation) and has been found suitable to own the
stock of CPI, which is a corporate licensee (a Corporate Licensee) under the
terms of the Nevada Act. As a Registered Corporation, Ameristar is required
periodically to submit detailed financial and operating reports to the Nevada
Commission and furnish any other information that the Nevada Commission may
require. No person may become a stockholder of, or receive any percentage of
profits from, a Corporate Licensee without first obtaining licenses and
approvals from the Nevada Gaming Authorities. Ameristar and CPI have obtained
from the Nevada Gaming Authorities the various registrations, findings of
suitability, approvals, permits and licenses currently required in order to
engage in gaming activities in Nevada.



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The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, CPI or Ameristar in
order to determine whether such individual is suitable or should be licensed as
a business associate of a gaming licensee. Officers, directors and certain key
employees of CPI must file applications with the Nevada Gaming Authorities and
may be required to be licensed or found suitable by the Nevada Gaming
Authorities. Officers, directors and key employees of Ameristar who are
actively and directly involved in gaming activities of CPI may be required to
be reviewed or found suitable by the Nevada Gaming Authorities. The Nevada
Gaming Authorities may deny an application for licensing for any cause that
they deem reasonable. A finding of suitability is comparable to licensing, and
both require submission of detailed personal and financial information followed
by a thorough investigation. The applicant for licensing or a finding of
suitability must pay all the costs of the investigation. Changes in licensed
positions must be reported to the Nevada Gaming Authorities, and in addition to
their authority to deny an application for a finding of suitability or
licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a
change in a corporate position.

If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with CPI or Ameristar, the companies involved would have to sever
all relationships with such person. In addition, the Nevada Commission may
require 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.



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The Nevada Act requires any person who acquires beneficial ownership of
more than 5% of a Registered Corporations voting securities to report the
acquisition to the Nevada Commission. The Nevada Act requires that beneficial
owners of more than 10% of a Registered Corporations voting securities apply
to the Nevada Commission for a finding of suitability within thirty days after
the Chairman of the Nevada Board mails the written notice requiring such
filing. Under certain circumstances, an institutional investor, as defined in
the Nevada Act, which acquires more than 10%, but not more than 15%, of a
Registered Corporations voting securities may apply to the Nevada Commission
for a waiver of such finding of suitability if such institutional investor
holds the voting securities for investment purposes only. An institutional
investor shall not be deemed to hold voting securities for investment purposes
unless the voting securities were acquired and are held in the ordinary course
of business as an institutional investor and not for the purpose of causing,
directly or indirectly, the election of a majority of the members of the board
of directors of the Registered Corporation, any change in the Registered
Corporations corporate charter, bylaws, management, policies or operations of
the Registered Corporation, or any of its gaming affiliates, or any other
action which the Nevada Commission finds to be inconsistent with holding the
Registered Corporations voting securities for investment purposes only.
Activities which are not deemed to be inconsistent with holding voting
securities for investment purposes only include (1) voting on all matters voted
on by stockholders; (2) making financial and other inquiries of management of
the type normally made by securities analysts for informational purposes and
not to cause a change in its management, policies or operations; and (3) such
other activities as the Nevada Commission may determine to be consistent with
such investment intent. If the beneficial holder of voting securities who must
be found suitable is a corporation, partnership or trust, it must submit
detailed business and financial information including a list of beneficial
owners. The applicant is required to pay all costs of investigation.

Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Nevada Commission or
the Chairman of the Nevada Board, may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the common stock of
a Registered Corporation beyond such period of time as may be prescribed by the
Nevada Commission may be guilty of a criminal offense. Ameristar is subject to
disciplinary action if, after it receives notice that a person is unsuitable to
be a stockholder or to have any other relationship with Ameristar or CPI,
Ameristar, (1) pays that person any dividend or interest upon voting securities
of Ameristar, (2) allows that person to exercise, directly or indirectly, any
voting right conferred through securities held by the person, (3) pays
remuneration in any form to that person for services rendered or otherwise, or
(4) fails to pursue all lawful efforts to require such unsuitable person to
relinquish his voting securities including, if necessary, the immediate
purchase of said voting securities by Ameristar, for cash at fair market value.
Additionally, the Liquor Board of Elko County has the authority to approve all
persons owning or controlling the stock of any corporation controlling a gaming
license within 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



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acquisition of such ownership would
otherwise be inconsistent with the declared policy of the State of Nevada. If
the Nevada Commission determines that a person is unsuitable to own such
security, then pursuant to the Nevada Act, the Registered Corporation can be
sanctioned, including the loss of its approvals, if without the prior approval
of the Nevada Commission, it (1) pays to the unsuitable person any dividend,
interest, or any distribution whatsoever; (2) recognizes any voting right by
such unsuitable person in connection with such securities; (3) pays the
unsuitable person remuneration in any form; or (4) makes any payment to the
unsuitable person by way of principal, redemption, conversion, exchange,
liquidation or similar transaction.

Ameristar is required to maintain a current stock ledger in Nevada, which
may be examined by the Nevada Gaming Authorities at any time. If any securities
are held in trust by an agent or by a nominee, the record holder may be
required to disclose the identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds for finding the
record holder unsuitable. Ameristar is also required to render maximum
assistance in determining the identity of the beneficial owner. The Nevada
Commission has the power to require Ameristar stock certificates to bear a
legend indicating that the securities are subject to the Nevada Act. However,
to date, the Nevada Commission has not imposed such a requirement on Ameristar.

Ameristar may not make a public offering of its securities without the
prior approval of the Nevada Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. On March 22, 2001, the Nevada Gaming Commission granted us approval
to make public offerings for a period of two years, subject to specified
conditions (the Shelf Approval). The Shelf Approval also applies to any
company we wholly own that is a publicly traded corporation or would become a
publicly traded corporation pursuant to a public offering (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 of 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.



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The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada Corporate Licensee gaming licensees, and Registered
Corporations that are affiliated with those operations, may be injurious to
stable and productive corporate gaming. The Nevada Commission has established a
regulatory scheme to ameliorate the potentially adverse effects of these
business practices upon Nevadas gaming industry and to further Nevadas policy
to (1) assure the financial stability of Corporate Licensees and their
affiliates; (2) preserve the beneficial aspects of conducting business in the
corporate form; and (3) promote a neutral environment for the orderly
governance of corporate affairs. Approvals are, in certain circumstances,
required from the Nevada Commission before the Registered Corporation can make
exceptional repurchases of voting securities above the current market price
thereof and before a corporate acquisition opposed by management can be
consummated. The Nevada Act also requires prior approval of a plan of
recapitalization proposed by the Registered Corporations Board of Directors in
response to a tender offer made directly to the Registered Corporations
stockholders for the purposes of acquiring control of the Registered
Corporation.

License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada licensees respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable monthly, quarterly or annually and are based upon either (1)
a percentage of the gross revenues received; (2) the number of gaming devices
operated; or (3) the number of table games operated. A casino entertainment tax
is also paid by casino operations where entertainment is furnished in
connection with the selling or serving of food and refreshments, or the selling
of merchandise.

Any person who is licensed, required to be licensed, registered, required
to be registered, or is under common control with such persons (collectively,
Licensees), and who proposes to become involved in a gaming venture outside
of Nevada is required to deposit with the Nevada Board, and thereafter
maintain, a revolving fund in the amount of $10,000 to pay the expenses of
investigation of the Nevada Board of their participation in such foreign
gaming. The revolving fund is subject to increase or decrease at the discretion
of the Nevada Commission. Thereafter, Licensees are required to comply with
certain reporting requirements imposed by the Nevada Act. Licensees are also
subject to disciplinary action by the Nevada Commission if they knowingly
violate any laws of the foreign jurisdiction pertaining to the foreign gaming
operation, fail to conduct the foreign gaming operation in accordance with the
standards of honesty and integrity required of Nevada gaming operations, engage
in activities or enters into associations that are harmful to the State of
Nevada or its ability to collect gaming taxes and fees, or employs, contracts
with or associates with a person in the foreign operation who has been denied a
license or finding of suitability in Nevada on the ground of unsuitability.

Other Jurisdictions.We expect to be subject to similar rigorous
regulatory standards in each jurisdiction in which we seek to conduct gaming
operations. There can be no assurance that statutes or regulations adopted or
fees and taxes imposed by other jurisdictions will permit profitable operations
by us.



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

Non-Gaming Regulations.The sale of alcoholic beverages by us at our
Missouri properties is subject to the licensing, control and regulation by the
Missouri Gaming Commission as described above and in Kansas City, Missouri by
Clay County. The sale of alcoholic beverages by us is subject to the licensing,
control and regulation in Council Bluffs, Iowa by the Alcoholic Beverage
Division of the Iowa Department of Commerce, 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.

All cruising vessels operated by us must comply with U.S. Coast Guard
requirements as to safety and must hold a Certificate of Inspection. These
requirements set limits on the operation of the vessel and require that each
vessel be operated by a minimum complement of licensed personnel. Loss of the
vessels Inspection Certificate would preclude its use as a riverboat. Every
five years, 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
May 2003 by undergoing a thorough underwater inspection. Upon the formal
adoption of regulations relating to this program by the U.S. Coast Guard, we
may be able to extend the dry-dock requirement further, to November 2005.
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.



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All of our shipboard employees employed on U.S. Coast Guard-approved
vessels, even those who have nothing to do with the actual operations of the
vessel, such as dealers, waiters and security personnel, may be subject to the
Jones Act, which, among other things, exempts those employees from state limits
on workers compensation awards.




Item 2. Properties

Properties

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, may be accessed via the
Missouri Highway 210 exit on Interstate 435.

In connection with the acquisition of Ameristar Kansas City, we assumed
the obligations of the prior owner under a development agreement with the Port
Authority of Kansas City, Missouri. This agreement obligates us to contribute
$1 million over five years to a foundation to benefit local entrepreneurs who
are minorities, minority-owned business enterprises or women-owned business
enterprises. The agreement requires the parties to agree upon a plan for the
foundation by December 31, 2001, which deadline has been extended to June 30,
2002. We have received a foundation proposal from the Port Authority and are
currently evaluating it. If an agreement for the foundation establishment is
not reached on a timely basis, we may be required under the development
agreement to offer to qualified minority investors a class of common stock in
our Ameristar Kansas City subsidiary representing a 10% equity interest in this
subsidiary at a fair market value price. We would have no obligation to pay
dividends on this stock, which would be optionally redeemable by us after three
years at a maximum price equal to the original purchase price of the stock plus
a return of 15% per annum. The purchasers would have the right to require us to
repurchase the stock at a maximum price equal to the original purchase price of
the stock plus a return equal to the prime rate (as defined in the development
agreement) plus one percent per annum. Such an offering would be subject to
numerous conditions.

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 Council Bluffs.Ameristar Council Bluffs is located on an
approximately 50-acre site along the bank of the Missouri River and adjacent to
the Nebraska Avenue exit on Interstate 29 immediately north of the junction of
Interstates 29 and 80. We own approximately 27 acres of this site and have
rights to use the remaining portion of the site that is owned by the State of
Iowa for a 50-year term. We 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.

Ameristar Vicksburg.In connection with the development of Ameristar
Vicksburg, we acquired eight parcels in Vicksburg along Washington Street near
Interstate 20. These parcels comprise approximately 48 acres, approximately 34
of which can be developed. In addition, we have developed a 20-acre
mobile home park with 30 single- and 20 double-wide mobile



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homes. This mobile home park is
located seven miles from Ameristar Vicksburg and sites are available for rent
by employees and other persons. The mobile home park rental rates are
competitive with the local market rates.

The Jackpot Properties.Cactus Petes is located on a 35-acre site and
Horseshu is located on a 30-acre site, both of which we own. The Cactus Petes
and Horseshu sites are across from each other on U.S. Highway 93. We also own
239 housing units in Jackpot, including 90 units in two apartment complexes
developed as United States Department of Agriculture Rural Economic and
Community Development Services Multi-Family Housing Program (USDA) projects.
These housing units support the primary operations of the Jackpot properties.
The 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 31,600 square feet of office space in
various locations, including for our executive offices in Las Vegas, Nevada.
Substantially all of our real property assets secure our obligations under our
senior credit facilities.




Item 3. Legal Proceedings

From time to time, we are a party to litigation 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.




PART II






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

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

|               |      |   |      |  |     |   |      |  | 
|-------------- | ---- | - | ---- |  | --- | - | ---- |  | 
|               |      |   | High |  | Low
|               |      |   |      |  |    
|               | 2000 |   |      |  |     |   |      |  | 
|First Quarter  |      | $ | 4.19 |  |     | $ | 3.63 | 
|Second Quarter |      |   | 4.34 |  |     |   | 3.00 | 
|Third Quarter  |      |   | 6.00 |  |     |   | 4.19 | 
|Fourth Quarter |      |   | 6.63 |  |     |   | 4.59 | 



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|               |      |   |       |  |     |   |       |  | 
|-------------- | ---- | - | ----- |  | --- | - | ----- |  | 
|               |      |   | High  |  | Low
|               |      |   |       |  |    
|               | 2001 |   |       |  |     |   |       |  | 
|First Quarter  |      | $ | 6.75  |  |     | $ | 4.50  | 
|Second Quarter |      |   | 18.75 |  |     |   | 6.53  | 
|Third Quarter  |      |   | 21.90 |  |     |   | 9.41  | 
|Fourth Quarter |      |   | 25.51 |  |     |   | 12.00 | 

Ameristar, a Nevada corporation, was incorporated in 1993. As of March 8,
2002, there were 173 holders of record of Ameristars Common Stock.

No dividends on Ameristars Common Stock have been declared during the
last three fiscal years. We intend to retain all earnings for use in the
development of its business and do not anticipate paying any cash dividends in
the foreseeable future. In addition, our senior credit facilities and senior
subordinated notes obligate us to comply with certain financial 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. Ameristar Casinos, Inc. is a Nevada
corporation that was incorporated in 1993.



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Item 6. Selected Financial Data

The following data has been derived from our audited 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 year ended December 31,              
|                                                                                                                                                            |                                         |      |                                              
|STATEMENT OF
OPERATIONS DATA(1):                                                                                                                            |                                         | 1997 |                                               | 1998    |   | 1999 |         | 2000    | 2001
|                                                                                                                                                            |                                         |      |                                               |         |   |      |         |         |     
|                                                                                                                                                            |                                         |      | (Amounts in Thousands, Except Per Share Data)
|REVENUES:                                                                                                                                                   |                                         |      |                                               |         |   |      |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|                                                                                                                                                            | Casino(2)                               |      | $                                             | 169,241 |   |      | $       | 210,968 |      |   | $       | 240,445 |   |   | $       | 278,567 |   |   | $       | 551,648 |  
|                                                                                                                                                            | Food and beverage                       |      |                                               | 30,672  |   |      |         | 45,853  |      |   |         | 49,142  |   |   |         | 53,653  |   |   |         | 70,314  |  
|                                                                                                                                                            | Rooms                                   |      |                                               | 9,685   |   |      |         | 14,201  |      |   |         | 17,257  |   |   |         | 18,121  |   |   |         | 23,384  |  
|                                                                                                                                                            | Other                                   |      |                                               | 8,275   |   |      |         | 10,401  |      |   |         | 11,089  |   |   |         | 12,018  |   |   |         | 18,074  |  
|                                                                                                                                                            |                                         |      |                                               |         |   |      |         |         |      |   |         |         |   |   |         |         |   |   |         |         |  
|                                                                                                                                                            |                                         |      | 217,873                                       |         |   |      | 281,423 |         |      |   | 317,933 |         |   |   | 362,359 |         |   |   | 663,420 |        
|                                                                                                                                                            | Less: Promotional allowances            |      |                                               | 15,530  |   |      |         | 22,092  |      |   |         | 24,618  |   |   |         | 28,224  |   |   |         | 36,598  |  
|                                                                                                                                                            |                                         |      |                                               |         |   |      |         |         |      |   |         |         |   |   |         |         |   |   |         |         |  
|                                                                                                                                                            | Net revenues                            |      |                                               | 202,343 |   |      |         | 259,331 |      |   |         | 293,315 |   |   |         | 334,135 |   |   |         | 626,822 |  
|                                                                                                                                                            |                                         |      |                                               |         |   |      |         |         |      |   |         |         |   |   |         |         |   |   |         |         |  
|OPERATING EXPENSES:                                                                                                                                         |                                         |      |                                               |         |   |      |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|                                                                                                                                                            | Casino(2)                               |      |                                               | 74,897  |   |      |         | 98,036  |      |   |         | 107,386 |   |   |         | 127,077 |   |   |         | 276,903 |  
|                                                                                                                                                            | Food and beverage                       |      |                                               | 19,784  |   |      |         | 31,698  |      |   |         | 33,207  |   |   |         | 35,135  |   |   |         | 46,169  |  
|                                                                                                                                                            | Rooms                                   |      |                                               | 3,130   |   |      |         | 5,809   |      |   |         | 6,372   |   |   |         | 6,944   |   |   |         | 7,921   |  
|                                                                                                                                                            | Other                                   |      |                                               | 7,546   |   |      |         | 10,044  |      |   |         | 10,203  |   |   |         | 12,257  |   |   |         | 11,813  |  
|                                                                                                                                                            | Selling, general and administrative     |      |                                               | 51,958  |   |      |         | 75,604  |      |   |         | 86,142  |   |   |         | 90,416  |   |   |         | 129,060 |  
|                                                                                                                                                            | Depreciation and amortization           |      |                                               | 16,358  |   |      |         | 24,191  |      |   |         | 24,460  |   |   |         | 27,784  |   |   |         | 40,101  |  
|                                                                                                                                                            | Preopening costs                        |      |                                               |        |   |      |         | 10,611  |      |   |         |        |   |   |         |        |   |   |         |        |  
|                                                                                                                                                            | Impairment loss on assets held for
sale |      |                                               | 646     |   |      |         |        |      |   |         |        |   |   |         | 57,153  |   |   |         |        |  
|                                                                                                                                                            |                                         |      |                                               |         |   |      |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|                                                                                                                                                            | Total
operating expenses                |      |                                               | 174,319 |   |      |         | 255,993 |      |   |         | 267,770 |   |   |         | 356,766 |   |   |         | 511,967 |  
|                                                                                                                                                            |                                         |      |                                               |         |   |      |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|INCOME (LOSS) FROM OPERATIONS                                                                                                                               |                                         |      | 28,024                                        |         |   |      | 3,338   |         |      |   | 25,545  |         |   |   | (22,631 | )       |   |   | 114,855 |        
|OTHER INCOME (EXPENSE):                                                                                                                                     |                                         |      |                                               |         |   |      |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|                                                                                                                                                            | Interest income                         |      |                                               | 445     |   |      |         | 296     |      |   |         | 300     |   |   |         | 161     |   |   |         | 522     |  
|                                                                                                                                                            | Interest expense                        |      |                                               | (12,107 | ) |      |         | (22,699 | )    |   |         | (24,449 | ) |   |         | (28,316 | ) |   |         | (64,931 | )
|                                                                                                                                                            | Other                                   |      |                                               | (35     | ) |      |         | (13     | )    |   |         | (851    | ) |   |         | (942    | ) |   |         | (776    | )
|                                                                                                                                                            |                                         |      |                                               |         |   |      |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|Income (loss) before income tax provision
(benefit), extraordinary loss on early
retirement of debt and cumulative
effect of change in accounting principle |                                         |      | 16,327                                        |         |   |      | (19,078 | )       |      |   | 545     |         |   |   | (51,728 | )       |   |   | 49,670  |        
|                                                                                                                                                            | Income tax provision (benefit)          |      |                                               | 5,959   |   |      |         | (6,363  | )    |   |         | 340     |   |   |         | (17,981 | ) |   |         | 16,381  |  
|                                                                                                                                                            |                                         |      |                                               |         |   |      |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|Income (loss) before extraordinary loss
on early retirement of debt and
cumulative
effect of change in accounting principle                                 |                                         |      | 10,368                                        |         |   |      | (12,715 | )       |      |   | 205     |         |   |   | (33,747 | )       |   |   | 33,289  |        
|Extraordinary loss on early retirement
of                      debt, net of income tax benefit
of $387 and $3,479, respectively                             |                                         |      | (673                                          | )       |   |      |        |         |      |   |        |         |   |   | (6,560  | )       |   |   |        |        
|                                                                                                                                                            |                                         |      |                                               |         |   |      |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|Income (loss) before cumulative effect of
change in accounting principle                                                                                    |                                         |      | 9,695                                         |         |   |      | (12,715 | )       |      |   | 205     |         |   |   | (40,307 | )       |   |   | 33,289  |        
|Cumulative effect of change in
accounting principle  adoption of SFAS
No. 133, net of income tax benefit of
$73                                            |                                         |      |                                              |         |   |      |        |         |      |   |        |         |   |   |        |         |   |   | (135    | )      
|                                                                                                                                                            |                                         |      |                                               |         |   |      |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|NET INCOME (LOSS)                                                                                                                                           |                                         | $    | 9,695                                         |         |   | $    | (12,715 | )       |      | $ | 205     |         |   | $ | (40,307 | )       |   | $ | 33,154  |        
|                                                                                                                                                            |                                         |      |                                               |         |   |      |         |         |      |   |         |         |   |   |         |         |   |   |         |        



39



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##### Table of Contents



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

|                                    |                   |                                                                                                                             |         |         |  |                                               |      |      |  |        |       |   |  |        |      |  |  |        |       |   |  |        |      | 
|----------------------------------- | ----------------- | --------------------------------------------------------------------------------------------------------------------------- | ------- | ------- |  | --------------------------------------------- | ---- | ---- |  | ------ | ----- | - |  | ------ | ---- |  |  | ------ | ----- | - |  | ------ | ---- | 
|                                    |                   |                                                                                                                             |         |         |  | For the year ended December 31,              
|STATEMENT OF OPERATIONS DATA        |                   |                                                                                                                            
|(CONTINUED):                        |                   | 1997                                                                                                                        |         | 1998    |  | 1999                                          |      | 2000 |  | 2001  
|                                    |                   |                                                                                                                             |         |         |  |                                               |     
|                                    |                   |                                                                                                                             |         |         |  | (Amounts in Thousands, Except Per Share Data)
|EARNINGS
PER SHARE(3):              |                   |                                                                                                                             |         |         |  |                                               |      |      |  |        |       |   |  |        |      |  |  |        |       |  
|                                    |                   | Income (loss) before
extraordinary loss
on early retirement of debt and
cumulative effect of change in
accounting principle |         |         |  |                                               |      |      |  |        |       |   |  |        |      |  |  |        |       |   |  |       
|                                    |                   |                                                                                                                             |         | Basic   |  | $                                             | 0.51 |      |  | $      | (0.62 | ) |  | $      | 0.01 |  |  | $      | (1.65 | ) |  | $      | 1.59 | 
|                                    |                   |                                                                                                                             |         |         |  |                                               |      |      |  |        |       |   |  |        |      |  |  |        |       |  
|                                    |                   |                                                                                                                             |         | Diluted |  | $                                             | 0.51 |      |  | $      | (0.62 | ) |  | $      | 0.01 |  |  | $      | (1.65 | ) |  | $      | 1.52 | 
|                                    |                   |                                                                                                                             |         |         |  |                                               |      |      |  |        |       |   |  |        |      |  |  |        |       |  
|                                    | Net income (loss) |                                                                                                                             |         |         |  |                                               |      |      |  |        |       |   |  |        |      |  |  |        |       |   | 
|                                    |                   |                                                                                                                             |         | Basic   |  | $                                             | 0.48 |      |  | $      | (0.62 | ) |  | $      | 0.01 |  |  | $      | (1.98 | ) |  | $      | 1.59 | 
|                                    |                   |                                                                                                                             |         |         |  |                                               |      |      |  |        |       |   |  |        |      |  |  |        |       |  
|                                    |                   |                                                                                                                             |         | Diluted |  | $                                             | 0.48 |      |  | $      | (0.62 | ) |  | $      | 0.01 |  |  | $      | (1.98 | ) |  | $      | 1.51 | 
|                                    |                   |                                                                                                                             |         |         |  |                                               |      |      |  |        |       |   |  |        |      |  |  |        |       |  
|WEIGHTED AVERAGE SHARES OUTSTANDING |                   |                                                                                                                             |         |         |  |                                               |      |      |  |        |       |   |  |        |      |  |  |        |       |  
|                                    |                   |                                                                                                                             | Basic   |         |  | 20,360                                        |      |      |  | 20,360 |       |   |  | 20,362 |      |  |  | 20,401 |       |   |  | 20,906 |     
|                                    |                   |                                                                                                                             |         |         |  |                                               |      |      |  |        |       |   |  |        |      |  |  |        |       |  
|                                    |                   |                                                                                                                             | Diluted |         |  | 20,360                                        |      |      |  | 20,360 |       |   |  | 20,362 |      |  |  | 20,401 |       |   |  | 21,908 |     
|                                    |                   |                                                                                                                             |         |         |  |                                               |      |      |  |        |       |   |  |        |      |  |  |        |       |  

|                                                                                             |  |              |         |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |         | 
|-------------------------------------------------------------------------------------------- |  | ------------ | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                                                                             |  | December 31,
|                                                                                             |  |             
|BALANCE SHEET AND OTHER DATA:                                                                |  | 1997         |         | 1998 |  | 1999 |         | 2000 |  | 2001
|                                                                                             |  |              |         |      |  |      |         |      |  |     
|Cash and cash equivalents                                                                    |  | $            | 13,031  |      |  | $    | 18,209  |      |  | $    | 15,531  |  |  | $ | 36,245  |  |  | $ | 41,098  | 
|Total assets                                                                                 |  |              | 336,186 |      |  |      | 351,773 |      |  |      | 378,645 |  |  |   | 890,921 |  |  |   | 892,592 | 
|Total notes payable, long-term
debt and capital lease
obligations, net of current
maturities |  |              | 193,113 |      |  |      | 230,399 |      |  |      | 242,890 |  |  |   | 780,475 |  |  |   | 624,255 | 
|Stockholders
equity(4)                                                                      |  |              | 80,639  |      |  |      | 67,924  |      |  |      | 68,169  |  |  |   | 28,044  |  |  |   | 157,336 | 
|Capital expenditures                                                                         |  |              | 72,932  |      |  |      | 32,312  |      |  |      | 57,590  |  |  |   | 33,357  |  |  |   | 114,114 | 



---

|(1) |  | Portions of the land-based facilities at Ameristar Council Bluffs opened
in February and March 1997. 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.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Casino revenues and casino costs for each of 1997, 1998, 1999 and 2000
have been adjusted to account for the reclassification of players points
in accordance with EITF 00-22.                                                                                                                                                                                                                                                                                                                                                                  
|   
|   
|   
|   
|(3) |  | Weighted average basic and diluted number of shares outstanding are equal
for 1997, 1998, 1999 and 2000 as stock options were anti-dilutive for 1998
and 2000 and the dilution was not material in 1997 and 1999.                                                                                                                                                                                                                                                                                                                               
|   
|   
|   
|   
|(4) |  | No dividends were paid in 1997 through 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    



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AMERISTAR CASINOS, INC.
CONSOLIDATED SELECTED QUARTERLY FINANCIAL DATA

|                                                                                           |  |                                               |         |          |  |               |         |              |  |       |         |  |  |   |         |  |  |   |         | 
|------------------------------------------------------------------------------------------ |  | --------------------------------------------- | ------- | -------- |  | ------------- | ------- | ------------ |  | ----- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                                                                           |  | For the fiscal quarter ended                 
|                                                                                           |  |                                              
|                                                                                           |  | March 31,                                     |         | June 30, |  | September 30, |         | December 31, |  |       |         | 
|                                                                                           |  | 2001                                          |         | 2001     |  | 2001          |         | 2001         |  | Total
|                                                                                           |  |                                               |         |          |  |               |         |              |  |      
|                                                                                           |  | (Amounts in Thousands, Except Per Share Data)
|Net
revenues                                                                               |  | $                                             | 152,131 |          |  | $             | 151,905 |              |  | $     | 162,653 |  |  | $ | 160,133 |  |  | $ | 626,822 | 
|Income from operations                                                                     |  |                                               | 26,766  |          |  |               | 29,450  |              |  |       | 31,972  |  |  |   | 26,667  |  |  |   | 114,855 | 
|Income before income tax provision and
cumulative effect of change in
accounting principle |  |                                               | 6,392   |          |  |               | 13,799  |              |  |       | 17,490  |  |  |   | 11,989  |  |  |   | 49,670  | 
|Income before cumulative effect of
change in accounting principle                          |  |                                               | 3,996   |          |  |               | 8,875   |              |  |       | 11,265  |  |  |   | 9,153   |  |  |   | 33,289  | 
|Net income                                                                                 |  |                                               | 3,861   |          |  |               | 8,875   |              |  |       | 11,265  |  |  |   | 9,153   |  |  |   | 33,154  | 
|Basic earnings per share (1)                                                               |  | $                                             | 0.19    |          |  | $             | 0.43    |              |  | $     | 0.54    |  |  | $ | 0.42    |  |  | $ | 1.59    | 
|Diluted earnings per share (1)                                                             |  |                                               | 0.18    |          |  |               | 0.40    |              |  |       | 0.49    |  |  |   | 0.40    |  |  |   | 1.51    | 

|                                                       |  |                                               |        |          |  |               |        |              |  |       |         |      |  |   |        |      |  |   |         |  
|------------------------------------------------------ |  | --------------------------------------------- | ------ | -------- |  | ------------- | ------ | ------------ |  | ----- | ------- | ---- |  | - | ------ | ---- |  | - | ------- | -
|                                                       |  | For the fiscal quarter ended                 
|                                                       |  |                                              
|                                                       |  | March 31,                                     |        | June 30, |  | September 30, |        | December 31,
|                                                       |  | 2000                                          |        | 2000     |  | 2000          |        | 2000         |  | Total
|                                                       |  |                                               |        |          |  |               |        |              |  |      
|                                                       |  | (Amounts in Thousands, Except Per Share Data)
|Net
revenues (2)                                       |  | $                                             | 79,979 |          |  | $             | 81,865 |              |  | $     | 84,499  |      |  | $ | 87,792 |      |  | $ | 334,135 |  
|Income (loss) from operations                          |  |                                               | 11,334 |          |  |               | 6,003  |              |  |       | (49,599 | )(3) |  |   | 9,631  |      |  |   | (22,631 | )
|Income (loss) before income tax and
extraordinary item |  |                                               | 4,315  |          |  |               | (679   | )            |  |       | (56,648 | )    |  |   | 1,284  |      |  |   | (51,728 | )
|Income (loss) before extraordinary item                |  |                                               | 2,784  |          |  |               | (483   | )            |  |       | (36,864 | )    |  |   | 816    |      |  |   | (33,747 | )
|Net income (loss)                                      |  |                                               | 2,784  |          |  |               | (483   | )            |  |       | (36,864 | )    |  |   | (5,744 | )(4) |  |   | (40,307 | )
|Basic earnings (loss) per share (1)                    |  | $                                             | 0.14   |          |  | $             | (0.02  | )            |  | $     | (1.81   | )    |  | $ | (0.28  | )    |  | $ | (1.98   | )
|Diluted earnings (loss) per share (1)                  |  |                                               | 0.13   |          |  |               | (0.02  | )            |  |       | (1.81   | )    |  |   | (0.28  | )    |  |   | (1.98   | )



---

|(1) |  | Because earnings (loss) 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 (loss) per share amounts for the year.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Net revenues for 2000 have been adjusted to account for players points reclassification according to EITF 00-22.                                                                                                                                                                                          
|   
|   
|   
|   
|(3) |  | Includes impairment loss on assets held for sale of $57,153.                                                                                                                                                                                                                                              
|   
|   
|   
|   
|(4) |  | Extraordinary loss on early extinguishment of debt was $6,560, net of tax benefit of $3,479.                                                                                                                                                                                                              



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##### Table of Contents








|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 properties consist of Ameristar
Casino Hotel Kansas City, located in Kansas City, Missouri; Ameristar Casino
St. Charles, located in St. Charles, Missouri serving the St. Louis
metropolitan area; Ameristar Casino Hotel Council Bluffs, located in Council
Bluffs, Iowa serving the Omaha, Nebraska/Council Bluffs metropolitan area;
Ameristar Casino Hotel Vicksburg, located in Vicksburg, Mississippi; and Cactus
Petes Resort Casino and The Horseshu Hotel & Casino located in Jackpot, Nevada
at the Idaho border. We acquired the Missouri properties in late December 2000.
We sold The Reserve Hotel Casino in Henderson, Nevada in late January 2001.

We recently completed, or are in the process of completing, several major
enhancement projects at our properties. These projects include the following:



| |  |  | New Casino and Entertainment Facility at Ameristar St. Charles.We
continue to make progress on the new casino and entertainment facility
under construction at Ameristar St. Charles without interruption to the
propertys ongoing operations. Construction is on schedule and the new
facility is expected to open in mid-2002. The estimated construction
cost to complete this project is approximately $170 million, of which
$51.1 million had been incurred as of December 31, 2001.   
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | New Parking Garage at Ameristar Kansas City.In October 2001,
Ameristar Kansas City began construction of a new $23 million,
2,650-space parking garage. Construction of the parking garage is
expected to be completed in July 2002.                                                                                                                                                                                                                                                          
|
| |  |  | Renovation and Enhancement Project at Ameristar Council Bluffs.In
the first quarter of 2001, we completed a renovation and enhancement of
the first two levels of the casino and the land-based amenities at the Council Bluffs property,
featuring the installation of multimedia, high-definition plasma screens
throughout the casino along with new slot product and EZ-Pay, a cashless
ticket system designed to improve guest satisfaction.                                             
|
| |  |  | Renovation and Enhancement Project at Ameristar Vicksburg.In the
second quarter of 2001, we substantially completed a renovation and enhancement project at Ameristar Vicksburg,
including a completely renovated casino with the latest slot machine
technology; a new VIP players lounge; the Bottleneck Blues Bar, an
intricately-themed, delta-style, blues club environment with live
entertainment, dining and gaming; and new high-definition plasma screens
for special event viewing.



42



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##### Table of Contents





| |  |  | Single Boat Consolidation at Ameristar Kansas City.In the fourth
quarter of 2001, we completed the consolidation of two contiguous but
separate casinos at Ameristar Kansas City into a single casino,
including completing some modifications to the layout of the casino
floor to take advantage of the single casino configuration and enhance
customer satisfaction.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our properties operations have experienced some seasonality, with the
winter months being the slower periods. Since our customers primarily reside
within a 100-mile radius of our properties, we believe our revenues have only
been marginally affected by the slowdown in air travel resulting from the
events of September 11, 2001.

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

Results of Operations

The following table highlights the consolidated cash flow information and
results of operations of our operating subsidiaries for our principal
properties:



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|                                              |                                            |  |                         |         |      |  |      |          |    |  |   |         |  
|--------------------------------------------- | ------------------------------------------ |  | ----------------------- | ------- | ---- |  | ---- | -------- | -- |  | - | ------- | -
|                                              |                                            |  | Year ended December 31,
|                                              |                                            |  |                        
|                                              |                                            |  | 1999                    |         | 2000 |  | 2001
|                                              |                                            |  |                         |         |      |  |     
|Consolidated cash flows information:          |                                            |  |                         |         |      |  |      |          |    |  |   |        
|                                              | Cash flows provided by operations          |  | $                       | 34,287  |      |  | $    | 38,836   |    |  | $ | 111,342 |  
|                                              | Cash flows used in investing               |  |                         | (50,048 | )    |  |      | (521,206 | )  |  |   | (31,970 | )
|                                              | Cash flows provided by/(used in) financing |  |                         | 13,083  |      |  |      | 503,084  |    |  |   | (74,519 | )
|Net revenues (1):                             |                                            |  |                         |         |      |  |      |          |    |  |   |        
|                                              | Ameristar Kansas City (2)                  |  | $                       |        |      |  | $    | 7,845    |    |  | $ | 210,547 |  
|                                              | Ameristar St. Charles (2)                  |  |                         |        |      |  |      | 4,289    |    |  |   | 144,887 |  
|                                              | Ameristar Council Bluffs                   |  |                         | 109,678 |      |  |      | 120,868  |    |  |   | 130,727 |  
|                                              | Ameristar Vicksburg                        |  |                         | 74,365  |      |  |      | 79,600   |    |  |   | 78,636  |  
|                                              | Jackpot Properties                         |  |                         | 57,120  |      |  |      | 59,339   |    |  |   | 56,978  |  
|                                              | The Reserve                                |  |                         | 51,969  |      |  |      | 62,082   |    |  |   | 5,046   |  
|                                              | Corporate and other                        |  |                         | 183     |      |  |      | 112      |    |  |   | 1       |  
|                                              |                                            |  |                         |         |      |  |      |          |    |  |   |        
|                                              | Consolidated net revenues                  |  | $                       | 293,315 |      |  | $    | 334,135  |    |  | $ | 626,822 |  
|                                              |                                            |  |                         |         |      |  |      |          |    |  |   |        
|Adjusted operating income (loss) (3):         |                                            |  |                         |         |      |  |      |          |    |  |   |        
|                                              | Ameristar Kansas City (2)                  |  | $                       |        |      |  | $    | 1,168    |    |  | $ | 43,447  |  
|                                              | Ameristar St. Charles (2)                  |  |                         |        |      |  |      | 597      |    |  |   | 40,986  |  
|                                              | Ameristar Council Bluffs                   |  |                         | 20,714  |      |  |      | 22,060   |    |  |   | 28,029  |  
|                                              | Ameristar Vicksburg                        |  |                         | 15,392  |      |  |      | 16,041   |    |  |   | 14,376  |  
|                                              | Jackpot Properties                         |  |                         | 10,619  |      |  |      | 10,595   |    |  |   | 9,344   |  
|                                              | The Reserve (3)                            |  |                         | (7,089  | )    |  |      | (168     | )  |  |   | 67      |  
|                                              | Corporate and other                        |  |                         | (14,091 | )    |  |      | (15,771  | )  |  |   | (21,394 | )
|                                              |                                            |  |                         |         |      |  |      |          |    |  |   |        
|                                              | Consolidated adjusted operating income     |  | $                       | 25,545  |      |  | $    | 34,522   |    |  | $ | 114,855 |  
|                                              |                                            |  |                         |         |      |  |      |          |    |  |   |        
|EBITDA (4):                                   |                                            |  |                         |         |      |  |      |          |    |  |   |        
|                                              | Ameristar Kansas City (2)                  |  | $                       |        |      |  | $    | 1,459    |    |  | $ | 57,040  |  
|                                              | Ameristar St. Charles (2)                  |  |                         |        |      |  |      | 715      |    |  |   | 44,882  |  
|                                              | Ameristar Council Bluffs                   |  |                         | 28,430  |      |  |      | 32,053   |    |  |   | 37,320  |  
|                                              | Ameristar Vicksburg                        |  |                         | 21,092  |      |  |      | 22,945   |    |  |   | 22,707  |  
|                                              | Jackpot Properties                         |  |                         | 13,743  |      |  |      | 14,215   |    |  |   | 13,344  |  
|                                              | The Reserve                                |  |                         | 426     |      |  |      | 6,146    |    |  |   | 67      |  
|                                              | Corporate and other                        |  |                         | (13,686 | )    |  |      | (15,227  | )  |  |   | (20,404 | )
|                                              |                                            |  |                         |         |      |  |      |          |    |  |   |        
|                                              | Consolidated EBITDA                        |  | $                       | 50,005  |      |  | $    | 62,306   |    |  | $ | 154,956 |  
|                                              |                                            |  |                         |         |      |  |      |          |    |  |   |        
|Adjusted operating income (loss) margins (3): |                                            |  |                         |         |      |  |      |          |    |  |   |        
|                                              | Ameristar Kansas City (2)                  |  |                         |        |      |  |      | 14.9     | %  |  |   | 20.6    | %
|                                              | Ameristar St. Charles (2)                  |  |                         |        |      |  |      | 13.9     | %  |  |   | 28.3    | %
|                                              | Ameristar Council Bluffs                   |  |                         | 18.9    | %    |  |      | 18.3     | %  |  |   | 21.4    | %
|                                              | Ameristar Vicksburg                        |  |                         | 20.7    | %    |  |      | 20.2     | %  |  |   | 18.3    | %
|                                              | Jackpot Properties                         |  |                         | 18.6    | %    |  |      | 17.9     | %  |  |   | 16.4    | %
|                                              | The Reserve (3)                            |  |                         | (13.6   | %)   |  |      | (0.3     | %) |  |   | 1.3     | %
|                                              | Consolidated operating income margin       |  |                         | 8.7     | %    |  |      | 10.3     | %  |  |   | 18.3    | %
|EBITDA Margins (4):                           |                                            |  |                         |         |      |  |      |          |    |  |   |        
|                                              | Ameristar Kansas City (2)                  |  |                         |        |      |  |      | 18.6     | %  |  |   | 27.1    | %
|                                              | Ameristar St. Charles (2)                  |  |                         |        |      |  |      | 16.7     | %  |  |   | 31.0    | %
|                                              | Ameristar Council Bluffs                   |  |                         | 25.9    | %    |  |      | 26.5     | %  |  |   | 28.5    | %
|                                              | Ameristar Vicksburg                        |  |                         | 28.4    | %    |  |      | 28.8     | %  |  |   | 28.9    | %
|                                              | Jackpot Properties                         |  |                         | 24.1    | %    |  |      | 24.0     | %  |  |   | 23.4    | %
|                                              | The Reserve                                |  |                         | 0.8     | %    |  |      | 9.9      | %  |  |   | 1.3     | %
|                                              | Consolidated EBITDA margin                 |  |                         | 17.0    | %    |  |      | 18.6     | %  |  |   | 24.7    | %



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---

|(1) |  | Certain reclassifications, having no effect on net income, have
been made to the financial information for 1999 and 2000 to conform to
the presentation for 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | The Missouri properties were acquired on December 20, 2000.
According to information published by the prior owner of the Missouri
properties, as adjusted to exclude gain from the sale of the Missouri
properties and to account for the implementation of Emerging Issues
Task Force 00-22, Accounting for Points and Certain Other Time-Based
or Volume-Based Sales Incentive Offers, and Offers for Free Products or
Services to be Delivered in the Future, the combined operating results
of the Missouri properties (including operating results reported by the
prior owner and Ameristar) for the twelve-month period ended December
31, 2000 were as set forth below. The combined operating results of
the Missouri properties for the twelve-month period ended December 31,
2001 are shown below for comparative purposes. Operating results for
1999 are not presented as the properties were under the prior owners
control for the entire year. All amounts are in thousands.

|                        |  |                    |         |      |  |   |         |  
|----------------------- |  | ------------------ | ------- | ---- |  | - | ------- | -
|                        |  | Twelve Months     
|                        |  | Ended December 31,
|                        |  |                   
|                        |  | 2000               |         | 2001
|                        |  |                    |         |     
|Net revenues            |  | $                  | 320,772 |      |  | $ | 355,434 |  
|Operating income        |  |                    | 62,916  |      |  |   | 84,433  |  
|EBITDA                  |  |                    | 84,810  |      |  |   | 101,922 |  
|Operating income margin |  |                    | 19.6    | %    |  |   | 23.8    | %
|EBITDA margin           |  |                    | 26.4    | %    |  |   | 28.7    | %

|(3) |  | Adjusted operating income is income from operations (as reported)
before the $57.2 million impairment loss on assets held for sale
recorded in 2000 in connection with the sale of The Reserve.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(4) |  | EBITDA consists of income from operations plus depreciation,
amortization and impairment loss on assets held for sale. EBITDA
margin is EBITDA as a percentage of net revenues. EBITDA information
is presented solely as a supplemental disclosure because management
believes that it is a widely used measure of operating performance in
the gaming industry. EBITDA should not be construed as an alternative
to income from operations (as determined in accordance with generally
accepted accounting principles) as an indicator of our operating
performance, or as an alternative to cash flows from operating
activities (as determined in accordance with generally accepted
accounting principles) as a measure of liquidity. We have significant
uses of cash flows, including capital expenditures, interest payments,
taxes and debt principal repayments, which are not reflected in EBITDA.
It should also be noted that not all gaming companies that report
EBITDA information calculate EBITDA in the same manner as us.

Year Ended December 31, 2001 Versus Year Ended December 31, 2000

Net Revenues

Consolidated net revenues for the year ended December 31, 2001 were $626.8
million compared to $334.1 million for 2000, an increase of $292.7 million or
87.6 percent. The growth in revenues is primarily attributable to
contributions from the Kansas City and St. Charles properties, which were
acquired on December 20, 2000 and contributed $355.4 million in combined net
revenues during the twelve months ended December 31, 2001, as well as
significant revenue growth at Ameristar Council Bluffs. The Missouri
properties contributions were partially offset by the absence of revenues from
The Reserve, which was sold on January 29, 2001.

Ameristar Kansas Citys net revenues of $210.5 million for 2001 were
adversely impacted by a market-wide decline in table games revenues and
construction disruption associated with the one-boat consolidation, casino
floor reconfiguration and parking garage. Net revenues in the latter portion
of the period were also adversely impacted by enhanced competition from another
property following the June 2001 opening of that propertys newly renovated
facility. Ameristar Kansas City had a 32.8% market share in 2001, down
slightly from 33.6% in 2000.

Net revenues of $144.9 million at Ameristar St. Charles for 2001 were
positively impacted by strong overall market growth and market share increases
driven by aggressive marketing



45



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and promotional programs and the introduction of
new slot product. Ameristar St. Charles market share grew from 17.6% in the
first quarter of 2001 to 19.9% in the fourth quarter of 2001.

Net revenues at Ameristar Council Bluffs for 2001 were $130.7 million, an
increase of $9.8 million, or 8.1 percent, over 2000. Net revenues during the
beginning of the year were adversely affected by construction disruption
associated with the propertys renovation and enhancement project as well as
adverse winter weather conditions. However, Ameristar Council Bluffs saw
improved results from the renovation project beginning in the third quarter of
2001, with net revenues in the second half of 2001 of $70.8 million, an
increase of 20.8 percent over the corresponding period in 2000. The propertys
market share also improved significantly after completion of the renovation
project, resulting in a 33.7% market share for 2001, up from 32.1% for 2000.

Ameristar Vicksburgs net revenues for 2001 declined 1.3 percent to $78.6
million compared to the same period in 2000, primarily due to construction
disruption associated with the renovation and enhancement project completed in
the second quarter 2001 and the relatively flat Vicksburg market generally in
2001. Like Ameristar Council Bluffs, net revenues at Ameristar Vicksburg began
to improve once construction was completed, leading to a 4.6 percent increase
in net revenues in the second half of 2001 compared to the same period in 2000.
Ameristar Vicksburg continued to lead the market in 2001 with a market share
of 32.7%, down slightly from 32.9% in 2000.

The Jackpot properties generated $57.0 million of net revenues in 2001, a
decline of 4.0 percent compared to the same period in 2000, primarily as the
result of slow economic conditions in the southern Idaho market.

The Reserve produced net revenues of $5.0 million for the year ended
December 31, 2001, which consisted of less than one month of operations prior
to being sold on January 29, 2001.

Income from Operations

Income from operations for the twelve months ended December 31, 2001
improved to $114.9 million, up $80.4 million over adjusted income from
operations of $34.5 million (excluding the $57.2 million impairment loss
associated with the sale of The Reserve) in 2000. This increase is primarily
due to contributions made by the Missouri properties, which contributed $84.4
million to income from operations during 2001, partially offset by an increase
in corporate and other expenses of $5.6 million primarily resulting from our
increased size and scope following the acquisition of the Missouri properties.
Our adjusted operating income margin (excluding the effect of the impairment
loss associated with the sale of The Reserve) increased from 10.3 percent in
2000 to 18.3 percent in 2001.

Income from operations at Ameristar Kansas City of $43.4 million for 2001
was adversely impacted by the factors that affected revenues described above.
Ameristar St. Charles generated $41.0 million of income from operations during
2001, with the propertys strong revenues during the period leading to a 28.3%
operating income margin for 2001.



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Ameristar Council Bluffs reported income from operations of $28.0 million
for 2001 compared to $22.1 million in 2000, a $5.9 million or 26.7 percent
improvement compared to 2000. This improvement is primarily due to increased
revenues and improved operating efficiencies, particularly in the latter
portion of the year after the completion of the propertys renovation and
enhancement project, as well as a continued emphasis on controlling costs.

Ameristar Vicksburgs income from operations of $14.4 million in 2001
represents a decrease of $1.6 million, or 10.0 percent as compared to 2000.
This decline is primarily attributable to decreased revenues resulting from
construction disruption in the first half of the year and additional expenses
(including depreciation and amortization) associated with the newly renovated
facilities. During the second half of 2001, once construction was completed at
Ameristar Vicksburg and revenues began to improve, income from operations
improved $0.3 million or 4.2 percent compared to the corresponding period in
2000.

The Jackpot properties reported income from operations of $9.3 million in
the year 2001, a $1.3 million or 12.3 percent decline as compared to income
from operations of $10.6 million in 2000. This decline was due to reduced
revenues primarily during the first half of the period.

Interest Expense

Consolidated interest expense, net of capitalized interest of $17.8
million in 2001 and $1.4 million in 2000, was $64.9 million in 2001 compared to
$28.3 million in 2000. The increased interest expense reflects our additional
debt incurred in connection with the acquisition of the Missouri properties,
and the increase in capitalized interest is primarily attributable to our
acquisition of construction in progress in connection with our acquisition of
the St. Charles property.

We recorded a $3.5 million non-recurring charge to interest expense for
the amortization of interim credit facility costs in the first quarter of 2001.
A charge to interest expense of $1.9 million was also incurred during 2001 due
to changes in the fair value of our interest rate collar agreement covering $50
million principal amount of indebtedness under our senior credit facilities.

Income Tax Expense

Our effective federal tax rate on income was 31.5% in 2001 and the
effective tax benefit on losses was 34.7% in 2000. The federal statutory rate
was 35% in both years. The differences from the statutory rates are due to the
effects of certain expenses incurred by us, which are not deductible for
federal income tax purposes. 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. This directly reduced income tax expense. Income tax expense
for the year ended December 31, 2001 also includes $0.7 million of state income
taxes. See Liquidity and Capital Resources below for an additional
discussion regarding our tax credits and carry-forwards.



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Net Income

Our diluted earnings per share before non-recurring items for the year
ended December 31, 2001 was $1.59, compared to a loss per share before
non-recurring items of $0.16 for the year ended December 31, 2000. Net income
of $33.2 million for the year ended December 31, 2001 included one-time charges
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. In addition, our
2001 earnings were negatively impacted by approximately $0.05 per share due to
additional depreciation expense related to refining the remaining useful lives
of assets acquired in the Missouri properties acquisition and benefited by
approximately $0.08 per share resulting from a lower effective tax rate caused
by our recording of previously unrecognized tax credits. After accounting for
all of these items, our earnings per share for 2001 was $1.51. Net loss for
the year ended December 31, 2000 included a one-time charge for the impairment
loss relating to the sale of The Reserve, which increased the loss per share by
$1.82 and resulted in a loss per share of $1.98 for 2000.

Year Ended December 31, 2000 Versus Year Ended December 31, 1999

Significant Events

We experienced an overall growth in net revenues and operating cash flows
for the twelve months ended December 31, 2000 compared to 1999. The results of
operations for the year ended December 31, 2000 were significantly impacted by
the following events:



| |  |  | We completed acquisitions of the Kansas City and St. Charles
properties in late December of 2000. The inclusion of 11 days of
operations at the two new Missouri properties resulted in an increase to
net revenues of $12.1 million for the year ended December 31, 2000.                                                                                                                                                                                                                                                                             
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | We also completed significant casino and parking expansions at the
Iowa and Mississippi properties in late 1999 and early 2000. In
addition, a number of new generation multi-coin slot machines were
installed throughout our properties and the strategic implementation of
enhanced marketing programs were introduced, aimed at increasing
revenues and profitability. Our philosophy of reinvesting in our
properties continued with ongoing renovation and enhancement projects at
Ameristar Council Bluffs and Ameristar Vicksburg.             
|
| |  |  | We agreed on October 17, 2000 to sell substantially all of the assets
of The Reserve Hotel Casino for approximately $71.6 million. The sale of
The Reserve closed in late January 2001. The sale resulted in an
impairment loss of $57.2 million, which reduced operating income for the
year ended December 31, 2000. As a result, we reported a $22.6 million
loss from operations for the year ended December 31, 2000, as compared
to a $25.5 million income from operations for 1999, despite increases in
revenue and cash flows from operations.

Consolidated
Results



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Net revenues for the year ended December 31, 2000 were $334.1 million
compared to $293.3 million for 1999, an increase of $40.8 million, or 13.9
percent. This growth resulted from casino and parking expansions at our Iowa
and Mississippi properties, the introduction of new generation multi-coin slot
machines throughout our properties, the strategic implementation of enhanced
marketing programs and the additional revenues provided by the two new Missouri
properties. A significant amount of the increase in net revenues was due to the
acquisition of the Kansas City and St. Charles properties on December 20, 2000,
though each of our properties experienced an increase in revenues.

Adjusted income from operations for the twelve months ended December 31,
2000 was $34.5 million (excluding the impairment loss of $57.2 million
associated with the sale of The Reserve) compared to income from operations of
$25.5 million for 1999, an increase of $9.0 million or 35.3 percent. The
adjusted operating income margin increased from 8.7 percent in 1999 to 10.3
percent in 2000 (excluding the effect of the impairment loss associated with
the sale of The Reserve). These increases in operating income prior to the
impairment loss resulted primarily from increased revenues at all the
properties, partially offset by operating expense increases at the properties
(particularly marketing costs) and development costs related to our
unsuccessful bid for a gaming license in South St. Louis County, Missouri.

We incurred an extraordinary loss of $10.0 million ($6.6 million net of
tax) for the retirement of our $100 million subordinated notes in December
2000. These notes were retired in connection with the refinancing for the
purchase of the Missouri properties.

We incurred a net
loss of $40.3 million for the year ended December 31,
2000, compared to net income of $0.2 million in 1999. The net loss was a result
of the $57.2 million impairment of assets ($37.1 million net of tax) and the
$10.0 million ($6.6 million net of tax) extraordinary loss on the retirement of
debt. Net income in 2000, prior to these unusual and non-recurring
transactions, was $3.4 million. Earnings per share, prior to these unusual and
non-recurring transactions, was $0.16 for 2000, compared to $0.01 for 1999.

Property Revenues

Ameristar Council Bluffs had total net revenues of $120.9 million for the
year ended December 31, 2000, compared to $109.7 million in 1999, an increase
of $11.2 million, or 10.2 percent. The increase was primarily driven by
increased slot revenues, offset slightly by lower table games revenues. The
slot increase of $13.9 million was attributable to the addition of the third
deck of the boat in late 1999 (which increased the number of gaming positions
by approximately 349), the largest number of new generation multi-coin slot
machines in the market, an aggressive new cash-back program and overall
continued growth in the Iowa gaming market. The decrease in table win of $1.4
million from 1999 to 2000 was the result of a 1.6 percentage point decline in
table games hold percentage, which more than offset the increase in table drop
of $0.9 million.

Net revenues at Ameristar Vicksburg for the year ended December 31, 2000
were $79.6 million compared to $74.4 million in 1999, an increase of $5.2
million, or 7.0 percent. The property experienced an increase in slot revenue
of $5.5 million or 9.8 percent. The increase in net revenues was largely due to
the casino expansion in the fall of 1999, the installation of



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new generation
multi-coin slot machines, an increase in slot machine count and improved
marketing strategies.

The Jackpot properties produced net revenues of $59.3 million for the year
ended December 31, 2000 compared to $57.1 million in 1999, an increase of $2.2
million, or 3.9 percent. The increased revenues were primarily attributable to
slot machine upgrades and improved marketing programs. Increased slot revenues
of $1.9 million over the prior year were attributable to enhanced slot product,
timely slot conversions and effective marketing programs.

The Reserve had net revenues for the year ended December 31, 2000 of $62.1
million, an improvement of $10.1 million, or 19.4 percent over the 1999 net
revenues of $52.0 million. Slot revenue was the primary component of net
revenues, comprising nearly 70 percent of the net revenues for the year. Slot
revenue of $43.1 million exceeded the prior year by $7.2 million, or 20.0
percent. This improvement was primarily attributable to the implementation of
various strategies to drive revenues and gain market share.

Operating Expenses

The company-wide operating expense ratio for 2000 improved to 89.7 percent
of net revenues (before the asset impairment loss of $57.2 million in
connection with the sale of The Reserve), compared to 91.3 percent of net
revenues in 1999. The improvement in this ratio was primarily the result of
increased revenues, partially offset by operating expense increases at the
properties and corporate office and $1.9 million in development costs related
to our unsuccessful bid for a gaming license in South St. Louis County,
Missouri.

Casino costs and expenses for the year ended December 31, 2000 increased
$19.7 million, or 18.3 percent, from $107.4 million in 1999 to $127.1 million
in 2000. As a percentage of casino revenues, casino expenses increased to 45.6
percent in 2000, compared to 44.7 percent in 1999. The increase in casino
expenses as a percentage of casino revenues was due to an increase in cash back
to players and an aggressive marketing strategy implemented in the second
quarter of 2000. This cost increase was partially offset by other efficiencies
in casino operations.

Food and beverage costs and expenses increased by $1.9 million to $35.1
million in 2000, from $33.2 million in 1999. The food and beverage
expense-to-revenue ratio decreased to 65.5 percent in 2000, compared to 67.6
percent in 1999. This improvement was primarily related to improved operational
efficiencies experienced during 2000.

Rooms expenses increased 7.8 percent to $6.9 million in 2000, from $6.4
million in 1999. The room expense-to-revenue ratio increased to 38.3 percent in
2000, compared to 37.0 percent in 1999. The increase was primarily related to
increases in payroll and benefits and the addition of the Kansas City property
with a 184-room hotel for part of December 2000.

Selling, general and administrative costs and expenses (including
utilities and maintenance and business development costs) increased $4.3
million, or 5.0 percent, from the prior year amount of $86.1 million.The
increase was due primarily to $1.9 million in development costs related to our
unsuccessful bid for a gaming license in South St. Louis County, Missouri,



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increases in marketing costs associated with the implementation of an
aggressive marketing strategy in the second quarter of 2000, increases in
corporate overhead related to increased corporate staffing levels and increases
in employee compensation at Ameristar Council Bluffs, Ameristar Vicksburg and
the Jackpot properties, partially offset by a decrease in such costs at The
Reserve.

Depreciation and amortization expense in 2000 of $27.8 million represented
an increase of $3.3 million or 13.6 percent over 1999. The increase was due to
the addition of the Missouri properties along with the new third deck and
parking garage at Council Bluffs and improvements at the Vicksburg facilities.

Interest Expense

Interest expense, net of capitalized interest of $1.4 million in 2000 and
$0.6 million in 1999, was $28.3 million for the year ended December 31, 2000,
compared to $24.4 million in 1999, an increase of $3.9 million, or 15.8
percent. The increased interest expense related primarily to increased debt
incurred to finance construction of the third deck and parking garage at
Ameristar Council Bluffs, the casino expansion at Ameristar Vicksburg and the
purchase of the Kansas City and St. Charles properties in December. In
addition, our average borrowing rate was 10.6% in 2000, compared to 9.8% in
1999, reflective of higher interest rates in the general economy throughout
much of 2000. Interest was capitalized on borrowings for construction related
to Ameristar Vicksburg, Ameristar Council Bluffs and Ameristar St. Charles
after the December 20, 2000 acquisition.

Income Tax Expense

Our effective tax benefit on losses was 34.7% in 2000 and the effective
tax rate on income was 62.4% in 1999 (versus the federal statutory rate of
35%). The differences from the statutory rates were due to the effects of
certain expenses incurred by us, which were not deductible for federal income
tax purposes.

Liquidity and Capital Resources

Cash flows provided by operating activities were $111.3 million, $38.8
million and $34.3 million for the years ended December 31, 2001, 2000 and 1999,
respectively. The increase from 2000 to 2001 is primarily due to the
contribution of operating income by the Missouri properties as well as
improvements in operating income at Ameristar Council Bluffs, each as discussed
in Results of Operations above. The increase from 1999 to 2000 was due
primarily to the increase in operating income from improved operations at all
of our properties.

Cash flows used in investing activities were $32.0 million, $521.2
million, and $50.0 million for the years ended December 31, 2001, 2000 and
1999, respectively. In 2001, capital expenditures of approximately $114.1
million (including capitalized interest) primarily relating to our construction
projects described in Overview above were partially offset by approximately
$71.6 million of proceeds generated by the sale of The Reserve in January 2001.
The acquisition of Ameristar Kansas City and Ameristar St. Charles in December
2000 utilized approximately $486.8 million in cash.



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Cash flows used in financing activities in 2001 were $74.5 million. Cash
flows provided by financing activities were $503.1 million and $13.1 million
for the years ended December 31, 2000 and 1999, respectively. Cash flows used
or provided in financing activities were significantly impacted by the
following transactions during 2000 and 2001:



| |  |  | In December 2000, we refinanced substantially all of our long-term
debt in connection with our acquisition of the Missouri properties.                                                                                                                                                                                         
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 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 our term loans B and C outstanding under our senior
credit facilities, and (2) repay amounts outstanding under the
revolving loan portion of 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 December 2001, we sold 4,900,000 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.                                                                          

Primarily as a result of the transactions described above, partially offset by
additional borrowings primarily relating to the construction of the new casino
and entertainment facility at Ameristar St. Charles and the parking garage at
Ameristar Kansas City, we reduced our total long-term debt outstanding by
approximately $155.6 million in 2001, from $786.1 million at December 31, 2000
to $630.5 million at December 31, 2001.

Our principal long term debt is comprised of $375.5 million of senior
credit facilities and $380 million in aggregate principal amount of 10.75%
senior subordinated notes due in 2009. The senior credit facilities consist of
a $75 million revolving credit facility, a $75 million revolving credit/term
loan facility and term loans A, B and C (which had $6.0 million, $12.0 million,
$33.4 million, $103.5 million and $88.7 million outstanding, respectively, as
of December 31, 2001). Our senior credit facilities and the indenture governing
our senior subordinated notes require us to comply with various financial and
other covenants. At December 31, 2001, we were in compliance with all required
covenants. Our senior credit facilities are guaranteed by all our subsidiaries
and are secured by first priority security interests on substantially all of
our real and personal property, including the capital stock of our
subsidiaries.

In addition to capital expenditures for equipment and maintenance at each
of our properties, capital expenditures made during 2001 (including capitalized
interest) included: approximately $66.3 million on the new casino and
entertainment facility at Ameristar St. Charles; approximately $8.9 million on
the new 2,650-space parking garage at Ameristar Kansas City; $8.4 million on
the renovation and enhancement project at Ameristar Council Bluffs; and $9.5
million on the renovation and enhancement project at Ameristar Vicksburg.
Capital expenditures in 2000 of $33.4 million included $13.1 million related to
expansion and remodeling projects at Ameristar Council Bluffs (including the
completion of the 1,000 space



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parking garage) and $11.7 million in remodeling
projects and equipment at Ameristar Vicksburg. Capital expenditures of $57.6
million in 1999 included, among other things, approximately $26.9 million at
Ameristar Council Bluffs, including adding a third deck to the casino and
constructing the parking garage, and $16.6 million at Ameristar Vicksburg
including expanding the casino, remodeling restaurants and completing other
site improvements.

We expect the costs for the completion of our ongoing construction
projects, including purchases of furniture, fixtures and equipment (but
excluding capitalized interest), in 2002 to be approximately $119 million for
the St. Charles project and $14 million for the Kansas City parking garage,
which are expected to be funded through substantial additional borrowings under
our credit facilities and through operating cash flow. Our senior credit
facilities limit the amount that we can spend on the St. Charles project to
$110 million plus otherwise allowable capital expenditures, but we expect the
cost of the project to exceed this amount. While we are not currently in
violation of any of the provisions of our senior credit facilities, we will
need to obtain a waiver of this limit from our lenders. We expect to request a
waiver from the lenders under our senior credit facilities during the second
quarter of 2002, but we cannot be sure that the lenders will grant our request.
If we do not receive the waiver, the completion of the project will be
significantly delayed.

Upon the opening of the new casino and entertainment facility currently under
construction at Ameristar St. Charles, we will no longer capitalize the
interest payments associated with borrowings made to fund construction and we
will recognize a significant increase in our base of depreciable assets.
Accordingly, after the new facility opens at Ameristar St. Charles, we will
incur substantial additional interest expense and record substantial additional
charges to depreciation and amortization compared to periods prior to the new
facilitys opening.

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 flow from operations, cash and cash equivalents and availability
under our senior credit facilities will support our operations and liquidity
requirements, including capital expenditure plans, for the foreseeable future.
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. At December 31, 2001, we
had $124.6 million available for borrowing under our senior credit
facilities, including $63.0 million dedicated to the new casino and
entertainment facility at Ameristar St. Charles.

As a result of the loss associated with closing the sale of The Reserve in
January 2001, we did not make any federal tax payments in 2001. In addition,
we had approximately $61 million in operating loss carry-forwards and $2
million in alternative minimum tax credits at December 31, 2001, which will
reduce the amount of cash payments of federal income tax that we are required
to make in 2002.

We have entered into an interest rate collar agreement to manage interest
expense, which is subject to fluctuation due to the variable-rate nature of the
debt under our senior credit facilities. Under the agreement, which covers
$50.0 million of borrowings under our senior credit facilities, we have a LIBOR
floor rate of 5.39 percent and a LIBOR ceiling rate of 6.75 percent, plus the
applicable margin. In 1999, 2000, and 2001, we paid approximately $49,000, $0,
and $578,000 in additional interest as a result of this agreement. In
addition, we recognized the value of the collar agreement ($1.9 million at
December 31, 2001) in other long-term liabilities on our
consolidated balance sheets with a corresponding
increase to interest expense during the year ended December 31, 2001. We also
recognized $0.1 million, net of tax, as a cumulative effect of change in
accounting principal upon adoption of SFAS No. 133.



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In April 2001, we entered into an interest rate swap agreement to fix the
interest rate on $100 million of LIBOR borrowings under our senior credit
facilities at 5.07 percent plus the applicable margin. For the year ended
December 31, 2001, we incurred approximately $1.0 million in additional
interest expense as a result of this agreement. The value of the swap
agreement ($3.0 million as of December 31, 2001) has been
recorded in other long-term liabilities on our consolidated balance sheets, with a corresponding reduction in
stockholders equity, net of tax, recorded as accumulated other comprehensive
loss.

We continue to monitor interest rate markets and may enter into interest
rate collar or swap agreements for additional amounts of principal under our
senior credit facilities as market conditions warrant.

We have not declared any dividends on our common stock in the past, and we
intend for the foreseeable future to retain all earnings for use in the
development of our business instead of paying cash dividends. In addition, as
described above, the terms of our senior credit facilities and senior
subordinated notes obligate us to comply with certain financial covenants that
may restrict or prohibit the payment of dividends.

Contractual 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.

|                                |       |        |                                      |           |   |            |         |         |   |   |         |         |  |   |         |         | 
|------------------------------- | ----- | ------ | ------------------------------------ | --------- | - | ---------- | ------- | ------- | - | - | ------- | ------- |  | - | ------- | ------- | 
|                                |       |        | Payment Due by Period (In Thousands)
|                                |       |        |                                     
|Type of Contractual Obligation  |       | 2002   |                                      | 2003-2006 |   | After 2006 |         | Total  
|                                |       |        |                                      |           |   |            |        
|Long-Term Debt Instruments      |       | $      | 8,433                                |           |   | $          | 156,900 |         |   | $ | 465,171 |         |  | $ | 630,504 |        
|Capital Leases                  |       |        | 1,456                                |           |   |            | 2,232   |         |   |   | 429     |         |  |   | 4,117   |        
|Operating Leases                |       |        | 937                                  |           |   |            | 2,895   |         |   |   | 1,578   |         |  |   | 5,410   |        
|Material Construction Contracts |       | 90,014 |                                      |           | 0 |            |         |         | 0 |   |         | 90,014  | 
|                                |       |        |                                      |           |   |            |         |         |   |   |         |         |  |   |         |        
|                                | Total |        | $                                    | 100,840   |   |            | $       | 162,027 |   |   | $       | 467,178 |  |   | $       | 730,045 | 
|                                |       |        |                                      |           |   |            |         |         |   |   |         |         |  |   |         |        

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.
Including the amounts under contract described above, we expect to
spend approximately $133 million in 2002 to complete the new casino and entertainment
facility at Ameristar St. Charles and the parking garage at Ameristar Kansas
City.



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At December 31, 2001, we had outstanding letters of credit in the amount
of $7.4 million, which reduced the amount of our available borrowing 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.

Recently Issued Accounting Standards

In June 2001, the Financial Accounting Standard Board issued SFAS No. 141,
Business Combinations and SFAS No. 142, Goodwill and Other Intangible
Assets. The primary impact on us is that the excess of purchase price over
fair market value of the net assets acquired in connection with the
acquisitions of the Missouri properties (goodwill) will no longer be
amortized beginning January 1, 2002. Instead, goodwill will be reviewed at
least annually for impairment, and more frequently if events or circumstances
indicate a possible impairment. At December 31, 2001, our consolidated
goodwill was $83.2 million. We are currently reviewing goodwill
to determine whether any impairment exists. Goodwill amortization was
$0.4 million, $0.3 million and $2.2 million for the years ended December 31, 1999, 2000 and 2001,
respectively.

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment on Disposal of Long-Lived Assets, effective January 1, 2002. SFAS
No. 144 supercedes SFAS No. 121 and portions of other accounting statements.
The provisions applicable to us are substantially the same as those applied
under SFAS No. 121 and we, therefore, do not believe that the adoption of SFAS
No. 144 will have a material impact on our results of operations or financial
position.






|Item 7A. | Quantitative and Qualitative Disclosures About Market Risk
|-------- | ----------------------------------------------------------

As of December 31, 2001, we had $243.5 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 and $50 million is covered by an interest rate collar
agreement that sets a floor and ceiling for the interest rate thereon. Other
than the borrowings under the senior credit facilities that are not covered by
the interest rate swap agreement and $1.2 million in other long-term debt
outstanding at December 31, 2001 (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, 2001, the average interest rate applicable to the Variable Rate
Debt was 5.67 percent. An increase of one percentage point in the average
interest rate applicable to the Variable Rate Debt outstanding at December 31,
2001, would increase our annual interest costs by approximately $1.4 million.
We continue to monitor interest rate markets and may enter into interest rate
collar or swap agreements for additional amounts of principal under the senior
credit facilities as market conditions warrant.




Item 8. Financial Statements and Supplementary Data

The Report of our 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-27 hereof.



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

None.




PART III




Item 10. Directors and Executive Officers of the Registrant

The information required by this Item is set forth under the captions
Item 1. Election of Directors  Information Concerning the Nominees and 
Directors and Executive Officers in our definitive Proxy Statement to be filed
with the Securities and Exchange Commission and is incorporated herein by this
reference as if set forth in full.




Item 11. Executive Compensation

The information required by this Item is set forth under the caption
Executive Compensation in our definitive Proxy Statement to be filed with the
Securities and Exchange Commission and is incorporated herein by this reference
as if set forth in full.






|Item 12. | Security Ownership of Certain Beneficial Owners and Management
|-------- | --------------------------------------------------------------

The information required by this Item is set forth under the caption Item
1. Election of Directors  Security Ownership of Certain Beneficial Owners and
Management in our definitive Proxy Statement to be filed with the Securities
and Exchange Commission and is incorporated herein by this reference as if set
forth in full.




Item 13. Certain Relationships and Related Transactions

The information required by this Item is set forth under the caption
Certain Transactions in our definitive Proxy Statement to be filed with the
Securities and Exchange Commission and is incorporated herein by this reference
as if set forth in full.




PART IV






|Item 14. | Exhibits, Financial Statement Schedules and Reports on Form 8-K
|-------- | ---------------------------------------------------------------

The following are filed as part of this Report:

(a)  1. Financial Statements

|                                                                                                      |  |  |  | 
|----------------------------------------------------------------------------------------------------- |  |  |  | 
|Report of Independent Public Accountants.                                                             |  |  |  | 
|Consolidated Balance Sheets as of December 31, 2000 and
2001.                                         |  |  |  | 
|Consolidated Statements of Operations for the years ended
December 31, 1999, 2000 and 2001.           |  |  |  | 
|Consolidated Statements of Stockholders Equity for the
years ended December 31, 1999, 2000 and 2001. |  |  |  | 



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|                                                                                            |  |  |  | 
|------------------------------------------------------------------------------------------- |  |  |  | 
|Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 2000 and 2001. |  |  |  | 
|Notes 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 listed are filed or incorporated by reference as
part of this Report. Certain of the listed exhibits are incorporated by
reference to previously filed reports of the registrant under the Securities
Exchange Act of 1934, as amended, including Forms 10-K, 10-Q and 8-K. These
reports have been filed with the Securities and Exchange Commission under file
number 0-22494.

|        |  |                                                               |  |                                                                                                                                                                               
|------- |  | ------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                               |  |                                                                                                                                                                               
|Number  |  | Description Of Exhibit                                        |  | Method Of Filing                                                                                                                                                              
|        |  |                                                               |  |                                                                                                                                                                               
|3.1     |  | Articles of Incorporation of
Ameristar Casinos, Inc. (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).
|       
|3.2     |  | Bylaws of ACI.                                                |  | Incorporated by reference to
Exhibit 3.2 to ACIs Annual
Report on Form 10-K for the
year ended December 31, 1995
(the 1995 10-K).                                          
|       
|4.1     |  | Specimen Common Stock Certificate                             |  | Incorporated by reference to
Exhibit 4 to Amendment No. 2
to the Form S-1.                                                                                                    



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BTCo

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                        
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                        
|Number  |  | Description Of Exhibit                                                                                                                                                                                                                                                                                                                                                                                                    |  | Method Of Filing                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                        
|4.2(a)  |  | Credit Agreement (the Credit
Agreement) dated as of December
20, 2000 among ACI, the 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 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)  |  | 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.                                                                          
|       
|4.2(d)  |  | Interest Rate Collar Agreement
dated August 10, 1998 between ACI
and Wells Fargo Bank, N.A.                                                                                                                                                                                                                                                                                                                               |  | Incorporated by reference to
Exhibit 4.2(b) to ACIs Annual
Report on Form 10-K for the
year ended December 31, 1998                   
|       
|4.3     |  | Senior Subordinated Credit
Agreement dated as of December
20, 2000 by and among ACI, the
Guarantors named on the signature
pages thereto, the Lenders named
on the signature pages thereto,
Bankers Trust Company, as Agent
for the Lenders, and Bear Stearns
Corporate Lending Inc., as
Documentation Agent for the
Lenders.                                                                                             |  | Incorporated by reference to
Exhibit 4.3 to the 2000 10-K.                                                                             
|       
|4.4     |  | 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.                                                                             



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|         |  |                                                                                                                    |  |                                                                                                                                                       
|-------- |  | ------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit  |  |                                                                                                                    |  |                                                                                                                                                       
|Number   |  | Description Of Exhibit                                                                                             |  | Method Of Filing                                                                                                                                      
|         |  |                                                                                                                    |  |                                                                                                                                                       
|*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) |  | Amended and Restated Executive
Employment Agreement dated as of
March 11, 2002 between ACI and
Gordon R. Kanofsky. |  | Filed electronically herewith.                                                                                                                        
|        
|*10.1(d) |  | Executive Employment Agreement
dated as of March 13, 2002
between ACI and Peter C. Walsh.                          |  | Filed electronically herewith.                                                                                                                        
|        
|*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.                                                                                 
|        
|*10.4(a) |  | 1999 Stock Incentive Plan of
Ameristar Casinos, Inc.                                                               |  | Incorporated by reference to
Exhibit 10.6 to ACIs
Quarterly Report on Form 10-Q
for the quarter ended June 30,
1999.                                 
|        
|*10.4(b) |  | First Amendment to 1999 Stock
Incentive Plan of Ameristar
Casinos, Inc.                                            |  | Incorporated by reference to
Exhibit 10.4(b) of the 2000
10-K.                                                                                        



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|        |  |                                                                                                                                                                                                                                       |  |                                                                                                                                                      
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                       |  |                                                                                                                                                      
|Number  |  | Description Of Exhibit                                                                                                                                                                                                                |  | Method Of Filing                                                                                                                                     
|        |  |                                                                                                                                                                                                                                       |  |                                                                                                                                                      
|*10.5   |  | Form of Indemnification Agreement
between ACI and each of its
directors and officers.                                                                                                                                                 |  | Incorporated by reference to
Exhibit 10.33 to Amendment No.
2 to the Form S-1.                                                                       
|       
|10.6    |  | 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.                                                                                           
|       
|10.7    |  | Excursion Boat Sponsorship and
Operations Agreement, dated
September 15, 1994, between Iowa
West Racing Association and
ACCBI.                                                                                                        |  | Incorporated by reference to
Exhibit 10.15 to the 1995
10-K.                                                                                         
|       
|10.8    |  | 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 the 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.                       
|       
|10.9    |  | Asset Purchase Agreement dated as
of October 17, 2000 by and among
Ameristar Casino Kansas City,
Inc., ACI, Kansas City Station
Corporation and Station Casinos,
Inc. (SCI)                                                         |  | Incorporated by reference to
Exhibit 10.1 to ACIs
Quarterly Report on Form 10-Q
for the quarter ended
September 30, 2000 (the
September 2000 10-Q)
|       
|10.10   |  | Asset Purchase Agreement dated as
of October 17, 2000 by and among
Ameristar Casino St. Charles,
Inc., ACI, St. Charles Riverfront
Station, Inc. and SCI                                                                              |  | Incorporated by reference to
Exhibit 10.2 to the September
2000 10-Q.                                                                                
|       
|10.11   |  | Asset Purchase Agreement dated as
of October 17, 2000 by and among
Lake Mead Station, Inc., SCI,
Ameristar Casino Las Vegas, Inc.
and ACI                                                                                             |  | Incorporated by reference to
Exhibit 10.2 to the September
2000 10-Q.                                                                                
|       
|*10.12  |  | Ameristar Casinos, Inc. Deferred
Compensation Plan                                                                                                                                                                                    |  | Incorporated by reference to
Exhibit 10.14 to the 2000
10-K.                                                                                         
|       
|21.1    |  | Subsidiaries of ACI.                                                                                                                                                                                                                  |  | Incorporated by reference to
Exhibit 21.1 to the 2000 10-K.                                                                                          



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|        |  |                                                                                                                                           |  |                                                            
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------
|Exhibit |  |                                                                                                                                           |  |                                                            
|Number  |  | Description Of Exhibit                                                                                                                    |  | Method Of Filing                                           
|        |  |                                                                                                                                           |  |                                                            
|23.1    |  | Consent of Arthur Andersen LLP.                                                                                                           |  | Filed electronically herewith.                             
|       
|99.1    |  | 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.
|       
|99.2    |  | Letter regarding Arthur Andersen
LLPs audit services.                                                                                    |  | Filed electronically herewith.                             



---

|* |  | Denotes a management contract or compensatory plan or arrangement.
|- |  | ------------------------------------------------------------------

(b)  Reports on Form 8-K

On November 26, 2001, we filed a Current Report on Form 8-K in connection
with the issuance of a press release announcing certain revised plans for the
new casino and entertainment facility at Ameristar St. Charles.



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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 27, 2002 | By:                                                       | /s/ Craig H. Neilsen
|               |                                                          
|               | Craig H. Neilsen
Chairman of the Board, President and CEO

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     |  | Craig H. Neilsen, President, Chairman of the Board
and CEO (principal executive officer)                                           |  | March 27, 2002
|                        
|/s/ Thomas M. Steinbauer |  | Thomas M. Steinbauer, Senior Vice President of
Finance (principal financial officer and principal
accounting officer) and Director |  | March 27, 2002
|                        
|/s/ Larry A. Hodges      |  | Larry A. Hodges, Director                                                                                                          |  | March 27, 2002
|                        
|/s/ Joseph E. Monaly     |  | Joseph E. Monaly, Director                                                                                                         |  | March 27, 2002
|                        
|/s/ W. Bruce Turner      |  | W. Bruce Turner, Director                                                                                                          |  | March 27, 2002



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On this 27th of
March, 2002, Craig H. Neilsen directed Connie Wilson
in his presence as well as our own, to sign the foregoing document as Craig H.
Neilsen. Upon viewing the signatures as signed by Connie Wilson and in
our presence, Craig H. Neilsen declared to us that he adopted them as his own
signatures.



| | /s/ Rhonda VogelWitness
| | -----------------------





| | /s/ Victoria VryWitness
| | -----------------------

STATE OF NEVADA     )
                      
                    ):ss.
COUNTY OF CLARK     )

I, Janet Catron, Notary Public in and for said county and state, do
hereby certify that Craig H. Neilsen personally appeared before me and is known
or identified to me to be the President and Chief Executive Officer of
Ameristar Casinos, Inc., the corporation that executed the within instrument or
the person who executed the instrument on behalf of said corporation. Craig H.
Neilsen, who being unable due to physical incapacity to sign his name or offer
his mark, did direct Connie Wilson in his presence, as well as my own, to
sign his name to the foregoing document. Craig H. Neilsen, after viewing his
name as signed by Connie Wilson thereupon adopted the signatures as his
own by acknowledging to me his intention to so adopt them as if he had
personally executed the same both in his individual capacity and on behalf of
said corporation, and further acknowledged to me that such corporation executed
the same.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal this
27th day of March, 2002.





| | /s/ Janet CatronNotary Public
| | -----------------------------

My Commission Expires: 5/9/2005

Residing at:     Las Vegas, NV



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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
    of Ameristar Casinos, Inc.:

We have audited the accompanying consolidated balance sheets of Ameristar
Casinos, Inc. (a Nevada corporation) and subsidiaries (the
Company) as of December 31, 2000
and 2001, and the related consolidated statements of operations, stockholders
equity and cash flows for each of the three years in the period ended December
31, 2001. These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Ameristar Casinos,
Inc. and subsidiaries as of December 31, 2000 and 2001, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States.

As explained in Note 2 of the notes to consolidated financial statements,
effective January 1, 2001, Ameristar Casinos, Inc. changed its method of
accounting for derivative financial instruments in accordance with Statements
of Financial Accounting Standards No. 133 and No. 138.




ARTHUR ANDERSEN LLP

Las Vegas, Nevada
February 8, 2002



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##### Table of Contents



AMERISTAR CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
 ASSETS
(Amounts in Thousands)

|                                                                       |                                                            |                                                 |         |              |         |      |         |         |         | 
|---------------------------------------------------------------------- | ---------------------------------------------------------- | ----------------------------------------------- | ------- | ------------ | ------- | ---- | ------- | ------- | ------- | 
|                                                                       |                                                            |                                                 |         | December 31,
|                                                                       |                                                            |                                                 |         |             
|                                                                       |                                                            |                                                 |         | 2000         |         | 2001
|                                                                       |                                                            |                                                 |         |              |         |     
|CURRENT ASSETS:                                                        |                                                            |                                                 |         |              |         |      |         |        
|                                                                       | Cash and cash equivalents                                  |                                                 | $       | 36,245       |         |      | $       | 41,098  |        
|                                                                       | Restricted cash                                            |                                                 |         | 1,590        |         |      |         | 45      |        
|                                                                       | Accounts receivable, net                                   |                                                 |         | 9,731        |         |      |         | 3,608   |        
|                                                                       | Income tax refund receivable                               |                                                 |         | 125          |         |      |         |        |        
|                                                                       | Inventories                                                |                                                 |         | 4,501        |         |      |         | 5,206   |        
|                                                                       | Prepaid expenses                                           |                                                 |         | 5,350        |         |      |         | 7,421   |        
|                                                                       | Deferred income taxes                                      |                                                 |         | 2,502        |         |      |         | 3,452   |        
|                                                                       | Assets held for sale                                       |                                                 |         | 73,195       |         |      |         |        |        
|                                                                       |                                                            |                                                 |         |              |         |      |         |        
|                                                                       |                                                            | Total current assets                            |         |              | 133,239 |      |         |         | 60,830  | 
|                                                                       |                                                            |                                                 |         |              |         |      |         |        
|PROPERTY AND EQUIPMENT, at cost:                                       |                                                            |                                                 |         |              |         |      |         |        
|                                                                       | Buildings and improvements                                 |                                                 |         | 415,761      |         |      |         | 461,869 |        
|                                                                       | Furniture, fixtures and equipment                          |                                                 |         | 135,894      |         |      |         | 135,949 |        
|                                                                       | Furniture, fixtures and equipment under capitalized leases |                                                 |         | 8,317        |         |      |         | 8,317   |        
|                                                                       |                                                            |                                                 |         |              |         |      |         |        
|                                                                       |                                                            |                                                 | 559,972 |              |         |      | 606,135 |        
|                                                                       |                                                            | Less: Accumulated depreciation and amortization |         |              | 115,921 |      |         |         | 149,945 | 
|                                                                       |                                                            |                                                 |         |              |         |      |         |        
|                                                                       |                                                            |                                                 | 444,051 |              |         |      | 456,190 |        
|                                                                       | Land                                                       |                                                 |         | 43,173       |         |      |         | 43,173  |        
|                                                                       | Construction in progress                                   |                                                 |         | 154,881      |         |      |         | 221,152 |        
|                                                                       |                                                            |                                                 |         |              |         |      |         |        
|                                                                       |                                                            | Total
property and equipment, net               |         |              | 642,105 |      |         |         | 720,515 | 
|                                                                       |                                                            |                                                 |         |              |         |      |         |        
|EXCESS OF PURCHASE PRICE OVER FAIR
MARKET VALUE OF NET ASSETS ACQUIRED |                                                            |                                                 | 86,384  |              |         |      | 83,224  |        
|                                                                       |                                                            |                                                 |         |              |         |      |         |        
|DEPOSITS AND OTHER ASSETS                                              |                                                            |                                                 | 29,193  |              |         |      | 28,023  |        
|                                                                       |                                                            |                                                 |         |              |         |      |         |        
|TOTAL ASSETS                                                           |                                                            | $                                               | 890,921 |              |         | $    | 892,592 |        
|                                                                       |                                                            |                                                 |         |              |         |      |         |        

The accompanying notes are an integral part of these consolidated financial statements.



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##### Table of Contents



AMERISTAR CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
(continued)
 LIABILITIES AND STOCKHOLDERS EQUITY
(Amounts in Thousands, Except Share Data)

|                                                                |                                                                                                                                                                          |                                         |                            |        |              |        |         |        |         |         | 
|--------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------- | -------------------------- | ------ | ------------ | ------ | ------- | ------ | ------- | ------- | 
|                                                                |                                                                                                                                                                          |                                         |                            |        | December 31,
|                                                                |                                                                                                                                                                          |                                         |                            |        |             
|                                                                |                                                                                                                                                                          |                                         |                            |        | 2000         |        | 2001   
|                                                                |                                                                                                                                                                          |                                         |                            |        |              |        |        
|CURRENT LIABILITIES:                                            |                                                                                                                                                                          |                                         |                            |        |              |        |         |       
|                                                                | Accounts payable                                                                                                                                                         |                                         | $                          | 13,124 |              |        | $       | 10,331 |        
|                                                                | Construction contracts payable                                                                                                                                           |                                         |                            | 4,493  |              |        |         | 16,455 |        
|                                                                | Accrued liabilities                                                                                                                                                      |                                         |                            | 41,374 |              |        |         | 51,648 |        
|                                                                | Current obligations under capitalized leases                                                                                                                             |                                         |                            | 2,002  |              |        |         | 1,170  |        
|                                                                | Current maturities of notes payable and long-term debt                                                                                                                   |                                         |                            | 8,956  |              |        |         | 8,433  |        
|                                                                | Liabilities related to assets held for sale                                                                                                                              |                                         |                            | 6,837  |              |        |         |       |        
|                                                                |                                                                                                                                                                          |                                         |                            |        |              |        |         |       
|                                                                | Total current liabilities                                                                                                                                                |                                         |                            | 76,786 |              |        |         | 88,037 |        
|                                                                |                                                                                                                                                                          |                                         |                            |        |              |        |         |       
|OBLIGATIONS UNDER CAPITALIZED LEASES, net of current maturities |                                                                                                                                                                          |                                         | 3,354                      |        |              |        | 2,184   |       
|                                                                |                                                                                                                                                                          |                                         |                            |        |              |        |         |       
|NOTES PAYABLE AND LONG-TERM DEBT, net of current maturities     |                                                                                                                                                                          |                                         | 777,121                    |        |              |        | 622,071 |       
|                                                                |                                                                                                                                                                          |                                         |                            |        |              |        |         |       
|DEFERRED INCOME TAXES AND OTHER LONG-TERM LIABILITIES           |                                                                                                                                                                          |                                         | 5,616                      |        |              |        | 22,964  |       
|                                                                |                                                                                                                                                                          |                                         |                            |        |              |        |         |       
|COMMITMENTS AND CONTINGENCIES                                   |                                                                                                                                                                          |                                         |                            |        |              |        |         |       
|STOCKHOLDERS EQUITY:                                           |                                                                                                                                                                          |                                         |                            |        |              |        |         |       
|                                                                | Preferred stock, $.01 par value: Authorized - 30,000,000 shares; Issued  None                                                                                           |                                         |                            |       |              |        |         |       |        
|                                                                | Common stock, $.01 par value: Authorized -
30,000,000 shares; Issued and outstanding -
20,442,963 shares at December 31, 2000 and
25,858,771 shares at December 31, 2001 |                                         |                            | 204    |              |        |         | 258    |        
|                                                                |                                                                                                                                                                          | Additional paid-in capital              |                            |        | 43,265       |        |         |        | 141,302 |        
|                                                                |                                                                                                                                                                          | Accumulated other comprehensive loss    |                            |        |             |        |         |        | (1,953  | )      
|                                                                |                                                                                                                                                                          | Retained earnings (accumulated deficit) |                            |        | (15,425      | )      |         |        | 17,729  |        
|                                                                |                                                                                                                                                                          |                                         |                            |        |              |        |         |       
|                                                                |                                                                                                                                                                          |                                         | Total stockholders equity |        |              | 28,044 |         |        |         | 157,336 | 
|                                                                |                                                                                                                                                                          |                                         |                            |        |              |        |         |       
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                      |                                                                                                                                                                          | $                                       | 890,921                    |        |              | $      | 892,592 |       
|                                                                |                                                                                                                                                                          |                                         |                            |        |              |        |         |        |        

The accompanying notes are an integral part of these consolidated financial statements.



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##### Table of Contents



AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
 
(Amounts in Thousands, Except Per Share Data)

|                                                                                                                                |                                |                                         |                               |     |                          |         |         |         |         |         |         |        |         |         | 
|------------------------------------------------------------------------------------------------------------------------------- | ------------------------------ | --------------------------------------- | ----------------------------- | --- | ------------------------ | ------- | ------- | ------- | ------- | ------- | ------- | ------ | ------- | ------- | 
|                                                                                                                                |                                |                                         |                               |     | Years ended December 31,
|                                                                                                                                |                                |                                         |                               |     |                         
|                                                                                                                                |                                |                                         |                               |     | 1999                     |         | 2000    |         | 2001   
|                                                                                                                                |                                |                                         |                               |     |                          |         |         |         |        
|REVENUES:                                                                                                                       |                                |                                         |                               |     |                          |         |         |         |         |         |         |       
|                                                                                                                                |                                | Casino                                  |                               | $   | 240,445                  |         |         | $       | 278,567 |         |         | $      | 551,648 |        
|                                                                                                                                |                                | Food and beverage                       |                               |     | 49,142                   |         |         |         | 53,653  |         |         |        | 70,314  |        
|                                                                                                                                |                                | Rooms                                   |                               |     | 17,257                   |         |         |         | 18,121  |         |         |        | 23,384  |        
|                                                                                                                                |                                | Other                                   |                               |     | 11,089                   |         |         |         | 12,018  |         |         |        | 18,074  |        
|                                                                                                                                |                                |                                         |                               |     |                          |         |         |         |         |         |         |       
|                                                                                                                                |                                |                                         | 317,933                       |     |                          |         | 362,359 |         |         |         | 663,420 |       
|                                                                                                                                |                                | Less: Promotional allowances            |                               |     | 24,618                   |         |         |         | 28,224  |         |         |        | 36,598  |        
|                                                                                                                                |                                |                                         |                               |     |                          |         |         |         |         |         |         |       
|                                                                                                                                |                                |                                         | Net revenues                  |     |                          | 293,315 |         |         |         | 334,135 |         |        |         | 626,822 | 
|                                                                                                                                |                                |                                         |                               |     |                          |         |         |         |         |         |         |       
|OPERATING EXPENSES:                                                                                                             |                                |                                         |                               |     |                          |         |         |         |         |         |         |       
|                                                                                                                                |                                | Casino                                  |                               |     | 107,386                  |         |         |         | 127,077 |         |         |        | 276,903 |        
|                                                                                                                                |                                | Food and beverage                       |                               |     | 33,207                   |         |         |         | 35,135  |         |         |        | 46,169  |        
|                                                                                                                                |                                | Rooms                                   |                               |     | 6,372                    |         |         |         | 6,944   |         |         |        | 7,921   |        
|                                                                                                                                |                                | Other                                   |                               |     | 10,203                   |         |         |         | 12,257  |         |         |        | 11,813  |        
|                                                                                                                                |                                | Selling, general and administrative     |                               |     | 86,142                   |         |         |         | 90,416  |         |         |        | 129,060 |        
|                                                                                                                                |                                | Depreciation and amortization           |                               |     | 24,460                   |         |         |         | 27,784  |         |         |        | 40,101  |        
|                                                                                                                                |                                | Impairment loss on assets held for sale |                               |     |                         |         |         |         | 57,153  |         |         |        |        |        
|                                                                                                                                |                                |                                         |                               |     |                          |         |         |         |         |         |         |       
|                                                                                                                                |                                | Total operating expenses                |                               |     | 267,770                  |         |         |         | 356,766 |         |         |        | 511,967 |        
|                                                                                                                                |                                |                                         |                               |     |                          |         |         |         |         |         |         |       
|                                                                                                                                |                                |                                         | Income (loss) from operations |     |                          | 25,545  |         |         |         | (22,631 | )       |        |         | 114,855 | 
|OTHER INCOME (EXPENSE):                                                                                                         |                                |                                         |                               |     |                          |         |         |         |         |         |         |       
|                                                                                                                                |                                | Interest income                         |                               |     | 300                      |         |         |         | 161     |         |         |        | 522     |        
|                                                                                                                                |                                | Interest expense                        |                               |     | (24,449                  | )       |         |         | (28,316 | )       |         |        | (64,931 | )      
|                                                                                                                                |                                | Other                                   |                               |     | (851                     | )       |         |         | (942    | )       |         |        | (776    | )      
|                                                                                                                                |                                |                                         |                               |     |                          |         |         |         |         |         |         |       
|INCOME (LOSS) BEFORE INCOME TAX PROVISION
(BENEFIT), EXTRAORDINARY LOSS AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE |                                |                                         | 545                           |     |                          |         | (51,728 | )       |         |         | 49,670  |       
|                                                                                                                                | Income tax provision (benefit) |                                         |                               | 340 |                          |         |         | (17,981 | )       |         |         | 16,381 |        
|                                                                                                                                |                                |                                         |                               |     |                          |         |         |         |         |         |         |       
|INCOME (LOSS) BEFORE EXTRAORDINARY LOSS
AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE                                 |                                |                                         | 205                           |     |                          |         | (33,747 | )       |         |         | 33,289  |       
|Extraordinary loss on early retirement of debt,
net of income tax benefit of $3,479                                             |                                |                                         |                              |     |                          |         | (6,560  | )       |         |         |        |       
|                                                                                                                                |                                |                                         |                               |     |                          |         |         |         |         |         |         |       
|INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE                                                        |                                |                                         | 205                           |     |                          |         | (40,307 | )       |         |         | 33,289  |       
|Cumulative effect of change in accounting principle  adoption of SFAS
No. 133, net of income tax benefit of $73                |                                |                                         |                              |     |                          |         |        |         |         |         | (135    | )     
|                                                                                                                                |                                |                                         |                               |     |                          |         |         |         |         |         |         |       
|NET INCOME (LOSS)                                                                                                               |                                | $                                       | 205                           |     |                          | $       | (40,307 | )       |         | $       | 33,154  |       
|                                                                                                                                |                                |                                         |                               |     |                          |         |         |         |         |         |         |       

The accompanying notes are an integral part of these consolidated financial statements.



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##### Table of Contents



AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Continued)

|                           |                                                                                                  |         |  |                          |      |      |  |      |       |   |  |   |      | 
|-------------------------- | ------------------------------------------------------------------------------------------------ | ------- |  | ------------------------ | ---- | ---- |  | ---- | ----- | - |  | - | ---- | 
|                           |                                                                                                  |         |  | Years ended December 31,
|                           |                                                                                                  |         |  |                         
|                           |                                                                                                  |         |  | 1999                     |      | 2000 |  | 2001
|                           |                                                                                                  |         |  |                          |      |      |  |     
|EARNINGS (LOSS) PER SHARE: |                                                                                                  |         |  |                          |      |      |  |      |       |   |  |  
|                           | Income (loss) before
extraordinary loss and
cumulative effect of change
in accounting principle: |         |  |                          |      |      |  |      |       |   |  |   |     
|                           |                                                                                                  | Basic   |  | $                        | 0.01 |      |  | $    | (1.65 | ) |  | $ | 1.59 | 
|                           |                                                                                                  |         |  |                          |      |      |  |      |       |   |  |  
|                           |                                                                                                  | Diluted |  | $                        | 0.01 |      |  | $    | (1.65 | ) |  | $ | 1.52 | 
|                           |                                                                                                  |         |  |                          |      |      |  |      |       |   |  |  
|                           | Net income (loss):                                                                               |         |  |                          |      |      |  |      |       |   |  |   |     
|                           |                                                                                                  | Basic   |  | $                        | 0.01 |      |  | $    | (1.98 | ) |  | $ | 1.59 | 
|                           |                                                                                                  |         |  |                          |      |      |  |      |       |   |  |  
|                           |                                                                                                  | Diluted |  | $                        | 0.01 |      |  | $    | (1.98 | ) |  | $ | 1.51 | 
|                           |                                                                                                  |         |  |                          |      |      |  |      |       |   |  |  

The accompanying notes are an integral part of these consolidated financial statements.



F-5



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##### Table of Contents



AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(Amounts and Shares in Thousands)

|                           |                                                      |  |               |       |            |   |         |    |             |   |               |        |              |   |        |        |   |   |         |         |   |   |         |         |  
|-------------------------- | ---------------------------------------------------- |  | ------------- | ----- | ---------- | - | ------- | -- | ----------- | - | ------------- | ------ | ------------ | - | ------ | ------ | - | - | ------- | ------- | - | - | ------- | ------- | -
|                           |                                                      |  | Capital Stock |       |            |   |         |    | Accumulated |   | Retained      |        |              |   |       
|                           |                                                      |  |               |       | Additional |   | Other   |    | Earnings    |   |               |        |             
|                           |                                                      |  | Number        |       |            |   |         |    | Paid-In     |   | Comprehensive |        | (Accumulated |   |        |        |  
|                           |                                                      |  | of Shares     |       | Amount     |   | Capital |    | Loss        |   | Deficit)      |        | Total       
|                           |                                                      |  |               |       |            |   |         |    |             |   |               |        |             
|Balance, December 31, 1998 |                                                      |  | 20,360        |       |            | $ | 204     |    |             | $ | 43,043        |        |              | $ |       |        |   | $ | 24,677  |         |   | $ | 67,924  |        
|                           | Net income                                           |  |               |      |            |   |         |   |             |   |               |       |              |   |        |       |   |   |         | 205     |   |   |         | 205     |  
|                           | Exercise of stock options                            |  |               | 15    |            |   |         |   |             |   |               | 40     |              |   |        |       |   |   |         |        |   |   |         | 40      |  
|                           |                                                      |  |               |       |            |   |         |    |             |   |               |        |              |   |        |        |   |   |         |         |   |   |         |        
|Balance, December 31, 1999 |                                                      |  | 20,375        |       |            |   | 204     |    |             |   | 43,083        |        |              |   |       |        |   |   | 24,882  |         |   |   | 68,169  |        
|                           | Net loss                                             |  |               |      |            |   |         |   |             |   |               |       |              |   |        |       |   |   |         | (40,307 | ) |   |         | (40,307 | )
|                           | Exercise of stock options                            |  |               | 68    |            |   |         |   |             |   |               | 182    |              |   |        |       |   |   |         |        |   |   |         | 182     |  
|                           |                                                      |  |               |       |            |   |         |    |             |   |               |        |              |   |        |        |   |   |         |         |   |   |         |        
|Balance, December 31, 2000 |                                                      |  | 20,443        |       |            |   | 204     |    |             |   | 43,265        |        |              |   |       |        |   |   | (15,425 | )       |   |   | 28,044  |        
|                           | Net income                                           |  |               |      |            |   |         |   |             |   |               |       |              |   |        |       |   |   |         | 33,154  |   |   |         | 33,154  |  
|                           | Change in fair value of interest rate swap agreement |  |               |      |            |   |         |   |             |   |               |       |              |   |        | (1,953 | ) |   |         |        |   |   |         | (1,953  | )
|                           |                                                      |  |               |       |            |   |         |    |             |   |               |        |              |   |        |        |   |   |         |         |   |   |         |        
|                           | Total comprehensive income                           |  |               |       |            |   |         |    |             |   |               |        |              |   |        |        |   |   |         |         |   |   |         | 31,201  |  
|                           | Issuance of common stock, net of offering costs      |  |               | 4,900 |            |   |         | 49 |             |   |               | 94,179 |              |   |        |       |   |   |         |        |   |   |         | 94,228  |  
|                           | Exercise of stock options                            |  |               | 516   |            |   |         | 5  |             |   |               | 1,994  |              |   |        |       |   |   |         |        |   |   |         | 1,999   |  
|                           | Tax benefits of stock option exercises               |  |               |      |            |   |         |   |             |   |               | 1,864  |              |   |        |       |   |   |         |        |   |   |         | 1,864   |  
|                           |                                                      |  |               |       |            |   |         |    |             |   |               |        |              |   |        |        |   |   |         |         |   |   |         |        
|Balance, December 31, 2001 |                                                      |  | 25,859        |       |            | $ | 258     |    |             | $ | 141,302       |        |              | $ | (1,953 | )      |   | $ | 17,729  |         |   | $ | 157,336 |        
|                           |                                                      |  |               |       |            |   |         |    |             |   |               |        |              |   |        |        |   |   |         |         |   |   |         |        

The accompanying notes are an integral part of these consolidated financial statements.



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##### Table of Contents



AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)

|                                          |                                                                                          |                                                        |         |                          |        |      |          |          |         |   |         |          |        | 
|----------------------------------------- | ---------------------------------------------------------------------------------------- | ------------------------------------------------------ | ------- | ------------------------ | ------ | ---- | -------- | -------- | ------- | - | ------- | -------- | ------ | 
|                                          |                                                                                          |                                                        |         | Years ended December 31,
|                                          |                                                                                          |                                                        |         |                         
|                                          |                                                                                          |                                                        |         | 1999                     |        | 2000 |          | 2001    
|                                          |                                                                                          |                                                        |         |                          |        |      |          |         
|CASH FLOWS FROM OPERATING ACTIVITIES:     |                                                                                          |                                                        |         |                          |        |      |          |          |         |   |         |         
|                                          | Net income (loss)                                                                        |                                                        | $       | 205                      |        |      | $        | (40,307  | )       |   | $       | 33,154   |       
|                                          |                                                                                          |                                                        |         |                          |        |      |          |          |         |   |         |         
|                                          | Adjustments to reconcile net income (loss) to net cash
provided by operating activities: |                                                        |         |                          |        |      |          |          |         |   |         |          |       
|                                          |                                                                                          | Depreciation and amortization                          |         |                          | 24,460 |      |          |          | 27,784  |   |         |          | 40,101 | 
|                                          |                                                                                          | Amortization of debt issuance costs and debt discounts |         |                          | 668    |      |          |          | 734     |   |         |          | 7,365  | 
|                                          |                                                                                          | Extraordinary loss on early retirement of debt         |         |                          |       |      |          |          | 10,039  |   |         |          |       | 
|                                          |                                                                                          | Change in value of interest rate collar agreement      |         |                          |       |      |          |          |        |   |         |          | 1,900  | 
|                                          |                                                                                          | Impairment loss on assets held for sale                |         |                          |       |      |          |          | 57,153  |   |         |          |       | 
|                                          |                                                                                          | Net loss on disposition of assets                      |         |                          | 852    |      |          |          | 942     |   |         |          | 777    | 
|                                          |                                                                                          | Change in deferred income taxes                        |         |                          | 2,166  |      |          |          | (20,682 | ) |         |          | 14,560 | 
|                                          |                                                                                          | Decrease in income tax refund receivable               |         |                          | 1,365  |      |          |          | 1,325   |   |         |          | 125    | 
|                                          |                                                                                          | Decrease (increase) in other current assets            |         |                          | (1,438 | )    |          |          | (3,369  | ) |         |          | 4,826  | 
|                                          |                                                                                          | Increase in current liabilities                        |         |                          | 6,009  |      |          |          | 5,217   |   |         |          | 8,534  | 
|                                          |                                                                                          |                                                        |         |                          |        |      |          |          |         |   |         |         
|                                          | Total adjustments                                                                        |                                                        |         | 34,082                   |        |      |          | 79,143   |         |   |         | 78,188   |       
|                                          |                                                                                          |                                                        |         |                          |        |      |          |          |         |   |         |         
|Net cash provided by operating activities |                                                                                          |                                                        | 34,287  |                          |        |      | 38,836   |          |         |   | 111,342 |         
|                                          |                                                                                          |                                                        |         |                          |        |      |          |          |         |   |         |         
|CASH FLOWS FROM INVESTING ACTIVITIES:     |                                                                                          |                                                        |         |                          |        |      |          |          |         |   |         |         
|                                          | Capital expenditures                                                                     |                                                        |         | (57,590                  | )      |      |          | (33,357  | )       |   |         | (114,114 | )     
|                                          | Increase (decrease) in construction contracts payable                                    |                                                        |         | 5,444                    |        |      |          | (1,848   | )       |   |         | 11,962   |       
|                                          | Acquisition of Missouri properties, net of cash acquired                                 |                                                        |         |                         |        |      |          | (486,800 | )       |   |         |         |       
|                                          | Proceeds from sale of The Reserve                                                        |                                                        |         |                         |        |      |          |         |         |   |         | 71,559   |       
|                                          | Proceeds from sale of assets (other than The Reserve)                                    |                                                        |         | 2,029                    |        |      |          | 1,838    |         |   |         | 28       |       
|                                          | Decrease (increase) in deposits and other non-current assets                             |                                                        |         | 69                       |        |      |          | (1,039   | )       |   |         | (1,405   | )     
|                                          |                                                                                          |                                                        |         |                          |        |      |          |          |         |   |         |         
|Net cash used in investing activities     |                                                                                          |                                                        | (50,048 | )                        |        |      | (521,206 | )        |         |   | (31,970 | )       
|                                          |                                                                                          |                                                        |         |                          |        |      |          |          |         |   |         |         

The accompanying notes are an integral part of these consolidated financial statements.



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##### Table of Contents



AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
(Amounts in Thousands)

|                                                     |                                                                            |   |                          |        |      |   |         |          |   |   |         |          |  
|---------------------------------------------------- | -------------------------------------------------------------------------- | - | ------------------------ | ------ | ---- | - | ------- | -------- | - | - | ------- | -------- | -
|                                                     |                                                                            |   | Years ended December 31,
|                                                     |                                                                            |   |                         
|                                                     |                                                                            |   | 1999                     |        | 2000 |   | 2001   
|                                                     |                                                                            |   |                          |        |      |   |        
|CASH FLOWS FROM FINANCING ACTIVITIES:                |                                                                            |   |                          |        |      |   |         |          |   |   |         |         
|                                                     | Proceeds from issuance of notes payable and long-term debt                 |   |                          | 19,047 |      |   |         | 788,227  |   |   |         | 395,269  |  
|                                                     | Principal payments of notes payable, long-term debt and capitalized leases |   |                          | (6,004 | )    |   |         | (264,487 | ) |   |         | (558,548 | )
|                                                     | Debt issuance costs                                                        |   |                          |       |      |   |         | (20,838  | ) |   |         | (7,467   | )
|                                                     | Proceeds from stock offering                                               |   |                          |       |      |   |         |         |   |   |         | 94,228   |  
|                                                     | Exercise of stock options                                                  |   |                          | 40     |      |   |         | 182      |   |   |         | 1,999    |  
|                                                     |                                                                            |   |                          |        |      |   |         |          |   |   |         |         
|Net cash provided by (used in) financing activities  |                                                                            |   | 13,083                   |        |      |   | 503,084 |          |   |   | (74,519 | )       
|                                                     |                                                                            |   |                          |        |      |   |         |          |   |   |         |         
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                            |   | (2,678                   | )      |      |   | 20,714  |          |   |   | 4,853   |         
|CASH AND CASH EQUIVALENTS  BEGINNING OF YEAR        |                                                                            |   | 18,209                   |        |      |   | 15,531  |          |   |   | 36,245  |         
|                                                     |                                                                            |   |                          |        |      |   |         |          |   |   |         |         
|CASH AND CASH EQUIVALENTS  END OF YEAR              |                                                                            | $ | 15,531                   |        |      | $ | 36,245  |          |   | $ | 41,098  |         
|                                                     |                                                                            |   |                          |        |      |   |         |          |   |   |         |         
|SUPPLEMENTAL CASH FLOW DISCLOSURES:                  |                                                                            |   |                          |        |      |   |         |          |   |   |         |         
|                                                     | Cash paid for interest, net of amounts capitalized                         |   | $                        | 23,474 |      |   | $       | 30,946   |   |   | $       | 44,583   |  
|                                                     | Income taxes paid (refunds received)                                       |   | $                        | (3,192 | )    |   | $       | (2,162   | ) |   | $       | 1,065    |  
|NONCASH INVESTING AND FINANCING ACTIVITIES:          |                                                                            |   |                          |        |      |   |         |          |   |   |         |         
|                                                     | Acquisition of assets with capital leases                                  |   | $                        | 153    |      |   | $       | 4,531    |   |   | $       |         |  
|                                                     | Acquisition of assets with notes payable                                   |   | $                        |       |      |   | $       | 3,641    |   |   | $       | 264      |  

The accompanying notes are an integral part of these consolidated financial statements.



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##### Table of Contents



AMERISTAR CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1  Basis of presentation

The consolidated financial statements of Ameristar Casinos, Inc., a Nevada
corporation (ACI or the Company) include the accounts of the Company and
its wholly-owned subsidiaries. The Companys principal subsidiaries are Cactus
Petes, Inc. (CPI), Ameristar Casino Vicksburg, Inc. (ACVI), Ameristar
Casino Council Bluffs, Inc. (ACCBI), Ameristar Casino Kansas City, Inc.
(ACKCI) and Ameristar Casino St. Charles, Inc. (ACSCI). ACI also owns A.C.
Food Services, Inc., a purchasing subsidiary, Ameristar Casino St. Louis, Inc.,
a subsidiary formed to pursue a gaming license in South St. Louis County,
Missouri, and Ameristar Casino Las Vegas, Inc. (ACLVI), which owned and
operated The Reserve Hotel Casino in Henderson, Nevada, in metropolitan Las
Vegas, until it sold the property in January 2001. All significant
intercompany accounts and transactions have been eliminated from the
accompanying consolidated financial statements.

CPI owns and operates two casino-hotels in Jackpot, Nevada  Cactus Petes
Resort Casino and The Horseshu Hotel and Casino. ACVI owns and operates
Ameristar Vicksburg, a riverboat-themed dockside casino and related hotel and
other land-based facilities in Vicksburg, Mississippi. ACCBI owns and operates
Ameristar Council Bluffs, a riverboat casino and related hotel and other
land-based facilities in Council Bluffs, Iowa that serves the Council Bluffs
and Omaha, Nebraska metropolitan area. ACKCI owns a master-planned gaming and
entertainment facility in Kansas City, Missouri, which features a casino,
hotel, cinema multiplex and restaurants. ACSCI owns a permanently moored
riverboat casino in St. Charles, Missouri that serves the St. Louis
metropolitan area.

The gaming licenses granted to ACSCI, ACKCI, ACVI and ACCBI must be
periodically renewed by the respective state gaming authorities to continue
gaming operations. In addition, ACCBIs gaming operations are subject to a
county-wide reauthorizing referendum every eight years, commencing in 2002.

Note 2  Summary of significant accounting policies

Use of estimates

The preparation of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.



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Cash and cash equivalents

The Company considers all highly liquid investments with maturities of
three months or less when purchased to be cash equivalents. Cash equivalents
are carried at cost, which approximates market, due to the short-term
maturities of these instruments.

Accounts receivable

Gaming receivables are included as part of the Companys accounts
receivable balance. An allowance of $0.6 million and $0.2 million at December
31, 2000 and 2001, respectively, has been applied to reduce receivables 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. 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 $0.6 million, $1.4
million, and $17.8 million was capitalized for the years ended December 31,
1999, 2000, 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. For major renovation projects, assets to
be disposed of are identified and the Company writes down the value of these
assets to realizable value when disposed of. Costs of major renovation
projects are capitalized in accordance with existing policies.

Depreciation is provided on 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 40 years
|Furniture, fixtures and equipment                          |  | 3 to 15 years
|Furniture, fixtures and equipment
under capitalized leases |  | 3 to 5 years 

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.



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Derivative Instruments and Hedging Activities

The Company seeks to manage interest rate risk associated with variable
rate borrowings through the use of derivative financial instruments. The
Company accounts for derivative financial instruments in accordance with
Statement of Financial Accounting Standards (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 Note 5  Notes payable and long-term debt for
additional discussion of the derivative instruments.

Gaming revenues

In accordance with industry practice, the Company recognizes as gaming
revenues the net win from gaming activities, which is the difference between
gaming wins and losses. Gross revenues include the retail value of
complimentary food, beverage and lodging services furnished to customers. The
retail value of these promotional allowances is deducted to compute net
revenues. The estimated departmental costs of providing such promotional
allowances are included in casino operating expenses and consist of the
following:

|                  |  |                          |        |      |  |      |        |  |  |   |        | 
|----------------- |  | ------------------------ | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                  |  | Years ended December 31,
|                  |  |                         
|                  |  | 1999                     |        | 2000 |  | 2001
|                  |  |                          |        |      |  |     
|                  |  | (Amounts in Thousands)  
|Food and beverage |  | $                        | 20,189 |      |  | $    | 20,552 |  |  | $ | 22,632 | 
|Room              |  |                          | 1,336  |      |  |      | 1,089  |  |  |   | 1,550  | 
|Other             |  |                          | 1,382  |      |  |      | 1,303  |  |  |   | 3,638  | 
|                  |  |                          |        |      |  |      |        |  |  |   |        | 
|                  |  | $                        | 22,907 |      |  | $    | 22,944 |  |  | $ | 27,820 | 
|                  |  |                          |        |      |  |      |        |  |  |   |        | 

The Companys players clubs allow customers to earn certain complimentary
services and/or cash rebates based on the volume of the customers gaming
activity. The Emerging Issues Task Force (EITF) Issue 00-22, Accounting for
Points and Certain Other Time-Based or Volume-Based Sales Incentive Offers,
and Offers for Free Products or Services to be Delivered in the Future (EITF
00-22), was effective beginning in the first quarter of 2000 and requires that
progress towards earning points for cash-based loyalty programs be recorded as
a reduction of revenue, including reclassifying prior period amounts.
Previously, the Company accounted for its players clubs in accordance with
EITF 00-22, except that the Company recorded the charge for progress towards
the complimentary services/cash rebates as a casino department expense. The
Company has reclassified these charges totaling $7.0 million and $7.9 million
for the years ended December 31, 1999 and 2000, respectively, as a reduction of
casino revenue.



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##### Table of Contents



Advertising

The Company expenses advertising costs the first time the advertising
takes place. Advertising expense included in selling, general and
administrative expenses was approximately $10.7 million, $11.6 million, and
$17.6 million for the years ended December 31, 1999, 2000 and 2001,
respectively.

Preopening costs and business development expenses

Preopening costs primarily represent direct personnel and other operating
costs incurred prior to the opening of new facilities 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). The adoption
of SOP 98-5 did not have a material impact on the Companys operations in 1999,
2000, or 2001 since the Company was not developing any new facilities.

Business development expenses are general costs incurred in connection
with identifying, evaluating and pursuing opportunities to expand into existing
or emerging gaming jurisdictions. Such costs include, among others, legal
fees, land option payments and fees for applications filed with regulatory
agencies and are expensed as incurred. During the year ended December 31,
2000, the Company incurred $2.0 million of business development expenses,
classified as selling, general, and administrative expenses, for its abandoned
efforts to obtain a gaming license in South St. Louis County, Missouri.

Federal income taxes

Income taxes are recorded in accordance with SFAS 109, Accounting for
Income Taxes. SFAS 109 requires recognition of deferred income tax assets and
liabilities for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.

Recently issued accounting standards

Impairment of long-lived assets

Prior to January 2002, the Company accounted for impairment of long-lived
assets in accordance with Statement of Financial Accounting Standards (SFAS)
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of. In August 2001, the FASB issued SFAS No. 144,
Accounting for the Impairment on Disposal of Long-Lived Assets, effective
January 1, 2002. SFAS No. 144 supercedes SFAS No. 121 and portions of other
accounting statements. The provisions applicable to the Company are
substantially the same as those applied under SFAS No. 121.

SFAS No. 121 and SFAS No. 144 require that long-lived assets be reviewed
for impairment whenever events or changes in circumstances indicate that the
book value of the



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##### Table of Contents



asset may not be recoverable. The Company reviews long-lived
assets for such events or changes in circumstances at each balance sheet date.
If a long-lived asset is to be held and used, the Company assesses
recoverability based on the future undiscounted cash flows of the related asset
over the remaining life compared to the assets book value. If an impairment
exists, the asset is written down to fair value, based on quoted market prices
or another valuation technique, such as discounted cash flow analysis.

If a long-lived asset is to be sold, the asset is reported at the lower of
carrying amount or fair value less cost to sell, with fair value measured as
discussed above. The Company recognized a $57.2 million impairment loss
related to the sale of The Reserve in 2000, as discussed more fully in Note 9
- Sale of The Reserve.

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). See  Note 10  Pro forma data for
more detail on this transaction. The Company amortized goodwill through
December 31, 2001.

In June 2001, the Financial Accounting Standard Board (FASB) issued SFAS
No. 141, Business Combinations and SFAS No. 142, Goodwill and Other
Intangible Assets. The primary impact on the Company is that goodwill will no
longer be amortized beginning January 1, 2002. Goodwill
amortization was $0.4 million, $0.3 million and $2.2 million for the years ended December 31, 1999, 2000 and 2001,
respectively.

Under SFAS No. 142, goodwill must be reviewed for impairment upon adoption
and then no less frequently than annually, using a fair value assessment
approach. As of December 31, 2001, the balance of goodwill was $83.2 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. This benefit will reduce the
Companys annual federal income tax payable without effecting income tax
expense. The Company is currently reviewing goodwill to determine
whether any impairment exists. Goodwill will be reviewed at least
annually for impairment and more frequently if events or circumstances indicate
a possible impairment.

Reclassifications

Certain reclassifications, having no effect on net income, have been made
to the prior periods consolidated financial statements to conform to the
current periods presentation.



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##### Table of Contents



Note 3  Accrued liabilities

Accrued liabilities consist of the following:

|                                  |  |                        |        |      |  |   |        | 
|--------------------------------- |  | ---------------------- | ------ | ---- |  | - | ------ | 
|                                  |  | December 31,          
|                                  |  |                       
|                                  |  | 2000                   |        | 2001
|                                  |  |                        |        |     
|                                  |  | (Amounts in Thousands)
|Compensation and related benefits |  | $                      | 12,643 |      |  | $ | 11,480 | 
|Interest                          |  |                        | 2,986  |      |  |   | 15,939 | 
|Taxes other than income taxes     |  |                        | 8,089  |      |  |   | 10,427 | 
|Players clubs                    |  |                        | 6,220  |      |  |   | 3,125  | 
|Progressive slot machine jackpots |  |                        | 4,638  |      |  |   | 4,726  | 
|Deposits and other accruals       |  |                        | 6,798  |      |  |   | 5,951  | 
|                                  |  |                        |        |      |  |   |        | 
|                                  |  | $                      | 41,374 |      |  | $ | 51,648 | 
|                                  |  |                        |        |      |  |   |        | 



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##### Table of Contents



Note 4  Federal and state income taxes

The provision (benefit) for income taxes consists of the following:

|                                                                     |                      |   |                          |     |      |   |         |         |   |   |        |        | 
|-------------------------------------------------------------------- | -------------------- | - | ------------------------ | --- | ---- | - | ------- | ------- | - | - | ------ | ------ | 
|                                                                     |                      |   | Years ended December 31,
|                                                                     |                      |   |                         
|                                                                     |                      |   | 1999                     |     | 2000 |   | 2001   
|                                                                     |                      |   |                          |     |      |   |        
|                                                                     |                      |   | (Amounts in Thousands)  
|Taxes on income from continuing operations:                          |                      |   |                          |     |      |   |         |         |   |   |        |       
|                                                                     | Federal income taxes |   | $                        | 340 |      |   | $       | (17,981 | ) |   | $      | 15,648 | 
|                                                                     | State income taxes   |   |                          |    |      |   |         |        |   |   |        | 733    | 
|Tax benefit from extraordinary item                                  |                      |   |                         |     |      |   | (3,479  | )       |   |   |       |       
|Tax benefit from cumulative effect of change
in accounting principle |                      |   |                         |     |      |   |        |         |   |   | (73    | )     
|                                                                     |                      |   |                          |     |      |   |         |         |   |   |        |       
|                                                                     |                      | $ | 340                      |     |      | $ | (21,460 | )       |   | $ | 16,308 |       
|                                                                     |                      |   |                          |     |      |   |         |         |   |   |        |       

The components of the income tax provision (benefit) are as follows:

|         |  |                          |        |      |  |      |         |   |  |   |        | 
|-------- |  | ------------------------ | ------ | ---- |  | ---- | ------- | - |  | - | ------ | 
|         |  | Years ended December 31,
|         |  |                         
|         |  | 1999                     |        | 2000 |  | 2001
|         |  |                          |        |      |  |     
|         |  | (Amounts in Thousands)  
|Current  |  | $                        | (1,250 | )    |  | $    |        |   |  | $ | 733    | 
|Deferred |  |                          | 1,590  |      |  |      | (21,460 | ) |  |   | 15,575 | 
|         |  |                          |        |      |  |      |         |   |  |   |        | 
|         |  | $                        | 340    |      |  | $    | (21,460 | ) |  | $ | 16,308 | 
|         |  |                          |        |      |  |      |         |   |  |   |        | 

The reconciliation of income tax at the federal statutory rates to income
tax expense is as follows:

|                                             |  |                          |      |      |  |      |       |    |  |  |      |  
|-------------------------------------------- |  | ------------------------ | ---- | ---- |  | ---- | ----- | -- |  |  | ---- | -
|                                             |  | Years ended December 31,
|                                             |  |                         
|                                             |  | 1999                     |      | 2000 |  | 2001
|                                             |  |                          |      |      |  |     
|Federal statutory rate                       |  |                          | 34.0 | %    |  |      | (35.0 | )% |  |  | 35.0 | %
|State income tax expense                     |  |                          |     |      |  |      |      |    |  |  | 1.0  |  
|Nondeductible political and lobbying costs   |  |                          | 11.0 |      |  |      |      |    |  |  | 0.3  |  
|Nondeductible meals and entertainment        |  |                          | 4.2  |      |  |      | 0.1   |    |  |  | 0.1  |  
|Other nondeductible expenses                 |  |                          | 13.2 |      |  |      | 0.2   |    |  |  | 0.1  |  
|Previously unrecognized credit carryforwards |  |                          |     |      |  |      |      |    |  |  | (3.5 | )
|                                             |  |                          |      |      |  |      |       |    |  |  |      |  
|                                             |  |                          | 62.4 | %    |  |      | (34.7 | )% |  |  | 33.0 | %
|                                             |  |                          |      |      |  |      |       |    |  |  |      |  

Under SFAS No. 109, deferred income taxes reflect the net tax effects of
temporary differences between the carrying amount of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Companys net deferred tax liability consisted of
the following:


F-15Table of Contents

|                           |                                         |                                |        |                        |         |      |         |         |         |  
|-------------------------- | --------------------------------------- | ------------------------------ | ------ | ---------------------- | ------- | ---- | ------- | ------- | ------- | -
|                           |                                         |                                |        | December 31,          
|                           |                                         |                                |        |                       
|                           |                                         |                                |        | 2000                   |         | 2001
|                           |                                         |                                |        |                        |         |     
|                           |                                         |                                |        | (Amounts in Thousands)
|Deferred tax assets:       |                                         |                                |        |                        |         |      |         |        
|                           | Accrued expenses                        |                                | $      | 2,465                  |         |      | $       | 2,195   |        
|                           | Alternative minimum tax credit          |                                |        | 2,045                  |         |      |         | 2,126   |        
|                           | Net operating loss carryforwards        |                                |        | 20,710                 |         |      |         | 21,427  |        
|                           | Impairment loss on assets held for sale |                                |        | 20,004                 |         |      |         |        |        
|                           | Other                                   |                                |        | 2,430                  |         |      |         | 5,684   |        
|                           |                                         |                                |        |                        |         |      |         |        
|                           |                                         | Total deferred tax assets      |        |                        | 47,654  |      |         |         | 31,432  |  
|                           |                                         |                                |        |                        |         |      |         |        
|Deferred tax liabilities:  |                                         |                                |        |                        |         |      |         |        
|                           | Property and equipment                  |                                |        | (47,021                | )       |      |         | (40,758 | )      
|                           | Other                                   |                                |        | (3,747                 | )       |      |         | (5,380  | )      
|                           |                                         |                                |        |                        |         |      |         |        
|                           |                                         | Total deferred tax liabilities |        |                        | (50,768 | )    |         |         | (46,138 | )
|                           |                                         |                                |        |                        |         |      |         |        
|Net deferred tax liability |                                         | $                              | (3,114 | )                      |         | $    | (14,706 | )      
|                           |                                         |                                |        |                        |         |      |         |        

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, 2001, the Company has available $61.2
million of unused operating loss carryforwards that may be applied against
future taxable income. The unused operating loss carryforwards will expire in
2018 through 2021. No valuation allowance has been provided against deferred
tax assets as the Company believes it is more likely than not that deferred tax
assets are realizable based on expected future taxable income.

Note 5  Notes payable and long-term debt

Notes payable and long-term debt consist of the following:

|                                                                                                                                                                                                  |                                                                                                                                                        |  |                        |        |      |  |   |        | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------- | ------ | ---- |  | - | ------ | 
|                                                                                                                                                                                                  |                                                                                                                                                        |  | December 31,          
|                                                                                                                                                                                                  |                                                                                                                                                        |  |                       
|                                                                                                                                                                                                  |                                                                                                                                                        |  | 2000                   |        | 2001
|                                                                                                                                                                                                  |                                                                                                                                                        |  |                        |        |     
|                                                                                                                                                                                                  |                                                                                                                                                        |  | (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 credit facility, at variable
interest (11.8 percent at December 31, 2000 and 5.2 percent at December 31,
2001), through December 20, 2005    |  | $                      | 75,000 |      |  | $ | 6,000  | 
|                                                                                                                                                                                                  | Revolving term loan facility, at
variable interest (11.8 percent at December 31, 2000 and 5.2 percent at
December 31, 2001), through December 20, 2005 |  |                        |       |      |  |   | 12,000 | 



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|                                                                                                                                                 |                                                                                                                                                                |   |                        |         |      |   |         |         | 
|------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ---------------------- | ------- | ---- | - | ------- | ------- | 
|                                                                                                                                                 |                                                                                                                                                                |   | December 31,          
|                                                                                                                                                 |                                                                                                                                                                |   |                       
|                                                                                                                                                 |                                                                                                                                                                |   | 2000                   |         | 2001
|                                                                                                                                                 |                                                                                                                                                                |   |                        |         |     
|                                                                                                                                                 |                                                                                                                                                                |   | (Amounts in Thousands)
|                                                                                                                                                 | Term loan A, at variable interest (11.8 percent at December 31, 2000 and 5.2
percent at December 31, 2001),
principal due quarterly, through
December 20, 2005 |   |                        | 75,000  |      |   |         | 33,376  | 
|                                                                                                                                                 | Term
loan B, at variable interest (12.3 percent at December 31, 2000 and 5.7
percent at December 31, 2001),
principal due quarterly, through
December 20, 2006 |   |                        | 175,000 |      |   |         | 103,464 | 
|                                                                                                                                                 | Term
loan C, at variable interest (12.5 percent at December 31, 2000 and 5.9
percent at December 31, 2001),
principal due quarterly, through
December 20, 2007 |   |                        | 150,000 |      |   |         | 88,683  | 
|Senior subordinated credit facility,
unsecured, variable interest (11.0
percent at December 31, 2000), paid
in full in February 2001             |                                                                                                                                                                |   | 300,000                |         |      |   |        |        
|Senior subordinated notes, secured,
10.75 percent fixed interest, payable
semi-annually, principal due
February 2, 2009 (net of $4,455
discount) |                                                                                                                                                                |   |                       |         |      |   | 375,545 |        
|Other                                                                                                                                            |                                                                                                                                                                |   | 11,077                 |         |      |   | 11,436  |        
|                                                                                                                                                 |                                                                                                                                                                |   |                        |         |      |   |         |        
|                                                                                                                                                 |                                                                                                                                                                |   | 786,077                |         |      |   | 630,504 |        
|Less: Current maturities                                                                                                                         |                                                                                                                                                                |   | 8,956                  |         |      |   | 8,433   |        
|                                                                                                                                                 |                                                                                                                                                                |   |                        |         |      |   |         |        
|                                                                                                                                                 |                                                                                                                                                                | $ | 777,121                |         |      | $ | 622,071 |        
|                                                                                                                                                 |                                                                                                                                                                |   |                        |         |      |   |         |        

Maturities of the Companys borrowings for the next five years as of
December 31, 2001 are as follows (amounts in thousands):

|           |  |   |         | 
|---------- |  | - | ------- | 
|2002       |  | $ | 8,433   | 
|2003       |  |   | 13,181  | 
|2004       |  |   | 17,841  | 
|2005       |  |   | 25,340  | 
|2006       |  |   | 100,538 | 
|Thereafter |  |   | 465,171 | 
|           |  |   |         | 
|           |  | $ | 630,504 | 
|           |  |   |         | 

Senior credit facilities

On December 20, 2000, the Company refinanced substantially all of its
long-term debt with new $575 million senior credit facilities provided by a
group of lenders led by affiliates of Deutsche Bank AG and a $300 million
senior subordinated credit facility provided by a group of lenders also led by
affiliates of Deutsche Bank AG. In connection with the refinancing, the
Company repurchased through a tender offer $100 million in aggregate principal
amount of its



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10.5 percent senior subordinated notes due 2004 and repaid and
terminated its previous $115 million revolving credit facility and
approximately $30.2 million of other indebtedness. As a result of the early
repurchase of the 10.5 percent senior subordinated notes issued in 1997 and the
early termination of a previous credit facility, during 2000, the Company
incurred an extraordinary charge of $6.6 million (net of associated tax benefit
of $3.5 million). This extraordinary charge was comprised of the premium paid
to the noteholders, unamortized discount on the notes and the write-off of
related loan costs and fees.

The Companys senior credit facilities consist of a revolving credit
facility, a revolving term loan facility and term loans A, B and C.
At December 31, 2001, the Company had $124.6 milion
available for borrowing under the senior credit facilities. Each of
these facilities bears interest at a variable rate based on LIBOR (eurodollar
loans) or the prime rate (base rate loans) plus a margin. For the revolving
credit facility, the revolving term loan facility and the term loan A, the
interest rate margin fluctuates based on the leverage ratio, which is the ratio
of the consolidated debt to latest twelve months EBITDA, as defined, and ranges
from 1.50 percent to 3.25 percent in the case of eurodollar loans and from 0.50
percent to 2.25 percent in the case of base rate loans. For term loans B and C,
the margins are fixed at 3.75 percent and 4.00 percent, respectively, in the
case of eurodollar loans, and at 2.75 percent and 3.00 percent, respectively,
in the case of base rate loans. In the case of eurodollar loans, the Company
has the option of electing a one, two, three, or six-month interest period,
with interest payable at the earlier of three months from the initial borrowing
date or renewal date and expiration of interest period selected.

The revolving term loan facility converts to a term loan on December 31, 2002.
The revolving credit facility, the revolving term loan facility and the term
loan A all mature on December 20, 2005. The term loan B matures on December
20, 2006 and the term loan C matures on December 20, 2007. The term loan A is
subject to mandatory quarterly principal repayments increasing from $0.9
million in the first quarter of 2002 to $3.1 million in 2005. The term loan B
is subject to mandatory quarterly principal repayments of $0.3 million from the
first quarter of 2001 through 2005 and $24.8 million in 2006. The term loan C
is subject to mandatory quarterly principal repayments of $0.2 million from the
first quarter of 2002 through 2006 and $21.1 million in 2007. All mandatory
principal repayments have been made through December 31, 2001.

In addition to making all required quarterly principal repayments under
the senior credit facilities, in 2001 the Company prepaid and permanently
reduced the senior credit facilities as follows:



| |  |  | In January 2001, upon the closing of the sale of The Reserve,
the Company partially repaid and permanently reduced the revolving
loan commitment and the term loan A by a total of $50 million;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | In February 2001, upon the issuance of the Companys 10.75%
senior subordinated notes (described below), the Company prepaid the
term loan B and term loan C by a total of $50 million; and        
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | In December 2001, upon the Companys sale of 4.9 million
shares of common stock in a secondary public offering, the Company
prepaid the term loans on a pro rata basis by a total of $94.2
million.

The senior credit facilities contain certain affirmative and negative
covenants, including restrictions on the incurrence of additional indebtedness,
restrictions on dividend payments and other restrictions, as well as promises
to maintain certain financial ratios and tests within defined parameters. As
of December 31, 2001, the Company was required to maintain a maximum of 3:1
senior debt ratio, defined as senior debt divided by EBITDA (as defined) and a
maximum of a 5:1 total debt ratio, defined as consolidated debt divided by
EBITDA. As of December 31, 2001, the Companys senior debt and total debt
ratios were 1.57:1 and 4.09:1, respectively.

As of December 31, 2001, the Company was required to maintain a minimum
fixed charge coverage ratio (EBITDA divided by fixed charges, as defined) of
1.50:1. As of December 31, 2001, the Companys fixed charge coverage ratio was
2.20:1. The senior credit facilities also limit the Companys aggregate
capital expenditures in each year. For the period from December 20, 2000
through December 31, 2001, the Company was limited to a maximum of $26 million
of capital expenditures in addition to capital expenditures of $110 million in
connection with the St. Charles expansion project, $9.5 million in connection
with the ongoing renovation project at Ameristar Vicksburg and $8.0 million in
connection with the ongoing renovation project at Ameristar Council Bluffs. As
of December 31, 2001, the Company was in compliance with the capital
expenditure covenant. The senior credit facilities also require the Company to
maintain a consolidated tangible net worth (as defined) of at least $23 million
plus 50 percent of net income (without any reduction for net losses) as of the
end of each quarter plus net proceeds of certain equity offerings and stock
options exercised. As of December 31, 2001, the Companys consolidated
tangible net worth was $21.9 million more than required by this covenant.

Senior subordinated credit facility

On December 20, 2000, the Company obtained a $300 million senior
subordinated credit facility provided by a group of lenders led by affiliates
of Deutsche Bank AG. This credit facility served as the interim financing for
the Companys acquisition of the Missouri properties until it was retired using
proceeds from the 10.75% senior subordinated notes in February 2001. During
the first quarter of 2001, the Company amortized $3.5 million ($2.3 million net
of tax) of debt issuance costs to interest expense related to the senior
subordinated credit facility.

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 proceeds
of the offering were used (1) to repay the $300



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##### Table of Contents



million in principal amount
outstanding under the senior subordinated credit facility and accrued interest
thereon, (2) to partially repay and permanently reduce the term loan B and term
loan C under the Companys senior credit facilities by a total of $50 million,
(3) to partially repay the revolving credit facility under the Companys senior
credit facilities by $13.7 million and (4) for working capital purposes. The
notes are unsecured and rank junior to all of the Companys existing and future
senior debt, including borrowings under the Companys senior credit facilities.

The 10.75% senior subordinated notes were issued by the Company, and all
of the Companys current subsidiaries (the Guarantors) have jointly and
severally, and fully and unconditionally, guaranteed the notes. Each of the
Guarantors is a wholly owned subsidiary of the Company, and the Guarantors
constitute all of the Companys direct and indirect subsidiaries. The Company
is a holding company with no operations or material assets independent of those
of the Guarantors, other than its investment in the Guarantors, and the
aggregate assets, liabilities, earnings and equity of the Guarantors are
substantially equivalent to the assets, liabilities, earnings and equity on a
consolidated basis of the Company. Separate financial statements and certain
other disclosures concerning the Guarantors are not presented because, in the
opinion of management, such information is not material to investors. Other
than customary restrictions imposed by applicable corporate statutes, there are
no restrictions on the ability of the Guarantors to transfer funds to the
Company in the form of cash dividends, loans or advances.

Interest rate collar and swap agreements

In 1997, the Company entered into an interest rate collar agreement with
Wells Fargo Bank to manage interest expense. The agreement, which covered
$50.0 million of the borrowings under the previous credit facility and covers
$50.0 million of the eurodollar borrowings under the revolving term loan facility
and the term loan A, terminates on June 30, 2003. The Company has a LIBOR
floor rate of 5.39 percent and a LIBOR ceiling rate of 6.75 percent, plus the
applicable margin. In 2000 and 2001, the Company paid approximately $0 and
$0.6 million, respectively, in interest as a result of this agreement. In
addition, the Company recognized the value of the collar agreement ($1.9
million at December 31, 2001) in other long-term liabilities in the accompanying consolidated
balance sheets. Because the collar agreement is not a highly
effective hedge, the change in fair value was recorded as
additional interest expense during the
year ended December 31, 2001. The Company also recognized $0.1 million, net of
tax, as a cumulative effect of change in accounting principle upon adoption of
SFAS No. 133 (see Note 2).

In April 2001, the Company entered into an interest rate swap agreement to
fix the interest rate on $100 million of LIBOR borrowings under the senior
credit facilities at 5.07 percent plus the applicable margin. The interest rate
swap agreement is expected to be highly effective as a hedging instrument as
long as sufficient LIBOR-based borrowings are outstanding under the senior
credit facilities. Any ineffectiveness, however, will be recorded in the
Companys condensed consolidated income statements as additional
interest
expense. No ineffectiveness was recognized in 2001. The value of the swap
agreement ($3.0 million as of December 31, 2001) has been
recorded in other long-term liabilities in the accompanying consolidated balance sheets, with a corresponding
reduction in stockholders equity, net of tax, recorded as accumulated other
comprehensive loss. This deferred loss will be recognized as additional



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interest expense as the Company makes periodic interest payments. The Company
paid $0.9 million of additional interest expense in 2001 as a result of this
agreement.

Fair value of long-term debt

The estimated fair value of the Companys long-term debt at December 31,
2000 was approximately the same as its book value of $777.1 million because
primarily all long-term debt carried variable interest rates. The estimated
fair value of the Companys long-term debt at December 31, 2001 was
approximately $669.2 million, compared to its book value of
$630.5 million,
based on the quoted market price of the senior subordinated notes. Primarily
all other long-term debt carries variable interest rates.

Note 6  Leases

Capital leases

The Company has various capital leases for slot machines, restaurant
equipment, and computer and other equipment. These leases have interest rates
ranging from 5.1% to 11.7% and require aggregate monthly payments of $123,000
as of December 31, 2001.

Future minimum lease payments required under capitalized leases for the
five years subsequent to December 31, 2001 are as follows (amounts in
thousands):

|                                        |  |   |       | 
|--------------------------------------- |  | - | ----- | 
|2002                                    |  | $ | 1,456 | 
|2003                                    |  |   | 1,396 | 
|2004                                    |  |   | 786   | 
|2005                                    |  |   | 25    | 
|2006                                    |  |   | 25    | 
|Thereafter                              |  |   | 429   | 
|                                        |  |   |       | 
|                                        |  |   | 4,117 | 
|Less: Amount representing interest      |  |   | 763   | 
|                                        |  |   |       | 
|Present value of minimum lease payments |  | $ | 3,354 | 
|                                        |  |   |       | 

Operating leases

ACI leases office space in Las Vegas, Nevada to serve as its corporate
offices. Monthly payments are approximately $63,000 plus the Companys share
of certain common area maintenance expenses. Payments under the leases are
subject to annual escalation clauses corresponding to increases in the cost of
living. The Company recorded rental expense of approximately $0.6 million,
$0.6 million, and $0.8 million under these leases in the years ended December
31, 1999, 2000 and 2001, respectively.

In November 1999, the Company entered into a three-year lease (with
renewal options for an additional 18 years) for a portion of the land on which
Ameristar Vicksburg is situated. The lease initially requires quarterly
payments of approximately $20,000. The lease contains a purchase option
exercisable at various times during the term of the lease.



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Note 7  Benefit plans

401(k) plan

The Company maintains a defined contribution 401(k) plan which covers all
employees who meet certain age and length of service requirements and allows an
employer contribution up to 50 percent of the first four percent of each
participating employees compensation. Plan participants can elect to defer
before-tax compensation through payroll deductions. These deferrals are
regulated under Section 401(k) of the Internal Revenue Code. The Companys
matching contributions were $0.6 million, $0.6 million, and $1.1 million for
the fiscal years ended December 31, 1999, 2000, 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.

Insurance plan

The Company has a qualified employee insurance plan covering all employees
who work an average of 32 hours or more per week on a regular basis. The plan,
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
$7.5 million, $9.8 million, and $15.1 million for the years ended December 31,
1999, 2000 and 2001, respectively.

Stock incentive plans

The Company has various stock incentive plans for directors, officers,
employees, consultants and advisers of the Company. The plans permit grants of
options to purchase common stock intended to qualify as incentive stock options
or non-qualified stock options and also provides for grants of restricted
stock. The maximum number of shares available for issuance under the plans is
approximately 4.6 million, subject to certain limitations. To date, the
Company has not granted any awards of restricted stock. The Compensation
Committee of the Board of Directors administers the plans and has broad
discretion to establish the terms of stock option awards, including without
limitation the power to set the term (up to 10 years), vesting schedule and
exercise price of stock option awards.

In December 2000, in connection with the Companys acquisition of two
properties in Missouri (see Note 10  Pro forma data), 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 vest on December 31,
2007, subject to accelerated vesting from December 2001 through December 2005
based on the Missouri properties meeting certain annual performance targets
(as established annually by the Board of Directors or a Committee thereof).
Based on the performance of the Missouri properties in 2001, the vesting of
60,752 stock options was accelerated to December 31, 2001. If all of the
members of the Missouri management team were to leave the employment of the



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Company prior to December 31, 2007, the Company would recognize compensation
expense of $0.8 million based on the spread between the exercise price of the
stock options that vested as of December 31, 2001 and the Companys stock price
on the date the performance targets were set. See also Note 13  Subsequent
events.

Summary information for stock option grants under the Companys plans is
as follows:

|                                           |          |                          |           |       |           |         |           |       |  |         |           |       |          |   |      |  |  |  |           |   |  |   |       | 
|------------------------------------------ | -------- | ------------------------ | --------- | ----- | --------- | ------- | --------- | ----- |  | ------- | --------- | ----- | -------- | - | ---- |  |  |  | --------- | - |  | - | ----- | 
|                                           |          | Years ended December 31,
|                                           |          |                         
|                                           |          | 1999                     |           | 2000  |           | 2001   
|                                           |          |                          |           |       |           |        
|                                           | Weighted |                          |           |       |           |         | Weighted  |       |  |         |           |       | Weighted
|                                           | Average  |                          |           |       |           |         | Average   |       |  |         |           |       | Average 
|                                           | Exercise |                          |           |       |           |         | Exercise  |       |  |         |           |       | Exercise
|                                           |          | Options                  |           | Price |           | Options |           | Price |  | Options |           | Price
|                                           |          |                          |           |       |           |         |           |       |  |         |           |      
|Outstanding at beginning of year           |          |                          | 1,140,110 |       |           | $       | 2.68      |       |  |         | 1,441,510 |       |          | $ | 2.99 |  |  |  | 3,223,979 |   |  | $ | 4.05  | 
|Granted                                    |          |                          | 579,170   |       |           |         | 3.52      |       |  |         | 1,969,542 |       |          |   | 4.67 |  |  |  | 448,450   |   |  |   | 11.13 | 
|Exercised                                  |          |                          | (15,264   | )     |           |         | 2.64      |       |  |         | (67,699   | )     |          |   | 2.69 |  |  |  | (515,908  | ) |  |   | 3.26  | 
|Canceled                                   |          |                          | (262,506  | )     |           |         | 2.86      |       |  |         | (119,374  | )     |          |   | 2.25 |  |  |  | (540,924  | ) |  |   | 4.11  | 
|                                           |          |                          |           |       |           |         |           |       |  |         |           |       |          |   |      |  |  |  |           |   |  |   |       | 
|Outstanding at end of year                 |          |                          | 1,441,510 |       |           |         | 2.68      |       |  |         | 3,223,979 |       |          |   | 4.05 |  |  |  | 2,615,597 |   |  |   | 5.36  | 
|                                           |          |                          |           |       |           |         |           |       |  |         |           |       |          |   |      |  |  |  |           |   |  |   |       | 
|Options exercisable at end of year         |          |                          | 382,184   |       |           | $       | 2.78      |       |  |         | 608,632   |       |          | $ | 3.06 |  |  |  | 502,001   |   |  | $ | 3.54  | 
|Options available for grant at end of year |          |                          | 1,158,490 |       | 1,293,058 |         | 1,393,532 |      

Following is a summary of the status of stock options outstanding at
December 31, 2001:

|              |  |                     |           |                     |  |                  |     |                  |  |                |       |  |  |                  |         |  |  |   |       | 
|------------- |  | ------------------- | --------- | ------------------- |  | ---------------- | --- | ---------------- |  | -------------- | ----- |  |  | ---------------- | ------- |  |  | - | ----- | 
|              |  | Outstanding Options |           | Exercisable Options
|              |  |                     |           |                    
|Exercise      |  |                     |           |                     |  | Weighted Average |     | Weighted Average |  |                |       |  |  | Weighted Average
|Price Range   |  | Number              |           | Remaining Life      |  | Exercise Price   |     | Number           |  | Exercise Price
|              |  |                     |           |                     |  |                  |     |                  |  |               
|$2.64         |  |                     | 412,110   |                     |  |                  | 6.0 |                  |  | $              | 2.64  |  |  |                  | 249,868 |  |  | $ | 2.64  | 
|$2.75-$4.59   |  |                     | 447,776   |                     |  |                  | 7.9 |                  |  |                | 3.72  |  |  |                  | 90,603  |  |  |   | 3.61  | 
|$4.64         |  |                     | 675,000   |                     |  |                  | 9.0 |                  |  |                | 4.64  |  |  |                  | 60,752  |  |  |   | 4.64  | 
|$4.72-$6.75   |  |                     | 758,261   |                     |  |                  | 8.8 |                  |  |                | 5.13  |  |  |                  | 99,778  |  |  |   | 4.96  | 
|$7.54-$10.55  |  |                     | 112,250   |                     |  |                  | 9.3 |                  |  |                | 8.19  |  |  |                  |        |  |  |   |      | 
|$12.56-$17.74 |  |                     | 160,100   |                     |  |                  | 9.6 |                  |  |                | 14.16 |  |  |                  | 1,000   |  |  |   | 16.00 | 
|$18.56-$23.61 |  |                     | 50,100    |                     |  |                  | 9.8 |                  |  |                | 21.18 |  |  |                  |        |  |  |   |      | 
|              |  |                     |           |                     |  |                  |     |                  |  |                |       |  |  |                  |         |  |  |   |       | 
|              |  |                     | 2,615,597 |                     |  |                  | 8.4 |                  |  |                | 5.36  |  |  |                  | 502,001 |  |  |   | 3.54  | 
|              |  |                     |           |                     |  |                  |     |                  |  |                |       |  |  |                  |         |  |  |   |       | 

The Company accounts for its stock option plans under Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees
(APB 25). Under SFAS No. 123, Accounting for Stock-Based Compensation,
all employee stock option grants are considered compensatory. SFAS No. 123 provides, among other
things, that companies may elect to account for employee stock options using
APB 25. Had compensation cost for these plans been determined consistent with
SFAS No. 123, the Companys net income (loss) and earnings (loss) per share
would have been adjusted to the pro forma amounts in the following table. The
table also discloses the weighted average assumptions used in estimating the
fair value of each option grant on the date of grant using the Black-Scholes
option pricing model and the estimated weighted average fair value of



F-23



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the options granted. The model assumes no expected future dividend payments on the
Companys common stock for the options granted in 1999, 2000 and 2001.

|                                   |                                                   |  |                                               |       |      |  |      |         |   |  |   |        |  
|---------------------------------- | ------------------------------------------------- |  | --------------------------------------------- | ----- | ---- |  | ---- | ------- | - |  | - | ------ | -
|                                   |                                                   |  | Years ended December 31,                     
|                                   |                                                   |  |                                              
|                                   |                                                   |  | 1999                                          |       | 2000 |  | 2001
|                                   |                                                   |  |                                               |       |      |  |     
|                                   |                                                   |  | (Amounts in Thousands, Except Per Share Data)
|Net income (loss):                 |                                                   |  |                                               |       |      |  |      |         |   |  |   |       
|                                   | As reported                                       |  | $                                             | 205   |      |  | $    | (40,307 | ) |  |   | 33,154 |  
|                                   | Pro forma                                         |  |                                               | (246  | )    |  |      | (40,989 | ) |  |   | 31,649 |  
|Basic earnings (loss) per share:   |                                                   |  |                                               |       |      |  |      |         |   |  |   |       
|                                   | As reported                                       |  | $                                             | 0.01  |      |  | $    | (1.98   | ) |  |   | 1.59   |  
|                                   | Pro forma                                         |  |                                               | (0.01 | )    |  |      | (2.01   | ) |  |   | 1.51   |  
|Diluted earnings (loss) per share: |                                                   |  |                                               |       |      |  |      |         |   |  |   |       
|                                   | As reported                                       |  | $                                             | 0.01  |      |  | $    | (1.98   | ) |  |   | 1.51   |  
|                                   | Pro forma                                         |  |                                               | (0.01 | )    |  |      | (2.01   | ) |  |   | 1.44   |  
|Weighted average assumptions:      |                                                   |  |                                               |       |      |  |      |         |   |  |   |       
|                                   | Expected stock price volatility                   |  |                                               | 58    | %    |  |      | 54      | % |  |   | 54     | %
|                                   | Risk-free interest rate                           |  |                                               | 5.8   | %    |  |      | 5.6     | % |  |   | 4.6    | %
|                                   | Expected option lives (years)                     |  |                                               | 5     |      |  |      | 5       |   |  |   | 5      |  
|                                   | Estimated fair value per share of options granted |  | $                                             | 1.94  |      |  | $    | 2.73    |   |  | $ | 5.83   |  

Note 8  Earnings per share

The Company calculates earnings per share in accordance with SFAS 128,
Earnings Per Share. Basic earnings per share are computed by dividing
reported earnings by the weighted average number of common shares outstanding
during the period. Diluted earnings per share reflects the additional dilution
for all potentially dilutive securities such as stock options. All outstanding
stock options were excluded from the calculation of diluted earnings per share
for the years ended December 31, 1999 and 2000 because the dilutive effect was
not significant in 1999 and the effect of including the options would have been
anti-dilutive in 2000. For 2001, all outstanding options are dilutive and 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:



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|                                                                           |  |                          |        |      |  |      |        |  |  |  |        | 
|-------------------------------------------------------------------------- |  | ------------------------ | ------ | ---- |  | ---- | ------ |  |  |  | ------ | 
|                                                                           |  | Years ended December 31,
|                                                                           |  |                         
|                                                                           |  | 1999                     |        | 2000 |  | 2001
|                                                                           |  |                          |        |      |  |     
|                                                                           |  | (Amounts in Thousands)  
|Weighted average number of shares
outstanding  basic earnings per share   |  |                          | 20,362 |      |  |      | 20,401 |  |  |  | 20,906 | 
|Dilutive effect of stock options                                           |  |                          |       |      |  |      |       |  |  |  | 1,002  | 
|                                                                           |  |                          |        |      |  |      |        |  |  |  |        | 
|Weighted average number of shares
outstanding  diluted earnings per share |  |                          | 20,362 |      |  |      | 20,401 |  |  |  | 21,908 | 
|                                                                           |  |                          |        |      |  |      |        |  |  |  |        | 

Note 9  Sale of The Reserve

On October 17, 2000, the Company, through ACLVI, agreed to sell
substantially all of the assets of The Reserve to a wholly owned subsidiary of
Station Casinos, Inc. On January 29, 2001, the Company completed its planned
sale of The Reserve for a total consideration of approximately $71.6 million.
The proceeds from the sale of The Reserve were used (1) to partially repay and
permanently reduce the revolving loan commitment and the term loan A under the
Companys senior credit facilities by a total of $50 million, (2) to repay
revolving loans under the Companys senior credit facilities (which remain
available for future borrowing), and (3) to repay certain indebtedness
associated with the assets sold in the transaction.

The sale of The Reserve resulted in a loss of approximately $57.2 million.
This impairment loss was recorded in 2000 as required by SFAS No. 121. The
following table shows certain financial information of The Reserve for the
periods indicated:

|                                  |  |                        |         |      |  |   |       | 
|--------------------------------- |  | ---------------------- | ------- | ---- |  | - | ----- | 
|                                  |  | December 31,          
|                                  |  |                       
|                                  |  | 2000                   |         | 2001
|                                  |  |                        |         |     
|                                  |  | (Amounts in Thousands)
|Net revenues (1)                  |  | $                      | 62,082  |      |  | $ | 5,046 | 
|Income (loss) from operations (2) |  |                        | (57,321 | )    |  |   | 67    | 



---

|(1) |  | Net revenues for 2000 and 2001 have been adjusted to account for
the players points reclassification in compliance with EITF 00-22.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Includes an impairment loss of $57.2 million for the year ended
December 31, 2000.                                                 

Note 10  Pro forma data

On December 20,
2000, the Company, through two newly-formed wholly owned
subsidiaries, completed its acquisitions of substantially all of the assets of
two gaming properties in St. Charles and Kansas City, Missouri (the
Acquisitions). The total purchase price for the Acquisitions, net of cash
acquired, was $486.8 million. The Acquisitions were financed with a portion of
the proceeds from the senior credit facilities and the Companys senior
subordinated credit facility (which was subsequently refinanced with a portion
of the



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##### Table of Contents



proceeds of the senior subordinated notes). The excess of purchase
price over fair market value of net assets acquired was assigned a useful life
of 40 years. See also Note 2  Summary of significant accounting policies.

In January 2001, the
Company sold The Reserve Hotel Casino for approximately $71.6
million in a separate transaction.

The following unaudited pro forma data summarizes the Companys results of
operations for the periods indicated as if the Acquisitions and the sale of The
Reserve had occurred as of January 1, 2000. This unaudited pro forma
consolidated financial information is not necessarily indicative of what the
Companys actual results would have been had the Acquisitions and the sale of
The Reserve been completed on January 1, 2000 or of future financial results.

|                                                                                         |  |                        |         |      |  |   |         | 
|---------------------------------------------------------------------------------------- |  | ---------------------- | ------- | ---- |  | - | ------- | 
|                                                                                         |  | December 31,          
|                                                                                         |  |                       
|                                                                                         |  | 2000                   |         | 2001
|                                                                                         |  |                        |         |     
|                                                                                         |  | (Amounts in Thousands,
|                                                                                         |  | Except Per Share Data)
|                                                                                         |  |                       
|Net revenues                                                                             |  | $                      | 582,443 |      |  | $ | 621,776 | 
|Income before extraordinary loss and
cumulative effect of change in
accounting principle |  |                        | 16,792  |      |  |   | 33,703  | 
|Basic earnings per share                                                                 |  |                        | 0.82    |      |  |   | 1.61    | 
|Diluted earnings per share                                                               |  |                        | 0.82    |      |  |   | 1.54    | 

Note 11  Commitments and contingencies

Litigation. From time to time, the Company is a party to litigation 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-related health care benefits program is self-funded up to a maximum
amount per claim. Claims in excess of this maximum are fully insured through a
stop-loss insurance policy. Accruals are based on claims filed and estimates
of claims incurred but not reported. At December 31, 2000 and 2001, the
Companys liabilities for unpaid and incurred but not reported claims totaled
$1.6 million and $2.3 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 future claims payments.

Note 12  Related party transactions

The Company engages Neilsen & Company, L.L.C., a company that is owned and
controlled by Craig H. Neilsen, the Companys president, chief executive
officer and chairman, to provide certain professional services, office space
and other equipment and facilities. The Company also leases from Neilsen &
Company two condominiums in Sun Valley, Idaho, which it makes available at no
charge to management personnel and certain



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business associates with the
objective of strengthening management morale and maintaining goodwill with
important business contacts. Until 1999, the Company also leased office space
from the Lynwood Shopping Center, which was controlled by Mr. Neilsen. In
addition, Intermountain Express, Inc. (Intermountain), a transportation
concern owned and controlled by Mr. Neilsen, provided CPI with package delivery
services between Jackpot, Nevada and Twin Falls, Idaho until July 2000. CPI
provided contracted driver services and miscellaneous other supplies to
Intermountain until 2000.

Total payments to these related parties were $96,000, $76,000, and $69,000
for the years ended December 31, 1999, 2000, and 2001, respectively. CPI was
paid $21,000, $23,000, and $0 during 1999, 2000 and 2001, respectively, by
Intermountain for services and supplies.

In managements opinion, at the time the above described transactions were
entered into, they were in the best interest of the Company and on terms as
fair to the Company as could have been obtained from unaffiliated parties.

In December 2001, the Company completed a public offering of 6,900,000
shares of its common stock at $20.50 per share. Of the shares sold, 4,900,000
were sold by the Company and 2,000,000 were sold by Mr. Neilsen. The Company
incurred approximately $950,000 for 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.

Note 13  Subsequent events (unaudited)

In February 2002, John Finamore, the President of Missouri Operations,
left the employment of the Company. As a result of Mr. Finamores departure,
in the first quarter of 2002: (1) 307,807 unvested stock options previously
granted to Mr. Finamore were cancelled; (2) the Company recorded a compensation
expense relating to certain severance payments made to Mr. Finamore, and (3)
the Company recorded a compensation expense relating to the vested stock
options held by Mr. Finamore, which vesting had been accelerated as described
more fully in Note 7  Benefit plans  Stock incentive plans.



F-27