AGY Argosy Gaming

Argosy Gaming Company Reports Higher Second Quarter 2004 Earnings Alton, Ill., July 29 /PRNewswire-FirstCall/ -- Argosy Gaming Company (NYSE:AGY) today announced results for the three months ended June 30, 2004. Diluted earnings per share ("EPS") were $0.63 on net income of $18.6 million, as compared to EPS of $0.24 on net income of $6.9 million for the second quarter of 2003. Improved performance at the Company's Lawrenceburg and Riverside properties contributed to the year-over-year increase in earnings. Earnings in the second quarter of 2003 were impacted by 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. The combination of these two items reduced second quarter 2003 EPS by $0.26 per share. Included in the results of the second quarter of 2004 are after-tax expenses of approximately $0.02 per share, associated with the refinancing of the Company's 10 3/4% notes due 2009. Results for the second quarter of 2004 were also positively impacted by approximately $0.05 per share by the recent agreement reached with the City of Lawrenceburg, Indiana to reduce the annual payments to the city in return for additional capital investment at the Company's Lawrenceburg property. Net revenues for the second quarter of 2004 were $254.6 million, up 2.5% from second quarter 2003 net revenues of $248.3 million. Net revenues at the Company's Riverside property continue to benefit from the opening of the new casino, and were 58.2% higher in the quarter than in the second quarter of 2003. In Illinois, operational actions taken to mitigate the impact of increased gaming and admission taxes caused year-over-year revenues to fall. Net revenues at the Company's Alton property and Joliet property were down 11.9% and 14.0%, respectively in the second quarter of 2004. The Company reported EBITDA (earnings before interest, taxes, depreciation and amortization) of $66.2 million for the second quarter 2004, as compared to $45.5 million for the second quarter 2003. At Argosy Casino Riverside, EBITDA increased from $4.8 million in the second quarter of 2003 to $10.7 million in the second quarter of 2004, or 124%. The EBITDA margin (EBITDA as a percent of Net Revenues) for the Company in the second quarter of 2003 was 18.3%, but was negatively impacted by approximately 5 percentage points due to the Indiana tax charge and write down in Joliet mentioned earlier. Even after giving effect to these items, the EBITDA margin for the second quarter of 2004 improved by approximately 3 percentage points, at 26.0%. The EBITDA margin at every one of the Company's properties was higher in the second quarter of 2004 than in the same quarter of 2003. Net income for the six months ended June 30, 2004, was $22.5 million ($0.76 EPS) on net revenues of $518.7 million, compared to net income of $21.6 million ($0.74 EPS) on net revenues of $484.7 million for the same period in 2003. For the six-month period ended June 30, 2003, the Indiana tax rate increase and the asset write-down reduced the EPS by $0.26 per share. For the six-month period ended June 30, 2004, results were positively impacted by the Lawrenceburg agreement by $0.05 per share, but were negatively impacted by $0.52 per share in expenses related to the refinancing of the Company's 10 3/4% notes. "The year started out with exceptional results. The second quarter results were on track with our expectations of improved year-over-year results," said Richard J. Glasier, President and Chief Executive Officer. "Operationally, Argosy is well situated to grow from a strong base. We're particularly pleased to see the strong return on investment on our project in Riverside, which gives us additional confidence in our announced expansion projects." Capital spending during the quarter ending June 30, 2004, was approximately $15.2 million, and was primarily maintenance capital, including conversion of the Company's slot machines to Ticket-in, Ticket-out ("TITO") technology. As of the end of the quarter, approximately 90% of the Company's slot machines were TITO-operational. The Company continues to expect to be essentially 100% TITO-operational by the end of the year. The Company is spending approximately $8 million in project capital to renovate and move the boat formerly used at its Riverside property to Sioux City. The boat is expected to arrive in Sioux City this week, and should be operational at its new location by the end of August. The project includes an increase in the number of slot machines from 482 to 625 and an increase in the number of gaming tables from 14 to 18. The boat will also enhance customer comfort by increasing the square footage of the property's gaming space by approximately 60%. Construction at the Company's Riverside expansion project, which includes construction of a new state-of-the-art parking garage and the addition of a premier hotel, is expected to commence in early August. When completed, the $75 million project will provide for over a 20% increase in the number of guest parking spaces, with enclosed parking for 1,400, and 250 rooms at a property that currently does not have a hotel. Argosy is in the process of evaluating several different options for expansion at its Lawrenceburg property, and expects to finalize details on a project during the third quarter. The expansion is expected to include a combination of increased gaming positions, incremental parking and additional hotel rooms. The Company is preliminarily estimating a project cost in the area of $150 million. Argosy expects to recover approximately $50 million of the project cost through credits against future annual development fee payments to the City of Lawrenceburg. Based on these projects and anticipated maintenance capital expenditures, Argosy believes it will spend approximately $50 million to $60 million on capital in the second half of the year, for a full year total of $95 million to $100 million. Due to the cash flow from its properties' operating performance, the Company reported that debt was down from $894.6 million as of March 31, 2004, to $847.1 million as of June 30, 2004. Of that amount, $27.6 million was outstanding under the revolving portion of its senior secured credit facility, as compared to $53.1 million at March 31, 2004. The Company recently initiated negotiations to refinance its existing senior secured credit facility, and anticipates closing the transaction before the end of the third quarter. From the initial terms and conditions discussed, Argosy expects to be able to reduce its interest expense on the outstanding balances of the existing facility. In conjunction with the refinancing, the Company expects to write off deferred financing costs associated with the existing facility of approximately $5.4 million, reducing third quarter 2004 EPS by $0.11. "The strength of the bond and commercial bank markets has given us the chance to both lower our interest costs and gain flexibility for our development plans," said Glasier. "We think there may be some attractive new investment opportunities in the market in the coming quarters, and we look forward to using our strong balance sheet to take advantage of them." Based on the year-to-date performance and the Company's forecast for the rest of the year, Argosy expects reported full-year 2004 EPS to be in the range of $1.73 - $1.83. Included in this estimate is a $0.09 impact to EPS from the $5 million credit from the City of Lawrenceburg for full-year 2004 and $0.63 in costs associated with refinancing the Company's senior subordinated notes in February and the senior secured credit facility now being negotiated. Argosy will host a conference call for interested parties on July 29, 2004, at 11:00 a.m. EDT to review its second quarter financial results. The call will be broadcast live via the Internet and may be accessed through our web site at http://www.argosycasinos.com/ . For those interested in participating in the call, please dial (706) 634-1306 and reference conference ID #8816637 five to ten minutes prior to the call start time. A replay of the call will be made available through August 5, 2004 and can be accessed through our web site at 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.. 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, 2004 2003 2004 2003 (unaudited)(unaudited)(unaudited)(unaudited) Revenues: Casino $258,213 $252,153 $524,220 $493,010 Admissions 5,351 3,162 10,711 6,167 Food, beverage and other 25,958 24,993 52,418 49,753 289,522 280,308 587,349 548,930 Less promotional allowances (34,958) (31,963) (68,696) (64,253) Net revenues 254,564 248,345 518,653 484,677 Costs and expenses: Gaming and admission taxes 90,013 95,466 181,591 175,323 Casino 31,179 33,228 63,753 67,374 Selling, general and administrative 37,925 39,481 82,101 75,270 Food, beverage and other 18,721 17,761 37,322 35,559 Other operating expenses 9,735 10,379 19,598 20,885 Depreciation and amortization 14,848 12,839 29,073 25,522 Write down of assets - 6,500 - 6,500 202,421 215,654 413,438 406,433 Income from operations 52,143 32,691 105,215 78,244 Other income (expense): Interest income 18 35 39 86 Interest expense (16,594) (18,989) (34,645) (37,936) Expense on early retirement of debt (763) - (26,040) - (17,339) (18,954) (60,646) (37,850) Income before income taxes 34,804 13,737 44,569 40,394 Income tax expense (16,221) (6,788) (22,026) (18,784) Net income $18,583 $6,949 $22,543 $21,610 Basic income per share $0.63 $0.24 $0.77 $0.75 Diluted income per share $0.63 $0.24 $0.76 $0.74 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, 2004 2003 2004 2003 (unaudited)(unaudited)(unaudited)(unaudited) Casino Revenues Alton Belle Casino $25,901 $29,199 $53,087 $58,586 Argosy Casino - Riverside 36,963 23,658 75,201 48,116 Argosy Casino - Baton Rouge 20,939 20,430 42,634 40,489 Argosy Casino - Sioux City 11,397 10,780 23,083 21,169 Argosy Casino - Lawrenceburg 107,671 103,136 219,673 200,197 Empress Casino Joliet 55,342 64,950 110,542 124,453 Total $258,213 $252,153 $524,220 $493,010 Net Revenues Alton Belle Casino $24,590 $27,910 $50,634 $56,135 Argosy Casino - Riverside 35,826 22,650 73,756 46,014 Argosy Casino - Baton Rouge 21,505 20,967 43,856 41,802 Argosy Casino - Sioux City 11,035 10,475 22,381 20,575 Argosy Casino - Lawrenceburg 108,049 104,085 220,982 202,423 Empress Casino Joliet 53,559 62,258 107,044 117,728 Total $254,564 $248,345 $518,653 $484,677 Income (loss) from operations Alton Belle Casino $2,426 $2,619 $5,584 $9,333 Argosy Casino - Riverside 8,121 3,408 17,505 7,402 Argosy Casino - Baton Rouge 2,805 1,200 5,430 2,989 Argosy Casino - Sioux City 2,793 1,831 5,212 3,590 Argosy Casino - Lawrenceburg 33,722 24,365 66,838 50,431 Empress Casino Joliet 9,058 5,510 19,413 16,218 Corporate (6,782) (6,242) (14,767) (11,719) Total $52,143 $32,691 $105,215 $78,244 ARGOSY GAMING COMPANY AND SUBSIDIARIES SELECTED FINANCIAL INFORMATION RECONCILIATION OF NET INCOME TO EBITDA (a) (In Thousands, unaudited) Three months ended Three months ended June 30, 2004 June 30, 2003 Net income (b) $18,583 $6,949 Income tax expense 16,221 6,788 Interest expense, net 16,576 18,954 Depreciation and amortization expense: Alton Belle Casino 1,608 1,640 Argosy Casino - Riverside 2,588 1,373 Argosy Casino - Baton Rouge 2,239 2,170 Argosy Casino - Sioux City 597 1,141 Argosy Casino - Lawrenceburg 3,583 3,257 Empress Casino Joliet 3,587 2,723 Corporate (c) 646 535 Total 14,848 14,848 12,839 12,839 EBITDA (a): Alton Belle Casino 4,034 4,259 Argosy Casino - Riverside 10,709 4,781 Argosy Casino - Baton Rouge 5,044 3,370 Argosy Casino - Sioux City 3,390 2,972 Argosy Casino - Lawrenceburg 37,305 27,622 Empress Casino Joliet 12,645 8,233 Corporate (c) (6,899) (5,707) Total $66,228 $66,228 $45,530 $45,530 ARGOSY GAMING COMPANY AND SUBSIDIARIES SELECTED FINANCIAL INFORMATION RECONCILIATION OF NET INCOME TO EBITDA (a) (In Thousands, unaudited) Six months ended Six months ended June 30, 2004 June 30, 2003 Net income (b) $22,543 $21,610 Income tax expense 22,026 18,784 Interest expense, net 34,606 37,850 Depreciation and amortization expense: Alton Belle Casino 3,160 3,411 Argosy Casino - Riverside 5,049 2,818 Argosy Casino - Baton Rouge 4,505 4,232 Argosy Casino - Sioux City 1,720 2,187 Argosy Casino - Lawrenceburg 6,995 6,494 Empress Casino Joliet 6,387 5,333 Corporate (c) 1,257 1,047 Total 29,073 29,073 25,522 25,522 EBITDA (a): Alton Belle Casino 8,744 12,744 Argosy Casino - Riverside 22,554 10,220 Argosy Casino - Baton Rouge 9,935 7,221 Argosy Casino - Sioux City 6,932 5,777 Argosy Casino - Lawrenceburg 73,833 56,925 Empress Casino Joliet 25,800 21,551 Corporate (c) (39,550) (10,672) Total $108,248 $108,248 $103,766 $103,766 ARGOSY GAMING COMPANY NOTES TO SELECTED FINANCIAL INFORMATION (in thousands) (a) "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. (b) Net income includes $763 and $26,040 of expense on early retirement of debt for the three months and six months ended June 30, 2004, respectively. (c) 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, 2004 2003 (unaudited) Current assets: Cash and cash equivalents $69,754 $67,205 Accounts receivable, net 4,136 4,292 Income taxes receivable - 1,015 Deferred income taxes 12,377 13,295 Other current assets 6,860 7,196 Total current assets 93,127 93,003 Net property and equipment 551,611 548,120 Other assets: Deferred finance costs, net 16,562 16,748 Goodwill, net 727,470 727,470 Intangible assets, net 24,917 26,092 Other 3,157 439 Total other assets 772,106 770,749 Total assets $1,416,844 $1,411,872 Current liabilities: Accounts payable $11,861 $26,955 Accrued payroll and related expenses 25,540 24,125 Accrued gaming and admission taxes 17,693 14,486 Other accrued liabilities 56,946 70,070 Accrued interest 15,400 9,296 Income taxes payable 5,411 - Current maturities of long-term debt 3,713 4,648 Total current liabilities 136,564 149,580 Long-term debt 843,396 865,510 Deferred income taxes 105,803 93,119 Other long-term obligations 711 419 Stockholders' equity: Common stock, $.01 par; 120,000,000 shares authorized; 29,474,783 and 29,314,542 shares issued and outstanding at June 30, 2004 and December 31, 2003, respectively 295 293 Capital in excess of par 95,754 92,551 Accumulated other comprehensive loss (563) (1,941) Retained earnings 234,884 212,341 Total stockholders' equity 330,370 303,244 Total liabilities and stockholders' equity $1,416,844 $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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