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Argosy Gaming Reports 'Best Ever' Third Quarter

24 October 2001

ALTON, Illinois – (Press Release) -- Argosy Gaming Company (NYSE: AGY) today announced its best ever third quarter operating results for the period ended September 30, 2001.

Record Third Quarter

Argosy reported a 38% increase in third quarter earnings per diluted share to $0.62 on net income of $18.3 million for the three months ended September 30, 2001, as compared to net income of $0.45 per diluted share on net income of $13.1 million for the third quarter ended September 30, 2000.

Earnings for 2001 are presented before giving effect to a $1.9 million pre-tax charge related to the Company's previously announced plans to abandoned a joint-venture development project in Kenosha, Wisconsin. After consideration of the charge, the Company's third quarter 2001 net income was $0.58 per diluted share on net income of $17.2 million.

The Company reported third quarter 2001 casino revenues of $216.1 million, an increase of $43.9 million over third quarter 2000. The increase in casino revenues is primarily related to the Empress Casino Joliet acquisition on July 31, 2001. The Empress Casino Joliet reported $43.6 million in casino revenue for the months of August and September, the first two months under Argosy ownership.

Casino revenues increased a combined 5% or $3.8 million at Alton, Riverside, Baton Rouge and Sioux City, and decreased 4% or $3.5 million at Lawrenceburg, primarily due to new competition that entered the Cincinnati marketplace in October 2000.

The Company reported EBITDA (earnings before interest, taxes, depreciation and amortization) of $64.2 million for the third quarter 2001, before giving effect to the $1.9 million pre-tax charge, as compared to $49.6 million for the third quarter ended 2000.

The Empress Casino Joliet reported EBITDA of $12.7 million for its first two months under Argosy ownership. Excluding the Joliet and Lawrenceburg properties, EBITDA increased 5% from $22.0 million to $23.2 million. At Lawrenceburg, EBITDA decreased 7% from $34.9 million to $32.6 million due primarily to decreased casino revenues and increased complimentary admissions related to the new competition in the Cincinnati market.

The Company reported that third quarter 2001 operating margins were consistent with the prior year margins of a combined 28% for the Alton, Riverside, Baton Rouge and Sioux City properties and 36% for Lawrenceburg. The Empress Casino Joliet reported 30% operating margins for its first two months of operation under Argosy ownership.

James B. Perry, President and Chief Executive Officer, commented, ``We have already begun to achieve the cash flow diversification we had been seeking in acquiring the Empress Casino Joliet. In its first two months under Argosy ownership, the Joliet casino contributed 19% of our total property EBITDA for the full quarter while Lawrenceburg contributed 48%, as compared to 61% the prior year.''

The Company reported net income of $1.59 per diluted share on net income of $46.5 million for the nine months ended September 30, 2001, before giving effect to the $1.9 million pre-tax charge, representing a 35% increase over the $1.18 per diluted share on net income of $34.3 million, before consideration of an extraordinary item incurred in 2000. After giving effect to the non-recurring charge and extraordinary item, respectively, the Company's net income for the nine months ended September 30, 2001 was $1.55 per diluted share on net income of $45.4 million, as compared to $1.14 per diluted share on net income of $33.2 million for the period ended September 30, 2000.

For the nine months ended September 30, 2001, Argosy reported casino revenues of $554.4 million, reflecting an increase of $52.0 million over the first nine months of 2000, including the previously discussed $43.6 million at Joliet. Excluding Joliet and Lawrenceburg, casino revenues increased 5% from $239.4 million to $252.3 million. At Lawrenceburg, casino revenues decreased 2% from $263.0 million to $258.5 million primarily due to new competition.

For the first nine months of 2001, Argosy reported EBITDA of $162.6 million, including $12.7 million for Joliet, before giving effect to the $1.9 million pre-tax charge, as compared to $147.8 million in 2000, excluding non-recurring items. EBITDA increased a combined 6% from $65.1 million to $69.2 million at Alton, Riverside, Baton Rouge and Sioux City, and decreased 5% from $101.8 million to $96.5 million at Lawrenceburg for the nine months ended September 30, 2001.

Mr. Perry said, ``Our 2001 earnings and free cash flow have been greatly enhanced over 2000 as a result of our two immediately accretive strategic acquisitions. The acquisition of the Empress Casino Joliet in July, as well as the acquisition of our minority partners' interests in Lawrenceburg in the first quarter, will continue to drive growth in both earnings and free cash flow throughout the next year.''

``Additionally,'' said Perry, ``we see further potential growth in earnings, free cash flow and shareholder value, driven by an expansion of our current facilities and through a combination of continued operational enhancements coupled with technology that will help build a sustainable competitive advantage in our markets. We are in the process of reviewing potential expansion projects at several locations, including gaming barges in Kansas City and Joliet.''

The Company said that it implemented a human resources strategy two years ago that has resulted in a reduction of payroll costs as a percentage of revenue and increased customer satisfaction. This strategy will be further enhanced next year as the Company refines its focus on activities to attract, motivate and retain service-oriented employees as well as to increase productivity.

During 2001, we have been developing a data warehouse that we plan to fully implement during 2002. The Company expects to begin seeing the benefits of this effort in the latter half of next year when it will use the data warehouse to allocate marketing budgets more efficiently, generate new business and increase market share.

Finally, the Company said that it is currently laying the foundation for a move toward the use of cashless slot machines that it expects to begin implementing over the next 18 months. The introduction of this new gaming equipment will increase customer satisfaction and provide operational efficiencies that will increase productivity. The Company expects this new gaming equipment to begin to benefit revenue and earnings growth in 2003.

The Company said that it believes the events that occurred on September 11, 2001 will have less impact on its local markets business model than they will have on fly-in destination casino markets. However, Argosy said further weakening in general economic conditions could impact its markets.

Based upon its analysis of the best information currently available, there does not appear to be a clear industry consensus on the general economic outlook for 2002 and beyond. Argosy, however, believes that while customers will continue to seek entertainment value at their local casinos, they may have smaller entertainment budgets. Therefore, the numbers of patrons visiting casinos may remain stable or even increase while the revenue per patron could decrease.

The Company said that it doesn't foresee any changes to the competitive landscape in Alton, Baton Rouge or Sioux City next year. However, the Kansas City market will continue to absorb the impact of two competitors who recently completed significant property renovations. Argosy is now the only operator utilizing a three-level riverboat while all competitors are operating barge facilities. In Joliet, the Company anticipates increased competition as its closest competitor recently converted from two multi-level riverboat facilities to a barge facility. Although our Lawrenceburg casino's year-over-year operating results have been impacted by the opening of a new competitor in late 2000, the Company anticipates year-over-year improvements in casino revenue beginning in the first quarter 2002 as the market has absorbed the new competition.

The Company said that in view of the above factors and its previously mentioned growth drivers, it is currently comfortable in estimating earnings on a diluted basis of $0.48 to $0.52 for the quarter ended December 31, 2001. For fiscal year 2002, taking into account the full year impact of our two acquisitions and assuming no material changes in economic conditions or other events not contemplated above, the Company is currently comfortable in estimating earnings per diluted share of $2.90 to $3.05, representing growth of approximately 40% over 2001. If the Company achieves its estimated earnings per share growth in 2002, free cash flow would grow by approximately 28% to approximately $3.85 to $4.00 per diluted share.

Argosy will host a conference call for interested parties on October 24, 2001, at 9:30 a.m. CST to review its third quarter financial results. For those interested in participating in the call, please dial (203) 748-8964 ten to fifteen minutes prior to the call start time. A telephonic replay of the conference call will be made available through November 3, 2001 and can be accessed by dialing (402) 220-0684. The call will also be broadcast live via the Internet and may be accessed through our web site at www.argosycasinos.com or through www.prnewswire.com . A simulcast of the web cast will be made available through November 3, 2001 and can be accessed through our web site: www.argosycasinos.com or through www.prnewswire.com .

Argosy is a leading multi-jurisdictional owner and operator of riverboat casinos and related entertainment and hotel facilities in the midwestern and southern United States. Argosy, through its subsidiaries, owns and operates the Alton Belle Casino in Alton, Illinois, serving the St. Louis metropolitan market; the Argosy Casino in Riverside, Missouri, serving the greater Kansas City metropolitan market; the Argosy Casino-Baton Rouge in Louisiana; the Belle of Sioux City in Iowa; the Empress Casino and Hotel in Joliet, Illinois, serving the greater Chicagoland market; and the Argosy Casino & Hotel in Lawrenceburg, Indiana, serving the Cincinnati and Dayton metropolitan markets. Argosy was named ``Company of the Year'' at the Gaming Industry Annual Awards ceremony in October 2000.

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