Ameristar takes loss of $57.2 mil. on sale of Reserve

Monday, Nov. 20, 2000 | 11:26 a.m.

Ameristar Casinos Inc. of Las Vegas said Friday it will take a non-cash charge of $57.2 million on its sale of the Reserve hotel-casino, causing the company to post a heavy loss for the quarter ending Sept. 30.

The loss from the sale of the Reserve to Station Casinos Inc. resulted in a net loss of $36.9 million, or $1.81 per share, for the quarter, compared to net income of $287,000, or 1 cent per share, in the year-ago quarter. The non-cash charge reduced Ameristar's income taxes by $20 million in the quarter.

Without the Reserve loss, Ameristar's earnings would have been flat.

Ameristar is selling the long-struggling Reserve to Station in a deal related to Ameristar's pending purchase of Station's Kansas City and St. Charles, Mo., riverboats. Ameristar plans to pay $475 million for the two riverboats, and will sell the Reserve for $70 million. The $57.2 million loss represents the difference between the book value of the Reserve on Ameristar's balance sheet and the $70 million sale price.

Ameristar said it has arranged $875 million in financing commitments from Deutsche Bank AG to finance the purchase of the boats and to refinance its existing debt.

Though the Reserve has struggled since its February 1998 opening, Ameristar said net revenues at the property rose 23 percent during the Sept. 30 quarter to $16 million, while cash flow improved from $16,000 in the year-ago quarter to $952,000 in the most recent quarter. Ameristar attributed the gains to "strategies to drive revenues and gain market share."

Net revenues for the company rose 12 percent to $86.6 million, a record for the company, while cash flow was up 16 percent to $15.1 million. Cash flow figures do not include the loss on the sale of the Reserve.

Higher revenues and cash flow were primarily driven by stronger performances at the company's properties in Council Bluffs, Iowa, Vicksburg, Miss., and Jackpot, Nev. Cash flow rose 4 percent to $5.3 million in Vicksburg, rose 5 percent to $8 million at Council Bluffs, and shot up 22 percent in Jackpot to $4.5 million.

Both the Council Bluffs and Vicksburg properties were expanded since the September 1999 quarter. Jackpot's higher numbers were driven by slot technology upgrades and new marketing efforts, Ameristar said.