AGY Argosy Gaming

ALTON, Ill., Aug. 2 /PRNewswire-FirstCall/ -- Argosy Gaming Company (NYSE:AGY) today announced results for the three months ended June 30, 2005. Diluted earnings per share ("EPS") were $0.73 on net income of $21.7 million, as compared to EPS of $0.63 on net income of $18.6 million for the second quarter of 2004. In the second quarter of 2004, Argosy and the City of Lawrenceburg entered into an agreement whereby by making a substantial capital investment at its Lawrenceburg property, Argosy would receive a reduction in its payments to the city by five million dollars annually for ten years. In addition to reflecting the impact of this credit for the relevant quarter, the second quarter of 2004 also includes a $1.25 million credit, or $0.02 per share, for the first quarter of 2004. The results of the second quarter of 2004 also include expenses of approximately $0.02 per share associated with the refinancing of the Company's 10 3/4% notes due 2009. On November 3, 2004, Argosy entered into a definitive merger agreement with Penn National Gaming, Inc. under which all outstanding shares of Argosy are to be acquired for $47 per share. Included in the results of the second quarter of 2005 are $0.02 per share of expenses associated with the proposed merger. Net revenues for the second quarter of 2005 were $270.9 million, up 6.4% from second quarter 2004 net revenues of $254.6 million. EBITDA (earnings before interest, taxes, depreciation and amortization) increased to $68.7 million for the second quarter 2005, as compared to $66.2 million for the second quarter 2004. At Argosy Casino Baton Rouge, net revenues increased 21%, from $21.5 million to $26.1 million, and EBITDA increased 35%, from $5.0 million to $6.8 million, in the second quarters of 2004 and 2005 respectively, in part due to visitors to the city for a bowling conference that concluded July 4. In Sioux City, net revenues improved 24% and EBITDA increased 27% from the second quarter of 2004 to the same period of 2005 due to the addition of the renovated boat formally used at the Company's Riverside property. Net revenues for the property were $13.7 million and EBITDA was $4.3 million in the second quarter of 2005, up from net revenues of $11.0 million and EBITDA of $3.4 million in the second quarter of 2004. The Company's EBITDA margin (EBITDA as a percent of net revenues) was 25.4% for the second quarter of 2005, as compared to 26.0% for the same quarter in 2004. Interest expense for the second quarter of 2005 was $14.3 million as compared to $16.6 million for the second quarter of 2004. The reduction in interest expense was predominantly the result of a lower effective interest rate for the Company following a refinancing of the Company's $675 million Revolving Credit Facility and Term Loan B in September of 2004 and a lower outstanding balance on the Term Loan B. For the six months ended June 30, 2005, net income was $43.0 million ($1.44 EPS) on net revenues of $541.9 million, compared to net income of $22.5 million ($0.76 EPS) on net revenues of $518.7 million for the same period in 2004. For the six-month period ended June 30, 2004, results were negatively impacted by $0.52 per share in expenses related to the refinancing of the Company's 10 3/4% notes. Included in the six-month period ended June 30, 2005 were expenses related to the merger with Penn that negatively impacted results for the six months by $0.07. Argosy reported that debt decreased from $803.2 million as of March 31, 2005 to $764.6 million as of June 30, 2005. The Company spent $9.4 million in maintenance capital in the second quarter of 2005, for a total of $17.7 million for the first six months of the year. Project capital for the second quarter of 2005 was $13.5 million, predominantly for the work on the replacement garage and new hotel at the Company's Riverside property. Pursuant to the merger agreement between Argosy and Penn, Argosy has agreed not to provide any guidance concerning its expected earnings or other performance. The transaction is still subject to certain regulatory approvals, and is expected to close in the third quarter of 2005. 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 Argosy Casino-Alton in 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, judicial actions and gaming legislative or regulatory agency actions (including obtaining the requisite approval of regulatory authorities for the proposed merger between Argosy and Penn National Gaming); -- 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 Six Months Ended June 30, June 30, June 30, June 30, 2005 2004 2005 2004 (unaudited) (unaudited) (unaudited) (unaudited) Revenues: Casino $274,192 $258,213 $549,175 $524,220 Admissions 5,113 5,351 10,642 10,711 Food, beverage and other 28,590 25,958 56,888 52,418 307,895 289,522 616,705 587,349 Less promotional allowances (37,002) (34,958) (74,795) (68,696) Net revenues 270,893 254,564 541,910 518,653 Costs and expenses: Gaming and admission taxes 96,007 90,013 191,833 181,591 Casino 30,875 31,179 62,406 63,753 Selling, general and administrative 44,438 37,925 88,604 82,101 Food, beverage and other 20,528 18,721 40,661 37,322 Other operating expenses 10,317 9,735 21,055 19,598 Depreciation and amortization 14,783 14,848 30,409 29,073 216,948 202,421 434,968 413,438 Income from operations 53,945 52,143 106,942 105,215 Other income (expense): Interest income 99 18 177 39 Interest expense (14,298) (16,594) (28,951) (34,645) Expense on early retirement of debt - (763) - (26,040) (14,199) (17,339) (28,774) (60,646) Income before income taxes 39,746 34,804 78,168 44,569 Income tax expense (18,087) (16,221) (35,185) (22,026) Net income $21,659 $18,583 $42,983 $22,543 Basic income per share $0.73 $0.63 $1.45 $0.77 Diluted income per share $0.73 $0.63 $1.44 $0.76 Weighted average shares outstanding: Basic 29,582,119 29,442,736 29,569,146 29,394,255 Diluted 29,873,947 29,666,772 29,865,111 29,629,305 ARGOSY GAMING COMPANY AND SUBSIDIARIES SELECTED FINANCIAL INFORMATION SUMMARY OPERATING DATA (In Thousands) Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2005 2004 2005 2004 (unaudited)(unaudited)(unaudited)(unaudited) Casino Revenues Argosy Casino - Alton $28,022 $25,901 $56,328 $53,087 Argosy Casino - Riverside 38,229 36,963 78,016 75,201 Argosy Casino - Baton Rouge 23,506 20,939 48,027 42,634 Argosy Casino - Sioux City 14,241 11,397 27,987 23,083 Argosy Casino - Lawrenceburg 112,000 107,671 224,371 219,673 Empress Casino Joliet 58,194 55,342 114,446 110,542 Total $274,192 $258,213 $549,175 $524,220 Net Revenues Argosy Casino - Alton $26,621 $24,590 $53,830 $50,634 Argosy Casino - Riverside 35,661 35,826 72,752 73,756 Argosy Casino - Baton Rouge 26,071 21,505 52,435 43,856 Argosy Casino - Sioux City 13,700 11,035 26,938 22,381 Argosy Casino - Lawrenceburg 111,932 108,049 224,627 220,982 Empress Casino Joliet 56,908 53,559 111,328 107,044 Total $270,893 $254,564 $541,910 $518,653 Income (loss) from operations Argosy Casino - Alton $3,469 $2,426 $8,043 $5,584 Argosy Casino - Riverside 7,099 8,121 15,024 17,505 Argosy Casino - Baton Rouge 4,266 2,805 8,869 5,430 Argosy Casino - Sioux City 3,323 2,793 6,587 5,212 Argosy Casino - Lawrenceburg 33,182 33,722 66,394 66,838 Empress Casino Joliet 11,823 9,058 22,360 19,413 Corporate (9,217) (6,782) (20,335) (14,767) Total $53,945 $52,143 $106,942 $105,215 ARGOSY GAMING COMPANY AND SUBSIDIARIES SELECTED FINANCIAL INFORMATION RECONCILIATION OF NET INCOME TO EBITDA (1) (In Thousands, unaudited) Three months ended Three months ended June 30, 2005 June 30, 2004 Net income (2) $21,659 $18,583 Income tax expense 18,087 16,221 Interest expense, net 14,199 16,576 Depreciation and amortization expense: Argosy Casino - Alton 1,661 1,608 Argosy Casino - Riverside 2,888 2,588 Argosy Casino - Baton Rouge 2,516 2,239 Argosy Casino - Sioux City 974 597 Argosy Casino - Lawrenceburg 3,680 3,583 Empress Casino Joliet 2,403 3,587 Corporate (3) 661 646 Total 14,783 14,783 14,848 14,848 EBITDA (1): Argosy Casino - Alton 5,130 4,034 Argosy Casino - Riverside 9,987 10,709 Argosy Casino - Baton Rouge 6,782 5,044 Argosy Casino - Sioux City 4,297 3,390 Argosy Casino - Lawrenceburg 36,862 37,305 Empress Casino Joliet 14,226 12,645 Corporate (2) (3) (8,556) (6,899) Total $68,728 $68,728 $66,228 $66,228 ARGOSY GAMING COMPANY AND SUBSIDIARIES SELECTED FINANCIAL INFORMATION RECONCILIATION OF NET INCOME TO EBITDA (1) (In Thousands) Six months ended Six months ended June 30, 2005 June 30, 2004 Net income (2) $42,983 $22,543 Income tax expense 35,185 22,026 Interest expense, net 28,774 34,606 Depreciation and amortization expense: Argosy Casino - Alton 3,295 3,160 Argosy Casino - Riverside 6,803 5,049 Argosy Casino - Baton Rouge 4,922 4,505 Argosy Casino - Sioux City 1,946 1,720 Argosy Casino - Lawrenceburg 7,381 6,995 Empress Casino Joliet 4,749 6,387 Corporate (3) 1,313 1,257 Total 30,409 30,409 29,073 29,073 EBITDA (1): Argosy Casino - Alton 11,338 8,744 Argosy Casino - Riverside 21,827 22,554 Argosy Casino - Baton Rouge 13,791 9,935 Argosy Casino - Sioux City 8,533 6,932 Argosy Casino - Lawrenceburg 73,775 73,833 Empress Casino Joliet 27,109 25,800 Corporate (2) (3) (19,022) (39,550) Total $137,351 $137,351 $108,248 $108,248 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 $763 and $26,040 of pre-tax expense on early retirement of debt for the three and six months ended June 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. ARGOSY GAMING COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share and Per Share Data) June 30, December 31, 2005 2004 Current assets: (unaudited) Cash and cash equivalents $74,751 $80,069 Accounts receivable, net 3,733 3,534 Income taxes receivable 1,029 8,705 Deferred income taxes 14,560 14,224 Other current assets 9,717 10,064 Total current assets 103,790 116,596 Net property and equipment 556,123 544,929 Other assets: Deferred finance costs, net 18,010 19,576 Goodwill, net 727,470 727,470 Intangible assets, net 23,134 24,263 Other 9,066 5,622 Total other assets 777,680 776,931 Total assets $1,437,593 $1,438,456 Current liabilities: Accounts payable $12,437 $10,032 Accrued payroll and related expenses 26,734 25,447 Accrued gaming and admission taxes 17,324 12,424 Other accrued liabilities 58,800 76,317 Accrued interest 17,458 17,627 Current maturities of long-term debt 2,607 2,512 Total current liabilities 135,360 144,359 Long-term debt 762,034 811,615 Deferred income taxes 120,015 107,794 Other long-term obligations 3,056 1,926 Stockholders' equity: Common stock, $.01 par; 120,000,000 shares authorized; 29,590,702 and 29,553,772 shares issued and outstanding at June 30, 2005 and December 31, 2004, respectively 296 296 Capital in excess of par 99,963 98,580 Retained earnings 316,869 273,886 Total stockholders' equity 417,128 372,762 Total liabilities and stockholders' equity $1,437,593 $1,438,456 DATASOURCE: Argosy Gaming Company CONTACT: Jim Wise, +1-618-474-7476, or Erin Williams, +1-618-474-7465, both of Argosy Gaming Company Web site: http://www.argosycasinos.com/

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