AGY Argosy Gaming

Argosy Gaming Company Reports Third Quarter 2004 Earnings ALTON, Ill., Oct. 27 /PRNewswire-FirstCall/ -- Argosy Gaming Company (NYSE:AGY) today announced third quarter results for the period ended September 30, 2004. Diluted earnings per share ("Diluted EPS") were $0.71 on net income of $21.1 million, as compared to Diluted EPS of $0.56 on net income of $16.5 million for the third quarter of 2003. Included in the quarterly results for the third quarter of 2004 is a gain of $3.2 million pre-tax, or approximately $0.06 per diluted share, from the sale of one of the boats that operated at the Company's Joliet property prior to the addition of the current barge-based facility. In previously issued guidance, the Company anticipated incurring a $0.11 charge in the third quarter related to the recent refinancing of its senior credit facility. However, the charge was not incurred, as the ultimate structure of the refinancing requires that the associated fees be amortized over the life of the amended facility instead of being expensed currently. Net income for the nine months ended September 30, 2004, was $43.7 million ($1.47 EPS) on net revenues of $785.1 million, compared to net income of $38.1 million ($1.30 EPS) on net revenues of $727.6 million for the same period in 2003. For the nine-month period ended September 30, 2003, a $5.9 million charge due to new legislation regarding the calculation of the 2002 increase in Indiana gaming tax rates and a $6.5 million write-down of barge platforms originally intended for use at the Company's Joliet property reduced EPS by $0.26 per share. For the nine-month period ended September 30, 2004, results were positively impacted by the $0.06 per share gain on the sale of the Joliet boat, but were negatively impacted by $0.52 per share in expenses related to the refinancing of the Company's 10 3/4% notes in February. Third Quarter Results Net revenues for the third quarter of 2004 were $266.5 million, up 9.7% from third quarter 2003 net revenues of $242.9 million. Each of the Company's properties reported higher net revenues in the third quarter of 2004 than in the same quarter of 2003. Argosy Casino-Riverside achieved a 53.3% increase in net revenues versus the same quarter in 2003, improving from $22.7 million to $34.8 million, and in line with its capacity increase due to the opening of its new casino in December 2003. In Sioux City, net revenues increased 22.6%, from $10.2 million in 2003 to $12.5 million in 2004. In September, the first full month of operations from the larger riverboat previously used in Riverside, casino revenues in Sioux City increased 48% on a 28% increase in capacity. At the Company's Lawrenceburg property net revenues increased $7.7 million, or 7.1%, to $115.5 million from $107.8 million in the third quarter of 2003. The Company reported EBITDA (earnings before interest, taxes, depreciation and amortization) of $71.6 million for the third quarter 2004, as compared to $63.1 million for the third quarter 2003. The $8.5 million increase is primarily related to the successful expansion of the Company's Riverside casino and improved operational performance at most of the Company's properties. EBITDA margin (EBITDA as a percent of net revenues) improved from the same quarter last year at every property except for the Company's two Illinois casinos, excluding Joliet's boat sale. Company-wide, EBITDA margin for the quarter was 26.9%, up from 26.0% for the same quarter last year. The Company's effective gaming and admission tax rate (gaming and admission taxes as a percent of net revenues) increased 2.0 percentage points, from 33.8% in the third quarter of 2003 to 35.8% this quarter. The gain from the sale of the boat in Joliet had a positive impact on the consolidated EBITDA margin of 1.2 percentage points. "Higher revenues and improved margins are a strong testament to the great job done by our management teams," said Richard J. Glasier, President and CEO of Argosy Gaming Company. "I'm very pleased with our results this quarter, particularly in light of the tough tax environment in Illinois and the highly competitive nature of some of the markets we operate in." The Company reported a reduction in debt from $847.1 million as of June 30, 2004 to $805.3 million as of September 30, 2004. As a result of the reduction in debt and a lower effective interest rate, net interest expense dropped from $19.0 million in the third quarter of 2003 to $15.6 million in the current quarter. On September 30, 2004 Argosy completed a refinancing of its Revolving Credit and Term Loan B facilities. The existing Credit Agreement, which consisted of a $400 million revolver and $275 million term loan B, was amended and restated to permit a $500 million revolver and $175 million term loan B. The new facility reduces the interest rate on the term loan B from LIBOR plus 225 basis points to LIBOR plus 175 basis points. The interest rate for LIBOR-based loans under the new facility for the revolver dropped by approximately 88 basis points. Argosy spent $14.0 million in capital during the quarter ended September 30, 2004 of which approximately half was for maintenance capital and half for project capital at the Sioux City and Riverside properties. The Argosy IV riverboat, which was previously used in Riverside, went into service in Sioux City on September 1, 2004, with 125 more slot machines and six additional gaming tables. The Sioux City expansion project, which also included enhanced parking and a new live entertainment venue, was completed on budget at a cost of approximately $8 million. At Riverside, work has begun on the construction of a 1,400-space garage to replace the existing 800-space facility. Completion is expected at the end of August of 2005. The $75 million project also includes the construction of a hotel with approximately 250 rooms that is expected to be completed near the end of 2006. Argosy continues to evaluate alternative expansion projects at Lawrenceburg and expects to finalize its decision by year-end 2004. The Company expects capital expenditures for the fourth quarter of 2004 to be in the range of $15 million to $20 million, of which $10 million to $12 million will be for project capital, and the remainder for maintenance capital. "Argosy's new casino at Riverside is still growing the Kansas City market, and the transfer of the Riverside boat to Sioux City has created a lot of excitement in the market," said Glasier. "Our investments at these properties have given us very solid returns. We're looking forward to continued growth with our expansion projects in Riverside and Lawrenceburg." In October 2004, the Company entered into a contract to purchase Raceway Park in Toledo, Ohio for approximately $20 million, subject to various conditions including regulatory approval. The purchase also includes an off-track wagering facility in Sandusky, Ohio. Guidance Argosy expects reported full-year 2004 EPS in the range of $1.95 - $2.00. Included in the estimate are $0.52 in costs associated with refinancing the Company's senior subordinated notes in February and the $0.06 gain from the sale of the Joliet boat. Argosy will host a conference call for interested parties on October 27, 2004, at 11:00 a.m. EDT to review its third quarter financial results. For those interested in participating in the call, please dial (706) 634-1306 and reference conference ID #1541464 ten to fifteen minutes prior to the call start time. The call will also be broadcast live via the Internet and may be accessed through our web site at http://www.argosycasinos.com/ . A simulcast of the web cast will be made available through November 3, 2004 and can be accessed through our web site: http://www.argosycasinos.com/ . Argosy Gaming Company is a leading owner and operator of casinos and related entertainment and hotel facilities in the midwestern and southern United States. Argosy owns and operates the Alton Belle Casino in Alton, Illinois, serving the St. Louis metropolitan market; the Argosy Casino-Riverside in Missouri, serving the greater Kansas City metropolitan market; the Argosy Casino-Baton Rouge in Louisiana; the Argosy Casino-Sioux City in Iowa; the Argosy Casino-Lawrenceburg in Indiana, serving the Cincinnati and Dayton metropolitan markets; and the Empress Casino Joliet in Illinois serving the greater Chicagoland market. This press release contains statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as the Company or its management "believes," "anticipates," "expects," "forecasts," "estimates," "foresees," or other words or phrases of similar import. Similarly, such statements herein that describe the Company's business outlook, objectives, strategy, intentions or goals are also forward-looking statements. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected, including but not limited to: -- competitive and general economic conditions in the markets in which the Company operates, including locations of competitors and legalization of gaming in new jurisdictions; -- construction factors relating to the Company's expansion projects, including delays, zoning issues, environmental restrictions, weather and other hazards, site access matters and building permit issues; -- the ability to effectively implement operational changes at the Company's properties; -- litigation outcomes and judicial actions, including gaming legislative action, referenda and taxation; -- the effect of economic, credit and capital market conditions on the economy in general, and on gaming companies in particular; -- changes in laws (including increased tax rates), regulations or accounting standards; -- the effect of future legislation or regulatory changes on the Company's operations (including legalization of gaming in new jurisdictions); -- other risks and uncertainties detailed from time to time in the Company's filings with the Securities and Exchange Commission. -Tables Follow- ARGOSY GAMING COMPANY CONSOLIDATED STATEMENTS OF INCOME (In Thousands, Except Per Share Data) Three Months Ended Nine Months Ended September September September September 30, 30, 30, 30, 2004 2003 2004 2003 (unaudited) (unaudited) (unaudited) (unaudited) Revenues: Casino $271,204 $245,928 $795,424 $738,938 Admissions 5,829 4,594 16,540 10,761 Food, beverage and other 26,828 24,270 79,246 74,023 303,861 274,792 891,210 823,722 Less promotional allowances (37,373) (31,854) (106,069) (96,107) Net revenues 266,488 242,938 785,141 727,615 Costs and expenses: Gaming and admission taxes 95,442 82,125 277,033 257,448 Casino 30,660 32,499 94,413 99,873 Selling, general and administrative 42,153 37,412 124,254 112,682 Food, beverage and other 19,304 17,394 56,626 52,953 Other operating expenses 10,449 10,420 30,047 31,305 Depreciation and amortization 16,504 13,235 45,577 38,757 Gain on sale of assets (3,155) - (3,155) - Write down of assets - - - 6,500 211,357 193,085 624,795 599,518 Income from operations 55,131 49,853 160,346 128,097 Other income (expense): Interest income 65 20 104 106 Interest expense (15,680) (19,054) (50,325) (56,990) Expense on early retirement of debt - - (26,040) - (15,615) (19,034) (76,261) (56,884) Income before income taxes 39,516 30,819 84,085 71,213 Income tax expense (18,376) (14,330) (40,402) (33,114) Net income $21,140 $16,489 $43,683 $38,099 Basic income per share $0.72 $0.56 $1.48 $1.31 Diluted income per share $0.71 $0.56 $1.47 $1.30 Weighted average shares outstanding: Basic 29,475,631 29,230,951 29,421,578 29,095,635 Diluted 29,658,326 29,428,042 29,634,103 29,339,888 ARGOSY GAMING COMPANY AND SUBSIDIARIES SELECTED FINANCIAL INFORMATION SUMMARY OPERATING DATA (In Thousands) Three Months Ended Nine Months Ended September September September September 30, 30, 30, 30, 2004 2003 2004 2003 (unaudited)(unaudited)(unaudited)(unaudited) Casino Revenues Alton Belle Casino $27,774 $26,778 $80,861 $85,364 Argosy Casino - Riverside 35,980 23,453 111,181 71,569 Argosy Casino - Baton Rouge 20,109 20,109 62,743 60,598 Argosy Casino - Sioux City 12,914 10,515 35,997 31,684 Argosy Casino - Lawrenceburg 115,358 106,817 335,031 307,014 Empress Casino Joliet 59,069 58,256 169,611 182,709 Total $271,204 $245,928 $795,424 $738,938 Net Revenues Alton Belle Casino $26,433 $25,583 $77,067 $81,718 Argosy Casino - Riverside 34,847 22,724 108,603 68,738 Argosy Casino - Baton Rouge 20,533 20,358 64,389 62,160 Argosy Casino - Sioux City 12,497 10,190 34,878 30,765 Argosy Casino - Lawrenceburg 115,504 107,805 336,486 310,228 Empress Casino Joliet 56,674 56,278 163,718 174,006 Total $266,488 $242,938 $785,141 $727,615 Income (loss) from operations Alton Belle Casino $3,009 $3,694 $8,593 $13,027 Argosy Casino - Riverside 6,208 3,814 23,713 11,216 Argosy Casino - Baton Rouge 1,809 1,226 7,239 4,215 Argosy Casino - Sioux City 3,055 1,748 8,267 5,338 Argosy Casino - Lawrenceburg 34,530 32,302 101,368 82,733 Empress Casino Joliet (4) 14,259 12,802 33,672 29,020 Corporate (7,739) (5,733) (22,506) (17,452) Total $55,131 $49,853 $160,346 $128,097 ARGOSY GAMING COMPANY AND SUBSIDIARIES SELECTED FINANCIAL INFORMATION RECONCILIATION OF NET INCOME TO EBITDA (1) (In Thousands, unaudited) Three months ended Three months ended September 30, 2004 September 30, 2003 Net income $21,140 $16,489 Income tax expense 18,376 14,330 Interest expense, net 15,615 19,034 Depreciation and amortization expense: Alton Belle Casino 1,746 1,598 Argosy Casino - Riverside 4,355 1,479 Argosy Casino - Baton Rouge 2,178 2,282 Argosy Casino - Sioux City 786 1,119 Argosy Casino - Lawrenceburg 3,585 3,216 Empress Casino Joliet 3,212 2,986 Corporate (3) 642 555 Total 16,504 16,504 13,235 13,235 EBITDA (1): Alton Belle Casino 4,755 5,292 Argosy Casino - Riverside 10,563 5,293 Argosy Casino - Baton Rouge 3,987 3,508 Argosy Casino - Sioux City 3,841 2,867 Argosy Casino - Lawrenceburg 38,115 35,518 Empress Casino Joliet (4) 17,471 15,788 Corporate (3) (7,097) (5,178) Total $71,635 $71,635 $63,088 $63,088 ARGOSY GAMING COMPANY AND SUBSIDIARIES SELECTED FINANCIAL INFORMATION RECONCILIATION OF NET INCOME TO EBITDA (1) (In Thousands, unaudited) Nine months ended Nine months ended September 30, 2004 September 30, 2003 Net income (2) $43,683 $38,099 Income tax expense 40,402 33,114 Interest expense, net 50,221 56,884 Depreciation and amortization expense: Alton Belle Casino 4,906 5,009 Argosy Casino - Riverside 9,404 4,297 Argosy Casino - Baton Rouge 6,683 6,514 Argosy Casino - Sioux City 2,506 3,306 Argosy Casino - Lawrenceburg 10,580 9,710 Empress Casino Joliet 9,599 8,319 Corporate (3) 1,899 1,602 Total 45,577 45,577 38,757 38,757 EBITDA (1): Alton Belle Casino 13,499 18,036 Argosy Casino - Riverside 33,117 15,513 Argosy Casino - Baton Rouge 13,922 10,729 Argosy Casino - Sioux City 10,773 8,644 Argosy Casino - Lawrenceburg 111,948 92,443 Empress Casino Joliet (4) 43,271 37,339 Corporate (2)(3) (46,647) (15,850) Total $179,883 $179,883 $166,854 $166,854 ARGOSY GAMING COMPANY NOTES TO SELECTED FINANCIAL INFORMATION (in thousands) (1) "EBITDA" represents earnings before interest, taxes, depreciation and amortization. EBITDA is presented solely as a supplemental disclosure because management believes it is 1) a widely used measure of operating performance in the gaming industry, 2) a principal basis for valuation of gaming companies and 3) is used as a basis for determining compliance with our credit facility. Management uses property-level EBITDA (EBITDA before corporate expense) and EBITDA margin (EBITDA as a percent of net revenues) as the primary measures of our properties' performance, including the evaluation and compensation of operating personnel. EBITDA should not be construed as an alternative to GAAP-based financial measures such as operating income, an indicator of our operating performance, or cash flows from operating activities, a measure of our liquidity. We have significant uses of cash flows, including capital expenditures, interest payments, taxes and debt principal repayments, which are not reflected in EBITDA. We believe the performance of our operating units is more appropriately measured before these expenses, since the allocation of our capital is decided by corporate management and is subject to the approval of the board of directors. In addition, we manage cash and finance our operations at the consolidated level and we file a consolidated income tax return. We do not consider EBITDA in isolation. Our calculation of EBITDA may not be comparable to similarly titled measures reported by other companies. (2) Includes $26,040 of pre-tax expense on early retirement of debt for the nine months ended September 30, 2004. (3) Because we do not include corporate expense in our computation, property-level EBITDA does not reflect all the costs of operating the properties as if each were a stand-alone business unit. Corporate expense includes significant expenses necessary to manage a multiple casino operation, certain of which, such as corporate executive compensation, development, public company reporting, treasury, accounting, legal and tax expenses, would also be required of a typical stand-alone casino property. (4) Included for the three and nine months ended September 30, 2004 is a gain of $3,155 on the sale of an asset held for sale. Included for the nine months ended September 30, 2003 is a $6,500 write-down of assets related to assets previously held for future development. ARGOSY GAMING COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share and Per Share Data) September 30, December 31, 2004 2003 Current assets: (unaudited) Cash and cash equivalents $63,829 $67,205 Accounts receivable, net 3,693 4,292 Income taxes receivable - 1,015 Deferred income taxes 12,001 13,295 Other current assets 10,665 7,196 Total current assets 90,188 93,003 Net property and equipment 548,684 548,120 Other assets: Deferred finance costs, net 20,230 16,748 Goodwill, net 727,470 727,470 Intangible assets, net 24,338 26,092 Other 4,652 439 Total other assets 776,690 770,749 Total assets $1,415,562 $1,411,872 Current liabilities: Accounts payable $14,579 $26,955 Accrued payroll and related expenses 24,323 24,125 Accrued gaming and admission taxes 20,117 14,486 Other accrued liabilities 69,439 70,070 Accrued interest 6,594 9,296 Income taxes payable 9,762 - Current maturities of long-term debt 2,526 4,648 Total current liabilities 147,340 149,580 Long-term debt 802,751 865,510 Deferred income taxes 112,145 93,119 Other long-term obligations 1,211 419 Stockholders' equity: Common stock, $.01 par; 120,000,000 shares authorized; 29,479,267 and 29,314,542 shares issued and outstanding at September 30, 2004 and December 31, 2003, respectively 295 293 Capital in excess of par 95,796 92,551 Accumulated other comprehensive loss - (1,941) Retained earnings 256,024 212,341 Total stockholders' equity 352,115 303,244 Total liabilities and stockholders' equity $1,415,562 $1,411,872 DATASOURCE: Argosy Gaming Company CONTACT: Jim Wise, media inquiries, +1-618-474-7476, or Erin Williams, investor relations, +1-618-474-7465, both of Argosy Gaming Company Web site: http://www.argosycasinos.com/

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