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Isle of Capri Casinos reports Q2 results

ST. LOUIS, Missouri – (PRESS RELEASE) -- Isle of Capri Casinos, Inc. (Nasdaq: ISLE) today reported financial results for the second quarter ended October 29, 2006. The Company reported a 15.8% increase in net revenues from continuing operations to $243.2 million for the second quarter compared to net revenues from continuing operations of $210.0 million for the same quarter in fiscal 2006. Net loss from continuing operations decreased to $4.2 million or $0.14 per diluted common share, during the second quarter of fiscal 2007 compared to $5.5 million or $0.18 per diluted common share for the second quarter of fiscal 2006. Adjusted EBITDA(1) from continuing operations for the second quarter of fiscal 2007 increased 26.2% to $41.0 million compared to Adjusted EBITDA(1) from continuing operations of $32.5 million for the same quarter in fiscal 2006. Operating results for fiscal 2006 were negatively impacted by Hurricanes Katrina and Rita. During the quarter ended October 29, 2006, the Company recognized a pretax gain of $13.8 million related to the sale of its Isle-Bossier City and Isle-Vicksburg properties. This gain is included in income from discontinued operations and the impact on net income per diluted common share was $0.25 for the three months ended October 29,2006.

For the six months ended October 29, 2006, the Company reported a 14.3% increase in net revenues from continuing operations to $517.2 million, compared to $452.5 million for the comparable period in the prior year. For the first six months of fiscal 2007, the Company reported an increase in income from continuing operations to $1.1 million, or $0.03 per diluted common share. Net loss from continuing operations for the same period in fiscal 2006 was $2.2 million, or $0.07 per diluted common share. Adjusted EBITDA(1) from continuing operations in the six-month period reported a 25.1% increase to $97.9 million, compared to $78.2 million for the comparable six-month period in fiscal 2006. During the six months ended October 29, 2006, the Company recognized a pretax gain of $13.8 million related to the sale of its Isle- Bossier City and Isle-Vicksburg properties. This gain is included in income from discontinued operations and the impact on net income per diluted share was $0.25 for the six months ended October 29, 2006 with the remaining $0.12 coming from the discontinued operations.

For the three and six months ended October 29, 2006 and October 23, 2005, Isle-Bossier City, Isle-Vicksburg and Colorado Grande-Cripple Creek are reflected as discontinued operations. Accordingly, the operating results for these properties are not included in the net revenue, income from continuing operations and Adjusted EBITDA(1) results discussed above. The sale of Isle- Bossier City and Isle-Vicksburg closed on July 31, 2006. Proceeds from the sale were approximately $240.0 million.

"Fiscal 2007 continues to be a transitional year as we concentrate on new development projects, future growth opportunities and long-term strategies. Our portfolio will soon increase by two as we move closer to opening gaming properties in Pompano Beach, Fla. and Waterloo, Iowa bringing the Isle of Capri experience to new markets," Bernard Goldstein, chairman and chief executive officer, said.

Highlights and Updates

-- The Company topped out its slot machine facility at Pompano Park Harness Track in Florida on October 4 and anticipates opening the facility in early 2007 with 1,500 slot machines, a poker room and four restaurants including Bragozzo, an Italian bistro and wine bar created by accomplished chef, Luke Palladino; Farraddays', it's signature steakhouse; a tropical-themed Isle Buffet and a traditional New York Style delicatessen.

-- The Company's new casino property in Waterloo, Iowa was topped out on November 9. The project will include a 35,000 square foot single level casino with 1,300 gaming positions, three restaurants, a 200-room hotel and 1,000 parking spaces. The project scope has recently been expanded and will also include a night club, a full service spa and a resort pool. The project cost has been increased to $175 million and the Company expects to open the casino in late Spring 2007.

-- The $45 million, 250-room Isle of Capri Hotel in Bettendorf, Iowa is on schedule and is expected to open in the Summer of 2007.

-- The Company continues to pursue the one stand-alone slot machine gaming license in Pittsburgh, Pennsylvania. The Company has received master plan approval from the City Planning Commission for its proposed project, and participated in a suitability hearing before the Pennsylvania Gaming Control Board (PGCB). The proposed project, one of three competing proposals before the PGCB, includes a $450 million casino, a $290 million multi-purpose arena, and more than $350 million in residential, office and retail development by Nationwide Realty Investors on the site of the existing Mellon Arena. The Company expects a licensure decision by late-December.

-- The Company announced a revised agreement in connection with resort developer Eighth Wonder's proposal to build an integrated resort complex on Sentosa Island in Singapore. The proposal is one of three bidders for the project with a licensure decision expected in early- December. The revised agreement includes equity ownership in the resort complex by Melco PBL Entertainment, Eighth Wonder and Isle of Capri. If the project is selected, Isle of Capri would own a 13.8 percent interest for an investment of $65 million. Additionally, Isle of Capri will receive a payment equal to 2% of casino gross revenues for a 15-year period.

-- The Company repurchased 255,721 shares of its common stock during the second quarter ended October 29, 2006, at an average price of $21.21 per share.

"Our team is closely monitoring results and managing costs during this transitional year. We are facing some near-term challenges due to increased competition and softness in certain markets that require cost cutting in operational expenses and broadened marketing strategies. As fiscal 2007 moves forward we will continue to face these challenges head-on, elevate our brand offerings and position the Company for future growth and stability," said Tim Hinkley, president and chief operating officer.

Operational Review of the Company's Continuing Operations for the Second Quarter of Fiscal 2007 Compared to the Second Quarter of Fiscal 2006

Operating results for the second quarter of fiscal 2007 include some significant additional expenses as compared to the second quarter of fiscal 2006. These include an increase of approximately $4.5 million in property insurance expense over the prior year's second quarter, for a six-month total increase of $9.0 million over the prior year, which was allocated across all operating properties. This increase is expected to continue through fiscal 2007. The Company also recorded approximately $1.6 million of stock compensation expense in the second quarter of fiscal 2007 related to the adoption of FASB Statement No. 123(revised 2004) "Share-Based Payment" (SFAS 123®). These costs will also be recurring. The Company also recorded approximately $1.7 million of relocation costs related to moving its corporate headquarters to Saint Louis, Missouri. Further office relocation costs will be recorded in the third fiscal quarter of 2007 and will end with the completion of the office relocation. The stock compensation expense and office relocation costs are reflected in the Corporate and other expense line item.

In Mississippi, the Company's three continuing operations contributed 27.6% of net revenues. Isle-Biloxi's net revenues and adjusted EBITDA(1) were up from the prior year period principally due to prior year closure of the property caused by Hurricane Katrina. Adjusted EBITDA(1) at the property was also up significantly over the same quarter in fiscal 2006 due to reduced competition in the market. Isle-Natchez experienced decreases in both net revenues and Adjusted EBITDA(1) primarily resulting from the reopening of the casinos on the Gulf Coast. Isle-Lula's net revenues increased slightly. Adjusted EBITDA(1) at the property increased moderately due to more efficient management of expenses.

In Louisiana, Isle-Lake Charles contributed 16.4% of net revenues. Isle- Lake Charles experienced an increase in net revenues and Adjusted EBITDA(1) as compared to the prior year period, primarily due to the closure of a competitor in the market and the closure of Isle-Lake Charles between September 22, 2005 and October 8, 2005 due to Hurricane Rita.

In Missouri, the Company's two properties contributed 16.5% of net revenues. Isle-Kansas City's net revenues were down due to a decreased gaming patron count attributable to the completion of other expansion projects in the market and increased marketing intensity by competitors. Isle-Boonville's net revenues and Adjusted EBITDA(1) increased due to an increase in marketing efforts and the opening of the new hotel.

In Iowa, the Company's three casinos contributed 19.5% of net revenues. Combined, the Company's two Quad-City properties and Isle-Marquette showed a decrease in both net revenues and Adjusted EBITDA(1) due to increased competition in the key feeder markets.

In Colorado, the Company's two Black Hawk casino operations contributed 16.2% of net revenues. The Black Hawk properties experienced a decrease in net revenues as compared to the prior year period primarily due to the opening of competitors' upgraded facilities. Adjusted EBITDA(1) also decreased primarily due to increased operating costs associated with our expanded facility and marketing expenses associated with the opening of competitors' expansion projects.

New development expenses increased compared to the second quarter of fiscal 2006 primarily due to an increase in expenses related to the pursuit of the gaming license in Pittsburgh, Pennsylvania and costs incurred during the second fiscal quarter of 2007 relating to pursuit of the casino license in Singapore.

The decrease in corporate expenses is primarily due to prior year costs and reserves related to litigation matters and contributions the Company made in the prior year to Isle team member relief funds from Hurricane Katrina.

Preopening cost increased compared to the second quarter of fiscal 2006 primarily due to costs related to our casino developments in Coventry, England, Pompano Beach, Florida and Waterloo, Iowa.

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