Argosy Gaming Company Reports 2004 Results

Argosy Gaming Company Reports 2004 Results

ALTON, Ill., Feb. 9 /PRNewswire-FirstCall/ -- Argosy Gaming Company (NYSE:AGY) today announced its fourth quarter and year-end operating results for the periods ended December 31, 2004. Diluted earnings per share ("Diluted EPS") for the fourth quarter of 2004 was $0.60 on net income of $17.9 million, as compared to Diluted EPS of $0.46 on net income of $13.6 million for the fourth quarter of 2003. Included in the fourth quarter 2004 results are $2.8 million in costs related to the proposed merger between Argosy and Penn National Gaming, which negatively impacted Diluted EPS by $0.06 and an accrual reversal related to a settlement with the State of Indiana regarding the deductibility of state gaming tax payments that positively impacted EPS by $0.03. The Company attributes the increase in net income to a $4.1 million decrease in net interest expense as a result of a reduction in debt levels and a lower cost of borrowing, and strong operational performance, particularly in the month of December.

The Company's full year 2004 diluted EPS was $2.07 on net income of $61.5 million, as compared to $1.76 per share on net income of $51.7 million for 2003. Included in net income for 2003 was a $6.5 million pre-tax charge for the write-down of barge platforms originally intended for use at the Company's Joliet property and a $5.9 million pre-tax charge due to new legislation regarding the calculation of the 2003 increase in Indiana gaming tax rates, for a combined impact to 2003 Diluted EPS of $0.26. For the 12-month period ended December 31, 2004, results were positively impacted by a $3.2 million pre-tax gain on the sale of a former gaming vessel in Joliet and the $1.0 million Indiana income tax accrual reversal mentioned above, but were negatively impacted by $26.0 million in pre-tax expenses related to the refinancing of the Company's 10 3/4% notes in February and $3.8 million in pre-tax merger-related costs. These four items together resulted in a net reduction of 2004 Diluted EPS by $0.50.

2004 Highlights

-- Net revenues for the year increased $81.4 million from 2003, to
$1.0 billion, including a $50.6 million increase in net revenues at
the Company's Riverside property and a $26.1 million increase in net
revenues at the Company's Lawrenceburg property.

-- The Company's new casino at its Riverside property has positively
impacted the Kansas City market, where gaming revenues grew over
10% in 2004. In addition to growing the market, Argosy Riverside's
share of the market increased from 15.7% in 2003 to 21.7% in 2004. A
$75 million expansion project to add a hotel and replace the existing
parking garage at the property is currently underway.

-- The boat formerly used at Argosy's Riverside property was renovated
and transferred to Sioux City. The resulting 29.8% increase in gaming
capacity translated into a 34.7% increase in casino revenues and a
56.1% increase in operating income at the property for the period
September through December 2004.

-- Argosy refinanced $350 million of Senior Subordinated Notes as well as
its $675 million Revolving Credit Facility and Term Loan B at lower
rates and with more flexible covenants. Coupled with a lower average
outstanding debt balance, the result was a $10.8 million decrease in
interest expense for 2004 as compared to 2003.


Fourth Quarter 2004 Results


Net revenues for the fourth quarter of 2004 were $255.7 million, up $23.8 million from fourth quarter 2003 net revenues of $231.9 million. Net revenues for the quarter increased versus fourth quarter 2003 at every property except Lawrenceburg, where they were essentially unchanged. Argosy Casino-Riverside benefited from the success of its new casino, as net revenues increased $10.8 million, or 44.8%, versus the same quarter in 2003, to $34.8 million. Argosy Sioux City also had a strong performance in the quarter with net revenues of $13.5 million, for a year-over-year increase of 29.9% due primarily to its renovated boat and expanded gaming capacity.

"While I'm very pleased with the increase in net revenues for the quarter, I think it's even more important to note the excellent flow-through to EBITDA that the properties achieved," said Richard J. Glasier, President and Chief Executive Officer. "Our property management has been very good at controlling costs, particularly in the payroll area. Benefit and insurance expenses have remained relatively constant, while at the same time we've seen positive results from technological efficiencies like the implementation of Ticket-in/Ticket-out ("TITO") slot machines."

The Company reported EBITDA (earnings before interest, taxes, depreciation and amortization) of $62.5 million for the fourth quarter 2004, as compared to $57.7 million for the fourth quarter 2003. The Company's EBITDA margin for the quarter was 24.5%, down from 24.9% for the same quarter last year. Gaming and admission taxes for the Company for the quarter were 35.3% of net revenues, up from 33.5% in the fourth quarter of 2003. At the property level (excluding corporate expenses) the EBITDA margin improved from 27.8% in the fourth quarter of 2003 to 28.8% in the same quarter of 2004.

Financial Position

Argosy reported that debt decreased from $870.2 million as of December 31, 2003 to $814.1 million as of December 31, 2004. Full-year 2004 capital spending was $75.3 million, which was primarily for the completion of the new casino in Riverside, the beginning of work on the new $75 million hotel and garage project in Riverside and the renovation and relocation of the boat from Riverside to Sioux City. In addition, the Company essentially completed its stated objective of becoming 100% TITO-operational by year-end 2004.

"Our consistent strong operational performance was certainly a key component in Penn National Gaming's decision to acquire Argosy," said Glasier. "Our employees should be proud of the part they have played in helping develop what is expected to become one of the largest gaming companies in the country."

Pursuant to the merger agreement between Argosy and Penn National Gaming, Argosy has agreed not to provide any guidance concerning its expected earnings or other performance.

Argosy will host a conference call for interested parties on February 9, 2005, at 10:00 a.m. EST to review its fourth quarter financial results. For those interested in participating in the call, please dial (706) 634-1306 and reference conference ID #3657889 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.argosy.com/ . A replay of the call may be accessed at the same web site through February 23, 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 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, 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.



ARGOSY GAMING COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)

Three Months Ended For the years ended
December December December December
31, 31, 31, 31,
2004 2003 2004 2003
(unaudited) (unaudited)
Revenues:
Casino $258,576 $232,044 $1,054,000 $970,982
Admissions 5,390 4,787 21,930 15,548
Food, beverage and
other 26,236 23,909 105,482 97,932
290,202 260,740 1,181,412 1,084,462
Less promotional
allowances (34,493) (28,851) (140,562) (124,958)
Net revenues 255,709 231,889 1,040,850 959,504

Costs and expenses:
Gaming and admission
taxes 90,273 77,724 367,306 335,172
Casino 30,108 31,852 124,521 131,725
Selling, general and
administrative 43,726 37,757 167,980 150,439
Food, beverage and
other 19,308 17,205 75,934 70,158
Other operating
expenses 9,750 9,690 39,797 40,995
Depreciation and
amortization 16,384 13,466 61,961 52,223
Gain on disposition
of asset held for
sale - - (3,155) -
Write down of assets - - - 6,500
209,549 187,694 834,344 787,212
Income from operations 46,160 44,195 206,506 172,292

Other income (expense):
Interest income 47 50 151 156
Interest expense (14,690) (18,762) (65,015) (75,752)
Expense on early
retirement of debt - - (26,040) -
(14,643) (18,712) (90,904) (75,596)

Income before income taxes 31,517 25,483 115,602 96,696

Income tax expense (13,655) (11,849) (54,057) (44,963)

Net income $17,862 $13,634 $61,545 $51,733

Basic income per share $0.61 $0.47 $2.09 $1.78

Diluted income per share $0.60 $0.46 $2.07 $1.76

Weighted average shares
outstanding:

Basic 29,509,851 29,303,807 29,443,767 29,148,106

Diluted 29,806,420 29,472,088 29,668,096 29,380,910



ARGOSY GAMING COMPANY AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
SUMMARY OPERATING DATA
(In Thousands)

Three Months Ended For the years ended
December December December December
31, 31, 31, 31,
2004 2003 2004 2003
(unaudited) (unaudited)
Casino Revenues
Alton Belle Casino $26,307 $23,561 $107,168 $108,925
Argosy Casino - Riverside 35,291 24,554 146,472 96,123
Argosy Casino - Baton Rouge 20,197 19,344 82,940 79,942
Argosy Casino - Sioux City 13,894 10,643 49,891 42,327
Argosy Casino - Lawrenceburg 104,346 103,906 439,377 410,920
Empress Casino Joliet 58,541 50,036 228,152 232,745
Total $258,576 $232,044 $1,054,000 $970,982

Net Revenues
Alton Belle Casino $25,253 $23,012 $102,320 $104,730
Argosy Casino - Riverside 34,803 24,040 143,406 92,778
Argosy Casino - Baton Rouge 20,843 19,833 85,232 81,993
Argosy Casino - Sioux City 13,480 10,376 48,358 41,141
Argosy Casino - Lawrenceburg 104,793 104,966 441,279 415,194
Empress Casino Joliet 56,537 49,662 220,255 223,668
Total $255,709 $231,889 $1,040,850 $959,504

Income (loss) from operations
Alton Belle Casino $3,867 $3,552 $12,460 $16,579
Argosy Casino - Riverside 6,616 1,977 30,329 13,193
Argosy Casino - Baton Rouge 2,076 2,419 9,315 6,634
Argosy Casino - Sioux City 3,784 1,964 12,051 7,302
Argosy Casino - Lawrenceburg 29,812 29,687 131,180 112,420
Empress Casino Joliet (4) 11,811 11,976 45,483 40,996
Corporate (11,806) (7,380) (34,312) (24,832)
Total $46,160 $44,195 $206,506 $172,292



ARGOSY GAMING COMPANY AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
RECONCILIATION OF NET INCOME TO EBITDA (1)
(In Thousands, unaudited)

Three months ended Three months ended
December 31, 2004 December 31, 2003
Net income $17,862 $13,634
Income tax expense 13,655 11,849
Interest expense, net 14,643 18,712

Depreciation and amortization expense:
Alton Belle Casino 1,650 1,563
Argosy Casino - Riverside 4,477 1,977
Argosy Casino - Baton Rouge 2,240 2,198
Argosy Casino - Sioux City 1,025 1,131
Argosy Casino - Lawrenceburg 3,986 3,225
Empress Casino Joliet 2,336 2,801
Corporate (3) 670 571
Total 16,384 16,384 13,466 13,466

EBITDA (1):
Alton Belle Casino 5,517 5,115
Argosy Casino - Riverside 11,093 3,954
Argosy Casino - Baton Rouge 4,316 4,617
Argosy Casino - Sioux City 4,809 3,095
Argosy Casino - Lawrenceburg 33,798 32,912
Empress Casino Joliet 14,147 14,777
Corporate (3) (11,136) (6,809)
Total $62,544 $62,544 $57,661 $57,661



ARGOSY GAMING COMPANY AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
RECONCILIATION OF NET INCOME TO EBITDA (1)
(In Thousands)

For the year ended For the year ended
December 31, 2004 December 31, 2003
Net income (2) $61,545 $51,733
Income tax expense 54,057 44,963
Interest expense, net 64,864 75,596

Depreciation and amortization
expense:
Alton Belle Casino 6,556 6,572
Argosy Casino - Riverside 13,881 6,274
Argosy Casino - Baton Rouge 8,923 8,712
Argosy Casino - Sioux City 3,531 4,437
Argosy Casino - Lawrenceburg 14,566 12,935
Empress Casino Joliet 11,935 11,120
Corporate (3) 2,569 2,173
Total 61,961 61,961 52,223 52,223

EBITDA (1):
Alton Belle Casino 19,016 23,151
Argosy Casino - Riverside 44,210 19,467
Argosy Casino - Baton Rouge 18,238 15,346
Argosy Casino - Sioux City 15,582 11,739
Argosy Casino - Lawrenceburg 145,746 125,355
Empress Casino Joliet (4) 57,418 52,116
Corporate (2) (3) (57,783) (22,659)
Total $242,427 $242,427 $224,515 $224,515



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 year ended December 31, 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 year ended December 31, 2004 is a gain of $3,155 on
the sale of an asset held for sale. Included for the year ended
December 31, 2003 is a $6,500 write-down of assets related to assets
previously held for future development.



ARGOSY GAMING COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)

December 31,
2004 2003
Current assets:
Cash and cash equivalents $80,069 $67,205
Accounts receivable, net of
allowance for doubtful accounts
of $1,764 and $1,893, respectively 3,534 4,292
Income taxes receivable 8,705 1,015
Deferred income taxes 14,224 13,295
Other current assets 10,064 7,196
Total current assets 116,596 93,003

Net property and equipment 544,929 548,120
Other assets:
Deferred finance costs, net of
accumulated amortization
of $8,747 and $15,120, respectively 19,576 16,748
Goodwill, net of accumulated
amortization of $11,334 727,470 727,470
Intangible assets, net of
accumulated amortization of
$12,599 and $11,894, respectively 24,263 26,092
Other 5,622 439
Total other assets 776,931 770,749
Total assets $1,438,456 $1,411,872

Current liabilities:
Accounts payable $10,032 $26,955
Accrued payroll and related
expenses 25,447 24,125
Accrued gaming and admission
taxes 12,424 14,486
Other accrued liabilities 76,317 70,070
Accrued interest 17,627 9,296
Current maturities of long-term
debt 2,512 4,648
Total current liabilities 144,359 149,580

Long-term debt 811,615 865,510
Deferred income taxes 107,794 93,119
Other long-term obligations 1,926 419
Stockholders' equity:
Common stock, $.01 par;
120,000,000 shares authorized;
29,553,772 and 29,314,542 shares
issued and outstanding, respectively 296 293
Capital in excess of par 98,580 92,551
Accumulated other comprehensive
(loss) - (1,941)
Retained earnings 273,886 212,341
Total stockholders' equity 372,762 303,244
Total liabilities and stockholders'
equity $1,438,456 $1,411,872



Source: 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.argosy.com/


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