**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

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**FORM 10-K**

 

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**(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 27, 2008**                                                                                                                                                                      |
| ** ** | ** ** | **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 ofregistrant as specified in its charter)

 

| **Delaware**                                                               | ** ** | **41-1659606**                             |
|----------------------------------------------------------------------------|------------|--------------------------------------------|
| (State  or other jurisdiction

of  incorporation or organization)          |       | (I.R.S.  Employer

Identification  Number) |
|                                                                       |       |                                       |
| **600  Emerson Road, Suite 300, St. Louis, Missouri**                 | ** ** | **63141**                                  |
| (Address of principal executive offices)                                   |       | (Zip Code)                                 |
|                                                                       |       |                                       |
| Registrant’s telephone number, including area code:**(314) 813-9200** |

 

SecuritiesRegistered Pursuant to Section 12(b) of the Act: **None**

 

SecuritiesRegistered Pursuant to Section 12(g) of the Act:

**CommonStock, $.01 Par Value Per Share**

(Title of Class)

 

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Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the SecuritiesAct.  Yes o  No x

 

Indicate by check mark if the registrant is notrequired to file reports pursuant to Section 13 or Section 15(d) ofthe Act.  Yes o  No x

 

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

 

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K is not contained herein, andwill not be contained, to the best of registrant’s knowledge, in definitiveproxy or information statements incorporated by reference in Part III ofthis Form 10-K or any amendment to this Form 10-K.  x

 

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, a non-accelerated filer, or asmaller reporting company. See the definitions of “large accelerated filer,”“accelerated filer” and “smaller reporting company” in Rule 12b-2 of theExchange Act.

 
| Large  accelerated filer  o                                              |   | Accelerated  filer  x |
|------------------------------------------------------------------------------------|--------|---------------------------------|
|                                                                               |   |                            |
| Non-accelerated  filer  o (Do not check if a smaller reporting  company) |   | Smaller  reporting company o    |

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

 

The aggregate market valueof the voting and non-voting stock held by non-affiliates(1) of theCompany is $333,184,516, based on the last reported sale price of $20.61 pershare on October 26, 2007 on the NASDAQ Stock Market; multiplied by16,166,158 shares of Common Stock outstanding and held by non-affiliates of theCompany on such date.

 

As of July 8, 2008, the Company had a total of30,857,558 shares of Common Stock outstanding (which excludes 4,372,073 sharesheld by us in treasury).

 

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

 

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Part III incorporates information byreference to the Registrant’s definitive proxy statement to be filed with theSecurities and Exchange Commission within 120 days after the end of the fiscalyear.

 

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**ISLE OFCAPRI CASINOS, INC.**

**FORM 10-K**

**INDEX**

 
| ** **      | ** **                                                                                                          | **PAGE** |
|-----------------|---------------------------------------------------------------------------------------------------------------------|----------|
| *PART I*   |                                                                                                                | 2        |
|            |                                                                                                                |     |
| ITEM 1.    | BUSINESS                                                                                                            | 2        |
|            |                                                                                                                |     |
| ITEM 1A.   | RISK FACTORS                                                                                                        | 9        |
|            |                                                                                                                |     |
| ITEM 1B.   | UNRESOLVED STAFF COMMENTS                                                                                           | 15       |
|            |                                                                                                                |     |
| ITEM 2.    | PROPERTIES                                                                                                          | 15       |
|            |                                                                                                                |     |
| ITEM 3.    | LEGAL PROCEEDINGS                                                                                                   | 19       |
|            |                                                                                                                |     |
| ITEM 4.    | SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                | 19       |
|            |                                                                                                                |     |
| *PART II*  |                                                                                                                | 20       |
|            |                                                                                                                |     |
| ITEM 5.    | MARKET FOR  REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES  OF EQUITY SECURITIES | 20       |
|            |                                                                                                                |     |
| ITEM 6.    | SELECTED  FINANCIAL DATA                                                                                            | 22       |
|            |                                                                                                                |     |
| ITEM 7.    | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                         | 24       |
|            |                                                                                                                |     |
| ITEM 7A.   | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                         | 37       |
|            |                                                                                                                |     |
| ITEM 8.    | FINANCIAL  STATEMENTS AND SUPPLEMENTARY DATA                                                                        | 39       |
|            |                                                                                                                |     |
| ITEM 9.    | CHANGES IN  AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                               | 75       |
|            |                                                                                                                |     |
| ITEM 9A.   | CONTROLS AND  PROCEDURES                                                                                            | 75       |
|            |                                                                                                                |     |
| ITEM 9B.   | OTHER INFORMATION                                                                                                   | 76       |
|            |                                                                                                                |     |
| *PART III* |                                                                                                                | 76       |
|            |                                                                                                                |     |
| ITEM 10.   | DIRECTORS,  EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                             | 76       |
|            |                                                                                                                |     |
| ITEM 11.   | EXECUTIVE  COMPENSATION                                                                                             | 76       |
|            |                                                                                                                |     |
| ITEM 12.   | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL  OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS                     | 76       |
|            |                                                                                                                |     |
| ITEM 13.   | CERTAIN  RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE                                          | 76       |
|            |                                                                                                                |     |
| ITEM 14.   | PRINCIPAL  ACCOUNTANT FEES AND SERVICES                                                                             | 76       |
|            |                                                                                                                |     |
| *PART IV*  |                                                                                                                | 76       |
|            |                                                                                                                |     |
| ITEM 15.   | EXHIBITS,  FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                                                    | 76       |
|            |                                                                                                                |     |
| SIGNATURES      | 77                                                                                                                  |

 

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**DISCLOSUREREGARDING FORWARD-LOOKING STATEMENTS**

 

*This report contains statements that we believe are, or maybe considered to be, “forward-looking statements” within the meaning of thePrivate Securities Litigation Reform Act of 1995. All statements other thanstatements of historical fact included in this report regarding the prospectsof our industry or our prospects, plans, financial position or businessstrategy, may constitute forward-looking statements. In addition, forward-lookingstatements generally can be identified by the use of forward-looking words suchas “may,” “will,” “expect,” “intend,” “estimate,” “foresee,” “project,” “anticipate,”“believe,” “plans,” “forecasts,” “continue” or “could” or the negatives of theseterms or variations of them or similar terms. Furthermore, such forward-lookingstatements may be included in various filings that we make with the SEC orpress releases or oral statements made by or with the approval of one of ourauthorized executive officers. Although we believe that the expectationsreflected in these forward-looking statements are reasonable, we cannot assureyou that these expectations will prove to be correct. These forward-lookingstatements are subject to certain known and unknown risks and uncertainties, aswell as assumptions that could cause actual results to differ materially fromthose reflected in these forward-looking statements. Factors that might causeactual results to differ include, but are not limited to, those discussed inthe section entitled “Risk Factors” beginning on page 2 of this Report.Readers are cautioned not to place undue reliance on any forward-lookingstatements contained herein, which reflect management’s opinions only as of thedate hereof. Except as required by law, we undertake no obligation to revise orpublicly release the results of any revision to any forward-looking statements.You are advised, however, to consult any additional disclosures we make in ourreports to the SEC. All subsequent written and oral forward-looking statementsattributable to us or persons acting on our behalf are expressly qualified intheir entirety by the cautionary statements contained in this Report.*

 

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**PART I**

 

**ITEM 1. BUSINESS**

**Overview**

 

Weare a leading developer, owner and operator of branded gaming facilities andrelated lodging and entertainment facilities in regional markets in the UnitedStates and internationally. We currently operate 14 casinos in the United States,located in Mississippi, Louisiana, Missouri, Iowa, Colorado and Florida.Internationally we operate 4 casinos in Coventry, Dudley and Wolverhampton,England and Freeport, Grand Bahamas. We also operate a harness racing track atour casino in Florida.

 

Ourfiscal year ends each year on the last Sunday of April. During fiscal 2008, weopened casinos developed by us in Waterloo, Iowa and Coventry, England;completed the acquisition of our casino in Caruthersville, Missouri; purchasedthe 43% minority interest not owned by us in our Black Hawk, Coloradoproperties; and completed the opening of our new casino in Pompano, Florida.Also in fiscal 2008, we had significant changes to our executive managementteam, as James Perry joined us as Chief Executive Officer and as a director;Virginia McDowell became our President and Chief Operating Officer; and DaleBlack became our Chief Financial Officer.

 

Duringfiscal 2008 we developed and announced a strategic plan designed to improve ourfree cash flow. This plan includes developing two distinct brands within ourbusiness, Isle and Lady Luck, and reinvesting in our core assets.

 

TheIsle brand and will be introduced at our properties which have a regional drawand tend to be in larger markets where we have expansion potential demonstratedby either the size of the market or excess land that we control. The Isle brandwill offer expanded amenities, usually offering hotel rooms, expanded food andbeverage offerings and conference and convention capabilities.

 

TheLady Luck casinos will be focused on a local customer base, typically insmaller markets with less growth potential. The goal of the Lady Luck brandwill be to offer the best entertainment option for the respective marketfeaturing casual dining, and popular local entertainment in a comfortablesetting.

 

Theoperating focus of both brands will be to deliver superior guest experience byproviding customers with the most popular gaming product in a clean, safe,friendly and fun environment. We have begun implementing several operatinginitiatives to improve on these attributes as customer research consistentlyconfirms that these are the primary drivers in our customers decision makingprocess in choosing a casino to attend. To this end we have implemented a customercourtesy program whereby we will measure our progress against three primarycourtesy behaviors and incentivise our employees on improvements. In additionour maintenance, capital, and operating plans have been designed to improve onareas where customers have told us we are lacking in these key areas of clean,safe, friendly and fun. Finally we have designed our incentive plans to alignemployee incentives with the key initiatives and shareholders’ needs.

 

Through the strategicplanning process we identified several capital projects which we will seek toimplement over the next 18 to 24 months and beyond, aimed at enhancing theexperience of our customers and consistent with a brand strategy that isdesigned to clearly define the experience that will be delivered by each brand.This will enable us to manage the expectations of our customers, employees andthe investment community, and will align our operating strategy with the needsof our customers in each market. We believe that these internal projects offerus the highest potential uses of the free cash flow that we expect to generatein the intermediate term, as we look to improve our properties and also beginto de-lever our Company.

 

We expect thatapproximately $160 million will go towards the rebuilding and refurbishment ofthe Biloxi property, which we plan to begin as soon as we determine the timingof the settlement of our Hurricane Katrina insurance claims, and our goal is tohave the project completed roughly in line with the Margaritaville projectwhich is being developed adjacent to our property.     We expect the insurance proceeds will provide a significantportion of the construction cost of the Biloxi project. The Biloxi project isexpected to include a new single level casino, restoration of our conventionspace, new food venues, and renovation of the hotel rooms in the south hoteltower.

 

Additionally, we haveearmarked approximately $16 million to $18 million to convert several of ourlocal facilities to the Lady Luck brand. The Company plans to re-brand itsproperties in Davenport, Iowa, Lula, Mississippi, and Marquette, Iowa, andcomplete the re-branding in Caruthersville.

 

Lastly, we have identified approximately 1,200 hotel rooms(approximately forty percent of our room inventory) and many of the publicareas in our hotels which are in need of renovation. We expect to begin therenovations once we have more clarity on the macro economic picture, ouroperating success and credit flexibility and better understand the estimatedcosts of completing the renovations.

 

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**Casino Properties**

 

Thefollowing is an overview of our existing casino properties as of the end offiscal year 2008:

 
| ** **                               | ** ** | **Date Acquired or** | ** ** | **Slot**     | ** ** | **Table**  | ** ** | **Hotel**  | ** ** | **Parking** | ** ** |
|------------------------------------------|------------|--------------------------------|------------|--------------|------------|------------|------------|------------|------------|-------------|------------|
| **Property**                             | ** ** | **Opened**                     | ** ** | **Machines** | ** ** | **Games**  | ** ** | **Rooms**  | ** ** | **Spaces**  | ** ** |
| ** **                               | ** ** | ** **                     | ** ** | ** **   | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** |
| *Louisiana*                              |       |                           |       |         |       |       |       |       |       |        |       |
| Lake  Charles                            |       | July 1995                 |       | 1,961        |       | 76         |       | 493        |       | 2,335       |       |
| *Mississippi*                            |       |                           |       |         |       |       |       |       |       |        |       |
| Lula                                     |       | March 2000                |       | 1,305        |       | 15         |       | 487        |       | 1,583       |       |
| Biloxi                                   |       | August 1992               |       | 1,336        |       | 40         |       | 710        |       | 1,600       |       |
| Natchez                                  |       | March 2000                |       | 630          |       | 11         |       | 141        |       | 908         |       |
| *Missouri*                               |       |                           |       |         |       |       |       |       |       |        |       |
| Kansas  City                             |       | June 2000                 |       | 1,335        |       | 25         |       | —     |       | 1,807       |       |
| Boonville                                |       | December 2001             |       | 947          |       | 27         |       | 140        |       | 1,101       |       |
| Caruthersville                           |       | June 2007                 |       | 651          |       | 23         |       | —     |       | 1,000       |       |
| *Iowa*                                   |       |                           |       |         |       |       |       |       |       |        |       |
| Bettendorf                               |       | March 2000                |       | 1,026        |       | 36         |       | 514        |       | 2,063       |       |
| Rhythm  City-Davenport                   |       | October 2000              |       | 972          |       | 14         |       | —     |       | 968         |       |
| Marquette                                |       | March 2000                |       | 614          |       | 13         |       | 25         |       | 475         |       |
| Waterloo                                 |       | July 2007                 |       | 1,101        |       | 35         |       | 195        |       | 1,127       |       |
| *Colorado*                               |       |                           |       |         |       |       |       |       |       |        |       |
| Black  Hawk                              |       | December 1998             |       | 1,371        |       | 18         |       | 238        |       | 1,100       |       |
| Colorado  Central Station - Black Hawk   |       | April 2003                |       | 644          |       | 16         |       | 164        |       | 1,200       |       |
| *Florida*                                |       |                           |       |         |       |       |       |       |       |        |       |
| Pompano  Park                            |       | July 1995/April 2007 |       | 1,500        |       | 38         |       | —     |       | 3,962       |       |
| *International Properties*               |       |                           |       |         |       |       |       |       |       |        |       |
| Our  Lucaya                              |       | December 2003             |       | 303          |       | 25         |       | —     |       | —      |       |
| Blue  Chip-Dudley (66 2/3% owned)        |       | November 2003             |       | 20           |       | 9          |       | —     |       | 40          |       |
| Blue  Chip-Wolverhampton (66 2/3% owned) |       | April 2004                |       | 20           |       | 11         |       | —     |       | 25          |       |
| Coventry                                 |       | July 2007                 |       | 20           |       | 31         |       | —     |       | 100         |       |

 

***Louisiana***

 

*Lake Charles*

 

LakeCharles, which commenced operations in July 1995, is located on a 19-acresite along Interstate 10, the main thoroughfare connecting Houston, Texas toLake Charles, Louisiana. The property consists of two dockside casinos offering1,961 slot machines and 76 table games, a 252-room deluxe hotel, a separate241-room hotel, a 105,000 square foot land-based pavilion and entertainmentcenter, and 2,335 parking spaces, including approximately 1,400 spaces in anattached parking garage. The pavilion and entertainment center offer customersa wide variety of non-gaming amenities, including a 97-seat Farraddays’restaurant, a 360-seat Calypso’s buffet, a 165-seat Tradewinds Marketplace, a64-seat Lucky Wins oriental restaurant and Caribbean Cove, which features freelive entertainment and can accommodate 180 customers. The pavilion also has a14,750 square foot entertainment center comprised of an 1,100-seat specialevents center designed for concerts, live boxing, televised pay-per-viewevents, banquets and other events, meeting facilities and administrativeoffices.

 

TheLake Charles market currently consists of two dockside gaming facilities (whichinclude our property and Pinnacle Entertainment’s one-level facility), a NativeAmerican casino and a pari-mutuel facility/racino (operated by Boyd Gaming).Pinnacle Entertainment is in the process of developing their second casino(utilizing a license acquired from Harrah’s Entertainment after Hurricane Rita)which would be adjacent to their current facility. It is expected to be inoperation by early 2010. The current number of slot machines in the marketexceeds 8,200 machines and table games exceed 200 tables. In calendar year2007, the two gaming facilities (Isle and Pinnacle) and one racino (Boyd), inthe aggregate, generated gaming revenues of approximately $640.6 million.Revenues for the Native American property are not published. Lake Charles isthe closest gaming market to the Houston metropolitan area, which has apopulation of approximately 5.5 million and is located approximately 140miles west of Lake Charles. We believe that the Isle-Lake Charles attractscustomers primarily from southeast Texas, including Houston, Beaumont,Galveston, Orange and Port Arthur and from local area residents. Approximately520,000 and 1.6 million people reside within 50 and 100 miles,respectively, of the Isle-Lake Charles.

 

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***Mississippi***

 

*Lula*

 

Lula,which we acquired in March 2000, is strategically located off of Highway49, the only road crossing the Mississippi River between Mississippi andArkansas for more than 50 miles in either direction. The property consists oftwo dockside casinos containing 1,305 slot machines and 15 table games, twoon-site hotels with a total of 487 rooms, a land-based pavilion andentertainment center, 1,583 parking spaces, and a new 28-space RV Park, whichopened in July of 2007. The pavilion and entertainment center offer a widevariety of non-gaming amenities, including a 145-seat Farraddays’ restaurant, a300-seat Calypso’s buffet and a 44-seat Tradewinds Marketplace.

 

Ourcasino property is the only gaming facility in the Coahoma County, Mississippimarket and generated gaming revenues of approximately $78.7 million in calendaryear 2007. Lula draws a significant amount of business from the Little Rock,Arkansas metropolitan area, which has a population of approximately 666,000 andis located approximately 120 miles west of the property. Coahoma County is alsolocated approximately 60 miles southwest of Memphis, Tennessee, which isprimarily served by 9 casinos in Tunica, Mississippi. In addition, November 2007saw the opening of a new competitor, Harlow’s Casino, 90 miles down-river fromLula in Greenville, MS. The opening of this new casino resulted in a 3% averagereduction in the overall market share of Mississippi’s Northern Region, whichincludes Lula. The greater part of that impact was in our primary targetmarket. Approximately 964,000 people reside within the property’s primarytarget market. Lula also competes with Native American casinos in Oklahoma anda racino in Memphis, Tennessee.

 

*Biloxi*

 

Biloxi,which commenced operations in August 1992, is located on a 17-acre site atthe eastern end of a cluster of facilities formerly known as “Casino Row” inBiloxi, Mississippi, and is the first property reached by visitors coming fromAlabama, Florida and Georgia via Highway 90.

 

OnAugust 29, 2005 the property was significantly damaged by HurricaneKatrina. The property was closed on August 28, 2005 and remained closed tothe public until December 26, 2005. The Highway 90 bridge spanning BiloxiBay, located immediately to the east of the property, was also destroyed. Thebridge was replaced with a new, larger bridge which partially opened in November 2007and fully opened in April 2008.

 

InOctober 2005, the Mississippi legislature amended its gaming laws to allowcasinos to operate land-based facilities within 800 feet of the mean high waterline. Our Biloxi property is a land-based casino offering approximately 1,336gaming positions, a 710-room hotel including 200 whirlpool suites, a 120-seatrestaurant called “A Taste of Farraddays’,” a 200-seat Calypso’s buffet, aTradewinds Express and 1,600 parking spaces. In May 2006, we completed therenovation of our existing atrium that added a new multi-story feature bar,connected the parking garage with the atrium by a covered walkway, andincreased the number of parking spaces to approximately 1,600. In November 2006,we opened a 138-seat fine-dining restaurant and osteria called Bragozzo. In February 2007,we opened a full service Starbucks. In September 2007, we converted theBragozzo restaurant to a full service Farraddays’ restaurant and converted “ATaste of Farraddays” to a banquet room called “Paradise Room” used to holdspecial events such as player parties.

 

Priorto Hurricane Katrina, the Mississippi Gulf Coast market (which includes Biloxi,Gulfport and Bay St. Louis) was one of the largest gaming markets in the UnitedStates and consisted of 12 dockside gaming facilities which, in the aggregate,generated gaming revenues of $1.2 billion during calendar year 2004, which wasthe last full calendar year before the storm. Including the Isle, elevencasinos have re-entered the market since Hurricane Katrina. In calendar year2007, the Gulf Coast market reached revenues of $1.3 billion.

 

*Natchez*

 

Natchez,which we acquired in March 2000, is located off of Highways 84 and 61 inwestern Mississippi. The property consists of a dockside casino offering 630 slotmachines and 11 table games, a 141-room off-site hotel located approximatelyone mile from the casino, a 150-seat Calypso’s buffet and 908 parking spaces.

 

Ourproperty is currently the only gaming facility in the Natchez market andgenerated total revenues of approximately $42.2 million in calendar year 2007.We believe that the Isle-Natchez attracts customers primarily from among the117,000 people residing within 50 miles of the Isle-Natchez.  The Grand Soleil Casino Company began siteconstruction for its river 

 

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boatcasino and land-based hotel during early 2008. Construction has been halted andrestarted several times due to legal and financial issues, but we expect thatthe facility could potentially open and impact the Natchez market by early2009.

 

***Missouri***

 

*Kansas City*

 

OurKansas City property, which we acquired in June 2000, is the closestgaming facility to downtown Kansas City and consists of a dockside casinooffering 1,335 slot machines and 25 table games, a 96-seat Farraddays’ Bistrorestaurant, a 260-seat Calypso’s buffet, a 45-seat Tradewinds Marketplace and1,807 parking spaces. Plans for an $85 million expansion project at our KansasCity property were cancelled in fiscal year 2008 and as a result, $1.1 millionof the project costs were written off.

 

TheKansas City market consists of four dockside gaming facilities and a tribalcasino that, in the aggregate, generated gaming revenues of approximately$720.7 million in calendar year 2007. The other operators of the docksidegaming facilities in this market are Ameristar Casinos, Penn National Gaming(formerly Argosy Gaming) and Harrah’s Entertainment. The tribal casino, ownedby the Wyandotte Tribe, opened in January 2008 with 430 class II slots andgenerated about $4.4 million gaming revenue during the first three months ofoperations. We believe that our Kansas City casino attracts customers primarilyfrom the Kansas City metropolitan area, which has approximately1.9 million residents.

 

Inthe spring of 2007, the Kansas legislature authorized casinos in severallocations throughout the State of Kansas, including two in the Kansas City,Kansas area. This process is on-going with one of the Kansas City, Kansas areacasinos proposed to be located at the Woodlands Track and the other proposed tobe a resort-type destination casino.

 

Inthe fourth quarter of fiscal year 2008, the State of Missouri, beganreconstruction of the Paseo Bridge and interchanges adjacent to ourproperty.  The construction is expectedto continue into fiscal 2011.  While weexpect traffic access to our property to be maintained during the constructionperiod, our customers will be subject to changes in their egress routes.

 

*Boonville*

 

OurBoonville property, which opened on December 6, 2001, is located off ofInterstate 70, approximately halfway between Kansas City and St. Louis. Theproperty consists of a single level dockside casino offering 947 slot machines,21 table games and 6 poker tables, a 140-room hotel that opened inMay 2006, a 32,400 square foot pavilion and entertainment center and 1,101parking spaces. The pavilion and entertainment center offers customers a widevariety of non-gaming amenities, including an 83-seat Farraddays’ restaurant, a218-seat Calypso’s buffet, a 24-seat Tradewinds Marketplace, an 800 seat eventcenter, and a historic display area. We are the only gaming facility betweenKansas City, Missouri, and St. Louis, Missouri and generated gaming revenues ofapproximately $83.5 million in calendar year 2007. We believe that ourBoonville casino attracts customers primarily from the mid-Missouri regionincluding the Columbia and Jefferson City areas.

 

*Caruthersville*

 

Our Caruthersville property was acquired onJune 11, 2007 and is a riverboat casino located along the Mississippiriver in Southeast Missouri.  InJune 2008, the casino was re-branded as a Lady Luck casino.  The property consists of 651 slot machines,15 table games and 8 poker games. Caruthersville is the only casino located in Southeast Missouri.

 

***Iowa***

 

*Bettendorf*

 

TheBettendorf property, which we acquired in March 2000, is located off ofInterstate 74, an interstate highway serving the Quad Cities metropolitan area.The property consists of a dockside casino offering 1,026 slot machines and 36table games, a 514-room hotel, including a new $45 million, 258-room tower,which opened in May 2007, approximately 20,500 square feet ofconvention/banquet space, a 102-seat Farraddays’ restaurant, a 272-seatCalypso’s buffet, a 26-seat Tradewinds Marketplace and 2,063 parkingspaces.  We have entered into agreementswith the City of Bettendorf, Iowa under which the City is constructing anevents center adjacent to our new hotel. We will lease, manage, and provide financial and operating support forthe events center.

 

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TheQuad Cities metropolitan area, consisting of Bettendorf and Davenport, Iowa andMoline and Rock Island, Illinois, currently has three gaming operations—our twogaming facilities in Bettendorf and in Davenport, and one smaller operator,which has recently received approval to relocate within the market andconstruct a substantially larger facility. The three operations in the QuadCities generated, in the aggregate, gaming revenues of approximately $189.9million in calendar year 2007. Our operations in the Quad Cities also competewith other gaming operations in Illinois and Iowa.

 

*Davenport*

 

OurDavenport property, which we acquired in October 2000, is located at theintersection of River Drive and Highway 61, a state highway serving the QuadCities metropolitan area. The property consists of a dockside gaming facilityoffering 972 slot machines and 14 table games, a 228-seat Hit Parade buffet, aGrab-n-Go food outlet and 968 parking spaces.

 

*Marquette*

 

OurMarquette property, which we acquired in March 2000, is located inMarquette, Iowa, approximately 60 miles north of Dubuque, Iowa. The propertyconsists of a dockside casino offering 614 slot machines and 13 table games, aland-based facility which includes a 165-seat Calypso’s buffet restaurant, aTradewinds Marketplace, an entertainment showroom, a 25-room hotel, a marinaand 475 parking spaces.

 

Weare the only gaming facility in the Marquette, Iowa market and generated gamingrevenues of approximately $36.6 million in calendar year 2007. We believe mostof our Marquette customers are from northeast Iowa and Wisconsin and we competefor those customers with other gaming facilities in Iowa and Wisconsin.

 

*Waterloo*

 

OurWaterloo property, which opened on June 30, 2007, is located adjacent toHighway 218 and US 20 in Waterloo, Iowa. The property consists of a singlelevel casino offering 1,101 slot machines, 29 table games and 6 poker tables.The property also offers a wide variety of non-gaming amenities, including a105-seat Farraddays’ restaurant  a208-seat Isle buffet, a 36-seat Tradewinds marketplace, a 12-seat Starbucks,Club Capri Lounge, Fling feature bar, 5,000 sq. ft. of meeting space, over1,100 parking spaces and a 195-room hotel, which includes 27 suites, as well asan indoor pool and hot tub area.

 

Weare the only gaming facility in the Waterloo, Iowa market. We compete withother casinos in eastern Iowa. We generated gaming revenues of approximately$39.0 million in calendar year 2007, which included the first six months of theproperty’s operations.

 

***Colorado***

 

*Black Hawk*

 

OurBlack Hawk property, which operates as a Isle branded casino, commencedoperations in December 1998, is located on an approximately 10-acre siteand is one of the first gaming facilities reached by customers arriving fromDenver via Highway 119, the main thoroughfare connecting Denver to Black Hawk.The property includes a land-based casino with 1,371 slot machines and 18 tablegames, 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-gamingamenities, including a 96-seat Farraddays’ restaurant, a 228-seat Calypso’sbuffet and a 32-seat Tradewinds Marketplace. In January 2008, Isle of Capri acquired the remaining minorityinterest in of this property from Nevada Gold & Casinos Inc., and wenow own 100% of the Isle-Black Hawk.

 

*The Colorado Central Station-Black Hawk*

 

TheColorado Central Station-Black Hawk, which we acquired in April 2003, islocated across the intersection of Main Street and Mill Street from theIsle-Black Hawk. The property consists of a land-based casino with 644 slotmachines, 16 table games, a 164-room hotel that opened in December 2005and 1,200 parking spaces in our parking structure connecting Isle-Black Hawkand Colorado Central Station-Black Hawk. The property also offers guests diningin its Station Café  that was opened inearly 2007 as well as a Quizno’s sandwich franchise that is located in thebasement of the facility.  All threesites are connected via sky bridges. In January 2008, we acquired theminority interest in this property from Nevada Gold & Casinos Inc.,and we now own 100% of the Black Hawk operations.

 

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Whencasinos having multiple gaming licenses in the same building are combined, theBlack Hawk/Central City market consists of 23 gaming facilities (eight of whichhave more than 600 slot machines), which in aggregate, generated gamingrevenues of approximately $661.2 million in calendar year 2007. Black Hawk isthe closest gaming market to the Denver, Colorado metropolitan area, which hasa population of approximately 2.7 million and is located approximately 40miles east of Black Hawk. We believe that the Black Hawk and Colorado CentralStation-Black Hawk attract customers primarily from Denver, Boulder, FortCollins and Golden, Colorado and Cheyenne, Wyoming.

 

**Florida**

 

*Pompano*

 

In1995, we acquired Pompano Park, a harness racing track located in PompanoBeach, Florida. Pompano Park is located off of Interstate 95 and the FloridaTurnpike on a 223-acre owned site, near Fort Lauderdale, midway between Miamiand West Palm Beach. Pompano Park is the only racetrack licensed to conductharness racing in Florida.

 

OnApril 14, 2007, following changes to Florida law, we opened a gamingfacility including 1,500 slot machines, two restaurants and a feature bar atPompano Park adjacent to the existing grandstand at a cost of approximately$190 million. Two additional restaurants and a new poker room with 38 tables onthe second floor of the facility opened in May 2007.  The Isle-Pompano draws most of its customersfrom the approximately 2.6 million people residing within a 25-mile radiusof the facility and competes with two other racinos and two tribal gamingfacilities in the market.

 

**Grand Bahama Island**

 

*Our Lucaya*

 

OurLucaya is a 19,000 square-foot casino located at the Our Lucaya Resort inFreeport, Grand Bahama and offers 303 slot machines, 25 table games and a110-seat restaurant.

 

**United Kingdom**

 

*Blue Chip-Dudley*

 

Ourpub-style casino in Dudley, England is one of 17 gaming facilities in the WestMidlands market. Dudley is close to the Birmingham metropolitan area, which hasa population of approximately 5.3 million. The casino consists of 20 slotmachines, 9 table games, and 28 electronic touch bet table terminals. We owntwo-thirds of the Blue Chip-Dudley.

 

*Blue Chip-Wolverhampton*

 

Ourpub-style casino in Wolverhampton, England is also in the West Midlands market.Wolverhampton is close to the Birmingham metropolitan area. The casino consistsof 20 slot machines, 11 table games, and 34 electronic touch bet tableterminals. We own two-thirds of the Blue Chip-Wolverhampton.

 

*Coventry*

 

OnJuly 6, 2007, we opened a casino in Coventry, England under the 1968Gambling Act. This facility has 20 slot machines, 31 table games, includingpoker, and 50 electronic touch bet table terminals.  The development is a full entertainment facilitywith two restaurants and three bars.

 

**Marketing**

 

Our marketing programsare designed to promote our overall business strategy of providing customerswith a safe, clean, friendly and fun gaming experience at each of ourproperties. We have developed an extensive proprietary database of customersthat allows us to create effective targeted marketing and promotional programsthat are designed to reward customer loyalty, attract new customers to ourproperties and maintain high recognition of our brands.

 

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In March 2008 weannounced our new strategic plan, the main components of which are to focus onorganic growth opportunities and to consolidate our portfolio into two brands –Isle and Lady Luck.  Our re-brandingdecisions will be based on a variety of factors, including the size of thefacility, amenities, and the size of the primary markets served.  The Isle brand will feature regionalfacilities with hotel rooms and convention facilities designed for bothbusiness and leisure travelers, with upgraded amenities, all of which willcomplement our casino product. Based on a significant market research projectconducted with our database customers, we will reintroduce Lady Luck as thebrand for our smaller facilities that serve more local markets.

 

Specifically, as weimplement our strategic plan, we expect our marketing programs and initiativesto focus on the following areas:

 

·      *Customer Research:* Overall, our operating and marketingstrategies have been developed and are being implemented to meet the needs anddesires of our customers in each of our locations.  In order to assess these needs and desires,we engage in significant customer research in each of our markets.  Upon receipt of these surveys, we assess theattitudes of our customers and the customers of our competitive propertiestowards the most important attributes of their experience in a regional and/orlocal gaming facility.  We use theextensive information gathered from these research initiatives to makemarketing, operating and development decisions that, we believe, will optimizethe position of our properties relative to our competition.

 

·      *Branding Initiatives:* As previously discussed, we havedesigned a strategic plan that will consolidate our property portfolio fromfour brands into two brands.  We believethat this approach will allow us to most effectively align and promote ourproperties based upon customer needs and desires, will further allow us to moreefficiently market our properties on a consolidated basis, and will streamlinethe costs associated with marketing our portfolio.

 

·      *Database Marketing:* We are streamlining our databasemarketing initiatives across the Company in order to focus our marketingefforts on profitable customers who have a proven willingness to regularlyvisit our properties.  Specifically, ourfocus is on eliminating from our database customers who have historically beenincluded in significant marketing efforts but have proven costly either as aresult of excessive marketing expenditures on the part of the Company, orbecause these customers have become relatively dormant in terms of customeractivity yet have remained active in our database.

 

·      *Segmentation:*We have compiled an extensive database of customer information over time.  Among our most important marketinginitiatives, we are currently introducing database segmentation to ourproperties in order to adjust investment rates to a level at which we expect tomeet a reasonable level of customer profitability.

 

·      *RetailDevelopment:* We believe that we must more effectively attract new,non-database customers to our properties moving forward in order to increaseprofitability and free cash flow.  Thesecustomers are generally less expensive to attract and retain and, therefore,currently represent a significant opportunity for our operations.

 

**Employees**

 

Asof April 27, 2008, we employed approximately 8,559 people. None of ouremployees are subject to a collective bargaining agreement. We believe that ourrelationship with our employees is satisfactory.

 

**Governmental Regulations**

 

Thegaming and racing industries are highly regulated, and we must maintain ourlicenses and pay gaming taxes to continue our operations. Each of ourfacilities is subject to extensive regulation under the laws, rules andregulations of the jurisdiction where it is located. These laws, rules andregulations generally relate to the responsibility, financial stability andcharacter of the owners, managers and persons with financial interests in thegaming operations. Violations of laws in one jurisdiction could result indisciplinary action in other jurisdictions. A more detailed description of theregulations to which we are subject is contained in Exhibit 99.1 to theAnnual Report on Form 10-K, which exhibit is incorporated herein byreference.

 

Ourbusinesses are subject to various federal, state and local laws and regulationsin addition to gaming regulations. These laws and regulations include, but arenot limited to, restrictions and conditions concerning alcoholic beverages,environmental matters, employees, currency transactions, taxation, zoning andbuilding codes, and marketing and advertising. Such laws and regulations couldchange or could be interpreted differently in the future, or new laws and 

 

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regulationscould be enacted. Material changes, new laws or regulations, or materialdifferences interpretations by courts or governmental authorities couldadversely affect our operating results.

 

**ITEM 1A. RISK FACTORS**

 

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

 

The gaming industry isintensely competitive, and we face a high degree of competition in the markets in which we operate. We havenumerous competitors, including land-based casinos, dockside casinos, riverboatcasinos, casinos located on Native American-owned lands and at racing andpari-mutuel operations and video lottery and video pokermachines not located in casinos. Several of ourcompetitors have substantially better name recognition, marketing and financialresources than we do; competitors with more financialresources may therefore be able to improve the quality of, or expand, theirgaming facilities in a way that we may be unable to match. Legalizedgaming is currently permitted in various forms throughout the United States. Certain states have recently legalized, and other states arecurrently considering legalizing gaming, Other jurisdictions,including states in close proximity to jurisdictions where we currently haveoperations, have considered and may consider legalizingcasino gaming and other forms of competition. In addition,there is no limit on the number of gaming licensesthat may be granted in several of the markets in which we operate. As a result,new licenses could be awarded to gaming facilities in these markets, which could allow new gaming operators to enter our markets and have an adverse effecton our operating results.  Expansion of existing gaming facilities andthe development of new gaming facilities in our current markets will increasecompetition for our existing and future operations. Inaddition, many Native American tribes conduct casino gaming on Native American-ownedlands throughout the United States.  These facilitieshave the advantages of being land-based and exempt from certain state andfederal taxes and operational restrictions.  Some Native American tribes are either in theprocess of establishing or expanding, or are considering the establishment orexpansion of, gaming in Oklahoma, Texas, Louisiana, Florida, Alabama, Kansas,Colorado, Mississippi, Wisconsin and Iowa. Theestablishment or expansion of new gaming facilities and casinos on NativeAmerican-owned lands will increase competition for our existing and futuregaming facilities in proximity to Native American-owned lands. 

 

We also competewith other forms of legalized gaming and entertainment such as online computergambling, bingo, pull tab games, card parlors, sports books,“cruise-to-nowhere” operations, pari-mutuel or telephonic betting on horseracing and dog racing, state-sponsored lotteries, jai-alai, and,in the future, may compete with gaming at other venues.   In addition, we compete more generally withother forms of entertainment for the discretionary spending of our customers.

 

Our existinggaming facilities compete directly with other gaming properties in Louisiana,Mississippi, Missouri, Iowa, Florida and Colorado. We also compete with gamingoperators in other gaming jurisdictions such as Atlantic City, New Jersey andLas Vegas, Nevada. Our existing casinos attract a significant number of theircustomers from Houston, Texas; Mobile, Alabama; Kansas City, Missouri; SouthernFlorida; Little Rock, Arkansas and Denver, Colorado.  Our continued success depends upon drawing customers fromeach of these geographic markets. Legalization of gaming in jurisdictionscloser to these geographic markets than the jurisdictions in which ourfacilities are located would have a material adverse effect on our operatingresults. In that regard, the Kansas Legislature recentlyauthorized casinos in several locations throughout the state of Kansas,including two in the Kansas City, Kansas area. We expectcompetition to increase as new gaming operators enter our markets, existingcompetitors expand their operations, gaming activities expand in existingjurisdictions and gaming is legalized in new jurisdictions. Wecannot predict with any certainty the effects of existing and futurecompetition on our operating results. 

 

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

 

As owners andoperators of gaming and pari-mutuel wagering facilities, we are subject to extensive state and localregulation.  Stateand local authorities require us and our subsidiaries to demonstratesuitability to obtain and retain various licenses and require that we haveregistrations, permits and approvals to conduct gaming operations. The regulatoryauthorities in the jurisdictions in which we operate havevery broad discretion with regard to their regulation of gaming operators, andmay for a broad variety of reasons and in accordance with applicable laws,rules and regulations, limit, condition, suspend, fail to renew or revoke a license toconduct gaming operations or prevent us from owning the securities of any ofour gaming subsidiaries, or prevent other persons from owningan interest in us or doing business with us.  We may also be deemed responsible for the actsand conduct of our employees. Substantial fines or forfeiture of 

 

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assets for violations ofgaming laws or regulations may be levied against us, our subsidiaries and thepersons involved, and some regulatory authorities have theability to require us to suspend our operations. Thesuspension or revocation of any of our licenses or ouroperations or the levy on us or our subsidiaries of asubstantial fine would have a material adverse effect on our business. 

 

To date, we havedemonstrated suitability to obtain and have obtained all governmental licenses,registrations, permits and approvals necessary for us to operate our existinggaming facilities.  Wecannot assure you that we will be able to retain these licenses, registrations,permits and approvals or that we will be able to obtain any new ones in orderto expand our business, or that our attempts to do so will be timely. Like all gaming operators in the jurisdictions in which weoperate, we must periodically apply to renew our gaming licenses and have the suitability of certain of our directors, officersand employees approved.  We cannot assure you that we will be able toobtain such renewals or approvals. 

 

In addition, regulatoryauthorities in certain jurisdictions must approve, in advance, any restrictionson transfers of, agreements not to encumber or pledges of equity securitiesissued by a corporation that is registered as an intermediary company with suchstate, or that holds a gaming license. If these restrictions are not approvedin advance, they will be invalid. 

 

From time to time,legislators and special interest groups have proposed legislation that wouldexpand, restrict or prevent gaming operations in the jurisdictions in which weoperate. In addition, from time to time, certain anti-gaming groups havechallenged constitutional amendments or legislation that would limit ourability to continue to operate in those jurisdictions in which theseconstitutional amendments or legislation have been adopted. For example, theFlorida District Court of Appeals First District reversed the lower court’sdecision granting summary judgment in favor of Floridians for a Level PlayingField (FLPF), of which we are a member. The Court ruled that a trial isnecessary to determine whether FLPF failed to obtain the required number ofsignatures to place the constitutional amendment authorizing slot machines onthe ballot approved by the voters. We believe that at trial FLPF would prevailon the merits. However, if FLPF is ultimately unsuccessful in the litigation,the statewide vote amending the Florida constitution to permit slot machines atpari-mutuels could be invalidated and our right to operate slot machines atPompano Park would be eliminated, which would have an adverse effect on us. Wecannot assure you as to the outcome of this litigation.

*** ***

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

 

State and localauthorities raise a significant amount of revenue through taxes and fees ongaming activities.  We believe that the prospect of significantrevenue is one of the primary reasons that jurisdictions permit legalizedgaming.  As aresult, gaming companies are typically subject to significant taxes and fees inaddition to normal federal, state, local and provincial income taxes, and suchtaxes and fees are subject to increase at any time. We pay substantial taxesand fees with respect to our operations.  From time to time, federal, state, local andprovincial legislators and officials have proposed changes in tax laws, or inthe administration of such laws, affecting the gaming industry.  In addition, we believe that worsening economicconditions that result in state and local governments havingbudget shortfalls (as is currently the case in many of the jurisdictions inwhich we operate)  couldintensify the efforts of state and local governments to raise revenues throughincreases in gaming taxes.  Some of the states in which we own or operatecasinos continue to experience budget shortfalls and, as a result, may increasegaming taxes to raise more revenue.  We cannot determine with certainty thelikelihood of changes in tax laws or in the administration of such laws.  Such changes, ifadopted, could have a material adverse effect on our business, financialcondition and results of operations. 

*** ***

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

 

Several of our riverboatsmust comply with U.S. Coast Guard requirements as to boat design, on-boardfacilities, equipment, personnel and safety and must hold U.S. Coast GuardCertificates of Documentation and Inspection.  The U.S. Coast Guard requirements also setlimits on the operation of the riverboats and mandate licensing of certainpersonnel involved with the operation of the riverboats.  Loss of a riverboat’s Certificate ofDocumentation and Inspection could preclude its use as a riverboat casino.  Each of ourriverboats 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. 

 

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We are required to havethird parties periodically inspect and certify all of our casino barges forstability and single compartment flooding integrity.  Our casino barges and otherfacilities must also meet local fire safetystandards.  Wewould incur additional costs if any of our gaming facilities were not incompliance with one or more of these regulations. 

 

We are also subject tocertain federal, state and local environmental laws, regulations and ordinancesthat apply to non-gaming businesses generally, such as the Clean Air Act, theClean Water Act, the Resource Conservation Recovery Act, the ComprehensiveEnvironmental Response, Compensation and Liability Act and the Oil PollutionAct of 1990.  Undervarious federal, state and local laws and regulations, an owner or operator ofreal property may be held liable for the costs of removal or remediation ofcertain hazardous or toxic substances or wastes located on its property,regardless of whether or not the present owner or operator knows of, or isresponsible for, the presence of such substances or wastes.  We have not identified any issues associatedwith our properties that could reasonably be expected to have an adverse effecton us or the results of our operations.  However, several of our properties are locatedin industrial areas or were used for industrial purposes for many years.  As a consequence, itis possible that historical or neighboring activities have affected one or moreof our properties and that, as a result, environmental issues could arise inthe future, the precise nature of which we cannot now predict.  The coverage and attendant compliance costsassociated with these laws, regulations and ordinances may result in futureadditional costs. 

 

Regulations adopted bythe Financial Crimes Enforcement Network of the U.S. Treasury Departmentrequire us to report currency transactions in excess of $10,000 occurringwithin a gaming day, including identification of the patron by name and socialsecurity number. U.S. Treasury Department regulations also require us to reportcertain suspicious activity, including any transaction that exceeds $5,000 ifwe know, suspect or have reason to believe that the transaction involves fundsfrom illegal activity or is designed to evade federal regulations or reportingrequirements. Substantial penalties can be imposed against us if we fail to complywith these regulations. 

 

We are also subject to avariety of other local rules and regulations, including zoning, environmental,construction and land-use laws and regulations governing the serving ofalcoholic beverages.

*** ***

***Our business may be adversely affected by legislationprohibiting tobacco smoking.***

 

Legislation invarious forms to ban indoor tobacco smoking has recently been enacted orintroduced in many states and local jurisdictions, including several of thejurisdictions in which we operate. On January 1, 2008, a statewide smoking banthat includes casino floors went into effect in Colorado. This smoking ban inColorado has had some negative impact on business volume at our Black Hawkproperties, the long-term impact of which we cannot yet predict. If additionalrestrictions on smoking are enacted in jurisdictions in which we operate,particularly if such restrictions are not applicable to all competitivefacilities in that gaming market, our business could be materially and adverselyaffected.

*** ***

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

 

We have a significantamount of indebtedness. As of April 27, 2008, we hadapproximately $1.5 billion of total debt outstanding. 

 

Our significant indebtednesscould have important consequences to our financial health, such as: 

 

·limiting our ability to obtain additional financing to fund our working capitalrequirements, capital expenditures, debt service, general corporate or otherobligations; 

 

·limiting our ability to use operating cash flow to fundworking capital, capital expenditures, expansion and other important areas of our business because we must dedicate asignificant portion of our cash flowto make principal and interest payments on our indebtedness; 

 

·increasing our interest expense if there is a rise in interest rates, because aportion of our borrowings under our senior secured credit facility are subjectto interest rate periods with short-term durations thatrequire ongoing refunding at the then current rates of interest; 

 

·causing an event of default if we fail to satisfy the financial and restrictive covenants contained in theindenture and agreements governing our7% senior subordinated notes due 2014, our seniorsecured credit facility and our other indebtedness, which could result in all of our debt becoming immediately due and payable,could permit our secured lenders to foreclose on the assets securing oursecured debt and have 

 

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other adverseconsequences, any of which, if notcured or waived, could have a material adverse effect on us; 

 

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

 

· increasing our vulnerability to and limiting ourability to react to changing market conditions, changes in our industry and economic downturns or downturns inour business. 

 

Any of the factors listedabove could have a material adverse effect on our business, financial conditionand results of operations.  In addition, although based on our currentlevel of operations, we believe that our operating cash flow, available cashand available borrowings under our senior secured credit facility will besufficient to meet our anticipated future liquidity needs, we cannot assure youthat our business will continue to generate sufficient cash flow, or thatfuture available draws under our senior secured credit facility will besufficient, to enable us to meet our liquidity needs, including to service ourindebtedness.

*** ***

***Despite our significant indebtedness, we may still be ableto incur significantly more debt. This could intensify the risks describedabove.***

 

The terms of theindenture and agreements governing the senior subordinated 7%notes, our senior secured credit facility and ourother indebtedness limit, but do not prohibit, us or our subsidiaries fromincurring significant additional indebtedness in the future. 

 

As of April 27, 2008, we had thecapacity to incur additionalindebtedness, including the ability to incur additional indebtedness under allof our lines of credit, of approximately $170.0 million.Refer to Footnote 7, Long-Term Debt, for additional discussion on our Senior Secured Credit Facility. Approximately $18.6 millionof these lines of credit were used to support letters ofcredit. Our capacity to issue additional indebtedness is subject to thelimitations imposed by the covenants in our senior secured credit facility andthe indenture governing our senior subordinated 7% notes.  The indenturegoverning our senior subordinated 7% notesand our senior secured credit facility contain financial and other restrictivecovenants, but will not fully prohibit us from incurring additional debt.  If new debt is addedto our current level of indebtedness, the related risks that we now face could intensify. 

*** ***

***Restrictive covenants in the agreements governing ourindebtedness may prevent us from pursuing business strategies that couldotherwise improve our results of operations.***

 

We have made and willneed to make significant capital expenditures at our existing facilities toremain competitive with current and future competitors in our markets.  Our senior securedcredit facility and the indenturegoverning our senior subordinated 7%notes contain operating and financial restrictions that may limit our abilityto obtain the financing to make these capital expenditures. 

 

Our agreements governingour indebtedness, among other things, require us to maintaincertain specified financial ratios and to meet certain financial tests.  Our debt agreements also 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 andtransactions with affiliates. 

*** ***

***We may experience construction delays during our expansionor development projects which could adversely affect our operations.***

 

We currently expect tobegin a construction project at our Biloxi property and plan to commenceadditional construction projects at several of our properties. We also evaluateother expansion opportunities as they become available and we may in the futureengage in additional construction projects. The anticipated costs andconstruction periods are based upon budgets, conceptual design documents andconstruction schedule estimates prepared by us in consultation with ourarchitects and contractors. 

 

Construction projectsentail significant risks, which can substantially increase costs or delaycompletion of a project. Such risks include shortages of materials or skilledlabor, unforeseen engineering, environmental 

 

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or geological problems,work stoppages, weather interference and unanticipated cost increases.  Most of thesefactors are beyond our control.  In addition, difficulties or delays inobtaining any of the requisite licenses, permits or authorizations fromregulatory authorities can increase the cost or delay the completion of anexpansion or development. Significant budget overruns or delays with respect toexpansion and development projects could adversely affect our results ofoperations. 

*** ***

***We may not be able to successfully expand to new locationsor recover our investment in new properties which would adversely affect ouroperations and available resources.***

 

We regularly evaluate andpursue new gaming acquisition and development opportunities in existing and newgaming markets. To the extent that we elect to pursue any new gamingacquisition or development opportunity, our ability to benefit from ourinvestment will depend on many factors, including: 

 

·our ability to successfully identify attractive acquisition and developmentopportunities; 

 

·our ability to successfully operate any developed or acquired properties; 

 

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

 

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

 

·the availability of adequate financing on acceptable terms. 

 

Many of these factors arebeyond our control. There have recently been significantdisruptions in the global capital markets that have adversely impacted theability of borrowers to access capital. Many analysts are predicting that these disruptions may continue for theforeseeable future.  Accordingly, it islikely that we are dependent on free cash flow from operations and remainingborrowing capacity under our senior secured credit facility to implement ournear-term expansion plans and fund our planned capital expenditures.  As a result of these and other considerations, we cannot be sure that we will be able to recover ourinvestments in any new gaming development opportunities or acquired facilities,or successfully expand to additional locations. 

*** ***

***If our key personnel leave us, our business could beadversely affected.***

 

We have recentlyhad many changes in our senior executive management team, and have embarked onthe execution of a strategic plan developed by, and to be led by, thatteam.  Our continuedsuccess will depend, among other things, on the efforts and skills of a few keyexecutive officers and the experience of our property managers,which have also recently experienced significant turnover.  Our success also depends on our ability to attract and retain additional highlyqualified personnel with gaming industry experience and qualifications toobtain the requisite licenses.  We do not maintain “key man” life insurancefor any of our employees. There is no assurance that we would be able toattract and hire suitable replacements for any of our key employees. We needqualified executives, managers and skilled employees with gaming industryexperience to continue to successfully operate our business.  We believe a shortage of skilled labor in thegaming industry may make it increasingly difficult and expensive to attract andretain qualified employees.  We expect that increased competition in thegaming industry will intensify this problem. 

*** ***

***Membersof the Goldstein family control a large percentage of our common stock andtheir decisions may differ from those that may be made by other shareholders.***

*** ***

Bernard Goldstein, our currentChairman and former Chief Executive Officer, his sons, including RobertGoldstein, our Vice Chairman and Jeffrey Goldstein, one of our directors; andvarious family trusts associated with members of the Goldstein Family,collectively own and control approximately 51% of our common stock, as of July8, 2008.  Although the members of theGoldstein family are free to vote their shares differently than one another,the Goldstein family will be able to exert a significant amount of control overthe election of our board of directors and the vote on substantially all othermatters, including significant corporate transactions, such as the approval ofa merger or other transactions involving a sale of us.  The interests of the Goldstein family maydiffer from those of our other shareholders.

 

***Wehave a history of fluctuations in our operating income (losses), and we mayincur additional operating losses in the future.  Our operating results could fluctuatesignificantly on a periodic basis.***

 

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We sustained a net lossof $96.9 million and operating loss of $36.1 million in fiscal year 2008 and anet loss of $4.6 million in fiscal year 2007. Companies with fluctuations inincome (loss) from operations often find it more challenging to raise capitalto finance improvements in their businesses and to undertake other activitiesthat return value to their shareholders. In addition, companies with operatingresults that fluctuate significantly on a quarterly or annual basis experienceincreased volatility in their stock prices in addition to difficulties inraising capital.  We cannot assure youthat we will not have fluctuations in our income (losses) from operations inthe future, and should that occur, that we would not suffer adverseconsequences to our business as a result, which could decrease the value of ourcommon stock.

 

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

 

Dockside and riverboatfacilities are subject to risks in addition to those associated with land-basedcasinos, including loss of service due to casualty, mechanical failure,extended or extraordinary maintenance, flood, hurricane or other severeweather. Our riverboats and barges face additional risks from the movement ofvessels on waterways. 

 

Reduced patronageand the loss of a dockside or riverboat casino from service for any period oftime could adversely affect our results of operations. For example, as a resultof Hurricanes Katrina and Rita,we closed our Biloxi facility from August 28, 2005 to December 26, 2005 and ourLake Charles facility from September 22, 2005 to October 8, 2005.  Flooding on the waterwayswhere our dockside and riverboat casinos operate also may require us to closeour facilities from time to time, with a resulting adverse affect on ourbusiness.  During the Spring of 2008, wewere forced to close our Natchez and Davenport properties, for several dayseach, due to flooding. While our businessinterruption insurance provided sufficient coverage for those losses, we cannotbe sure that the proceeds from any future claim will be sufficient tocompensate us if one or more of our casinos experience a closure. 

 

In fiscal 2007 and 2008, in part as a resultof hurricane claims in the Gulf Coast region over the past several years, wehave experienced a significant increase in property and business interruptionpremiums. 

 

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

*** ***

***Energy and fuel price increases, such as therecent dramatic increases in gasoline prices, mayadversely affect our costs of operations and our******revenues.***

 

Our casino properties usesignificant 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 would negatively affect our resultsof operations.  Inaddition, energy and fuel price increases in cities that constitute asignificant source of customers for our properties could result in a decline indisposable income of potential customers, and lead ourcustomers and potential customers to decide not to travel, both of which couldresult in a corresponding decrease in visitation toour properties, which would negatively impact our revenues.  The extent of the impact is subject to themagnitude and duration of the energy and fuel price increases,which recently have been very significant, but thisimpact could be material. 

*** ***

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

 

Our business operationsare subject to changes in international, national and local economicconditions, including changes in the economy as well asthe economic impact related to future security alerts in connection withthreatened or actual terrorist attacks and related to the war in Iraq, whichmay affect our customers’ willingness to travel and visitour properties. Recent unprecedented increases in the price of gasoline mayalso affect our customers’ willingness to travel.  A recession or downturn in the generaleconomy, or in a region constituting a significant source of customers for ourproperties, could result in fewer customers visiting our properties, whichwould adversely affect our results of operations. 

*** ***

***The market price of our common stock may fluctuatesignificantly.***

 

The market price of ourcommon stock has historically been volatile and may continue to fluctuatesubstantially due to a number of factors, including actual or anticipatedchanges in our results of operations, the announcement of significanttransactions or other agreements by our competitors, conditions or trends 

 

14

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in the ourindustry or other entertainment industries with which we compete, generaleconomic conditions including those affecting our customers’ discretionaryspending, changes in the cost of air travel or the cost of gasoline, changes inthe gaming markets in which we operate and changes in the trading value of ourcommon stock.  The stock market ingeneral, as well as stocks in the gaming sector have been subject tosignificant volatility and extreme price fluctuations that have sometimes beenunrelated or disproportionate to individual companies’ operatingperformances.   Broad market or industry factors may harm themarket price of our common stock, regardless of our operating performance.

*** ***

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

 

In the UK and theBahamas, we are subject to certain additional risks, including difficulty instaffing and managing foreign subsidiary operations, foreign currencyfluctuations, dependence on foreign economies, political issues, adverse taxconsequences and uncertainty in regulatory reform in the UK.In addition, in the Bahamas current gaming regulation preclude residents fromparticipating in gaming activities. Therefore,disruptions in tourism traffic due to issues such as increased costs and/orreduced availability of airline and other means of transportation and hotelaccommodations can have an adverse impact in our gaming operations. 

*** ***

***Failure to maintain effective internal controls inaccordance with Section 404 of the Sarbanes-Oxley Act could result in a loss ofinvestor confidence regarding our financial reports or may have a materialadverse effect on our business.***

 

We are required tocomply with the reporting requirements of Section 404 of the Sarbanes-Oxley Act.  In doing so, we may identify significantdeficiencies or errors that are not currently known to us.  As a public company, we are required toreport, among other things, control deficiencies that constitute a “ materialweakness” or changes in internal controls that, or that are reasonably likelyto, materially affect internal controls over financial reporting.

 

In fiscal 2007, we identified several materialweaknesses in our internal control over financial reporting and have restatedour financial results for theyears ended through April 30, 2006 and the related quarterly results therein,and the first three fiscal quarters ended January 28, 2007. We believe that we haveremediated our material weaknesses. We cannot be assured that additionalmaterial weaknesses, significant deficiencies and control deficiencies in ourinternal control over financial reporting will not be identified in the future.

 

The effectiveness of ourinternal control over financial reporting in the future could be impacted by avariety of factors, including faulty human judgment, simple errors, omissionsor mistakes, and the possibility that any enhancements to disclosure controlsand procedures may still not be adequate to assure timely and accuratefinancial information. 

 

If we fail to achieve andmaintain effective controls and procedures for financial reporting, we could beunable to provide timely and accurate financial information. This may cause usto fail to satisfy the reporting requirements with our lenders and give rise toan event of default or cause investors to lose confidence in our reportedfinancial information. This may also have an adverse effect on the tradingprice of our common stock. 

 

* * * * * * *

 

In addition to theforegoing, you should consider each of the factors set forth in this AnnualReport in evaluating our business and our prospects. The factors described inour Part 1 Item 1A are not the only ones we face. Additional risks anduncertainties not presently known to us or that we currently considerimmaterial may also impair our business operations.   This report is qualified in its entirety bythese risk factors.  If any of the foregoing risks actually occur, our business, financial condition and results of operation could be materially harmed.  In that case, the trading price of our securities, including our common stock, could declinesignificantly. 

 

**ITEM 1B. UNRESOLVED STAFFCOMMENTS**

 

None.

 

**ITEM 2. PROPERTIES**

 

*Lake Charles*

 

Weown approximately 2.7 acres and lease approximately 16.2 acres of land inCalcasieu Parish, Louisiana for use in connection with the Isle-Lake Charles.This lease automatically renewed in March 2005 for five years and we havethe option to renew it for fifteen (15) additional terms of five years each,subject to increases based on the Consumer Price Index 

 

15

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(“CPI”)with a minimum of 10% and construction of hotel facilities on the property. Weown two hotels in Lake Charles with a total of 493 rooms. Annual rent paymentsunder the Lake Charles lease are approximately $2.1 million.

 

*Lula*

 

Welease approximately 1,000 acres of land in Coahoma County, Mississippi andutilize approximately 50 acres in connection with the operations of theIsle-Lula. Unless terminated by us at an earlier date, the lease expires in2033. Rent under the lease is currently 5.5% of gross gaming revenue asreported to the Mississippi Gaming Commission, plus $100,000 annually. We alsoown approximately 100 acres in Coahoma County, which may be utilized for futuredevelopment.

 

*Biloxi*

 

Welease our Biloxi berth from the Biloxi Port Commission at an annual rent of thegreater of $510,000 or 1% of the gross gaming revenue net of state and localgaming taxes. The lease terminates on July 1, 2009 and we have the optionto renew it for seven additional terms of five years each subject to increasesbased on the CPI, limited to 6% for each renewal period.

 

Welease the real estate upon which some of our land-based facilities, includingthe casino, are located from the City of Biloxi and the Mississippi Secretaryof State at current annual rent of $561,800 per year, plus 3% of our Biloxiproperty’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 itis renewable at our option for five additional terms of five years each and asixth option renewal term, concluding on January 31, 2034, subject to rentincreases based on the CPI, limited to 6% for each renewal period.

 

InApril 1994, in connection with the construction of a hotel, we enteredinto a lease for additional land adjoining our Biloxi property. This lease withthe City of Biloxi and the Mississippi Secretary of State is for an initialterm of 25 years, with options to renew for six additional terms of ten yearseach and a final option period concluding December 31, 2085. Currentannual rent is $605,000 plus 4% of gross non-gaming revenues, as defined in thelease, and renewals are subject to rent increases based on the CPI. The annualrent is adjusted after each five-year period based on increases in the CPI,limited to a 10% increase in any five-year period.

 

InAugust 2002, we entered into a lease for two additional parcels of landadjoining our property and the hotel. On the parcel adjoining the Biloxiproperty, we constructed a multi-level parking garage that has approximately1,000 parking spaces. There is additional ground level parking on a parcel ofland in front of the garage, also subject to this lease, with approximately 600parking spaces. We have constructed a 400-room addition to the existing hotelon the parcel leased next to the existing hotel. In addition, we may constructa hotel above the parking garage. This lease with the City of Biloxi and theMississippi Secretary of State is for an initial term of forty years, with oneoption to renew for an additional twenty-five years and additional optionsthereafter, with the consent of the Mississippi Secretary of State, consistentwith the term of the lease described in the preceding paragraph. When combinedwith the base and percentage rents described for the leases in the precedingtwo paragraphs, annual rent under those two leases and this lease was $4.0million for lease year ending July 31, 2007, and estimated to be $3.5million for the lease year ending July 31, 2008. Such minimum rent is toincrease thereafter over time in accordance with a formula based on anticipatedtiming for completion of the hotel on top of the parking garage (orAugust 31, 2008, whichever occurs first), up to a minimum rent of $3.7million.  The minimum rent for the leaseyear beginning August 1, 2008 will be $3.7 million in accordance with theterms of the lease agreement. Suchamounts are subject to decreases due to market adjustments andincreases based on the CPI. Also, we are responsible for annual rent equal to4% of gross retail revenue and gross cash revenue (as defined in the lease),but without double counting. If the rent minimum described in the precedingsentences is not otherwise satisfied from other rents, then this percentagerent is not in addition to the minimum rent, but rather is to be applied tothat minimum.

 

Inconnection with and pursuant to a settlement between the City of Biloxi and theState of Mississippi concerning the control and management of the area where weare located, we also have agreed to pay the City of Biloxi’s lease obligationsto the State of Mississippi for an agreed upon period of time. This amount is$500,000 per year, payable on June 30, subject to increases based on theCPI and decreases if there are other tenants of the subject property. Thisobligation ends after June 2018 but may be renewed for thirty years.

 

Wehave also entered into a joint venture arrangement to sublease a surfaceparking lot next to our Biloxi property. Our portion of the annual rent underthis lease is approximately $222,000. The current term is for five yearsexpiring December 31, 2010, with a renewal option for an additionalfive-year term (under which our annual rent would increase based on the CPI),extending the lease through December 31, 2015, if exercised.

 

16

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*Natchez*

 

Throughnumerous lease agreements, we lease approximately 24 acres of land in Natchez,Mississippi that are used in connection with the operations of our Natchezproperty. Unless terminated by us at an earlier date, the leases have varyingexpiration dates through 2037. Annual rent under the leases total approximately$1.1 million. We also lease approximately 7.5 acres of land that is utilizedfor parking at the facility. We own approximately 6 additional acres ofproperty in Natchez, Mississippi, as well as the property upon which our hotelis located.

 

*Kansas City*

 

Welease approximately 28 acres from the Kansas City Port Authority in connectionwith the operation of our Kansas City property. The term of the original leasewas ten years and expired in October 2006 and was renewed for anadditional five years. The lease includes seven additional five-year renewaloptions. The minimum lease payments are indexed to correspond to any rise orfall in the CPI, initially after the ten-year term of the lease or August 21,2007 and thereafter, at each five year renewal date. Rent under the leasecurrently is the greater of $2.6 million (minimum rent) per year, or 3.25% ofgross revenues, less complimentaries.

 

*Boonville*

 

Welease our 27 acre casino site in Boonville pursuant to a lease agreement withthe City of Boonville. Under the terms of agreement, we lease the site for aperiod of ninety-nine years. In lieu of rent, we are assessed additionalamounts by the City of Boonville based on a 3.5% tax on gaming revenue, up to$1.0 million, which we recognize as additional gaming taxes. We leaseapproximately 27 acres from the City of Boonville.

 

*Caruthersville*

 

Weown approximately 37 acres, including our riverboat casino and 1,000 parkingspaces in Caruthersville, Missouri.

 

*Bettendorf*

 

Weown approximately 24.6 acres of land in Bettendorf, Iowa used in connectionwith the operations of our Bettendorf property. We also lease approximatelyeight acres of land on a month-to-month basis from an entity owned by familymembers of our chairman, Bernard Goldstein, including Robert S. Goldstein, ourvice chairman and director and Jeffrey D. Goldstein, a director of our company,which we utilize for parking and warehouse space. The initial term of the leaseexpires sixty days after written notice is given to either party and rent underthe lease is currently $23,360 per month.

 

*Davenport*

 

Pursuantto various lease agreements, we lease approximately twelve acres of land inDavenport, Iowa used in connection with the operations of RhythmCity-Davenport. The aggregate annual rent on these leases is approximately$300,000 and they have varying expiration dates through 2022.

 

*Marquette*

 

Welease the dock site in Marquette, Iowa that is used in connection with ourMarquette operations. The lease expires in 2019, and annual rent under thelease is approximately $180,000, plus $1.00 per passenger, plus 2.5% of gamingrevenues (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 (lessstate wagering taxes) in excess of $60.0 million. We also rent approximatelytwo acres of land used for the employee parking lot that is a month-to-monthrental of $417 and an easement related to an overhead pedestrian bridge anddriveway that is an annual payment of approximately $6,300. We also ownapproximately 25 acres of land for the pavilion, hotel, satellite offices,warehouse, lots by the marina and other property.

 

*Waterloo*

 

Thecasino occupies approximately 30 acres of land, which we own. We also enteredinto a one-year lease agreement for 17,517 sq. ft. of warehouse space. Rentunder this lease is currently $4,306 per month.

 

17

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*Black Hawk*

 

Weown approximately 10.1 acres of land in Black Hawk, Colorado for use inconnection with our Black Hawk operations. The property leases an additionalparcel of land adjoining the Isle of Capri Black Hawk where the ColoradoCentral Station Hotel and parking are located. This lease is for an initialterm of nine years with options to renew for eighteen additional terms of fiveyears each with the final option period concluding June 1, 2094. Annualrent is currently $1.8 million indexed to correspond to any rise or fall in theCPI at one-year intervals, not to exceed a 3% increase or decrease from theprevious year’s rate.

 

*The Colorado Central Station-Black Hawk*

 

Weown or lease approximately 7.1 acres of land in Black Hawk, Colorado for use inconnection with the Colorado Central Station-Black Hawk. The property leases anadditional parcel of land near the Colorado Central Station-Black Hawk forparking described above. This lease is for an initial term of ten years withoptions to renew for nine additional terms of ten years each with the finaloption period concluding August 2094. Currently the annual rent is$576,000 and renewals are subject to 20% rent increases over the rate of theprevious term.

 

*Pompano*

 

Weown approximately 223 acres at Pompano.

 

*Our Lucaya*

 

Welease the casino at Our-Lucaya under the terms of a two-year lease whichcommenced June 1, 2007. However, beginning in October 2007 the leasemay be terminated by either party with six months notice. Annual rentalpayments under the lease are currently $1.9 million.

 

*Blue Chip-Dudley*

 

Throughour two-thirds ownership interest in Blue Chip, plc, we own the approximately12,000 square-foot building used for the Blue Chip-Dudley casino operation. Wealso own an 8,000 square-foot parking area for the casino.

 

*Blue Chip-Wolverhampton*

 

Throughour two-thirds ownership interest in Blue Chip, plc, we own the approximately12,000 square-foot building used for the Blue Chip-Wolverhampton casino operation.We also own a 2,000 square foot parking area for the casino.

 

*Coventry*

 

Weentered into a 15 year lease agreement with renewal options for an additional10 years during fiscal 2004 to lease approximately 116,000 square feet for anew casino in Coventry, England in the sub-level of the Arena CoventryConvention Center. The convention center was developed, owned and operated by anon-affiliated entity and began operations in August 2005. Due to certainstructural elements installed during the construction of the space being leasedand certain prepaid lease payments made by us, we are required to be treated,for accounting purposes only, as the “owner” of the Arena Coventry ConventionCenter, in accordance with Emerging Issues Task Force Issue No. 97-10 (“EITF97-10”), “The Effect of Lessee Involvement in Asset Construction,” even thoughwe do not own these assets and do not participate in or control the operationsof the convention center.

 

*Other*

 

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

 

Welease our corporate offices in Creve Coeur, Missouri, Biloxi, Mississippi, andBoca Raton, Florida.

 

Weown additional property and have various property leases and options to eitherlease or purchase property that are not directly related to our existingoperations and that may be utilized in the future in connection with expansionprojects at our existing facilities or development of new projects.

 

18

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**ITEM 3. LEGAL PROCEEDINGS**

 

Lady Luck GamingCorporation (now our wholly owned subsidiary) and several joint venturepartners have been defendants in the Greek Civil Court and the GreekAdministrative Court in similar lawsuits brought by the country of Greecethrough its Minister of Tourism (now Development) and Finance.  The actions allege that the defendants failedto make specified payments in connection with the gaming license bid processfor Patras, Greece. Although it is difficult to determine the damages beingsought from the lawsuits, the action may seek damages up to that aggregateamount plus interest from the date of the action. Through April 27, 2008,we have accrued an estimated liability including interest of $8.9 million. TheAthens Civil Court of First Instance granted judgment in our favor anddismissed the civil lawsuit. Appeals to both the Athens Civil Appeals Court andthe Greek Civil Supreme Court have been dismissed. The Greek Civil SupremeCourt denied the appeal on the basis that the Administrative Court is thecompetent court to hear the matter. During October 2005, after theadministrative lawsuit had been dismissed by both the Athens AdministrativeCourt of First Instance and the Athens Administrative Court of Appeals on thebasis that the Administrative Court did not have a jurisdiction, theAdministrative Supreme Court remanded the matter back to the AthensAdministrative Appeals Court for a hearing on the merits, which court in May 2008rendered judgment in our favor on procedural grounds and not on the merits. Weexpect the Greek government to appeal this decision to the AdministrativeSupreme Court.  Therefore, the outcome ofthis matter is still in doubt and cannot be predicted with any degree ofcertainty. We intend to continue a vigorous and appropriate defense to theclaims asserted in this matter.

 

We are subject to certainfederal, state and local environmental protection, health and safety laws,regulations and ordinances that apply to businesses generally, and are subjectto cleanup requirements at certain of our facilities as a result thereof. Wehave not made, and do not anticipate making, material expenditures, nor do weanticipate incurring delays with respect to environmental remediation or protection.However, in part because our present and future development sites have, in somecases, been used as manufacturing facilities or other facilities that generatematerials that are required to be remediated under environmental laws andregulations, there can be no guarantee that additional pre-existing conditionswill not be discovered and that we will not experience material liabilities ordelays.

 

We are subject to variouscontingencies and litigation matters and have a number of unresolved claims. Althoughthe ultimate liability of these contingencies, this litigation and these claimscannot be determined at this time, we believe that they will not have amaterial adverse effect on our consolidated financial position, results ofoperations or cash flows.

 

**ITEM 4. SUBMISSION OF MATTERSTO A VOTE OF SECURITY HOLDERS**

 

Therewere no matters submitted to a vote of our security holders during the fourthquarter of the fiscal year 2008.

 

19

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**PART II**

 

**ITEM 5. MARKET FOR REGISTRANT’SCOMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES**

 

(a)

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

 
| ** **                                 | ** ** | **High**   | ** ** | **Low**    | ** ** |
|--------------------------------------------|------------|------------|------------|------------|------------|
| First Quarter  (through July 8, 2008) |       | $          | 7.45       |       | $          | 4.20 |   |
| ** **                                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| Fiscal Year  Ending April 27, 2008    |       |       |       |       |       |
| Fourth Quarter                             |       | $          | 11.57      |       | $          | 6.62 |   |
| Third Quarter                              |       | 20.62      |       | 10.00      |       |
| Second Quarter                             |       | 21.44      |       | 18.17      |       |
| First Quarter                              |       | 25.56      |       | 21.51      |       |
|                                       |       |       |       |       |       |
| Fiscal Year  Ending April 29, 2007    |       |       |       |       |       |
| Fourth Quarter                             |       | $          | 29.07      |       | $          | 24.70 |   |
| Third Quarter                              |       | 31.30      |       | 24.44      |       |
| Second Quarter                             |       | 25.25      |       | 19.30      |       |
| First Quarter                              |       | 33.01      |       | 23.32      |       |

 

ii.                       *Holders of Common Stock*. As of July 8, 2008, there wereapproximately 1,421 holders of record of our common stock.

 

iii.                    *Dividends.* We have never declared or paid any dividendswith respect to our common stock and the current policy of our board ofdirectors is to retain earnings to provide for the growth of our company. Inaddition, our senior secured credit facility and the indentures governing our7% senior subordinated notes limit our ability to pay dividends. See “Item8-Financial Statements and Supplementary Data-Isle of Capri Casinos, Inc.-Notesto Consolidated Financial Statements—Note 7.” Consequently, no cash dividendsare expected to be paid on our common stock in the foreseeable future. Further,there can be no assurance that our current and proposed operations willgenerate the funds needed to declare a cash dividend or that we will havelegally available funds to pay dividends. In addition, we may fund part of ouroperations in the future from indebtedness, the terms of which may prohibit orrestrict the payment of cash dividends. If a holder of common stock isdisqualified by the regulatory authorities from owning such shares, such holderwill not be permitted to receive any dividends with respect to such stock. See “Item1-Business-Governmental Regulations.”

 

iv.                   *Equity Compensation Plans.* The following table provides informationabout securities authorized for issuance under our 1993 and 2000 Employee StockOption Plans, and our Deferred Bonus Plan, for the fiscal year 2008.

 
| ** **                                                  | ** ** | **(a)**                                                                                                                                              | ** ** | ** **                                                                                                               | ** ** | ** **                                                                                                                                                                                                                            | ** ** |
|-------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| **Plan category**                                      | ** ** | **Number of securities to be  issued upon exercise of  outstanding options, warrants  and rights** | ** ** | **(b)**

**Weighted-average exercise  price of outstanding options,  warrants and rights** | ** ** | **(c)**

**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     |       | 3,832,346                                                                                                                                            |       | $                                                                                                                        | 18.15      |                                                                                                                                                                                                                                  | 350,043    |   |
| Equity  compensation plans not approved by security holders |       | —                                                                                                                                               |       | —                                                                                                                   |       | —                                                                                                                                                                                                                                |       |
| Total                                                       |       | 3,832,346                                                                                                                                            |       | $                                                                                                                        | 18.15      |                                                                                                                                                                                                                                  | 350,043    |   |

 

20

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(b)                  *Issuance of UnregisteredSecurities*

None.

 

(c)                   *Purchases of our CommonStock*

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

 
| **Period**                                       | ** ** | **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)** | ** ** |
|--------------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------|------------|
|                                             |       |                                         |       |                                         |       |                                                                                                               |       |                                                                                                              |       |
| January 28,  2008 to February 24, 2008 |       | —                                       |       | $                                            | —     |                                                                                                               | —     |                                                                                                              | 1,104,208  |   |
| February 25,  2008 to March 30, 2008   |       | —                                       |       | —                                       |       | —                                                                                                             |       | 1,104,208                                                                                                         |       |
| March 31,  2008 to April 27, 2008      |       | —                                       |       | —                                       |       | —                                                                                                             |       | 1,104,208                                                                                                         |       |
| Total                                            |       | —                                       |       |                                         |       | —                                                                                                             |       | 1,104,208                                                                                                         |       |
|                                                  |            |                                              |            |                                              |            |                                                                                                                    |            |                                                                                                                   |            |  |

 

----

 (1)          Wehave purchased our common stock under stock repurchase programs. Theseprograms, allow for the repurchase of up to 6,000,000 shares. To date, we havepurchased 4,895,792 shares of our common stock under these programs. Theseprograms have no approved dollar amounts, nor expiration dates.

 

**COMPARISON OF 5 YEAR CUMULATIVETOTAL RETURN***

Among Isle of Capri Casinos, Inc., The NASDAQComposite Index

And The Dow Jones US Gambling Index

 

 

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* $100 invested on 4/27/03 In stock or 4/30/03 In Index-Includingreinvestment of dividends. Indexes calculated on month-end basis.

 

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**ITEM 6. SELECTED FINANCIALDATA.**

 

The following tablepresents our selected consolidated financial data for the five most recentfiscal years, which is derived from our audited consolidated financialstatements and the notes to those statements. Because the data in this tabledoes not provide all of the data contained in our consolidated financialstatements, including the related notes, you should read “Management’sDiscussion and Analysis of Financial Condition and Results of Operations,” ourconsolidated financial statements, including the related notes containedelsewhere in this document and other data we have filed with the U.S.Securities and Exchange Commission.

 
| ** **                                                                          | ** ** | **Fiscal Year Ended (1)**                                       | ** ** |
|-------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------|------------|
| ** **                                                                          | ** ** | **April 27,**                                                             | ** ** | **April 29,** | ** ** | **April 30,** | ** ** | **April 24,** | ** ** | **April 25,** | ** ** |
| **Statement of Operations**                                               | ** ** | **2008**                                                                       | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                                                          | ** ** | **(dollars in millions, except per share data)** | ** ** |
| Revenues:                                                                           |       |                                                                           |       |   |   |   |   |   |   |   |   |
| Casino                                                                              |       | $                                                                              | 1,121.9    |   | $ | 1,015.6 |   | $ | 1,004.1 |   | $ | 957.6 |   | $ | 948.9 |   |
| Rooms                                                                               |       | 49.5                                                                           |       | 49.6 |   | 37.0 |   | 33.1 |   | 33.4 |   |
| Pari-mutuel  commissions and fees                                                   |       | 19.1                                                                           |       | 20.0 |   | 20.5 |   | 20.1 |   | 20.3 |   |
| Food, beverage  and other                                                           |       | 136.5                                                                          |       | 130.6 |   | 125.9 |   | 124.9 |   | 120.3 |   |
| Gross revenues                                                                      |       | 1,327.0                                                                        |       | 1,215.9 |   | 1,187.5 |   | 1,135.6 |   | 1,122.9 |   |
| Less promotional  allowances                                                        |       | (201.6                                                                         | )          | (214.5 | ) | (200.2 | ) | (188.3 | ) | (183.4 | ) |
| Net revenues                                                                        |       | 1,125.4                                                                        |       | 1,001.4 |   | 987.3 |   | 947.3 |   | 939.5 |   |
| Operating  expenses:                                                                |       |                                                                           |       |   |   |   |   |   |   |   |   |
| Casino                                                                              |       | 163.3                                                                          |       | 159.5 |   | 151.9 |   | 157.3 |   | 150.8 |   |
| Gaming taxes                                                                        |       | 288.4                                                                          |       | 210.4 |   | 219.4 |   | 215.1 |   | 207.8 |   |
| Rooms                                                                               |       | 12.0                                                                           |       | 9.8 |   | 8.5 |   | 7.5 |   | 7.5 |   |
| Pari-mutuel                                                                         |       | 16.8                                                                           |       | 15.3 |   | 16.1 |   | 15.5 |   | 15.4 |   |
| Food, beverage  and other                                                           |       | 45.5                                                                           |       | 32.3 |   | 31.5 |   | 29.9 |   | 26.5 |   |
| Marine and  facilities                                                              |       | 68.0                                                                           |       | 60.2 |   | 57.0 |   | 56.3 |   | 53.5 |   |
| Marketing and  administrative                                                       |       | 290.6                                                                          |       | 269.3 |   | 246.3 |   | 236.9 |   | 232.6 |   |
| Corporate and  development                                                          |       | 49.0                                                                           |       | 57.2 |   | 57.8 |   | 41.0 |   | 32.9 |   |
| Valuation and  other charges                                                        |       | 85.2                                                                           |       | 8.5 |   | 13.4 |   | 4.1 |   | — |   |
| Preopening                                                                          |       | 6.5                                                                            |       | 13.6 |   | 0.3 |   | 0.2 |   | 2.3 |   |
| Depreciation and  amortization                                                      |       | 136.1                                                                          |       | 99.5 |   | 88.8 |   | 80.5 |   | 76.9 |   |
| Total operating  expenses                                                           |       | 1,161.4                                                                        |       | 935.6 |   | 891.0 |   | 844.3 |   | 806.2 |   |
| Operating income  (loss)                                                            |       | (36.0                                                                          | )          | 65.8 |   | 96.3 |   | 103.0 |   | 133.3 |   |
| Interest expense                                                                    |       | (109.3                                                                         | )          | (89.2 | ) | (76.3 | ) | (65.0 | ) | (69.8 | ) |
| Interest income                                                                     |       | 3.8                                                                            |       | 7.5 |   | 2.7 |   | 1.6 |   | 0.5 |   |
| Loss on early  extinguishment of debt                                               |       | (15.3                                                                          | )          | — |   | (2.1 | ) | (5.3 | ) | (14.1 | ) |
| Income (loss)  from continuing operations before income taxes and minority interest |       | (156.8                                                                         | )          | (15.9 | ) | 20.7 |   | 34.3 |   | 49.8 |   |
| Income tax  benefit (provision)                                                     |       | 64.8                                                                           |       | (1.9 | ) | (5.6 | ) | (11.3 | ) | (12.4 | ) |
| Minority  interest                                                                  |       | (4.9                                                                           | )          | (3.6 | ) | (6.5 | ) | (5.4 | ) | (10.0 | ) |
| Income (loss)  from continuing operations                                           |       | (96.9                                                                          | )          | (21.3 | ) | 8.6 |   | 17.6 |   | 27.4 |   |
| Income from  discontinued operations, net of income taxes                           |       | —                                                                         |       | 16.7 |   | 10.2 |   | 2.2 |   | 0.2 |   |
| Net income  (loss)                                                                  |       | $                                                                              | (96.9      | ) | $ | (4.6 | ) | $ | 18.9 |   | $ | 19.7 |   | $ | 27.7 |   |

 

22

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| ** **                                                        | ** ** | **Fiscal Year Ended (1)**                                       | ** ** |
|-------------------------------------------------------------------|------------|--------------------------------------------------------------------------------|------------|
| ** **                                                        | ** ** | **April 27,**                                                             | ** ** | **April 29,** | ** ** | **April 30,** | ** ** | **April 24,** | ** ** | **April 25,** | ** ** |
| **Statement of Operations Data (continued):** | ** ** | **2008**                                                                       | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                                        | ** ** | **(dollars in millions, except per share data)** | ** ** |
| Income (loss)  per common share:                                  |       |                                                                           |       |   |   |   |   |   |   |   |   |
| Basic                                                             |       |                                                                           |       |   |   |   |   |   |   |   |   |
| Income (loss)  from continuing operations                         |       | $                                                                              | (3.16      | ) | $ | (0.70 | ) | $ | 0.29 |   | $ | 0.59 |   | $ | 0.93 |   |
| Income from  discontinued operations                              |       | —                                                                         |       | 0.55 |   | 0.34 |   | 0.07 |   | 0.01 |   |
| Net Income  (loss)                                                |       | $                                                                              | (3.16      | ) | $ | (0.15 | ) | $ | 0.63 |   | $ | 0.66 |   | $ | 0.94 |   |
|                                                              |       |                                                                           |       |   |   |   |   |   |   |   |   |
| Diluted                                                           |       |                                                                           |       |   |   |   |   |   |   |   |   |
| Income (loss)  from continuing operations                         |       | $                                                                              | (3.16      | ) | $ | (0.70 | ) | $ | 0.28 |   | $ | 0.57 |   | $ | 0.90 |   |
| Income from  discontinued operations                              |       | —                                                                         |       | 0.55 |   | 0.32 |   | 0.07 |   | 0.01 |   |
| Net Income  (loss)                                                |       | $                                                                              | (3.16      | ) | $ | (0.15 | ) | $ | 0.60 |   | $ | 0.64 |   | $ | 0.91 |   |
| ** **                                                        | ** ** | ** **                                                                     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Other  Data:**                                                  |       |                                                                           |       |   |   |   |   |   |   |   |   |
| Net cash provided  by (used in):                                  |       |                                                                           |       |   |   |   |   |   |   |   |   |
| Operating  activities                                             |       | $                                                                              | 133.4      |   | $ | 70.9 |   | $ | 86.7 |   | $ | 169.6 |   | $ | 174.0 |   |
| Investing  activities                                             |       | $                                                                              | (302.4     | ) | $ | (197.3 | ) | $ | (176.4 | ) | $ | (213.8 | ) | $ | (159.9 | ) |
| Financing  activities                                             |       | $                                                                              | 72.5       |   | $ | 193.5 |   | $ | 64.9 |   | $ | 55.4 |   | $ | 25.8 |   |
| Capital  expenditures*                                            |       | $                                                                              | 190.5      |   | $ | 451.4 |   | $ | 224.4 |   | $ | 187.9 |   | $ | 151.6 |   |
|                                                              |       |                                                                           |       |   |   |   |   |   |   |   |   |
| **Operating  Data:**                                              |       |                                                                           |       |   |   |   |   |   |   |   |   |
| Number of slot  machines (2)                                      |       | 15,756                                                                         |       | 14,484 |   | 12,875 |   | 12,672 |   | 12,702 |   |
| Number of table  games (2)                                        |       | 463                                                                            |       | 370 |   | 483 |   | 485 |   | 398 |   |
| Number of hotel  rooms (2)                                        |       | 3,107                                                                          |       | 2,672 |   | 2,652 |   | 2,129 |   | 2,082 |   |
| Average daily  occupancy rate (2)                                 |       | 71.2                                                                           | %          | 79.2 | % | 81.7 | % | 84.8 | % | 83.7 | % |
|                                                              |       |                                                                           |       |   |   |   |   |   |   |   |   |
| **Balance  Sheet Data:**                                          |       |                                                                           |       |   |   |   |   |   |   |   |   |
| Cash and cash  equivalents                                        |       | $                                                                              | 91.8       |   | $ | 188.1 |   | $ | 121.0 |   | $ | 146.5 |   | $ | 134.6 |   |
| Total assets                                                      |       | $                                                                              | 1,974.2    |   | $ | 2,075.7 |   | $ | 1,877.7 |   | $ | 1,735.5 |   | $ | 1,547.6 |   |
| Long-term debt,  including current portion                        |       | $                                                                              | 1,507.3    |   | $ | 1,418.0 |   | $ | 1,219.1 |   | $ | 1,153.8 |   | $ | 1,086.5 |   |
| Stockholders’  equity                                        |       | $                                                                              | 188.0      |   | $ | 281.8 |   | $ | 280.2 |   | $ | 260.1 |   | $ | 238.3 |   |

 

----

*  Excludes: destroyed Biloxi casino barge of $7.4 million in fiscal 2005and $36.8 million in fiscal 2006, and Biloxi temporary casino of $37.9 millionin fiscal 2006 and discontinued operations of Vicksburg and Bossier City

 

(1)   Our fiscal year ended April 30, 2006includes 53 weeks while all other fiscal years include 52 weeks. The operatingresults and data from continuing operations presented for fiscal years prior tofiscal year 2005 are not comparable to other fiscal years presented becausethey do not include the operating results of the Isle-Our Lucaya, which weopened on December 15, 2003, the Blue Chip-Dudley, which we acquired on November 28,2003, the Blue Chip-Wolverhampton, which we opened on April 22, 2004, andthe Blue Chip-Walsall, which we opened on September 23, 2004. The resultsof fiscal years 2004-2007 reflect Bossier City, Vicksburg and ColoradoGrande-Cripple Creek as discontinued operations.  We opened new casino operations in Pompano,Waterloo, and Coventry in April 2007, June 2007, and July 2007,respectively.  We acquired our casinooperations in Caruthersville in June 2007.

 

(2)   The results of fiscal years 2004-2007 reflectBossier City, Vicksburg and Colorado Grande-Cripple Creek as discontinuedoperations.

 

23

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| **ITEM 7.** | ** ** | **MANAGEMENT’S DISCUSSION AND  ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |
|------------------|------------|-------------------------------------------------------------------------------------------------|

 

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

 

**Executive Overview**

 

We are a leading developer, owner and operator ofbranded gaming facilities and related lodging and entertainment facilities inregional markets in the United States and internationally. We haveintentionally sought geographic diversity to limit the risks caused by weather,regional economic difficulties and local gaming authorities and regulations. Wecurrently operate casinos in Mississippi, Louisiana, Missouri, Iowa, Coloradoand Florida. Internationally we operate casinos in Coventry, Dudley andWolverhampton, England and Freeport, Grand Bahamas. We also operate a harnessracing track at our casino in Florida.

 

Ouroperating results have been affected by write-offs and other valuation charges,the acquisition or opening of new properties, dispositions of properties,losses from the early extinguishment of debt, pre-opening expenses andincreases in competition.  ThisManagement’s Discussion and Analysis of Financial Condition and Results ofOperations should be read in conjunction with and giving consideration to thefollowing:

 

*Write-offs and Other Valuation Charges* – As a result of continuing losses, a reviewof expected future operating trends and the current fair values or our long-livedassets in England, we recorded an impairment charge of $78.7 million related tolong-lived assets of our UK operations as of our 2008 fiscal year end. Theresults from operations for the fiscal year 2008 also include $6.5 million ofcharges related to the termination of our plans to develop a new casino in westHarrison County, Mississippi and the cancellation of construction projects inDavenport, Iowa and Kansas City, Missouri.

 

*Opening of New Properties -*During fiscal year 2008, our operating resultswere impacted by the opening of the slot gaming facility at our Pompano Parkfacility in April 2007, the acquisition of our Caruthersville, Missouricasino in June 2007 and the opening of our Waterloo, Iowa and Coventry,England casinos in June 2007 and July 2007, respectively.

 

*Acquisition of Minority Interest –*On January 27, 2008, we acquired the 43%minority interest in our Black Hawk, Colorado casino properties for $64.8million.

 

*Losses from Early Extinguishment of Debt –***We recorded a total of $15.3 million inlosses associated with the early extinguishment of debt during fiscal year2008, including a $9.0 million call premium paid to retire our 9% SeniorSubordinated Notes, and $6.3 million of deferred finance costs associated withthe retired debt instruments.

 

*Pre-Opening Expenses* - In fiscal year 2008, we opened our new Waterloo and Coventryproperties. In late fiscal year 2007 we opened the slot gaming facility at ourPompano Park property.  For fiscal years2008 and 2007, we recorded pre-opening expenses related to these properties inthe amounts of $6.5 million and $13.6 million, respectively.

 

*Increased Competition* - Following the impact of Hurricane Katrina in the fall of 2005, ourMississippi properties in Biloxi and Natchez experienced strong revenue growthas a result of limited competition on the Gulf Coast. Since that time, the GulfCoast has seen recovery in casino development which, combined with the closureof the Biloxi/Ocean Springs bridge through November 1, 2007, hassignificantly reduced our market share in Biloxi from their artificially highpost-Katrina levels. Patron counts have decreased at our Natchez property asgaming patrons who were displaced by hurricanes have returned to the GulfCoast.  In Louisiana, our Lake Charles propertyexperienced higher gaming revenues in fiscal year 2007 due to the closure ofcompetitors’ facilities as a result of Hurricane Rita.  Competition has reopened which has resultedin decreased gaming revenues at our Lake Charles property in fiscal year2008.  Our Quad Cities (Bettendorf andDavenport) and Marquette properties have experienced increased competition inmany of their feeder markets, which has continued to have a negative impact ongaming revenues at these properties.

 

*Natchez Flooding –*Our Natchez property was closed due to flooding for the last fourteendays of fiscal year 2008.

 

*Impact of Smoking Restrictions –*Our properties in Black Hawk have beennegatively impacted by a smoking ban which went into effect on January 1,2008.  Our Quad Cities properties havebenefited from a similar smoking ban affecting competing casinos in Illinois.

 

24

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*Impact of the Economy –*Our properties are subject to the impact of general economicconditions. Increases in gasoline prices and other macro economic factors may impact the frequency of ourcustomers’ visits and a decline in economic conditions in many of our marketsmay also affect our potential customers’ disposable income.

 

**Results of Operations**

 

Ourresults of operations for the fiscal years ended April 27, 2008, April 29,2007 and April 30, 2006 reflect the consolidated operations of all of oursubsidiaries and include the following properties: Lake Charles, Biloxi, Lula,Natchez, Kansas City, Boonville, Caruthersville, Bettendorf, Marquette,Waterloo, Davenport, Black Hawk, Colorado Central Station-Black Hawk, OurLucaya, Blue Chip-Dudley, Blue Chip-Wolverhampton, Coventry, and Pompano Park.Fiscal years 2007 and 2006 results have been reclassified to reflect Vicksburgand the Bossier City which were sold on July 31, 2006, as discontinuedoperations.

 

Ourfiscal year ends on the last Sunday in April. This fiscal year conventioncreates more comparability of our quarterly operations, by generally having anequal number of weeks (13) and weekend days (26) in each quarter.Periodically, this convention necessitates a 53-week year. The fiscal yearsended April 27, 2008 and April 29, 2007 were 52-week years.   The fiscal year ended April 30, 2006was a 53-week year.

 

Webelieve that our historical results of operations may not be indicative of ourfuture results of operations because of the substantial present and expectedfuture increase in competition for gaming customers in each of our markets, asnew gaming facilities open and existing gaming facilities expand or enhancetheir facilities. We believe that our operating results may be materiallyaffected by the economy and weather.

 

**ISLE OFCAPRI CASINOS, INC.**

**(Inthousands)**

 
| ** **              | ** ** | **Net Revenues**           | ** ** | **Operating Income (Loss)** | ** ** |
|-------------------------|------------|---------------------------------|------------|---------------------------------------|------------|
| ** **              | ** ** | **Fiscal Year Ended** | ** ** | **Fiscal Year Ended**       | ** ** |
| ** **              | ** ** | **April 27,**              | ** ** | **April 29,**                    | ** ** | **April 30,** | ** ** | **April 27,** | ** ** | **April 29,** | ** ** | **April 30,** | ** ** |
| **(in thousands)** | ** ** | **2008**                        | ** ** | **2007**                              | ** ** | **2006** | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
| Mississippi             |       |                            |       |                                  |       |   |   |   |   |   |   |   |   |
| Biloxi                  |       | $                               | 90,586     |                                  | $          | 147,825 |   | $ | 100,790 |   | $ | (3,538 | ) | $ | 26,948 |   | $ | 28,143 |   |
| Natchez                 |       | 35,707                          |       | 40,864                                |       | 46,135 |   | 7,412 |   | 9,391 |   | 12,230 |   |
| Lula                    |       | 75,399                          |       | 83,068                                |       | 85,731 |   | 11,034 |   | 4,231 |   | 12,089 |   |
| Mississippi  Total      |       | 201,692                         |       | 271,757                               |       | 232,656 |   | 14,908 |   | 40,570 |   | 52,462 |   |
| Louisiana               |       |                            |       |                                  |       |   |   |   |   |   |   |   |   |
| Lakes Charles           |       | 159,470                         |       | 170,751                               |       | 161,912 |   | 22,380 |   | 22,079 |   | 19,952 |   |
| Missouri                |       |                            |       |                                  |       |   |   |   |   |   |   |   |   |
| Kansas City             |       | 75,630                          |       | 82,269                                |       | 88,009 |   | 6,985 |   | 7,258 |   | 10,282 |   |
| Boonville               |       | 79,816                          |       | 81,156                                |       | 74,519 |   | 19,485 |   | 17,884 |   | 17,060 |   |
| Caruthersville  (1)     |       | 26,857                          |       | —                                |       | — |   | 2,574 |   | — |   | — |   |
| Missouri Total          |       | 182,303                         |       | 163,425                               |       | 162,528 |   | 29,044 |   | 25,142 |   | 27,342 |   |
| Iowa                    |       |                            |       |                                  |       |   |   |   |   |   |   |   |   |
| Bettendorf              |       | 92,429                          |       | 87,699                                |       | 97,154 |   | 18,967 |   | 17,120 |   | 23,320 |   |
| Davenport               |       | 52,681                          |       | 60,483                                |       | 69,007 |   | 8,650 |   | 8,094 |   | 10,435 |   |
| Marquette               |       | 32,968                          |       | 37,593                                |       | 42,536 |   | 4,380 |   | 4,802 |   | 7,424 |   |
| Waterloo (2)            |       | 64,650                          |       | —                                |       | — |   | 2,314 |   | (925 | ) | (329 | ) |
| Iowa Total              |       | 242,728                         |       | 185,775                               |       | 208,697 |   | 34,311 |   | 29,091 |   | 40,850 |   |
| Colorado                |       |                            |       |                                  |       |   |   |   |   |   |   |   |   |
| Black  Hawk/Colorado    |       |                            |       |                                  |       |   |   |   |   |   |   |   |   |
| Central Station         |       | 144,521                         |       | 153,718                               |       | 163,412 |   | 30,811 |   | 27,894 |   | 36,132 |   |
| Florida                 |       |                            |       |                                  |       |   |   |   |   |   |   |   |   |
| Pompano (2)             |       | 160,831                         |       | 30,059                                |       | 24,721 |   | (7,749 | ) | (20,308 | ) | (2,550 | ) |
| International           |       |                            |       |                                  |       |   |   |   |   |   |   |   |   |
| Blue Chip               |       | 9,435                           |       | 8,898                                 |       | 8,221 |   | (1,563 | ) | (2,282 | ) | (10,974 | ) |
| Coventry (2)            |       | 8,227                           |       | —                                |       | — |   | (98,485 | ) | (4,135 | ) | (1,324 | ) |
| Our Lucaya              |       | 15,548                          |       | 16,777                                |       | 25,349 |   | (835 | ) | 7,192 |   | (2,201 | ) |
| International  Total    |       | 33,210                          |       | 25,675                                |       | 33,570 |   | (100,883 | ) | 775 |   | (14,499 | ) |
| Corporate and  Other    |       | 597                             |       | 234                                   |       | (137 | ) | (58,902 | ) | (59,417 | ) | (63,217 | ) |
|                    |       | $                               | 1,125,352  |                                  | $          | 1,001,394 |   | $ | 987,359 |   | $ | (36,080 | ) | $ | 65,826 |   | $ | 96,472 |   |

 

----

(1) Reflectsresults since the June 2007 acquisition effective date.

 

25

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(2) Waterloo,Pompano, and Coventry opened for operations in June 2007, April 2007and July 2007, respectively.

 

Note:The table excludes our Vicksburg and Bossier City properties which have beenclassified as discontinued operations.

 

**Fiscal Year 2008 Compared toFiscal Year 2007**

 

*Revenues*

Revenues for the fiscal years ended 2008 and 2007 are as follows:

* *
| ** **                        | ** ** | **Fiscal Year Ended** | ** ** | ** **         | ** ** | ** **   | ** ** |
|-----------------------------------|------------|---------------------------------|------------|--------------------|------------|--------------|------------|
| ** **                        | ** ** | **April 27,**              | ** ** | **April 29,** | ** ** | ** **   | ** ** | **Percentage** | ** ** |
| **(in thousands)**           | ** ** | **2008**                        | ** ** | **2007**           | ** ** | **Variance** | ** ** | **Variance** | ** ** |
| ** **                        | ** ** | ** **                      | ** ** | ** **         | ** ** | ** **   | ** ** | ** ** | ** ** |
| Revenues:                         |       |                            |       |               |       |         |       |   |   |
| Casino                            |       | $                               | 1,121,860  |               | $          | 1,015,629    |       | $ | 106,231 |   | 10.5 | % |
| Rooms                             |       | 49,498                          |       | 49,584             |       | (86          | )          | -0.2 | % |
| Pari-mutuel  commissions and fees |       | 19,096                          |       | 20,004             |       | (908         | )          | -4.5 | % |
| Food, beverage  and other         |       | 136,481                         |       | 130,635            |       | 5,846        |       | 4.5 | % |
| Gross revenues                    |       | 1,326,935                       |       | 1,215,852          |       | 111,083      |       | 9.1 | % |
| Less promotional  allowances      |       | (201,583                        | )          | (214,458           | )          | 12,875       |       | 6.0 | % |
| Net revenues                      |       | $                               | 1,125,352  |               | $          | 1,001,394    |       | 123,958 |   | 12.4 | % |
|                                   |            |                                 |            |                    |            |              |            |  |  |  |  |  |

 

*Casino Revenues -*Casino revenues increased $106.2 million, or 10.5%, compared to fiscalyear 2007.  Our increased casino revenueswere primarily a result of the opening or acquisition of new casino propertiesin Caruthersville, Waterloo, Pompano and Coventry, and increased casinorevenues at Bettendorf driven by the opening of our new hotel in May 2007.Casino revenues from our new casino operations were $224.9 million for thefiscal year 2008. Same property casino revenues decreased $118.7 million forthe fiscal year 2008. This included decreased casino revenues at Biloxi of$62.7 million for the fiscal year 2008, due to increased competition andpost-hurricane normalization and at Lake Charles of $11.1 million for thefiscal year 2008, due to post-hurricane normalization and $11.5 million at ourBlack Hawk operations primarily due to planned reductions in our complimentary allowancesand the impact of a state smoking ban at casinos effective January 2008.

 

*Rooms Revenue -*Rooms revenue decreased $0.1 million, or 0.2%, for the fiscal year2008, compared to the fiscal year 2007. These revenues decreased in total atour Biloxi and Lula properties by $5.1 million for the fiscal year 2008,primarily related to increased competition and post-hurricane normalization andthe closure since October of over 170 rooms in Lula for repair.  Rooms revenue increased $5.4 million in Iowadriven by the new hotel tower in Bettendorf and the opening of our Waterloofacility.

 

*Pari-mutuel Commissions and Fees -*Pari-mutuel commissions earned at PompanoPark for the fiscal year 2008 decreased $0.9 million, or 4.5% compared to thefiscal year 2007 due primarily to decreased wagering on simulcast races.

 

*Food, Beverage and Other Revenues -*Food, beverage and other revenues**increased $5.8 million, or 4.5%, for the fiscal year 2008,compared to the fiscal year 2007.  Ourincreased food, beverage and other revenues were primarily a result of theopening or acquisition of new casino properties in Caruthersville, Waterloo,Pompano and Coventry. Considering the acquisition or opening of new propertiesfor which our food, beverage and other revenues increased $24.0 million for thefiscal year 2008, same property food beverage and other revenues decreased$18.2 million for the fiscal year 2008. This included decreased food, beverageand other revenues at Biloxi of $9.2 million for the fiscal year 2008, due to increasedcompetition and post-hurricane normalization, and at Lake Charles of $4.1million for the fiscal year 2008, primarily due to the collection of $2.2million in business interruption proceeds reflected in the prior year andpost-hurricane normalization.

 

*Promotional Allowances -*Promotional allowances, which are made up ofcomplimentaries, cash points and coupons, are rewards that we give our loyalcustomers to encourage them to continue to patronize our properties. * *Promotional allowances decreased $12.9million, or 6.0%, for the fiscal year 2008, compared to the fiscal year2007.  Considering the acquisition oropening of new properties for which our promotional allowances increased $20.1million for the fiscal year 2008, same property promotional allowancesdecreased $33.0 million for fiscal year 2008. Decreases in such promotionalallowances reflect decreases in gross revenues at certain of our propertieswith Biloxi accounting for $18.2 million of the decrease for the fiscal year2008, due to increased competition and post-hurricane normalization. Ourdecision to reduce certain marketing incentives to our less profitable customersegments has also reduced our overall promotional allowances.

 

26

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*Operating Expenses*

 

Operatingexpenses for the fiscal years 2008 and 2007 are as follows:

 
| ** **                              | ** ** | **Fiscal Year Ended** | ** ** | ** **         | ** ** | ** **   | ** ** |
|-----------------------------------------|------------|---------------------------------|------------|--------------------|------------|--------------|------------|
| ** **                              | ** ** | **April 27,**              | ** ** | **April 29,** | ** ** | ** **   | ** ** | **Percentage** | ** ** |
| **(in thousands)**                 | ** ** | **2008**                        | ** ** | **2007**           | ** ** | **Variance** | ** ** | **Variance** | ** ** |
| ** **                              | ** ** | ** **                      | ** ** | ** **         | ** ** | ** **   | ** ** | ** ** | ** ** |
| Operating  expenses:                    |       |                            |       |               |       |         |       |   |   |
| Casino                                  |       | $                               | 163,250    |               | $          | 159,534      |       | $ | 3,716 |   | 2.3 | % |
| Gaming taxes                            |       | 288,402                         |       | 210,404            |       | 77,998       |       | 37.1 | % |
| Rooms                                   |       | 12,031                          |       | 9,811              |       | 2,220        |       | 22.6 | % |
| Pari-mutuel  commissions and fees       |       | 16,834                          |       | 15,342             |       | 1,492        |       | 9.7 | % |
| Food, beverage  and other               |       | 45,538                          |       | 32,262             |       | 13,276       |       | 41.2 | % |
| Marine and  facilities                  |       | 68,044                          |       | 60,174             |       | 7,870        |       | 13.1 | % |
| Marketing and  administrative           |       | 290,591                         |       | 269,279            |       | 21,312       |       | 7.9 | % |
| Corporate and  development              |       | 48,974                          |       | 57,217             |       | (8,243       | )          | -14.4 | % |
| Write-offs and  other valuation charges |       | 85,184                          |       | 8,466              |       | 76,718       |       | 906.2 | % |
| Pre-opening                             |       | 6,457                           |       | 13,573             |       | (7,116       | )          | -52.4 | % |
| Depreciation and  amortization          |       | 136,127                         |       | 99,506             |       | 36,621       |       | 36.8 | % |
| Total operating  expenses               |       | $                               | 1,161,432  |               | $          | 935,568      |       | 225,864 |   | 24.1 | % |
|                                         |            |                                 |            |                    |            |              |            |  |  |  |  |  |

 

*Casino -*Casino operating expenses increased $3.7 million, or 2.3%, for fiscalyear 2008 compared to fiscal year 2007. Considering the acquisition or openingof new properties for which our casino expenses increased $27.0 million forfiscal year 2008, same property casino expenses decreased $23.3 million for fiscalyear 2008.  Overall casino expenses forfiscal year 2008 compared to fiscal year 2007, decreased in proportion tocasino revenue from 15.7% to 14.6%.

 

*Gaming Taxes -*State and local gaming taxes increased $78.0 million, or 37.1%, forfiscal year 2008, as compared to the prior fiscal year.  Considering the acquisition or opening of newproperties for which our gaming taxes increased $92.4 million for fiscal year2008, same property gaming taxes decreased $14.4 million for fiscal year2008.  This decrease in same propertygaming taxes for the comparative fiscal years 2008 and 2007 corresponds to thereductions in gaming revenues.  Theeffective rate for gaming taxes as a percentage of gaming revenue increasedfrom 20.7% to 25.7% for the fiscal year 2008, due to an increase in the mix ofgaming revenues derived from jurisdictions with higher gaming tax ratesincluding Florida and England, partially offset by decreased gaming revenues inMississippi.

 

*Rooms -*Rooms expense increased $2.2 million, or 22.6% for the fiscal year 2008as compared to the fiscal year 2007. Rooms expense reflects increased room capacity due to the opening of theWaterloo property hotel and the Bettendorf property hotel expansion.  These expenses directly relate to the cost ofproviding hotel rooms.  A reduction incomplimentary hotel rooms provided to our customers also increases our roomsexpense as the cost of rooms expense allocated to casino expense is reduced.

 

*Pari-mutuel Commissions and Fees -* Pari-mutuel operating costs of the PompanoPark property increased $1.5 million for the fiscal year 2008 compared tofiscal year 2007. Such costs consist primarily of compensation, benefits,purses, simulcast fees and other direct costs of track operations.

 

*Food, Beverage and Other -*Food, beverage and other expenses increased$13.3 million, or 41.2% in fiscal year 2008 as compared to fiscal year 2007.Same property food, beverage and other expenses decreased $2.8 million forfiscal year 2008.  This decrease in sameproperty food, beverage and other expenses for fiscal year 2008, reflectsreductions in our food, beverage and other revenues.

 

*Marine and Facilities -*These expenses include salaries, wages andbenefits of the marine and facilities departments, operating expenses of themarine crews, insurance, maintenance of public areas, housekeeping and generalmaintenance of the riverboats and pavilions. Marine and facilities expensesincreased $7.9 million, or 13.1%, in fiscal year 2008. Same property marine andfacilities expenses decreased $3.5 million for fiscal year 2008. This decreasein same property marine and facilities expenses for fiscal year 2008 ascompared to fiscal year 2007 is primarily the result of staff reductions andlabor cost management.

 

*Marketing and Administrative -*These expenses include salaries, wages andbenefits of the marketing and sales departments, as well as promotions, directmail, advertising, special events and entertainment. Administrative expensesinclude

 

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administrationand human resource department expenses, rent, professional fees and propertytaxes.  Marketing and administrativeexpenses increased $21.3 million, or 7.9%, in fiscal year 2008 compared tofiscal year 2007.  Same propertymarketing and administrative expenses decreased $32.4 million for fiscal year2008. This decrease in same property marketing and administrative expenses forfiscal year 2008 reflects our decision to reduce marketing costs to lessprofitable customer marketing segments and to reduce our administrative costs.

 

*Corporate and Development -* During fiscal year 2008, our corporate anddevelopment expenses were $49.0 million compared to $57.2 million for fiscalyear 2007. This overall decrease in corporate and development expenses is dueprimarily to fiscal year 2007 including $16.2 million in development expensesprimarily associated with development opportunities in Pittsburgh andSingapore.

 

*Write-offs and Other Valuation Charges –*As a result of continuing losses, a review ofexpected future operating trends and the current fair values or our long-livedassets in Coventry, England, we have recorded an impairment charge of $78.0million related to long-lived assets of our Coventry operations as of our 2008fiscal year end. Additionally, werecognized $6.5 million in impairment charges for fiscal year 2008 primarilyrelated to the write-off of costs related to the termination of our plans todevelop a new casino in west Harrison County, Mississippi, the write-off ofconstruction projects we decided to terminate in Davenport, and Kansas City,and $0.7 million for impairment of long-lived assets at our Blue Chipoperations.  During fiscal year 2007, werecognized an $8.5 million impairment charge relating to goodwill at Lula, Mississippiand real property at Blue Chip.

 

*Pre-opening -*Pre-opening expenses for fiscal year 2008 included $3.4 million, $2.8million and $0.3 million for Waterloo, Coventry and Pompano, respectively.Pre-opening expenses during fiscal year 2007 included $10.6 million, $2.1million, and $0.9 million for our Pompano Park, Coventry, and Waterlooproperties, respectively.

 

*Depreciation and Amortization -*Depreciation and amortization expense forfiscal year 2008 increased $36.6 million, or 36.8% due primarily to our hotelexpansion at our Bettendorf property, the acquisition of Caruthersville, theopening of our Waterloo and Coventry properties, and the opening of the slotgaming facility at our Pompano property. Depreciation and amortization expense at our new casino propertiesincreased by $33.0 million compared to fiscal year 2007.

 

*Other Income (Expense), Income Taxes, Minority Interest andDiscontinued Operations*

 

Interestexpense, interest income, loss on early extinguishment of debt, income tax(provision) benefit, minority interest and income from discontinued operations,net of income taxes for the fiscal years 2008 and 2007 are as follows:

 
| ** **                                                | ** ** | **Fiscal Year Ended** | ** ** | ** **         | ** ** | ** **   | ** ** |
|-----------------------------------------------------------|------------|---------------------------------|------------|--------------------|------------|--------------|------------|
| ** **                                                | ** ** | **April 27,**              | ** ** | **April 29,** | ** ** | ** **   | ** ** | **Percentage** | ** ** |
| **(in thousands)**                                   | ** ** | **2008**                        | ** ** | **2007**           | ** ** | **Variance** | ** ** | **Variance** | ** ** |
| ** **                                                | ** ** | ** **                      | ** ** | ** **         | ** ** | ** **   | ** ** | ** ** | ** ** |
| Interest expense                                          |       | $                               | (109,286   | )                  | $          | (89,150      | )          | $ | (20,136 | ) | 22.6 | % |
| Interest income                                           |       | 3,814                           |       | 7,469              |       | (3,655       | )          | -48.9 | % |
| Loss on early  extinguishment of debt                     |       | (15,274                         | )          | —             |       | (15,274      | )          | 100.0 | % |
| Income tax  (provision) benefit                           |       | 64,820                          |       | (1,906             | )          | 66,726       |       | -3500.8 | % |
| Minority  interest                                        |       | (4,868                          | )          | (3,568             | )          | (1,300       | )          | 36.4 | % |
| Income from  discontinued operations, net of income taxes |       | —                          |       | 16,692             |       | (16,692      | )          | -100.0 | % |
|                                                           |            |                                 |            |                    |            |              |            |  |  |  |  |  |

 

*Interest Expense*- Interest expense increased $20.1 million for fiscal year 2008compared to fiscal year 2007.  Thisincrease is primarily attributable to higher debt balances under our SeniorSecured Credit Facilities to fund acquisitions, and property and equipmentadditions.

 

*Interest Income -*During fiscal year 2008, our interest income was $3.8 million comparedto $7.5 million for fiscal year 2007. The change in interest income reflects changes in our invested cashbalances and interest rates.

 

*Loss on Early Extinguishment of Debt –*Our loss included the $9.0 million callpremium from the early redemption of our $200.0 million 9% Senior SubordinatedNotes at 104.5% and a write-off of the related deferred financing costs of $2.4million. Additionally, during the first quarter of fiscal year 2008, wereplaced our February 2005 Credit Facility with our July 2007 CreditFacility resulting in a loss on early extinguishment of debt of $2.3 millionfrom the write-off of deferred financing costs. In the fourth quarter of fiscalyear 2008, we retired the Isle of Capri Black Hawk’s Senior Secured Credit Facilityresulting in a loss on early extinguishment of debt of $1.6 million from thewrite-off of deferred financing costs. These transactions resulted in a total loss on early extinguishment ofdebt of $15.3 million for fiscal year 2008.

 

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*Income Tax (Provision) Benefit –*Our income tax (provision) benefit is andthus our effective income tax rate has been impacted by interim changes in ourestimate of annual taxable income for financial statement purposes as well asour percentage of permanent items in relation to such estimated income orloss.  Effective income tax rates were asfollows:

 

| ** **             | ** ** | **Fiscal Year Ended** | ** ** |
|------------------------|------------|---------------------------------|------------|
| ** **             | ** ** | **April 27,**              | ** ** | **April 29,** | ** ** |
| ** **             | ** ** | **2008**                        | ** ** | **2007** | ** ** |
| Continuing  operations |       | 41.33                           | %          | -12.02 | % |
| Total                  |       | 41.33                           | %          | 108.20 | % |

 

*Minority Interests -* During fiscal year 2008, our minorityinterest expense was $4.9 million, compared to $3.6 million for fiscal year2007.  Minority interests are recordedfor our minority partner’s interest in our Colorado.  Following our acquisition of the remaininginterest in our Colorado operations, we no longer record a minority interestfor such operations.

 

*Income From Discontinued Operations -*On July 31, 2006, we completed the saleof our Bossier City and Vicksburg properties. Income from discontinued operations for fiscal year 2007 includes pretaxoperating income of $5.6 million, and we also recorded a gain on sale ofdiscontinued operations of $23.3 million during fiscal 2007.  Income tax provision for fiscal year 2007 was$12.2 million, resulting in income from discontinued operations of $16.7million.

 

**Fiscal Year 2007 Compared toFiscal Year 2006**

 

Note: Our 2006 fiscal year included 53 weeks ofoperations while our 2007 fiscal year included 52 weeks of operations.

 

*Revenues*

 

Revenues for the fiscal years 2007 and 2006 are as follows:

 
| ** **                        | ** ** | **Fiscal Year Ended** | ** ** | ** **         | ** ** | ** **   | ** ** |
|-----------------------------------|------------|---------------------------------|------------|--------------------|------------|--------------|------------|
| ** **                        | ** ** | **April 29,**              | ** ** | **April 30,** | ** ** | ** **   | ** ** | **Percentage** | ** ** |
| **(in thousands)**           | ** ** | **2007**                        | ** ** | **2006**           | ** ** | **Variance** | ** ** | **Variance** | ** ** |
| ** **                        | ** ** | ** **                      | ** ** | ** **         | ** ** | ** **   | ** ** | ** ** | ** ** |
| Revenues:                         |       |                            |       |               |       |         |       |   |   |
| Casino                            |       | $                               | 1,015,629  |               | $          | 1,004,143    |       | $ | 11,486 |   | 1.1 | % |
| Rooms                             |       | 49,584                          |       | 36,999             |       | 12,585       |       | 34.0 | % |
| Pari-mutuel  commissions and fees |       | 20,004                          |       | 20,534             |       | (530         | )          | -2.6 | % |
| Food, beverage  and other         |       | 130,635                         |       | 125,857            |       | 4,778        |       | 3.8 | % |
| Gross revenues                    |       | 1,215,852                       |       | 1,187,533          |       | 28,319       |       | 2.4 | % |
| Less promotional  allowances      |       | (214,458                        | )          | (200,174           | )          | (14,284      | )          | -7.1 | % |
| Net revenues                      |       | $                               | 1,001,394  |               | $          | 987,359      |       | 14,035 |   | 1.4 | % |
|                                   |            |                                 |            |                    |            |              |            |  |  |  |  |  |

 

*Casino Revenues -*Casino revenues increased $11.5 million or 1.1% in fiscal year 2007compared to fiscal year 2006. We experienced an increase in casino revenues atBiloxi due to limited competition in the Biloxi market in the early part of the2007 fiscal year and our 2006 fiscal year four month closure due to HurricaneKatrina. Similarly, Lake Charles experienced an increase in casino revenuesfrom the prior year due to closure during fiscal year 2006 for 16 daysresulting from Hurricane Rita and the closure of a competitor in the market.Boonville’s casino revenues increased as compared to the 2006 fiscal year dueto increased gaming patrons who we believe were attracted by the opening of thenew hotel. Also, casino revenues at Pompano increased due to the opening of thenew casino and increased marketing efforts. These increases were offset bydecreases in casino revenues at other properties including decreases at ourColorado, Iowa and Kansas City properties in each case primarily due toincreased competition and in some cases severe weather in the 2007 fiscal yearas compared to 2006. Casino revenues also decreased at Lucaya primarily due toa decline in tourists on the island and reduced marketing spending as we hadbeen preparing to close this operation. Natchez saw a decrease in revenues in2007 as compared to 2006, mostly due to the re-opening of casinos on theMississippi Gulf Coast following the hurricanes.

 

*Rooms Revenue -*Roomsrevenue increased $12.6 million in fiscal year 2007 compared to fiscal year2006 primarily resulting from the increased capacity at Biloxi, Black Hawk, andthe new hotel at Boonville.

 

*Pari-mutuel -*Pari-mutuelcommissions and fees earned at Pompano Park in Florida for the 2007 fiscal yeardecreased $0.5 million or 2.6% compared to the prior year due primarily todecreases in wagering.

 

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*Food, beverage and other revenues -*Food, beverage and other revenues increasedby $4.8 million primarily due to an increase at Biloxi resulting from its 2006fiscal year four month closure and limited competition in the market during theearly part of the 2007 fiscal year.

 

*Promotional Allowances -*Promotional allowances, which are made up of complimentary revenues,cash points and coupons are rewards that we give our loyal customers toencourage them to continue to patronize our properties. These allowancesincreased by $14.3 million in fiscal year 2007 compared to fiscal year 2006primarily due to increased marketing efforts to address heightened competitionin several of our markets.

 

*Operating Expenses*

 

Operatingexpenses for the fiscal years 2007 and 2006 are as follows:

 
| ** **                              | ** ** | **Fiscal Year Ended** | ** ** | ** **         | ** ** | ** **   | ** ** |
|-----------------------------------------|------------|---------------------------------|------------|--------------------|------------|--------------|------------|
| ** **                              | ** ** | **April 29,**              | ** ** | **April 30,** | ** ** | ** **   | ** ** | **Percentage** | ** ** |
| **(in thousands)**                 | ** ** | **2007**                        | ** ** | **2006**           | ** ** | **Variance** | ** ** | **Variance** | ** ** |
| ** **                              | ** ** | ** **                      | ** ** | ** **         | ** ** | ** **   | ** ** | ** ** | ** ** |
| Operating  expenses:                    |       |                            |       |               |       |         |       |   |   |
| Casino                                  |       | $                               | 159,534    |               | $          | 151,860      |       | $ | 7,674 |   | 5.1 | % |
| Gaming taxes                            |       | 210,404                         |       | 219,365            |       | (8,961       | )          | -4.1 | % |
| Rooms                                   |       | 9,811                           |       | 8,463              |       | 1,348        |       | 15.9 | % |
| Pari-mutuel  commissions and fees       |       | 15,342                          |       | 16,051             |       | (709         | )          | -4.4 | % |
| Food, beverage  and other               |       | 32,262                          |       | 31,530             |       | 732          |       | 2.3 | % |
| Marine and  facilities                  |       | 60,174                          |       | 56,993             |       | 3,181        |       | 5.6 | % |
| Marketing and  administrative           |       | 269,279                         |       | 246,334            |       | 22,945       |       | 9.3 | % |
| Corporate and  development              |       | 57,217                          |       | 57,803             |       | (586         | )          | -1.0 | % |
| Write-offs and  other valuation charges |       | 8,466                           |       | 13,388             |       | (4,922       | )          | -36.8 | % |
| Pre-opening                             |       | 13,573                          |       | 281                |       | 13,292       |       | 4730.2 | % |
| Depreciation and  amortization          |       | 99,506                          |       | 88,819             |       | 10,687       |       | 12.0 | % |
| Total operating  expenses               |       | $                               | 935,568    |               | $          | 890,887      |       | 44,681 |   | 5.0 | % |
|                                         |            |                                 |            |                    |            |              |            |  |  |  |  |  |

 

*Casino* -Casino operating expenses increased $7.7 million in fiscal year 2007 overfiscal year 2006. These expenses are primarily comprised of salaries, wages andbenefits and other operating expenses of the casinos. This increase wasprimarily due to increases in Biloxi’s operating costs related to increasedgaming volumes over the prior year and the opening of additional gaming spacein the current year.

 

*Gaming Taxes -*Stateand local gaming taxes decreased by $9.0 million in fiscal year 2007 comparedto fiscal year 2006 primarily due to a reversal of $6.9 million in previouslyaccrued gaming taxes at our Lucaya property following a fiscal year 2007amendment reducing the statutory gaming tax rate retroactively back to December 2003.

 

*Rooms -*Room expensesincreased $1.3 million in fiscal year 2007 compared to fiscal year 2006. Theseexpenses directly relate to the cost of providing hotel rooms. Other costs ofthe hotels are shared with the casinos and are presented in their respectiveexpense categories. The increase in expenses was primarily due to Biloxi andLake Charles having been closed for a portion of the prior year due tohurricanes, the new hotel at Boonville and the hotel expansion at Black Hawk.

 

*Pari-mutuel Commissions and Fees -*Pari-mutuel operating costs of Pompano Parkin Florida decreased 4.4% in fiscal year 2007 compared to fiscal year 2006.Such costs consist primarily of compensation, benefits, purses, simulcast feesand other direct costs of track operations.

 

*Food, Beverage and Other -*Food, beverage and other expenses increased $0.7 million in fiscal year2007 as compared to fiscal year 2006. Food and beverage expenses as apercentage of gross food and beverage revenues decreased from 25.1% for fiscalyear 2006, to 24.7% for the fiscal year 2007. These expenses consist primarilyof the cost of goods sold, salaries, wages and benefits and other operatingexpenses of these departments. The improved margin percentage relates tocontinuing cost control efforts. These gross expenses increased primarily dueto increased food and beverage revenues in fiscal 2007 caused by Biloxi beingclosed for four months in fiscal year 2006 due to Hurricane Katrina, which wasoffset by decreased expenses at the Colorado and Iowa properties as a result ofdecreased food and beverage sales due to increased competition in thosemarkets.

 

*Marine and Facilities -*Marine and facilities expenses increased $3.2 million in fiscal year 2007compared to fiscal year 2006. These expenses include salaries, wages andbenefits of the marine and facilities departments, operating expenses of the

 

30

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marinecrews, insurance, maintenance of public areas, housekeeping and generalmaintenance of the riverboats and pavilions. The increase was primarily due toclosure of Biloxi in the prior year due to Hurricane Katrina, the closure ofLake Charles in fiscal year 2006 due to Hurricane Rita and expanded facilitiesat Pompano Park in Florida.

 

*Marketing and Administrative -*Marketing expenses increased 2.2% in fiscalyear 2007 compared to fiscal year 2006. The increase in marketing expenses isprimarily related to increased revenues and increased marketing efforts toaddress increased competition in several of our markets. Marketing expensesinclude salaries, wages and benefits of the marketing and sales departments, aswell as promotions, direct mail, advertising, special events and entertainment.

 

Administrativeexpenses increased 7.1% in fiscal year 2007 over fiscal year 2006. Theseexpenses include administration and human resource department expenses, rent,new development activities, professional fees, insurance and property taxes.The increase is due primarily to the closure of Biloxi in the fiscal year 2006due to Hurricane Katrina, the closure of Lake Charles in fiscal year 2006 dueto Hurricane Rita, increased property insurance expense at all of ourproperties, stock compensation expense, and corporate relocation expense.

 

*Corporate and Development –*During fiscal year 2007, our corporate and development expenses were$57.2 million compared to $57.8 million for fiscal year 2006. During fiscal2007 we adopted FAS 123(R) resulting in an increase in corporate expensesof $5.6 million for stock compensation expense which was offset primarily by a$4.1 decrease in development costs.

 

*Write-offs and Other Valuation Charges -*We recorded valuation charges in fiscal year2007 of $8.5 million relating to goodwill impairment at Lula of $7.8 millionand due to an asset impairment charge on real property at Blue Chip of $0.7million. In fiscal year 2006 we recorded valuation charges at Lucaya of $3.6million due to the change in expected cash flows resulting from our previousdecision to close the casino. Subsequently, in April 2007, our Board ofDirectors approved agreements with its landlord and the Government of theBahamas, which allowed the casino to remain open; however, the impairmentcharge was not reversed in 2007. Additionally in fiscal year 2006 we recordedvaluation charges totaling $9.8 million, including $9.2 million related togoodwill and intangible asset impairment and $0.6 million in fixed assetimpairment related to our Blue Chip operations.

 

*Pre-opening -*Pre-openingexpenses during fiscal year 2007 included $10.5 million, $2.1 million, and $0.9million for our Pompano Park, Coventry, and Waterloo properties.

 

*Depreciation and Amortization -*Depreciation expense increased by $10.7million in fiscal year 2007 compared to fiscal year 2006. Depreciation hasincreased primarily due to new property additions at our Colorado and theBiloxi properties, the new hotel at Boonville, and additional depreciation forthe capitalization of the Coventry Arena Convention Center.

 

*Other Income (Expense), Income Taxes, Minority Interest andDiscontinued Operations*

 

Interestexpense, interest income, loss on early extinguishment of debt, income tax(provision) benefit, minority interest and income from discontinued operations,net of income taxes for the fiscal years 2007 and 2006 are as follows:

 
| ** **                                                | ** ** | **Fiscal Year Ended** | ** ** | ** **         | ** ** | ** **   | ** ** |
|-----------------------------------------------------------|------------|---------------------------------|------------|--------------------|------------|--------------|------------|
| ** **                                                | ** ** | **April 29,**              | ** ** | **April 30,** | ** ** | ** **   | ** ** | **Percentage** | ** ** |
| **(in thousands)**                                   | ** ** | **2007**                        | ** ** | **2006**           | ** ** | **Variance** | ** ** | **Variance** | ** ** |
| ** **                                                | ** ** | ** **                      | ** ** | ** **         | ** ** | ** **   | ** ** | ** ** | ** ** |
| Interest expense                                          |       | $                               | (89,150    | )                  | $          | (76,335      | )          | $ | (12,815 | ) | 16.8 | % |
| Interest income                                           |       | 7,469                           |       | 2,694              |       | 4,775        |       | 177.2 | % |
| Loss on early  extinguishment of debt                     |       | —                          |       | (2,110             | )          | 2,110        |       | -100.0 | % |
| Income tax  (provision) benefit                           |       | (1,906                          | )          | (5,628             | )          | 3,722        |       | -66.1 | % |
| Minority  interest                                        |       | (3,568                          | )          | (6,462             | )          | 2,894        |       | -44.8 | % |
| Income from  discontinued operations, net of income taxes |       | 16,692                          |       | 10,244             |       | 6,448        |       | 62.9 | % |
|                                                           |            |                                 |            |                    |            |              |            |  |  |  |  |  |

 

*Interest Expense -*Net interest expense increased $12.8 million in fiscal year 2007compared to fiscal year 2006. This is attributable to higher interest rates andhigher debt balances on our senior secured credit facility.

 

*Interest Income -*During fiscal year 2007, our interest income was $7.5 million comparedto $2.7 million for fiscal year 2006. The change in interest income reflects changes in our invested cashbalances and interest rates.

 

31

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*Loss on Early Extinguishment of Debt –*Pursuant to theamendment of a debt agreement during fiscal year 2006, Isle of Capri BlackHawk, L.L.C. recognized a loss on the early extinguishment of debt of $2.1million due to the write-off of previously deferred financing costs.

 

*Income Tax (Provision) Benefit –*Our income tax (provision) benefit is andthus our effective income tax rate has been impacted by interim changes in our estimateof annual taxable income for financial statement purposes as well as ourpercentage of permanent items in relation to such estimated income orloss.  Effective income tax rates were asfollows:

 

| ** **             | ** ** | **Fiscal Year Ended** | ** ** |
|------------------------|------------|---------------------------------|------------|
| ** **             | ** ** | **April 29,**              | ** ** | **April 30,** | ** ** |
| ** **             | ** ** | **2007**                        | ** ** | **2006** | ** ** |
| Continuing  operations |       | -12.02                          | %          | 27.16 | % |
| Total                  |       | 108.20                          | %          | 39.37 | % |

 

*Minority Interests –* During fiscal year 2007, our minorityinterest expense was $3.6 million, compared to $6.5 million for fiscal year2006.  Minority interests are recordedfor our minority partner’s interest in our Colorado.

 

*Income From Discontinued Operations -*Income from discontinued operations forfiscal year 2007 includes pretax operating income from our Bossier City andVicksburg properties of $5.6 million, and we also recorded a gain on sale ofdiscontinued operations of $23.3 million during fiscal 2007.  Income tax provision for fiscal year 2007 was$12.2 million, resulting in income from discontinued operations of $16.7million.**Income from discontinuedoperations for fiscal year 2006 includes pretax operating income from thesesame properties of $16.8 million. Income tax provision for fiscal year 2006 was$6.6 million, resulting in income from discontinued operations of $10.2million.

 

**Liquidity and Capital Resources**

 

*Cash Flows from Operating Activities -*During the fiscal year ended April 27,2008, we provided $133.4 million in cash flows from operating activitiescompared to providing $70.9 million during the fiscal year ended April 29,2007.  The increase in cash flows fromoperating activities is primarily due to the collection of $48.4 million ininsurance receivables.

 

*Cash Flows used in Investing Activities**-*During the fiscal year ended April 27, 2008 we used $302.4 million forinvesting activities compared to using $197.3 million during the fiscal yearended April 29, 2007.  Significantinvesting activities for the fiscal year ended April 27, 2008 included theacquisition of the remaining 43% minority interest in our Black Hawk, Coloradocasino properties for $64.8 million, the acquisition of our Caruthersvillecasino for $43.3 million and purchases of property and equipment of $190.5million.

 

Forthe fiscal year ended April 29, 2007, significant investing activitiesincluded the purchase of property and equipment for $451.4 million offset bythe proceeds from the sale of our Bossier City and Vicksburg propertiestotaling $238.7 million.

 

*Cash Flows from Financing Activities -*During the fiscal year ended April 27,2008 our net cash flows from financing activities were $72.5 million primarilyincluding:

 

·                  Borrowings under our new July 2007Credit Facility used to:

 

i.                extinguish andrepay the February 2005 Credit Facility including revolving loans and termloans totaling $503.5 million;

ii.             extinguish and repayour $200.0 million, 9% Senior Subordinated notes plus a call premium of $9.0million; and

iii.          fund our $64.8 millionacquisition of the 43% minority interest in our Black Hawk, Colorado casinoproperties and refinance approximately $195 million of indebtedness under theBlack Hawk Credit Facility.

 

·                  Payments of deferred financing costs of $8.9million primarily associated with our new credit facility.

·                  Proceeds from the exercise of stock optionsof $5.7 million.

 

During the fiscal yearended April 29, 2007, our net cash flows from financing activities were$193.5 million primarily including:

 

· Net borrowings under our February 2005Credit Facility of $207.0 million.

· Repurchased 447,308 shares of ourcommon stock at an average price of $23.28 per share for an aggregate of $10.4million.

 

32

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· Proceeds from the exercise of stockoptions of $5.6 million.

· Payments under the Isle-Black Hawk’ssenior secured credit facility of $6.1 million.

 

*Availability of Cash and Additional Capital* - At April 27, 2008, we had cash andcash equivalents and marketable securities of $110.3 million.

 

Asof April 27, 2008, we had $130.5 million in revolving credit and $869.3million in term loans outstanding under the $1.35 billion credit facility. Ournet line of credit availability at April 27, 2008 was approximately $170.0million. Our July 2007 Credit Facility can be increased by $300.0 million,subject to syndication and covenant flexibility, through additionalborrowings  “greenshoe” provisions.Exercise of the greenshoe provisions could result in resetting the CreditFacility interest rates to current market conditions.

 

Therevolving loan commitment on the July 2007 Credit Facility is a variablerate instrument based on, at our option, LIBOR or our lender’s prime rate plusthe applicable interest rate spread, and is effective through July 2012.The average rate on our outstanding borrowings under the July 2007 CreditFacility was approximately 6.55% at April 27, 2008. From time to time weenter into various swap agreements to hedge against future interest rateincreases.  As of April 27, 2008, wehave outstanding swap agreements which have fixed LIBOR (before the applicablespread) at a weighted average rate of 4.65% for $450 million of our debt withmaturity dates ranging from 2010 to 2012.

 

We are highly leveragedand our debt agreements contain covenants which may restrict our ability toborrow funds. Our July 2007 Credit Facility includes a number ofaffirmative and negative covenants, including certain financial covenantsincluding maintenance of a leverage ratio and minimum interest coverage ratio.The July 2007 Credit Facility also restricts our ability to make certaininvestments or distributions. The indenture governing our 7% SeniorSubordinated Notes limits, among other things, our ability and our restrictedsubsidiaries ability to borrow money, make restricted payments, use assets assecurity in other transactions, enter into transactions with affiliates or paydividends on or repurchase stock. The indenture also limits our ability toissue and sell capital stock of subsidiaries, sell assets in excess ofspecified amounts or merge with or into other companies.

 

Whilewe believe that existing cash, cash flow from operations and availableborrowings under our existing credit facilities will be sufficient to supportour working capital needs, planned capital expenditures and debt servicerequirements for the foreseeable future, there is no assurance that thesesources will in fact provide adequate funding for our planned capitalexpenditures. As a result, limitations on our capital resources could delay orcause us to abandon certain plans for capital improvements at our existingproperties and/or development of new properties, which could place us at acompetitive disadvantage. If so we may need to access additional debt or equityfinancing which may not be available on acceptable terms. We will continue toevaluate our planned capital expenditures at each of our existing locations inlight of the operating performance of the facilities at such locations.

 

*Capital Expenditures* - Historically, we have made significant investments in property andequipment and expect that our operations will continue to demand ongoinginvestments to keep our properties competitive. Our current planned capitalexpenditures over the next 18 to 24 months are estimated as follows:

 

·                  $40 million in maintenance capitalexpenditures for fiscal year 2009.

·                  $16 million to $18 million to re-brand ourproperties in Davenport, Lula, Marquette and Caruthersville as Lady Luckproperties during fiscal year 2009.

·                  $160 million for the rebuilding andrefurbishment of our Biloxi property which we plan to begin as soon as wedetermine the timing of the settlement of our Hurricane Katrina insuranceclaims and continued review of our credit availability.  This project is expected to extend into fiscalyear 2011.  The Biloxi project isexpected to include a new single-level casino, restoration of our conventionspace, new food venues and renovation of the hotel rooms in the south tower.

 

Additionalcapital expenditures for renovation of up to 1,200 additional hotel rooms areunder design and cost review.  The timingand amount of our capital expenditures is subject to the availability of cashunder our Credit Facility, the timing of additional insurance proceeds and cashflows from our continuing operations.

 

*Future Development and Other Projects:*Our primary focusfor fiscal year 2009 and beyond is on organic growth opportunities at ourexisting properties; however, as part of our business development activities,from time to time we may enter into agreements which could result in theacquisition or development of businesses or assets.  Our business development efforts and relatedagreements may require the expenditure of cash. The amount and timing of our cash expenditures may vary based upon ourevaluation of development opportunities.

 

33

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Our development plans are subject to a variety offactors including but not limited to: obtaining permits, licenses and approvalsfrom appropriate regulatory and other agencies, legislative changes and, incertain circumstances, negotiating acceptable leases.

 

**Critical Accounting Estimates**

 

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

 

·                  those that require the use of assumptionsabout matters that are inherently and highly uncertain at the time theestimates are made;

·                  those estimates where, had we chosendifferent estimates or assumptions, the resulting differences would have had amaterial impact on our financial condition, changes in financial condition orresults of operations; and

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

 

Basedupon management’s discussion of the development and selection of these criticalaccounting estimates with the Audit Committee of our Board of Directors, webelieve the following accounting estimates involve a higher degree of judgmentand complexity.

 

*Goodwill and Other IntangibleAssets -*At April 27,2008, we had goodwill and other intangible assets of $396.9 million,representing 20.1% of total assets. Statement of Financial Accounting Standards (SFAS) No. 142 “Goodwilland Other Intangible Assets” (“SFAS 142”), requires goodwill and otherintangible assets with indefinite useful lives be tested for impairmentannually or more frequently if an event occurs or circumstances change that mayreduce the fair value of our goodwill and other intangible assets below theircarrying value.  For properties withgoodwill and/or other intangible assets with indefinite lives, this testrequires the comparison of the implied fair value of each property to carryingvalue.  The implied fair value includesestimates of future cash flows that are based on reasonable and supportableassumptions and represent our best estimates of the cash flows expected toresult from the use of the assets and their eventual disposition.  Changes in estimates or application ofalternative assumptions and definitions could produce significantly differentresults.

 

Duringthe fourth quarter of each fiscal year, we engage an independent third partyvaluation firm to conduct annual impairment testing under SFAS 142.  As a result of this annual impairment testingwe recorded a $7.8 million write-down of goodwill at Lula during fiscal year2007.

 

*Property and Equipment -*At April 27, 2008, we had property andequipment, net of accumulated depreciation of $1,329.0 million, representing67.3% of total assets.  We capitalize thecost of property and equipment. Maintenance and repairs that neither materially add to the value of theproperty nor appreciably prolong its life are charged to expense as incurred.  We depreciate property and equipment on astraight-line basis over their estimated useful lives.  The estimated useful lives are based on thenature of the assets as well as our current operating strategy.  Future events such as property expansions, newcompetition, changes in technology and new regulations could result in a changein the manner in which we are using certain assets requiring a change in theestimated useful lives of such assets.

 

*Impairment of Long-lived Assets -*We evaluate long-livedassets 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 ordisposal of long-lived assets. In assessing the recoverability of the carryingvalue of property, equipment and other long-lived assets, we make assumptionsregarding future cash flows and residual values.  If these estimates or the related assumptionsare not achieved or change in the future, we may be required to record animpairment loss for these assets.  Inevaluating impairment of long-lived assets for newly opened operations,estimates of future cash flows and residual values may require some period ofactual results to provide the basis for an opinion of future cash flows andresidual values used in the determination of an impairment loss for theseassets.  Such an impairment loss would berecognized as a non-cash component of operating income.

 

Duringthe fourth quarter of fiscal year 2008, we engaged an independent third partyvaluation firm to conduct an appraisal of our long-lived assets associated withour Coventry, England due to the continuation of losses from operations, areview of expected future operating trends and the current fair values of ourlong-lived assets in Coventry.  Basedupon this appraisal, we recorded an impairment charge of $78.0 million relatingto the write-down of long-lived assets at our Coventry, England operations asof the end of fiscal 2008.

 

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*Self-Insurance Liabilities -*We are self-funded up to a maximum amount perclaim for our employee-related health care benefits program, workers’compensation insurance and general liability insurance.  Claims in excess of this maximum are fullyinsured through a stop-loss insurance policy. We accrue a discounted estimate for workers’ compensation insurance andgeneral liabilities based on claims filed and estimates of claims incurred butnot reported. We rely on independent consultants to assist in the determinationof estimated accruals.  While theestimated cost of claims incurred depends on future developments, such asincreases in health care costs, in our opinion, recorded reserves are adequateto cover future claims payments.

 

*Insurance Accounting -*We have insurance coverage related to damagefrom three hurricanes for property damage incurred, property operating costsduring the operational downtime of the hurricanes, incremental costs incurred relatedto hurricane damage and recovery activities and business interruption insurancefor lost profits during the period directly related to the hurricanes.  The insurance claim is subject to the use ofestimates and negotiations with our insurance carriers.  The total amount of impairments, lossesrecognized and expenses incurred have been recorded in our statement ofoperations as “Marketing and administrative” and have been offset by the amountwe believe is probable to be collected from our insurance carriers under ourpolicy coverages.  We have receivedpartial proceeds from our insurance carriers related to the losses we havesustained, and through April 27, 2008 have received advances of $153.8million.  At April 27, 2008 we havean insurance receivable relating to our hurricane claim of $7.6 million andadditional claims pending in excess of our receivable.  When we reach agreement with our insurancecarriers on the final amount of the insurance proceeds we are entitled to, wewill also record any related gain in excess of any remaining insurancereceivable.  Our insurance policies alsoprovide coverage for the loss of profits caused by the storms.  Any lost profit recoveries will be recognizedwhen agreed to with our insurance carriers and will be reflected in the relatedproperties’ revenues.

 

*Income Tax Assets and Liabilities-*We account forincome taxes in accordance with Statement of Financial Accounting Standards No. 109,“Accounting for Income Taxes” (“SFAS 109”). SFAS 109 requires that we recognizea current tax asset or liability for the estimated taxes payable or refundablebased upon application of the enacted tax rates to taxable income in thecurrent year. Additionally, we are required to recognize a deferred taxliability or asset for the estimated future tax effects attributable totemporary differences. Temporary differences occur when differences arisebetween: (a) the amount of taxable income and pretax financial income fora year and (b) the tax basis of assets or liabilities and their reportedamounts in financial statements. SFAS 109 also requires that any deferred taxasset recognized must be reduced by a valuation allowance for any tax benefitsthat, in our judgment and based upon available evidence, may not be realizable.

 

As of April 30, 2007, we adopted FASBInterpretation No. 48, “Accounting for Uncertainty in Income Taxes - anInterpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 requires thattax positions be assessed using a two-step process. A tax position is recognizedif it meets a “more likely than not” threshold, and is measured at the largestamount of benefit that is greater than 50 percent likely of being realized.Uncertain tax positions must be reviewed at each balance sheet date.Liabilities recorded as a result of this analysis must generally be recordedseparately from any current or deferred income tax accounts, and are classifiedas current Other accrued liabilities or long-term Other long-term liabilitiesbased on the time until expected payment.

 

Werecognize accrued interest and penalties related to unrecognized tax benefitsin income tax expense. This policy did not change as a result of the adoptionof FIN 48.

 

*Slot Club Awards -*We reward our slot customers for theirloyalty based on the dollar amount of play on slot machines. We accrue forthese slot club awards based on an estimate of the value of the outstandingawards utilizing the age and prior history of redemptions. Future events, suchas a change in our marketing strategy or new competition, could result in achange in the value of the awards.

 

*Stock Based Compensation -*We apply the FASB Statement of FinancialAccounting Standards No. 123 (revised 2004), “Share-Based Payment” (SFAS123(R)). The estimate of the fair value of the stock options is calculatedusing the Black-Scholes-Merton option-pricing model. This model requires theuse of various assumptions, including the historical volatility, the risk freeinterest rate, estimated expected life of the grants, the estimated dividendyield and estimated rate of forfeitures. Total stock option expense is includedin the expense category corresponding to the employees’ regular compensation inthe accompanying consolidated statements of operations.

 

*New Development Projects andPre-opening costs -*Wepursue development opportunities for new gaming facilities in our ongoingefforts to grow and develop the Company. Projects that have not yet been deemed as probable to reach completionbecause they have not yet met certain conditions, including receipt ofsufficient regulatory approvals, site control or related permits and orprobable financing are considered by us to be in the development stage.  In accordance with Statement of

 

35

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Position98-5 “Reporting on the Costs of Start-Up Activities” (“SOP 98-5”), costsrelated to projects in the development stage, except for those costs asdetailed in SOP 98-5, are recorded as an expense of new development at thecorporate level and recorded on the accompanying consolidated statement ofoperations in the operating expense line item “Corporate & development”.  Items for which a future value is probable,regardless of the project’s outcome, may be subject to capitalization andsubsequent depreciation and amortization.

 

Forapproved projects, certain eligible costs related to such projects arecapitalized. We follow the guidance of Statement of Financial AccountingStandards No. 67 (“SFAS 67”) “Accounting for Costs and Initial RentalOperations of Real Estate Projects”, which are classified under the line item “Propertyand equipment, net” on the balance sheet. Costs that are not capital in nature but either retain value orrepresent future liability, such as refundable utility deposits or a notepayable, receive the appropriate balance sheet treatment.  All costs that are neither eligible forcapitalization nor eligible for other balance sheet treatment, such as payroll,advertising, utilities and travel, are recorded as operating expenses whenincurred.

 

*Contingencies -*We are involved in various legal proceedingsand have identified certain loss contingencies. We record liabilities relatedto these contingencies when it is determined that a loss is probable andreasonably estimable in accordance with Statement of Financial AccountingStandards No. 5, “Accounting for Contingencies.”  These assessments are based on our knowledgeand experience as well as the advice of legal counsel regarding current andpast events.  Any such estimates are alsosubject to future events, court rulings, negotiations between the parties andother uncertainties. If an actual loss differs from our estimate, or the actualoutcome of any of the legal proceedings differs from expectations, operatingresults could be impacted.

 

**Contractual Obligations and Commercial Commitments**

 

The following table provides information as offiscal year 2008, about our contractual obligations and commercial commitments.The table presents contractual obligations by due dates and related contractualcommitments by expiration dates (in millions).

 
| ** **                                         | ** ** | **Payments Due by Period** | ** ** |
|----------------------------------------------------|------------|-------------------------------------------|------------|
| **Contractual Obligations**                   | ** ** | **Total**                                 | ** ** | **Less Than  1 Year** | ** ** | **1-3 Years** | ** ** | **4-5 Years** | ** ** | **After 5 Years** | ** ** |
| Long-Term Debt                                     |       | $                                         | 1,507.3    |   | $ | 9.7 |   | $ | 18.3 |   | $ | 150.0 |   | $ | 1,329.3 |   |
| Estimated  interest payments on long-term debt (1) |       | 509.5                                     |       | 88.5 |   | 177.9 |   | 179.5 |   | 63.6 |   |
| Operating Leases                                   |       | 673.0                                     |       | 21.7 |   | 32.6 |   | 31.0 |   | 587.7 |   |
| Long-Term  Obligations (2)                         |       | 27.5                                      |       | 18.3 |   | 4.2 |   | 1.5 |   | 3.5 |   |
| Other Long-Term  Obligations (3)                   |       | 17.3                                      |       | 2.4 |   | 2.8 |   | 2.5 |   | 9.6 |   |
| Total  Contractual Cash Obligations                |       | 2,734.6                                   |       | 140.6 |   | 235.8 |   | 364.5 |   | 1,993.7 |   |
|                                                    |            |                                           |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)                 Estimated interest payment on long-term debtare based on principal amounts outstanding at our fiscal year end andforecasted LIBOR rates for our bank credit facility.

(2)                 Long-term obligations include future purchasecommitments as well as current and future construction contracts.

(3)                 Other Long-Term Obligations include ourcontractual cash payments associated with assets accounted for under EITF97-10.

 

**Recently Issued Accounting Standards**

 

*New Pronouncements -*In September 2006, the FASB issued SFAS No. 157,“Fair Value Measurements” (“SFAS 157”) which defines fair value,establishes a framework for measuring fair value in GAAP, and expandsdisclosures about fair value measurements. SFAS 157 applies under otheraccounting pronouncements that require or permit fair value measurements, theFASB having previously concluded in those accounting pronouncements that fairvalue is the relevant measurement attribute. SFAS 157 is effective forfinancial statements issued for fiscal years beginning after November 15,2007, for financial assets and for nonfinancial assets and nonfinancialliabilities, except for items that are recognized or disclosed at fair value inthe financial statements on a recurring basis, for fiscal years beginning afterNovember 15, 2008. We are currently evaluating the impact the adoption ofSFAS 157, including the deferment provisions of FSP 157-2, will have onthe consolidated financial statements.

 

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InFebruary 2007, the FASB issued SFAS No. 159, “The Fair Value Optionfor Financial Assets and Financial Liabilities”  (“SFAS 159”). SFAS 159permits companies to choose to measure many financial instruments and certainother items at fair value. The objective is to improve financial reporting byproviding companies with the opportunity to mitigate volatility in reportedearnings caused by measuring related assets and liabilities differently withouthaving to apply complex hedge accounting provisions. The fair value optionestablished by SFAS 159 permits all companies to choose to measureeligible items at fair value at specified election dates. At each subsequentreporting date, companies shall report in earnings any unrealized gains andlosses on items for which the fair value option have been elected.SFAS 159 is effective as of the beginning of a company’s first fiscal yearthat begins after November 15, 2007.

 

InDecember 2007, the FASB also issued SFAS No. 160, “NoncontrollingInterests In Consolidated Financial Statements — An Amendment of AccountingResearch Bulletin No. 51,” the provisions of which are effective forperiods beginning after December 15, 2008. This statement requires anentity to classify noncontrolling interests in subsidiaries as a separatecomponent of equity. Additionally, transactions between an entity andnoncontrolling interests are required to be treated as equity transactions. TheCompany is currently evaluating the impact of this statement on the financialstatements.

 

**ITEM 7A. QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

Market risk is the risk of loss arising from adversechanges in market rates and prices, including interest rates, foreign currencyexchange rates, commodity prices and equity prices. Our primary exposure tomarket risk is interest rate risk associated with our senior secured creditfacility (“July 2007 Credit Facility”).

 

**Senior Secured Credit Facilities**

 

Duringthe fiscal year 2008,  we entered intosix interest rate swap arrangements with an aggregate notional value of $450.0million as of April 27, 2008.  Theswap agreements effectively convert portions of the July 2007 CreditFacility variable debt to a fixed-rate basis until the respective swap agreementsterminate, which occurs during fiscal years 2010, 2011, and 2012.  These swap agreements meet the criteria forhedge accounting for cash flow hedges and have been evaluated, as of fiscalyear 2008, as being fully effective.

 

The following table provides information at April 27,2008 about our financial instruments that are sensitive to changes in interestrates. The table presents principal cash flows and related weighted averageinterest rates by expected maturity dates.

 

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**InterestRate Sensitivity**

**Principal(Notional) Amount by Expected Maturity**

**AverageInterest (Swap) Rate**

 
| **Fiscal year**                                                | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | ** ** | ** ** | **Fair Value** | ** ** |
|---------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|----------------|------------|------------|------------|---------------------|------------|
| **(dollars in millions)**                                 | ** ** | **2009**   | ** ** | **2010**   | ** ** | **2011**   | ** ** | **2012**   | ** ** | **2013**   | ** ** | **Thereafter** | ** ** | **Total**  | ** ** | **4/27/2008**       | ** ** |
| **Liabilities**                                                     |       |       |       |       |       |       |       |       |       |       |       |           |       |       |       |                |       |
| Long-term debt,  including current portion                          |       |       |       |       |       |       |       |       |       |       |       |           |       |       |       |                |       |
| Fixed rate                                                          |       | $          | 0.3        |       | $          | 0.2        |       | $          | 0.2        |       | $          | 0.2            |       | $          | 0.2        |                | $          | 503.3 |   | $ | 504.4 |   | $ | 381.9 |   |
| Average interest  rate                                              |       | 7.01       | %          | 7.01       | %          | 7.01       | %          | 7.01       | %          | 7.01       | %          | 7.01           | %          |       |       |                |       |
|                                                                |       |       |       |       |       |       |       |       |       |       |       |           |       |       |       |                |       |
| Variable rate                                                       |       | $          | 9.4        |       | $          | 8.9        |       | $          | 8.9        |       | $          | 8.9            |       | $          | 140.7      |                | $          | 826.1 |   | $ | 1,002.9 |   | $ | 889.9 |   |
| Average interest  rate (1)                                          |       | 5.02       | %          | 5.10       | %          | 5.80       | %          | 6.29       | %          | 6.50       | %          | 6.62           | %          |       |       |                |       |
|                                                                |       |       |       |       |       |       |       |       |       |       |       |           |       |       |       |                |       |
| **Interest  Rate Derivative Financial Instruments Related to Debt** |       |       |       |       |       |       |       |       |       |       |       |           |       |       |       |                |       |
| Interest rate  swaps                                                |       |       |       |       |       |       |       |       |       |       |       |           |       |       |       |                |       |
| Pay  fixed/receive variable (2)                                     |       | $          | —     |       | $          | 100.0      |       | $          | 300.0      |       | $          | 50.0           |       | $          | —     |                | $          | — |   | $ | 450.0 |   | $ | 13.7 |   |
| Average pay rate                                                    |       | 4.65       | %          | 4.65       | %          | 4.65       | %          | 4.50       | %          | 0.00       | %          | 0.00           | %          | 4.65       | %          |                |       |
| Average receive rate                                                |       | 3.16       | %          | 3.31       | %          | 3.87       | %          | 4.40       | %          | 0.00       | %          | 0.00           | %          | 3.35       | %          |                |       |

 

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(1)                  Represents the annual average LIBOR from theforward yield curve at April 27, 2008 plus the weighted average marginabove LIBOR on all consolidated variable rate debt.

(2)                  Fair value represents the amount we would payto the respective counter party if we had terminated the swap agreements on April 27,2008.

 

We are also exposed to market risks relating tofluctuations in currency exchange rates related to our ownership interests anddevelopment activities in the UK.  Wefinance a portion of our UK investments in the local currency of the UK and dueto the limited scope and nature of our UK operations, our market risks areimmaterial.

 

For the fiscal year 2008, we recorded a loss of $0.4million in foreign currency translation adjustments on the accompanyingconsolidated balance sheets. Foreign currency translation adjustments show thecumulative effect, at the balance sheet date, of fluctuations in the foreigncurrency exchange rate on balances denominated in a foreign currency, whichwere recorded at a historical rate at the transaction date.

 

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**ITEM 8.**                              **FINANCIAL STATEMENTS ANDSUPPLEMENTARY DATA**

 

The followingconsolidated financial statements are included in this report:

 
| Report of Independent Registered Public Accounting  Firm on Internal Control Over Financial Reporting                                        |   |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                         |   |
| Report of Independent Registered Public Accounting  Firm on Consolidated Financial Statements                                                |   |
|                                                                                                                                         |   |
| Consolidated Balance Sheets — April 27, 2008 and  April 29, 2007                                                              |   |
|                                                                                                                                         |   |
| Fiscal Years Ended April 27, 2008,  April 29, 2007 and April 30, 2006                                                         |   |
| Consolidated  Statements of Operations                                                                                                       |   |
| Consolidated  Statements of Cash Flows                                                                                                       |   |
| Consolidated  Statements of Stockholders’ Equity                                                                                        |   |
|                                                                                                                                         |   |
| Notes to Consolidated Financial Statements                                                                                                   |   |
|                                                                                                                                         |   |
| Schedule II – Valuation and Qualifying Accounts – Fiscal  Years Ended April, 27, 2008, April 29, 2007 and April 30, 2006 |   |

 

39

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**Report ofIndependent Registered Public Accounting Firm**

 

The Board of Directors and Stockholders

Isle of Capri Casinos, Inc.

 

Wehave audited Isle of Capri Casinos, Inc.’s internal control over financialreporting as of April 27, 2008, based on criteria established in *Internal Control –Integrated Framework* issued by the Committee of SponsoringOrganizations of the Treadway Commission (the COSO criteria). Isle ofCapri Casinos, Inc.’s management is responsible for maintaining effectiveinternal control over financial reporting and for its assessment of theeffectiveness of internal control over financial reporting included in theaccompanying Management’s Report on Internal Control Over Financial Reporting.Our responsibility is to express an opinion on the Company’s internal controlover financial reporting based on our audit.

 

Weconducted our audit in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whethereffective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internalcontrol over financial reporting, assessing the risk that a material weaknessexists, testing and evaluating the design and operating effectiveness ofinternal control based on the assessed risk, and performing such otherprocedures as we considered necessary in the circumstances. We believe that ouraudit provides a reasonable basis for our opinion.

 

Acompany’s internal control over financial reporting is a process designed toprovide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertainto the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorizations of management and directorsof the company; and (3) provide reasonable assurance regarding preventionor timely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.

 

Becauseof its inherent limitations, internal control over financial reporting may notprevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls maybecome inadequate because of changes in conditions or that the degree ofcompliance with the policies or procedures may deteriorate.

 

Inour opinion, Isle of Capri Casinos, Inc. maintained, in all materialrespects, effective internal control over financial reporting as of April 27,2008, based on****the COSO criteria**.**

 

Wealso have audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States), the consolidated balance sheets ofIsle of Capri Casinos, Inc. as of April 27, 2008 and April 29,2007, and the related consolidated statements of operations, stockholders’equity, and cash flows for the fiscal years ended April 27, 2008, April 29,2007 and April 30, 2006, and our report dated July 10, 2008,expressed an unqualified opinionthereon.

 

 
|                   | /s/    ERNST &  YOUNG LLP |
|------------------------|--------------------------------------------------------|
| Saint  Louis, Missouri |                                                   |
| July 10,  2008    |                                                   |

 

40

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**Report ofIndependent Registered Public Accounting Firm**

 

The Board of Directors and Stockholders

Isle of Capri Casinos, Inc.

 

Wehave audited the accompanying consolidated balance sheets of Isle of CapriCasinos, Inc. as of April 27, 2008 and April 29, 2007, and therelated consolidated statements of operations, stockholders’ equity, and cashflows for the fiscal years ended April 27, 2008, April 29, 2007, and April 30,2006. Our audits also included the financial statement schedule listed in theIndex at Item 15(a). These financial statements and schedule are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements and schedule based on our audits.

 

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating theoverall financial statement presentation. We believe that our audits provide areasonable basis for our opinion.

 

Inour opinion, the financial statements referred to above present fairly, in allmaterial respects, the consolidated financial position of Isle of Capri Casinos, Inc.at April 27, 2008 and April 29, 2007, and the consolidated results ofits operations and its cash flows for the years ended April 27, 2008, April 29,2007, and April 30, 2006, in conformity with U.S. generally acceptedaccounting principles. Also, in our opinion, the related financial statementschedule, when considered in relation to the basic financial statements takenas a whole, presents fairly in all material respects the information set forththerein.

 

Asdiscussed in Note 1 to the consolidated financial statements, on April 30,2007, the Company changed its method of accounting for uncertain tax positions.Additionally, as discussed in Note 1 to the consolidated financial statements,on May 1, 2006, the Company changed its method of accounting forshare-based payments.

 

Wealso have audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States), Isle of Capri Casinos, Inc.’sinternal control over financial reporting as of April 27, 2008, based onthe criteria established in *Internal Control – IntegratedFramework* issued by the Committee of Sponsoring Organizations of theTreadway Commission, and our report dated July 10, 2008, expressed anunqualified opinion thereon.

 

 
|                   | /s/    ERNST &  YOUNG LLP |
|------------------------|--------------------------------------------------------|
| Saint  Louis, Missouri |                                                   |
| July 10,  2008    |                                                   |

 

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**ISLE OFCAPRI CASINOS, INC.**

**CONSOLIDATEDBALANCE SHEETS**

**(In thousands,except share and per share amounts)**

 
| ** **                                                                                                                                           | ** ** | **April 27,** | ** ** | **April 29,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|--------------------|------------|
| ** **                                                                                                                                           | ** ** | **2008**           | ** ** | **2007**           | ** ** |
| **ASSETS**                                                                                                                                           |       |               |       |               |       |
| Current assets:                                                                                                                                      |       |               |       |               |       |
| Cash and cash  equivalents                                                                                                                           |       | $                  | 91,790     |               | $          | 188,114 |   |
| Marketable  securities                                                                                                                               |       | 18,533             |       | 17,169             |       |
| Accounts  receivable, net of allowance for doubtful accounts of $4,258 and $4,335,  respectively                                                     |       | 12,195             |       | 22,527             |       |
| Insurance  receivable                                                                                                                                |       | 7,689              |       | 56,040             |       |
| Income taxes  receivable                                                                                                                             |       | 28,663             |       | —             |       |
| Deferred income  taxes                                                                                                                               |       | 12,606             |       | 12,421             |       |
| Prepaid expenses  and other assets                                                                                                                   |       | 27,905             |       | 24,067             |       |
| Total current  assets                                                                                                                                |       | 199,381            |       | 320,338            |       |
| Property and  equipment, net                                                                                                                         |       | 1,328,986          |       | 1,338,570          |       |
| Other assets:                                                                                                                                        |       |               |       |               |       |
| Goodwill                                                                                                                                             |       | 307,649            |       | 297,268            |       |
| Other intangible  assets, net                                                                                                                        |       | 89,252             |       | 74,154             |       |
| Deferred  financing costs, net                                                                                                                       |       | 13,381             |       | 13,644             |       |
| Restricted cash                                                                                                                                      |       | 4,802              |       | 4,637              |       |
| Prepaid deposits  and other                                                                                                                          |       | 22,948             |       | 27,080             |       |
| Deferred income  taxes                                                                                                                               |       | 7,767              |       | —             |       |
| Total assets                                                                                                                                         |       | $                  | 1,974,166  |               | $          | 2,075,691 |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                        |       |               |       |               |       |
| Current  liabilities:                                                                                                                                |       |               |       |               |       |
| Current  maturities of long-term debt                                                                                                                |       | $                  | 9,698      |               | $          | 7,594 |   |
| Accounts payable                                                                                                                                     |       | 29,283             |       | 60,460             |       |
| Accrued  liabilities:                                                                                                                                |       |               |       |               |       |
| Payroll and  related                                                                                                                                 |       | 47,618             |       | 48,402             |       |
| Property and  other taxes                                                                                                                            |       | 30,137             |       | 23,380             |       |
| Interest                                                                                                                                             |       | 8,580              |       | 10,166             |       |
| Income taxes                                                                                                                                         |       | —             |       | 16,011             |       |
| Progressive  jackpots and slot club awards                                                                                                           |       | 13,768             |       | 12,785             |       |
| Other                                                                                                                                                |       | 44,353             |       | 56,943             |       |
| Total current  liabilities                                                                                                                           |       | 183,437            |       | 235,741            |       |
| Long-term debt,  less current maturities                                                                                                             |       | 1,497,591          |       | 1,410,385          |       |
| Deferred income  taxes                                                                                                                               |       | —             |       | 41,451             |       |
| Other accrued  liabilities                                                                                                                           |       | 52,821             |       | 30,817             |       |
| Other long-term  liabilities                                                                                                                         |       | 52,305             |       | 47,639             |       |
| Minority  interest                                                                                                                                   |       | —             |       | 27,836             |       |
| Stockholders’  equity:                                                                                                                          |       |               |       |               |       |
| Preferred stock,  $.01 par value; 2,000,000 shares authorized; none issued                                                                           |       | —             |       | —             |       |
| Common stock,  $.01 par value; 45,000,000 shares authorized; shares issued: 35,229,006 at  April 27, 2008 and 34,682,534 at April 29, 2007 |       | 353                |       | 347                |       |
| Class B  common stock, $.01 par value; 3,000,000 shares authorized; none issued                                                                 |       | —             |       | —             |       |
| Additional  paid-in capital                                                                                                                          |       | 188,036            |       | 175,132            |       |
| Retained  earnings                                                                                                                                   |       | 58,253             |       | 155,127            |       |
| Accumulated  other comprehensive (loss) income                                                                                                       |       | (5,601             | )          | 3,358              |       |
|                                                                                                                                                 |       | 241,041            |       | 333,964            |       |
| Treasury stock,  4,372,073 shares at April 27, 2008 and 4,323,555 shares at  April 29, 2007                                                |       | (53,029            | )          | (52,142            | )          |
| Total  stockholders’ equity                                                                                                                     |       | 188,012            |       | 281,822            |       |
| Total  liabilities and stockholders’ equity                                                                                                     |       | $                  | 1,974,166  |               | $          | 2,075,691 |   |

 

See accompanying notes toconsolidated financial statements.

 

42

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**ISLE OF CAPRI CASINOS, INC.**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(In thousands, except share and  per share amounts)**

** **
| ** **                                                                                                                                                                | ** ** | **Fiscal Year Ended** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                                                                                                                | ** ** | **April 27,**              | ** ** | **April 29,** | ** ** | **April 30,** | ** ** |
| ** **                                                                                                                                                                | ** ** | **2008**                        | ** ** | **2007** | ** ** | **2006** | ** ** |
| Revenues:                                                                                                                                                                 |       |                            |       |   |   |   |   |
| Casino                                                                                                                                                                    |       | $                               | 1,121,860  |   | $ | 1,015,629 |   | $ | 1,004,143 |   |
| Rooms                                                                                                                                                                     |       | 49,498                          |       | 49,584 |   | 36,999 |   |
| Food, beverage  and other                                                                                                                                                 |       | 136,481                         |       | 130,635 |   | 125,857 |   |
| Pari-mutuel  commissions and fees                                                                                                                                         |       | 19,096                          |       | 20,004 |   | 20,534 |   |
| Gross revenues                                                                                                                                                            |       | 1,326,935                       |       | 1,215,852 |   | 1,187,533 |   |
| Less promotional  allowances                                                                                                                                              |       | (201,583                        | )          | (214,458 | ) | (200,174 | ) |
| Net revenues                                                                                                                                                              |       | 1,125,352                       |       | 1,001,394 |   | 987,359 |   |
| Operating  expenses:                                                                                                                                                      |       |                            |       |   |   |   |   |
| Casino                                                                                                                                                                    |       | 163,250                         |       | 159,534 |   | 151,860 |   |
| Gaming taxes                                                                                                                                                              |       | 288,402                         |       | 210,404 |   | 219,365 |   |
| Rooms                                                                                                                                                                     |       | 12,031                          |       | 9,811 |   | 8,463 |   |
| Pari-mutuel  commissions and fees                                                                                                                                         |       | 16,834                          |       | 15,342 |   | 16,051 |   |
| Food, beverage  and other                                                                                                                                                 |       | 45,538                          |       | 32,262 |   | 31,530 |   |
| Marine and  facilities                                                                                                                                                    |       | 68,044                          |       | 60,174 |   | 56,993 |   |
| Marketing and  administrative                                                                                                                                             |       | 290,591                         |       | 269,279 |   | 246,334 |   |
| Corporate and  development                                                                                                                                                |       | 48,974                          |       | 57,217 |   | 57,803 |   |
| Write-offs and  other valuation charges                                                                                                                                   |       | 85,184                          |       | 8,466 |   | 13,388 |   |
| Preopening                                                                                                                                                                |       | 6,457                           |       | 13,573 |   | 281 |   |
| Depreciation and  amortization                                                                                                                                            |       | 136,127                         |       | 99,506 |   | 88,819 |   |
| Total operating  expenses                                                                                                                                                 |       | 1,161,432                       |       | 935,568 |   | 890,887 |   |
| Operating income  (loss):                                                                                                                                                 |       | (36,080                         | )          | 65,826 |   | 96,472 |   |
| Interest expense                                                                                                                                                          |       | (109,286                        | )          | (89,150 | ) | (76,335 | ) |
| Interest income                                                                                                                                                           |       | 3,814                           |       | 7,469 |   | 2,694 |   |
| Loss on early  extinguishment of debt                                                                                                                                     |       | (15,274                         | )          | — |   | (2,110 | ) |
|                                                                                                                                                                      |       |                            |       |   |   |   |   |
| Income (loss)  from continuing operations before income taxes and minority interest                                                                                       |       | (156,826                        | )          | (15,855 | ) | 20,721 |   |
| Income tax  benefit (provision)                                                                                                                                           |       | 64,820                          |       | (1,906 | ) | (5,628 | ) |
| Minority  interest                                                                                                                                                        |       | (4,868                          | )          | (3,568 | ) | (6,462 | ) |
| Income (loss)  from continuing operations                                                                                                                                 |       | (96,874                         | )          | (21,329 | ) | 8,631 |   |
| Income from  discontinued operations including gain on sale, net of income taxes of $-,  $12,151 and $6,630 for the fiscal years ended 2008, 2007 and 2006,  respectively |       | —                          |       | 16,692 |   | 10,244 |   |
| Net income  (loss)                                                                                                                                                        |       | $                               | (96,874    | ) | $ | (4,637 | ) | $ | 18,875 |   |
|                                                                                                                                                                      |       |                            |       |   |   |   |   |
| Earnings (loss)  per common share basic:                                                                                                                                  |       |                            |       |   |   |   |   |
| Income (loss)  from continuing operations                                                                                                                                 |       | $                               | (3.16      | ) | $ | (0.70 | ) | $ | 0.29 |   |
| Income from  discontinued operations including gain on sale, net of income taxes                                                                                          |       | —                          |       | 0.55 |   | 0.34 |   |
| Net income  (loss)                                                                                                                                                        |       | $                               | (3.16      | ) | $ | (0.15 | ) | $ | 0.63 |   |
|                                                                                                                                                                      |       |                            |       |   |   |   |   |
| Earnings (loss)  per common share diluted:                                                                                                                                |       |                            |       |   |   |   |   |
| Income (loss)  from continuing operations                                                                                                                                 |       | $                               | (3.16      | ) | $ | (0.70 | ) | $ | 0.28 |   |
| Income from  discontinued operatons, net of income taxes                                                                                                                  |       | —                          |       | 0.55 |   | 0.32 |   |
| Net income  (loss)                                                                                                                                                        |       | $                               | (3.16      | ) | $ | (0.15 | ) | $ | 0.60 |   |
|                                                                                                                                                                      |       |                            |       |   |   |   |   |
| Weighted average  basic shares                                                                                                                                            |       | 30,699,457                      |       | 30,384,255 |   | 30,028,051 |   |
| Weighted average  diluted shares                                                                                                                                          |       | 30,699,457                      |       | 30,384,255 |   | 31,270,486 |   |

 

See accompanying notes toconsolidated financial statements.

 

43

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**ISLE OF CAPRI CASINOS, INC.**

**CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY**

**(In thousands, except share amounts)**

 
| ** **                                                                                         | ** ** | ** **         | ** ** | ** ** | ** ** | ** **     | ** ** | ** **   | ** ** | ** **   | ** ** | **Accum.**  | ** ** | ** **   | ** ** | ** **        | ** ** |
|----------------------------------------------------------------------------------------------------|------------|--------------------|------------|------------|------------|----------------|------------|--------------|------------|--------------|------------|-------------|------------|--------------|------------|-------------------|------------|
| ** **                                                                                         | ** ** | ** **         | ** ** | ** ** | ** ** | ** **     | ** ** | ** **   | ** ** | ** **   | ** ** | **Other**   | ** ** | ** **   | ** ** | ** **        | ** ** |
| ** **                                                                                         | ** ** | ** **         | ** ** | ** ** | ** ** | ** **     | ** ** | ** **   | ** ** | ** **   | ** ** | **Compre-** | ** ** | ** **   | ** ** | **Total**         | ** ** |
| ** **                                                                                         | ** ** | **Shares of** | ** ** | ** ** | ** ** | **Additional** | ** ** | **Unearned** | ** ** | ** **   | ** ** | **hensive** | ** ** | ** **   | ** ** | **Stock-**        | ** ** |
| ** **                                                                                         | ** ** | **Common**         | ** ** | **Common** | ** ** | **Paid-in**    | ** ** | **Compen-**  | ** ** | **Retained** | ** ** | **Income**  | ** ** | **Treasury** | ** ** | **holders’** | ** ** |
| ** **                                                                                         | ** ** | **Stock**          | ** ** | **Stock**  | ** ** | **Capital**    | ** ** | **sation**   | ** ** | **Earnings** | ** ** | **(Loss)**  | ** ** | **Stock**    | ** ** | **Equity**        | ** ** |
| Balance,  April 24, 2005                                                                      |       | 33,528,159         |       | $          | 336        |           | $          | 152,162      |       | $            | (1,488     | )           | $          | 140,889      |       | $                 | 2,782      |   | $ | (34,619 | ) | $ | 260,062 |   |
| Net income                                                                                         |       | —             |       | —     |       | —         |       | —       |       | 18,875       |       | —      |       | —       |       | 18,875            |       |
| Reclassification  of unrealized gain on interest rate swap contracts net of income taxes of  $(68) |       | —             |       | —     |       | —         |       | —       |       | —       |       | (105        | )          | —       |       | (105              | )          |
| Foreign currency  translation adjustments                                                          |       | —             |       | —     |       | —         |       | —       |       | —       |       | (2,546      | )          | —       |       | (2,546            | )          |
| Comprehensive  income                                                                              |       |               |       |       |       |           |       |         |       |         |       |        |       |         |       | 16,224            |       |
| Exercise of stock  options, including income tax benefit of $2,119                                 |       | 765,104            |       | 7          |       | 11,019         |       | —       |       | —       |       | —      |       | 957          |       | 11,983            |       |
| Purchase of  treasury stock                                                                        |       | —             |       | —     |       | —         |       | —       |       | —       |       | —      |       | (8,494       | )          | (8,494            | )          |
| Grant of  nonvested stock                                                                          |       | —             |       | —     |       | 367            |       | (367         | )          | —       |       | —      |       | —       |       | —            |       |
| Amortization of  unearned compensation                                                             |       | —             |       | —     |       | —         |       | 472          |       | —       |       | —      |       | —       |       | 472               |       |
| Balance,  April 30, 2006                                                                      |       | 34,293,263         |       | 343        |       | 163,548        |       | (1,383       | )          | 159,764      |       | 131         |       | (42,156      | )          | 280,247           |       |
| Net loss                                                                                           |       | —             |       | —     |       | —         |       | —       |       | (4,637       | )          | —      |       | —       |       | (4,637            | )          |
| Foreign currency  translation adjustments                                                          |       | —             |       | —     |       | —         |       | —       |       | —       |       | 3,227       |       | —       |       | 3,227             |       |
| Comprehensive  loss                                                                                |       |               |       |       |       |           |       |         |       |         |       |        |       |         |       | (1,410            | )          |
| Exercise of stock  options, including income tax benefit of $849                                   |       | 389,271            |       | 4          |       | 5,617          |       | —       |       | —       |       | —      |       | —       |       | 5,621             |       |
| Issuance of  deferred bonus shares from treasury stock                                             |       | —             |       | —     |       | (429           | )          | —       |       | —       |       | —      |       | 429          |       | —            |       |
| Purchase of  treasury stock                                                                        |       | —             |       | —     |       | —         |       | —       |       | —       |       | —      |       | (10,415      | )          | (10,415           | )          |
| Deferred bonus  expense                                                                            |       | —             |       | —     |       | 548            |       | —       |       | —       |       | —      |       | —       |       | 548               |       |
| Stock  compensation expense                                                                        |       | —             |       | —     |       | 7,231          |       | —       |       | —       |       | —      |       | —       |       | 7,231             |       |
| Reclassification  of unearned compensation due to the adoption of SFAS 123(R)                      |       | —             |       | —     |       | (1,383         | )          | 1,383        |       | —       |       | —      |       | —       |       | —            |       |
| Balance,  April 29, 2007                                                                      |       | 34,682,534         |       | $          | 347        |           | $          | 175,132      |       | $            | —     |        | $          | 155,127      |       | $                 | 3,358      |   | $ | (52,142 | ) | $ | 281,822 |   |
| Net loss                                                                                           |       | —             |       | —     |       | —         |       |         |       | (96,874      | )          | —      |       | —       |       | (96,874           | )          |
| Unrealized loss  on interest rate swap contracts net of income tax benefit of $5,159               |       | —             |       | —     |       | —         |       | —       |       | —       |       | (8,555      | )          | —       |       | (8,555            | )          |
| Foreign currency  translation adjustments                                                          |       | —             |       | —     |       | —         |       | —       |       | —       |       | (404        | )          | —       |       | (404              | )          |
| Comprehensive  loss                                                                                |       | —             |       | —     |       | —         |       | —       |       | —       |       | —      |       | —       |       | (105,833          | )          |
| Exercise of stock  options, including income tax benefit of $977                                   |       | 546,472            |       | 6          |       | 5,741          |       | —       |       | —       |       | —      |       | —       |       | 5,747             |       |
| Issuance of  deferred bonus shares from treasury stock                                             |       | —             |       | —     |       | (414           | )          | —       |       | —       |       | —      |       | 414          |       | —            |       |
| Purchase of  treasury stock                                                                        |       | —             |       | —     |       | —         |       | —       |       | —       |       | —      |       | (1,301       | )          | (1,301            | )          |
| Deferred bonus  expense                                                                            |       | —             |       | —     |       | 265            |       | —       |       | —       |       | —      |       | —       |       | 265               |       |
| Stock  compensation expense                                                                        |       | —             |       | —     |       | 7,312          |       | —       |       | —       |       | —      |       | —       |       | 7,312             |       |
| Balance,  April 27, 2008                                                                      |       | 35,229,006         |       | $          | 353        |           | $          | 188,036      |       | $            | —     |        | $          | 58,253       |       | $                 | (5,601     | ) | $ | (53,029 | ) | $ | 188,012 |   |

 

Seeaccompanying notes to consolidated financial statements.

 

44

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**ISLE OFCAPRI CASINOS, INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Inthousands)**

 
| ** **                                                                                | ** ** | **Fiscal Year Ended** | ** ** |
|-------------------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                                | ** ** | **April 27,**              | ** ** | **April 29,** | ** ** | **April 30,** | ** ** |
| ** **                                                                                | ** ** | **2008**                        | ** ** | **2007** | ** ** | **2006** | ** ** |
| Operating activities:                                                                     |       |                            |       |   |   |   |   |
| Net income  (loss)                                                                        |       | $                               | (96,874    | ) | $ | (4,637 | ) | $ | 18,875 |   |
| Adjustments to  reconcile net income (loss) to net cash provided by operating activities: |       |                            |       |   |   |   |   |
| Depreciation and  amortization                                                            |       | 136,127                         |       | 99,506 |   | 100,501 |   |
| Amortization of  deferred financing costs                                                 |       | 2,700                           |       | 2,636 |   | 2,979 |   |
| Stock  compensation expense                                                               |       | 7,312                           |       | 7,231 |   | — |   |
| Amortization of  unearned compensation                                                    |       | 265                             |       | 548 |   | 472 |   |
| (Gain) loss on  derivative instruments                                                    |       | 550                             |       | 1,045 |   | (1,465 | ) |
| (Gain) loss on  disposal of assets                                                        |       | (90                             | )          | (26,244 | ) | 668 |   |
| Asset impairment  charge                                                                  |       | —                          |       | — |   | 75,868 |   |
| Valuation and  other charges                                                              |       | 85,184                          |       | 8,466 |   | 13,388 |   |
| Early  extinguishment of debt                                                             |       | 15,274                          |       | — |   | 2,110 |   |
| Deferred income  taxes                                                                    |       | (35,194                         | )          | (12,374 | ) | 420 |   |
| Minority  interest                                                                        |       | 4,868                           |       | 3,568 |   | 6,462 |   |
| Changes in  operating assets and liabilities:                                             |       |                            |       |   |   |   |   |
| (Purchases)  sales of trading securities                                                  |       | (1,364                          | )          | 558 |   | (1,222 | ) |
| Accounts  receivable                                                                      |       | 10,276                          |       | (4,797 | ) | (5,794 | ) |
| Insurance  receivable                                                                     |       | 48,393                          |       | 1,359 |   | (133,268 | ) |
| Income taxes                                                                              |       | (32,562                         | )          | 6,940 |   | 12,292 |   |
| Prepaid expenses  and other assets                                                        |       | (1,098                          | )          | (15,985 | ) | (9,468 | ) |
| Accounts payable  and accrued liabilities                                                 |       | (10,410                         | )          | 3,075 |   | 3,857 |   |
| Net cash  provided by operating activities                                                |       | 133,357                         |       | 70,895 |   | 86,675 |   |
|                                                                                      |       |                            |       |   |   |   |   |
| Investing  activities:                                                                    |       |                            |       |   |   |   |   |
| Purchase of  property and equipment                                                       |       | (190,459                        | )          | (451,422 | ) | (224,391 | ) |
| Purchase of  other intangible assets                                                      |       | (4,000                          | )          | (4,013 | ) | (5,775 | ) |
| Net cash paid  for acquisitions                                                           |       | (107,895                        | )          |   |   |   |   |
| Proceeds from  sales of assets held for sale                                              |       | —                          |       | 238,725 |   | — |   |
| Insurance  proceeds for hurricane damages                                                 |       | —                          |       | 21,963 |   | 53,905 |   |
| Restricted cash                                                                           |       | 65                              |       | (2,524 | ) | (175 | ) |
| Other                                                                                     |       | (157                            | )          | — |   | — |   |
| Net cash used in  investing activities                                                    |       | (302,446                        | )          | (197,271 | ) | (176,436 | ) |
|                                                                                      |       |                            |       |   |   |   |   |
| Financing  activities:                                                                    |       |                            |       |   |   |   |   |
| Proceeds from long-term  debt borrowings                                                  |       | 875,000                         |       | — |   | 240,000 |   |
| Principal  payments on long-term debt                                                     |       | (697,108                        | )          | (7,089 | ) | (169,749 | ) |
| Net borrowings  (repayments) on line of credit                                            |       | (99,355                         | )          | 205,421 |   | (4,916 | ) |
| Payment of  deferred financing costs                                                      |       | (8,881                          | )          | — |   | (1,797 | ) |
| Purchase of  treasury stock                                                               |       | (1,301                          | )          | (10,415 | ) | (8,494 | ) |
| Distribution to  minority interests                                                       |       | (1,588                          | )          | — |   | — |   |
| Proceeds from  exercise of stock options including tax benefit                            |       | 5,747                           |       | 5,621 |   | 9,864 |   |
| Net cash  provided by financing activities                                                |       | 72,514                          |       | 193,538 |   | 64,908 |   |
|                                                                                      |       |                            |       |   |   |   |   |
| Effect of  foreign currency exchange rates on cash                                        |       | 251                             |       | (97 | ) | (575 | ) |
|                                                                                      |       |                            |       |   |   |   |   |
| Net increase  (decrease) in cash and cash equivalents                                     |       | (96,324                         | )          | 67,065 |   | (25,428 | ) |
| Cash and cash  equivalents at beginning of year                                           |       | 188,114                         |       | 121,049 |   | 146,477 |   |
| Cash and cash  equivalents at end of year                                                 |       | $                               | 91,790     |   | $ | 188,114 |   | $ | 121,049 |   |

 

See accompanying notes toconsolidated financial statements.

 

45

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**ISLEOF CAPRI CASINOS, INC.**

# **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(amountsin thousands, except share and per share amounts)**

 

**1.Organization**

 

*Organization*- Isle of Capri Casinos, Inc., a Delaware corporation, was incorporated inFebruary 1990. Except where otherwise noted, the words “we,” “us,” “our”and similar terms, as well as “Company,” refer to Isle of Capri Casinos, Inc.and all of its subsidiaries. We are a leading developer, owner and operator ofbranded gaming facilities and related lodging and entertainment facilities inmarkets throughout the United States and internationally. Our wholly ownedsubsidiaries own and operate thirteen casino gaming facilities in the UnitedStates located in Black Hawk, Colorado; Lake Charles, Louisiana; Lula, Biloxiand Natchez, Mississippi; Kansas City, Caruthersville and Boonville, Missouri;Bettendorf, Davenport, Waterloo and Marquette, Iowa; and Pompano Beach,Florida. Effective January 27, 2008, we own 100% of our operations inBlack Hawk, Colorado following the acquisition of our minority partner’s 43%interest in those operations. Our international gaming interests include whollyowned casinos in Freeport, Grand Bahamas and Coventry, England and a two-thirdsownership interest in casinos in Dudley and Wolverhampton, England.

 

**2.Summary of Significant Accounting Policies**

 

*Basisof Presentation* – The consolidated financial statementsinclude the accounts of the Company and its subsidiaries. All significantintercompany balances and transactions have been eliminated. We view eachproperty as an operating segment and all such operating segments have beenaggregated in to one reporting segment.

 

Discontinued operationsrelate to those of the Riverboat Corporation of Mississippi-Vicksburg inVicksburg, Mississippi and Louisiana Riverboat Gaming Partnership in BossierCity, Louisiana, prior to July 31, 2006 when they were sold and are shownnet of income tax effects in accordance with Statement of Financial AccountingStandards No. 144, “Accounting for the Impairment or Disposal ofLong-Lived Assets” (“SFAS 144”).

 

*FiscalYear-End* - Our fiscal year ends on the last Sunday in April.Periodically, this system necessitates a 53-week year.  Fiscal years 2008 and 2007 are both 52-weekyears, which commenced on April 30, 2007 and May 1, 2006,respectively. Fiscal 2006 was a 53-week year, which commenced on April 25,2005.

 

*Reclassifications***–**Certain reclassifications of prior yearpresentations have been made to conform to the fiscal year 2008 presentation.

 

*Use ofEstimates* - The preparation of financial statements inconformity with accounting principles generally accepted in the United Statesrequires management to make estimates and assumptions that affect the amountsreported in the financial statements and accompanying notes. Actual resultscould differ from those estimates.

 

*Cashand Cash Equivalents* - We consider all highly liquidinvestments purchased with an original maturity of three months or less as cashequivalents. Cash also includes the minimum operating cash balances required bystate regulatory bodies, which totaled $23,982 and $25,246 at April 27,2008 and April 29, 2007, respectively.

 

*MarketableSecurities -*Marketable securities consist of tradingsecurities primarily held by Capri Insurance Corporation, our captive insurancesubsidiary. The trading securities are primarily debt and equity securitiesthat are purchased with the intention to resell in the near term. The tradingsecurities are carried at fair value with changes in fair value recognized incurrent period income in the accompanying statements of operations.

 

*Inventories*- Inventories are stated at the lower of cost or market.  Cost isdetermined by the lower of cost (weighted average) or market value.

 

*Propertyand Equipment* - Property and equipment are stated at cost orif acquired through acquisition, its value as determined under purchaseaccounting. Assets subject to impairment write downs are recorded at the lowerof net book value or fair value. Wecapitalize the cost of purchases of property and equipment and capitalize thecost of improvements to property and equipment that increases the value orextends the useful lives of the assets. Costs of normal repairs andmaintenance are charged to expense as incurred.

 

46

----

 

Depreciationis computed using the straight-line method over the following estimated usefullives of the assets:

 
| ** **                            | ** ** | **Years**                                         |
|---------------------------------------|------------|---------------------------------------------------|
| Slot machines, software and computers |       | 3-5                                               |
| Furniture, fixtures and equipment     |       | 5-10                                              |
| Leasehold improvements                |       | Lesser of life of lease  or estimated useful life |
| Buildings and improvements            |       | 7-39.5                                            |

 

Certain leasedproperties, in Coventry, England and Bettendorf, Iowa are accounted for inaccordance with Emerging Issues Task Force 97-10, “The Effect of LesseeInvolvement in Asset Construction” (“EITF 97-10”).

 

*Capitalized Interest* - The interest cost associated with majordevelopment and construction projects is capitalized and included in the costof the project. When no debt is incurred specifically for a project, interestis capitalized on amounts expended on the project using the weighted-averagecost of our outstanding borrowings. Capitalization of interest ceases when theproject is substantially complete or development activity is suspended for morethan a brief period. Capitalized interest was $3,335, $9,528 and $4,589for fiscal years 2008, 2007 and 2006, respectively.

 

*OperatingLeases* - We recognize rent expense for each lease on thestraight line basis, aggregating all future minimum rent payments including anypredetermined fixed escalations of the minimum rentals. Our liabilities includethe aggregate difference between rent expense recorded on the straight-linebasis and amounts paid under the leases.

 

*Restricted Cash –*We classify cash that is either statutorily or contractually restricted as toits withdrawal or usage as a long term asset due to the duration of theunderlying restriction. Restricted cash primarily includes amounts related tostate tax bonds and other gaming bonds, amounts held in escrow related toleases and other deposits related to new development activities oracquisitions.

 

*Goodwilland Other Intangible Assets* - Goodwill represents the excessof the cost over the net identifiable tangible and intangible assets ofacquired businesses and is stated at cost, net of impairments, if any. Otherintangible assets include values attributable to acquired gaming licenses,customer lists, and trademarks. Statement ofFinancial Accounting Standards No. 142, *Goodwill andOther Intangible Assets*, (“SFAS 142”) requires these assets be reviewedfor impairment at least annually. For intangible assets with indefinite livesnot subject to amortization, we review, at least annually, the continued use ofan indefinite useful life. If these intangible assets are determined to have afinite useful life, they are amortized over their estimated remaining usefullives.

 

*Long-Lived Assets* - We periodicallyevaluate the carrying value of long-lived assets to be held and used inaccordance with SFAS 144 which requires impairment losses to be recorded on long-livedassets used in operations when indicators of impairment are present and theundiscounted cash flows estimated to be generated by those assets are less thanthe assets’ carrying amounts. In that event, a loss is recognized based on theamount by which the carrying amount exceeds the fair market value of thelong-lived assets.

 

*DeferredFinancing Costs* - The costs of issuing long-term debt arecapitalized and amortized using the effective interest method over the term ofthe related debt.

 

*Self-Insurance*– We are self-funded up to a maximum amount per claim for employee-relatedhealth care benefits, workers’ compensation insurance and general liabilityinsurance. Claims in excess of this maximum are fully insured through astop-loss insurance policy. We accrue for workers’ compensation and generalliability insurance on a discounted basis based on claims filed and estimatesof claims incurred but not reported. The estimates have been discounted at 5.3%and 6.0% at April 27, 2008 and April 29, 2007, respectively. Weutilize independent consultants to assist in the determination of estimatedaccruals. As of April 27, 2008 and April 29, 2007, ouremployee-related health care benefits program and discounted workers’compensation and general liabilities for unpaid and incurred but not reportedclaims are $27,031 and $28,937, respectively and are included in Accruedliabilities-payroll and related for health care benefits and workers’compensation insurance and in Accrued liabilities-other for general liabilityinsurance in the accompanying consolidated balance sheets. While the total costof claims incurred depends on future developments, in management’s opinion,recorded reserves are adequate to cover future claims payments.

 

*DerivativeInstruments and Hedging Activities* - SFAS No. 133, *Accounting for Derivative Instruments and HedgingActivities* (“SFAS 133”) requires we recognize all of our derivativeinstruments as either assets or liabilities in the

 

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consolidated balancesheet at fair value. We utilize derivative financial instruments to manageinterest rate risk associated with some of our variable rate borrowings.Derivative financial instruments are intended to reduce our exposure tointerest rate risk. We account for changes in the fair value of a derivativeinstrument depending on the intended use of the derivative and the resultingdesignation, which is established at the inception of a derivative. SFAS 133requires that a company formally document, at the inception of a hedge, thehedging relationship and the entity’s risk management objective and strategyfor undertaking the hedge, including identification of the hedging instrument,the hedged item or transaction, the nature of the risk being hedged, the methodused to assess effectiveness and the method that will be used to measure hedgeineffectiveness of derivative instruments that receive hedge accountingtreatment. For derivative instruments designated as cash flow hedges, changesin fair value, to the extent the hedge is effective, are recognized in othercomprehensive income until the hedged item is recognized in earnings. Hedgeeffectiveness is assessed quarterly based on the total change in the derivative’sfair value.

 

*RevenueRecognition*- In accordance with gaming industry practice, werecognize casino revenues as the net win from gaming activities. Casinorevenues are net of accruals for anticipated payouts of progressive slotjackpots and certain table games wherein incremental jackpot amounts owed areaccrued for games in which every coin played or wagered adds to the jackpottotal. Revenues from rooms, food, beverage, entertainment and the gift shop arerecognized at the time the related service or sale is performed or made.

 

*NetRevenues* - The retail value of rooms, food and beverage andother services furnished to guests without charge is included in gross revenuesand then deducted as promotional allowances to arrive at net revenues includedin the accompanying consolidated statement of operations. We also record theredemption of coupons and points for cash as a promotional allowance. Theestimated cost of providing such complimentary services are included in casinoexpense in the accompanying consolidated statements of operations are asfollows:

 
| ** **                            | ** ** | **Fiscal Year Ended** | ** ** |
|---------------------------------------|------------|---------------------------------|------------|
| ** **                            | ** ** | **April 27,**              | ** ** | **April 29,** | ** ** | **April 30,** | ** ** |
| ** **                            | ** ** | **2008**                        | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                  |       |                            |       |   |   |   |   |
| Rooms                                 |       | $                               | 10,080     |   | $ | 12,980 |   | $ | 9,647 |   |
| Food and  beverage                    |       | 64,145                          |       | 66,098 |   | 58,793 |   |
| Other                                 |       | 152                             |       | 223 |   | 250 |   |
| Total cost of  complimentary services |       | $                               | 74,377     |   | $ | 79,301 |   | $ | 68,690 |   |

 

*SlotClub Awards* - We provide slot patrons with rewards based onthe dollar amount of play on slot machines. A liability has been establishedbased on an estimate of the value of these outstanding rewards, utilizing theage and prior history of redemptions.

 

*Advertising-*Advertising costs are expensed the first time the relatedadvertisement appears. Total advertising costs were $25,217, $22,640 and$21,392 in fiscal years 2008, 2007 and 2006, respectively.

 

*DevelopmentCosts -*We pursue development opportunities for new gamingfacilities in an ongoing effort to expand our business. In accordance withStatement of Position 98-5 “Reporting on the Costs of Start-Up Activities” (“SOP98-5”), costs related to projects in the development stage, except for thosecosts as detailed in SOP 98-5, are recorded as a development expense.Additionally, following the guidance of SFAS No. 67,*Accounting for Costs and Initial Rental Operationsof Real Estate Projects,*development costs are expensed when thedevelopment is deemed less than probable. Total development costs expensed were$5,539, $16,262 and $20,370, in fiscal years 2008, 2007 and 2006, respectively,and were recorded in the consolidated statements of operations in corporate anddevelopment expenses.

 

*Pre-OpeningCosts -* We account for costs incurred during the pre-openingphase of operations in accordance with Statement of Position 98-5, *Reporting on the Costs of Start-Up Activities,*and expense pre-opening costs as incurred. Pre-opening costs include payroll,outside services, advertising, insurance, utilities, travel and various otherexpenses related to new operations. All such costs are recorded in theconsolidated statements of operations in pre-opening. Pre-opening expenses inour consolidated financial statements were incurred in connection with theopening of the Pompano Park racino in April 2007, Isle-Waterloo in June 2007and Isle-Coventry in July 2007.

 

*IncomeTaxes* – We account for income taxes in accordance with SFAS No. 109,“Accounting for Income Taxes” (“SFAS 109”). SFAS 109 requires therecognition of deferred income tax assets, net of applicable reserves relatedto net operating loss carry forwards and certain temporary differences.Recognizable future tax benefits are subject to a valuation reserve, unlesssuch tax benefits are determined to be more likely than not. On April 30,2007, we adopted the additional

 

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provisions of FASBInterpretation No. 48 (“FIN 48”). We recognize accrued interest andpenalties related to unrecognized tax benefits in income tax expense.

 

*Earnings(Loss) Per Common Share* - In accordance with the provisionsof SFAS No. 128, “Earnings Per Share” (“SFAS 128”), basic earnings (loss)per share (“EPS”) is computed by dividing net income (loss) applicable tocommon stock by the weighted average common shares outstanding during theperiod. Diluted EPS reflects the additional dilution for all potentiallydilutive securities such as stock options. Any options with an exercise pricein excess of the average market price of the our common stock during theperiods presented are not considered when calculating the dilutive effect ofstock options for diluted earnings per share calculations.

 

*Stock-BasedCompensation* – Our stock-based compensation is accounted forin accordance with SFAS No. 123 (revised 2004), “Shared-Based Payment” (“SFAS 123(R)”).  On May 1, 2006, we elected the modifiedprospective method, in which compensation cost is recognized beginning with theeffective date (a) based on the requirements of SFAS 123(R) forall share-based payments granted or modified after the effective date and (b) basedon the requirements of SFAS 123 for all awards granted to employees prior tothe effective date of SFAS 123(R) that remain unvested on theeffective date.

 

*ForeignCurrency Translation*- We account for currency translation inaccordance with SFAS No. 52, “Foreign Currency Translation” (“SFAS 52”).Assets and liabilities denominated in foreign currencies are translated intoU.S. dollars at the exchange rate in effect at each balance sheet date.Statement of operations accounts are translated monthly at the average rate ofexchange prevailing during the period. Translation adjustments resulting from thisprocess are included in stockholders’ equity as accumulated other comprehensiveincome. The cumulative gain from foreign currency translation included in othercomprehensive loss is $2,977 and $3,381 as of April 27, 2008 and April 29,2007, respectively. Gains and losses from foreign currency transactions areincluded in marketing and administrative expense. A loss of $356 was recordedin fiscal year 2008 and gains of $1,846 and $1,051 were recorded in fiscalyears 2007 and 2006, respectively.

 

*Allowance for Doubtful Accounts –*We reserve for receivables that may not becollected.  Methodologies for estimatingthe allowance for doubtful accounts range from specific reserves to variouspercentages applied to aged receivables. Historical collection rates are considered, as are customerrelationships, in determining specific reserves.

 

*Recently Issued Accounting Standards*-*New Pronouncements-*In September 2006,the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”)which defines fair value, establishes a framework for measuring fair value inGAAP, and expands disclosures about fair value measurements. SFAS 157applies under other accounting pronouncements that require or permit fair valuemeasurements, the FASB having previously concluded in those accountingpronouncements that fair value is the relevant measurement attribute.SFAS 157 is effective for financial statements issued for fiscal yearsbeginning after November 15, 2007, and interim periods within those fiscalyears. On February 12, 2008, the FASB issued FASB Staff Position No. FAS157-2, Effective Date of FASB Statement No. 157 (“FSP 157-2”), delayingthe effective date of FASB 157 to fiscal years beginning after November 15,2008, for nonfinancial assets and nonfinancial liabilities, except for itemsthat are recognized or disclosed at fair value in the financial statements on arecurring basis. We are currently evaluating the impact the adoption ofSFAS 157, including the deferment provisions of FSP 157-2, will have onthe consolidated financial statements.

 

InFebruary 2007, the FASB issued SFAS No. 159, “The Fair Value Optionfor Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159permits companies to choose to measure many financial instruments and certainother items at fair value. The objective is to improve financial reporting byproviding companies with the opportunity to mitigate volatility in reportedearnings caused by measuring related assets and liabilities differently withouthaving to apply complex hedge accounting provisions. The fair value optionestablished by SFAS 159 permits all companies to choose to measureeligible items at fair value at specified election dates. At each subsequentreporting date, companies shall report in earnings any unrealized gains andlosses on items for which the fair value option have been elected.SFAS 159 is effective as of the beginning of a company’s first fiscal yearthat begins after November 15, 2007. We are currently evaluating the fairvalue option under SFAS 159 and evaluating what impact such adoption wouldhave on the consolidated financial statements.

 

InDecember 2007, the FASB also issued SFAS No. 160, “NoncontrollingInterests In Consolidated Financial Statements — An Amendment of AccountingResearch Bulletin No. 51,” the provisions of which are effective forperiods beginning after December 15, 2008. This statement requires anentity to classify noncontrolling interests in subsidiaries as a separatecomponent of equity. Additionally, transactions between an entity andnoncontrolling interests are required to be treated as equity transactions. TheCompany is currently evaluating the impact of this statement on theconsolidated financial statements.

 

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** **

**3. Property and Equipment, Net**

 

Property and equipment,net consists of the following:

 
| ** **                                      | ** ** | **April 27,** | ** ** | **April 29,** | ** ** |
|-------------------------------------------------|------------|--------------------|------------|--------------------|------------|
| ** **                                      | ** ** | **2008**           | ** ** | **2007**           | ** ** |
| Property and  equipment:                        |       |               |       |               |       |
| Land and land  improvements                     |       | $                  | 151,747    |               | $          | 141,222 |   |
| Leasehold  improvements                         |       | 323,155            |       | 320,250            |       |
| Buildings and  improvements                     |       | 719,175            |       | 530,358            |       |
| Riverboats and  floating pavilions              |       | 142,444            |       | 127,812            |       |
| Furniture,  fixtures and equipment              |       | 517,591            |       | 452,859            |       |
| Construction in  progress                       |       | 35,438             |       | 223,351            |       |
| Total property  and equipment                   |       | 1,889,550          |       | 1,795,852          |       |
| Less accumulated  depreciation and amortization |       | (560,564           | )          | (457,282           | )          |
| Property and  equipment, net                    |       | $                  | 1,328,986  |               | $          | 1,338,570 |   |

 

**4.Acquisitions**

 

*Acquisitionof Minority Interest in Black Hawk, Colorado Operations –*Effective January 27, 2008, wepurchased the 43% minority membership interest in our Black Hawk, Coloradosubsidiaries for a purchase price of $64,800, including transaction costs.Following the acquisition, we own 100% of our Black Hawk, Colorado operations.  The purchase price for these membershipinterests was determined based upon estimates of future cash flows andevaluations of the net assets acquired. We funded the purchase through cash andborrowings under our Senior Credit Facility. We accounted for the purchase using the purchase method of accounting inaccordance with SFAS No. 141 “Business Combinations” (“SFAS 141”). Thirdparty valuations for the property and equipment, and intangible assets arestill in process. After consideration of the minority interest liability of $29,819,the preliminary purchase price allocation included $14,000 in property andequipment, $10,600 in other intangible assets and $10,381 in goodwill.

 

*Acquisitionof Caruthersville -*OnJune 10, 2007, we acquired 100% of the membership interests of AtzarMissouri Riverboat Gaming Company, L.L.C., a Missouri limited liability companylocated in Caruthersville, Missouri.  Thepurchase price, including transaction costs, was approximately $46,241,including $2,940 of cash acquired. The purchase price for these membershipinterests was determined based upon estimates of future cash flows andevaluations of the net assets acquired. During January 2008, we finalizedcertain post closing date adjustments with the seller. The purchase wasaccounted for using the purchase method of accounting in accordance with SFAS141. Third party valuations were obtained for the property and equipment, andother intangible assets.  The purchaseprice included $959 in net working capital, $39,861 in property and equipment,and $5,421 in other intangible assets.

 

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**5. Intangible Assets and Goodwill**

 

Intangibleassets consist of the following:

 
| ** **                                       | ** ** | **April 27, 2008** | ** ** | **April 29, 2007** | ** ** |
|--------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **                                       | ** ** | **Gross**                    | ** ** | ** **                   | ** ** | **Net** | ** ** | **Gross** | ** ** | ** ** | ** ** | **Net** | ** ** |
| ** **                                       | ** ** | **Carrying**                 | ** ** | **Accumulated**              | ** ** | **Carrying** | ** ** | **Carrying** | ** ** | **Accumulated** | ** ** | **Carrying** | ** ** |
| ** **                                       | ** ** | **Amount**                   | ** ** | **Amortization**             | ** ** | **Amount** | ** ** | **Amount** | ** ** | **Amortization** | ** ** | **Amount** | ** ** |
|                                             |       |                         |       |                         |       |   |   |   |   |   |   |   |   |
| **Indefinite-lived  assets**                     |       |                         |       |                         |       |   |   |   |   |   |   |   |   |
| Gaming licenses                                  |       | $                            | 73,891     |                         | $          | — |   | $ | 73,891 |   | $ | 61,953 |   | $ | — |   | $ | 61,953 |   |
| Trademarks                                       |       | 12,500                       |       | —                       |       | 12,500 |   | 12,201 |   | — |   | 12,201 |   |
| **Intangible  assets - subject to amortization** |       |                         |       |                         |       |   |   |   |   |   |   |   |   |
| Trademarks                                       |       | 102                          |       | (93                          | )          | 9 |   | — |   | — |   | — |   |
| Customer lists                                   |       | 3,307                        |       | (455                         | )          | 2,852 |   | — |   | — |   | — |   |
| Total                                            |       | $                            | 89,800     |                         | $          | (548 | ) | $ | 89,252 |   | $ | 74,154 |   | $ | — |   | $ | 74,154 |   |

 

Ourindefinite-lived intangible assets consist primarily of gaming licenses andtrademarks for which it is reasonably assured that we will continue to renewindefinitely. Our finite-lived assets consist primarily of customer listsamortized over 3 years and trademarks which have a contractual term or it hasbeen decided not to renew, amortized over their remaining legal or contractuallife.  The weighted average remaininglife of our other intangible assets subject to amortization is approximately2.5 years.

 

Futureamortization expense of our amortizable intangible assets is as follows:

 
| 2009  |   | $     | 1,111  |   |
|-------|--------|-------|--------|--------|
| 2010  |   | 1,102 |   |
| 2011  |   | 648   |   |
| Total |   | $     | 2,861  |   |

 

Arollforward of goodwill is as follows:

 
| ** **                                                           | ** ** | **April 27, 2008** | ** ** | **April 29, 2007** | ** ** |
|----------------------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| Balance,  beginning of period                                        |       | $                            | 297,268    |                         | $          | 305,365 |   |
| Acquisition of  minority interest in Black Hawk, Colorado operations |       | 10,381                       |       | —                       |       |
| Impairment  Isle-Lula                                                |       | —                       |       | (7,801                       | )          |
| Other, net                                                           |       | —                       |       | (296                         | )          |
| Balance, end of  period                                              |       | $                            | 307,649    |                         | $          | 297,268 |   |

 

**6. Valuationand Other Charges**

 

As a result of continuinglosses, a review of expected future operating trends and the current fairvalues of our long-lived assets in Coventry, England, we have recorded animpairment charge of $77,978 related to long-lived assets of our Coventryoperations as of April 27, 2008. The current fair values used in our determination of the impairmentcharge were based upon a third party appraisal, a review of historical costsand other relevant information.  Thebalance of long-lived assets as of April 27, 2008, following the recordingof the impairment charge is $55,830. This includes $5,012 of owned assets used in the operation of ourCoventry casino and $50,818 of assets representing the Coventry Convention Centerwhich we are deemed to own under EITF 97-10. Future operating results of anddecisions regarding our Coventry casino could result in additional impairmentcharges associated with these assets. During the fiscal year 2008, we also recorded valuation and othercharges of $7,206 related to the termination of the Company’s plans to developa new casino in west Harrison County, Mississippi and the cancellation ofconstruction projects in Davenport, Iowa and Kansas City, Missouri and avaluation charge to write-down the carrying value of the Blue Chip casino inWalsall, England.

 

During fiscal year 2007,we recorded valuation and other charges of $8,466 in the accompanyingconsolidated statements of operations. The amount primarily relates to the$7,801 goodwill impairment charge at Lula that resulted from our annualvaluation review required by FAS 142. Also included in this amount wasapproximately $665 related to the write-down of the long-lived assets due tothe closure of one of the Blue Chip casinos in Walsall, England.

 

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During fiscal year 2006,we recorded valuation and other charges of $13,388 in the accompanyingconsolidated statements of operations. These charges related to a $9,192impairment charge against goodwill and other intangible assets and a $554charge on fixed asset at our Blue Chip properties due to the economicperformance of Blue Chip. We also recorded a $3,642 charge related to our thenplanned exit of Our Lucaya including $2,415 in fixed asset impairments and$1,227 in expected severance payments. During fiscal year 2007, following a newagreement with the Government of the Bahamian, we decided to continue theoperations in Our Lucaya and reversed $1,170 of the severance accrual.

 

**7.****             ****Long-Term Debt**

 

Long-termdebt consists of the following:

 
| ** **                                                                                                                                          | ** ** | **April 27,** | ** ** | **April 29,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|--------------------|------------|
| ** **                                                                                                                                          | ** ** | **2008**           | ** ** | **2007**           | ** ** |
| Senior Secured  Credit Facilities:                                                                                                                  | ** ** | ** **         | ** ** | ** **         | ** ** |
| July 2007  Credit Facility:                                                                                                                    |       |               |       |               |       |
| Revolving line  of credit, expires July 26, 2012, interest payable at least quarterly at  either LIBOR and/or prime plus a margin              |       | $                  | 130,500    |               | $          | — |   |
| Variable rate  term loans, mature November 25, 2013, principal and interest payments due  quarterly at either LIBOR and/or prime plus a margin |       | 869,313            |       | —             |       |
| February 2005  Credit Facility:                                                                                                                |       |               |       |               |       |
| Revolving line  of credit                                                                                                                           |       | —             |       | 210,000            |       |
| Variable rate  term loans                                                                                                                           |       | —             |       | 293,500            |       |
| Senior  Subordinated Notes:                                                                                                                         |       |               |       |               |       |
| 7% Senior  Subordinated Notes, interest payable semi-annually March 1 and  September 1                                                    |       | 500,000            |       | 500,000            |       |
| 9% Senior  Subordinated Notes, extinguished August 2007                                                                                        |       | —             |       | 200,000            |       |
| Senior Secured  Credit Facilities of Subsidiaries - non-recourse to Isle of Capri  Casinos, Inc.                                               |       |               |       |               |       |
| Isle-Black Hawk  Credit Facility:                                                                                                                   |       |               |       |               |       |
| Revolving line  of credit                                                                                                                           |       | —             |       | 16,400             |       |
| Variable rate  term loan                                                                                                                            |       | —             |       | 187,150            |       |
| Blue Chip Credit  Facility                                                                                                                          |       | 1,262              |       | 6,157              |       |
| Other                                                                                                                                               |       | 6,214              |       | 4,772              |       |
|                                                                                                                                                |       | 1,507,289          |       | 1,417,979          |       |
| Less current  maturities                                                                                                                            |       | 9,698              |       | 7,594              |       |
| Long-term debt                                                                                                                                      |       | $                  | 1,497,591  |               | $          | 1,410,385 |   |

 

*July 2007Credit Facility -*OnJuly 26, 2007, we entered into a $1,350,000 senior secured credit facility(“July 2007 Credit Facility”), replacing the February 2005 CreditFacility. The July 2007 Credit Facility is secured on a first prioritybasis by substantially all of our assets and by all of our significant domesticsubsidiaries.

 

The July 2007 CreditFacility consists of a $475,000, five-year revolving line of credit and an$875,000 term loan facility. The $875,000 term loan facility consists of a$500,000 senior secured loan facility which was drawn at closing In January 2008,we used proceeds from our term loan facility to fully repay and retire theIsle-Black Hawk Senior Secured Credit Facility. Simultaneously, we designatedour Black Hawk subsidiaries as “restricted subsidiaries” under the July 2007Credit Facility. Our net line of credit availability at April 27, 2008 isapproximately $170,000, after consideration of approximately $18,600 inoutstanding letters of credit. We have an annual commitment fee related to theunused credit facility of up to 0.5% which is included in interest expense inthe accompanying consolidated statements of operations.

 

The weighted averageeffective interest rate of the February 2005 and July 2007 CreditFacilities for fiscal years 2008 and 2007 were 6.55% and 7.73%, respectively.

 

The July 2007 CreditFacility includes a number of affirmative and negative covenants. Additionally,we must comply with certain financial covenants including maintenance of aleverage ratio and minimum interest coverage ratio.  The July 2007 Credit Facility alsorestricts our ability to make certain investments or distributions.  We are in compliance with the covenants as ofApril 27, 2008.

 

*February 2005Credit Facility –*Priorto entering into the July 2007 Credit Facility, we were party to the February 2005Credit Facility (“February 2005 Credit Facility”), which consisted of a$400,000 revolving line of credit facility maturing in February 2010 and a$300,000 term loan facility maturing in February 2011.

 

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*7% SeniorSubordinated Notes -*During 2004, we issued $500,000 of 7% Senior Subordinated Notes due2014 (“7% Senior Subordinated Notes”). The 7% Senior Subordinated Notes areguaranteed, on a joint and several basis, by all of our significant domesticsubsidiaries and other subsidiaries as described more fully in Note 18. All ofthe guarantor subsidiaries are wholly owned by us. The 7% Senior SubordinatedNotes are general unsecured obligations and rank junior to all existing andfuture senior indebtedness, and equally with all existing and future seniorsubordinated debt, and senior to any future subordinated indebtedness. The 7%Senior Subordinated Notes are redeemable, in whole or in part, at our option atany time on or after March 1, 2009, at the redemption prices (expressed aspercentages of principal amount) set forth below plus accrued and unpaidinterest to the applicable redemption date, if redeemed during the 12-monthperiod beginning on March 1st of the years indicated below:

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

 

The indenture, governingthe 7% Senior Subordinated Notes limits, among other things, our ability andour restricted subsidiaries ability to borrow money, make restricted payments,use assets as security in other transactions, enter into transactions withaffiliates or pay dividends on or repurchase stock. The indenture also limitsour ability to issue and sell capital stock of subsidiaries, sell assets inexcess of specified amounts or merge with or into other companies.

 

*9%Senior Subordinated Notes -*During 2002, we issued $200,000 of 9% SeniorSubordinated Notes due 2012 (“9% Senior Subordinated Notes”). These 9% SeniorSubordinated Notes were called for redemption at 104.5% and redeemed during August 2007.

 

*Isle-BlackHawk Senior Secured Credit Facility -*During 2005, Isle of Capri Black Hawk, L.L.C. enteredinto a $240,000 Second Amended and Restated Credit Agreement and amended suchagreement during January 2007 (the “Isle-Black Hawk Credit Facility”). Thecredit agreement, as amended, provided for a $50,000 revolving credit facilityand a $190,000 term loan facility. The credit agreement was secured by liens onsubstantially all of Isle of Capri Black Hawk, L.L.C.’s assets. As of January 28,2008, we repaid and cancelled the Isle-Black Hawk Credit Facility withborrowings under our July 2007 Credit Facility.

 

The weighted-averageeffective interest rate of total debt outstanding under the Isle-Black HawkCredit Facility for the fiscal years 2008 and 2007 was 6.99% and 6.79%,respectively.

 

*Blue Chip Credit Facility -*Blue Chip Casinos Ltd. (“Blue Chip”)entered into an agreement effective November 28, 2003, as amended on May 24,2004, with the Bank of Scotland to borrow up to £3,500 (the “Blue Chip CreditFacility”) to fund its casino development program. The Blue Chip CreditFacility is secured on a first priority basis by substantially all of Blue Chip’sassets. As of April 27, 2008, we had repaid all outstanding balances underthe term loan facility and had £636 ($1,262) outstanding balance under the £800revolving loan facility. The interest rate at Blue Chip’s option is (1) theBank of Scotland’s base rate plus a current margin of 2.0% or (2) LIBORplus a margin of 1.75%.  For fiscal years2008 and 2007, the weighted-average effective interest rate was 8.75% and7.25%, respectively. The Blue Chip Credit Facility is non-recourse to theCompany.

 

Blue Chip was in defaultof certain debt covenants as of and subsequent to April 27, 2008,which have been cured by Blue Chip or compliance waived by the bank. Asof April 27, 2008, Blue Chip had no letters of credit outstandingunder the Blue Chip Credit Facility, and net availability under the Blue ChipCredit Facility was £164 ($325).

 

*Losses on Early Extinguishment ofDebt -*Inconjunction with the replacement of the February 2005 Credit Facility withthe July 2007 Credit Facility, $2,192 of unamortized debt issuance costswere recorded as a loss on early extinguishment of debt for fiscal year 2008,while the remaining deferred debt issuance costs will be amortized over therespective lives of the new revolver and term credit facilities of the July 2007Credit Facility. Losses on Early Extinguishment of Debt for the fiscal year2008 totaled $15,274 and included the $2,192 from the credit facilityrefinancing, the $9,000 call premium and write-off of $2,468 in unamortizeddeferred financing costs associated with the call of our 9% Senior SubordinatedNotes and $1,614 of unamortized deferred financing costs associated with theearly repayment of our Black Hawk Credit Facility.  We followed EITF 96-19 “Debtor’s Accountingfor a Modification of Exchange of Debt Instruments” and EITF 98-14 “Debtor’sAccounting for changes in Line-of-Credit or Revolving Debt Arrangements” inaccounting for this refinancing transaction and its associated deferred debtissuance costs.

 

53

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*Interest Rate Swap Agreements -*We have entered into various interestrate swap agreements pertaining to the July 2007 Credit Facility for anaggregate notional value of $450,000 with maturity dates ranging from fiscalyear 2010 to 2012 in order to manage market risk on variable rate term loansoutstanding, as well as comply with, in part, requirements under the July 2007Credit Facility.

 

These swap agreementsmeet the criteria for hedge accounting for cash flow hedges and have beenevaluated, as of fiscal year 2008, as being fully effective.  As a result, there is no impact on ourconsolidated statement of operations from changes in fair value.  As of April 27, 2008, we recorded aliability of $13,714 in Other long-term liabilities representing the fairmarket value of the swap agreements and an unrealized loss of $8,555, net of a$5,159 deferred income tax benefit, in Accumulated other comprehensive loss onthe consolidated balance sheet. As of fiscal year 2008, the weighted averagefixed LIBOR interest rate of our interest rate swap agreements was 4.65%.

 

The fair value of the estimatedinterest differential between the applicable future variable rates and theinterest rate swap contracts not designated as hedging instruments, expressedin present value terms, totaled $0 and $528 as of fiscal year 2008 and fiscalyear 2007, respectively. Based on the maturity dates of the contracts, theseamounts are included in prepaid expenses and other assets in the accompanyingconsolidated balance sheets.

 

The aggregate principalpayments due on long-term debt as of April 27, 2008 over the next fiveyears and thereafter, are as follows:

 
| **Fiscal Years Ending:** | ** ** | ** ** | ** ** |
|------------------------------------|------------|------------|------------|
| 2009                               |       | $          | 9,698      |   |
| 2010                               |       | 9,159      |       |
| 2011                               |       | 9,104      |       |
| 2012                               |       | 9,123      |       |
| 2013                               |       | 140,905    |       |
| Thereafter                         |       | $          | 1,329,300  |   |
| Total                              |       | $          | 1,507,289  |   |

 

**8. OtherLong-Term Obligations**

 

*Coventry Convention Center -*We entered into an agreement duringfiscal year 2004 to lease space for a new casino, which opened in July 2007,in Coventry, England in the sub-level of the Arena Coventry Convention Center.The convention center was developed, and is owned and operated by anon-affiliated entity and began operations in August 2005. Because certainstructural elements were installed by us during the construction of the spacebeing leased and certain prepaid lease payments we made, we are required to betreated, for accounting purposes only, as the “owner” of the Arena CoventryConvention Center, in accordance with Emerging Issues Task Force Issue No. 97-10(“EITF 97-10”), “The Effect of Lessee Involvement in Asset Construction”.Accordingly, we have recorded a long-term obligation for £24,230 ($48,058) and£23,837 ($47,639) as of April 27, 2008 and April 29, 2007,respectively, even though we do not; (1) own this asset, (2) we arenot the obligor on the corresponding long-term obligation and (3) do notparticipate in or control the operations of the convention center.  Upon completion of the convention center wewere precluded from accounting for the transaction as a sale and leasebackunder SFAS No. 98 “Accounting for Leases” due to our continuinginvolvement as a tenant, as a result of our lease prepayments during theconstruction period of the convention center. Therefore, we are accounting for the transaction using the directfinancing method in accordance with SFAS No. 66 “Accounting for the Salesof Real Estate”.

 

The other long-termobligation will be reflected in our consolidated balance sheets untilcompletion of the lease term, when the related fixed assets will be removedfrom our financial statements. At such time, the net of the remainingobligation over the carrying value of the fixed asset will be recognized as again on sale of the facility.

 

The following tablerepresents future minimum payments, which will be recognized as interestexpense, due under the long-term obligation as of April 27, 2008 in valuesof both British Pounds and U.S. Dollars using the April 27, 2008 exchangerate of 1.9833 US Dollars to British Pounds.

 

54

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| **Fiscal Years Ending:** | ** ** | ** ** | ** **  | ** ** | ** ** |
|------------------------------------|------------|------------|-------------|------------|------------|
| 2009                               |       | £     |  623   |       | $          | 1,236 |   |
| 2010                               |       | 623        |        | 1,236      |       |
| 2011                               |       | 623        |        | 1,236      |       |
| 2012                               |       | 623        |        | 1,236      |       |
| 2013                               |       | 623        |        | 1,236      |       |
| Thereafter                         |       | 4,827      |        | 9,573      |       |
| Total minimum  lease payments      |       | £     |  7,942 |       | $          | 15,753 |   |

 

*Bettendorf Events Center* – We have entered into agreements withthe City of Bettendorf, Iowa under which the City has agreed to construct anevents center adjacent to our new hotel. We will lease, manage, and providefinancial and operating support for the events center. The Company hasdetermined the events center is a transaction under EITF 97-10. As such, theCompany is deemed to be the owner of the events center during the constructionperiod and at April 27, 2008, has recorded construction in process of$5,428 and an other long-term obligation of $4,247. Total construction costs ofthe event center are estimated at approximately $20,000.

 

**9.Common Stock**

 

*Earningsper Share of Common Stock -*The following table sets forth the computation ofbasic and diluted earnings (loss) per share (in thousands, except share and pershare amounts):

 
| ** **                                                                                                     | ** ** | **April 27,** | ** ** | **April 29,** | ** ** | **April 30,** | ** ** |
|----------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|--------------------|------------|--------------------|------------|
| ** **                                                                                                     | ** ** | **2008**           | ** ** | **2007**           | ** ** | **2006**           | ** ** |
| Numerator:                                                                                                     |       |               |       |               |       |               |       |
| Income (loss)  applicable to common shares:                                                                    |       |               |       |               |       |               |       |
| Income (loss)  from continuing operations                                                                      |       | $                  | (96,874    | )                  | $          | (21,329            | )          | $ | 8,631 |   |
|                                                                                                           |       |               |       |               |       |               |       |
| Income from  discontinued operations                                                                           |       | —             |       | 16,692             |       | 10,244             |       |
|                                                                                                           |       |               |       |               |       |               |       |
| Net income  (loss)                                                                                             |       | $                  | (96,874    | )                  | $          | (4,637             | )          | $ | 18,875 |   |
|                                                                                                           |       |               |       |               |       |               |       |
| Denominator:                                                                                                   |       |               |       |               |       |               |       |
| Denominator for  basic earnings (loss) per share - weighted average shares                                     |       | 30,699,457         |       | 30,384,255         |       | 30,028,051         |       |
| Effect of  dilutive securities Employee stock options and nonvested restricted stock                           |       | —             |       | —             |       | 1,242,435          |       |
| Denominator for  diluted earnings (loss) per share - adjusted weighted average shares and assumed  conversions |       | 30,699,457         |       | 30,384,255         |       | 31,270,486         |       |
|                                                                                                           |       |               |       |               |       |               |       |
| Basic earnings  (loss) per share:                                                                              |       |               |       |               |       |               |       |
| Income (loss)  from continuing operations                                                                      |       | $                  | (3.16      | )                  | $          | (0.70              | )          | $ | 0.29 |   |
| Income from  discontinued operations                                                                           |       | —             |       | 0.55               |       | 0.34               |       |
| Net income  (loss)                                                                                             |       | $                  | (3.16      | )                  | $          | (0.15              | )          | $ | 0.63 |   |
|                                                                                                           |       |               |       |               |       |               |       |
| Diluted earnings  (loss) per share:                                                                            |       |               |       |               |       |               |       |
| Income (loss)  from continuing operations                                                                      |       | $                  | (3.16      | )                  | $          | (0.70              | )          | $ | 0.28 |   |
| Income from  discontinued operations                                                                           |       | —             |       | 0.55               |       | 0.32               |       |
| Net income  (loss)                                                                                             |       | $                  | (3.16      | )                  | $          | (0.15              | )          | $ | 0.60 |   |

 

Potentially dilutivecommon stock options excluded from the computation of diluted earnings (loss)per share which were anti-dilutive due to our loss from continuing operationswere 3,872,513, and 3,057,054 for fiscal years 2008 and 2007,respectively.  Potentially dilutivecommon stock options excluded from the computation of diluted earnings pershare due to anti-dilution were 335,106 for fiscal year 2006.

 

*Stock Based Compensation**—**Stock Options –*We have two stock-based compensationplans, the 1993 Stock Option Plan and the 2000 Stock Option Plan as amended,which have a maximum of 4,650,000 and 3,500,000 options, respectively, which wereserved for issuance and may be granted to directors, officers andemployees.  The plans provide for theissuance of incentive stock options and nonqualified options which have amaximum term of 10 years and are, generally, exercisable in yearly installmentsof 20% commencing one year after the date of grant.  We have 350,043 shares available for futureissuance under its equity compensation plans as of April 27, 2008.

 

55

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Effective May 1,2006, we have adopted SFAS 123(R) using the modified prospective method,thus, results for the periods prior to May 1, 2006 have not been restatedin relation to the application of SFAS 123(R). We recognized $7,312 and $7,231for stock option expense for fiscal years 2008 and 2007, respectively. Theincome tax benefit recognized for nonqualified stock option expense wasapproximately $1,861 and $1,584 for fiscal years 2008 and 2007, respectively.We also recognized an excess tax benefit on the exercise of stock options of$977 and $849 in fiscal years 2008 and 2007, respectively which decreased ourfederal taxes payable.

 

As of April 27,2008, there was $10,151 in unrecognized stock compensation costs, related to unvestedoptions, which we expect we will recognize over the remaining vesting periodswith a weighted average remaining vesting period of 3.9 years. Stock optionsgranted generally are exercisable in yearly installments of 20%, commencing oneyear after the date of grant. We recognize compensation expense for thesegrants on a straight-line basis over the requisite service period for eachseparately vesting portion of the award as if the award was, in-substance,multiple awards.

 

The fair value of eachoption grant is estimated on the date of the grant using theBlack-Scholes-Merton option-pricing model with the range of assumptionsdisclosed in the following table for the periods presented. Weighted averagevolatility is calculated using the historical volatility of our stock pricesover a range of dates equal to the expected term of a grant’s options. Theweighted average expected term is calculated using historical data that isrepresentative of the option for which the fair value is to be determined. Theexpected term represents the period of time that options granted are expectedto be outstanding. The weighted average risk-free rate is based on the U.S.Treasury yield curve in effect at the time of the grant for the approximateperiod of time equivalent to the grant’s expected term.

 
| ** **                                 | ** ** | **April 27, 2008** | ** ** | **April 29, 2007** | ** ** | **April 30, 2006** | ** ** |
|--------------------------------------------|------------|------------------------------|------------|------------------------------|------------|------------------------------|------------|
|                                       |       |                         |       |                         |       |                         |       |
| Weighted average  volatility               |       | 43.02                        | %          | 52.28                        | %          | 55.03                        | %          |
| Expected  dividends                        |       | None                         |       | None                         |       | None                         |       |
| Weighted average  expected term (in years) |       | 6.79                         |       | 5.89                         |       | 6.36                         |       |
| Weighted average  risk-free rate           |       | 3.94                         | %          | 4.69                         | %          | 4.32                         | %          |

 

A summary of optionactivity for the fiscal year 2008 is presented below:

 
| ** **                                              | ** ** | ** **  | ** ** | **Weighted** | ** ** | **Weighted**  | ** ** | ** **    | ** ** |
|---------------------------------------------------------|------------|-------------|------------|--------------|------------|---------------|------------|---------------|------------|
| ** **                                              | ** ** | ** **  | ** ** | **Average**  | ** ** | **Average**   | ** ** | **Aggregate** | ** ** |
| ** **                                              | ** ** | ** **  | ** ** | **Exercise** | ** ** | **Remaining** | ** ** | **Intrinsic** | ** ** |
| ** **                                              | ** ** | **Options** | ** ** | **Price**    | ** ** | **Life**      | ** ** | **Value**     | ** ** |
|                                                    |       |        |       |         |       |          |       |          |       |
| Outstanding  options at April 30, 2007             |       | 2,957,073   |       | $            | 17.96      |          |       |          |       |   |
| Options granted                                         |       | 1,762,800   |       | 16.40        |       |          |       |          |       |
| Options  exercised                                      |       | (546,472    | )          | 9.16         |       |          |       |          |       |
| Options  forfeited and expired                          |       | (341,055    | )          | 21.86        |       |          |       |          |       |
| Outstanding  options at April 27, 2008             |       | 3,832,346   |       | $            | 18.15      |          | 7.5        |          | $          | — |   |
|                                                    |       |        |       |         |       |          |       |          |       |
| Outstanding  exercisable options at April 27, 2008 |       | 1,364,876   |       | $            | 17.68      |          | 5.0        |          | $          | — |   |

 

The total intrinsic valueof options exercised during fiscal years 2008, 2007 and 2006 was $5,423, $4,992and $6,908, respectively. Upon the exercise of options, we issued new shares tothe optionee which increases the total number of common shares outstanding. Theweighted average fair value of options granted during the fiscal years 2008,2007 and 2006 was $7.72, $13.67 and $13.09 per share, respectively.

 

Prior to May 1,2006, we applied the recognition and measurement principles of APB 25 andrelated Interpretations in accounting for the Company’s three stock-basedemployee compensation plans. No stock-based employee compensation expense isreflected in net income as all options granted under those plans had anexercise price equal to the market value of the underlying common stock on thedate of grant. The following table illustrates the effect on net income andearnings per share as if the Company had applied the fair value recognitionprovisions of SFAS 123 as amended by SFAS 148, to stock-based employeecompensation.

 

56

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| ** **                                                                                                                                    | ** ** | **April 30, 2006** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|
|                                                                                                                                          |       |                         |       |
| Net income                                                                                                                                    |       | $                            | 18,875     |   |
| Deduct: Total  stock-based employee compensation expense determined under fair value based  method for all awards, net of related tax effects |       | (3,804                       | )          |
| Pro forma income  before discontinued operations                                                                                              |       | $                            | 15,071     |   |
|                                                                                                                                          |       |                         |       |
| Earnings per  share: Basic                                                                                                                    |       |                         |       |
| As Reported                                                                                                                                   |       |                         |       |
| Net income                                                                                                                                    |       | $                            | 0.63       |   |
| Earnings per  share: Basic                                                                                                                    |       |                         |       |
| Pro Forma                                                                                                                                     |       |                         |       |
| Net income                                                                                                                                    |       | $                            | 0.50       |   |
|                                                                                                                                          |       |                         |       |
| Earnings per  share: Diluted                                                                                                                  |       |                         |       |
| As Reported                                                                                                                                   |       |                         |       |
| Net income                                                                                                                                    |       | $                            | 0.60       |   |
| Earnings per  share: Diluted                                                                                                                  |       |                         |       |
| Pro Forma                                                                                                                                     |       |                         |       |
| Net income                                                                                                                                    |       | $                            | 0.48       |   |

 

 *Stock-BasedCompensation—Deferred Bonus Plan* - In fiscal 2001, our stockholders approved theDeferred Bonus Plan. The Deferred Bonus Plan provides for the issuance ofnon-vested stock to eligible officers and employees who agree to receive a deferredbonus in the form of non-vested stock. The vesting of the stock is dependentupon continued service to the Company for a period of five years and the fairvalue of the non-vested stock is amortized ratably over the vesting period. At April 27,2008, the non-vested stock outstanding in connection with the Deferred BonusPlan totaled 40,167 shares, none of which were granted during fiscal year endedApril 27, 2008. Compensation expense related to stock-based compensationunder the Deferred Bonus Plan for fiscal years 2008, 2007, and 2006 totaled$265, $548, and $367, respectively. We do not plan to award any furthercompensation under the Deferred Bonus Plan, however, any grants that have beenawarded prior to the Deferred Bonus Plan’s discontinuation will be paidprovided the vesting requirements are met.

 

The following tablepresents the number and weighted average grant-date fair value of sharesgranted, vested and forfeited during the fiscal year 2008:

 
| ** **                               | ** ** | ** ** | ** ** | **Weighted** | ** ** |
|------------------------------------------|------------|------------|------------|--------------|------------|
| ** **                               | ** ** | **Number** | ** ** | **Average**  | ** ** |
| ** **                               | ** ** | **of**     | ** ** | **Fair**     | ** ** |
| ** **                               | ** ** | **Shares** | ** ** | **Value**    | ** ** |
|                                     |       |       |       |         |       |
| Non-vested stock  at April 29, 2007 |       | 99,981     |       | $            | 19.80      |   |
| Shares granted                           |       | —     |       | —       |       |
| Shares vested                            |       | (50,377    | )          | 17.33        |       |
| Shares forfeited                         |       | (9,437     | )          | 20.47        |       |
| Non-vested stock  at April 27, 2008 |       | 40,167     |       | $            | 22.73      |   |

 

The weighted average fairvalue of shares vested related to the Deferred Bonus Plan for fiscal years2008, 2007 and 2006 is $873, $266 and $731, respectively.

 

*StockRepurchase –*Since November 15, 2000, our Board ofDirectors has approved a stock repurchase program, as amended, allowing up to6,000,000 shares of our common stock to be repurchased.  As of April 27, 2008, we have repurchased4,895,792 shares of common stock, and retired 553,800 shares of commonstock under this stock repurchase program.

 

57

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**10.Deferred Compensation Plans**

 

*2005 Deferred Compensation Plan -*On January 11,2005, we adopted the 2005 Deferred Compensation Plan (the “Plan”), whichamended and restated the prior deferred compensation arrangement. The Plan isan unfunded deferred compensation arrangement for the benefit of key managementofficers and employees of the Company and its subsidiaries. The terms of thePlan include the ability of the participants to defer, on a pre-tax basis,salary, bonus payments and any voluntary deferrals to the Company’s RetirementTrust and Savings Plan in excess of the amount permitted under IRS Code Section 401(k).The terms also allow for a discretionary annual matching contribution by theCompany. The Plan allows for the aggregation and investment of deferred amountsin notional investment alternatives, including units representing shares of ourcommon stock.   The liability related tothe Plan as of fiscal 2008 and 2007 was $3,242 and $3,108, respectively.  Expense for our contributions related to thePlan was $85, $31 and $36 in fiscal years 2008, 2007 and 2006, respectively

 

**11.  Supplemental Disclosure of Cash FlowInformation**

 

For the fiscal yearsended April 27, 2008, April 29, 2007 and April 30, 2006 we made cashpayments of interest, net of capitalized interest for $108,090, $90,620 and$88,360, respectively.  Additionally, wepaid income taxes, net of refunds, of $7,949 and $18,528 in fiscal years 2008and 2007, respectively and collected a refund, net of payments of $392 infiscal year 2006.

 

For the fiscal year endedApril 27, 2008 we purchased land financed with a note payable for$3,096.  Also, as discussed in Note 8, weacquired $4,247 of assets and obligations related to the Bettendorf ConventionCenter.

 

58

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**12. Income Taxes**

 

Income tax (benefit) provisionfrom continuing operations consists of the following (in thousands):

 
| ** **                      | ** ** | **Fiscal Year Ended** | ** ** |
|---------------------------------|------------|---------------------------------|------------|
| ** **                      | ** ** | **April 27,**              | ** ** | **April 29,** | ** ** | **April 30,** | ** ** |
| ** **                      | ** ** | **2008**                        | ** ** | **2007** | ** ** | **2006** | ** ** |
| Current:                        |       |                            |       |   |   |   |   |
| Federal                         |       | $                               | (20,110    | ) | $ | 6,873 |   | $ | 1,459 |   |
| State                           |       | (466                            | )          | 1,244 |   | 2,040 |   |
|                            |       | (20,576                         | )          | 8,117 |   | 3,499 |   |
| Deferred:                       |       |                            |       |   |   |   |   |
| Federal                         |       | (40,472                         | )          | (8,362 | ) | 2,298 |   |
| State                           |       | (3,772                          | )          | 2,151 |   | (169 | ) |
|                            |       | (44,244                         | )          | (6,211 | ) | 2,129 |   |
|                            |       |                            |       |   |   |   |   |
| Income tax  (benefit) provision |       | $                               | (64,820    | ) | $ | 1,906 |   | $ | 5,628 |   |

 

There is no internationaltax expense or benefit in our consolidated tax provision for any fiscal yearbecause either our international operations are based in a jurisdiction thatdoes not impose a corporate income tax or the jurisdiction only taxes our localoperations and those local operations generate losses for which we haveestablished full valuation allowances. These international losses will be taxbenefited at such time that the related international operations generateoperating earnings, subject to statutory limitations. Effective April 27,2008, all of our international operations are subject to taxation in the UnitedStates.

 

A reconciliation ofincome taxes from continuing operations at the statutory corporate federal taxrate of 35% to the income tax (benefit) provision reported in the accompanyingconsolidated statements of operations is as follows (in thousands):

 
| ** **                                | ** ** | **Fiscal Year Ended** | ** ** |
|-------------------------------------------|------------|---------------------------------|------------|
| ** **                                | ** ** | **April 27,**              | ** ** | **April 29,** | ** ** | **April 30,** | ** ** |
| ** **                                | ** ** | **2008**                        | ** ** | **2007** | ** ** | **2006** | ** ** |
| Statutory tax  (benefit) provision        |       | $                               | (54,889    | ) | $ | (5,548 | ) | $ | 7,259 |   |
| Effects of :                              |       |                            |       |   |   |   |   |
| State taxes                               |       | (5,895                          | )          | 2,451 |   | 1,575 |   |
| Other                                     |       |                            |       |   |   |   |   |
| Various  permanent differences            |       | 1,620                           |       | 1,528 |   | 1,264 |   |
| Goodwill  impairment                      |       | —                          |       | 2,730 |   | — |   |
| Employment tax  credits                   |       | (1,351                          | )          | (1,798 | ) | (3,353 | ) |
| Change in state  allowances               |       | 1,656                           |       | 944 |   | 296 |   |
| International  operations                 |       | 1,392                           |       | 1,412 |   | 4,286 |   |
| Capital loss                              |       | (3,136                          | )          | — |   | — |   |
| Bad debt expense                          |       | (4,377                          | )          | — |   | — |   |
| Minority  interest                        |       | (1,943                          | )          | (1,874 | ) | (2,605 | ) |
| Bahamas  impairment                       |       | —                          |       | 845 |   | (870 | ) |
| Hurricane  Katrina involuntary conversion |       | —                          |       | — |   | (1,843 | ) |
| Qualified stock  option expense           |       | 845                             |       | 1,103 |   | — |   |
| Other                                     |       | 1,258                           |       | 113 |   | (381 | ) |
| Income tax  (benefit) provision           |       | $                               | (64,820    | ) | $ | 1,906 |   | $ | 5,628 |   |

 

59

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Significant components ofour domestic net deferred income tax asset (liability) are as follows (inthousands):

 
| ** **                                  | ** ** | **Fiscal Year Ended** | ** ** |
|---------------------------------------------|------------|---------------------------------|------------|
| ** **                                  | ** ** | **April 27,**              | ** ** | **April 29,** | ** ** |
| ** **                                  | ** ** | **2008**                        | ** ** | **2007** | ** ** |
| Deferred tax  liabilities:                  |       |                            |       |   |   |
| Property and  equipment                     |       | $                               | (24,560    | ) | $ | (62,449 | ) |
| Other                                       |       | (8,034                          | )          | (4,661 | ) |
| Total deferred  tax liabilities             |       | (32,594                         | )          | (67,110 | ) |
| Deferred tax  assets:                       |       |                            |       |   |   |
| Accrued expenses                            |       | 21,895                          |       | 20,050 |   |
| Alternative  minimum tax credit             |       | 2,704                           |       | — |   |
| Employment tax  credits                     |       | 1,848                           |       | 82 |   |
| Capital loss  carryover                     |       | 1,576                           |       | 1,451 |   |
| Net operating  losses                       |       | 22,011                          |       | 16,472 |   |
| Other                                       |       | 12,277                          |       | 7,586 |   |
| Total deferred  tax assets                  |       | 62,311                          |       | 45,641 |   |
| Valuation  allowance on deferred tax assets |       | (9,343                          | )          | (7,561 | ) |
| Net deferred tax  asset                     |       | 52,968                          |       | 38,080 |   |
|                                        |       |                            |       |   |   |
| Net deferred tax  asset (liability)         |       | $                               | 20,374     |   | $ | (29,030 | ) |

 

At April 27, 2008,we have federal net operating loss carryforwards of $30,452 for income taxpurposes, with expiration dates from fiscal year 2011 to 2028. Approximately$26,406 of these net operating losses are attributable to IC Holdings Colorado, Inc. andits wholly-owned subsidiary CCSC/Blackhawk, Inc. (“IC Holdings, Inc. &Sub”) and can only be used to offset income earned by these entities. Theremaining federal net operating losses are subject to limitations under theinternal revenue code and underlying treasury regulations, which may limit theamount ultimately utilized; however, we believe that all federal net operatinglosses will be utilized prior to expiration. IC Holdings, Inc. & Sub also has a federal capital losscarryforward of $4,146 that expires in 2011 for which it has established a fullvaluation allowance because it does not expect to benefit from the capitalloss. We also have state income tax net operating loss carryforwards of$216,549 with expiration dates from fiscal year 2009 to 2028. We havedetermined that it is more likely than not that we will not be able to utilize$134,723 of the state income tax net operating losses and have established avaluation reserve accordingly.  If or whenrecognized, the tax benefits relating to any reversal of the valuationallowance on deferred tax assets at April 27, 2008 will be accounted foras follows: approximately $4,651 will be recognized as a reduction of incometax expense, $4,692 will be recognized as a reduction of goodwill.  We also have a federal general businesscredit carryforward of $1,848 for income tax purposes, which expires in thefiscal year 2027.  We believe that thesecredits will be utilized prior to expiration. Deferred income taxes related toNOL carryforwards have been classified as noncurrent to reflect the expectedutilization of the carryforwards.  Theproperty and equipment deferred tax liability at April 27, 2008 is net ofthe deferred tax asset related to the Coventry impairment of $29,295.

 

We adopted the provisions of FIN No. 48 on April 30,2007. The adoption of FIN 48 did not have any impact on our consolidatedstatement of operations or stockholders’ equity within the consolidated balancesheet. We had a total of $24,152 and $21,819 of unrecognized tax benefits as ofApril 30, 2007 and April 27, 2008, respectively.  A reconciliation of the beginning and endingamounts of unrecognized tax benefits are as follows:

 
| ** **                                         | ** ** | **April 27,** | ** ** |
|----------------------------------------------------|------------|--------------------|------------|
| ** **                                         | ** ** | **2008**           | ** ** |
|                                               |       |               |       |
| Balance at  April 30, 2007                    |       | $                  | 24,152     |   |
| Gross increases  - tax positions in current period |       | 949                |       |
| Gross increases  - tax positions in prior periods  |       | 8,539              |       |
| Gross decreases  - tax positions in prior periods  |       | (486               | )          |
| Settlements                                        |       | (11,335            | )          |
| Lapse of statute  of limitations                   |       | —             |       |
| Balance at  April 27, 2008                    |       | $                  | 21,819     |   |

 

Included in the balance of unrecognized tax benefitsat April 27, 2008 are $8,128 of tax benefits that, if recognized, wouldaffect the effective tax rate.  Alsoincluded in the balance of unrecognized tax benefits at April 27, 2008 are$9,318 of tax benefits that, if recognized, would result in adjustments todeferred taxes.

 

60

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We recognize accrued interest and penalties related tounrecognized tax benefits in income tax expense. This policy did not change asa result of the adoption of FIN 48. Related to the unrecognized tax benefitsnoted above, we accrued interest of $3,250 and no penalties during the fiscalyear ended 2008.  In total, as of April 27,2008, we have recognized a liability of $5,513 for interest and no amount forpenalties.

 

We believe that an increase in unrecognized taxbenefits related to federal and state exposures in the coming year, thoughpossible, cannot be reasonably estimated and will not be significant.  In addition, we believe that it is reasonablypossible that an amount between $7,900 and $12,000 of its currently remainingunrecognized tax positions may be recognized by the end of the fiscal yearending April 26, 2009.  Theseamounts relate to positions taken or to be taken on federal, Louisiana, andMississippi income tax returns for the fiscal years ending April 2002through April 2007. These amounts are expected to be resolved during thenext twelve months as a result of the anticipated completion of federal,Louisiana, and Mississippi income tax examinations as well as the filing ofamended income tax returns.

 

We file income tax returns in the U.S. federaljurisdiction, various state jurisdictions, and foreign jurisdictions. As of April 27,2008, we were no longer subject to examination of our U.S. federal income taxreturns filed for tax years prior to 2004, due to statute expirations andsettlements. The IRS is currently examining our federal income tax returns forthe 2004 and 2005 tax years which relate to our fiscal years ended April 24,2005 and April 30, 2006, respectively. In addition, various statejurisdictions are currently examining our state income tax returns for varioussubsidiaries. The tax returns for subsequent years are also subject toexamination.

 

We file in numerous state jurisdictions with varyingstatutes of limitations. Our unrecognized state tax benefits are related tostate tax returns open from tax years 2001 through 2007 depending on each state’sstatute of limitations.

 

 **13. Hurricanes and Related Charges**

 

In the fall of 2005, ourproperties in Biloxi, Mississippi, Lake Charles, Louisiana and Pompano Beach,Florida were struck by Hurricanes Katrina, Rita and Wilma, respectively.

 

We have insurance coverage related to the three hurricanes for propertydamage and destruction, and business interruption insurance for incrementalcosts incurred and for lost profits. We have received partial proceeds from ourinsurance carriers related to losses we have sustained.  Our belief is we will ultimately collect morethan the $75,868 related to the property impairment as the insurance coverageis for replacement value and the insurance receivable recorded for the propertyimpairment represents the net book value of the assets at the date ofloss.  In addition, we have not yetreceived proof of losses on open claims under the business interruption loss ofprofits coverage related to the claim in Biloxi. We continue to negotiate withour insurers to settle our claims.  Thetimeline for final settlement of the claims is expected to occur within oneyear.  Actual insurance receipts inexcess of our insurance receivable for loss of income claims are recorded asfood, beverage, and other revenues. Other insurance proceeds received above anyinsurance receivable are shown as a reduction of expense in a component ofincome from operations.

 

The following table showsthe activity flowing through the hurricane insurance accounts:

 
| ** **                             | ** ** | **Total Incurred as of** | ** ** |
|----------------------------------------|------------|-----------------------------------------|------------|
| ** **                             | ** ** | **April 27,**                      | ** ** | **April 29,** | ** ** |
| ** **                             | ** ** | **2008**                                | ** ** | **2007** | ** ** |
|                                   |       |                                    |       |   |   |
| Property  impairment (1)               |       | $                                       | 75,868     |   | $ | 75,868 |   |
| Incremental  costs incurred (2)        |       | 85,639                                  |       | 84,793 |   |
| Loss of income  (3)                    |       | 2,817                                   |       | 2,817 |   |
| Hurricane  related charges, net (4)    |       | (3,019                                  | )          | (4,776 | ) |
| Insurance  receivable, gross           |       | 161,305                                 |       | 158,702 |   |
| Insurance  receipts                    |       | (153,755                                | )          | (102,662 | ) |
| Insurance  receivable, net of receipts |       | $                                       | 7,550      |   | $ | 56,040 |   |

 

----

(1) Represents thebook value of property impairments recognized at the date of loss as areceivable under our insurance policies.

(2) Insuredincremental costs incurred by us totaling $85,639 were recorded as an insurancereceivable for $847, $22,617, and $62,174 in fiscal years 2008, 2007, and 2006,respectively.

 

61

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(3) During fiscal2007, we recorded a gain and insurance receivable of $2,817 as the result of aproof of loss under the business interruption-lost profits coverage.

(4) Primarilyrepresents deductibles under insurance policies recorded as a hurricane relatedcharge during fiscal 2006 which has been partially offset by $1,757 gain onsettlement of the Hurricane Rita claim in fourth quarter of fiscal year 2008.

 

In connection withflooding in the Midwest during April 2008, our Natchez, Mississippi andDavenport, Iowa, locations closed.  As aresult, the Company has incurred additional expense of $139 above the insurancedeductible which is included in the insurance receivable in the consolidatedbalance sheet.

 

Subsequent to our fiscalyear end, we received $4,836 of cash which reduced the receivable and relatedto the settlement of the Hurricane Rita claim.

 

**14.Discontinued Operations**

 

On July 31, 2006, wecompleted the sale of our Bossier City and Vicksburg properties for cashproceeds of $238,725 net of transaction costs and a working capital adjustment.

 

On April 25, 2005,the Company and Colorado Grande executed a Stock Purchase Agreement with asubsidiary of Nevada Gold & Casinos, Inc. (“Nevada Gold”) to sellall outstanding shares of the common stock of Colorado Grande to a subsidiaryof Nevada Gold. A subsidiary of Nevada Gold was the (43%) minority owner ofIsle of Capri Black Hawk, L.L.C. prior to our purchase of their minorityinterest. The aggregate estimated sales price agreed to was $6,500 payable: (a) $600in cash upon closing and, (b) a $5,900 promissory note secured by thestock of Colorado Grande and Nevada Gold’s future membership distributions fromthe Isle-Black Hawk until the note was fully repaid. This note was fully repaidduring fiscal year 2008.  The balanceoutstanding under this note was $1,273 as of April 29, 2007.

 

The estimated sales pricewas adjusted by the difference between actual working capital and a targetworking capital (as defined by the Sales Agreement) on the closing date. Thepost closing adjustment to adjust the actual working capital to the targetworking capital was made during the fiscal year ended April 30, 2006 forthe Colorado Grande-Cripple Creek property sale and approximately $800 in cashwas paid to us by Nevada Gold.

 

The results of ourdiscontinued operations are summarized as follows:

 
| ** **                                         | ** ** | **Discontinued Operations** | ** ** |
|----------------------------------------------------|------------|----------------------------------|------------|
| ** **                                         | ** ** | **Fiscal Year Ended**  | ** ** |
| ** **                                         | ** ** | **April 29,**               | ** ** | **April 30,** | ** ** |
| ** **                                         | ** ** | **2007**                         | ** ** | **2006** | ** ** |
| Net revenues                                       |       | $                                | 41,291     |   | $ | 166,361 |   |
| Gain on sale of  discontinued operations           |       | 23,244                           |       | — |   |
| Pretax income  from discontinued operations        |       | 5,599                            |       | 16,874 |   |
| Income tax  provision from discontinued operations |       | (12,151                          | )          | (6,630 | ) |
| Income from  discontinued operations, net of tax   |       | 16,692                           |       | 10,244 |   |
|                                                    |            |                                  |            |  |  |  |  |

 

Net interest expense of$3,312 and $12,973 for fiscal years 2007 and 2006, respectively, has beenallocated to discontinued operations based on the ratio of net assets to besold to the sum of total net assets of the Company plus our debt that was notattributable to a particular operation in accordance with EITF 87-24, “Allocationof Interest to Discontinued Operations.”

 

**15.Employee Benefit Plan**

 

*401(k) Plan–*We have a 401(k) plan covering substantially all ofour employees who have completed one year of service. Expense for ourcontributions related to the 401(k) plan was $759, $1,921 and $1,669 infiscal years 2008, 2007 and 2006, respectively. Our contribution is based on apercentage of employee contributions and may include an additionaldiscretionary amount. The 401(k) plan allows employees to invest no morethan 5% of their contribution in our common stock.

 

**16.Related Party Transactions**

 

We lease approximatelyeight acres of land on a month-to-month basis from an entity owned by ourchairman and members of his family. The land is used for parking and warehousespace by the Isle-Bettendorf. The initial term of the lease expires sixty daysafter written notice is given to either party and rent under the lease iscurrently $23 per month.

 

62

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We reimbursed AlterTrading Corporation (a private entity owned by our chairman and his family) forannual lease payments of approximately $34, $46 and $119 in fiscal years 2008,2007 and 2006, respectively, for property leased by Alter Trading Corporation.The land was leased at our request in order to secure sites for possible casinooperations.

 

A member of the Board ofDirectors has provided consulting services to us related to on-going contractsand real estate transactions in the United States. The total fees paid were $78and $56 plus expenses in fiscal years 2008 and 2007.

 

In 2004, we entered intoa contract with a member of the Board of Directors for consulting fees relatedto on-going contracts and transactions in the United Kingdom. The total feespaid under this contract were $60 in fiscal years 2008, 2007 and 2006,respectively.

 

In 2005, one of ourwholly owned subsidiaries, Isle of Capri Bettendorf, L.C., entered into aDevelopment Agreement with the City of Bettendorf, Iowa and Green BridgeCompany relating to the development of a conference/events center inBettendorf, Iowa, the expansion of the hotel at Bettendorf and relatedfacilities, including a skywalk between the hotel and conference/events centerand a parking facility. Green Bridge Company is indirectly wholly owned by ourchairman and members of his family. As part of the transaction, Isle of CapriBettendorf, L.C. purchased certain real estate owned by Green Bridge Company atits fair market value of $393 in fiscal year 2008. Isle of Capri Bettendorf,L.C. will hold Green Bridge Company harmless from certain future increases inassessments on adjacent property owned by Green Bridge Company, capped at$4,500.

 

63

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**17. Fair Value of Financial Instruments**

 

The following methods andassumptions were used to estimate the fair value of each class of financialinstruments for which it is practicable to estimate that value:

 

Assets, including cash, restricted cash andnotes receivable are carried at cost, which approximates fair value due totheir short-term maturities.

 

Marketable securities consist of tradingsecurities held by Capri Insurance Corporation, our captive insurancesubsidiary. The trading securities are primarily debt and equity securitieswhich we buy with the intention to resell in the near term. Our tradingsecurities are carried at fair value with changes in fair value recognized incurrent period consolidated statements of operations.

 

The fair value of our long-term debt isestimated 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 futurepayments utilizing current rates available to us for debt of similar remainingmaturities. Debt obligations with a short remaining maturity are valued at thecarrying amount. The estimated carrying amounts and fair values of ourfinancial instruments are as follows:

 
| ** **                                      | ** ** | **April 27, 2008** | ** ** | **April 29, 2007** | ** ** |
|-------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **                                      | ** ** | **Carrying**                 | ** ** | ** **                   | ** ** | **Carrying** | ** ** | ** ** | ** ** |
| ** **                                      | ** ** | **Amount**                   | ** ** | **Fair Value**          | ** ** | **Amount** | ** ** | **Fair Value** | ** ** |
|                                            |       |                         |       |                         |       |   |   |   |   |
| **Financial  assets:**                          |       |                         |       |                         |       |   |   |   |   |
| Cash and cash  equivalents                      |       | $                            | 91,790     |                         | $          | 91,790 |   | $ | 188,114 |   | $ | 188,114 |   |
| Marketable  securities                          |       | 18,533                       |       | 18,533                       |       | 17,169 |   | 17,169 |   |
| Restricted cash                                 |       | 4,802                        |       | 4,802                        |       | 4,637 |   | 4,637 |   |
| Notes receivable                                |       | 5,000                        |       | 5,000                        |       | 6,280 |   | 6,280 |   |
| Interest rate  swaps                            |       | —                       |       | —                       |       | 528 |   | 528 |   |
|                                            |       |                         |       |                         |       |   |   |   |   |
| **Financial  liabilities:**                     |       |                         |       |                         |       |   |   |   |   |
| Revolver                                        |       | $                            | 130,500    |                         | $          | 130,500 |   | $ | — |   | $ | — |   |
| Variable rate  term loans                       |       | 869,313                      |       | 756,302                      |       | — |   | — |   |
| 7% Senior  subordinated notes                   |       | 500,000                      |       | 377,500                      |       | 500,000 |   | 490,500 |   |
| Senior secured  credit facility                 |       | —                       |       | —                       |       | 503,500 |   | 503,500 |   |
| 9% Senior  subordinated notes                   |       | —                       |       | —                       |       | 200,000 |   | 209,250 |   |
| Isle-Black Hawk  senior secured credit facility |       | —                       |       | —                       |       | 203,550 |   | 203,550 |   |
| Blue Chip Credit  Facility                      |       | 1,262                        |       | 1,262                        |       | 6,157 |   | 6,157 |   |
| Other long-term  debt                           |       | 6,214                        |       | 6,214                        |       | 4,772 |   | 4,685 |   |
| Interest rate  swaps                            |       | 13,714                       |       | 13,714                       |       | — |   | — |   |
| Other long-term  obligations                    |       | 52,305                       |       | 52,305                       |       | 47,639 |   | 47,639 |   |

 

64

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**18.Consolidating Condensed Financial Information**

 

Certain of our whollyowned subsidiaries have fully and unconditionally guaranteed on a joint andseveral basis, the payment of all obligations under our 7% Senior SubordinatedNotes.

 

The following whollyowned subsidiaries of the Company are co-borrowers, on a joint and severalbasis, under the July 2007 Credit Facility and are guarantors of the 7%Senior Subordinated Notes: Riverboat Corporation of Mississippi; RiverboatServices, Inc.; CSNO, L.L.C.; St. Charles Gaming Company, Inc.; IOCHoldings, 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 CapriBettendorf Marina Corp.; Isle of Capri Marquette, Inc.; IOC-Davenport, Inc.;IOC-St. Louis County, Inc.; IOC-Black Hawk County, Inc.; IOC-PA,L.L.C.; IOC-City of St. Louis, L.L.C.; IOC-Manufacturing, Inc.; RiverboatCorporation of Mississippi — Vicksburg Isle of Capri Black Hawk, L.L.C.; Isleof Capri Black Hawk Capital Corp.; IC Holdings Colorado, Inc.;CCSC/Blackhawk, Inc.; and IOC-Black Hawk Distribution Company, L.L.C.;Casino America of Colorado, Inc.; Black Hawk Holdings, L.L.C. and IOC-Caruthersville,L.L.C.  Each of the subsidiaries’guarantees is joint and several with the guarantees of the other subsidiaries.

 

The followingsubsidiaries are not guarantors or co-borrowers under the July 2007 CreditFacility or the 7% Senior Subordinated Notes: Blue Chip Casinos, PLC; Isle ofCapri of Jefferson County, Inc.; IOC-Mississippi, Inc.; CasinoParking, Inc.; Isle of Capri-Bahamas, Ltd.; IOC-Bahamas Holding, Inc.;ASMI Management, Inc.; IOC Development Company, L.L.C.; Casino America, Inc.;International Marco Polo Services, Inc.; Isle of Capri of Michigan L.L.C.;IOC Services, L.L.C.; Capri Air, Inc.; Lady Luck Gaming Corp.; Lady LuckGulfport, Inc.; Lady Luck Vicksburg, Inc.; Lady Luck Biloxi, Inc.;Lady Luck Central City, Inc.; Pompano Park Holdings, L.L.C; JPLA Pelican,L.L.C.; IOC-Cameron, L.L.C.; The Isle of Capri Casinos Limited, IOC Pittsburgh, Inc.and Capri Insurance Corporation.

 

65

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Consolidating condensedbalance sheets as of April 27, 2008 and April 29, 2007 are as follows(in thousands):

 
| ** **                                       | ** ** | **As of April 27, 2008** | ** ** |
|--------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                       | ** ** | **Isle of Capri**                  | ** ** | ** ** | ** ** | ** ** | ** ** | **Consolidating** | ** ** | ** ** | ** ** |
| ** **                                       | ** ** | **Casinos, Inc.**                       | ** ** | ** ** | ** ** | **Non-** | ** ** | **and** | ** ** | **Isle of Capri** | ** ** |
| ** **                                       | ** ** | **(Parent**                                  | ** ** | **Guarantor** | ** ** | **Guarantor** | ** ** | **Eliminating** | ** ** | **Casinos, Inc.** | ** ** |
| ** **                                       | ** ** | **Obligor)**                                 | ** ** | **Subsidiaries** | ** ** | **Subsidiaries** | ** ** | **Entries** | ** ** | **Consolidated** | ** ** |
| **Balance  Sheet**                               |       |                                         |       |   |   |   |   |   |   |   |   |
| Current assets                                   |       | $                                            | 46,683     |   | $ | 107,235 |   | $ | 45,568 |   | $ | (105 | ) | $ | 199,381 |   |
| Intercompany  receivables                        |       | 1,441,591                                    |       | (382,547 | ) | 20,394 |   | (1,079,438 | ) | — |   |
| Investments in  subsidiaries                     |       | 162,496                                      |       | — |   | — |   | (162,496 | ) | — |   |
| Property and  equipment, net                     |       | 18,714                                       |       | 1,238,222 |   | 72,050 |   | — |   | 1,328,986 |   |
| Other assets                                     |       | 70,358                                       |       | 368,316 |   | 7,125 |   | — |   | 445,799 |   |
| Total assets                                     |       | $                                            | 1,739,842  |   | $ | 1,331,226 |   | $ | 145,137 |   | $ | (1,242,039 | ) | $ | 1,974,166 |   |
|                                             |       |                                         |       |   |   |   |   |   |   |   |   |
| Current  liabilities                             |       | $                                            | 38,368     |   | $ | 107,672 |   | $ | 37,502 |   | $ | (105 | ) | $ | 183,437 |   |
| Intercompany  payables                           |       | —                                       |       | 889,382 |   | 190,056 |   | (1,079,438 | ) | — |   |
| Long-term debt, less  current maturities         |       | 1,491,063                                    |       | 5,041 |   | 1,487 |   | — |   | 1,497,591 |   |
| Other accrued  liabilities                       |       | 22,399                                       |       | 24,670 |   | 58,057 |   | — |   | 105,126 |   |
| Minority  interest                               |       | —                                       |       | — |   | — |   | — |   | — |   |
| Stockholders’  equity                       |       | 188,012                                      |       | 304,461 |   | (141,965 | ) | (162,496 | ) | 188,012 |   |
| Total  liabilities and stockholders’ equity |       | $                                            | 1,739,842  |   | $ | 1,331,226 |   | $ | 145,137 |   | $ | (1,242,039 | ) | $ | 1,974,166 |   |

 
| ** **                                                                           | ** ** | **As of April 29, 2007** | ** ** |
|--------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                           | ** ** | **Isle of Capri**                  | ** ** | ** ** | ** ** | ** ** | ** ** | **Consolidating** | ** ** | ** ** | ** ** |
| ** **                                                                           | ** ** | **Casinos, Inc.**                       | ** ** | ** ** | ** ** | **Non-** | ** ** | **and** | ** ** | **Isle of Capri** | ** ** |
| ** **                                                                           | ** ** | **(Parent**                                  | ** ** | **Guarantor** | ** ** | **Guarantor** | ** ** | **Eliminating** | ** ** | **Casinos, Inc.** | ** ** |
| ** **                                                                           | ** ** | **Obligor)**                                 | ** ** | **Subsidiaries** | ** ** | **Subsidiaries** | ** ** | **Entries** | ** ** | **Consolidated** | ** ** |
| **Balance  Sheet**                                                                   |       |                                         |       |   |   |   |   |   |   |   |   |
| Current assets                                                                       |       | $                                            | 98,116     |   | $ | 170,803 |   | $ | 51,491 |   | $ | (72 | ) | $ | 320,338 |   |
| Intercompany  receivables                                                            |       | 1,135,623                                    |       | (459,025 | ) | (61,730 | ) | (614,868 | ) | — |   |
| Investments in  subsidiaries                                                         |       | 270,176                                      |       | — |   | — |   | (270,176 | ) | — |   |
| Property and equipment,  net                                                         |       | 19,644                                       |       | 1,178,899 |   | 140,027 |   | — |   | 1,338,570 |   |
| Other assets                                                                         |       | 19,250                                       |       | 395,923 |   | 7,410 |   | (5,800 | ) | 416,783 |   |
| Total assets                                                                         |       | $                                            | 1,542,809  |   | $ | 1,286,600 |   | $ | 137,198 |   | $ | (890,916 | ) | $ | 2,075,691 |   |
|                                                                                 |       |                                         |       |   |   |   |   |   |   |   |   |
| Current  liabilities                                                                 |       | $                                            | 61,585     |   | $ | 139,007 |   | $ | 39,556 |   | $ | (4,407 | ) | $ | 235,741 |   |
| Intercompany  payables                                                               |       | 15                                           |       | 542,726 |   | 70,731 |   | (613,472 | ) | — |   |
| Long-term debt,                                                                      |       |                                         |       |   |   |   |   |   |   |   |   |
| less current  maturities                                                             |       | 1,200,500                                    |       | 205,359 |   | 4,526 |   | — |   | 1,410,385 |   |
| Other accrued  liabilities, deferred taxes and long-term obligations  |       | (1,113                                       | )          | 71,136 |   | 49,884 |   | — |   | 119,907 |   |
| Minority  interest                                                                   |       | —                                       |       | — |   | — |   | 27,836 |   | 27,836 |   |
| Stockholders’  equity                                                           |       | 281,822                                      |       | 328,372 |   | (27,499 | ) | (300,873 | ) | 281,822 |   |
| Total  liabilities and stockholders’ equity                                     |       | $                                            | 1,542,809  |   | $ | 1,286,600 |   | $ | 137,198 |   | $ | (890,916 | ) | $ | 2,075,691 |   |

 

66

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Consolidatingcondensed statements of operations for the fiscal years ended April 27,2008, April 29, 2007 and April 30, 2006 are as follows:

 
| ** **                                               | ** ** | **For the Fiscal Year Ended April 27, 2008** | ** ** |
|----------------------------------------------------------|------------|---------------------------------------------------------------------------------|------------|
| ** **                                               | ** ** | **Isle of Capri**                                                     | ** ** | ** ** | ** ** | ** ** | ** ** | **Consolidating** | ** ** | ** ** | ** ** |
| ** **                                               | ** ** | **Casinos, Inc.**                                                          | ** ** | ** ** | ** ** | **Non-** | ** ** | **and** | ** ** | **Isle of Capri** | ** ** |
| ** **                                               | ** ** | **(Parent**                                                                     | ** ** | **Guarantor** | ** ** | **Guarantor** | ** ** | **Eliminating** | ** ** | **Casinos, Inc.** | ** ** |
| **Statement of Operations**                    | ** ** | **Obligor)**                                                                    | ** ** | **Subsidiaries** | ** ** | **Subsidiaries** | ** ** | **Entries** | ** ** | **Consolidated** | ** ** |
| Revenues:                                                |       |                                                                            |       |   |   |   |   |   |   |   |   |
| Casino                                                   |       | $                                                                               | —     |   | $ | 1,092,292 |   | $ | 29,568 |   | $ | — |   | $ | 1,121,860 |   |
| Rooms, food,  beverage and other                         |       | 359                                                                             |       | 199,582 |   | 18,149 |   | (13,015 | ) | 205,075 |   |
| Gross revenues                                           |       | 359                                                                             |       | 1,291,874 |   | 47,717 |   | (13,015 | ) | 1,326,935 |   |
| Less promotional  allowances                             |       | —                                                                          |       | (200,141 | ) | (1,442 | ) | — |   | (201,583 | ) |
| Net revenues                                             |       | 359                                                                             |       | 1,091,733 |   | 46,275 |   | (13,015 | ) | 1,125,352 |   |
|                                                     |       |                                                                            |       |   |   |   |   |   |   |   |   |
| Operating  expenses:                                     |       |                                                                            |       |   |   |   |   |   |   |   |   |
| Casino                                                   |       | —                                                                          |       | 150,925 |   | 12,325 |   | — |   | 163,250 |   |
| Gaming taxes                                             |       | —                                                                          |       | 285,444 |   | 2,958 |   | — |   | 288,402 |   |
| Rooms, food,  beverage and other                         |       | 55,822                                                                          |       | 409,426 |   | 121,420 |   | (13,015 | ) | 573,653 |   |
| Management fee  expense (revenue)                        |       | (29,886                                                                         | )          | 37,635 |   | (7,749 | ) | — |   | — |   |
| Depreciation and  amortization                           |       | 5,089                                                                           |       | 123,264 |   | 7,774 |   | — |   | 136,127 |   |
| Total operating  expenses                                |       | 31,025                                                                          |       | 1,006,694 |   | 136,728 |   | (13,015 | ) | 1,161,432 |   |
|                                                     |       |                                                                            |       |   |   |   |   |   |   |   |   |
| Operating income  (loss)                                 |       | (30,666                                                                         | )          | 85,039 |   | (90,453 | ) | — |   | (36,080 | ) |
| Interest  expense, net                                   |       | (25,196                                                                         | )          | (71,037 | ) | (9,239 | ) | — |   | (105,472 | ) |
| Loss on  extinguishment of debt                          |       | (13,660                                                                         | )          | (1,614 | ) | — |   | — |   | (15,274 | ) |
| Equity in income  (loss) of subsidiaries                 |       | (98,617                                                                         | )          | — |   | — |   | 98,617 |   | — |   |
|                                                     |       |                                                                            |       |   |   |   |   |   |   |   |   |
| Income (loss)  before income taxes and minority interest |       | (168,139                                                                        | )          | 12,388 |   | (99,692 | ) | 98,617 |   | (156,826 | ) |
| Income tax (provision)  benefit                          |       | 71,265                                                                          |       | (1,094 | ) | (5,351 | ) | — |   | 64,820 |   |
| Minority  interest                                       |       | —                                                                          |       | (4,868 | ) | — |   | — |   | (4,868 | ) |
| Net income  (loss)                                       |       | $                                                                               | (96,874    | ) | $ | 6,426 |   | $ | (105,043 | ) | $ | 98,617 |   | $ | (96,874 | ) |

 
| ** **                                                                          | ** ** | **For the Fiscal Year Ended April 29, 2007** | ** ** |
|-------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------|------------|
| ** **                                                                          | ** ** | **Isle of Capri**                                                     | ** ** | ** ** | ** ** | ** ** | ** ** | **Consolidating** | ** ** | ** ** | ** ** |
| ** **                                                                          | ** ** | **Casinos, Inc.**                                                          | ** ** | ** ** | ** ** | **Non-** | ** ** | **and** | ** ** | **Isle of Capri** | ** ** |
| ** **                                                                          | ** ** | **(Parent**                                                                     | ** ** | **Guarantor** | ** ** | **Guarantor** | ** ** | **Eliminating** | ** ** | **Casinos, Inc.** | ** ** |
| **Statement of Operations**                                               | ** ** | **Obligor)**                                                                    | ** ** | **Subsidiaries** | ** ** | **Subsidiaries** | ** ** | **Entries** | ** ** | **Consolidated** | ** ** |
| Revenues:                                                                           |       |                                                                            |       |   |   |   |   |   |   |   |   |
| Casino                                                                              |       | $                                                                               | —     |   | $ | 991,399 |   | $ | 24,230 |   | $ | — |   | $ | 1,015,629 |   |
| Rooms, food,  beverage and other                                                    |       | 94                                                                              |       | 196,578 |   | 17,806 |   | (14,255 | ) | 200,223 |   |
| Gross revenues                                                                      |       | 94                                                                              |       | 1,187,977 |   | 42,036 |   | (14,255 | ) | 1,215,852 |   |
| Less promotional  allowances                                                        |       | —                                                                          |       | (213,624 | ) | (834 | ) | — |   | (214,458 | ) |
| Net revenues                                                                        |       | 94                                                                              |       | 974,353 |   | 41,202 |   | (14,255 | ) | 1,001,394 |   |
|                                                                                |       |                                                                            |       |   |   |   |   |   |   |   |   |
| Operating  expenses:                                                                |       |                                                                            |       |   |   |   |   |   |   |   |   |
| Casino                                                                              |       | —                                                                          |       | 153,288 |   | 6,246 |   | — |   | 159,534 |   |
| Gaming taxes                                                                        |       | —                                                                          |       | 213,715 |   | (3,311 | ) | — |   | 210,404 |   |
| Rooms, food,  beverage and other                                                    |       | 49,643                                                                          |       | 387,095 |   | 42,508 |   | (13,122 | ) | 466,124 |   |
| Management fee  expense (revenue)                                                   |       | (31,350                                                                         | )          | 37,585 |   | (6,235 | ) | — |   | — |   |
| Depreciation and  amortization                                                      |       | 1,955                                                                           |       | 94,268 |   | 3,283 |   | — |   | 99,506 |   |
| Total operating  expenses                                                           |       | 20,248                                                                          |       | 885,951 |   | 42,491 |   | (13,122 | ) | 935,568 |   |
|                                                                                |       |                                                                            |       |   |   |   |   |   |   |   |   |
| Operating income  (loss)                                                            |       | (20,154                                                                         | )          | 88,402 |   | (1,289 | ) | (1,133 | ) | 65,826 |   |
| Interest  expense, net                                                              |       | (27,772                                                                         | )          | (46,186 | ) | (5,118 | ) | (2,605 | ) | (81,681 | ) |
| Equity in income  (loss) of subsidiaries                                            |       | 9,114                                                                           |       | — |   | — |   | (9,114 | ) | — |   |
| Income (loss)  from continuing operations before income taxes and minority interest |       | (38,812                                                                         | )          | 42,216 |   | (6,407 | ) | (12,852 | ) | (15,855 | ) |
| Income tax  (provision) benefit                                                     |       | 17,483                                                                          |       | (19,093 | ) | (296 | ) | — |   | (1,906 | ) |
| Minority  interest                                                                  |       | —                                                                          |       | — |   | — |   | (3,568 | ) | (3,568 | ) |
| Income (loss)  from continuing operations                                           |       | (21,329                                                                         | )          | 23,123 |   | (6,703 | ) | (16,420 | ) | (21,329 | ) |
| Income from  discontinued operations, net of taxes                                  |       | —                                                                          |       | 16,692 |   | — |   | — |   | 16,692 |   |
| Equity in  earnings of discontinued operations                                      |       | 16,692                                                                          |       | — |   | — |   | (16,692 | ) | — |   |
| Income from  discontinued operations, net of taxes                                  |       | 16,692                                                                          |       | 16,692 |   | — |   | (16,692 | ) | 16,692 |   |
| Net income  (loss)                                                                  |       | $                                                                               | (4,637     | ) | $ | 39,815 |   | $ | (6,703 | ) | $ | (33,112 | ) | $ | (4,637 | ) |

 

67

----

 
| ** **                                                                          | ** ** | **For the Fiscal Year Ended April 30, 2006** | ** ** |
|-------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------|------------|
| ** **                                                                          | ** ** | **Isle of Capri**                                                     | ** ** | ** ** | ** ** | ** ** | ** ** | **Consolidating** | ** ** | ** ** | ** ** |
| ** **                                                                          | ** ** | **Casinos, Inc.**                                                          | ** ** | ** ** | ** ** | **Non-** | ** ** | **and** | ** ** | **Isle of Capri** | ** ** |
| ** **                                                                          | ** ** | **(Parent**                                                                     | ** ** | **Guarantor** | ** ** | **Guarantor** | ** ** | **Eliminating** | ** ** | **Casinos, Inc.** | ** ** |
| **Statement of Operations**                                                         | ** ** | **Obligor)**                                                                    | ** ** | **Subsidiaries** | ** ** | **Subsidiaries** | ** ** | **Entries** | ** ** | **Consolidated** | ** ** |
| Revenues:                                                                           |       |                                                                            |       |   |   |   |   |   |   |   |   |
| Casino                                                                              |       | $                                                                               | —     |   | $ | 973,648 |   | $ | 30,495 |   | $ | — |   | $ | 1,004,143 |   |
| Rooms, food,  beverage and other                                                    |       | 146                                                                             |       | 177,717 |   | 17,428 |   | (11,901 | ) | 183,390 |   |
| Gross revenues                                                                      |       | 146                                                                             |       | 1,151,365 |   | 47,923 |   | (11,901 | ) | 1,187,533 |   |
| Less promotional  allowances                                                        |       | —                                                                          |       | (198,768 | ) | (1,406 | ) | — |   | (200,174 | ) |
| Net revenues                                                                        |       | 146                                                                             |       | 952,597 |   | 46,517 |   | (11,901 | ) | 987,359 |   |
|                                                                                |       |                                                                            |       |   |   |   |   |   |   |   |   |
| Operating  expenses:                                                                |       |                                                                            |       |   |   |   |   |   |   |   |   |
| Casino                                                                              |       | —                                                                          |       | 144,201 |   | 7,659 |   | — |   | 151,860 |   |
| Gaming taxes                                                                        |       | —                                                                          |       | 214,642 |   | 4,723 |   | — |   | 219,365 |   |
| Rooms, food,  beverage and other                                                    |       | 41,582                                                                          |       | 330,005 |   | 63,338 |   | (4,081 | ) | 430,844 |   |
| Management fee  expense (revenue)                                                   |       | (34,172                                                                         | )          | 41,617 |   | (7,445 | ) | — |   | — |   |
| Depreciation and  amortization                                                      |       | 1,540                                                                           |       | 83,405 |   | 6,429 |   | (2,556 | ) | 88,818 |   |
| Total operating  expenses                                                           |       | 8,950                                                                           |       | 813,870 |   | 74,704 |   | (6,637 | ) | 890,887 |   |
|                                                                                |       |                                                                            |       |   |   |   |   |   |   |   |   |
| Operating income  (loss)                                                            |       | (8,804                                                                          | )          | 138,727 |   | (28,187 | ) | (5,264 | ) | 96,472 |   |
| Interest  expense, net                                                              |       | (14,508                                                                         | )          | (44,053 | ) | (2,405 | ) | (12,675 | ) | (73,641 | ) |
| Loss on early  extinguishment of debt                                               |       | —                                                                          |       | (2,110 | ) | — |   | — |   | (2,110 | ) |
| Equity in income  (loss) of subsidiaries                                            |       | 24,633                                                                          |       | — |   | — |   | (24,633 | ) | — |   |
| Income (loss)  from continuing operations before income taxes and minority interest |       | 1,321                                                                           |       | 92,564 |   | (30,592 | ) | (42,572 | ) | 20,721 |   |
| Income tax  (provision) benefit                                                     |       | 7,310                                                                           |       | (16,822 | ) | 3,884 |   | — |   | (5,628 | ) |
| Minority  interest                                                                  |       | —                                                                          |       | — |   | — |   | (6,462 | ) | (6,462 | ) |
| Income (loss)  from continuing operations                                           |       | 8,631                                                                           |       | 75,742 |   | (26,708 | ) | (49,034 | ) | 8,631 |   |
| Income from  discontinued operations, net of taxes                                  |       | —                                                                          |       | 10,460 |   | (216 | ) | — |   | 10,244 |   |
| Equity in  earnings of discontinued operations                                      |       | 10,244                                                                          |       | — |   | — |   | (10,244 | ) | — |   |
| Income from  discontinued operations, net of taxes                                  |       | 10,244                                                                          |       | 10,460 |   | (216 | ) | (10,244 | ) | 10,244 |   |
| Net income  (loss)                                                                  |       | $                                                                               | 18,875     |   | $ | 86,202 |   | $ | (26,924 | ) | $ | (59,278 | ) | $ | 18,875 |   |

 

68

----

 

Consolidatingcondensed statements of cash flows for the fiscal years ended April 27,2008, April 29, 2007 and April 30, 2006 are as follows:

 
| ** **                                                              | ** ** | **For the Fiscal Year Ended April 27, 2008** | ** ** |
|-------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------|------------|
| ** **                                                              | ** ** | **Isle of Capri**                                                     | ** ** | ** ** | ** ** | ** ** | ** ** | **Consolidating** | ** ** | ** ** | ** ** |
| ** **                                                              | ** ** | **Casinos, Inc.**                                                          | ** ** | ** ** | ** ** | **Non-** | ** ** | **and** | ** ** | **Isle of Capri** | ** ** |
| ** **                                                              | ** ** | **(Parent**                                                                     | ** ** | **Guarantor** | ** ** | **Guarantor** | ** ** | **Eliminating** | ** ** | **Casinos, Inc.** | ** ** |
| **Statement of Cash Flows**                              | ** ** | **Obligor)**                                                                    | ** ** | **Subsidiaries** | ** ** | **Subsidiaries** | ** ** | **Entries** | ** ** | **Consolidated** | ** ** |
| Net cash  provided by (used in) operating activities                    |       | $                                                                               | (59,756    | ) | $ | 204,239 |   | $ | (11,126 | ) | $ | — |   | $ | 133,357 |   |
| Net cash  provided by (used in) investing activities                    |       | (301,245                                                                        | )          | (271,981 | ) | (20,507 | ) | 291,287 |   | (302,446 | ) |
| Net cash  provided by (used in) financing activities                    |       | 283,469                                                                         |       | 49,816 |   | 30,516 |   | (291,287 | ) | 72,514 |   |
| Effect of  foreign currency exchange rates on cash and cash equivalents |       | —                                                                          |       | — |   | 251 |   | — |   | 251 |   |
| Net increase  (decrease) in cash and cash equivalents                   |       | (77,532                                                                         | )          | (17,926 | ) | (866 | ) | — |   | (96,324 | ) |
| Cash and cash  equivalents at beginning of the period                   |       | 82,895                                                                          |       | 85,466 |   | 19,753 |   | — |   | 188,114 |   |
| Cash and cash  equivalents at end of the period                         |       | $                                                                               | 5,363      |   | $ | 67,540 |   | $ | 18,887 |   | $ | — |   | $ | 91,790 |   |

 
| ** **                                                              | ** ** | **For the Fiscal Year Ended April 29, 2007** | ** ** |
|-------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------|------------|
| ** **                                                              | ** ** | **Isle of Capri**                                                     | ** ** | ** ** | ** ** | ** ** | ** ** | **Consolidating** | ** ** | ** ** | ** ** |
| ** **                                                              | ** ** | **Casinos, Inc.**                                                          | ** ** | ** ** | ** ** | **Non-** | ** ** | **and** | ** ** | **Isle of Capri** | ** ** |
| ** **                                                              | ** ** | **(Parent**                                                                     | ** ** | **Guarantor** | ** ** | **Guarantor** | ** ** | **Eliminating** | ** ** | **Casinos, Inc.** | ** ** |
| **Statement of Cash Flows**                              | ** ** | **Obligor)**                                                                    | ** ** | **Subsidiaries** | ** ** | **Subsidiaries** | ** ** | **Entries** | ** ** | **Consolidated** | ** ** |
| Net cash  provided by (used in) operating activities                    |       | $                                                                               | (382       | ) | $ | 79,308 |   | $ | (8,031 | ) | $ | — |   | $ | 70,895 |   |
| Net cash  provided by (used in) investing activities                    |       | 16,105                                                                          |       | (149,463 | ) | (118,495 | ) | 54,582 |   | (197,271 | ) |
| Net cash  provided by (used in) financing activities                    |       | 37,980                                                                          |       | 72,887 |   | 137,253 |   | (54,582 | ) | 193,538 |   |
| Effect of  foreign currency exchange rates on cash and cash equivalents |       | —                                                                          |       | — |   | (97 | ) | — |   | (97 | ) |
| Net increase  (decrease) in cash and cash equivalents                   |       | 53,703                                                                          |       | 2,732 |   | 10,630 |   | — |   | 67,065 |   |
| Cash and cash  equivalents at beginning of the period                   |       | 29,192                                                                          |       | 82,734 |   | 9,123 |   | — |   | 121,049 |   |
| Cash and cash  equivalents at end of the period                         |       | $                                                                               | 82,895     |   | $ | 85,466 |   | $ | 19,753 |   | $ | — |   | $ | 188,114 |   |

 

69

----

 
| ** **                                                              | ** ** | **For the Fiscal Year Ended April 30, 2006** | ** ** |
|-------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------|------------|
| ** **                                                              | ** ** | **Isle of Capri**                                                     | ** ** | ** ** | ** ** | ** ** | ** ** | **Consolidating** | ** ** | ** ** | ** ** |
| ** **                                                              | ** ** | **Casinos, Inc.**                                                          | ** ** | ** ** | ** ** | **Non-** | ** ** | **and** | ** ** | **Isle of Capri** | ** ** |
| ** **                                                              | ** ** | **(Parent**                                                                     | ** ** | **Guarantor** | ** ** | **Guarantor** | ** ** | **Eliminating** | ** ** | **Casinos, Inc.** | ** ** |
| **Statement of Cash Flows**                              | ** ** | **Obligor)**                                                                    | ** ** | **Subsidiaries** | ** ** | **Subsidiaries** | ** ** | **Entries** | ** ** | **Consolidated** | ** ** |
| Net cash provided  by (used in) operating activities                    |       | $                                                                               | (84,861    | ) | $ | 217,927 |   | $ | (46,391 | ) | $ | — |   | $ | 86,675 |   |
| Net cash  provided by (used in) investing activities                    |       | (89,463                                                                         | )          | (159,967 | ) | (9,662 | ) | 82,656 |   | (176,436 | ) |
| Net cash  provided by (used in) financing activities                    |       | 149,932                                                                         |       | (47,543 | ) | 45,175 |   | (82,656 | ) | 64,908 |   |
| Effect of  foreign currency exchange rates on cash and cash equivalents |       | —                                                                          |       | — |   | (575 | ) | — |   | (575 | ) |
| Net increase  (decrease) in cash and cash equivalents                   |       | (24,392                                                                         | )          | 10,417 |   | (11,453 | ) | — |   | (25,428 | ) |
| Cash and cash  equivalents at beginning of the period                   |       | 53,584                                                                          |       | 72,317 |   | 20,576 |   | — |   | 146,477 |   |
| Cash and cash  equivalents at end of the period                         |       | $                                                                               | 29,192     |   | $ | 82,734 |   | $ | 9,123 |   | $ | — |   | $ | 121,049 |   |

 

70

----

 

**19. Selected Quarterly FinancialInformation (unaudited)**

** **
| ** **                                 | ** ** | **Fiscal Quarters Ended** | ** ** |
|--------------------------------------------|------------|-------------------------------------|------------|
| ** **                                 | ** ** | **July 29,**                   | ** ** | **October 28,** | ** ** | **January 27,** | ** ** | **April 27,** | ** ** |
| ** **                                 | ** ** | **2007**                            | ** ** | **2007** | ** ** | **2008** | ** ** | **2008** | ** ** |
| ** **                                 | ** ** | ** **                          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net revenues                               |       | $                                   | 278,533    |   | $ | 278,838 |   | $ | 269,665 |   | $ | 298,316 |   |
| Operating income                           |       | 18,046                              |       | 2,304 |   | 6,279 |   | (62,709 | ) |
| Net loss                                   |       | (7,115                              | )          | (24,635 | ) | (13,849 | ) | (51,275 | ) |
|                                       |       |                                |       |   |   |   |   |   |   |
| Loss per common  share basic and diluted   |       | $                                   | (0.23      | ) | $ | (0.80 | ) | $ | (0.45 | ) | $ | (1.66 | ) |
|                                       |       |                                |       |   |   |   |   |   |   |
| Weighted average  basic and diluted shares |       | 30,417,036                          |       | 30,726,768 |   | 30,836,139 |   | 30,845,436 |   |

 
| ** **                                                       | ** ** | **Fiscal Quarters Ended** | ** ** |
|------------------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                                       | ** ** | **July 30,**                   | ** ** | **October 29,** | ** ** | **January 28,** | ** ** | **April 29,** | ** ** |
| ** **                                                       | ** ** | **2006**                            | ** ** | **2006** | ** ** | **2007** | ** ** | **2007** | ** ** |
| ** **                                                       | ** ** | ** **                          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net revenues                                                     |       | $                                   | 273,968    |   | $ | 243,224 |   | $ | 230,839 |   | $ | 253,363 |   |
| Operating income                                                 |       | 31,340                              |       | 13,959 |   | 9,707 |   | 10,820 |   |
| Income (loss)  from continuing operations                        |       | 5,328                               |       | (4,187 | ) | (9,346 | ) | (13,124 | ) |
| Income (loss)  from discontinued operations, net of income taxes |       | 3,956                               |       | 13,817 |   | 416 |   | (1,497 | ) |
| Net income  (loss)                                               |       | 9,284                               |       | 9,630 |   | (8,930 | ) | (14,621 | ) |
| Earnings (loss)  per common share basic:                         |       |                                |       |   |   |   |   |   |   |
| Income (loss)  from continuing operations                        |       | $                                   | 0.18       |   | $ | (0.14 | ) | $ | (0.31 | ) | $ | (0.43 | ) |
| Income (loss)  from discontinued operations, net of income taxes |       | 0.13                                |       | 0.46 |   | 0.02 |   | (0.05 | ) |
| Net income  (loss)                                               |       | $                                   | 0.31       |   | $ | 0.32 |   | $ | (0.29 | ) | $ | (0.48 | ) |
| Earnings (loss)  per common share diluted:                       |       |                                |       |   |   |   |   |   |   |
| Income (loss)  from continuing operations                        |       | $                                   | 0.17       |   | $ | (0.14 | ) | $ | (0.31 | ) | $ | (0.43 | ) |
| Income (loss)  from discontinued operations, net of income taxes |       | 0.13                                |       | 0.46 |   | 0.02 |   | (0.05 | ) |
| Net income  (loss)                                               |       | $                                   | 0.30       |   | $ | 0.32 |   | $ | (0.29 | ) | $ | (0.48 | ) |
|                                                             |       |                                |       |   |   |   |   |   |   |
| Weighted average  basic shares                                   |       | 30,422,077                          |       | 30,346,015 |   | 30,371,020 |   | 30,400,245 |   |
| Weighted average  diluted shares                                 |       | 31,403,879                          |       | 30,346,015 |   | 30,371,020 |   | 30,400,245 |   |
|                                                                  |            |                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

We opened new casino operations in Pompano, Waterloo, and Coventry inApril 2007, June 2007, and July 2007, respectively.  We acquired our casino operations inCaruthersville in June 2007.

 

A summary of certain revenues and expensesimpacting our quarterly financial results is as follows:

 
| ** **                            | ** ** | **Fiscal Quarters Ended** | ** ** |
|---------------------------------------|------------|-------------------------------------|------------|
| ** **                            | ** ** | **July 29,**                   | ** ** | **October 28,** | ** ** | **January 27,** | ** ** | **April 27,** | ** ** |
| ** **                            | ** ** | **2007**                            | ** ** | **2007** | ** ** | **2008** | ** ** | **2008** | ** ** |
| (Expense) Revenue                |       |                                |       |   |   |   |   |   |   |
| Write-offs and  Valuation Charges     |       | —                              |       | (6,526 | ) | — |   | (78,658 | ) |
| Preopening                            |       | (6,133                              | )          | (324 | ) | — |   | — |   |
| Insurance  recoveries                 |       | 348                                 |       | — |   | — |   | 1,757 |   |
| Development  costs                    |       | (1,523                              | )          | (799 | ) | (1,546 | ) | (1,672 | ) |
| Loss on early  extinguishment of debt |       | (2,192                              | )          | (11,468 | ) | — |   | (1,614 | ) |

 
| ** **                                   | ** ** | **Fiscal Quarters Ended** | ** ** |
|----------------------------------------------|------------|-------------------------------------|------------|
| ** **                                   | ** ** | **July 30,**                   | ** ** | **October 29,** | ** ** | **January 28,** | ** ** | **April 29,** | ** ** |
| ** **                                   | ** ** | **2006**                            | ** ** | **2006** | ** ** | **2007** | ** ** | **2007** | ** ** |
| (Expense) Revenue                       |       |                                |       |   |   |   |   |   |   |
| Write-offs and  Valuation Charges            |       | —                              |       | (665 | ) | — |   | (7,801 | ) |
| Preopening                                   |       | (249                                | )          | (389 | ) | (2,499 | ) | (10,436 | ) |
| Insurance  recoveries                        |       | —                              |       | — |   | 2,817 |   | — |   |
| Our Lucaya lease  termination and settlement |       | (2,250                              | )          | — |   | — |   | 11,776 |   |
| Development  costs                           |       | (4,727                              | )          | (4,534 | ) | (5,393 | ) | (1,608 | ) |
| Corporate office  relocation                 |       | (2,608                              | )          | (988 | ) | (1,122 | ) | (670 | ) |

 

71

----

 

*Write-offs and Valuation Charges –*Duringfiscal year 2008, we recorded $78,658 inimpairment charges related to our UK operations and $6,526 of charges primarilyrelated to costs previously capitalized in connection with a proposed projectin west Harrison County, Mississippi and the write-off of construction projectsin Davenport, Iowa and Kansas City, Missouri, and.  In fiscal year 2007 we recorded $665 inimpairment charges related to our Blue Chip operations and $7,801 in goodwillimpairment related to our operations in Lula, Mississippi.

 

*Preopening expense –*Wereincurred prior to the opening of our casinos in Pompano, Waterloo and Coventry.

 

*Insurance recoveries –*Reflectprimarily receipts relating to business interruption claims.

 

*Loss on extinguishment of debt –*Duringfiscal year 2008, we extinguished our 9% Subordinated Notes and Black HawkCredit Facility, and we refinanced our February 2005Credit Facility.

 

*Our Lucaya lease termination and settlement –*Duringthe first quarter of fiscal year 2007 we terminated our lease in Our Lucayaresulting in an expense of $2,250. During the fourth quarter of fiscal 2007 wereached a settlement reinstating our lease and other items, and retroactivelyreducing our gaming taxes resulting in income of $9,526.

 

*Development Expenses –*Expensesinclude costs for the pursuit of opportunities for new gaming facilities toexpand our business.  The level of suchexpenses is subject to change based upon the level of development activities.

 

*Corporate Office Relocation –*Duringfiscal year 2007 we relocated our corporate office from Biloxi, Mississippi toSt. Louis, Missouri.

 

**20. Commitments and Contingencies**

 

Blue Chip Casinos, Ltd. - In November 2003, pursuant to a subscriptionand shareholders agreement, the Isle of Capri Casinos, Ltd. (the “Isle-Ltd.”),a wholly owned subsidiary of the Company, acquired a two-thirds interest inBlue Chip. Under the agreement, the Isle-Ltd. has the option to require theminority shareholders to sell their respective shares to the Isle-Ltd at fairvalue or at a price to be agreed upon. This option is available for a period of two years from the later offive years after the acquisition date or for three years after the introductionof new gaming laws.  If the Isle-Ltd.does not exercise its option, the minority shareholders have the right, duringthe 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 agreedupon.  Due to the current uncertainty inUnited Kingdom gaming legislation and the long-term nature of this option, theimpact of this obligation is not reasonably estimable at this time.

 

*Operating Leases* - Future minimumpayments over the lease term of non-cancelable operating leases with initialterms of one year or more consisted of the following at April 27, 2008:

 
| **Fiscal Years Ending:** | ** ** | ** ** | ** ** |
|------------------------------------|------------|------------|------------|
| 2009                               |       | $          | 21,670     |   |
| 2010                               |       | 16,912     |       |
| 2011                               |       | 15,728     |       |
| 2012                               |       | 15,486     |       |
| 2013                               |       | 15,537     |       |
| Thereafter                         |       | 587,742    |       |
| Total minimum  lease payments      |       | $          | 673,075    |   |

 

Rent expense was approximately $37,794, $41,060 and $36,051 in fiscalyears 2008, 2007 and 2006, respectively. Such amounts include contingent rentals of $9,182, $10,208 and $9,559 infiscal years 2008, 2007 and 2006, respectively.

 

*Our Lucaya* - During fiscal 2007,as part of our agreement with the Bahamian government, we obtained a retroactivereduction in our gaming tax rate to be applied to the casinos historical andfuture gaming revenues.  This resulted inour reversing expense, in fiscal year 2007, of approximately $6,856 inpreviously accrued estimated gaming taxes. We also agreed with the Bahamian government on a receivable related to amarketing subsidy for the casino.  Underthis agreement, we reversed a $1,500 reserve allowance we had previouslyrecorded against this marketing subsidy receivable.

 

*Legal and Regulatory Proceedings*- Lady Luck Gaming Corporation (now our wholly owned subsidiary) and severaljoint venture partners have been defendants in the Greek Civil Court and theGreek Administrative Court in similar lawsuits brought by the country of Greecethrough its Minister of Tourism (now Development) and Finance.  The actions allege that the defendants failedto make specified payments in connection with the gaming license bid processfor Patras, Greece.  Although it isdifficult to determine the damages being sought from the lawsuits, the actionmay seek damages up to that aggregate amount plus interest from the date of theaction.  Through April 27, 2008, we haveaccrued an estimated liability including interest of $8,910.  The Athens Civil Court of First Instancegranted judgment in our favor and dismissed the civil lawsuit.  Appeals to both the Athens Civil AppealsCourt and the Greek Civil Supreme Court have been dismissed.  The Greek Civil Supreme Court denied theappeal on the basis that the Administrative Court is the competent court tohear the matter.  During October 2005,after the administrative lawsuit had been dismissed by both the AthensAdministrative Court of First Instance and the Athens Administrative Court ofAppeals on the basis that the Administrative Court did not have a jurisdiction,the Administrative Supreme Court remanded the matter back to the AthensAdministrative Appeals Court for a hearing on the merits, which court in May2008 rendered judgment in our favor on procedural grounds and not on the merits.  We expect the Greek government to appeal thisdecision to the Administrative Supreme Court. Therefore, the outcome of this matter is still in doubt and cannot bepredicted with any degree of certainty. We intend to continue a vigorous and appropriate defense to the claimsasserted in this matter.

 

 

72

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We are subject to certain federal, state and local environmentalprotection, health and safety laws, regulations and ordinances that apply tobusinesses generally, and are subject to cleanup requirements at certain of ourfacilities as a result thereof.  We havenot made, and do not anticipate making, material expenditures, nor do weanticipate incurring delays with respect to environmental remediation orprotection.  However, in part because ourpresent and future development sites have, in some cases, been used asmanufacturing facilities or other facilities that generate materials that arerequired to be remediated under environmental laws and regulations, there canbe no guarantee that additional pre-existing conditions will not be discoveredand we will not experience material liabilities or delays.

 

We are subject to various contingencies and litigation matters and havea number of unresolved claims.  Althoughthe ultimate liability of these contingencies, this litigation and these claimscannot be determined at this time, we believe they will not have a materialadverse effect on our consolidated financial position, results of operations orcash flows.

 

*Subsequent Event –*Subsequent tofiscal year end 2008, we reached an agreement terminating our agreement for thepotential development of a casino project in Portland Oregon.  As a part of this agreement, we agreed toterminate our rights under a land option and to pay a termination fee. As aresult of this termination, we plan to record a $6,000 charge in our firstquarter of fiscal 2009 consisting of a write-off of $5,000 representing ourrights under the land option and $1,000 termination fee.  Under the terms of the agreement we retaincertain rights but no continuing obligations with regard to this developmentproject.

 

73

----

 

**ISLE OFCAPRI CASINOS, INC.**

** **

**SCHEDULE II – VALUATION AND QUALIFYINGACCOUNTS**

**(Inthousands)**

** **

**Accounts Receivable Reserve**

 
| **Period**                 | ** ** | **Balance at  Beginning of  Year** | ** ** | **Charged to  Costs and  Expenses** | ** ** | **Deductions from  Reserves** | ** ** | **Balance at End  of Year** | ** ** |
|----------------------------|------------|----------------------------------------------|------------|-----------------------------------------------|------------|------------------------------------|------------|--------------------------------------------|------------|
|                       |       |                                         |       |                                          |       |                               |       |                                       |       |
| Year Ended April  27, 2008 |       | $                                            | 4,335      |                                          | $          | 3,407                              |       | $                                          | 3,484      |   | $ | 4,258 |   |
|                       |       |                                         |       |                                          |       |                               |       |                                       |       |
| Year Ended April  29, 2007 |       | 1,909                                        |       | 2,716                                         |       | 290                                |       | 4,335                                      |       |
|                       |       |                                         |       |                                          |       |                               |       |                                       |       |
| Year Ended April  30, 2006 |       | 2,483                                        |       | 1,563                                         |       | 2,137                              |       | 1,909                                      |       |
|                            |            |                                              |            |                                               |            |                                    |            |                                            |            |  |  |  |  |

 

**OtherReceivables Reserve**

 
| **Period**                 | ** ** | **Balance at  Beginning of  Year** | ** ** | **Charged to  Costs and  Expenses** | ** ** | **Deductions from  Reserves** | ** ** | **Balance at End  of Year** | ** ** |
|----------------------------|------------|------------------------------------|------------|-------------------------------------|------------|-------------------------------|------------|-----------------------------|------------|
|                       |       |                               |       |                                |       |                          |       |                        |       |
| Year Ended April  27, 2008 |       | $                                  | 3,194      |                                | $          | —                        |       | $                           | —     |   | $ | 3,194 |   |
|                       |       |                               |       |                                |       |                          |       |                        |       |
| Year Ended April  29, 2007 |       | 2,345                              |       | 1,000                               |       | 151                           |       | 3,194                       |       |
|                       |       |                               |       |                                |       |                          |       |                        |       |
| Year Ended April  30, 2006 |       | 2,345                              |       | —                              |       | —                        | ** ** | 2,345                       |       |
|                            |            |                                    |            |                                     |            |                               |            |                             |            |  |  |  |  |

 

74

----

 

**ITEM 9.**     **CHANGESIN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**

 

None.

 

**ITEM 9A.**                     **CONTROLS AND PROCEDURES**

** **

**EVALUATION OF DISCLOSURE CONTROLSAND PROCEDURES**

** **

*Evaluation ofDisclosure Controls and Procedures -*Based on theirevaluation as of April 27, 2008, our Chief Executive Officer and ChiefFinancial Officer have concluded that our disclosure controls and procedures(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) weresufficiently effective to ensure that the information required to be disclosedby us in this Report was recorded, processed, summarized and reported withinthe time periods specified in the SEC’s rules and instructions for Form 10-K.

 

*Management’s Report on InternalControl over Financial Reporting -*Our management is responsible for establishing and maintaining adequateinternal control over financial reporting (as defined in Rule 13a-15(f) underthe Exchange Act). Our management, including our Chief Executive Officer andChief Financial Officer, assessed the effectiveness of our internal controlover financial reporting as of April 27, 2008. In making this assessment,our management used the criteria set forth by the Committee of Sponsoring Organizationsof the Treadway Commission in Internal Control-Integrated Framework. Ourmanagement has concluded that, as of April 27, 2008, our internal controlover financial reporting is effective based on these criteria. Ernst &Young LLP, an independent registered public accounting firm, who audited andreported on the consolidated financial statements included in this AnnualReport on Form 10-K, has issued an attestation report on the effectiveness ofthe Company’s internal control over financial reporting as stated in theirreport which is included in Item 8.

 

*Changes in Internal Controls overFinancial Reporting -*Therehave been no changes in our internal controls over financial reporting duringthe quarter ended April 27, 2008 that have materially affected, or arereasonably likely to materially affect our internal controls over financialreporting, other than the remediation of the material weakness discussed below.

 

*Inherent Limitations onEffectiveness of Controls -*Our management, including our Chief Executive Officer and ChiefFinancial Officer, does not expect that our disclosure controls and proceduresor our internal controls will prevent all errors and all fraud. A controlsystem, no matter how well conceived and operated, can provide only reasonable,not absolute, assurance that the objectives of the control system are met.Further, the design of a control system must reflect the fact that there areresource constraints, and the benefits of controls must be considered relativeto their costs. Because of the inherent limitations in all control systems, noevaluation of controls can provide absolute assurance that all control issuesand instances of fraud, if any, within our company have been detected.

 

*Remediation of Material Weakness-*As disclosed in ourfiscal 2007 third quarter report on Form 10-Q/A as of January 28, 2007, weidentified a material weakness in our internal control over financial reportingrelated to controls over the accounting for leases. A material weakness is asignificant deficiency or combination of significant deficiencies that resultsin more than a remote likelihood that a material misstatement of the annual orinterim consolidated financial statements will not be prevented or detected. Wehave remediated the material weakness for lease accounting during the fourthquarter of fiscal year 2008 by engaging a third party professional servicesfirm to review all of our leases and to verify we are recording leases inaccordance with generally accepted accounting principles, based on lease terms.In addition, we have implemented a revised Summary of Procedures for leaseaccounting. These updated procedures state the technical guidance on accountingfor leases and instituted a multi-level review control for new leases at theproperty level and at the corporate office.

 

75

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**ITEM 9B.**                              **OTHER INFORMATION**

** **

None.

 

**PART III**

** **

**ITEM 10.**                                **DIRECTORS, EXECUTIVEOFFICERS AND CORPORATE GOVERNANCE**

** **

This item has been omittedfrom this report and is incorporated by reference to Isle of Capri’s definitiveproxy statement to be filed with the U.S. Securities and Exchange Commissionwithin 120 days after the end of the fiscal year covered by this report.

 

**ITEM 11.**                                **EXECUTIVE COMPENSATION**

** **

This item has been omittedfrom this report and is incorporated by reference to Isle of Capri’s definitiveproxy statement to be filed with the U.S. Securities and Exchange Commissionwithin 120 days after the end of the fiscal year covered by this report.

 

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

** **

This item has been omittedfrom this report and is incorporated by reference to Isle of Capri’s definitiveproxy statement to be filed with the U.S. Securities and Exchange Commissionwithin 120 days after the end of the fiscal year covered by this report.

 

**ITEM 13.**                                **CERTAIN RELATIONSHIPS ANDRELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE**

** **

This item has been omittedfrom this report and is incorporated by reference to Isle of Capri’s definitiveproxy statement to be filed with the U.S. Securities and Exchange Commissionwithin 120 days after the end of the fiscal year covered by this report.

 

**ITEM 14.**                                **PRINCIPAL ACCOUNTANT FEESAND SERVICES**

** **

This item has been omittedfrom this report and is incorporated by reference to Isle of Capri’s definitiveproxy statement to be filed with the U.S. Securities and Exchange Commissionwithin 120 days after the end of the fiscal year covered by this report.

 

**PART IV**

** **

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

** **

Thefollowing documents are filed as part of this Form 10-K.

 

(a)    Consolidated financial statements filed as part of this report arelisted under Part II, Item 8.

 

(b)    The exhibits listed on the “Index to Exhibits” are filed with thisreport or incorporated by reference as set forth below.

 

All other schedules areomitted because they are not applicable or not required, or because therequired information is included in the consolidated financial statement ornotes thereto.

 

76

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** **

**SIGNATURES**

 

Pursuant to the requirements of Section 13 or15(d) of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 
|                      | **ISLE OF CAPRI CASINOS, INC.** |
|---------------------------|---------------------------------|
|                      |                            |
| Dated: July 10, 2008 | By:                             | /s/    James  B. Perry |
|                      |                            | **         James  B. Perry,** |
|                      |                            | **Chief Executive Officer, Executive Vice Chairman and  Director** |

 

77

----

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, this report has been signed below by the followingpersons on behalf of the registrant and in the capacities and on the datesindicated.

 
| Dated: July 10, 2008 | /s/  James B.  Perry                                                                                                     |
|---------------------------|------------------------------------------------------------------------------------------------------------------------------------|
|                      | **James B.  Perry,  Chief Executive Officer, Executive Vice Chairman of the Board and Director****(Principal  Executive Officer)** |
|                      |                                                                                                                               |
| Dated: July 10, 2008 | /s/    Dale  R. Black                                                                                          |
|                      | **Dale R.  Black,****Senior Vice  President and****Chief Financial  Officer****(Principal  Financial and Accounting Officer)**     |
|                      |                                                                                                                               |
| Dated: July 10, 2008 | *    BERNARD GOLDSTEIN                                                                                         |
|                      | **Bernard  Goldstein,  Chairman of the Board and Director**                                                                        |
|                      |                                                                                                                               |
| Dated: July 10, 2008 | *    ROBERT S. GOLDSTEIN                                                                                       |
|                      | **Robert S.  Goldstein,****Vice Chairman of  the Board and Director**                                                              |
|                      |                                                                                                                               |
| Dated: July 10, 2008 | *    ALAN J. GLAZER                                                                                            |
|                      | **Alan J.  Glazer, Director**                                                                                                      |
|                      |                                                                                                                               |
| Dated: July 10, 2008 | *    LEE WIELANSKY                                                                                             |
|                      | **Lee  Wielansky, Director**                                                                                                       |
|                      |                                                                                                                               |
| Dated: July 10, 2008 | *    W. Randolph Baker                                                                                         |
|                      | **W.  Randolph Baker, Director**                                                                                                   |
|                      |                                                                                                                               |
| Dated: July 10, 2008 | *    JEFFREY D. GOLDSTEIN                                                                                      |
|                      | **Jeffrey D.  Goldstein, Director**                                                                                                |
|                      |                                                                                                                               |
| Dated: July 10, 2008 | *    JOHN BRACKENBURY                                                                                          |
|                      | **John  Brackenbury, Director**                                                                                                    |
|                      |                                                                                                                               |
| Dated: July 10, 2008 | *    SHAUN R. HAYES                                                                                            |
|                      | **Shaun R.  Hayes, Director**                                                                                                      |

 

*Dale R. Black, by signing his name hereto, does sign this document on behalf ofthe above-named individuals, pursuant to the powers of attorney duly executedby such individuals, which have been filed as an exhibit to this RegistrationStatement.

 
| Dated: July 10, 2008 | /s/   Dale  R. Black |
|---------------------------|-------------------------------------|
| ** **                | **Dale R.  Black,**                 |
| ** **                | **Attorney-in-Fact**                |

 

78

----

 

**INDEX TOEXHIBITS**

 
| **EXHIBIT  NUMBER** | ** ** | **DESCRIPTION**                                                                                                                                                                                                                                                                                         |
|---------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1A                |       | Certificate of  Incorporation of Casino America, Inc. (Incorporated by reference to the  Registration Statement on Form S-1 filed September 3, 1993)                                                                                                                                     |
|                |       |                                                                                                                                                                                                                                                                                                    |
| 3.1B                |       | Amendment to  Certificate of Incorporation of Casino America, Inc. (Incorporated by  reference to the Proxy Statement for the fiscal year ended April 26,  1998)                                                                                                                              |
|                |       |                                                                                                                                                                                                                                                                                                    |
| 3.2A                |       | By-laws of Casino  America, Inc. (Incorporated by reference to the Registration Statement  on Form S-1 filed September 3, 1993)                                                                                                                                                          |
|                |       |                                                                                                                                                                                                                                                                                                    |
| 3.2B                |       | Amendment to By-laws of  Casino America, Inc., dated February 7, 1997 (Incorporated by  reference to Exhibit 3.2A to the Annual Report on Form 10-K filed  on July 28, 1997)                                                                                                   |
|                |       |                                                                                                                                                                                                                                                                                                    |
| 4.1                 |       | 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  (Incorporated by reference to Exhibit 4.3 to the Registration Statement  on Form S-4 filed on May 12, 2004) |
|                |       |                                                                                                                                                                                                                                                                                                    |
| 10.1†          |       | Casino  America, Inc. description of Employee Bonus Plan (Incorporated by reference  to the Annual Report on Form 10-K for the fiscal year ended  April 30, 1993)                                                                                                                   |
|                |       |                                                                                                                                                                                                                                                                                                    |
| 10.2†          |       | Director’s Option Plan  (Incorporated by reference to the Registration Statement on Form S-8  filed June 30, 1994)                                                                                                                                                                       |
|                |       |                                                                                                                                                                                                                                                                                                    |
| 10.3†          |       | Amended Casino America, Inc.  1993 Stock Option Plan (Incorporated by reference to the Proxy Statement  filed on August 25, 1997)                                                                                                                                                             |
|                |       |                                                                                                                                                                                                                                                                                                    |
| 10.4†          |       | Isle of Capri  Casinos, Inc. 2000 Long-Term Stock Incentive Plan (Incorporated by  reference to the Proxy Statement filed on August 15, 2000)                                                                                                                                                 |
|                |       |                                                                                                                                                                                                                                                                                                    |
| 10.5†          |       | Amended and Restated  Isle of Capri Casinos, Inc. 2000 Long-Term Stock Incentive Plan  (Incorporated by reference to the Proxy Statement filed on August 27,  2007)                                                                                                                           |
|                |       |                                                                                                                                                                                                                                                                                                    |
| 10.6†          |       | Isle of Capri  Casinos, Inc. Deferred Bonus Plan (Incorporated by reference to the  Proxy Statement filed on August 15, 2000)                                                                                                                                                                 |
|                |       |                                                                                                                                                                                                                                                                                                    |
| 10.7†          |       | Isle of Capri  Casinos, Inc.’s 1995 Deferred Compensation Plan (Incorporated by  reference to Exhibit 10.31 to the Quarterly Report on Form 10-Q  filed on March 1, 2005)                                                                                                      |
|                |       |                                                                                                                                                                                                                                                                                                    |
| 10.8†          |       | Isle of Capri  Casinos, Inc.’s 2005 Deferred Compensation Plan (Incorporated by  reference to Exhibit 10.32 to the Quarterly Report on Form 10-Q  filed on March 1, 2005)                                                                                                      |
|                |       |                                                                                                                                                                                                                                                                                                    |
| 10.9†          |       | Isle of Capri  Casinos, Inc.’s 2005 Non-employee Director Deferred Compensation Plan (Incorporated  by reference to Exhibit 10.33 to the Quarterly Report Form 10-Q  filed on March 1, 2005)                                                                                   |
|                |       |                                                                                                                                                                                                                                                                                                    |
| 10.10†         |       | Isle of Capri  Casinos, Inc. Master Retirement Plan (Incorporated by reference to  Exhibit 10.26 to the Annual Report on Form 10-K filed on July 6,  2005)                                                                                                                          |
|                |       |                                                                                                                                                                                                                                                                                                    |
| 10.11†         |       | Employment Agreement,  dated as of January 1, 2002, between Isle of Capri Casinos, Inc.  and Allan B.Solomon (Incorporated by reference to Exhibit 10.23 to  Amendment No. 1 to Registration Statement on Form S-4 filed on June 19,  2002)                          |
|                |       |                                                                                                                                                                                                                                                                                                    |
| 10.12†         |       | Employment Agreement,  dated as of January 1, 2005, between Isle of Capri Casinos, Inc.  and Robert F. Griffin (Incorporated by reference to Exhibit 10.34 to the  Quarterly Report on Form 10-Q filed on March 1, 2005)                                                       |
|                |       |                                                                                                                                                                                                                                                                                                    |
| 10.13†         |       | Employment Agreement,  dated January 13, 2006, between Isle of Capri Casinos, Inc. and  Donn R. Mitchell II (Incorporated by reference to Exhibit 99.2  to the Current Report on Form 8-K filed on January 19, 2006).                                                |
|                |       |                                                                                                                                                                                                                                                                                                    |
| 10.14†         |       | Consulting Agreement,  dated as of March 23, 2006, by and between John G. Brackenbury and  Isle of Capri Casinos, Inc. (Incorporated by reference to  Exhibit 99.1 to the Current Report on From 8-K filed on March 29,  2006)                                                 |

 

79

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| **EXHIBIT  NUMBER** | ** ** | **DESCRIPTION**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|---------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.15†         |       | Employment Agreement,  dated as of July 16, 2007, between Isle of Capri Casinos, Inc. and  Virginia McDowell (Incorporated by reference to Exhibit 10.1 to the  Current Report on Form 8-K filed on July 20, 2007)                                                                                                                                                                                                                                                                                                                                                         |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.16†         |       | Employment Agreement  dated as of December 3, 2007, between Isle of Capri Casinos, Inc.  and Dale R. Black (Incorporated by reference to Exhibit 10.1 to the  Current Report on Form 8-K filed on December 12, 2007)                                                                                                                                                                                                                                                                                                                                                       |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.17†         |       | Employment Agreement,  dated as of March 4, 2008, between Isle of Capri Casinos, Inc. and  James B. Perry (Incorporated by reference to Exhibit 10.1 to the Current  Report on Form 8-K filed on March 10, 2008)                                                                                                                                                                                                                                                                                                                                                           |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.18†*        |       | Employment Agreement,  dated as of July 1, 2008, between Isle of Capri Casinos, Inc. and  Edmund L. Quatmann, Jr.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.19†*        |       | Form Employment  Agreement for Senior Vice Presidents of Isle of Capri Casinos, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.20†*        |       | Form Stock Option  Award Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.21†         |       | Consulting Agreement,  dated as of March 23, 2006, between John G. Brackenbury and Isle of  Capri Casinos, Inc. (Incorporated by reference to Exhibit 99.1 to  the Current Report on From 8-K filed on March 29, 2006)                                                                                                                                                                                                                                                                                                                                                          |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.22               |       | Credit Agreement, dated  as of July 26, 2007 among Isle of Capri Casinos, Inc., the Lenders  listed herein, Credit Suisse, Cayman Island Branch, as administrative agent,  issuing bank and swing line lender, Credit Suisse Securities (USA) LLC, as  lead arranger and bookrunner, Deutsche Bank Securities Inc. and CIBC World  Markets Corp., as co-syndication agents and U.S. Bank, N.A. and Wachovia  Bank, National Association, as co-documentation agents (Incorporated by  reference to Exhibit 10.1 to the Current Report on Form 8-K filed  on July 31, 2007) |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.23               |       | Security Agreement,  dated as of July 26, 2007, among Isle of Capri Casinos, Inc., its  material subsidiaries party thereto, and Credit Suisse, Cayman Islands  Branch, as Administrative Agent for and representative of the financial  institutions party to the Credit Agreement and any Hedge Providers (as  defined therein) (Incorporated by reference to Exhibit 10.1 to the  Current Report on Form 8-K filed on July 31, 2007)                                                                                                                                    |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.24               |       | Biloxi Waterfront  Project Lease dated May 12, 1986 with Point Cadet Development  Corporation (Biloxi) (Incorporated by reference to an exhibit to the Annual  Report on Form 10-K for the fiscal year ended April 30, 1992)                                                                                                                                                                                                                                                                                                                                                         |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.25               |       | Addendum to Lease  Agreement, dated August 1, 1992, between the City of Biloxi,  Mississippi, Point Cadet Development Corporation (Biloxi) (Incorporated by  reference to an exhibit to the Annual Report on Form 10-K for the fiscal  year ended April 30, 1992)                                                                                                                                                                                                                                                                                                                    |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.26               |       | Second Addendum to  Lease, dated April 9, 1994, by and between the City of Biloxi,  Mississippi, Point Cadet Development Corporation, the Biloxi Port Commission  and Riverboat Corporation of Mississippi (Biloxi) (Incorporated by reference  to an exhibit to the Annual Report on Form 10-K for the fiscal year  ended April 30, 1994)                                                                                                                                                                                                                                           |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.27               |       | Third Addendum to  Casino Lease, dated April 26, 1995, by and between the City of Biloxi,  Mississippi, Point Cadet Development Corporation, the Biloxi Port Commission  and Riverboat Corporation of Mississippi (Biloxi) (Incorporated by reference  to an exhibit to the Annual Report on Form 10-K for the fiscal year  ended April 30, 1995)                                                                                                                                                                                                                                    |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.28               |       | Biloxi Waterfront  Project Lease dated as of April 9, 1994 by and between the City of  Biloxi, Mississippi and Riverboat Corporation of Mississippi (Biloxi)  (Incorporated by reference to an exhibit to the Annual Report on  Form 10-K for the fiscal year ended April 30, 1994)                                                                                                                                                                                                                                                                                                  |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.29               |       | First Amendment to  Biloxi Waterfront Project Lease (Hotel Lease), dated as of April 26,  1995, by and between Riverboat Corporation of Mississippi (Biloxi)  (Incorporated by reference to an exhibit to the Annual Report on Form 10-K  for the fiscal year ended April 30, 1995)                                                                                                                                                                                                                                                                                                  |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.30               |       | Point Cadet Compromise  and Settlement Agreement, dated August 15, 2002, by and between the  Secretary of State of the State of Mississippi, the City of Biloxi,  Mississippi, the Board of Trustees of State Institutions of Higher Learning  and Isle of Capri Casinos, Inc. and Riverboat Corporation of Mississippi  (Biloxi) (Incorporated by reference to an Exhibit 10.29 to the Annual  Report on Form 10-K filed on July 30, 2007)                                                                                                                                |

 

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| **EXHIBIT  NUMBER** | ** ** | **DESCRIPTION**                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|---------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.31               |       | Biloxi Waterfront  Project Garage-Podium Lease and Easement dated as of August 15, 2002, by  and between the Secretary of State of the State of Mississippi, the City of  Biloxi, Mississippi, the Board of Trustees of State Institutions of Higher  Learning and Isle of Capri Casinos, Inc. and Riverboat Corporation of  Mississippi (Biloxi) (Incorporated by reference to an Exhibit 10.30 to  the Annual Report on Form 10-K filed on July 30, 2007) |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.32               |       | Amended and Restated  Berth Rental Agreement dated May 12, 1992 between the Biloxi Port  Commission and Riverboat Corporation of Mississippi (Biloxi) (Incorporated by  reference to an exhibit to the Annual Report on Form 10-K for the fiscal  year ended April 30, 1992)                                                                                                                                                                                          |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.33               |       | Second Amendment to  Berth Rental Agreement dated August 13, 1996, (ii) Third Amendment  to Berth Rental Agreement dated December 14, 1999 and (iii) Letter  Agreement to Berth Rental Agreement dated October 17, 2006 (Biloxi)  (Incorporated by reference to an Exhibit 10.32 to the Annual Report on  Form 10-K filed on July 30, 2007)                                                                                                  |
| 10.34               |       | Agreement on Casino  Berth Tract dated as of August 15, 2002, State consented to dredging,  wharfing and filling by Isle of areas to reconfigure Berth Tract to accommodate  a larger gaming vessel (Biloxi) (Incorporated by reference to an  Exhibit 10.33 to the Annual Report on Form 10-K filed on  July 30, 2007)                                                                                                                                          |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.35               |       | 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 (St. Charles) (Incorporated by reference to an Exhibit 10.28 to  the Annual Report on Form 10-K filed on July 02, 1999)                                                                                                                                                         |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.36               |       | 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.  (Incorporated by reference to the Registration Statement on Form S-4/A  filed June 19, 2002)                                                                                                                                                                                               |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.37               |       | Addendum to Lease dated  as of June 22, 1994 by and among Roger Allen Johnson, Jr., Charles  Bryant Johnson and Magnolia Lady, Inc. (Incorporated by reference to an  Exhibit 10.46 to the Annual Report on Form 10-K filed on  July 28, 2000)                                                                                                                                                                                                         |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.38               |       | Second addendum to  Lease dated as of October 17, 1995 by and among Roger Allen  Johnson, Jr., Charles Bryant Johnson and Magnolia Lady, Inc.  (Incorporated by reference to an Exhibit 10.47 to the Annual Report on  Form 10-K filed on July 28, 2000)                                                                                                                                                                                          |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.39*              |       | Lease of premises at  the Arena, Phoenix Way, Foleshill, Coventry dated February 7th,  2007 by and among Arena Coventry Limited, Isle of Capri Casinos Limited and  Isle of Capri Casinos, Inc.                                                                                                                                                                                                                                                                            |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.40*              |       | Master Lease between  The City of Boonville, Missouri and IOC-Boonville, Inc. formally known  as Davis Gaming Boonville, Inc. dated as of July 18, 1997.                                                                                                                                                                                                                                                                                                              |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.41*              |       | Amendment to Master  Lease between The City of Boonville, Missouri and IOC-Boonville, Inc.  formally known as Davis Gaming Boonville, Inc. dated as of  April 19, 1999.                                                                                                                                                                                                                                                                                               |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.42*              |       | Second Amendment to  Master Lease between The City of Boonville, Missouri and  IOC-Boonville, Inc. formerly known as Davis Gaming Boonville, Inc.  dated as of September 17, 2001.                                                                                                                                                                                                                                                                                    |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.43*              |       | Third Amendment to  Master Lease between The City of Boonville, Missouri and  IOC-Boonville, Inc. formerly known as Gold River’s Boonville  Resort, Inc. and Davis Gaming Boonville, Inc. dated as of  November 19, 2001.                                                                                                                                                                                                                                   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.44*              |       | Assignment and  Assumption Agreement (Lease Agreement) between Flamingo Hilton Riverboat  Casino, LP, Isle of Capri Casinos, Inc. and IOC-Kansas City, Inc.  dated as of June 6, 2000.                                                                                                                                                                                                                                                                                |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.45*              |       | Lease and  Agreement-Spring 1995 between Andrianakos Limited Liability Company and Isle  of Capri Black Hawk, LLC. dated as of August 15, 1995                                                                                                                                                                                                                                                                                                                                  |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.46*              |       | Addendum to the Lease  and Agreement-Spring 1995 between Andrianakos Limited Liability Company and  Isle of Capri Black Hawk, LLC. dated as of April 4, 1996.                                                                                                                                                                                                                                                                                                                   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.47*              |       | Second Addendum to the  Lease and Agreement-Spring 1995 between Andrianakos Limited Liability Company  and Isle of Capri Black Hawk, LLC. dated as of March 21, 2003.                                                                                                                                                                                                                                                                                                           |

 

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| **EXHIBIT  NUMBER** | ** ** | **DESCRIPTION**                                                                                                                                                                                                                                                                                                                                                             |
|---------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.48*              |       | Third Addendum to the  Lease and Agreement-Spring 1995 between Andrianakos Limited Liability Company  and Isle of Capri Black Hawk, LLC. dated as of April 22, 2003.                                                                                                                                                                                                   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                        |
| 10.49               |       | Operator’s  Contract dated August 11, 1994; as amended by: (i) Amendment to  Operator’s Contract dated August 15, 1998; and (ii) Second  Amendment to Operator’s Contract dated June 30, 2004(Bettendorf) (Incorporated by  reference to an Exhibit 10.38 to the Annual Report on Form 10-K  filed on July 30, 2007) |
|                |       |                                                                                                                                                                                                                                                                                                                                                                        |
| 12.1*               |       | Computation of ratio of  earnings to fixed charges                                                                                                                                                                                                                                                                                                                          |
|                |       |                                                                                                                                                                                                                                                                                                                                                                        |
| 21.1*               |       | Significant  Subsidiaries of Isle of Capri Casinos, Inc.                                                                                                                                                                                                                                                                                                               |
|                |       |                                                                                                                                                                                                                                                                                                                                                                        |
| 23.1*               |       | Consent of Ernst &  Young LLP                                                                                                                                                                                                                                                                                                                                      |
|                |       |                                                                                                                                                                                                                                                                                                                                                                        |
| 24.1*               |       | Powers of Attorney  Directors                                                                                                                                                                                                                                                                                                                                               |
|                |       |                                                                                                                                                                                                                                                                                                                                                                        |
| 31.1*               |       | Certification of Chief  Executive Officer pursuant to Rule 13a—14(a) under the Securities  Exchange Act of 1934                                                                                                                                                                                                                                              |
|                |       |                                                                                                                                                                                                                                                                                                                                                                        |
| 31.2*               |       | Certification of Chief  Financial Officer pursuant to Rule 13a—14(a) under the Securities  Exchange Act of 1934                                                                                                                                                                                                                                              |
|                |       |                                                                                                                                                                                                                                                                                                                                                                        |
| 32.1*               |       | Certification of Chief  Executive Officer Pursuant to 18 U.S.C. Section 1350                                                                                                                                                                                                                                                                                           |
|                |       |                                                                                                                                                                                                                                                                                                                                                                        |
| 32.2*               |       | Certification of Chief  Financial Officer Pursuant to 18 U.S.C. Section 1350                                                                                                                                                                                                                                                                                           |
|                |       |                                                                                                                                                                                                                                                                                                                                                                        |
| 99.1*               |       | Description of Governmental  Regulation.                                                                                                                                                                                                                                                                                                                                    |

 

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*                                  Filed herewith.

†                                   Management contract or compensatory plan orarrangement.

 

82

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