**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-K**


**(Mark
      One)**


**x**
            **ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**





**For
      the fiscal year ended April 24, 2005**





**OR**





**o**
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**


**For
      the transition period from ______________________ to
      ______________________**





Commission
      File Number 0-20538





**ISLE
      OF CAPRI CASINOS, INC.**


(Exact
      name of registrant as specified in its charter)


Delaware
            
            41-1659606(State
                or other jurisdiction
            
            (I.R.S.
                Employerof
                incorporation or organization)
            
            Identification
                Number)1641
                Popps Ferry Road, Biloxi, Mississippi
            
            39532(Address
                of principal executive offices)
            
            (Zip
                Code)Registrant's
                telephone number, including area code:
            
            (228)
                396-7000


Securities
      Registered Pursuant to Section 12(b) Of The Act: None





Securities
      Registered Pursuant to Section 12(g) Of The Act:


Common
      Stock, $.01 Par Value Per Share


(Title
      of
      Class)


Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes x No o





Indicate
      by check mark if the registrant is an accelerated filer (as defined in Rule
      12b-2 of the Act). Yes x No o




The
      aggregate market value of the voting and non-voting stock held by
      non-affiliates 1 of
      the
      Company is $327,191,180, based on the last reported sale price of $22.26 per
      share on October 22, 2004 on the NASDAQ Stock Market; multiplied by 14,698,615
      shares of Common Stock outstanding and held by non-affiliates of the Company
      on
      such date.




As
      of
      Ju1y 1, 2005, the Company had a total of 33,591,320 shares of Common Stock
      outstanding (which excludes 3,607,178 shares held by us in
      treasury).




Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K. o








(1) Affiliates
      for the purpose of this item refer to the directors, named executive officers
      and/or persons owning 10% or more of the Company’s common stock, both of record
      and beneficially; however, this determination does not constitute an admission
      of affiliate status for any of the individual stockholders.





**Document
      Incorporated by Reference:**





Document
            Part
                of Form 10-K into which IncorporatedIsle
                of Capri Casinos, Inc.’s Definitive Proxy Statement for its Annual Meeting
                of Stockholders to be held October 7, 2005.
            Part
                III








**ISLE
      OF CAPRI CASINOS, INC.**


**FORM
      10-K**


**INDEX**





PagePART
                I.
            2ITEM
                1. BUSINESS
            2ITEM
                2. PROPERTIES
            41ITEM
                3. LEGAL PROCEEDINGS
            46ITEM
                4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
            47PART
                II.
            47ITEM
                5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATEDSTOCKHOLDER
              MATTERS
                AND ISSUER PURCHASES OF EQUITY SECURITIES
            47ITEM
                6. SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
            50ITEM
                7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION
                AND RESULTS OF OPERATIONS
            52ITEM
                7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
              ABOUT
                MARKET RISK
            70ITEM
                8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
            72ITEM
                9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
              ACCOUNTING
                AND FINANCIAL DISCLOSURE
            121ITEM
                9A. CONTROLS AND PROCEDURES
            121ITEM
                9B. OTHER INFORMATION
            123PART
                III.
            123ITEM
                10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
            123ITEM
                11. EXECUTIVE COMPENSATION
            123ITEM
                12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
              MANAGEMENT
                AND RELATED STOCKHOLDER MATTERS
            123ITEM
                13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
            123ITEM
                14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
            123PART
                IV.
            124ITEM
                15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
            124SIGNATURES
            125











**DISCLOSURE
      REGARDING FORWARD-LOOKING STATEMENTS**





All
      statements other than statements of historical or current facts included in
      this
      annual report on form 10-K or incorporated by reference herein, including,
      without limitation, statements regarding our future financial position, business
      strategy, budgets, projected costs and plans and objectives of management for
      future operations, are forward-looking statements. Forward-looking statements
      generally can be identified by the use of forward-looking terminology such
      as
“may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe” or
“continue” or the negative thereof or variations thereon or similar terminology.
      Although we believe that the expectations reflected in such forward-looking
      statements are reasonable, we can give no assurance that such expectations
      will
      prove to have been correct.







Important
      factors with respect to any such forward-looking statements, including certain
      risks and uncertainties that could cause actual results to differ materially
      from our expectations (“cautionary statements”), are disclosed under “Risk
      Factors” and elsewhere in this annual report on Form 10-K, including, without
      limitation, in conjunction with the forward-looking statements included in
      this
      Annual Report on Form 10-K.







We
      urge
      you to review carefully the section “Risk Factors” beginning on page 12 in this
      annual report on Form 10-K for a more complete discussion of the risks of
      purchasing our common stock. All subsequent written and oral forward-looking
      statements attributable to us, or persons acting on our behalf, are expressly
      qualified in their entirety by these cautionary statements.





1


**PART
      I**





**ITEM
      1.****BUSINESS.**





**Overview**





We
      were
      incorporated in Delaware in February 1990. We are a leading developer, owner
      and
      operator of branded gaming facilities and related lodging and entertainment
      facilities in growing markets in the United States and internationally. We
      wholly own and operate eleven gaming facilities in the U.S. located in Lake
      Charles and Bossier City, Louisiana; Lula, Biloxi, Vicksburg and Natchez,
      Mississippi; Kansas City and Boonville, Missouri; and Bettendorf, Davenport
      and
      Marquette, Iowa. We also own a 57% interest in, and receive management fees
      for
      operating, two gaming facilities in Black Hawk, Colorado. Only one of
      these gaming facilities operates under the name “Isle of Capri” and features our
      distinctive tropical island theme. Our international gaming interests include
      a
      wholly owned casino in Freeport, Grand Bahama, and a two-thirds ownership
      interest in casinos in Dudley, Wolverhampton, and Walsall, England. We also
      wholly own and operate a pari-mutuel harness racing facility in Pompano Beach,
      Florida.





We
      have
      signed a development agreement with the City of Bettendorf pursuant to which
      we
      agreed to construct a new 250-room Isle hotel, additional parking, a Kitt’s
      Kitchen restaurant, and an expansion of the existing buffet, and the City agreed
      to construct a 50,000 square foot convention center adjacent to our facility,
      which will be managed by the Isle-Bettendorf. The cost of our portion of this
      project will be approximately $45.0 million, and the new hotel is planned to
      open in the late spring of 2007.





We
      have
      been selected by the Iowa Racing and Gaming Commission as the successful
      applicant for a gaming license in Waterloo, Iowa. We plan to spend approximately
      $119.0 million on constructing a 35,000 square foot single level casino with
      1,300 gaming positions, three of our signature restaurants, a 200-room hotel
      and
      1,000 parking spaces. We expect the construction project to take approximately
      24 months including the acquisition of necessary permits and licenses.





For
      the
      twelve fiscal months ended April 24, 2005, we had net revenues of approximately
      $1.1 billion.





**Competitive
      Strengths**





*Strong
      Brand Identity.* Most
      of
      our casino properties operate under the “Isle of Capri” name, and the facilities
      were designed to incorporate our distinctive tropical island theme. Most of
      our
      gaming facilities contain similar amenities, including hotels, one or more
      of
      our trademark restaurants (Farraddays’ fine dining restaurant, Calypso’s buffet,
      Kitt’s Kitchen restaurant and Tradewinds Marketplace), a Banana Cabana gift
      shop, an entertainment center for performances and meetings and ample parking.
      Each of our uniquely branded facilities also offers all customers membership
      in
      our themed rewards program, which rewards loyal customers with points and
      complimentaries that can be redeemed at any of our properties by using a
      player’s club card. These programs are named IsleOne Players Club, the Fan Club,
      and the Fast Track Club at the Isle of Capri properties, the Rhythm
      City-Davenport and the Colorado Central Station-Black Hawk, respectively. We
      believe our brand names convey excitement, entertainment, consistent
      high-quality service and value to our customers.


2





*Standardized
      Quality and Services* .
      We have
      developed and implemented standardized procedures for operating our casinos,
      hotels, restaurants and other non-gaming amenities, which has allowed us to
      fully and effectively integrate the domestic properties we have developed or
      acquired during the past eleven years. We utilize management development and
      employee training programs to implement these procedures throughout our
      facilities, which we believe help us efficiently operate our facilities. This
      standardization encourages high-quality service and provides our customers
      with
      a consistent experience.





*Geographically
      Diverse Markets.* We
      own or
      operate our gaming facilities in eleven distinct geographic markets located
      in 6
      states, the Bahamas and the United Kingdom (“UK”), allowing us to maintain
      diverse sources of revenue and cash flow.





Most
      of
      our gaming facilities are conveniently located near major highways. We have
      located our facilities so that, in most cases, they are either the first casino
      reached by customers arriving from major nearby cities or are within a cluster
      of facilities, allowing us to generate significant customer
      traffic.





*Substantial
      Capital Investment in Our Properties* .
      We are
      continuing to expand and upgrade the facilities at several of our domestic
      properties. We believe the continued investment in our domestic properties
      has
      improved their competitive position. We also believe our expansion into
      international markets will further strengthen the “Isle of Capri” brand and
      allow us to take advantage of new growing markets.





*Effective
      Utilization of Proprietary Database* .
      We have
      developed an extensive proprietary database of primarily slot-oriented customers
      that allows us to create and deploy effective targeted marketing and promotional
      programs, merchandise giveaways, game tournaments and other special events.
      These promotional programs are designed to reward customer loyalty and maintain
      high recognition of our “Isle of Capri” brand. As of April 24, 2005, our
      database contained approximately 6.2 million members, of whom approximately
      1.6
      million receive regular communications from us. We believe we have effectively
      used our database to encourage repeat visits, increase customers’ length of stay
      and improve our operating results.





*Experienced,
      Stable Management Team.* We
      are an
      experienced gaming operator and opened our first gaming facility approximately
      thirteen years ago. Each member of our senior management team has extensive
      gaming or related industry experience and has been with us for several years,
      providing consistency in our operations.


3





**Casino
      Properties**





Here
      is
      an overview of our existing casino properties as of April 24, 2005:





**Date
                Opened or**
            
            **Slot**
            
            **Table**
            
            **Hotel**
            
            **Parking****Property**
            **Acquired**
            
            **Machines**
            
            **Games**
            
            **Rooms**
            
            **Spaces***Louisiana*Isle-Lake
                Charles
            
            July
                1995
            
            1,598
            
            82
            
            493
            
            2,200Isle-Bossier
                City
            
            May
                1994
            
            1,050
            
            34
            
            786
            
            1,537*Mississippi*Isle-Lula
            
            March
                2000
            
            1,511
            
            35
            
            486
            
            1,780Isle-Biloxi
            
            August
                1992
            
            1,184
            
            28
            
            367
            
            1,450Isle-Vicksburg
            
            August
                1993
            
            796
            
            20
            
            122
            
            1,100Isle-Natchez
            
            March
                2000
            
            636
            
            11
            
            143
            
            908*Missouri*Isle-Kansas
                City
            
            June
                2000
            
            1,580
            
            37
            
            -
            
            2,054Isle-Boonville
            
            December
                2001
            
            904
            
            27
            
            -
            
            1,101*Iowa*Isle-Bettendorf
            
            March
                2000
            
            1,102
            
            31
            
            256
            
            1,539Rhythm
                City-Davenport
            
            October
                2000
            
            1,019
            
            17
            
            121
            
            984Isle-Marquette
            
            March
                2000
            
            711
            
            15
            
            25
            
            462*Colorado*Isle-Black
                Hawk (57% owned)
            
            December
                1998
            
            1,328
            
            21
            
            238
            
            1,100Colorado
                Central Station-Black Hawk (57% owned)
            
            April
                2003
            
            697
            
            20
            
            -
            
            600*International
                Properties*Isle-Our
                Lucaya
            
            December
                2003
            
            372
            
            33
            
            -
            
            -Blue
                Chip-Dudley (66 2/3% owned)
            
            November
                2003
            
            10
            
            29
            
            -
            
            63Blue
                Chip-Wolverhampton (66 2/3% owned)
            
            April
                2004
            
            10
            
            48
            
            -
            
            10Blue
                Chip-Walsall (66 2/3% owned)
            
            October
                2004
            
            10
            
            51
            
            -
            
            -





***Louisiana***





*The
      Isle-Lake Charles*





The
      Isle-Lake Charles, which commenced operations in July 1995, is located on a
      19-acre site along Interstate 10, the main thoroughfare connecting Houston,
      Texas to Lake Charles, Louisiana. The property consists of two dockside casinos
      offering 1,598 slot machines and 82 table games, a 252-room deluxe hotel, a
      separate 241-room hotel, a 105,000 square foot land-based pavilion and
      entertainment center, and 2,200 parking spaces, including approximately 1,400
      spaces in an attached parking garage. The pavilion and entertainment center
      offers customers a wide variety of non-gaming amenities, including a 97-seat
      Farraddays’ restaurant, a 360-seat Calypso’s buffet, a 165-seat Tradewinds
      Marketplace, a 140-seat Kitt’s Kitchen restaurant, a 64-seat Lucky Wins oriental
      restaurant and Caribbean Cove, which features free live entertainment and can
      accommodate 180 customers. The pavilion also has a 14,750 square foot
      entertainment center comprised of an 1,100-seat special events center designed
      for concerts, live boxing, televised pay-per-view events, banquets and other
      events, meeting facilities and administrative offices.


4





The
      Lake
      Charles market consists of three dockside gaming facilities (which include
      the
      Isle-Lake Charles and facilities operated by Harrah and Pinnacle Entertainment),
      a Native American casino and a pari-mutuel facility/racino (operated by Boyd
      Gaming). Total slot machines in the market exceed 7,600 machines and table
      games
      exceed 200 tables. The Pinnacle Entertainment facility opened at the end of
      May
      2005. In calendar year 2004, the two dockside gaming facilities and one racino,
      in the aggregate, generated gaming revenues of approximately $462.0 million.
      Revenues for the Native American property are not published and are not
      available. Lake Charles is the closest gaming market to the Houston metropolitan
      area, which has a population of approximately 4.7 million and is located
      approximately 140 miles west of Lake Charles. We believe that the Isle-Lake
      Charles attracts customers primarily from southeast Texas, including Houston,
      Beaumont, Galveston, Orange and Port Arthur and from local area residents.
      Approximately 490,000 and 1.6 million people reside within 50 and 100 miles,
      respectively, of the Isle-Lake Charles.





*The
      Isle-Bossier City*





The
      Isle-Bossier City, which commenced operations in May 1994, is located on a
      38-acre site along the Red River approximately one-quarter mile off Interstate
      20, the main highway connecting Dallas/Ft. Worth, Texas to Bossier
      City/Shreveport, Louisiana. The property consists of a dockside casino offering
      1,050 slot machines and 34 table games, a 560-room on-site deluxe hotel, a
      226-room off-site hotel located approximately two miles from the casino, a
      39,000 square foot land-based pavilion and entertainment center, and 1,537
      parking spaces including approximately 900 spaces in an attached parking garage.
      The pavilion and entertainment center offer a wide variety of non-gaming
      amenities, including a 77-seat Farraddays’ restaurant, a 301-seat Calypso’s
      buffet, a 30-seat Tradewinds Marketplace and a 150-seat Kitt’s Kitchen.





The
      Bossier City/Shreveport market consists of five dockside gaming facilities
      and a
      pari-mutuel facility that operates slot machines, which, in the aggregate,
      generated gaming revenues of approximately $835.4 million in calendar year
      2004
      and, with the exception of Native American casino in Oklahoma that offers only
      Class II gaming and blackjack, is the closest gaming market to the Dallas/Ft.
      Worth, Texas metropolitan area. The Dallas/Ft. Worth metropolitan area has
      a
      population of approximately 5.2 million and is located approximately 190 miles
      west of Bossier City/Shreveport. The other operators of gaming facilities in
      this market are Harrah’s Entertainment (which operates one of the dockside
      gaming facilities and the Louisiana Downs pari-mutuel facility), Penn National
      Gaming, Boyd Gaming and Pinnacle Entertainment. We believe that the Isle-Bossier
      City attracts customers primarily from the local area, northeastern Texas and
      the Dallas/Ft. Worth metropolitan area. Approximately 550,000 and 1.8 million
      people reside within 50 and 100 miles, respectively, of the Isle-Bossier
      City.





***Mississippi***





*The
      Isle-Lula*





The
      Isle-Lula, which was acquired in March 2000, is strategically located off of
      Highway 49, the only road crossing the Mississippi River from Mississippi to
      Arkansas for more than 50 miles in either direction. The property consists
      of
      two dockside casinos containing 1,511 slot machines and 35 table games, two
      on-site hotels with a total of 486 rooms, a land-based pavilion and
      entertainment center, and 1,780 parking spaces. The pavilion and entertainment
      center offer a wide variety of non-gaming amenities, including a 100-seat
      Farraddays’ restaurant, a 300-seat Calypso’s buffet and a 48-seat Tradewinds
      Marketplace.


5


The
      Isle-Lula is the only gaming facility in the Coahoma County, Mississippi market
      and generated gaming revenues of approximately $89.6 million in calendar year
      2004. The Isle-Lula is the closest gaming facility to the Little Rock, Arkansas
      metropolitan area, which has a population of approximately 580,000 and is
      located approximately 120 miles northwest of the property. Coahoma County is
      also located approximately 60 miles southwest of Memphis, Tennessee, which
      is
      primarily served by 10 casinos in Tunica, Mississippi. Approximately 850,000
      people reside within 150 miles of the property’s primary target
      market.





*The
      Isle-Biloxi*





The
      Isle-Biloxi, which commenced operations in August 1992, is located on a 17-acre
      site at the eastern end of a cluster of facilities known as “Casino Row” in
      Biloxi, Mississippi, and is the first property reached by visitors coming from
      Alabama, Florida and Georgia via Highway 90. The property consists of a dockside
      casino offering 1,184 slot machines and 28 table games, a 367-room hotel, a
      90-seat Farraddays’ restaurant, a 425-seat Calypso’s buffet, a 64-seat
      Tradewinds Marketplace and 1,450 parking spaces. We recently completed a new
      400-room hotel, expanded our conference center and added a spa at the
      Isle-Biloxi. A new casino is currently under construction offsite and will
      feature significantly expanded gaming space (including 2,100 slot machines
      and
      50 table games), new entertainment venues, restaurants and other amenities.
      We
      expect to close the existing casino for approximately two weeks between
      Thanksgiving and Christmas of 2005 while we move the new facility into
      place.





The
      Mississippi Gulf Coast market (which includes Biloxi, Gulfport and Bay St.
      Louis) is one of the largest gaming markets in the United States and consists
      of
      12 dockside gaming facilities which, in the aggregate, generated gaming revenues
      of approximately $911.4 million in calendar year 2004. In addition, a Hard
      Rock
      Casino and Hotel currently is under construction and is expected to open in
      fall
      of 2005. Among the other operators of dockside gaming facilities in this market
      are MGM Mirage, Harrah’s Entertainment, Penn National Gaming and Pinnacle
      Entertainment. The Mississippi Gulf Coast, a regional tourist destination,
      is
      the closest gaming market to the Mobile, Alabama metropolitan area, which has
      a
      population of approximately 540,000 and is located approximately 60 miles east
      of Biloxi. We believe that the Isle-Biloxi attracts customers from the local
      area, Alabama, Florida, Georgia and southeastern Louisiana, including New
      Orleans and Baton Rouge. Approximately 800,000 and 2.9 million people reside
      within 50 to 100 miles, respectively, of the Isle-Biloxi.





*The
      Isle-Vicksburg*





The
      Isle-Vicksburg, which commenced operations in August 1993, is located on an
      18-acre site approximately one-mile north of Interstate 20, the main road
      connecting Jackson, Mississippi to Vicksburg, Mississippi. The property consists
      of a dockside casino offering 796 slot machines and 20 table games, a 122-room
      hotel, a 12,483 square foot land-based pavilion and entertainment center, 1,100
      parking spaces, a 67-space recreational vehicle park, a 68-seat Farraddays’
      restaurant, a 211-seat Calypso’s buffet, a Tradewinds Marketplace and live
      entertainment.





The
      Vicksburg market consists of four dockside gaming facilities that, in the
      aggregate, generated gaming revenues of approximately $247.2 million in calendar
      year 2004. The other operators of dockside gaming facilities in this market
      are
      Alliance Gaming, Ameristar Casinos and Columbia Sussex. The Jackson metropolitan
      area is also served by a Native American gaming facility. Vicksburg is the
      closest gaming market to the Jackson, Mississippi metropolitan area, which
      has a
      population of approximately 440,000 and is located approximately 40 miles east
      of Vicksburg. We believe that the Isle-Vicksburg attracts customers primarily
      from the local area, Jackson and northeastern Louisiana. Approximately 530,000
      people reside within 50 miles of the Isle-Vicksburg.


6


*The
      Isle-Natchez*





The
      Isle-Natchez, which was acquired in March 2000, is located off of Highways
      84
      and 61 in western Mississippi. The property consists of a dockside casino
      offering 636 slot machines and 11 table games, a 143-room off-site hotel located
      approximately one mile from the casino, a 150-seat Calypso’s buffet and 908
      parking spaces.





The
      Isle-Natchez is the only gaming facility in the Natchez market and generated
      gaming revenues of approximately $36.4 million in calendar year 2004. We believe
      that the Isle-Natchez attracts customers primarily from among the 110,000 people
      residing within 50 miles of the Isle-Natchez.





***Missouri***





*The
      Isle-Kansas City*





We
      acquired the Isle-Kansas City in June 2000. The facility is the closest facility
      to downtown Kansas City and consists of a dockside casino offering 1,580 slot
      machines and 37 table games, a 72-seat Farraddays’ restaurant, a 325-seat
      Calypso’s buffet, a 24-seat Tradewinds Marketplace and 2,054 parking
      spaces.





The
      Kansas City market consists of four dockside gaming facilities that, in the
      aggregate, generated gaming revenues of approximately $676.8 million in calendar
      year 2004. The other operators of dockside gaming facilities in this market
      are
      Ameristar Casinos, Argosy Gaming and Harrah’s Entertainment. We believe that the
      Isle-Kansas City attracts customers primarily from the Kansas City metropolitan
      area, which has approximately 1.7 million residents.





*The
      Isle-Boonville*





The
      Isle-Boonville, which opened on December 6, 2001, is located off of Interstate
      70, approximately halfway between Kansas City and St. Louis. The property
      consists of a dockside casino offering 904 slot machines and 27 table games,
      a
      32,396 square foot pavilion and entertainment center and 1,101 parking spaces.
      The pavilion and entertainment center offers customers a wide variety of
      non-gaming amenities, including a 92-seat Farraddays’ restaurant, a 270-seat
      Calypso’s buffet, a 32-seat Tradewinds Marketplace and a historic display area.
      Isle-Boonville has begun construction on a 140-room hotel, which will include
      20
      suites and a 6,000 square foot event center. We expect to complete the project
      in late spring of 2006 at an expected cost of approximately $17.5
      million.





The
      Isle-Boonville is the only gaming facility between Kansas City, Missouri, and
      St. Louis, Missouri and generated gaming revenues of approximately $72.9 million
      in calendar year 2004. We believe the Isle-Boonville attracts most of its
      customers from the approximately 733,000 persons living within a 75-mile radius
      in central Missouri, including Jefferson City and Columbia.


7


***Iowa***





*The
      Isle-Bettendorf*





The
      Isle-Bettendorf, which we acquired in March 2000, is located off of Interstate
      74, an interstate highway serving the Quad Cities metropolitan area. The
      property consists of a dockside casino offering 1,102 slot machines and 31
      table
      games, a 256-room hotel, approximately 108,900 square feet of convention/banquet
      space, a 140-seat Farraddays’ restaurant, a 320-seat Calypso’s buffet, a 30-seat
      Tradewinds Marketplace and 1,539 parking spaces. We have signed a development
      agreement with the City of Bettendorf pursuant to which we agreed to construct
      a
      new 250-room Isle hotel, additional parking, and the City agreed to construct
      a
      50,000 square foot convention center adjacent to the company’s facility, which
      will be managed by the Isle-Bettendorf. The cost of our portion of this project
      will be approximately $45.0 million, and the new hotel is scheduled to open
      in
      the late spring of 2007.





The
      Quad
      Cities metropolitan area, consisting of Bettendorf and Davenport, Iowa and
      Moline and Rock Island, Illinois currently has three gaming operations - our
      two
      gaming facilities, the Isle-Bettendorf and the Rhythm City-Davenport, and one
      smaller operator. The three operations in the Quad Cities generated, in the
      aggregate, gaming revenues of approximately $220.9 million in calendar year
      2004. In addition to the Quad Cities metropolitan area, our operations in the
      Quad Cities also compete with gaming operations in Peoria, Illinois; Dubuque,
      Clinton and Des Moines, Iowa; and to a lesser extent, gaming operations in
      the
      Chicago, Illinois metropolitan area.





*The
      Rhythm City-Davenport*





The
      Rhythm City-Davenport, which we acquired in October 2000, is located between
      Interstates 74, 80 and 280. The property consists of a dockside gaming facility
      offering 1,019 slot machines and 17 table games, a 121-room off-site hotel
      located approximately four blocks from the casino, a 290-seat Hit Parade buffet,
      a 76-seat Rock Around the Clock diner and 984 parking spaces.





*The
      Isle-Marquette*





The
      Isle-Marquette, which we acquired in March 2000, is located in Marquette, Iowa,
      approximately 60 miles north of Dubuque, Iowa. The property consists of a
      dockside casino offering 711 slot machines and 15 table games, a land-based
      facility including a 25-room hotel, a 160-seat Calypso’s buffet restaurant, a
      Tradewinds Marketplace, an entertainment showroom, a marina and 462 parking
      spaces.





The
      Isle-Marquette is the only gaming facility in the Marquette, Iowa market, and
      generated gaming revenues of approximately $41.8 million in calendar year 2004.
      We believe the Isle-Marquette draws most of its customers from northeast Iowa
      and Wisconsin and to some extent, competes for those customers with another
      riverboat facility and a racetrack with slot machines, both of which are in
      the
      Dubuque area. We have received gaming regulatory approval for an expansion
      project that will add 60 hotel rooms and improved parking. We are currently
      evaluating hotel development alternatives for this property.


8


***Colorado***





*The
      Isle-Black Hawk*





The
      Isle-Black Hawk, which commenced operations in December 1998, is located on
      an
      approximately 10-acre site and is one of the first gaming facilities reached
      by
      customers arriving from Denver via Highway 119, the main thoroughfare connecting
      Denver to Black Hawk. The property currently consists of a land-based casino
      with 1,328 slot machines and 21 table games, a 238-room hotel and 1,100 parking
      spaces in an attached parking garage. The Isle-Black Hawk also offers customers
      a wide variety of non-gaming amenities, including a 96-seat Farraddays’
      restaurant, a 228-seat Calypso’s buffet, a 32-seat Tradewinds Marketplace and a
      4,000 square foot event center that can be used for meetings and entertainment.
      We own 57% of the Isle-Black Hawk through an unrestricted subsidiary and receive
      a management fee for operating the facility.





The
      Black
      Hawk/Central City market consists of 28 gaming facilities (nine of which have
      more than 600 slot machines), which, in aggregate, generated gaming revenues
      of
      approximately $577.0 million in calendar year 2004. Black Hawk is the closest
      gaming market to the Denver, Colorado metropolitan area, which has a population
      of approximately 2.6 million and is located approximately 40 miles east of
      Black
      Hawk. We believe that the Isle-Black Hawk attracts customers primarily from
      Denver, Boulder, Fort Collins and Golden, Colorado and Cheyenne,
      Wyoming.





*The
      Colorado Central Station-Black Hawk*





The
      Colorado Central Station-Black Hawk, which we acquired in April 2003, is located
      across the intersection of Main Street and Mill Street from the Isle-Black
      Hawk.
      The property currently consists of a land-based casino with 697 slot machines,
      20 table games and 600 parking spaces in our new parking structure connecting
      Isle-Black Hawk and Colorado Central Station-Black Hawk. The property also
      offers guests two dining options including the Fire Box restaurant and the
      Chew
      Chew deli. We own 57% of the Colorado Central Station-Black Hawk through an
      unrestricted subsidiary and receive a management fee for operating the
      facility.





We
      are in
      the final stages of a $94.0 million expansion project for the Isle-Black Hawk
      and Colorado Central Station-Black Hawk properties. We recently completed our
      expansion of the Isle-Black Hawk and the Colorado Central Station-Black Hawk
      casinos. We have completed a portion of our new parking structure with 600
      parking spaces open to the public. The new 162-room Colorado Central Station
      hotel is currently ahead of schedule and expected to be completed by end of
      calendar year 2005. Additionally, we continue to construct public improvements
      to extend Main Street directly to Colorado Route 119, approximately one
      half-mile closer to Denver. Completion is expected in the spring of
      2006.





**Florida**





*Pompano
      Park*





In
      1995,
      we acquired Pompano Park, a harness racing track located in Pompano Beach,
      Florida. Pompano Park is conveniently located off of Interstate 95 and the
      Florida Turnpike on a 220-acre owned site, midway between Miami and West Palm
      Beach. Pompano Park is the only racetrack licensed to conduct harness racing
      in
      Florida. During the fiscal year ended April 24, 2005, Pompano Park conducted
      149
      live racing programs. Pompano Park can accommodate up to 14,500 customers and
      has 4,000 parking spaces and 1,040 horse stalls. The six-story, air-conditioned
      facility consists of 21 poker tables, a box seat area, a 260,000 square foot
      clubhouse, a large grandstand, a 1,250-seat dining area from which the races
      can
      be viewed, five concession stands, five bars and a 180-seat Player’s Lounge
      cafeteria.


9


In
      November 2004, voters in the State of Florida voted to amend the state's
      constitution to allow the voters of Miami-Dade and Broward counties (Broward
      County is the location of the Pompano Park Racetrack) to decide whether to
      approve slot machines in racetracks and jai alai frontons in their respective
      counties. Broward county voters passed their local referendum and Dade county
      voters rejected their referendum in March 2005. Enabling gaming legislation
      was
      not passed in the current session of the Florida legislature despite the
      constitutional requirement that such legislation be in effect by July 1, 2005.
      Along with the other Broward county pari-mutuels, we filed a lawsuit seeking
      authority to proceed with the development of slot machine facilities despite
      the
      absence of enabling legislation. On June 21, 2005, the Circuit Court judge
      issued a decision in favor of the pari-mutuel facilities, which decision will
      be
      appealed. Accordingly, the regulation and timing of installation and operation
      of slot machines has not been finally determined. This facility draws most
      of
      its customers from the 2.6 million people residing within a 25-mile
      radius.





**Grand
      Bahama Island**





*The
      Isle-Our Lucaya*





The
      Isle-Our Lucaya is one of two gaming facilities in the Freeport market on the
      Island of Grand Bahama. The competing facility has been closed since the
      hurricanes struck the island in September 2004. This market generated gaming
      revenues of approximately $30.7 million in calendar year 2004 and has a
      population of approximately 50,000 and approximately 300,000 visitors annually.
      The Island has 3,200 hotel rooms. The facility is located at Our Lucaya Beach
      & Golf Resort, which features a Westin and Sheraton hotel with 1,260 rooms
      although 260 rooms have been unavailable since the hurricanes struck the island
      in September 2004. The approximately 19,000 square-foot resort-style casino
      offers 372 slot machines, 33 table games and a 110-seat restaurant.





**United
      Kingdom**





*Blue
      Chip-Dudley*





The
      pub-style casino in Dudley, England is one of 17 gaming facilities in the West
      Midlands market. Dudley is close to the Birmingham metropolitan area, which
      has
      a population of approximately 5.3 million. The casino consists of 10 slot
      machines, 29 table games and 63 parking spaces. We own two-thirds of the Blue
      Chip-Dudley through an unrestricted subsidiary.





*Blue
      Chip-Wolverhampton*





The
      pub-style casino in Wolverhampton, England is also in the West Midlands market.
      Wolverhampton is close to the Birmingham metropolitan area. The casino consists
      of 10 slot machines, 48 table games and 10 parking spaces. We own two-thirds
      of
      the Blue Chip-Wolverhampton through an unrestricted subsidiary.





*Blue
      Chip-Walsall*





The
      pub-style casino in Walsall, England is also in the West Midlands market.
      Walsall is close to the Birmingham metropolitan area. The casino consists of
      10
      slot machines and 51 table games. We own two-thirds of the Blue Chip-Walsall
      through an unrestricted subsidiary.


10


*Coventry*





We
      remain
      committed to our development project in the UK to build a casino in Coventry;
      however, legislation enacted in April 2005 limits the number of regional casinos
      to one. The number may be increased only through additional legislation. We
      have
      obtained all necessary gaming licenses to open a casino at the RICOHTM Arena
      Coventry in the summer of 2006 under the Gaming Act of 1968. We believe we
      are
      well positioned to develop a regional casino in Coventry should we be awarded
      a
      regional casino license.





**Marketing**





We
      attract customers to our casinos by designing and implementing marketing and
      promotional programs that emphasize our Isle of Capri, Rhythm City and Colorado
      Central Station brands and reward loyal customers. We have developed an
      extensive proprietary database of primarily slot-oriented customers that allows
      us to create effective targeted marketing and promotional programs, merchandise
      giveaways, game tournaments and other special events. These programs are
      designed to reward customer loyalty, attract new customers to our properties
      and
      maintain high recognition of our brands. These promotional programs are designed
      to reward customer loyalty and maintain high recognition of our “Isle of Capri”
      brand.





As
      of
      April 24, 2005, our database contained approximately 6.2 million members, of
      whom approximately 1.6 million receive regular mailings. To develop this
      database, we offer all of our customers a membership in the IsleOne Players
      Club
      at Isle of Capri properties, the Fan Club at the Rhythm City-Davenport and
      the
      Fast Track Club at the Colorado Central Station property. These programs reward
      loyal customers with IsleOne points that can be redeemed at our casinos by
      using
      our player’s club card. Currently, the player’s club card allows us to track the
      members’ gaming preferences, maximum, minimum and total amount wagered and
      frequency of visits. Players are classified in groups according to these
      characteristics. Our database is used for direct marketing programs and other
      promotional events that are tailored to these specific groups of players. We
      believe we have effectively used
      our
      database to encourage repeat visits, increase customers’ length of stay and
      improve our operating results.




We
      place
      significant emphasis on attracting local residents and seek to maintain a strong
      local identity in each market in which we operate by initiating and supporting
      community and special events. We use broadcast media to promote the Isle of
      Capri brand name and attract customers to our properties. To further enhance
      our
      tropical theme, we have engaged actor Ricardo Montalban to narrate our radio
      advertisements and appear in our television advertisements.





**Employees**





As
      of
      April 24, 2005, we employed approximately 10,500 people. None of our employees
      are subject to a collective bargaining agreement. We believe that our
      relationship with our employees is satisfactory.


11


**Risk
      Factors**





***We
      face significant competition from other gaming operations that could have a
      material adverse effect on our future operations.***





We
      face
      intense competition in the markets in which we operate. We have numerous
      competitors, including land-based casinos, dockside casinos, riverboat casinos,
      casinos located on Native American-owned lands and at racing and pari-mutuel
      operations. Several of our competitors have substantially better name
      recognition, marketing and financial resources than we do. Legalized gaming
      is
      currently permitted in various forms throughout the United States. Certain
      states have recently legalized, and other states are currently considering
      legalizing, casino gaming in designated areas. There is no limit on the number
      of gaming licenses that may be granted in several of the markets in which we
      operate. As a result, new licenses could be awarded to gaming facilities in
      such
      markets, which could have an adverse effect on our operating results. In
      particular, we face new competition in the Lake Charles, Louisiana market where
      Pinnacle Entertainment recently opened a dockside casino facility with a
      reported cost of $365.0 million. We also will face new competition in the
      Mississippi Gulf Coast market where a Hard Rock Casino and Hotel is under
      construction and is expected to open by fall of 2005. In addition, the
      pari-mutuel facility in the Bossier City, Louisiana market has expanded the
      number of slot machines available at its facility. **** Expansion
      of existing gaming facilities and the development of new gaming facilities
      in
      our current markets will increase competition for our existing and future
      operations. In addition, many Native American tribes conduct casino gaming
      on
      Native American-owned lands throughout the United States. Such facilities have
      the advantages of being land-based and exempt from certain state and federal
      taxes. Some Native American tribes are either in the process of establishing
      or
      expanding, or are considering the establishment or expansion of, gaming in
      Oklahoma, Texas, Louisiana, Alabama, Kansas, Colorado and Iowa, which could
      impact operations at some of our properties. The establishment or expansion
      of
      new gaming facilities and casinos on Native American-owned lands will increase
      competition for our existing and future operations.





We
      also
      compete with other forms of legalized gaming and entertainment such as online
      computer gambling, bingo, pull tab games, card parlors, sports books,
      pari-mutuel or telephonic betting on horse racing and dog racing,
      state-sponsored lotteries, jai-alai, video lottery terminals and video poker
      terminals and, in the future, may compete with gaming at other
      venues.





Our
      existing gaming facilities compete directly with other gaming properties in
      Louisiana, Mississippi, Missouri, Iowa and Colorado. We also compete with gaming
      operators in other gaming jurisdictions such as Atlantic City, New Jersey and
      Las Vegas, Nevada. Our existing casinos attract a significant number of their
      customers from Houston and Dallas/Fort Worth, Texas; Mobile, Alabama; Jackson,
      Mississippi; Memphis, Tennessee; Little Rock, Arkansas and Denver, Colorado.
      Our
      continued success depends upon drawing customers from each of these geographic
      markets. Legalization of gaming in jurisdictions closer to these geographic
      markets than the jurisdictions in which our facilities are located would have
      a
      material adverse effect on our operating results. Electronic games of skill
      were
      recently approved by the voters in Arkansas for operation at pari-mutuel
      facilities, and while that approval is subject to county-wide votes in the
      counties where the pari-mutuel facilities are located, the operation of those
      machines could adversely impact our operations in Lula and Bossier City.
      Similarly, voters in Oklahoma recently authorized certain table games at
      Oklahoma tribal casinos, which we believe has had, and may continue to have,
      an
      adverse impact on the Bossier City market. We expect competition to increase
      as
      new gaming operators enter our markets, existing competitors expand their
      operations, gaming activities expand in existing jurisdictions and gaming is
      legalized in new jurisdictions. We cannot predict with any certainty the effects
      of existing and future competition on our operating results.


12


***We
      are subject to extensive regulation from gaming authorities that could adversely
      affect us.***





*Licensing
      Requirements.*


As
      owners
      and operators of gaming facilities, we are subject to extensive state and local
      regulation. State and local authorities require us and our subsidiaries to
      demonstrate suitability to obtain and retain various licenses and require that
      we have registrations, permits and approvals to conduct gaming operations.
      The
      regulatory authorities in the jurisdictions in which we operate may limit,
      condition, suspend or revoke a license to conduct gaming operations or prevent
      us from owning the securities of any of our gaming subsidiaries. We may also
      be
      deemed responsible for the acts and conduct of our employees. Substantial fines
      or forfeiture of assets for violations of gaming laws or regulations may be
      levied against us, our subsidiaries and the persons involved. The suspension
      or
      revocation of any of our licenses or the levy on us or our subsidiaries of
      a
      substantial fine would have a material adverse effect on our
      business.





To
      date,
      we have demonstrated suitability to obtain and have obtained all governmental
      licenses, registrations, permits and approvals necessary for us to operate
      our
      existing gaming facilities. However, like all gaming operators in the
      jurisdictions in which we operate, we must periodically apply to renew our
      gaming licenses. We cannot assure you that we will be able to obtain such
      renewals. We remain committed to our development project in the UK to build
      a
      casino in Coventry; however, legislation enacted in April 2005 limits the number
      of regional casinos to one. The number may be increased only through additional
      legislation. We have obtained all necessary gaming licenses to open a casino
      at
      the RICOHTM Arena Coventry in the summer of 2006 under the Gaming Act of 1968. We
      believe we are well positioned to develop a regional casino in Coventry should
      we be awarded a regional casino license.  In
      addition, if we expand our gaming operations in the jurisdictions in which
      we
      currently operate or to new jurisdictions, we will have to meet suitability
      requirements and obtain additional licenses, registrations, permits and
      approvals from gaming and non-gaming authorities in these jurisdictions.





For
      example, in connection with our successful bid for the 10th gaming license
      in
      Illinois, we must be found suitable and our proposed facility must be approved
      by the Illinois Gaming Board. In addition, the Illinois Attorney General has
      raised issues with regard to the appropriateness of the Village of Rosemont
      as a
      host community and the Illinois Gaming Board’s selection of our bid. The
      Illinois Gaming Board (working with the Illinois Attorney General) has also
      resumed an administrative proceeding seeking to revoke the gaming license from
      our proposed merger partner, which if successful may adversely impact our
      ability to operate a gaming facility in the Village of Rosemont. The Illinois
      Attorney General has also filed a suit against the Illinois Gaming Board seeking
      to enjoin the Board from conducting a suitability investigation of us in
      connection with the merger provided for under the plan of reorganization (which
      suitability review has been “suspended” by the Illinois Gaming Board pending the
      completion of the aforementioned revocation proceeding. During the fourth
      quarter of fiscal 2005, the governor of Illinois appointed a new gaming board.
      One of the first acts by the new board was to authorize the reinstatement of
      the
      proceeding to rescind the license from the current owner. For the reasons set
      forth above, among others, we believe that our ability to obtain the gaming
      license and open a gaming facility in Rosemont has been subjected to added
      uncertainty.





In
      November 2004, voters in the State of Florida voted to amend the state's
      constitution to allow the voters of Miami-Dade and Broward counties (Broward
      County is the location of the Pompano Park Racetrack) to decide whether to
      approve slot machines in racetracks and jai alai frontons in their respective
      counties. Broward county voters passed their local referendum and Dade county
      voters rejected their referendum in March 2005. Enabling gaming legislation
      was
      not passed in the current session of the Florida legislature despite the
      constitutional requirement that such legislation be in effect by July 1, 2005.
      Along with the other Broward county pari-mutuels, we filed a lawsuit seeking
      authority to proceed with the development of slot machine facilities despite
      the
      absence of enabling legislation. On June 21, 2005, the Circuit Court judge
      issued a decision in favor of the pari-mutuel facilities, which




13




decision
      will be appealed.  Accordingly, the regulation and timing of installation
      and operation of slot machines has not been finally determined.


In
        addition, regulatory authorities in certain jurisdictions must approve, in
        advance, any restrictions on transfers of, agreements not to encumber or
        pledges
        of equity securities issued by a corporation that is registered as an
        intermediary company with such state, or that holds a gaming license. If
        these
        restrictions are not approved in advance, they will be invalid.


*Potential
      Changes in Regulatory Environment.*


From
      time
      to time, legislators and special interest groups have proposed legislation
      that
      would expand, restrict or prevent gaming operations in the jurisdictions in
      which we operate. In addition, from time to time, certain anti-gaming groups
      propose referenda that, if adopted, would limit our ability to continue to
      operate in those jurisdictions in which such referenda are adopted. Any
      expansion of gaming or restriction on or prohibition of our gaming operations
      could have a material adverse effect on our operating results.


***We
        are subject to the possibility of an increase in gaming taxes, which would
        increase our costs*** *.*





State
      and
      local authorities raise a significant amount of revenue through taxes and fees
      on gaming activities. We believe that the prospect of significant revenue is
      one
      of the primary reasons that jurisdictions permit legalized gaming. As a result,
      gaming companies are typically subject to significant taxes and fees in addition
      to normal federal, state, local and provincial income taxes, and such taxes
      and
      fees are subject to increase at any time. We pay substantial taxes and fees
      with
      respect to our operations. From time to time, federal, state, local and
      provincial legislators and officials have proposed changes in tax laws, or
      in
      the administration of such laws, affecting the gaming industry. In addition,
      poor economic conditions could intensify the efforts of state and local
      governments to raise revenues through increases in gaming taxes. On May 6,
      2004,
      the Iowa legislature made several changes to its gaming tax structure,
      increasing the taxes and fees we pay with respect to our operations located
      in
      that State. Effective July 1, 2004, gaming taxes increased from 20% to 22%
      of
      adjusted gross receipts. Additionally, there are two prepaid assessments due
      on
      June 1, 2005 and June 1, 2006 in an amount equal to 2.152% of our adjusted
      gross
      receipts for fiscal year 2004. These assessments will be offset by future state
      gaming taxes, with a credit for 20% of the assessments paid allowed each year
      beginning July 1, 2010 for five consecutive years. We are also required to
      reimburse the state of Iowa for costs associated with monitoring and enforcement
      by the Iowa Gaming Commission and the Iowa Department of Criminal Investigation.
      Some of the states in which we own or operate casinos continue to experience
      budget shortfalls and, as a result, may increase gaming taxes to raise more
      revenue. It is not possible to determine with certainty the likelihood of
      changes in tax laws or in the administration of such laws. Such changes, if
      adopted, could have a material adverse effect on our business, financial
      condition and results of operations.





***We
      are subject to non-gaming regulation that could adversely affect
      us.***





Several
      of our riverboats must comply with U.S. Coast Guard requirements as to boat
      design, on-board facilities, equipment, personnel and safety and must hold
      U.S.
      Coast Guard Certificates of Documentation and Inspection. The U.S. Coast Guard
      requirements also set limits on the operation of the riverboats and mandate
      licensing of certain personnel involved with the operation of the riverboats.
      Loss of a riverboat’s Certificate of Documentation and Inspection could preclude
      its use as a riverboat casino. Each of our riverboats is inspected annually
      and,
      every five years, is subject to dry-docking for inspection of its hull, which
      could result in a temporary loss of service .





We
      are
      required to have third parties periodically inspect and certify all of our
      casino barges for stability and single compartment flooding integrity. Our
      casino barges must also meet local fire safety standards. We would incur
      additional costs if any of our gaming facilities were not in compliance with
      one
      or more of these regulations.


14


We
      are
      also subject to certain federal, state and local environmental laws, regulations
      and ordinances that apply to non-gaming businesses generally, such as the Clean
      Air Act, the Clean Water Act, the Resource Conservation Recovery Act, the
      Comprehensive Environmental Response, Compensation and Liability Act and the
      Oil
      Pollution Act of 1990. Under various federal, state and local laws and
      regulations, an owner or operator of real property may be held liable for the
      costs of removal or remediation of certain hazardous or toxic substances or
      wastes located on its property, regardless of whether or not the present owner
      or operator knows of, or is responsible for, the presence of such substances
      or
      wastes. We have not identified any issues associated with our properties that
      could reasonably be expected to have an adverse effect on us or the results
      of
      our operations. However, several of our properties are located in industrial
      areas or were used for industrial purposes for many years. As a consequence,
      it
      is possible that historical or neighboring activities have affected one or
      more
      of our properties and that, as a result, environmental issues could arise in
      the
      future, the precise nature of which we cannot now predict. The coverage and
      attendant compliance costs associated with these laws, regulations and
      ordinances may result in future additional costs.





Regulations
      adopted by the Financial Crimes Enforcement Network of the U.S. Treasury
      Department require us to report currency transactions in excess of $10,000
      occurring within a gaming day, including identification of the patron by name
      and social security number. U.S. Treasury Department regulations also require
      us
      to report certain suspicious activity, including any transaction that exceeds
      $5,000 if we know, suspect or have reason to believe that the transaction
      involves funds from illegal activity or is designed to evade federal regulations
      or reporting requirements. Substantial penalties can be imposed against us
      if we
      fail to comply with these regulations.





We
      are
      also subject to a variety of other local rules and regulations, including
      zoning, environmental, construction and land-use laws and regulations governing
      the serving of alcoholic beverages. Penalties can be imposed against us if
      we
      fail to comply with these regulations. The imposition of a substantial penalty
      or the loss of service of a gaming facility for a significant period of time
      would have a material adverse affect on our business.





***Our
      substantial indebtedness could adversely affect our financial health and
      restrict our operations.***





We
      have a
      significant amount of indebtedness. As of April 24, 2005, we had $1.2 billion
      of
      total debt outstanding.





Our
      significant indebtedness could have important consequences, such
      as:





·
            limiting
                our ability to obtain additional financing to fund our working capital
                requirements, capital expenditures, debt service, general corporate
                or
                other obligations;


·
            limiting
                our ability to use operating cash flow in other areas of our business
                because we must dedicate a significant portion of these funds to
                make
                principal and interest payments on our
                indebtedness;


·
            increasing
                our interest expense if there is a rise in interest rates, because
                a
                portion of our borrowings under our senior secured credit facility
                are
                subject to interest rate periods with short-term durations (typically
                30
                to 180 days) that require ongoing refunding at the then current rates
                of
                interest;


·
            causing
                our failure to comply with the financial and restrictive covenants
                contained in the indenture and agreements governing the 7% senior
                subordinated notes due 2014, the 9% senior subordinated notes due
                2012,
                our senior secured credit facility and our other indebtedness, which
                could
                cause a default under those instruments and which, if not cured or
                waived,
                could have a material adverse effect on us;


·
            placing
                us at a competitive disadvantage to our competitors who are not as
                highly
                leveraged; and


·
            increasing
                our vulnerability to and limiting our ability to react to changing
                market
                conditions, changes in our industry and economic
                downturns.





15




Any
      of
      the factors listed above could have a material adverse effect on our business,
      financial condition and results of operations. In addition, as of April 24,
      2005, we had the capacity to issue additional indebtedness, including the
      ability to incur additional indebtedness under all of our lines of credit,
      of
      approximately $452.8 million, subject to the limitations imposed by the
      covenants in the senior secured credit facility and the indentures governing
      our
      notes. The indenture governing our notes and the senior secured credit facility
      contain financial and other restrictive covenants, but will not fully prohibit
      us from incurring additional debt. If new debt is added to our current level
      of
      indebtedness, related risks that we now face could increase.




We
      have
      made and will need to make significant capital expenditures at our existing
      facilities to remain competitive with current and future competitors in our
      markets. Our senior secured credit facility and the indentures governing our
      notes contain operating and financial restrictions that may limit our ability
      to
      obtain the financing to make these capital expenditures.





Our
      agreements governing our indebtedness, among other things, limit our ability
      to:


**·**
            borrow
                money;


**·**
            make
                capital expenditures;


**·**
            use
                assets as security in other
                transactions;


**·**
            make
                restricted payments or restricted
                investments;


**·**
            incur
                contingent obligations;****and


**·**
            sell
                assets and enter into leases and transactions with
                affiliates.





**We
      May Not Be Able to Successfully Recover Our Investment in New Locations**




We
      regularly evaluate and pursue new gaming acquisition and development
      opportunities in existing and new gaming markets. For example, in December
      2003
      we entered into an agreement to develop and operate an entertainment complex,
      which will include a casino, in a commercial leisure complex in Coventry,
      England. While we seek the requisite approvals for the proposed project, we
      are
      committed to making certain investments in the project. In the event we obtain
      all necessary approvals, we will invest significant additional
      funds.





To
      the
      extent that we elect to pursue any new gaming acquisition or development
      opportunity, our ability to benefit from our investment will depend on many
      factors, including:





·
            our
                ability to successfully identify attractive acquisition and development
                opportunities;





**·**
            our
                ability to successfully integrate the operations of any acquired
                properties;





·
            our
                ability to attract and retain competent management and employees
                for the
                new locations;





·
            our
                ability to secure required federal, state and local licenses, permits
                and
                approvals, which in some jurisdictions are limited in number and
                subject
                to intense competition;





·
            the
                availability of adequate financing on acceptable
                terms.




Many
      of
      these factors are beyond our control. Therefore, we cannot be sure that we
      will
      be able to recover our investments in any new gaming development opportunities
      or acquired facilities, or successfully expand to additional locations.


16




**We
      May Experience Construction Delays During Our Expansion or Development Projects**




We
      currently are engaged in substantial expansion projects at several of our
      domestic properties and have plans to commence construction on a new facility
      in
      the UK. We also evaluate other expansion opportunities as they become available
      and we may in the future engage in additional construction projects. The
      anticipated costs and construction periods are based upon budgets, conceptual
      design documents and construction schedule estimates prepared by us in
      consultation with our architects and contractors.




Construction
      projects entail significant risks, which can substantially increase costs or
      delay completion of a project. Such risks include shortages of materials or
      skilled labor, unforeseen engineering, environmental or geological problems,
      work stoppages, weather interference and unanticipated cost increases. Most
      of
      these factors are beyond our control. In addition, difficulties or delays in
      obtaining any of the requisite licenses, permits or authorizations from
      regulatory authorities can increase the cost or delay the completion of an
      expansion or development. Significant budget overruns or delays with respect
      to
      expansion and development projects could adversely affect our results of
      operations.




***If
      our key personnel leave us, our business will be significantly adversely
      affected.***





Our
      continued success will depend, among other things, on the efforts and skills
      of
      a few key executive officers and the experience of our property managers as
      well
      as our ability to attract and retain additional highly qualified personnel
      with
      gaming industry experience and qualifications to obtain the requisite licenses.
      We do not maintain “key man” life insurance for any of our employees. There is
      no assurance that we would be able to attract and hire suitable replacements
      for
      any of our key employees. We need qualified executives, managers and skilled
      employees with gaming industry experience to continue to successfully operate
      our business. We believe a shortage of skilled labor in the gaming industry
      may
      make it increasingly difficult and expensive to attract and retain qualified
      employees. We expect that increased competition in the gaming industry will
      intensify this problem.





***Inclement
      weather and other conditions could seriously disrupt our business, financial
      condition and results of operations.***





Dockside
      and riverboat facilities are subject to risks in addition to those associated
      with land-based casinos, including loss of service due to casualty, mechanical
      failure, extended or extraordinary maintenance, flood, hurricane or other severe
      weather. Our riverboats and barges face additional risks from the movement
      of
      vessels on waterways.





Reduced
      patronage and the loss of a dockside or riverboat casino from service for any
      period of time could adversely affect our results of operations. For example,
      as
      a result of hurricanes, we closed the Isle-Our Lucaya from September 1, 2004
      to
      October 13, 2004 and twenty-one other days throughout October 2004 and November
      2004 and the Isle-Biloxi from September 14, 2004 to September 17, 2004. While
      our business interruption insurance provided sufficient coverage for those
      losses, we cannot assure you that the proceeds from any future claim will be
      sufficient to compensate us if one or more of our casinos experience a
      closure.





Access
      to
      a number of our facilities may also be affected by road conditions, such as
      construction and traffic. In addition, severe weather such as high winds and
      blizzards occasionally limits access to our facilities in
      Colorado.


17


***Energy
      and fuel price increases may adversely affect our costs of operations and our
      revenues***





Our
      casino properties use significant amounts of electricity, natural gas and other
      forms of energy. While no shortages of energy have been experienced, substantial
      increases in the cost of electricity in the United States will negatively affect
      our results of operations. In addition, energy and fuel price increases in
      cities that constitute a significant source of customers for our properties
      could result in a decline in disposable income of potential customers and a
      corresponding decrease in visitation to our properties, which would negatively
      impact our revenues. The extent of the impact is subject to the magnitude and
      duration of the energy and fuel price increases, but this impact could be
      material.





***A
      downturn in general economic conditions may adversely affect our results of
      operations.***





Our
      business operations are subject to changes in international, national and local
      economic conditions, including changes in the economy related to future security
      alerts in connection with threatened or actual terrorist attacks and related
      to
      the war with Iraq, which may affect our customers’ willingness to travel. A
      recession or downturn in the general economy, or in a region constituting a
      significant source of customers for our properties, could result in fewer
      customers visiting our properties, which would adversely affect our results
      of
      operations.





***We
      have international operations that are subject to different risks than our
      domestic operations.***





With
      our
      expansion into the UK and the Bahamas, we are subject to certain additional
      risks, including difficulty in staffing and managing foreign subsidiary
      operations, foreign currency fluctuations, dependence on foreign economies,
      political issues, adverse tax consequences and uncertainty in regulatory reform
      in the UK. In addition, in the Bahamas current gaming regulation preclude
      residence from participating in gaming activities. Therefore, disruptions in
      tourism traffic such as airline and other means of transportation and hotel
      accommodations can have an adverse impact in our gaming operations.





**Regulation
      and Licensing**





The
      ownership and operation of casino gaming facilities are subject to extensive
      state and local regulations. We are required to obtain and maintain gaming
      licenses in each of the jurisdictions in which we conduct gaming. The
      limitation, conditioning or suspension of gaming licenses could (and the
      revocation or non-renewal of gaming licenses, or the failure to reauthorize
      gaming in certain jurisdictions, would) materially adversely affect our
      operation in that jurisdiction. In addition, changes in law that restrict or
      prohibit our gaming operations in any jurisdiction could have a material adverse
      effect on us. For example, the State of Florida legislature did not pass
      enabling gaming legislation in the most current session despite a constitutional
      requirement that it do so. For a variety of reasons, there can be no assurance
      that Florida law will ultimately allow the operation of slot machines at
      racetracks or jai alai facilities in Broward county, which recently passed
      a
      local referendum to do so.





We
      remain
      committed to our development project in the UK to build a casino in Coventry;
      however, legislation enacted in April 2005 limits the number of regional casinos
      to one. The number may be increased only through additional legislation. We
      have
      obtained all necessary gaming licenses to open a casino at the RICOHTM Arena
      Coventry in the summer of 2006 under the Gaming Act of 1968. We believe we
      are
      well positioned to develop a regional casino in Coventry should we be awarded
      a
      regional casino license.




***Louisiana***





In
      July
      1991, Louisiana enacted legislation permitting certain types of gaming activity
      on certain rivers and waterways in Louisiana. The legislation granted authority
      to supervise riverboat gaming activities to the Louisiana Riverboat Gaming
      Commission and the Riverboat Gaming Enforcement




18




Division
      of the Louisiana State Police. The Louisiana Riverboat Gaming Commission was
      authorized to hear and determine all appeals relative to the granting,
      suspension, revocation, condition or renewal of all licenses, permits and
      applications. In addition, the Louisiana Riverboat Gaming Commission established
      regulations concerning authorized routes, duration of excursions, minimum levels
      of insurance, construction of riverboats and periodic inspections. The Riverboat
      Gaming Enforcement Division of the Louisiana State Police was authorized to
      investigate applicants and issue licenses, investigate violations of the statute
      and conduct continuing reviews of gaming activities.





In
      May
      1996, regulatory oversight of riverboat gaming was transferred to the Louisiana
      Gaming Control Board, which is comprised of nine voting members appointed by
      the
      governor. The Louisiana Gaming Control Board now oversees all licensing matters
      for riverboat casinos, land-based casinos, racinos, video poker and certain
      aspects of Native American gaming other than those responsibilities reserved
      to
      the Louisiana State Police.





The
      Louisiana Gaming Control Board is empowered to issue up to 15 licenses to
      conduct gaming activities on a riverboat of new construction in accordance
      with
      applicable law. However, no more than six licenses may be granted to riverboats
      operating from any one designated waterway.





The
      Louisiana State Police continues to be involved broadly in gaming enforcement
      and reports to the Louisiana Gaming Control Board. Louisiana law permits the
      Louisiana State Police, among other things, to continue to (1) conduct
      suitability investigations, (2) audit, investigate and enforce compliance with
      standing regulations, (3) initiate enforcement and administrative actions and
      (4) perform “all other duties and functions necessary for the efficient,
      efficacious, and thorough regulation and control of gaming activities and
      operations” under the Louisiana Gaming Control Board’s
      jurisdiction.





Louisiana
      gaming law specifies certain restrictions relating to the operation of riverboat
      gaming, including the following:





·
            agents
                of the Louisiana State Police are permitted on board at any time
                during
                gaming operations;





·
            gaming
                devices, equipment and supplies may only be purchased or leased from
                permitted suppliers and, with respect to gaming equipment, from permitted
                manufacturers;





·
            gaming
                may only take place in the designated gaming area while the riverboat
                is
                docked on a designated river or
                waterway;





·
            gaming
                equipment may not be possessed, maintained or exhibited by any person
                on a
                riverboat except in the specifically designated gaming area or in
                a secure
                area used for inspection, repair or storage of such
                equipment;





·
            wagers
                may be received only from a person present on a licensed
                riverboat;





·
            persons
                under 21 are not permitted in designated gaming
                areas;





·
            except
                for slot machine play, wagers may be made only with tokens, chips
                or
                electronic cards purchased from the licensee aboard a
                riverboat;





·
            licensees
                may only use docking facilities and routes for which they are licensed
                and
                may only board and discharge passengers at the riverboat’s licensed
                berth;





·
            licensees
                must have adequate protection and indemnity
                insurance;






19





·
            licensees
                must have all necessary federal and state licenses, certificates
                and other
                regulatory approvals prior to operating a riverboat;
                and





·
            gaming
                may only be conducted in accordance with the terms of the license
                and
                Louisiana law.





To
      receive a gaming license in Louisiana, an applicant must be found to be a person
      of good character, honesty and integrity and a person whose prior activities,
      criminal record, if any, reputation, habits and associations do not (1) pose
      a
      threat to the public interest of the State of Louisiana or to the effective
      regulation and control of gaming or (2) create or enhance the dangers of
      unsuitable, unfair or illegal practices, methods and activities in the conduct
      of gaming or the carrying on of business and financial arrangements of gaming
      activities. In addition, the Louisiana Gaming Control Board will not grant
      a
      license unless it finds that, among other things:





·
            the
                applicant can demonstrate the capability, either through training,
                education, business experience or a combination of the preceding,
                to
                operate a gaming operation;





·
            the
                proposed financing of the riverboat and the gaming operations is
                adequate
                for the nature of the proposed operation and is from a suitable and
                acceptable source;





·
            the
                applicant demonstrates a proven ability to operate a vessel of comparable
                size, capacity and complexity to a riverboat so as to ensure the
                safety of
                its passengers;





·
            the
                applicant submits with its application for a license a detailed plan
                of
                design of the riverboat;





·
            the
                applicant designates the docking facilities to be used by the
                riverboat;





·
            the
                applicant shows adequate financial ability to construct and maintain
                a
                riverboat; and





·
            the
                applicant has a good faith plan to recruit, train and upgrade minorities
                in all employment classifications.





An
      initial license to conduct riverboat gaming operations is valid for a term
      of
      five years and legislation passed in the 1999 legislative session provides
      for
      renewals every five years thereafter. Louisiana gaming law provides that a
      renewal application for the period succeeding the initial five-year term of
      an
      operator’s license must be made to the Louisiana Gaming Control Board and must
      include a statement under oath of any and all changes in information, including
      financial information, provided in the previous application. The transfer of
      a
      license or an interest in a license is prohibited. A gaming license is deemed
      to
      be a privilege under Louisiana law and, as such, may be denied, revoked,
      suspended, conditioned or limited at any time by the Louisiana Gaming Control
      Board. The Isle-Bossier City and the Isle-Lake Charles each received a five-year
      renewal of their license on July 20, 1999.





On
      April
      9, 2004, the Isle-Bossier City and the Isle-Lake Charles filed applications
      for
      a second five-year renewal of their three licenses. These five-year renewal
      applications were approved for Louisiana Riverboat Gaming Partnership and Grand
      Palais Riverboat Incorporated on August 17, 2004 and St. Charles Gaming Company
      was approved on March 29, 2005.





Certain
      persons affiliated with a riverboat gaming licensee, including directors and
      officers of the licensee, directors and officers of any holding company of
      the
      licensee involved in gaming operations, persons holding 5% or greater interests
      in the licensee and persons exercising influence over a licensee, are subject
      to
      the application and suitability requirements of Louisiana gaming
      law.


20


The
      sale,
      purchase, assignment, transfer, pledge or other hypothecation, lease,
      disposition or acquisition by any person of securities that represent 5% or
      more
      of the total outstanding shares issued by a licensee is subject to the approval
      of the Louisiana Gaming Control Board. A security issued by a licensee must
      generally disclose these restrictions. Prior approval from the Louisiana Gaming
      Control Board is required for the sale, purchase, assignment, transfer, pledge
      or other hypothecation, lease, disposition or acquisition of any ownership
      interest of 5% or more of any non-corporate licensee or for the transfer of
      any
“economic interest” of 5% or more of any licensee or affiliated gaming person.
      An “economic interest” is defined as any interest whereby a person receives or
      is entitled to receive, by agreement or otherwise, a profit, gain, thing of
      value, loan, credit, security interest, ownership interest or other
      benefit.





Fees
      payable to the state for conducting gaming activities on a riverboat include
      (1)
      $50,000 per riverboat for the first year of operation and $100,000 per year
      per
      riverboat thereafter, plus (2) 18.5% of net gaming proceeds. Legislation was
      passed during the 2001 legislative session that allowed those riverboats that
      had been required to conduct cruises, including the riverboats at the Isle-Lake
      Charles, to remain permanently dockside beginning April 1, 2001. The legislation
      also increased the gaming tax for operators from 18.5% to 21.5%. A statute
      also
      authorizes local governing authorities to levy boarding fees. We currently
      have
      development agreements with certain local governing authorities in the
      jurisdictions in which we operate pursuant to which we make payments in lieu
      of
      boarding fees. In Bossier City, we have a development agreement with the Bossier
      Parish Police Jury pursuant to which we are required to pay 0.65% of net gaming
      proceeds until January 2007. This rate is more than the statutory amount of
      0.63%. In addition to this 0.65%, the Bossier City operation is also subject
      to
      statutory boarding fees.





A
      licensee must notify and/or seek approval from the Louisiana Gaming Control
      Board in connection with any withdrawals of capital, loans, advances or
      distributions in excess of 5% of retained earnings for a corporate licensee,
      or
      of capital accounts for a partnership or limited liability company licensee,
      upon completion of any such transaction. The Louisiana Gaming Control Board
      may
      issue an emergency order for not more than ten days prohibiting payment of
      profits, income or accruals by, or investments in, a licensee. Unless excepted
      or waived by the Louisiana Gaming Control Board, riverboat gaming licensees
      and
      their affiliated gaming persons must notify the Louisiana Gaming Control Board
      60 days prior to the receipt by any such persons of any loans or extensions
      of
      credit or modifications thereof. The Louisiana Gaming Control Board is required
      to investigate the reported loan, extension of credit or modification thereof
      and to determine whether an exemption exists on the requirement of prior written
      approval and, if such exemption is not applicable, to either approve or
      disapprove the transaction. If the Louisiana Gaming Control Board disapproves
      of
      a transaction, the transaction cannot be entered into by the licensee or
      affiliated gaming person. We are an affiliated gaming person of our subsidiaries
      that hold the licenses to conduct riverboat gaming at the Isle-Bossier City
      and
      the Isle-Lake Charles.





The
      failure of a licensee to comply with the requirements set forth above may result
      in the suspension or revocation of that licensee’s gaming license. Additionally,
      if the Louisiana Gaming Control Board finds that the individual owner or holder
      of a security of a corporate license or intermediary company or any person
      with
      an economic interest in a licensee is not qualified under Louisiana law, the
      Louisiana Gaming Control Board may require, under penalty of suspension or
      revocation of the license, that the person not:


·
            receive
                dividends or interest on securities of the
                corporation;





·
            exercise
                directly or indirectly a right conferred by securities of the
                corporation;





·
            receive
                remuneration or economic benefit from the
                licensee;





·
            exercise
                significant influence over activities of the licensee;
                or






21






·
            continue
                its ownership or economic interest in the
                licensee.





A
      licensee must periodically report the following information to the Louisiana
      Gaming Control Board, which is not confidential and is available for public
      inspection: (1) the licensee’s net gaming proceeds from all authorized games,
      (2) the amount of net gaming proceeds tax paid and (3) all quarterly and annual
      financial statements presenting historical data, including annual financial
      statements that have been audited by an independent certified public
      auditor.





During
      the 1996 special session of the Louisiana legislature, legislation was enacted
      placing on the ballot for a statewide election a constitutional amendment
      limiting the expansion of gaming, which was subsequently passed by the voters.
      As a result, local option elections are required before new or additional forms
      of gaming can be brought into a parish.





Proposals
      to amend or supplement Louisiana’s riverboat gaming statute are frequently
      introduced in the Louisiana State Legislature. There is no assurance that
      changes in Louisiana gaming law will not occur or that such changes will not
      have a material adverse effect on our business in Louisiana.





***Mississippi***





In
      June
      1990, Mississippi enacted legislation legalizing dockside casino gaming for
      counties along the Mississippi River, which is the western border for most
      of
      the state, and the Gulf Coast, which is the southern border for most of the
      state. The legislation gave each of those counties the opportunity to hold
      a
      referendum on whether to allow dockside casino gaming within its
      boundaries.





Gaming
      vessels in Mississippi must be located on the Mississippi River, on navigable
      waters in eligible counties along the Mississippi River or in the waters lying
      south of the counties along the Mississippi Gulf Coast. Mississippi law permits
      unlimited stakes gaming on permanently moored vessels on a 24-hour basis and
      does not restrict the percentage of space that may be utilized for gaming.
      There
      are no limitations on the number of gaming licenses that may be issued in
      Mississippi.





The
      ownership and operation of gaming facilities in Mississippi are subject to
      extensive state and local regulation intended to:





·
            prevent
                unsavory or unsuitable persons from having any direct or indirect
                involvement with gaming at any time or in any
                capacity;





·
            establish
                and maintain responsible accounting practices and procedures for
                gaming
                operations;





·
            maintain
                effective control over the financial practices of licensees, including
                establishing minimum procedures for internal fiscal affairs and
                safeguarding of assets and revenues, providing reliable record keeping
                and
                making periodic reports;





·
            provide
                a source of state and local revenues through taxation and licensing
                fees;





·
            prevent
                cheating and fraudulent practices;
                and





·
            ensure
                that gaming licensees, to the extent practicable, employ Mississippi
                residents.





The
      regulations are subject to amendment and interpretation by the Mississippi
      Gaming Commission. Changes in Mississippi laws or regulations may limit or
      otherwise materially affect the types of gaming that may be conducted in
      Mississippi and such changes, if enacted, could have an adverse effect on us
      and
      our Mississippi gaming operations.






22




We
      are
      registered as a publicly traded corporation under the Mississippi Gaming Control
      Act. Our gaming operations in Mississippi are subject to regulatory control
      by
      the Mississippi Gaming Commission, the State Tax Commission and various other
      local, city and county regulatory agencies (collectively referred to as the
      “Mississippi Gaming Authorities”). Our subsidiaries have obtained gaming
      licenses from the Mississippi Gaming Authorities. We must obtain a waiver from
      the Mississippi Gaming Commission before beginning any proposed gaming
      operations outside of Mississippi. The licenses held by our Mississippi gaming
      operations have terms of three years and are not transferable. The Isle-Biloxi,
      the Isle-Vicksburg, the Isle-Natchez and the Isle-Lula hold licenses effective
      from May 23, 2003, through May 22, 2006. There is no assurance that new licenses
      can be obtained at the end of each three-year period of a license. Moreover,
      the
      Mississippi Gaming Commission may, at any time, and for any cause it deems
      reasonable, revoke, suspend, condition, limit or restrict a license or approval
      to own shares of stock in our subsidiaries that operate in
      Mississippi.





Substantial
      fines for each violation of Mississippi’s gaming laws or regulations may be
      levied against us, our subsidiaries and the persons involved. A violation under
      a gaming license held by a subsidiary of ours operating in Mississippi may
      be
      deemed a violation of all the other licenses held by us.





We,
      along
      with each of our Mississippi gaming subsidiaries, must periodically submit
      detailed financial, operating and other reports to the Mississippi Gaming
      Commission and/or the State Tax Commission. Numerous transactions, including
      substantially all loans, leases, sales of securities and similar financing
      transactions entered into by any of our Mississippi gaming subsidiaries must
      be
      reported to or approved by the Mississippi Gaming Commission. In addition,
      the
      Mississippi Gaming Commission may, at its discretion, require additional
      information about our operations.





Certain
      of our officers and employees and the officers, directors and certain key
      employees of our Mississippi gaming subsidiaries must be found suitable or
      be
      licensed by the Mississippi Gaming Commission. We believe that all required
      findings of suitability related to all of our Mississippi properties have been
      applied for or obtained, although the Mississippi Gaming Commission at its
      discretion may require additional persons to file applications for findings
      of
      suitability. In addition, any person having a material relationship or
      involvement with us may be required to be found suitable or licensed, in which
      case those persons must pay the costs and fees associated with such
      investigation. The Mississippi Gaming Commission may deny an application for
      a
      finding of suitability for any cause that it deems reasonable. Changes in
      certain licensed positions must be reported to the Mississippi Gaming
      Commission. In addition to its authority to deny an application for a finding
      of
      suitability, the Mississippi Gaming Commission has jurisdiction to disapprove
      a
      change in a licensed position. The Mississippi Gaming Commission has the power
      to require us and any of our Mississippi gaming subsidiaries to suspend or
      dismiss officers, directors and other key employees or to sever relationships
      with other persons who refuse to file appropriate applications or who the
      authorities find unsuitable to act in such capacities.





Employees
      associated with gaming must obtain work permits that are subject to immediate
      suspension under certain circumstances. The Mississippi Gaming Commission will
      refuse to issue a work permit to a person who has been convicted of a felony,
      committed certain misdemeanors or knowingly violated the Mississippi Gaming
      Control Act, and it may refuse to issue a work permit to a gaming employee
      for
      any other reasonable cause.





At
      any
      time, the Mississippi Gaming Commission has the power to investigate and require
      the finding of suitability of any record or beneficial stockholder of ours.
      The
      Mississippi Gaming Control Act requires any person who individually or in
      association with others acquires, directly or indirectly, beneficial ownership
      of more than 5% of our common stock to report the acquisition to the Mississippi
      Gaming Commission, and such person may be required to be found suitable. In
      addition, the Mississippi Gaming Control Act requires any person who,
      individually or in association with others, becomes,






23




directly
      or indirectly, a beneficial owner of more than 10% of our common stock, as
      reported to the U.S. Securities and Exchange Commission, to apply for a finding
      of suitability by the Mississippi Gaming Commission and pay the costs and fees
      that the Mississippi Gaming Commission incurs in conducting the
      investigation.





The
      Mississippi Gaming Commission has generally exercised its discretion to require
      a finding of suitability of any beneficial owner of more than 5% of a registered
      publicly traded corporation’s stock. However, the Mississippi Gaming Commission
      has adopted a regulation that may permit certain "institutional" investors
      to
      obtain waivers that allow them to beneficially own, directly or indirectly,
      up
      to 15% (19% in certain specific instances) of the voting securities of a
      registered publicly traded corporation without a finding of suitability. If
      a
      stockholder who must be found suitable is a corporation, partnership or trust,
      it must submit detailed business and financial information, including a list
      of
      beneficial owners.





Any
      person who fails or refuses to apply for a finding of suitability or a license
      within 30 days after being ordered to do so by the Mississippi Gaming Commission
      may be found unsuitable. We believe that compliance by us with the licensing
      procedures and regulatory requirements of the Mississippi Gaming Commission
      will
      not affect the marketability of our securities. Any person found unsuitable
      who
      holds, directly or indirectly, any beneficial ownership of our securities beyond
      such time as the Mississippi Gaming Commission prescribes may be guilty of
      a
      misdemeanor. We are subject to disciplinary action if, after receiving notice
      that a person is unsuitable to be a stockholder or to have any other
      relationship with us or our subsidiaries operating casinos in Mississippi,
      we:





·
            pay
                the unsuitable person any dividend or other distribution upon its
                voting
                securities;





·
            recognize
                the exercise, directly or indirectly, of any voting rights conferred
                by
                its securities;





·
            pay
                the unsuitable person any remuneration in any form for services rendered
                or otherwise, except in certain limited and specific circumstances;
                or





·
            fail
                to pursue all lawful efforts to require the unsuitable person to
                divest
                itself of the securities, including, if necessary, our immediate
                purchase
                of the securities for cash at a fair market
                value.





We
      may be
      required to disclose to the Mississippi Gaming Commission upon request the
      identities of the holders of any of our debt securities. In addition, under
      the
      Mississippi Gaming Control Act, the Mississippi Gaming Commission may, in its
      discretion, (1) require holders of our securities, including our notes, to
      file
      applications, (2) investigate such holders and (3) require such holders to
      be
      found suitable to own such securities. Although the Mississippi Gaming
      Commission generally does not require the individual holders of obligations
      such
      as the notes to be investigated and found suitable, the Mississippi Gaming
      Commission retains the discretion to do so for any reason, including but not
      limited to a default, or where the holder of the debt instrument exercises
      a
      material influence over the gaming operations of the entity in question. Any
      holder of debt securities required to apply for a finding of suitability must
      pay all investigative fees and costs of the Mississippi Gaming Commission in
      connection with such an investigation.





The
      Mississippi regulations provide that a change in control of us may not occur
      without the prior approval of the Mississippi Gaming Commission. Mississippi
      law
      prohibits us from making a public offering of our securities without the
      approval of the Mississippi Gaming Commission if any part of the proceeds of
      the
      offering is to be used to finance the construction, acquisition or operation
      of
      gaming facilities in Mississippi, or to retire or extend obligations incurred
      for one or more such purposes. The Mississippi Gaming Commission has the
      authority to grant a continuous approval of securities offerings and has granted
      such approval for us, subject to renewal every two years.






24




Regulations
      of the Mississippi Gaming Commission prohibit certain repurchases of securities
      of publicly traded corporations registered with the Mississippi Gaming
      Commission, including holding companies such as ours, without prior approval
      of
      the Mississippi Gaming Commission. Transactions covered by these regulations
      are
      generally aimed at discouraging repurchases of securities at a premium over
      market price from certain holders of greater than 3% of the outstanding
      securities of the registered publicly traded corporation. The regulations of
      the
      Mississippi Gaming Commission also require prior approval for a “plan of
      recapitalization” as defined in such regulations.





We
      must
      maintain in the State of Mississippi current stock ledgers, which may be
      examined by the Mississippi Gaming Authorities at any time. If any securities
      are held in trust by an agent or by a nominee, the record holder may be required
      to disclose the identity of the beneficial owner to the Mississippi Gaming
      Authorities. A failure to make such disclosure may be grounds for finding the
      record holder unsuitable. We must render maximum assistance in determining
      the
      identity of the beneficial owner.





Mississippi
      law requires that certificates representing shares of our common stock bear
      a
      legend to the general effect that the securities are subject to the Mississippi
      Gaming Control Act and regulations of the Mississippi Gaming Commission. The
      Mississippi Gaming Commission has the authority to grant a waiver from the
      legend requirement, which we have obtained. The Mississippi Gaming Commission,
      through the power to regulate licenses, has the power to impose additional
      restrictions on the holders of our securities at any time.





The
      Mississippi Gaming Commission enacted a regulation in 1994 requiring that,
      as a
      condition to licensure, an applicant must provide a plan to develop
      infrastructure facilities amounting to 25% of the cost of the casino and a
      parking facility capable of accommodating 500 cars. In 1999, the Mississippi
      Gaming Commission approved amendments to this regulation that increased the
      infrastructure development requirement from 25% to 100% for new casinos (or
      upon
      acquisition of a closed casino), but grandfathered existing licensees and
      development plans approved prior to the effective date of the new regulation.
      “Infrastructure facilities” include any of the following:





·
            a
                250-room or larger hotel of at least a two-star rating as defined
                by the
                current edition of the Mobil Travel
                Guide;





·
            theme
                parks;





·
            golf
                courses;





·
            marinas;





·
            entertainment
                facilities;





·
            tennis
                complexes; and





·
            any
                other facilities approved by the Mississippi Gaming
                Commission.





Parking
      facilities, roads, sewage and water systems or civic facilities are not
      considered “infrastructure facilities.” The Mississippi Gaming Commission may
      reduce the number of rooms required in a hotel if it is satisfied that
      sufficient rooms are available to accommodate the anticipated number of
      visitors. In 2003, the Mississippi Gaming Commission again amended its
      regulations regarding development plan approval but left the 100% infrastructure
      requirement intact.





License
      fees and taxes are payable to the State of Mississippi and to the counties
      and
      cities in which a




25




Mississippi
      gaming subsidiary’s respective operations will be conducted. The license fee
      payable to the state of Mississippi is based upon gross revenue of the licensee
      (generally defined as gaming receipts less payout to customers as winnings)
      and
      equals 4% of gross revenue of $50,000 or less per month, 6% of gross revenue
      in
      excess of $50,000 but less than $134,000 per calendar month, and 8% of gross
      revenue in excess of $134,000 per calendar month. The foregoing license fees
      are
      allowed as a credit against the licensee’s Mississippi income tax liability for
      the year paid. Additionally, a licensee must pay a $5,000 annual license fee
      and
      an annual fee based upon the number of games it operates. The gross revenue
      tax
      imposed by the Mississippi communities and counties in which our casino
      operations are located equals 0.4% of gross revenue of $50,000 or less per
      calendar month, 0.6% of gross revenue over $50,000 and less than $134,000 per
      calendar month and 0.8% of gross revenue greater than $134,000 per calendar
      month. These fees have been imposed in, among other cities and counties, Biloxi,
      Vicksburg, and Coahoma County. Certain local and private laws of the state
      of
      Mississippi may impose fees or taxes on the Mississippi gaming subsidiaries
      in
      addition to the fees described above.





The
      Mississippi Gaming Commission requires, as a condition of licensure or license
      renewal, that casino vessels on the Mississippi Gulf Coast that are not
      self-propelled must be moored to withstand a Category 4 hurricane with 155
      mile-per-hour winds and 15-foot tidal surge. We believe that all of our
      Mississippi gaming locations currently meet this requirement. A 1996 Mississippi
      Gaming Commission regulation prescribes the hurricane emergency procedure to
      be
      used by the Mississippi Gulf Coast casinos.





The
      sale
      of food or alcoholic beverages at our Mississippi gaming locations is subject
      to
      licensing, control and regulation by the applicable state and local authorities.
      The agencies involved have full power to limit, condition, suspend or revoke
      any
      such license, and any such disciplinary action could (and revocation would)
      have
      a material adverse effect upon the operations of the affected casino or casinos.
      Certain of our officers and managers and our Mississippi gaming subsidiaries
      must be investigated by the Alcoholic Beverage Control Division of the State
      Tax
      Commission in connection with liquor permits that have been issued. The
      Alcoholic Beverage Control Division of the State Tax Commission must approve
      all
      changes in licensed positions.





On
      three
      separate occasions since 1998, certain anti-gaming groups have proposed
      referenda that, if adopted, would have banned gaming in Mississippi and required
      that gaming entities cease operations within two years after the ban. All three
      referenda were declared invalid by Mississippi courts because each lacked a
      required government revenue impact statement.





***Missouri***





Conducting
      gambling games and operating an excursion gambling boat in Missouri are subject
      to extensive regulation under Missouri’s Riverboat Gambling Act and the rules
      and regulations promulgated thereunder. The Missouri Gaming Commission was
      created by the Missouri Riverboat Gambling Act and is charged with regulatory
      authority over riverboat gaming operations in Missouri, including the issuance
      of riverboat gaming licenses. In June 2000, IOC-Kansas City, Inc., a subsidiary
      of ours, was issued a riverboat gaming license in connection with our Kansas
      City operation. Additionally, in December 2001, IOC-Boonville, Inc., a
      subsidiary of ours, was issued a riverboat gaming license for our Boonville
      operation.





In
      order
      to obtain a riverboat gaming license, the proposed operating business entity
      must complete a Class A Riverboat Gaming Application, comprised of comprehensive
      application forms, including corroborating attachments, and undergo an extensive
      background investigation by the Missouri Gaming Commission. In addition, each
      key person associated with the applicant (including directors, officers,
      managers and owners of a significant direct or indirect interest in the
      applicant) must complete a Riverboat Gaming Application Form I and undergo
      a
      background investigation. Certain key business entities closely related to
      the
      applicant or "business entity key persons" must undergo a similar






26




application
      process and background check. An applicant will not receive a license to conduct
      gambling games and to operate an excursion gambling boat if the applicant and
      its key persons have not established good repute and moral character and no
      licensee shall either employ or contract with any person who has pled guilty
      to,
      or been convicted of, a felony, to perform any duties directly connected with
      the licensee’s privileges under a license granted by the Commission. Each
      license granted entitles a licensee to conduct gambling games on an excursion
      gambling boat or to operate an excursion gambling boat and the equipment thereon
      from a specific location. The duration of the license initially runs for two
      one-year terms; thereafter, two-year terms. The Commission also licenses the
      serving of alcoholic beverages on riverboats and related
      facilities.





In
      determining whether to grant a license, the Commission considers the following
      factors, among others: (i) the integrity of the applicants; (ii) the types
      and
      variety of games the applicant may offer; (iii) the quality of the physical
      facility, together with improvements and equipment, and how soon the project
      will be completed; (iv) the financial ability of the applicant to develop and
      operate the facility successfully; (v) the status of governmental actions
      required by the facility; (vi) management ability of the applicant; (vii)
      compliance with applicable statutes, rules, charters and ordinances; (viii)
      the
      economic, ecological and social impact of the facility as well as the cost
      of
      public improvements; (ix) the extent of public support or opposition; (x) the
      plan adopted by the home dock city or county; and (xi) effects on
      competition.





A
      licensee is subject to the imposition of penalties, suspension or revocation
      of
      its license for any act that is injurious to the public health, safety, morals,
      good order, and general welfare of the people of the State of Missouri, or
      that
      would discredit or tend to discredit the Missouri gaming industry or the State
      of Missouri, including without limitation: (i) failing to comply with or make
      provision for compliance with the legislation, the rules promulgated thereunder
      or any federal, state or local law or regulation; (ii) failing to comply with
      any rules, order or ruling of the Missouri Gaming Commission or its agents
      pertaining to gaming; (iii) receiving goods or services from a person or
      business entity who does not hold a supplier’s license but who is required to
      hold such license by the legislation or the rules; (iv) being suspended or
      ruled
      ineligible or having a license revoked or suspended in any state or gaming
      jurisdiction; (v) associating with, either socially or in business affairs,
      or
      employing persons of notorious or unsavory reputation or who have extensive
      police records, or who have failed to cooperate with any officially constituted
      investigatory or administrative body and would adversely affect public
      confidence and trust in gaming; (vi) employing in any Missouri gaming operation
      any person known to have been found guilty of cheating or using any improper
      device in connection with any gambling game; (vii) use of fraud, deception,
      misrepresentation or bribery in securing any license or permit issued pursuant
      to the legislation; (viii) obtaining any fee, charge, or other compensation
      by
      fraud, deception or misrepresentation; and (ix) incompetence, misconduct, gross
      negligence, fraud, misrepresentation or dishonesty in the performance of the
      functions or duties regulated by the Missouri Riverboat Gambling
      Act.





Any
      transfer or issuance of ownership interest in a publicly held gaming licensee
      or
      its holding company that results in an entity owning, directly or indirectly,
      an
      aggregate ownership interest of 5% or more in the gaming licensee must be
      reported to the Missouri Gaming Commission within seven days. Further, any
      pledge or hypothecation of 5% or more of the ownership interest in a publicly
      held gaming licensee or its holding company must be reported to the Missouri
      Gaming Commission within seven days.





Every
      employee participating in a riverboat gaming operation must hold an occupational
      license. In addition, the Missouri Gaming Commission issues supplier’s licenses,
      which authorize the supplier licensee to sell or lease gaming equipment and
      supplies to any licensee involved in the operation of gaming
      operations.





Riverboat
      gaming operations may only be conducted on the Missouri River or Mississippi
      River. Although, all of the excursion gambling boats in Missouri are permanently
      moored boats or barges, a two






27




hour
      simulated cruise is imposed in order to ensure the enforcement of loss limit
      restrictions. Missouri law imposes a maximum loss per person per cruise of
      $500.
      Minimum and maximum wagers on games are set by the licensee and wagering may
      be
      conducted only with a cashless wagering system, whereby money is converted
      to
      tokens, electronic cards or chips that can only be used for wagering. No person
      under the age of 21 is permitted to wager, and wagers may only be taken from
      a
      person present on a licensed excursion gambling boat.





The
      Missouri Riverboat Gambling Act imposes a 20% wagering tax on adjusted gross
      receipts (generally defined as gross receipts less winnings paid to wagerers)
      from gambling games. The tax imposed is to be paid by the licensee to the
      Commission on the day after the day when the wagers were made. Of the proceeds
      of that tax, 10% goes to the local government where the home dock is located,
      and the remainder goes to the State of Missouri.





The
      Missouri Riverboat Gambling Act also requires that licensees pay a $2.00
      admission tax to the Missouri Gaming Commission for each person admitted to
      a
      gaming cruise. The licensee is required to maintain public books and records
      clearly showing amounts received from admission fees, the total amount of gross
      receipts and the total amount of adjusted gross receipts. In addition, all
      local
      income, earnings, use, property and sales taxes are applicable to licensees.
      There have been from time to time pending before the Missouri General Assembly
      several proposed bills which individually or in combination would, if adopted,
      (1) remove the loss limit restriction, (2) adjust the amount of wagering tax
      imposed on adjusted gross receipts of licensees and/or (3) adjust the amount
      of
      admission tax paid by the licensee for each person admitted for a gaming
      cruise.





***Iowa***





In
      1989,
      the State of Iowa legalized riverboat gaming on the Mississippi River and other
      waterways located in Iowa. The legislation authorized the granting of licenses
      to non-profit corporations that, in turn, are permitted to enter into operating
      agreements with qualified persons who also actually conduct riverboat gaming
      operations. Such operators must likewise be approved and licensed by the Iowa
      Racing and Gaming Commission (the “Iowa Gaming Commission”).





The
      Isle-Bettendorf has the right to renew its operator’s contract with the Scott
      County Regional Authority, a non-profit corporation organized for the purpose
      of
      facilitating riverboat gaming in Bettendorf, Iowa, for succeeding three-year
      periods as long as Scott County voters approve gaming in the jurisdiction.
      Under
      the operator’s contract, the Isle-Bettendorf pays the Scott County Regional
      Authority a fee equal to 4.1% of the adjusted gross receipts. Further, the
      Isle-Bettendorf pays a fee to the City of Bettendorf equal to 1.65% of adjusted
      gross receipts.





In
      June
      1994, Upper Mississippi Gaming Corporation, a non-profit corporation organized
      for the purpose of facilitating riverboat gaming in Marquette, Iowa, entered
      into an operator’s agreement for the Isle-Marquette for a period of twenty-five
      years. Under the management agreement, the non-profit organization is to be
      paid
      a fee of $0.50 per passenger. Further, pursuant to a dock site agreement (which
      also has a term of twenty-five years), the Isle-Marquette is required to pay
      a
      fee to the City of Marquette in the amount of $1.00 per passenger, plus a fixed
      amount of $15,000 per month and 2.5% of gaming revenues (less state wagering
      taxes) in excess of $20.0 million but less than $40.0 million; 5% of gaming
      revenues (less state wagering taxes) in excess of $40.0 million but less than
      $60.0 million; and 7.5% of gaming revenues (less state wagering taxes) in excess
      of $60.0 million.





In
      October 2000, the Riverboat Development Authority, a non-profit corporation
      organized for the purpose of facilitating riverboat gaming in Davenport, Iowa,
      entered into an operator’s agreement with the Isle-Davenport to conduct
      riverboat gaming in Davenport, Iowa. The operating agreement requires the
      Isle-Davenport to make weekly payments to the qualified sponsoring organization
      equal to 4.1% of each week’s adjusted gross receipts (as defined in the enabling
      legislation) or $38,461.54, whichever is greater.






28




This
      agreement will remain in effect through March 31, 2009 and may be extended
      by
      the Isle-Davenport so long as it holds a license to conduct gaming. In addition,
      the Isle-Davenport pays a docking fee, gaming tax and a payment in lieu of
      taxes
      to the City of Davenport. Pursuant to a development agreement with the City,
      the
      Isle-Davenport has exclusive docking privileges in the City of Davenport until
      March 31, 2017 in consideration for this docking fee. The docking fee has both
      a
      fixed base and a per passenger increment. The fixed fee commenced April 1,
      1994
      at $111,759 and increases annually by 4%. The incremental component is a $0.10
      charge for each passenger in excess of 1,117,579 passengers (which charge also
      increases by 4% per year). The City is also guaranteed an annual gaming tax
      of
      $558,789.50 per year (based on a minimum passenger floor count of 1,117,579
      passengers at $0.50 per passenger). Finally, the Isle-Davenport is obligated
      to
      pay a payment in lieu of taxes to support the downtown development district.
      This annual lump sum payment is in the amount of $123,516 plus $0.20 per
      passenger in excess of 1,117,579 passengers. This payment in lieu of taxes
      is
      further subject to a minimum $226,179 per year payment.





Iowa
      law
      permits gaming licensees to offer unlimited stakes gaming on games approved
      by
      the Iowa Gaming Commission on a 24-hour basis. Dockside casino gaming is
      authorized and the Iowa Gaming Commission now permits licensees the option
      to
      operate on permanently moored vessels or moored barges. The legal age for gaming
      is 21.





All
      Iowa
      licenses were approved for renewal at the March 3, 2005 Iowa Gaming Commission
      meeting. These licenses are not transferable and will need to be renewed in
      March 2006 and prior to the commencement of each subsequent annual renewal
      period.





The
      ownership and operation of gaming facilities in Iowa are subject to extensive
      state laws, regulations of the Iowa Gaming Commission and various county and
      municipal ordinances (collectively, the “Iowa Gaming Laws”), concerning the
      responsibility, financial stability and character of gaming operators and
      persons financially interested or involved in gaming operations. Iowa Gaming
      Laws seek to: (1) prevent unsavory or unsuitable persons from having direct
      or
      indirect involvement with gaming at any time or in any capacity; (2) establish
      and maintain responsible accounting practices and procedures; (3) maintain
      effective control over the financial practices of licensees (including the
      establishment of minimum procedures for internal fiscal affairs, the
      safeguarding of assets and revenues, the provision of reliable record keeping
      and the filing of periodic reports with the Iowa Gaming Commission); (4) prevent
      cheating and fraudulent practices; and (5) provide a source of state and local
      revenues through taxation and licensing fees. Changes in Iowa Gaming Laws could
      have a material adverse effect on the Iowa gaming operations.





Gaming
      licenses granted to individuals must be renewed every year, and licensing
      authorities have broad discretion with regard to such renewals. Licenses are
      not
      transferable. The Iowa gaming operations must submit detailed financial and
      operating reports to the Iowa Gaming Commission. Certain contracts of licensees
      in excess of $100,000 must be submitted to and approved by the Iowa Gaming
      Commission.





Certain
      officers, directors, managers and key employees of the Iowa gaming operations
      are required to be licensed by the Iowa Gaming Commission. Employees associated
      with gaming must obtain work permits that are subject to immediate suspension
      under specific circumstances. In addition, anyone having a material relationship
      or involvement with the Iowa gaming operations may be required to be found
      suitable or to be licensed, in which case those persons would be required to
      pay
      the costs and fees of the Iowa Gaming Commission in connection with the
      investigation. The Iowa Gaming Commission may deny an application for a license
      for any cause deemed reasonable. In addition to its authority to deny an
      application for license, the Iowa Gaming Commission has jurisdiction to
      disapprove a change in position by officers or key employees and the power
      to
      require the Iowa gaming operations to suspend or dismiss officers, directors
      or
      other key employees or sever relationships with other persons who refuse to
      file
      appropriate applications or whom the Iowa Gaming Commission finds unsuitable
      to
      act in such capacities.






29




The
      Iowa
      Gaming Commission may revoke a gaming license if the licensee:





·
            has
                been suspended from operating a gaming operation in another jurisdiction
                by a board or commission of that
                jurisdiction;





·
            has
                failed to demonstrate financial responsibility sufficient to meet
                adequately the requirements of the gaming
                enterprise;





·
            is
                not the true owner of the
                enterprise;





·
            has
                failed to disclose ownership of other persons in the
                enterprise;





·
            is
                a corporation 10% of the stock of which is subject to a contract
                or option
                to purchase at any time during the period for which the license was
                issued, unless the contract or option was disclosed to the Iowa Gaming
                Commission and the Iowa Gaming Commission approved the sale or transfer
                during the period of the license;





·
            knowingly
                makes a false statement of a material fact to the Iowa Gaming
                Commission;





·
            fails
                to meet a monetary obligation in connection with an excursion gaming
                boat;





·
            pleads
                guilty to, or is convicted of a
                felony;





·
            loans
                to any person, money or other thing of value for the purpose of permitting
                that person to wager on any game of
                chance;





·
            is
                delinquent in the payment of property taxes or other taxes or fees
                or a
                payment of any other contractual obligation or debt due or owed to
                a city
                or county; or





·
            assigns,
                grants or turns over to another person the operation of a licensed
                excursion boat (this provision does not prohibit assignment of a
                management contract approved by the Iowa Gaming Commission) or permits
                another person to have a share of the money received for admission
                to the
                excursion boat.





If
      it
      were determined that the Iowa Gaming Laws were violated by a licensee, the
      gaming licenses held by a licensee could be limited, made conditional, suspended
      or revoked. In addition, the licensee and the persons involved could be subject
      to substantial fines for each separate violation of the Iowa Gaming Laws in
      the
      discretion of the Iowa Gaming Commission. Limitations, conditioning or
      suspension of any gaming license could (and revocation of any gaming license
      would) have a material adverse effect on operations.





The
      Iowa
      Gaming Commission may also require any individual who has a material
      relationship with the Iowa gaming operations to be investigated and licensed
      or
      found suitable. The Iowa Gaming Commission, prior to the acquisition, must
      approve any person who acquires 5% or more of a licensee’s equity securities.
      The applicant stockholder is required to pay all costs of this
      investigation.




Gaming
      taxes approximating 22% of the adjusted gross receipts will be payable by each
      licensee on its operations to the State of Iowa. In addition, there will be
      two
      prepaid assessments due on June 1, 2005 and June 1, 2006 in an amount equal
      to
      2.152% of each licensee's adjusted gross receipts for fiscal year 2004. These
      assessments will be offset by future state gaming taxes paid by each licensee
      with a credit for 20% of the assessments paid allowed each year beginning July
      1, 2010 for five consecutive years.




30




The
      state
      of Iowa is also reimbursed by the licensees for all costs associated with
      monitoring and enforcement by the Iowa Gaming Commission and the Iowa Department
      of Criminal Investigation.





***Colorado***





The
      State
      of Colorado created the Division of Gaming (the “Colorado Division”) within the
      Department of Revenue to license, implement, regulate and supervise the conduct
      of limited gaming under the Colorado Limited Gaming Act. The Director of the
      Colorado Division (the “Colorado Director”), pursuant to regulations promulgated
      by, and subject to the review of, a five-member Colorado Limited Gaming Control
      Commission (the “Colorado Commission”), has been granted broad power to ensure
      compliance with the Colorado gaming laws and regulations (collectively, the
      “Colorado Regulations”). The Colorado Director may inspect without notice,
      impound or remove any gaming device. The Colorado Director may examine and
      copy
      any licensee’s records, may investigate the background and conduct of licensees
      and their employees, and may bring disciplinary actions against licensees and
      their employees. The Colorado Director may also conduct detailed background
      investigations of persons who loan money to, or otherwise provide financing
      to,
      a licensee.





The
      Colorado Commission is empowered to issue five types of gaming and
      gaming-related licenses, and has delegated authority to the Colorado Director
      to
      issue certain types of licenses and approve certain changes in ownership. The
      licenses are revocable and non-transferable. The failure or inability of the
      Isle of Capri Black Hawk, LLC “Isle-Black Hawk” or CCSC/Blackhawk, Inc “Colorado
      Central Station-Black Hawk” (each, a “Colorado Casino” or collectively, the
“Colorado Casinos”), or the failure or inability of others associated with any
      of the Colorado Casinos, including us, to maintain necessary gaming licenses
      or
      approvals would have a material adverse effect on our operations. All persons
      employed by any of the Colorado Casinos, and involved, directly or indirectly,
      in gaming operations in Colorado also are required to obtain a Colorado gaming
      license. All licenses must be renewed annually, except those for key and support
      employees, which must be renewed every two years.





As
      a
      general rule, under the Colorado Regulations, no person may have an “ownership
      interest” in more than three retail gaming licenses in Colorado. The Colorado
      Commission has ruled that a person does not have an ownership interest in a
      retail gaming licensee for purposes of the multiple license prohibition if:





·
            that
                person has less than a 5% ownership interest in an institutional
                investor
                that has an ownership interest in a publicly traded licensee or publicly
                traded company affiliated with a
                licensee;





·
            a
                person has a 5% or more ownership interest in an institutional investor,
                but the institutional investor has less than a 5% ownership interest
                in a
                publicly traded licensee or publicly traded company affiliated with
                a
                licensee;





·
            an
                institutional investor has less than a 5% ownership interest in a
                publicly
                traded licensee or publicly traded company affiliated with a
                licensee;





·
            an
                institutional investor possesses voting securities in a fiduciary
                capacity
                for another person, and does not exercise voting control over 5%
                or more
                of the outstanding voting securities of a publicly traded licensee
                or of a
                publicly traded company affiliated with a
                licensee;





·
            a
                registered broker or dealer retains possession of voting securities
                of a
                publicly traded licensee or of a publicly traded company affiliated
                with a
                licensee for its customers and not for its own account, and exercises
                voting rights for less than 5% of the outstanding voting securities
                of a
                publicly traded licensee or publicly traded company affiliated with
                a
                licensee;





·
            a
                registered broker or dealer acts as a market maker for the stock
                of a
                publicly traded licensee or of a publicly traded company affiliated
                with a
                licensee and exercises voting rights in less than 5% of the outstanding
                voting securities of the publicly traded licensee or publicly traded
                company affiliated with a licensee;








31





·
            an
                underwriter is holding securities of a publicly traded licensee or
                publicly traded company affiliated with a licensee as part of an
                underwriting for no more than 90 days after the beginning of such
                underwriting if it exercises voting rights of less than 5% of the
                outstanding voting securities of a publicly traded licensee or publicly
                traded company affiliated with a
                licensee;





·
            a
                book entry transfer facility holds voting securities for third parties,
                if
                it exercises voting rights with respect to less than 5% of the outstanding
                voting securities of a publicly traded licensee or publicly traded
                company
                affiliated with a licensee; or





·
            a
                person’s sole ownership interest is less than 5% of the outstanding voting
                securities of the publicly traded licensee or publicly traded company
                affiliated with a licensee.





Because
      we own the Colorado Casinos, our business opportunities, and those of persons
      with an “ownership interest” in us, or any of the Colorado Casinos, are limited
      to interests that comply with the Colorado Regulations and the Colorado
      Commission’s rule.





In
      addition, pursuant to the Colorado Regulations, no manufacturer or distributor
      of slot machines or associated equipment may, without notification being
      provided to the Colorado Division within ten days, knowingly have an interest
      in
      any casino operator, allow any of its officers or any other person with a
      substantial interest in such business to have such an interest, employ any
      person if that person is employed by a casino operator, or allow any casino
      operator or person with a substantial interest therein to have an interest
      in a
      manufacturer’s or distributor’s business. A “substantial interest” means the
      lesser of (i) as large an interest in an entity as any other person or (ii)
      any
      financial or equity interest equal to or greater than 5%. The Colorado
      Commission has ruled that a person does not have a “substantial interest” if
      such person’s sole ownership interest in such licensee is through the ownership
      of less than 5% of the outstanding voting securities of a publicly traded
      licensee or publicly traded affiliated company of a licensee.





We
      are a
“publicly traded corporation” under the Colorado Regulations.





Under
      the
      Colorado Regulations, any person or entity having any direct or indirect
      interest in a gaming licensee or an applicant for a gaming license, including,
      but not limited to, us, Casino America of Colorado, Inc., IC Holdings Colorado,
      Inc., IOC Black Hawk Distribution Company, LLC or either of the two Colorado
      Casinos and their security holders, may be required to supply the Colorado
      Commission with substantial information, including, but not limited to,
      background information, source of funding information, a sworn statement that
      such person or entity is not holding his or her interest for any other party,
      and fingerprints. Such information, investigation and licensing (or finding
      of
      suitability) as an “associated person” automatically will be required of all
      persons (other than certain institutional investors discussed below) which
      directly or indirectly beneficially own 10% or more of a direct or indirect
      beneficial ownership or interest in either of the two Colorado Casinos, through
      their beneficial ownership of any class of voting securities of us, Casino
      America of Colorado, Inc., IC Holdings Colorado, Inc., IOC Black Hawk
      Distribution Company, LLC or either of the two Colorado Casinos. Those persons
      must report their interest within 10 days and file appropriate applications
      within 45 days after acquiring that interest. Persons who directly or indirectly
      beneficially own 5% or more (but less than 10%) of a direct or indirect
      beneficial






32




ownership
      or interest in either of the two Colorado Casinos, through their beneficial
      ownership of any class of voting securities of us, Casino America of Colorado,
      Inc., IC Holdings Colorado, Inc., IOC Black Hawk Distribution Company, LLC
      or
      either of the two Colorado Casinos, must report their interest to the Colorado
      Commission within 10 days after acquiring that interest and may be required
      to
      provide additional information and to be found suitable. (It is the current
      practice of the gaming regulators to require findings of suitability for persons
      beneficially owning 5% or more of a direct or indirect beneficial ownership
      or
      interest, other than certain institutional investors discussed below.) If
      certain institutional investors provide specified information to the Colorado
      Commission and are holding for investment purposes only, those investors, in
      the
      Colorado Commission’s discretion, may be permitted to own up to 14.99% of the
      Colorado Casinos through their beneficial ownership in any class of voting
      of
      securities of us, Casino America of Colorado, Inc., IC Holdings Colorado, Inc.,
      IOC Black Hawk Distribution Company, LLC or either of the two Colorado Casinos,
      before being required to be found suitable. All licensing and investigation
      fees
      will have to be paid by the person in question. The associated person
      investigation fee currently is $62 per hour.





The
      Colorado Regulations define a “voting security” to be a security the holder of
      which is entitled to vote generally for the election of a member or members
      of
      the board of directors or board of trustees of a corporation or a comparable
      person or persons of another form of business organization.





The
      Colorado Commission also has the right to request information from any person
      directly or indirectly interested in, or employed by, a licensee, and to
      investigate the moral character, honesty, integrity, prior activities, criminal
      record, reputation, habits and associations of: (1) all persons licensed
      pursuant to the Colorado Limited Gaming Act; (2) all officers, directors and
      stockholders of a licensed privately held corporation; (3) all officers,
      directors and stockholders holding either a 5% or greater interest or a
      controlling interest in a licensed publicly traded corporation; (4) all general
      partners and all limited partners of a licensed partnership; (5) all persons
      that have a relationship similar to that of an officer, director or stockholder
      of a corporation (such as members and managers of a limited liability company);
      (6) all persons supplying financing or loaning money to any licensee connected
      with the establishment or operation of limited gaming; (7) all persons having
      a
      contract, lease or ongoing financial or business arrangement with any licensee,
      where such contract, lease or arrangement relates to limited gaming operations,
      equipment devices or premises; and (8) all persons contracting with or supplying
      any goods and services to the gaming regulators.





Certain
      public officials and employees are prohibited from having any direct or indirect
      interest in a license or limited gaming.





In
      addition, under the Colorado Regulations, every person who is a party to a
      “gaming contract” (as defined below) or lease with an applicant for a license,
      or with a licensee, upon the request of the Colorado Commission or the Colorado
      Director, must promptly provide the Colorado Commission or Colorado Director
      all
      information that may be requested concerning financial history, financial
      holdings, real and personal property ownership, interests in other companies,
      criminal history, personal history and associations, character, reputation
      in
      the community and all other information that might be relevant to a
      determination of whether a person would be suitable to be licensed by the
      Colorado Commission. Failure to provide all information requested constitutes
      sufficient grounds for the Colorado Director or the Colorado Commission to
      require a licensee or applicant to terminate its “gaming contract” or lease with
      any person who failed to provide the information requested. In addition, the
      Colorado Director or the Colorado Commission may require changes in “gaming
      contracts” before an application is approved or participation in the contract is
      allowed. A “gaming contract” is defined as an agreement in which a person does
      business with or on the premises of a licensed entity.





The
      Colorado Commission and the Colorado Division have interpreted the Colorado
      Regulations to permit the Colorado Commission to investigate and find suitable
      persons or entities providing financing to or acquiring securities from us,
      Casino America of Colorado, Inc., IC Holdings Colorado, Inc., IOC Black Hawk
      Distribution Company, LLC or either of the two Colorado Casinos. As noted above,
      any






33




person
      or
      entity required to file information, be licensed or found suitable would be
      required to pay the costs thereof and of any investigation. Although the
      Colorado Regulations do not require the prior approval for the execution of
      credit facilities or issuance of debt securities, the Colorado regulators
      reserve the right to approve, require changes to or require the termination
      of
      any financing, including if a person or entity is required to be found suitable
      and is not found suitable. In any event, lenders, note holders, and others
      providing financing will not be able to exercise certain rights and remedies
      without the prior approval of the Colorado gaming authorities. Information
      regarding lenders and holders of securities will be periodically reported to
      the
      Colorado gaming authorities.





Except
      under certain limited circumstances relating to slot machine manufacturers
      and
      distributors, every person supplying goods, equipment, devices or services
      to
      any licensee in return for payment of a percentage, or calculated upon a
      percentage, of limited gaming activity or income must obtain an operator license
      or be listed on the retailer’s license where such gaming will take
      place.





An
      application for licensure or suitability may be denied for any cause deemed
      reasonable by the Colorado Commission or the Colorado Director, as appropriate.
      Specifically, the Colorado Commission and the Colorado Director must deny a
      license to any applicant who, among other things: (1) fails to prove by clear
      and convincing evidence that the applicant is qualified; (2) fails to provide
      information and documentation requested; (3) fails to reveal any fact material
      to qualification, or supplies information which is untrue or misleading as
      to a
      material fact pertaining to qualification; (4) has been convicted of, or has
      a
      director, officer, general partner, stockholder, limited partner or other person
      who has a financial or equity interest in the applicant who has been convicted
      of, specified crimes, including the service of a sentence upon conviction of
      a
      felony in a correctional facility, city or county jail, or community
      correctional facility or under the state board of parole or any probation
      department within ten years prior to the date of the application,
      gambling-related offenses, theft by deception or crimes involving fraud or
      misrepresentation, is under current prosecution for such crimes (during the
      pendency of which license determination may be deferred), is a career offender
      or a member or associate of a career offender cartel, or is a professional
      gambler; or (5) has refused to cooperate with any state or federal body
      investigating organized crime, official corruption or gaming offenses. If the
      Colorado Commission determines that a person or entity is unsuitable to directly
      or indirectly own interests in us, Casino America of Colorado, Inc., IC Holdings
      Colorado, Inc., or either of the two Colorado Casinos, one or more of the
      Colorado Casinos may be sanctioned, which may include the loss of our approvals
      and licenses.





The
      Colorado Commission does not need to approve in advance a public offering of
      securities but rather requires the filing of notice and additional documents
      prior to a public offering of (i) voting securities, and (ii) non-voting
      securities if any of the proceeds will be used to pay for the construction
      of
      gaming facilities in Colorado, to directly or indirectly acquire an interest
      in
      a gaming facility in Colorado, to finance the operation of a gaming facility
      in
      Colorado or to retire or extend obligations for any of the foregoing. The
      Colorado Commission may, in its discretion, require additional information
      and
      prior approval of such public offering.





In
      addition, the Colorado Regulations prohibit a licensee or affiliated company
      thereof, such as us, Casino America of Colorado, Inc., IC Holdings Colorado,
      Inc., IOC Black Hawk Distribution Company, LLC or either of the two Colorado
      Casinos, from paying any unsuitable person any dividends or interest upon any
      voting securities or any payments or distributions of any kind (except as set
      forth below), or paying any unsuitable person any remuneration for services
      or
      recognizing the exercise of any voting rights by any unsuitable person. Further,
      under the Colorado Regulations, each of the Colorado Casinos and IOC Black
      Hawk
      Distribution Company, LLC may repurchase its voting securities from anyone
      found
      unsuitable at the lesser of the cash equivalent to the original investment
      in
      the applicable Colorado Casino or IOC Black Hawk Distribution Company, LLC
      or
      the current market price as of the date of the finding of unsuitability unless
      such voting securities are transferred to a suitable person (as determined
      by
      the Colorado Commission) within sixty (60) days after the finding of
      unsuitability. A licensee or affiliated company must pursue all lawful efforts
      to require an unsuitable person to relinquish all voting
      securities,






34




including
      purchasing such voting securities. The staff of Colorado Division has taken
      the
      position that a licensee or affiliated company may not pay any unsuitable person
      any interest, dividends or other payments with respect to non-voting securities,
      other than with respect to pursuing all lawful efforts to require an unsuitable
      person to relinquish non-voting securities, including by purchasing or redeeming
      such securities. Further, the regulations require anyone with a material
      involvement with a licensee, including a director or officer of a holding
      company, such as us, Casino America of Colorado, Inc., IC Holdings Colorado,
      Inc., IOC Black Hawk Distribution Company, LLC or any of the three Colorado
      Casinos, to file for a finding of suitability if required by the Colorado
      Commission.





Because
      of their authority to deny an application for a license or suitability, the
      Colorado Commission and the Colorado Director effectively can disapprove a
      change in corporate position of a licensee and with respect to any entity which
      is required to be found suitable, or indirectly can cause us, Casino America
      of
      Colorado, Inc., IC Holdings Colorado, Inc., IOC Black Hawk Distribution Company,
      LLC or the applicable Colorado Casino to suspend or dismiss managers, officers,
      directors and other key employees or sever relationships with other persons
      who
      refuse to file appropriate applications or who the authorities find unsuitable
      to act in such capacities.





Generally,
      a sale, lease, purchase, conveyance or acquisition of a controlling interest
      in
      a licensee is prohibited without the Colorado Commission’s prior approval.
      Persons may acquire a non-controlling interest in us without the Colorado
      Commission’s prior approval, but such persons may be required to file notices
      with the Colorado Commission and applications for suitability (as discussed
      above) and the Colorado Commission may, after such acquisition, find such person
      unsuitable and require them to dispose of their interest. Under some
      circumstances, we may not sell any interest in our Colorado gaming businesses
      without the prior approval of the Colorado Commission.





Each
      Colorado Casino must meet specified architectural requirements, fire safety
      standards and standards for access for disabled persons. Each Colorado Casino
      also must not exceed specified gaming square footage limits as a total of each
      floor and the full building. Each Colorado Casino may operate only between
      8:00
      a.m. and 2:00 a.m., and may permit only individuals 21 or older to gamble in
      the
      casino. It may permit slot machines, blackjack and poker, with a maximum single
      bet of $5.00. No Colorado Casino may provide credit to its gaming
      patrons.





A
      licensee is required to provide information and file periodic reports with
      the
      Colorado Division, including identifying those who have a 5% or greater
      ownership, financial or equity interest in the licensee, or who have the ability
      to control the licensee, or who have the ability to exercise significant
      influence over the licensee, or who loan money or other things of value to
      a
      licensee, or who have the right to share in revenues of limited gaming, or
      to
      whom any interest or share in profits of limited gaming has been pledged as
      security for a debt or performance of an act. A licensee, and any parent company
      or subsidiary of a licensee, who has applied to a foreign jurisdiction for
      licensure or permission to conduct gaming, or who possesses a license to conduct
      foreign gaming, is required to notify the Colorado Division. Any person licensed
      by the Colorado Commission and any associated person of a licensee must report
      criminal convictions and criminal charges to the Colorado Division.





The
      Colorado Commission has broad authority to sanction, fine, suspend and revoke
      a
      license for violations of the Colorado Regulations. Violations of many
      provisions of the Colorado Regulations also can result in criminal
      penalties.





The
      Colorado Constitution currently permits gaming only in a limited number of
      cities and certain commercial districts in such cities.




The
      Colorado Constitution permits a gaming tax of up to 40% on adjusted gross gaming
      proceeds, and authorizes the Colorado Commission to change the rate annually.
      The current gaming tax rate is 0.25% on adjusted gross gaming proceeds of up
      to
      and including $2.0 million, 2% over $2.0 million up to






35




and
      including $4.0 million, 4% over $4.0 million up to and including $5.0 million,
      11% over $5.0 million up to and including $10.0 million, 16% over $10.0 million
      up to and including $15.0 million and 20% on adjusted gross gaming proceeds
      in
      excess of $15.0 million. The City of Black Hawk has imposed an annual device
      fee
      of $750 per gaming device and may revise it from time to time. The City of
      Black
      Hawk also has imposed other fees, including a business improvement district
      fee
      and transportation fee, calculated based on the number of devices and may revise
      the same or impose additional such fees.




Colorado
      participates in multi-state lotteries.





The
      sale
      of alcoholic beverages is subject to licensing, control and regulation by the
      Colorado liquor agencies. All persons who directly or indirectly hold a 10%
      or
      more interest in, or 10% or more of the issued and outstanding capital stock
      of,
      any of the Colorado Casinos, through their ownership of us, Casino America
      of
      Colorado, Inc., IC Holdings Colorado, Inc., or
      either
      of the two Colorado Casinos,
      must file applications and possibly be investigated by the Colorado liquor
      agencies. The Colorado liquor agencies also may investigate those persons who,
      directly or indirectly, loan money to or have any financial interest in liquor
      licensees. In addition, there are restrictions on stockholders, directors and
      officers of liquor licensees preventing such persons from being a stockholder,
      director, officer or otherwise interested in some persons lending money to
      liquor licensees and from making loans to other liquor licensees. All licenses
      are revocable and transferable only in accordance with all applicable laws.
      The
      Colorado liquor agencies have the full power to limit, condition, suspend or
      revoke any liquor license and any disciplinary action could (and revocation
      would) have a material adverse effect upon the operations of us, Casino America
      of Colorado, Inc., IC Holdings Colorado, Inc., or the applicable Colorado
      Casino. Each Colorado Casino holds a retail gaming tavern liquor license for
      its
      casino, hotel and restaurant operations.





Currently,
      no person directly or indirectly interested in any of the Colorado Casinos
      may
      be directly or indirectly interested in many other types of liquor licenses,
      but
      may have an interest in a hotel and restaurant liquor license. No person can
      hold more than three retail gaming tavern liquor licenses. The remedies of
      certain lenders may be limited by applicable liquor laws and
      regulations.





***Florida***





On
      June
      15, 1995, the Florida Department of Business and Professional Regulation, acting
      through its division of pari-mutuel wagering (the “Florida Division”), issued
      its final order approving Pompano Park as a pari-mutuel wagering permit holder
      for harness and quarter horse racing at Pompano Park. The Florida Division
      approved Pompano Park’s license to conduct a total of 149 live evening
      performances for the season beginning July 1, 2003 to June 30, 2004. Although
      we
      do not presently intend to conduct quarter horse racing operations at Pompano
      Park, we may do so in the future, subject to Florida Division approval. The
      Florida Division must approve any transfer of 10% or more of stock of a
      pari-mutuel racing permit holder such as Pompano Park.





The
      Florida Statute and the applicable rules and regulations thereunder (the
“Florida Statute”) establish license fees, the tax structure on pari-mutuel
      permit holders and minimum purse requirements for breeders and owners. The
      Florida Division may revoke or suspend any permit or license upon the willful
      violation by the permit holder or licensee of any provision of the Florida
      Statute. Instead of suspending or revoking a permit or license, the Florida
      Division may impose various civil penalties on the permit holder or licensee.
      Penalties may not exceed $1,000 for each count or separate offense.





Pursuant
      to a Florida Division order and recent enactments to the Florida Statute,
      Pompano Park is also authorized to conduct full-card pari-mutuel wagering on:
      (1) simulcast harness races from outside Florida throughout the racing season
      and (2) night thoroughbred races within Florida if the thoroughbred permit
      holder has decided to simulcast night races. Pompano Park has been granted
      the
      exclusive right in Florida to conduct full-card simulcasting of harness racing
      on days during which no live racing is held at






36




Pompano
      Park. However, on non-race days, Pompano Park must offer to rebroadcast its
      simulcast signals to pari-mutuel facilities that are not thoroughbred parks
      in
      Pompano Park’s market area. In addition, Pompano Park may transmit its live
      races into any dog racing or jai alai facility in Florida, including Dade and
      Broward counties, for intertrack wagering. The Florida Statute establishes
      the
      percentage split between Pompano Park and the other facilities receiving such
      signals. Recent legislation in Florida provided certain reductions in applicable
      tax and license fees related to intertrack wagering on broadcasts of simulcast
      harness racing and thoroughbred racing. We believe that simulcast rights at
      Pompano Park and the recent changes in the Florida Statute are important to
      Pompano Park’s operating results.





The
      Florida Statute permits pari-mutuel facilities licensed by the Florida Division
      to operate card rooms in those counties in which a majority vote of the County
      Commission has been obtained and a local ordinance has been adopted. Pompano
      Park reopened its card room in fiscal year 2004 after State Legislation was
      amended authorizing card game pot limits to be eliminated and bets limits of
      $2
      per bet were imposed.





***Bahamas***





In
      1969,
      the Government of The Bahamas enacted the Lotteries and Gaming Act. This
      legislation, together with its regulations, governs and regulates gaming. The
      Gaming Board is the body that regulates the operation of casinos. The gaming
      license is renewable annually. All casino workers must be approved by the Board
      and are issued certificates, which are also renewable on an annual basis. There
      is a basic annual gaming tax of $200,000 payable in six equal shares. In
      addition a winnings tax is also imposed and is based on the following
      scale:





Winnings
                  of
              $10,000,000
              25%$10,000,001
                  - $16,000,000
              20%$16,000,001
                  - $20,000,000
              10%amounts
                  exceeding $20,000,001
              5%





The
      Minister of Tourism has responsibility for gaming and acts in consultation
      with
      the Gaming Board. A license can be cancelled if a fraudulent or misleading
      representation has been supplied to the Board or if there is a breach of
      restrictions or conditions imposed by the Minister. There is however a right
      to
      be heard before cancellation is made final. Citizens, permanent residents and
      holders of work permits are prohibited from gambling. Those found doing so
      are
      guilty of an offense punishable by law. The operator may also be liable if
      it
      knowingly allows any such persons to gamble in its establishment.





Currently
      the Casino has an agreement to lease the premises housing its operations and
      a
      management agreement. The Casino holds a number of other licenses including
      one
      with the Port Authority of Grand Bahama, a business license and liquor and
      dining and dancing licenses.





***United
      Kingdom***





Gaming
      and gaming facilities in the UK are currently subject to regulation under the
      Gaming Act of 1968 (the “Gaming Act”). Under the Gaming Act, the Gaming Board
      for Great Britain (the “Gaming Board”) is charged with ensuring compliance with
      the Gaming Act and the regulations promulgated under the Gaming Act. Pursuant
      to
      its regulatory authority, the Gaming Board has issued detailed guidelines that
      govern licensing procedures as well as the management, operation and supervision
      of gaming facilities. (See further regarding new Gambling Act
      2005).





The
      Gaming Act specifies that only individuals that have been a resident of Great
      Britain for at least six months or a company incorporated in Great Britain
      can
      apply for a license to operate, or operate, a casino in Great Britain. The
      Gaming Act does not prohibit foreign ownership in casinos operated by a






37




resident
      of Great Britain. Casinos can be located only in certain designated areas known
      as “permitted areas,” of which there currently are fifty-three; 142 gaming
      facilities currently are operating in these permitted areas.





A
      casino
      operator must obtain a Certificate of Consent from the Gaming Board prior to
      submitting an application for a gaming license. Before it grants a Certificate
      of Consent, the Gaming Board must be satisfied that the applicant is “fit and
      proper” to operate a gaming facility. To be deemed fit and proper, the applicant
      must convince the Gaming Board of its ability to diligently comply with the
      Gaming Act and the regulations promulgated thereunder. The applicant also must
      convince the Board that gaming in the proposed gaming facility would be
      conducted fairly and properly and without disorder or disturbance. The Board
      also evaluates the character, reputation and financial standing of both the
      applicant and any entity that would operate or hold a significant ownership
      interest in the gaming facility.





The
      Certificate of Consent, if granted, permits the recipient to apply for a gaming
      license for a specific location. Additional Certificates of Consent are required
      for additional locations. The Certificate of Consent requires that any gaming
      license application be submitted within one year and may restrict the type
      of
      gaming for which the applicant may seek a license.





The
      applicant must submit an application to a Justice of the local Magistrates
      Court
      (the “Licensing Justice”), seeking a license to provide commercial gaming in the
      location specified by the Certificate of Consent. The license application must
      include the name and description of the facility to be used for gaming. A copy
      of the application also must be filed with the Gaming Board, a designated
      officer of the police, the relevant local authority, the relevant fire authority
      and the relevant collector of duty. Within 14 days of submitting the license
      application, the applicant must publish a notice in the local newspaper stating
      that such application has been made. The applicant also must post notice outside
      the facility for which the gaming license has been requested. A copy of the
      newspaper notice must be sent to the licensing authority before the application
      will be considered.





Gaming
      Board regulations provide guidelines under which the Licensing Justices review
      license applications. Under current regulations, before granting a license,
      the
      Justice must determine that there exists “substantial demand for gaming
      facilities of the kind proposed to be provided on the relevant premises.” The
      Justice also must be satisfied that current gaming facilities are either not
      available in an area that is reasonably accessible to prospective players or,
      where such facilities are available, the current gaming facilities are
      insufficient to meet current demand. The Justice also must evaluate the
      suitability of the proposed gaming facility, including the lay-out of the
      facility and the character, condition and location of the facility, and whether
      the applicant is fit and proper to be a holder of the license under the Gaming
      Act.





The
      Gaming Board regulations also establish detailed guidelines governing the
      operation, management and supervision of gaming facilities. Under the Gaming
      Board guidelines, an inspector must supervise the croupiers who are normally
      in
      charge of two gaming tables, under the direction of a pit boss. The role of
      the
      inspector is to verify large payouts, ensure compliance with gaming regulations,
      confirm verbal bets and resolve player disputes. Gaming Board guidelines also
      require that management and inspectors have a clear view of the tables and
      all
      players at all times. Gaming facilities also must be designed to permit adequate
      supervision by the police and the Gaming Board’s inspectors.





The
      transfer of 15% or more of the voting power of a casino triggers an obligation
      on the part of the holder of the existing Certificate of Consent to apply to
      the
      Gaming Board for a continuance of its Certificate of Consent. The Gaming Board
      will evaluate whether the transferee is fit and proper to hold a gaming license
      and meets the tests discussed above.





The
      government of the UK recently enacted new legislation to liberalize gaming
      in a
      socially responsive manner in light of developments in the industry and new
      technology. The Gambling Act was




38




passed
      by
      the UK Parliament on 8 April 2005 and will be implemented in stages. Under
      the
      new legislation, a new Gambling Commission will be created to oversee license
      applications and establish new regulations for gaming (including on-line gaming)
      in the UK. It is anticipated that it will take over responsibilities from the
      Gaming Board in the fall of 2005 and work on the transition is in progress
      to
      meet this objective. The legislation will provide a significant change in
      regulation of the casino industry including:





·
            removing
                the requirement that gaming facilities operate as private members’ clubs,
                including the statutorily prescribed 24-hour interval between membership
                and play;


·
            extending
                the gaming products available;


·
            abolishing
                the demand test and permitted area
                rules;


·
            allowing
                large casinos specific numbers of gaming machines with a broader
                range of
                stakes and prizes;


·
            allowing
                casinos to offer live entertainment and to advertise;
                and


·
            allowing
                a new category of regional casinos.





In
      order
      to pass the legislation, having regard to the UK General Election on 5 May
      2005,
      the Government agreed to limit the number of Regional Casinos (such as that
      planned in Coventry) to one on a pilot basis. An increase in the number of
      regional casinos can be approved by a Ministerial Order using the affirmative
      resolution procedure, which will require that the order is affirmed by a vote
      of
      both Houses of Parliament.





In
      the
      meantime, the company has obtained all necessary Gaming Licenses to open a
      casino under the current legislation (Gaming Act 1968) and such plans are
      proceeding with a view to opening a smaller scale casino at the RICOH TM Arena in
      Coventry in 2006.





***Non-Gaming
      Regulation***





We
      are
      subject to certain federal, state and local safety and health, employment and
      environmental laws, regulations and ordinances that apply to non-gaming
      businesses generally, such as the Clean Air Act, Clean Water Act, Occupational
      Safety and Health Act, Resource Conservation Recovery Act, the Comprehensive
      Environmental Response, Compensation and Liability Act and the Oil Pollution
      Act
      of 1990. We have not made, and do not anticipate making, material expenditures
      with respect to such environmental laws and regulations. However, the coverage
      and attendant compliance costs associated with such laws, regulations and
      ordinances may result in future additional costs to our operations. For example,
      the Department of Transportation has promulgated regulations under the Oil
      Pollution Act of 1990 requiring owners and operators of certain vessels to
      establish through the Coast Guard evidence of financial responsibility for
      clean
      up of oil pollution. This requirement has been satisfied by proof of adequate
      insurance.





Our
      riverboats operated in Louisiana and Iowa must comply with U.S. Coast Guard
      requirements as to boat design, on-board facilities, equipment, personnel and
      safety and hold U.S. Coast Guard Certificates of Documentation and Inspection.
      The U.S. Coast Guard requirements also set limits on the operation of the
      riverboats and require licensing of certain personnel involved with the
      operation of the riverboats. Loss of a riverboat’s Certificate of Documentation
      and Inspection could preclude its use as a riverboat casino. Each of our
      riverboats is inspected annually and, every five years, is subject to
      dry-docking for inspection of its hull, which could result in a temporary loss
      of service.





The
      barges are inspected by third parties and certified with respect to stability
      and single compartment flooding integrity. Our casino barges must also meet
      local fire safety standards. We would incur additional costs if any of our
      gaming facilities were not in compliance with one or more of these
      regulations.






39




Regulations
      adopted by the Financial Crimes Enforcement Network of the U.S. Treasury
      Department require us to report currency transactions in excess of $10,000
      occurring within a gaming day, including identification of the patron by name
      and social security number. U.S. Treasury Department regulations also require
      us
      to report certain suspicious activity, including any transaction that exceeds
      $5,000 if we know, suspect or have reason to believe that the transaction
      involves funds from illegal activity or is designed to evade federal regulations
      or reporting requirements. Substantial penalties can be imposed against us
      if we
      fail to comply with these regulations.





All
      of
      our shipboard employees, even those who have nothing to do with our operation
      as
      a vessel, such as dealers, waiters and security personnel, may be subject to
      the
      Jones Act which, among other things, exempts those employees from state limits
      on workers’ compensation awards.





40


**ITEM
      2.**  **PROPERTIES.**





*The
      Isle-Lake Charles*





We
      own
      approximately 2.7 acres and lease approximately 16.25 acres of land in Calcasieu
      Parish, Louisiana for use in connection with the Isle-Lake Charles. The lease
      expires in March 2010, with fifteen renewal options of five years each. Rent
      under the Isle-Lake Charles lease is currently $1.5 million per year and is
      subject to increases based on the Consumer Price Index (“CPI”).





*The
      Isle-Bossier City*





We
      own
      approximately 38 acres of land in Bossier City, Louisiana for use in connection
      with the Isle-Bossier City and we own a 225-room hotel on approximately 10.5
      acres of land located 2.5 miles east of the Isle-Bossier City.





*The
      Isle-Lula*





We
      lease
      approximately 1,000 acres of land in Coahoma County, Mississippi and utilize
      approximately 50 acres in connection with the operations of the Isle-Lula.
      Unless terminated by us at an earlier date, the lease expires in 2033. Rent
      under the lease is currently 5.5% of gross gaming revenue as established by
      the
      Mississippi Gaming Commission, as well as $3,333 per month for the hotel. We
      also own approximately 100 acres in Coahoma County, which may be utilized for
      future development.





*The
      Isle-Biloxi*





We
      lease
      the Biloxi berth from the Biloxi Port Commission at an annual rent of the
      greater of $500,000 or 1% of the gross gaming revenue net of state and local
      gaming taxes. The lease terminates on July 1, 2009 and we have the option to
      renew it for seven additional terms of five years each subject to increases
      based on the CPI, limited to 6% for each renewal period.





We
      lease
      the real estate upon which some of our land-based facilities are located from
      the City of Biloxi and the Mississippi Secretary of State at current annual
      rent
      of $561,800 per year, plus 3% of the Isle-Biloxi’s gross gaming revenues, net of
      state and local gaming taxes and fees, in excess of $25.0 million. The lease
      terminates on July 1, 2009, but it is renewable at our option for five
      additional terms of five years each and a sixth option renewal term, concluding
      on January 31, 2034, subject to rent increases based on the CPI, limited to
      6%
      for each renewal period. In April 1994, we entered into an addendum to this
      lease that requires us to pay 4% of our gross non-gaming revenue, net of sales
      tax, complimentaries and discounts. Additional rent will be due to the City
      of
      Biloxi for the amount of any increase from and after January 1, 2016, in the
      rent due to the State Institutions of Higher Learning under a lease between
      the
      City of Biloxi and the State Institutions of Higher Learning and for any
      increases in certain tidelands leases between the City of Biloxi and the State
      of Mississippi.





In
      April
      1994, in connection with the construction of a hotel, we entered into a lease
      for additional land adjoining the Isle-Biloxi. This lease with the City of
      Biloxi and the Mississippi Secretary of State is for an initial term of 25
      years, with options to renew for six additional terms of ten years each and
      a
      final option period concluding December 31, 2085. Current annual rent is
      $605,000 plus 4% of gross non-gaming revenue, as defined in the lease, and
      renewals are subject to rent increases based on the CPI. The
      annual rent is adjusted after each five-year period based on increases in the
      CPI, limited to a 10% increase in any five-year period.





In
      August
      2002, we entered into a lease for two additional parcels of land adjoining
      the
      Isle-Biloxi and the hotel. On the parcel adjoining the Isle-Biloxi, we
      constructed a multi-level parking garage that






41




has
      approximately 1,000 parking spaces. There is additional ground level parking
      on
      a parcel of land in front of the garage, also subject to this lease, with
      approximately 600 parking spaces. We have constructed a 400 room addition to
      the
      existing hotel on the parcel leased next to the existing hotel. In addition,
      we
      may construct a hotel above the parking garage. This lease with the City of
      Biloxi and the Mississippi Secretary of State is for an initial term of forty
      years, with one option to renew for an additional twenty-five years and
      additional options thereafter, with the consent of the Mississippi Secretary
      of
      State, consistent with the term of the lease described in the preceding
      paragraph. When combined with the base and percentage rents described for the
      leases in the preceding two paragraphs, annual rent under those two leases
      and
      this lease is estimated to be $3.3 million (depending on the completion date
      of
      the hotel) for the lease year ending July 31, 2005 and $3.5 million for lease
      year ending July 31, 2006. Such minimum rent to increase thereafter over time
      in
      accordance with a formula based on anticipated timing for completion of the
      current hotel and completion of the hotel on top of the parking garage (or
      August 31, 2008, which ever occurs first), up to a minimum rent of $3.7 million.
      Such amounts are subject to decreases due to market adjustments and increases
      based on the CPI. Also, we are responsible for annual rent equal to 4% of gross
      retail revenue and gross cash revenue (as defined in the lease), but without
      double counting. If the rent minimum described in the preceding sentences is
      not
      otherwise satisfied from other rents, then this percentage rent is not in
      addition to the minimum rent, but rather is to be applied to that
      minimum.





In
      connection with and pursuant to a settlement between the City of Biloxi and
      the
      State of Mississippi concerning the control and management area where the
      Isle-Biloxi is located, we also have agreed to pay the City of Biloxi’s lease
      obligations to the State of Mississippi. This amount is $500,000 per year,
      payable on June 30, subject to increases based on the CPI and decreases if
      there
      are other tenants of the subject property. This obligation ends after June
      2018,
      but may be renewed for thirty years.





We
      have
      also entered into a joint venture arrangement to sublease property containing
      a
      two-level parking garage next to the Isle-Biloxi. Our annual rent under this
      lease is approximately $200,000. The current term is for three years expiring
      December 31, 2005, with a renewal option for an additional five-year term (under
      which our annual rent would increase to approximately $212,500) extending the
      lease through December 31, 2010. The extension will occur unless the Company
      sends a notice to terminate by July 1, 2005. The Company has no plans to
      terminate the lease.





*The
      Isle-Vicksburg*





We
      own
      approximately 13.1 acres of land in Vicksburg, Mississippi for use in connection
      with the Isle-Vicksburg. We own an additional thirteen acres of land in
      Vicksburg on which we operate off-site parking and a recreational vehicle park.
      We also entered into a lease for approximately five acres of land adjacent
      to
      the Isle-Vicksburg to be used for additional parking.





*The
      Isle-Natchez*





Through
      numerous lease agreements, we lease approximately 24 acres of land in Natchez,
      Mississippi that is used in connection with the operations of the Isle-Natchez.
      Unless terminated by us at an earlier date, the lease expiration dates through
      2037. Rents under the leases currently total approximately $101,000 per month.
      We also lease approximately 7.5 acres of land that is utilized for parking
      at
      the facility. We own approximately six acres of property in Natchez,
      Mississippi, as well as the property upon which our hotel is
      located.


42


*The
      Isle-Kansas City*





We
      lease
      approximately twenty-eight acres from the Kansas City Port Authority in
      connection with the operation of the Isle-Kansas City facility. The term of
      the
      lease is ten years, expiring in October 2006, and we have the option to renew
      the lease for eight additional terms of five years each. Rent under the lease
      is
      currently $3.0 million per year, subject to the higher of $3.0 million (minimum
      rent) per year, or 3.25% of gross revenues, less complimentaries.





*The
      Isle-Boonville*





We
      lease
      the site from the City of Boonville under a lease agreement, which has a term
      of
      ninety-nine years. We were required to pay $1.7 million to the City of Boonville
      as a lump sum rent payment during construction of the casino. There was no
      rent
      due after the casino opening date. We were, however, assessed additional amounts
      by the City of Boonville based on a 3.5% tax on gaming revenue, which we
      recognized as additional rent.





*The
      Isle-Bettendorf*





We
      own
      approximately 24.6 acres of land in Bettendorf, Iowa used in connection with
      the
      operations of the Isle-Bettendorf. We also lease approximately eight acres
      of
      land on a month-to-month basis from an entity owned by family members of our
      chief executive officer, Bernard Goldstein, including Robert S. Goldstein and
      Jeffrey D. Goldstein, directors of our company, which we utilize for parking
      and
      warehouse space. The initial term of the lease expires sixty days after written
      notice is given to either party and rent under the lease is currently $23,360
      per month.





*The
      Rhythm City-Davenport*





Pursuant
      to various lease agreements, we lease approximately twelve acres of land in
      Davenport, Iowa used in connection with the operations of Rhythm City-Davenport.
      The aggregate annual rent on these leases is approximately $0.8 million and
      they
      have varying expiration dates through 2022. We also own a 121-room hotel on
      approximately one acre of land located several blocks northeast of the Rhythm
      City-Davenport.





*The
      Isle-Marquette*





We
      lease
      the dock site in Marquette, Iowa that is used in connection with the operations
      of the Isle-Marquette. The lease expires in 2019, and rent under the lease
      is
      currently $15,000 per month, plus $0.50 per passenger, plus 2.5% of gaming
      revenues (less state wagering taxes) in excess of $20.0 million but less than
      $40.0 million; 5% of gaming revenues (less state wagering taxes) in excess
      of
      $40.0 million but less than $60.0 million; and 7.5% of gaming revenues (less
      state wagering taxes) in excess of $60.0 million. We also rent approximately
      5
      acres of land used for the employee parking lot. That is a month-to-month rental
      of $833. We also own approximately twenty-five acres of land for the pavilion,
      hotel, satellite offices, warehouse, lots by the marina, and other
      property.





*The
      Isle-Black Hawk*





We
      own
      approximately 10.1 acres of land in Black Hawk, Colorado for use in connection
      with the Isle-Black Hawk.


43





*The
      Colorado Central Station-Black Hawk*





We
      own
      and lease approximately 7.1 acres of land in Black Hawk, Colorado for use in
      connection with the Colorado Central Station-Black Hawk. We lease additional
      parcels of land adjoining the Colorado Central Station-Black Hawk for parking.
      This lease is for an initial term of nine years with options to renew for
      eighteen additional terms of five years each with the final option period
      concluding June 1, 2094. Annual rent is $1.7 million indexed to correspond
      to
      any rise or fall in the CPI at one-year intervals beginning June 1, 1996, not
      to
      exceed a 3% increase or decrease from the previous year’s rate. We also entered
      into a lease for additional parking. This lease is for an initial term of ten
      years with options to renew for nine additional terms of ten years each with
      the
      final option period concluding June 1, 2094. Annual rent is $576,000 and
      renewals are subject to 20% rent increases over the rate of the previous term.





*Pompano
      Park*





We
      own
      approximately 223 acres at Pompano Park.





*The
      Isle-Our Lucaya*





We
      sublease the casino property under an agreement that is in effect until December
      2012, and requires us to make payments under the following terms: (1) $2.0
      million per year in equal monthly installments due on the first of each month
      for the first two years ending November 30, 2006, (2) the annual amount
      increases to $2.5 million in years three and four of the lease, and then to
      $3.0
      million for the remainder of the lease, (3) plus $125,000 per year in equal
      monthly installments due on the first of each month for common area maintenance
      and (4) plus a minimum room buy of fifty from the hotel at a rate of $54 per
      night. After the second year of the lease, if earnings before income taxes,
      depreciation and amortization fall below $3.0 million, we have the option to
      cancel with a one-year notice.





Additionally,
      the agreement requires us to pay a monthly resort marketing fee (the “Fee”).
      This Fee is calculated at six percent of annual gross revenues of the casino,
      where such receipts are in excess of $33.3 million a year for the first two
      years, $40.0 million a year for years three and four and $45.0 million a year
      for years five through ten.





*Blue
      Chip-Dudley*





Through
      our two-thirds ownership interest in Blue Chip PLC, we own the 15,000
      square-foot building that contains the Blue Chip-Dudley casino operation. We
      also own an 8,000 square-foot parking area for the casino.





*Blue
      Chip-Wolverhampton*





Through
      our two-thirds ownership interest in Blue Chip PLC, we own the 15,000
      square-foot building that contains the Blue Chip-Wolverhampton casino
      operation.





*Blue
      Chip-Walsall*





Through
      our two-thirds ownership interest in Blue Chip PLC, we own the 17,938
      square-foot building that contains the Blue Chip-Walsall casino operation.


44


*Coventry*





We
      entered into a twenty five year lease in December 2003, to lease approximately
      120,000 square feet within the arena compound that will be used in connection
      with the operation of the Isle-Coventry. In addition to the payment of £4.0
      million plus value added tax (“VAT”) ($7.6 million as of April 24, 2005, based
      on published exchange rates), the lease requires us to pay one more payment
      of
£2.0 million plus VAT in July 2005 for prepaid rent. In the fourth quarter of
      fiscal 2006, we will pay approximately £1.3 million plus VAT ($2.5 million as of
      April 24, 2005, based on published exchange rates) per year offset by the £6.0
      million plus VAT ($11.5 million as of April 24, 2005, based on published
      exchange rates) prepaid rent and interest of 8% per annum on the unpaid balance
      that reduces annual rent expenses over 15 years.





*Other*





We
      own
      all of the riverboats and barges utilized at our facilities. We also own or
      lease all of our gaming and non-gaming equipment.





We
      lease
      our corporate office in Biloxi, Mississippi and our corporate office in Boca
      Raton, Florida.





We
      have
      various property leases and options to either lease or purchase property that
      are not directly related to our existing operations and that may be utilized
      in
      the future in connection with expansion projects at our existing facilities
      or
      development of new projects.





45


**ITEM
      3. LEGAL PROCEEDINGS.**




In
      August
      1997, a lawsuit was filed which sought to nullify a contract to which Louisiana
      Riverboat Gaming Partnership is a party. Pursuant to the contract, Louisiana
      Riverboat Gaming Partnership paid a fixed amount plus a percentage of revenue,
      to various local governmental entities, including the City of Bossier City
      and
      the Bossier Parish School Board, in lieu of payment of a per-passenger boarding
      fee. The case was tried on April 6, 2004. The trial court rendered a ruling
      in
      favor of the defendants, finding that although the legislature amended the
      boarding fee statute in 2003 so as to prohibit future boarding fee agreements,
      any pre-existing agreement between a riverboat and either the City of Bossier
      City or the Bossier Parish Police Jury will remain valid and in effect until
      its
      expiration. Louisiana Riverboat Gaming Partnership’s contract expired on April
      4, 2004. Therefore, Louisiana Riverboat Gaming Partnership now pays a boarding
      fee to the City as outlined by the statute. Louisiana Riverboat Gaming
      Partnership still has an existing contract with the Bossier Parish Police Jury,
      which was not at issue in the litigation, and which will remain in effect until
      its expiration on January 1, 2007, unless extended by the parties. The
      plaintiffs appealed the trial court’s ruling to the Second Circuit Court of
      Appeal, and the appellate court reversed and remanded the matter. We, along
      with
      the other defendants, filed writ applications to appeal the matter to the
      Louisiana Supreme Court. The court has granted two applications for appeal,
      one
      filed on behalf of Bossier City and Bossier Parish and another filed on behalf
      of the Bossier Sheriff’s Office and the Greater Bossier Economic Development
      Foundation. A hearing has not been scheduled. We will continue to vigorously
      defend this matter as may be required.





Lady
      Luck
      Gaming Corporation (now our wholly owned subsidiary) and several joint venture
      partners are defendants in a lawsuit brought by the country of Greece through
      its Minister of Tourism (now Development) and Finance. The action alleges that
      the defendants failed to make specified payments in connection with the gaming
      license bid process for Patras, Greece. The payment we are alleged to have
      been
      required to make aggregates approximately 6.5 million Euros (which was
      approximately $8.5 million as of April 24, 2005 based on published exchange
      rates). Although it is difficult to determine the damages being sought from
      the
      lawsuit, the action may seek damages up to that aggregate amount plus interest
      from the date of the action. The Athens Civil Court of First Instance granted
      judgment in our favor and dismissed the lawsuit, but the Ministry of Tourism
      appealed the matter and the appeal was heard in April 2002 before the Athens
      Appeal Court of First Instance. The Athens Appeal Court issued certified copies
      of judgments denying the Ministry’s appeals. The Ministry elected to appeal this
      matter further. We have taken action to have the decisions granted in our favor
      set for a hearing before the Administrative Supreme Court and the Greek Supreme
      Court, respectively. Briefs were filed in the administrative matter in June
      2005
      and the civil matter is set for hearing during May 2006. The outcome of this
      matter is still in doubt and cannot be predicted with any degree of certainty.
      We intend to continue a vigorous and appropriate defense to the claims asserted
      in this matter.





On
      December 30, 2002, the County of Jefferson, Missouri initiated a lawsuit in
      the
      Circuit Court of Jefferson County, Missouri against us and a subsidiary alleging
      a breach of a 1993 contract entered into by the County, that subsidiary, and
      guaranteed by Lady Luck Gaming Corporation relating to the development of a
      casino-site near Kimmswick, Missouri. The suit alleges damages in excess of
      $10.0 million. Discovery is ongoing and the matter has been set for a trial
      in
      January 2006. The outcome of this matter cannot be predicted with any degree
      of
      certainty. We believe the claims against us to be without merit and we intend
      to
      vigorously and appropriately defend the claims asserted in this
      matter.





We
      are
      subject to various contingencies and engaged in various other litigation matters
      that have a number of unresolved claims. Although the ultimate liability of
      these contingencies, this litigation and these claims cannot be determined
      at
      this time, we believe that they will not have a material adverse effect on
      our
      consolidated financial position, results of operations or cash
      flows.


46


**ITEM
      4.**  **SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.**


None.





**PART
      II**




**ITEM
      5. MARKET FOR REGISTRANT'S COMMON EQUITY RELATED
      STOCKHOLDER**


**MATTERS
      AND ISSUER PURCHASES OF EQUITY SECURITIES.**





(a)


*i.*
            *Market
                Information*.
                Our common stock is traded on the NASDAQ National Market under the
                symbol
                “ISLE”. The following table presents the high and low closing sales prices
                for our common stock as reported by the NASDAQ National Market for
                the
                fiscal periods indicated.





**High**
            
            **Low**Fiscal
                Year Ending April 30, 2006First
                Quarter (through July 1, 2005)
            
            $
            27.13
            
            $
            26.09Fiscal
                Year Ended April 24, 2005First
                Quarter
            
            $
            23.55
            
            $
            16.25Second
                Quarter
            
            
            22.26
            
            
            15.90Third
                Quarter
            
            
            27.90
            
            
            20.24Fourth
                Quarter
            
            
            30.68
            
            
            23.77Fiscal
                Year Ended April 25, 2004First
                Quarter
            
            $
            18.13
            
            $
            12.83Second
                Quarter
            
            
            21.94
            
            
            16.27Third
                Quarter
            
            
            23.41
            
            
            18.47Fourth
                Quarter
            
            
            26.45
            
            
            19.90











*ii.*
            *Holders
                of Common Stock*.
                As of July 1, 2005, there were approximately 1,672 holders of record
                of
                our common stock.





*iii.*
            *Dividends**.*We
                have never declared or paid any dividends with respect to our common
                stock
                and the current policy of our board of directors is to retain earnings
                to
                provide for the growth of the company. In addition, our senior secured
                credit facility and the indentures governing our 7% senior subordinated
                notes and our 9% senior subordinated notes limit our ability to pay
                dividends. See “Item 8-Financial Statements and Supplementary Data-Isle of
                Capri Casinos, Inc.-Notes to Consolidated Financial Statements -
                Note 7.”
                Consequently, no cash dividends are expected to be paid on our common
                stock in the foreseeable future. Further, there can be no assurance
                that
                our current and proposed operations will generate the funds needed
                to
                declare a cash dividend or that we will have legally available funds
                to
                pay dividends. In addition, we may fund part of our operations in
                the
                future from indebtedness, the terms of which may prohibit or restrict
                the
                payment of cash dividends. If a holder of common stock is disqualified
                by
                the regulatory authorities from owning such shares, such holder will
                not
                be permitted to receive any dividends with respect to such stock.
                See
                “Item 1-Business-Regulation and
                Licensing.”






47






iv.
            *Equity
                Compensation Plans*.The following table provides information about securities authorized
                for
                issuance under our 1992, 1993 and 2000 Employee Stock Option Plans,
                and
                our Deferred Bonus Plan, for the fiscal year ended April 24,
                2005.






(a)
            (b)
            (c)Plan
                category
            Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights
            Weighted-average
                exercise price of outstanding options, warrants and rights
            Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))Equity
                compensation plans approved by security holders
            3,536,299
            $13.24
            833,448Equity
                compensation plans not approved by security holders
            -
            -
            -Total
            3,536,299
            $13.24
            833,448







(b)  Issuance
          of Unregistered Securities
 
 We
          maintain the Isle of Capri Casinos, Inc. Retirement Trust & Savings Plan,
          which is a tax-qualified retirement plan (the “Plan”). The Plan was established
          on July 1, 1993 and since the date of its establishment, the Plan has offered
          participants in the Plan the option of investing in a fund invested in
          our
          common stock. In June 1995, we filed a Registration Statement on Form S-8
          (Commission File No. 33-93088) to register 30,000 shares of our common
          stock to
          be acquired by participants in the Plan (the “1995 Registration Statement”).
          Subsequent to the filing of the 1995 Registration Statement, Plan participants
          acquired in excess of the 30,000 shares of our registered common stock.
          In March
          2005, we filed a Registration Statement on Form S-8 (Commission File No.
          333-123234) to register an additional 100,000 shares of common stock to
          be
          offered for investment in the Plan (the “2005 Registration Statement”).
          Following the filing of the 1995 Registration Statement and prior to the
          filing
          of the 2005 Registration Statement, the acquisition by the Plan’s trustee of a
          certain number of shares of Isle common stock for the benefit and at the
          direction of Plan participants, as well as the interests in the Plan, were
          not
          registered in compliance with applicable federal and state securities
          laws.
 
 We
          may be
          subject to claims by the Plan’s participants for rescission of their
          acquisitions of shares of our common stock in the Plan under federal and
          state
          securities laws until the expiration of the applicable statute of limitations
          period. We do not currently believe that the potential claims for rescission
          and
          any related penalties would have a material adverse effect on us because
          we do
          not believe that many participants in the Plan who purchased shares prior
          to the
          filing of the 2005 Registration Statement are likely to assert rescission
          claims
          because of the appreciation of our common stock over the applicable statute
          of
          limitations period.




48


(c)  Purchases
        of our Common Stock




The following table provides information related to our purchases of Isle of
      Capri Casinos, Inc. common stock:





**Total
                Number of Shares Purchased**
            
            **Average
                Price Paid per Share**
            
            **Total
                Number of Shares Purchased as Part of Publicly Announced Programs
                (1)**
            
            **Maximum
                Number of Shares that May Yet Be Purchased Under the Programs
                (1)****Period**January
                24, 2005 to February 20, 2005
            
            
            -
            
            $
            -
            
            
            -
            
            
            488,205February
                21, 2005 to March 27, 2005
            
            
            -
            
            
            -
            
            
            -
            
            
            488,205March
                28, 2005 to April 24, 2005
            
            
            -
            
            
            -
            
            
            -
            
            
            488,205Total
            
            
            -
            
            $
            -
            
            
            -
            
            
            488,205





(1)
      We
      have purchased our common stock under two separate repurchase programs. The
      first program, which allowed repurchase of up to 1,500,000 shares was announced
      on November 15, 2000, and subsequently expanded to allow repurchase of an
      additional 1,500,000 shares, as announced on January 11, 2001. The current
      program was announced on October 25, 2002 and allows for the repurchase of
      up to
      1,500,000 shares. To date, we have purchased 4,011,795 shares of our common
      stock under the two programs. These programs have no approved dollar amounts,
      nor expiration dates.


49


**ITEM
      6. SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA.**





The
      following table presents our selected consolidated financial data for the five
      most recent fiscal years, which is derived from our audited consolidated
      financial statements and the notes to those statements. Because the data in
      this
      table does not provide all of the data contained in our consolidated financial
      statements, including the related notes, you should read “Management’s
      Discussion and Analysis of Financial Condition and Results of Operations,” our
      consolidated financial statements, including the related notes contained
      elsewhere in this document and other data we have filed with the U.S. Securities
      and Exchange Commission.




**Fiscal
                Year Ended (1)****April
                24,**
            
            **April
                25,**
            
            **April
                27,**
            
            **April
                28,**
            
            **April
                29,****2005**
            
            **2004**
            
            **2003**
            
            **2002**
            
            **2001****Income
                Statement Data:**
            
            
            
            (dollars
                in millions, except per share data)Revenues:Casino
            
            $
            1,121.3
            
            $
            1,116.4
            
            $
            1,051.3
            
            $
            1,057.0
            
            $
            957.1Rooms
            
            
            47.7
            
            
            44.6
            
            
            49.2
            
            
            56.0
            
            
            50.7Pari-mutuel
                commissions and fees
            
            
            20.1
            
            
            20.3
            
            
            23.9
            
            
            23.5
            
            
            22.2Food,
                beverage and other
            
            
            149.5
            
            
            143.7
            
            
            140.9
            
            
            152.1
            
            
            148.3Gross
                revenues
            
            
            1,338.6
            
            
            1,325.0
            
            
            1,265.3
            
            
            1,288.6
            
            
            1,178.3Less
                promotional allowances
            
            
            227.0
            
            
            219.6
            
            
            200.5
            
            
            203.3
            
            
            195.5Net
                revenues
            
            
            1,111.6
            
            
            1,105.4
            
            
            1,064.8
            
            
            1,085.3
            
            
            982.8Operating
                expenses:Casino
            
            
            186.6
            
            
            181.5
            
            
            181.7
            
            
            194.9
            
            
            183.9Gaming
                taxes
            
            
            250.3
            
            
            245.0
            
            
            229.6
            
            
            227.0
            
            
            192.6Rooms
            
            
            10.3
            
            
            10.0
            
            
            11.6
            
            
            13.3
            
            
            12.1Pari-mutuel
            
            
            15.5
            
            
            15.4
            
            
            16.9
            
            
            16.8
            
            
            16.2Food,
                beverage and other
            
            
            35.8
            
            
            32.0
            
            
            34.1
            
            
            35.8
            
            
            32.0Marine
                and facilities
            
            
            67.7
            
            
            65.6
            
            
            65.9
            
            
            70.0
            
            
            63.6Marketing
                and administrative
            
            
            319.0
            
            
            306.1
            
            
            282.8
            
            
            286.0
            
            
            257.9Valuation
                charge
            
            
            4.1
            
            
            -
            
            
            1.9
            
            
            61.4
            
            
            1.0Other
                charges
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            8.2Preopening
            
            
            0.2
            
            
            2.3
            
            
            -
            
            
            3.9
            
            
            0.2Depreciation
                and amortization
            
            
            97.4
            
            
            89.8
            
            
            76.6
            
            
            72.1
            
            
            69.1Total
                operating expenses
            
            
            986.9
            
            
            947.7
            
            
            901.1
            
            
            981.2
            
            
            836.8Operating
                income
            
            
            124.7
            
            
            157.7
            
            
            163.7
            
            
            104.1
            
            
            146.0Interest
                expense
            
            
            (75.7
            )
            
            (83.5
            )
            
            (82.6
            )
            
            (89.2
            )
            
            (98.9
            )Interest
                income
            
            
            2.2
            
            
            0.9
            
            
            0.6
            
            
            0.9
            
            
            5.1Loss
                on early extinguishment of debt
            
            
            (5.3
            )
            
            (26.1
            )
            
            -
            
            
            (7.0
            )
            
            -Minority
                interest
            
            
            (5.5
            )
            
            (10.1
            )
            
            (9.5
            )
            
            (7.7
            )
            
            (6.4
            )Equity
                in income (loss) of unconsolidated joint ventures
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (0.2
            )Income
                from continuing operations before income taxes
            
            
            40.4
            
            
            38.9
            
            
            72.2
            
            
            1.1
            
            
            45.6Income
                taxes
            
            
            19.5
            
            
            12.6
            
            
            26.6
            
            
            1.1
            
            
            20.5Income
                from continuing operations
            
            
            20.9
            
            
            26.3
            
            
            45.6
            
            
            0.0
            
            
            25.1Income
                (loss) from discontinued operations, net of income taxes
            
            
            (2.9
            )
            
            1.4
            
            
            -
            
            
            -
            
            
            -Net
                income
            
            $
            18.0
            
            $
            27.7
            
            $
            45.6
            
            $
            0.0
            
            $
            25.1Adjusted
                net income (2)
            
            
            N/A
            
            
            N/A
            
            
            N/A
            
            
            N/A
            
            $
            35.0





(Footnotes
        follow table)






50






**Fiscal
                Year Ended (1)****April
                24,**
            
            **April
                25,**
            
            **April
                27,**
            
            **April
                28,**
            
            **April
                29,****2005**
            
            **2004**
            
            **2003**
            
            **2002**
            
            **2001****Income
                Statement Data (continued):**
            
            
            
            (dollars
                in millions, except per share data)Income
                per common share:Basic
            
            $
            0.61
            
            $
            0.94
            
            $
            1.57
            
            $
            -
            
            $
            0.84Diluted
            
            $
            0.58
            
            $
            0.91
            
            $
            1.50
            
            $
            -
            
            $
            0.80Adjusted
                income per common share:Basic
                (2)
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            1.17Diluted
                (2)
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            1.11**Other
                Data:**Net
                cash provided by (used in):Operating
                activities
            
            $
            169.9
            
            $
            173.2
            
            $
            138.2
            
            $
            153.7
            
            $
            74.2Investing
                activities
            
            $
            (213.7
            )
            $
            (159.1
            )
            $
            (126.6
            )
            $
            (100.6
            )
            $
            (225.4
            )Financing
                activities
            
            $
            55.4
            
            $
            25.8
            
            $
            6.4
            
            $
            (53.2
            )
            $
            59.9Capital
                expenditures
            
            $
            217.3
            
            $
            153.4
            
            $
            61.3
            
            $
            98.3
            
            $
            162.1**Operating
                Data:**Number
                of slot machines (3)
            
            
            14,518
            
            
            14,558
            
            
            13,532
            
            
            14,649
            
            
            13,604Number
                of table games (3)
            
            
            539
            
            
            452
            
            
            335
            
            
            383
            
            
            395Number
                of hotel rooms (3)
            
            
            3,037
            
            
            2,990
            
            
            2,850
            
            
            3,869
            
            
            3,912Average
                daily occupancy rate (4)
            
            
            84.4
            %
            
            84.7
            %
            
            78.9
            %
            
            85.0
            %
            
            85.3
            %**Balance
                Sheet Data:**Cash
                and cash equivalents
            
            $
            146.7
            
            $
            134.6
            
            $
            94.6
            
            $
            76.6
            
            $
            76.7Total
                assets
            
            
            1,681.4
            
            
            1,531.8
            
            
            1,416.0
            
            
            1,353.4
            
            
            1,390.7Long-term
                debt, including current portion
            
            
            1,156.1
            
            
            1,088.9
            
            
            1,028.0
            
            
            1,009.3
            
            
            1,039.1Stockholders'
                equity
            
            
            261.4
            
            
            241.4
            
            
            203.9
            
            
            159.2
            
            
            166.0




(1)
      The
      operating results and data presented for fiscal years prior to fiscal year
      2002
      are not comparable to other fiscal years presented because they do not include
      the operating results of the Isle-Boonville, which opened on December 6, 2001.
      The operating results and data presented for fiscal years prior to fiscal year
      2003 are not comparable to other fiscal years presented as we ceased operations
      at the Isle-Tunica on September 3, 2002, acquired the Colorado Central
      Station-Black Hawk and the Colorado Grande-Cripple Creek on April 22, 2003,
      and
      we ceased operations at the Colorado Grande-Cripple Creek on April 25, 2005. The
      operating results and data presented for fiscal years prior to fiscal year
      2004
      are not comparable to other fiscal years presented because they do not include
      the operating results of the Isle-Our Lucaya, which we opened on December 15,
      2003, the Blue Chip-Dudley, which we acquired on November 28, 2003, and the
      Blue
      Chip-Wolverhampton, which we opened on April 22, 2004. We also ceased operations
      at the Lady Luck-Las Vegas on September 3, 2003. The results of fiscal years
      2003-2005 have been reclassified to reflect Colorado Grande-Cripple Creek as
      discontinued operations.




(2)
      Excludes amortization of goodwill and other indefinite-lived intangible assets
      in connection with the adoption of Statement of Financial Accounting Standards
      No. 142, “Goodwill and Other Intangible Assets.”




(3)
      The
      data presented for fiscal years prior to 2003 is not comparable to other fiscal
      years presented due to the exclusion of the 223 Colorado Grande-Cripple Creek
      slot machines due to discontinued operations.




(4)
      The
      data presented for fiscal years prior to 2003 is not comparable to other fiscal
      years presented due to the exclusion of the 227 Isle-Tunica and the 792 Lady
      Luck-Las Vegas hotel rooms.




N/A
      Not
      applicable.


51


**ITEM
                7.**
            **MANAGEMENT'S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS.**





*You
      should read the following discussion together with the financial statements,
      including the related notes and the other financial information in this Form
      10-K.*





**Executive
      Overview**





We
      are a
      leading developer, owner and operator of branded gaming facilities and related
      lodging and entertainment facilities in regional markets in the United States
      and internationally. We continue to investigate developing new locations,
      purchasing existing operations and expanding our current properties. These
      activities require capital-intensive investments that have long-term return
      potential. We have intentionally sought geographic diversity to limit the risks
      caused by weather, regional economic difficulties, and local gaming authorities
      and regulations. We currently operate casinos in Mississippi, Louisiana,
      Missouri, Iowa, Colorado and Freeport, Grand Bahamas Island. We operate a
      harness racing track in Florida. Additionally, we have a controlling interest
      in
      casino investments in Dudley, Wolverhampton and Walsall, England, each of which
      is operated by the minority owners.





The
      following table reflects our consolidated net revenues and operating income
      by
      state:





**ISLE
                OF CAPRI CASINOS, INC.****CONSOLIDATED
                STATEMENTS OF OPERATIONS****(In
                thousands)****Fiscal
                Year Ended****April
                24,**
            
            **April
                25,**
            
            **Variance**
            
            **Variance****2005**
            
            **2004**
            
            **$**
            
            **%**Net
                revenues:Mississippi
            
            $
            256,313
            
            $
            260,912
            
            $
            (4,599
            )
            
            (1.8
            %)Louisiana
            
            
            281,434
            
            
            280,176
            
            
            1,258
            
            
            0.4
            %Missouri
            
            
            166,274
            
            
            161,445
            
            
            4,829
            
            
            3.0
            %Iowa
            
            
            211,650
            
            
            210,486
            
            
            1,164
            
            
            0.6
            %Colorado
            
            
            138,588
            
            
            148,916
            
            
            (10,328
            )
            
            (6.9
            %)International
            
            
            31,115
            
            
            9,401
            
            
            21,714
            
            
            231.0
            %Corporate
                and other
            
            
            26,234
            
            
            34,106
            
            
            (7,872
            )
            
            (23.1
            %)Total
                net revenues
            
            $
            1,111,608
            
            $
            1,105,442
            
            $
            6,166
            
            
            0.6
            %Operating
                income:Mississippi
            
            $
            30,163
            
            $
            44,075
            
            $
            (13,912
            )
            
            (31.6
            %)Lousiana
            
            
            39,894
            
            
            37,693
            
            
            2,201
            
            
            5.8
            %Missouri
            
            
            24,976
            
            
            23,762
            
            
            1,214
            
            
            5.1
            %Iowa
            
            
            44,710
            
            
            43,300
            
            
            1,410
            
            
            3.3
            %Colorado
            
            
            29,764
            
            
            39,954
            
            
            (10,190
            )
            
            (25.5
            %)International
            
            
            (4,013
            )
            
            (4,953
            )
            
            940
            
            
            19.0
            %Corporate
                and other
            
            
            (40,842
            )
            
            (26,103
            )
            
            (14,739
            )
            
            (56.5
            %)Operating
                income
            
            $
            124,652
            
            $
            157,728
            
            $
            (33,076
            )
            
            (21.0
            %)








52




In
      Mississippi , our four operations contributed $256.3 million or 23.1% of our
      net
      revenues during the fiscal year ended April 24, 2005. Due primarily to
      construction disruption during our Biloxi hotel construction and increasingly
      competitive environments in our Vicksburg and Lula markets, our Mississippi
      net
      revenues declined $4.6 million. Our decline in revenue coupled with increased
      marketing, employee benefits, maintenance, land rent and depreciation, resulted
      in a corresponding decline in operating income of $13.9 million. We expect
      to
      complete the Biloxi hotel expansion by mid-summer of 2005, prior to the expected
      opening of an additional branded competitor in the market in the fall of 2005.
      Additionally, we expect to close the existing Biloxi casino barge for
      approximately two weeks during early December 2005 to install our new, larger
      casino barge, which will feature significantly expanded gaming space, new
      entertainment venues, new restaurants and other amenities. We expect that our
      expansion and the addition of a new branded competitor will have a positive
      impact on the Biloxi market.





In
      Louisiana, our two properties contributed $281.4 million or 25.3% of our net
      revenues during the fiscal year ended April 24, 2005. Net revenues increased
      $1.3 million due to the positive results in Lake Charles related to the
      renovation and expansion of its Grand Palais casino partially offset by a
      decline in Bossier City related to increasing competitive pressures in that
      market. Operating income in Louisiana also increased $2.2 million as labor
      and
      other cost reduction programs implemented in Bossier City coupled with revenue
      increases at Lake Charles. An additional competitor entered the Lake Charles
      market in late May 2005. We expect this entrant will cause the market to grow
      but at the same time to have a negative impact on existing market participants.
      The Bossier City market is highly competitive and is facing increased
      competition from expansion of Native American gaming in Oklahoma.





In
      Missouri, our two properties contributed $166.3 million or 15.0% of our net
      revenues during the fiscal year ended April 24, 2005. Net revenues increased
      $4.8 million while operating income increased $1.2 million as a result of Kansas
      City’s previous casino expansion and aggressive marketing as well as Boonville’s
      continuing efforts to maximize its full potential. Beginning in May 2005, there
      were disruptions to traffic flow at the Kansas City property as the Paseo Bridge
      on Interstate 35 will be closed for repairs for four to seven months and will
      likely result in reduction of gaming revenues during this period.





In
      Iowa,
      our three casinos contributed $211.7 million or 19.0% of our net revenues during
      the fiscal year ended April 24, 2005. Net revenues increased by $1.2 million
      and
      operating income increased by $1.4 million. A decrease in depreciation from
      the
      Davenport property, due to an extension of the hotel’s useful life, was
      substantially offset by a charge to increase operating lease expense and a
      2%
      increase in the Iowa gaming tax rates. The charge was due to the change in
      the
      recognition of long-term lease costs. The tax rates became effective July 1,
      2004. In fiscal 2005 the Quad-city properties have faced increasing competition
      from casinos in the Chicagoland market as those operators refine their product
      and service offerings.





In
      Colorado, our two Black Hawk properties contributed $138.6 million or 12.5%
      of
      our net revenues during the fiscal year ended April 24, 2005. During fiscal
      2005, construction at our Black Hawk properties, which significantly reduced
      parking for the Colorado Central Station-Black Hawk and restricted access to
      the
      street entrances to both Black Hawk casinos, adversely impacted net revenues
      and
      operating income by $10.3 million and $10.2 million, respectively. In February
      2005 we opened 600 new parking spaces and the construction disruption began
      to
      decline. By mid-June, 2005 we completed the casino expansions at both casinos,
      a
      new restaurant, the skywalks connecting the casinos to the new garage and a
      total of 900 new parking spaces thus ending the most disruptive phase of our
      Black Hawk expansion projects. Construction of the new 162 room Colorado Central
      Station hotel is currently ahead of schedule and the hotel is expected to open
      near the end of calendar 2005. Construction on the extension of Main Street
      to
      Colorado Route 119, temporarily delayed by engineering problems, has now
      resumed. Completion is expected in the Spring of 2006.


53


In
      our
      international locations, we experienced an increase in net revenues due to
      comparison to a portion year (Blue Chip opened is mid-November 2003 and Isle-Our
      Lucaya opened in mid-December 2003) and operating income due to the recording
      of
      $2.0 million of business interruption proceeds at Isle-Our Lucaya, related
      to
      closings caused by Hurricane Frances in the second quarter of fiscal 2005.
      Both
      our international locations continue to experience growing pains and are
      expected to generate negative operating income with an improving
      trend.





In
      corporate and other, our new development expenses increased to $14.4 million
      for
      the fiscal year ended April 24, 2005, up from $5.8 million for the same period
      in the previous fiscal year. This is primarily due to our continuing development
      efforts in the UK, Florida, Waterloo and other initial investments to proposed
      future projects.





In
      November 2004, voters in the State of Florida voted to amend the state's
      constitution to allow the voters of Miami-Dade and Broward counties (Broward
      County is the location of the Pompano Park Racetrack) to decide whether to
      approve slot machines in racetracks and jai alai frontons in their respective
      counties. Broward county voters passed their local referendum and Dade county
      voters rejected their referendum in March 2005. Enabling gaming legislation
      was
      not passed in the current session of the Florida legislature despite the
      constitutional requirement that such legislation be in effect by July 1, 2005.
      Along with the other Broward county pari-mutuels, we filed a lawsuit seeking
      authority to proceed with the development of slot machine facilities despite
      the
      absence of enabling legislation. On June 21, 2005, the Circuit Court judge
      issued a decision in favor of the pari-mutuel facilities, which decision will
      be
      appealed. Accordingly, the regulation and timing of installation and operation
      of slot machines has not been finally determined.





We
      remain
      committed to our development project in the UK to build a casino in Coventry;
      however, legislation enacted in April 2005 limits the number of regional casinos
      to one. The number may be increased only through additional legislation. We
      have
      obtained all necessary gaming licenses to open a casino at the RICOHTM Arena
      Coventry in the summer of 2006 under the Gaming Act of 1968. We believe we
      are
      well positioned to develop a regional casino in Coventry should we be awarded
      a
      regional casino license.





**Critical
      Accounting Estimates**





Our
      consolidated financial statements are prepared in accordance with U.S. generally
      accepted accounting principles that require our management to make estimates
      and
      assumptions that affect reported amounts and related disclosures. Management
      identifies critical accounting estimates as:




·
            those
                that require the use of assumptions about matters that are inherently
                and
                highly uncertain at the time the estimates are made;




·
            those
                estimates where, had we chosen different estimates or assumptions,
                the
                resulting differences would have had a material impact on our financial
                condition, changes in financial condition or results of operations;
                and




·
            those
                estimates that, if they were to change from period to period, likely
                would
                result in a material impact on our financial condition, changes in
                financial condition or results of
                operations.





Based
      upon management’s discussion of the development and selection of these critical
      accounting estimates with the Audit Committee of our Board of Directors, we
      believe the following accounting estimates involve a higher degree of judgment
      and complexity.





54





***Goodwill
      and Other Intangible Assets***





At
      April
      24, 2005, we had goodwill and other intangible assets with indefinite useful
      lives of $412.8 million, representing 25% of total assets. Statement of
      Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets”
      (“SFAS 142”), requires that goodwill and intangible assets with indefinite
      useful lives be tested for impairment annually or more frequently if an event
      occurs or circumstances change that may reduce the fair value of the company’s
      goodwill and intangible assets below its carrying value. We completed our
      annual **** impairment
      test as required under SFAS 142 in the **** fourth
      quarter of fiscal year 2005 and determined that, other than the goodwill
      associated with our Colorado Grande-Cripple Creek casino, goodwill and other
      indefinite-lived intangible assets were not impaired. A charge of $4.0 million
      was recorded in the fourth quarter for the impairment of Colorado Grande-Cripple
      Creek’s remaining goodwill. For properties with goodwill and/or other intangible
      assets with indefinite lives, this test requires the comparison of the implied
      fair value of each property to carrying value. The implied fair value includes
      estimates of future cash flows that are based on reasonable and supportable
      assumptions and represent our best estimates of the cash flows expected to
      result from the use of the assets and their eventual disposition. Changes in
      estimates or application of alternative assumptions and definitions could
      produce significantly different results.





***Property
      and Equipment***





At
      April
      24, 2005, we had property and equipment of $1,027 billion, representing 61%
      of
      total assets. We capitalize the cost of property and equipment. Maintenance
      and
      repairs that neither materially add to the value of the property nor appreciably
      prolong its life are charged to expense as incurred. Costs incurred in
      connection with the company’s “all properties other capital improvements,”
      program, as detailed in the “Liquidity and Capital Resources” section below,
      include individual capital expenditures related to the purchase of furniture
      and
      equipment and to the upgrade of hotel rooms, restaurants and other areas of
      our
      properties. We depreciate property and equipment on a straight-line basis over
      their estimated useful lives. The estimated useful lives are based on the nature
      of the assets as well as our current operating strategy. Future events such
      as
      property expansions, new competition and new regulations could result in a
      change in the manner in which we are using certain assets requiring a change
      in
      the estimated useful lives of such assets. We evaluate long-lived assets for
      impairment using Statement of Financial Accounting Standards No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”),
      which addresses financial accounting and reporting for the impairment or
      disposal of long-lived assets. In assessing the recoverability of the carrying
      value of property and equipment, we make assumptions regarding future cash
      flows
      and other factors. If these estimates or the related assumptions change in
      the
      future, we may be required to record impairment loss for these assets. Such
      an
      impairment loss would be recognized as a non-cash component of operating
      income.





***Self-Insurance
      Liabilities***





We
      are
      self-funded up to a maximum amount per claim for our employee-related health
      care benefits program, workers’ compensation insurance and general liability
      insurance. Claims in excess of this maximum are fully insured through a
      stop-loss insurance policy. We accrue for these liabilities based on claims
      filed and estimates of claims incurred but not reported. We rely on independent
      consultants to assist in the determination of estimated accruals. While the
      total cost of claims incurred depends on future developments, such as increases
      in health care costs, in our opinion, recorded reserves are adequate to cover
      future claims payments.


55





***Income
      Tax Assets and Liabilities***





We
      account for income taxes in accordance with Statement of Financial Accounting
      Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”). SFAS 109 requires
      that we recognize a current tax asset or liability for the estimated taxes
      payable or refundable based upon application of the enacted tax rates to taxable
      income in the current year. Additionally, we are required to recognize a
      deferred tax liability or asset for the estimated future tax effects
      attributable to temporary differences. Temporary differences occur when
      differences arise between: (a) the amount of taxable income and pretax financial
      income for a year and (b) the tax bases of assets or liabilities and their
      reported amounts in financial statements. SFAS 109 also requires that any
      deferred tax asset recognized must be reduced by a valuation allowance for
      any
      tax benefits that, in our judgment and based upon available evidence, may not
      be
      realizable.





The
      deferred tax assets and liabilities, as well as the need for a valuation
      allowance, are evaluated on a quarterly basis and adjusted if necessary. We
      use
      forecasted future operating results and consider enacted tax laws and rates
      in
      determining if the valuation allowance is sufficient. We operate in multiple
      taxing jurisdictions and are therefore subject to varying tax laws and potential
      audits, which could impact our assessments and estimates.





***Contingencies***





We
      are
      involved in various legal proceedings and have identified certain loss
      contingencies. We record liabilities related to these contingencies when it
      is
      determined that a loss is probable and reasonably estimable. These assessments
      are based on our knowledge and experience as well as the advice of legal counsel
      regarding current and past events. Any such estimates are also subject to future
      events, court rulings, negotiations between the parties and other uncertainties.
      If an actual loss differs from our estimate, or the actual outcome of any of
      the
      legal proceedings differs from expectations, operating results could be
      impacted.





We
      routinely face challenges from federal and other tax authorities regarding
      the
      amount of taxes due. These challenges include questions regarding the timing
      and
      amount of deductions and the allocation of income among various tax
      jurisdictions. We record tax accruals for probable exposures associated with
      the
      various filing positions in accordance with Statement of Financial Accounting
      Standards No. 5, “Accounting for Contingencies.”





***Slot
      Club Awards***





We
      reward
      our slot customers for their loyalty based on the dollar amount of play on
      slot
      machines. We accrue for these slot club awards based on an estimate of the
      value
      of the outstanding awards utilizing the age and prior history of redemptions.
      Future events such as a change in our marketing strategy or new competition
      could result in a change in the value of the awards.


56





**Results
      of Operations**





Our
      results of operations for the fiscal year ended April 24, 2005, reflect the
      consolidated operations of all of our subsidiaries and include the following
      properties: the Isle-Bossier City, the Isle-Lake Charles, the Isle-Biloxi,
      the
      Isle-Lula, the Isle-Natchez, the Isle-Vicksburg, the Isle-Kansas City, the
      Isle-Boonville, the Isle-Bettendorf, the Isle-Marquette, the Rhythm
      City-Davenport, the Isle-Black Hawk, the Colorado Central Station-Black Hawk,
      the Isle-Our Lucaya, the Blue Chip-Dudley, the Blue Chip-Wolverhampton, the
      Blue
      Chip-Walsall and Pompano Park. Fiscal 2005 results have been reclassified to
      reflect the Colorado Grande-Cripple Creek as discontinued
      operations.





Our
      results of operations for the fiscal year ended April 25, 2004 reflect the
      consolidated operations of all of our subsidiaries and include the following
      properties: the Isle-Bossier City, the Isle-Lake Charles, the Isle-Biloxi,
      the
      Isle-Lula, the Isle-Natchez, the Isle-Vicksburg, the Isle-Kansas City, the
      Isle-Boonville, the Isle-Bettendorf, the Isle-Marquette, the Rhythm
      City-Davenport, the Isle-Black Hawk, the Colorado Central Station-Black Hawk,
      the Lady Luck-Las Vegas, the Isle-Our Lucaya, the Blue Chip-Dudley, the Blue
      Chip-Wolverhampton and Pompano Park. On October 30, 2002, we completed the
      sale
      of the Lady Luck-Las Vegas. We operated the casino until September 3, 2003,
      when
      the purchaser’s designated gaming operator received regulatory approval. The
      Isle-Our Lucaya began operations in December of 2003. We purchased a two-thirds
      interest in Blue Chip Casinos, PLC (“Blue Chip”) in November of 2003. Blue Chip
      owns and operates a pub-style casino in Dudley, England, and a pub-style casino
      in Wolverhampton, England, which began operations in April of 2004. Fiscal
      2004
      results have been reclassified to reflect the Colorado Grande-Cripple Creek
      as
      discontinued operations.





Our
      results of operations for the fiscal year ended April 27, 2003, reflect the
      consolidated operations of all of our subsidiaries, and includes the following
      properties: the Isle-Bossier City, the Isle-Lake Charles, the Isle-Biloxi,
      the
      Isle-Lula, the Isle-Natchez, the Isle-Tunica, the Isle-Vicksburg, the
      Isle-Kansas City, the Isle-Boonville, the Isle-Bettendorf, the Isle-Marquette,
      the Rhythm City-Davenport, the Isle-Black Hawk, the Lady Luck-Las Vegas and
      Pompano Park. Isle-Tunica ceased casino operations on September 3, 2002, prior
      to the sale of assets to Boyd Casino Strip, LLC on October 7, 2002. On October
      30, 2002, we completed the sale of the Lady Luck-Las Vegas. We continued to
      operate the casino until September 3, 2003, when the purchaser’s designated
      gaming operator received regulatory approval. Results also include the Colorado
      Central Station-Black Hawk subsequent to its acquisition on April 22, 2003.
      Fiscal 2003 results have been reclassified to reflect the Colorado
      Grande-Cripple Creek as discontinued operations.





We
      believe that our historical results of operations may not be indicative of
      our
      future results of operations because of the substantial present and expected
      future increase in competition for gaming customers in each of our markets,
      as
      new gaming facilities open and existing gaming facilities expand or enhance
      their facilities. We believe that our operating results are materially affected
      by the economy and weather.





***Fiscal
      Year Ended April 24, 2005 Compared to Fiscal Year Ended April 25,
      2004***





Gross
      revenues for the fiscal year ended April 24, 2005 were $1.3 billion, which
      included $1.1 billion of casino revenue, $47.7 million of room revenue, $20.1
      million of pari-mutuel commissions, $128.1 million of food and beverage revenue
      and $21.3 million of other revenue. This compares to gross revenues for the
      fiscal year ended April 25, 2004 of $1.3 billion, which included $1.1 billion
      of
      casino revenue, $44.6 million of room revenue, $20.3 million of pari-mutuel
      commissions and $124.4 million of food and beverage and $19.4 million of other
      revenue.





Casino
      revenue remained flat compared to fiscal year 2004. **** We
      saw an
      increase in casino revenues at our Missouri properties due primarily to the
      Isle-Kansas City’s expansion of its gaming floor and the Isle-






57




Boonville’s
      continued strong performance. Likewise, casino revenues increased at the
      Isle-Lake Charles resulting from the expansion and renovation of the Grand
      Palais. The addition of the Isle-Our Lucaya and the Blue Chip-Dudley also
      increased casino revenues as these properties opened in the third quarter of
      fiscal 2004. These increases were offset by the sale of the Lady Luck-Las Vegas.
      In Colorado, casino revenues declined as the Isle-Black Hawk and the Colorado
      Central Station-Black Hawk have been affected by construction disruption. We
      also faced decreases in casino revenues at the Isle-Biloxi because of
      construction and the aftermath of Hurricane Ivan.





Room
      revenue increased 7.1% compared to fiscal year 2004 **** primarily
      as a result of the additional capacity at the Isle-Bossier City. Pari-mutuel
      commissions earned at Pompano Park in Florida for the fiscal year was
      essentially flat compared to prior year. Food and beverage revenues increased
      by
      3.9% because of renovations made to the buffets at the Isle-Vicksburg, the
      Isle-Lake Charles and the Isle-Bossier City. The addition of the Isle-Our Lucaya
      and the Blue Chip locations also added to food and beverage
      revenues.





Promotional
      allowances, which are made up of complimentary revenues, cash points and
      coupons, are rewards that we give our loyal customers to encourage them to
      continue to patronize our properties. These allowances increased by 3.4% in
      fiscal year 2005 as we increased our direct mail efforts to promote
      play **.**





Casino
      operating expenses increased 2.8% over fiscal year 2004. These expenses are
      primarily comprised of salaries, wages and benefits and other operating expenses
      of the casinos. The increase in casino operating expenses is attributable to
      the
      additions of the Isle-Our Lucaya and Blue Chip. Isle-Our Lucaya incurred casino
      operating expenses during the time the property was closed in the aftermath
      of
      last year’s hurricanes. These increases are partially offset by the
      discontinuation of gaming operations at the Lady Luck-Las Vegas, following
      the
      finalization of the property’s sale, and a decrease in salaries, wages, taxes
      and benefits at the Isle-Bossier City due to cost controls.





State
      and
      local gaming taxes increased by 2.2% compared to fiscal year 2004. Effective
      July 1, 2004, we were subject to an additional assessment of 2.0% of gross
      gaming revenues in Iowa due to a tax increase enacted in that state.





Room
      expenses increased 4.2% compared to fiscal year 2004. **** These
      expenses directly relate to the cost of providing hotel rooms. Other costs
      of
      the hotels are shared with the casinos and are presented in their respective
      expense categories. The increase in expenses was due primarily to the additional
      room capacity at the Isle-Bossier City.





Pari-mutuel
      operating costs of Pompano Park in Florida remained flat compared to fiscal
      year
      2004. Such costs consist primarily of compensation, benefits, purses, simulcast
      fees and other direct costs of track operations.





Food
      and
      beverage expenses increased 12.5% over fiscal year 2004. Food and beverage
      expenses as a percentage of gross food and beverage revenues increased from
      21.7% for the fiscal year ended April 25, 2004, to 23.7% for the fiscal year
      ended April 24, 2005. These
      expenses consist primarily of the cost of goods sold, salaries, wages and
      benefits and other operating expenses of these departments. Food,
      beverage and other expenses as a percentage of gross food, beverage and other
      revenues increased from 22.3% for the fiscal year ended April 25, 2004, to
      24.0%
      for the fiscal year ended April 24, 2005. These
      expenses increased partly as a result of the expansion at the Isle-Bossier
      City.
      Room service and banquet expense increased as the availability of meeting space
      and hotel rooms increased during the fiscal year. The addition of the Isle-Our
      Lucaya and Blue Chip also increased food, beverage and other
      expenses.





Marine
      and facilities expenses increased 3.2% compared to fiscal year 2004. These
      expenses include salaries, wages and benefits of the marine and facilities
      departments, operating expenses of the marine






58




crews,
      insurance, maintenance of public areas, housekeeping and general maintenance
      of
      the riverboats and pavilions. The increase was primarily due to the
      Isle-Vicksburg’s parking lot repairs completed in the first quarter of fiscal
      2005, ongoing repairs and maintenance at the Isle-Lula, and the addition of
      the
      Isle-Our Lucaya. The increase was partially offset by a decrease in benefits
      expense for the marine and facilities departments at the Isle-Bossier
      City.





Marketing
      expenses increased 1.8% compared to fiscal year 2004. The increase in marketing
      expenses is primarily due to the addition of the Isle-Our Lucaya and is
      partially offset by the finalization of the sale of the Lady Luck-Las Vegas.
      Marketing expenses include salaries, wages and benefits of the marketing and
      sales departments, as well as promotions, direct mail, advertising, special
      events and entertainment.





Administrative
      expenses have increased 6.9% over fiscal year 2004. These expenses include
      administration and human resource department expenses, rent, new development
      activities, professional fees and property taxes. The increase is due to the
      addition of the Isle-Our Lucaya and Blue Chip. We also increased our development
      and investment activities domestically and in the UK. In Florida, we supported
      the successful campaign to pass a constitutional amendment that allows the
      voters of Miami-Dade and Broward counties to decide whether to approve slot
      machines in racetracks and jai alai facilities in their respective counties.
      These increases were partially offset by finalization of the sale and
      discontinuation of all operations at the Lady Luck-Las Vegas and savings from
      combining some administrative functions of our the Isle-Bettendorf and the
      Rhythm City-Davenport properties.




Depreciation
      expense increased by 8.5% compared to fiscal year 2004. Depreciation has
      increased as a result of the company’s capital expansion programs **.** The
      increase was primarily due to a one-time charge for additional depreciation
      expense of $2.9 million related to a reclassification of certain land
      improvements that were improperly classified as land at the time of the
      conversion of the company's manual system to a computerized asset tracking
      system in fiscal 2002, identified in the second fiscal quarter of 2005, as
      well
      as the capital additions at the Isle-Biloxi, Isle-Bossier City, the Isle-Lake
      Charles and the Isle-Kansas City.





We
      incurred a loss on early extinguishment of debt totaling $5.3 million in fiscal
      2005 in connection with the amendment of our senior secured credit facility
      on
      February 4, 2005. These charges include the write-off of debt acquisition costs.
      We also incurred a loss on early extinguishment of debt of $26.1 million in
      fiscal 2004 related to the amendment of our $390.0 million 8.75% senior
      subordinated notes on March 3, 2004. These charges included early payment
      premiums as well as the write-off of debt acquisition costs.





Net
      interest expense decreased 11.0% compared with fiscal year 2004. This is
      primarily attributable to the lower average balances outstanding. Net interest
      also excludes capitalized interest of $3.2 million for the fiscal year ended
      April 24, 2005, as compared to $1.5 million for the fiscal year ended April
      25,
      2004. The increase in capitalized interest results from the expansion projects
      at the Isle-Biloxi and in Black Hawk. The increase is partially offset by the
      completion of the expansion projects at the Isle-Bossier City.




Our
      effective tax rate from continuing operations was 48.1% for the fiscal year
      ended April 24, 2005, compared to 32.4% for fiscal year ended April 25, 2004,
      which, in each case, excludes an unrelated party’s portion of the Colorado
      Central Station-Black Hawk income taxes. The increase in the rate for fiscal
      2005 is a result of the effect of non-deductible permanent items on earnings,
      the impact of not benefiting from a portion of the current operating losses
      of
      the Company’s interests in the UK and state income taxes. Also in the second
      fiscal quarter ended 2004, the Internal Revenue Service concluded a federal
      tax
      examination covering four tax years without significant adjustments and provided
      administrative guidance on certain other tax matters for other open years.
      As a
      result, we analyzed our tax accruals and reduced income tax expense by
      approximately $3.4 million for previously accrued






59




income
      tax liabilities. This had the effect of reducing our effective tax rate to
      32.4%
      from continuing operations, excluding the minority interest’s portion of the
      Colorado Central Station-Black Hawk income taxes. Excluding the impact of these
      adjustments, our fiscal year 2004 effective rate from continuing operations
      would have been 41.1%, excluding the minority interest’s portion of the Colorado
      Central Station-Black Hawk income taxes.





***Fiscal
      Year Ended April 25, 2004 Compared to Fiscal Year Ended April 27,
      2003***





Gross
      revenues for the fiscal year ended April 25, 2004, were $1.3 billion, which
      included $1.1 billion of casino revenue, $44.6 million of room revenue, $20.3
      million of pari-mutuel commissions, $124.4 million of food and beverage revenue
      and $19.4 million of other revenue. This compares to gross revenues for the
      fiscal year ended April 27, 2003 of $1.3 billion, which included $1.1 billion
      of
      casino revenue, $49.2 million of room revenue, $23.9 million of pari-mutuel
      commissions and $121.3 million of food and beverage and $19.5 million of other
      revenue.





Casino
      revenue increased 6.2%. In Colorado, a full year contribution by the Colorado
      Central Station-Black Hawk and the Colorado Grande-Cripple Creek added an
      additional $59.6 million in casino revenue. Additionally, Isle-Black Hawk’s
      casino revenue increased $3.7 million. We were pleased when a statewide
      referendum that would have allowed video lottery terminals in all of the state’s
      horse racing tracks was defeated. The gains in Colorado were partially offset
      by
      the closing and subsequent sale of the Isle’s Tunica and Las Vegas locations.
      Because of construction disruptions and increase in the number of competitors,
      the Isle-Bossier City saw casino revenue decrease by 5.2%.





Room
      revenue decreased 9.5% compared to prior year. The decrease was primarily
      attributed to a decrease of 1,019 hotel rooms resulting from the sale of the
      Isle-Tunica and the Lady Luck-Las Vegas. The decrease was partially offset
      by
      increased room revenue at the Isle-Bossier City due to the completion of its
      265-room hotel expansion in January of 2004.





Pari-mutuel
      revenue earned at Pompano Park in Florida decreased by 14.9%. The decrease
      is
      primarily attributable to the general decrease of onsite wagering on horse
      races. Additionally, the park did not hold live races in July, August or
      September of 2003 to increase the purse pool for later races, thereby decreasing
      the number of live race days in fiscal year 2004 compared to fiscal year 2003.
      Pompano Park plans to hold live races in July, August and September of
      2004.





Food
      and
      beverage revenue increased 2.6% from year to year. The increase is primarily
      due
      to the addition of Colorado Central Station. Other revenue has remained
      essentially flat year over year.





Promotional
      allowances, which are made up of complimentary revenue, cash points and coupons,
      are rewards that we give our loyal customers to encourage them to continue
      to
      patronize our properties. These allowances increased by 10.0% in fiscal year
      2004 primarily as a result of the addition of our Colorado properties as well
      as
      the maturing of the customer database at the Isle-Boonville.





Casino
      operating expenses remained flat over fiscal year 2003. These expenses are
      primarily comprised of salaries, wages and benefits and other operating expenses
      of the casinos. The casino operating expenses incurred by the addition of the
      Colorado Central Station-Black Hawk were offset by the decrease in casino
      expenses because of the sale of our Las Vegas and Tunica
      properties.





State
      and
      local gaming taxes increased by 6.7% compared to fiscal year 2003. Gaming
      taxes in Iowa will increase from 20% to 22% of adjusted gross receipts effective
      July 1, 2004. Additionally, we will incur two prepaid assessments due on June
      1,
      2005 and June 1, 2006 of 2.125% for each of our Iowa licensee’s fiscal year 2004
      adjusted gross receipts. These assessments will be offset by a credit on future
      state gaming taxes of 20% each year beginning July 1, 2010 for five consecutive
      years.






60




Room
      expenses decreased 14.2% compared to fiscal year 2003. The decrease in room
      expenses resulted from the sale of our hotel operations at the Isle-Tunica
      and
      the Lady Luck-Las Vegas. These decreases were partially offset by the increase
      in room expenses from the addition of hotel rooms at the Isle-Bossier City.





Pari-mutuel
      operating costs of Pompano Park in Florida decreased by 8.8% compared to fiscal
      year 2003. Such costs consist primarily of compensation, benefits, purses,
      simulcast fees and other direct costs of track operations.





Food
      and
      beverage expenses decreased 7.5%. This decrease reflects the sale of the
      Isle-Tunica and the Lady Luck-Las Vegas. These expenses consist primarily of
      the
      cost of goods sold, salaries, wages and benefits and other operating expenses.
      Food and beverage expenses as a percentage of gross food and beverage revenues
      decreased from 24.0% for the fiscal year ended April 27, 2003, to 21.7% for
      the
      fiscal year ended April 25, 2004.





Marine
      and facilities expenses remained essentially flat. These expenses included
      salaries, wages and benefits, operating expenses of the marine crews, insurance,
      housekeeping and general maintenance of the riverboats and floating pavilions.
      The elimination of cruising requirements in Iowa beginning in May 2004 may
      yield
      additional cost reductions, which would partially offset the increase in the
      Iowa gaming taxes.





Marketing
      expenses increased 8.9% year over year. Marketing expenses included salaries,
      wages and benefits of the marketing and sales departments, as well as
      promotions, advertising, special events and entertainment. Marketing expenses
      have increased as the company addresses construction disruptions and increasing
      competition in a number of its markets.





Administrative
      expenses have increased 7.7% over fiscal year 2003. Administrative expenses
      included administration and human resource department expenses, rent, new
      development activities, professional fees and property taxes. Costs associated
      with new development increased substantially in fiscal year 2004 primarily
      due
      to activities in the St. Louis area and the UK. We continue to seek new
      development opportunities and therefore expect that new development costs will
      continue at comparable levels in fiscal year 2005.


The valuation charge for the fiscal year ended April 27, 2003, totaling $1.9
      million is a reserve for an impairment of our investment to date in Ardent
      Gaming, L.L.C., an unrelated third party. The system being developed under
      the
      joint venture was substantially past due and we believed it was probable that
      we
      would not recover our investment.




Depreciation
      expense increased by 17.2% compared to fiscal year 2003. Depreciation has
      increased as a result of the company’s capital expansion programs. This includes
      not only the improvements at Isle-Biloxi and Isle-Bossier City but also the
      company-wide project to update its slot product.





Interest
      expense increased 1.1% as compared with fiscal year 2003. Interest expense
      primarily relates to indebtedness incurred in connection with the acquisition
      of
      property, equipment, leasehold improvements and berthing and concession rights
      and is net of capitalized interest of $1.5 million in fiscal year 2004 as
      compared to $0.2 million in fiscal year 2003.





We
      recorded a $26.1 million loss on the extinguishment of our $390.0 million 8.75%
      Senior Subordinated Notes. These notes were replaced by the issuance of $500
      million in 7% Senior Subordinated Notes. We used the proceeds from the notes
      issuance not only to repay the $390 million 8.75% Senior Subordinated Notes,
      but
      also $37.5 million of our Senior secured credit facility Term Loan






61




B
      and
      $8.0 million of our Senior secured credit facility Revolving Loans, and to
      pay
      premiums and debt issuance fees and expenses. Remaining amounts were used for
      general corporate purposes.





Our
      effective tax rate from continuing operations was 32.4% for the fiscal year
      ended April 25, 2004 as compared to 36.9% for the fiscal year ended April 27,
      2003, which, in each case, excludes an unrelated party’s portion of the Colorado
      Central Station-Black Hawk income taxes. In the second fiscal quarter ended
      October 26, 2003, the Internal Revenue Service concluded a federal tax
      examination covering four tax years without significant adjustments and provided
      administrative guidance on certain other tax matters for other open years.
      As a
      result, we analyzed our tax accruals and reduced income tax expense by
      approximately $3.4 million for previously accrued income tax liabilities. This
      had the effect of reducing our effective tax rate to 32.4% from continuing
      operations, excluding the minority interest’s portion of the Colorado Central
      Station-Black Hawk income taxes, as compared to 36.9% for the year ended April
      27, 2003. Excluding the impact of these adjustments, our fiscal year 2004
      effective rate from continuing operations would have been 41.1%, excluding
      the
      minority interest’s portion of the Colorado Central Station-Black Hawk income
      taxes.





**Liquidity
      and Capital Resources**





At
      April
      24, 2005, we had cash and cash equivalents and marketable securities of $162.8
      million compared to $134.6 million in cash and cash equivalents at April 25,
      2004, the end of our last fiscal year. Of this $28.2 million increase, $12.1
      is
      an increase in cash and cash equivalents and is the net result of $169.9 million
      net cash provided by operating activities, $213.7 million net cash used in
      investing activities, $55.4 million net cash provided by financing activities
      and $0.5 million increase in cash from the effect of foreign currency exchange
      rates. The remaining increase of  $16.1 million is marketable securities
      held by Capri Insurance Corporation, of which we have the ability to draw up
      to
      50% of the balance of these securities. In addition, as of April 24, 2005,
      we had
      $452.8 million of capacity under lines of credit and available term debt which
      consisting of $389.8 million in unused credit capacity under the revolving
      loan
      commitment on our senior secured credit facility, $9.0
      million of unused credit capacity with the Isle-Black Hawk’s senior secured
      credit facility (limited to use by the Isle-Black Hawk), and
      $54.0 million under other lines of credit and available term debt. During the
      quarter ended April 24, 2005, the Isle-Black Hawk drew down $26.0 million on
      its
      revolving loan under the Isle-Black Hawk’s senior secured credit facility. We
      believe that existing cash, cash flow from operations and available borrowings
      under our lines of credit will be sufficient to support our working capital
      needs, planned capital expenditures and debt service requirements for the
      foreseeable future.


62





***Investing
      Activities***





We
      invested $217.3 million in property and equipment during the fiscal year ended
      April 24, 2005. The following table reflects expenditures and accruals for
      property and equipment on major projects for which we are committed to in fiscal
      2005 and 2004 and projected expenditures for these projects. The amounts in
      the
      table do not include any expenditures and accruals prior to fiscal
      2004.





**Actual**
            
            **Remaining****Fiscal
                Year**
            
            **Fiscal
                Year**
            
            **Fiscal
                Year****Ended
                4/25/04**
            
            **Ended
                4/24/05**
            
            **Ending
                4/30/06**
            
            **Thereafter**(dollars
                in millions)**Property**
            **Project**Isle-Biloxi
            Construct
                hotel & parking facility
            $
                21.1
            
            $
                43.5
            
            $
                9.5
            
            $
                -Isle-Biloxi
            Construct
                casino barge
            -
            
            7.4
            
            83.1
            
            -Isle-Bossier
                City
            Construct
                hotel & entertainment center
            38.2
            
            5.8
            
            -
            
            -Isle-Bossier
                City
            Renovate
                casino
            0.4
            
            2.4
            
            2.2
            
            -Isle-Bettendorf
            Construct
                hotel
            -
            
            -
            
            4.3
            
            40.7Isle-Lake
                Charles
            Renovate
                & expand casinos
            10.9
            
            11.6
            
            6.5
            
            -Isle-Kansas
                City
            Renovate
                & expand casino
            8.2
            
            -
            
            -
            
            -Isle-Boonville
            Construct
                hotel
            -
            
            2.0
            
            15.5
            
            -Isle-Black
                Hawk (57% owned)
            Expansion
                & public improvements
            8.0
            
            62.5
            
            22.1
            
            -Isle-Waterloo
            Construct
                casino & hotel
            -
            
            -
            
            12.0
            
            107.0Coventry
            Construct
                leasehold improvements
            -
            
            8.4
            
            25.1
            
            22.3Blue
                Chip
            Construct
                leasehold improvements
            -
            
            2.2
            
            -
            
            -Other
                properties (1)
            IGT
                Advantage program
            -
            
            9.3
            
            15.4
            
            -All
            Slot
                programs
            29.6
            
            31.8
            
            29.3
            
            -All
            Other
                capital improvements
            37.0
            
            30.4
            
            46.9
            
            13.1Total
            
            $
                153.4
            
            $
                217.3
            
            $
                271.9
            
            $
                183.1(1)
                Includes: Isle-Biloxi, Isle-Vicksburg, Isle-Lula, Isle-Natchez and
                to be
                determined.





The other capital improvements at all of our properties consists of numerous
      capital expenditures related to the purchase of furniture and equipment and
      the
      upgrade of hotel rooms, restaurants and other areas of our
      properties.





The
      Isle-Biloxi plan, estimated at $79.0 million, will include an additional 400
      hotel rooms, a 12,000 square-foot convention/entertainment center, an expanded
      pool and spa area and a 1,000-space parking facility, which was completed in
      December 2003. The parking garage provides a podium for future expansion of
      an
      additional hotel tower. We expect full completion of the new 400-room hotel
      expansion by mid-summer and expect to open the spa in early fall of 2005. In
      October 2004, we announced plans to replace
      the casino at the Isle-Biloxi with a new state-of-the-art casino facility.
      The
      approximately $90.0 million new casino, is expected to be opened in December
      2005 and will feature significantly expanded gaming space, new entertainment
      venues and restaurants and other amenities. Our new casino is currently under
      construction offsite. We plan to close the existing casino for approximately
      two
      weeks between Thanksgiving and Christmas of 2005 while we move the new facility
      into place. We are reviewing our options for the existing barge that will be
      replaced at the Isle-Biloxi in December 2005.





We
      have
      signed a development agreement with the City of Bettendorf pursuant to which
      we
      agreed to construct a new 250-room Isle hotel, additional parking, a Kitt’s
      Kitchen restaurant, and an expansion of the existing buffet, and the City agreed
      to construct a 50,000 square foot convention center adjacent to the company’s
      facility, which will be managed by the Isle-Bettendorf. The cost of our portion
      of this project is approximately $45.0 million, and the new hotel is planned
      to
      open in the late spring of 2007.






63




The
      Isle-Marquette had planned $5.9 million in improvements which would have
      included a 60-room hotel and improved parking. This
      construction has been delayed due to wetlands remediation approvals. We are
      currently evaluating other alternative hotel development scenarios for this
      property.





We
      have
      begun construction of a 140-room hotel, including 20 suites and a 6,000 square
      foot event center at the Isle-Boonville. The project is expected to be complete
      in late spring of 2006 and we have spent approximately $2.0 million on the
      project. The remaining $15.5 will be spent in fiscal 2006.





We
      are in
      the final stages of a $94 million expansion project for the Isle-Black Hawk
      and
      Colorado Central Stations-Black Hawk properties. We recently completed our
      expansion of the Isle-Black Hawk and the Colorado Central Station-Black Hawk
      casinos. We have completed a portion of our new parking structure with 600
      parking spaces open to the public. The new 162-room Colorado Central Station
      hotel is currently ahead of schedule and expected to be completed near the
      end
      of calendar year 2005. Additionally, we continue to construct public
      improvements to extend Main Street directly to Colorado Route 119, approximately
      one half-mile closer to Denver. Completion is expected in the spring of
      2006.





As
      announced in December 2003, we entered into an agreement to develop and operate
      an Isle of Capri-themed casino, subject to obtaining a license, in a commercial
      leisure complex currently under development in Coventry, England. In fiscal
      year
      2005, Isle was granted a gaming license to open the Coventry casino under the
      current legislation (Gaming Act 1968). Originally, total project costs were
      estimated to be $94.9 million, but recently that estimate was revised to $55.8
      million. Project costs for the leased space include design, architectural,
      mechanical and electrical build-out, construction and equipment. As of fiscal
      year end April 24, 2005, we have spent $8.4 million on the Coventry project
      and
      expect to spend the remainder over the next 15 months. Completion date for
      the
      casino at the RICOH TM Arena
      Coventry is estimated to be August 2006.





We
      have
      been selected by the Iowa Racing and Gaming Commission as the successful
      applicant for a gaming license in Waterloo, Iowa. We plan to spend approximately
      $119.0 million on constructing a 35,000 square foot single level casino with
      1,300 gaming positions, three of our signature restaurants, a 200-room hotel
      and
      1,000 parking spaces. We expect the construction project to take approximately
      20 months following the receipt of necessary permits and licenses, which we
      expect to receive.





In
      May
      2005, the company signed a management agreement with resort developer Eighth
      Wonder to manage the casino included in Eighth Wonder’s proposal for a new
      integrated resort complex in Singapore. In the first quarter fiscal 2006, the
      Company paid Eighth Wonder $4.0 million pursuant to the terms of this
      agreement.





On
      March
      15, 2004, we announced that we had been selected by the Illinois Gaming Board
      as
      the successful bidder in a federal bankruptcy court auction for the 10th
      Illinois gaming license conducted pursuant to an agreement approved by, among
      other parties, the Illinois Attorney General. We bid $518.0 million to acquire
      by merger the stock of a company in bankruptcy that owns the license. Our bid
      currently expires on August 1, 2005, which date has been extended monthly by
      us
      several times. If this merger is completed, we expect to spend approximately
      $150.0 million in addition to amounts already expended at the site in Rosemont,
      Illinois to construct a single-level, 40,000 square foot casino with 1,200
      gaming positions, restaurants, an entertainment venue and retail space. We
      plan
      to finance the Rosemont, Illinois project through equity contributions from
      us
      and from a limited number of individual investors, who in the aggregate will
      own
      20% as required by Illinois law, in an amount sufficient to allow non-recourse
      financing for the remainder of the cash needed to complete the project. The
      federal bankruptcy court has confirmed the plan of reorganization pursuant
      to
      which the merger would be consummated.





The
      merger remains subject to certain conditions, including a finding of suitability
      and final approval by the Illinois Gaming Board as well as certain other
      conditions. In addition, the Illinois Attorney General has raised issues with
      regard to the appropriateness of the Village of Rosemont as a host






64
 
  community
        and the Illinois Gaming Board’s selection of our bid. The Illinois Gaming Board
        (working with the Illinois Attorney General) has also resumed an administrative
        proceeding seeking to revoke the gaming license from our proposed merger
        partner, which if successful may adversely impact our ability to operate
        a
        gaming facility in the Village of Rosemont. The Illinois Attorney General
        has
        also filed a suit against the Illinois Gaming Board seeking to enjoin the
        Board
        from conducting a suitability investigation of us in connection with the
        merger
        provided for under the plan of reorganization (which suitability review has
        been
“suspended” by the Illinois Gaming Board pending the completion of the
        aforementioned revocation proceeding). During the fourth quarter of fiscal
        2005,
        the governor of Illinois appointed a new gaming board. One of the first acts
        by
        the new board was to authorize the reinstatement of the proceeding to rescind
        the license from the current owner. For the reasons set forth above, among
        others, we believe that our ability to obtain the gaming license and open
        a
        gaming facility in Rosemont has been subjected to added uncertainty. The
        Illinois Supreme Court has also agreed to review certain challenges to
        amendments to the Illinois Riverboat Gambling Act relating to the proposed
        relocation of the 10 th license.
        There can be no assurance that the foregoing conditions will be satisfied
        or
        that we will ultimately acquire the license. Additionally, because Illinois
        limits the number of gaming licenses, each license has intrinsic value.
        Therefore, this license is considered an intangible asset. As such, the full
        cost of the license and all associated costs were originally capitalized
        in the
        amount of $2.5 million. Due to the continuing uncertainty with respect to
        this
        matter, we have recorded a valuation charge for the full amount expended
        at
        April 24, 2005. We do not anticipate any significant expenditures related
        to the
        monthly renewal.





On
      October 29, 2004, we loaned $5.0 million to Florida Gaming Corporation (“Florida
      Gaming”). Interest accrues on the unpaid principal balance of the loan at an
      annual rate of 6.0% and is paid in arrears on the first day of each fiscal
      quarter. The loan is secured by a pledge of all of the issued and outstanding
      shares of capital stock of Florida Gaming Centers, Inc. (“FGC”), a wholly owned
      subsidiary of Florida Gaming. The entire unpaid principal amount of the loan
      and
      unpaid interest thereon is payable on the earlier of (1) the sale of all or
      any
      material portion of the assets of, or all or any substantial equity interest
      in
      FGC, or (2) December 31, 2008. Concurrently with the loan, Florida Gaming and
      FGC entered into a letter agreement with us pursuant to which Florida Gaming
      and
      FGC gave us exclusive
      negotiating rights with respect to the acquisition of all or substantially
      all
      of FGC’s Miami jai alai business for a period ending no later than December 31,
      2008.





In
      November 2004, voters in the State of Florida voted to amend the state's
      constitution to allow the voters of Miami-Dade and Broward counties (Broward
      County is the location of the Pompano Park Racetrack) to decide whether to
      approve slot machines in racetracks and jai alai frontons in their respective
      counties. Broward county voters passed their local referendum and Dade county
      voters rejected their referendum in March 2005. Enabling gaming legislation
      was
      not passed in the current session of the Florida legislature despite the
      constitutional requirement that such legislation be in effect by July 1, 2005.
      Along with the other Broward county pari-mutuels, we filed a lawsuit seeking
      authority to proceed with the development of slot machine facilities despite
      the
      absence of enabling legislation. On June 21, 2005, the Circuit Court judge
      issued a decision in favor of the pari-mutuel facilities, which decision will
      be
      appealed. Accordingly, the regulation and timing of installation and operation
      of slot machines has not been finally determined. Should we be successful,
      we
      plan to construct a new facility in two phases. Phase I will include an
      expansion of the existing facility to accommodate 1,800 to 2,000 additional
      slots, at a cost of approximately $155.0 million to be completed in
      approximately nine to twelve months from project start. Phase II, subject to
      timing and circumstances of Phase I, will include an additional facility
      expansion and an additional 1,000 slots at a planned cost of approximately
      $85.0
      million.





In
      January 2005, we announced plans to deploy the IGT AdvantageTM ** Casino
      System. The total cost of the project is expected to be approximately $24.7
      million, of which $1.6 million is included in the Colorado Central Station-Black
      Hawk property expansion project discussed above. We have also spent $7.7 million
      at the Isle-Biloxi, the Isle-Vicksburg, the Isle-Lula, the Isle-Natchez and
      another property to be determined, leaving a remaining budget of $15.4 million.
      This will allow our properties to experience






65




product
      upgrades to operate more competitively within their markets. Our slot
      improvement initiative also includes an increased ticket-in/ticket-out slot
      product offering.





We
      expense all developmental costs until we determine that ultimate licensure
      and
      operation is deemed probable. At that time, we evaluate the applicable costs
      and
      capitalize if appropriate.





All
      of
      our development plans are subject to obtaining permits, licenses and approvals
      from appropriate regulatory and other agencies and, in certain circumstances,
      negotiating acceptable leases. In addition, many of the plans are preliminary,
      subject to continuing refinement or otherwise subject to change.





***Financing
      Activities***





During
      the twelve month period ended April 24, 2005, we had net sources of cash of
      $55.4 million primarily in
      the
      following financing activities:





·
            We
                received proceeds from the issuance of new debt of $250.7
                million.


·
            We
                made net borrowings under the Isle-Black Hawk’s credit facility of $26.0
                million.


·
            We
                made borrowings under Blue Chip’s credit facility of $0.1
                million.


·
            We
                made principal payments on our senior secured credit facility and
                other
                debt of $210.0 million.


·
            We
                purchased 364,895 shares of our common stock at a total cost of $6.4
                million.


·
            We
                made cash distributions to a minority partner totaling $4.3
                million.


·
            We
                paid $5.2 million in costs related to therefinancing
                of our senior secured credit
                facility.





On
      February 4, 2005, we refinanced our senior secured credit facility. Our new
      senior secured facility provides for a $400.0 million revolving credit facility
      maturing on February 4, 2010 and a $250.0 million term loan facility maturing
      on
      February 4, 2011 (or at our option, February 6, 2012 if we elect to refinance
      our existing 9.00% senior subordinated notes currently due March 2012) with
      an
      additional $50.0 million delayed draw term loan available until August 3, 2005.
      At our mutual discretion with the lead arranger, we may increase the revolver
      and/or term loan, in an aggregate amount up to $200.0 million, subject to
      certain conditions. The term loans are payable in quarterly installments
      beginning on March 31, 2005 and ending on February 4, 2011 unless extended
      as
      described above. The revolving credit facility may bear interest at the higher
      of (1) 0.5% in excess of the federal funds effective rate or the rate that
      the
      bank group announces from time to time as its prime lending rate plus an
      applicable margin of up to 1.75% or (2) a rate tied to a LIBOR rate plus an
      applicable margin of up to 2.75%. The term loan may bear interest at the higher
      of (1) 0.5% in excess of the federal funds effective rate or the rate that
      the
      bank group announces from time to time as its prime lending rate plus an
      applicable margin of up to 0.75% or (2) a rate tied to a LIBOR rate plus an
      applicable margin of 1.75%. The proceeds from the refinancing were used to
      pay
      down the existing senior secured credit facility term loan, of which $205.6
      million in principal and $0.7 million in accrued interest were outstanding
      as of
      February 4, 2005. The remainder of the undrawn facility will be used for general
      corporate purposes, including working capital, permitted acquisitions, capital
      expenditures and investments.





Pursuant
      to the refinancing, we recognized a loss before income taxes on early
      extinguishment of debt of $5.3 million, due to the write-off of previously
      deferred financing costs related to our existing senior secured credit facility.
      The costs associated with the new senior secured credit facility have been
      deferred and are being amortized over the term of the new facility.





Our
      senior secured credit facility, among other things, limits our ability to borrow
      money, make capital expenditures, use assets as security in other transactions,
      make restricted payments or restricted investments, incur contingent
      obligations, sell assets and enter into leases and transactions with affiliates.
      In addition, our credit facility requires us to meet certain financial ratios
      and tests, including: a minimum






66




consolidated
      EBITDA test, a maximum consolidated total leverage test, a maximum consolidated
      senior leverage test, and a minimum interest coverage ratio.




As
      of
      April 24, 2005, we had $439.8 million of capacity under lines of credit and
      available term debt consisting of $398.8 million in unused credit capacity
      under
      the revolving loan commitment on our senior secured credit facility, $9.0
      million of unused credit capacity under the Isle-Black Hawk’s senior secured
      credit facility (limited to use by the Isle-Black Hawk) and $54.0 million of
      available credit under other lines of credit. The revolving loan commitment
      is a
      variable rate instrument based on, at our option, LIBOR or our lender’s prime
      rate plus the applicable interest rate spread, and is effective through February
      2011. Our lines of credit are also at variable rates based on our lender’s prime
      rate and are subject to annual renewal. There is no assurance that these sources
      will in fact provide adequate funding for the expenditures described above
      or
      that planned capital investments will be sufficient to allow us to remain
      competitive in our existing markets.





During
      the year, we modified the covenants related to the Isle-Black Hawk senior credit
      facility to align the covenants with the financial impact of projected effects
      of construction on those facilities. We are in compliance with all covenants
      contained in our senior and subordinated debt instruments as of April 24, 2005.
      If we do not maintain compliance with these covenants, the lenders under the
      Black Hawk senior secured credit facility have the option (in some cases, after
      the expiration of contractual grace periods), but not the obligation, to demand
      immediate repayment of all or any portion of the obligations outstanding under
      the facility. Any significant deterioration of earnings could affect certain
      of
      our covenants. Adverse changes in our credit rating or stock price would not
      impact our borrowing costs or covenant compliance under existing debt
      instruments. Future events, such as a significant increase in interest rates
      can
      be expected to increase our costs of borrowing under our Black Hawk senior
      secured credit facility. The indentures governing our 7% senior subordinated
      notes and our 9% senior subordinated notes limit, among other things, our
      ability to borrow money, create liens, make restricted payments and sell assets.
      We anticipate being in compliance with our debt covenants during fiscal year
      2006.





We
      are
      highly leveraged and may be unable to obtain additional debt or equity financing
      on acceptable terms. As a result, limitations on our capital resources could
      delay or cause us to abandon certain plans for capital improvements at our
      existing properties and/or development of new properties. We will continue
      to
      evaluate our planned capital expenditures at each of our existing locations
      in
      light of the operating performance of the facilities at such
      locations.


67





**Contractual
      Obligations and Commercial Commitments**





The
      following table provides information as of April 24, 2005, about our contractual
      obligations and commercial commitments. The table presents contractual
      obligations by due dates and related contractual commitments by expiration
      dates.





**Payments
                Due by Period**(dollars
                in millions)******Contractual
                Obligations**
            **Total**
            **Less
                Than 1 Year**
            **1-3
                Years**
            **4-5
                Years**
            **After
                5 Years**Long-Term
                Debt (1)
            $
                1,153.9
            $
                7.4
            $
                198.1
            $
                9.0
            $
                939.4Capital
                Lease Obligations (2)
            2.2
            0.1
            0.1
            0.2
            1.8Operating
                Leases (2)
            1,062.8
            16.1
            30.4
            29.6
            986.7Other
                Long-Term Obligations (3)
            102.2
            98.6
            3.3
            0.4
            -Total
                Contractual Cash Obligations
            $
                2,321.1
            $
                122.2
            $
                231.9
            $
                39.2
            $
                1,927.9





**Amount
                of Commitment Expiration per Period**(dollars
                in millions)**Other
                Commercial Commitments**
            **Total
                Amounts Committed**
            **Less
                Than 1 Year**
            **1-3
                Years**
            **4-5
                Years**
            **Over
                5 Years**Lines
                of Credit (1)
            $
                452.8
            $
                54.0
            $
                9.0
            $
                389.8
            $
                -Standby
                Letters of Credit (4)
            17.9
            17.9
            -
            -
            -Total
                Commercial Commitments
            $
                470.7
            $
                71.9
            $
                9.0
            $
                389.8
            $
                -




(1)
      The
      table does not include associated interest expense. See Note 7, Long-Term Debt,
      in the accompanying notes to consolidated financial statements.


(2)
      See
      Note 9, Commitments, in the accompanying notes to consolidated financial
      statements.


(3)
      Other
      long-term obligations include current and future construction contracts as
      discussed under “Investing Activities” on page 63. This amount also includes
      $8.7 million in open purchase orders at April 24, 2005.


(4)
      Standby letters of credit consists of the following: $5.0 million for the
      Isle-Black Hawk and Colorado Central Station, $2.1 million for gaming taxes,
      $4.3 million for workers’ compensation and $6.5 million for other.





**Recently
      Issued Accounting Standards**





On
      December 16, 2004, the FASB issued Statement of Financial Accounting Standards
      No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”), which is a
      revision of Statement of Financial Accounting Standards No. 123, “Accounting for
      Stock-Based Compensation” (“SFAS 123”). Statement 123(R) supersedes APB Opinion
      No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), and amends
      Statement of Financial Accounting Standards No. 95, “Statement of Cash Flows”
      (“SFAS 95”). Generally, the accounting method required by SFAS 123(R) is similar
      to the accounting method required by SFAS 123. However, SFAS 123(R) requires
      all
      share-based payments to employees, including grants of employee stock options,
      to be recognized in the income statement based on their fair market values.
      Pro
      forma disclosure is no longer an alternative. SFAS 123(R) must be adopted as
      of
      the beginning of the first interim or annual reporting period of our first
      fiscal year that begins on or after June 15, 2005. Early adoption will be
      permitted in periods in which financial statements have not yet been issued.
      We
      are required to adopt SFAS 123(R) on May 1, 2006, but are continuing to evaluate
      our option to early adopt.






68




SFAS
      123(R) permits public companies to adopt its requirements using one of two
      methods:





1)
            A
                “modified prospective” method in which compensation cost is recognized
                beginning with the effective date (a) based on the requirements of
                SFAS
                123(R) for all share-based payments granted after the effective date
                and
                (b) based on the requirements of SFAS 123 for all awards granted
                to
                employees prior to the effective date of SFAS 123(R) that remain
                unvested
                on the effective date.





2)
            A
                “modified retrospective” method which includes the requirements of the
                modified prospective method described above, but also permits entities
                to
                restate for the amounts previously recognized under SFAS 123 for
                purposes
                of pro forma disclosures either (a) all prior periods presented or
                (b)
                prior interim periods of the year of adoption.





We
      are
      currently evaluating the two recognition methods available under SFAS 123(R)
      to
      determine which method we will adopt.





As
      permitted by SFAS 123, we currently account for share-based payments to
      employees using APB 25’s intrinsic value method and, as such, generally
      recognize no compensation cost for employee stock options. Accordingly, the
      adoption of SFAS 123(R)’s fair value method is expected to have a significant
      impact on our results of operations, although it will have no impact on our
      overall financial position. The ongoing impact of adoption of SFAS 123(R) cannot
      be predicted at this time because it will depend on levels of share-based
      payments granted in the future. However, had we adopted SFAS 123(R) in prior
      periods, the impact of that standard would have approximated the impact of
      SFAS
      123 as described in the disclosure of pro forma net income and earnings per
      share in Note 1 to our consolidated financial statements. SFAS 123(R) also
      requires the benefits of tax deductions in excess of recognized compensation
      cost to be reported as a financing cash flow, rather than as an operating cash
      flow as required under current literature. This requirement will reduce net
      operating cash flows and increase net financing cash flows in periods after
      adoption.





69





**ITEM
      7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK.**





Market
      risk is the risk of loss arising from adverse changes in market rates and
      prices, including interest rates, foreign currency exchange rates, commodity
      prices and equity prices. Our primary exposure to market risk is interest rate
      risk associated with our senior secured credit facility and the Isle-Black
      Hawk
      senior secured credit facility.




**Isle-Black
      Hawk Senior Secured Credit Facility**


The
      Isle-Black Hawk has entered into four interest rate swap agreements with an
      aggregate notional value of $80.0 million or 42.2% of its variable rate term
      debt outstanding under the Isle-Black Hawk’s senior secured credit facility as
      of April 24, 2005. The swap agreements effectively convert portions of its
      variable rate debt to a fixed-rate basis until the fourth fiscal quarter of
      2008, thus reducing the impact of interest rate changes on future interest
      expense. These interest rate swap agreements terminate as follows: $40.0 million
      in each of fiscal 2006 and 2008. We evaluate the effectiveness of these hedged
      transactions on a quarterly basis. We found no portion of the hedging
      instruments to be ineffective during the quarter ended April 24, 2005.
      Accordingly, no gains or losses have been recognized on these cash flow
      hedges.





The
      following table provides information at April 24, 2005 about our financial
      instruments that are sensitive to changes in interest rates. The table presents
      principal cash flows and related weighted average interest rates by expected
      maturity dates.





**Interest
                Rate Sensitivity****Principal
                (Notional) Amount by Expected Maturity****Average
                Interest (Swap) Rate****Fiscal
                year**
            
            
            
            
            
            
            
            **Fair
                Value**(dollars
                in millions)
            **2006**
            **2007**
            **2008**
            **2009**
            **2010**
            **Thereafter**
            **Total**
            **4/24/2005****Liabilities**Long-term
                debt, including current portionFixed
                rate
            $
                1.6
            $
                1.1
            $
                1.2
            $
                1.3
            $
                1.0
            $
                704.3
            $
                710.5
            $
                706.4Average
                interest rate
            7.6%
            7.6%
            7.6%
            7.6%
            7.6%
            7.6%Variable
                rate
            $
                5.9
            $
                31.4
            $
                164.5
            $
                4.5
            $
                2.5
            $
                236.9
            $
                445.7
            $
                445.7Average
                interest rate (1)
            6.0%
            6.6%
            6.7%
            6.3%
            6.4%
            6.6%**Interest
                Rate Derivative Financial Instruments Related to
                Debt**Interest
                rate swapsPay
                fixed/receive variable (2)
            $
                40.0
            $
                -
            $
                40.0
            $
                -
            $
                -
            $
                -
            $
                80.0
            $
                0.3Average
                pay rate
            2.6%
            3.8%
            3.8%
            0.0%
            0.0%
            0.0%Average
                receive rate
            3.6%
            4.2%
            4.4%
            0.0%
            0.0%
            0.0%




(1) Represents the annual average LIBOR from the forward yield curve at April
      24, 2005 plus the weighted average margin above LIBOR on all consolidated
      variable rate debt.


(2)Fair
                value represents the amount we would have to pay the counter party
                if we
                had terminated the swap agreements at April 24,
                2005.







70




We
      are
      also exposed to market risks relating to fluctuations in currency exchange
      rates
      related to our ownership interests and development activities in the UK.





For
      the
      fiscal year ended April 24, 2005, we recorded a gain of $2.0 million in foreign
      currency translation adjustments on the accompanying consolidated balance
      sheets. Foreign currency translation adjustments show the cumulative effect,
      at
      the balance sheet date, of fluctuations in the foreign currency exchange rate
      on
      balances denominated in a foreign currency, which were recorded at a historical
      rate at the transaction date.


71


**ITEM
      8.****FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.**





**Page****Isle
                of Capri Casinos, Inc.**Report
                of Independent Registered Public Accounting Firm
            73Consolidated
                Balance Sheets, April 24, 2005 and April 25, 2004
            74Consolidated
                Statements of Income, Years ended April 24, 2005, April 25, 2004
                and April
                27, 2003
            75Consolidated
                Statements of Stockholders’ Equity, Years ended April 24, 2005, April 25,
                2004
              
              and
                April 27, 2003
            76Consolidated
                Statements of Cash Flows, Years ended April 24, 2005, April 25, 2004
                and
              
              April
                27, 2003
            77Notes
                to Consolidated Financial Statements
            79








72


**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





The
      Board
      of Directors and Stockholders


Isle
      of
      Capri Casinos, Inc.




We
      have
      audited the accompanying consolidated balance sheets of Isle of Capri Casinos,
      Inc. as of April 24, 2005 and April 25, 2004, and the related consolidated
      statements of income, stockholders’ equity, and cash flows for the years ended
      April 24, 2005, April 25, 2004 and April 27, 2003. Our audits also included
      the
      financial statement schedule listed in the index at Item 15(a). These financial
      statements and schedule are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these financial statements and
      schedule based on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the consolidated financial position of Isle of Capri Casinos,
      Inc. at April 24, 2005 and April 25, 2004, and the consolidated results of
      its
      operations and its cash flows for the years ended April 24, 2005, April 25,
      2004
      and April 27, 2003, in conformity with U.S. generally accepted accounting
      principles. Also, in our opinion, the related financial statement schedule,
      when
      considered in relation to the basic financial statements taken as a whole,
      presents fairly in all material respects the information set forth
      therein.





We
      also
      have audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the effectiveness of Isle of Capri Casinos,
      Inc.’s internal control over financial reporting as of April 24, 2005, based on
      criteria established in Internal Control-Integrated Framework issued by the
      Committee of Sponsoring Organizations of the Treadway Commission and our report
      dated June 28, 2005 expressed an unqualified opinion thereon.





ERNST
      & YOUNG LLP




New
      Orleans, Louisiana


June
      28,
      2005

















73


**ISLE
                OF CAPRI CASINOS, INC.****CONSOLIDATED
                BALANCE SHEETS****(In
                thousands, except per share data)********ASSETS**
            
            **April
                24,**
            
            **April
                25,****2005**
            
            **2004**Current
                assets:Cash
                and cash equivalents
            
            $
            146,743
            
            $
            134,582Marketable
                securities
            
            
            16,016
            
            
            -Accounts
                receivable, net
            
            
            15,460
            
            
            10,427Income
                tax receivable
            
            
            -
            
            
            2,860Deferred
                income taxes
            
            
            8,607
            
            
            11,283Deferred
                state income taxes
            
            
            988
            
            
            -Prepaid
                expenses and other assets
            
            
            16,634
            
            
            16,169Total
                current assets
            
            
            204,448
            
            
            175,321Property
                and equipment, net
            
            
            1,026,906
            
            
            907,460Other
                assets:Goodwill
            
            
            340,409
            
            
            341,585Other
                intangible assets
            
            
            72,364
            
            
            72,349Deferred
                financing costs, net
            
            
            19,461
            
            
            23,340Restricted
                cash
            
            
            2,193
            
            
            2,482Prepaid
                deposits and other
            
            
            15,665
            
            
            9,303Total
                assets
            
            $
            1,681,446
            
            $
            1,531,840******LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilities:Current
                maturities of long-term debt
            
            $
            7,501
            
            $
            8,040Accounts
                payable
            
            
            42,456
            
            
            21,725Accrued
                liabilities:Interest
            
            
            10,312
            
            
            10,311Payroll
                and related
            
            
            47,806
            
            
            45,588Property
                and other taxes
            
            
            21,061
            
            
            17,167Income
                taxes
            
            
            1,160
            
            
            -Progressive
                jackpots and slot club awards
            
            
            15,045
            
            
            14,828Other
            
            
            34,321
            
            
            21,856Total
                current liabilities
            
            
            179,662
            
            
            139,515Long-term
                debt, less current maturities
            
            
            1,148,617
            
            
            1,080,824Deferred
                income taxes
            
            
            42,102
            
            
            29,630Deferred
                state income taxes
            
            
            9,329
            
            
            8,191Other
                accrued liabilities
            
            
            17,115
            
            
            12,091Minority
                interest
            
            
            23,225
            
            
            20,183Stockholders'
                equity:Preferred
                stock, $.01 par value; 2,000 shares authorized; none
                issued
            
            
            -
            
            
            -Common
                stock, $.01 par value; 45,000 shares authorized; shares issued
                andoutstanding:
                33,528 at April 24, 2005 and 33,055 at April 25, 2004
            
            
            335
            
            
            330Class
                B common stock, $.01 par value; 3,000 shares authorized; none
                issued
            
            
            -
            
            
            -Additional
                paid-in capital
            
            
            148,177
            
            
            143,385Unearned
                compensation
            
            
            (1,488
            )
            
            (1,413
            )Retained
                earnings
            
            
            146,133
            
            
            128,095Accumulated
                other comprehensive income
            
            
            2,858
            
            
            521296,015
            
            
            270,918Treasury
                stock, 3,607 shares at April 24, 2005 and 3,338 shares at April 25,
                2004
            
            
            (34,619
            )
            
            (29,512
            )Total
                stockholders' equity
            
            
            261,396
            
            
            241,406Total
                liabilities and stockholders' equity
            
            $
            1,681,446
            
            $
            1,531,840




See
      notes
      to consolidated financial statements






74






**ISLE
                OF CAPRI CASINOS, INC.****CONSOLIDATED
                STATEMENTS OF INCOME****(In
                thousands, except per share data)****Fiscal
                Year Ended****April
                24,**
            
            **April
                25,**
            
            **April
                27,****2005**
            
            **2004**
            
            **2003**Revenues:Casino
            
            $
            1,121,316
            
            $
            1,116,351
            
            $
            1,051,318Rooms
            
            
            47,732
            
            
            44,564
            
            
            49,215Pari-mutuel
                commissions and fees
            
            
            20,126
            
            
            20,327
            
            
            23,894Food,
                beverage and other
            
            
            149,419
            
            
            143,768
            
            
            140,832Gross
                revenues
            
            
            1,338,593
            
            
            1,325,010
            
            
            1,265,259Less
                promotional allowances
            
            
            226,985
            
            
            219,568
            
            
            200,481Net
                revenues
            
            
            1,111,608
            
            
            1,105,442
            
            
            1,064,778Operating
                expenses:Casino
            
            
            186,606
            
            
            181,504
            
            
            181,648Gaming
                taxes
            
            
            250,316
            
            
            244,992
            
            
            229,608Rooms
            
            
            10,346
            
            
            9,929
            
            
            11,573Pari-mutuel
            
            
            15,449
            
            
            15,395
            
            
            16,889Food,
                beverage and other
            
            
            35,817
            
            
            32,000
            
            
            34,140Marine
                and facilities
            
            
            67,697
            
            
            65,610
            
            
            65,912Marketing
                and administrative
            
            
            318,924
            
            
            306,219
            
            
            282,751Valuation
                charge
            
            
            4,136
            
            
            -
            
            
            1,923Preopening
            
            
            247
            
            
            2,293
            
            
            -Depreciation
                and amortization
            
            
            97,418
            
            
            89,772
            
            
            76,626Total
                operating expenses
            
            
            986,956
            
            
            947,714
            
            
            901,070Operating
                income
            
            
            124,652
            
            
            157,728
            
            
            163,708Interest
                expense
            
            
            (75,717
            )
            
            (83,456
            )
            
            (82,565
            )Interest
                income
            
            
            2,244
            
            
            872
            
            
            562Loss
                on early extinguishment of debt
            
            
            (5,251
            )
            
            (26,115
            )
            
            -Minority
                interest
            
            
            (5,493
            )
            
            (10,072
            )
            
            (9,451
            )Income
                from continuing operations before income taxes
            
            
            40,435
            
            
            38,957
            
            
            72,254Income
                taxes
            
            
            19,451
            
            
            12,626
            
            
            26,650Income
                from continuing operations
            
            
            20,984
            
            
            26,331
            
            
            45,604Income
                (loss) from discontinued operations, net of income taxes
            
            
            (2,946
            )
            
            1,418
            
            
            (11
            )Net
                income
            
            $
            18,038
            
            $
            27,749
            
            $
            45,593Earnings
                (loss) per common share-basic:Income
                from continuing operations
            
            $
            0.71
            
            $
            0.89
            
            $
            1.57Income
                (loss) from discontinued operations, net of income taxes
            
            
            (0.10
            )
            
            0.05
            
            
            -Net
                income
            
            $
            0.61
            
            $
            0.94
            
            $
            1.57Earnings
                (loss) per common share-diluted:Income
                from continuing operations
            
            $
            0.68
            
            $
            0.86
            
            $
            1.50Income
                (loss) from discontinued operatons, net of income taxes
            
            
            (0.10
            )
            
            0.05
            
            
            -Net
                income
            
            $
            0.58
            
            $
            0.91
            
            $
            1.50Weighted
                average basic shares
            
            
            29,682
            
            
            29,404
            
            
            28,984Weighted
                average diluted shares
            
            
            30,930
            
            
            30,466
            
            
            30,452




See
      notes
      to consolidated financial statements






75




**ISLE
      OF CAPRI CASINOS, INC.**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY**


(In
      thousands)


**Accum.****Other****Compre-****Shares
                of**
            
            
            
            **Additional**
            
            **Unearned**
            
            
            
            **hensive**
            
            
            
            **Total****Common**
            
            **Common**
            
            **Paid-in**
            
            **Compen-**
            
            **Retained**
            
            **Income**
            
            **Treasury**
            
            **Stockholders'****Stock**
            
            **Stock**
            
            **Capital**
            
            **sation**
            
            **Earnings**
            
            **(Loss)**
            
            **Stock**
            
            **Equity**Balance,
                April 28, 2002
            31,826
            
            $
                314
            
            $
                135,432
            
            $
                (1,352)
            
            $
                54,753
            
            $
                (4,061)
            
            $
                (25,888)
            
            $
                159,198Net
                income
            -
            
            -
            
            -
            
            -
            
            45,593
            
            -
            
            -
            
            45,593Unrealized
                loss on interestrate
                swap contract
            -
            
            -
            
            -
            
            -
            
            -
            
            -
            
            -
            
            -net
                of income tax benefit of $163
            -
            
            -
            
            -
            
            -
            
            -
            
            (223)
            
            -
            
            (223)Comprehensive
                income
            -
            
            -
            
            -
            
            -
            
            -
            
            -
            
            -
            
            45,370Exercise
                of stock options, includingincome
                tax benefit of $1,611
            998
            
            12
            
            6,772
            
            -
            
            -
            
            -
            
            (2,636)
            
            4,148Purchase
                of treasury stock
            -
            
            -
            
            -
            
            -
            
            -
            
            -
            
            (5,429)
            
            (5,429)Treasury
                stock retired
            (447)
            
            (4)
            
            (5,425)
            
            -
            
            -
            
            -
            
            5,429
            
            -Grant
                of nonvested stock
            -
            
            -
            
            763
            
            (763)
            
            -
            
            -
            
            -
            
            -Amortization
                of unearnedcompensation
            -
            
            -
            
            -
            
            617
            
            -
            
            -
            
            -
            
            617Balance,
                April 27, 2003
            32,377
            
            322
            
            137,542
            
            (1,498)
            
            100,346
            
            (4,284)
            
            (28,524)
            
            203,904Net
                income
            -
            
            -
            
            -
            
            -
            
            27,749
            
            -
            
            -
            
            27,749Unrealized
                gain on interestrate
                swap contract,net
                of income taxes of $2,322
            -
            
            -
            
            -
            
            -
            
            -
            
            4,044
            
            -
            
            4,044Foreign
                currency translationadjustments
            -
            
            -
            
            -
            
            -
            
            -
            
            761
            
            -
            
            761Comprehensive
                income
            -
            
            -
            
            -
            
            -
            
            -
            
            -
            
            -
            
            32,554Exercise
                of stock options, includingincome
                tax benefit of $1,833
            785
            
            9
            
            7,407
            
            -
            
            -
            
            -
            
            (988)
            
            6,428Purchase
                of treasury stock
            -
            
            -
            
            -
            
            -
            
            -
            
            -
            
            (2,030)
            
            (2,030)Treasury
                stock retired
            (107)
            
            (1)
            
            (2,029)
            
            -
            
            -
            
            -
            
            2,030
            
            -Grant
                of nonvested stock
            -
            
            -
            
            465
            
            (465)
            
            -
            
            -
            
            -
            
            -Amortization
                of unearnedcompensation
            -
            
            -
            
            -
            
            550
            
            -
            
            -
            
            -
            
            550Balance,
                April 25, 2004
            33,055
            
            330
            
            143,385
            
            (1,413)
            
            128,095
            
            521
            
            (29,512)
            
            241,406Net
                income
            -
            
            -
            
            -
            
            -
            
            18,038
            
            -
            
            -
            
            18,038Unrealized
                gain on interestrate
                swap contracts
            -
            
            -
            
            -
            
            -
            
            -
            
            -
            
            -
            
            -net
                of income taxes of $224
            -
            
            -
            
            -
            
            -
            
            -
            
            345
            
            -
            
            345Foreign
                currency translationadjustments
            -
            
            -
            
            -
            
            -
            
            -
            
            1,992
            
            -
            
            1,992Comprehensive
                income
            -
            
            -
            
            -
            
            -
            
            -
            
            -
            
            -
            
            20,375Exercise
                of stock options, includingincome
                tax benefit of $828
            473
            
            5
            
            4,191
            
            -
            
            -
            
            -
            
            1,253
            
            5,449Purchase
                of treasury stock
            -
            
            -
            
            -
            
            -
            
            -
            
            -
            
            (6,360)
            
            (6,360)Grant
                of nonvested stock
            -
            
            -
            
            601
            
            (601)
            
            -
            
            -
            
            -
            
            -Amortization
                of unearnedcompensation
            -
            
            -
            
            -
            
            526
            
            -
            
            -
            
            -
            
            526Balance,
                April 24, 2005
            33,528
            
            $
                335
            
            $
                148,177
            
            $
                (1,488)
            
            $
                146,133
            
            $
                2,858
            
            $
                (34,619)
            
            $
                261,396






See
      notes
      to consolidated financial statements






76






**ISLE
                OF CAPRI CASINOS, INC.****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****(In
                thousands)****Fiscal
                Year Ended****April
                24,**
            
            **April
                25,**
            
            **April
                27,****2005**
            
            **2004**
            
            **2003****Operating
                activities:**Net
                income
            
            $
            18,038
            
            $
            27,749
            
            $
            45,593Adjustments
                to reconcile net income to net cashprovided
                by operating activities:Depreciation
                and amortization
            
            
            97,821
            
            
            90,063
            
            
            76,626Amortization
                of deferred financing costs
            
            
            3,886
            
            
            4,261
            
            
            3,704Amortization
                of unearned compensation
            
            
            526
            
            
            550
            
            
            617Goodwill
                impairment charge
            
            
            3,958
            
            
            -
            
            
            -Loss
                on early extinguishment of debt
            
            
            5,251
            
            
            26,115
            
            
            -Valuation
                charge
            
            
            1,621
            
            
            -
            
            
            1,923Other
                charges
            
            
            2,515
            
            
            -
            
            
            -Deferred
                income taxes
            
            
            15,078
            
            
            8,788
            
            
            23,574Minority
                interest
            
            
            5,493
            
            
            10,072
            
            
            9,451Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (4,796
            )
            
            (2,433
            )
            
            2,200Income
                tax receivable
            
            
            4,949
            
            
            (1,027
            )
            
            (2,260
            )Prepaid
                expenses and other assets
            
            
            2,022
            
            
            1,356
            
            
            (1,045
            )Accounts
                payable and accrued liabilities
            
            
            13,524
            
            
            7,736
            
            
            (22,196
            )Net
                cash provided by operating activities
            
            
            169,886
            
            
            173,230
            
            
            138,187**Investing
                activities:**Purchase
                of property and equipment
            
            
            (188,879
            )
            
            (151,629
            )
            
            (58,358
            )Purchase
                of short-term investments, net of sales
            
            
            (14,842
            )
            
            -
            
            
            -Net
                cash paid for acquisitions
            
            
            -
            
            
            (10,917
            )
            
            (80,313
            )Proceeds
                from sales of assets
            
            
            -
            
            
            -
            
            
            11,961Investments
                in and advances to joint ventures
            
            
            -
            
            
            (549
            )
            
            (927
            )Restricted
                cash
            
            
            (98
            )
            
            (79
            )
            
            855Prepaid
                deposits and other
            
            
            (4,327
            )
            
            (1,602
            )
            
            (569
            )Payments
                on notes receivable
            
            
            23
            
            
            5,658
            
            
            753Loans
                made
            
            
            (5,563
            )
            
            -
            
            
            -Net
                cash used in investing activities
            
            
            (213,686
            )
            
            (159,118
            )
            
            (126,598
            )**Financing
                activities:**Proceeds
                from debt
            
            
            250,718
            
            
            668,526
            
            
            105,030Net
                increase (reduction) in line of credit
            
            
            26,107
            
            
            (5,917
            )
            
            (69,086
            )Principal
                payments on debt and cash paid to retire debt
            
            
            (209,975
            )
            
            (622,899
            )
            
            (17,967
            )Payment
                of deferred financing costs
            
            
            (5,249
            )
            
            (10,951
            )
            
            (2,936
            )Purchase
                of treasury stock
            
            
            (6,360
            )
            
            (2,030
            )
            
            (5,429
            )Proceeds
                from exercise of stock options
            
            
            4,519
            
            
            3,753
            
            
            2,383Cash
                distribution to minority partner
            
            
            (4,344
            )
            
            (4,638
            )
            
            (5,555
            )Net
                cash provided by financing activities
            
            
            55,416
            
            
            25,844
            
            
            6,440**Effect
                of foreign currency exchange rates on cash**
            
            
            545
            
            
            -
            
            
            -Net
                increase in cash and cash equivalents
            
            
            12,161
            
            
            39,956
            
            
            18,029Cash
                and cash equivalents at beginning of year
            
            
            134,582
            
            
            94,626
            
            
            76,597Cash
                and cash equivalents at end of year
            
            $
            146,743
            
            $
            134,582
            
            $
            94,626





See
      notes
      to consolidated financial statements






77





**ISLE
                OF CAPRI CASINOS, INC.****CONSOLIDATED
                STATEMENTS OF CASH FLOWS (CONTINUED)**(In
                thousands)**Fiscal
                Year Ended****April
                24,**
            
            **April
                25,**
            
            **April
                27,****2005**
            
            **2004**
            
            **2003****Supplemental
                disclosure of cash flow information:**Net
                cash payments for:Interest
                (net of capitalized interest)
            
            $
            75,029
            
            $
            77,598
            
            $
            77,172Income
                taxes, net of refunds
            
            
            (8
            )
            
            4,804
            
            
            18,066**Supplemental
                schedule of noncash investing activities:**Other:Construction
                costs funded through accounts payable andnotes
                payable
            
            
            28,372
            
            
            1,807
            
            
            2,875Acquisitions
                of businesses:Fair
                value of assets acquired
            
            
            -
            
            
            12,433
            
            
            86,065Less
                fair value of liabilities assumed
            
            
            -
            
            
            (1,516
            )
            
            (5,752
            )Net
                cash payment
            
            
            -
            
            
            10,917
            
            
            80,313Sale
                of businesses:Fair
                value of assets disposed
            
            
            -
            
            
            -
            
            
            11,870Less
                fair value of liabilities sold
            
            
            -
            
            
            -
            
            
            -Net
                cash received
            
            
            -
            
            
            -
            
            
            11,870





See
      notes
      to consolidated financial statements





78




**ISLE
      OF CAPRI CASINOS, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**




**1.
      Summary of Significant Accounting Policies**





**Nature
      of Operations**


Isle
      of
      Capri Casinos, Inc. (the “Company” or “Isle of Capri”) was incorporated as a
      Delaware corporation on February 14, 1990. The Company, through its
      subsidiaries, is engaged in the business of developing, owning and operating
      branded gaming facilities and related lodging and entertainment facilities
      in
      growing markets in the United States and internationally. The Company wholly
      owns and operates twelve casinos in eleven gaming facilities in the United
      States located in Lake Charles and Bossier City, Louisiana; Lula, Biloxi,
      Vicksburg and Natchez, Mississippi; Kansas City and Boonville, Missouri; and
      Bettendorf, Davenport and Marquette, Iowa. The Company also owns a 57% interest
      in, and receives a management fee for operating, two gaming facilities in Black
      Hawk, Colorado. All but two of these gaming facilities operate under the name
      “Isle of Capri” and feature the Company’s distinctive tropical island theme. The
      Company receives a significant amount of its revenue from patrons within 50
      miles of the properties. If economic conditions in these areas were to decline
      materially or additional casino licenses were awarded in these locations, the
      Company’s results of operations could be materially affected. As such, the
      Company’s operations are dependent on the continued licensing or qualification
      of the Company and such licensing and qualifications are reviewed periodically
      by the gaming authorities in the state of operation. The Company’s international
      gaming interests include a wholly owned casino in Freeport, Grand Bahama, and
      a
      two-thirds ownership interest in casinos in Dudley, Wolverhampton and Walsall,
      England. The Company also wholly owns and operates a pari-mutuel harness racing
      facility in Pompano Beach, Florida.





**Fiscal
      Year-End**


The
      Company’s fiscal year ends on the last Sunday in April. This fiscal year creates
      more comparability of the Company’s quarterly operations, by generally having an
      equal number of weeks (13) and week-end days (26) in each quarter. Periodically,
      this system necessitates a 53-week year. Fiscal 2005 commenced on April 26,
      2004
      and ends on April 24, 2005.




**Principles
      of Consolidation**


The
      consolidated financial statements include the accounts of the Company and its
      subsidiaries. All significant intercompany balances and transactions have been
      eliminated in consolidation.





**Use
      of Estimates**


The
      preparation of financial statements in conformity with U.S. generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities, and disclosure of
      contingent assets and liabilities, at the date of the financial statements
      and
      the reported amounts of revenues and expenses during the reporting period.
      Actual results could differ from those estimates.





**Cash
      and Cash Equivalents**


The
      Company considers all highly liquid investments purchased with an original
      maturity of three months or less as cash equivalents. Cash
      equivalents are placed primarily with high-credit-quality financial
      institutions. The carrying amount of cash equivalents approximates fair value
      because of the short maturity of these instruments. Cash includes the minimum
      cash balances required by state regulatory bodies, which totaled approximately
      $33.7 million and $32.4 million at April 24, 2005 and April 25, 2004,
      respectively.


79
 
  **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**


**1.
      Summary of Significant Accounting Policies (continued)**





**Marketable
      Securities**


Marketable
      securities consist of trading securities held by Capri Insurance Corporation,
      our captive insurance subsidiary. The trading securities are primarily debt
      and
      equity securities which we buy with the intention to resell in the near term.
      Our trading securities are carried at fair value with changes in fair value
      recognized in current period income.





**Inventories**


Inventories
      generally consist of food and beverage and retail merchandise, and are stated
      at
      the lower of cost
      or
      market. Cost is determined by the weighted average method.





**Property
      and Equipment**


Property
      and equipment are stated at cost. The Company capitalizes the cost of purchases
      of property and equipment and capitalizes the cost of improvements to property
      and equipment that increases the value or extends the useful lives of the
      assets. Costs of normal repairs and maintenance are charged to expense as
      incurred. Gains or losses on dispositions of property and equipment are included
      in the determination of income. Depreciation is computed using the straight-line
      method over the following estimated useful lives of the assets:





**Years**Slot
                machines, software and computers
            3Furniture,
                fixtures and equipment
            5-10Leasehold
                improvements
            5-39.5Riverboats
                and floating pavilions
            25Buildings
                and improvements
            39.5





Capital
      leases are depreciated over the estimated useful life of the assets or the
      life
      of the lease, whichever is shorter.





**Goodwill
      and Other** **Intangible
      Assets**


Goodwill,
      representing the excess of the cost over the net identifiable tangible and
      intangible assets of acquired businesses, is stated at cost. Other intangible
      assets include the license value attributed to the Louisiana gaming licenses
      acquired through the Company’s acquisition of St. Charles Gaming Company, Grand
      Palais Riverboat, Inc. and Louisiana Riverboat Gaming Partnership (the
“Licenses”), the value of the Lady Luck trademarks and player databases acquired
      in the acquisition of Lady Luck Gaming Corporation and the value of the Colorado
      Central Station trademarks acquired in the acquisition of CCSC/Blackhawk, Inc.
      and until April 25, 2005, Colorado Grande Enterprises, Inc. The licenses have
      indefinite lives as the Company has determined that there are no legal,
      regulatory, contractual, economic or other factors that would limit the useful
      life of the Licenses and the Company intends to renew and operate the Licenses
      indefinitely. In addition, other key factors in the Company’s assessment that
      these Licenses have an indefinite life include: (1) the Company’s license
      renewal experience confirms that the renewal process is perfunctory and renewals
      would not be withheld except under extraordinary circumstances; (2) the renewals
      related to these Licenses confirms the Company’s belief that the renewal process
      could be completed without substantial cost and without material modification
      of
      the Licenses; (3) the economic performance of the operations related to the
      Licenses support the Company’s intention of operating the Licenses indefinitely;
      and (4) the continued limitation of gaming licenses in the State of Louisiana
      limits competition in the jurisdictions where these Licenses are maintained.
      Statement of Financial Accounting Standards No. 142, “Goodwill and Other
      Intangible Assets,” (“SFAS 142”) requires that these assets be reviewed for
      impairment at least annually. Based on its review, the Company
      believes






80




**ISLE
        OF CAPRI CASINOS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


**1.
      Summary of Significant Accounting Policies (continued)**





**Goodwill
      and Other** **Intangible
      Assets (continued)**





that,
      as
      of April 24, 2005, except for the goodwill associated with the Colorado Grande
      -Cripple Creek and the full cost of the license for Rosemont, there were no
      impairments of its goodwill and other indefinite-lived intangible assets.





The
      Company intends to continue to evaluate intangible assets that are not being
      amortized at least annually to determine whether events and circumstances
      continue to support an indefinite useful life. If these assets are subsequently
      determined to have a finite useful life, they will be tested for impairment,
      and
      then amortized prospectively over the estimated remaining useful lives and
      accounted for in the same manner as other intangible assets that are subject
      to
      amortization.





**Long-Lived
      Assets**


The
      Company periodically evaluates the carrying value of long-lived assets to be
      held for sale or held and used in accordance with Statement of Financial
      Accounting Standards No. 144, “Accounting for the Impairment or Disposal of
      Long-Lived Assets” (“SFAS 144”),. SFAS 144 requires impairment losses to be
      recorded on long-lived assets used in operations when indicators of impairment
      are present and the undiscounted cash flows estimated to be generated by those
      assets are less than the assets’ carrying amounts. In that event, a loss is
      recognized based on the amount by which the carrying amount exceeds the fair
      market value of the long-lived assets. Loss on long-lived assets to be disposed
      of is determined in a similar manner, except that fair market values are reduced
      for the cost of disposal.





Based
      on
      its review, the Company believes that, as of April 24, 2005 ,
      except
      for the assets held for sale associated with Colorado Grande-Cripple
      Creek, there
      were no impairments of its long-lived assets.





**Deferred
      Financing Costs**


The
      costs
      of issuing long-term debt are capitalized and amortized over the term of the
      related debt.





**Self
      -Insurance**


The
      Company is self-insured for various levels of general liability, workers’
      compensation, and employee medical and life insurance coverage. Self-insurance
      liabilities are estimated based on the Company’s claims experience and are
      included in current accrued liabilities on the consolidated balance
      sheets.





**Slot
      Club Awards**


The
      Company provides slot patrons with incentives based on the dollar amount of
      play
      on slot machines. A liability has been established based on an estimate of
      the
      value of these outstanding incentives, utilizing the age and prior history
      of
      redemptions. ****








81
 
  **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**


**1.
      Summary of Significant Accounting Policies (continued)**





**Derivative
      Instruments and Hedging Activities**


The
      Company utilizes derivative financial instruments to manage interest rate risk
      associated with variable rate borrowings. Derivative financial instruments
      are
      intended to reduce the Company’s exposure to interest rate risk. The Company
      accounts for changes in the fair value of a derivative instrument depending
      on
      the intended use of the derivative and the resulting designation, which is
      established at the inception of a derivative. FASB Statement of Financial
      Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging
      Activities,” (“SFAS 133”) requires that a company formally document, at the
      inception of a hedge, the hedging relationship and the entity’s risk management
      objective and strategy for undertaking the hedge, including identification
      of
      the hedging instrument, the hedged item or transaction, the nature of the risk
      being hedged, the method used to assess effectiveness and the method that will
      be used to measure hedge ineffectiveness of derivative instruments that receive
      hedge accounting treatment. For derivative instruments designated as cash flow
      hedges, changes in fair value, to the extent the hedge is effective, are
      recognized in other comprehensive income until the hedged item is recognized
      in
      earnings. Hedge effectiveness is assessed quarterly based on the total change
      in
      the derivative’s fair value.





**Revenue
      Recognition**


In
      accordance with gaming industry practice, the Company recognizes casino revenues
      as the net win from gaming activities, which is the difference between gaming
      wins and losses. Casino revenues are net of
      accruals for anticipated payouts of progressive slot jackpots and certain table
      games. Revenues from the hotel, food, beverage, entertainment, and the gift
      shop
      are recognized at the time the related service or sale
      is
      performed/made.





**Net
      Revenues**


Net
      revenues do not include the retail amount of food, beverage and other items
      provided gratuitously to customers. The Company records the redemption of
      coupons and points for cash as a reduction of revenue. These amounts, that
      are
      included in promotional allowances in the accompanying consolidated statements
      of operations, were as follows:





**Fiscal
                Year Ended****April
                24,**
            
            **April
                25,**
            
            **April
                27,****2005**
            
            **2004**
            
            **2003**(In
                thousands)Rooms
            
            $
            25,716
            
            $
            24,690
            
            $
            26,137Food
                and beverage
            
            
            91,783
            
            
            90,451
            
            
            86,169Other
            
            
            2,684
            
            
            2,484
            
            
            2,913Customer
                loyalty programs
            
            
            106,802
            
            
            101,943
            
            
            85,262Total
                promotional allowances
            
            $
            226,985
            
            $
            219,568
            
            $
            200,481








82
 
   **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**


**1.
      Summary of Significant Accounting Policies (continued)**





**Net
      Revenues (continued)**





The
      estimated cost of providing such complimentary services that is included in
      casino expense in the accompanying consolidated statements of operations was
      as
      follows:





**Fiscal
                Year Ended****April
                24,**
            
            **April
                25,**
            
            **April
                27,****2005**
            
            **2004**
            
            **2003**(In
                thousands)Rooms
            
            $
            11,961
            
            $
            12,148
            
            $
            12,753Food
                and beverage
            
            
            72,750
            
            
            69,279
            
            
            66,402Other
            
            
            288
            
            
            266
            
            
            806Total
                cost of complimentary services
            
            $
            84,999
            
            $
            81,693
            
            $
            79,961





**Advertising**


Advertising
      costs are expensed the first time such advertisement appears. Total advertising
      costs, including direct mail marketing, were $25.1 million in fiscal 2005,
      $24.8
      million in fiscal 2004 and $10.8 million in fiscal 2003.





**Preopening
      Expense**


Preopening,
      pre-operating and organizational costs are expensed as incurred.





**Capitalized
      Interest**


The
      interest cost associated with major development and construction projects is
      capitalized and included in the cost of the project. When no debt is incurred
      specifically for a project, interest is capitalized on amounts expended on
      the
      project using the weighted-average cost of the Company’s outstanding borrowings.
      Capitalization of interest ceases when the project is substantially complete
      or
      development activity is suspended for more than a brief period.








83
 
   **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**





**1.
      Summary of Significant Accounting Policies (continued)**





**Income
      Taxes**


Income
      taxes are accounted for in accordance with the provisions of FASB Statement
      of
      Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS
      109”). Deferred tax assets and liabilities are recognized for the future tax
      consequences attributable to differences between the financial statement
      carrying amounts of existing assets and liabilities and their respective tax
      bases. Deferred tax assets and liabilities are measured using enacted tax rates
      expected to apply to taxable income in the years in which those temporary
      differences are expected to be recovered or settled. The effect of a change
      in
      tax rates related to deferred tax assets and liabilities is recognized in income
      in the period that includes the enactment date.





The
      Company routinely faces challenges from federal and other tax authorities
      regarding the amount of taxes due. These challenges include questions regarding
      the timing and amount of deductions and the allocation of income among various
      tax jurisdictions. The Company records tax accruals for probable exposures
      associated with the various filing positions.





**Earnings
      (Loss) per Share of Common Stock**


In
      accordance with the provisions of FASB Statement of Financial Accounting
      Standards No. 128, “Earnings Per Share” (“SFAS 128”), basic earnings (loss) per
      share (“EPS”) is computed by dividing net income (loss) applicable to common
      stock by the weighted average common shares outstanding during the period.
      Diluted EPS reflects the additional dilution for all potentially dilutive
      securities such as stock options.





**Stock-Based
      Compensation**


The
      Company applies the recognition and measurement principles of APB 25 and related
      Interpretations in accounting for the Company’s three stock-based employee
      compensation plans. No stock-based employee compensation expense is reflected
      in
      net income as all options granted under those plans had an exercise price equal
      to the market value of the underlying common stock on the date of grant. The
      following table illustrates the effect on net income and earnings per share
      as
      if the Company had applied the fair value recognition provisions of SFAS
      123 as
      amended by SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and
      Disclosure” (“SFAS 148”) ,
      to
      stock-based employee compensation.




**Fiscal
                Year Ended****April
                24, 2005**
            
            **April
                25, 2004**
            
            **April
                27, 2003**(In
                thousands, except per share data)Net
                income, as reported
            
            $
            18,038
            
            $
            27,749
            
            $
            45,593Deduct:
                total stock-based employeecompensation
                expense determined under fairvalue
                based method for all awards, net ofrelated
                tax effects
            
            $
            (3,944
            )
            $
            (4,175
            )
            $
            (5,332
            )Pro
                forma net income
            
            $
            14,094
            
            $
            23,574
            
            $
            40,261Earnings
                per common share:Basic
                - as reported
            
            $
            0.61
            
            $
            0.94
            
            $
            1.57Basic
                - pro forma
            
            $
            0.47
            
            $
            0.80
            
            $
            1.39Diluted
                - as reported
            
            $
            0.58
            
            $
            0.91
            
            $
            1.50Diluted
                - pro forma
            
            $
            0.46
            
            $
            0.77
            
            $
            1.32




84
   **ISLE
        OF CAPRI CASINOS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


**1.
      Summary of Significant Accounting Policies (continued)**





**Stock-Based
      Compensation (continued)**








The
      fair
      value of each option grant is estimated on the date of grant using the
      Black-Scholes option-pricing model with the following assumptions:





**Risk-Free**
            **Original**
            **Expected**
            **Expected****Fiscal
                Year**
            **Interest
                Rate**
            **Expected
                Life**
            **Volality**
            **Dividends**2005
            4.00%
            6.26
                years
            55.8%
            None2004
            3.02%
            6.05
                years
            57.8%
            None2003
            2.97%
            6.14
                years
            58.4%
            None





**Currency
      Translation**




The
      Company accounts for currency translation in accordance with FASB Statement
      of
      Financial Standards No. 52, “Foreign Currency Translation”. Assets and
      liabilities denominated in foreign currencies are translated into U.S. dollars
      at the exchange rate in effect at each balance sheet date. Income statement
      accounts are translated at the average rate of exchange prevailing during the
      period. Translation adjustments resulting from this process are included in
      stockholders’ equity as other comprehensive income. Gains and losses from
      foreign currency transactions are included in operating income.





**Reclassification**


The
      consolidated financial statements for prior years reflect certain
      reclassifications to conform to the current year presentation. Specifically,
      results of operations for all periods presented were reclassified to reflect
      the
      discontinued operations for the Colorado Grande-Cripple Creek. The assets and
      liabilities for Colorado Grande-Cripple Creek have not been reflected as
      discontinued operations as the amounts were not material to its consolidated
      financial position.





**Short-term
      Investments**


Short-term
      investments consist primarily of short-term commercial paper at the Isle of
      Capri Black Hawk, L.L.C. (the “Isle-Black Hawk”). The carrying amount of
      short-term investments approximates fair value because of the short maturity
      of
      these instruments.


85
 
   **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**





**1.
      Summary of Significant Accounting Policies (continued)**





**Recently
      Issued Accounting Standards**


On
      December 16, 2004, the FASB issued Statement of Financial Accounting Standards
      No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”), which is a
      revision of Statement of Financial Accounting Standards No. 123, “Accounting for
      Stock-Based Compensation” (“SFAS 123”). Statement 123(R) supersedes APB Opinion
      No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), and amends
      Statement of Financial Accounting Standards No. 95, “Statement of Cash Flows”
      (“SFAS 95”). Generally, the accounting method required by SFAS 123(R) is similar
      to the accounting method required by SFAS 123. However, SFAS 123(R) requires
      all
      share-based payments to employees, including grants of employee stock options,
      to be recognized in the income statement based on their fair market values.
      Pro
      forma disclosure is no longer an alternative. SFAS 123(R) must be adopted as
      of
      the beginning of the first annual reporting period of the Company’s first fiscal
      year that begins on or after June 15, 2005. Early adoption will be permitted
      in
      periods in which financial statements have not yet been issued. The Company
      is
      required to adopt SFAS 123(R) on May 1, 2006, but is continuing to evaluate
      its
      option to early adopt.





SFAS
      123(R) permits public companies to adopt its requirements using one of two
      methods:





1)
            A
                “modified prospective” method in which compensation cost is recognized
                beginning with the effective date (a) based on the requirements of
                SFAS
                123(R) for all share-based payments granted after the effective date
                and
                (b) based on the requirements of SFAS 123 for all awards granted
                to
                employees prior to the effective date of SFAS 123(R) that remain
                unvested
                on the effective date.





2)
            A
                “modified retrospective” method which includes the requirements of the
                modified prospective method described above, but also permits entities
                to
                restate for the amounts previously recognized under SFAS 123 for
                purposes
                of pro forma disclosures either (a) all prior periods presented or
                (b)
                prior interim periods of the year of adoption.





The
      Company is currently evaluating the two recognition methods available under
      SFAS
      123(R) to determine which method it will adopt.




As
      permitted by SFAS 123, the Company currently accounts for share-based payments
      to employees using APB 25’s intrinsic value method and, as such, generally
      recognizes no compensation cost for employee stock options. Accordingly, the
      adoption of SFAS 123(R)’s fair value method is expected to have a significant
      impact on its result of operations, although it will have no impact on the
      Company’s overall financial position. The ongoing impact of adoption of SFAS
      123(R) cannot be predicted at this time because it will depend on levels of
      share-based payments granted in the future. However, had the Company adopted
      SFAS 123(R) in prior periods, the impact of that standard would have
      approximated the impact of SFAS 123 as described in the disclosure of pro forma
      net income and earnings per share as shown above in Note 1. SFAS 123(R) also
      requires the benefits of tax deductions in excess of recognized compensation
      cost to be reported as a financing cash flow, rather than as an operating cash
      flow as required under current literature. This requirement will reduce net
      operating cash flows and increase net financing cash flows in periods after
      adoption.








86


**ISLE
        OF CAPRI CASINOS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**





**2.
      Property Held for Sale**





On
      April
      25, 2005, the Company and Colorado Grande executed a Stock Purchase Agreement
      with a subsidiary of Nevada Gold & Casinos, Inc. to sell all outstanding
      shares of the common stock of Colorado Grande to a subsidiary of Nevada Gold
      & Casinos, Inc. The aggregate estimated sales price agreed to is $6.5
      million payable:




(a)
      $600,000 in cash upon closing and




(b)
      a
      $5.9 million promissory note secured by the stock of Colorado Grande and Nevada
      Gold’s future membership distributions from the Isle-Black Hawk until the note
      has been fully repaid.




The
      estimated sales price is to be adjusted by the difference between actual working
      capital and a target working capital (as defined by the Sales Agreement) on
      the
      closing date. The actual working capital is to be determined by Nevada Gold
      within 45 days of the closing date and reviewed by independent auditors for
      both
      parties. The post closing adjustment will be paid in cash to the other party,
      as
      necessary to cause the actual working capital to be equal to the target working
      capital.




Discontinued
      operations relate to those of the Colorado Grande casino, located in Cripple
      Creek, Colorado. Results of operations of the Colorado Grande casino are
      included in the consolidated statements of income as discontinued operations
      and
      are shown net of income tax effects. The results of operations for the Colorado
      Grande for prior fiscal years presented were also reclassified and presented
      as
      discontinued operations in accordance with SFAS 144.




Revenue,
      expense, and net income (loss) from discontinued operations are summarized
      as
      follows:







**Fiscal
                Year Ended****April
                24,**
            
            **April
                25,**
            
            **April
                27,****2005**
            
            **2004**
            
            **2003**(In
                thousands)Gross
                revenues
            
            $
            8,996
            
            $
            9,942
            
            $
            199Less
                promotional allowances
            
            
            1,980
            
            
            2,241
            
            
            32Net
                revenues
            
            
            7,016
            
            
            7,701
            
            
            167Total
                operating expenses, including goodwill impairmentof
                $4.0 million
            
            
            10,156
            
            
            6,074
            
            
            106Operating
                income (loss)
            
            
            (3,140
            )
            
            1,627
            
            
            61Interest
                expense, net
            
            
            (8
            )
            
            (2
            )
            
            -Income
                (loss) before income taxes
            
            
            (3,132
            )
            
            1,629
            
            
            61Income
                tax provision (benefit)
            
            
            (186
            )
            
            211
            
            
            72Income
                (loss) from discontinued operations, net of taxes
            
            $
            (2,946
            )
            $
            1,418
            
            $
            (11
            )










87




**ISLE
        OF CAPRI CASINOS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**





**3.**  **Property
      and Equipment**





Property
      and equipment consists of the following:





**April
                24,**
            
            **April
                25,****2005**
            
            **2004**(In
                thousands)Property
                and equipment:Land
                and land improvements
            
            $
            155,857
            
            $
            161,700Leasehold
                improvements
            
            
            161,960
            
            
            145,834Buildings
                and improvements
            
            
            446,370
            
            
            424,051Riverboats
                and floating pavilions
            
            
            181,487
            
            
            173,951Furniture,
                fixtures and equipment
            
            
            426,749
            
            
            375,448Construction
                in progress
            
            
            129,591
            
            
            24,142Total
                property and equipment
            
            
            1,502,014
            
            
            1,305,126Less
                accumulated depreciation and amortization
            
            
            475,108
            
            
            397,666Property
                and equipment, net
            
            $
            1,026,906
            
            $
            907,460





Interest
      capitalized totaled $3.2 million in fiscal 2005, $1.5 million in fiscal 2004
      and
      $0.2 million in fiscal 2003.





**4.
      Goodwill and Other Intangible Assets**





The
      changes in the carrying amount of goodwill are as follows (in
      thousands):





Balance
                at April 27, 2003
            
            $
            334,114Final
                purchase accounting adjustments related to the Colorado
                CentralStation-Black
                Hawk and the Colorado Grande-Cripple Creek
            
            
            1,064Acquired
                goodwill
            
            
            6,242Foreign
                currency translation adjustment
            
            
            165Balance
                at April 25, 2004
            
            
            341,585Reclassification
                of goodwill
            
            
            2,022Foreign
                currency translation adjustment
            
            
            761Impairment
                of the Colorado Grande - Cripple Creek
            
            
            (3,959
            )Balance
                at April 24, 2005
            
            $
            340,409





The
      $2.0
      million for the fiscal year ended April 24, 2005, is for the Company’s final
      purchase price allocation on Blue Chip.








88





**ISLE
          OF CAPRI CASINOS, INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
          (continued)**


**4.
      Goodwill and Other Intangible Assets (continued)**





Based
      on
      the fact that the net fair value of the Colorado Grande-Cripple Creek of $5.8
      million exceeds the carrying value of the long-term assets of $9.8 million,
      including goodwill of $6.9 million, a charge of $4.0 million was recorded in
      the
      fourth quarter for the impairment of the Colorado Grande-Cripple Creek’s
      remaining goodwill. Since the Company no longer has a continued presence in
      the
      Cripple Creek market, the Colorado Grande-Cripple Creek’s operating results,
      including this associated goodwill impairment and minority interest share is
      classified as discontinued operations on the consolidated statements of income
      and prior year results have been reclassified to conform to the fiscal 2005
      presentation.





Other
      intangible assets consist of the following:





**April
                24,**
            
            **April
                25,****2005**
            
            **2004**(In
                thousands)Gaming
                licenses
            
            $
            53,379
            
            $
            53,379Trademarks
                and player database
            
            
            18,985
            
            
            18,970Other
                intangible assets, net
            
            $
            72,364
            
            $
            72,349





**5.** **Restricted
      Cash**





For
      the
      fiscal years ended April 24, 2005 and April 25, 2004, the Company’s restricted
      cash ** includes
      workers’ compensation deposits in the amount of $0.04 million and $0.3 million,
      respectively, and various other deposits totaling $2.2 million and $2.2 million,
      respectively.





**6.
      Self-Insurance Liabilities**





The
      Company’s employee-related health care benefits program, workers’ compensation
      insurance and general liability insurance are self-funded up to a maximum amount
      per claim. Claims in excess of this maximum are fully insured through stop-loss
      insurance policies. The liabilities are based on claims filed and estimates
      of
      claims incurred but not reported. For the fiscal years ended April 24, 2005
      and
      April 25, 2004, the Company’s liabilities for unpaid and incurred but not
      reported claims totaled $22.9 million and $19.0 million, respectively, and
      are
      included in “Accrued liabilities-payroll and related” for health care benefits
      and workers’ compensation insurance and in “Accrued liabilities-other” for
      general liability insurance in the accompanying consolidated balance sheets.
      While the total cost of claims incurred depends on future developments, in
      management’s opinion, recorded reserves are adequate to cover future claims
      payments.


89
 
  **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**


**7.
      Long-Term Debt**





**April
                24,**
            
            **April
                25,****2005**
            
            **2004**Long-term
                debt consists of the following:
            
            (In
                thousands)7%
                Senior Subordinated Notes (described below)
            
            $
            500,000
            
            $
            500,0009%
                Senior Subordinated Notes (described below)
            
            
            200,000
            
            
            200,000Senior
                Secured Credit Facility (described below):Variable
                rate term loan
            
            
            249,375
            
            
            207,500Isle-Black
                Hawk Senior Secured Credit Facility, non-recourse to Isle of CapriCasinos,
                Inc. (described below):Variable
                rate term loan Tranche C
            
            
            163,350
            
            
            165,000Revolver
            
            
            26,000
            
            
            -Special
                Assessment BID Bonds, non-recourse to Isle of Capri Casinos,
                Inc.(described
                below)
            
            
            590
            
            
            700Blue
                Chip Credit Facility (6.50% at April 24, 2005) due January
                2009;non-recourse
                to Isle of Capri Casinos, Inc.
            
            
            6,942
            
            
            3,418Variable
                rate TIF Bonds due to City of Bettendorf (described below)
            
            
            3,875
            
            
            4,624Variable
                rate General Obligation Bonds due to City of Davenport (described
                below)
            
            
            1,830
            
            
            1,83012.5%
                note payable, due in monthly installments of $125, including
                interest,beginning
                October 1997 through October 2005
            
            
            494
            
            
            1,833Other
            
            
            3,662
            
            
            3,9591,156,118
            
            
            1,088,864Less
                current maturities
            
            
            7,501
            
            
            8,040Long-term
                debt
            
            $
            1,148,617
            
            $
            1,080,824





The
      following is a brief description of the Company’s and its subsidiaries’
      borrowing arrangements. Certain of these arrangements contain financial
      covenants. The Company and its subsidiaries were in compliance with all
      covenants as of April 24, 2005 and April 25, 2004.


90
 
   **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**


**7.
      Long-Term Debt (continued)**





**7%
      Senior Subordinated Notes**


On
      March
      3, 2004, the Company issued $500.0 million of 7% Senior Subordinated Notes
      due
      2014. The 7% Senior Subordinated Notes are guaranteed by all of the Company’s
      significant domestic subsidiaries, excluding the subsidiaries that own and
      operate the Isle-Black Hawk and the Colorado Central Station-Black Hawk, and
      other subsidiaries as described more fully in Note 22. The 7% Senior
      Subordinated Notes are general unsecured obligations and rank junior to all
      existing and future senior indebtedness, senior to any subordinated indebtedness
      and equally with all existing and future senior subordinated debt, including
      the
      $200.0 million in aggregate principal amount of the existing 9% Senior
      Subordinated Notes. Interest on the 7% Senior Subordinated Notes is payable
      semi-annually on each March 1 and September 1 through maturity. The 7% Senior
      Subordinated Notes are redeemable, in whole or in part, at the Company’s option
      at any time on or after March 1, 2009, at the redemption prices (expressed
      as
      percentages of principal amount) set forth below plus accrued and unpaid
      interest to the applicable redemption date, if redeemed during the 12-month
      period beginning on March 1 of the years indicated below:





**Year**
            **Percentage**2009
            103.500%2010
            102.333%2011
            101.167%2012 and thereafter
            100.000%





Additionally,
      the Company may redeem a portion of the 7% Senior Subordinated Notes with the
      proceeds of specified equity offerings.





The
      Company issued the 7% Senior Subordinated Notes under an indenture between
      the
      Company, the subsidiary guarantors and a trustee. The indenture, among other
      things, limits the ability of the Company and its restricted subsidiaries to
      borrow money, make restricted payments, use assets as security in other
      transactions, enter into transactions with affiliates or pay dividends on or
      repurchase its stock or its restricted subsidiaries’ stock. The Company is also
      limited in its ability to issue and sell capital stock of its subsidiaries
      and
      in its ability to sell assets in excess of specified amounts or merge with
      or
      into other companies.





91
 
  **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**




**7.
      Long-Term Debt (continued)**





**9%
      Senior Subordinated Notes**


On
      March
      27, 2002, the Company issued $200.0 million of 9% senior subordinated notes
      due
      2012 (the “9% Senior Subordinated Notes”). The
      9%
      senior subordinated notes are guaranteed by all of the Company’s significant
      domestic subsidiaries, excluding the subsidiaries that own and operate the
      Isle-Black Hawk and Colorado Central Station-Black Hawk, and other subsidiaries
      as described more fully in Note 22. The
      9%
      senior subordinated notes are general unsecured obligations and rank junior
      to
      all existing and future senior indebtedness, senior to any subordinated
      indebtedness and equally with all existing and future senior subordinated debt,
      including the $500.0 million in aggregate principal amount of the existing
      7%
      senior subordinated notes. Interest
      on the 9% Senior Subordinated Notes is payable semi-annually on each March
      15
      and September 15 through maturity. The 9% Senior Subordinated Notes are
      redeemable, in whole or in part, at the Company’s option at any time on or after
      March 15, 2007, at the redemption prices (expressed as percentages of principal
      amount) set forth below plus accrued and unpaid interest to the applicable
      redemption date, if redeemed during the 12-month period beginning on March
      15 of
      the years indicated below:





**Year**
            **Percentage**2007
            104.500%2008
            103.000%2009
            101.500%2010 and thereafter
            100.000%





Additionally,
      the Company may redeem a portion of the 9% Senior Subordinated Notes with the
      proceeds of specified equity offerings.





The
      Company issued the 9% senior subordinated notes under an indenture between
      the
      Company, the subsidiary guarantors and a trustee. The indenture, among other
      things, limits the ability of the Company and its restricted subsidiaries to
      borrow money, make restricted payments, use assets as security in other
      transactions, enter into transactions with affiliates or pay dividends on or
      repurchase its stock or its restricted subsidiaries’ stock. The Company is also
      limited in its ability to issue and sell capital stock of its subsidiaries
      and
      in its ability to sell assets in excess of specified amounts or merge with
      or
      into other companies.


92
 
  **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**




**7.
      Long-Term Debt (continued)**





**Senior
      Secured Credit Facility**


On
      February 4, 2005, the Company refinanced its senior secured credit facility.
      The
      refinanced facility provides for a $400.0 million revolving credit facility
      maturing on February 4, 2010 and a $250.0 million term loan facility maturing
      on
      February 4, 2011 (or February 6, 2012 if the Company elects to refinance its
      existing 9% Senior Subordinated Notes currently due March 2012) with an
      additional $50.0 million delayed draw term loan available until August 3, 2005,
      at which time the option expires. At the Company’s and the lead arranger’s
      mutual discretion, the Company may increase the revolver and/or term loan,
      in an
      aggregate amount up to $200.0 million subject to certain conditions. The term
      loans are payable in quarterly installments beginning on March 31, 2005 and
      ending on February 4, 2011 unless extended as described above. The revolving
      credit facility may bear interest at the higher of (1) 0.5% in excess of the
      federal funds effective rate or the rate that the bank group announces from
      time
      to time as its prime lending rate plus an applicable margin of up to 1.75%
      or
      (2) a rate tied to a LIBOR rate plus an applicable margin of up to 2.75%. The
      term loan may bear interest at the higher of (1) 0.5% in excess of the federal
      funds effective rate or the rate that the bank group announces from time to
      time
      as its prime lending rate plus an applicable margin of up to 0.75% or (2) a
      rate
      tied to a LIBOR rate plus an applicable margin of 1.75%.





The
      proceeds from the refinancing were used to pay down the existing senior secured
      credit facility term loan, of which $205.6 million in principal and $0.7 million
      in accrued interest were outstanding as of February 4, 2005. The remainder
      of
      the undrawn facility will be used for general corporate purposes, including
      working capital, permitted acquisitions, capital expenditures and investments.





Pursuant
      to the refinancing, the Company recognized a loss before income taxes on early
      extinguishment of debt of $5.3 million, due to the write-off of previously
      deferred financing costs related to its existing senior secured credit facility.
      The costs associated with the new senior secured credit facility have been
      deferred and are being amortized over the term of the new facility.





The
      senior secured credit facility provides for certain covenants, including those
      of a financial nature. The senior secured credit facility is secured by liens
      on
      substantially all of the Company’s assets and guaranteed by all of its
      restricted subsidiaries.





The
      weighted average effective interest rate of total debt outstanding under the
      senior secured credit facility at April 24, 2005, was 4.61%.





At
      April
      24, 2005, the Company had $249.4 million outstanding under the senior secured
      credit facility and no amounts outstanding under the term loan facility or
      the
      delayed draw term loan.





**Isle-Black
      Hawk Senior Secured Credit Facility**


The
      Isle-Black Hawk senior secured credit facility provides for a $40.0 million
      revolving credit facility maturing on December 31, 2006, or such date as the
      Tranche C term loans are repaid in full, whichever comes first and $165.0
      million Tranche C term loan matures on December 31, 2007, each of which is
      non-recourse to the Isle of Capri Casinos, Inc. The Isle-Black Hawk is required
      to make quarterly principal payments of $0.4 million on the term loan portions
      of the Isle-Black Hawk senior secured credit facility that commenced in June
      2004, with a balloon payment of $159.2 million due upon maturity.








93
 
   **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**





**7.
      Long-Term Debt (continued)**





At
      the
      Isle-Black Hawk’s option, the revolving credit facility loan may bear interest
      at (1) the higher of 0.5% in excess of the federal funds effective rate or
      the
      rate that the bank group announces from time to time as its prime lending rate
      plus an applicable margin of up to 2.50% or (2) a rate tied to a LIBOR rate
      plus
      an applicable margin of up to 3.50%. The Tranche C term loan may bear interest
      at (1) the higher of 0.5%
      in
      excess of the federal funds effective rate or the rate that the bank group
      announces from time to time as its prime lending rate plus an applicable margin
      of up to 2.00% or (2) a rate tied to a LIBOR rate plus an applicable margin
      of
      up to 3.00%.





The
      Isle-Black Hawk senior secured credit facility as amended provides for certain
      covenants including those of a financial nature. The Isle-Black Hawk was in
      compliance with all of the covenants as of April 24,
      2005 .
      The
      Isle-Black Hawk senior secured credit facility is secured by liens on the
      Isle-Black Hawk’s assets.





The
      weighted average effective interest rate of total debt outstanding under the
      Isle-Black Hawk Senior Secured Credit Facility at April 24, 2005, was
      5.89%.





**Interest
      Rate Swap Agreements**


The
      Isle-Black Hawk has interest rate swap agreements with an aggregate notional
      value of $80.0 million or 42.2% of its variable rate term debt outstanding
      under
      the Isle-Black Hawk’s senior secured credit facility as of April 24, 2005. The
      swap agreements effectively convert portions of its variable rate debt to a
      fixed-rate basis until the fourth fiscal quarter of 2008, thus reducing the
      impact of interest rate changes on future interest expense. The interest rate
      swap agreements terminate as follows: $40.0 million in fiscal 2006 and $40.0
      million in fiscal 2008. The Company evaluates the effectiveness of these hedged
      transactions on a quarterly basis. No portion of the hedging instruments was
      ineffective during the fiscal year ended April 24, 2005. Accordingly, no gains
      or losses have been recognized on these cash flow hedges.





At
      April
      24, 2005, the Isle-Black Hawk does not expect to reclassify any net gains or
      losses on derivative instruments from accumulated other comprehensive income
      to
      earnings during the next twelve months due to the payment of variable interest
      associated with the floating rate debt.





**Isle-Black
      Hawk Special Assessment BID Bonds**


In
      July
      1998, the Black Hawk Business Improvement District (the “BID”), issued $2.9
      million in 6% bonds due on December 1, 2009. The proceeds from the sale of
      the
      bonds were used to fund road and utility improvements in the Special Improvement
      District 1997-1 (the “SID”), of which the Isle-Black Hawk is a member. The total
      costs of the improvements amounted to $2.2 million with the excess proceeds
      being returned to the bondholders by the BID. The Isle-Black Hawk is responsible
      for 50% of this amount plus interest, which is non-recourse to the Isle of
      Capri
      Casinos, Inc. In April 2000, the Isle-Black Hawk made the first of twenty
      semi-annual payments of $0.1 million in the form of special property tax
      assessments levied on the improvement project. This amount is calculated by
      amortizing $1.1 million or 50% of the net bond proceeds, over twenty periods
      at
      an interest rate of 6.25%. The difference between the bond rate of 6% and the
      6.25% assessed is to cover administrative costs of the BID related to the
      issuance.














94





**ISLE
        OF CAPRI CASINOS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


**7.
      Long-Term Debt (continued)**





**Blue
      Chip Credit Facility**


In
      2004,
      Blue Chip PLC entered into an agreement with the Bank of Scotland to borrow
      up
      to £3.5 million ($6.8 million) to fund its casino development program. As of
      April 24, 2005, only £3.1 million ($6.0 million) has been borrowed. The term
      loan is to be repaid in quarterly payments commencing in July 2005, and is
      to be
      repaid in April 2009 should Blue Chip borrow the additional £0.4 million ($0.8
      million). If the additional funds are not borrowed, the loan will be repaid
      in
      January 2009. The interest rate is either, at Blue Chip’s option, the Bank of
      Scotland’s base rate or LIBOR plus a margin of 1.75 percent.





**Isle-Bettendorf
      TIF Bonds**


As
      part
      of the City of Bettendorf Development Agreement dated June 17, 1997, the City
      of
      Bettendorf issued $9.5 million in tax incremental financing bonds (“TIF Bonds”),
      $7.5 million of which was used by the Isle-Bettendorf to construct an overpass,
      parking garage, related site improvements and pay for disruption damages caused
      by construction of the overpass. To enable financing of the City of Bettendorf’s
      obligations, the Isle-Bettendorf will pay incremental property taxes on the
      developed property assessed at a valuation of not less than $32.0 million until
      the TIF Bonds mature. Additionally, the TIF Bonds will also be repaid from
      the
      incremental taxes on the developed property within the defined “TIF District,”
      which includes the Isle-Bettendorf and over 100 other tax paying entities.
      In
      the event that the taxes generated by the project and other qualifying
      developments in the redevelopment district do not fund the repayment of the
      total TIF Bonds prior to their scheduled maturity, the Isle-Bettendorf will
      pay
      the City of Bettendorf $0.25 per person for each person entering the boat until
      the remaining balance has been repaid.





**Isle-Davenport
      General Obligation Bonds**


In
      2002,
      the Isle-Davenport entered into an agreement with the City of Davenport whereby
      the City of Davenport would construct and own a skybridge connecting to the
      Isle-Davenport’s facility, allowing safer access across the street and railroad
      tracks. The project, which is currently under construction by the City of
      Davenport, is expected to cost $6.4 million, with the Isle-Davenport obligated
      to pay $1.8 million. In February 2004, the City of Davenport issued $1.8 million
      in ten-year general obligation tax-exempt bonds at an average interest rate
      of
      3.1%. The Isle-Davenport is required to make annual payments of principal and
      interest to the City of Davenport to retire the bonds.





**Other**


The
      aggregate principal payments due on total long-term debt over the next five
      fiscal years and thereafter are as follows:


**Fiscal
                Year Ending**(In
                thousands)2006
            
            $
            7,5012007
            
            
            32,5382008
            
            
            165,6622009
            
            
            5,7692010
            
            
            3,452Thereafter
            
            
            941,196$
            1,156,118








95




**ISLE
        OF CAPRI CASINOS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**
  **7.
      Long-Term Debt (continued)**





As
      of
      April 24, 2005, the Company had $452.8 million of availability under its lines
      of credit.





Standby
      letters of credit consists of the following: $5.0 million for the Isle-Black
      Hawk and Colorado Central Station, $2.1 million for gaming taxes, $4.3 million
      for workers’ compensation and $6.5 million for other.





**8.
      Comprehensive Income**





Comprehensive
      income consists of the following:




**Unrealized
                gain (loss) on interest rate swaps**
            
            **Foreign
                currency translation adjustment**
            
            **Accumulated
                other comprehensive income (loss)**(In
                thousands)Balance,
                April 28, 2002
            
            $
            (4,061
            )
            $
            -
            
            $
            (4,061
            )Net
                change
            
            
            (223
            )
            
            -
            
            
            (223
            )Balance,
                April 27, 2003
            
            
            (4,284
            )
            
            -
            
            
            (4,284
            )Net
                change
            
            
            4,044
            
            
            761
            
            
            4,805Balance,
                April 25, 2004
            
            $
            (240
            )
            $
            761
            
            $
            521Net
                change
            
            
            345
            
            
            1,992
            
            
            2,337Balance,
                April 24, 2005
            
            $
            105
            
            $
            2,753
            
            $
            2,858




For
      the
      interest rate swap agreements, the fair value of the estimated interest
      differential between the applicable future variable rates and the interest
      rate
      swap agreement contracts, expressed in present value terms, totaled $33,000,
      net
      of income taxes, and is recorded as a current asset. There was no effect on
      income related to hedge ineffectiveness.





**9.
      Commitments**





**Isle-Lake
      Charles**


The
      Company leases approximately 16.25 acres of land in Calcasieu Parish, Louisiana
      for use in connection with the Isle-Lake Charles. This agreement expires in
      March 2010, with fifteen renewal options of five years each. Rent under the
      Isle-Lake Charles lease is currently $1.5 million per year and is subject to
      increases based on the Consumer Price Index (“CPI”).





**Isle-Lula**


The
      Company leases approximately 1,000 acres of land in Coahoma County, Mississippi
      and utilizes approximately 50 acres in connection with the operations of the
      Isle-Lula. Unless terminated by the Company at an earlier date, the lease
      expires in 2033. Rent under the lease is currently 5.5% of gross gaming revenue
      as established by the Mississippi Gaming Commission, as well as $3,333 per
      month
      for the Rhythm & Blues Hotel.






96


**ISLE
        OF CAPRI CASINOS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**




**9.
      Commitments (continued)**





**Isle-Biloxi**


The
      Company has an agreement with the Biloxi Port Commission that provides the
      Company with certain docking rights. This agreement expires in July 2009, with
      seven renewal options of five years each. Annual rentals are the greater of
      $500,000 or 1% of gross gaming revenue, as defined. Annual rent during each
      renewal term is adjusted for increases in the CPI, limited to 6% for each
      renewal period.





In
      addition, the Company leases certain land, buildings, and other improvements
      from the City of Biloxi under a lease and concession agreement. This agreement
      expires in July 2009, with options to renew for six additional terms of five
      years each. Annual rent is $530,000 plus 3% of gross gaming revenue, as defined,
      in excess of $25.0 million. Annual rent during each renewal term is adjusted
      for
      increases in the CPI, limited to 6% for each renewal period.





In
      April
      1994, the Company entered an Addendum to the lease with the City of Biloxi,
      which requires the Company to pay 4% of gross non-gaming revenues received
      as
      defined, net of sales tax, comps and discounts. Additional rent will be due
      to
      the City of Biloxi for the amount of any increase from and after January 1,
      2016
      in the rent due to the State Institutions of Higher Learning under a lease
      between the City of Biloxi and the State Institutions of Higher Learning (the
      “IHL Lease”) and for any increases in certain tidelands leases between the City
      of Biloxi and the State of Mississippi.





In
      April
      1994, in connection with the construction of a hotel, the Company entered a
      lease for additional land. The Company first acquired the leasehold interest
      of
      Sea Harvest, Inc., the original lessee, for consideration
      of $8,000 per month for a period of ten years. The Company’s lease is with the
      City of Biloxi, Mississippi, for an initial term of twenty-five years, with
      options to renew for six additional terms of ten years each and
      a
      final option period with a termination date commensurate with the termination
      date of the IHL Lease, but in no event later than December 31, 2085. Current
      annual rent is $605,000, plus 4% of gross non-gaming revenue, as defined. The
      annual rent is adjusted after each five-year period based on increases in the
      CPI, limited to a 10% increase in any five-year period.





In
      August
      2002, the Company entered into a lease for two additional parcels of land
      adjoining the Isle-Biloxi and the hotel. On the parcel adjoining the
      Isle-Biloxi, the Company constructed a multi-level parking garage that has
      approximately 1,000 parking spaces. There is additional ground level parking
      on
      a parcel of land in front of the garage, also subject to this lease, with
      approximately 600 parking spaces. The Company has constructed a 400 room
      addition to the existing hotel on the parcel leased next to the existing hotel.
      In addition, the Company may construct a hotel above the parking garage. This
      lease with the City of Biloxi and the Mississippi Secretary of State is for
      an
      initial term of forty years, with one option to renew for an additional
      twenty-five years and additional options thereafter, with the consent of the
      Mississippi Secretary of State, consistent with the term of the lease described
      in the preceding paragraph. When combined with the base and percentage rents
      described for the leases in the preceding two paragraphs, annual rent under
      those two leases and this lease are estimated to be $3.3 million (depending
      on
      the completion date of the hotel) for lease year ending July 31, 2005 and $3.5
      million for lease year ending July 31, 2006. Such minimum rent to increase
      thereafter over time in accordance with a formula based on anticipated timing
      for completion of the current hotel and completion of the hotel on top of the
      parking garage (or August 31,2008, which ever occurs first), up to a minimum
      rent of $3.7 million. Such amounts are subject to decreases due to market
      adjustments and increases based on the CPI. Also, the Company is responsible
      for
      annual rent equal to 4% of gross retail revenue and gross cash revenue (as
      defined in the lease), but without double counting. If the rent minimum
      described in the preceding sentences is not otherwise satisfied from other
      rents, then this percentage rent is not in addition to the minimum rent, but
      rather is to be applied to that minimum.






97


**ISLE
        OF CAPRI CASINOS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**




**9.
      Commitments (continued)**





In
      connection with and pursuant to a settlement between the City of Biloxi and
      the
      State of Mississippi concerning the control and management area where the
      Isle-Biloxi is located, the Company also has agreed to pay the City of Biloxi’s
      lease obligations to the State of Mississippi. This amount is $500,000 per
      year,
      payable on June 30, subject to increases based on the CPI and decreases if
      there
      are other tenants of the subject property. This obligation ends after June
      2018,
      but may be renewed for thirty years.





The
      Company has also entered into a joint venture arrangement to sublease property
      containing a two-level parking garage next to the Isle-Biloxi. Annual rent
      under
      this lease is approximately $200,000. The current term is for three years
      expiring December 31, 2005, with a renewal option for another five years (under
      which the annual rent would increase to approximately $212,500 and automatically
      extends through December 2010 unless the Company sends a notice to terminate
      by
      July 1, 2005. The Company has no plans to terminate the lease.





**Isle-Natchez**


Through
      numerous lease agreements, the Company leases approximately 24 acres of land
      in
      Natchez, Mississippi, which is used in connection with the operation of the
      Isle-Natchez. Unless terminated by the Company at an earlier date, the lease
      expiration dates vary through 2037. Rents under the leases currently total
      approximately $101,000 per month. The Company also leases approximately 7.5
      acres of land, which is utilized for parking at the facility.





**Isle-Kansas
      City**


The
      Company leases approximately 28 acres from the Kansas City Port Authority in
      connection with the operation of the Isle-Kansas City. The term of the lease
      is
      ten years and the Company has the option to renew the lease for eight additional
      terms of five years each. Rent under the lease is currently $3.0 million per
      year, subject to the higher of $3.0 million (minimum rent) per year, or 3.25%
      of
      gross revenues, less complimentaries.





**Isle-Boonville**


The
      Company entered into a lease agreement with the City of Boonville. Under the
      terms of agreement, the Company leases the site for a period of ninety-nine
      years. The Company was required to pay $1.7 million to the City of Boonville
      as
      lump sum rent payment during construction of the casino. There was no rent
      due
      after the casino opening date. The Company was, however, assessed additional
      amounts by the City of Boonville based on a 3.5% tax on gaming revenue, which
      the Company recognized as additional rent.





**Isle-Bettendorf**


The
      Company has signed a development agreement with the City of Bettendorf pursuant
      to which the Company agreed to construct a new 250-room Isle hotel, additional
      parking, a Kitt’s Kitchen restaurant and an expansion of the existing buffet,
      and the City agreed to construct a 50,000 square foot convention center adjacent
      to the company’s facility, which will be managed by the Isle-Bettendorf. The
      cost of the Company’s portion of this project is approximately $45.0 million,
      and the new hotel is planned to open in the late spring of
      2007.


98
 
  **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**





**9.
      Commitments (continued)**





**Isle-Davenport**


Through
      various lease agreements, the Company leases approximately twelve acres of
      land
      in Davenport, Iowa in connection with the operations of Rhythm City-Davenport.
      The aggregate annual rent on these leases is approximately $0.8 million and
      they
      have varying expiration dates through 2022. Pursuant to a development agreement
      with the City, the Isle-Davenport has exclusive docking privileges in the City
      of Davenport until March 31, 2017 in consideration of this docking fee. The
      docking fee has both a fixed base and a per passenger increment. The fixed
      fee
      commenced April 1, 1994 at $111,759 and increases annually by 4%. The
      incremental component is a $0.10 charge for each passenger in excess of
      1,117,579 passengers (which charge also increases by 4% per year).





**Isle-Marquette**


The
      Company leases riverfront land from the City of Marquette, Iowa, under a lease
      agreement. This agreement expires in December 2019. Annual rent is $180,000
      payable in equal monthly installments due on the first of each month. In
      addition to the base rent, the Company must also pay the following amounts:
      (1)
      $0.50 per customer per day due the 15 th day
      following each month and (2) 2.5% of net gambling receipts, as defined, from
      $20.0 million to $40.0 million, plus 5% of net gambling receipts, as defined,
      from $40.0 million to $60.0 million, plus 7.5% of net gambling receipts, as
      defined, in excess of $60.0 million, due annually.





**Colorado
      Central Station-Black Hawk**


The
      Company leases additional parcels of land adjoining the Colorado Central
      Station-Black Hawk for current and future parking. The lease for current parking
      is for an initial term of nine years with options to renew for eighteen
      additional terms of five years
      each with the final option period concluding June 1, 2094. Annual rent is $1.7
      million indexed to correspond to any rise or fall in the CPI at one-year
      intervals beginning June 1, 1996, not to exceed 3% difference from the previous
      year’s rate. The lease for future parking is for an initial term of ten years
      with options to renew for nine additional terms of ten years each with the
      final
      option period concluding June 1, 2094. Annual rent is $576,000 and renewals
      are
      subject to 20% rent increases over the rate of the previous term.





**Isle-Our
      Lucaya**


The
      Company subleases the casino property under an agreement that is in the effect
      until December 2012 and requires the Company to make payments under the
      following terms:(1) $2.0 million per year in equal monthly installments due
      on
      the first of each month for the first two years ending November 30, 2006, (2)
      the annual amount increases to $2.5 million in years three and four and then
      to
      $3.0 million for the remainder of the lease, (3) plus $125,000 per year in
      equal
      monthly installments due on the first of each month for common area maintenance
      and (4) plus a minimum room buy of fifty from the hotel at a rate of $54 per
      night. After the second year of the lease, if earnings before income taxes,
      depreciation and amortization fall below $3.0 million, the Company has the
      option to cancel with a one-year notice.





Additionally,
      the agreement requires the Company to pay a monthly resort marketing fee (the
      “Fee”). The Fee is calculated at six percent of annual gross revenues of the
      casino, where such receipts are in excess of $33.3 million a year, for the
      first
      two years, $40.0 million a year for years three and four, $45.0 million a year,
      for years five through ten.


99
 
  **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**





**9.
      Commitments (continued)**





**Other**


In
      December 2003, the Company entered into a 25-year lease with Arena Coventry
      Limited to lease approximately 120,000 square feet within the arena compound
      that will be used in connection with the operation of the Isle-Coventry. In
      addition to the payment of £4.0 million plus value added tax (“VAT”) ($7.7
      million at April 24, 2005), the lease requires us to pay one more payment of
      £2.0 million plus VAT in July 2005 for prepaid rent. In the fourth quarter of
      fiscal 2006, the Company will pay approximately £1.3 million plus VAT ($2.5
      million at April 24, 2005) per year offset by the £6.0 million plus VAT ($11.5
      million at April 24, 2005) prepaid rent that reduces annual rent expenses over
      15 years.





In
      November 2003, pursuant to a subscription and shareholders agreement, the Isle
      of Capri Casinos, Ltd. (the “Isle-Ltd.”), a wholly owned subsidiary of the
      Company, acquired a two-thirds interest in Blue Chip Casinos,
      PLC (“Blue Chip”). Under the agreement, the Isle-Ltd. has the option to require
      the minority shareholders to sell their respective shares to the Isle-Ltd at
      fair value or at a price to be agreed upon. This option is available for a
      period of seven years from the acquisition date or for five years from the
      introduction of new gaming laws whichever is later. If the Isle-Ltd. does not
      exercise its option, the minority shareholders have the right, during the
      one-year period after the option expiration date, to require the Isle-Ltd.
      to
      purchase the minority shares at fair value or at a price to be agreed upon.
      Due
      to the current uncertainty in United Kingdom (“UK”) gaming legislation, and the
      long-term nature of this option, the impact of this obligation is not reasonably
      estimable at this time.





Future
      minimum payments under capital leases and noncancelable operating leases with
      initial terms of one year
      or
      more consisted of the following at April 24, 2005:





**Capital**
            
            **Operating****Leases**
            
            **Leases**(In
                thousands)2006
            
            $
            321
            
            $
            15,9692007
            
            
            321
            
            
            15,9542008
            
            
            321
            
            
            14,7462009
            
            
            321
            
            
            15,0042010
            
            
            321
            
            
            14,986Thereafter
            
            
            3,108
            
            
            1,118,035Total
                minimum lease payments
            
            $
            4,713
            
            $
            1,194,694Amounts
                representing interest
            
            
            (2,474
            )Present
                value of net minimum lease payments
            
            $
            2,239





100
 
  **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**





**9.
      Commitments (continued)**





All
      future operating minimum lease payments include long-term land lease payments,
      which have various renewal options varying between five to ten years. The
      Company expects that the Company’s properties will continue in operation and
      these leases will be renewed for the next 80 to 90 years. Rent expense for
      operating leases was approximately $38.7 million in fiscal 2005, $37.5 million
      in fiscal 2004 and $34.6 million in fiscal 2003. Such amounts include contingent
      rentals of $9.7 million in fiscal 2005, $9.5 million in fiscal 2004 and $9.4
      million in fiscal 2003.





**10.
      Related Party Transactions**





The
      Company leases approximately eight acres of land on a month-to-month basis
      from
      an entity owned by family members of the Company’s chief executive officer,
      Bernard Goldstein, including Robert S. Goldstein and Jeffrey D. Goldstein,
      directors of the Company. The land is used for parking and warehouse space
      by
      the Isle-Bettendorf. The initial term of the lease expires sixty days after
      written notice is given to either party and rent under the lease is currently
      $23,360 per month.





The
      Company reimburses Alter Trading Corporation, a company owned by Robert S.
      Goldstein, Jeffrey D. Goldstein and other members of the Goldstein family,
      for
      annual lease payments of approximately $93,000 with respect to property leased
      by Alter Trading Corporation. The land was leased at the Company’s request in
      order to secure a site for possible casino operations.





On
      April
      22, 2005, the Company approved an agreement to sell the Colorado Grande-Cripple
      Creek for an estimated $6.5 million payable in $0.6 million cash and a $5.9
      million promissory note secured by the assets of the casino. After receiving
      offers from several third parties, the Company’s Board of Directors agreed to
      sell the Colorado Grande-Cripple Cripple Creek to Nevada Gold & Casinos,
      Inc. Nevada Gold & Casinos, Inc. also owns 43% of the Isle-Black Hawk and
      the Colorado Central Station-Black Hawk.





On
      August
      19, 2004, the Company entered into a contract with John Brackenbury, a member
      of
      the Board of Directors, for consulting fees related to the UK’s on-going
      contracts and transactions. The total paid under this contract during fiscal
      2005 was $40,000. The contract continues month-to-month at $5,000 per month.





In
      November 2002, the Company, through
      its wholly owned subsidiary, Isle of Capri Bettendorf, L.C., awarded
      a
      contract in the amount of approximately $120,000, to dredge the Bettendorf
      Marina, the location of the Isle-Bettendorf property, to Blackhawk Fleet, Inc.
      of Davenport, Iowa. Blackhawk Fleet, Inc. is an affiliate of the Alter Company,
      which is owned by Bernard Goldstein, and members of his immediate family.
      Subsequent to the awarding of the contract (to Blackhawk Fleet and Skipper
      Marina, the third party contractor on the overall project) and prior to its
      implementation, the contract was approved as a related party transaction by
      the
      Iowa Racing and Gaming Commission on March 6, 2003.





In
      March
      2003, the Company, through its wholly owned subsidiary, Lady Luck Vicksburg,
      Inc., sold three barges to the Alter Company. The barges were previously
      classified as property held for sale and sold for $100,000.





The
      Company’s Board of Directors has previously approved all of these transactions.
      The Company obtained pre-approval from the Audit Committee (comprised of
      independent directors) of the Company’s Board of Directors for these related
      party transactions.


101
 
  **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**





**11.
      Common Stock**





**Earnings
      (Loss) per Share of Common Stock**





The
      following table sets forth the computation of basic and diluted earnings (loss)
      per share:





**Fiscal
                Year Ended****April
                24,**
            
            **April
                25,**
            
            **April
                27,****2005**
            
            **2004**
            
            **2003**(In
                thousands, except per share data)Numerator:Income
                applicable to common shares:Income
                from continuing operations
            
            $
            20,984
            
            $
            26,331
            
            $
            45,604Income
                (loss) from discontinued operations
            
            
            (2,946
            )
            
            1,418
            
            
            (11
            )Net
                income
            
            $
            18,038
            
            $
            27,749
            
            $
            45,593Denominator:Denominator
                for basic earnings (loss) per share -weighted
                - average shares
            
            
            29,682
            
            
            29,404
            
            
            28,984Effect
                of dilutive securitiesEmployee
                stock optionsand
                nonvested restricted stock
            
            
            1,248
            
            
            1,062
            
            
            1,468Denominator
                for diluted earnings (loss) per share -adjusted
                weighted - average shares andassumed
                conversions
            
            
            30,930
            
            
            30,466
            
            
            30,452Basic
                earnings (loss) per share:Income
                from continuing operations
            
            $
            0.71
            
            $
            0.89
            
            $
            1.57Income
                (loss) from discontinued operations
            
            
            (0.10
            )
            
            0.05
            
            
            -Net
                income
            
            $
            0.61
            
            $
            0.94
            
            $
            1.57Diluted
                earnings (loss) per share:Income
                from continuing operations
            
            $
            0.68
            
            $
            0.86
            
            $
            1.50Income
                (loss) from discontinued operations
            
            
            (0.10
            )
            
            0.05
            
            
            -Net
                income
            
            $
            0.58
            
            $
            0.91
            
            $
            1.50


102
 
  **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**





**11.
      Common Stock (continued)**





**Stock-based
      Compensation - Stock Option Plans**


Under
      the
      Company’s 1992, 1993 and 2000 Stock Option Plans, as amended, a maximum of
      1,058,750, 4,650,000 and 2,500,000 options, respectively, are reserved for
      issuance and may be granted to directors, officers and employees. The plans
      provide for the issuance of incentive stock options and nonqualified options
      which have a maximum term of 10 years and are, generally, exercisable in yearly
      installments ranging from 20% to 25%, commencing one year after the date of
      grant. The Company has 548,624 shares available for future issuance under its
      equity compensation plans.





Stock
      options outstanding are as follows:


**Weighted**
            
            **Weighted**
            
            **Weighted****Average**
            
            **Average**
            
            **Average****2005**
            **Exercise**
            **2004**
            **Exercise**
            **2003**
            **Exercise****Options**
            **Price**
            **Options**
            **Price**
            **Options**
            **Price**Outstanding
                options at beginning offiscal
                year
            3,367,997
            $12.31
            3,572,083
            $9.80
            3,944,851
            $7.32Options
                granted
            662,421
            20.42
            751,431
            20.59
            780,148
            15.06Options
                exercised
            (472,375)
            9.48
            (669,764)
            8.13
            (997,717)
            4.23Options
                canceled
            (225,431)
            16.37
            (285,753)
            12.54
            (155,199)
            9.07Outstanding
                options at end of fiscal year
            3,332,612
            $14.05
            3,367,997
            $12.31
            3,572,083
            $9.80Weighted
                average fair value ofoptions
                granted
            $20.42
            
            $11.69
            
            $8.82





The
      following table summarizes information about stock options outstanding at April
      24, 2005:





**Options
                Outstanding**
            
            **Options
                Exercisable****Weighted
                Average**
            
            
            **Weighted**
            
            
            **Weighted****Ranges
                of**
            
            **Number**
            
            **Remaining**
            
            **Average**
            
            **Number**
            **Average****Exercise
                Prices**
            
            **Outstanding**
            
            **Contractual
                Life**
            
            **Exercise
                Price**
            
            **Exercisable**
            **Exercise
                Price**$2.61
                - $5.22
            
            295,029
            
            3.0
            years
            
            $3.13
            
            295,029
            $3.135.22
                - 7.84
            
            645,283
            
            5.9
            years
            
            6.54
            
            312,283
            6.587.84
                - 10.45
            
            232,902
            
            4.4
            years
            
            10.25
            
            232,902
            10.2510.45
                - 13.06
            
            54,003
            
            2.9
            years
            
            12.38
            
            54,003
            12.3813.06
                - 15.67
            
            837,405
            
            6.2
            years
            
            15.27
            
            467,005
            15.0715.67
                - 18.28
            
            58,779
            
            3.0
            years
            
            16.40
            
            58,779
            16.4018.28
                - 20.90
            
            1,146,250
            
            8.7
            years
            
            20.40
            
            117,100
            20.5220.90
                - 23.51
            
            36,408
            
            3.3
            years
            
            22.55
            
            36,408
            22.5523.51
                - 26.12
            
            26,553
            
            4.9
            years
            
            25.47
            
            21,553
            25.32$2.61
                - $26.12
            
            3,332,612
            
            6.4
            years
            
            $14.05
            
            1,595,062
            $11.16







103





**ISLE
        OF CAPRI CASINOS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


**11.
      Common Stock (continued)**





Any
      options with an exercise price in excess of the average market price of the
      Company’s common stock during the periods presented are not considered when
      calculating the dilutive effect of stock options for diluted earnings per share
      calculations. The average amount of options excluded from the calculation were
      1,468,478 shares, 1,331,635 shares and 2,730,093 shares for fiscal years 2005,
      2004 and 2003, respectively.





**Stock-based
      Compensation - Deferred Bonus Plan**


In
      the
      fiscal 2001, the Company’s stockholders approved the Deferred Bonus Plan. The
      Plan provides for the issuance of non-vested stock to eligible officers and
      employees who agree to receive a deferred bonus in the form of non-vested stock.
      The vesting of the stock is dependent upon continued service to the Company
      for
      a period of five years. At April 24, 2005, the non-vested stock issued in
      connection with the Plan totaled 203,687 shares, of which 36,400 shares were
      issued during fiscal year ended April 24, 2005 at $23.80, the weighted-average
      fair value of the non-vested stock at the grant date. For the fiscal year ended
      April 24, 2005, the Company recorded an unearned compensation contra account
      in
      consolidated stockholders’ equity equal to the fair value of the non-vested
      award and recorded compensation expense for the portion of unearned compensation
      that had been earned through April 24, 2005. Compensation expense related to
      stock-based compensation under the Deferred Bonus Plan totaled $606,000 in
      fiscal 2005, $605,000 in fiscal 2004, and $617,000 in fiscal 2003.





**Stock
      Repurchase**


On
      November 15, 2000, the Company’s Board of Directors approved a stock repurchase
      program, which allowed for the purchase of up to 1.5 million shares of the
      Company’s outstanding common stock. The Board expanded this program on January
      11, 2001, and allowed an additional 1.5 million shares to be repurchased. On
      October 25, 2002, the Company’s Board of Directors approved a new stock
      repurchase program allowing for the purchase of up to 1.5 million shares of
      the
      Company’s outstanding common stock, for a total of 4.5 million shares. As of
      April 24, 2005, the Company has repurchased 3.6 million and retired 553,800
      shares of common stock under these programs.





**Stockholder
      Rights Plan**


In
      February 1997, the Company adopted a Stockholder Rights Plan. The Plan is
      designed to preserve the long-term value of the shareholders’ investment in the
      Company. Under the Plan, each shareholder will receive a distribution of one
      right for each share of the Company’s outstanding common stock. The rights were
      distributed to shareholders of record on March 3, 1997, and will expire ten
      years thereafter. Each right entitles the holder to purchase one one-thousandth
      (1/1,000) of a share of a new series of participating preferred stock at an
      initial exercise price of $12.50. Initially the rights are represented by the
      Company’s common stock certificates and are not exercisable. The rights become
      exercisable shortly after a person or group acquires beneficial ownership of
      15%
      or more of the Company or publicly announces its intention to commence a tender
      or exchange offer that would result in the 15% beneficial ownership level.
      Under
      certain circumstances involving a buyer’s acquisition of a 15% position in the
      Company, all rights holders except the buyer will be entitled to purchase common
      stock at half price. If the Company is acquired through a merger, after such
      an
      acquisition, all rights holders except the buyer will be entitled to purchase
      stock in the buyer at half price. The Company may redeem the rights at one
      cent
      each at any time before a buyer acquires 15% of the Company’s
      stock.













104




**ISLE
        OF CAPRI CASINOS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**





**12.
      Deferred Compensation Plans**





**2005
      Deferred Compensation Plan**


On
      January 11, 2005, the Company adopted the 2005 Deferred Compensation Plan (the
      “Plan”), which amends and restates its existing deferred compensation
      arrangement. The Plan is an unfunded deferred compensation arrangement for
      the
      benefit of key management officers and employees of the Company and its
      subsidiaries. The terms of the Plan include the ability of the participants
      to
      defer, on a pre-tax basis, salary, bonus payments and any voluntary deferrals
      to
      the Company’s Retirement Trust and Savings Plan in excess of the amount
      permitted under IRS Code Section 401(k). The terms also include a discretionary
      annual matching contribution by the Company. The Plan allows for the aggregation
      and investment of deferred amounts in notional investment alternatives,
      including units representing shares of the Company’s common
      stock.





**Non-Employee
      Directors’ Deferred Compensation Plan**


On
      January 11, 2005, the Company adopted the Non-Employee Directors’ Deferred
      Compensation Plan (the “Directors’ Plan”). The Directors’ Plan provides a means
      by which non-employee directors can defer the receipt of their annual retainer
      and meeting fees. Deferred amounts are subject to notional investment in either
      a money market or similar cash equivalent fund or units representing shares
      of
      the Company’s common stock. Deferred amounts, as adjusted for earnings during
      the deferral period, are distributed after a director ceases to serve for any
      reason.





**13.
      Employee Benefit Plans**





**401(k)
      Plan**


The
      Company has a 401(k) plan covering substantially all of its employees. The
      Company’s contribution expense related to the 401(k) plan was approximately $2.0
      million in fiscal 2005, $1.9 million in fiscal 2004 and $1.5 million in fiscal
      2003. The Company’s contribution is based on a percentage of employee
      contributions and may include an additional discretionary amount. The 401(k)
      plan allows employees to invest no more than 5% of their contribution in the
      Company’s common stock.





**Insurance
      Plan**


The
      Company has a qualified employee insurance plan covering all employees who
      work
      an average of 32 hours or more per week on a regular basis. The plan, which
      is
      self-funded by the Company with respect to claims below a certain maximum
      amount, requires contributions from eligible employees and their dependents.
      The
      Company’s contribution expense for the plan was approximately $39.6 million in
      fiscal 2005, $35.9 million in fiscal 2004 and $37.9 million in fiscal
      2003.


105
 
  **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**





**14.
      Business Interruption Insurance Recoveries**





During
      the fiscal year ended April 24, 2005, the Company recorded $2.2 million in
      business interruption insurance proceeds, which was received subsequent to
      2005.
      These amounts are recorded in the accompanying consolidated statements of income
      in the line item “Marketing and administrative operating expenses.” The business
      interruption insurance proceeds relate to the closing of the Isle-Our Lucaya
      from September 1, 2004 to October 13, 2004 and twenty-one other days throughout
      October 2004 and November 2004 due to Hurricane Frances and the closing of
      the
      Isle-Biloxi from September 14, 2004 to September 17, 2004 due to Hurricane
      Ivan.





In
      the
      fourth quarter of fiscal 2004, the Company received $0.3 million in business
      interruption insurance proceeds. The amount was received to offset expenses
      incurred as a result of a flood during construction at the Isle-Boonville.
      In
      addition to flood damages and related clean-up expenses, the Company also
      incurred costs for the delay of construction.





**15.
      Valuation Charge**





As
      a
      result of adverse gaming legislation in the UK, the Company determined during
      the fiscal year ended April 24, 2005 that previously capitalized fixed assets
      for certain projects would not be recoverable under the provisions of SFAS
      No.
      144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. As such,
      the Company recorded an impairment charge of $1.6 million in the line item
      “Valuation charge” in the accompanying consolidated statements of
      income.





The
      valuation charge for fiscal 2003, totaling $1.9 million, was a reserve for
      a
      loss contingency against the investment to date in Ardent Gaming, L.L.C., an
      unrelated third party. The cashless gaming system being developed under the
      joint venture was substantially past due and the Company believes it will not
      recover its investment. ****




On
      March
      15, 2004, the Company announced that it had been selected by the Illinois Gaming
      Board as the successful bidder in a federal bankruptcy court auction for the
      10th Illinois gaming license conducted pursuant to an agreement approved by,
      among other parties, the Illinois Attorney General. The Company bid $518.0
      million to acquire by merger the stock of a company in bankruptcy that owns
      the
      license. The plan of reorganization pursuant to which the merger would be
      consummated has been confirmed by the federal bankruptcy court. The merger
      remains subject to certain conditions, including a finding of suitability and
      final approval by the Illinois Gaming Board as well as certain other conditions.
      In addition, the Illinois Attorney General has raised issues with regard to
      the
      appropriateness of the Village of Rosemont as a host community and the Illinois
      Gaming Board’s selection of the Company’s bid. The Illinois Gaming Board
      (working with the Illinois Attorney General) has also resumed an administrative
      proceeding seeking to revoke the gaming license from the Company’s proposed
      merger partner, which if successful may adversely impact the Company’s ability
      to operate a gaming facility in the Village of Rosemont. The Illinois Attorney
      General has also filed a suit against the Illinois Gaming Board seeking to
      enjoin the Board from conducting a suitability investigation of the Company
      in
      connection with the merger provided for under the plan of reorganization (which
      suitability review has been “suspended” by the Illinois Gaming Board pending the
      completion of the aforementioned revocation proceeding). During the fourth
      quarter of fiscal 2005, the governor of Illinois appointed a new gaming board.
      One of the first acts by the new board was to authorize the reinstatement of
      the
      proceeding to rescind the license from the current owner. For the reasons set
      forth above, among others, the Company believes that its ability to obtain
      the
      gaming license and open a gaming facility in Rosemont has been subjected to
      added uncertainty. The Illinois Supreme Court has also agreed to review certain
      challenges to amendments to the Illinois Riverboat Gambling Act relating to
      the
      proposed relocation of the 10 th






106




**ISLE
        OF CAPRI CASINOS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


**15.
        Valuation Charge (continued)**


license.
      There can be no assurance that the foregoing conditions will be satisfied or
      that the Company will ultimately acquire the license. Additionally, because
      Illinois limits the number of gaming licenses, each license has intrinsic value.
      Therefore, this license is considered an intangible asset. As such, the full
      cost of the license and all associated costs were originally capitalized in
      the
      amount of $2.5 million. Due to the continuing uncertainty with respect to this
      matter, the Company has recorded a valuation charge for the full amount expended
      at April 24, 2005.





**16.
      Preopening Expenses**





Preopening
      expenses, representing salaries, benefits, training, marketing and other costs,
      of $0.2 million and $2.3 million in fiscal 2005 and fiscal 2004, respectively,
      were incurred in connection with the opening of the Blue Chip-Walsall on
      September 23, 2004 and with the openings of the Isle-Our Lucaya on December
      15,
      2003 and the Blue Chip-Wolverhampton on April 22, 2004. There were no preopening
      expenses in fiscal 2003.





**17.
      Loss On Early Extinguishment Of Debt**





The
      Company incurred a loss on early extinguishment of debt totaling $5.3 million
      in
      fiscal 2005 in connection with the refinancing of its Senior secured credit
      facility on February 4, 2005. These charges include the write-off of debt
      acquisition costs.





The
      Company incurred a loss on early extinguishment of debt of $26.1 million in
      fiscal 2004 related to the refinancing of the Company’s $390.0 million 8.75%
      Senior Subordinated Notes on March 3, 2004. These charges included early payment
      premiums as well as the write-off of debt acquisition costs.





**18.
      Income Taxes**





Income
      tax provision from continuing operations consists of the following:





A
      reconciliation of income taxes from continuing operations at the statutory
      corporate federal tax rate of 35% to the income tax provision reported in the
      accompanying consolidated statements of operations is as follows:




**Fiscal
                Year Ended****April
                24,**
            
            **April
                25,**
            
            **April
                27,****2005**
            
            **2004**
            
            **2003**(In
                thousands)Statutory
                tax provision
            
            $
            14,368
            
            $
            13,893
            
            $
            25,294Effects
                of :State
                taxes
            
            
            1,990
            
            
            465
            
            
            1,407Non-deductible
                items
            
            
            1,907
            
            
            537
            
            
            251Adjustment
                to prior year's taxes
            
            
            78
            
            
            (7
            )
            
            57Employment
                tax credits
            
            
            (419
            )
            
            (472
            )
            
            (392
            )IRS
                adjustment
            
            
            -
            
            
            (3,400
            )
            
            -Foreign
                activity
            
            
            1,314
            
            
            1,113
            
            
            -Other
            
            
            213
            
            
            497
            
            
            33$
            19,451
            
            $
            12,626
            
            $
            26,650







107





**ISLE
        OF CAPRI CASINOS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


**18.
      Income Taxes (continued)**





**Fiscal
                Year Ended****April
                24,**
            
            **April
                25,**
            
            **April
                27,****2005**
            
            **2004**
            
            **2003**(In
                thousands)Current:Federal
            
            $
            1,863
            
            $
            3,176
            
            $
            1,934State
            
            
            2,287
            
            
            662
            
            
            1,1424,150
            
            
            3,838
            
            
            3,076Deferred:Federal
            
            
            14,527
            
            
            8,735
            
            
            22,552State
            
            
            774
            
            
            53
            
            
            1,02215,301
            
            
            8,788
            
            
            23,574$
            19,451
            
            $
            12,626
            
            $
            26,650





Significant
      components of the Company’s net deferred state and federal income tax
      liabilities are as follows :





**Fiscal
                Year Ended****April
                24,**
            
            **April
                25,****2005**
            
            **2004**(In
                thousands)Deferred
                tax liabilities:Property
                and equipment
            
            $
            77,436
            
            $
            84,572Other
            
            
            1,645
            
            
            1,935Total
                deferred tax liabilities
            
            
            79,081
            
            
            86,507Deferred
                tax assets:Hedging
                transactions
            
            
            (15
            )
            
            146Accrued
                expenses
            
            
            10,172
            
            
            13,242Charitable
                contribution carryover
            
            
            32
            
            
            411Alternative
                minimum tax credit
            
            
            3,641
            
            
            3,184Employment
                tax credits
            
            
            2,954
            
            
            2,764Net
                operating losses
            
            
            14,874
            
            
            33,776Other
            
            
            7,097
            
            
            6,446Total
                deferred tax assets
            
            
            38,755
            
            
            59,969Valuation
                allowance on deferred tax assets
            
            
            (1,511
            )
            
            -Net
                deferred tax liability
            
            $
            41,837
            
            $
            26,538








108


**ISLE
        OF CAPRI CASINOS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


**18.
      Income Taxes (continued)**





At
      April
      24, 2005, the Company had alternative minimum tax credits that can be carried
      forward indefinitely to reduce future regular tax liabilities. Additionally,
      as
      of April 24, 2005, the Company has federal net operating losses carryforwards
      of
      $40.9 million for income tax purposes, with expiration dates from 2011 to 2023.
      A portion of the net operating losses, $13.9 million, are subject to limitations
      under the income tax regulations, which may limit the amount ultimately
      utilized; however, the Company believes that all net operating losses, except
      $0.7 million related to discontinued operations, will be utilized prior to
      expiration.





At
      April
      24, 2005, the deferred taxes valuation allowance relates to the discontinued
      operations at the Colorado Grande-Cripple Creek. (See Note 2 for income taxes
      allocated to discontinued operations.)





During
      the third quarter of fiscal 2004, the Internal Revenue Service concluded a
      federal tax examination covering April 1999 to April 2001 without significant
      adjustments. They are currently examining the tax years April 2002 to April
      2003. The Company believes that any tax liability arising from the examination
      will not have a material impact on its consolidated financial position and
      results of operations and cash flows.





**19.
      Fair Value of Financial Instruments**





The
      following methods and assumptions were used to estimate the fair value of each
      class of financial instruments for which it is practicable to estimate that
      value:





Assets,
      including cash, restricted cash, and notes receivable are carried at cost,
      which
      approximates fair value due to their short-term maturities.





Marketable
      securities consist of trading securities held by Capri Insurance Corporation,
      our captive insurance subsidiary. The trading securities are primarily debt
      and
      equity securities which we buy with the intention to resell in the near term.
      Our trading securities are carried at fair value with changes in fair value
      recognized in current period income.





Long-term
      debt - The fair value of the Company’s long-term debt is estimated based on the
      quoted market price of the underlying debt issue or, when a quoted market price
      is not available, the discounted cash flow of future payments utilizing current
      rates available to the Company for debt of similar remaining maturities. Debt
      obligations with a short remaining maturity are valued at the carrying
      amount.








109
 
  **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**





**19.
      Fair Value of Financial Instruments (continued)**





The
      estimated carrying amounts and fair values of the Company’s financial
      instruments are as follows:





**April
                24, 2005**
            
            **April
                25, 2004****Carrying**
            
            
            
            **Carrying****Amount**
            
            **Fair
                Value**
            
            **Amount**
            
            **Fair
                Value**(In
                thousands)**Financial
                assets:**Cash
                and cash equivalents
            
            $
            146,743
            
            $
            146,743
            
            $
            134,582
            
            $
            134,582Marketable
                securities
            
            
            16,016
            
            
            16,016
            
            
            -
            
            
            -Restricted
                cash
            
            
            3,099
            
            
            3,099
            
            
            3,001
            
            
            3,001Notes
                receivable
            
            
            5,472
            
            
            5,472
            
            
            -
            
            
            -**Financial
                liabilities:**7%
                Senior subordinated notes
            
            $
            500,000
            
            $
            485,650
            
            $
            500,000
            
            $
            480,000Senior
                secured credit facility
            
            
            249,375
            
            
            249,375
            
            
            207,500
            
            
            207,5009%
                Senior subordinated notes
            
            
            200,000
            
            
            210,340
            
            
            200,000
            
            
            215,000Isle-Black
                Hawk senior secured credit facility
            
            
            189,350
            
            
            189,350
            
            
            165,000
            
            
            165,000Blue
                Chip Credit Facility
            
            
            6,942
            
            
            6,942
            
            
            3,418
            
            
            3,418TIF
                bonds
            
            
            3,875
            
            
            3,875
            
            
            4,624
            
            
            4,624General
                obligation bonds
            
            
            1,830
            
            
            1,835
            
            
            1,830
            
            
            1,830BID
                bonds
            
            
            590
            
            
            590
            
            
            700
            
            
            700Other
                long-term debt
            
            
            4,156
            
            
            4,156
            
            
            5,792
            
            
            5,792








**20.
      Contingencies**





In
      August
      1997, a lawsuit was filed that seeks to nullify a contract to which Louisiana
      Riverboat Gaming Partnership is a party. Pursuant to the contract, Louisiana
      Riverboat Gaming Partnership paid a fixed amount plus a percentage of revenues
      to various local governmental entities, including the City of Bossier City
      and
      the Bossier Parish School Board, in lieu of payment of a per-passenger boarding
      fee. The case was tried on April 6, 2004. The trial court rendered a ruling
      in
      favor of the defendants, finding that, although the legislature amended the
      boarding fee statute in 2003 so as to prohibit future boarding fee agreements,
      any pre-existing agreement between a riverboat and either the City of Bossier
      City or the Bossier Parish Police Jury will remain valid and in effect until
      its
      expiration. Louisiana Riverboat Gaming Partnership’s contract expired on April
      4, 2004. Therefore, Louisiana Riverboat Gaming Partnership now pays a boarding
      fee to the City as outlined by the statute. Louisiana Riverboat Gaming
      Partnership still has an existing contract with the Bossier Parish Police Jury,
      which was not an issue in the litigation, and which will remain in effect until
      its expiration on January 1, 2007, unless extended by the parties. The
      plaintiffs appealed the trial court’s ruling to the Second Circuit Court of
      Appeal, and the appellate court reversed and remanded the matter. The Company,
      along with the other defendants, filed writ applications to appeal the matter
      to
      the Louisiana Supreme Court. The court has granted two applications for
      appeal-one filed on behalf of Bossier City and Bossier Parish and another filed
      on behalf of the Bossier Sheriff’s Office and the Greater Bossier Economic
      Development Foundation. A hearing has not been scheduled. The Company will
      continue to vigorously defend this matter as may be required.


110
 
  **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**





**20.
      Contingencies (continued)**





Lady
      Luck
      Gaming Corporation (now a wholly owned subsidiary of the Company) and several
      joint venture partners are defendants in a lawsuit brought by the country of
      Greece through its Minister of Tourism (now Development) and Finance. The action
      alleges that the defendants failed to make specified payments in connection
      with
      the gaming license bid process for Patras, Greece. The payment the Company
      is
      alleged to have been required to make aggregates approximately 6.5 million
      Euros
      (which was approximately $8.5 million as of April 24, 2005, based on published
      exchange rates). Although it is difficult to determine the damages being sought
      from the lawsuit, the action may seek damages up to that aggregate amount plus
      interest from the date of the action.
      The Athens Civil Court of First Instance granted judgment in the Company’s favor
      and dismissed the lawsuit, but the Ministry appealed the matter and the appeal
      was heard before the Athens Appeal Court of First Instance. The Athens Appeal
      Court issued certified copies of judgments denying the Ministry’s appeal. The
      Ministry elected to appeal this matter further to the Supreme Court. The Company
      has taken action to have the decisions granted in its favor set for a hearing
      before the Administrative Supreme Court and the Greek Supreme Court. The
      administrative matter is set for hearing during June 2005 and the civil matter
      is set for hearing during May 2006. The outcome of this matter is still in
      doubt
      and cannot be predicted with any degree of certainty. The Company intends to
      continue a vigorous and appropriate defense to the claims asserted in this
      matter.





On
      December 30, 2002, the County of Jefferson, Missouri initiated a lawsuit in
      the
      Circuit Court of Jefferson County, Missouri against the Company and a subsidiary
      alleging a breach of a 1993 contract entered into by the County and that
      subsidiary, and guaranteed by Lady Luck Gaming Corporation, relating to the
      development of a casino site near Kimmswick, Missouri. The suit alleges damages
      in excess of $10.0 million. Discovery is ongoing and the matter has been set
      for
      a trial during January 2006. The outcome of this matter cannot be predicted
      with
      any degree of certainty. The Company believes the claims against it to be
      without merit and intends to vigorously and appropriately defend the claims
      asserted in this matter.





The
      Company is subject to certain federal, state and local environmental protection,
      health and safety laws, regulations and ordinances that apply to businesses
      generally, and is subject to cleanup requirements at certain of its facilities
      as a result thereof. The Company has not made, and does not anticipate making,
      material expenditures, nor does it anticipate incurring delays with respect
      to
      environmental remediation or protection. However, in part because the Company’s
      present and future development sites have, in some cases, been used as
      manufacturing facilities or other facilities that generate materials that are
      required to be remediated under environmental laws and regulations, there can
      be
      no guarantee that additional pre-existing conditions will not be discovered
      and
      that the Company will not experience material liabilities or
      delays.





The
      Company is subject to various contingencies and litigation matters and has
      a
      number of unresolved claims. Although the ultimate liability of these
      contingencies, this litigation and these claims cannot be determined at this
      time, the Company believes that they will not have a material adverse effect
      on
      its consolidated financial position, results of operations or cash flows.










111








**ISLE
        OF CAPRI CASINOS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


**21.
      Consolidating Condensed Financial Information**





Certain
      of the Company’s subsidiaries have fully and unconditionally guaranteed the
      payment of all obligations under the Company’s $200.0 million 9% Senior
      Subordinated Notes due 2012 and $500.0 million 7% Senior Subordinated Notes
      due
      2014. The following tables present the consolidating condensed financial
      information of the parent company, guarantor subsidiaries and non-guarantor
      subsidiaries of the Isle of Capri Casinos, Inc., balance sheets as of April
      24,
      2005 and April 25, 2004, statements of income and cash flows for the fiscal
      years ended April 24, 2005, April 25, 2004 and April 27, 2003.











**ISLE
                OF CAPRI CASINOS, INC.****CONSOLIDATING
                CONDENSED GUARANTOR SUBSIDIARIES, NON-GUARANTOR SUBSIDIARIES,****AND
                PARENT COMPANY FINANCIAL INFORMATION****AS
                OF APRIL 24, 2005 AND APRIL 25, 2004 AND FOR****THE
                YEARS ENDED APRIL 24, 2005, APRIL 25, 2004 AND APRIL 27,
                2003****UNAUDITED****(In
                thousands)****Isle
                of Capri**
            
            
            
            **(b)**
            
            **Consolidating****Casinos,
                Inc.**
            
            **(a)**
            
            **Non-**
            
            **and**
            
            **Isle
                of Capri****(Parent**
            
            **Guarantor**
            
            **Guarantor**
            
            **Eliminating**
            
            **Casinos,
                Inc.****Obligor)**
            
            **Subsidiaries**
            
            **Subsidiaries**
            
            **Entries**
            
            **Consolidated****As
                of April 24, 2005****Balance
                Sheet**Current
                assets
            
            $
            63,560
            
            $
            82,644
            
            $
            64,871
            
            $
            (6,627
            )
            $
            204,448Intercompany
                receivables
            
            
            896,214
            
            
            (228,835
            )
            
            42,463
            
            
            (709,842
            )
            
            -Investments
                in subsidiaries
            
            
            233,544
            
            
            269,817
            
            
            (10,027
            )
            
            (493,334
            )
            
            -Property
                and equipment, net
            
            
            4,630
            
            
            774,165
            
            
            248,111
            
            
            -
            
            
            1,026,906Other
                assets
            
            
            21,806
            
            
            375,967
            
            
            58,215
            
            
            (5,896
            )
            
            450,092Total
                assets
            
            $
            1,219,754
            
            $
            1,273,758
            
            $
            403,633
            
            $
            (1,215,699
            )
            $
            1,681,446Current
                liabilities
            
            $
            22,360
            
            $
            99,930
            
            $
            67,110
            
            $
            (9,738
            )
            $
            179,662Intercompany
                payables
            
            
            -
            
            
            623,879
            
            
            85,963
            
            
            (709,842
            )
            
            -Long-term
                debt,less
                current maturities
            
            
            946,875
            
            
            8,080
            
            
            193,662
            
            
            -
            
            
            1,148,617Other
                accrued liabilities
            
            
            (7,939
            )
            
            77,012
            
            
            (527
            )
            
            -
            
            
            68,546Minority
                interest
            
            
            -
            
            
            -
            
            
            -
            
            
            23,225
            
            
            23,225Stockholders'
                equity
            
            
            258,458
            
            
            464,857
            
            
            57,425
            
            
            (519,344
            )
            
            261,396Total
                liabilities and stockholders' equity
            
            $
            1,219,754
            
            $
            1,273,758
            
            $
            403,633
            
            $
            (1,215,699
            )
            $
            1,681,446











112
 
  **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**





**21.
      Consolidating Condensed Financial Information (continued)**





**Isle
                of Capri**
            
            
            
            **(b)**
            
            **Consolidating****Casinos,
                Inc.**
            
            **(a)**
            
            **Non-**
            
            **and**
            
            **Isle
                of Capri****(Parent**
            
            **Guarantor**
            
            **Guarantor**
            
            **Eliminating**
            
            **Casinos,
                Inc.****Obligor)**
            
            **Subsidiaries**
            
            **Subsidiaries**
            
            **Entries**
            
            **Consolidated****For
                the Fiscal Year Ended April 24, 2005****Statement
                of Income**Revenues:Casino
            
            $
            -
            
            $
            941,439
            
            $
            179,877
            
            $
            -
            
            $
            1,121,316Rooms,
                food, beverage and other
            
            
            1,359
            
            
            184,976
            
            
            51,556
            
            
            (20,614
            )
            
            217,277Gross
                revenues
            
            
            1,359
            
            
            1,126,415
            
            
            231,433
            
            
            (20,614
            )
            
            1,338,593Less
                promotional allowances
            
            
            -
            
            
            187,451
            
            
            39,534
            
            
            -
            
            
            226,985Net
                revenues
            
            
            1,359
            
            
            938,964
            
            
            191,899
            
            
            (20,614
            )
            
            1,111,608Operating
                expenses:Casino
            
            
            -
            
            
            155,340
            
            
            31,266
            
            
            -
            
            
            186,606Gaming
                taxes
            
            
            -
            
            
            216,864
            
            
            33,452
            
            
            -
            
            
            250,316Rooms,
                food, beverage and other
            
            
            26,146
            
            
            343,489
            
            
            105,310
            
            
            (22,329
            )
            
            452,616Management
                fee expense (revenue)
            
            
            (31,418
            )
            
            32,516
            
            
            (1,098
            )
            
            -
            
            
            -Depreciation
                and amortization
            
            
            1,590
            
            
            83,763
            
            
            12,065
            
            
            -
            
            
            97,418Total
                operating expenses
            
            
            (3,682
            )
            
            831,972
            
            
            180,995
            
            
            (22,329
            )
            
            986,956Operating
                income
            
            
            5,041
            
            
            106,992
            
            
            10,904
            
            
            1,715
            
            
            124,652Interest
                expense, net
            
            
            4,229
            
            
            (67,484
            )
            
            (10,218
            )
            
            -
            
            
            (73,473
            )Loss
                on early extinguishment of debt
            
            
            -
            
            
            (5,251
            )
            
            -
            
            
            -
            
            
            (5,251
            )Minority
                interest
            
            
            -
            
            
            -
            
            
            -
            
            
            (5,493
            )
            
            (5,493
            )Equity
                in income (loss) of subsidiaries
            
            
            20,949
            
            
            6,492
            
            
            (18,451
            )
            
            (8,990
            )
            
            -Income
                (loss) from continuing operations beforeincome
                taxes
            
            
            30,219
            
            
            40,749
            
            
            (17,765
            )
            
            (12,768
            )
            
            40,435Income
                taxes
            
            
            12,181
            
            
            13,130
            
            
            (5,860
            )
            
            -
            
            
            19,451Income
                (loss) from continuing operations
            
            
            18,038
            
            
            27,619
            
            
            (11,905
            )
            
            (12,768
            )
            
            20,984Loss
                from discontinued operations, net of taxes
            
            
            -
            
            
            -
            
            
            (2,946
            )
            
            -
            
            
            (2,946
            )Net
                income (loss)
            
            $
            18,038
            
            $
            27,619
            
            $
            (14,851
            )
            $
            (12,768
            )
            $
            18,038










113
 
  **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**





**21.
      Consolidating Condensed Financial Information (continued)**





**Isle
                of Capri**
            
            
            
            **(b)**
            
            **Consolidating****Casinos,
                Inc.**
            
            **(a)**
            
            **Non-**
            
            **and**
            
            **Isle
                of Capri****(Parent**
            
            **Guarantor**
            
            **Guarantor**
            
            **Eliminating**
            
            **Casinos,
                Inc.****Obligor)**
            
            **Subsidiaries**
            
            **Subsidiaries**
            
            **Entries**
            
            **Consolidated****For
                the Fiscal Year Ended April 24, 2005****Statement
                of Cash Flows**Net
                cash provided by (used in)operating
                activities
            
            $
            19,556
            
            $
            113,237
            
            $
            46,082
            
            $
            (8,989
            )
            $
            169,886Net
                cash provided by (used in)investing
                activities
            
            
            (34,102
            )
            
            (123,823
            )
            
            (69,330
            )
            
            13,569
            
            
            (213,686
            )Net
                cash provided by (used in)financing
                activities
            
            
            34,811
            
            
            1,138
            
            
            24,047
            
            
            (4,580
            )
            
            55,416Effect
                of foreign currency exchange rates oncash
                and cash equivalents
            
            
            -
            
            
            -
            
            
            545
            
            
            -
            
            
            545Net
                increase (decrease) in cash andcash
                equivalents
            
            
            20,265
            
            
            (9,448
            )
            
            1,344
            
            
            -
            
            
            12,161Cash
                and cash equivalents atbeginning
                of the year
            
            
            33,323
            
            
            67,108
            
            
            34,151
            
            
            -
            
            
            134,582Cash
                and cash equivalents atend
                of the year
            
            $
            53,588
            
            $
            57,660
            
            $
            35,495
            
            $
            -
            
            $
            146,743








**Isle
                of Capri**
            
            
            
            **(b)**
            
            **Consolidating****Casinos,
                Inc.**
            
            **(a)**
            
            **Non-**
            
            **and**
            
            **Isle
                of Capri****(Parent**
            
            **Guarantor**
            
            **Guarantor**
            
            **Eliminating**
            
            **Casinos,
                Inc.****Obligor)**
            
            **Subsidiaries**
            
            **Subsidiaries**
            
            **Entries**
            
            **Consolidated****As
                of April 25, 2004****Balance
                Sheet**Current
                assets
            
            $
            43,106
            
            $
            93,620
            
            $
            40,749
            
            $
            (2,154
            )
            $
            175,321Intercompany
                receivables
            
            
            890,557
            
            
            (228,132
            )
            
            73,495
            
            
            (735,920
            )
            
            -Investments
                in subsidiaries
            
            
            215,764
            
            
            262,777
            
            
            8,855
            
            
            (487,396
            )
            
            -Property
                and equipment, net
            
            
            4,521
            
            
            721,982
            
            
            180,957
            
            
            -
            
            
            907,460Other
                assets
            
            
            21,890
            
            
            376,933
            
            
            50,236
            
            
            -
            
            
            449,059Total
                assets
            
            $
            1,175,838
            
            $
            1,227,180
            
            $
            354,292
            
            $
            (1,225,470
            )
            $
            1,531,840Current
                liabilities
            
            $
            23,531
            
            $
            89,100
            
            $
            29,038
            
            $
            (2,154
            )
            $
            139,515Intercompany
                payables
            
            
            14,900
            
            
            620,157
            
            
            100,863
            
            
            (735,920
            )
            
            -Long-term
                debt,less
                current maturities
            
            
            905,000
            
            
            9,391
            
            
            166,433
            
            
            -
            
            
            1,080,824Deferred
                state income taxes
            
            
            -
            
            
            7,997
            
            
            194
            
            
            -
            
            
            8,191Other
                accrued liabilities
            
            
            (8,621
            )
            
            63,297
            
            
            (12,955
            )
            
            -
            
            
            41,721Minority
                interest
            
            
            -
            
            
            -
            
            
            -
            
            
            20,183
            
            
            20,183Stockholders'
                equity
            
            
            241,028
            
            
            437,238
            
            
            70,719
            
            
            (507,579
            )
            
            241,406Total
                liabilities and stockholders' equity
            
            $
            1,175,838
            
            $
            1,227,180
            
            $
            354,292
            
            $
            (1,225,470
            )
            $
            1,531,840







114


**ISLE
        OF CAPRI CASINOS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**




**21.
      Consolidating Condensed Financial Information (continued)**





**Isle
                of Capri**
            
            
            
            **(b)**
            
            **Consolidating****Casinos,
                Inc.**
            
            **(a)**
            
            **Non-**
            
            **and**
            
            **Isle
                of Capri****(Parent**
            
            **Guarantor**
            
            **Guarantor**
            
            **Eliminating**
            
            **Casinos,
                Inc.****Obligor)**
            
            **Subsidiaries**
            
            **Subsidiaries**
            
            **Entries**
            
            **Consolidated****For
                the Fiscal Year Ended April 25, 2004****Statement
                of Income**Revenues:Casino
            
            $
            -
            
            $
            943,564
            
            $
            172,787
            
            $
            -
            
            $
            1,116,351Rooms,
                food, beverage and other
            
            
            1,228
            
            
            180,889
            
            
            26,542
            
            
            -
            
            
            208,659Gross
                revenues
            
            
            1,228
            
            
            1,124,453
            
            
            199,329
            
            
            -
            
            
            1,325,010Less
                promotional allowances
            
            
            -
            
            
            180,060
            
            
            39,508
            
            
            -
            
            
            219,568Net
                revenues
            
            
            1,228
            
            
            944,393
            
            
            159,821
            
            
            -
            
            
            1,105,442Operating
                expenses:Casino
            
            
            -
            
            
            157,070
            
            
            24,434
            
            
            -
            
            
            181,504Gaming
                taxes
            
            
            -
            
            
            211,622
            
            
            33,370
            
            
            -
            
            
            244,992Rooms,
                food, beverage and other
            
            
            26,005
            
            
            346,355
            
            
            59,086
            
            
            -
            
            
            431,446Management
                fee expense (revenue)
            
            
            (31,960
            )
            
            32,464
            
            
            (504
            )
            
            -
            
            
            -Depreciation
                and amortization
            
            
            1,591
            
            
            78,807
            
            
            9,374
            
            
            -
            
            
            89,772Total
                operating expenses
            
            
            (4,364
            )
            
            826,318
            
            
            125,760
            
            
            -
            
            
            947,714Operating
                income
            
            
            5,592
            
            
            118,075
            
            
            34,061
            
            
            -
            
            
            157,728Interest
                expense, net
            
            
            30,143
            
            
            (101,050
            )
            
            (11,677
            )
            
            -
            
            
            (82,584
            )Loss
                on early extinguishment of debt
            
            
            -
            
            
            (26,115
            )
            
            -
            
            
            -
            
            
            (26,115
            )Minority
                interest
            
            
            -
            
            
            -
            
            
            -
            
            
            (10,072
            )
            
            (10,072
            )Dividend
                income
            
            
            64,493
            
            
            -
            
            
            -
            
            
            (64,493
            )
            
            -Equity
                in income (loss) of subsidiaries
            
            
            (61,781
            )
            
            (19,574
            )
            
            (451
            )
            
            81,806
            
            
            -Income
                (loss) from continuing operations beforeincome
                taxes
            
            
            38,447
            
            
            (28,664
            )
            
            21,933
            
            
            7,241
            
            
            38,957Income
                taxes
            
            
            10,698
            
            
            2,038
            
            
            (110
            )
            
            -
            
            
            12,626Income
                (loss) from continuing operations
            
            
            27,749
            
            
            (30,702
            )
            
            22,043
            
            
            7,241
            
            
            26,331Income
                from discontinued operations, net of taxes
            
            
            -
            
            
            -
            
            
            1,418
            
            
            -
            
            
            1,418Net
                income (loss)
            
            $
            27,749
            
            $
            (30,702
            )
            $
            23,461
            
            $
            7,241
            
            $
            27,749











115
 
 **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**





**21.
      Consolidating Condensed Financial Information (continued)**





**Isle
                of Capri**
            
            
            
            **(b)**
            
            **Consolidating****Casinos,
                Inc.**
            
            **(a)**
            
            **Non-**
            
            **and**
            
            **Isle
                of Capri****(Parent**
            
            **Guarantor**
            
            **Guarantor**
            
            **Eliminating**
            
            **Casinos,
                Inc.****Obligor)**
            
            **Subsidiaries**
            
            **Subsidiaries**
            
            **Entries**
            
            **Consolidated****For
                the Fiscal Year Ended April 25, 2004****Statement
                of Cash Flows**Net
                cash provided by (used in)operating
                activities
            
            $
            (3,728)
            
            $
            131,019
            
            $
            32,716
            
            $
            13,223
            
            $
            173,230Net
                cash provided by (used in)investing
                activities
            
            
            (29,856)
            
            
            (116,720)
            
            
            (10,533)
            
            
            (2,009)
            
            
            (159,118)Net
                cash provided by (used in)financing
                activities
            
            
            59,594
            
            
            (1,407)
            
            
            (15,991)
            
            
            (16,352)
            
            
            25,844Net
                increase in cash andcash
                equivalents
            
            
            26,010
            
            
            12,892
            
            
            6,192
            
            
            (5,138)
            
            
            39,956Cash
                and cash equivalents atbeginning
                of the year
            
            
            7,313
            
            
            53,268
            
            
            29,495
            
            
            4,550
            
            
            94,626Cash
                and cash equivalents atend
                of the year
            
            $
            33,323
            
            $
            66,160
            
            $
            35,687
            
            $
            (588)
            
            $
            134,582




















116
 
  **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**





**21.
      Consolidating Condensed Financial Information (continued)**








**Isle
                of Capri**
            
            
            
            **(b)**
            
            **Consolidating****Casinos,
                Inc.**
            
            **(a)**
            
            **Non-**
            
            **and**
            
            **Isle
                of Capri****(Parent**
            
            **Guarantor**
            
            **Guarantor**
            
            **Eliminating**
            
            **Casinos,
                Inc.****Obligor)**
            
            **Subsidiaries**
            
            **Subsidiaries**
            
            **Entries**
            
            **Consolidated****For
                the Fiscal Year Ended April 27, 2003****Statement
                of Income**Revenues:Casino
            
            $
            -
            
            $
            942,695
            
            $
            108,623
            
            $
            -
            
            $
            1,051,318Rooms,
                food, beverage and other
            
            
            839
            
            
            192,331
            
            
            20,771
            
            
            -
            
            
            213,941Gross
                revenues
            
            
            839
            
            
            1,135,026
            
            
            129,394
            
            
            -
            
            
            1,265,259Less
                promotional allowances
            
            
            -
            
            
            177,361
            
            
            23,120
            
            
            -
            
            
            200,481Net
                revenues
            
            
            839
            
            
            957,665
            
            
            106,274
            
            
            -
            
            
            1,064,778Operating
                expenses:Casino
            
            
            -
            
            
            168,601
            
            
            13,047
            
            
            -
            
            
            181,648Gaming
                taxes
            
            
            -
            
            
            208,697
            
            
            20,911
            
            
            -
            
            
            229,608Rooms,
                food, beverage and other
            
            
            19,501
            
            
            355,452
            
            
            36,312
            
            
            -
            
            
            411,265Valuation
                charge
            
            
            1,923
            
            
            -
            
            
            -
            
            
            -
            
            
            1,923Management
                fee expense (revenue)
            
            
            (34,570
            )
            
            31,164
            
            
            3,406
            
            
            -
            
            
            -Depreciation
                and amortization
            
            
            1,174
            
            
            69,285
            
            
            6,167
            
            
            -
            
            
            76,626Total
                operating expenses
            
            
            (11,972
            )
            
            833,199
            
            
            79,843
            
            
            -
            
            
            901,070Operating
                income
            
            
            12,811
            
            
            124,466
            
            
            26,431
            
            
            -
            
            
            163,708Interest
                expense, net
            
            
            34,392
            
            
            (109,358
            )
            
            (7,037
            )
            
            -
            
            
            (82,003
            )Minority
                interest
            
            
            -
            
            
            -
            
            
            -
            
            
            (9,451
            )
            
            (9,451
            )Dividend
                income
            
            
            6,441
            
            
            -
            
            
            -
            
            
            (6,441
            )
            
            -Equity
                in income (loss) of subsidiaries
            
            
            12,489
            
            
            9,586
            
            
            (160
            )
            
            (21,915
            )
            
            -Income
                from continuing operations beforeincome
                taxes
            
            
            66,133
            
            
            24,694
            
            
            19,234
            
            
            (37,807
            )
            
            72,254Income
                taxes
            
            
            20,540
            
            
            5,971
            
            
            139
            
            
            -
            
            
            26,650Income
                (loss) from continuing operations
            
            
            45,593
            
            
            18,723
            
            
            19,095
            
            
            (37,807
            )
            
            45,604Loss
                from discontinued operations, net of taxes
            
            
            -
            
            
            -
            
            
            (11
            )
            
            
            
            
            (11
            )Net
                income (loss)
            
            $
            45,593
            
            $
            18,723
            
            $
            19,084
            
            $
            (37,807
            )
            $
            45,593

















117
 
  **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**





**21.
      Consolidating Condensed Financial Information (continued)**





**Isle
                of Capri**
            
            
            
            **(b)**
            
            **Consolidating****Casinos,
                Inc.**
            
            **(a)**
            
            **Non-**
            
            **and**
            
            **Isle
                of Capri****(Parent**
            
            **Guarantor**
            
            **Guarantor**
            
            **Eliminating**
            
            **Casinos,
                Inc.****Obligor)**
            
            **Subsidiaries**
            
            **Subsidiaries**
            
            **Entries**
            
            **Consolidated****For
                the Fiscal Year Ended April 27, 2003****Statement
                of Cash Flows**Net
                cash provided by (used in)operating
                activities
            
            $
            147,708
            
            $
            44,508
            
            $
            28,437
            
            $
            (82,466
            )
            $
            138,187Net
                cash provided by (used in)investing
                activities
            
            
            (66,434
            )
            
            (49,889
            )
            
            (87,078
            )
            
            76,803
            
            
            (126,598
            )Net
                cash provided by (used in)financing
                activities
            
            
            (78,263
            )
            
            336
            
            
            77,084
            
            
            7,283
            
            
            6,440Net
                increase (decrease) in cash andcash
                equivalents
            
            
            3,011
            
            
            (5,045
            )
            
            18,443
            
            
            1,620
            
            
            18,029Cash
                and cash equivalents atbeginning
                of the year
            
            
            2,690
            
            
            58,312
            
            
            15,738
            
            
            (143
            )
            
            76,597Cash
                and cash equivalents atend
                of the year
            
            $
            5,701
            
            $
            53,267
            
            $
            34,181
            
            $
            1,477
            
            $
            94,626








(a)  The
      following subsidiaries of the Company are guarantors of the 7% Senior
      Subordinated Notes and the 9% Senior Subordinated Notes: Riverboat Corporation
      of Mississippi; Riverboat Corporation of Mississippi-Vicksburg; Riverboat
      Services, Inc.; CSNO, L.L.C.; Louisiana Riverboat Gaming Partnership; St.
      Charles Gaming Company, Inc.; IOC Holdings, L.L.C.; Grand Palais Riverboat,
      Inc.; LRGP Holdings, L.L.C.; P.P.I, Inc.; Isle of Capri Casino Colorado, Inc.;
      IOC-Coahoma, Inc.; IOC-Natchez, Inc.; IOC-Lula, Inc.; IOC-Boonville, Inc.;
      IOC-Kansas City, Inc.; Isle of Capri Bettendorf, L.C.; Isle of Capri Marquette,
      Inc.; IOC-Davenport, Inc.; LL Holding Corporation; IOC-St. Louis County, Inc.;
      IOC-Black Hawk County, Inc.; IOC-PA, L.L.C. and IOC-City of St. Louis, L.L.C..
      Each of the subsidiaries’ guarantees is joint and several with the guarantees of
      the other subsidiaries.





(b)  The
      following subsidiaries are not guarantors of the 7% Senior Subordinated Notes
      and the 9% Senior Subordinated Notes: Isle of Capri Black Hawk, L.L.C.; Isle
      of
      Capri Black Hawk Capital Corp.; IC Holdings Colorado, Inc.; CCSC/Blackhawk,
      Inc.; Colorado Grande Enterprises, Inc.; IOC-Black Hawk Distribution Company,
      L.L.C.; Blue Chip Casinos, PLC; Isle of Capri of Jefferson County, Inc.; Casino
      Parking, Inc.; Isle of Capri-Bahamas, Ltd.; ASMI Management, Inc.; IOC
      Development Company, L.L.C.; Casino America, Inc.; ICC Corp.; International
      Marco Polo Services, Inc.; IOC, L.L.C.; Isle of Capri of Michigan L.L.C.; Isle
      of Capri Bettendorf Marina Corp.; Water Street Redevelopment Corporation; IOC
      Services, L.L.C.; Louisiana Horizons, L.L.C.; Capri Air, Inc.; Lady Luck Gaming
      Corp.; Lady Luck Gulfport, Inc.; Lady Luck Vicksburg, Inc.; Lady Luck Biloxi,
      Inc.; Lady Luck Central City, Inc.; Pompano Park Holdings, L.L.C.; Casino
      America of Colorado, Inc.; JPLA Pelican, L.L.C.; IOC-Cameron, L.L.C.; Isle
      of
      Capri Casinos Limited and Capri Insurance Corporation.











118
 
  **ISLE
            OF CAPRI CASINOS, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
            (continued)**





**22.
      Selected Quarterly Financial Information (unaudited)**


**Fiscal
                  Quarters Ended****July
                  25,**
              
              **October
                  24,**
              
              **January
                  23,**
              
              **April
                  24,****2004**
              
              **2004**
              
              **2005**
              
              **2005**(In
                  thousands, except per share data)Net
                  revenues
              
              $
              278,721
              
              $
              267,771
              
              $
              265,426
              
              $
              299,690Operating
                  income
              
              
              36,461
              
              
              22,681
              
              
              27,964
              
              
              37,546Income
                  from continuing operations
              
              
              10,247
              
              
              185
              
              
              3,494
              
              
              7,058Net
                  income
              
              
              10,609
              
              
              448
              
              
              3,530
              
              
              3,451Earnings
                  per common share-basic:Income
                    from continuing operations
              
              
              0.35
              
              
              0.01
              
              
              0.12
              
              
              0.24Net
                    income
              
              
              0.36
              
              
              0.02
              
              
              0.12
              
              
              0.12Earnings
                  per common share-diluted:Income
                    from continuing operations
              
              
              0.34
              
              
              0.01
              
              
              0.11
              
              
              0.22Net
                    income
              
              
              0.35
              
              
              0.01
              
              
              0.11
              
              
              0.11







**Fiscal
                Quarters Ended****July
                27,**
            
            **October
                26,**
            
            **January
                25,**
            
            **April
                25,****2003**
            
            **2003**
            
            **2004**
            
            **2004**(In
                thousands, except per share data)Net
                revenues
            
            $
            283,714
            
            $
            267,385
            
            $
            263,484
            
            $
            290,859Operating
                income
            
            
            45,340
            
            
            35,527
            
            
            35,502
            
            
            41,359Income
                from continuing operations
            
            
            13,168
            
            
            10,217
            
            
            7,602
            
            
            (4,656
            )Net
                income
            
            
            13,552
            
            
            10,710
            
            
            7,833
            
            
            (4,346
            )Earnings
                per common share-basic:Income
                from continuing operations
            
            
            0.45
            
            
            0.35
            
            
            0.26
            
            
            (0.16
            )Net
                income
            
            
            0.46
            
            
            0.37
            
            
            0.27
            
            
            (0.15
            )Earnings
                per common share-diluted:Income
                from continuing operations
            
            
            0.44
            
            
            0.33
            
            
            0.24
            
            
            (0.16
            )Net
                income
            
            
            0.45
            
            
            0.35
            
            
            0.25
            
            
            (0.15
            )




Quarterly
      data for fiscal year 2005 may not necessarily sum to the full year data reported
      in the Company’s consolidated financial statements.





The
      first
      quarter of fiscal year 2005 includes $0.06 million related to preopening
      expenses incurred in preparation for the opening of the Blue Chip-Walsall on
      September 23, 2004. The first quarter of fiscal year 2005 excludes $0.4 million
      related to the Colorado Grande-Cripple Creek as discontinued operations.





The
      second quarter of fiscal year 2005 includes $0.2 million related to preopening
      expenses incurred in preparation for the opening of the Blue Chip-Walsall on
      September 23, 2004. The second quarter of fiscal year 2005 excludes $0.3 million
      related to the Colorado Grande-Cripple Creek as discontinued operations.





The
      third
      quarter of fiscal year 2005 includes a valuation charge of $1.6 million related
      to previously capitalized fixed assts for certain projects as a result of
      current uncertainties related to gaming legislation in the UK. The third quarter
      of fiscal year 2005 excludes $0.04 million related to the Colorado
      Grande-Cripple Creek as discontinued operations.










119




**ISLE
        OF CAPRI CASINOS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**




**22.
      Selected Quarterly Financial Information (unaudited)
      (continued)**





The
      fourth quarter of fiscal year 2005 includes $2.3 million gain on sale of option
      related to an option to purchase real estate in St. Louis, Missouri; a reserve
      of $2.5 million for the license in Rosemont, Illinois; and a $5.3 million loss
      on early extinguishment of debt related to the refinancing of the Company’s
      senior secured credit facility on February 4, 2005. The fourth quarter of fiscal
      year 2005 excludes ($3.6) million related to Colorado Grande-Cripple Creek
      as
      discontinued operations.





The
      first
      quarter of fiscal year 2004 includes $0.3 million related to preopening expenses
      incurred in preparation for the opening of the Isle-Our Lucaya on December
      15,
      2003. The first quarter of fiscal year 2004 excludes $0.4 million related to
      the
      Colorado Grande-Cripple Creek as discontinued operations.





The
      second quarter of fiscal year 2004 includes $0.3 million related to preopening
      expenses incurred in preparation for the opening of the Isle-Our Lucaya on
      December 15, 2003. The second quarter of fiscal year 2004 excludes $0.5 million
      related to the Colorado Grande-Cripple Creek as discontinued operations.





The
      third
      quarter of fiscal year 2004 includes $1.5 million related to preopening expenses
      incurred in preparation for the opening of the Isle-Our Lucaya on December
      15,
      2003. The third quarter of fiscal year 2004 excludes $0.2 million related to
      the
      Colorado Grande-Cripple Creek as discontinued operations.





The
      fourth quarter of fiscal year 2004 includes $0.2 million related to preopening
      expenses incurred in preparation for the opening of the Blue Chip-Wolverhampton
      on April 22, 2004. Also included in the fourth quarter of fiscal year 2004
      is
      $26.1 million in loss on early extinguishment of debt in connection with the
      refinancing of the Company’s $390.0 million 8.75% Senior Subordinated Notes on
      March 3, 2004. These other charges include early payment premiums, as well
      as
      the write-off of debt acquisition costs. The fourth quarter of fiscal year
      2004
      excludes $0.3 million related to the Colorado Grande-Cripple Creek as
      discontinued operations.





**23.
      Subsequent Events**





On
      April
      25, 2005, the Company consummated the sale of the Colorado Grande-Cripple Creek
      for $6.5 million payable in $0.6 million cash and a $5.9 million promissory
      note
      secured by the stock of Colorado Grande and Nevada Gold’s future membership
      distributions from the Isle-Black Hawk until the note has been fully repaid.





On
      May 6,
      2005, the Company signed a casino management and related developmental and
      options agreements with resort developer Eighth Wonder to manage the casino
      included in Eighth Wonder’s proposal for a new integrated resort complex in
      Singapore should Eighth Wonder be selected to develop such complex. In the
      first
      quarter fiscal 2006, the Company paid Eighth Wonder $4.0 million pursuant to
      the
      terms of this agreement.





On
      May
      11, 2005, the Company has been selected by the Iowa Racing and Gaming Commission
      as the successful applicant for a gaming license in Waterloo, Iowa. The Company
      plans to spend approximately $119.0 million on constructing a 35,000 square
      foot
      single level casino with 1,300 gaming positions, three of its signature
      restaurants, a 200-room hotel and 1,000 parking spaces. The Company expects
      the
      construction project to take approximately 20 months following the receipt
      of
      necessary permits and licenses, which the company expects to
      receive.








120
 
  **ITEM
        9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
        ACCOUNTING** **AND
        FINANCIAL DISCLOSURE.**





None.





**ITEM
      9A. CONTROLS AND PROCEDURES**





**Evaluation
      of Disclosure Controls and Procedures**





We
      maintain disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in our Exchange Act reports is recorded,
      processed, summarized and reported within the time periods specified in the
      SEC’s rules and forms, and that such information is accumulated and communicated
      to our management, including our Chief Executive Officer and Chief Financial
      Officer, as appropriate, to allow timely decisions regarding required
      disclosure.





As
      of
      April 24, 2005 we carried out an evaluation, under the supervision and with
      the
      participation of our management, including our Chief Executive Officer and
      Chief
      Financial Officer, of the effectiveness of the design and operation of our
      disclosure controls and procedures. Based on the foregoing, our Chief Executive
      Officer and Chief Financial Officer have concluded that the design and operation
      of the Company’s disclosure controls and procedures were effective as of April
      24, 2005.





**Changes
      in Internal Control Over Financial Reporting**





During
      the fiscal quarter and fiscal year ended April 24, 2005, there was no change
      in
      our internal control over financial reporting that has materially affected,
      or
      is reasonably likely to materially affect, our internal control over financial
      reporting.





**Management’s
      Annual Report on Internal Control Over Financial Reporting**





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting, as such term is defined in Exchange Act Rule
      13a-15(f). Under the supervision and with the participation of our management,
      including our Chief Executive Officer and Chief Financial Officer, we conducted
      an evaluation of the effectiveness of our internal control over financial
      reporting based on the framework in *Internal
      Control-Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission. Based
      on our evaluation under the framework in *Internal
      Control-Integrated Framework* ,
      our
      management concluded that our internal control over financial reporting was
      effective as of April 24, 2005 to provide reasonable assurance regarding the
      reliability of financial reporting and the preparation of financial statements
      for external purposes in accordance with generally accepted accounting
      principles. Our management’s assessment of the effectiveness of our internal
      control over financial reporting as of April 24, 2005 has been audited by Ernst
      & Young LLP, an independent registered public accounting firm, as stated in
      their report which is included below, which expresses unqualified opinions
      on
      management’s assessment and on the effectiveness of our internal control over
      financial reporting as of April 24, 2005.





**Report
      of Independent Registered Public Accounting Firm on Internal Control Over
      Financial Reporting**





**The
      Board of Directors and Stockholders of Isle of Capri Casinos, Inc.**





We
      have
      audited management’s assessment, included in the accompanying Management’s
      Annual Report on Internal Control over Financial Reporting, that Isle of Capri
      Casinos, Inc. maintained effective internal control over financial reporting
      as
      of April 24, 2005, based on criteria established in Internal Control -






121




Integrated
      Framework issued by the Committee of Sponsoring Organizations of the Treadway
      Commission (the COSO criteria). Isle of Capri Casinos, Inc.’s management is
      responsible for maintaining effective internal control over financial reporting
      and for its assessment of the effectiveness of internal control over financial
      reporting. Our responsibility is to express an opinion on management’s
      assessment and an opinion on the effectiveness of the company’s internal control
      over financial reporting based on our audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether effective
      internal control over financial reporting was maintained in all material
      respects. Our audit included obtaining an understanding of internal control
      over
      financial reporting, evaluating management’s assessment, testing and evaluating
      the design and operating effectiveness of internal control, and performing
      such
      other procedures as we considered necessary in the circumstances. We believe
      that our audit provides a reasonable basis for our opinion.





A
      company’s internal control over financial reporting is a process designed to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles. A company’s internal control over
      financial reporting includes those policies and procedures that (1) pertain
      to
      the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company; (2)
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the company are
      being made only in accordance with authorizations of management and directors
      of
      the company; and (3) provide reasonable assurance regarding prevention or timely
      detection of unauthorized acquisition, use, or disposition of the company’s
      assets that could have a material effect on the financial
      statements.





Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.





In
      our
      opinion, management’s assessment that Isle of Capri Casinos, Inc. maintained
      effective internal control over financial reporting as of April 24, 2005, is
      fairly stated, in all material respects, based on the COSO criteria. Also,
      in
      our opinion, Isle of Capri Casinos, Inc. maintained, in all material respects,
      effective internal control over financial reporting as of April 24, 2005, based
      on **** the
      COSO
      criteria **.**





We
      also
      have audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the consolidated balance sheets of Isle of
      Capri Casinos, Inc. as of April 24, 2005, and April 25, 2004, and the related
      consolidated statements of income, stockholders’ equity, and cash flows for the
      years ended April 24, 2005, April 25, 2004, and April 27, 2003 **** of
      Isle
      of Capri Casinos, Inc. and our report dated June 28, 2005 expressed an
      unqualified opinion thereon.











**Ernst
      & Young LLP**








New
      Orleans, Louisiana


June
      28,
      2005








122




**ITEM
      9B. OTHER INFORMATION**





None.





**PART
      III**





**ITEM
      10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
      REGISTRANT.**





This
      item
      has been omitted from this report and is incorporated by reference to Isle
      of
      Capri’s definitive proxy statement to be filed with the U.S. Securities and
      Exchange Commission within 120 days after the end of the fiscal year covered
      by
      this report.





**ITEM
      11. EXECUTIVE COMPENSATION.**





This
      item
      has been omitted from this report and is incorporated by reference to Isle
      of
      Capri’s definitive proxy statement to be filed with the U.S. Securities and
      Exchange Commission within 120 days after the end of the fiscal year covered
      by
      this report.





**ITEM
      12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND****MANAGEMENT AND RELATED STOCKHOLDER MATTERS.**





This
      item
      has been omitted from this report and is incorporated by reference to Isle
      of
      Capri’s definitive proxy statement to be filed with the U.S. Securities and
      Exchange Commission within 120 days after the end of the fiscal year covered
      by
      this report.




**ITEM
      13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.**




This
      item
      has been omitted from this report and is incorporated by reference to Isle
      of
      Capri’s definitive proxy statement to be filed with the U.S. Securities and
      Exchange Commission within 120 days after the end of the fiscal year covered
      by
      this report.





**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.**





This
      item
      has been omitted from this report and is incorporated by reference to Isle
      of
      Capri’s definitive proxy statement to be filed with the U.S. Securities and
      Exchange Commission within 120 days after the end of the fiscal year covered
      by
      this report.





123





**PART
      IV**





**ITEM
      15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
      8-K.**





(a)  Documents
      Filed as Part of this Report .





1.  Financial
      Statements .





The
      following financial statements and report of independent registered public
      accounting firm are included on pages 73 to 120 of this Form 10-K:





**Isle
      of Capri Casinos, Inc.**





Report
      of
      Independent Registered Public Accounting Firm


Consolidated Balance Sheets - April 24, 2005 and April 25, 2004


Consolidated Statements of Income - Fiscal Years ended April 24, 2005,


April 25, 2004, and April 27, 2003


Consolidated
      Statements of Stockholders’ Equity - Fiscal Years ended


April
      24,
      2005, April 25, 2004 and April 27, 2003


Consolidated
      Statements of Cash Flows - Fiscal Years ended April 24, 2005,


April
      25,
      2004 and April 27, 2003


Notes
      to
      Consolidated Financial Statements





2.  Financial
      Statements Schedule .





The
      following financial statement schedule is filed on page 126 of this Form 10-K
      and should be read in conjunction with the financial statements included under
      Item 8.





Schedule
      II-Valuation and Qualifying Accounts





All
      other
      schedules are omitted because they are not applicable or not required or because
      the required information is included in the Consolidated Financial Statements
      or
      Notes.





3.  Exhibits .





A
      list of
      the exhibits included as part of this Form 10-K is set forth in the Index to
      Exhibits that immediately precedes such exhibits, which is incorporated herein
      by reference.










124


**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.


**ISLE
      OF CAPRI CASINOS, INC.**





Dated:
      July 6,
      2005 By:/s/
      Bernard Goldstein


Bernard Goldstein, Chairman of the Board,


Chief Executive Officer, and Director





Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities and on the dates indicated.








Dated:
      July 6, 2005 /s/ Bernard Goldstein


Bernard
      Goldstein, Chairman of the Board,


Chief
      Executive Officer and Director


(Principal
      Executive Officer)





Dated:
                July 6, 2005
            /s/
                Rexford A. Yeisley


Rexford
                A. Yeisley, Senior Vice President and Chief Financial Officer


(Principal
      Financial and Accounting Officer)





Dated:
      July 6,
      2005 /s/
      Robert S. Goldstein


Robert
      S.
      Goldstein, Director





Dated:
      July 6,
      2005 /s/
      Alan J. Glazer


Alan
                J. Glazer, Director





Dated:
                July 6, 2005
            /s/
                Emanuel Crystal


Emanuel
                Crystal, Director





Dated:
                July 6, 2005
            /s/
                W. Randolph Baker


W.
                Randolph Baker, Director





Dated:
                July 6, 2005
            /s/
                Jeffrey D. Goldstein


Jeffrey
                D. Goldstein, Director





Dated:
                July 6, 2005
            /s/
                John Brackenbury


John
                Brackenbury, Director







125





**Schedule
                II****Isle
                of Capri Casinos, Inc.****Consolidated
                Valuation and Qualifying Accounts****(In
                thousands)****Additions****Balance
                at Beginning of Period**
            
            **Charged
                to Costs and Expenses**
            
            **Charged
                to Other Accounts**
            
            **Deductions
                from Reserves**
            
            **Balance
                at End of Period****Year
                Ended April 24, 2005**Allowance
                for doubtful accounts
            
            $
            2,510
            
            $
            1,233
            
            $
            558
            
            $
            1,356
            
            $
            2,945Reserve
                against investments in and advancesto
                non-consolidated affiliates (2)
            
            $
            1,923
            
            $
            -
            
            $
            -
            
            $
            1,923
            
            $
            -Reserve
                for impairment of long-lived assets (1)
            
            $
            375
            
            $
            4,136
            
            $
            46
            
            $
            2,515
            
            $
            2,042**Year
                Ended April 25, 2004**Allowance
                for doubtful accounts
            
            $
            2,603
            
            $
            2,019
            
            $
            -
            
            $
            2,112
            
            $
            2,510Reserve
                against investments in and advancesto
                non-consolidated affiliates (2)
            
            $
            1,923
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            1,923Reserve
                for impairment of long-lived assets (3)
            
            $
            17,511
            
            $
            -
            
            $
            -
            
            $
            17,136
            
            $
            375**Year
                Ended April 27, 2003**Allowance
                for doubtful accounts
            
            $
            3,192
            
            $
            -
            
            $
            -
            
            $
            589
            
            $
            2,603Reserve
                against investments in and advancesto
                non-consolidated affiliates (2)
            
            $
            -
            
            $
            1,923
            
            $
            -
            
            $
            -
            
            $
            1,923Reserve
                for impairment of long-lived assets (3)
            
            $
            78,873
            
            $
            -
            
            $
            -
            
            $
            61,362
            
            $
            17,511





(1)
            Total
                valuation charge of $4,136 for the fiscal year ended April 24, 2005
                consists of (1) an impairment charge related to previously capitalized
                fixed assets for certain projects that were determined to be impaired
                as a
                result of adverse gaming legislation in the UK and (2) full write-off
                of
                the license costs at Rosemont (See footnote 15) .


(2)
            Valuation
                charge for the fiscal year ended April 25, 2004 represents an amount
                that
                is fully reserved as a loss contingency against the investment to
                date in
                Ardent Gaming, L.L.C., an unrelated third-party. The system being
                developed under the joint venture is substantially past due and management
                believes it is probable that it will not recover its investment.
                This
                reserve was written off in fiscal year 2005.


(3)
            Valuation
                charge for the fiscal year ended April 27, 2003 consists of impairment
                charges of $59.2 million for the difference between net book value
                of the
                Lady Luck-Las Vegas and the Isle-Tunica and fair value less any costs
                to
                sell, and $2.2 million for a barge and hulls that had been in storage
                for
                future development and offered for sale. These assets were sold in
                fiscal
                2004, and the valuation charge was reversed against the asset
                accounts.


126


**INDEX
        TO EXHIBITS**
 
 **EXHIBIT
        NUMBER**  **DESCRIPTION**
 
 3.1A
              Certificate
                  of Incorporation of Casino America, Inc. (1)3.1B
              Amendment
                  to Certificate of Incorporation of Casino America, Inc.
                  (2)3.2A
              By-laws
                  of Casino America, Inc. (1)3.2B
              Amendments
                  to By-laws of Casino America, Inc., dated February 7, 1997
                  (3)4.3
              Indenture,
                  dated as of March 3, 2004, among Isle of Capri Casinos, Inc., the
                  subsidiary guarantors named therein and U.S. Bank National
                  Association,  as Trustee (4)4.4
              Registration
                  Rights Agreement, dated as of March 3, 2004, among Isle of Capri
                  Casinos,
                  Inc., the subsidiary guarantors named therein and Deutsche Bank
                  Securities
                  Inc. and CIBC World Markets Corp. on behalf of themselves and as
                  representatives of the other initial purchasers (4)4.5
              Indenture,
                  dated as of March 27, 2002 among Isle of Capri Casinos, Inc., the
                  subsidiary guarantors named therein and State Street Bank and Trust
                  Company, as trustee (5)4.8
              Rights
                  Agreement, dated as of February 7, 1997, between Casino America,
                  Inc. and
                  Norwest Bank Minnesota, N.A., as rights agent (6)10.1*
              Casino
                  America, Inc. description of Employee Bonus Plan (7)10.2*
              Director’s
                  Option Plan (8)10.3
              Biloxi
                  Waterfront Project Lease dated as of April 9, 1994 by and between
                  the City
                  of Biloxi, Mississippi and Riverboat Corporation of Mississippi
                  (9)10.4
              First
                  Amendment to Biloxi Waterfront Project Lease (Hotel Lease), dated
                  as of
                  April 26, 1995, by and between Riverboat Corporation of Mississippi
                  (10)10.5
              Amended
                  and Restated Lease, dated as of April 19, 1999, among Port Resources,
                  Inc.
                  and CRU, Inc., as landlords and St. Charles Gaming Company, Inc.,
                  as
                  tenant (11)10.6*
              Amended
                  Casino America, Inc. 1992 Stock Option Plan (12)10.7*
              Amended
                  Casino America, Inc. 1993 Stock Option Plan (13)10.8
              Lease
                  of property in Coahoma, Mississippi dated as of November 16, 1993
                  by and
                  among Roger Allen Johnson, Jr., Charles Bryant Johnson and Magnolia
                  Lady,
                  Inc. (5)10.9
              Addendum
                  to Lease dated as of June 22, 1994 by and among Roger Allen Johnson,
                  Jr.,
                  Charles Bryant Johnson and Magnolia Lady, Inc. (14)10.10
              Second
                  addendum to Lease dated as of October 17, 1995 by and among Roger
                  Allen
                  Johnson, Jr., Charles Bryant Johnson and Magnolia Lady, Inc.
                  (14)10.11
              Amended
                  and Restated Operating Agreement of Isle of Capri Black Hawk, L.L.C.,
                  dated as of July 29, 1997, between Casino America of Colorado,
                  Inc. and
                  Blackhawk Gold, Ltd. as amended (5)10.12
              Development
                  Agreement dated as of June 17, 1997, between City of Bettendorf,
                  Lady Luck
                  Bettendorf, Lady Luck Quad Cities, Inc. and Bettendorf Riverboat
                  Development, LC (5)10.13
              Operator’s
                  Contract, dated as of December 28, 1989, between Riverboat Development
                  Authority and the Connelley Group, LP, as amended on February 9,
                  1990,
                  March 1, 1990, January 1, 1991, September 30, 1994 and March 1,
                  1998
                  (5)10.14*
              Isle
                  of Capri Casinos, Inc. 2000 Long-Term Stock Incentive Plan
                  (15)






127




**INDEX
                  TO EXHIBITS (continued)**10.15*
              Isle
                  of Capri Casinos, Inc. Deferred Bonus Plan (15)10.16*
              Employment
                  Agreement dated as of January 1, 2002 between Isle of Capri Casinos,
                  Inc.
                  and Allan B. Solomon (5)10.17*
              Employment
                  Agreement dated as of January 1, 2002 between Isle of Capri Casinos,
                  Inc.
                  and Rexford A. Yeisley (5)10.18*
              Employment
                  Agreement dated as of January 1, 2002 between Isle of Capri Casinos,
                  Inc.
                  and Timothy M. Hinkley (5)10.19*
              Employment
                  Agreement dated as of January 1, 2002 between Isle of Capri Casinos,
                  Inc.
                  and Bernard Goldstein (5)10.20*
              Employment
                  Agreement dated as of July 1, 2003 between Isle of Capri Casinos,
                  Inc. and
                  Thomas J. Carr (16)10.21
              Third
                  Amended and Restated Credit Agreement, dated as of February 4,
                  2005, among
                  Isle of Capri Casinos, Inc., the lenders listed therein, Canadian
                  Imperial
                  Bank of Commerce, as administrative agent and issuing lender, Deutsche
                  Bank Trust Company Americas and Wells Fargo Bank, N.A., as co-syndication
                  agents, Calyon New York Branch and the CIT/Group/Equipment Financing,
                  Inc., as co-documentation agents and CIBC World Markets Corp.,
                  as lead
                  arranger (17)10.22*
              Isle
                  of Capri Casinos, Inc.’s 2005 Deferred Compensation Plan
                  (18)10.23*
              Isle
                  of Capri Casinos, Inc.’s 1995 Deferred Compensation Plan
                  (18)10.24*
              Isle
                  of Capri Casinos, Inc.’s 2005 Non-employee Director Deferred Compensation
                  Plan (18)10.25*
              Employment
                  Agreement dated as of January 1, 2005 between Isle of Capri Casinos,
                  Inc.
                  and Robert F. Griffin (18)10.26*
              Isle
                  of Capri Casinos, Inc. Master Retirement Plan10.27
              First
                  Amended and Restated Credit Agreement, dated as of April 22, 2003,
                  by and
                  among Isle of Capri Black Hawk, L.L.C., Canadian Imperial Bank
                  of
                  Commerce, as administrative agent, the agents named therein and
                  certain
                  other lenders party from time to time thereto10.28
              First
                  Amendment to First Amended and Restated Credit Agreement, dated
                  as of
                  February 6, 2004, by and among Isle of Capri Black Hawk, L.L.C.,
                  Canadian
                  Imperial Bank of Commerce, as administrative agent, the credit
                  support
                  parties named therein and certain other lenders party from time
                  to time
                  thereto10.29
              Second
                  Amendment to First Amended and Restated Credit Agreement, dated
                  as of July
                  26, 2004, by and among Isle of Capri Black Hawk, L.L.C., Canadian
                  Imperial
                  Bank of Commerce, as administrative agent, the credit support parties
                  named therein and certain other lenders party from time to time
                  thereto10.30
              Third
                  Amendment to First Amended and Restated Credit Agreement, dated
                  as of
                  April 22, 2005, by and among Isle of Capri Black Hawk, L.L.C.,
                  Canadian
                  Imperial Bank of Commerce, as administrative agent, the credit
                  support
                  parties named therein and certain other lenders party from time
                  to time
                  thereto (19)12.1
              Computation
                  of ratio of earnings to fixed charges.21.1
              Subsidiaries
                  of Isle of Capri Casinos, Inc.23.1
              Consent
                  of Ernst & Young LLP






128




**INDEX
                  TO EXHIBITS (continued)**31.1
              Certification
                  of Chief Executive Officer pursuant to Rule 13a - 14(a) under the
                  Securities Exchange Act of 1934, filed under Exhibit 31 of Item
                  601 of
                Regulation
                  S-K.31.2
              Certification
                  of Chief Financial Officer pursuant to Rule 13a - 14(a) under the
                  Securities Exchange Act of 1934, filed under Exhibit 31 of Item
                  601 of
                  Regulation S-K.32.1
              Certification
                  of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002 (18 U.S.C. Section 1350) filed under Exhibit 32 of
                  Item 601 of
                  Regulation S-K.32.2
              Certification
                  of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002 (18 U.S.C. Section 1350) filed under Exhibit 32 of
                  Item 601 of
                  Regulation S-K.(1)
              Filed
                  as an exhibit to Casino America, Inc.’s Registration Statement on Form S-1
                  filed September 3, 1993, as amended (Reg. No. 33-68434), and incorporated
                  herein by reference.(2)
              Filed
                  as an exhibit to Casino America, Inc.’s Proxy Statement for the fiscal
                  year ended April 26, 1998 (File No. 0-20538) and incorporated herein
                  by
                  reference.(3)
              Filed
                  as an exhibit to Isle of Capri Casinos, Inc.’s Annual Report on Form 10-K
                  for the fiscal year ended April 27, 1997 (File No. 0-20538) and
                  incorporated herein by reference.(4)
              Filed
                  as an exhibit to Isle of Capri Casinos, Inc.’s Registration Statement on
                  Form S-4 filed on May 12, 2004 (File No. 333-115419) and incorporated
                  herein by reference.(5)
              Filed
                  as an exhibit to Isle of Capri Casinos, Inc.’s Amendment No. 1 to
                  Registration Statement on Form S-4 filed on June 19, 2002 (File
                  No.
                  333-88802) and incorporated herein by reference.(6)
              Filed
                  as an exhibit to Casino America, Inc.’s Current Report on Form 8-K filed
                  on February 14, 1997 (File No. 0-20538) and incorporated herein
                  by
                  reference.(7)
              Filed
                  as an exhibit to Casino America, Inc.’s Annual Report on form 10-K for the
                  fiscal year ended April 30, 1993 (File No. 0-20538) and incorporated
                  herein by reference.(8)
              Filed
                  as an exhibit to Casino America, Inc.’s Registration Statement on Form S-8
                  filed June 30, 1994 (File No. 33-80918) and incorporated herein
                  by
                  reference.(9)
              Filed
                  as an exhibit to Casino America, Inc.’s Annual Report on Form 10-K for
                  fiscal year ended April 30, 1994 (File No. 0-20538) and incorporated
                  herein by reference.(10)
              Filed
                  as an exhibit to Casino America, Inc.’s Annual Report on Form 10-K for
                  fiscal year ended April 30, 1995 (File No. 0-20538) and incorporated
                  herein by reference.(11)
              Filed
                  as an exhibit to Isle of Capri Casinos, Inc.’s Annual Report on Form 10-K
                  for the fiscal year ended April 25, 1999 (File No. 0-20538) and
                  incorporated herein by reference.(12)
              Filed
                  as an exhibit to Casino America, Inc.’s Proxy Statement for the fiscal
                  year ended April 30, 1996 (File No. 0-20538) and incorporated herein
                  by
                  reference.(13)
              Filed
                  as an exhibit to Casino America, Inc.’s Proxy Statement for the fiscal
                  year ended April 27, 1997 (File No. 0-20538) and incorporated herein
                  by
                  reference.






129




**INDEX
                  TO EXHIBITS (continued)**(14)
              Filed
                  as an exhibit to Isle of Capri Casinos, Inc.’s Annual Report on Form 10-K
                  for the fiscal year ended April 30, 2000 (File No. 0-20538) and
                  incorporated herein by reference.(15)
              Filed
                  as an exhibit to Isle of Capri Casinos, Inc.’s Proxy Statement for the
                  fiscal year ended April 30, 2000 (File No. 0-20538) and incorporated
                  herein by reference.(16)
              Filed
                  as an exhibit to Isle of Capri Casinos, Inc.’s Annual Report on Form 10-K
                  for the fiscal year ended April 24, 2005 (File No. 0-20538) and
                  incorporated herein by reference.(17)
              Filed
                  as an exhibit to Isle of Capri Casinos, Inc.’s Current Report on Form 8-K
                  filed on February 10, 2005 (File No. 0-20538) and incorporated
                  herein by
                  reference.(18)
              Filed
                  as an exhibit to Isle of Capri Casinos, Inc.’s Quarterly Report on Form
                  10-Q for the fiscal quarter ended January 23, 2005 (File No. 0-20538)
                  and
                  incorporated herein by reference.(19)
              Filed
                  as an exhibit to Isle of Capri Casino, Inc.’s Current Report on Form 8-K
                  filed on April 28, 2005 (File No. 0-20538) and incorporated herein
                  by
                  reference.
 * Management
        contract or compensatory plan or arrangement.
   130