Isle of Capri Casinos Q2 Results Down

18 November 2002

During the second quarter, Isle of Capri Casinos posted net revenues of $260.1 million, compared to $260.5 million for the same period in fiscal 2002. Earnings before interest, taxes, depreciation and amortization (EBITDA), as adjusted for certain items, decreased 9% to $53.7 million, compared to last year's second quarter. EBITDA is considered a key measure of the company's operating cash flow.

For the first six months of fiscal 2003, Isle of Capri Casinos reported net income of $20.1 million, or $0.66 per diluted share. This compares to net income for the prior year's period of $16.3 million, or $0.55 per diluted share.

Net revenue for the first six months of fiscal 2003 was $536.8 million, up from $523.4 million for the comparable period in the previous year. EBITDA, as adjusted for certain items, in the six-month period was $114.6 million, an increase of $3.7 million, or 3%, over the prior year six-month period EBITDA of $110.9 million.

Second Quarter Results

Operating results for the second quarter ended October 27, 2002 reflected the inclusion of operations of the Isle-Boonville (opened December 2001) offset by a leveling off in visits to the company's properties due to overall economic conditions, combined with a series of severe weather disruptions, including Hurricane Lily and tropical storms Hannah, Fay and Isidore, affecting Isle of Capri Louisiana and Mississippi Gulf Coast properties and feeder markets.

The second quarter was marked by a number of significant financial and operating highlights. These were: a further reduction of the company's debt level; increases in customer play at Isle of Capri Casino properties due to the company's Island Gold Card and Isle Miles marketing programs; divestiture of the Tunica, Miss. property on October 7, 2002 and Las Vegas on October 30, 2002, three days after the quarter's end; and commencement of construction of a 265-room hotel at Isle of Capri Casinos' Bossier City, La. property.

Bernard Goldstein, Isle of Capri Casinos, Inc.'s chairman and chief executive officer, said: "The company made strides in several areas this quarter, despite facing many challenges outside of our control, including increased competition in some of our markets. One highlight was the beginning of the expansion and improvement plan for some of our existing properties, demonstrating our disciplined approach to growing our product."

The company reduced its total debt by $14.4 million during the second quarter, which was in line with our expectations. In the last twelve months ended October 27, 2002, total debt, net of total cash, has been reduced by approximately $87.0 million. This reduction in debt contributed to the second quarter $2.4 million reduction of interest expense to prior year. For the last twelve months ended October 27, 2002, the company continued to achieve its goal of having its ratio debt to EBITDA, as adjusted, at four times and the coverage ratio of EBITDA, as adjusted, to cash interest at 3.0 times for the company and its restricted subsidiaries.

Island Gold Card members' contribution to revenue increased 9.1% during the quarter, compared to prior year indicating the increased play from members of the company's players' club, which awards members with bonuses, complimentaries and other premiums.

In addition, the company's deferred-reward portion of its Island Gold players' club, "Isle Miles," more than doubled its enrollment during the quarter, with these participants increasing their revenue contributions for the quarter by 13.5% as compared to the prior year.

The Isle began the implementation of One Team Member at a Time, the company's branded employee mentoring program designed to reduce turnover and increase customer satisfaction. As well, we completed our Power to Please program empowering every staff member, from CEO to frontline employee, with the tools to resolve customer concerns immediately.

Completion of the sale of casinos in Tunica in the second quarter and Las Vegas in the third quarter will eliminate further losses at those properties. The company closed the Tunica casino on September 3, 2002, which was 33 days prior to the sale; however, the company continued to incur operating expenses up until the sale date.

Construction work for the expansion of the Bossier City, La. hotel and casino began during the second quarter and will include a hotel tower, with 265 rooms, a Kitt's Kitchen restaurant, a new pool and deck, and a 12,000- square-foot convention/entertainment center. Completion of the approximately $50 million expansion is expected during the spring of 2004.

John M. Gallaway, president and chief operating officer said, "The current economy, road construction disruption and severe weather we experienced in our markets produced results below prior year. However, we were able to continue our goal of paying down debt while not wavering from our commitment to providing a fun experience for our customers."