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Argosy Reports Mixed Results

In June of 2002, the legislatures in Indiana and Illinois changed the gaming and admission tax rates for casino operators, effective July 1, 2002. In states where Argosy is subject to graduated tax rates or city lease fees, the Company records these costs over the course of the year based upon management's best estimate of the annualized effective rates for its properties. Gaming and admission taxes are included in the operating expenses of each affected property.

The effect of the increased gaming tax rates in Illinois and Indiana during the first six months of 2002 was $17.0 million, and was expensed in the second quarter of 2002. This increase brought the effective gaming and admission tax rate for the second quarter 2002 to approximately 34.9% of casino revenues. In June of 2003, the Illinois legislature raised gaming and admission tax rates again. In the second quarter of 2003, the Company recorded the impact for the first six months of the year, a total of $6.2 million, bringing the effective gaming and admission tax rate for the quarter to 37.9%, including the $5.9 million for Indiana taxes mentioned above. The Company expects the effective gaming and admission tax rate for full year 2003 to be approximately 35.5%, as compared to 30.7% for full year 2002.

Net income for the six months ended June 30, 2003, was $21.6 million ($0.74 Diluted EPS) on net revenues of $484.7 million, compared to net income of $36.0 million ($1.22 Diluted EPS) on net revenues of $475.1 million for the same period in 2002. The six-month results are impacted by the same items described above for the quarterly results. For the six month period ended June 30, 2003, the $5.9 million expense for the Indiana tax rate increase and the $6.5 million asset writedown reduced the Diluted EPS by $0.26 per share.

Net revenues for the second quarter of 2003 were $248.3 million, up 6.4% from second quarter 2002 net revenues of $233.4 million. The Company's Lawrenceburg property continued to benefit from the implementation of dockside operations last August and a refined marketing program, resulting in a 15.0% increase in net revenues versus the same quarter in 2002. Net revenues for the Empress Casino Joliet were up 2.6% as a result of the opening of the property's barge-based casino facility in mid-May. Daily win per unit at the Empress Casino Joliet increased more than 30% between the last two weeks of April and the first two weeks of June. Net revenues for the Company's other properties were essentially flat on a combined basis.

The Company reported EBITDA (earnings before interest, taxes, depreciation and amortization) of $45.5 million for the second quarter 2003, as compared to $54.3 million for the second quarter 2002. The decrease is primarily related to year-over-year increases in gaming and admission tax rates, as well as the asset writedown. The operating margin (EBITDA as a percent of net revenues) for the quarter was 18.3%, down from 23.3% for the same quarter last year. In terms of property performance (i.e., excluding all gaming and admission taxes and the impact of the asset writedown in the quarter), the Company's operating margin improved by approximately one percentage point.

"The operational results at our properties this quarter has been outstanding," said Richard J. Glasier, President and Chief Executive Officer. "Our continued focus on our strengths in the locals casino market is more important than ever in today's environment, and I'm very pleased that this strategy has been so effective. Unfortunately, our operating successes this quarter have been offset by the gaming tax situation in Illinois."

Capital Structure

Capital spending during the quarter ending June 30, 2003, was approximately $35 million, and was primarily incurred to construct the Company's expansion projects in Joliet and Riverside. Construction on the Joliet barge was completed in mid-May, at a total cost of approximately $42 million. The transition from the two existing boats to the new barge took place with virtually no disruption in operations.

"Our new casino in Joliet has achieved everything we had hoped for operationally," said Glasier. "The facility offers a much improved gaming experience for our guests, and the impact has been dramatic. The property saw an immediate increase in both admissions and win per unit, as we regained share in the Chicago market. Our success on this project makes us even more confident about our investment in Riverside."

Construction at the Company's Riverside expansion project, which includes construction of a new casino barge facility and a renovation of the pavilion, is proceeding on schedule and on budget. When completed, the $105 million project will provide for a 50% increase in gaming capacity and increased parking facilities. The Company recently completed a new buffet area in May, and expects to have the entire project completed near the end of the year. The Company is currently the only casino operator in the Kansas City market that operates from a multi-level riverboat.

Argosy expects to spend approximately $80 million to $90 million in capital in the last half of the year, for a full year total of $150 million to $160 million, primarily on the Riverside project, as well as on continuing the transition to Ticket In/Ticket Out ("TITO") slot machines at its properties. The Company has an objective of operating exclusively with TITO machines by the end of 2004.

Due to the cash flow from the properties' strong operating performance, the Company reported that debt was down from $893.1 million as of March 31, 2003, to $876.7 million as of June 30, 2003. Of that amount, $46.5 million was outstanding under the revolving portion of its senior secured credit facility, as compared to $61.7 million at March 31, 2003.

Illinois Update

In response to the enactment of legislation that substantially increased gaming and admission taxes at casinos in Illinois, the Company has developed a strategy to minimize the impact of the tax increase to shareholders. As a result, the Company anticipates taking several operational actions at the Company's Alton and Joliet properties. These actions could include reducing and refocusing the amount spent on marketing, adjusting hours of restaurant operations and pricing for the properties' food and beverage operations, implementing admission fees at the Joliet property, reducing the number of participation games and table games while increasing the number of slot machines and reducing the hours of casino operations to benefit from a corresponding decline in operational costs. Through these actions, the Company hopes to partially offset the impact of the increased tax burden. The ability to achieve this objective will be highly dependent on the competitive environment and customer response.

Argosy Gaming Company is a leading owner and operator of riverboat casinos and related entertainment and hotel facilities in the midwestern and southern United States. Argosy owns and operates the Alton Belle Casino in Alton, Illinois, serving the St. Louis metropolitan market; the Argosy Casino- Riverside in Missouri, serving the greater Kansas City metropolitan market; the Argosy Casino-Baton Rouge in Louisiana; the Argosy Casino-Sioux City in Iowa; the Argosy Casino-Lawrenceburg in Indiana, serving the Cincinnati and Dayton metropolitan markets; and the Empress Casino Joliet in Illinois serving the greater Chicagoland market.

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