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Majestic Star reports results

LAS VEGAS, Nevada -- (PRESS RELEASE) -- The Majestic Star Casino, LLC today released financial results for the three- and nine-month periods ended September 30, 2006. The Majestic Star Casino, LLC and its subsidiaries (collectively, the "Company" or "Majestic") operate two adjacent dockside gaming facilities ("Majestic Star" and "Majestic Star II") supported by a pavilion containing restaurants and a lounge ("BHR" and together with Majestic Star and Majestic Star II the "Majestic Properties") located in Gary, Indiana, and two Fitzgeralds brand casinos located in Tunica, Mississippi ("Fitzgeralds Tunica") and Black Hawk, Colorado ("Fitzgeralds Black Hawk").

Consolidated Results: Three-Month Period Ended September 30, 2006

The Company's net revenues for the three-month period ended September 30, 2006 were $86.4 million, an increase of $21.7 million, or 33.4%, from the same period in 2005. Casino revenues increased $25.4 million, or 36.5%, to $94.8 million. The increase in net revenues and casino revenues is primarily due to the acquisition of Majestic Star II and its interests in BHR and Buffington Harbor Parking Association ("BHPA") (together "the Acquired Entities"). The Acquired Entities contributed net revenues and casino revenues of $25.6 million and $28.5 million, respectively. Majestic Star had declines in net revenues and casino revenues of $5.2 million and $4.6 million, respectively, during the three months ended September 30, 2006 as compared to the same period in 2005. During the third quarter, promotional allowances, which are deducted from gross revenues to arrive at net revenues, increased to $17.3 million from $11.7 million in the same quarter last year. The increase in promotional allowances is due to the acquisition of Majestic Star II and greater levels of promotional and complimentary activities at Majestic Star and Fitzgeralds Tunica. At the Majestic Properties, promotional and complimentary expenses increased as management attempted to improve the level of gaming play of existing customers and to reintroduce our gaming facilities to customers that patronized the Majestic Properties prior to the acquisition and integration of Trump Indiana. At Fitzgeralds Tunica, promotional and complimentary expenses increased as part of the repositioning of the property to attract a higher worth gaming customer and to remain competitive with the marketing and promotions of other gaming properties in the Tunica market.

The Company expects to report a net loss of $5.8 million compared to a net loss of $0.1 million for the same period in 2005. The $5.7 million increase in net loss for the three months ended September 30, 2006 was mainly due to lower net revenues at Majestic Star, lower than anticipated revenues at the Acquired Entities and an increase in interest expense of $7.6 million resulting from the long-term debt incurred to finance the purchase of the Acquired Entities. The increase in interest expense was partially offset by a one-time property tax credit in the amount of $1.1 million at the Majestic Properties.

For the three-month period ended September 30, 2006, adjusted EBITDA was $17.1 million, compared to adjusted EBITDA of $13.4 million in the same period last year, an increase of $3.7 million, or 28.2%. The Majestic Properties contributed $2.8 million to the increase. At Fitzgeralds Tunica and Fitzgerald Black Hawk adjusted EBITDA increased $0.6 million and $0.3 million, respectively, from the prior year. Adjusted EBITDA is defined as EBITDA (earnings before interest, taxes, depreciation, amortization, and other non-operating expenses, which is primarily non-usage fees on the credit facility) adjusted for the loss on investment in BHR (which is depreciation expense and applicable in the three- and nine-month periods ended September 30, 2005), and certain non-recurring charges as identified in the table at the end of this press release, which reconciles net income (loss) to EBITDA and adjusted EBITDA. See the detailed explanation below as to the usefulness and limitations of using EBITDA and adjusted EBITDA as financial measures and a reconciliation of net income (loss) to EBITDA and adjusted EBITDA.

Consolidated Results: Nine-Month Period Ended September 30, 2006

The Company's net revenues for the nine-month period ended September 30, 2006 were $271.9 million, an increase of $77.2 million, or 39.7%, from the same period in 2005. Casino revenues increased $79.8 million, or 38.2%, to $288.7 million. The increase is primarily due to the Acquired Entities, which contributed net revenues and casino revenues of $85.0 million and $88.7 million, respectively. Majestic Star had declines in net revenues and casino revenues of $9.3 million and $11.7 million, respectively, during the nine months ended September 30, 2006 as compared to the same period in 2005.

For the nine-month period ended September 30, 2006, the Company expects to report a net loss of $4.8 million as compared to a net loss of $0.7 million for the same period in 2005. The $4.1 million increase in net loss for the nine months ended September 30, 2006 is principally due to lower net revenues at Majestic Star, lower than anticipated revenues at the Acquired Properties and an increase in interest expense of $22.7 million due to our higher levels of debt. As mentioned in the three-month discussion, the Company is recognizing a $1.1 million one-time property tax savings. Negatively impacting net income during the nine months ended September 30, 2005 was a $2.3 million charge resulting from the termination of the sale of Fitzgeralds Black Hawk and $1.5 million of catch-up depreciation and amortization that had been suspended when the related assets were classified as held for sale.

For the nine-month period ended September 30, 2006, adjusted EBITDA was $63.4 million, compared to adjusted EBITDA of $42.2 million in the same period last year, an increase of $21.2 million, or 50.2%. The Majestic Properties contributed $22.9 million of the increase. Adjusted EBITDA at Fitzgeralds Tunica and Fitzgeralds Black Hawk decreased $0.6 million and $0.5 million, respectively, from the prior year. During the nine months ended September 30, 2006 as compared to the same period in 2005, corporate expenses, exclusive of the $2.3 million charge related to the termination of the Fitzgeralds Black Hawk sale, increased $0.7 million primarily due to increases in payroll. Higher corporate expenses negatively impacted the Company's adjusted EBITDA.

Total cash and cash equivalents at September 30, 2006 was $26.8 million as compared to $32.4 million at December 31, 2005. Total debt outstanding at September 30, 2006 was $576.1 million compared to $592.9 million at December 31, 2005. The Company had $53.8 million available on its $80.0 million credit facility at September 30, 2006.

Majestic Star/Majestic Star II/BHR/BHPA ("Majestic Properties")

The Majestic Properties' net revenues increased from $34.7 million in the third quarter of 2005 to $55.0 million in the third quarter of 2006, and from $105.0 million in the nine-month period ended September 30, 2005 to $180.6 million in the same period in 2006. These increases in net revenues were due to increases in casino revenues of $23.9 million, or 63.3%, to $61.6 million for the third quarter of 2006 and $76.9 million, or 67.6%, to $190.8 million for the nine months ended September 30, 2006. These increases were due to the Acquired Entities.

Adjusted EBIDTA increased in the three- and nine-month periods ended September 30, 2006 from $6.8 million and $21.8 million, respectively, to $9.5 million and $44.8 million, respectively, principally due to the Acquired Entities. The adjusted EBITDA margin declined from 19.5% in the third quarter of 2005 to 17.3% in the third quarter of 2006. A significant portion of this decline resulted from increases in marketing and promotions (which while impacting net revenues also contributed to our lower adjusted EBITDA). During the third quarter of 2006, management increased marketing and promotional expenses by $5.9 million, or 82.1%, over the second quarter 2006. The Majestic Properties also incurred $0.5 million of greater payroll expenses in the third quarter as compared to the second quarter, as changes were made in management, and staff was added to improve casino operations and guest service. The adjusted EBITDA margins for the nine months ended September 30, 2006 and 2005 were 24.8% and 20.8%, respectively.

Fitzgeralds Tunica

Fitzgeralds Tunica's net revenues increased from $20.8 million in the third quarter of 2005 to $22.4 million in the third quarter of 2006 and from $62.8 million in the nine-month period ended September 30, 2005 to $65.4 million in the same period in 2006. These increases in net revenues were due to increases in casino revenues, which increased from $21.9 million in the third quarter of 2005 to $23.7 million for the third quarter of 2006 and from $66.2 million to $70.0 million for the nine months ended September 30, 2006 compared to the same period in 2005.

EBITDA for the three months ended September 30, 2006 increased to $5.6 million from $5.0 million in the year earlier period. In the nine-month period ended September 30, 2006, EBITDA was $15.5 million as compared to $16.1 million in the same period last year. For the three months ended September 30, 2006 as compared to the year earlier period, the EBITDA margin increased from 24.0% to 25.0%, and for the nine months ended September 30, 2006 as compared to the same period in 2005, the EBITDA margin declined from 25.6% to 23.7%. The increase in EBITDA and the EBITDA margin in the third quarter of 2006 reflects management's efforts to reposition the property and expand its offerings to higher value gaming customers. For the quarter, volumes were up significantly. Table game drop increased 68.9% in the third quarter of 2006 from the same quarter last year. Slot coin-in increased 3.4% in the three months ended September 30, 2006 compared to last year.

Fitzgeralds Black Hawk

Fitzgeralds Black Hawk's net revenues were down $0.3 million to $8.9 million and down $1.0 million to $25.9 million during the three- and nine-month periods ended September 30, 2006 and 2005, respectively. These declines in net revenues directly resulted from declines in casino revenue of $0.3 million and $0.9 million in the third quarter and nine months ended September 30, 2006, respectively. The lower levels of casino revenue in the three- and nine-month periods ended September 30, 2006 compared to the year earlier periods were caused primarily by declines in slot handle of 9.5% and 6.2%, respectively, offset by increases in slot win percentages of 6.8% and 3.5%, respectively. The decline in slot handle is directly related to the expansion, new amenities and greater levels of marketing at competitors.

In the third quarter of 2006, EBITDA increased $0.3 million to $3.2 million from the year earlier period. EBITDA declined to $8.1 million in the nine-month period ended September 30, 2006 from $8.6 million in the previous year same period. Negatively impacting Fitzgerald Black Hawk's performance during the quarter and year ended September 30, 2005 was the closure of the main highway from Denver to Black Hawk from June 21 to September 12, 2005 due to a major landslide. EBITDA margins for the three- and nine-month periods of 2006 were 36.2% and 31.3%, respectively, and 32.2% and 32.1%, respectively, for the year earlier periods.

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