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Argosy Gaming Results Down

4 February 2004

ALTON, Illinois – (Press Release) -- Argosy Gaming Company (NYSE: AGY) today announced its fourth quarter and year-end operating results for the periods ended December 31, 2003. Diluted earnings per share ("Diluted EPS") for the fourth quarter of 2003 were $0.46 on net income of $13.6 million, as compared to Diluted EPS of $0.56 on net income of $16.5 million for the fourth quarter of 2002. The Company attributes substantially all of the decrease in net income to increased gaming and admissions taxes in Illinois.

The Company's full year 2003 diluted EPS was $1.76 on net income of $51.7 million, as compared to $2.43 per share on net income of $71.5 million for 2002. Included in net income for 2003 was a $6.5 million pre-tax charge for the write-down of barge platforms originally intended for use at the Company's Joliet property and a $5.9 million pre-tax charge due to new legislation regarding the calculation of the 2002 increase in Indiana gaming tax rates.

2003 Highlights

"Last year was a good one for the Company, despite the continued challenges presented by the tax environment," said Richard J. Glasier, President and Chief Executive Officer. "The over $150 million in capital projects which we completed have had the positive impact we hoped for, and we look forward to the full-year benefit of these improved facilities in 2004. I'm proud of the extent to which we were able to modify our marketing and operating plans to help offset the increased tax burden, as well as take advantage of dockside gaming in Lawrenceburg."

* All Argosy properties, with the exception of those in Illinois, are currently operating ticket-in/ticket-out ("TITO") slot machines. Approximately half of the Company's total slot machines are currently "TITO" operational, with an additional one quarter "TITO"-ready. The Company said that, pending the timing of approval in Illinois, it still expects to meet its goal of being essentially 100% "TITO" operational by the end of 2004. The Company anticipates implementing "TITO" operations in Illinois by mid-year.

* The Company completed its $6 million expansion of the barge-based facility in Sioux City. The property had a strong performance in the year with net revenues of $41.1 million for a year-over-year increase of 9.0%, while property EBITDA (a non-GAAP measure representing earnings before interest, taxes, depreciation and amortization) increased 19.4% year over year. Sioux City's EBITDA margin (EBITDA as a percent of net revenues) for the year was 28.5%, up from 26.0% in 2002.

* The Company completed its $43 million barge-based casino facility in Joliet, making the property competitive with the other barge-based facilities in the Chicago market. In response to the significant increase in tax rates, management at Empress Casino Joliet focused on the most profitable customer segments. Therefore, the property experienced a decline in net revenues for the year.

* The $105 million casino expansion at the Argosy Casino -- Riverside opened to the public on December 11, just three weeks before the end of the fourth quarter, and the positive impact to revenues was immediate. The Mediterranean-themed facility features a 62,000 square foot casino with state-of-the-art ventilation system, offering 1,750 "TITO" slot machines, and five new or expanded food and beverage operations.

"The opening of our new Kansas City casino could not have gone better," said Glasier. "Throughout the year, the property faced operating disruption due to construction and performed very well under the circumstances. Now that the work is done, the overwhelmingly positive reaction from our guests and the media and the strong revenue figures validate our decision to move forward with the project."

Net revenues for the year were $959.5 million, up from $936.8 million in 2002. Significant factors affecting revenues were a $35.1 million increase in net revenues at the Company's Lawrenceburg property, where dockside gaming was implemented in August 2002, and the decline in net revenues at the Company's Illinois properties.

The $22.7 million increase in net revenues was offset by a $45.4 million increase in gaming and admission taxes incurred by the Company, a $6.5 million write-down mentioned above and a $5.2 million increase in lease payments made to the city of Lawrenceburg. Due to operating efficiencies, the Company was able to limit the decrease in EBITDA to $33.0 million, at $224.5 million for the year, compared to $257.5 million in 2002.

Fourth Quarter 2003 Results

Net revenues for the fourth quarter of 2003 were $231.9 million, up $6.7 million from fourth quarter 2002 net revenues of $225.2 million. Argosy Casino-Lawrenceburg's net revenues of $105.0 million were up significantly, increasing $10.8 million, or 11.5%, versus the same quarter in 2002, primarily due to the enhancement of certain marketing programs and growth in the overall market. Argosy Sioux City also had a strong performance in the quarter, with net revenues of $10.4 million, for a year-over-year increase of 8.9%. At the Argosy Casino - Riverside, the positive impact of opening of the new facility caused net revenues to grow by 7.1% from the same quarter in 2002, to $24.0 million.

In Illinois, both the Empress Casino Joliet and the Alton Belle Casino saw a drop in net revenues as a result of the operational changes deemed necessary by the increase in the Illinois tax rates in July. Net revenues at the Empress Casino Joliet were $49.7 million, down $2.8 million or 5.4%, while at the Alton Belle Casino, which was also impacted by increased competitive pressures from other operators in the St. Louis market, net revenues were $23.0 million, down $3.5 million, or 13.1%.

The Company reported EBITDA of $57.7 million for the fourth quarter 2003, as compared to $61.8 million for the fourth quarter 2002. The $4.1 million decrease is primarily related to a $10.5 million year-over-year increase in gaming and admission taxes, partially offset by the increase in revenues mentioned above. The Company's EBITDA margin for the quarter was 24.9%, down from 27.4% for the same quarter last year. Gaming and admission taxes for the Company for the quarter were 33.5% of net revenues, up from 29.8% in the fourth quarter of 2002.

Of particular note among the properties were the Sioux City and Joliet casinos. The Sioux City property EBITDA increased 33.9% from the fourth quarter of 2002, and the margin for the quarter was 29.8%, up from 2002's 24.3%. At the Empress Casino Joliet, management was able to increase EBITDA $0.7 million, despite a drop in net revenues. As a result, the EBITDA margin at the property increased from 26.8% in the fourth quarter of 2002 to 29.8% in 2003. The Alton Belle Casino, which competes primarily with Missouri-based casinos, was more limited in its ability to offset the Illinois tax increase, and was also impacted by competitive marketing programs by other casinos in the market. EBITDA for the quarter was $5.1 million, and the margin was 22.2%.

"The prudent and intelligent response from our management teams in Illinois after the tax rate changed in July has helped in mitigating the increased gaming taxes," said Glasier. "They have done an outstanding job in a very challenging situation. The task becomes even more challenging in 2004, when the properties will be impacted by the full-year effect of the new tax rates, but I'm confident that we will continue to modify and improve our operations based on the successes we've had so far."

EBITDA at Baton Rouge increased to $4.6 million for the quarter, compared to $4.0 million for the fourth quarter 2002, and the margin improved from 19.8% to 23.3%. In Lawrenceburg, EBITDA dropped from $34.8 million in the fourth quarter 2002 to $32.9 million this quarter, and the margins decreased from 37.0% to 31.4%, as increases in the state and city tax and lease fees more than offset the increase in net revenues. The combined effect of these taxes and fees were 42.2% of property net revenues in the fourth quarter of 2003 as compared to 34.2% in 2002. EBITDA at the Riverside property was $4.0 million as compared to $5.2 million in the fourth quarter of 2002, primarily as a result of construction disruption during the quarter until the new casino opened, as well as increased expenses related to the opening.

"The EBITDA performance at our properties this quarter either met or exceeded our internal expectations, with the exception of Alton," said Glasier. "Operationally, the Company is performing at as high a level as it ever has."

Financial Position

The Company reported that debt decreased from $890.8 million as of December 31, 2002, to $870.2 million as of December 31, 2003. Full-year 2003 capital spending was $136.6 million, which was lower than originally anticipated in part due to the timing of payments for construction at Riverside. The Company anticipates spending approximately $24 million in the first quarter of 2004 for the work at Riverside. Capital spending was also impacted by lower than anticipated expenditures at the corporate level and favorable pricing on purchases of "TITO" slot machines.

Guidance

The Company announced that it expects the following items to impact financial results in 2004:

* The recently opened facility in Kansas City should have a positive impact on revenues as capacity was increased approximately 50%, however the Company expects revenues at its two Illinois properties to decrease during the first half of the year in continued response to the tax environment in Illinois.

* The Company expects that EBITDA margins in 2004 will be similar to 2003 due to increased operating efficiencies offset by an expected increase in Argosy's overall gaming and admission tax rate from 35% of net revenues in 2003 to 39% in 2004.

* Corporate expense should increase approximately 6-8% from 2003 due to development activity expenses, additional staffing in MIS related largely to the Company's expanded data warehouse, and higher insurance costs.

* It is expected that the Company will refinance the outstanding $350 million of 10 3/4% senior subordinated notes due 2009 in the first quarter of 2004. Interest expense is expected to decline accordingly, before taking into consideration an approximately $27 million pre-tax charge in connection with this refinancing.

* Depreciation and amortization expense should rise by approximately $10 million due to the opening of the Joliet and Kansas City projects.

* Maintenance capital spending for 2004 is expected to be in the range of $35 million to $40 million.

* The Company expects to have approximately 29.4 million diluted shares outstanding.

Based on these factors and including the above-mentioned refinancing charge, which is expected to decrease diluted EPS by approximately $0.53, the Company estimates that 2004 diluted EPS will be in the range of $1.62 to $1.72.

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