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Horseshoe Gaming Holding Corp. Reports Q3 Earnings

The Company's third quarter revenues increased 111 percent to $260.8 million as compared to $123.6 million in the third quarter of 1999. Earnings before interest, taxes, depreciation, amortization and certain other items (``EBITDA'') was $60.4 million for the three months ended September 30, 2000 versus $33.4 million for the comparable period in 1999.

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 nine months ended September 30, 2000, the Company reported revenues of $773.5 million as compared to $363.7 million in the comparable period in 1999 and reported EBITDA of $199.9 million versus $101.7 million in the first nine months of 1999.

Horseshoe Tunica reported an increase in net revenues of 6 percent for the three months ended September 30, 2000, as compared to the comparable period in the prior year. Slot volumes coupled with an increase in the slot hold percentage contributed to the revenue increase for the quarter.

EBITDA before corporate expenses at the Tunica property increased 12 percent for the three months ended September 30, 2000, as compared to the three months ended September 30, 1999. Horseshoe Tunica's EBITDA margin before corporate expenses was 34 percent for the three months ended September 30, 2000, as compared to 32 percent in the comparable year-earlier period.

The expansion of Horseshoe Tunica's current operating facilities is on schedule and expected to be completed late in the fourth quarter of 2000. The property is increasing its total gaming space by approximately 21,000 square feet and adding approximately 500 additional slot machines and approximately 10 table games. In addition, the expanded facility will include a new 625-seat buffet and an Asian restaurant. The total projected cost is approximately $40 million and is being funded through operating cash flow. The additional space should enable Horseshoe Tunica to take full advantage of peak business periods when the property historically has operated at maximum capacity.

Horseshoe Bossier City reported that net revenues increased 11 percent in the three months ended September 30, 2000 as compared to the comparable period in the prior year. Slot volume continues to be the driving force behind these revenue increases.

EBITDA before corporate expenses at the Bossier City property increased 22 percent for the three months ended September 30, 2000, as compared to the three months ended September 30, 1999. Horseshoe Bossier City's EBITDA margin before corporate expenses was 28 percent for the three months ended September 30, 2000, compared to 25 percent in the comparable year-earlier period. The increased margins in 2000 are primarily due to net revenue increases.

As previously stated, on December 1, 1999, the Company completed its acquisition of the operating subsidiaries of Empress Entertainment, Inc. The prior year information listed below was obtained from Empress Entertainment, Inc. and is presented for informational purposes only.

Net revenues increased 7 percent and 4 percent at Empress Joliet and Empress Hammond, respectively, in the third quarter of 2000 as compared to the comparable period in 1999, however, EBITDA margins at both properties have been affected by additional expenditures necessary to increase the operating and service standards to a level more consistent with the Company's expectations.

OTHER ITEMS Corporate expenses for the third quarter of 2000 were $15.2 million as compared to $2.0 million in the third quarter of 1999. In addition to increased costs related to the expansion of the corporate staff to accommodate the Empress acquisition and increased legal and professional fees primarily related to regulatory matters in Illinois, the Company also recorded $8.1 million in other charges. These charges include $3.1 million for benefits and severance related to certain current and former executives and $5.0 million of contributions to the MBE Incubator Fund, Inc. (the ``Incubator Fund''). The main purpose of the Incubator Fund is to assist and foster minority owned business enterprises located in Illinois, Indiana, Louisiana and Mississippi, which provide goods and services to the casino industry. To date, the Company has contributed $6.0 million in total to the Incubator Fund.

Deferred compensation expense decreased $3.0 million in the third quarter of 2000 as compared to the same period in the prior year resulting in income of $3.0 million for the quarter. This is a result of the decrease in valuation of the Company's stock which is a function of the Company's EBITDA and debt as applied to EBITDA multiples of other publicly traded gaming companies.

The increase in consolidated depreciation and amortization expense of $10.5 million in the third quarter of 2000 as compared to the year-earlier period is primarily attributable to both depreciation of the two new properties and the amortization of the goodwill associated with the Empress acquisition.

During the third quarter of 2000, the Company recorded $25.4 million of additional goodwill relating to further allocations of the purchase price of the Empress properties to the tangible and intangible assets acquired and liabilities assumed. The goodwill is being amortized over 25 years from the date of acquisition.

Interest expense increased $5.3 million in the third quarter of 2000 as compared to the comparable period in the prior year due to increased borrowings necessary to fund the Empress acquisition. During the third quarter, the Company capitalized $0.6 million in interest expense from the ongoing expansion of its Tunica property.

During the third quarter of 2000, the Company sold a riverboat held for sale which had previously been written down to $1.0 million. A gain on the sale of $1.6 million was recorded in the third quarter of 2000.

As previously reported, on July 19, 2000, the Company received a Notice of Denial of License Renewal from the Illinois Gaming Board (``IGB'') related to the Empress Joliet' property. The Company is appealing the decision of the IGB. During the appeal process, the Company continues to operate Empress Joliet in a business as usual manner.

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