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Argosy Gaming Reports Record Fourth Quarter and Year-End Earnings

29 January 2002

ALTON, Illinois –- (Press Release) -- Jan. 29, 2002 -- Argosy Gaming Company (NYSE: AGY) today announced its fourth quarter and year-end operating results for the period ended December 31, 2001.

Record Fourth Quarter:

The Company's fourth quarter 2001 earnings per diluted share increased to $0.70 on net income of $20.7 million, as compared to $0.42 per diluted share on net income of $12.2 million for the fourth quarter of 2000.

Argosy's fourth quarter 2001 casino revenues increased 46% to $229.0 million, an increase of $72.5 million over fourth quarter 2000. The increase in casino revenues is primarily related to the $ 58.5 million generated at the Empress Casino Joliet, which the Company acquired on July 31, 2001. Fourth quarter 2001 casino revenues at Alton, Riverside, Baton Rouge and Sioux City increased a combined 9%, or $7.1 million, and increased 9%, or $7.0 million, at Lawrenceburg notwithstanding new competition that entered the Cincinnati marketplace in October 2000.

The Company's EBITDA, (earnings before interest, taxes, depreciation and amortization) increased to $69.8 million for the fourth quarter 2001, as compared to $46.6 million for the fourth quarter 2000. The increase is primarily related to the Empress Casino Joliet which reported $17.6 million in EBITDA for the fourth quarter 2001. At Lawrenceburg, EBITDA increased 14%, or $4.4 million, to $35.7 million from $31.3 million, and the four other properties' EBITDA increased a combined 7% to $22.4 million from $21.0 million for the fourth quarter 2000.

Argosy's fourth quarter 2001 operating margins increased from 38% to 40% at Lawrenceburg and decreased from a combined 29% to 28% at the Alton, Riverside, Baton Rouge and Sioux City properties. The Empress Casino Joliet reported 31% operating margins for the quarter, up 1% from the first two months of operation under Argosy ownership during the months of August and September 2001.

James B. Perry, President and Chief Executive Officer, commenting on the fourth quarter results said, ``The tragic events of September 11 and the recessionary economic environment had little effect on our local markets. Our fourth quarter casino revenues, assuming we owned the Empress in 2000, were up 7% on a year-over-year basis, despite the casino revenue decline reported in Joliet during October and November related to the opening of a new barge facility by our closest competitor in early October 2001.''

Record Fiscal Year:

The Company's net income was $2.25 per diluted share on net income of $66.1 million for the year ended December 31, 2001, after giving effect to a $1.1 million after-tax charge in the third quarter, as compared to net income of $1.56 per diluted share on net income of $45.4 million for the year ended December 31, 2000, after giving effect to a $1.2 million after-tax extraordinary item and a $4.1 million after-tax write-down of assets.

For the year ended December 31, 2001, Argosy's casino revenues increased 19% to $783.4 million, reflecting an increase of $124.5 million over the year ended 2000. The increase is primarily related to the Empress Casino Joliet, which reported $102.1 million in casino revenues from July 31, 2001 when it was acquired by Argosy. At Lawrenceburg, casino revenues increased $2.4 million to $346.4 million notwithstanding the year-over-year impact of new competition from October 2000. Excluding Joliet and Lawrenceburg, casino revenues increased 6% or $20.0 million to $334.9 million.

The Company's EBITDA for the year ended December 31, 2001 increased $37.9 million to $232.4 million, after giving effect to the pre-tax charge incurred in 2001, and including $30.4 million at Joliet, as compared to $194.5 million in 2000, including non-recurring items. EBITDA was essentially flat at $132.2 million at Lawrenceburg for the year ended 2001, in spite of increased complimentary admissions related to the new competition in the Cincinnati market. EBITDA increased a combined 6% from $86.0 million to $91.5 million at Alton, Riverside, Baton Rouge and Sioux City.

Perry said, ``The ongoing execution of our financial plan and continuing focus on business fundamentals, together with our strategic acquisitions last year, are making a noticeable impact on revenues, earnings and cash flow. Our focus on operations is delivering impressive results -- allowing us to maintain margins and increase shareholder value.''

Argosy said that ranking high among its key operational initiatives for 2002 are the following:

-- Fully implementing its data warehouse to enhance its proven ability to build relationships with customers which will increase the effectiveness of its marketing programs.

-- Expanding its human resources strategy to develop more capable supervisors allowing for a greater span of control and improving workforce productivity.

-- Working toward regulatory approval of cashless slot machines to improve the appeal of its product offering and reduce operating costs.

Legislative Update:

The Company said it is carefully monitoring markets where regulatory activity holds the promise of potential risks and rewards. Many states facing significant budget pressures are considering various gaming related initiatives. Those states of particular interest to the Company are:

-- Indiana, where a Senate committee has proposed to allow for "flexible boarding" -- allowing the riverboat vessels to remain permanently berthed and providing passengers with unlimited ingress and egress. The Governor has proposed a $2.00 increase in boarding fees while the House of Representatives has proposed a $1.00 increase in boarding fees and a 2-1/2% increase in the adjusted gross revenues tax to 22-1/2%.

-- Iowa, where voters in nine counties with riverboat or racetrack casinos will decide if the casinos should continue to operate. A local referendum will be held in November 2002 pursuant to the 1994 state law requiring citizens of the host counties to reaffirm their support for gaming every eight years.

-- Missouri, where the Governor has proposed a repeal of the State's loss limits. The Governor has also proposed a $1.00 increase in boarding fees.

-- Kansas, Kentucky and Ohio, all of which border the Company's operations, where legislative efforts are underway to allow slot machines and/or video gaming machines at parimutual racetracks.

Growth Opportunities:

Mr. Perry stated ``While our performance and results in 2001 have been impressive, we're concentrating on the future and how we will grow the Company over the next three to five years. We intend to drive continued growth in earnings, free cash flow and shareholder value through key operational improvements coupled with an expansion of our current facilities.''

Argosy said it is in the process of obtaining regulatory approval for expansion projects in both Riverside, MO and Joliet, IL. These properties currently compete with barged-based casinos in their respective markets and are top priorities for investment over the next two years. If approved by the various regulatory agencies, Argosy anticipates spending approximately $160 million to $180 million to complete both projects.

The Company said that it plans to finance these potential projects from free cash flow and borrowings under its senior secured credit facility. The Company anticipates expending approximately $40 million to $50 million in 2002 if both projects are approved, with the balance to be spent in 2003. The Company plans to spend approximately $30 million on maintenance capital in 2002.

In Riverside, the Company is looking to replace its current three-level riverboat facility with a single level 58,000 square-foot barge-based facility providing for a 50% increase in gaming positions and a new high limit area. The project would also include the renovation and expansion of the current pavilion to include new dining venues and an expanded buffet and dining room, plus additional surface and VIP parking areas. The Riverside ``Master Plan'' allows for the possibility of a hotel and more garage space to be added at a future date.

Perry said, ``This project will have great customer appeal and will allow us to capture increased market share in a growing market. It also provides the Company an opportunity to maximize revenues if Missouri repeals the $500 loss limit and to confront the possibility of slot or video gaming machines at racetracks being approved in Kansas. While providing many operational cost efficiencies, it also allows us the opportunity to redeploy the current riverboat to another site thereby enhancing revenues and free cash flow at two locations.''

In Joliet, Argosy is looking to replace its two multi-level riverboat casinos with a single-level barge providing for an approximately 75,000 square foot platform. This project would be constructed as a first step in the ``Master Plan'' for the 300 acres available for development at the Empress Casino and Hotel in Joliet. The barge facility, which features expansion capabilities, allows for this asset to be utilized as part of the final site plan.

Perry further said, ``A barge facility in Joliet would have tremendous customer appeal as evidenced by the early success of the barge facility recently opened by our nearest competitor. The facility will also provide numerous operating efficiencies and position the casino for any possible future expansions in the maximum allowed Illinois gaming positions.''

The Company said that if both expansion projects are approved in their currently planned form, it has minimally targeted $35 million of combined EBITDA in their first full year of operations. Argosy said that it expects a 3% to 5% overall growth rate in its markets for 2002 and that EBITDA will grow consistent with the markets. If the markets in which it operates grow to a greater or lesser extent, the Company said its EBITDA will reflect the same fluctuations. For 2002, the Company said that it anticipates it will break even at its Baton Rouge Convention Hotel, as compared to an EBITDA loss of approximately $1.7 million, including pre-opening expenses, in 2001.

Argosy said that it continues to explore opportunities that meet or exceed its financial disciplines. It recently filed a proposal to develop a casino in Barnhart, Missouri located approximately 22 miles south of downtown St. Louis adjacent to Interstate 55. The Company said it may be some months before state regulators reopen the site selection process, and it is premature at this time to determine what, if any, effects the proposal may have on the Company's operations in the future. Argosy said that it is also reviewing potential investment opportunities at racetracks in adjacent states to minimize the risks of new legislation authorizing slot machines and/or video gaming machines at parimutual racetracks.

Capital Structure:

Argosy's debt at year-end was $999.2 million, including $350 million 10-3/4% Senior Subordinated Notes due 2009 and $200 million 9% Senior Subordinated Notes due 2011. Under its senior secured credit facility, the Company has outstanding, $162.2 million under the $400 million revolving portion and $273.6 million under its term loan. Argosy has no off-balance sheet debt.

The Company announced, pursuant to the terms of its senior secured credit facility, it has fixed the interest rate on $200 million of the term loan at approximately 6.25% through September 30, 2004.

Argosy's goodwill amortization for the year ended December 31, 2001 was $7.8 million. The Company said amortization of the remaining book value of goodwill ceased as of January 1, 2002 and will be tested for impairment at least annually pursuant to new guidance issued by the Financial Accounting Standards Board (FASB Statement 142).

Commenting on the Company's debt levels, interest rates, and the proposed projects, Perry said, ``Prudent capital expenditures and lowering our weighted average cost of capital, which have been top priorities of the Company over the last four to five years, continue to be the focus of our financial discipline. These projects and our current capital structure meet or exceed our goals while providing for future growth in revenue and free cash flow.''

Earnings Outlook:

Argosy 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 $0.79 to $0.83 for the quarter ended March 31, 2002. For fiscal year 2002, assuming no material changes in economic conditions, legislative changes, or other events not contemplated above, the Company is currently comfortable in estimating earnings per diluted share of $3.10 to $3.25, representing growth of approximately 38% over 2001. If the Company achieves its estimated earnings per share and EBITDA growth in 2002, free cash flow before project capital would grow by approximately 31% to a range of $4.21 to $4.30 per diluted share.

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