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Argosy Gaming Reports Record Results for Second Quarter

Record Second Quarter Earnings and Revenues:

The Company reported record net income of $13.7 million or $0.47 per diluted share for the second quarter ended June 30, 2001, as compared to $11.9 million or $0.41 per diluted share, before extraordinary and non- recurring charges, for the second quarter ended June 30, 2000. After consideration of these charges, the Company's second quarter 2000 net income was $6.6 million or $0.23 per diluted share. (See Discussion and Analysis -- Extraordinary and non-recurring charges)

Argosy reported second quarter 2001 casino revenues of $166.5 million, reflecting an increase of $1.7 million over the second quarter 2000. Casino revenues increased 6% from $78.6 million to $83.0 million at the western properties (Alton, Riverside, Baton Rouge and Sioux City) and decreased 3% from $86.1 million to $83.5 million at Lawrenceburg, primarily due to new competition that entered the Cincinnati marketplace in October 2000.

The Company reported net income of $28.3 million or $0.97 per diluted share for the six months ended June 30, 2001, as compared to $25.4 million or $0.87 per diluted share, before consideration of the extraordinary and non- recurring items in 2000. After giving effect to the extraordinary and non- recurring items, the Company's net income for the six months ended June 30, 2000 was $20.0 million or $0.69 per diluted share.

For the six months ended June 30, 2001, Argosy reported record casino revenues of $338.3 million, reflecting an increase of $8.0 million over the first six months of 2000. Casino revenues increased 6% from $158.3 million to $167.4 million at the western properties and decreased 1% from $172.0 million to $170.9 million at Lawrenceburg for the six months ended June 30, 2001.

James B. Perry, President and Chief Executive Officer, commenting on the results of the second quarter and six months ended June 30, 2001, said, ``While second quarter and six-month operating results exceeded our expectations and previous guidance, we still anticipate increased competitive pressure in our Kansas City market as two competitors recently completed property renovations.

"Additionally, we expect to experience ongoing competitive pressures at our Lawrenceburg casino as the Cincinnati market continues to absorb another competitor. However, we have not experienced any material effects, either positive or negative, related to general economic conditions.''

Record Second Quarter EBITDA:

Argosy reported EBITDA (earnings before interest, taxes, depreciation and amortization) of $48.2 million for the second quarter 2001, as compared to $47.5 million for the second quarter ended 2000. EBITDA increased at the western properties from $20.7 million to $22.5 million, a 9% increase, and decreased 6% from $32.6 million to $30.7 million at Lawrenceburg, due primarily to decreased casino revenues and increased complimentary admissions related to the new competition in the Cincinnati market.

For the six months ended June 30, 2001, Argosy reported EBITDA of $98.4 million, as compared to $98.2 million in 2000. EBITDA increased 7% from $43.1 million to $46.0 million at the western properties and decreased 4% from $66.8 million to $63.9 million at Lawrenceburg for the six months ended June 30, 2000.

``Second quarter operating margins improved to 25% in Riverside and Sioux City while Alton and Lawrenceburg continued to post strong 36% margins,'' said Mr. Perry. ``In Baton Rouge, margins declined 5% to 20% primarily due to expenses related to the opening of the hotel and a 3% increase in taxes in Louisiana related to the commencement of dockside gaming on April 1, 2001. We anticipate, however, that Baton Rouge revenues and EBITDA margins will benefit from dockside gaming as the year progresses.''

Significant Events

-- Lawrenceburg acquisition: The Company completed the acquisition of its minority partners' interests in the Lawrenceburg Hotel and Casino during the first quarter ended 2001. The second quarter of 2001 reflects 100% ownership of all five of its properties.

-- Empress Casino and Hotel Joliet: The Company announced on April 16, 2001 that it had entered into an agreement to acquire the Empress Casino Joliet for $465 million. Argosy anticipates closing the transaction in the third quarter, subject to receiving all regulatory approvals. Upon completion of the transaction, Argosy expects to hold a conference call for all interested parties to discuss the financial impact of the transaction on its earnings outlook and capital structure. (see Outlook)

Discussion and Analysis:

-- Extraordinary and non-recurring charges: For the quarter and six months ended June 30, 2000, the Company recorded an extraordinary charge of $1.2 million or $0.04 per diluted share related to the redemption of approximately $22.2 million of its 13 1/4% First Mortgage Notes and a non-cash after-tax charge of $4.2 million or $0.14 per diluted share related to the write-down of the original Alton landing facility that is no longer utilized in the Company's operations.

Depreciation and amortization: Depreciation and amortization expense increased $2.0 million to $11.2 million from $9.2 million for the second quarter and increased $3.2 million to $21.2 million from $18.0 million for the six months ended June 30, 2001, due primarily to the goodwill amortization associated with the Lawrenceburg acquisition.

-- Net interest Expense: Net interest expense increased $4.8 million to $13.8 million from $9.0 million for the second quarter and increased $6.6 million to $25.2 million from $18.6 million for the six months ended June 30, 2001, due primarily to additional borrowings used to acquire the Lawrenceburg casino minority interests.

-- Minority Interests: Minority interest expense was $0.0 million for the second quarter ended 2001 as compared to $9.9 million the prior year and decreased to $4.1 million from $20.2 million for the six months ended June 30, 2001, due to the acquisition of the minority partners' interests during the first quarter. The Company no longer incurs any minority interest expense now that it owns 100% of all of its properties.

Outlook:

The Company said that while it anticipates the pending Empress Casino Joliet acquisition will be accretive to both earnings and free cash flow, the actual impact would depend on the closing date of the transaction and other matters. As a result, it is premature at this time to provide guidance for its 2001 and 2002 impact. Argosy said it expects to provide guidance for the balance of 2001 and 2002 when it hosts a conference call for all interested parties approximately one week after closing the transaction.

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