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Ameristar Casinos Reports Mixed Results

-- Net revenues of $187.3 million, an increase of $31.5 million, or 20.2 percent, over the third quarter of 2001.

-- Adjusted operating income of $31.4 million, representing a decrease of $0.6 million in operating income, or 1.9 percent, as compared to the same quarter last year. Adjusted operating income for the third quarter of 2002 excludes $6.0 million of non-recurring charges associated with (1) preopening expenses of $4.9 million relating to the new St. Charles facility and (2) a $1.1 million impairment loss from the pending sale of certain gaming equipment.

-- EBITDA (as defined below) of $45.0 million compared to $41.9 million for the third quarter of 2001, representing an increase of 7.4 percent.

-- Net income of $7.4 million, down $3.9 million, or 34.5 percent, as compared to the third quarter of 2001.

-- Diluted earnings per share of $0.28 compared to $0.49 for the third quarter of 2001. Diluted earnings per share before non-recurring charges were $0.43.

The growth in revenues and EBITDA in the third quarter of 2002 as compared to the prior year was driven primarily by increased revenues at the expanded Ameristar St. Charles facility, which opened August 6, 2002, as well as continued strong operating results at the Company's Council Bluffs and Vicksburg properties. The Company's net income in the third quarter 2002 was negatively impacted by an increase in the base of depreciable assets and the reduction of capitalized interest following the opening of the new St. Charles facility, the preopening expenses described above, and initial operating inefficiencies at the new St. Charles facility.

"We are pleased that our innovative marketing initiatives, leading-edge design and value-oriented amenities have resulted in record market shares in each of our markets in the third quarter," said Craig H. Neilsen, the Company's Chairman, President and CEO. "Our commitment to delivering an exceptional gaming and entertainment experience to our customers is ongoing. We believe the tangible results of this commitment and operating philosophy will be realized through continuing growth in revenues and improvements in operating performance."

Net revenues at Ameristar St. Charles for the third quarter of 2002 grew to $55.0 million, an increase of 53.2 percent from the third quarter of 2001, marking the seventh straight quarter of double-digit revenue growth for the property. Ameristar St. Charles continued to improve its market share, with an increase in the third quarter of 2002 to an all-time record 26.8 percent, up from 19.0 percent in the third quarter of 2001, principally due to the opening of the new facility in August 2002.

Adjusted operating income (operating income before impairment loss on certain gaming equipment held for sale and preopening expenses related to the new St. Charles facility) was $8.8 million in the third quarter of 2002, representing a decrease of 19.3 percent from the corresponding period in 2001. Recurring operating expenses (i.e., excluding preopening expenses and impairment loss) increased by $21.1 million largely due to higher labor and related costs and depreciation expenses associated with the opening of the new facility. As a result, the adjusted operating income margin declined to 16.0 percent from 30.3 percent for the third quarter of 2001.

Management expects to achieve improved operating margins in future periods through labor efficiencies, player development initiatives, and other operational changes, but the property's stabilized operating income margin is not expected to reach the level of the old facility because the old facility was substantially smaller, offered limited amenities and could not always meet customer demand. The new facility is designed to absorb continuing growth of the dynamic St. Louis market. Despite operating inefficiencies associated with the opening of the new facility, EBITDA at the St. Charles property improved to $13.1 million in the third quarter of 2002, an increase of 11.0 percent over the corresponding period in 2001.

Ameristar Kansas City generated net revenues of $55.5 million for the third quarter of 2002, which represents an increase of $4.6 million, or 9.0 percent, over the prior year's quarter. The property's 15.2 percent increase in gaming revenues as compared to the third quarter of 2001 exceeded the 5.6 percent growth in the overall Kansas City market and improved the property's market share in the third quarter of 2002 to 35.7 percent (an all-time record for Ameristar), up from 32.6 percent in the third quarter of the prior year. The Kansas City property has held the number-one market position since the opening of the new 2,650-space parking garage in June 2002. Increased costs of targeted marketing programs, including coin coupon offerings, which are recorded as promotional allowances, caused net revenues to grow at a lower rate than gaming revenues.

Ameristar Kansas City's results were also adversely impacted by business disruption associated with construction activity related to enhancements of its casino and entertainment facilities that began in July of this year. These enhancements, undertaken to further improve its competitive position in the Kansas City market, include significant improvements to the casino and major renovations to the property's land-based amenities, and are expected to be completed in the first quarter of 2003.

Despite the increase in revenues, adjusted income from operations at Ameristar Kansas City decreased $0.7 million, or 6.5 percent, and EBITDA decreased $0.3 million, or 2.2 percent, in the third quarter of 2002 compared to the third quarter of 2001. The increase in operating expenses of $5.3 million, or 13.2 percent, from the third quarter of 2001 to 2002 was due to higher labor and related costs associated with customer service initiatives as well as additional expenses directly related to increased revenues, including gaming taxes and other expenses attributable to player development strategies.

Ameristar Council Bluffs posted substantially improved financial results again in the third quarter of 2002 as it continued to benefit from the on-going refinement of targeted marketing programs, the installation of new gaming equipment and the implementation of cost containment programs. Net revenues increased to $36.9 million, up $4.4 million from the third quarter of 2001. The 13.5 percent increase in net revenues was driven by a 15.5 percent increase in gaming revenues, which far outpaced the Council Bluffs market's 3.4 percent growth in gross gaming revenues. As a result, Ameristar Council Bluffs improved its leading market share position to an all-time record 38.0 percent for the third quarter of 2002, up from 34.4 percent in the third quarter of 2001. Ameristar has now been the market share leader in Council Bluffs for thirteen consecutive months. Adjusted operating income and EBITDA also improved significantly, up 32.1 percent and 23.5 percent, respectively, over the same quarter in 2001.

Ameristar Vicksburg also experienced dramatic improvement in the third quarter of 2002, with net revenues increasing by $3.1 million, or 15.3 percent, over the same quarter in 2001, due to the same factors stated above with respect to Ameristar Council Bluffs. Adjusted operating income increased $2.3 million, or 63.9 percent, and EBITDA increased $2.3 million, or 39.0 percent, over the same quarter in 2001. Ameristar Vicksburg, the long-time market share leader in Vicksburg, improved its market share to an all-time record 40.2 percent in the third quarter of 2002, up from 34.6 percent in the third quarter of 2001.

Net revenues at the Jackpot Properties in the third quarter of 2002 were $16.5 million, up 1.2 percent from the third quarter of 2001. This improvement is attributable to more effective marketing programs and an improved Southern Idaho economy in the 2002 period compared to the 2001 period. The Jackpot Properties generated adjusted operating income of $2.7 million and EBITDA of $3.6 million, down 32.5 percent and 26.5 percent, respectively, from the third quarter of 2001. The decline in adjusted operating income and EBITDA is primarily the result of a $0.7 million increase in employee benefit costs.

At September 30, 2002, the Company's total debt was $755.9 million, representing an increase of $40.3 million from total debt at June 30, 2002. The increase is primarily attributable to borrowings made to fund construction of the new casino and entertainment facility at Ameristar St. Charles and the parking garage at Ameristar Kansas City. The Company's cash increased $1.4 million to $47.2 million from June 30 to September 30, 2002.

The Company's interest expense in the third quarter of 2002 was $13.9 million, down 6.1 percent from $14.8 million in the third quarter of 2001, due to a lower average interest rate on the outstanding debt. Total interest cost, before capitalizing interest associated with the Company's ongoing construction projects, was $17.4 million in the third quarter of 2002 compared to $20.0 million for the same period in 2001. In September 2002, Standard & Poor's Ratings Services increased its rating on the Company's senior secured debt to BB-, which reduced the interest rate on a portion of the Company's senior credit facilities.

In accordance with Statement of Financial Accounting Standards No. 142, which the Company adopted on January 1, 2002, the Company no longer records goodwill amortization expense. Ameristar recorded $0.8 million in goodwill amortization expense ($0.5 million after tax) in the third quarter of 2001, which decreased diluted earnings per share by $0.02 for that quarter.

The number of diluted shares outstanding increased by 15.1 percent from the third quarter of 2001 to the third quarter of 2002, primarily due to the issuance of 4.9 million shares in the Company's December 2001 public equity offering. Among other factors, this increase in outstanding shares affects the comparability of earnings per share between the third quarter of 2001 and the third quarter of 2002.

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