AGY Argosy Gaming

Argosy Gaming Company Reports First Quarter 2004 Earnings ALTON, Ill., April 27 /PRNewswire-FirstCall/ -- Argosy Gaming Company today announced first quarter results for the period ended March 31, 2004. Earnings per diluted share ("EPS") were $0.13 on net income of $4.0 million, as compared to $0.50 per diluted share on net income of $14.7 million for the first quarter of 2003. Included in the results of the first quarter of 2004 are after-tax expenses of $14.8 million, or $0.50 per share, associated with the February 2004 refinancing of the Company's outstanding 10-3/4% notes due 2009. Net revenues were $264.1 million for the first quarter of 2004, up $27.8 million, or 12% from $236.3 million in the first quarter of 2003. Of note, net revenues at Argosy's Riverside property increased 62%, or $14.6 million, from the first quarter of the prior year. At Argosy's Lawrenceburg property, net revenues also grew by $14.6 million, or 15% over the first quarter of 2003. Net revenues at the Company's Illinois properties declined 5%, or $4.2 million, primarily as a result of actions taken by the Company following the increase in the gaming and admission tax rates there. Argosy's EBITDA (earnings before interest, taxes, depreciation and amortization) for the quarter was up 16% year over year, at $67.3 million for the first quarter 2004 compared to $58.2 million for the first quarter 2003. The increase is primarily related to improved results at the Company's Lawrenceburg and Riverside properties, partially offset by increased gaming and admission tax rates. EBITDA improved at each of the Company's properties compared to the same quarter in 2003, with the exception of the Company's two Illinois properties, where increased gaming and admission tax rates more than offset operational efficiencies. "We're thrilled by the response to our investment in Riverside. To have EBITDA more than double from the same quarter last year is outstanding," said Richard J. Glasier, President and CEO of Argosy. "We're especially pleased that the new facility has been successful not only in bringing back guests who decided to forego playing at Argosy while the construction was underway, but in growing the entire Kansas City market, as new visitors are attracted to the property." The Company's EBITDA margin (EBITDA as a percent of net revenues) for the quarter was 26%, up from 25% the same quarter last year. This improvement was achieved despite the increase in gaming and admission taxes as a percent of net revenues from 34% in the first quarter of 2003 to 35% in 2004. At Argosy's Riverside property, EBITDA margin increased almost eight percentage points for the first quarter of 2004, from 23.3% to 31.2%, and matched the 31.2% EBITDA margin achieved at the Company's Sioux City property. The highest EBITDA margin performance for the Company was achieved in Lawrenceburg, where it was 32.3% for the first quarter of 2004, up from 29.8% during the same quarter in 2003. The Empress Casino Joliet was also able to improve its EBITDA margin, from 24.0% in 2003 to 24.6% for the first quarter of this year, despite a decrease in revenues and increase in gaming and admission taxes at the property. "Our management teams did an excellent job of translating revenue growth into EBITDA growth this quarter," said Glasier. "In several cases, the percentage increase in EBITDA was more than twice the percentage increase in casino revenues." Capital Structure Capital spending during the quarter ended March 31, 2004 was $30.7 million and consisted of maintenance capital and residual payments for construction of the new casino at the Company's Riverside property, which opened in December 2003. The Company has decided to move the riverboat formerly used in Riverside to Sioux City to replace the boat currently in use there. Argosy expects to spend approximately $8 million to $10 million for relocation and renovation of the vessel. Completion is anticipated at the end of the third quarter of 2004, and will include a 150-unit increase in the number of slot machines. The Company is also considering additional capital investment at its Riverside and Lawrenceburg properties. Argosy continues to transition to Ticket-In, Ticket-Out ("TITO") slot machines as part of its maintenance capital plan based on the anticipated operating efficiencies afforded by the technology, as well as consumer preference for the product. Approximately 55% of the Company's slot machines are currently operating with TITO technology, and an additional 30% are TITO- ready and available for use, pending regulatory approval. The Company began utilizing TITO machines in Alton and Joliet earlier this month. Subject to receiving final approval from the state of Illinois, the Company expects to be essentially 100% TITO-operational by the end of the year. In February of 2004, the Company refinanced $329 million out of a total of $350 million of the Company's 10-3/4% Notes due 2009 with a new issue of $350 million in notes at a rate of 7%. The new notes mature in 2014. Because capital spending and the costs associated with the refinancing exceeded the free cash flow generated by operations during the quarter, Company debt increased from $870.2 million as of December 31, 2003 to $894.6 million as of March 31, 2004. Guidance Argosy announced the following updates to its previously issued earnings guidance: -- The Company is redeeming the remaining outstanding $21 million in 10-3/4% Notes due 2009 on June 1, 2004. The Company expects to incur an after-tax charge of approximately $0.02 per share in the second quarter related to this transaction. -- The Company expects capital spending for the balance of 2004 to be between $40 million and $45 million, including final payments for the new casino at Riverside and the renovation and transfer of the Riverside boat to Sioux City. Capital spending for the full year of 2004 is expected to between $70 million and $75 million. -- On an annualized basis, the positive impact of additional capacity in Sioux City and the efficiencies of dockside operations are expected to offset the recently passed gaming tax increase in Iowa. However, the tax increase is expected to have a small negative impact on the 2004 results. Based on these factors and the Company's stronger than expected first quarter performance, Argosy now estimates EPS for 2004, after deduction of $0.52 in charges to EPS in connection with the refinancing of the Company's $350 million of 10 3/4% notes, to be in the range of $1.73 to $1.83. Argosy will host a conference call for interested parties on April 27, 2004, at 11:00 a.m. EDT to review its first quarter 2004 results. Call participants should dial (706) 634-1306 ten to fifteen minutes before the call and reference ID #6681757. The call will be broadcast live via the Internet and may be accessed through our web site at http://www.argosycasinos.com/ . A replay of the call will be available at our web site through May 2, 2003. 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 timing of the transition to cashless slots at the Company's properties; - 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. ARGOSY GAMING COMPANY CONSOLIDATED STATEMENTS OF INCOME (In Thousands, Except Per Share Data) Three Months Ended Mar 31, Mar 31, 2004 2003 (unaudited) (unaudited) Revenues: Casino $266,007 $240,857 Admissions 5,360 3,005 Food, beverage and other 26,460 24,760 297,827 268,622 Less promotional allowances (33,738) (32,290) Net revenues 264,089 236,332 Costs and expenses: Gaming and admission taxes 91,578 79,857 Casino 32,574 34,146 Selling, general and administrative 44,176 35,789 Food, beverage and other 18,601 17,798 Other operating expenses 9,863 10,506 Depreciation and amortization 14,225 12,683 211,017 190,779 Income from operations 53,072 45,553 Other income (expense): Interest income 21 51 Interest expense (18,051) (18,947) Expense on early retirement of debt (25,277) - (43,307) (18,896) Income before income taxes 9,765 26,657 Income tax expense (5,805) (11,996) Net income $3,960 $14,661 Basic income per share $0.13 $0.51 Diluted income per share $0.13 $0.50 ARGOSY GAMING COMPANY AND SUBSIDIARIES SELECTED FINANCIAL INFORMATION CASINO AND NET REVENUES (In Thousands) Three Months Ended Mar 31, Mar 31, 2004 2003 (unaudited) (unaudited) Casino Revenues Alton Belle Casino $27,186 $29,387 Argosy Casino - Riverside 38,238 24,458 Argosy Casino - Baton Rouge 21,695 20,059 Argosy Casino - Sioux City 11,686 10,389 Argosy Casino - Lawrenceburg 112,002 97,061 Empress Casino Joliet 55,200 59,503 Total $266,007 $240,857 Net Revenues Alton Belle Casino $26,044 $28,225 Argosy Casino - Riverside 37,930 23,364 Argosy Casino - Baton Rouge 22,351 20,835 Argosy Casino - Sioux City 11,346 10,100 Argosy Casino - Lawrenceburg 112,933 98,338 Empress Casino Joliet 53,485 55,470 Total $264,089 $236,332 ARGOSY GAMING COMPANY AND SUBSIDIARIES SELECTED FINANCIAL INFORMATION RECONCILIATION OF INCOME FROM OPERATIONS TO EBITDA(1) (In Thousands, unaudited) For the three months ended March 31, 2004 Income Depreciation and (loss) amortization from operations expense EBITDA(1) Alton Belle Casino $3,158 $1,552 $4,710 Argosy Casino - Riverside 9,384 2,461 11,845 Argosy Casino - Baton Rouge 2,625 2,266 4,891 Argosy Casino - Sioux City 2,419 1,123 3,542 Argosy Casino - Lawrenceburg 33,116 3,412 36,528 Empress Casino Joliet 10,355 2,800 13,155 Corporate(2) (7,985) 611 (7,374) Total $53,072 $14,225 $67,297 For the three months ended March 31, 2003 Income Depreciation and (loss) amortization from operations expense EBITDA(1) Alton Belle Casino $6,714 $1,771 $8,485 Argosy Casino - Riverside 3,994 1,445 5,439 Argosy Casino - Baton Rouge 1,789 2,062 3,851 Argosy Casino - Sioux City 1,759 1,046 2,805 Argosy Casino - Lawrenceburg 26,066 3,237 29,303 Empress Casino Joliet 10,708 2,610 13,318 Corporate(2) (5,477) 512 (4,965) Total $45,553 $12,683 $58,236 See accompanying notes to selected financial information ARGOSY GAMING COMPANY NOTES TO SELECTED FINANCIAL INFORMATION (1) "EBITDA" is defined as earnings before interest (including expense on early retirement of debt), 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) 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) March 31, December 31, 2004 2003 (unaudited) Current assets: Cash and cash equivalents $71,779 $67,205 Accounts receivable, net 3,832 4,292 Income taxes receivable 2,675 1,015 Deferred income taxes 12,924 13,295 Other current assets 7,309 7,196 Total current assets 98,519 93,003 Net property and equipment 551,179 548,120 Other assets: Deferred finance costs, net 17,513 16,748 Goodwill, net 727,470 727,470 Intangible assets, net 25,501 26,092 Other 569 439 Total other assets 771,053 770,749 Total assets $1,420,751 $1,411,872 Current liabilities: Accounts payable $15,924 $26,955 Accrued payroll and related expenses 22,072 24,125 Accrued gaming and admission taxes 31,957 44,570 Other accrued liabilities 41,229 39,986 Accrued interest 5,760 9,296 Current maturities of long-term debt 3,748 4,648 Total current liabilities 120,690 149,580 Long-term debt 890,827 865,510 Deferred income taxes 99,461 93,119 Other long-term obligations 416 419 Stockholders' equity: Common stock, $.01 par; 120,000,000 shares authorized; 29,399,845 and 29,314,542 shares issued and outstanding at March 31, 2004 and December 31, 2003, respectively 294 293 Capital in excess of par 94,146 92,551 Accumulated other comprehensive (loss) (1,384) (1,941) Retained earnings 216,301 212,341 Total stockholders' equity 309,357 303,244 Total liabilities and stockholders' equity $1,420,751 $1,411,872 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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