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Ameristar Reports Results Up for Q3

29 October 2003

LAS VEGAS – (Press Release) -- Ameristar Casinos, Inc. (Nasdaq: ASCA) today announced results for the third quarter of 2003.

Third quarter 2003 highlights:

* Record net revenues of $201.5 million, an increase of $14.3 million, or 7.6%, from the third quarter of 2002.

* Operating income of $34.2 million and EBITDA (a non-GAAP financial measure which is defined and reconciled with operating income below) of $50.1 million, representing increases of 34.8% and 28.5%, respectively, from the third quarter of 2002. Operating income and EBITDA included charges of $1.3 million related to the introduction of the "All New Ameristar Kansas City" and $0.9 million associated with the unsuccessful pursuit of a corporate acquisition.

* Net income of $11.9 million, a 60.4% increase from $7.4 million for the third quarter of 2002.

* Diluted earnings per share of $0.44 for the third quarter of 2003, compared to $0.28 for the third quarter of 2002. Our previously issued estimate for diluted earnings per share for the third quarter of 2003 was $0.47 to $0.52. Analysts' latest consensus estimate for the third quarter of 2003, as reported by Thomson First Call, was $0.54. Diluted earnings per share in 2003 was reduced by $0.06 per share as a result of costs related to the introduction of the "All New Ameristar Kansas City," the unsuccessful pursuit of the corporate acquisition and the early retirement of long-term debt. Diluted earnings per share benefited by $0.03 per share due to an adjustment to the interest accrual on our senior subordinated notes.

* On September 12-14, 2003, we introduced the "All New Ameristar Kansas City," which features a completely renovated casino with the widespread implementation of ticket-in, ticket-out slot machines and seven new restaurant and entertainment venues, including the 330-seat Amerisports Brew Pub with state-of-the-art audio and video technology.

* We continued to be the leader in our markets in the implementation of "coinless" slot technology. We remain on target to implement "coinless" technology in 75% of the slot machines at our riverboat properties by the end of 2003 and approximately 100% by the end of 2004.

The record revenues in the third quarter of 2003 were driven primarily by a 20.1% increase in revenues at Ameristar St. Charles. The new St. Charles facility, which opened in August 2002, continued to generate strong results. Revenues were also positively impacted by a 9.1% increase in revenues at Council Bluffs as the property continued to extend its market share lead. Net income and diluted earnings per share for the third quarter of 2003 improved despite increases in net interest expense and depreciation expense.

For the three months ended September 30, 2003, consolidated net interest expense increased to $15.1 million from $13.9 million for the same period in 2002 as a result of a significant reduction in capitalized interest following the opening of the new St. Charles facility, partially offset by a $1.4 million adjustment to our interest accrual recorded in the third quarter of 2003. Depreciation and amortization expense increased from $13.6 million in the third quarter of 2002 to $15.9 million in the third quarter of 2003, primarily due to the opening of the new St. Charles facility and the Kansas City enhancements. Net income and diluted earnings per share were also reduced by charges of $1.3 million related to the introduction of the "All New Ameristar Kansas City," $0.9 million associated with the unsuccessful pursuit of the corporate acquisition and $0.4 million related to the early retirement of debt.

Craig H. Neilsen, Chairman and CEO, stated, "We are very pleased with our performance in the third quarter. We continue to benefit from the implementation of our business model and operating strategies, including maintaining the highest quality facilities in each of our markets and successfully executing targeted marketing and cost management strategies. Our St. Charles, Council Bluffs, Vicksburg and Jackpot properties continue to be market share leaders, which contributed to our record net revenues for the quarter. We believe Ameristar Kansas City's future financial results will improve as occurred following the completion of the renovation and improvement projects at Ameristar Council Bluffs and Ameristar Vicksburg and the new facility at Ameristar St. Charles."

Ameristar St. Charles

Ameristar St. Charles again posted record results. Net revenues increased 20.1% to $66.0 million, from $55.0 million in the prior-year quarter, due to a full quarter of operations from the new gaming, restaurant and entertainment facilities. For the third quarter of 2003, Ameristar St. Charles' market share increased to 31.8%, 5.0% more than in the third quarter of 2002.(1) Ameristar St. Charles has been the market share leader in the greater St. Louis market in each of the four quarters since the new facility opened.

Operating income increased to $15.6 million from $3.9 million, and EBITDA increased to $21.4 million from $8.2 million, in the third quarter of 2003 compared to the third quarter of 2002. In the third quarter of 2002, we incurred impairment charges and pre-opening expenses totaling $4.9 million related to the opening of the new facility. Excluding these charges, operating income increased 78.3% and EBITDA increased 63.9% in the third quarter of 2003 compared to the prior-year quarter. Ameristar St. Charles' operating margin improved to 23.7% and its EBITDA margin improved to 32.5% for the third quarter of 2003.

Ameristar Kansas City

On September 12-14, 2003, we introduced the "All New Ameristar Kansas City" with a free public concert by Martina McBride, two-time Academy of Country Music top Female Vocalist, a world-class fireworks display and other festivities. The enhanced facility includes a completely renovated casino with the widespread implementation of ticket-in, ticket-out slot machine technology and a casino cabaret featuring live Las Vegas-style entertainment. The property also features new food and entertainment venues, including the Great Plains Cattle Co., Falcon Diner, Depot No. 9 Stage and Bar, Pearl's Oyster Bar, the Amerisports Brew Pub with state-of-the-art audio and video technology and a food court with three popular national chain outlets. Net revenues at Ameristar Kansas City remained stable at $55.5 million in the third quarter of 2003 compared to the third quarter of 2002 despite the significant construction disruption from the renovation of the facility.

Operating income was $9.4 million and EBITDA was $13.0 million in the third quarter of 2003, compared to $10.1 million and $13.4 million, respectively, in the third quarter of 2002. In the 2003 quarter, operating income and EBITDA were impacted by $1.3 million of costs incurred to open the new venues and to advertise, market and promote the introduction of the "All New Ameristar Kansas City."

Ameristar Council Bluffs

Net revenues at Ameristar Council Bluffs increased 9.1% to $40.3 million in the third quarter of 2003, compared to $36.9 million for the third quarter of 2002. Ameristar Council Bluffs' market share increased to 39.4%, compared to 38.0% in the prior-year period. The property has now been the market share leader for 25 consecutive months.

Operating income and operating margins at Ameristar Council Bluffs increased to $12.3 million and 30.6%, respectively, in the third quarter of 2003 from $10.3 million and 28.0%, respectively, in the third quarter of 2002. EBITDA grew to $14.9 million for the third quarter of 2003, an 18.3% increase from $12.6 million for the same period in the prior year. EBITDA margin reached a record level of 37.0% during the third quarter of 2003.

Ameristar Vicksburg

Despite continuing softness in the Vicksburg gaming market, Ameristar Vicksburg reported an increase in net revenues of 1.4%, to $23.6 million for the third quarter of 2003 from $23.3 million for the third quarter of 2002. Food and beverage revenues were negatively impacted by the renovation of the Veranda Buffet, which is expected to be completed in December 2003. Ameristar Vicksburg continued to maintain its long-time market leadership position, with a 40.1% share in the third quarter of 2003.

Operating income decreased to $5.1 million for the third quarter of 2003 from $5.5 million for the third quarter of 2002. EBITDA also decreased, from $7.8 million for the third quarter of 2002 to $7.5 million for the third quarter of 2003. The decline in operating income and EBITDA was primarily due to higher self-funded health insurance costs due to a significant increase in the number of large claims.

Jackpot Properties

Net revenues at the Jackpot Properties decreased $0.4 million, or 2.5%, in the third quarter of 2003 compared to the third quarter of 2002. The Jackpot Properties' financial results continue to be impacted by the sluggish Southern Idaho economy.

The Jackpot Properties reported operating income of $2.5 million and EBITDA of $3.4 million for the third quarter of 2003, down 8.2% and 4.0%, respectively, from the third quarter of 2002. In addition to lower revenues, the decreases in operating income and EBITDA are attributable to higher general and administrative expenses.

Income tax rates

Our effective income tax rate for the quarter ended September 30, 2003 was 37.0%, compared to 33.5% for the prior-year quarter. The federal income tax statutory rate was 35.0% in both years. The differences from the statutory rate are due to the effects of state income tax expense and certain expenses we incurred that are not deductible for federal income tax purposes.

Liquidity and Capital Resources

At September 30, 2003, our total debt was $737.3 million, a decrease of $61.7 million since December 31, 2002. During the third quarter of 2003, we repaid approximately $29.4 million of long-term debt, including a $20.0 million prepayment of our senior credit facilities and a $1.9 million prepayment of other long-term debt. During the fourth quarter of 2003, we will make approximately $6.0 million of mandatory principal payments. Additionally, we intend to prepay up to $20.0 million of other long-term debt during the fourth quarter.

Our cash and cash equivalents decreased from $90.6 million at December 31, 2002 to $81.5 million at September 30, 2003. At September 30, 2003, we had $68.5 million of available revolving borrowing capacity under our senior credit facilities.

Interest expense (net of capitalized interest associated with our ongoing construction projects) for the third quarter of 2003 was $15.1 million, up 8.5% from $13.9 million for the third quarter of 2002. Total interest cost before capitalizing interest was $15.5 million for the quarter ended September 30, 2003, compared to $17.4 million for the quarter ended September 30, 2002. Interest cost decreased due to a lower weighted-average debt balance in the third quarter of 2003 compared to the prior-year quarter as a result of mandatory and accelerated reductions in long-term debt during 2003. Interest expense also declined due to lower average interest rates associated with our senior credit facilities in the third quarter 2003 compared to the third quarter 2002 and the $1.4 million adjustment to the interest accrual on our senior subordinated notes recorded in the current-year quarter.

Capital expenditures for 2003 will exceed the amount currently permitted under our senior credit facilities (approximately $73 million) due to the acceleration of our implementation of "coinless" slots at our properties and the renovation and improvement projects recently completed at Ameristar Kansas City. Accordingly, we expect to seek from our lenders a waiver of the capital expenditure limitation under our senior credit facilities prior to the end of the year.

While we do not currently anticipate any difficulties in obtaining the waiver, no assurances can be given that we will be able to do so.

For the year ending December 31, 2003, we expect to generate free cash flow of $55 million to $57 million. Free cash flow is a non-GAAP financial measure, which we define as cash flows from operations, as defined in accordance with GAAP, less capital expenditures. The reconciliation of estimated GAAP cash flows from operations to estimated free cash flow is shown below.

Earnings guidance for the fourth quarter of 2003 and year ending December 31, 2003

Based on our preliminary results of operations to date and our outlook for the remainder of the quarter, we currently estimate consolidated operating income of $29 million to $31 million, EBITDA of $45 million to $47 million (given anticipated depreciation expense of $16 million) and diluted earnings per share of $0.30 to $0.34 for the fourth quarter of 2003. For the year ending December 31, 2003, we are revising our previously issued guidance and currently estimate operating income of $137 million to $139 million, EBITDA of $200 million to $202 million (given anticipated depreciation expense of $63 million) and diluted earnings per share of $1.71 to $1.75.

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