2007 Annual Report - Ameristar Casinos, Inc.

In December 2000, we assumed several agreements with the Missouri 210 Highway TransportationDevelopment District (“Development District”) that had been entered into in order to assist the DevelopmentDistrict in the financing of a highway improvement project in the area around the Ameristar Kansas City propertyprior to our purchase of that property. In order to pay for the highway improvement project, the DevelopmentDistrict issued revenue bonds totaling $9.0 million in principal amount with scheduled maturities from 2006 through2011. We have issued an irrevocable standby letter of credit with a bank in support of obligations of theDevelopment District for certain principal and interest on the revenue bonds. The amount outstanding under thisletter of credit was $2.6 million as of December 31, 2007 and may be subsequently reduced as principal and interestmature under the revenue bonds. Additionally, we are obligated to pay any shortfall in the event that amounts ondeposit are insufficient to cover the obligations under the bonds as well as any costs incurred by the DevelopmentDistrict that are not payable from the taxed revenues used to satisfy the bondholders. Through December 31, 2007,we had paid $2.1 million in shortfalls and other costs. As required by the agreements, we anticipate that we will bereimbursed by the Development District for these shortfall payments from future available cash flow, as defined,and have recorded a corresponding receivable as of December 31, 2007.At December 31, 2007, we had outstanding letters of credit in the amount of $5.4 million, which reduced theamount available to borrow under our revolving loan facility. We do not have any other guarantees, contingentcommitments or other material liabilities that are not reflected on our consolidated balance sheets. For moreinformation, see “Note 5 - Long-term debt” of Notes to Consolidated Financial Statements.Critical Accounting Policies and EstimatesManagement’s discussion and analysis of our results of operations and liquidity and capital resources are basedon our consolidated financial statements. To prepare our consolidated financial statements in accordance withaccounting principles generally accepted in the United States, we must make estimates and assumptions that affectthe amounts reported in the consolidated financial statements. We regularly evaluate these estimates andassumptions, particularly in areas we consider to be critical accounting estimates, where changes in the estimatesand assumptions could have a material impact on our results of operations, financial position and, generally to alesser extent, cash flows. Senior management and the Audit Committee of our Board of Directors have reviewed thedisclosures included herein about our critical accounting estimates, and have reviewed the processes to determinethose estimates.Property and EquipmentWe have significant capital invested in our property and equipment, which represents approximately 84% of ourtotal assets. Judgments are made in determining the estimated useful lives of assets, salvage values to be assigned toassets and if or when an asset has been impaired. The accuracy of these estimates affects the amount of depreciationexpense recognized in our financial results and the extent to which we have a gain or loss on the disposal of theasset. We assign lives to our assets based on our standard policy, which we believe is representative of the useful lifeof each category of assets. We review the carrying value of our property and equipment whenever events andcircumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cashflows expected to result from its use and eventual disposition. The factors we consider in performing this assessmentinclude current operating results, trends and prospects, as well as the effect of obsolescence, demand, competitionand other economic factors.Goodwill and Other Intangible AssetsAt December 31, 2007, we had approximately $338.0 million in goodwill and $232.6 million in other intangibleassets on our consolidated balance sheet resulting from our acquisition of Resorts East Chicago in September 2007and the Missouri properties in December 2000. As required by Statement of Financial Accounting Standards(“SFAS”) No. 142, we completed our 2007 annual assessment for impairment and determined that no goodwillimpairment existed. The assessment requires the use of estimates about future operating results of each reportingunit to determine its estimated fair value. Changes in forecasted operations can materially affect these estimates.50