----

----

**UNITED STATES SECURITIES AND EXCHANGE COMMISSION****WASHINGTON, D.C., 20549**

----

**FORM 10-Q**

| **ý** | **Quarterly Report  under Section 13 or 15(d) of the Securities Exchange Act of 1934**        |
|------------|-----------------------------------------------------------------------------------------------|
|       |                                                                                          |
|       | **For the quarterly period ended June 30, 2001.**                                             |
|       |                                                                                          |
|       | **or**                                                                                        |
|       |                                                                                          |
| **o**      | **Transition Report Pursuant  to Section 13 or 15(d) of the Securities Exchange Act of 1934** |

**Commission File Number 1-11853**

**ARGOSY GAMING COMPANY**(Exact name ofRegistrant as Specified in its Charter)

| **Delaware**                 | **37-1304247**      |
|------------------------------|---------------------|
| (State or other jurisdiction | (I.R.S. Employer    |
| of incorporation)            | Identification No.) |
|                         |                |

**219Piasa StreetAlton, Illinois 62002(618) 474-7500**(Address,including zip code, and telephone number, includingarea code, of Registrant's principal executive offices)

    Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.    Yes ý    No o

**APPLICABLE ONLY TO CORPORATE ISSUERS:**

    Indicate the number of shares outstanding ofeach of the issuer's classes of common stock as of the latest practicabledate:  28,758,270 shares of Common Stock,$.01 par value per share, as of  August10, 2001.

----

----

 

| **ARGOSY GAMING COMPANY**                                               |
|-------------------------------------------------------------------------|
| **CONDENSED CONSOLIDATED BALANCE SHEETS**                               |
| (In  Thousands, Except Share and Per Share Data)                        |
|                                                                    |   |   |   |   |
|                                                                    | **June 30,** |   | **December 31,** |   |
|                                                                    | **2001** |   | **2000** |   |
|                                                                    | **** |   | **** |   |
|                                                                    | **(unaudited)** |   |   |   |
| **Current assets:**                                                     |   |   |   |   |
|                                                                    | Cash and cash equivalents | $ | 40,745 |   | $ | 59,374 |   |
|                                                                    | Accounts receivable, net | 2,439 |   | 2,444 |   |
|                                                                    | Deferred income taxes | 7,650 |   | 4,849 |   |
|                                                                    | Other current assets | 5,713 |   | 5,527 |   |
|                                                                    |   | **** |   | **** |   |
|                                                                    | Total current assets | 56,547 |   | 72,194 |   |
|                                                                    |   | **** |   | **** |   |
|                                                                    |   |   |   |   |
| **Net property and equipment**                                          | 394,929 |   | 397,989 |   |
|                                                                    |   |   |   |   |
| **Other assets:**                                                       |   |   |   |   |
|                                                                    | Deferred finance costs, net | 13,179 |   | 7,767 |   |
|                                                                    | Goodwill and other intangible assets, net | 350,945 |   | 56,681 |   |
|                                                                    | Other, net | 2,573 |   | 2,605 |   |
|                                                                    |   | **** |   | **** |   |
|                                                                    | Total other assets | 366,697 |   | 67,053 |   |
|                                                                    |   | **** |   | **** |   |
| **Total assets**                                                        | $ | 818,173 |   | $ | 537,236 |   |
|                                                                    |  |   |  |   |
|                                                                    |   |   |   |   |
| **Current liabilities:**                                                |   |   |   |   |
|                                                                    | Accounts payable | $ | 15,026 |   | $ | 15,304 |   |
|                                                                    | Accrued payroll and related expenses | 13,217 |   | 11,677 |   |
|                                                                    | Other accrued liabilities | 50,210 |   | 54,934 |   |
|                                                                    | Current maturities of long-term debt | 1,446 |   | 23,775 |   |
|                                                                    |   | **** |   | **** |   |
|                                                                    | Total current liabilities | 79,899 |   | 105,690 |   |
|                                                                    | **** |   | **** |   |
|                                                                    |   |   |   |   |
| **Long-term debt**                                                      | 589,907 |   | 252,561 |   |
| **Deferred income taxes**                                               | 14,677 |   | 10,762 |   |
| **Other long-term obligations**                                         | 245 |   | 236 |   |
| **Minority interests in equity of consolidated subsidiaries**           | - |   | 64,035 |   |
|                                                                    |   |   |   |   |
| **Stockholders' equity:**                                               |   |   |   |   |
|                                                                    | Common stock, $.01 par; 60,000,000 shares authorized;  28,758,270 and 28,394,423 shares issued and outstanding at June 30, 2001 and  December 31, 2000, respectively | 288 |   | 284 |   |
|                                                                    | Capital in excess of par | 81,918 |   | 80,693 |   |
|                                                                    | Retained earnings | 51,239 |   | 22,975 |   |
|                                                                    |   | **** |   | **** |   |
|                                                                    | Total stockholders' equity | 133,445 |   | 103,952 |   |
|                                                                    |   | **** |   | **** |   |
| **Total liabilities and stockholders' equity**                          | $ | 818,173 |   | $ | 537,236 |   |
|                                                                    |  |   |  |   |
|                                                                    |   |   |   |   |
|                                                                    |   |   |   |   |
| See  accompanying notes to condensed consolidated financial statements. |
|                                                                         |  |  |  |  |  |  |  |  |

 

| **ARGOSY GAMING COMPANY**                                               |
|-------------------------------------------------------------------------|
| **CONDENSED CONSOLIDATED STATEMENTS OF INCOME**                         |
| (In  Thousands, Except Share and Per Share Data)                        |
|                                                                    |   |   |   |   |
|                                                                    | **Six Months Ended** |   |
|                                                                    | **** |   |
|                                                                    | **June 30,** |   | **June 30,** |   |
|                                                                    | **2001** |   | **2000** |   |
|                                                                    | **(unaudited)** |   | **(unaudited)** |   |
|                                                                    | **** |   | **** |   |
| **Revenues:**                                                           |   |   |   |   |
|                                                                    |   |   |   |   |
|                                                                    | Casino | $ | 338,262 |   | $ | 330,276 |   |
|                                                                    | Admissions | 9,111 |   | 9,704 |   |
|                                                                    | Food, beverage and other | 35,230 |   | 32,734 |   |
|                                                                    |   |  |   |  |   |
|                                                                    | 382,603 |   | 372,714 |   |
|                                                                    | Less promotional allowances | (45,903 | ) | (46,536 | ) |
|                                                                    |  |   |  |   |
| Net revenues                                                            | 336,700 |   | 326,178 |   |
|                                                                    |   |   |   |   |
| **Costs and expenses:**                                                 |   |   |   |   |
|                                                                    | Casino | 128,234 |   | 121,724 |   |
|                                                                    | Selling, general and administrative | 67,962 |   | 68,530 |   |
|                                                                    | Food, beverage and other | 26,063 |   | 22,730 |   |
|                                                                    | Other operating expenses | 16,020 |   | 14,956 |   |
|                                                                    | Depreciation and amortization | 21,229 |   | 18,049 |   |
|                                                                    | Write down of assets | - |   | 6,800 |   |
|                                                                    |  |   |  |   |
|                                                                    | 259,508 |   | 252,789 |   |
|                                                                    |  |   |  |   |
| Income from operations                                                  | 77,192 |   | 73,389 |   |
|                                                                    |   |   |   |   |
| **Other income (expense):**                                             |   |   |   |   |
|                                                                    | Interest income | 625 |   | 931 |   |
|                                                                    | Interest expense | (25,827 | ) | (19,512 | ) |
|                                                                    |  |   |  |   |
|                                                                    | (25,202 | ) | (18,581 | ) |
|                                                                    |  |   |  |   |
|                                                                    |   |   |   |   |
| Income before income  taxes, minority interests and extraordinary item  | 51,990 |   | 54,808 |   |
| Minority interests                                                      | (4,086 | ) | (20,238 | ) |
| Income tax expense                                                      | (19,640 | ) | (13,400 | ) |
|                                                                    |  |   |  |   |
| Income before  extraordinary item                                       | 28,264 |   | 21,170 |   |
| Extraordinary loss on  extinguishment of debt                           | - |   | (1,154 | ) |
|                                                                    |  |   |  |   |
| **Net income**                                                          | $ | 28,264 |   | $ | 20,016 |   |
|                                                                    |  |   |  |   |
|                                                                    |   |   |   |   |
|                                                                    |   |   |   |   |
| Basic income per share  before extraordinary loss                       | $ | 0.99 |   | $ | 0.75 |   |
| Extraordinary loss                                                      | - |   | (0.04 | ) |
|                                                                    |  |   |  |   |
| **Basic income per share**                                              | $ | 0.99 |   | $ | 0.71 |   |
|                                                                    |  |   |  |   |
|                                                                    |   |   |   |   |
|                                                                    |   |   |   |   |
| Diluted income per  share before extraordinary loss                     | $ | 0.97 |   | $ | 0.73 |   |
| Extraordinary loss                                                      | - |   | (0.04 | ) |
|                                                                    |  |   |  |   |
| **Diluted income per share**                                            | $ | 0.97 |   | $ | 0.69 |   |
|                                                                    |  |   |  |   |
|                                                                    |   |   |   |   |
|                                                                    |   |   |   |   |
| See  accompanying notes to condensed consolidated financial statements. |
|                                                                    |   |   |   |   |

 

| **ARGOSY GAMING COMPANY**                                               |
|-------------------------------------------------------------------------|
| **CONDENSED CONSOLIDATED STATEMENTS OF INCOME**                         |
| (In  Thousands, Except Share and Per Share Data)                        |
|                                                                    |   |   |   |   |
|                                                                    | **Three Months Ended** |   |
|                                                                    | **** |   |
|                                                                    | **June 30,** |   | **June 30,** |   |
|                                                                    | **2001** |   | **2000** |   |
|                                                                    | **** |   | **** |   |
|                                                                    | **(unaudited)** |   | **(unaudited)** |   |
| **Revenues:**                                                           |   |   |   |   |
|                                                                    | Casino | $ | 166,482 |   | $ | 164,749 |   |
|                                                                    | Admissions | 4,472 |   | 4,716 |   |
|                                                                    | Food, beverage and other | 18,063 |   | 16,237 |   |
|                                                                    |   |  |   |  |   |
|                                                                    |   | 189,017 |   | 185,702 |   |
|                                                                    | Less promotional allowances | (23,052 | ) | (23,795 | ) |
|                                                                    |   |  |   |  |   |
| Net revenues                                                            | 165,965 |   | 161,907 |   |
|                                                                    |   |   |   |   |
| **Costs and expenses:**                                                 |   |   |   |   |
|                                                                    | Casino | 63,704 |   | 60,525 |   |
|                                                                    | Selling, general and administrative | 32,648 |   | 34,845 |   |
|                                                                    | Food, beverage and other | 13,485 |   | 11,671 |   |
|                                                                    | Other operating expenses | 7,968 |   | 7,386 |   |
|                                                                    | Depreciation and amortization | 11,156 |   | 9,213 |   |
|                                                                    | Write down of assets | - |   | 6,800 |   |
|                                                                    |   |  |   |  |   |
|                                                                    | 128,961 |   | 130,440 |   |
|                                                                    |  |   |  |   |
| Income from operations                                                  | 37,004 |   | 31,467 |   |
|                                                                    |   |   |   |   |
| **Other income (expense):**                                             |   |   |   |   |
|                                                                    | Interest income | 139 |   | 449 |   |
|                                                                    | Interest expense | (13,945 | ) | (9,405 | ) |
|                                                                    |   |  |   |  |   |
|                                                                    | (13,806 | ) | (8,956 | ) |
|                                                                    |  |   |  |   |
| Income before income  taxes, minority interests and extraordinary item  | 23,198 |   | 22,511 |   |
| Minority interests                                                      | - |   | (9,860 | ) |
| Income tax expense                                                      | (9,517 | ) | (4,900 | ) |
|                                                                    |  |   |  |   |
| Income before  extraordinary item                                       | 13,681 |   | 7,751 |   |
| Extraordinary loss on  extinguishment of debt                           | - |   | (1,154 | ) |
|                                                                    |  |   |  |   |
|                                                                    |   |   |   |   |
| **Net income**                                                          | $ | 13,681 |   | $ | 6,597 |   |
|                                                                    |  |   |  |   |
|                                                                    |   |   |   |   |
| Basic income per share  before extraordinary loss                       | $ | 0.48 |   | $ | 0.27 |   |
| Extraordinary loss                                                      | - |   | (0.04 | ) |
|                                                                    |  |   |  |   |
| **Basic income per share**                                              | $ | 0.48 |   | $ | 0.23 |   |
|                                                                    |  |   |  |   |
|                                                                    |   |   |   |   |
|                                                                    |   |   |   |   |
| Diluted income per  share before extraordinary loss                     | $ | 0.47 |   | $ | 0.27 |   |
| Extraordinary loss                                                      | - |   | (0.04 | ) |
|                                                                    |  |   |  |   |
| **Diluted income per share**                                            | $ | 0.47 |   | $ | 0.23 |   |
|                                                                    |  |   |  |   |
|                                                                    |   |   |   |   |
| See  accompanying notes to condensed consolidated financial statements. |

 

| **ARGOSY GAMING COMPANY**                                               |
|-------------------------------------------------------------------------|
| **CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**                     |
| (In  Thousands, Except Share and Per Share Data)                        |
|                                                                    |   |   |   |   |
|                                                                    | **Six Months Ended** |
|                                                                    | **** |
|                                                                    | **June 30,** | ** ** | **June 30,** |   |
|                                                                    | **2001** | ** ** | **2000** |   |
|                                                                    | **** |   | **** |   |
|                                                                    | **(unaudited)** |   | **(unaudited)** |   |
|                                                                    |   |   |   |   |
| **Cash flows from operating activities:**                               |   |   |   |   |
|                                                                    | Net income | $ | 28,264 |   | $ | 20,016 |   |
|                                                                    | Adjustments to reconcile net income to net cash provided  by operating activities: |   |   |   |   |
|                                                                    | Extraordinary loss | - |   | 1,154 |   |
|                                                                    | Depreciation | 17,026 |   | 16,782 |   |
|                                                                    | Amortization | 4,889 |   | 1,920 |   |
|                                                                    | Compensation expense recognized on issuance of stock | - |   | 39 |   |
|                                                                    | Write down of assets | - |   | 6,800 |   |
|                                                                    | Minority interests | 4,086 |   | 20,238 |   |
|                                                                    | Deferred income taxes | (259 | ) | 10,195 |   |
|                                                                    | Changes in operating assets and liabilities: |   |   |   |   |
|                                                                    | Accounts receivable and other current assets | (182 | ) | 3,910 |   |
|                                                                    | Accounts payable and other current liabilities | (3,169 | ) | (5,789 | ) |
|                                                                    |   |  |   |  |   |
|                                                                    | Net cash provided by operating activities | 50,655 |   | 75,265 |   |
|                                                                    |   |  |   |  |   |
|                                                                    |   |   |   |   |
| **Cash flows from investing activities:**                               |   |   |   |   |
|                                                                    | Purchases of property and equipment | (14,089 | ) | (17,960 | ) |
|                                                                    | Purchases of Minority Interests in Partnership | (366,699 | ) | (7,000 | ) |
|                                                                    | Other | (1,831 | ) | - |   |
|                                                                    |   |  |   |  |   |
|                                                                    | Net cash used in investing activities | (382,619 | ) | (24,960 | ) |
|                                                                    |  |   |  |   |
|                                                                    |   |   |   |   |
| **Cash flows from financing activities:**                               |   |   |   |   |
|                                                                    | Proceeds (repayment) of line of credit, net | 179,800 |   | (30,100 | ) |
|                                                                    | Proceeds from issuance of subordinated notes | 159,000 |   | - |   |
|                                                                    | Payments on long-term debt and installment contracts | (14,414 | ) | (2,808 | ) |
|                                                                    | Repurchase of First Mortgage Notes | - |   | (23,716 | ) |
|                                                                    | Decrease in restricted cash held in escrow | - |   | 25,244 |   |
|                                                                    | Payments of deferred finance costs | (6,386 | ) | - |   |
|                                                                    | Repayment of partner loans | (266 | ) | (9,167 | ) |
|                                                                    | Partnership equity distributions | (5,199 | ) | (8,523 | ) |
|                                                                    | Repayment of partner capital contribution | - |   | (1,890 | ) |
|                                                                    | Payment of preferred equity return and dividends to  partner | (456 | ) | (1,165 | ) |
|                                                                    | Proceeds from stock option exercises | 1,229 |   | - |   |
|                                                                    | Other | 27 |   | 42 |   |
|                                                                    |   |  |   |  |   |
|                                                                    | Net cash provided by (used in) financing activities | 313,335 |   | (52,083 | ) |
|                                                                    |   |  |   |  |   |
| Net decrease in cash  and cash equivalents                              | (18,629 | ) | (1,778 | ) |
| Cash and cash  equivalents, beginning of period                         | 59,374 |   | 47,090 |   |
|                                                                    |  |   |  |   |
| Cash and cash  equivalents, end of period                               | $ | 40,745 |   | $ | 45,312 |   |
|                                                                    |  |   |  |   |
|                                                                    |   |   |   |   |
| See  accompanying notes to condensed consolidated financial statements. |
|                                                                         |  |  |  |  |  |  |  |  |  |  |

** **

| **ARGOSY GAMING COMPANY**                                               |
|-------------------------------------------------------------------------|
| **CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY**           |
| (In  Thousands, Except Share and Per Share Data)                        |
|                                                                    |   |   |   |   |   |   |   |   |   |   |
|                                                                    |   |   |   |   |   |   |   |   | **Total** |   |
|                                                                    |   |   | **Common** |   | **Capital in** |   | **Retained** |   | **Stockholders'** |   |
|                                                                    | **Shares** |   | **Stock** |   | **Excess of Par** |   | **Earnings** |   | **Equity** |   |
|                                                                    |  |   |  |   |  |   |  |   |  |   |
|                                                                    |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31,  2000                                             | 28,394,423 |   | $ | 284 |   | $ | 80,693 |   | $ | 22,975 |   | $ | 103,952 |   |
|                                                                    | Stock options exercised | 363,847 |   | 4 |   | 1,225 |   | - |   | 1,229 |   |
|                                                                    | Net income for the six months ended June 30, 2001 | - |   | - |   | - |   | 28,264 |   | 28,264 |   |
|                                                                    |  |   |  |   |  |   |  |   |  |   |
| Balance, June 30, 2001                                                  | 28,758,270 |   | $ | 288 |   | $ | 81,918 |   | $ | 51,239 |   | $ | 133,445 |   |
|                                                                    |  |   |  |   |  |   |  |   |  |   |
|                                                                    |   |   |   |   |   |   |   |   |   |   |
| See  accompanying notes to condensed consolidated financial statements. |

 

**ARGOSYGAMING COMPANYNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)**(In Thousands, Except Share and Per ShareData)

**1.**         **Basis of Presentation**

            ArgosyGaming Company (collectively with its subsidiaries, "Argosy" or"Company") is engaged in the business of providing casino stylegaming and related entertainment to the public, through its riverboat casinosin Alton, Illinois; Lawrenceburg, Indiana; Riverside, Missouri; Baton Rouge,Louisiana; and Sioux City, Iowa.

            Theaccompanying unaudited condensed consolidated financial statements have beenprepared in accordance with the instructions to Form 10-Q and Article 10 ofRegulation S-X.  Accordingly, they donot include all of the information and footnotes required by generally acceptedaccounting principles for complete financial statements.  Interim results may not necessarily beindicative of results which may be expected for any other interim period or forthe year as a whole.  For furtherinformation, refer to the financial statements and footnotes thereto for theyear ended December 31, 2000, included in the Company's Annual Report on Form10-K (File No. 1-11853).  Theaccompanying unaudited condensed consolidated financial statements contain alladjustments which are, in the opinion of management, necessary to presentfairly the financial position and the results of operations for the periodsindicated.  Such adjustments includeonly normal recurring accruals.  Certain2000 amounts have been reclassified to conform to the 2001 financial statementpresentation.

            TheFinancial Accounting Standards Board recently issued FASB Statement 142,Accounting for Goodwill and Intangible Assets. Upon adoption of the statement, amortization of the remaining book valueof goodwill will cease as of January 1, 2002 and will be tested for impairmentat least annually.  The provisions ofthe statement are effective for fiscal years beginning after December 15,2001.  Goodwill and intangible assets acquiredin transactions completed after June 30, 2001, will follow the new requirementsimmediately.  Based on the Company’spreliminary review, application of the non-amortization provisions of thestatement would have increased diluted income per share by $0.04 and $0.07 forthe three months and six months ended June 30, 2001, respectively.  The diluted income per share effect for thethree months and six months ended June 30, 2000, would have been less than$0.01 for each period, respectively. During 2002, the Company will perform the first of the requiredimpairment tests of goodwill and indefinite lived intangible assets as ofJanuary 1, 2002, and has not yet determined what the effect of these tests willbe on the earnings and financial position of the Company.

            TheCompany adopted new accounting guidance(EITF 00-14 and EITF 00-22) issued in, and effective beginning with the firstquarter 2001, which requires that the cost of the cash-back component of theCompany’s ‘Argosy Preferred Card’ customer loyalty program, includingpromotional coupons, be treated as a reduction of revenues.  These costs had previously been treated as acasino expense.  The new guidanceimpacts only the classification of these costs on Argosy’s income statement.  It does not impact operating profit orEBITDA.  The prior year’s results havebeen reclassified to reflect the impact of implementing this new guidance.

 

**2.  Long-Term Debt**

            Long-termdebt consists of the following:

|                                                                                                                                                    | **June 30,** |    | **December 31,** |                 |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|---------|------------------|----------------------|
|                                                                                                                                                    | **2001**     |    | **2000**         |                 |
|                                                                                                                                                    | ****         |    | ****             |                 |
| Senior Subordinated  Notes including unamortized premium of $8,712 at June 30, 2001, due June  2009, interest payable semi-annually at 10.75% | $            | 358,712 |             | $                    | 200,000 |   |
|                                                                                                                                                    |         |    |             |                 |
| Senior secured line of  credit, expires June 2004, interest payable at least quarterly at  either LIBOR or prime plus a margin                | 227,200      |    | 47,400           |       |
|                                                                                                                                                    |         |    |             |                 |
| Notes payable,  principal and interest payments due quarterly through September 2015,  discounted at 10.5%                                    | 5,441        |    | 5,831            |                 |
|                                                                                                                                                    |         |    |             |                 |
| Notes payable,  principal and interest payments due monthly, interest payable at prime +  1%, secured by gaming vessel and certain equipment  | -            |    | 14,024           |                 |
|                                                                                                                                                    |         |    |             |                 |
| Loans from partner,  principal due in annual installments, interest payable at prime + 6%                                                          | -            |    | 9,081            |                 |
|                                                                                                                                                    | ****         |    | ****             |                 |
|                                                                                                                                                    | 591,353      |    | 276,336          |                 |
| Less:  current maturities                                                                                                                          | 1,446        |    | 23,775           |                 |
|                                                                                                                                                    | ****         |    | ****             |                 |
| Long-term debt, less  current maturities                                                                                                                | $            | 589,907 |             | $                    | 252,561 |   |
|                                                                                                                                                    | ****         |    | ****             |                 |

            OnFebruary 1, 2001, the Company issued $150,000 of additional Senior SubordinatedNotes (“Subordinated Notes”) due 2009. Prior to this issuance, the Company had $200,000 of outstandingSubordinated Notes.  On March 2, 2001,the Company entered into an amended and restated Senior Secured Line of CreditAgreement (“Credit Facility”), increasing the Company’s available line ofcredit from $195,000 to $400,000.  TheCredit Facility is secured by liens on substantially all of the Company’sassets and the Company’s subsidiaries are co-borrowers.  Substantially all of the Company’swholly-owned operating subsidiaries guarantee the Subordinated Notes.  The Subordinated Notes rank junior to all ofthe senior indebtedness of the Company, including borrowings under the CreditFacility.

            TheSubordinated Notes and the Credit Facility contain certain restrictions on thepayment of dividends on the Company’s common stock and the incurrence ofadditional indebtedness, as well as other customary debt covenants.  In addition, the Credit Facility requiresthe Company to maintain certain financial ratios.

**3.  Earnings Per Share**

            The following table sets forth thecomputation of basic and diluted earnings per share:

|                                                                       | **Six Months Ended**                            |       | **Three Months Ended** |       |
|----------------------------------------------------------------------------|-------------------------------------------------|------------|------------------------|------------|
|                                                                       | ****                                            |       | ****                   |       |
|                                                                       | **June 30,**                                    |       | **June 30,**           |       | **June 30,** |   | **June 30,** |   |
|                                                                       | **2001**                                        |       | **2000**               |       | **2001** |   | **2000** |   |
|                                                                       | ****                                            |       | ****                   |       | **** |   | **** |   |
|                                                                       | **(unaudited)**                                 |       | **(unaudited)**        |       | **(unaudited)** |   | **(unaudited)** |   |
| **Numerator:**                                                             |                                            |       |                   |       |   |   |   |   |
| Numerator for basic  and diluted earnings per share -                      |                                            |       |                   |       |   |   |   |   |
|                                                                       | Net Income before extraordinary item            | $          | 28,264                 |       | $ | 21,170 |   | $ | 13,681 |   | $ | 7,751 |   |
|                                                                       |                                                 |       |                        |       |  |   |  |   |
| **Denominator:**                                                           |                                            |       |                   |       |   |   |   |   |
| Denominator for basic  earnings per share -                                |                                            |       |                   |       |   |   |   |   |
|                                                                       | Weighted-average shares outstanding             | 28,512,489 |                   | 28,269,972 |   | 28,568,892 |   | 28,307,027 |   |
|                                                                       |                                            |       |                   |       |   |   |   |   |   |
| Effect of dilutive  securities (computed using the treasury stock method): |                                            |       |                   |       |   |   |   |   |
|                                                                       | Restricted stock                                | -          |                   | 69,165     |   | - |   | 39,330 |   |
|                                                                       | Employee and directors stock options            | 688,355    |                   | 726,810    |   | 654,014 |   | 743,185 |   |
|                                                                       | Warrants                                        | 76,359     |                   | 67,639     |   | 77,477 |   | 69,349 |   |
|                                                                       |                                            |            |                   |            |   |  |   |  |   |
| Dilutive potential common shares                                           | 764,714                                         |       | 863,614                |       | 731,491 |   | 851,864 |   |
|                                                                       |                                                 |       |                        |       |  |   |  |   |
|                                                                       |                                            |       |                   |       |   |   |   |   |
| Denominator for  diluted earnings per share - adjusted                     |                                            |       |                   |       |   |   |   |   |
|                                                                       | Weighted-average shares and assumed conversions | 29,277,203 |                   | 29,133,586 |   | 29,300,383 |   | 29,158,891 |   |
|                                                                       |                                                 |       |                        |       |  |   |  |   |
| Basic income per share  before extraordinary loss                          | $                                               | 0.99       |                   | $          | 0.75 |   | $ | 0.48 |   | $ | 0.27 |   |
| Extraordiary loss                                                          | -                                               |       | (0.04                  | )          | - |   | (0.04 | ) |
|                                                                       |                                                 |       |                        |       |  |   |  |   |
| Basic income per share                                                     | $                                               | 0.99       |                   | $          | 0.71 |   | $ | 0.48 |   | $ | 0.23 |   |
|                                                                       |                                                 |       |                        |       |  |   |  |   |
|                                                                       |                                            |       |                   |       |   |   |   |   |
| Diluted earnings per  share before extraordinary loss                      | $                                               | 0.97       |                   | $          | 0.73 |   | $ | 0.47 |   | $ | 0.27 |   |
| Extraordinary loss                                                         | -                                               |       | (0.04                  | )          | - |   | (0.04 | ) |
|                                                                       |                                                 |       |                        |       |  |   |  |   |
| Diluted earnings per  share                                                | $                                               | 0.97       |                   | $          | 0.69 |   | $ | 0.47 |   | $ | 0.23 |   |
|                                                                       |                                                 |       |                        |       |  |   |  |   |
|                                                                       |                                            |       |                   |       |   |   |   |   |

 

**4. **       **LawrenceburgAcquisition**

             OnFebruary 22, 2001, Argosy Gaming Company completed its purchase of a 29%limited partnership interest in the Argosy Casino and Hotel in Lawrenceburg,Indiana ( the “Lawrenceburg Casino”) from Conseco Entertainment, L.L.C.(“Conseco”).  The purchase price for the29% minority interest was $260 million and included the repayment of Conseco’spreferred equity interest and outstanding partner loans.  The Company and Conseco also settled allpending litigation between the partners.

                OnMarch 8, 2001, the Company completed its purchase of the remaining 13.5%limited partnership interest in the Lawrenceburg Casino from Centaur, Inc.(“Centaur”).  The purchase price for the13.5% minority interest was $105 million.

                As aresult of these acquisitions, the Company now owns 100% of the Lawrenceburgcasino.

                Thepurchase prices for the minority interests were determined based upon estimatesof future cash flows and evaluations of the net worth of the assetsacquired.  The purchases are beingaccounted for under the purchase method. The allocation of the purchase price resulted in approximately $296million in goodwill, which is being amortized over a 40-year life.  The purchases were funded with approximately$155 million of net proceeds received by the Company from issuance ofadditional 103⁄4% senior subordinated notes and borrowings of approximately $210million under the Company’s amended and restated senior credit facility.

                Thefollowing unaudited pro forma consolidated financial information for theCompany has been prepared assuming acquisitions of Conseco and Centaur minorityinterests in our Lawrenceburg property had occurred on the first day of theperiod.

 

|                          | **For the six months ended** |    | **For the three months ended** |   |
|-------------------------------|------------------------------|---------|--------------------------------|--------|
|                          | ****                         |    | ****                           |   |
|                          | **June 30, 2001**            |    | **June 30, 2000**              |   | **June 30, 2001** |   | **June 30, 2000** |   |
|                          | **(unaudited)**              |    | **(unaudited)**                |   | **(unaudited)** |   | **(unaudited)** |   |
|                          | ****                         |    | ****                           |   | **** |   | **** |   |
| Net revenues                  | $                            | 336,700 |                           | $      | 326,178 |   | $ | 165,965 |   | $ | 161,907 |   |
|                          |                              |    |                                |   |  |   |  |   |
| Income from operations        | $                            | 77,302  |                           | $      | 73,065 |   | $ | 37,004 |   | $ | 31,263 |   |
|                          |                              |    |                                |   |  |   |  |   |
| Net income                    | $                            | 28,170  |                           | $      | 21,172 |   | $ | 13,681 |   | $ | 7,107 |   |
|                          |                              |    |                                |   |  |   |  |   |
| Diluted net income per  share | $                            | 0.97    |                           | $      | 0.73 |   | $ | 0.47 |   | $ | 0.25 |   |
|                          | ****                         |    | ****                           |   | **** |   | **** |   |

                Theseunaudited pro forma results are presented for comparative purposes only.  The pro forma results are not necessarilyindicative of what our actual results would have been had the acquisitions beencompleted as of the beginning of the period, or of future results.

**5.**    **Commitments and Contingent Liabilities**

             TheCompany has agreed to provide up to $40,000 as part of our agreement to developand operate a proposed casino in Kenosha, Wisconsin.  The proposed casino would be owned by the Menominee Indian Tribeof Wisconsin.  Of this $40,000commitment, Argosy has advanced $1,600 during 2001 and is obligated to provideup to an additional $3,400 upon the tribe receiving approval from the UnitedStates Bureau of Indian Affairs to place the proposed casino property infederal trust for the benefit of the tribe. The Company’s obligation to provide the next $30,000 of our commitmentwill be made as a subordinated note concurrent with, and conditioned upon, thetribe successfully completing an institutional debt offering to finance themajority of the costs of the project.  Finally,the Company has agreed to provide a $5,000 completion guarantee on theconstruction of the proposed facility.

             The Illinois Gaming Board imposed acondition on its approval of our recent acquisition of Empress Casino Jolietwhich requires the Company to take all steps necessary to economicallydisassociate ourselves from our Kenosha casino development agreement partner byno later than October 1, 2001.  IfArgosy is unable to comply with these conditions, the Company will be subjectto disciplinary action by the Illinois Gaming Board that could include asubstantial monetary penalty and/or revocation of the Empress Casino Jolietgaming license.  Any disciplinary actionimposed upon the Company could, and the loss of the Empress Casino Jolietwould, materially and adversely affect our business and financial condition andwould constitute an event of default under all of our indebtedness.

             ThisKenosha project and our funding commitment are subject to numerous regulatoryapprovals.  Further financial obligationsto our partner are conditioned upon obtaining the requisite regulatoryapprovals and the tribe raising the remaining project costs through aninstitutional debt offering in an amount of $150,000.  If these approvals and outside financing for the project are notobtained by September 30, 2001, our development agreement and relatedobligations will automatically terminate. The nature and magnitude of the issues and obstacles that our Kenoshapartners face lead us to believe that they will not be able to obtain thenecessary approvals in a timely manner. Consequently, the Company believes we will economically disassociatefrom our partner by October 1, 2001.

        The Companyis subject to, from time to time, various legal and regulatory proceedings in theordinary course of its business.  TheCompany believes that current proceedings will not have a material effect onthe financial condition of the Company or the results of its operations.

**6. **        **Subsidiary Guarantors**

             The Credit Facility is secured by afirst lien on substantially all of the Company’s assets and the Company’ssubsidiaries are co-borrowers.  TheSubordinated Notes are fully and unconditionally guaranteed, on a joint andseveral basis, by substantially all of the Company’s subsidiaries.  The Subordinated Notes rank junior to all ofthe senior indebtedness of the Company, including borrowings under the CreditFacility.

             The Company’s subsidiary whichoperates the Lawrenceburg Casino & Hotel is now a guarantor.  Prior to the Company’s acquisition of theminority interests in Lawrenceburg, the subsidiary was a non-guarantor.  As such, previous financial statements havebeen reclassified to reflect this subsidiary as a guarantor.
             Condensed balance sheets as of June30, 2001, and December 31, 2000, are as follows:
 **June 30, 2001**  ****  **Parent  Company** **Guarantors** **Eliminations** **Consolidated**  ****** ******** ******** ******** **         **Current assets:**         Cash  and cash equivalents$4,163 $36,582 $- $40,745  Other  current assets 7,132 8,670 - 15,802       Total  current assets   11,295 45,252 - 56,547               **Net property and equipment**   2,792 392,137 - 394,929                   **Other assets:**     ** **   Goodwill  and other intangible assets, net  13,179  350,945 - 364,124  Investment  in subsidiaries   708,309 -  (708,309)-  Other,  net    237 2,336 - 2,573        Total  other assets721,725 353,281 (708,309)366,697       Total  assets$735,812 $790,670 $(708,309)$818,173               **Current liabilities:**         Accounts  payable$2,202 $12,824 $- $15,026  Other  current liabilities10,127 53,300 - 63,427  Current  maturities of long-term debt776 670 - 1,446        Total  current liabilities 13,105 66,794 - 79,899                 **Long-term debt**585,136 4,771 - 589,907 **Intercompany advances and  investments, net**- 305,564 (305,564)- **Deferred income taxes**4,126 10,551 - 14,677 **Other long-term obligations**- 245 - 245          **Stockholders' equity:**         Common  stock, $.01 par; 60,000,000 shares authorized; 28,758,270 shares issued and  outstanding at June 30, 2001288 1 (1)288  Capital  in excess of par81,918 5,256 (5,256)81,918  Retained  earnings 51,239 397,488 (397,488)51,239       Total  stockholders' equity133,445 402,745  (402,745)133,445      Total  liabilities and stockholders' equity$735,812 $790,670 $(708,309)$818,173      
** **
 **December 31, 2000**  ****  **Parent**        **Company** **Guarantors** **Eliminations** **Consolidated**** ** **** **** **** **** **Current assets:** ** ** ** ** ** ** ** ** Cash  and cash equivalents$3,476 $55,898 $- $59,374  Other  current assets4,842 7,978 - 12,820        Total  current assets8,318 63,876 - 72,194                 **Net property and equipment**2,181 395,808 - 397,989          **Other assets:** ** ** ** ** ** ** ** ** Goodwill  and other intangible assets, net7,657 56,791 - 64,448  Investment  in subsidiaries343,751 - (343,751)-  Other,  net271 2,334 - 2,605       Total  other assets351,679 59,125 (343,751)67,053      Total  assets$362,178 $518,809 $(343,751)$537,236      **Current liabilities:** ** ** ** ** ** ** ** ** Accounts  payable$1,960 $13,344 $- $15,304  Other  current liabilities7,283 59,328 - 66,611  Current  maturities of long-term debt- 23,775 - 23,775       Total  current liabilities9,243 96,447 - 105,690               **Long-term debt**247,400 5,161 - 252,561 **Intercompany advances and** ** ** ** ** ** ** ** ****investments, net**- 102,241 (102,241)- **Deferred income taxes**1,583 9,179 - 10,762 **Other long-term obligations**- 236 - 236 **Minority interests in equity** ** ** ** ** ** ** ** ****of consolidated subsidiaries**- - 64,035 64,035          **Stockholders' equity:** ** ** ** ** ** ** ** ** Common  stock, $.01 par; 60,000,000 shares         authorized;  28,394,423 shares issued and         outstanding  at December 31, 2000284 1 (1)284  Capital  in excess of par80,693 5,256 (5,256)80,693  Retained  earnings22,975 300,288 (300,288)22,975        Total  stockholders' equity103,952 305,545 (305,545)103,952       Total  liabilities and stockholders' equity$362,178 $518,809 $(343,751)$537,236      
 

             Condensedstatements of income for the six and three months ended June 30, 2001 and 2000,are as follows
 **Six Months ended June 30, 2001**  ****  **Parent**        **Company** **Guarantors** **Eliminations** **Consolidated**  **** **** **** ****          **Revenues:** ** ** ** ** ** ** ** ** Casino$- $338,262 $- $338,262    Admissions- 9,111 - 9,111  Food, beverage and  other2,028 35,230 (2,028)35,230        2,028 382,603 (2,028)382,603  Less promotional  allowances(4)(45,899)- (45,903)      Net revenues2,024 336,704 (2,028)336,700               **Costs and expenses :** ** ** ** ** ** ** ** ** Casino- 128,234 - 128,234  Selling, general and  administrative9,219 60,771 (2,028)67,962  Food, beverage and  other- 26,063 - 26,063  Other operating  expenses121 15,899 - 16,020  Depreciation and  amortization176 21,053 - 21,229        9,516 252,020 (2,028)259,508      Income (loss) from  operations(7,492)84,684 - 77,192               **Other income (expense):** ** ** ** ** ** ** ** ** Interest income2,554 954 (2,883)625  Interest expense(12,518)(16,192)2,883 (25,827)       (9,964)(15,238)- (25,202)              Income (loss) before  income taxes, minority interests and equity in net income of consolidated  subsidiaries(17,456)69,446 - 51,990 Equity in net income  of consolidated subsidiaries32,532 - (32,532)- Minority interests- (4,086)- (4,086)Income tax (expense)  benefit13,188 (32,828)- (19,640)     Net income$28,264 $32,532 $(32,532)$28,264      
** **
 **Six months ended June  30, 2000**  ****  **Parent**        **Company** **Guarantors** **Eliminations** **Consolidated**  **** **** **** **** **Revenues:** ** ** ** ** ** ** ** ** Casino$- $330,276 $- $330,276  Admissions- 9,704 - 9,704  Food,  beverage and other2,071 32,534 (1,871)32,734        2,071 372,514 (1,871)372,714  Less  promotional allowances(6)(46,530)- (46,536)      Net  revenues2,065 325,984 (1,871)326,178               **Costs and expenses :** ** ** ** ** ** ** ** ** Casino- 121,724 - 121,724  Selling,  general and administrative7,073 63,328 (1,871)68,530  Food,  beverage and other- 22,730 - 22,730  Other  operating expenses154 14,802 - 14,956  Depreciation  and amortization186 17,863 - 18,049  Write  down of assets6,800 -   6,800        14,213 240,447 (1,871)252,789      Income  (loss) from operations(12,148)85,537 - 73,389               **Other income (expense):** ** ** ** ** ** ** ** ** Interest  income3,263 2,958 (5,290)931  Interest  expense(16,398)(8,404)5,290 (19,512)        (13,135)(5,446)- (18,581)               Income  (loss) before income taxes, minority interests, extraordinary item and equity  in net income of consolidated subsidiaries(25,283)80,091 - 54,808 Equity  in net income of consolidated subsidiaries37,007 - (37,007)- Minority  interests- (20,238)- (20,238)Income  tax (expense) benefit9,446 (22,846)- (13,400)Extraordinary  loss on extinguishment of debt(1,154)- - (1,154)     Net  income$20,016 $37,007 $(37,007)$20,016      
** **
 **Three months ended June  30, 2001**  ****  **Parent**        **Company**** ****Guarantors**** ****Eliminations**** ****Consolidated**** ** **** **** **** **** **Revenues:** ** ** ** ** ** ** ** ** Casino$- $166,482 $- $166,482  Admissions- 4,472 - 4,472  Food,  beverage and other1,075 18,063 (1,075)18,063       1,075 189,017 (1,075)189,017  Less  promotional allowances(2)(23,050)- (23,052)     Net  revenues1,073 165,967 (1,075)165,965      **Costs and expenses :** ** ** ** ** ** ** ** ** Casino- 63,704 - 63,704  Selling,  general and administrative4,294 29,429 (1,075)32,648  Food,  beverage and other- 13,485 - 13,485  Other  operating expenses66 7,902 - 7,968  Depreciation  and amortization92 11,064 - 11,156       4,452 125,584 (1,075)128,961      Income  (loss) from operations(3,379)40,383 - 37,004               **Other income (expense):** ** ** ** ** ** ** ** ** Interest  income1,126 376 (1,363)139  Interest  expense(5,292)(10,016)1,363 (13,945)      (4,166)(9,640)- (13,806)              Income  (loss) before income taxes, minority interests and equity in net income of  consolidated subsidiaries(7,545)30,743 - 23,198 Equity  in net income of consolidated subsidiaries13,962 - (13,962)- Minority  interests- - - - Income  tax (expense) benefit7,264 (16,781)- (9,517)     Net  income$13,681 $13,962 $(13,962)$13,681      
 

****
 **Three months ended June  30, 2000**  ****  **Parent**        **Company** **Guarantors** **Eliminations** **Consolidated**** ** **** **** **** **** **Revenues:** ** ** ** ** ** ** ** ** Casino$- $164,749 $- $164,749  Admissions- 4,716 - 4,716  Food,  beverage and other853 16,237 (853)16,237       853 185,702 (853)185,702  Less  promotional allowances(2)(23,793)- (23,795)     Net  revenues851 161,909 (853)161,907      **Costs and expenses :** ** ** ** ** ** ** ** ** Casino- 60,525 - 60,525  Selling,  general and administrative3,498 32,200 (853)34,845  Food,  beverage and other- 11,671 - 11,671  Other  operating expenses47 7,339 - 7,386  Depreciation  and amortization91 9,122 - 9,213  Write  down of assets6,800 - - 6,800       10,436 120,857 (853)130,440      Income  (loss) from operations(9,585)41,052 - 31,467      **Other income (expense):** ** ** ** ** ** ** ** ** Interest  income1,530 1,389 (2,470)449  Interest  expense(7,938)(3,937)2,470 (9,405)      (6,408)(2,548)- (8,956)              Income  (loss) before income taxes, minority interests, extraordinary item and equity  in net income of consolidated subsidiaries(15,993)38,504 - 22,511 Equity  in net income of consolidated subsidiaries17,445 - (17,445)- Minority  interests- (9,860)- (9,860)Income  tax (expense) benefit6,299 (11,199)- (4,900)Extraordinary  loss on extinguishment of debt(1,154)- - (1,154)     Net  income$6,597 $17,445 $(17,445)$6,597      
 

             Condensedstatements of cash flows for the six months ended June 30, 2001 and 2000, areas follows:
 **Six months ended June 30, 2001**  ****  **Parent**        **Company** **Guarantors** **Eliminations** **Consolidated**  **** **** **** ****   ** ** ** ** ** ** ** ****Net cash provided by (used in) operating activities****$**(1,552)$52,207 $- $50,655    **** **** **** **** **Cash flows from investing activities:** ** ** ** ** ** ** ** ** Purchases of property  and equipment(752)(13,337)- (14,089) Purchase of minority  interests in Partnership1,373 (303,010)(65,062)(366,699) Investments in and  advances from (to) subsidiaries(332,025)266,963 65,062 -  Other- (1,831)- (1,831) **** **** **** ****  Net cash used in  investing activities(331,404)(51,215)- (382,619) **** **** **** ****          **Cash flows from financing activities :** ** ** ** ** ** ** ** ** Proceeds from line of  credit, net179,800 - - 179,800  Proceeds from issuance  of subordinated notes159,000 - - 159,000  Payments on long-term  debt- (14,414)- (14,414) Payments of deferred  finance costs(6,386)- - (6,386) Repayment of partner  loans- (266)- (266) Partnership equity  distributions- (5,199)- (5,199) Payment of preferred  equity return and dividends to partner  (456)- (456) Proceeds from stock  option exercises1,229 - - 1,229  Other- 27 - 27  **** **** **** ****  Net cash provided by  (used in) financing activities333,643 (20,308)- 313,335  **** **** **** **** Net (decrease)  increase in cash and cash equivalents687 (19,316)- (18,629)Cash and cash equivalents,  beginning of period3,476 55,898 - 59,374  **** **** **** **** Cash and cash  equivalents, end of period$4,163 $36,582 $- $40,745      
 

** **
 **Six months ended June 30, 2000**  ****  **Parent**        **Company** **Guarantors** **Eliminations** **Consolidated**** ** **** **** **** **** **Net cash provided by (used in) operating activities**$(3,944)$79,209 $- $75,265               **Cash flows from investing activities:** ** ** ** ** ** ** ** ** Purchases of property  and equipment(757)(17,203)- (17,960) Purchase of minority  interest in partnership(7,000)- - (7,000) Investments in and  advances (to) from subsidiaries39,994 (39,994)- -  **** **** **** ****  Net cash (used in)  provided by investing activities32,237 (57,197)- (24,960) **** **** **** ****          **Cash flows from financing activities :** ** ** ** ** ** ** ** ** Repayment of line of  credit, net(30,100)- - (30,100) Payments on long-term  debt and          installment contracts- (2,808)- (2,808) Repurchase of First  Mortgage Notes(23,716)- - (23,716) Decrease in restricted  cash held in escrow25,244 - - 25,244  Repayment of partner  loans- (9,167)- (9,167) Partnership equity  distributions- (8,523)- (8,523) Repayment of partner  capital contribution- (1,890)- (1,890) Payment of preferred  equity return and         dividends to partner- (1,165)- (1,165) Other91 (49)- 42   **** **** **** ****  Net cash used in  financing activities(28,481)(23,602)- (52,083)  **** **** **** **** Net (decrease) in cash  and cash equivalents(188)(1,590)- (1,778)Cash and cash  equivalents, beginning of  period531 46,559 - 47,090  **** **** **** **** Cash and cash  equivalents, end of period$343 $44,969 $- $45,312  **** **** **** **** 
 

**7.**                       **Subsequent Event – Acquisition ofEmpress Casino Joliet**

             On July 31, 2001, the Companycompleted the acquisition of the Empress Casino Joliet Corporation forapproximately $465 million.  Thisacquisition was funded through the issuance of $200 million of 9.0% SeniorSubordinated Notes due 2011 and a $275 million Term Loan through our newamended and restated Credit Facility dated July 31, 2001.

 

**ARGOSY GAMING COMPANYMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

                           *Except where otherwise noted, thewords, “we,” “us,” “our” and similar terms, as well as references to “Argosy”or the “Company” refer to Argosy Gaming Company and all of its subsidiaries.*

**Overview**

**            **             Throughour subsidiaries, we own and operate the Alton Belle Casino, in Alton,Illinois; the Argosy Casino in Riverside, Missouri; the Argosy Casino in BatonRouge, Louisiana; the Belle of Sioux City Casino in Sioux City, Iowa; and theArgosy Casino in Lawrenceburg, Indiana. In the first quarter of 2001, the Company became the sole owner of theArgosy Casino in Lawrenceburg, Indiana, through the purchase of the 42.5%minority interests in the property. Prior to this acquisition, we were the majority owner of the Lawrenceburgcasino and, as such, our historical consolidated financial statements includedthe assets, liabilities and results of operations for the Lawrenceburg casinoon a consolidated basis.  As a result,we have allocated the entire purchase price on a preliminary basis togoodwill.  On February 5, 2001, weopened our 300-room hotel at our Baton Rouge location.  On July 31, 2001, we completed ouracquisition of the Empress Casino Joliet.

**Recent Developments**

             *Property Overview:* The Empress CasinoJoliet is located in Joliet, Illinois on a 300-acre site approximately 40 milessouthwest of Chicago and approximately two miles from the intersection ofInterstate 55 and Interstate 80. For the twelve months ending March 31, 2001,the Empress Casino Joliet generated $248.4 million in net revenue and $73.8million in EBITDA. The casino consists of two adjacent riverboat vesselsproviding a combined 36,300 square feet of gaming space with 1,110 slotmachines and 35 table games. Both riverboats remain dockside and offercustomers unlimited ingress and egress. The dockside complex features a 150,000square foot Egyptian themed pavilion with three restaurants, an entertainmentlounge and banquet/conference facilities. The pavilion also contains anoff-track pari-mutuel betting parlor. The property includes a 102-room hotel,surface parking areas with approximately 2,350 spaces and an 80-spacerecreational vehicle park.

             *EmpressCasino Joliet Gaming Market:*TheEmpress Casino Joliet draws from a population of approximately eight millionpeople who reside within 50 miles of Joliet, including the southern and westernregions of the greater Chicago metropolitan area, as well as portions of northcentral Illinois. The Empress Casino Joliet competes against eight othercasinos in the Chicago gaming market, which has the largest local population ofany state-licensed gaming market and is the third largest gaming market in theUnited States. The nine riverboat casinos operating in the Chicago marketgenerated over $2 billion of gaming revenues during the twelve months endingMarch 31, 2001, an 8% increase from the prior comparable twelve month period.The Empress Casino Joliet had 9% of the gaming positions in the Chicago marketas of December 31, 2000 and captured 12% of the market's gaming revenues in2000.

             TheChicago market comprises four casinos in northern Illinois and five casinos inIndiana on Lake Michigan. Empress Casino Joliet's closest competitor is locatedin downtown Joliet approximately five miles from the Empress Casino Joliet.This competitor is currently constructing a new barge casino to replace itsexisting riverboat facilities, which is expected to be completed in the thirdquarter of 2001.  Illinois licenseeswithin the Chicago market offer dockside gaming providing customers withunlimited casino access. Conversely, casinos in the East Chicago marketoperating under an Indiana license are required to cruise, which restrictsboarding times. Entrance into the market is limited by the fixed number ofgaming licenses available in Illinois and Indiana. A maximum of ten licensesare permitted in Illinois, of which nine have been issued and a maximum ofeleven licenses are permitted in Indiana, of which ten have been issued.

             *Challengeto 1999 Amendment to Illinois Riverboat Gambling Act.*Becausewe already hold an Illinois gaming license, our acquisition of the EmpressCasino Joliet would not have been permitted prior to the 1999 amendment to theIllinois Riverboat Gambling Act. In June 1999, Illinois passed an amendment tothe Illinois Riverboat Gambling Act to permit casinos to offer continuousdockside gaming with unlimited ingress and egress and to permit the ownershipof multiple gaming licenses. The amendment also authorized gaming in CookCounty, Illinois and the transfer of a dormant gaming license from EastDubuque, Illinois to the Cook County Village of Rosemont. A group of plaintiffswho sought a gaming license for Lake County, Illinois filed a lawsuitrequesting the court to declare that the 1999 amendment violates the Illinoisand U.S. constitutions because the grant of the Rosemont license amounted to"special legislation." If a court invalidates the grant of theRosemont license, all of the provisions of the 1999 amendment, including theprovisions legalizing the ownership of multiple licenses, would also beinvalidated under the terms of the 1999 amendment. On January 25, 2001, thecourt dismissed the lawsuit concluding that the plaintiffs lacked standing andfailed to exhaust their administrative remedies. Consequently, the court didnot consider the merits of the plaintiffs' lawsuit. The plaintiffs haveappealed the lower court's ruling. If the appeal is successful, it is likelythat the case would be remanded to the lower court to initiate proceedings regardingthe merits of the plaintiffs' claims. A ruling of the lower court on the meritswould likely follow the lengthy process associated with discovery, fact-findingand trial. Thereafter, the lower court's decision would be subject to appeal toan appellate court and potentially to the Illinois Supreme Court.

             *Transfer of Ownership Agreement.* Inconnection with its approval of our proposed acquisition of the Empress CasinoJoliet, the Illinois Gaming Board required us to enter into a transfer ofownership agreement.  This agreement,which is similar to an agreement entered into by another Illinoismultiple-license owner, is designed to permit the continuous operation of twoIllinois casinos by a single owner in the event the 1999 amendment provisionsrelating to multiple license ownership were invalidated. Under this agreement,if the relevant provisions of the amendment to the Illinois Riverboat GamblingAct are invalidated by a final, non-appealable judicial ruling, we will beobligated to transfer all of our shares of the Empress Casino JolietCorporation to a trustee to hold in trust and use our best efforts toeffectuate a sale of the shares at fair market value. During this time, wewould manage the Empress Casino Joliet for a fee and be permitted to makedistributions for attributable taxes and debt service. If we do not sell theshares within one year, or such longer time as agreed to by the Illinois GamingBoard, the Empress Casino Joliet would be required to immediately relinquishits gaming license. In this event, we would be obligated to pay the IllinoisGaming Board an amount equal to ninety percent (90%) of the operating profitsof the Empress Casino Joliet earned during the period the shares were in trust.
             Thetransfer of ownership agreement provides that the trust will terminate uponlegislative action that causes the Illinois Riverboat Gambling Act to permitthe ownership of multiple gaming licenses or following a corporatereorganization by us that permits us to comply with the provisions of theIllinois Riverboat Gambling Act.

             Theplacement in trust of our stock in the Empress Casino Joliet pursuant to theagreement would constitute an event of default under the indenture governingour 10-3/ 4 % senior subordinated notes due 2009 and under our senior creditfacility. Because the challenge to the 1999 amendment is in the early stages oflitigation and our obligation to put the stock in trust is not triggered untila final, non-appealable judgment invalidating the 1999 amendment is entered, webelieve we would have sufficient notice and time to negotiate appropriateamendments to or refinance our 10-3/ 4 % senior subordinated notes due 2009 andsenior credit facility to avoid such an event of default. In the event that weare unable to satisfactorily amend or refinance these debt instruments, all ofour indebtedness, including our recently issued 9% senior subordinated notes,would be in default and our business and financial condition would bematerially adversely affected. If the provisions of the 1999 amendmentlegalizing dockside gaming were invalidated we would be required to resumecruising and suspend our dockside gaming activities at the Empress CasinoJoliet until such time as the Illinois legislature passed a law reauthorizingdockside gaming. The loss of dockside gaming would adversely affect ourfinancial results.

             *Conditions of Illinois Gaming Board Approval.*The Illinois Gaming Board imposed two conditions on its approval of ouracquisition of Empress Casino Joliet. First, we are required to take all stepsnecessary to economically disassociate ourselves from our Kenosha casinodevelopment agreement partner by no later than October 1, 2001. Second, we arerequired to develop and fully implement a comprehensive due diligence plan to ensurethe integrity and accountability of the persons or entities with whom weconduct business. If we are unable to comply with these conditions, we will besubject to disciplinary action by the Illinois Gaming Board that could includea substantial monetary penalty and/or revocation of the Empress Casino Jolietgaming license. Any disciplinary action imposed upon us could, and the loss ofthe Empress Casino Joliet license would, materially and adversely affect ourbusiness and financial condition and would constitute an event of default underall of our indebtedness, including the notes.

             To date, we believe that we havesatisfied all of our obligations under the Kenosha casino developmentagreements. Our further financial obligations to our partner are conditionedupon obtaining the requisite regulatory approvals and the tribe raising theremaining project costs through an institutional debt offering in an amount of$150 million. The proposed Kenosha casino project requires, among other things,approval from the United States Bureau of Indian Affairs to place in federaltrust the proposed casino site for the benefit of the tribe. If these approvalsand outside financing for the project are not obtained by September 30, 2001,our development agreement and related obligations will automatically terminate.The nature and magnitude of the issues and obstacles that our Kenosha partnersface lead us to believe that they will not be able to obtain the necessaryapprovals in a timely manner. Consequently, we believe we will satisfy ourcondition to economically disassociate from Nii-Jii by October 1, 2001. Tosatisfy the second condition, we have commenced developing a due diligence planthat we will submit to the Illinois Gaming Board for approval andimplementation. This comprehensive due diligence plan will improve our overallinternal control procedures and we believe that we will satisfy the secondIllinois Gaming Board condition.

 
 **For the six months ended** **For the three months ended**  **** ****  **June 30,** **June 30,** **June 30,** **June 30,**  **2001** **2000** **2001** **2000**  **** **** **** ****  **(unaudited****)** **(unaudited****)** **(unaudited****)** **(unaudited)** **Casino Revenues**         Alton Belle Casino$61,576 $56,376 $30,489 $28,187  Argosy Casino - Riverside49,269 48,351 23,894 23,522  Argosy Casino - Baton Rouge38,553 35,977 19,499 18,303  Belle of Sioux City Casino17,968 17,621 9,099 8,626  Argosy Casino - Lawrenceburg170,896 171,951 83,501 86,111       Total$338,262 $330,276 $166,482 $164,749  **** **** **** ****          **Net Revenues (1)**         Alton Belle Casino$59,239 $54,110 $29,299 $26,908  Argosy Casino - Riverside47,214 46,205 22,823 22,388  Argosy Casino - Baton Rouge38,373 34,101 19,803 17,119  Belle of Sioux City Casino17,504 17,022 8,872 8,298  Argosy Casino - Lawrenceburg174,155 174,405 85,086 87,111  Other215 335 82 83       Total (1)$336,700 $326,178 $165,965 $161,907  **** **** **** ****          **Income (loss) from Operations(2)**         Alton Belle Casino$18,458 $16,356 $8,958 $7,922  Argosy Casino - Riverside10,519 8,449 4,689 3,732  Argosy Casino - Baton Rouge4,559 6,370 2,438 2,990  Belle of Sioux City Casino3,722 3,090 1,867 1,540  Argosy Casino - Lawrenceburg55,582 56,264 27,002 27,263  Corporate(12,427)(7,220)(6,330)(3,637) Jazz Enterprises, Inc. (5)(2,500)(2,585)(1,257)(1,261) Other(721)(535)(363)(282)      Total (6)$77,192 $80,189 $37,004 $38,267  **** **** **** ****          **EBITDA(2)(3)**         Alton Belle Casino$21,351 $19,411 $10,413 $9,424  Argosy Casino - Riverside12,624 11,188 5,770 5,116  Argosy Casino - Baton Rouge7,517 8,633 4,012 4,202  Belle of Sioux City Casino4,501 3,858 2,257 1,941  Argosy Casino - Lawrenceburg63,853 66,829 30,656 32,608  Lawrenceburg financial advisory fee (4)(927)(3,342)- (1,630) Corporate(9,345)(7,034)(4,363)(3,546) Jazz Enterprises, Inc. (5)(1,124)(1,235)(569)(586) Other(29)(70)(16)(49)      Total (6)$98,421 $98,238 $48,160 $47,480  **** **** **** ****          
** **

 
****(1)New  accounting guidance issued in, and effective beginning with the first quarter  2001 requires that the cost of the cash-back component of the Company’s  ‘Argosy Preferred Card’ customer loyalty program, including promotional  coupons, be treated as a reduction of revenues.  These costs had previously been treated as a casino  expense.  The new guidance impacts  only the classification of these costs on Argosy’s income statement.  It does not impact operating profit or  property EBITDA.  The prior year’s  results have been reclassified to reflect the impact of implementing this new  guidance.  (2)Income  from operations and EBITDA exclude (i) consideration of any management fee  paid to us, (ii) 42.5% minority interest in our Lawrenceburg casino for  periods prior to our February 2001 acquisition of Conseco Entertainment,  L.L.C.’s 29.0% minority interest and our March 2001, acquisition of Centaur,  Inc.’s 13.5% minority interest and (iii) the 30% minority interest in our  Sioux City casino for the period prior to our July 2000 acquisition of this  interest.  (3)“EBITDA”  is defined as earnings before interest, taxes, depreciation and amortization  and is presented before any management fees paid to Argosy.  EBITDA should not be construed as an alternative  to operating income, or net income (as determined in accordance with  generally accepted accounting principles) as an indicator of our operating  performance, or as an alternative to cash flows generated by operating,  investing and financing activities (as an indicator of cash flow or a measure  of liquidity).  EBITDA is presented  solely as a supplemental disclosure because management believes that it is a  widely used measure of operating performance in the gaming industry and for  companies with a significant amount of depreciation and amortization.  EBITDA may not be comparable to similarly  titled measures reported by other companies.   We have other significant uses of cash flows, including debt service  and capital expenditures, which are not reflected in EBITDA.  (4)The  Lawrenceburg partnership paid a financial advisory fee equal to 5.0% of its  EBITDA to a minority partner prior to our acquisition of Conseco’s minority  interest in February, 2001.  (5)Jazz  Enterprises, Inc. is a wholly-owned subsidiary that owns and operates the  Catfish Town real estate development adjacent to the Company’s Baton Rouge  casino.  (6)Excludes  a $6.8 million pretax charge related to the write-off of assets for the three  and six months ended June 30, 2000.   
**Six months ended June 30, 2001 compared to six months endedJune 30, 2000**

             *Casino*—Casinorevenues for the six months ended June 30, 2001, increased $8.0 million, or2.4%, to $338.3 million from $330.3 million for the six months ended June 30,2000.  The western properties (Alton,Riverside, Sioux City and Baton Rouge) reported an aggregate 5.7% increase incasino revenues from $158.3 million to $167.4 million. In particular, Altoncasino revenues increased from $56.4 million to $61.6 million, Riverside casinorevenues increased from $48.4 million to $49.3 million, Sioux City casinorevenues increased from $17.6 million to $18.0 million, and Baton Rouge casinorevenues increased from $36.0 million to $38.6 million. Lawrenceburg casinorevenues decreased $1.1 million, or 0.6%, to $170.9 million for the six monthsended June 30, 2001, from $172.0 million for the six months ended June 30,2000.  Each of our casinos reportedincreases in the average win per passenger for the six months ended June 30,2001, versus the six months ended June 30, 2000.

             Casinoexpenses increased $6.5 million to $128.2 million for the six months ended June30, 2001, from $121.7 million for the six months ended June 30, 2000.  This increase is due to increased gamingtaxes totaling $2.8 million and increases in other casino expenses of $3.7million to support the overall increased revenues as well as increased payrollrelated costs at all properties.

             *Admissions*—Admissionsrevenues (net of complimentary admissions) decreased to $1.8 million for thesix months ended June 30, 2001, from $3.3 million for the six months ended June30, 2000, due to an increase in complimentary admissions given to customers aspart of Lawrenceburg’s marketing program.

             *Food,Beverage and Other*—Food, beverage and other revenues increased $2.5million to $35.2 million for the six month period ended June 30, 2001, from$32.7 million for the six month period ended June 30, 2000. Food, beverage andother net profit decreased $0.8 million to $9.2 million for the six monthsended June 30, 2001, from $10.0 million for the six months ended June 30, 2000.

             *Selling,General and Administrative*—Selling, general and administrativeexpenses decreased $0.5 million to $68.0 million for the six months ended June30, 2001, from $68.5 million for the six months ended June 30, 2000, dueprimarily to a decrease in management fees of $2.4 million (due to Argosy’sacquisition of Lawrenceburg’s minority interests in the first quarter 2001),offset by increases in  general andadministrative expenses at our properties.

             *OtherOperating Expenses*—Other operating expenses increased by $1.0million to $16.0 million for the six months ended June 30, 2001, as compared to$15.0 million for the six months ended June 30, 2000, due to increases attributableto the overall increase in revenues.

             *Depreciationand Amortization*—Depreciation and amortization increased $3.2million from $18.0 million for the six months ended June 30, 2000, to $21.2million for the six months ended June 30, 2001, due primarily to $2.9 millionin incremental goodwill amortization related to the Lawrenceburg acquisitionlate in the first quarter 2001.

             *Write Downof Assets –*For the six months ended June 30, 2000, $6.8 millionrelated to the Alton landing facility was written down.

             *InterestExpense*—Net interest expense increased $6.6 million to $25.2 millionfor the six months ended June 30, 2001, from $18.6 million for the six monthsended June 30, 2000.  This increase isprimarily attributable to additional borrowings under our amended and restatedCredit Facility and the issuance of additional Senior Subordinated Notesrelated to our Lawrenceburg acquisition completed late in the first quarter2001.
             *Minority Interests –*Our minority interestexpense decreased by $16.1 million to $4.1 million for the six months endedJune 30, 2001, as compared to $20.2 million for the six months ended June 30,2000.  This decrease is attributable toour Lawrenceburg casino minority interest acquisitions during the first quarter2001, and as the sole owner, we will no longer incur minority interest expense.

             *Income TaxExpense –*Income tax expense increased by $6.2 million to $19.6million for the six months ended June 30, 2001, from $13.4 million for the sixmonths ended June 30, 2000.  During thesix months ended June 30, 2001 and 2000, we recorded income tax expense ateffective rates of 41% and 39%, respectively.

             *ExtraordinaryLoss –*We recorded an extraordinary loss of $1.2 million for the sixmonths ended June 30, 2000, related to the completion of the final phase of theearly extinguishment of debt in conjunction with the 1999 refinancing.  This extraordinary loss is net of a $0.8million tax benefit.

             *Net Income –*Net income was $28.3 million for the six months ended June 30, 2001,compared to $20.0 million for the six months ended June 30, 2000, due primarilyto the factors discussed above.

**Three months ended June 30, 2001 compared to three monthsended June 30,  2000**

                *Casino*—Casinorevenues for the three months ended June 30, 2001, increased $1.8 million, or1.1%, to $166.5 million from $164.7 million for the three months ended June 30,2000.  The western properties (Alton,Riverside, Sioux City and Baton Rouge) reported an aggregate 5.5% increase incasino revenues from $78.6 million to $83.0 million. In particular, Altoncasino revenues increased from $28.2 million to $30.5 million, Riverside casinorevenues increased from $23.5 million to $23.9 million, Sioux City casinorevenues increased from $8.6 million to $9.1 million, and Baton Rouge casinorevenues increased from $18.3 million to $19.5 million. Lawrenceburg casinorevenues decreased $2.6 million, or 3.0%, to $83.5 million for the three monthsended June 30, 2001, from $86.1 million for the three months ended June 30,2000.  Each of our casinos reportedincreases in the average win per passenger for the three months ended June 30,2001, versus the three months ended June 30, 2000.

                Casinoexpenses increased $3.2 million to $63.7 million for the three months endedJune 30, 2001, from $60.5 million for the three months ended June 30,2000.  This increase is due to increasedgaming taxes totaling $1.1 million and increases in other casino expenses of$2.1 million to support the overall increased revenues as well as increasedpayroll related costs at all properties.

                *Admissions*—Admissionsrevenues (net of complimentary admissions) decreased to $0.8 million for thethree months ended June 30, 2001, from $1.6 million for the three months endedJune 30, 2000, due to an increase in complimentary admissions given tocustomers as part of Lawrenceburg’s marketing program.

                *Food,Beverage and Other*—Food, beverage and other revenues increased $1.9million to $18.1 million for the three month period ended June 30, 2001, from$16.2 million for the three month period ended June 30, 2000.  Food, beverage and other net profit was $4.6million for the three months ended June 30, 2001, and for the three monthsended June 30, 2000.

                *Selling,General and Administrative*—Selling, general and administrative expensesdecreased $2.2 million to $32.6 million for the three months ended June 30,2001, from $34.8 million for the three months ended June 30, 2000, dueprimarily to a decrease in management fees of $1.6 million (due to Argosy’sacquisition of Lawrenceburg’s minority interest in the first quarter 2001) anda  net decrease of $0.6 million inpromotions and general administrative costs.

                *OtherOperating Expenses*—Other operating expenses increased by $0.6million to $8.0 million for the three months ended June 30, 2001, as comparedto $7.4 million for the three months ended June 30, 2000, due to increasesattributable to the overall increase in revenues.

                *Depreciationand Amortization*—Depreciation and amortization increased $2.0million from $9.2 million for the three months ended June 30, 2000, to $11.2million for the three months ended June 30, 2001, due primarily to $1.9 millionin incremental goodwill amortization related to the Lawrenceburg acquisitionlate in the first quarter 2001.

                *Write Downof Assets –*For the three months ended June 30, 2000, $6.8 millionrelated to the Alton landing facility was written down.

                *InterestExpense*—Net interest expense increased $4.8 million to $13.8 millionfor the three months ended June 30, 2001, from $9.0 million for the threemonths ended June 30, 2000.  Thisincrease is primarily attributable to additional borrowings under our amendedand restated Credit Facility and the issuance of additional Senior SubordinatedNotes related to our Lawrenceburg acquisition completed late in the firstquarter 2001.

             *Minority Interests –*We had no minority interest expense for the three monthsended June 30, 2001, as compared to $9.9 million for the three months endedJune 30, 2000.  This decrease isattributable to our Lawrenceburg casino minority interest acquisitions duringthe first quarter 2001, and as the sole owner, we no longer incur minorityinterest expense.

                *Income TaxExpense –*Income tax expense increased by $4.6 million to $9.5million for the three months ended June 30, 2001, from $4.9 million for thethree months ended June 30, 2000. During the three months ended June 30, 2001 and 2000, we recorded incometax expense at effective rates of 41% and 39%, respectively.

                *ExtraordinaryLoss –*We recorded an extraordinary loss of $1.2 million for thethree months ended June 30, 2000, related to completion of the final phase ofthe early extinguishment of debt in conjunction with the 1999 refinancing.  This extraordinary loss is net of a $0.8million tax benefit.

                *Net Income –*Net income was $13.7 million for the three months ended June 30,2001, compared to $6.6 million for the three months ended June 30, 2000, dueprimarily to the factors discussed above.

**Competition**

                OurAlton Casino faces competition from four other riverboat casino operators inthe St. Louis area.  Our RiversideCasino faces competition from three casino companies in the Kansas Cityarea.  Our Baton Rouge Casino facescompetition from one casino located in downtown Baton Rouge, a nearby NativeAmerican casino and multiple casinos throughout Louisiana. We face competitionin Sioux City, Iowa from video gaming devices in nearby South Dakota, from twoland-based Native American casinos and, to a lesser extent, from slot machinesat a pari-mutual race track in Council Bluffs, Iowa and from two riverboatcasinos in the Council Bluffs, Iowa/Omaha, Nebraska market.  The Lawrenceburg casino faces competitionfrom two riverboat casinos in the Cincinnati market, the second of which openedin October 2000.  In addition, theLawrenceburg casino competes with a riverboat casino in the Louisville,Kentucky area approximately 100 miles from our Lawrenceburg facility.  There could be further unanticipatedcompetition in any market which we operate as a result of legislative changesor other events.  We expect each marketin which we participate, both current and prospective, to be highlycompetitive.

**Liquidity and Capital Resources**

                Inthe six months ended June 30, 2001, we generated cash flows from operatingactivities of $50.7 million compared to $75.3 million for the same period in2000.  This reduction is due primarilyto benefitting from the utilization of net operating loss carry forwards whichreduced cash tax payments by approximately $12.5 million during the six monthsended June 30, 2000.

             Inthe six months ended June 30, 2001, we used cash flows for investing activitiesof $382.6 million compared to $25.0 million for the six months ended June 30,2000.  The increase in the use of fundsfor the six months ended June 30, 2001, is due primarily to our acquisition ofthe minority interests in the Lawrenceburg casino requiring the use of $366.7million in cash.  During the six monthsended June 30, 2001, $6.0 million of cash flows was used for construction ofthe Baton Rouge Hotel.

             Duringthe six months ended June 30, 2001, cash of $313.3 million was provided byfinancing activities compared to using $52.1 million of cash flows forfinancing activities for the same period in 2000.  In the first quarter 2001, $159.0 million was provided throughthe issuance of $150.0 million of additional 103⁄4% Senior Subordinated Notes,due 2009, at a price of 106% of par.  Inaddition, as of June 30, 2001, we had additional net borrowings of $179.8 millionon our line of credit.  These funds wereused to fund the purchase of the Lawrenceburg casino minority interest.  Cash flows in 2001 and 2000 were used forrepayment of long-term debt, repayment of partner loans, and distributionsrelated to the Lawrenceburg partnership.

                At June 30, 2001, we hadapproximately $40.7 million of cash and cash equivalents.  At June 30, 2001, we had outstanding $358.7million of Senior Subordinated Notes, due June 2009, including $8.7 million ofunamortized premium, and $227.2 million on a senior secured revolving creditfacility, due June 2004.  The SeniorSubordinated Notes bear interest at 10.75%, and the Senior Secured CreditFacility bears interest at LIBOR or prime plus a margin. As of June 30, 2001,availability under the credit facility was approximately $170.9 million.  The Subordinated Notes and the CreditFacility contain certain restrictions on the payment of dividends on theCompany’s common stock and the occurrence of additional indebtedness, as wellas other typical debt covenants.  Inaddition, the Credit Facility requires the Company to maintain certainfinancial ratios as follows:  (1) TotalLeverage Ratio of a maximum of 4.0 to 1.0; (2) Senior Leverage Ratio of amaximum of 2.75 to 1.0; and (3) Fixed Charge Ratio of a minimum of 1.25 to1.0.  As of June 30, 2001, the Companyis in compliance with these ratios.

             Wehave made a significant investment in property and equipment and plan to makesignificant additional investments at certain of our existing properties.  In the second half of 2001, we expectmaintenance capital expenditures primarily related to the purchase of newgaming product and facility enhancements to be approximately $13.3 million, andexpenditures related to other project capital expenditures to be approximately$6.1 million.

             OnJuly 31, 2001, we completed our acquisition of the Empress Casino Joliet forapproximately $465 million.  Thisacquisition was funded through the issuance of $200 million of 9.0% SeniorSubordinated Notes due 2011 and a $275 million Term Loan under our amended andrestated Credit Facility dated July 31, 2001. We believe that cash on hand, operating cash flows, and funds availableunder our Credit Facility will be sufficient to fund our current operating,capital expenditure and debt service obligations for the next 12 months.

             Consistentwith gaming industry practice, we conduct our operations with a net workingcapital deficit.  Unlike traditionalindustrial companies, a gaming company’s balance sheet has limited accountsreceivable and inventories.  In addition,casinos generate significant cash on a daily basis.  We generally apply our daily cash flows to pay down indebtednessunder our revolving credit facility and pay our current liabilities pursuant totheir normal cycles.  Given thesignificant daily cash flows generated by our operations and the financialflexibility provided by our credit facility, the existence of a working capitaldeficit has no impact on our ability to operate our business or meet ourobligations as they become due.

**Cautionary Statements for Purposes of the "SafeHarbor" Provisions of the Private Securities Litigation Reform Act of 1995**

        *This Reportcontains forward-looking statements within the meaning of the PrivateSecurities Litigation Reform Act of 1995. When used in this document, the words "anticipate","believe", "estimate" and "expect" and similarexpressions are generally intended to identify forward-looking statements.  Investors are cautioned that anyforward-looking statements, including those regarding the intent, belief orcurrent expectations of the Company or its management, are not guarantees offuture performance and involve risks and uncertainties, and that actual resultsmay differ materially from those in the forward-looking statements as a resultof various factors including, but not limited to, (i) competitive and generaleconomic conditions in the markets in which the Company operates, (ii)increased competitive pressures in the markets in which the Company operates,(iii) the effect of future legislation or regulatory changes on the Company'soperations and (iv) other risks detailed from time to time in the Company'sSecurities and Exchange Commission filings. The Company does not intend to update these forward-looking statements.*

**ARGOSY GAMING COMPANYOTHER INFORMATION**

**PARTII.**          **Other Information**

Item1.  *Legal Proceedings -*

             TheCompany is from time to time a party to legal proceedings arising in theordinary course of business. Other than as disclosed below, the Company isunaware of any legal proceedings, which, even if the outcome were unfavorableto the Company, would have a material adverse impact on either its financialcondition or results of operations.

Item 2.  *Changes inSecurities*

             EffectiveJuly 26, 2001, 100% of the previously issued (February 1, 2001) privateplacement Senior Subordinated Notes (“Restricted Notes”) were exchanged by thenote holders for registered notes with substantially identical terms.

Item 3.  *DefaultsUpon Senior Securities -* None

Item 4.  *Submissionof Matters to a Vote of Security Holders*

             TheCompany’s Annual Meeting of Stockholders was held on April 17, 2001.  At the meeting, the stockholders voted onthe election of three directors.  Votingon this matter was as follows:

 
 Votes  For Withheld/  Abstain      John B. Pratt, Sr.26,198,763 505,328F. Lance Callis26,200,483 503,608Edward F. Brennan26,200,333 503,758
Item 5.  *OtherInformation-*None

Item6.  *Exhibits and reports on Form 8-K*

(a)         *Exhibits -*None

(b)        *Reports on Form 8-K*
1.Report  on Form 8-K, dated June 21, 2001, filed with the Securities and Exchange  Commission, containing the following related to the Company’s agreement  (dated April 12, 2001) to acquire all of the outstanding stock of Empress  Casino Joliet Corporation.  The  Company anticipates closing this acquisition, subject to all required  approvals, in the third quarter 2001.   a.Financial  statements of business acquired. b.Pro  forma financial information.  2.Report  on Form 8-K, dated July 24, 2001, filed with the Securities and Exchange  Commission, containing a Press Release dated July 24, 2001, announcing the  Company’s second quarter operating results for the period ended June 30,  2001.  3.Report  on Form 8-K, dated July 31, 2001, filed with the Securities and Exchange  Commission, containing the following related to the Company’s consummation of  the acquisition of the Empress Casino Joliet Corporation on July 31, 2001.   a.Financial  statements of business acquired.   b.Pro  forma financial information.
 

**ARGOSY GAMING COMPANYSIGNATURES**

          Pursuantto the requirement of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 
Date: August  14, 2001/s/   Dale R. Black       Dale  R. Black       Senior Vice President-Chief   Financial Officer