Horseshoe Gaming Completes Empress Joliet Casino Sale, Reports Profit for Second Quarter

2 August 2001

In addition, the Company reported an 8 percent increase in second quarter 2001 net income to $22.5 million as compared to $20.8 million for the second quarter of 2000. Second quarter net revenues increased 7 percent to $262.0 million, from $244.5 million in 2000.

Consolidated earnings before interest, taxes, depreciation, amortization and certain other items decreased 3 percent to $63.9 million for the quarter ended June 30, 2001 as compared to $65.6 million for the comparable period in 2000. EBITDA is calculated by adding depreciation and amortization, deferred compensation and other non-recurring items to income from operations.

The Company considers EBITDA to be a widely accepted financial indicator of a company's ability to service debt, fund capital expenditures and expand its business. EBITDA, however, is not calculated in the same way by all companies and is neither a measure required, nor represents cash flow from operations as defined by generally accepted accounting principles. EBITDA should not be considered by an investor as an alternative to net income, as an indicator of operating performance or as an alternative to cash flow as a measure of liquidity.

For the six months ended June 30, 2001, the Company reported net income, net revenues and EBITDA of $47.8 million, $525.5 million, and $132.2 million, respectively, as compared to $41.3 million, $494.4 million, and $138.8 million, respectively, in the comparable period in 2000.

Net revenues in Bossier City decreased 7 percent in the second quarter of 2001 as compared to the prior year, primarily due to an additional competitor in the Bossier City/Shreveport market which caused decreases in slot and table volume, coupled with reduced hold percentages for both slots and table games.

EBITDA before corporate expenses and non-recurring items in Bossier City decreased 31 percent in the second quarter of 2001 as compared to the second quarter of 2000. Bossier City's EBITDA margin before corporate expenses and non-recurring items was 21 percent, compared to 28 percent in the comparable year-earlier period. The decreased margins in 2001 are primarily due to increased marketing expenses related to additional competition in the market and the additional 1 percent gaming tax effective April 1, 2001. Gaming taxes will increase an additional 1 percent on April 1, 2002 and a final increase of 1 percent on April 1, 2003 based upon a bill passed by the Louisiana Legislature in March 2001.

Tunica reported an increase in net revenues of 6 percent in the quarter ended June 30, 2001 as compared to the comparable period in the prior year. The increase was primarily the result of a reduction in the amount of promotional costs incurred for player database marketing, as well as both volume and hold percentage increases in slots and table games during the quarter.

EBITDA before corporate expenses and non-recurring items in Tunica increased 3 percent for the quarter ended June 30, 2001 as compared to the prior year period. Tunica's EBITDA margin before corporate expenses and non-recurring items was 35 percent for the quarter ended June 30, 2001, as compared to 36 percent in the comparable year-earlier period. Margins were slightly lower in Tunica in the 2001 period due to the recently opened expansion, including staffing, utilities and higher cost of sales for food and beverage items related to the enlarged buffet and the new gourmet restaurant.

Net revenues in Hammond increased 15 percent in the second quarter of 2001 as compared to the prior year. This increase is primarily attributable to higher volumes in both slots and table games, which were slightly offset by a decrease in hold percentages in slots.

EBITDA before corporate expenses and non-recurring items in Hammond decreased 3 percent in the second quarter of 2001 as compared to the prior year. Hammond's EBITDA margin before corporate expenses and non-recurring items was 21 percent in the second quarter of 2001 as compared to 25 percent in the comparable year-earlier period.

During the second quarter of 2001, the Company continued to invest significant resources in the Hammond facility in order to increase the service standard at that property as it geared up for the second quarter conversion to the Horseshoe brand. Hammond was also affected by continued construction disruption in the pavilion area during the second quarter of 2001 prior to the conversion to the Horseshoe brand. EBITDA for the second quarter of 2001 does not include $3.2 million of pre-opening costs related to the conversion.

Joliet reported net revenues which increased 16 percent in the second quarter of 2001 as compared to the second quarter of 2000. This increase is largely attributable to an increase in the slot hold percentage along with smaller increases in slot and table games volumes, offset by a decrease in the table games hold percentage.

EBITDA before corporate expenses and non-recurring items in Joliet increased 15 percent in the second quarter of 2001 as compared to the prior year. Joliet's EBITDA margin before corporate expenses and non-recurring items was unchanged at 30 percent for both the second quarter of 2001 and 2000. During the quarter, Joliet incurred significant direct mail expense related to the cash offers included in several of its promotions.