**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-K**


**(Mark
      One)**


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





**For
      the fiscal year ended April 30, 2006**





**OR**





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


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





Commission
      File Number 0-20538





**ISLE
      OF CAPRI CASINOS, INC.**


(Exact
      name of registrant as specified in its charter)


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


Securities
      Registered Pursuant to Section 12(b) of the Act: None





Securities
      Registered Pursuant to Section 12(g) of the Act:


Common
      Stock, $.01 Par Value Per Share


(Title
      of
      Class)


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





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act. Yes o No x





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





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




Indicate
        by check mark whether the registrant is a large accelerated filer, accelerated
        filer, or a non-accelerated filer (Check one):
 Large
        accelerated filer o Accelerated
        filer x Non-accelerated
        filer
o


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




The
      aggregate market value of the voting and non-voting stock held by
      non-affiliates 1 of
      the
      Company is $305,584,206, based on the last reported sale price of $20.79 per
      share on October 21, 2005 on the NASDAQ Stock Market; multiplied by 14,698,615
      shares of Common Stock outstanding and held by non-affiliates of the Company
      on
      such date.




As
        of
        July 3, 2006, the Company had a total of 30,392,940 shares of Common Stock
        outstanding (which excludes 3,902,423 shares held by us in
        treasury).
  
 (1) Affiliates
        for the purpose of this item refer to the directors, named executive officers
        and/or persons owning 10% or more of the Company’s common stock, both of record
        and beneficially; however, this determination does not constitute an admission
        of affiliate status for any of the individual stockholders.




**Document
        Incorporated by Reference:**
 
 Document
              Part
                  of Form 10-K into which IncorporatedIsle
                  of Capri Casinos, Inc.’s Definitive Proxy Statement for its Annual Meeting
                  of Stockholders to be held October 26, 2006.
              Part
                  III




**ISLE
        OF CAPRI CASINOS, INC.**
 **FORM
        10-K**
 **INDEX**
  PAGEPART
                    I
                2ITEM
                    1.       BUSINESS
                2ITEM
                    1A.    RISK FACTORS
                36ITEM
                    1B.     UNRESOLVED STAFF COMMENTS
                42ITEM
                    2.       PROPERTIES
                42ITEM
                    3.       LEGAL PROCEEDINGS
                46ITEM
                    4.       SUBMISSION OF MATTERS TO A
                    VOTE OF SECURITY HOLDERS
                47PART
                    II
                47ITEM
                    5.       MARKET FOR REGISTRANT’S COMMON
                    EQUITY, RELATEDSTOCKHOLDER
                  MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
                47ITEM
                    6.       SELECTED FINANCIAL
                    DATA
                49ITEM
                    7.       MANAGEMENT’S DISCUSSION AND
                    ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS
                51ITEM
                    7A.    QUANTITATIVE AND QUALITATIVE
                    DISCLOSURES
                  ABOUT MARKET RISK
                68ITEM
                    8.        FINANCIAL STATEMENTS AND
                    SUPPLEMENTARY DATA
                69ITEM
                    9.        CHANGES IN AND
                    DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE
                119ITEM
                    9A.     CONTROLS AND PROCEDURES
                119ITEM
                    9B.      OTHER INFORMATION
                121PART
                    III
                121ITEM
                    10.      DIRECTORS AND EXECUTIVE OFFICERS OF
                    THE REGISTRANT
                121ITEM
                    11.      EXECUTIVE COMPENSATION
                121ITEM
                    12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                    OWNERS AND
                  MANAGEMENT AND RELATED STOCKHOLDER MATTERS
                121ITEM
                    13.     CERTAIN RELATIONSHIPS AND RELATED
                    TRANSACTIONS
                121ITEM
                    14.     PRINCIPAL ACCOUNTANT FEES AND
                    SERVICES
                121PART
                    IV
                122ITEM
                    15.     EXHIBITS, FINANCIAL STATEMENT
                    SCHEDULES
                122SIGNATURES
                123









**DISCLOSURE
        REGARDING FORWARD-LOOKING STATEMENTS**
 
 All
        statements other than statements of historical or current facts included
        in this
        annual report on form 10-K or incorporated by reference herein, including,
        without limitation, statements regarding our future financial position, business
        strategy, budgets, projected costs and plans and objectives of management
        for
        future operations, are forward-looking statements. Forward-looking statements
        generally can be identified by the use of forward-looking terminology such
        as
“may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe” or
“continue” or the negative thereof or variations thereof or similar terminology.
        Although we believe that the expectations reflected in such forward-looking
        statements are reasonable, we can give no assurance that such expectations
        will
        prove to have been correct.
 
 Important
        factors with respect to any such forward-looking statements, including certain
        risks and uncertainties that could cause actual results to differ materially
        from our expectations (“cautionary statements”), are disclosed under “Risk
        Factors” and elsewhere in this annual report on Form 10-K, including, without
        limitation, in conjunction with the forward-looking statements included in
        this
        Annual Report on Form 10-K.
 
 We
        urge
        you to review carefully the section “Risk Factors” beginning on page 36 in this
        annual report on Form 10-K for a more complete discussion of the risks of
        investing our common stock. All subsequent written and oral forward-looking
        statements attributable to us, or persons acting on our behalf, are expressly
        qualified in their entirety by these cautionary statements.
  
 
 1


**PART
        I**
 
 **ITEM
        1.**   **BUSINESS.**
 
 **Overview**
 
 We
        were
        incorporated in Delaware in February 1990. We are a leading developer, owner
        and
        operator of branded gaming facilities and related lodging and entertainment
        facilities in markets throughout the United States and internationally. We
        wholly own and operate eleven gaming facilities in the U.S. located in Lake
        Charles and Bossier City, Louisiana; Lula, Biloxi, Vicksburg and Natchez,
        Mississippi; Kansas City and Boonville, Missouri; and Bettendorf, Davenport
        and
        Marquette, Iowa. We also own a 57% interest in, and receive management fees
        for
        operating, two gaming facilities in Black Hawk, Colorado. One of these
        facilities in Black Hawk, Colorado operates under the name “Isle of Capri” and
        features our distinctive tropical island theme. Our international gaming
        interests include a wholly owned casino in Freeport, Grand Bahama, and a
        two-thirds ownership interest in casinos in Dudley, Wolverhampton, and Walsall,
        England. We also wholly own and operate a pari-mutuel harness racing facility
        in
        Pompano Beach, Florida.
 
 On
        May
        11, 2005, we announced that the Iowa Racing and Gaming Commission awarded
        us a
        gaming license in Waterloo, Iowa. Construction is underway on a 35,000 square
        foot single level casino with 1,300 gaming positions, three restaurants,
        a
        200-room hotel and 1,000 parking spaces. We expect to open in late spring
        of
        2007 at a total cost of approximately $135 million.
 
 On
        January 4, 2006, a Florida statute became effective allowing Pompano Park
        and
        three other pari-mutuel facilities in Broward County to offer slot machine
        gaming to patrons at these facilities. Although there are pari-mutuel facilities
        in numerous other counties in the State of Florida, slot machine gaming is
        only
        authorized in Broward County where Pompano Park is located. We are constructing
        a gaming facility including 1,500 slot machines, four restaurants and a feature
        bar at Pompano Park adjacent to the existing grandstand at a cost approximately
        $140 million with slot machine gaming anticipated to commence in early calendar
        year 2007. We
        do not
        plan to open a temporary gaming facility. The
        statute authorizes us to operate up to 1,500 slot machines at Pompano Park
        365
        days per year, 16 hours per day and requires Pompano Park to pay an annual
        license fee of $3.0 million and gaming taxes equal to 50% of Pompano Park’s net
        slot machine revenue plus combined county and city taxes of approximately
        an
        additional 3.5% on the first $250 million of net slot machine revenue and
        5% on net slot machine revenue over $250 million. The
        Florida Department of Business and Professional Regulation is administering
        the
        law and is now implementing rules and regulations for the operation of the
        slot
        machines.
 
 On
        February 14, 2006, we announced the execution of an agreement to sell our
        properties in Bossier City, Louisiana and Vicksburg, Mississippi to Legends
        Gaming, LLC for $240 million. We expect to use proceeds from the sale to
        fund
        existing development projects and/or pay down debt. The agreement is subject
        to
        regulatory approvals and other customary closing conditions. This transaction
        is
        expected to close in the second quarter of fiscal 2007. These properties
        have
        been reported as discontinued operations throughout this document.
 
 In
        April
        2006, our Board of Directors approved a plan to close the Isle-Our Lucaya
        facility. Effective June 1, 2006, we notified our landlord of our decision
        to
        terminate the lease and we intend to cease operations by June 1, 2007 as
        required by our lease. We will continue to report the results of the Isle-Our
        Lucaya property as continuing operations until a probable sale of this facility
        is reached or operations are ceased, at which time, these results will be
        reported as discontinued operations.




2


On
          June
          15, 2006, we announced that we received site and development approval from
          the
          Mississippi Gaming Commission in connection with our previously announced
          casino
          resort in west Harrison County, Mississippi, which is approximately 20
          miles
          from the Mississippi/Louisiana state border near Interstate 10. Preliminary
          plans call for the estimated $250-$300 million project to include a single
          level
          gaming facility with over 2,000 gaming positions, a 500-room hotel, five
          restaurants and a complement of additional resort amenities. The project
          remains
          in the preliminary planning stages, and is subject to certain significant
          conditions, including but not limited to the receipt of all necessary licenses,
          approvals and permits.
 
 For
          the
          fiscal year ended April 30, 2006, we had net revenues from continuing operations
          of approximately $988.0 million.
 
 **Competitive
          Strengths**
 
 *Strong
          Brand Identity.* Most
          of
          our casino properties operate under the “Isle of Capri” name designed to
          incorporate our distinctive tropical island theme. Most of our domestic
          gaming
          facilities contain similar amenities, including hotels, one or more of
          our
          trademark restaurants (Farraddays’ fine dining restaurant, Calypso’s buffet and
          Tradewinds Marketplace), a Banana Cabana gift shop and an entertainment
          center
          for performances and meetings. Each of our facilities also offers all customers
          membership in our rewards program, which rewards loyal customers with points
          and
          complimentaries that can be redeemed at any of our properties by using
          a
          player’s club card. These programs are the IsleOne Players Club, the Fan Club,
          and the Fast Track Club at the Isle of Capri properties, the Rhythm
          City-Davenport and the Colorado Central Station-Black Hawk, respectively.
          We
          believe our brand names convey excitement, entertainment, consistent
          high-quality service and value to our customers.
  *Standardized
          Quality and Services* .
          We have
          developed and implemented standardized procedures for operating our casinos,
          hotels, restaurants and other non-gaming amenities, which has allowed us
          to
          fully and effectively integrate the domestic properties we have developed
          or
          acquired during the past fourteen years. We utilize management development
          and
          employee training programs to implement these procedures throughout our
          facilities, which we believe help us efficiently operate our facilities.
          This
          standardization encourages high-quality service and provides our customers
          with
          a consistent experience.
 
 *Geographically
          Diverse Markets.* We
          own or
          operate our gaming facilities in eleven distinct geographic markets located
          in 6
          states, the Bahamas and the United Kingdom, allowing us to maintain diverse
          sources of revenue and cash flow.
 
 Most
          of
          our gaming facilities are conveniently located near major highways. We
          have
          located our facilities so that, in most cases, they are either the first
          casino
          reached by customers arriving from major nearby cities or are within a
          cluster
          of facilities, allowing us to generate significant customer
          traffic.
 
 *Substantial
          Capital Investment in Our Properties* .
          We are
          continuing to expand and upgrade the facilities at several of our domestic
          properties and believe the continued investment has improved their competitive
          position.
   3




*Effective
        Utilization of Proprietary Database* .
        We have
        developed an extensive proprietary database of primarily slot-oriented customers
        that allows us to create and deploy effective targeted marketing and promotional
        programs, merchandise giveaways, game tournaments and other special events.
        These promotional programs are designed to reward customer loyalty and maintain
        high recognition of our “Isle of Capri” brand. As of April 30, 2006, our
        database contained approximately 6.9 million members, of whom approximately
        1.6
        million receive regular communications from us. We believe we have effectively
        used our database to encourage repeat visits, increase customers’ length of stay
        and improve our operating results.
 
 *Experienced,
        Stable Management Team.* We
        are an
        experienced gaming operator and opened our first gaming facility approximately
        fourteen years ago. Each member of our senior management team has extensive
        gaming or related industry experience and most have been with us for a number
        of
        years, providing consistency in our operations.
 
 **Casino
        Properties**
  The
        following is an overview of our existing casino properties as of April 30,
        2006:
 **Date
                      Opened or**
                  
                  **Slot**
                  
                  **Table**
                  
                  **Hotel**
                  
                  **Parking****Property***
                  **Acquired**
                  
                  **Machines**
                  
                  **Games**
                  
                  **Rooms**
                  
                  **Spaces***Louisiana*Isle-Lake
                      Charles
                  July
                      1995
                  
                  1,968
                  
                  83
                  
                  493
                  
                  2,200*Mississippi*Isle-Lula
                  March
                      2000
                  
                  1,506
                  
                  24
                  
                  486
                  
                  1,500Isle-Biloxi
                  August
                      1992
                  
                  927
                  
                  36
                  
                  728
                  
                  900Isle-Natchez
                  March
                      2000
                  
                  648
                  
                  19
                  
                  143
                  
                  908*Missouri*Isle-Kansas
                      City
                  June
                      2000
                  
                  1,533
                  
                  33
                  
                  -
                  
                  1,947Isle-Boonville
                  December
                      2001
                  
                  902
                  
                  34
                  
                  -
                  
                  1,079*Iowa*Isle-Bettendorf
                  March
                      2000
                  
                  1,122
                  
                  28
                  
                  256
                  
                  1,539Rhythm
                      City-Davenport
                  October
                      2000
                  
                  1,024
                  
                  17
                  
                  121
                  
                  984Isle-Marquette
                  March
                      2000
                  
                  708
                  
                  15
                  
                  25
                  
                  490*Colorado*Isle-Black
                      Hawk (57% owned)
                  December
                      1998
                  
                  1,378
                  
                  18
                  
                  238
                  
                  1,100Colorado
                      Central Station - Black Hawk (57% owned)
                  April
                      2003
                  
                  778
                  
                  15
                  
                  162
                  
                  1,200*International
                      Properties*Isle-Our
                      Lucaya
                  December
                      2003
                  
                  351
                  
                  33
                  
                  -
                  
                  -Blue
                      Chip-Dudley (66 2/3% owned)
                  November
                      2003
                  
                  10
                  
                  29
                  
                  -
                  
                  63Blue
                      Chip-Wolverhampton (66 2/3% owned)
                  April
                      2004
                  
                  10
                  
                  48
                  
                  -
                  
                  20Blue
                      Chip-Walsall (66 2/3% owned)
                  October
                      2004
                  
                  10
                  
                  51
                  
                  -
                  
                  -*
                      Excludes Isle-Vicksburg and Isle-Bossier City which have been
                      classified
                      as discontinued operations due to an agreementto
                    sell both properties.  The Company expects the transaction to close
                    in the second quarter of fiscal
                    2007.






4


***Louisiana***





*The
      Isle-Lake Charles*





The
      Isle-Lake Charles, which commenced operations in July 1995, is located on a
      19-acre site along Interstate 10, the main thoroughfare connecting Houston,
      Texas to Lake Charles, Louisiana. The property consists of two dockside casinos
      offering 1,968 slot machines and 83 table games, a 252-room deluxe hotel, a
      separate 241-room hotel, a 105,000 square foot land-based pavilion and
      entertainment center, and 2,200 parking spaces, including approximately 1,400
      spaces in an attached parking garage. The pavilion and entertainment center
      offer customers a wide variety of non-gaming amenities, including a 97-seat
      Farraddays’ restaurant, a 360-seat Calypso’s buffet, a 165-seat Tradewinds
      Marketplace, a 140-seat Kitt’s Kitchen restaurant, a 64-seat Lucky Wins oriental
      restaurant and Caribbean Cove, which features free live entertainment and can
      accommodate 180 customers. The pavilion also has a 14,750 square foot
      entertainment center comprised of an 1,100-seat special events center designed
      for concerts, live boxing, televised pay-per-view events, banquets and other
      events, meeting facilities and administrative offices.





The
      Lake
      Charles market currently consists of two dockside gaming facilities (which
      include the Isle-Lake Charles and Pinnacle Entertainment’s one-level barge
      facility), a Native American casino and a pari-mutuel facility/racino (operated
      by Boyd Gaming). Due to Hurricane Rita, Harrah’s has not operated in the market
      since its closure in September 2005. Pinnacle Entertainment has entered into
      an
      agreement to acquire the Harrah’s Lake Charles assets, including its two gaming
      licenses.  Pinnacle has announced that it intends to move one of these
      licenses out of the Lake Charles market and use the other license to develop
      a
      new casino in Lake Charles. The current number of slot machines in the market
      exceeds 8,200 machines and table games exceed 200 tables. In calendar year
      2005,
      the three gaming facilities (Isle, Pinnacle, Harrah’s) and one racino (Boyd), in
      the aggregate, generated gaming revenues of approximately $550 million. Revenues
      for the Native American property are not published and are not available. Lake
      Charles is the closest gaming market to the Houston metropolitan area, which
      has
      a population of approximately 4.7 million and is located approximately 140
      miles
      west of Lake Charles. We believe that the Isle-Lake Charles attracts customers
      primarily from southeast Texas, including Houston, Beaumont, Galveston, Orange
      and Port Arthur and from local area residents. Approximately 490,000 and 1.6
      million people reside within 50 and 100 miles, respectively, of the Isle-Lake
      Charles.





***Mississippi***





*The
      Isle-Lula*





The
      Isle-Lula, which was acquired in March 2000, is strategically located off of
      Highway 49, the only road crossing the Mississippi River between Mississippi
      and
      Arkansas for more than 50 miles in either direction. The property consists
      of
      two dockside casinos containing 1,506 slot machines and 24 table games, two
      on-site hotels with a total of 486 rooms, a land-based pavilion and
      entertainment center, and 1,500 parking spaces. The pavilion and entertainment
      center offer a wide variety of non-gaming amenities, including a 144-seat
      Farraddays’ restaurant, a 260-seat Calypso’s buffet and a 50-seat Tradewinds
      Marketplace.






5


The
      Isle-Lula is the only gaming facility in the Coahoma County, Mississippi market
      and generated gaming revenues of approximately $90.2 million in calendar year
      2005. The Isle-Lula is the closest gaming facility to the Little Rock, Arkansas
      metropolitan area, which has a population of approximately 629,000 and is
      located approximately 120 miles west of the property. Coahoma County is also
      located approximately 60 miles southwest of Memphis, Tennessee, which is
      primarily served by 9 casinos in Tunica, Mississippi. Approximately 964,000
      people reside within the property’s primary target market.





*The
      Isle-Biloxi*





The
        Isle-Biloxi, which commenced operations in August 1992, is located on a 17-acre
        site at the eastern end of a cluster of facilities formerly known as “Casino
        Row” in Biloxi, Mississippi, and is the first property reached by visitors
        coming from Alabama, Florida and Georgia via Highway 90.
 
 On
        August
        29, 2005 the property was significantly damaged by Hurricane Katrina. The
        property was closed on August 28, 2005 and remained closed to the public
        until
        December 26, 2005. The Highway 90 bridge spanning Biloxi Bay, located to
        the
        east of the property, was also destroyed. The bridge is expected to be replaced
        with a new, larger bridge within the next 18 months.
 
 In
        October 2005, the Mississippi legislature amended the gaming laws to allow
        casinos to operate land-based facilities within 800 feet of the shore. The
        Isle-Biloxi re-opened on December 26, 2005 with a land-based casino offering
        approximately 1,179 gaming positions, a 728-room hotel including 200 whirlpool
        suites, a 120-seat restaurant named “A Taste of Farraddays’,” a 200-seat
        Calypso’s buffet, a Tradewinds Express and 900 parking spaces. In
        late
        May 2006, Isle-Biloxi completed the renovation of its existing atrium that
        added
        a new multi-story feature bar, connected the parking garage with the atrium
        by a
        covered walkway, and increased the number of gaming positions to approximately
        1,600.
 
 Prior
        to
        Hurricane Katrina, the Mississippi Gulf Coast market (which includes Biloxi,
        Gulfport and Bay St. Louis) was one of the largest gaming markets in the
        United
        States and consisted of 12 dockside gaming facilities which, in the aggregate,
        generated gaming revenues of approximately $1.2 billion in calendar year
        2004.
        Comparable gaming revenue information for this market is not available for
        calendar year 2005 due to the impact of Hurricane Katrina. Since our re-opening
        in December 2005, four other competitors have re-entered the market: the
        Imperial Palace, Palace Casino Resort, Treasure Bay and Boomtown. During
        our
        fiscal 2007 we anticipate additional casinos to re-enter the market, although
        the effect of this additional competition cannot be determined.


*The
      Isle-Natchez*





The
      Isle-Natchez, which was acquired in March 2000, is located off of Highways
      84
      and 61 in western Mississippi. The property consists of a dockside casino
      offering 648 slot machines and 19 table games, a 143-room off-site hotel located
      approximately one mile from the casino, a 150-seat Calypso’s buffet and 908
      parking spaces.





The
      Isle-Natchez is the only gaming facility in the Natchez market and generated
      gaming revenues of approximately $42.3 million in calendar year 2005. We believe
      that the Isle-Natchez attracts customers primarily from among the 110,000 people
      residing within 50 miles of the Isle-Natchez.






6




***Missouri***
 
 *The
        Isle-Kansas City*
 
 The
        Isle-Kansas City which was acquired in June 2000, is the closest facility
        to
        downtown Kansas City and consists of a dockside casino offering 1,533 slot
        machines, 27 table games and 6 poker tables, a 96-seat Farraddays’ Bistro
        restaurant, a 372-seat Calypso’s buffet, a 45-seat Tradewinds Marketplace and
        1,947 parking spaces. We are currently in the design phase of an $85 million
        expansion project at Isle-Kansas City. The planned expansion project will
        improve guest traffic patterns and renovate existing gaming space. Exterior
        plans include a new, updated entryway, exterior facade refinishing,
        reconfiguration of existing parking, and the addition of 1,000 parking spaces.
        Plans for the casino interior include expanding and renovating the gaming
        area
        including 400 additional slots and adding an entertainment venue to seat
        at
        least 1,000 guests, as well as, additional food and beverage amenities. The
        planned Kansas City expansion project is subject to negotiation of an amended
        lease and development agreement and receipt of necessary permits and approvals.
 
 The
        Kansas City market consists of four dockside gaming facilities that, in the
        aggregate, generated gaming revenues of approximately $688.2 million in calendar
        year 2005. The other operators of dockside gaming facilities in this market
        are
        Ameristar Casinos, Penn National Gaming (formerly Argosy Gaming) and Harrah’s
        Entertainment. We believe that the Isle-Kansas City attracts customers primarily
        from the Kansas City metropolitan area, which has approximately 1.9 million
        residents.
 
 *The
        Isle-Boonville*
 
 The
        Isle-Boonville, which opened on December 6, 2001, is located off of Interstate
        70, approximately halfway between Kansas City and St. Louis. The property
        consists of a single level dockside casino offering 902 slot machines, 28
        table
        games and 6 poker tables, a 140-room hotel that opened in June 2006, a 32,400
        square foot pavilion and entertainment center and 1,079 parking spaces. The
        pavilion and entertainment center offers customers a wide variety of non-gaming
        amenities, including a 92-seat Farraddays’ restaurant, a 270-seat Calypso’s
        buffet, a 32-seat Tradewinds Marketplace and a historic display area.
        Isle-Boonville’s new hotel includes 20 suites and an 800-seat event center. The
        Isle-Boonville is the only gaming facility between Kansas City, Missouri,
        and
        St. Louis, Missouri and generated gaming revenues of approximately $75.2
        million
        in calendar year 2005.
 
 ***Iowa***
 
 *The
        Isle-Bettendorf*
 
 The
        Isle-Bettendorf,
        which we acquired in March 2000, is located off of Interstate 74, an interstate
        highway serving the Quad Cities metropolitan area. The property consists
        of a
        dockside casino offering 1,122 slot machines and 28 table games, a 256-room
        hotel, approximately 20,500 square feet of convention/banquet space, a 140-seat
        Farraddays’ restaurant, a 320-seat Calypso’s buffet, a 30-seat Tradewinds
        Marketplace and 1,539 parking spaces. We have signed a development agreement
        with the City of Bettendorf pursuant to which we are constructing a new 250-room
        Isle hotel, additional parking and an additional restaurant. Also, the City
        agreed to construct a 50,000 square foot convention center adjacent to the
        facility, which will be managed by the Isle-Bettendorf. The cost of our portion
        of this project will be approximately $45 million, and the new hotel is
        scheduled to open in the spring of 2007.
  7




The
        Quad
        Cities metropolitan area, consisting of Bettendorf and Davenport, Iowa and
        Moline and Rock Island, Illinois currently has three gaming operations -
        our two
        gaming facilities, the Isle-Bettendorf and the Rhythm City-Davenport, and
        one
        smaller operator. The three operations in the Quad Cities generated, in the
        aggregate, gaming revenues of approximately $217.8 million in calendar year
        2005. In addition to the Quad Cities metropolitan area, our operations in
        the
        Quad Cities also compete with other gaming operations in Illinois and Iowa.
 
 *The
        Rhythm City-Davenport*
 
 The
        Rhythm City-Davenport, which we acquired in October 2000, is located between
        Interstates 74, 80 and 280. The property consists of a dockside gaming facility
        offering 1,024 slot machines and 17 table games, a 290-seat Hit Parade buffet,
        a
        76-seat Rock Around the Clock diner and 984 parking spaces. The Rhythm
        City-Davenport also operates a 121-room off-site hotel located approximately
        four blocks from the casino. The hotel has been closed since February 2006,
        due
        to damage from a fire.
 
 *The
        Isle-Marquette*
 
 The
        Isle-Marquette, which we acquired in March 2000, is located in Marquette,
        Iowa,
        approximately 60 miles north of Dubuque, Iowa. The property consists of a
        dockside casino offering 708 slot machines and 15 table games, a land-based
        facility which includes a 160-seat Calypso’s buffet restaurant, a Tradewinds
        Marketplace, an entertainment showroom, a 25-room hotel, a marina and 490
        parking spaces.
 
 The
        Isle-Marquette is the only gaming facility in the Marquette, Iowa market,
        and
        generated gaming revenues of approximately $42.6 million in calendar year
        2005.
        We believe the Isle-Marquette draws most of its customers from northeast
        Iowa
        and Wisconsin and to some extent, competes for those customers with other
        gaming
        facilities in Iowa and Wisconsin.
 
 ***Colorado***
 
 *The
        Isle-Black Hawk*
 
 The
        Isle-Black Hawk, which commenced operations in December 1998, is located
        on an
        approximately 10-acre site and is one of the first gaming facilities reached
        by
        customers arriving from Denver via Highway 119, the main thoroughfare connecting
        Denver to Black Hawk. The property includes a land-based casino with 1,378
        slot
        machines and 18 table games, a 238-room hotel and 1,100 parking spaces in
        an
        attached parking garage. The Isle-Black Hawk also offers customers a wide
        variety of non-gaming amenities, including a 96-seat Farraddays’ restaurant, a
        228-seat Calypso’s buffet, a 32-seat Tradewinds Marketplace and a 4,000 square
        foot event center that can be used for meetings and entertainment. We own
        57% of
        the Isle-Black Hawk through an unrestricted subsidiary and receive a management
        fee for operating the facility.
 
 *The
        Colorado Central Station-Black Hawk*
 
 The
        Colorado Central Station-Black Hawk, which we acquired in April 2003, is
        located
        across the intersection of Main Street and Mill Street from the Isle-Black
        Hawk.
        The property currently consists of a land-based casino with 778 slot machines,
        15 table games, a 162-room hotel that opened December 24, 2005 and 1,200
        parking
        spaces in our new parking structure connecting Isle-Black Hawk and Colorado
        Central Station-Black Hawk. The property also offers guests dining in its
        food
        court that was opened in 2005 featuring three distinct dining options. We
        own
        57% of the Colorado Central Station-Black Hawk through an unrestricted
        subsidiary and receive a management fee for operating the facility.
  8




The
        Black
        Hawk/Central City market consists of 26 gaming facilities (six of which have
        more than 600 slot machines), which, in aggregate, generated gaming revenues
        of
        approximately $604.7 million in calendar year 2005. Black Hawk is the closest
        gaming market to the Denver, Colorado metropolitan area, which has a population
        of approximately 2.6 million and which is located approximately 40 miles
        east of
        Black Hawk. We believe that the Isle-Black Hawk and Colorado Central
        Station-Black Hawk attract customers primarily from Denver, Boulder, Fort
        Collins and Golden, Colorado and Cheyenne, Wyoming.
 
 **Florida**
 
 *Pompano
        Park*
 
 In
        1995,
        we acquired Pompano Park, a harness racing track located in Pompano Beach,
        Florida. Pompano Park is conveniently located off of Interstate 95 and the
        Florida Turnpike on a 223-acre owned site, near Fort Lauderdale, midway between
        Miami and West Palm Beach. Pompano Park is the only racetrack licensed to
        conduct harness racing in Florida. During the fiscal year ended April 30,
        2006,
        Pompano Park conducted 149 live racing programs. Pompano Park can accommodate
        up
        to 14,500 customers and has 4,000 parking spaces and 1,040 horse stalls.
        The
        six-story, air-conditioned facility consists of 21 poker tables, a box seat
        area, a 277,000 square foot clubhouse, a large grandstand, a 1,250-seat dining
        area from which the races can be viewed, five concession stands, five bars
        and a
        180-seat Player’s Lounge cafeteria.
 
 In
        November 2004, voters in the State of Florida voted to amend the state's
        constitution to allow the voters of Miami-Dade and Broward counties (Broward
        County is the location of the Pompano Park Racetrack) to decide whether to
        approve slot machines in racetracks and jai alai frontons in their respective
        counties. Broward County voters passed their local referendum and Dade county
        voters rejected their referendum in March 2005. In December 2005, the Florida
        legislature passed legislation to permit the operation of 1,500 slot machines
        at
        Pompano Park. We are constructing a gaming facility including 1,500 slot
        machines, four restaurants and feature bar at Pompano Park adjacent to the
        existing grandstand at a cost of approximately $140 million with slot machine
        gaming anticipated to commence in early 2007 . This
        facility has drawn and we anticipate will continue to draw most of its customers
        from the 2.6 million people residing within a 25-mile radius.
 
 **Grand
        Bahama Island**
 
 *The
        Isle-Our Lucaya*
 
 The
        Isle-Our Lucaya is a 19,000 square-foot resort-style casino located in Freeport,
        Grand Bahama that offers 351 slot machines, 33 table games and a 110-seat
        restaurant.
 
 **United
        Kingdom**
 
 *Blue
        Chip-Dudley*
 
 The
        pub-style casino in Dudley, England is one of 17 gaming facilities in the
        West
        Midlands market. Dudley is close to the Birmingham metropolitan area, which
        has
        a population of approximately 5.3 million. The casino consists of 10 slot
        machines, 29 table games and 63 parking spaces. We own two-thirds of the
        Blue
        Chip-Dudley through an unrestricted subsidiary.
  9


*Blue
      Chip-Wolverhampton*





The
      pub-style casino in Wolverhampton, England is also in the West Midlands market.
      Wolverhampton is close to the Birmingham metropolitan area. The casino consists
      of 10 slot machines, 48 table games and 20 parking spaces. We own two-thirds
      of
      the Blue Chip-Wolverhampton through an unrestricted subsidiary.





*Blue
      Chip-Walsall*





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





*Coventry*





We
      have
      obtained a gaming license to open a casino at RICOH TM Arena in
      Coventry, England under the 1968 Gambling Act and are currently constructing
      this facility. Additionally, we are exploring our options with respect to
      overall development plans for this property, including a possible entertainment
      facility.





**Marketing**





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





The
      Company has enhanced its gaming service by installing the IGT AdvantageTM Casino
      System at our properties in Mississippi, Lake Charles, La. and Colorado Central
      Station in Black Hawk. The state-of-the-art system interfaces with our
      proprietary IsleOne marketing system giving the Company a robust platform for
      future automated marketing programs. The Mississippi properties feature one
      such
      program called IslePlay allowing customers to redeem direct marketing offers
      electronically. Deployment of the IGT AdvantageTM Casino System continues at our
      properties in Missouri and Iowa at this time.





As
      of
      April 30, 2006, our database contained approximately 6.9 million members, of
      whom approximately 1.6 million receive regular mailings. To develop this
      database, we offer all of our customers a membership in the IsleOne Players
      Club
      at Isle of Capri properties, the Fan Club at the Rhythm City-Davenport and
      the
      Fast Track Club at the Colorado Central Station property. These programs reward
      loyal customers with points that can be redeemed at our casinos by using our
      player’s club card. Currently, the player’s club card allows us to track the
      members’ gaming preferences, maximum, minimum and total amount wagered and
      frequency of visits. Players are classified in groups according to these
      characteristics. Our database is used for direct marketing programs and other
      promotional events that are tailored to these specific groups of players. We
      believe we have effectively used our database to encourage repeat visits,
      increase customers’ length of stay and improve our operating results.




10


We
      place
      significant emphasis on attracting local residents and seek to maintain a strong
      local identity in each market in which we operate by initiating and supporting
      community and special events. We use broadcast media to promote our brands
      and
      attract customers to our properties.





**Employees**





As
      of
      April 30, 2006, we employed approximately 8,516 people, which excludes employees
      at Isle-Vicksburg and Isle-Bossier City, which are presented as discontinued
      operations. None of our employees are subject to a collective bargaining
      agreement. We believe that our relationship with our employees is satisfactory.





**Regulation
      and Licensing**





The
      ownership and operation of casino gaming facilities are subject to extensive
      state and local regulations. We are required to obtain and maintain gaming
      licenses in each of the jurisdictions in which we conduct gaming. The
      limitation, conditioning or suspension of gaming licenses could (and the
      revocation or non-renewal of gaming licenses, or the failure to reauthorize
      gaming in certain jurisdictions, would) materially adversely affect our
      operation in that jurisdiction. In addition, changes in law that restrict or
      prohibit our gaming operations in any jurisdiction could have a material adverse
      effect on us.





***Louisiana*** ****





In
      July
      1991, Louisiana enacted legislation permitting certain types of gaming activity
      on certain rivers and waterways in Louisiana. The legislation granted authority
      to supervise riverboat gaming activities to the Louisiana Riverboat Gaming
      Commission and the Riverboat Gaming Enforcement Division of the Louisiana State
      Police. The Louisiana Riverboat Gaming Commission was authorized to hear and
      determine all appeals relative to the granting, suspension, revocation,
      condition or renewal of all licenses, permits and applications. In addition,
      the
      Louisiana Riverboat Gaming Commission established regulations concerning
      authorized routes, duration of excursions, minimum levels of insurance,
      construction of riverboats and periodic inspections. The Riverboat Gaming
      Enforcement Division of the Louisiana State Police was authorized to investigate
      applicants and issue licenses, investigate violations of the statute and conduct
      continuing reviews of gaming activities.





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





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





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




11


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





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





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





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





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





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





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





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





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





·
            licensees
                must have adequate protection and indemnity
                insurance;





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





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





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





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





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






12


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





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





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





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





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





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





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





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





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




13


Fees
      payable to the state for conducting gaming activities on a riverboat include
      (1)
      $50,000 per riverboat for the first year of operation and $100,000 per year
      per
      riverboat thereafter, plus (2) 18.5% of net gaming proceeds. Legislation was
      passed during the 2001 legislative session that allowed those riverboats that
      had been required to conduct cruises, including the riverboats at the Isle-Lake
      Charles, to remain permanently dockside beginning April 1, 2001. The legislation
      also increased the gaming tax for operators from 18.5% to 21.5%. A statute
      also
      authorizes local governing authorities to levy boarding fees. We currently
      have
      development agreements in Lake Charles with certain local governing authorities
      in the jurisdictions in which we operate pursuant to which we make payments
      in
      lieu of boarding fees.




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





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





·
            receive
                dividends or interest on securities of the
                corporation;





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





·
            receive
                remuneration or economic benefit from the
                licensee;





·
            exercise
                significant influence over activities of the licensee;
                or





·
            continue
                its ownership or economic interest in the
                licensee.





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





14


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





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





***Mississippi*** ****





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





In
      its
      2005 regular session, the legislature amended Mississippi law to allow gaming
      to
      be conducted on vessels or cruise vessels placed upon permanent structures
      located on, in or above the Mississippi River, on, in or above navigable waters
      in eligible counties along the Mississippi River or on, in or above the waters
      lying south of the counties along the Mississippi Gulf Coast. Later, after
      Hurricane Katrina, the Mississippi legislature again amended the law to allow
      land-based gaming along the Gulf Coast in very limited circumstances.
      Mississippi law permits unlimited stakes gaming, on a 24-hour basis and does
      not
      restrict the percentage of space that may be utilized for gaming. There are
      no
      limitations on the number of gaming licenses that may be issued in
      Mississippi.





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





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





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





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





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





·
            prevent
                cheating and fraudulent practices;
                and





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





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




15


We
      are
      registered as a publicly traded corporation under the Mississippi Gaming Control
      Act. Our gaming operations in Mississippi are subject to regulatory control
      by
      the Mississippi Gaming Commission, the State Tax Commission and various other
      local, city and county regulatory agencies (collectively referred to as the
      “Mississippi Gaming Authorities”). Our subsidiaries have obtained gaming
      licenses from the Mississippi Gaming Authorities. We must obtain a waiver from
      the Mississippi Gaming Commission before beginning any proposed gaming
      operations outside of Mississippi. The licenses held by our Mississippi gaming
      operations have terms of three years and are not transferable. The Isle-Biloxi,
      the Isle-Vicksburg, the Isle-Natchez and the Isle-Lula hold licenses effective
      from May 23, 2006, through May 22, 2009. In addition, our wholly-owned
      subsidiary, IOC Manufacturing, Inc. holds a manufacturer and distributor’s
      license, so that we may perform certain upgrades to our Mississippi player
      tracking system. This license has a term of three years, is effective from
      June
      16, 2005, through June 15, 2008, and is not transferable. There is no assurance
      that new licenses can be obtained at the end of each three-year period of a
      license. Moreover, the Mississippi Gaming Commission may, at any time, and
      for
      any cause it deems reasonable, revoke, suspend, condition, limit or restrict
      a
      license or approval to own shares of stock in our subsidiaries that operate
      in
      Mississippi.





Substantial
      fines for each violation of Mississippi’s gaming laws or regulations may be
      levied against us, our subsidiaries and the persons involved. Disciplinary
      action against us or one of our subsidiary gaming licensees in any jurisdiction
      may lead to disciplinary action against us or any of our subsidiary licensees
      in
      Mississippi, including, but not limited to, the revocation or suspension of
      any
      such subsidiary gaming license.





We,
      along
      with each of our Mississippi gaming subsidiaries, must periodically submit
      detailed financial, operating and other reports to the Mississippi Gaming
      Commission and/or the State Tax Commission. Numerous transactions, including
      but
      not limited to substantially all loans, leases, sales of securities and similar
      financing transactions entered into by any of our Mississippi gaming
      subsidiaries must be reported to or approved by the Mississippi Gaming
      Commission. In addition, the Mississippi Gaming Commission may, at its
      discretion, require additional information about our operations.





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





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






16


At
      any
      time, the Mississippi Gaming Commission has the power to investigate and require
      the finding of suitability of any record or beneficial stockholder of ours.
      The
      Mississippi Gaming Control Act requires any person who individually or in
      association with others acquires, directly or indirectly, beneficial ownership
      of more than 5% of our common stock to report the acquisition to the Mississippi
      Gaming Commission, and such person may be required to be found suitable. In
      addition, the Mississippi Gaming Control Act requires any person who,
      individually or in association with others, becomes, directly or indirectly,
      a
      beneficial owner of more than 10% of our common stock, as reported to the U.S.
      Securities and Exchange Commission, to apply for a finding of suitability by
      the
      Mississippi Gaming Commission and pay the costs and fees that the Mississippi
      Gaming Commission incurs in conducting the investigation.





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





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





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





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





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





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





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




17


connection with such an investigation.




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





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




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





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





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





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





·
            theme
                parks;





·
            golf
                courses;





·
            marinas;





·
            entertainment
                facilities;




18





·
            tennis
                complexes; or





·
            any
                other facilities approved by the Mississippi Gaming
                Commission.





Parking
      facilities, roads, sewage and water systems or civic facilities are not
      considered “infrastructure facilities.” The Mississippi Gaming Commission may
      reduce the number of rooms required in a hotel if it is satisfied that
      sufficient rooms are available to accommodate the anticipated number of
      visitors. In 2003 and in 2006, the Mississippi Gaming Commission again amended
      its regulation regarding development plan approval but left the 100%
      infrastructure requirement intact.





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





The
      Mississippi Gaming Commission requires, as a condition of licensure or license
      renewal, that casino vessels on the Mississippi Gulf Coast that are not
      self-propelled must be moored to withstand a Category 4 hurricane with 155
      mile-per-hour winds and 15-foot tidal surge. However, after Hurricane Katrina,
      Isle - Biloxi reopened its casino on shore rather than on a vessel. A 1996
      Mississippi Gaming Commission regulation prescribes the hurricane emergency
      procedure to be used by the Mississippi Gulf Coast casinos.





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





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




19


***Missouri*** ****





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





In
      order
      to obtain a riverboat gaming license, the proposed operating business entity
      must complete a Class A Riverboat Gaming Application, comprised of comprehensive
      application forms, including corroborating attachments, and undergo an extensive
      background investigation by the Missouri Gaming Commission. In addition, each
      key person associated with the applicant (including directors, officers,
      managers and owners of a significant direct or indirect interest in the
      applicant) must complete a Riverboat Gaming Application Form I and undergo
      a
      background investigation. Certain key business entities closely related to
      the
      applicant or "business entity key persons" must undergo a similar application
      process and background check. An applicant will not receive a license to conduct
      gambling games and to operate an excursion gambling boat if the applicant and
      its key persons have not established good repute and moral character and no
      licensee shall either employ or contract with any person who has pled guilty
      to,
      or been convicted of, a felony, to perform any duties directly connected with
      the licensee’s privileges under a license granted by the Commission. Each
      license granted entitles a licensee to conduct gambling games on an excursion
      gambling boat or to operate an excursion gambling boat and the equipment thereon
      from a specific location. The duration of the license initially runs for two
      one-year terms; thereafter, two-year terms. In conjunction with the renewal
      of
      each license, the Missouri Gaming Commission requires an updated Class A
      Riverboat Gaming Application and, prior to the renewal of the license, conducts
      an additional investigation of the licensee and of us with specific emphasis
      on
      new information provided in the updated Class A Riverboat Gaming Application.
      The Commission also licenses the serving of alcoholic beverages on riverboats
      and related facilities.





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





A
      licensee is subject to
      the imposition of penalties, suspension or revocation of its license for any
      act
      that is injurious to the public health, safety, morals, good order, and general
      welfare of the people of the State of Missouri, or that would discredit or
      tend
      to discredit the Missouri gaming industry or the State of Missouri, including
      without limitation: (i) failing to comply with or make provision for compliance
      with the legislation, the rules promulgated thereunder or any federal, state
      or
      local law or regulation; (ii) failing to comply with any rules, order or ruling
      of the Missouri Gaming Commission or its agents pertaining to gaming; (iii)
      receiving goods or services from a person or business entity who does not hold
      a
      supplier’s license but who is required to hold such license by the legislation
      or the rules; (iv) being suspended or ruled ineligible or having a license
      revoked or suspended in any state or


20


gaming
      jurisdiction; (v) associating with, either
      socially or in business affairs, or employing persons of notorious or unsavory
      reputation or who have extensive police records, or who have failed to cooperate
      with any officially constituted investigatory or administrative body and would
      adversely affect public confidence and trust in gaming; (vi) employing in any
      Missouri gaming operation any person known to have been found guilty of cheating
      or using any improper device in connection with any gambling game; (vii) use
      of
      fraud, deception, misrepresentation or bribery in securing any license or permit
      issued pursuant to the legislation; (viii) obtaining any fee, charge, or other
      compensation by fraud, deception or misrepresentation; and (ix) incompetence,
      misconduct, gross negligence, fraud, misrepresentation or dishonesty in the
      performance of the functions or duties regulated by the Missouri Riverboat
      Gambling Act.




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





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





Riverboat
      gaming operations may only be conducted on, or within 1,000 feet of the main
      channel of, the Missouri River or Mississippi River. Although, all of the
      excursion gambling facilities in Missouri are permanently moored boats or
      impounded barges, a two hour simulated cruise is imposed in order to ensure
      the
      enforcement of loss limit restrictions. Missouri law imposes a maximum loss
      per
      person per cruise of $500. Minimum and maximum wagers on games are set by the
      licensee and wagering may be conducted only with a cashless wagering system,
      whereby money is converted to tokens, electronic cards or chips that can only
      be
      used for wagering. No person under the age of 21 is permitted to wager, and
      wagers may only be taken from a person present on a licensed excursion gambling
      boat.





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





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




21


***Iowa*** ****





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





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





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





In
      October 2000, the Riverboat Development Authority, a non-profit corporation
      organized for the purpose of facilitating riverboat gaming in Davenport, Iowa,
      entered into an operator’s agreement with the Isle-Davenport to conduct
      riverboat gaming in Davenport, Iowa. The operating agreement requires the
      Isle-Davenport to make weekly payments to the qualified sponsoring organization
      equal to 4.1% of each week’s adjusted gross receipts (as defined in the enabling
      legislation) provided that the Isle-Davenport has agreed that the qualifying
      sponsoring organization will be paid at least the following minimums: (i)
      $3,000,000 for the years ending June 30, 2006 and 2007; (ii) $3,200,000 for
      the
      year ending June 30, 2008 if the Isle-Davenport's new hotel is open by September
      30, 2007, otherwise $3,000,000 and (iii) $3,200,000 for the years ending June
      30, 2009 and thereafter. This agreement will remain in effect through March
      31,
      2009 and may be extended by the Isle-Davenport so long as it holds a license
      to
      conduct gaming. In addition, the Isle-Davenport pays a docking fee, admission
      fee, gaming tax and a payment in lieu of taxes to the City of Davenport.
      Pursuant to a development agreement with the City, the Isle-Davenport has
      exclusive docking privileges in the City of Davenport until March 31, 2017
      in
      consideration for this docking fee. The docking fee has both a fixed base and
      a
      per passenger increment. The fixed fee commenced April 1, 1994 at $111,759
      and
      increases annually by 4%. The incremental component is a $0.10 charge for each
      passenger in excess of 1,117,579 passengers (which charge also increases by
      4%
      per year). The City is also guaranteed an annual gaming tax of $558,789.50
      per
      year (based on a minimum passenger floor count of 1,117,579 passengers at $0.50
      per passenger). Finally, the Isle-Davenport is obligated to pay a payment in
      lieu of taxes to support the downtown development district. This annual lump
      sum
      payment is in the amount of $123,516 plus $0.20 per passenger in excess of
      1,117,579 passengers. This payment in lieu of taxes is further subject to a
      minimum $226,179 per year payment.




On
      July 26, 2005 the
      Isle-Davenport entered into a new development agreement with the City of
      Davenport that supersedes its existing development agreement. Upon satisfaction
      of certain conditions precedent, the docking fee and admission fee will be
      replaced by a development fee equal to 1.65% of




22


adjusted
      gross receipts. The conditions precedent were satisfied in June 2006 resulting
      in the aforementioned lease change. The term of the new development agreement
      is
      for fifty years. The development agreement also includes a payment in lieu
      of
      taxes in the amount equal to the real estate taxes on an assessed  value of
      $5,200,000 per year.





In
      November 2004, the Black Hawk County Gaming Association, a non-profit
      corporation organized for the purpose of facilitating riverboat gaming in
      Waterloo, Iowa entered into an operator's agreement with the Isle-Waterloo
      to
      conduct riverboat gaming in Waterloo, Iowa. The operating agreement requires
      that upon commencement of operations the Isle-Waterloo is to make weekly
      payments to the qualified sponsoring organization equal to 4.1% of each week's
      adjusted gross receipts and an additional fee of 1.65% of each week's adjusted
      gross receipts in lieu of any admission or docking fee which might otherwise
      be
      charged by the county or any city (as defined in Section 99F.1(1) of the Iowa
      Code). This agreement will remain in effect through March 31, 2015 and may
      be
      extended by the Isle-Waterloo so long as it holds a license to conduct gaming.
      In addition, the Isle-Waterloo has agreed to pay a development fee to the City.
      Pursuant to an admission fee administration and development agreement with
      the
      City and Black Hawk County Gaming Association the Isle-Waterloo shall pay a
      development fee equal to 0.5% of each week's adjusted gross receipts.





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





All
      Iowa
      licenses were approved for renewal at the March 2, 2006 Iowa Gaming Commission
      meeting. These licenses are not transferable and will need to be renewed in
      March 2007 and prior to the commencement of each subsequent annual renewal
      period.





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





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





Certain
      officers,
      directors, managers and key employees of the Iowa gaming operations are required
      to be licensed by the Iowa Gaming Commission. Employees associated with gaming
      must obtain work permits that are subject to immediate suspension under specific
      circumstances. In addition, anyone having a material relationship or involvement
      with the Iowa gaming operations may be required to be found suitable or to
      be
      licensed, in which case those persons would be required to pay the costs




23
 and
        fees
        of the Iowa Gaming Commission in connection with the investigation. The Iowa
        Gaming Commission may deny an application for a license for any cause deemed
        reasonable. In addition to its authority to deny an application for license,
        the
        Iowa Gaming Commission has jurisdiction to disapprove a change in position
        by
        officers or key employees and the power to require the Iowa gaming operations
        to
        suspend or dismiss officers, directors or other key employees or sever
        relationships with other persons who refuse to file appropriate applications
        or
        whom the Iowa Gaming Commission finds unsuitable to act in such
        capacities.





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





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





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





·
            is
                not the true owner of the
                enterprise;





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





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





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





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





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





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





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





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





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




24


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




Gaming
      taxes approximating 22% of the adjusted gross receipts will be payable by each
      licensee on its operations to the State of Iowa. In addition, the second of
      two
      prepaid assessments was paid on June 1, 2006 in an amount equal to 2.152% of
      each licensee's adjusted gross receipts for fiscal year 2004. These assessments
      will be offset by future state gaming taxes paid by each licensee with a credit
      for 20% of the assessments paid allowed each year beginning July 1, 2010 for
      five consecutive years. The state of Iowa is also reimbursed by the licensees
      for all costs associated with monitoring and enforcement by the Iowa Gaming
      Commission and the Iowa Department of Criminal Investigation.





***Colorado*** ****





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





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





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





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





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




25


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





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





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





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





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





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





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





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





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




26


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





Under
      the
      Colorado Regulations, any person or entity having any direct or indirect
      interest in a gaming licensee or an applicant for a gaming license, including,
      but not limited to, us, Casino America of Colorado, Inc., IC Holdings Colorado,
      Inc., IOC Black Hawk Distribution Company, LLC or either of the two Colorado
      Casinos and their security holders, may be required to supply the Colorado
      Commission with substantial information, including, but not limited to,
      background information, source of funding information, a sworn statement that
      such person or entity is not holding his or her interest for any other party,
      and fingerprints. Such information, investigation and licensing (or finding
      of
      suitability) as an “associated person” automatically will be required of all
      persons (other than certain institutional investors discussed below) which
      directly or indirectly beneficially own 10% or more of a direct or indirect
      beneficial ownership or interest in either of the two Colorado Casinos, through
      their beneficial ownership of any class of voting securities of us, Casino
      America of Colorado, Inc., IC Holdings Colorado, Inc., IOC Black Hawk
      Distribution Company, LLC or either of the two Colorado Casinos. Those persons
      must report their interest within 10 days (including institutional investors)
      and file appropriate applications within 45 days after acquiring that interest
      (other than certain institutional investors discussed below). Persons (including
      institutional investors) who directly or indirectly beneficially own 5% or
      more
      (but less than 10%) of a direct or indirect beneficial ownership or interest
      in
      either of the two Colorado Casinos, through their beneficial ownership of any
      class of voting securities of us, Casino America of Colorado, Inc., IC Holdings
      Colorado, Inc., IOC Black Hawk Distribution Company, LLC or either of the two
      Colorado Casinos, must report their interest to the Colorado Commission within
      10 days after acquiring that interest and may be required to provide additional
      information and to be found suitable. (It is the current practice of the gaming
      regulators to require findings of suitability for persons beneficially owning
      5%
      or more of a direct or indirect beneficial ownership or interest, other than
      certain institutional investors discussed below.) If certain institutional
      investors provide specified information to the Colorado Commission within 45
      days after acquiring their interest (which, under the current practice of the
      gaming regulators is an interest of 5% or more, directly or indirectly) and
      are
      holding for investment purposes only, those investors, in the Colorado
      Commission’s discretion, may be permitted to own up to 14.99% of the Colorado
      Casinos through their beneficial ownership in any class of voting of securities
      of us, Casino America of Colorado, Inc., IC Holdings Colorado, Inc., IOC Black
      Hawk Distribution Company, LLC or either of the two Colorado Casinos, before
      being required to be found suitable. All licensing and investigation fees will
      have to be paid by the person in question. The associated person investigation
      fee currently is $59 per hour.





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





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






27
 to
        limited gaming operations, equipment devices or premises; and (8) all persons
        contracting with or supplying any goods and services to the gaming regulators.





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





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





The
      Colorado Commission and the Colorado Division have interpreted the Colorado
      Regulations to permit the Colorado Commission to investigate and find suitable
      persons or entities providing financing to or acquiring securities from us,
      Casino America of Colorado, Inc., IC Holdings Colorado, Inc., IOC Black Hawk
      Distribution Company, LLC or either of the two Colorado Casinos. As noted above,
      any person or entity required to file information, be licensed or found suitable
      would be required to pay the costs thereof and of any investigation. Although
      the Colorado Regulations do not require the prior approval for the execution
      of
      credit facilities or issuance of debt securities, the Colorado regulators
      reserve the right to approve, require changes to or require the termination
      of
      any financing, including if a person or entity is required to be found suitable
      and is not found suitable. In any event, lenders, note holders, and others
      providing financing will not be able to exercise certain rights and remedies
      without the prior approval of the Colorado gaming authorities. Information
      regarding lenders and holders of securities will be periodically reported to
      the
      Colorado gaming authorities.





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





An
      application for
      licensure or suitability may be denied for any cause deemed reasonable by the
      Colorado Commission or the Colorado Director, as appropriate. Specifically,
      the
      Colorado Commission and the Colorado Director must deny a license to any
      applicant who, among other things: (1) fails to prove by clear and convincing
      evidence that the applicant is qualified; (2) fails to provide information
      and
      documentation requested; (3) fails to reveal any fact material to qualification,
      or supplies information which is untrue or misleading as to a material fact
      pertaining to qualification; (4) has been convicted of, or has a director,
      officer, general partner, stockholder, limited partner or other person who
      has a
      financial or equity interest in the applicant who has been convicted of,
      specified crimes, including the service of a sentence upon conviction of a
      felony in a correctional facility, city or county jail, or community
      correctional facility or under the state board of parole or any probation
      department within ten years prior to the date of the application,
      gambling-related offenses, theft by deception or crimes involving fraud or
      misrepresentation, is under current prosecution for such crimes (during the




28
 pendency
        of which license determination may be deferred), is a career offender or
        a
        member or associate of a career offender cartel, or is a professional gambler;
        or (5) has refused to cooperate with any state or federal body investigating
        organized crime, official corruption or gaming offenses. If the Colorado
        Commission determines that a person or entity is unsuitable to directly or
        indirectly own interests in us, Casino America of Colorado, Inc., IC Holdings
        Colorado, Inc., or either of the two Colorado Casinos, one or more of the
        Colorado Casinos may be sanctioned, which may include the loss of our approvals
        and licenses.





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





In
      addition, the Colorado Regulations prohibit a licensee or affiliated company
      thereof, such as us, Casino America of Colorado, Inc., IC Holdings Colorado,
      Inc., IOC Black Hawk Distribution Company, LLC or either of the two Colorado
      Casinos, from paying any unsuitable person any dividends or interest upon any
      voting securities or any payments or distributions of any kind (except as set
      forth below), or paying any unsuitable person any remuneration for services
      or
      recognizing the exercise of any voting rights by any unsuitable person. Further,
      under the Colorado Regulations, each of the Colorado Casinos and IOC Black
      Hawk
      Distribution Company, LLC may repurchase its voting securities from anyone
      found
      unsuitable at the lesser of the cash equivalent to the original investment
      in
      the applicable Colorado Casino or IOC Black Hawk Distribution Company, LLC
      or
      the current market price as of the date of the finding of unsuitability unless
      such voting securities are transferred to a suitable person (as determined
      by
      the Colorado Commission) within sixty (60) days after the finding of
      unsuitability. A licensee or affiliated company must pursue all lawful efforts
      to require an unsuitable person to relinquish all voting securities, including
      purchasing such voting securities. The staff of Colorado Division has taken
      the
      position that a licensee or affiliated company may not pay any unsuitable person
      any interest, dividends or other payments with respect to non-voting securities,
      other than with respect to pursuing all lawful efforts to require an unsuitable
      person to relinquish non-voting securities, including by purchasing or redeeming
      such securities. Further, the regulations require anyone with a material
      involvement with a licensee, including a director or officer of a holding
      company, such as us, Casino America of Colorado, Inc., IC Holdings Colorado,
      Inc., IOC Black Hawk Distribution Company, LLC or either of the two Colorado
      Casinos, to file for a finding of suitability if required by the Colorado
      Commission.





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





Generally,
      a sale, lease,
      purchase, conveyance or acquisition of any interest in a licensee is prohibited
      without the Colorado Commission’s prior approval. However, because we are a
      publicly traded corporation, persons may acquire an interest in us (even, under
      current staff interpretations, a controlling interest) without the Colorado
      Commission’s prior approval, but such persons may be required to file notices
      with the Colorado Commission and applications for suitability (as discussed




29
 above)
        and the Colorado Commission may, after such acquisition, find such person
        unsuitable and require them to dispose of their interest. Under some
        circumstances, we may not sell any interest in our Colorado gaming businesses
        without the prior approval of the Colorado Commission.





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





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





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





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




The
      Colorado Constitution permits a gaming tax of up to 40% on adjusted gross gaming
      proceeds, and authorizes the Colorado Commission to change the rate annually.
      The current gaming tax rate is 0.25% on adjusted gross gaming proceeds of up
      to
      and including $2.0 million, 2% over $2.0 million up to and including $4.0
      million, 4% over $4.0 million up to and including $5.0 million, 11% over $5.0
      million up to and including $10.0 million, 16% over $10.0 million up to and
      including $15.0 million and 20% on adjusted gross gaming proceeds in excess of
      $15.0 million. The City of Black Hawk has imposed an annual device fee of $750
      per gaming device and may revise it from time to time. The City of Black Hawk
      also has imposed other fees, including a business improvement district fee
      and
      transportation fee, calculated based on the number of devices and may revise
      the
      same or impose additional such fees.




Colorado
      participates in multi-state lotteries.





The
      sale of alcoholic
      beverages is subject to licensing, control and regulation by the Colorado liquor
      agencies. All persons who directly or indirectly hold a 10% or more interest
      in,
      or 10% or more of the issued and outstanding capital stock of, any of the
      Colorado Casinos, through their ownership of us, Casino America of Colorado,
      Inc., IC Holdings Colorado, Inc., or
      either
      of the two Colorado Casinos,
      must file applications and possibly be investigated by the Colorado liquor
      agencies. The Colorado liquor agencies also may investigate those persons who,
      directly or indirectly, loan money to or have any financial interest in liquor
      licensees. In addition, there are restrictions on stockholders, directors and
      officers of liquor licensees preventing such persons from being a stockholder,
      director, officer or otherwise interested in some persons lending money to
      liquor licensees and from making




30
 loans
        to
        other liquor licensees. All licenses are revocable and transferable only
        in
        accordance with all applicable laws. The Colorado liquor agencies have the
        full
        power to limit, condition, suspend or revoke any liquor license and any
        disciplinary action could (and revocation would) have a material adverse
        effect
        upon the operations of us, Casino America of Colorado, Inc., IC Holdings
        Colorado, Inc., or the applicable Colorado Casino. Each Colorado Casino holds
        a
        retail gaming tavern liquor license for its casino, hotel and restaurant
        operations.





Persons
      directly or indirectly interested in either of the two Colorado Casinos may
      be
      limited in certain other types of liquor licenses in which they may have an
      interest, and specifically cannot have an interest in a retail liquor license
      (but may have an interest in a hotel and restaurant liquor license and several
      other types of liquor licenses). No person can hold more than three retail
      gaming tavern liquor licenses. The remedies of certain lenders may be limited
      by
      applicable liquor laws and regulations.





***Florida*** ****





On
      June
      15, 1995, the Florida Department of Business and Professional Regulation, acting
      through its division of pari-mutuel wagering (the “Florida Division”), issued
      its final order approving Pompano Park as a pari-mutuel wagering permit holder
      for harness and quarter horse racing at Pompano Park. The Florida Division
      approved Pompano Park’s license to conduct a total of 160 live evening
      performances for the season beginning July 1, 2005 to June 30, 2006. Although
      we
      do not presently intend to conduct quarter horse racing operations at Pompano
      Park, we may do so in the future, subject to Florida Division approval. The
      Florida Division must approve any transfer of 10% or more of stock of a
      pari-mutuel racing permit holder such as Pompano Park.





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





Pursuant
      to a Florida Division order and enactments to the Florida Statute, Pompano
      Park
      is also authorized to conduct full-card pari-mutuel wagering on: (1) simulcast
      harness races from outside Florida throughout the racing season and (2) night
      thoroughbred races within Florida if the thoroughbred permit holder has decided
      to simulcast night races. Pompano Park has been granted the exclusive right
      in
      Florida to conduct full-card simulcasting of harness racing on days during
      which
      no live racing is held at Pompano Park. However, on non-race days, Pompano
      Park
      must offer to rebroadcast its simulcast signals to pari-mutuel facilities that
      are not thoroughbred parks in Pompano Park’s market area. In addition, Pompano
      Park may transmit its live races into any dog racing or jai alai facility in
      Florida, including Dade and Broward counties, for intertrack wagering. The
      Florida Statute establishes the percentage split between Pompano Park and the
      other facilities receiving such signals. Legislation in Florida provided certain
      reductions in applicable tax and license fees related to intertrack wagering
      on
      broadcasts of simulcast harness racing and thoroughbred racing. We believe
      that
      simulcast rights at Pompano Park and the changes in the Florida Statute are
      important to Pompano Park’s operating results.





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




31


In
      November 2004, voters in the State of Florida amended the state's constitution
      to allow the voters of Miami-Dade and Broward counties (Broward County is the
      location of the Pompano Park Racetrack) to decide whether to approve slot
      machines in racetracks and jai alai frontons in their respective counties.
      Broward County voters passed their local referendum and Miami-Dade county voters
      rejected their referendum in March 2005. An appeal challenging the validity
      of
      signatures needed to place the amendment on the ballot is pending following
      the
      granting of summary judgment against the plaintiffs in a lower court dismissing
      the challenge. Oral arguments were held in November 2005 but no decision has
      been issued as of the date of this filing. On
      January 4, 2006, a Florida Statute became effective allowing Pompano Park and
      three other pari-mutuel facilities in Broward County to offer slot machine
      gaming to patrons at these facilities. Although there are pari-mutuel facilities
      in numerous other counties in the State of Florida, slot machine gaming is
      only
      authorized in Broward County where Pompano Park is located. We are constructing
      a slot machine and entertainment area at Pompano Park adjacent to the existing
      grandstand at a cost of $140.5 million with slot machine gaming anticipated
      to
      commence in early 2007. We
      do not
      plan to open a temporary facility. The
      statute authorizes Pompano Park to install and operate up to 1500 slot machines
      at its facility 365 days per year, 16 hours per day and requires Pompano Park
      to
      pay an annual license fee of $3 million dollars and gaming taxes equal to 50%
      of
      Pompano Park’s net slot machine revenue plus combined
      county and city taxes of approximately an additional 3.5% on the first $250
      million of net slot machine revenue and 5% on net slot machine revenue over
      $250
      million. The
      Florida Division administering the law is now implementing rules and regulations
      for the operation of the slot machines.





***Bahamas***





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




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







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





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




32


Effective
      June 1, 2006, we notified our landlord of our decision to terminate the lease
      and we intend to cease operations by June 1, 2007 as required by our lease. In
      conjunction with exercising the lease termination, we paid a $2.2 million fee
      to
      the landlord. Based on our lease terms, projected cash flows and government
      regulations, we have taken a impairment charge of approximately $2.4 million
      and
      have accrued $1.2 million for severance payments.





***United
      Kingdom*** ****





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





The
      Gaming Act specifies that only individuals that have been a resident of Great
      Britain for at least six months or a company incorporated in Great Britain
      can
      apply for a license to operate, or operate, a casino in Great Britain. The
      Gaming Act does not prohibit foreign ownership in casinos operated by a resident
      of Great Britain. Casinos can be located only in certain designated areas known
      as “permitted areas,” of which there currently are fifty-three; there are
      approximately 142 gaming facilities currently are operating in these permitted
      areas.





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





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





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




33


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





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





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





The
      government of the UK recently enacted new legislation to update gaming in a
      socially responsive manner in light of developments in the industry and new
      technology. The Gambling Act was passed by the UK Parliament on April 8, 2005
      and will be implemented in stages. Under the new legislation, a new Gambling
      Commission has been created to oversee license applications and establish new
      regulations for gaming (including on-line gaming) in the UK. It has taken over
      responsibilities from the Gaming Board and is working on the transition to
      meet
      this objective. The legislation will provide a significant change in regulation
      of the casino industry including:





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


·
            extending
                the gaming products available;


·
            abolishing
                the demand test and permitted area
                rules;


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


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


·
            allowing
                a new category of regional casinos.





In
      order
      to pass the legislation, having regard to the UK General Election on May 5,
      2005, the Government agreed to limit the number of Regional Casinos to one,
      on a
      pilot basis. A list was recently released of cities being considered to receive
      the regional gaming license and Coventry was not included on the list. An
      increase in the number of regional casinos can be approved by a Ministerial
      Order using the affirmative resolution procedure, which will require that the
      order is affirmed by a vote of both Houses of Parliament.




34


We
      have obtained a gaming
      license to open a casino at RICOH TM Arena in
      Coventry, England under the 1968 Gambling Act and are currently constructing
      this facility. Additionally, we are exploring our options with respect to
      overall development plans for this property, including a possible entertainment
      facility.





***Non-Gaming
      Regulation*** ****





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





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





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





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





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




35


**ITEM
      1A.**  **RISK FACTORS.**





**Risk
      Factors**





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





We
      face
      intense competition in the markets in which we operate. We have numerous
      competitors, including land-based casinos, dockside casinos, riverboat casinos,
      casinos located on Native American-owned lands and at racing and pari-mutuel
      operations. Several of our competitors have substantially better name
      recognition, marketing and financial resources than we do. Legalized gaming
      is
      currently permitted in various forms throughout the United States. Certain
      states have recently legalized, and other states are currently considering
      legalizing, casino gaming in designated areas. There is no limit on the number
      of gaming licenses that may be granted in several of the markets in which we
      operate. As a result, new licenses could be awarded to gaming facilities in
      such
      markets, which could have an adverse effect on our operating results. Expansion
      of existing gaming facilities and the development of new gaming facilities
      in
      our current markets will increase competition for our existing and future
      operations. In addition, many Native American tribes conduct casino gaming
      on
      Native American-owned lands throughout the United States. Such facilities have
      the advantages of being land-based and exempt from certain state and federal
      taxes and operational restrictions imposed by state gaming authorities. Some
      Native American tribes are either in the process of establishing or expanding,
      or are considering the establishment or expansion of, gaming in Oklahoma, Texas,
      Louisiana, Florida, Alabama, Kansas, Colorado, Mississippi and Iowa. The
      establishment or expansion of new gaming facilities and casinos on Native
      American-owned lands will increase competition for our existing and future
      gaming facilities in proximity to Native American owned lands.





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





Our
      existing gaming facilities compete directly with other gaming properties in
      Louisiana, Mississippi, Missouri, Iowa and Colorado. We also compete with gaming
      operators in other gaming jurisdictions such as Atlantic City, New Jersey and
      Las Vegas, Nevada. Our existing casinos attract a significant number of their
      customers from Houston, Texas; Mobile, Alabama; Jackson, Mississippi; Memphis,
      Tennessee; Little Rock, Arkansas and Denver, Colorado. Our continued success
      depends upon drawing customers from each of these geographic markets.
      Legalization of gaming in jurisdictions closer to these geographic markets
      than
      the jurisdictions in which our facilities are located would have a material
      adverse effect on our operating results. We expect competition to increase
      as
      new gaming operators enter our markets, existing competitors expand their
      operations, gaming activities expand in existing jurisdictions and gaming is
      legalized in new jurisdictions. We cannot predict with any certainty the effects
      of existing and future competition on our operating results.





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





As
      owners
      and operators of gaming facilities, we are subject to extensive state and local
      regulation. State and local authorities require us and our subsidiaries to
      demonstrate suitability to obtain and retain various licenses and require that
      we have registrations, permits and approvals to conduct gaming operations.
      The
      regulatory authorities in the jurisdictions in which we operate may limit,
      condition, suspend or revoke a license to conduct gaming operations or prevent
      us from owning the securities of




36
 any
            of
            our gaming subsidiaries. We may also be deemed responsible for the acts
            and
            conduct of our employees. Substantial fines or forfeiture of assets for
            violations of gaming laws or regulations may be levied against us, our
            subsidiaries and the persons involved. The suspension or revocation of
            any of
            our licenses or the levy on us or our subsidiaries of a substantial fine
            would
            have a material adverse effect on our business.
 To
          date,
          we have demonstrated suitability to obtain and have obtained all governmental
          licenses, registrations, permits and approvals necessary for us to operate
          our
          existing gaming facilities. However, like all gaming operators in the
          jurisdictions in which we operate, we must periodically apply to renew
          our
          gaming licenses. We cannot assure you that we will be able to obtain such
          renewals.
 
 In
          addition, regulatory authorities in certain jurisdictions must approve,
          in
          advance, any restrictions on transfers of, agreements not to encumber or
          pledges
          of equity securities issued by a corporation that is registered as an
          intermediary company with such state, or that holds a gaming license. If
          these
          restrictions are not approved in advance, they will be invalid.
 
 On
          January 4, 2006, a Florida statute became effective allowing Pompano Park
          and
          three other pari-mutuel facilities in Broward County to offer slot machine
          gaming to patrons at these facilities. The
          Florida Department of Business and Professional Regulation is administering
          the
          law and is now implementing rules and regulations for the operation of
          the slot
          machines. We cannot assure you how restrictive the aforementioned rules
          will be
          drafted or that we will receive all necessary approvals to commence slot
          operations.
 
 From
          time
          to time, legislators and special interest groups have proposed legislation
          that
          would expand, restrict or prevent gaming operations in the jurisdictions
          in
          which we operate. In addition, from time to time, certain anti-gaming groups
          have attacked constitutional amendments or legislation that would limit
          our
          ability to continue to operate in those jurisdictions in which these
          constitutional amendments or legislation have been adopted. For example,
          in
          November 2004, voters in the State of Florida amended the state’s constitution
          to allow the voters of Miami-Dade and Broward counties (Broward County
          is the
          location of the Pompano Park Racetrack) to decide whether to approve slot
          machines in racetracks and jai alai frontons in their respective counties.
          Broward County voters passed their local referendum and Miami-Dade County
          voters
          rejected their referendum in March 2005. An appeal challenging the validity
          of
          signatures needed to place the Florida constitutional amendment on the
          ballot is
          pending following the granting of summary judgment against the plaintiffs
          in a
          lower court dismissing the challenge. Oral arguments were held in November
          2005,
          but no decision has been issued as of the date of this filing. If the
          constitutional amendment were ultimately found to be invalid, our right
          to
          operate slot machines at Pompano Park would be eliminated. We cannot assure
          you
          as to the outcome of this litigation. Any expansion of gaming or restriction
          on
          or prohibition of our gaming operations could have a material adverse effect
          on
          our operating results.
 
 ***We
          are subject to the possibility of an increase in gaming taxes, which would
          increase our costs*** *.*
 
 State
          and local authorities
          raise a significant amount of revenue through taxes and fees on gaming
          activities. We believe that the prospect of significant revenue is one
          of the
          primary reasons that jurisdictions permit legalized gaming. As a result,
          gaming
          companies are typically subject to significant taxes and fees in addition
          to
          normal federal, state, local and provincial income taxes, and such taxes
          and
          fees are subject to increase at any time. We pay substantial taxes and
          fees with
          respect to our operations. From time to time, federal, state, local and
          provincial legislators and officials have proposed changes in tax laws,
          or in
          the administration of such laws, affecting the gaming industry. In addition,
          poor economic conditions could intensify the efforts of state and local
          governments to raise revenues through increases in gaming taxes. Some of
          the
          states in which we own or operate casinos


37
 continue
        to experience budget shortfalls and, as a result, may increase gaming taxes
        to
        raise more revenue. It is not possible to determine with certainty the
        likelihood of changes in tax laws or in the administration of such laws.
        Such
        changes, if adopted, could have a material adverse effect on our business,
        financial condition and results of operations.


***We
        are subject to non-gaming regulation that could adversely affect
        us.***
 
 Several
        of our riverboats must comply with U.S. Coast Guard requirements as to boat
        design, on-board facilities, equipment, personnel and safety and must hold
        U.S.
        Coast Guard Certificates of Documentation and Inspection. The U.S. Coast
        Guard
        requirements also set limits on the operation of the riverboats and mandate
        licensing of certain personnel involved with the operation of the riverboats.
        Loss of a riverboat’s Certificate of Documentation and Inspection could preclude
        its use as a riverboat casino. Each of our riverboats is inspected annually
        and,
        every five years, is subject to dry-docking for inspection of its hull, which
        could result in a temporary loss of service .
  We
        are
        required to have third parties periodically inspect and certify all of our
        casino barges for stability and single compartment flooding integrity. Our
        casino barges must also meet local fire safety standards. We would incur
        additional costs if any of our gaming facilities were not in compliance with
        one
        or more of these regulations.
 
 We
        are
        also subject to certain federal, state and local environmental laws, regulations
        and ordinances that apply to non-gaming businesses generally, such as the
        Clean
        Air Act, the Clean Water Act, the Resource Conservation Recovery Act, the
        Comprehensive Environmental Response, Compensation and Liability Act and
        the Oil
        Pollution Act of 1990. Under various federal, state and local laws and
        regulations, an owner or operator of real property may be held liable for
        the
        costs of removal or remediation of certain hazardous or toxic substances
        or
        wastes located on its property, regardless of whether or not the present
        owner
        or operator knows of, or is responsible for, the presence of such substances
        or
        wastes. We have not identified any issues associated with our properties
        that
        could reasonably be expected to have an adverse effect on us or the results
        of
        our operations. However, several of our properties are located in industrial
        areas or were used for industrial purposes for many years. As a consequence,
        it
        is possible that historical or neighboring activities have affected one or
        more
        of our properties and that, as a result, environmental issues could arise
        in the
        future, the precise nature of which we cannot now predict. The coverage and
        attendant compliance costs associated with these laws, regulations and
        ordinances may result in future additional costs.
 
 Regulations
        adopted by the Financial Crimes Enforcement Network of the U.S. Treasury
        Department require us to report currency transactions in excess of $10,000
        occurring within a gaming day, including identification of the patron by
        name
        and social security number. U.S. Treasury Department regulations also require
        us
        to report certain suspicious activity, including any transaction that exceeds
        $5,000 if we know, suspect or have reason to believe that the transaction
        involves funds from illegal activity or is designed to evade federal regulations
        or reporting requirements. Substantial penalties can be imposed against us
        if we
        fail to comply with these regulations.
 
 We
        are
        also subject to a variety of other local rules and regulations, including
        zoning, environmental, construction and land-use laws and regulations governing
        the serving of alcoholic beverages. Penalties can be imposed against us if
        we
        fail to comply with these regulations. The imposition of a substantial penalty
        or the loss of service of a gaming facility for a significant period of time
        would have a material adverse affect on our business.
 
 ***Our
        substantial indebtedness could adversely affect our financial health and
        restrict our operations.***


38


We
        have a
        significant amount of indebtedness. As of April 30, 2006, we had $1.2 billion
        of
        total debt outstanding.
 
 Our
        significant indebtedness could have important consequences, such
        as:
 
 ·
            limiting
                our ability to obtain additional financing to fund our working capital
                requirements, capital expenditures, debt service, general corporate
                or
                other obligations; ·
            limiting
                our ability to use operating cash flow in other areas of our business
                because we must dedicate a significant portion of these funds to
                make
                principal and interest payments on our
                indebtedness; ·
            increasing
                our interest expense if there is a rise in interest rates, because
                a
                portion of our borrowings under our senior secured credit facility
                are
                subject to interest rate periods with short-term durations (typically
                30
                to 180 days) that require ongoing refunding at the then current rates
                of
                interest; ·
            causing
                our failure to comply with the financial and restrictive covenants
                contained in the indenture and agreements governing the 7% senior
                subordinated notes due 2014, the 9% senior subordinated notes due
                2012,
                our senior secured credit facility and our other indebtedness, which
                could
                cause a default under those instruments and which, if not cured or
                waived,
                could have a material adverse effect on us; ·
            placing
                us at a competitive disadvantage to our competitors who are not as
                highly
                leveraged; and ·
            increasing
                our vulnerability to and limiting our ability to react to changing
                market
                conditions, changes in our industry and economic
                downturns. 
 Any
        of
        the factors listed above could have a material adverse effect on our business,
        financial condition and results of operations. In addition, as of April 30,
        2006, we had the capacity to issue additional indebtedness, including the
        ability to incur additional indebtedness under all of our lines of credit,
        of
        approximately $433.4 million, of which, approximately $72.2 million of these
        lines of credit were used to support letters of credit. Our capacity to issue
        additional indebtedness is subject to the limitations imposed by the covenants
        in our senior secured credit facility and the indentures governing our notes.
        The indenture governing our notes and our senior secured credit facility
        contain
        financial and other restrictive covenants, but will not fully prohibit us
        from
        incurring additional debt. If new debt is added to our current level of
        indebtedness, related risks that we now face could increase.
  We
        have
        made and will need to make significant capital expenditures at our existing
        facilities to remain competitive with current and future competitors in our
        markets. Our senior secured credit facility and the indentures governing
        our
        notes contain operating and financial restrictions that may limit our ability
        to
        obtain the financing to make these capital expenditures.
 
 Our
        agreements governing our indebtedness, among other things, limit our ability
        to:
 **·**
            borrow
                money; **·**
            make
                capital expenditures; **·**
            use
                assets as security in other transactions; **·**
            make
                restricted payments or restricted
                investments; **·**
            incur
                contingent obligations;****and **·**
            sell
                assets and enter into leases and transactions with
                affiliates. 
 ***We
        may not be able to successfully expand to new locations or recover our
        investment in new locations which would adversely affect our operations and
        available resources.***


39
 We
          regularly evaluate and pursue new gaming acquisition and development
          opportunities in existing and new gaming markets including Waterloo, Iowa;
          Pompano Beach, Florida; Coventry, England; west Harrison County, Mississippi;
          Pittsburgh, Pennsylvania; Singapore and Rosemont, Illinois. To the extent
          that
          we elect to pursue any new gaming acquisition or development opportunity,
          our
          ability to benefit from our investment will depend on many factors, including:
 
 ·
              our
                  ability to successfully identify attractive acquisition and development
                  opportunities; 
 **·**
              our
                  ability to successfully operate any developed or acquired
                  properties; 
 ·
              our
                  ability to attract and retain competent management and employees
                  for the
                  new locations; 
 ·
              our
                  ability to secure required federal, state and local licenses, permits
                  and
                  approvals, which in some jurisdictions are limited in number and
                  subject
                  to intense competition; 
 ·
              the
                  availability of adequate financing on acceptable
                  terms.  Many
          of
          these factors are beyond our control. Therefore, we cannot be sure that
          we will
          be able to recover our investments in any new gaming development opportunities
          or acquired facilities, or successfully expand to additional locations.
 
 ***We
          may experience construction delays during our expansion or development
          projects
          which could adversely affect our operations.***
  We
          currently are engaged in substantial expansion projects at several of our
          properties. We also evaluate other expansion opportunities as they become
          available and we may in the future engage in additional construction projects.
          The anticipated costs and construction periods are based upon budgets,
          conceptual design documents and construction schedule estimates prepared
          by us
          in consultation with our architects and contractors.
  Construction
          projects entail significant risks, which can substantially increase costs
          or
          delay completion of a project. Such risks include shortages of materials
          or
          skilled labor, unforeseen engineering, environmental or geological problems,
          work stoppages, weather interference and unanticipated cost increases.
          Most of
          these factors are beyond our control. In addition, difficulties or delays
          in
          obtaining any of the requisite licenses, permits or authorizations from
          regulatory authorities can increase the cost or delay the completion of
          an
          expansion or development. Significant budget overruns or delays with respect
          to
          expansion and development projects could adversely affect our results of
          operations.
  ***If
          our key personnel leave us, our business will be significantly adversely
          affected.***
 
 Our
          continued success will depend, among other things, on the efforts and skills
          of
          a few key executive officers and the experience of our property managers
          as well
          as our ability to attract and retain additional highly qualified personnel
          with
          gaming industry experience and qualifications to obtain the requisite licenses.
          We do not maintain “key man” life insurance for any of our employees. There is
          no assurance that we would be able to attract and hire suitable replacements
          for
          any of our key employees. We need qualified executives, managers and skilled
          employees with gaming industry experience to continue to successfully operate
          our business. We believe a shortage of skilled labor in the gaming industry
          may
          make it increasingly difficult and expensive to attract and retain qualified
          employees. We expect that increased competition in the gaming industry
          will
          intensify this problem.


40


***Inclement
        weather and other conditions could seriously disrupt our business, financial
        condition and results of operations.***
 
 Dockside
        and riverboat facilities are subject to risks in addition to those associated
        with land-based casinos, including loss of service due to casualty, mechanical
        failure, extended or extraordinary maintenance, flood, hurricane or other
        severe
        weather. Our riverboats and barges face additional risks from the movement
        of
        vessels on waterways.
 
 Reduced
        patronage and the loss of a dockside or riverboat casino from service for
        any
        period of time could adversely affect our results of operations. For example,
        as
        a result of hurricanes Katrina and Rita, we closed the Isle-Biloxi from August
        28, 2005 to December 26, 2005 and the Isle-Lake Charles from September 22,
        2005
        to October 8, 2005. While our business interruption insurance provided
        sufficient coverage for those losses, we cannot be assured that the proceeds
        from any future claim will be sufficient to compensate us if one or more
        of our
        casinos experience a closure.
 
 In
        fiscal
        2007, as a result of hurricane claims in the Gulf Coast region over the past
        several years, we have experienced a significant increase in property and
        business interruption premiums.
 
 Access
        to
        a number of our facilities may also be affected by road conditions, such
        as
        construction and traffic. In addition, severe weather such as high winds
        and
        blizzards occasionally limits access to our facilities in Colorado.
 
 ***Energy
        and fuel price increases may adversely affect our costs of operations and
        our
        revenues***
 
 Our
        casino properties use significant amounts of electricity, natural gas and
        other
        forms of energy. While no shortages of energy have been experienced, substantial
        increases in the cost of electricity in the United States will negatively
        affect
        our results of operations. In addition, energy and fuel price increases in
        cities that constitute a significant source of customers for our properties
        could result in a decline in disposable income of potential customers and
        a
        corresponding decrease in visitation to our properties, which would negatively
        impact our revenues. The extent of the impact is subject to the magnitude
        and
        duration of the energy and fuel price increases, but this impact could be
        material.
 
 ***A
        downturn in general economic conditions may adversely affect our results
        of
        operations.***
 
 Our
        business operations are subject to changes in international, national and
        local
        economic conditions, including changes in the economy related to future security
        alerts in connection with threatened or actual terrorist attacks and related
        to
        the war with Iraq, which may affect our customers’ willingness to travel. A
        recession or downturn in the general economy, or in a region constituting
        a
        significant source of customers for our properties, could result in fewer
        customers visiting our properties, which would adversely affect our results
        of
        operations.
 
 ***We
        have international operations that are subject to different risks than our
        domestic operations.***
 
 In
        the
        United Kingdom and the Bahamas, we are subject to certain additional risks,
        including difficulty in staffing and managing foreign subsidiary operations,
        foreign currency fluctuations, dependence on foreign economies, political
        issues, adverse tax consequences and uncertainty in regulatory reform in
        the
        United Kingdom. In addition, in the Bahamas current gaming regulation preclude
        residence from participating in gaming activities. Therefore, disruptions
        in
        tourism traffic such as airline and other means of transportation and hotel
        accommodations can have an adverse impact in our gaming operations.


41


**ITEM
      1B.**  **UNRESOLVED STAFF COMMENTS.**





None.








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





*The
      Isle-Lake Charles*





We
      own
      approximately 2.7 acres and lease approximately 16.25 acres of land in Calcasieu
      Parish, Louisiana for use in connection with the Isle-Lake Charles. This lease
      automatically renewed in March 2005 and we have the option to renew it for
      sixteen additional terms of five years each. Rent under the Isle-Lake Charles
      lease is currently $1.5 million per year and is subject to increases based
      on
      the Consumer Price Index (“CPI”) and construction of hotel facilities on the
      property. We own two hotels in Lake Charles with a total of 493
      rooms.




*The
      Isle-Bossier City*





We
      own
      approximately 38 acres of land in Bossier City, Louisiana for use in connection
      with the Isle-Bossier City and we own two hotels with 565 rooms on approximately
      10.5 acres of land located 2.5 miles east of the Isle-Bossier City. We presently
      have a pending purchase agreement with Legends Gaming, LLC to sell our Bossier
      City operations which we expect to close in the second quarter of fiscal year
      2007.





*The
      Isle-Lula*





We
      lease
      approximately 1,000 acres of land in Coahoma County, Mississippi and utilize
      approximately 50 acres in connection with the operations of the Isle-Lula.
      Unless terminated by us at an earlier date, the lease expires in 2033. Rent
      under the lease is currently 5.5% of gross gaming revenue as calculated by
      the
      Mississippi Gaming Commission, plus $5,000 per month, as well as $3,333 per
      month for the hotel. We also own approximately 100 acres in Coahoma County,
      which may be utilized for future development.





*The
      Isle-Biloxi*





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





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




42


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





In
      August
      2002, we entered into a lease for two additional parcels of land adjoining
      the
      Isle-Biloxi and the hotel. On the parcel adjoining the Isle-Biloxi, we
      constructed a multi-level parking garage that has approximately 1,000 parking
      spaces. There is additional ground level parking on a parcel of land in front
      of
      the garage, also subject to this lease, with approximately 600 parking spaces.
      We have constructed a 400-room addition to the existing hotel on the parcel
      leased next to the existing hotel. In addition, we may construct a hotel above
      the parking garage. This lease with the City of Biloxi and the Mississippi
      Secretary of State is for an initial term of forty years, with one option to
      renew for an additional twenty-five years and additional options thereafter,
      with the consent of the Mississippi Secretary of State, consistent with the
      term
      of the lease described in the preceding paragraph. When combined with the base
      and percentage rents described for the leases in the preceding two paragraphs,
      annual rent under those two leases and this lease is estimated to be $4.3
      million for the lease year ending July 31, 2006 and $4.4 million for lease
      year
      ending July 31, 2007. Such minimum rent to increase thereafter over time in
      accordance with a formula based on anticipated timing for completion of the
      current hotel and completion of the hotel on top of the parking garage (or
      August 31, 2008, whichever occurs first), up to a minimum rent of $3.7 million.
      Such amounts are subject to decreases due to market adjustments and increases
      based on the CPI. Also, we are responsible for annual rent equal to 4% of gross
      retail revenue and gross cash revenue (as defined in the lease), but without
      double counting. If the rent minimum described in the preceding sentences is
      not
      otherwise satisfied from other rents, then this percentage rent is not in
      addition to the minimum rent, but rather is to be applied to that
      minimum.





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





We
      have
      also entered into a joint venture arrangement to sublease property containing
      a
      two-level parking garage next to the Isle-Biloxi. Our annual rent under this
      lease is approximately $212,500. The current term is for five years expiring
      December 31, 2010, with a renewal option for an additional five-year term (under
      which our annual rent would increase based on a Consumer Price Index) extending
      the lease through December 31, 2015.





*The
      Isle-Vicksburg*





We
      own
      approximately 13.1 acres of land in Vicksburg, Mississippi for use in connection
      with the Isle-Vicksburg. We own an additional thirteen acres of land in
      Vicksburg on which we operate off-site parking and a recreational vehicle park.
      We also entered into a lease for approximately five acres of land adjacent
      to
      the Isle-Vicksburg to be used for additional parking. We presently have a
      pending purchase agreement with Legends Gaming, LLC to sell our Vicksburg
      operations which we expect to close in the second quarter of fiscal year
      2007.






43


*The
      Isle-Natchez*





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





*The
      Isle-Kansas City*





We
      lease
      approximately twenty-eight acres from the Kansas City Port Authority in
      connection with the operation of the Isle-Kansas City facility. The term of
      the
      lease is ten years, expiring in October 2006, and we have the option to renew
      the lease for eight additional terms of five years each. Rent under the lease
      is
      currently $3.0 million per year, subject to the higher of $2.0 million (minimum
      rent) per year, or 3.25% of gross revenues, less complimentaries. As a part
      of
      our expansion plans, we are negotiating a new lease with the Kansas City Port
      Authority.





*The
      Isle-Boonville*





The
      Company entered into a lease agreement with the City of Boonville. Under the
      terms of agreement, the Company leases the site for a period of ninety-nine
      years. In lieu of rent, the Company is assessed additional amounts by the City
      of Boonville based on a 3.5% tax on gaming revenue, which the Company recognizes
      as additional rent.





*The
      Isle-Bettendorf*





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





*The
      Rhythm City-Davenport*





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





*The
      Isle-Marquette*





We
      lease the dock site in
      Marquette, Iowa that is used in connection with the operations of the
      Isle-Marquette. The lease expires in 2019, and rent under the lease is currently
      $15,000 per month, plus $0.50 per passenger, plus 2.5% of gaming revenues (less
      state wagering taxes) in excess of $20.0 million but less than $40.0 million;
      5%
      of gaming revenues (less state wagering taxes) in excess of $40.0 million but
      less than $60.0 million; and 7.5% of gaming revenues (less state wagering taxes)
      in excess of $60.0 million. We also rent approximately 5 acres of land used
      for
      the employee parking lot




44
 that
        is a
        month-to-month rental of $833. We also own approximately twenty-five acres
        of
        land for the pavilion, hotel, satellite offices, warehouse, lots by the marina,
        and other property.





*The
      Isle-Black Hawk*





Through
      our 57% ownership interest in Isle-Black Hawk, we own approximately 10.1 acres
      of land in Black Hawk, Colorado for use in connection with the Isle-Black
      Hawk.





*The
      Colorado Central Station-Black Hawk* ****





Through
      our 57% ownership interest in Colorado Central Station-Black Hawk, we own or
      lease approximately 7.1 acres of land in Black Hawk, Colorado for use in
      connection with the Colorado Central Station-Black Hawk. We lease additional
      parcels of land adjoining the Colorado Central Station-Black Hawk for parking.
      This lease is for an initial term of nine years with options to renew for
      eighteen additional terms of five years each with the final option period
      concluding June 1, 2094. Annual rent is $1.7 million indexed to correspond
      to
      any rise or fall in the CPI at one-year intervals beginning June 1, 1996, not
      to
      exceed a 3% increase or decrease from the previous year’s rate. We also entered
      into a lease for additional parking. This lease is for an initial term of ten
      years with options to renew for nine additional terms of ten years each with
      the
      final option period concluding June 1, 2094. Annual rent is $576,000 and
      renewals are subject to 20% rent increases over the rate of the previous term.





*Pompano
      Park*





We
      own
      approximately 223 acres at Pompano Park.





*The
      Isle-Our Lucaya*





In
      April
      2006, our Board of Directors approved a plan to close the Isle-Our Lucaya
      facility. Effective June 1, 2006, we notified our landlord of our decision
      to
      terminate the lease and we intend to cease operations by June 1, 2007 as
      required by our lease.  We
      will
      continue to report the results of the Isle-Our Lucaya property as continuing
      operations until a probable sale of this facility is reached or operations
      are
      ceased, at which time, these results will be reported as discontinued
      operations.





*Blue
      Chip-Dudley*





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





*Blue
      Chip-Wolverhampton*





Through
      our two-thirds ownership interest in Blue Chip PLC, we own the 15,000
      square-foot building used for the Blue Chip-Wolverhampton casino operation.
      We
      also own a 2,000 square foot parking area for the casino.





*Blue
      Chip-Walsall*





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




45


*Coventry*





We
      entered into a twenty-five year lease in December 2003, to lease approximately
      120,000 square
      feet within the arena compound that will be used in connection with the
      operation of the Isle-Coventry. We have paid approximately £6.0 million plus
      17.5% value added tax (“VAT”) ($10.9 million plus VAT as of April 30, 2006,
      based on published exchange rates) for prepaid rent. Due to delayed construction
      we will start to make lease payments in the second quarter of fiscal 2007 rather
      than fourth quarter of fiscal 2006 in the approximate amount of £1.3 million
      plus VAT ($2.4 million plus VAT as of April 30, 2006, based on published
      exchange rates) per year. The lease payment will be offset by the £6.0 million
      plus VAT ($10.9 million plus VAT as of April 30, 2006, based on published
      exchange rates) prepaid rent and interest of 8% per annum on the unpaid balance
      that reduces annual rent expenses over 15 years.





*Other*





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





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





We
      have
      entered into a lease for our new corporate office location in Creve Coeur,
      Missouri.





We
      own
      additional property and have various property leases and options to either
      lease
      or purchase property that are not directly related to our existing operations
      and that may be utilized in the future in connection with expansion projects
      at
      our existing facilities or development of new projects, including our proposed
      development in west Harrison County, Mississippi and our project currently
      under
      construction in Waterloo, Iowa.





**ITEM
      3. LEGAL PROCEEDINGS.**




Lady
      Luck
      Gaming Corporation (now our wholly owned subsidiary) and several joint venture
      partners are defendants in a lawsuit brought by the country of Greece through
      its Minister of Tourism (now Development) and Finance. The action alleges that
      the defendants failed to make specified payments in connection with the gaming
      license bid process for Patras, Greece. The payment we are alleged to have
      been
      required to make aggregates approximately 6.5 million Euros (which was
      approximately $8.2 million as of April 30, 2006 based on published exchange
      rates). Although it is difficult to determine the damages being sought from
      the
      lawsuit, the action may seek damages up to that aggregate amount plus interest
      from the date of the action. The Athens Civil Court of First Instance granted
      judgment in our favor and dismissed the lawsuit, but the Ministry appealed
      the
      matter and the appeal was heard before the Athens Appeal Court of First
      Instance. The Athens Appeal Court issued certified copies of judgments denying
      the Ministry’s appeal. The Ministry elected to appeal this matter further to the
      Supreme Court. During October 2005, the Administrative Supreme Court remanded
      the matter back to the Athens Administrative Appeals Court for a hearing on
      the
      merits, which is expected to take place at the end of 2006 or early 2007. The
      civil matter was set for hearing before the Greek Supreme Court during May
      2006;
      however, prior to the scheduled hearing date, the Greek Supreme Court reset
      the
      hearing for January 8, 2007. We intend to continue a vigorous and appropriate
      defense to the claims asserted in this matter.






46


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




We
      are
      subject to various contingencies and litigation matters and have a number of
      unresolved claims. Although the ultimate liability of these contingencies,
      this
      litigation and these claims cannot be determined at this time, we believe that
      they will not have a material adverse effect on our consolidated financial
      position, results of operations or cash flows. See Footnote 20 to the
      Consolidated Financial Statements for further discussion of these matters.








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





None.




**PART
      II**





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


MATTERS
      AND ISSUER PURCHASES OF EQUITY SECURITIES.





(a)


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




**High**
              
              
              **Low**Fiscal
                  Year Ending April 29, 2007First
                  Quarter (through July 3, 2006)
              $
              33.01
              
              $
              23.86Fiscal
                  Year Ended April 30, 2006Fourth
                  Quarter
              $
              33.93
              
              $
              27.70Third
                  Quarter
              
              28.76
              
              
              20.30Second
                  Quarter
              
              28.67
              
              
              19.48First
                  Quarter
              
              28.87
              
              
              22.60Fiscal
                  Year Ended April 24, 2005Fourth
                  Quarter
              $
              30.68
              
              $
              23.77Third
                  Quarter
              
              27.90
              
              
              20.24Second
                  Quarter
              
              22.26
              
              
              15.90First
                  Quarter
              
              23.55
              
              
              16.25





*ii.*
            *Holders
                of Common Stock*.
                As of July 3, 2006, there were approximately 1,576 holders of record
                of
                our common stock.





*iii.*
            *Dividends**.*We
                have never declared or paid any dividends with respect to our common
                stock
                and the current policy of our board of directors is to retain earnings
                to
                provide for the growth of the company. In addition, our senior secured
                credit facility and the indentures governing our 7%


47


senior
                subordinated notes and our 9% senior subordinated notes limit our
                ability
                to pay dividends. See “Item 8-Financial Statements and Supplementary
                Data-Isle of Capri Casinos, Inc.-Notes to Consolidated Financial
                Statements - Note 7.” Consequently, no cash dividends are expected to be
                paid on our common stock in the foreseeable future. Further, there
                can be
                no assurance that our current and proposed operations will generate
                the
                funds needed to declare a cash dividend or that we will have legally
                available funds to pay dividends. In addition, we may fund part of
                our
                operations in the future from indebtedness, the terms of which may
                prohibit or restrict the payment of cash dividends. If a holder of
                common
                stock is disqualified by the regulatory authorities from owning such
                shares, such holder will not be permitted to receive any dividends
                with
                respect to such stock. See “Item 1-Business-Regulation and
                Licensing.”





*iv.*
            *Equity
                Compensation Plans*.The following table provides information about securities authorized
                for
                issuance under our 1992, 1993 and 2000 Employee Stock Option Plans,
                and
                our Deferred Bonus Plan, for the fiscal year ended April 30,
                2006.


(a)
            (b)
            (c)Plan
                category
            Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights
            Weighted-average
                exercise price of outstanding options, warrants and rights
            Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))Equity
                compensation plans approved by security holders
            2,932,100
            $ 
                15.85
            1,186,032Equity
                compensation plans not approved by security holders
            -
            -
            -Total
            2,932,100
            $ 
                15.85
            1,186,032


(b)  Issuance
      of Unregistered Securities


None.





(c)  Purchases
        of our Common Stock
 The
        following table provides information related to our purchases of Isle of
        Capri
        Casinos, Inc. common stock:
  **Total
                  Number of Shares Purchased**
              
              
              **Average
                  Price Paid per Share**
              
              
              **Total
                  Number of Shares Purchased as Part of Publicly Announced Programs
                  (1)**
              
              
              **Maximum
                  Number of Shares that May Yet Be Purchased Under the Programs
                  (1)****Period**January
                  23, 2006 to February 19, 2006
              
              -
              
              $
              -
              
              
              -
              
              
              1,620,902February
                  20, 2006 to March 26, 2006
              
              -
              
              
              -
              
              
              -
              
              
              1,620,902March
                  27, 2006 to April 30, 2006
              
              -
              
              
              -
              
              
              -
              
              
              1,620,902Total
              
              -
              
              $
              -
              
              
              -
              
              
              1,620,902






48





(1)
      We
      have purchased our common stock under two separate repurchase programs. The
      first program, which allowed repurchase of up to 1,500,000 shares was announced
      on November 15, 2000, and subsequently expanded to allow repurchase of an
      additional 1,500,000 shares, as announced on January 11, 2001. The current
      program was announced on October 25, 2002 and allows for the repurchase of
      up to
      1,500,000 shares. On October 7, 2005 the board also approved the repurchase
      of
      an additional 1,500,000 shares. To date, we have purchased 4,379,098 shares
      of
      our common stock under the two programs. These programs have no approved dollar
      amounts, nor expiration dates.





**ITEM
      6. SELECTED FINANCIAL DATA.**





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





**Fiscal
                Year Ended (1)****April
                30,**
            
            
            **April
                24,**
            
            
            **April
                25,**
            
            
            **April
                27,**
            
            
            **April
                28,****2006**
            
            
            **2005**
            
            
            **2004**
            
            
            **2003**
            
            
            **2002****Income
                Statement Data:**
            (dollars
                in millions, except per share data)Revenues:Casino
            $
            1,004.6
            
            $
            957.8
            
            $
            948.9
            
            $
            878.6
            
            $
            879.2Rooms
            
            37.0
            
            
            33.1
            
            
            33.4
            
            
            38.8
            
            
            45.6Pari-mutuel
                commissions and fees
            
            20.6
            
            
            20.1
            
            
            20.3
            
            
            23.9
            
            
            23.5Food,
                beverage and other
            
            126.0
            
            
            124.8
            
            
            120.3
            
            
            117.3
            
            
            128.5Gross
                revenues
            
            1,188.2
            
            
            1,135.8
            
            
            1,122.9
            
            
            1,058.6
            
            
            1,076.8Less
                promotional allowances
            
            200.2
            
            
            188.3
            
            
            183.4
            
            
            166.3
            
            
            169.8Net
                revenues
            
            988.0
            
            
            947.5
            
            
            939.5
            
            
            892.3
            
            
            907.0Operating
                expenses:Casino
            
            152.5
            
            
            157.3
            
            
            152.3
            
            
            151.9
            
            
            164.0Gaming
                taxes
            
            220.0
            
            
            215.1
            
            
            208.9
            
            
            192.9
            
            
            190.8Rooms
            
            8.5
            
            
            7.5
            
            
            7.5
            
            
            9.3
            
            
            11.2Pari-mutuel
            
            16.1
            
            
            15.5
            
            
            15.4
            
            
            16.9
            
            
            16.8Food,
                beverage and other
            
            31.5
            
            
            29.8
            
            
            26.6
            
            
            28.7
            
            
            30.2Marine
                and facilities
            
            58.1
            
            
            56.7
            
            
            54.4
            
            
            54.3
            
            
            58.2Marketing
                and administrative
            
            294.0
            
            
            274.3
            
            
            260.8
            
            
            238.7
            
            
            241.7Valuation
                and other charges
            
            13.5
            
            
            4.1
            
            
            -
            
            
            1.9
            
            
            61.4Hurricane
                related charges, net
            
            4.7
            
            
            -
            
            
            -
            
            
            -
            
            
            -Preopening
            
            0.3
            
            
            0.2
            
            
            2.3
            
            
            -
            
            
            3.9Depreciation
                and amortization
            
            87.1
            
            
            82.3
            
            
            75.9
            
            
            63.9
            
            
            60.5Total
                operating expenses
            
            886.3
            
            
            842.8
            
            
            804.1
            
            
            758.5
            
            
            838.7Operating
                income
            
            101.7
            
            
            104.7
            
            
            135.4
            
            
            133.8
            
            
            68.3Interest
                expense
            
            (74.4)
            
            
            (64.7)
            
            
            (71.1)
            
            
            (65.8)
            
            
            (71.6)Interest
                income
            
            3.3
            
            
            1.8
            
            
            0.5
            
            
            0.4
            
            
            0.6Loss
                on early extinguishment of debt
            
            (2.1)
            
            
            (5.2)
            
            
            (14.1)
            
            
            -
            
            
            (7.0)Minority
                interest
            
            (6.5)
            
            
            (5.5)
            
            
            (10.1)
            
            
            (9.5)
            
            
            (7.7)Income
                (loss) from continuing operations before income taxes
            
            22.0
            
            
            31.1
            
            
            40.6
            
            
            58.9
            
            
            (17.4)Income
                taxes
            
            14.2
            
            
            16.1
            
            
            13.3
            
            
            21.6
            
            
            (5.5)Income
                (loss) from continuing operations
            
            7.8
            
            
            15.0
            
            
            27.3
            
            
            37.3
            
            
            (11.9)Income
                from discontinued operations, net of income taxes
            
            11.2
            
            
            3.0
            
            
            0.4
            
            
            8.3
            
            
            11.9Net
                income
            $
            19.0
            
            $
            18.0
            
            $
            27.7
            
            $
            45.6
            
            $
            -






49




**Fiscal
                  Year Ended (1)****April
                  30,**
              
              
              **April
                  24,**
              
              
              **April
                  25,**
              
              
              **April
                  27,**
              
              
              **April
                  28,****2006**
              
              
              **2005**
              
              
              **2004**
              
              
              **2003**
              
              
              **2002****Income
                  Statement Data (continued):**
              (dollars
                  in millions, except per share data)Income
                  per common share:BasicIncome
                  from continuing operations
              $
              0.26
              
              $
              0.51
              
              $
              0.93
              
              $
              1.29
              
              $
              (0.42)Income
                  from discontinued operations
              
              0.37
              
              
              0.10
              
              
              0.01
              
              
              0.29
              
              
              0.42Net
                  Income
              $
              0.63
              
              $
              0.61
              
              $
              0.94
              
              $
              1.57
              
              $
              -DilutedIncome
                  from continuing operations
              $
              0.25
              
              
              0.49
              
              $
              0.90
              
              $
              1.22
              
              $
              (0.40)Income
                  from discontinued operations
              
              0.36
              
              
              0.10
              
              
              0.01
              
              
              0.27
              
              
              0.40Net
                  Income
              $
              0.61
              
              $
              0.58
              
              $
              0.91
              
              $
              1.50
              
              $
              -**Other
                  Data:**Net
                  cash provided by (used in):Operating
                  activities
              $
              99.5
              
              $
              169.9
              
              $
              173.2
              
              $
              138.2
              
              $
              153.7Investing
                  activities
              $
              (188.9)
              
              $
              (213.7)
              
              $
              (159.1)
              
              $
              (126.6)
              
              $
              (100.6)Financing
                  activities
              $
              64.4
              
              $
              55.4
              
              $
              25.8
              
              $
              6.4
              
              $
              (53.2)Capital
                  expenditures*
              $
              161.8
              
              $
              217.3
              
              $
              153.4
              
              $
              61.3
              
              $
              98.3**Operating
                  Data:**Number
                  of slot machines (2)
              
              12,875
              
              
              12,672
              
              
              12,702
              
              
              11,665
              
              
              12,740Number
                  of table games (2)
              
              483
              
              
              485
              
              
              398
              
              
              283
              
              
              325Number
                  of hotel rooms (2)
              
              2,652
              
              
              2,129
              
              
              2,082
              
              
              2,198
              
              
              3,217Average
                  daily occupancy rate (3)
              
              81.7%
              
              
              84.8%
              
              
              83.7%
              
              
              78.1%
              
              
              84.0%**Balance
                  Sheet Data:**Cash
                  and cash equivalents
              $
              121.2
              
              $
              146.7
              
              $
              134.6
              
              $
              94.6
              
              $
              76.6Total
                  assets
              
              1,833.9
              
              
              1,681.4
              
              
              1,524.0
              
              
              1,416.0
              
              
              1,353.4Long-term
                  debt, including current portion
              
              1,221.3
              
              
              1,156.1
              
              
              1,088.9
              
              
              1,028.0
              
              
              1,009.3Stockholders'
                  equity
              
              282.7
              
              
              261.4
              
              
              241.4
              
              
              203.9
              
              
              159.2*Excludes:
                  destroyed Isle-Biloxi casino barge of $7.4 million in fiscal 2005
                  and
                  $36.8 million in fiscal 2006, and Isle-Biloxitemporary
casino
                  of $37.9 million in fiscal 2006 and discontinued operations of
                  Isle-Vicksburg and Isle-Bossier
                  City
   (1)
        The
        operating results and data presented for fiscal years prior to fiscal year
        2003
        are not comparable to other fiscal years presented as we ceased operations
        at
        the Isle-Tunica on September 3, 2002, acquired the Colorado Central
        Station-Black Hawk and the Colorado Grande-Cripple Creek on April 22, 2003
        and
        ceased operations at the Colorado Grande-Cripple Creek on April 25, 2005. The
        operating results and data presented for fiscal years prior to fiscal year
        2004
        are not comparable to other fiscal years presented because they do not include
        the operating results of the Isle-Our Lucaya, which we opened on December
        15,
        2003, the Blue Chip-Dudley, which we acquired on November 28, 2003, the Blue
        Chip-Wolverhampton, which we opened on April 22, 2004, and the Blue
        Chip-Walsall, which we opened on September 23, 2004. We also ceased operations
        at the Lady Luck-Las Vegas on September 3, 2003. The results of fiscal years
        2002-2006 have been reclassified to reflect the Isle-Bossier City,
        Isle-Vicksburg and Colorado Grande-Cripple Creek as discontinued
        operations.
  (2)
        The
        data presented for fiscal years prior to 2003 is not comparable to other
        fiscal
        years presented due to the exclusion of the 223 Colorado Grande-Cripple Creek
        slot machines due to discontinued operations. The results of fiscal years
        2002-2006 have been reclassified to reflect the Isle-Bossier City,
        Isle-Vicksburg and Colorado Grande-Cripple Creek as discontinued
        operations.
  (3)
        The
        data presented for fiscal years prior to 2003 is not comparable to other
        fiscal
        years presented due to the exclusion of the 227 Isle-Tunica and the 792 Lady
        Luck-Las Vegas hotel rooms. The results of fiscal years 2002-2006 have been
        reclassified to reflect the Isle-Bossier City, Isle-Vicksburg and Colorado
        Grande-Cripple Creek as discontinued operations.




50
 ITEM
          7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS.
  *You
          should read the following discussion together with the financial statements,
          including the related notes and the other financial information in this
          Form
          10-K.*
 
 **Executive
          Overview**
 
 We
          are a
          leading developer, owner and operator of branded gaming facilities and
          related
          lodging and entertainment facilities in regional markets in the United
          States
          and internationally. We continue to investigate developing new locations,
          purchasing existing operations and expanding our current properties. These
          activities require capital-intensive investments that have long-term return
          potential. We have intentionally sought geographic diversity to limit the
          risks
          caused by weather, regional economic difficulties, and local gaming authorities
          and regulations. We currently operate casinos in Mississippi, Louisiana,
          Missouri, Iowa, Colorado and Freeport, Grand Bahama Island. We operate
          a harness
          racing track in Florida. Additionally, we have a controlling interest in
          casino
          investments in Dudley, Wolverhampton and Walsall, England, each of which
          is
          operated by the minority owners. The following discussion includes results
          only
          from our continuing operations.
 
 The
          following table reflects our consolidated net revenues and operating income
          by
          state:
 **ISLE
                      OF CAPRI CASINOS, INC.****CONSOLIDATED
                      STATEMENTS OF OPERATIONS****(In
                      thousands)****Fiscal
                      Year Ended****April
                      30,**
                  
                  
                  **April
                      24,**
                  
                  
                  **Variance**
                  
                  
                  **Variance****2006**
                  
                  
                  **2005**
                  
                  
                  $
                  
                  
                  %Net
                      revenues:Mississippi
                  
                  $
                  232,475
                  
                  $
                  201,629
                  
                  $
                  30,846
                  
                  
                  15.3%Lousiana
                  
                  
                  161,912
                  
                  
                  172,081
                  
                  
                  (10,169)
                  
                  
                  (5.9%)Missouri
                  
                  
                  162,644
                  
                  
                  166,274
                  
                  
                  (3,630)
                  
                  
                  (2.2%)Iowa
                  
                  
                  208,977
                  
                  
                  211,650
                  
                  
                  (2,673)
                  
                  
                  (1.3%)Colorado
                  
                  
                  163,411
                  
                  
                  138,588
                  
                  
                  24,823
                  
                  
                  17.9%International
                  
                  
                  33,570
                  
                  
                  31,115
                  
                  
                  2,455
                  
                  
                  7.9%Corporate
                      and other
                  
                  
                  25,031
                  
                  
                  26,235
                  
                  
                  (1,204)
                  
                  
                  (4.6%)Total
                      net revenues
                  
                  $
                  988,020
                  
                  $
                  947,572
                  
                  $
                  40,448
                  
                  
                  4.3%Operating
                      income:Mississippi
                  
                  $
                  51,673
                  
                  $
                  23,117
                  
                  $
                  28,556
                  
                  
                  123.5%Lousiana
                  
                  
                  19,517
                  
                  
                  27,036
                  
                  
                  (7,519)
                  
                  
                  (27.8%)Missouri
                  
                  
                  27,011
                  
                  
                  24,976
                  
                  
                  2,035
                  
                  
                  8.1%Iowa
                  
                  
                  42,075
                  
                  
                  44,710
                  
                  
                  (2,635)
                  
                  
                  (5.9%)Colorado
                  
                  
                  36,132
                  
                  
                  29,764
                  
                  
                  6,368
                  
                  
                  21.4%International
                  
                  
                  (13,459)
                  
                  
                  (4,013)
                  
                  
                  (9,446)
                  
                  
                  (235.4%)Corporate
                      and other
                  
                  
                  (61,254)
                  
                  
                  (40,842)
                  
                  
                  (20,412)
                  
                  
                  (50.0%)Operating
                      income
                  
                  $
                  101,695
                  
                  $
                  104,748
                  
                  $
                  (3,053)
                  
                  
                  (2.9%)Note:
                      Exlcudes Isle-Vicksburg, Isle-Bossier City and Colorado Grande-Cripple
                      Creek which
                      have been classified as discontinued
                      operations
  In
            Mississippi, our three continuing operations contributed $232.5 million
            or 23.5%
            of our net revenues during the fiscal year ended April 30, 2006. Net
            revenues
            and operating income were up $30.8 million and $28.6 million, respectively,
            compared to prior year. The primary reason for these increases were a
            new and
            upgraded land-based casino at the Isle-Biloxi, limited competition in
            the Biloxi
            market due to closures related to Hurricane Katrina, and continuing effects
            of a
            population shift into the Isle-Natchez’ market. Isle-Lula’s results remained
            consistent with prior year.
  51


In
        Louisiana, the Isle-Lake Charles contributed $161.9 million or 16.4% of our
        net
        revenues during the fiscal year ended April 30, 2006. Net revenues decreased
        $10.2 million and operating income decreased $7.5 million over prior year.
        Isle-Lake Charles experienced a decrease in net revenues and operating income,
        compared to the prior year period, due to the addition of a competitor and
        the
        disruptions and charges related to Hurricane Rita.
 
 In
        Missouri, our two properties contributed $162.6 million or 16.5% of our net
        revenues during the fiscal year ended April 30, 2006. Net revenues were down
        $3.6 million and operating income was up $2.0 million. Isle-Kansas City’s net
        revenues and operating income were down due to a decreased gaming patron
        count
        caused primarily by the completion of competitors’ expansion projects in the
        market. Isle-Boonville’s net revenues and operating income increased due to an
        increase in marketing efforts.
 
 In
        Iowa,
        our three casinos contributed $209.0 million or 21.2% of our net revenues
        during
        the fiscal year ended April 30, 2006. Net revenues decreased $2.7 million
        primarily due to increased competition and operating income decreased $2.6
        million primarily due to increased marketing costs as compared to the prior
        year.
 
 In
        Colorado, our two Black Hawk properties contributed $163.4 million or 16.5%
        of
        our net revenues during the fiscal year ended April 30, 2006. Net revenues
        were
        up $24.8 million and operating income was up $6.4 million over prior year.
        During fiscal 2005, construction at our Black Hawk properties, which
        significantly reduced parking for the Colorado Central Station-Black Hawk
        and
        restricted access to the street entrances to both Black Hawk casinos, adversely
        impacted net revenues and operating income by $10.3 million and $10.2 million,
        respectively. In June 2005, we completed the casino expansions at both casinos,
        a new restaurant, the skywalks connecting the casinos to the new garage and
        a
        total of 900 new parking spaces thus ending the most disruptive phase of
        our
        Black Hawk expansion projects. Construction of the new 162-room Colorado
        Central
        Station hotel was completed in December 2005. The extension of Main Street
        to
        Colorado Route 119, temporarily delayed by engineering challenges, opened
        in the
        first quarter of fiscal 2007.
 
 In
        our
        international locations, we experienced an increase in net revenues of $2.5
        million. Operating income decreased $9.4 million primarily due to $13.3 million
        in valuation and other charges related to Blue Chip and the Isle-Our Lucaya. In
        April
        2006, our Board of Directors approved a plan to close the Isle-Our Lucaya
        facility.  Effective
        June 1, 2006, we notified our landlord of our decision to terminate the lease
        and we intend to cease operations by June 1, 2007 as required by our lease. In
        conjunction with exercising the lease termination, we paid a $2.2 million
        fee to
        our landlord to terminate the lease early. This amount will be expensed,
        in
        accordance with SFAS 146 on the date of notification, which was in the first
        quarter of fiscal year 2007.  We
        will
        continue to report the results of the Isle-Our Lucaya property as continuing
        operations until a probable sale of this facility is reached or operations
        are
        ceased at which time these results will be reported as discontinued
        operations.
 
 In
        corporate and other, our new development expenses increased to $19.7 million
        for
        the fiscal year ended April 30, 2006, up from $14.4 million for the same
        period
        in the previous fiscal year. This is primarily due to our continuing development
        efforts in Pompano Beach, Florida; Waterloo, Iowa; Pittsburgh, Pennsylvania;
        Singapore, and the United Kingdom as well as other initial investments to
        proposed future projects. Additional costs have been incurred due to the
        ongoing
        relocation of the corporate offices to the St. Louis, Missouri metropolitan
        area
        which is expected to be completed in late calendar year 2006.




52


**Critical
      Accounting Estimates**





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




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




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




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





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





***Goodwill
      and Other Intangible Assets***





At
      April
      30, 2006, we had goodwill and other intangible assets with indefinite useful
      lives of $371.1 million, representing 20.2% of total assets. Statement of
      Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets”
(“SFAS 142”), requires that goodwill and intangible assets with indefinite
      useful lives be tested for impairment annually or more frequently if an event
      occurs or circumstances change that may reduce the fair value of our goodwill
      and intangible assets below their carrying value. We completed our
      annual **** impairment
      test as required under SFAS 142 in the **** fourth
      quarter of fiscal year 2006. For properties with goodwill and/or other
      intangible assets with indefinite lives, this test requires the comparison
      of
      the implied fair value of each property to carrying value. The implied fair
      value includes estimates of future cash flows that are based on reasonable
      and
      supportable assumptions and represent our best estimates of the cash flows
      expected to result from the use of the assets and their eventual disposition.
      Changes in estimates or application of alternative assumptions and definitions
      could produce significantly different results.





***Property
      and Equipment***


At
      April 30, 2006, we had
      property and equipment of $938.4 million, representing 51.2% of total assets.
      We
      capitalize the cost of property and equipment. Maintenance and repairs that
      neither materially add to the value of the property nor appreciably prolong
      its
      life are charged to expense as incurred. Costs incurred in connection with
      our
“other capital improvements,” program, as detailed in the “Liquidity and Capital
      Resources” section below, include individual capital expenditures related to the
      purchase of furniture and equipment and to the upgrade of hotel rooms,
      restaurants and other areas of our properties. We depreciate property and
      equipment on a straight-line basis over their estimated useful lives. The
      estimated useful lives are based on the nature of the assets as well as our
      current operating strategy. Future events such as property expansions, new
      competition and new regulations could result in a change in the manner in which
      we are using certain assets requiring a change in the estimated useful lives
      of
      such assets. We evaluate long-lived assets for impairment using Statement of
      Financial Accounting Standards No. 144, “Accounting for the Impairment or
      Disposal of Long-Lived Assets” (“SFAS 144”), which addresses financial
      accounting and reporting for the impairment or


53


disposal
      of long-lived assets. In assessing the recoverability of the carrying value
      of
      property and equipment, we make assumptions regarding future cash flows and
      residual values. If these estimates or the related assumptions change in the
      future, we may be required to record impairment loss for these assets. Such
      an
      impairment loss would be recognized as a non-cash component of operating
      income.





***Self-Insurance
      Liabilities***





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





***Insurance
      Accounting***





We
      have
      recorded an impairment charge of $68.6 million based on current assessments
      of
      damages related to the impact of hurricanes. The impairment charge is offset
      by
      an insurance receivable for the amount we expect to recover from our insurance
      carriers under our policy coverages. We have incurred $62.2 million for
      incremental out-of-pocket costs related to the hurricanes and the property
      operating costs related to the periods affected by the hurricanes. These amounts
      are included in the “Hurricane related charges, net” in the accompanying
      statements of income. The Company has insurance coverage related to damage
      from
      the three hurricanes for property damage incurred, property operating costs
      during the operational downtime of the hurricanes, incremental costs incurred
      related to hurricane damage and recovery activities and business interruption
      insurance for lost profits during the period directly related to the hurricanes.
      The total amount of losses recognized and expenses incurred of $130.8 million
      has been recorded in the accompanying statement of income as “Hurricane related
      charges, net” and have been offset by the amount of $126.0 million, which the
      Company believes is probable that it will collect from its insurance carriers
      under its policy coverages. The remaining amount of $4.8 million represents
      the
      Company’s deductible portion of its claims. The Company believes it will receive
      proceeds from its insurance carrier related to all four types of losses the
      Company has sustained, and through July 5, 2007 has received advances of $55.4
      million, of which $53.9 million was received by April 30, 2006. When the Company
      and its insurance carriers agree on the final amount of the insurance proceeds
      the Company is entitled to, the Company will also record any related gain in
      this account. The Company's insurance policies also provide coverage for the
      loss of profits caused by the storms. Any lost profit recoveries will be
      recognized when agreed to with the insurance carrier and will be reflected
      in
      the related properties' revenues.





***Income
      Tax Assets and Liabilities***





We
      are
      subject to income taxes in the United States as well as various states and
      foreign jurisdictions in which we operate. We account for income taxes under
      SFAS No. 109, “Accounting for Income Taxes” (SFAS No. 109), whereby deferred tax
      assets and liabilities are recognized for the expected future tax consequences
      of events that have been included in the financial statements or income tax
      returns. Deferred tax assets and liabilities are determined based on differences
      between financial statement carrying amounts of existing assets and liabilities
      and their respective tax bases using enacted tax rates expected to apply to
      taxable income in the years in which those temporary differences are expected
      to
      be recovered or settled.




54


The
      effect on the income tax provision and deferred tax assets and liabilities
      of a
      change in tax rates is recognized in income in the period that includes the
      enactment date. We provide a valuation allowance for deferred tax assets,
      including net operating losses, when we believe that we will be unable to
      utilize the benefits of those assets on our tax returns. Changes to the
      valuation allowance are recorded in the period when we revise our estimate
      of
      the recoverability of the related deferred assets. As indicated in Note 18,
      we
      have provided a valuation allowance for certain state net operating losses
      (“NOLs”), and other deferred tax assets as of April 30, 2006 and April 24, 2005.
      Other than these exceptions, we are unaware of any circumstances that would
      cause the remaining deferred tax assets to not be realizable.





Our
      income tax returns are subject to examination by the Internal Revenue Service
      (“IRS”) and other taxing authorities. While positions taken in tax returns are
      sometimes subject to uncertainty in the tax laws, we do not take such positions
      unless we have “substantial authority” to do so under the Internal Revenue Code
      and applicable regulations. We may take positions on our tax returns based
      on
      substantial authority that are not ultimately accepted by the IRS or other
      taxing authorities. We assess such potential unfavorable outcomes based on
      the
      criteria of SFAS No. 5, “Accounting for Contingencies” (SFAS No. 5).  We
      establish a tax reserve if an unfavorable outcome is probable and the amount
      of
      the unfavorable outcome can be reasonably estimated. We assess the potential
      outcomes of tax uncertainties on a quarterly basis. In determining whether
      the
      probable criterion of SFAS No. 5 is met, we presume that the taxing authority
      will focus on the exposure and we assess the probable outcome of a particular
      issue based upon the relevant legal and technical merits. We also apply our
      judgment regarding the potential actions by the tax authorities and resolution
      through the settlement process. We maintain required tax reserves until such
      time as the underlying issue is resolved.





When
      actual results differ from reserve estimates, we adjust the income tax provision
      and our tax reserves in the period resolved. For tax years that are not examined
      by taxing authorities, we adjust tax reserves in the year that the statute
      of
      limitations expires. Our estimate of the potential outcome for any uncertain
      tax
      issue is highly judgmental, and we believe we have adequately provided for
      any
      reasonable and foreseeable outcomes related to uncertain tax
      matters.





***Contingencies***





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





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





***Slot
      Club Awards***





We
      reward
      our slot customers for their loyalty based on the dollar amount of play on
      slot
      machines. We accrue for these slot club awards based on an estimate of the
      value
      of the outstanding awards utilizing




55
 the
        age
        and prior history of redemptions. Future events such as a change in our
        marketing strategy or new competition could result in a change in the value
        of
        the awards.





**Results
      of Operations**





Our
      results of operations for the fiscal years ended April 30, 2006, and April
      24,
      2005, reflect the consolidated operations of all of our subsidiaries and include
      the following properties: the Isle-Lake Charles, the Isle-Biloxi, the Isle-Lula,
      the Isle-Natchez, the Isle-Kansas City, the Isle-Boonville, the Isle-Bettendorf,
      the Isle-Marquette, the Rhythm City-Davenport, the Isle-Black Hawk, the Colorado
      Central Station-Black Hawk, the Isle-Our Lucaya, the Blue Chip-Dudley, the
      Blue
      Chip-Wolverhampton, the Blue Chip-Walsall and Pompano Park. Fiscal 2006 and
      2005
      results have been reclassified to reflect the Isle-Vicksburg, the Isle-Bossier
      City and Colorado Grande-Cripple Creek as discontinued operations.





Our
      fiscal year ends on the last Sunday in April. This fiscal year convention
      creates more comparability of our quarterly operations, by generally having
      an
      equal number of weeks (13) and weekend days (26) in each quarter. Periodically,
      this convention necessitates a 53-week year. The fiscal year ended April 30,
      2006 was a 53-week year. The extra week was included in the fourth fiscal
      quarter.





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





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





***Fiscal
      Year Ended April 30, 2006 Compared to Fiscal Year Ended April 24,
      2005***





Gross
      revenues for the fiscal year ended April 30, 2006 were $1.2 billion, which
      included $1.0 billion of casino revenue, $37.0 million of room revenue, $20.6
      million of pari-mutuel commissions, $107.6 million of food and beverage revenue
      and $18.4 million of other revenue. This compares to gross revenues for the
      fiscal year ended April 24, 2005 of $1.1 billion, which included $957.9 million
      of casino revenue, $33.1 million of room revenue, $20.1 million of pari-mutuel
      commissions, $106.2 million of food and beverage revenue and $18.6 million
      of
      other revenue.





56


Casino
      revenue increased 4.9% compared to fiscal year 2005. We saw an increase in
      casino revenues at our Mississippi properties due to Isle-Biloxi’s limited
      competition following re-opening as a result of Hurricane Katrina and upgraded
      land-based casino, effects of population growth in the Isle-Natchez market
      because of hurricane relocations and an improved marketing program at Isle-Lula.
      Likewise, casino revenues increased at the Isle’s Colorado casinos due to the
      completion of the expansion projects. Isle-Lake Charles saw a decline in casino
      revenues due to the entry of a new competitor and the disruptions caused by
      Hurricane Rita. Our Iowa properties saw flat casino revenues. The Isle-Kansas
      City saw a drop in revenues due to decreased patron count caused by completion
      of competitors’ expansion projects in the market. Isle-Booneville casino
      revenues increased due to an increase in marketing efforts. Our international
      operations, which account for a small percentage of our gaming revenues, saw
      an
      increase in casino revenues primarily due to a decrease in hurricane disruptions
      at the Isle-Our Lucaya during fiscal year 2006.





Room
      revenue increased 11.8% compared to fiscal year 2005 primarily as a result
      of
      the additional capacity at the Isle-Biloxi. Pari-mutuel commissions earned
      at
      Pompano Park in Florida for the fiscal year increased 2.2% compared to prior
      year. Food and beverage revenues increased by 1.3%.





Promotional
      allowances, which are made up of complimentary revenues, cash points and
      coupons, are rewards that we give our loyal customers and incentives given
      to
      both existing and potential customers to encourage future patronage at our
      properties. These allowances increased by 6.3% in fiscal year 2006 as we
      increased our direct mail efforts to promote play and the addition of Isle
      Play
      at our Mississippi properties.





Casino
      operating expenses decreased 3.1% over fiscal year 2005. These expenses are
      primarily comprised of salaries, wages and benefits and other operating expenses
      of the casinos. Casino operating expenses have decreased despite an increase
      in
      casino revenue primarily due to temporary closures of operations in Biloxi,
      Lake
      Charles and Pompano caused by hurricanes in fiscal 2006 and certain operating
      costs at these properties being offset with expected insurance recoveries
      related to the closures. For further discussion, see footnote 14 to
      the consolidated financial statements.





State
      and
      local gaming taxes increased by 2.3% compared to fiscal year 2005 primarily
      due
      to the increase in gaming revenues.





Room
      expenses increased 13.5% compared to fiscal year 2005. These expenses directly
      relate to the cost of providing hotel rooms. The increase in expenses was due
      primarily to the additional room capacity at the Isle-Biloxi and increased
      guest
      counts at Isle-Natchez and Isle-Lake Charles.





Pari-mutuel
      operating costs of Pompano Park in Florida increased 3.9% compared to fiscal
      year 2005. Such costs consist primarily of compensation, benefits, purses,
      simulcast fees and other direct costs of track operations.





Food
      and
      beverage expenses increased 7.3% over fiscal year 2005. Food and beverage
      expenses as a percentage of gross food and beverage revenues increased from
      23.9% for the fiscal year ended April 24, 2005, to 25.3% for the fiscal year
      ended April 30, 2006. These
      expenses consist primarily of the cost of goods sold, salaries, wages and
      benefits and other operating expenses of these departments. Food,
      beverage and other expenses as a percentage of gross food, beverage and other
      revenues increased from 23.9% for the fiscal year ended April 24, 2005, to
      25.0%
      for the fiscal year ended April 30, 2006. These
      expenses increased partly as a result of the expansion at the Colorado
      property.




57


Marine
      and facilities expenses increased 2.6% compared to fiscal year 2005. These
      expenses include salaries, wages and benefits of the marine and facilities
      departments, operating expenses of the marine crews, insurance, maintenance
      of
      public areas, housekeeping and general maintenance of the riverboats and
      pavilions. The increase was primarily due to the Isle’s Colorado expansion
      projects that came on line during 2006.





Marketing
      expenses increased 2.0% compared to fiscal year 2005. The increase in marketing
      expenses is primarily due to the additional marketing of our Colorado properties
      after the completion of the expansion projects and additional corporate
      marketing expenses. Marketing expenses include salaries, wages and benefits
      of
      the marketing and sales departments, as well as promotions, direct mail,
      advertising, special events and entertainment.





Administrative
      expenses, which include administration and human resource department expenses,
      rent, new development activities, professional fees, insurance and property
      taxes, have increased 9.0% over fiscal year 2005. The increase is due primarily
      to the settlement of the Jefferson County, Missouri lawsuit and increased
      development and investment activities. In Florida, we supported the successful
      campaign to pass a constitutional amendment that allows the voters of Miami-Dade
      and Broward counties to decide whether to approve slot machines in racetracks
      and jai alai facilities in their respective counties. We are continuing to
      pursue a slot parlor license in Pittsburgh, Pennsylvania and have joined with
      resort developer Eighth Wonder in applying to operate a casino resort in
      Singapore. Additionally, we expect administrative expenses to increase in fiscal
      2007 primarily due to costs related to moving the corporate office from
      Mississippi to Missouri and expected substantial increased property insurance
      premiums related to increases in recent hurricane activity in our southern
      region.




Depreciation
      expense increased by 5.8% compared to fiscal year 2005. Depreciation has
      increased as a result of our capital expansion programs.





In
      fiscal
      2006, we recorded $3.6 million in impairment and severance related charges
      on
      the Isle-Our Lucaya property due to the change in future expected cash flows
      resulting from our decision to close the casino by June of 2007. As a result
      of
      adverse market conditions on the expected future cash flows of the Blue Chip
      operations, we recorded additional impairment charges of $9.6 million related
      to
      the Blue Chip properties. In fiscal 2005, we recorded a gain on the sale of
      a
      land option in St. Louis, Missouri, in addition to impairment related charges
      of
      $1.6 million related to fixed assets in the United Kingdom and $2.5 million
      on
      our investment in a license in Rosemont, Illinois.





We
      incurred a loss on early extinguishment of debt totaling $2.1 million in fiscal
      2006 in connection with the refinancing of the Isle-Black Hawk senior secured
      credit facility on October 24, 2005. In fiscal 2005, we incurred a loss on
      early
      extinguishment of debt totaling $5.3 million in connection with the amendment
      of
      our senior secured credit facility on February 4, 2005. These charges include
      the write-off of debt acquisition costs.





Net
      interest expense increased 13.1% compared with fiscal year 2005. This is
      primarily attributable to the higher average balances outstanding and higher
      interest rates on our variable rate debt and an increase in capitalized interest
      from $3.2 million in the fiscal year ended April 24, 2005 to $4.6 million in
      fiscal year ended April 30, 2006. The increase in capitalized interest results
      from the ongoing construction at Coventry, England and expansion projects at
      Pompano Park and Isle-Boonville.





Our
      effective tax rate from continuing operations for the year ended April 30,
      2006
      was 64.5% compared to 51.8% for the year ended April 24, 2005, which, in each
      case, excludes our joint venture partner’s portion of the Colorado Central
      Station-Black Hawk’s income taxes. This increase in effective rate over the
      comparable prior fiscal period is primarily attributable to the impact of not
      benefiting from a




58


portion
      of our current losses in the United Kingdom at this time, and not benefiting
      from the capital loss related to the Colorado Grande Cripple-Creek transaction
      at this time because of a lack of capital gains to offset against the loss.
      As
      part of our ongoing operations, we will continue to evaluate prudent tax
      planning strategies to maximize the benefits of existing tax attributes,
      however, no assurance can be made that this can be achieved. For further
      discussion, see footnote 18 to the consolidated financial
      statements.





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





Gross
      revenues for the fiscal year ended April 24, 2005 were $1.1 billion, which
      included $957.9 million of casino revenue, $33.1 million of room revenue, $20.1
      million of pari-mutuel commissions, $106.2 million of food and beverage revenue
      and $18.6 million of other revenue. This compares to gross revenues for the
      fiscal year ended April 25, 2004 of $1.1 billion, which included $0.9 billion
      of
      casino revenue, $33.4 million of room revenue, $20.3 million of pari-mutuel
      commissions and $103.4 million of food and beverage and $16.9 million of other
      revenue.





Casino
      revenue increased 0.9% compared to fiscal year 2004. **** We
      saw an
      increase in casino revenues at our Missouri properties due primarily to the
      Isle-Kansas City’s expansion of its gaming floor and the Isle-Boonville’s
      continued strong performance. Likewise, casino revenues increased at the
      Isle-Lake Charles resulting from the expansion and renovation of the Grand
      Palais. The addition of the Isle-Our Lucaya and the Blue Chip-Dudley also
      increased casino revenues as these properties opened in the third quarter of
      fiscal 2004. These increases were offset by the sale of the Lady Luck-Las Vegas.
      In Colorado, casino revenues declined as the Isle-Black Hawk and the Colorado
      Central Station-Black Hawk have been affected by construction disruption. We
      also faced decreases in casino revenues at the Isle-Biloxi because of
      construction and the aftermath of Hurricane Ivan.





Room
      revenue decreased 1.0% compared to fiscal year 2004 **** primarily
      as a result of construction at the Isle-Biloxi. Pari-mutuel commissions earned
      at Pompano Park in Florida for the fiscal year was essentially flat compared
      to
      prior year. Food and beverage revenues increased by 2.7% because of renovations
      made to the buffet at the Isle-Lake Charles. The addition of the Isle-Our Lucaya
      and the Blue Chip locations also added to food and beverage
      revenues.





Promotional
      allowances, which are made up of complimentary revenues, cash points and
      coupons, are rewards that we give our loyal customers to encourage them to
      continue to patronize our properties. These allowances increased by 2.7% in
      fiscal year 2005 as we increased our direct mail efforts to promote
      play .





Casino
      operating expenses increased 3.3% over fiscal year 2004. These expenses are
      primarily comprised of salaries, wages and benefits and other operating expenses
      of the casinos. The increase in casino operating expenses is attributable to
      the
      addition of the Isle-Our Lucaya and Blue Chip. This increase is partially offset
      by the discontinuation of gaming operations at the Lady Luck-Las Vegas,
      following the finalization of the property’s sale.





State
      and
      local gaming taxes increased by 3.0% compared to fiscal year 2004. Effective
      July 1, 2004, we were subject to an additional assessment of 2.0% of gross
      gaming revenues in Iowa due to a tax increase enacted in that state.





Room
      expenses decreased 0.8% compared to fiscal year 2004. **** These
      expenses directly relate to the cost of providing hotel rooms. Other costs
      of
      the hotels are shared with the casinos and are presented in their respective
      expense categories. The decrease in expenses was due primarily to the loss
      of
      room capacity due to construction at the Isle-Biloxi





59


Pari-mutuel
      operating costs of Pompano Park in Florida increase 0.4% compared to fiscal
      year
      2004. Such costs consist primarily of compensation, benefits, purses, simulcast
      fees and other direct costs of track operations.





Food
      and
      beverage expenses increased 13.3% over fiscal year 2004. Food and beverage
      expenses as a percentage of gross food and beverage revenues increased from
      21.7% for the fiscal year ended April 25, 2004, to 23.9% for the fiscal year
      ended April 24, 2005. These
      expenses consist primarily of the cost of goods sold, salaries, wages and
      benefits and other operating expenses of these departments. Food,
      beverage and other expenses as a percentage of gross food, beverage and other
      revenues increased from 22.1% for the fiscal year ended April 25, 2004, to
      23.9%
      for the fiscal year ended April 24, 2005. Room
      service and banquet expense increased as the availability of meeting space
      and
      hotel rooms increased during the fiscal year. The addition of the Isle-Our
      Lucaya and Blue Chip also increased food, beverage and other
      expenses.





Marine
      and facilities expenses increased 4.2% compared to fiscal year 2004. These
      expenses include salaries, wages and benefits of the marine and facilities
      departments, operating expenses of the marine crews, insurance, maintenance
      of
      public areas, housekeeping and general maintenance of the riverboats and
      pavilions. The increase was primarily due to ongoing repairs and maintenance
      at
      the Isle-Lula and the addition of the Isle-Our Lucaya.





Marketing
      expenses increased 1.4% compared to fiscal year 2004. The increase in marketing
      expenses is primarily due to the addition of the Isle-Our Lucaya and is
      partially offset by the finalization of the sale of the Lady Luck-Las Vegas.
      Marketing expenses include salaries, wages and benefits of the marketing and
      sales departments, as well as promotions, direct mail, advertising, special
      events and entertainment.





Administrative
      expenses have increased 8.6% over fiscal year 2004. These expenses include
      administration and human resource department expenses, rent, new development
      activities, professional fees, insurance and property taxes. The increase
      is due to the addition of the Isle-Our Lucaya and Blue Chip. We also increased
      our development and investment activities domestically and in the United
      Kingdom. In Florida, we supported the successful campaign to pass a
      constitutional amendment that allows the voters of Miami-Dade and Broward
      counties to decide whether to approve slot machines in racetracks and jai alai
      facilities in their respective counties. These increases were partially offset
      by finalization of the sale and discontinuation of all operations at the Lady
      Luck-Las Vegas and savings from combining some administrative functions of
      the
      Isle-Bettendorf and the Rhythm City-Davenport properties.




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





In
      fiscal year 2005, we
      recorded a gain on the sale of a land option in St. Louis, Missouri in addition
      to impairment related charges of $1.6 million related to fixed assets in the
      United Kingdom and $2.5 million on our investment in a license in Rosemont,
      Illinois. ****





60


We
      incurred a loss on early extinguishment of debt totaling $5.3 million in fiscal
      2005 in connection with the amendment of our senior secured credit facility
      on
      February 4, 2005. These charges include the write-off of debt acquisition costs.
      We also incurred a loss on early extinguishment of debt of $14.1 million in
      fiscal 2004 related to the amendment of our $390.0 million 8.75% senior
      subordinated notes on March 3, 2004. These charges included early payment
      premiums as well as the write-off of debt acquisition costs.





Net
      interest expense decreased 10.9% compared with fiscal year 2004. This is
      primarily attributable to the lower average balances outstanding and an increase
      in capitalized interest from $0.8 million in the fiscal year ended April 25,
      2004 to $3.2 million in fiscal year ended April 24, 2005. The increase in
      capitalized interest results from the expansion projects at the Isle-Biloxi
      and
      in Black Hawk.





Our
      effective tax rate from continuing operations was 51.8% for the fiscal year
      ended April 24, 2005, compared to 32.7% for fiscal year ended April 25, 2004,
      which, in each case, excludes our joint venture partner’s portion of the
      Colorado Central Station-Black Hawk income taxes. The increase in the rate
      for
      fiscal 2005 is a result of the effect of non-deductible permanent items on
      earnings, the impact of not benefiting, at this time, from a portion of the
      current operating losses of our interests in the United Kingdom and state income
      taxes. Also in the second fiscal quarter ended 2004, the Internal Revenue
      Service concluded a federal tax examination covering four tax years without
      significant adjustments and provided administrative guidance on certain other
      tax matters for other open years. As a result, we analyzed our tax accruals
      and
      reduced income tax expense by approximately $3.0 million for previously accrued
      income tax liabilities. This had the effect of reducing our effective tax rate
      to 32.7% from continuing operations, excluding the minority interest’s portion
      of the Colorado Central Station-Black Hawk income taxes. Excluding the impact
      of
      these adjustments, our fiscal year 2004 effective rate from continuing
      operations would have been 40.0%, excluding the minority interest’s portion of
      the Colorado Central Station-Black Hawk income taxes. For further discussion,
      see footnote 18 to the consolidated financial statements.





**Liquidity
      and Capital Resources**




At
        April
        30, 2006, we had cash and cash equivalents and marketable securities of $138.9
        million compared to $162.8 million in cash and cash equivalents at April
        24,
        2005, the end of our last fiscal year. Of this $23.9 million decrease, $25.6
        is
        a decrease in cash and cash equivalents and is the net result of $99.5 million
        net cash provided by operating activities, $188.9 million net cash used in
        investing activities, $64.4 million net cash provided by financing activities
        and $0.6 million decrease in cash from the effect of foreign currency exchange
        rates. The remaining increase of $1.7 million is marketable securities held
        by
        Capri Insurance Corporation, which is available to pay insurance claims.
        In
        addition, as of April 30, 2006, we had
        $361.2 million of unused capacity under lines of credit and available term
        debt
        consisting of $331.8 million in unused credit capacity under the revolving
        loan
        commitment on our senior secured credit facility, $25.4
        million of unused credit capacity with the Isle-Black Hawk’s senior secured
        credit facility (limited to use by the Isle-Black Hawk), and $4.0
        million under other lines of credit and available term debt. During the year
        ended April 30, 2006, the Isle-Black Hawk paid off $5.4 million, net of
        borrowings, on its revolving loan under the Isle-Black Hawk’s senior secured
        credit facility. We also had borrowings, net of payments of $0.5 million
        under
        other lines of credit. We
        believe that our cash and cash equivalents balance, our cash flows from
        operations, the financing sources discussed herein, planned asset sales and
        expected hurricane insurance proceeds will be sufficient to meet our normal
        operating requirements during the next twelve months and to fund additional
        investments. In addition, we may consider issuing additional debt or equity
        securities in the future to fund potential acquisitions or growth or to
        refinance existing debt.


61


***Investing
      Activities***




We
        invested $174.1 million in property and equipment during fiscal year 2006,
        including accrued purchases of $23.9 million. These amounts exclude $74.7
        million related to the Isle-Biloxi casino barge destroyed by Hurricane Katrina
        and the subsequent costs related to the temporary casino that we expect to
        recover from insurance proceeds. The following table reflects expenditures
        and
        accruals for property and equipment on major projects in fiscal years 2005
        and
        2006 and projected expenditures for these and other projects we are pursuing.
        The amounts in the table do not include any expenditures and accruals prior
        to
        fiscal 2005 and do
        not
        include capital required for development projects we are pursuing which involve
        us competing with other casino developers for a single license.


**Actual**
              
              **Remaining****Fiscal
                  Year**
              
              
              **Fiscal
                  Year**
              
              
              **Fiscal
                  Year****Ended
                  4/24/05**
              
              
              **Ended
                  4/30/06**
              
              
              **Ending
                  4/29/07**
              
              
              **Thereafter**(1)
              
              
              (1)
              
              
              (1)
              
              
              (3)(dollars
                  in millions)**Property**
              **Project**Isle-Biloxi
              Construct
                  hotel
              $
              43.0
              
              $
              9.6
              
              $
              -
              
              $
              -Isle-Bettendorf
              Construct
                  hotel
              
              -
              
              
              6.5
              
              
              34.0
              
              
              4.5Isle-Pompano
              Construct
                  casino
              
              -
              
              
              12.3
              
              
              128.2
              
              
              -Isle-Boonville
              Construct
                  hotel
              
              2.0
              
              
              14.3
              
              
              1.2
              
              
              -Isle-Waterloo
              Construct
                  casino & hotel
              
              -
              
              
              5.2
              
              
              77.0
              
              
              52.3Isle
                  - Kansas City
              Expansion
                  & public improvements
              
              -
              
              
              1.1
              
              
              15.2
              
              
              68.7Coventry
              Construct
                  leasehold improvements
              
              8.4
              
              
              18.1
              
              
              28.5
              
              
              -West
                  Harrison County
              Construct
                  hotel & casino
              
              -
              
              
              -
              
              
              35.0
              
              
              240.0Isle-Davenport
              Construct
                  hotel
              
              -
              
              
              0.3
              
              
              7.8
              
              
              34.9Isle-Lake
                  Charles
              Renovate
                  & expand casinos
              
              11.6
              
              
              5.2
              
              
              0.8
              
              
              -Isle-Black
                  Hawk (57% owned)
              Expansion
                  & public improvements
              
              62.5
              
              
              27.1
              
              
              1.9
              
              
              -Other
                  properties (2)
              IGT
                  Advantage program
              
              6.8
              
              
              12.1
              
              
              14.1
              
              
              -All
              Slot
                  programs
              
              28.8
              
              
              20.2
              
              
              23.9
              
              
              4.4All
              Other
                  capital improvements
              
              28.8
              
              
              29.8
              
              
              60.1
              
              
              19.4Total
              
              $
              191.9
              
              $
              161.8
              
              $
              427.7
              
              $
              424.2Discontinued
                  Operations (4)
              
              $
              18.0
              
              $
              12.3
              
              $
              3.2
              
              $
              -(1)
                  Excludes: destroyed Isle-Biloxi casino barge of $7.4 million in
                  fiscal
                  2005 and $36.8 million in fiscal 2006, and Isle-Biloxi temporary
casino
                  of $37.9 million in fiscal 2006(2)
                  Includes: Isle-Biloxi, Isle-Natchez, Isle-Lula, Isle-Lake Charles
                  and
                  Colorado Central Station(3)
                  The timing of these projects is discussed below(4)
                  Discontinued operations consist of Isle-Vicksburg and Isle-Bossier
                  City




The
          other
          capital improvements at all of our properties consists of numerous capital
          expenditures related to the purchase of furniture and equipment and the
          upgrade
          of hotel rooms, restaurants and other areas of our properties.
 
 The
          previously announced Isle-Biloxi hotel and parking plan, estimated at $79.0
          million, included an additional 400 hotel rooms, a 12,000 square-foot
          convention/entertainment center, an expanded pool and spa area and a 1,000-space
          parking facility. This project was completed prior to Hurricane Katrina,
          with
          the exception of the spa. In October 2004, we announced plans to replace
          the
          casino at Isle-Biloxi with a new state-of-the-art casino facility, which
          was
          expected to cost approximately $90.0 million and was expected to open in
          December 2005. The Isle-Biloxi casino barge and the new casino barge were
          destroyed by Hurricane Katrina. Subsequent
          to the end of the fiscal year, Isle-Biloxi completed the renovation of
          its
          existing atrium adding additional gaming space bringing the casino resort
          to
          approximately 1,600 gaming positions, opening a new multi-story entry feature
          and bar, and connecting the parking deck with the atrium by a covered walkway. We
          continue to evaluate our redevelopment opportunities for the Isle-Biloxi
          and
          expect a significant portion of these costs to be funded through anticipated
          insurance proceeds.
 
 62


We
          have
          signed a development agreement with the City of Bettendorf pursuant to
          which we
          agreed to construct a new 250-room Isle hotel, additional parking, a new
          restaurant, and an expansion of the existing buffet and the City agreed
          to
          construct a 50,000 square foot convention center adjacent to the facility,
          which
          will be managed by Isle-Bettendorf. The cost of our portion of this project
          is
          approximately $45.0 million, and the new hotel is scheduled to open in
          the
          spring of 2007.
  In
            November 2004, voters in the State of Florida amended the state’s constitution
            to allow the voters of Miami-Dade and Broward counties (Broward County
            is the
            location of the Pompano Park Racetrack) to decide whether to approve
            slot
            machines in racetracks and jai alai frontons in their respective counties.
            Broward County voters passed their local referendum and Miami-Dade County
            voters
            rejected their referendum in March 2005. On January 4, 2006, a Florida
            statue
            became effective allowing Pompano Park and three other pari-mutuel facilities
            in
            Broward County to offer slot machine gaming to patrons at these facilities.
            We
            are constructing a gaming facility including 1,500 slot machines, four
            restaurants and a feature bar at Pompano Park adjacent to the existing
            grandstand at a cost of approximately $140 million with slot machine
            gaming
            anticipated to commence in early calendar year 2007. We do not plan to
            open a
            temporary gaming facility. An appeal challenging the validity of signatures
            needed to place the amendment on the ballot is pending following the
            granting of
            summary judgment against the plaintiffs in a lower court dismissing the
            challenge. Oral arguments were held in November 2005 but no decision
            has been
            issued as of the date of this filing. If the constitutional amendment
            were
            ultimately found to be invalid, our right to operate slot machines at
            Pompano
            Park would be eliminated.
  In
            June
            2006, we opened the new 140-room hotel including 20 suites and an 800-seat
            entertainment venue at Isle-Boonville in Missouri. As of April 30, 2006
            we had
            spent approximately $16.3 million on the project. The remaining $1.2
            million
            will be spent in the subsequent period.
 
 We
          have
          been selected by the Iowa Racing and Gaming Commission as the successful
          applicant for a gaming license in Waterloo, Iowa. We plan to spend approximately
          $134.5 million on constructing a single-level casino with 1,300 gaming
          positions, three of our signature restaurants, a 200-room hotel and 1,000
          parking spaces. Construction is underway with completion expected in the
          late
          spring of 2007. As of the fiscal year ended April 30, 2006, we have spent
          approximately $5.2 million on this project.
 
 We
          announced plans for an $85.0 million expansion project at our Kansas City,
          Missouri property. The expansion project will improve guest traffic patterns
          in
          the casino and renovate existing gaming space. Exterior plans include a
          new,
          updated entryway, exterior facade refinishing, reconfiguration of existing
          parking, and the addition of 1,000 parking spaces. Plans for the casino
          interior
          include expanding and renovating the gaming area including 400 additional
          slots
          and adding an entertainment venue to seat at least 1,000 guests, as well
          as
          additional food and beverage amenities. The Kansas City expansion project
          is
          subject to negotiation of an amended lease and development agreement and
          receipt
          of necessary permits and approvals. As of April 30, 2006, we have spent
          approximately $1.1 million on this project.
 
 As
          announced in December 2003, we entered into an agreement to develop and
          operate
          an Isle of Capri-themed casino, subject to obtaining a license, in a commercial
          leisure complex currently under development in Coventry, England. In fiscal
          year
          2005, Isle was granted a gaming license to open the Coventry casino under
          the
          current legislation (Gaming Act 1968). Total project costs are estimated
          to be
          $55.0 million. Project costs for the leased space include design, architectural,
          mechanical and electrical build-out, construction and equipment. As of
          April 30,
          2006, we have spent $26.5 million on the Coventry project and expect to
          spend
          the remainder over the next twelve months. Completion of the casino at
          the
          RICOH TM Arena
          Coventry is estimated to be in spring of 2007.


63


On
        June
        15, 2006, we announced that we received site and development approval from
        the
        Mississippi Gaming Commission in connection with our previously announced
        casino
        resort in west Harrison County, Mississippi, which is approximately 20 miles
        from the Mississippi/Louisiana state border along Interstate 10. Preliminary
        plans call for the estimated $250-300 million project to include a single
        level
        gaming facility with over 2,000 gaming positions, a 500-room hotel, five
        restaurants and a complement of additional resort amenities. The project
        remains
        in the preliminary planning stages, and is subject to certain significant
        conditions, including but not limited to the receipt of all necessary licenses,
        approvals and permits.


We
      have
      completed a $94.0 million expansion project for Isle-Black Hawk and Colorado
      Central Station-Black Hawk properties. The project included expansion of the
      Isle-Black Hawk and the Colorado Central Station-Black Hawk casinos, a new
      1,000
      space parking structure and a new 162-room Colorado Central Station hotel,
      which
      opened on December 24, 2005. Subsequent to the end of the fiscal year,
      construction on the extension of Main Street just south of the Isle-Black Hawk
      connecting to Colorado Route 119 was completed and open to traffic.





In
      January 2005, we announced plans to deploy the IGT Advantage TM Casino
      System with a total cost of the project estimated to be $20.2 million. In 2006,
      the project was expanded by $12.8 million for fiscal year 2007 for a total
      project amount of approximately $33.0 of which $1.8 million is included in
      the
      Colorado Central Station-Black Hawk property expansion project discussed above.
      We have also spent $18.9 million at the Isle-Biloxi, the Isle-Lula, the
      Isle-Lake Charles, and the Isle-Natchez, leaving a remaining budget of
      approximately $14.1 million. We expect these product upgrades will allow us
      to
      operate more competitively within our markets. Our slot improvement initiative
      also includes an increased ticket-in/ticket-out slot product offering.




On
        March
        15, 2004, we announced that we had been selected by the Illinois Gaming Board
        as
        the successful bidder in a federal bankruptcy court auction for the 10th
        Illinois gaming license previously issued to Emerald Casinos, Inc. This process
        was conducted pursuant to an agreement approved by, among other parties,
        the
        Illinois Attorney General. We bid $518.0 million to acquire by merger the
        stock
        of a company in bankruptcy that owns the license. The plan of reorganization
        pursuant to which the merger would be consummated has been confirmed by the
        federal bankruptcy court. The merger remains subject to certain conditions,
        including a finding of suitability and final approval by the Illinois Gaming
        Board as well as certain other conditions. The entire matter also is the
        subject
        of ongoing litigation of which we are not a party. T he
        Illinois Attorney General has raised issues with regard to the appropriateness
        of the Village of Rosemont as a host  community
        and the Illinois Gaming Board's selection of our bid. In addition, in 2006
        the
        Illinois Gaming Board, based on a recommendation by an administrative law
        judge
        following a hearing, revoked the license issued to Emerald on the basis of
        Emerald’s past conduct (which revocation has been stayed pending the outcome of
        litigation). For
        the
        reasons set forth above, among others, we believe that our ability to obtain
        the
        gaming license and open a gaming facility in Rosemont has been subjected
        to
        added uncertainty. There can be no assurance that we will ultimately acquire
        the
        license. The full cost of the license and all associated costs were originally
        capitalized in the amount of $2.5 million. Due to the continuing uncertainty
        with respect to this matter, we recorded a valuation charge of $2.5 million
        for
        these capitalized license costs at April 24, 2005.
 
 In October 29, 2004, we loaned $5.0 million to Florida Gaming Corporation
        (“Florida Gaming”). Interest accrues on the unpaid principal balance of the loan
        at an annual rate of 6.0% and is paid in arrears on the first day of each
        fiscal
        quarter. The loan is secured by a pledge of all of the issued and outstanding
        shares of capital stock of Florida Gaming Centers, Inc. (“FGC”), a wholly owned
        subsidiary of Florida Gaming. The entire unpaid principal amount of the loan
        and
        unpaid interest


64


thereon
        is payable on the earlier of (1) the sale of all or any material portion
        of the
        assets of, or all or any substantial equity interest in FGC, or (2) December
        31,
        2008. Concurrently with the loan, Florida Gaming and FGC entered into a letter
        agreement with us pursuant to which Florida Gaming and FGC gave us exclusive
        negotiating rights with respect to the acquisition of all or substantially
        all
        of FGC’s Miami jai alai business for a period ending no later than December 31,
        2008.
  In
      May 2005, we signed a
      casino management and related development and option agreements with resort
      developer Eighth Wonder to manage the casino included in Eighth Wonder’s
      proposal for a new integrated resort complex in Singapore should Eighth Wonder
      be selected to develop such complex. During the fiscal quarter ended July 24,
      2005, we paid and expensed a $4.0 million payment to Eighth Wonder pursuant
      to
      the terms of these agreements. If Eighth Wonder is awarded this project, upon
      the occurrence of certain milestones, we will pay a total of $50.0 million
      in
      concession fees to Eighth Wonder for the right to operate the casino and a
      400-room hotel.





In
      December 2005, we signed a joint development agreement with Lemieux Group LP
      that includes a provision for us to fund a $290 million new multi-purpose arena
      and pursue a gaming license at a cost of approximately $50 million for a stand
      alone slot parlor in Pittsburgh, Pennsylvania. Plans include the new
      multi-purpose arena and a $400 million gaming facility, with 3,000 slot
      machines, that are part of a larger billion-dollar effort known as Pittsburgh
      First to redevelop the Lower Hill and Uptown Districts in conjunction with
      the
      Pittsburgh Penguins and a development partner. This proposal is one of three
      applications under consideration by the Pennsylvania Gaming Control Board for
      a
      single license with a decision expected by the end of calendar 2006 or early
      2007. If the license is granted to us, we anticipate that the construction
      of
      the project would begin shortly thereafter with a temporary casino also a
      possibility. Due to the uncertainty of the timing of the Gaming Control Board,
      license grant date, the final design of the gaming facility and the timing
      of
      obtaining the necessary permits, we have not included this project in the above
      table. We have issued a $50.0 million stand by letter of credit to the
      Pennsylvania Gaming Control board in connection with our license
      application.





Other
      capital improvements include maintenance capital items and other small
      projects.





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




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





***Financing
      Activities***





During
      the fiscal year ended April 30, 2006, we had net sources of cash from financing
      of $64.4 million primarily in the following financing activities:




•
            We
                exercised a $50.0 million delayed draw term loan available under
                our
                Senior Secured Credit Facility and made additional net borrowings
                of $27.5
                million.


•
              We
                received proceeds from the exercise of stock options of $9.3
                million.


•
            We
                  made principal payments on our senior secured credit facility and
                  other
                  debt of $34.7 million.


•
            We
                purchased 367,303 shares of our common stock at a total cost of $8.5
                million


•
            We
                paid $1.8 million in costs related to the Black Hawk financing
                costs


65




•
            We
                had net borrowings under the Isle-Black Hawk senior secured credit
                facility of $27.2million.




During
      fiscal 2005, we modified the covenants related to the Isle-Black Hawk senior
      secured credit facility to align the covenants with the financial impact of
      construction at Isle-Black Hawk. The Isle-Black Hawk is in compliance with
      all
      covenants contained in our senior and subordinated debt instruments as of April
      30, 2006.


We
      believe that our cash and cash equivalents balance, our cash flows from
      operations, planned asset sales, our expected hurricane insurance proceeds
      and
      the financing sources discussed herein, will be sufficient to meet our normal
      operating requirements during the next fiscal year and to fund additional
      investments. In addition, we may consider issuing additional debt or equity
      securities in the future to fund potential acquisitions or our developments
      or
      to refinance existing debt. We are highly leveraged and may be unable to obtain
      additional debt or equity financing on acceptable terms. As a result,
      limitations on our capital resources could delay or cause us to abandon certain
      plans for capital improvements at our existing properties and/or development
      of
      new properties. We will continue to evaluate our planned capital expenditures
      at
      each of our existing locations as well as opportunities to acquire or invest
      in
      companies, properties and other projects that meet our strategic and return
      on
      investment criteria. If a material acquisition or investment is completed,
      our
      operating results and financial condition could change significantly in future
      periods.





**Contractual
      Obligations and Commercial Commitments**





The
      following table
      provides information as of April 30, 2006, about our contractual obligations
      and
      commercial commitments. The table presents contractual obligations by due dates
      and related contractual commitments by expiration dates.


**Payments
                  Due by Period**(dollars
                  in millions)**Contractual
                  Obligations**
              **Total**
              **Less
                  Than 1 Year**
              **1-3
                  Years**
              **4-5
                  Years**
              **After
                  5 Years**Long-Term
                  Debt (1)
              $  1,219.0
              $  8.6
              $ 
                  16.0
              $ 
                  382.1
              $ 
                  812.3Capital
                  Lease Obligations (2)
              2.3
              0.0
              0.1
              0.2
              2.0Operating
                  Leases (2)
              1,119.3
              15.3
              24.1
              23.5
              1,056.4Other
                  Long-Term Obligations (3)
              36.5
              21.0
              15.5
              -
              -Total
                  Contractual Cash Obligations
              $ 
                  2,377.1
              $ 
                  44.9
              $ 
                  55.7
              $ 
                  405.8
              $ 
                  1,870.7




**Amount
                  of Commitment Expiration per Period**(dollars
                  in millions)**Other
                  Commercial Commitments**
              **Total
                  Amounts Committed**
              **Less
                  Than 1 Year**
              **1-3
                  Years**
              **4-5
                  Years**
              **Over
                  5 Years**Lines
                  of Credit (1)
              $ 
                  361.2
              $ 
                  4.0
              $ 
                  331.8
              $ 
                  25.4
              $ 
                  -Standby
                  Letters of Credit (4)
              22.2
              22.2
              -
              -
              -Pittsburgh
                  Letter of Credit (5)
              50.0
              50.0
              -
              -
              -Total
                  Commercial Commitments
              $ 
                  433.4
              $ 
                  76.2
              $ 
                  331.8
              $ 
                  25.4
              $ 
                  -


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


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


(3)
      Other
      long-term obligations include current and future construction contracts as
      discussed under “Investing Activities” on page 63. This amount also includes
      $10.9 million in open purchase orders at April 30, 2006.


(4)
      Standby letters of credit consists of the following: $4.0 million for the
      Isle-Black Hawk and


66


Colorado Central Station, $1.7 million for gaming taxes,
      $6.5
      million for workers’ compensation, $2.0 million on a lease in St. Louis, $5.8
      million for insurance and $2.2 million for other. (5)
        Letter of credit to the Pennsylvania Gaming Control Board related to our
        license
        application.


**Recently
        Issued Accounting Standards**
 
 On
        December 16, 2004, the FASB issued Statement of Financial Accounting Standards
        No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”), which is a
        revision of Statement of Financial Accounting Standards No. 123, “Accounting for
        Stock-Based Compensation” (“SFAS 123”). Statement 123(R) supersedes APB Opinion
        No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), and amends
        Statement of Financial Accounting Standards No. 95, “Statement of Cash Flows”
(“SFAS 95”). Generally, the accounting method required by SFAS 123(R) is similar
        to the accounting method required by SFAS 123. However, SFAS 123(R) requires
        all
        share-based payments to employees, including grants of employee stock options,
        to be recognized in the income statement based on their fair market values.
        Pro
        forma disclosure is no longer an alternative. SFAS 123(R) must be adopted
        as of
        the beginning of the first annual reporting period of our first fiscal year
        that
        begins on or after June 15, 2005. We are required to adopt SFAS 123(R) on
        May 1,
        2006.
 
 We
        have
        elected to apply the “modified prospective” method in which compensation cost is
        recognized beginning with the effective date (a) based on the requirements
        of
        SFAS 123(R) for all share-based payments granted after the effective date
        and
        (b) based on the requirements of SFAS 123 for all awards granted to employees
        prior to the effective date of SFAS 123(R) that remain unvested on the effective
        date.
 
 As
        permitted by SFAS 123, we currently account for share-based payments to
        employees using APB 25’s intrinsic value method and, as such, generally
        recognizes no compensation cost for employee stock options. Accordingly,
        the
        adoption of SFAS 123(R)’s fair value method will have a significant impact on
        its result of operations. The initial impact of adoption of SFAS 123(R) is
        discussed in Footnote 11 related to the fair market value of options that
        are
        not vested at the effective date of adoption. We
        are
        also required to estimate the number of instruments for which the requisite
        service is expected to be rendered in lieu of accounting for forfeitures
        as they
        occur.
 
 As
        123(R)
        also requires the benefits of tax deductions in excess of recognized
        compensation cost to be reported as a financing cash flow, rather than as
        an
        operating cash flow as required under current literature. This requirement
        will
        reduce net operating cash flows and increase net financing cash flows in
        periods
        after adoption.
  67


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


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


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





The
      Isle-Black Hawk has entered into seven interest rate swap agreements with an
      aggregate notional value of $80.0 million, or 42.2% of its variable rate term
      debt, outstanding under the Isle-Black Hawk senior secured credit facility
      as of
      April 30, 2006. The swap agreements were entered in to effectively convert
      portions of its variable rate debt to a fixed-rate basis until the fourth fiscal
      quarter of 2008, thus reducing the impact of interest rate changes on future
      interest expense. These interest rate swap agreements terminate in fiscal year
      2008.  During fiscal year 2006, the swaps were not designated as effective
      hedges.




The
      following table provides information at April 30, 2006 about our financial
      instruments that are sensitive to changes in interest rates. The table presents
      principal cash flows and related weighted average interest rates by expected
      maturity dates.




**Interest
                  Rate Sensitivity****Principal
                  (Notional) Amount by Expected Maturity****Average
                  Interest (Swap) Rate****Fiscal
                  year**
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              **Fair
                  Value**(dollars
                  in millions)
              
              **2007**
              
              **2008**
              
              **2009**
              
              **2010**
              
              **2011**
              
              **Thereafter**
              
              **Total**
              
              **4/30/2006****Liabilities**Long-term
                  debt, including current portionFixed
                  rate
              
              $ 
                  1.3
              
              $ 
                  1.3
              
              $ 
                  1.7
              
              $ 
                  0.4
              
              $ 
                  0.4
              
              $ 
                  703.5
              
              $ 
                  708.6
              
              $ 
                  714.3Average
                  interest rate
              
              7.6%
              
              7.6%
              
              7.6%
              
              7.6%
              
              7.6%
              
              7.6%Variable
                  rate
              
              $ 
                  7.3
              
              $ 
                  6.2
              
              $ 
                  6.9
              
              $ 
                  5.8
              
              $ 
                  396.3
              
              $ 
                  90.2
              
              $ 
                  512.7
              
              $
                   512.7Average
                  interest rate (1)
              
              7.3%
              
              7.2%
              
              7.2%
              
              7.3%
              
              7.4%
              
              7.5%**Interest
                  Rate Derivative Financial Instruments Related to
                  Debt**Interest
                  rate swapsPay
                  fixed/receive variable (2)
              
              $ 
                  40.0
              
              $ 
                  40.0
              
              $ 
                  -
              
              $ 
                  -
              
              $ 
                  -
              
              $ 
                  -
              
              $ 
                  80.0
              
              $ 
                  1.6Average
                  pay rate
              
              3.9%
              
              3.8%
              
              0.0%
              
              0.0%
              
              0.0%
              
              0.0%Average
                  receive rate
              
              5.5%
              
              5.4%
              
              0.0%
              
              0.0%
              
              0.0%
              
              0.0%




(1)
        Represents the annual average LIBOR from the forward yield curve at April
        30,
        2006 plus the weighted average margin above LIBOR on all consolidated variable
        rate debt.
 (2)
              Fair
                  value represents the amount we would have to receive from the counter
                  party if we had terminated the swap agreements at April 30,
                  2006.
 
 We
        are
        also exposed to market risks relating to fluctuations in currency exchange
        rates
        related to our ownership interests and development activities in the United
        Kingdom. We attempt to minimize our foreign exchange risk through obtaining,
        when it is practical to do so, financing in the United Kingdom.
 
 For
        the
        fiscal year ended April 30, 2006, we recorded a loss of $2.5 million in foreign
        currency translation adjustments on the accompanying consolidated balance
        sheets. Foreign currency translation adjustments show the cumulative effect,
        at
        the balance sheet date, of fluctuations in the foreign currency exchange
        rate on
        balances denominated in a foreign currency, which were recorded at a historical
        rate at the transaction date.
  68


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


**Page****Isle
                  of Capri Casinos, Inc.**Report
                  of Independent Registered Public Accounting Firm
              70Consolidated
                  Balance Sheets, April 30, 2006 and April 24, 2005
              71Consolidated
                  Statements of Income, Years ended April 30, 2006, April 24, 2005
                  and April
                  25, 2004
              72Consolidated
                  Statements of Stockholders’ Equity, Years ended April 30, 2006, April 24,
                  2005 and
                  April 25, 2004
              73Consolidated
                  Statements of Cash Flows, Years ended April 30, 2006, April 24,
                  2005 andApril
                  25, 2004
              74Notes
                  to Consolidated Financial Statements
              76






69


**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





The
      Board
      of Directors and Stockholders


Isle
      of
      Capri Casinos, Inc.





We
      have
      audited the accompanying consolidated balance sheets of Isle of Capri Casinos,
      Inc. as of April 30,
      2006and April 24,
      2005,
      and the
      related consolidated statements of income, stockholders’ equity, and cash flows
      for the years endedApril 30,
      2006,April 24,
      2005,
      and April 25,
      2004.
      These
      financial statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these financial statements based
      on
      our audits.





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





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the consolidated financial position of Isle of Capri Casinos,
      Inc. at April 30,
      2006 and April 24,
      2005 ,
      and the
      consolidated results of its operations and its cash flows for the years ended April 30,
      2006 , April 24,
      2005 and April 25,
      2004 ,
      in
      conformity with U.S. generally accepted accounting principles.





We
      also
      have audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the effectiveness of Isle of Capri Casinos,
      Inc.’s internal control over financial reporting as of April 30,
      2006 ,
      based
      on criteria established in Internal Control-Integrated Framework issued by
      the
      Committee of Sponsoring Organizations of the Treadway Commission and our report
      dated July 7, 2006, expressed an unqualified opinion thereon.





ERNST
      & YOUNG LLP


New
      Orleans, Louisiana


July
      7,
      2006






70




**ISLE
                  OF CAPRI CASINOS, INC.****CONSOLIDATED
                  BALANCE SHEETS****(In
                  thousands, except per share data)********ASSETS**
              
              **April
                  30,**
              
              
              **April
                  24,****2006**
              
              
              **2005**Current
                  assets:Cash
                  and cash equivalents
              $
              121,193
              
              $
              146,743Marketable
                  securities
              
              17,727
              
              
              16,016Accounts
                  receivable, net
              
              17,268
              
              
              15,460Insurance
                  receivable, net
              
              72,053
              
              
              -Deferred
                  income taxes
              
              9,006
              
              
              8,607Deferred
                  state income taxes
              
              891
              
              
              988Prepaid
                  expenses and other assets
              
              15,560
              
              
              16,634Total
                  current assets
              
              253,698
              
              
              204,448Property
                  and equipment, net
              
              938,428
              
              
              857,643Other
                  assets:Assets
                  held for sale
              
              222,446
              
              
              222,601Goodwill
              
              296,354
              
              
              305,000Other
                  intangible assets
              
              74,789
              
              
              54,435Deferred
                  financing costs, net
              
              16,064
              
              
              19,461Restricted
                  cash
              
              2,210
              
              
              2,193Prepaid
                  deposits and other
              
              29,955
              
              
              15,665Total
                  assets
              $
              1,833,944
              
              $
              1,681,446******LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Current
                  liabilities:Current
                  maturities of long-term debt
              $
              8,588
              
              $
              7,501Accounts
                  payable
              
              58,561
              
              
              42,456Accrued
                  liabilities:Interest
              
              10,523
              
              
              10,312Payroll
                  and related
              
              56,904
              
              
              47,806Property
                  and other taxes
              
              25,888
              
              
              21,061Income
                  taxes
              
              10,323
              
              
              1,160Progressive
                  jackpots and slot club awards
              
              12,415
              
              
              15,045Other
              
              40,652
              
              
              34,321Total
                  current liabilities
              
              223,854
              
              
              179,662Long-term
                  debt, less current maturities
              
              1,212,692
              
              
              1,148,617Deferred
                  income taxes
              
              58,105
              
              
              42,102Deferred
                  state income taxes
              
              6,335
              
              
              9,329Other
                  accrued liabilities
              
              23,580
              
              
              17,115Minority
                  interest
              
              26,690
              
              
              23,225Stockholders'
                  equity:Preferred
                  stock, $.01 par value; 2,000 shares authorized; none
                  issued
              
              -
              
              
              -Common
                  stock, $.01 par value; 45,000 shares authorized; shares issued
                  andoutstanding:
                  34,291 at April 30, 2006 and 33,528 at April 24, 2005
              
              343
              
              
              335Class
                  B common stock, $.01 par value; 3,000 shares authorized; none
                  issued
              
              -
              
              
              -Additional
                  paid-in capital
              
              160,508
              
              
              148,177Unearned
                  compensation
              
              (1,383)
              
              
              (1,488)Retained
                  earnings
              
              165,156
              
              
              146,133Accumulated
                  other comprehensive income
              
              220
              
              
              2,858324,844
              
              
              296,015Treasury
                  stock, 3,902 shares at April 30, 2006 and 3,607 shares at April
                  24,
                  2005
              
              (42,156)
              
              
              (34,619)Total
                  stockholders' equity
              
              282,688
              
              
              261,396Total
                  liabilities and stockholders' equity
              $
              1,833,944
              
              $
              1,681,446




See
        notes
        to consolidated financial statements
  71





**ISLE
                OF CAPRI CASINOS, INC.****CONSOLIDATED
                STATEMENTS OF INCOME****(In
                thousands, except per share data)****Fiscal
                Year Ended****April
                30,**
            
            
            **April
                24,**
            
            
            **April
                25,****2006**
            
            
            **2005**
            
            
            **2004**Revenues:Casino
            $
            1,004,644
            
            $
            957,878
            
            $
            948,903Rooms
            
            36,999
            
            
            33,093
            
            
            33,366Pari-mutuel
                commissions and fees
            
            20,573
            
            
            20,126
            
            
            20,327Food,
                beverage and other
            
            125,978
            
            
            124,780
            
            
            120,326Gross
                revenues
            
            1,188,194
            
            
            1,135,877
            
            
            1,122,922Less
                promotional allowances
            
            200,174
            
            
            188,305
            
            
            183,393Net
                revenues
            
            988,020
            
            
            947,572
            
            
            939,529Operating
                expenses:Casino
            
            152,490
            
            
            157,289
            
            
            152,346Gaming
                taxes
            
            220,039
            
            
            215,134
            
            
            208,926Rooms
            
            8,463
            
            
            7,454
            
            
            7,512Pari-mutuel
                commissions and fees
            
            16,051
            
            
            15,449
            
            
            15,395Food,
                beverage and other
            
            31,523
            
            
            29,848
            
            
            26,583Marine
                and facilities
            
            58,141
            
            
            56,680
            
            
            54,367Marketing
                and administrative
            
            293,969
            
            
            274,250
            
            
            260,845Valuation
                and other charges
            
            13,486
            
            
            4,136
            
            
            -Hurricane
                related charges, net
            
            4,776
            
            
            -
            
            
            -Preopening
            
            281
            
            
            247
            
            
            2,293Depreciation
                and amortization
            
            87,106
            
            
            82,337
            
            
            75,896Total
                operating expenses
            
            886,325
            
            
            842,824
            
            
            804,163Operating
                income
            
            101,695
            
            
            104,748
            
            
            135,366Interest
                expense
            
            (74,430)
            
            
            (64,745)
            
            
            (71,068)Interest
                income
            
            3,348
            
            
            1,898
            
            
            534Loss
                on early extinguishment of debt
            
            (2,110)
            
            
            (5,251)
            
            
            (14,116)Minority
                interest
            
            (6,517)
            
            
            (5,493)
            
            
            (10,072)Income
                from continuing operations before income taxes
            
            21,986
            
            
            31,157
            
            
            40,644Income
                taxes
            
            14,176
            
            
            16,125
            
            
            13,288Income
                from continuing operations
            
            7,810
            
            
            15,032
            
            
            27,356Income
                from discontinued operations, net of income taxes
            
            11,213
            
            
            3,006
            
            
            393Net
                income
            $
            19,023
            
            $
            18,038
            
            $
            27,749Earnings
                per common share-basic:Income
                from continuing operations
            $
            0.26
            
            $
            0.51
            
            $
            0.93Income
                from discontinued operations, net of income taxes
            
            0.37
            
            
            0.10
            
            
            0.01Net
                income
            $
            0.63
            
            $
            0.61
            
            $
            0.94Earnings
                per common share-diluted:Income
                from continuing operations
            $
            0.25
            
            $
            0.49
            
            $
            0.90Income
                from discontinued operatons, net of income taxes
            
            0.36
            
            
            0.10
            
            
            0.01Net
                income
            $
            0.61
            
            $
            0.58
            
            $
            0.91Weighted
                average basic shares
            
            30,028
            
            
            29,682
            
            
            29,404Weighted
                average diluted shares
            
            31,270
            
            
            30,930
            
            
            30,466


See
      notes
      to consolidated financial statements


72




**ISLE
                  OF CAPRI CASINOS, INC.****CONSOLIDATED
                  STATEMENTS OF STOCKHOLDERS' EQUITY****(In
                  thousands)****Accum.****Other****Compre-****Shares
                  of**
              
              
              
              
              
              **Additional**
              
              
              **Unearned**
              
              
              
              
              
              **hensive**
              
              
              
              
              
              **Total****Common**
              
              
              **Common**
              
              
              **Paid-in**
              
              
              **Compen-**
              
              
              **Retained**
              
              
              **Income**
              
              
              **Treasury**
              
              
              **Stockholders'****Stock**
              
              
              **Stock**
              
              
              **Capital**
              
              
              **sation**
              
              
              **Earnings**
              
              
              **(Loss)**
              
              
              **Stock**
              
              
              **Equity**Balance,
                  April 27, 2003
              32,377
              
              $
              322
              
              $
              137,542
              
              $
              (1,498)
              
              $
              100,346
              
              $
              (4,284)
              
              $
              (28,524)
              
              $
              203,904Net
                  income
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              27,749
              
              
              -
              
              
              -
              
              
              27,749Unrealized
                  gain on interestrate
                  swap contract,net
                  of income taxes of $2,322
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              4,044
              
              
              -
              
              
              4,044Foreign
                  currency translationadjustments
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              761
              
              
              -
              
              
              761Comprehensive
                  income
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              32,554Exercise
                  of stock options, includingincome
                  tax benefit of $1,833
              785
              
              
              9
              
              
              7,407
              
              
              -
              
              
              -
              
              
              -
              
              
              (988)
              
              
              6,428Purchase
                  of treasury stock
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,030)
              
              
              (2,030)Treasury
                  stock retired
              (107)
              
              
              (1)
              
              
              (2,029)
              
              
              -
              
              
              -
              
              
              -
              
              
              2,030
              
              
              -Grant
                  of nonvested stock
              -
              
              
              -
              
              
              465
              
              
              (465)
              
              
              -
              
              
              -
              
              
              -
              
              
              -Amortization
                  of unearnedcompensation
              -
              
              
              -
              
              
              -
              
              
              550
              
              
              -
              
              
              -
              
              
              -
              
              
              550Balance,
                  April 25, 2004
              33,055
              
              
              330
              
              
              143,385
              
              
              (1,413)
              
              
              128,095
              
              
              521
              
              
              (29,512)
              
              
              241,406Net
                  income
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              18,038
              
              
              -
              
              
              -
              
              
              18,038Unrealized
                  gain on interestrate
                  swap contractsnet
                  of income taxes of $224
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              345
              
              
              -
              
              
              345Foreign
                  currency translationadjustments
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,992
              
              
              -
              
              
              1,992Comprehensive
                  income
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              20,375Exercise
                  of stock options, includingincome
                  tax benefit of $828
              473
              
              
              5
              
              
              4,191
              
              
              -
              
              
              -
              
              
              -
              
              
              1,253
              
              
              5,449Purchase
                  of treasury stock
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (6,360)
              
              
              (6,360)Grant
                  of nonvested stock
              -
              
              
              -
              
              
              601
              
              
              (601)
              
              
              -
              
              
              -
              
              
              -
              
              
              -Amortization
                  of unearnedcompensation
              -
              
              
              -
              
              
              -
              
              
              526
              
              
              -
              
              
              -
              
              
              -
              
              
              526Balance,
                  April 24, 2005
              33,528
              
              
              335
              
              
              148,177
              
              
              (1,488)
              
              
              146,133
              
              
              2,858
              
              
              (34,619)
              
              
              261,396Net
                  income
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              19,023
              
              
              -
              
              
              -
              
              
              19,023Reclassification
                  of unrealized gain on interestrate
                  swap contractsnet
                  of income taxes of $(68)
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (105)
              
              
              -
              
              
              (105)Foreign
                  currency translationadjustments
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,533)
              
              
              -
              
              
              (2,533)Comprehensive
                  income
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              16,385Exercise
                  of stock options, includingincome
                  tax benefit of $3,020
              763
              
              
              8
              
              
              11,964
              
              
              -
              
              
              -
              
              
              -
              
              
              957
              
              
              12,929Purchase
                  of treasury stock
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (8,494)
              
              
              (8,494)Grant
                  of nonvested stock
              -
              
              
              -
              
              
              367
              
              
              (367)
              
              
              -
              
              
              -
              
              
              -
              
              
              -Amortization
                  of unearnedcompensation
              -
              
              
              -
              
              
              -
              
              
              472
              
              
              -
              
              
              -
              
              
              -
              
              
              472Balance,
                  April 30, 2006
              34,291
              
              $
              343
              
              $
              160,508
              
              $
              (1,383)
              
              $
              165,156
              
              $
              220
              
              $
              (42,156)
              
              $
              282,688





See
        notes
        to consolidated financial statements
  73





**ISLE
                OF CAPRI CASINOS, INC.****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****(In
                thousands)****Fiscal
                Year Ended****April
                30,**
            
            
            **April
                24,**
            
            
            **April
                25,****2006**
            
            
            **2005**
            
            
            **2004****Operating
                activities:**Net
                income
            $
            19,023
            
            $
            18,038
            
            $
            27,749Adjustments
                to reconcile net income to net cashprovided
                by operating activities:Depreciation
                and amortization
            
            98,789
            
            
            97,821
            
            
            90,063Amortization
                of deferred financing costs
            
            2,979
            
            
            3,886
            
            
            4,261Amortization
                of unearned compensation
            
            472
            
            
            526
            
            
            550Gain
                on derivative instruments
            
            1,585
            
            
            -
            
            
            -Asset
                impairment
            
            68,560
            
            
            -
            
            
            -Goodwill
                impairment
            
            9,191
            
            
            3,958
            
            
            -Valuation
                and other charges
            
            4,295
            
            
            4,136
            
            
            -Early
                extinguishment of debt
            
            2,110
            
            
            5,251
            
            
            26,115Deferred
                income taxes
            
            8,932
            
            
            15,078
            
            
            8,788Minority
                interest
            
            6,517
            
            
            5,493
            
            
            10,072Changes
                in operating assets and liabilities:Accounts
                receivable
            
            (5,874)
            
            
            (4,796)
            
            
            (2,433)Insurance
                receivable
            
            (125,959)
            
            
            -
            
            
            -Income
                taxes, net
            
            13,119
            
            
            4,949
            
            
            (1,027)Prepaid
                expenses and other assets
            
            (1,865)
            
            
            2,022
            
            
            1,356Accounts
                payable and accrued liabilities
            
            (2,327)
            
            
            13,524
            
            
            7,736Net
                cash provided by operating activities
            
            99,547
            
            
            169,886
            
            
            173,230**Investing
                activities:**Purchase
                of property and equipment
            
            (224,849)
            
            
            (188,879)
            
            
            (151,629)Purchase
                of intangibles
            
            (5,775)
            
            
            -
            
            
            -Purchase
                of short-term investments, net of sales
            
            (1,222)
            
            
            (14,842)
            
            
            -Net
                cash paid for acquisitions
            
            -
            
            
            -
            
            
            (10,917)Investments
                in and advances to joint ventures
            
            -
            
            
            -
            
            
            (549)Insurance
                proceeds for hurricane damages
            
            53,905
            
            
            -
            
            
            -Restricted
                cash
            
            (175)
            
            
            (98)
            
            
            (79)Prepaid
                deposits and other
            
            (10,815)
            
            
            (4,327)
            
            
            (1,602)Payments
                on notes receivable
            
            30
            
            
            23
            
            
            5,658Loans
                made
            
            (3)
            
            
            (5,563)
            
            
            -Net
                cash used in investing activities
            
            (188,904)
            
            
            (213,686)
            
            
            (159,118)**Financing
                activities:**Proceeds
                from debt
            
            240,000
            
            
            250,718
            
            
            668,526Principal
                payments on debt and cash paid to retire debt
            
            (169,749)
            
            
            (209,975)
            
            
            (622,899)Borrowings
                on line of credit
            
            59,742
            
            
            28,307
            
            
            74,361Repayments
                on line of credit
            
            (64,658)
            
            
            (2,200)
            
            
            (80,278)Payment
                of deferred financing costs
            
            (1,797)
            
            
            (5,249)
            
            
            (10,951)Purchase
                of treasury stock
            
            (8,494)
            
            
            (6,360)
            
            
            (2,030)Proceeds
                from exercise of stock options
            
            9,338
            
            
            4,519
            
            
            3,753Cash
                distribution to minority partner
            
            -
            
            
            (4,344)
            
            
            (4,638)Net
                cash provided by financing activities
            
            64,382
            
            
            55,416
            
            
            25,844**Effect
                of foreign currency exchange rates on cash**
            
            (575)
            
            
            545
            
            
            -Net
                increase (decrease) in cash and cash equivalents
            
            (25,550)
            
            
            12,161
            
            
            39,956Cash
                and cash equivalents at beginning of year
            
            146,743
            
            
            134,582
            
            
            94,626Cash
                and cash equivalents at end of year
            $
            121,193
            
            $
            146,743
            
            $
            134,582




See
        notes
        to consolidated financial statements
  74





**ISLE
                OF CAPRI CASINOS, INC.****CONSOLIDATED
                STATEMENTS OF CASH FLOWS (CONTINUED)**(In
                thousands)**Fiscal
                Year Ended****April
                30,**
            
            
            **April
                24,**
            
            
            **April
                25,****2006**
            
            
            **2005**
            
            
            **2004****Supplemental
                disclosure of cash flow information:**Net
                cash payments for:Interest
                (net of capitalized interest)
            $
            88,360
            
            $
            75,029
            
            $
            77,598Income
                taxes, net of refunds
            
            (392)
            
            
            (8)
            
            
            4,804**Supplemental
                schedule of noncash investing activities:**Other:Construction
                costs funded through accounts payable andnotes
                payable
            
            23,911
            
            
            28,372
            
            
            1,807Balance
                due on acquisition of license
            
            16,000
            
            
            -
            
            
            -Balance
                due on acquisitions of businesses:Fair
                value of assets acquired
            
            -
            
            
            -
            
            
            12,433Less
                fair value of liabilities assumed
            
            -
            
            
            -
            
            
            (1,516)Net
                cash payment
            
            -
            
            
            -
            
            
            10,917




See
      notes to consolidated financial statements




75


**1.
      Summary of Significant Accounting Policies**





**Nature
      of Operations**


Isle
      of
      Capri Casinos, Inc. (the “Company” or “Isle of Capri”) was incorporated as a
      Delaware corporation on February 14, 1990. The Company, through its
      subsidiaries, is engaged in the business of developing, owning and operating
      branded gaming facilities and related lodging and entertainment facilities
      in
      growing markets in the United States and internationally. The Company wholly
      owns and operates twelve casinos in eleven gaming facilities in the United
      States located in Lake Charles and Bossier City, Louisiana; Lula, Biloxi,
      Vicksburg and Natchez, Mississippi; Kansas City and Boonville, Missouri; and
      Bettendorf, Davenport and Marquette, Iowa. The Company also owns a 57% interest
      in, and receives a management fee for operating, two gaming facilities in Black
      Hawk, Colorado. All but two of these gaming facilities operate under the name
      “Isle of Capri” and feature the Company’s distinctive tropical island theme. The
      Company’s international gaming interests include a wholly owned casino in
      Freeport, Grand Bahama, and a two-thirds ownership interest in casinos in
      Dudley, Wolverhampton and Walsall, England. The Company also wholly owns and
      operates a pari-mutuel harness racing facility in Pompano Beach,
      Florida.





The
      Company receives a significant amount of its revenue from patrons within 50
      miles of the properties. If economic conditions in these areas were to decline
      materially or additional casino licenses were awarded in these locations, the
      Company’s results of operations could be materially affected.





The
      Company’s operations are dependent on the continued licensing or qualification
      of the Company and such licensing and qualifications are reviewed periodically
      by the gaming authorities in the state of operation. The loss of a license,
      in
      any jurisdiction in which it operates, could have a material adverse effect
      on
      future results. The Company is also dependent upon a stable regulatory and
      tax
      environment in the jurisdictions that it operates, including but not limited
      to
      the gaming regulations by which the Company is licensed. Any changes that occur
      in either the regulatory, political or tax structure could have a material
      effect on the Company’s operations.





**Fiscal
      Year-End**


The
      Company’s fiscal year ends on the last Sunday in April. This fiscal year creates
      more comparability of the Company’s quarterly operations, by generally having an
      equal number of weeks (13) and weekend days (26) in each quarter. Periodically,
      this convention necessitates a 53-week year. Fiscal 2006 commenced on April
      25,
      2005 and ended on April 30, 2006. The fiscal year ended April 30, 2006 was
      a
      53-week year. The extra week was included in the fourth fiscal
      quarter.




**Basis
      of Presentation**


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





Discontinued
      operations relate to those of the Colorado Grande casino, located in Cripple
      Creek, Colorado, the Isle-Vicksburg, which is the Riverboat Gaming Corporation
      of Mississippi-Vicksburg located in Vicksburg, Mississippi and the Isle-Bossier
      City, which is the Louisiana Riverboat Gaming Partnership located in Bossier
      City, Louisiana. Results of these operations are included in the consolidated
      statements of income as discontinued operations and are shown net of income
      tax
      effects. The financial position and results of these operations and financial
      position for prior fiscal years are presented as discontinued operations in
      accordance with SFAS 144.




76




**1.
        Summary of Significant Accounting Policies (continued)**
 
 **Basis
        of Presentation (continued)**
 In
        April
        2006, the Company’s Board of Directors approved a plan to close the Isle-Our
        Lucaya facility. Effective June 1, 2006, the Company notified its landlord
        of
        its decision to terminate the lease and the Company intends to cease operations
        by June 1, 2007 as required by its lease.  The
        Company will continue to report the results of the Isle-Our Lucaya property
        as
        continuing operations until a probable sale of this facility is reached or
        operations are ceased, at which time, these results will be reported as
        discontinued operations.
 
 **Use
        of Estimates**
 The
        preparation of financial statements in conformity with U.S. generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect the reported amounts of assets and liabilities, and disclosure of
        contingent assets and liabilities, at the date of the financial statements
        and
        the reported amounts of revenues and expenses during the reporting period.
        Actual results could differ from those estimates.
 
 **Cash
        and Cash Equivalents**
 The
        Company considers all highly liquid investments purchased with an original
        maturity of three months or less as cash equivalents. Cash
        equivalents are placed primarily with high-credit-quality financial
        institutions. The carrying amount of cash equivalents approximates fair value
        because of the short term maturity of these instruments. Cash and cash
        equivalents include s hort-term
        investments, which are considered highly liquid, and consist primarily of
        short-term commercial paper at the Isle of Capri Black Hawk, L.L.C. (the
        “Isle-Black Hawk”). The carrying amount of short-term investments approximates
        fair value because of the short maturity of these instruments. Cash
        also
        includes the minimum cash balances required by state regulatory bodies, which
        totaled approximately $33.6 million and $27.7 million at April 30, 2006 and
        April 24, 2005, respectively.
 
 **Marketable
        Securities**
 Marketable
        securities consist of trading securities held by Capri Insurance Corporation,
        the Company’s captive insurance subsidiary. The trading securities are primarily
        debt and equity securities that are purchased with the intention to resell
        in
        the near term. The trading securities are carried at fair value with changes
        in
        fair value recognized in current period income.
 
 **Inventories**
 Inventories
        generally consist of food and beverage and retail merchandise, and are stated
        at
        the lower of cost
        or
        market. Cost is determined by the weighted average method.
  77


**1.
        Summary of Significant Accounting Policies (continued)**
 
 **Property
        and Equipment**
 Property
        and equipment are stated at cost. The Company capitalizes the cost of purchases
        of property and equipment and capitalizes the cost of improvements to property
        and equipment that increases the value or extends the useful lives of the
        assets. Costs of normal repairs and maintenance are charged to expense as
        incurred. Gains or losses on dispositions of property and equipment are included
        in the determination of income. Depreciation is computed using the straight-line
        method over the following estimated useful lives of the
        assets:


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




Long-lived
        assets are not depreciated while they are classified as held for sale. Capital
        leases are depreciated over the estimated useful life of the assets or the
        life
        of the lease whichever is shorter.
 
 **Goodwill
        and Other** **Intangible
        Assets**
 Goodwill,
        representing the excess of the cost over the net identifiable tangible and
        intangible assets of acquired businesses, is stated at cost. Other intangible
        assets include the license value attributed to the Louisiana gaming licenses
        acquired through the Company’s acquisition of St. Charles Gaming Company and
        Grand Palais Riverboat, Inc. (the “Licenses”), the value of the Lady Luck
        trademarks and player databases acquired in the acquisition of Lady Luck
        Gaming
        Corporation and the value of the Colorado Central Station trademarks acquired
        in
        the acquisition of CCSC/Blackhawk, Inc. and until April 25, 2005, Colorado
        Grande Enterprises, Inc. The licenses related to Louisiana Riverboat Gaming
        Partnership are presented in Assets held for sale on the balance sheet due
        to
        the agreement to sell the Isle-Bossier City to Legends Gaming, LLC, as discussed
        in Note 2. The Licenses have indefinite lives as the Company has determined
        that
        there are no legal, regulatory, contractual, economic or other factors that
        would limit the useful life of the Licenses and the Company intends to renew
        and
        operate the Licenses indefinitely. In addition, other key factors in the
        Company’s assessment that these Licenses have an indefinite life include: (1)
        the Company’s license renewal experience confirms that the renewal process is
        perfunctory and renewals would not be withheld except under extraordinary
        circumstances; (2) the renewals related to these Licenses confirms the Company’s
        belief that the renewal process could be completed without substantial cost
        and
        without material modification of the Licenses; (3) the economic performance
        of
        the operations related to the Licenses support the Company’s intention of
        operating the Licenses indefinitely; and (4) the continued limitation of
        gaming
        licenses in the State of Louisiana limits competition in the jurisdictions
        where
        these Licenses are maintained. Statement of Financial Accounting Standards
        No.
        142, “Goodwill and Other Intangible Assets,” (“SFAS 142”) requires that these
        assets be reviewed for impairment at least annually. Based on its annual
        review,
        the Company believes that, except for the goodwill associated with licensing
        and
        goodwill at Blue Chip of $9.2 million, there were no impairments of its goodwill
        and other indefinite-lived intangible assets. Goodwill related to Isle-Bossier
        City is presented in Assets held for sale on the balance sheet due to the
        agreement to sell the property to Legends Gaming, LLC, as discussed in Note
        2.
  78
 **1.
          Summary of Significant Accounting Policies (continued)**
 
 **Goodwill
          and Other Intangible Assets (continued)**
 The
          Company intends to continue to evaluate intangible assets that are not
          being
          amortized at least annually to determine whether events and circumstances
          continue to support an indefinite useful life. If these assets are subsequently
          determined to have a finite useful life, they will be tested for impairment,
          and
          then amortized prospectively over the estimated remaining useful lives
          and
          accounted for in the same manner as other intangible assets that are subject
          to
          amortization.
 
 **Long-Lived
          Assets**
 The
          Company periodically evaluates the carrying value of long-lived assets
          to be
          held for sale or held and used in accordance with Statement of Financial
          Accounting Standards No. 144, “Accounting for the Impairment or Disposal of
          Long-Lived Assets” (“SFAS 144”). SFAS 144 requires impairment losses to be
          recorded on long-lived assets used in operations when indicators of impairment
          are present and the undiscounted cash flows estimated to be generated by
          those
          assets are less than the assets’ carrying amounts. In that event, a loss is
          recognized based on the amount by which the carrying amount exceeds the
          fair
          market value of the long-lived assets. Loss on long-lived assets to be
          disposed
          of is determined in a similar manner, except that fair market values are
          reduced
          for the cost of disposal.
 
 Based
          on
          the pending sale of the Isle-Vicksburg
          and Isle-Bossier City properties,
          the Company reclassified long-lived assets of $42.8 million and $126.3 million, respectively to
          assets
          held for sale. Additionally, during the fourth quarter review for asset impairment, the
          Company
          recorded valuation expense of $2.4 million and $0.7 million on the long-lived
          assets of Isle -
          Our
          Lucaya and IOC UK, Ltd - Blue Chip, respectively as an impairment to the
          carrying value of those assets.
 
 **Deferred
          Financing Costs**
 The
          costs
          of issuing long-term debt are capitalized and amortized using the effective
          interest method over the term of the related debt.
 
 **Self
          -Insurance**
 The
          Company is self-insured for various levels of general liability, workers’
compensation, and employee medical and life insurance coverage. Self-insurance
          liabilities are estimated based on the Company’s claims experience and are
          included in current accrued liabilities on the consolidated balance
          sheets.
 
 **Slot
          Club Awards**
 The
          Company provides slot patrons with rewards based on the dollar amount of
          play on
          slot machines. A liability has been established based on an estimate of
          the
          value of these outstanding rewards, utilizing the age and prior history
          of
          redemptions. ****
  79


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





**Derivative
      Instruments and Hedging Activities**


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





**Revenue
      Recognition**


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





**Net
      Revenues**


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




**Fiscal
                  Year Ended****April
                  30,**
              
              
              **April
                  24,**
              
              
              **April
                  25,****2006**
              
              
              **2005**
              
              
              **2004**(In
                  thousands)Rooms
              $
              19,506
              
              $
              18,091
              
              $
              18,589Food
                  and beverage
              
              76,097
              
              
              76,279
              
              
              75,435Other
              
              2,521
              
              
              2,239
              
              
              2,121Customer
                  loyalty programs
              
              102,050
              
              
              91,696
              
              
              87,248Total
                  promotional allowances
              $
              200,174
              
              $
              188,305
              
              $
              183,393




80




**1.
        Summary of Significant Accounting Policies (continued)**
 
 **Net
        Revenues (continued)** ****
 The
        estimated cost of providing such complimentary services that is included
        in
        casino expense in the accompanying consolidated statements of income was
        as
        follows:
 
 **Fiscal
                  Year Ended****April
                  30,**
              
              
              **April
                  24,**
              
              
              **April
                  25,****2006**
              
              
              **2005**
              
              
              **2004**(In
                  thousands)Rooms
              $
              9,636
              
              $
              9,108
              
              $
              9,517Food
                  and beverage
              
              59,508
              
              
              60,477
              
              
              57,714Other
              
              249
              
              
              195
              
              
              193Total
                  cost of complimentary services
              $
              69,393
              
              $
              69,780
              
              $
              67,424


**Advertising**


Advertising
      costs are expensed the first time such advertisement appears. Total advertising
      costs, including direct mail marketing, were $21.4 million in fiscal 2006,
      $19.7
      million in fiscal 2005 and $19.5 million in fiscal 2004.





**Pre-opening
      Expense**


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





**Capitalized
      Interest**


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





**Income
      Taxes**


Income
      taxes are recorded in accordance with Statement of Financial Accounting
      Standards No. 109, “Accounting for Income Taxes” (SFAS No. 109), whereby
      deferred tax assets and liabilities are recognized for the expected future
      tax
      consequences of events that have been included in the financial statements
      or
      income tax returns. Deferred tax assets and liabilities are determined based
      on
      differences between financial statement carrying amounts of existing assets
      and
      liabilities and their respective tax bases using enacted tax rates expected
      to
      apply to taxable income in the years in which those temporary differences are
      expected to be recovered or settled. The effect on the income tax provision
      and
      deferred tax assets and liabilities of a change in tax rates is recognized
      in
      income in the period that includes the enactment date.




81


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





**Income
      Taxes (continued)**


Income
      tax returns are subject to examination by the Internal Revenue Service (“IRS”)
      and other taxing authorities. As part of the examinations, the Company routinely
      faces challenges regarding the amount of taxes due. These challenges may include
      questions regarding the timing and amount of deductions and the allocation
      of
      income among various jurisdictions. Positions on the Company’s tax returns are
      based on substantial authority that may not ultimately be accepted by the IRS
      or
      other taxing authorities. Assessments for such potential unfavorable outcomes
      are based on the criteria of Statement of Financial Accounting Standards No.
      5,
“Accounting for Contingencies” (SFAS No. 5).  Tax reserves are established
      if an unfavorable outcome is probable and the amount of the unfavorable outcome
      can be reasonably estimated. These required tax reserves are maintained until
      the period that the underlying issue is resolved or when actual results differ
      from reserve estimates, and then the income tax provision and tax reserves
      are
      adjusted in that period. For tax years that are not examined by taxing
      authorities, tax reserves are adjusted in the period that the statute of
      limitations expires.





**Earnings
      per Share of Common Stock**


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





**Stock-Based
      Compensation**


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


**Fiscal
                  Year Ended****April
                  30, 2006**
              
              
              **April
                  24, 2005**
              
              
              **April
                  25, 2004**(In
                  thousands, except per share data)Net
                  income, as reported
              $
              19,023
              
              $
              18,038
              
              $
              27,749Deduct:
                  total stock-based employeecompensation
                  expense determined under fairvalue
                  based method for all awards, net ofrelated
                  tax effects
              
              (3,804)
              
              
              (3,944)
              
              
              (4,175)Pro
                  forma net income
              $
              15,219
              
              $
              14,094
              
              $
              23,574Earnings
                  per common share:Basic
                  - as reported
              $
              0.63
              
              $
              0.61
              
              $
              0.94Basic
                  - pro forma
              $
              0.51
              
              $
              0.47
              
              $
              0.80Diluted
                  - as reported
              $
              0.61
              
              $
              0.58
              
              $
              0.91Diluted
                  - pro forma
              $
              0.49
              
              $
              0.46
              
              $
              0.77




82


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





**Stock-Based
      Compensation (continued)**


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


**Risk-Free**
              **Original**
              **Expected**
              **Expected****Fiscal
                  Year**
              **Interest
                  Rate**
              **Expected
                  Life**
              **Volality**
              **Dividends**2006
              4.30%
              6.40
                  years
              55.1%
              None2005
              4.00%
              6.26
                  years
              55.8%
              None2004
              3.02%
              6.05
                  years
              57.8%
              None


**Currency
      Translation**


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





**Reclassification**


Results
      of operations for all periods presented were reclassified to reflect the
      discontinued operations for the Colorado Grande-Cripple Creek, the
      Isle-Vicksburg and the Isle-Bossier City properties. Property and equipment,
      net
      of depreciation, for the Isle-Vicksburg and the Isle-Bossier City have been
      reclassified to property held for sale, but not for Colorado Grande-Cripple
      Creek as the amounts were not material to the Company’s financial
      position.





**Allowance
      for Doubtful Accounts**




The
      Company reserves an estimated amount for receivables that may not be collected.
      Methodologies for estimating the allowance for doubtful accounts range from
      specific reserves to various percentages applied to aged receivables. Historical
      collection rates are considered, as are customer relationships, in determining
      specific reserves. The balances and activities of this account for fiscal years
      2006, 2005 and 2004 are disclosed in the following table.


**Allowance
                  for Doubtful Accounts****(In
                  thousands)****Additions****Balance
                  at Beginning of Period**
              
              
              **Charged
                  to Costs and Expenses**
              
              
              **Charged
                  to Other Accounts**
              
              
              **Deductions
                  from Reserves**
              
              
              **Balance
                  at End of Period****Year
                  Ended April 30, 2006**
              $
              2,945
              
              $
              1,562
              
              $
              562
              
              $
              2,698
              
              $
              2,371**Year
                  Ended April 24, 2005**
              $
              2,510
              
              $
              1,233
              
              $
              558
              
              $
              1,356
              
              $
              2,945**Year
                  Ended April 25, 2004**
              $
              2,603
              
              $
              2,019
              
              $
              -
              
              $
              2,112
              
              $
              2,510


83


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





**Recently
      Issued Accounting Standards**


On
      December 16, 2004, the FASB issued Statement of Financial Accounting Standards
      No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”), which is a
      revision of Statement of Financial Accounting Standards No. 123, “Accounting for
      Stock-Based Compensation” (“SFAS 123”). Statement 123(R) supersedes APB Opinion
      No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), and amends
      Statement of Financial Accounting Standards No. 95, “Statement of Cash Flows”
(“SFAS 95”). Generally, the accounting method required by SFAS 123(R) is similar
      to the accounting method required by SFAS 123. However, SFAS 123(R) requires
      all
      share-based payments to employees, including grants of employee stock options,
      to be recognized in the income statement based on their fair market values.
      Pro
      forma disclosure is no longer an alternative. SFAS 123(R) must be adopted as
      of
      the beginning of the first annual reporting period of the Company’s first fiscal
      year that begins on or after June 15, 2005. The Company is required to adopt
      SFAS 123(R) on May 1, 2006.





The
      Company has elected to apply the “modified prospective” method in which
      compensation cost is recognized beginning with the effective date (a) based
      on
      the requirements of SFAS 123(R) for all share-based payments granted after
      the
      effective date and (b) based on the requirements of SFAS 123 for all awards
      granted to employees prior to the effective date of SFAS 123(R) that remain
      unvested on the effective date. The
      initial impact of adoption of SFAS 123(R) is discussed in Note 11.





**2.
      Assets Held for Sale**





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




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




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




The
      estimated sales price was adjusted by the difference between actual working
      capital and a target working capital (as defined by the Sales Agreement) on
      the
      closing date. The post closing adjustment to adjust the actual working capital
      to the target working capital was made during the fiscal year ended April 30,
      2006 for the Colorado Grande-Cripple Creek property sale and $0.8 million in
      cash was paid to the Company by Nevada Gold.




On
      February 14, 2006, the Company announced that it had entered into a
      definitive purchase agreement, dated February 13, 2006 to sell its properties
      in
      Bossier City, Louisiana and Vicksburg, Mississippi to privately owned Legends
      Gaming, LLC for $240 million cash. The sales agreement includes a net working
      capital adjustment to the purchase price which is not expected to be
      significant. The closing of the transaction, expected to occur during the second
      quarter of fiscal 2007, is subject to regulatory and other customary closing
      conditions. Assets held for sale on the consolidated balance sheet as of April
      30, 2006 relates to $42.8 million of fixed assets at the Isle-Vicksburg and
      $126.3 million of fixed assets and $53.3 million of goodwill and other
      intangible assets at the Isle-Bossier City. Assets held for sale on the
      consolidated balance sheet as of April 24, 2005 relates to $41.7 million of
      fixed assets at Isle-Vicksburg and $127.6 million of fixed assets and $53.3
      million of goodwill and other intangible assets at Isle-Bossier City. The
      Company does not expect the net working capital components to be significant
      upon disposition.






84


**2.
      Assets Held for Sale (continued)**





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


Net
      interest expense of $24.6 million, $23.2 million and $32.1 million for the
      fiscal years 2006, 2005 and 2004 respectively has been allocated to discontinued
      operations based on the ratio of net assets to be sold to the sum of total
      net
      assets of the Company plus the Company’s debt that is not attributable to a
      particular operation.




**Discontinued
                  Operations****Fiscal
                  Year Ended****April
                  30,**
              
              
              **April
                  24,**
              
              
              **April
                  25,****2006**
              
              
              **2005**
              
              
              **2004**(In
                  thousands)Net
                  revenues
              $
              166,423
              
              $
              171,052
              
              $
              173,614Pretax
                  income (loss) from discontinued operations
              $
              18,250
              
              $
              6,146
              
              $
              (58)Income
                  from discontinued operations, net of tax
              $
              11,213
              
              $
              3,006
              
              $
              393




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





Property
      and equipment consists of the following:


**April
                  30,**
              
              
              **April
                  24,****2006**
              
              
              **2005**(In
                  thousands)Property
                  and equipment:Land
                  and land improvements
              $
              126,430
              
              $
              123,231Leasehold
                  improvements
              
              277,205
              
              
              161,746Buildings
                  and improvements
              
              345,326
              
              
              323,776Riverboats
                  and floating pavilions
              
              126,590
              
              
              148,062Furniture,
                  fixtures and equipment
              
              383,321
              
              
              343,576Construction
                  in progress
              
              87,074
              
              
              127,680Total
                  property and equipment
              
              1,345,946
              
              
              1,228,071Less
                  accumulated depreciation and amortization
              
              407,518
              
              
              370,428Property
                  and equipment, net
              $
              938,428
              
              $
              857,643


Interest
      capitalized totaled $4.6 million in fiscal 2006, $3.2 million in fiscal 2005
      and
      $0.8 million in fiscal 2004.




**4.
        Goodwill and Other Intangible Assets**
  The
        changes in the carrying amount of goodwill are as follows (in
        thousands):
 Balance
                      at April 25, 2004
                  $
                  306,176Reclassification
                      of goodwill
                  
                  2,022Foreign
                      currency translation adjustment
                  
                  761Impairment
                      of the Colorado Grande - Cripple Creek
                  
                  (3,959)Balance
                      at April 24, 2005
                  $
                  305,000Sale
                      of Colorado Grande - Cripple Creek
                  
                  (2,897)Impairment
                      related to Blue Chip Casinos
                  
                  (8,956)Foreign
                      currency translation adjustment
                  
                  (235)Goodwill
                      adjustment - Grand Palais Riverboat, Inc.
                  
                  3,442Balance
                      at April 30, 2006
                  $
                  296,354




85


**4.
      Goodwill and Other Intangible Assets**





For
      the
      fiscal year ended April 30, 2006, the net carrying value of the
      intangible assets of Blue Chip exceeded the fair value for which a charge of
      $9.2 million was recorded in the fourth quarter to impair the remaining carrying
      value of goodwill.





During
      the fiscal year ended April 30, 2006, an adjustment was made to adjust the
      deferred tax liability for basis differences related to the original purchase
      price of the Grand Palais Riverboat property at Lake Charles, Louisiana for
      $3.4
      million. The impact to prior years was not material.





Goodwill
      related to Isle-Bossier City is presented in Assets held for sale on the balance
      sheet for fiscal years 2004, 2005 and 2006 in accordance with the agreement
      to
      sell the property to Legends Gaming, LLC, as discussed in Note
      2.





In
      the
      fourth quarter of fiscal 2005 the net fair value of the Colorado Grande-Cripple
      Creek was $5.8 million which was exceeded by the carrying value of the
      long-term assets of $9.8 million, including goodwill of $6.9 million. A charge
      of $4.0 million was recorded in the fourth quarter of fiscal 2005 for the
      impairment of the Colorado Grande-Cripple Creek’s remaining goodwill. An
      adjustment to goodwill of $2.9 million for Colorado Grande-Cripple Creek was
      recorded as part of the recording of the final adjustment for the sale of the
      property in the fiscal year ended April 30, 2006. Colorado Grande-Cripple
      Creek’s operating results and minority interest share is classified as
      discontinued operations on the consolidated statements of income.





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




Other
      intangible assets consist of the following:


**April
                  30,**
              
              
              **April
                  24,****2006**
              
              
              **2005**(In
                  thousands)Gaming
                  licenses
              $
              57,224
              
              $
              35,450Trademarks
                  and player database
              
              17,565
              
              
              18,985Other
                  intangible assets, net
              $
              74,789
              
              $
              54,435




The
        increase in Other intangible assets, net for fiscal year 2006 compared to
        fiscal
        year 2005 is primarily due to $21.1 million related to the acquisition of
        the
        gaming license in Waterloo, Iowa. Other intangible assets, net is net of
        accumulated amortization prior to the adoption of FAS 142 of $25.0
        million.
 
 **5.** **Restricted
        Cash**
 
 Restricted
        cash of $2.2 million includes minimum cash requirements in banks for properties
        of $1.6 million and a state tax bond and other deposits for gaming at various
        properties of $0.6 million.
  86




**6.
        Self-Insurance Liabilities**
 
 The
        Company’s employee-related health care benefits program, workers’ compensation
        insurance and general liability insurance are self-funded up to a maximum
        amount
        per claim. Claims in excess of this maximum are fully insured through stop-loss
        insurance policies. The liabilities are based on claims filed and estimates
        of
        claims incurred but not reported. For the fiscal years ended April 24, 2006
        and
        April 25, 2005, the Company’s liabilities for unpaid and incurred but not
        reported claims totaled $27.4 million and $22.9 million, respectively, and
        are
        included in “Accrued liabilities-payroll and related” for health care benefits
        and workers’ compensation insurance and in “Accrued liabilities-other” for
        general liability insurance in the accompanying consolidated balance sheets.
        While the total cost of claims incurred depends on future developments, in
        management’s opinion, recorded reserves are adequate to cover future claims
        payments.
  **7.
          Long-Term Debt**
 **April
                      30,**
                  
                  
                  **April
                      24,****2006**
                  
                  
                  **2005**Long-term
                      debt consists of the following:
                  (In
                      thousands)7%
                      Senior Subordinated Notes (described below)
                  $
                  500,000
                  
                  $
                  500,0009%
                      Senior Subordinated Notes (described below)
                  
                  200,000
                  
                  
                  200,000Senior
                      Secured Credit Facility (described below)Variable
                      rate term loan
                  
                  296,500
                  
                  
                  249,375Revolver
                  
                  -
                  
                  
                  -Isle-Black
                      Hawk Senior Secured Credit Facility, non-recourse to Isle of
                      CapriCasinos,
                      Inc. (described below)Variable
                      rate term loan Tranche C
                  
                  189,050
                  
                  
                  163,350Revolver
                  
                  20,600
                  
                  
                  26,000Isle-Black
                      Hawk Special Assessment BID Bonds, non-recourse to Isle of
                      CapriCasinos,
                      Inc. (described below)
                  
                  472
                  
                  
                  590Blue
                      Chip Credit Facility (6.50% at April 30, 2006) due January
                      2009;non-recourse
                      to Isle of Capri Casinos, Inc. (described below)
                  
                  6,563
                  
                  
                  6,942Variable
                      rate TIF Bonds due to City of Bettendorf (described below)
                  
                  2,926
                  
                  
                  3,875Variable
                      rate General Obligation Bonds due to City of Davenport (described
                      below)
                  
                  1,675
                  
                  
                  1,83012.5%
                      note payable, due in monthly installments of $125, including
                      interest,beginning
                      October 1997 through October 2005
                  
                  -
                  
                  
                  494Other
                  
                  3,494
                  
                  
                  3,6621,221,280
                  
                  
                  1,156,118Less
                      current maturities
                  
                  8,588
                  
                  
                  7,501Long-term
                      debt
                  $
                  1,212,692
                  
                  $
                  1,148,617


The
      following is a brief description of the Company’s and its subsidiaries’
borrowing arrangements. Certain of these arrangements contain financial
      covenants. The Company and its subsidiaries were in compliance with all
      covenants as of April 30, 2006 and April 24, 2005.




87


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





**7%
      Senior Subordinated Notes**


On
      March
      3, 2004, the Company issued $500.0 million of 7% Senior Subordinated Notes
      due
      2014. The 7% Senior Subordinated Notes are guaranteed by all of the Company’s
      significant domestic subsidiaries, excluding the subsidiaries that own and
      operate the Isle-Black Hawk and the Colorado Central Station-Black Hawk, and
      other subsidiaries as described more fully in Note 21. The 7% Senior
      Subordinated Notes are general unsecured obligations and rank junior to all
      existing and future senior indebtedness, senior to any subordinated indebtedness
      and equally with all existing and future senior subordinated debt, including
      the
      $200.0 million in aggregate principal amount of the existing 9% Senior
      Subordinated Notes. Interest on the 7% Senior Subordinated Notes is payable
      semi-annually on each March 1 and September 1 through maturity. The 7% Senior
      Subordinated Notes are redeemable, in whole or in part, at the Company’s option
      at any time on or after March 1, 2009, at the redemption prices (expressed
      as
      percentages of principal amount) set forth below plus accrued and unpaid
      interest to the applicable redemption date, if redeemed during the 12-month
      period beginning on March 1 of the years indicated below:


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


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





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





**9%
      Senior Subordinated Notes**


On
      March
      27, 2002, the Company issued $200.0 million of 9% senior subordinated notes
      due
      2012 (the “9% Senior Subordinated Notes”). The
      9%
      senior subordinated notes are guaranteed by all of the Company’s significant
      domestic subsidiaries, excluding the subsidiaries that own and operate the
      Isle-Black Hawk and Colorado Central Station-Black Hawk, and other subsidiaries
      as described more fully in Note 21. The
      9%
      senior subordinated notes are general unsecured obligations and rank junior
      to
      all existing and future senior indebtedness, senior to any subordinated
      indebtedness and equally with all existing and future senior subordinated debt,
      including the $500.0 million in aggregate principal amount of the existing
      7%
      senior subordinated notes. Interest
      on the 9% Senior Subordinated Notes is payable semi-annually on each March
      15
      and September 15 through maturity. The 9% Senior Subordinated Notes are
      redeemable, in whole or in part, at the Company’s option at any time on or after
      March 15, 2007, at the redemption prices (expressed as percentages of principal
      amount) set forth below plus accrued and unpaid interest to the applicable
      redemption date, if redeemed during the 12-month period beginning on March
      15 of
      the years indicated below:




88


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


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


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





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





**Senior
      Secured Credit Facility**


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





The
      Company is required to pay a commitment fee of 0.50% of the unused revolving
      facility.





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





89


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





Pursuant
      to the refinancing, the Company recognized a loss before income taxes on early
      extinguishment of debt of $5.3 million in fiscal 2005, due to the write-off
      of
      previously deferred financing costs related to its existing senior secured
      credit facility. The costs of $4.8 million associated with the new senior
      secured credit facility have been deferred and are being amortized over the
      term
      of the new facility.





The
      senior secured credit facility provides for certain covenants, including those
      of a financial nature. The senior secured credit facility is secured by liens
      on
      substantially all of the Company’s assets and guaranteed by all of its
      restricted subsidiaries. As of April 30, 2006, the Company was in compliance
      with all covenants related to this facility.





The
      weighted average effective interest rate of total debt outstanding under the
      senior secured credit facility at April 30, 2006, was 6.76%.





At
      April
      30, 2006, the Company had $296.5 million outstanding under the senior secured
      term loan credit facility and no amounts outstanding under the revolving credit
      facility.





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


On
      October 24, 2005, Isle of Capri Black Hawk, L.L.C., a joint venture company
      that
      owns and operates two casinos in Black Hawk, Colorado is owned 57% by Isle
      of
      Capri Casinos, Inc. and 43% by a subsidiary of Nevada Gold & Casinos, Inc.,
      entered into a $240.0 million Second Amended and Restated Credit Agreement.
      The
      credit agreement, which amends and restates the Isle of Capri Black Hawk,
      L.L.C.’s existing credit agreement in its entirety, provides for a $50.0 million
      revolving credit facility maturing the earlier of October 24, 2010 or such
      date
      as the term loan facility is repaid in full and a $190.0 million term loan
      facility maturing on October 24, 2011. At the Isle of Capri Black Hawk, L.L.C.’s
      and the lead arranger’s mutual discretion, Isle of Capri Black Hawk, L.L.C. may
      increase the size of the revolver and/or term loan facility, in an aggregate
      amount up to $25.0 million subject to certain conditions. The term loans are
      payable in quarterly installments beginning on December 30, 2005 and ending
      on
      September 30, 2011. The revolving loans may bear interest at the Isle of Capri
      Black Hawk, L.L.C.’s option at (1) the higher of 0.5% in excess of the federal
      funds effective rate or the rate that the lead arranger announces from time
      to
      time as its prime lending rate plus an applicable margin up to 1.25% or (2)
      a
      rate tied to a LIBOR rate plus an applicable margin up to 2.25%. The term loans
      may bear interest at the Isle of Capri Black Hawk, L.L.C.’s option at (1) the
      higher of 0.5% in excess of the federal funds effective rate or the rate that
      the lead arranger announces from time to time as its prime lending rate, plus
      an
      applicable margin of 1.00% or (2) a rate tied to a LIBOR rate plus an applicable
      margin of 2.00%. The Isle of Capri Black Hawk, L.L.C is required to pay a
      commitment fee of 0.5% of the unused portion of the revolving facility. The
      credit agreement is secured by liens on substantially all of the Isle of Capri
      Black Hawk, L.L.C.’s assets. The credit agreement contains customary
      representations and warranties and affirmative and negative covenants and is
      non-recourse to the Company. Pursuant to the refinancing, the Company recognized
      a loss before income taxes on early extinguishment of debt of $2.1 million,
      due
      to the write-off of previously deferred financing costs related to its existing
      senior secured credit facility. The costs of $1.8 million associated with the
      new senior secured credit facility have been deferred and are being amortized
      over the term of the new facility.





90


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





The
      Isle-Black Hawk senior secured credit facility as amended provides for certain
      covenants including those of a financial nature. The Isle-Black Hawk was in
      compliance with all of the covenants as of April 30, 2006. The Isle-Black Hawk
      senior secured credit facility is secured by liens on the Isle-Black Hawk’s
      assets.





The
      weighted average effective interest rate of total debt outstanding under the
      Isle-Black Hawk Senior Secured Credit Facility at April 24, 2005, was
      6.51%.





**Interest
      Rate Swap Agreements**


The
      Isle-Black Hawk has interest rate swap agreements with an aggregate notional
      value of $80.0 million or 42.2% of its variable rate term debt outstanding
      under
      the Isle-Black Hawk’s senior secured credit facility as of April 30, 2006. The
      swaps were entered in to effectively convert portions of its variable rate
      debt
      to a fixed-rate basis until the fourth fiscal quarter of 2008, thus reducing
      the
      impact of interest rate changes on future interest expense. During fiscal year
      2006, the swaps were not designated as effective hedges. The interest rate
      swap
      agreements terminate in fiscal year 2008.





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


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





**Blue
      Chip Credit Facility**


Blue
      Chip
      PLC has an agreement with the Bank of Scotland to borrow up to £3.8 million
      ($6.9 million as of April 30, 2006) to fund its casino development program.
      As
      of April 30, 2006, only £3.6 million ($6.6 million) has been borrowed. The term
      loan is to be repaid in quarterly payments commencing in July 2005, and is
      to be
      repaid in April 2009 should Blue Chip borrow the additional £0.2 million ($0.4
      million). If the additional funds are not borrowed, the loan will be repaid
      in
      January 2009. The interest rate is either, at Blue Chip’s option, the Bank of
      Scotland’s base rate or LIBOR plus a margin of 1.75%. This debt is non-recourse
      to the Company.





91


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





**Isle-Bettendorf
      TIF Bonds**


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


**Isle-Davenport
      General Obligation Bonds**


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





**Other**


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


**Fiscal
                  Year Ending**(In
                  thousands)2007
              
              8,5882008
              
              7,4852009
              
              8,6122010
              
              6,2032011
              
              376,089Thereafter
              
              814,303$
              1,221,280


As
      of
      April 30, 2006, the Company had $361.2 million of availability under its lines
      of credit.





Standby
      letters of credit totaling $72.2 million consist of the following: $4.0 million
      for the Isle-Black Hawk and Colorado Central Station, $1.7 million for gaming
      taxes, $6.5 million for workers’ compensation, $2.0 million on a building lease
      for the Company’s headquarters in the St. Louis, Missouri area, $5.8 million for
      insurance and $2.2 million for other. A $50.0 million letter of credit also
      was
      issued in connection with the gaming license application in Pittsburgh,
      Pennsylvania.




92


**8.
        Comprehensive Income**
 
 Comprehensive
        income consists of the following:


**Unrealized
                  gain (loss) on interest rate swaps**
              
              
              **Foreign
                  currency translation adjustment**
              
              
              **Accumulated
                  other comprehensive income (loss****(In
                  thousands)**Balance,
                  April 27, 2003
              $
              (4,284)
              
              $
              -
              
              $
              (4,284)Net
                  change
              
              4,044
              
              
              761
              
              
              4,805Balance,
                  April 25, 2004
              $
              (240)
              
              $
              761
              
              $
              521Net
                  change
              
              345
              
              
              1,992
              
              
              2,337Balance,
                  April 24, 2005
              $
              105
              
              $
              2,753
              
              $
              2,858Net
                  change
              
              (105)
              
              
              (2,533)
              
              
              (2,638)Balance,
                  April 30, 2006
              $
              -
              
              $
              220
              
              $
              220


**9.
      Commitments**





**Isle-Lake
      Charles**


The
      Company leases approximately 16.25 acres of land in Calcasieu Parish, Louisiana
      for use in connection with the Isle-Lake Charles. This agreement expires in
      March 2010, with fifteen renewal options of five years each. Rent under the
      Isle-Lake Charles lease is currently $1.8 million per year and is subject to
      increases based on the Consumer Price Index (“CPI”).





**Isle-Lula**


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





**Isle-Biloxi**


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





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




93


**9.
      Commitments (continued)**





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





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





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





**Isle-Natchez**


Through
      numerous lease agreements, the Company leases approximately 24 acres of land
      in
      Natchez, Mississippi, which is used in connection with the operation of the
      Isle-Natchez. Unless terminated by the Company at an earlier date, the lease
      expiration dates vary through 2037. Rents under the leases currently total
      approximately $84,334 per month. The Company also leases approximately 7.5
      acres
      of land, which is utilized for parking at the facility.





**Isle-Kansas
      City**


The
      Company leases approximately 28 acres from the Kansas City Port Authority in
      connection with the operation of the Isle-Kansas City. The term of the lease
      is
      ten years and the Company has the option to renew the lease for eight additional
      terms of five years each. Rent under the lease is currently $2.0 million per
      year, subject to the higher of $2.0 million (minimum rent) per year, or 3.25%
      of
      gross revenues, less complimentaries.




94


**9.
      Commitments (continued)**





**Isle-Boonville**


The
      Company entered into a lease agreement with the City of Boonville. Under the
      terms of agreement, the Company leases the site for a period of ninety-nine
      years. In lieu of rent, the Company is assessed additional amounts by the City
      of Boonville based on a 3.5% tax on gaming revenue, which the Company recognizes
      as additional rent.





**Isle-Bettendorf**


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





**Isle-Davenport**


Through
      various lease agreements, the Company leases approximately twelve acres of
      land
      in Davenport, Iowa in connection with the operations of Rhythm City-Davenport.
      The aggregate annual rent on these leases is approximately $0.8 million and
      they
      have varying expiration dates through 2022. Pursuant to a development agreement
      with the City, the Isle-Davenport has exclusive docking privileges in the City
      of Davenport until March 31, 2017 in consideration of this docking fee. The
      docking fee has both a fixed base and a per passenger increment. The fixed
      fee
      commenced April 1, 1994 at $111,759 and increases annually by 4%. The
      incremental component is a $0.10 charge for each passenger in excess of
      1,117,579 passengers (which charge also increases by 4% per year). The lease
      is
      accounted for on a straight-line basis; however effective June 9, 2006, the
      Company has renegotiated the lease with the City of Davenport to pay a
      development fee of 1.65% of adjusted gross receipts, 0.5% gaming taxes and
      other
      fees, property taxes, rebates and payments in lieu of taxes as set forth in
      the
      agreement with a minimum assessment of $32.8 million to be paid no later than
      December 31, 2021. This is in conjunction with a joint development between
      Rhythm City and the City of Davenport known as the Riverfront Development
      Project and contains various conditions related to the design and completion
      of
      the project.





**Isle-Marquette**


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





95


**9.
      Commitments (continued)**





**Colorado
      Central Station-Black Hawk**


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





**Isle-Our
      Lucaya**


In
      April
      2006, the Company’s Board of Directors approved a plan to close the Isle-Our
      Lucaya facility. Effective
      June 1, 2006, the Company notified its landlord of its decision to terminate
      the
      lease and the Company intends to cease operations by June 1, 2007 as required
      by
      the lease. In
      conjunction with exercising the lease termination, the Company paid a $2.2
      million fee to its landlord to early terminate the lease. This amount will
      be
      expensed, in accordance with SFAS 146 on the date of notification, in the first
      quarter of fiscal 2007. Based on projected cash flows, we have recorded an
      impairment charge of approximately $2.4 million and based on Bahamian government
      regulations, we have accrued $1.2 million for severance payments in the fourth
      quarter of fiscal 2006. In addition, the Company will be required to make its
      $2.5 million annual lease payment in fiscal year 2007 according to the terms
      of
      the lease.





**Other**


In
      December 2003, the Company entered into a 25-year lease with Arena Coventry
      Limited to lease approximately 120,000 square feet within the arena compound
      that will be used in connection with the operation of the Isle-Coventry.
      Beginning in the fourth quarter of fiscal 2006, the Company will pay
      approximately £1.3 million plus VAT ($2.4 million at April 30, 2006) per year
      offset by £6.0 million plus VAT ($10.9 million at April 30, 2006) prepaid rent
      that reduces annual rent expenses over 15 years.





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





96


**9.
      Commitments (continued)**





Future
      minimum payments under capital leases and noncancelable operating leases with
      initial terms of one year or more consisted of the following at April 30,
      2006:


**Capital**
              
              
              **Operating****Leases**
              
              
              **Leases**(In
                  thousands)2007
              $
              330
              
              $
              15,2402008
              
              331
              
              
              12,2922009
              
              343
              
              
              11,8372010
              
              344
              
              
              11,8102011
              
              357
              
              
              11,672Thereafter
              
              3,410
              
              
              1,056,396Total
                  minimum lease payments
              $
              5,115
              
              $
              1,119,247Amounts
                  representing interest
              
              (2,892)Present
                  value of net minimum lease payments
              $
              2,223


All
        future operating minimum lease payments include long-term land lease payments,
        which have various renewal options varying between five to ten years. The
        Company has assumed that it will exercise all option periods for calculation
        of
        minimum lease payments. Rent expense for operating leases was approximately
        $36.0 million in fiscal 2006, $36.7 million in fiscal 2005 and $35.1 million
        in
        fiscal 2004. Such amounts include contingent rentals of $9.6 million in fiscal
        2006, $9.7 million in fiscal 2005 and $9.3 million in fiscal 2004.


**10.
      Related Party Transactions**





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





The
      Company reimbursed Alter Trading Corporation for annual lease payments of
      approximately $119,000 and $93,000 in fiscal 2006 and fiscal 2005, respectively,
      for property leased by Alter Trading Corporation. The land was leased at the
      Company’s request in order to secure sites for possible casino
      operations.





On
      August
      19, 2004, the Company entered into a contract with John Brackenbury, a member
      of
      the Board of Directors, for consulting fees related to on-going contracts and
      transactions in the United Kingdom. The total paid under this contract during
      fiscal 2006 and fiscal 2005 were $60,000 and $40,000, respectively. The contract
      continues month-to-month at $5,000 per month.





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





97


**10.
      Related Party Transactions (continued)**





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





**11.
      Common Stock**





**Earnings
      per Share of Common Stock**


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


**Fiscal
                  Year Ended****April
                  30,**
              
              
              **April
                  24,**
              
              
              **April
                  25,****2006**
              
              
              **2005**
              
              
              **2004**(In
                  thousands, except per share data)Numerator:Income
                  applicable to common shares:Income
                  from continuing operations
              $
              7,810
              
              $
              15,032
              
              $
              27,356Income
                  from discontinued operations
              
              11,213
              
              
              3,006
              
              
              393Net
                  income
              $
              19,023
              
              $
              18,038
              
              $
              27,749Denominator:Denominator
                  for basic earnings per share -weighted
                  - average shares
              
              30,028
              
              
              29,682
              
              
              29,404Effect
                  of dilutive securitiesEmployee
                  stock optionsand
                  nonvested restricted stock
              
              1,242
              
              
              1,248
              
              
              1,062Denominator
                  for diluted earnings per share -adjusted
                  weighted - average shares andassumed
                  conversions
              
              31,270
              
              
              30,930
              
              
              30,466Basic
                  earnings per share:Income
                  from continuing operations
              $
              0.26
              
              $
              0.51
              
              $
              0.93Income
                  from discontinued operations
              
              0.37
              
              
              0.10
              
              
              0.01Net
                  income
              $
              0.63
              
              $
              0.61
              
              $
              0.94Diluted
                  earnings per share:Income
                  from continuing operations
              $
              0.25
              
              $
              0.49
              
              $
              0.90Income
                  from discontinued operations
              
              0.36
              
              
              0.10
              
              
              0.01Net
                  income
              $
              0.61
              
              $
              0.58
              
              $
              0.91


Any
      options with an exercise price in excess of the average market price of the
      Company’s common stock during the periods presented are not considered when
      calculating the dilutive effect of stock options for diluted earnings per share
      calculations. The average number of options excluded from the calculation was
      335,106 shares, 1,468,478 shares, and 1,331,635 shares for fiscal years 2006,
      2005 and 2004, respectively.




98


**11.
      Common Stock (continued)**





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


Under
      the
      Company’s 1992, 1993 and 2000 Stock Option Plans, as amended, a maximum of
      1,058,750, 4,650,000 and 3,500,000 options, respectively, are reserved for
      issuance and may be granted to directors, officers and employees. The plans
      provide for the issuance of incentive stock options and nonqualified options
      which have a maximum term of 10 years and are, generally, exercisable in yearly
      installments ranging from 20% to 25%, commencing one year after the date of
      grant. The Company has 1,186,032 shares available for future issuance under
      its
      equity compensation plans.





Stock
      options outstanding are as follows:


**2006
                  Options**
              
              
              **Weighted
                  Average Exercise Price**
              
              
              **2005
                  Options**
              
              
              **Weighted
                  Average Exercise Price**
              
              
              **2004
                  Options**
              
              
              **Weighted
                  Average Exercise Price**Outstanding
                  options at beginning offiscal
                  year
              
              3,332,612
              
              $
              14.05
              
              
              3,367,997
              
              $
              12.31
              
              
              3,572,083
              
              $
              9.80Options
                  granted
              
              567,000
              
              
              22.43
              
              
              662,421
              
              
              20.42
              
              
              751,431
              
              
              20.59Options
                  exercised
              
              (763,104)
              
              
              12.01
              
              
              (472,375)
              
              
              9.48
              
              
              (669,764)
              
              
              8.13Options
                  canceled
              
              (204,408)
              
              
              19.18
              
              
              (225,431)
              
              
              16.37
              
              
              (285,753)
              
              
              12.54Outstanding
                  options at end of fiscal year
              
              2,932,100
              
              $
              15.85
              
              
              3,332,612
              
              $
              14.05
              
              
              3,367,997
              
              $
              12.31


The
        weighted average fair value of options granted during the years ended April
        30,
        2006, April 24, 2005 and April 23, 2004 was $13.09, $11.55 and $11.69,
        respectively.
 
 The
        following table summarizes information about stock options outstanding at
        April
        30, 2006:


**Options
                    Outstanding**
                
                **Options
                    Exercisable****Ranges
                    of Exercise Prices**
                
                **Number
                    Outstanding**
                
                **Weighted
                    Average Remaining Contractual Life**
                
                **Weighted
                    Average Exercise Price**
                
                
                
                **Number
                    Exercisable**
                
                
                **Weighted
                    Average Exercise Price**$2.61
                    - $5.22
                
                244,429
                
                
                2.0
                
                
                years
                
                
                $ 
                    3.13
                
                
                
                244,429
                
                
                $ 
                    3.135.22
                    - 7.84
                
                381,685
                
                
                5.1
                
                
                years
                
                
                6.50
                
                
                
                247,185
                
                
                6.507.84
                    - 10.45
                
                148,022
                
                
                3.4
                
                
                years
                
                
                10.25
                
                
                
                148,022
                
                
                10.2510.45
                    - 13.06
                
                39,173
                
                
                2.4
                
                
                years
                
                
                12.38
                
                
                
                39,173
                
                
                12.3813.06
                    - 15.67
                
                609,124
                
                
                5.0
                
                
                years
                
                
                15.18
                
                
                
                452,624
                
                
                15.0515.67
                    - 18.28
                
                7,827
                
                
                3.5
                
                
                years
                
                
                17.75
                
                
                
                7,827
                
                
                17.7518.28
                    - 20.90
                
                1,197,638
                
                
                8.1
                
                
                years
                
                
                20.35
                
                
                
                238,588
                
                
                20.4420.90
                    - 23.51
                
                26,962
                
                
                2.5
                
                
                years
                
                
                23.00
                
                
                
                26,962
                
                
                23.0023.51
                    - 26.12
                
                277,240
                
                
                8.9
                
                
                years
                
                
                24.66
                
                
                
                24,990
                
                
                25.22$2.61
                    - $26.12
                
                2,932,100
                
                
                6.3
                
                
                years
                
                
                $ 
                    15.85
                
                
                
                1,429,800
                
                
                $ 
                    12.21
  As
          permitted by SFAS 123, the Company currently accounts for share-based payments
          to employees using APB 25’s intrinsic value method and, as such, generally
          recognizes no compensation cost for employee stock options. Accordingly,
          the
          adoption of SFAS 123(R)’s fair value method will have a significant impact on
          its result of operations. The additional compensation expense, net of tax,
          for
          unvested options at April 30, 2006 that will be recognized is $1.9 million
          and
          $4.5 million for the quarter ended July 30, 2006 and the year ended April
          29,
          2007, respectively.
  99
  **11.
          Common Stock (continued)**
 
 Additionally,
          the Company will book compensation expense on options granted using the
          fair
          value method of accounting for stock-based compensation and will include
          an
          estimate of options expected to be forfeited in lieu of accounting for
          forfeitures as they occur.
 
 **Stock-based
          Compensation - Deferred Bonus Plan**
 In
          fiscal
          2001, the Company’s stockholders approved the Deferred Bonus Plan. The Plan
          provides for the issuance of non-vested stock to eligible officers and
          employees
          who agree to receive a deferred bonus in the form of non-vested stock.
          The
          vesting of the stock is dependent upon continued service to the Company
          for a
          period of five years. At April 30, 2006, the non-vested stock issued in
          connection with the Plan totaled 143,125 shares, of which 32,707 shares
          were
          issued during fiscal year ended April 30, 2006 at $24.33, the weighted-average
          fair value of the non-vested stock at the grant date. For the fiscal year
          ended
          April 30, 2005, the Company recorded unearned compensation in consolidated
          stockholders’ equity equal to the fair value of the non-vested award.
          Compensation expense related to stock-based compensation under the Deferred
          Bonus Plan totaled $514,576 in fiscal 2006, $606,000 in fiscal 2005, and
          $605,000 in fiscal 2004. The Company does not plan to award any further
          compensation under this plan, however, any grants that have been awarded
          prior
          to the plan’s discontinuation will be paid provided the vesting requirements are
          met.
 
 In
          accordance with the adoption of SFAS 123(R) on May 1, 2006, the Company
          will
          include an estimate of restricted shares expected to be forfeited in lieu
          of
          accounting for forfeitures as they occur in recording compensation expense
          under
          the Deferred Bonus Plan.
 
 **Stock
          Repurchase**
 On
          November 15, 2000, the Company’s Board of Directors approved a stock repurchase
          program, which allowed for the purchase of up to 1.5 million shares of
          the
          Company’s outstanding common stock. The Board expanded this program on January
          11, 2001, and allowed an additional 1.5 million shares to be repurchased.
          On
          October 25, 2002, the Company’s Board of Directors approved a new stock
          repurchase program allowing for the purchase of up to 1.5 million shares
          of the
          Company’s outstanding common stock, for a total of 4.5 million shares. As of
          April 30, 2006, the Company has repurchased 3.9 million and retired 553,800
          shares of common stock under these programs.
 
 **Stockholder
          Rights Plan**
 In
          February 1997, the Company adopted a Stockholder Rights Plan. The Plan
          is
          designed to preserve the long-term value of the shareholders’ investment in the
          Company. Under the Plan, each shareholder will receive a distribution of
          one
          right for each share of the Company’s outstanding common stock. The rights were
          distributed to shareholders of record on March 3, 1997, and will expire
          ten
          years thereafter. Each right entitles the holder to purchase one one-thousandth
          (1/1,000) of a share of a new series of participating preferred stock at
          an
          initial exercise price of $12.50. Initially the rights are represented
          by the
          Company’s common stock certificates and are not exercisable. The rights become
          exercisable shortly after a person or group acquires beneficial ownership
          of 15%
          or more of the Company or publicly announces its intention to commence
          a tender
          or exchange offer that would result in the 15% beneficial ownership level.
          Under
          certain circumstances involving a buyer’s acquisition of a 15% position in the
          Company, all rights holders except the buyer will be entitled to purchase
          common
          stock at half price. If the Company is acquired through a merger, after
          such an
          acquisition, all rights holders except the buyer will be entitled to purchase
          stock in the buyer at half price. The Company may redeem the rights at
          one cent
          each at any time before a buyer acquires 15% of the Company’s
          stock.
 
 100
  **12.
          Deferred Compensation Plans**
 
 **2005
          Deferred Compensation Plan**
 On
          January 11, 2005, the Company adopted the 2005 Deferred Compensation Plan
          (the
“Plan”), which amends and restates its existing deferred compensation
          arrangement. The Plan is an unfunded deferred compensation arrangement
          for the
          benefit of key management officers and employees of the Company and its
          subsidiaries. The terms of the Plan include the ability of the participants
          to
          defer, on a pre-tax basis, salary, bonus payments and any voluntary deferrals
          to
          the Company’s Retirement Trust and Savings Plan in excess of the amount
          permitted under IRS Code Section 401(k). The terms also include a discretionary
          annual matching contribution by the Company. The Plan allows for the aggregation
          and investment of deferred amounts in notional investment alternatives,
          including units representing shares of the Company’s common stock.
 
 **Non-Employee
          Directors’ Deferred Compensation Plan**
 On
          January 11, 2005, the Company adopted the Non-Employee Directors’ Deferred
          Compensation Plan (the “Directors’ Plan”). The Directors’ Plan provides a means
          by which non-employee directors can defer the receipt of their annual retainer
          and meeting fees. Deferred amounts are subject to notional investment in
          either
          a money market or similar cash equivalent fund or units representing shares
          of
          the Company’s common stock. Deferred amounts, as adjusted for earnings during
          the deferral period, are distributed after a director ceases to serve for
          any
          reason.
 
 **13.
          Employee Benefit Plans**
 
 **401(k)
          Plan**
 The
          Company has a 401(k) plan covering substantially all of its employees.
          The
          Company’s contribution expense related to the 401(k) plan was approximately $1.7
          million in fiscal 2006, $1.7 million in fiscal 2005 and $1.5 million in
          fiscal
          2004. The Company’s contribution is based on a percentage of employee
          contributions and may include an additional discretionary amount. The 401(k)
          plan allows employees to invest no more than 5% of their contribution in
          the
          Company’s common stock.
 
 **Insurance
          Plan**
 The
          Company has a qualified employee insurance plan covering all employees
          who work
          an average of 32 hours or more per week on a regular basis. The plan, which
          is
          self-funded by the Company with respect to claims below a certain maximum
          amount, requires contributions from eligible employees and their dependents.
          The
          Company’s contribution expense for the plan was approximately $32.2 million in
          fiscal 2006, $34.3 million in fiscal 2005 and $30.4 million in fiscal
          2004.
 
 **14.
          Hurricanes and Related Charges**
 
 On
          August
          29, 2005, Hurricane Katrina struck the Gulf Coast of Mississippi and Louisiana,
          which resulted in significant damage to the Company’s facility and its casino
          barge under construction in Biloxi, Mississippi. On December 26, 2005 the
          Company, using its existing facility, opened a casino as part of the land-based
          structure that was not severely damaged by the storm.
  On
          September 22, 2005, Hurricane Rita struck the Gulf Coast of Louisiana and
          Texas,
          which caused damage to the casino and hotel facilities in Lake Charles,
          Louisiana. The property was closed for 16 days as a result but subsequently
          reopened on October 8, 2005.
  On
          October 24, 2005, Hurricane Wilma struck Florida, causing damage to the
          Company’s Pompano Park racing facility. The Property was closed until December
          2, 2005.
  101
  **14.
          Hurricanes and Related Charges (continued)**
  The
          Company has insurance coverage related to damage from the three hurricanes
          for
          property damage incurred, property operating costs during the operational
          downtime of the hurricanes, incremental costs incurred related to hurricane
          damage and recovery activities and business interruption insurance for
          lost
          profits during the period directly related to the hurricanes. The Company
          believes it will receive proceeds from its insurance carrier related to
          all four
          types of losses the Company has sustained, and through July 5, 2007 has
          received
          advances of $55.4 million, of which $53.9 million was received by April
          30,
          2006.
  The
          Company has recognized asset impairments and losses of $68.6 million based
          on
          assessments of damage at all its locations. The Company has also incurred
          out-of-pocket costs directly related to the hurricanes and the property
          operating costs related to the period of closure caused by the hurricanes,
          of
          $62.2 million. The total amount of losses recognized and expenses incurred
          of
          $130.7 million has been recorded in the accompanying statement of income
          as
“Hurricane related charges, net” and has been offset by $126.0 million, which
          the Company believes is probable that it will collect from its insurance
          carriers under its policy coverages. The remaining amount of $4.8 million
          represents the Company’s deductible portion of its claims. As discussed, the
          Company has been receiving advances against its insurance claims from the
          applicable insurance carriers and believes it will ultimately collect more
          than
          the $130.7 million of loss recognized in the income statement due to its
          replacement value coverage for its property damage and the lost profits
          component of its coverage. These amounts will be recognized by the Company
          when
          it and the insurance carriers agree to the final amounts to be paid to
          the
          Company for the losses sustained. The following table shows the activity
          flowing
          through the insurance accounts:
  **Items
                    Incurred as of April 30, 2006**Property
                    impairment
                $
                68,560Incremental
                    costs incurred
                
                62,175Hurricane
                    related charges
                
                (4,776)Insurance
                    receivable, gross
                $
                125,959Insurance
                    receipts
                
                (53,906)Insurance
                    receivable, net
                $
                72,053
 During
            the fiscal year ended April 24, 2005, the Company recorded $2.2 million
            in
            business interruption insurance proceeds, which was received subsequent
            to 2005.
            These amounts are recorded in the accompanying consolidated statements
            of income
            for fiscal 2005 in the line item “Marketing and administrative operating
            expenses.” The business interruption insurance proceeds relate to the closing of
            the Isle-Our Lucaya from September 1, 2004 to October 13, 2004 and twenty-one
            other days throughout October 2004 and November 2004 due to Hurricane
            Frances
            and the closing of the Isle-Biloxi from September 14, 2004 to September
            17, 2004
            due to Hurricane Ivan.
 
 In
            the
            fourth quarter of fiscal 2004, the Company received $0.3 million in business
            interruption insurance proceeds. The amount was received to offset expenses
            incurred as a result of a flood during construction at the Isle-Boonville.
            In
            addition to flood damages and related clean-up expenses, the Company
            also
            incurred costs for the delay of construction.
  102
  **15.
            Valuation and Other Charges**
 
 As
            a
            result of adverse gaming legislation in the UK, the Company determined
            during
            the fiscal year ended April 24, 2005 that previously capitalized fixed
            assets
            for certain projects would not be recoverable under the provisions of
            SFAS No.
            144, “Accounting for the Impairment or Disposal of Long-Lived Assets”.
            Additionally as of April 30, 2006, the Company believes that based on
            the
            economic performance of Blue Chip and with its focus on other development
            plans,
            that an impairment of the goodwill associated with licensing and goodwill
            at
            Blue Chip is impaired. The Company recorded impairment charges of $9.0
            million
            to goodwill and $0.6 million to fixed assets for the fiscal year ended
            April 30,
            2006 and $1.6 million to fixed assets for the fiscal year ended April
            24, 2005
            in the line item “Valuation and other charges” in the accompanying consolidated
            statements of income.
 
 Additionally,
            during the fourth quarter fiscal year 2006 review for asset impairment,
            the
            Company recorded valuation expense of $2.4 million on the long-lived
            assets of
            Isle -Our
            Lucaya as an impairment to the carrying value of those assets. The Company
            also
            recorded expected severance cost as a valuation expense of $1.2 million
            related
            to the closure of Isle-Our Lucaya in June 2007.
  On
              March
              15, 2004, the Company announced that it had been selected by the Illinois
              Gaming
              Board as the successful bidder in a federal bankruptcy court auction
              for the
              10th Illinois gaming license previously issued to Emerald Casinos,
              Inc. This
              process was conducted pursuant to an agreement approved by, among other
              parties,
              the Illinois Attorney General. The Company bid $518.0 million to acquire
              by
              merger the stock of a company in bankruptcy that owns the license.
              The plan of
              reorganization pursuant to which the merger would be consummated has
              been
              confirmed by the federal bankruptcy court. The merger remains subject
              to certain
              conditions, including a finding of suitability and final approval by
              the
              Illinois Gaming Board as well as certain other conditions. The entire
              matter
              also is the subject of ongoing litigation to which the Company is not
              a party.
              T he
              Illinois Attorney General has raised issues with regard to the appropriateness
              of the Village of Rosemont as a host  community
              and the Illinois Gaming Board's selection of the Company’s bid. In addition, in
              2006 the Illinois Gaming Board, based on a recommendation by an administrative
              law judge following a hearing, revoked the license issued to Emerald
              on the
              basis of Emerald’s past conduct (which revocation has been stayed pending the
              outcome of litigation). For
              the
              reasons set forth above, among others, the Company believes that its
              ability to
              obtain the gaming license and open a gaming facility in Rosemont has been
              subjected to added uncertainty. There can be no assurance that the
              Company will
              ultimately acquire the license. The full cost of the license and all
              associated
              costs were originally capitalized in the amount of $2.5 million. Due
              to the
              continuing uncertainty with respect to this matter, a valuation charge
              of $2.5
              million was recorded for these capitalized license costs at April 24,
              2005.
 103
  **15.
            Valuation and Other Charges (continued)**
 
 As
            discussed in Note 2, on April 25, 2005, the Company and Colorado Grande
            executed
            a Stock Purchase Agreement (the “Agreement”) with a subsidiary of Nevada Gold
& Casinos, Inc. to sell all outstanding shares of the common stock of
            Colorado Grande to a subsidiary of Nevada Gold & Casinos, Inc. Pursuant to
            the Agreement, the estimated sales price was to be adjusted by the difference
            between actual working capital and a target working capital (as defined
            by the
            Agreement) on the closing date. The actual working capital was determined
            by
            Nevada Gold 45 days after the closing date and reviewed by independent
            auditors
            for both parties. The post closing adjustment to adjust the actual working
            capital to the target working capital was made during the fiscal year
            ended
            April 30, 2006, as an
            adjustment to goodwill and a corresponding valuation charge of $2.9 million
            for
            the Colorado Grande-Cripple Creek property sale. Colorado Grande-Cripple
            Creek’s
            operating results, including this associated goodwill impairment and
            minority
            interest share is classified as discontinued operations on the consolidated
            statements of income and prior year results have been reclassified to
            conform to
            the fiscal 2006 presentation.
 
 **16.
            Preopening Expenses**
 
 Preopening
            expenses, representing salaries, benefits, training, marketing and other
            costs,
            of $0.3 million, $0.2 million and $2.3 million in fiscal 2006, fiscal
            2005 and
            fiscal 2004, respectively, were incurred in connection with the opening
            of the
            Pompano Park racino in early calendar year 2007 and Isle-Waterloo in
            late spring
            of 2007, Blue Chip-Walsall on September 23, 2004 and with the openings
            of the
            Isle-Our Lucaya on December 15, 2003 and the Blue Chip-Wolverhampton
            on April
            22, 2004.
 
 **17.
            Loss On Early Extinguishment Of Debt**
 
 The
            Company incurred a loss on early extinguishment of debt totaling $5.3
            million in
            fiscal 2005 in connection with the refinancing of its Senior secured
            credit
            facility on February 4, 2005. These charges include the write-off of
            debt
            acquisition costs.
 
 The
            Company incurred a loss on early extinguishment of debt of $26.1 million
            in
            fiscal 2004 related to the refinancing of the Company’s $390.0 million 8.75%
            Senior Subordinated Notes on March 3, 2004. These charges included early
            payment
            premiums as well as the write-off of debt acquisition costs.
 
 **18.
            Income Taxes**
 
 Income
            tax provision from continuing operations consists of the following:
 **Fiscal
                        Year Ended****April
                        30,**
                    
                    
                    **April
                        24,**
                    
                    
                    **April
                        25,****2006**
                    
                    
                    **2005**
                    
                    
                    **2004**(In
                        thousands)Current:Federal
                    $
                    2,187
                    
                    $
                    (1,462)
                    
                    $
                    3,823State
                    
                    537
                    
                    
                    2,287
                    
                    
                    6772,724
                    
                    
                    825
                    
                    
                    4,500Deferred:Federal
                    
                    10,177
                    
                    
                    14,947
                    
                    
                    8,765State
                    
                    1,275
                    
                    
                    353
                    
                    
                    2311,452
                    
                    
                    15,300
                    
                    
                    8,788Income
                        taxes
                    $
                    14,176
                    
                    $
                    16,125
                    
                    $
                    13,288
 
 104
  **18.
          Income Taxes (continued)**
 
 There
          is
          no international tax expense or (benefit) in the Company’s consolidated tax
          provision for any fiscal year because either the international jurisdiction
          does
          not assess an income tax or the Company is currently unable to benefit
          from its
          international source losses. These international losses will be tax benefited
          at
          such time the related international operations generate operating earnings,
          subject to statutory limitations.
 
 A
          reconciliation of income taxes from continuing operations at the statutory
          corporate federal tax rate of 35% to the income tax provision reported
          in the
          accompanying consolidated statements of income is as follows:
  **Fiscal
                    Year Ended****April
                    30,**
                
                
                **April
                    24,**
                
                
                **April
                    25,****2006**
                
                
                **2005**
                
                
                **2004**(In
                    thousands)Statutory
                    tax provision
                $
                7,895
                
                $
                11,302
                
                $
                14,242Effects
                    of:State
                    taxes
                
                1,858
                
                
                1,716
                
                
                455Non-deductible
                    items
                
                645
                
                
                1,907
                
                
                537IRS
                    adjustment
                
                -
                
                
                -
                
                
                (3,000)Employment
                    tax credits
                
                (2,498)
                
                
                (335)
                
                
                (389)International
                    activity
                
                4,205
                
                
                1,314
                
                
                1,113Other
                
                839
                
                
                221
                
                
                330Valuation
                    Allowance
                
                1,232
                
                
                -
                
                
                -Income
                    taxes
                $
                14,176
                
                $
                16,125
                
                $
                13,288
  The
          provision for fiscal year 2006 includes a net tax benefit of $2.5 million
          for
          Employment tax credits which include a one-time retention tax credit of
          $1.8
          million related to the hurricanes. The provision for fiscal year 2006 also
          includes a tax expense of $4.2 million for international activity that
          includes
          $3.2 million related to a valuation charge against international operations
          that
          cannot be tax benefited at this time. During fiscal year 2006, the Company
          provided a valuation allowance of $1.2 million, which includes $0.9 million
          related to a capital loss carryover and $0.3 million related to state net
          operating losses.
 
 Significant
          components of the Company’s domestic net deferred state and federal income tax
          liabilities are as follows :
 **Fiscal
                      Year Ended****April
                      30,**
                  
                  
                  **April
                      24,****2006**
                  
                  
                  **2005**(In
                      thousands)Deferred
                      tax liabilities:Property
                      and equipment
                  $
                  (79,353)
                  
                  $
                  (77,436)Other
                  
                  (1,647)
                  
                  
                  (1,660)Total
                      deferred tax liabilities
                  
                  (81,000)
                  
                  
                  (79,096)Deferred
                      tax assets:Accrued
                      expenses
                  
                  10,219
                  
                  
                  10,172Alternative
                      minimum tax credit
                  
                  1,718
                  
                  
                  3,641Employment
                      tax credits
                  
                  80
                  
                  
                  2,954Capital
                      loss carryover
                  
                  937
                  
                  
                  -Net
                      operating losses
                  
                  13,273
                  
                  
                  14,874Other
                  
                  2,973
                  
                  
                  7,130Total
                      deferred tax assets
                  
                  29,200
                  
                  
                  38,771Valuation
                      allowance on deferred tax assets
                  
                  (2,743)
                  
                  
                  (1,511)Net
                      deferred tax asset
                  
                  26,457
                  
                  
                  37,260Net
                      deferred tax liability
                  $
                  (54,543)
                  
                  $
                  (41,836)
 105
 **18.
          Income Taxes (continued)**
 
 At
          April
          30, 2006, the Company has alternative minimum tax credits that can be carried
          forward indefinitely to reduce future regular tax liabilities. Additionally,
          as
          of April 30, 2006, the Company has federal net operating loss carryforwards
          of
          $25.1 million for income tax purposes, with expiration dates from 2011
          to 2023.
          Approximately $14.9 million of these net operating losses are attributable
          to
          Colorado Central Station-Black Hawk and can only be used to offset income
          earned by this entity. The remaining federal net operating losses are subject
          to
          limitations under the income tax regulations, which may limit the amount
          ultimately utilized; however, the Company believes that all federal net
          operating losses, except $0.7 million related to discontinued operations,
          will
          be utilized prior to expiration. The Company also has state income tax
          net
          operating loss carryforwards of $91.2 million, with expiration dates from
          2016
          to 2026.
 
 At
          April
          30, 2006, the Company had approximately $7.0 million of international loss
          carryforwards that will provide tax benefits at such time the related
          international operations generate sufficient taxable earnings.
 
 **19.
          Fair Value of Financial Instruments**
 
 The
          following methods and assumptions were used to estimate the fair value
          of each
          class of financial instruments for which it is practicable to estimate
          that
          value:
 
 Assets,
          including cash, restricted cash, and notes receivable are carried at cost,
          which
          approximates fair value due to their short-term maturities.
 
 Marketable
          securities consist of trading securities held by Capri Insurance Corporation,
          our captive insurance subsidiary. The trading securities are primarily
          debt and
          equity securities which we buy with the intention to resell in the near
          term.
          Our trading securities are carried at fair value with changes in fair value
          recognized in current period income.
 
 Long-term
          debt - The fair value of the Company’s long-term debt is estimated based on the
          quoted market price of the underlying debt issue or, when a quoted market
          price
          is not available, the discounted cash flow of future payments utilizing
          current
          rates available to the Company for debt of similar remaining maturities.
          Debt
          obligations with a short remaining maturity are valued at the carrying
          amount.
 
 106


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





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


**April
                  30, 2006**
              
              **April
                  24, 2005****Carrying**
              
              
              
              
              
              
              **Carrying****Amount**
              
              
              **Fair
                  Value**
              
              
              
              **Amount**
              
              
              **Fair
                  Value**(In
                  thousands)**Financial
                  assets:**Cash
                  and cash equivalents
              
              $
              121,193
              
              $
              121,193
              
              
              $
              146,743
              
              $
              146,743Marketable
                  securities
              
              
              17,727
              
              
              17,727
              
              
              
              16,016
              
              
              16,016Restricted
                  cash
              
              
              2,210
              
              
              2,210
              
              
              
              2,193
              
              
              2,193Notes
                  receivable
              
              
              9,453
              
              
              9,453
              
              
              
              5,472
              
              
              5,472Interest
                  rate swaps
              
              
              1,585
              
              
              1,585
              
              
              
              345
              
              
              345**Financial
                  liabilities:**7%
                  Senior subordinated notes
              
              $
              500,000
              
              $
              493,750
              
              
              $
              500,000
              
              $
              485,650Senior
                  secured credit facility
              
              
              296,500
              
              
              296,500
              
              
              
              249,375
              
              
              249,3759%
                  Senior subordinated notes
              
              
              200,000
              
              
              212,000
              
              
              
              200,000
              
              
              210,340Isle-Black
                  Hawk senior secured credit facility
              
              
              209,650
              
              
              209,650
              
              
              
              189,350
              
              
              189,350Blue
                  Chip Credit Facility
              
              
              6,563
              
              
              6,563
              
              
              
              6,942
              
              
              6,942TIF
                  bonds
              
              
              2,926
              
              
              2,944
              
              
              
              3,875
              
              
              3,875General
                  obligation bonds
              
              
              1,675
              
              
              1,673
              
              
              
              1,830
              
              
              1,835BID
                  bonds
              
              
              472
              
              
              472
              
              
              
              590
              
              
              590Other
                  long-term debt
              
              
              3,494
              
              
              3,494
              
              
              
              4,156
              
              
              4,156


**20.
      Contingencies**





Lady
      Luck
      Gaming Corporation (now a wholly owned subsidiary of the Company) and several
      joint venture partners are defendants in a lawsuit brought by the country of
      Greece through its Minister of Tourism (now Development) and Finance. The action
      alleges that the defendants failed to make specified payments in connection
      with
      the gaming license bid process for Patras, Greece. The payment the Company
      is
      alleged to have been required to make totals approximately 6.5 million Euros
      (which was approximately $8.2 million as of April 30, 2006 based on published
      exchange rates). Although it is difficult to determine the damages being sought
      from the lawsuit, the action may seek damages up to that aggregate amount plus
      interest from the date of the action. The Athens Civil Court of First Instance
      granted judgment in the Company’s favor and dismissed the lawsuit, but the
      Ministry appealed the matter and the appeal was heard before the Athens Appeal
      Court of First Instance. The Athens Appeal Court issued certified copies of
      judgments denying the Ministry’s appeal. The Ministry elected to appeal this
      matter further to the Supreme Court. During October 2005, the Administrative
      Supreme Court remanded the matter back to the Athens Administrative Appeals
      Court for a hearing on the merits, which is expected to take place at the end
      of
      2006 or early 2007. The civil matter was set for hearing before the Greek
      Supreme Court during May 2006; however, prior to the scheduled hearing date,
      the
      Greek Supreme Court reset the hearing for January 8, 2007. The Company intends
      to continue a vigorous and appropriate defense to the claims asserted in this
      matter.






107


**20.
      Contingencies (continued)**





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




On
      December 30, 2002, the County of Jefferson, Missouri initiated a lawsuit in
      the
      Circuit Court of Jefferson County, Missouri against the Company and a subsidiary
      alleging a breach of a 1993 contract entered into by the County and that
      subsidiary, and guaranteed by Lady Luck Gaming Corporation, relating to the
      development of a casino site near Kimmswick, Missouri. The suit alleged damages
      in excess of $10.0 million.  The Company increased its reserve for this
      suit by $6.1 million in the quarter ended October 23, 2005. A settlement was
      reached in the third fiscal quarter of 2006 and a payment was made that was
      within the Company’s reserves for this lawsuit.





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







**21.
      Consolidating Condensed Financial Information**





Certain
      of the Company’s subsidiaries have fully and unconditionally guaranteed the
      payment of all obligations under the Company’s $200.0 million 9% Senior
      Subordinated Notes due 2012 and $500.0 million 7% Senior Subordinated Notes
      due
      2014. The following tables present the consolidating condensed financial
      information of the parent company, guarantor subsidiaries and non-guarantor
      subsidiaries of the Isle of Capri Casinos, Inc., balance sheets as of April
      30,
      2006 and April 24, 2005, statements of income and cash flows for the fiscal
      years ended April 30, 2006, April 24, 2005 and April 25, 2004. The Company
      disregards intercompany transactions for purposes of computing income taxes
      at
      the subsidiary level. Therefore, no income tax provision is required to be
      eliminated in consolidation.





108


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


**ISLE
                  OF CAPRI CASINOS, INC.****CONSOLIDATING
                  CONDENSED GUARANTOR SUBSIDIARIES, NON-GUARANTOR SUBSIDIARIES,****AND
                  PARENT COMPANY FINANCIAL INFORMATION****AS
                  OF APRIL 30, 2006; APRIL 24, 2005 AND FOR****THE
                  YEARS ENDED APRIL 30, 2006; APRIL 24, 2005 AND APRIL 25,
                  2004****(In
                  thousands)****Isle
                  of Capri Casinos, Inc. (Parent Obligor)**
              
              
              **(a)
                  Guarantor Subsidiaries**
              
              
              **(b)
                  Non-Guarantor Subsidiaries**
              
              
              **Consolidating
                  and Eliminating Entries**
              
              
              **Isle
                  of Capri Casinos, Inc. Consolidated****As
                  of April 30, 2006****Balance
                  Sheet**Current
                  assets
              $
              47,103
              
              $
              162,659
              
              $
              56,762
              
              $
              (12,826)
              
              $
              253,698Intercompany
                  receivables
              
              980,029
              
              
              (365,151)
              
              
              70,539
              
              
              (685,417)
              
              
              -Investments
                  in subsidiaries
              
              259,565
              
              
              273,403
              
              
              (19,221)
              
              
              (513,747)
              
              
              -Property
                  and equipment, net
              
              5,801
              
              
              649,862
              
              
              282,765
              
              
              -
              
              
              938,428Other
                  assets
              
              19,516
              
              
              577,358
              
              
              50,744
              
              
              (5,800)
              
              
              641,818Total
                  assets
              $
              1,312,014
              
              $
              1,298,131
              
              $
              441,589
              
              $
              (1,217,790)
              
              $
              1,833,944Current
                  liabilities
              $
              38,651
              
              $
              125,821
              
              $
              76,150
              
              $
              (16,768)
              
              $
              223,854Intercompany
                  payables
              
              -
              
              
              551,749
              
              
              132,272
              
              
              (684,021)
              
              
              -Long-term
                  debt,less
                  current maturities
              
              993,500
              
              
              6,692
              
              
              212,500
              
              
              -
              
              
              1,212,692Other
                  accrued liabilities
              
              (2,607)
              
              
              93,687
              
              
              (3,060)
              
              
              -
              
              
              88,020Minority
                  interest
              
              -
              
              
              -
              
              
              -
              
              
              26,690
              
              
              26,690Stockholders'
                  equity
              
              282,470
              
              
              520,182
              
              
              23,727
              
              
              (543,691)
              
              
              282,688Total
                  liabilities and stockholders' equity
              $
              1,312,014
              
              $
              1,298,131
              
              $
              441,589
              
              $
              (1,217,790)
              
              $
              1,833,944






109




**21.
        Consolidating Condensed Financial Information (continued)**
 **Isle
                    of Capri Casinos, Inc. (Parent Obligor)**
                
                
                **(a)
                    Guarantor Subsidiaries**
                
                
                **(b)
                    Non-Guarantor Subsidiaries**
                
                
                **Consolidating
                    and Eliminating Entries**
                
                
                **Isle
                    of Capri Casinos, Inc. Consolidated****For
                    the Fiscal Year Ended April 30, 2006****Statement
                    of Income**Revenues:Casino
                $
                -
                
                $
                796,277
                
                $
                208,367
                
                $
                -
                
                $
                1,004,644Rooms,
                    food, beverage and other
                
                146
                
                
                148,427
                
                
                46,878
                
                
                (11,901)
                
                
                183,550Gross
                    revenues
                
                146
                
                
                944,704
                
                
                255,245
                
                
                (11,901)
                
                
                1,188,194Less
                    promotional allowances
                
                -
                
                
                155,264
                
                
                44,910
                
                
                -
                
                
                200,174Net
                    revenues
                
                146
                
                
                789,440
                
                
                210,335
                
                
                (11,901)
                
                
                988,020Operating
                    expenses:Casino
                
                672
                
                
                119,424
                
                
                32,394
                
                
                -
                
                
                152,490Gaming
                    taxes
                
                -
                
                
                180,402
                
                
                39,637
                
                
                -
                
                
                220,039Rooms,
                    food, beverage and other
                
                38,254
                
                
                280,743
                
                
                117,871
                
                
                (10,178)
                
                
                426,690Management
                    fee expense (revenue)
                
                (34,172)
                
                
                34,178
                
                
                (6)
                
                
                -
                
                
                -Depreciation
                    and amortization
                
                1,539
                
                
                69,333
                
                
                18,790
                
                
                (2,556)
                
                
                87,106Total
                    operating expenses
                
                6,293
                
                
                684,080
                
                
                208,686
                
                
                (12,734)
                
                
                886,325Operating
                    income
                
                (6,147)
                
                
                105,360
                
                
                1,649
                
                
                833
                
                
                101,695Interest
                    expense, net
                
                (14,210)
                
                
                (44,235)
                
                
                (12,637)
                
                
                -
                
                
                (71,082)Minority
                    interest
                
                -
                
                
                -
                
                
                -
                
                
                (6,517)
                
                
                (6,517)Loss
                    on extinguishment of debt
                
                -
                
                
                -
                
                
                (2,110)
                
                
                -
                
                
                (2,110)Equity
                    in income (loss) of subsidiaries
                
                37,839
                
                
                3,587
                
                
                (16,802)
                
                
                (24,624)
                
                
                -Income
                    (loss) from continuing operations beforeincome
                    taxes
                
                17,482
                
                
                64,712
                
                
                (29,900)
                
                
                (30,308)
                
                
                21,986Income
                    tax expense (benefit)
                
                (1,541)
                
                
                20,732
                
                
                (5,015)
                
                
                -
                
                
                14,176Income
                    (loss) from continuing operations
                
                19,023
                
                
                43,980
                
                
                (24,885)
                
                
                (30,308)
                
                
                7,810Income
                    (Loss) from discontinued operations, net of taxes
                
                -
                
                
                11,346
                
                
                (133)
                
                
                -
                
                
                11,213Net
                    income (loss)
                $
                19,023
                
                $
                55,326
                
                $
                (25,018)
                
                $
                (30,308)
                
                $
                19,023






110


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




**Isle
                  of Capri Casinos, Inc. (Parent Obligor)**
              
              
              **(a)
                  Guarantor Subsidiaries**
              
              
              **(b)
                  Non-Guarantor Subsidiaries**
              
              
              **Consolidating
                  and Eliminating Entries**
              
              
              **Isle
                  of Capri Casinos, Inc. Consolidated****For
                  the Fiscal Year Ended April 30, 2006****Statement
                  of Cash Flows**Net
                  cash provided by (used in)operating
                  activities
              $
              (30,820)
              
              $
              144,615
              
              $
              10,376
              
              $
              (24,624)
              
              $
              99,547Net
                  cash provided by (used in)investing
                  activities
              
              (41,489)
              
              
              (132,732)
              
              
              (40,052)
              
              
              25,369
              
              
              (188,904)Net
                  cash provided by (used in)financing
                  activities
              
              47,921
              
              
              (1,911)
              
              
              19,117
              
              
              (745)
              
              
              64,382Effect
                  of foreign currency exchange rates oncash
                  and cash equivalents
              
              -
              
              
              -
              
              
              (575)
              
              
              -
              
              
              (575)Net
                  increase (decrease) in cash andcash
                  equivalents
              
              (24,388)
              
              
              9,972
              
              
              (11,134)
              
              
              -
              
              
              (25,550)Cash
                  and cash equivalents atbeginning
                  of the period
              
              53,584
              
              
              57,661
              
              
              35,498
              
              
              -
              
              
              146,743Cash
                  and cash equivalents atend
                  of the period
              $
              29,196
              
              $
              67,633
              
              $
              24,364
              
              $
              -
              
              $
              121,193




**Isle
                  of Capri Casinos, Inc. (Parent Obligor)**
              
              
              **(a)
                  Guarantor Subsidiaries**
              
              
              **(b)
                  Non-Guarantor Subsidiaries**
              
              
              **Consolidating
                  and Eliminating Entries**
              
              
              **Isle
                  of Capri Casinos, Inc. Consolidated****As
                  of April 24, 2005****Balance
                  Sheet**Current
                  assets
              $
              63,560
              
              $
              82,644
              
              $
              64,871
              
              $
              (6,627)
              
              $
              204,448Intercompany
                  receivables
              
              896,214
              
              
              (228,835)
              
              
              42,463
              
              
              (709,842)
              
              
              -Investments
                  in subsidiaries
              
              233,544
              
              
              269,817
              
              
              (10,027)
              
              
              (493,334)
              
              
              -Property
                  and equipment, net
              
              4,630
              
              
              604,902
              
              
              248,111
              
              
              -
              
              
              857,643Other
                  assets
              
              21,806
              
              
              545,230
              
              
              58,215
              
              
              (5,896)
              
              
              619,355Total
                  assets
              $
              1,219,754
              
              $
              1,273,758
              
              $
              403,633
              
              $
              (1,215,699)
              
              $
              1,681,446Current
                  liabilities
              $
              22,360
              
              $
              99,930
              
              $
              67,110
              
              $
              (9,738)
              
              $
              179,662Intercompany
                  payables
              
              -
              
              
              623,879
              
              
              85,963
              
              
              (709,842)
              
              
              -Long-term
                  debt,less
                  current maturities
              
              946,875
              
              
              8,080
              
              
              193,662
              
              
              -
              
              
              1,148,617Other
                  accrued liabilities
              
              (7,939)
              
              
              77,012
              
              
              (527)
              
              
              -
              
              
              68,546Minority
                  interest
              
              -
              
              
              -
              
              
              -
              
              
              23,225
              
              
              23,225Stockholders'
                  equity
              
              258,458
              
              
              464,857
              
              
              57,425
              
              
              (519,344)
              
              
              261,396Total
                  liabilities and stockholders' equity
              $
              1,219,754
              
              $
              1,273,758
              
              $
              403,633
              
              $
              (1,215,699)
              
              $
              1,681,446






111




21. Consolidating Condensed Financial Information
      (continued)


**Isle
                  of Capri Casinos, Inc. (Parent Obligor)**
              
              
              **(a)
                  Guarantor Subsidiaries**
              
              
              **(b)
                  Non-Guarantor Subsidiaries**
              
              
              **Consolidating
                  and Eliminating Entries**
              
              
              **Isle
                  of Capri Casinos, Inc. Consolidated****For
                  the Fiscal Year Ended April 24, 2005****Statement
                  of Income**Revenues:Casino
              $
              -
              
              $
              778,001
              
              $
              179,877
              
              $
              -
              
              $
              957,878Rooms,
                  food, beverage and other
              
              1,359
              
              
              145,698
              
              
              51,556
              
              
              (20,614)
              
              
              177,999Gross
                  Revenues
              
              1,359
              
              
              923,699
              
              
              231,433
              
              
              (20,614)
              
              
              1,135,877Less
                  promotional allowances
              
              -
              
              
              148,771
              
              
              39,534
              
              
              -
              
              
              188,305Net
                  revenues
              
              1,359
              
              
              774,928
              
              
              191,899
              
              
              (20,614)
              
              
              947,572Operating
                  expenses:Casino
              
              -
              
              
              126,024
              
              
              31,266
              
              
              -
              
              
              157,290Gaming
                  taxes
              
              -
              
              
              181,682
              
              
              33,452
              
              
              -
              
              
              215,134Rooms,
                  food, beverage and other
              
              26,146
              
              
              278,936
              
              
              105,310
              
              
              (22,329)
              
              
              388,063Management
                  fee expense (revenue)
              
              (31,418)
              
              
              32,516
              
              
              (1,098)
              
              
              -
              
              
              -Depreciation
                  and amortization
              
              1,590
              
              
              68,682
              
              
              12,065
              
              
              -
              
              
              82,337Total
                  operating expenses
              
              (3,682)
              
              
              687,840
              
              
              180,995
              
              
              (22,329)
              
              
              842,824Operating
                  income
              
              5,041
              
              
              87,088
              
              
              10,904
              
              
              1,715
              
              
              104,748Interest
                  expense, net
              
              4,229
              
              
              (56,858)
              
              
              (10,218)
              
              
              -
              
              
              (62,847)Loss
                  on early extinguishment of debt
              
              -
              
              
              (5,251)
              
              
              -
              
              
              -
              
              
              (5,251)Minority
                  interest
              
              -
              
              
              -
              
              
              -
              
              
              (5,493)
              
              
              (5,493)Equity
                  in income (loss) of subsidiaries
              
              20,949
              
              
              6,492
              
              
              (18,451)
              
              
              (8,990)
              
              
              -Income
                  (loss) from continuing operations beforeIncome
                  taxes
              
              30,219
              
              
              31,471
              
              
              (17,765)
              
              
              (12,768)
              
              
              31,157Income
                  taxes
              
              12,181
              
              
              9,804
              
              
              (5,860)
              
              
              -
              
              
              16,125Income
                  (loss) from continuing operations
              
              18,038
              
              
              21,667
              
              
              (11,905)
              
              
              (12,768)
              
              
              15,032Income
                  from discontinued operations, net of taxes
              
              -
              
              
              5,952
              
              
              (2,946)
              
              
              -
              
              
              3,006Net
                  income (loss)
              $
              18,038
              
              $
              27,619
              
              $
              (14,851)
              
              $
              (12,768)
              
              $
              18,038






112




21. Consolidating Condensed Financial Information
      (continued)


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






113




21. Consolidating Condensed Financial Information
      (continued)


**Isle
                  of Capri Casinos, Inc. (Parent Obligor)**
              
              
              **(a)
                  Guarantor Subsidiaries**
              
              
              **(b)
                  Non-Guarantor Subsidiaries**
              
              
              **Consolidating
                  and Eliminating Entries**
              
              
              **Isle
                  of Capri Casinos, Inc. Consolidated****For
                  the Fiscal Year Ended April 25, 2004****Statement
                  of Income**Revenues:Casino
              $
              -
              
              $
              776,116
              
              $
              172,787
              
              $
              -
              
              $
              948,903Rooms,
                  food, beverage and other
              
              1,228
              
              
              146,249
              
              
              26,542
              
              
              -
              
              
              174,019Gross
                  Revenues
              
              1,228
              
              
              922,365
              
              
              199,329
              
              
              -
              
              
              1,122,922Less
                  promotional allowances
              
              -
              
              
              143,885
              
              
              39,508
              
              
              -
              
              
              183,393Net
                  revenues
              
              1,228
              
              
              778,480
              
              
              159,821
              
              
              -
              
              
              939,529Operating
                  expenses:Casino
              
              -
              
              
              127,912
              
              
              24,434
              
              
              -
              
              
              152,346Gaming
                  taxes
              
              -
              
              
              175,556
              
              
              33,370
              
              
              -
              
              
              208,926Rooms,
                  food, beverage and other
              
              26,005
              
              
              281,904
              
              
              59,086
              
              
              -
              
              
              366,995Management
                  fee expense (revenue)
              
              (31,960)
              
              
              32,464
              
              
              (504)
              
              
              -
              
              
              -Depreciation
                  and amortization
              
              1,591
              
              
              64,931
              
              
              9,374
              
              
              -
              
              
              75,896Total
                  operating expenses
              
              (4,364)
              
              
              682,767
              
              
              125,760
              
              
              -
              
              
              804,163Operating
                  income
              
              5,592
              
              
              95,713
              
              
              34,061
              
              
              -
              
              
              135,366Interest
                  expense, relatedInterest
                  expense
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Interest
                  income, relatedInterest
                  income
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Interest
                  expense, net
              
              30,143
              
              
              (89,000)
              
              
              (11,677)
              
              
              -
              
              
              (70,534)Loss
                  on early extinguishment of debt
              
              -
              
              
              (14,116)
              
              
              -
              
              
              -
              
              
              (14,116)Minority
                  interest
              
              -
              
              
              -
              
              
              -
              
              
              (10,072)
              
              
              (10,072)Dividend
                  income
              
              64,493
              
              
              -
              
              
              -
              
              
              (64,493)
              
              
              -Equity
                  in income (loss) of subsidiaries
              
              (61,781)
              
              
              (19,574)
              
              
              (451)
              
              
              81,806
              
              
              -Income
                  (loss) from continuing operations beforeIncome
                  taxes
              
              38,447
              
              
              (26,977)
              
              
              21,933
              
              
              7,241
              
              
              40,644Income
                  taxes
              
              10,698
              
              
              2,700
              
              
              (110)
              
              
              -
              
              
              13,288Income
                  (loss) from continuing operations
              
              27,749
              
              
              (29,677)
              
              
              22,043
              
              
              7,241
              
              
              27,356Income
                  from discontinued operations, net of taxes
              
              -
              
              
              (1,025)
              
              
              1,418
              
              
              -
              
              
              393Net
                  income (loss)
              $
              27,749
              
              $
              (30,702)
              
              $
              23,461
              
              $
              7,241
              
              $
              27,749






114


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


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




(a)  The
        following subsidiaries of the Company are guarantors of the 7% Senior
        Subordinated Notes and the 9% Senior Subordinated Notes: Riverboat Corporation
        of Mississippi; Riverboat Corporation of Mississippi-Vicksburg; Riverboat
        Services, Inc.; CSNO, L.L.C.; Louisiana Riverboat Gaming Partnership; St.
        Charles Gaming Company, Inc.; IOC Holdings, L.L.C.; Grand Palais Riverboat,
        Inc.; LRGP Holdings, L.L.C.; P.P.I, Inc.; Isle of Capri Casino Colorado,
        Inc.;
        IOC-Coahoma, Inc.; IOC-Natchez, Inc.; IOC-Lula, Inc.; IOC-Boonville, Inc.;
        IOC-Kansas City, Inc.; Isle of Capri Bettendorf, L.C.; Isle of Capri Marquette,
        Inc.; IOC-Davenport, Inc.; LL Holding Corporation; IOC-St. Louis County,
        Inc.;
        IOC-Black Hawk County, Inc.; IOC-PA, L.L.C.; IOC-City of St. Louis, L.L.C.;
        and
        IOC-Manufacturing, Inc. Each of the subsidiaries’ guarantees is joint and
        several with the guarantees of the other subsidiaries.
  (b)  The
        following subsidiaries are not guarantors of the 7% Senior Subordinated Notes
        and the 9% Senior Subordinated Notes: Isle of Capri Black Hawk, L.L.C.; Isle
        of
        Capri Black Hawk Capital Corp.; IOC Holdings Colorado, Inc.; CCSC/Blackhawk,
        Inc.; IOC-Black Hawk Distribution Company, L.L.C.; Blue Chip Casinos, PLC;
        Isle
        of Capri of Jefferson County, Inc.; Casino Parking, Inc.; Isle of Capri-Bahamas,
        Ltd.; ASMI Management, Inc.; IOC Development Company, L.L.C.; Casino America,
        Inc.; ICC Corp.; International Marco Polo Services, Inc.; IOC, L.L.C.; Isle
        of
        Capri of Michigan L.L.C.; Isle of Capri Bettendorf Marina Corp.; Water Street
        Redevelopment Corporation; IOC Services, L.L.C.; Louisiana Horizons, L.L.C.;
        Capri Air, Inc.; Lady Luck Gaming Corp.; Lady Luck Gulfport, Inc.; Lady Luck
        Vicksburg, Inc.; Lady Luck Biloxi, Inc.; Lady Luck Central City, Inc.; Pompano
        Park Holdings, L.L.C.; Casino America of Colorado, Inc.; JPLA Pelican, L.L.C.;
        IOC-Cameron, L.L.C.; Isle of Capri Casinos Limited, Isle of Capri Casinos
        Pittsburgh, Inc. and Capri Insurance Corporation.
  115




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


**Fiscal
                  Quarters Ended****July
                  24,**
              
              
              **October
                  23,**
              
              
              **January
                  22,**
              
              
              **April
                  30,****2005**
              
              
              **2005**
              
              
              **2006**
              
              
              **2006**(In
                  thousands, except per share data)Net
                  revenues
              $
              242,496
              
              $
              210,039
              
              $
              228,956
              
              $
              306,529Operating
                  income
              
              24,119
              
              
              9,491
              
              
              25,721
              
              
              42,364Income
                  (loss) from continuing operations
              
              3,295
              
              
              (5,531)
              
              
              1,956
              
              
              8,090Net
                  income (loss)
              
              3,984
              
              
              (4,219)
              
              
              4,133
              
              
              15,125Earnings
                  (loss) per common share-basic:Income
                  (loss) from continuing operations
              
              0.11
              
              
              (0.18)
              
              
              0.07
              
              
              0.27Net
                  income (loss)
              
              0.13
              
              
              (0.14)
              
              
              0.14
              
              
              0.50Earnings
                  (loss) per common share-diluted:Income
                  (loss) from continuing operations
              
              0.10
              
              
              (0.18)
              
              
              0.06
              
              
              0.26Net
                  income (loss)
              
              0.13
              
              
              (0.14)
              
              
              0.13
              
              
              0.48Weighted
                  average basic shares
              
              30,114
              
              
              30,097
              
              
              29,951
              
              
              30,028Weighted
                  average dilute shares
              
              31,529
              
              
              30,097
              
              
              31,042
              
              
              31,270




**Fiscal
                  Quarters Ended****July
                  25,**
              
              
              **October
                  24,**
              
              
              **January
                  23,**
              
              
              **April
                  24,****2004**
              
              
              **2004**
              
              
              **2005**
              
              
              **2005**(In
                  thousands, except per share data)Net
                  revenues
              $
              235,971
              
              $
              227,524
              
              $
              227,039
              
              $
              257,039Operating
                  income
              
              30,539
              
              
              17,739
              
              
              22,838
              
              
              33,632Income
                  (loss) from continuing operations
              
              8,368
              
              
              (995)
              
              
              2,320
              
              
              5,339Net
                  income
              
              10,609
              
              
              448
              
              
              3,530
              
              
              3,451Earnings
                  (loss) per common share-basic:Income
                  (loss) from continuing operations
              
              0.28
              
              
              (0.03)
              
              
              0.08
              
              
              0.18Net
                  income
              
              0.36
              
              
              0.02
              
              
              0.12
              
              
              0.12Earnings
                  (loss) per common share-diluted:Income
                  (loss) from continuing operations
              
              0.27
              
              
              (0.03)
              
              
              0.07
              
              
              0.17Net
                  income
              
              0.35
              
              
              0.01
              
              
              0.11
              
              
              0.11Weighted
                  average basic shares
              
              29,686
              
              
              29,532
              
              
              29,675
              
              
              29,833Weighted
                  average dilute shares
              
              30,749
              
              
              30,542
              
              
              31,037
              
              
              31,391


Income
      from continuing operations in the first quarter of fiscal year 2006 excludes
      $0.7 million related to Isle-Vicksburg, Isle-Bossier City, and Colorado
      Grande-Cripple Creek, which have all been classified as discontinued operations.





The
      second quarter of fiscal 2006 includes $1.2 million in hurricane related
      charges, net. Income from continuing operations in the second quarter of fiscal
      year 2006 excludes $1.3 million related to Isle-Vicksburg, Isle-Bossier City,
      and Colorado Grande-Cripple Creek, each of which have been classified as
      discontinued operations.





The
      third
      quarter of fiscal year 2006 includes a loss on early extinguishment of debt
      of
      $2.1 million. Income from continuing operations in the third quarter of fiscal
      year 2006 excludes $2.2 million related to Isle-Vicksburg, Isle-Bossier City,
      and Colorado Grande-Cripple Creek, each of which have been classified as
      discontinued operations. Included in income for the third quarter of fiscal
      year
      2006 is $3.6 million in hurricane related charges, net.






116


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





Income
      from continuing operations in the fourth quarter of fiscal year 2006 excludes
      $7.0 million related to Isle-Vicksburg, Isle-Bossier City, and Colorado
      Grande-Cripple Creek, which have all been classified as discontinued operations.
      Included in income for the fourth quarter of fiscal year 2006 is $13.3 million
      in valuation and other charges related primarily to impairment of goodwill
      and
      fixed assets at Blue Chip casinos in the United Kingdom and the accrual of
      a
      severance charge and impairment of fixed assets at Isle-Our Lucaya.





Income
      from continuing operations in the first quarter of fiscal year 2005 excludes
      income of $2.2 million related to Colorado Grande-Cripple Creek, Isle-Vicksburg
      and Isle-Bossier City which have all been classified as discontinued operations.





The
      second quarter of fiscal year 2005 includes $0.2 million related to other
      expenses incurred in preparation for the opening of the Blue Chip-Walsall on
      September 23, 2004. Income from continuing operations in the second quarter
      of
      fiscal year 2005 excludes $1.4 million related to Colorado Grande-Cripple Creek,
      Isle-Vicksburg and Isle-Bossier City, which have all been classified as
      discontinued operations.





The
      third
      quarter of fiscal year 2005 includes other charges of $1.6 million related
      to
      previously capitalized fixed assts for certain projects as a result of current
      uncertainties related to gaming legislation in the UK. Income from continuing
      operations in the third quarter of fiscal year 2005 excludes $1.2 million
      related to Colorado Grande-Cripple Creek, Isle-Vicksburg and Isle-Bossier City,
      which have all been classified as discontinued operations.





The
      fourth quarter of fiscal year 2005 includes $2.3 million gain on sale of option
      related to an option to purchase real estate in St. Louis, Missouri; a reserve
      of $2.5 million for the license in Rosemont, Illinois; and a $5.3 million loss
      on early extinguishment of debt related to the refinancing of the Company’s
      senior secured credit facility on February 4, 2005. Income from continuing
      operations in the fourth quarter of fiscal year 2005 excludes a loss of $1.9
      million related to Colorado Grande-Cripple Creek, Isle-Vicksburg and
      Isle-Bossier City, which have all been classified as discontinued
      operations.





**23.
      Subsequent Events**





The
      previously announced sale of the Company’s properties in Bossier City, Louisiana
      and Vicksburg, Mississippi is expected to close in the second quarter of fiscal
      2007, subject to regulatory and other customary closing conditions.





On
      June
      15, 2006, the Company announced that it received site and development approval
      from the Mississippi Gaming Commission in connection with its previously
      announced casino resort in west Harrison County, Mississippi, which is
      approximately 20 miles from the Mississippi/Louisiana state border near
      Interstate 10. Preliminary plans call for the estimated $250-$300 million
      project to include a single level gaming facility with over 2,000 gaming
      positions, a 500-room hotel, five restaurants and a complement of additional
      resort amenities. The project remains in the preliminary planning stages, and
      is
      subject to certain significant conditions, including but not limited to the
      receipt of all necessary licenses, approvals and permits.




117


**23.
        Subsequent Events (continued)**
 
 As
        reported in other notes, in April 2006, the Company’s Board of Directors
        approved a plan to close its Our Lucaya facility. Effective June 1, 2006,
        the
        Company notified its landlord of its decision to terminate the lease and
        the
        Company intends to cease operations by June 1, 2007 as required by the
        lease.  The
        Company will report these results as continuing operations until a probable
        sale
        of this facility is reached or operations are ceased, at which time these
        results will be reported as discontinued operations.
   118


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





None.





**ITEM
      9A. CONTROLS AND PROCEDURES**





**Evaluation
      of Disclosure Controls and Procedures**





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





As
      of April 30, 2006 we
      carried out an evaluation, under the supervision and with the participation
      of
      our management, including our Chief Executive Officer and Chief Financial
      Officer, of the effectiveness of the design and operation of our disclosure
      controls and procedures. Based on the foregoing, our Chief Executive Officer
      and
      Chief Financial Officer have concluded that the design and operation of the
      Company’s disclosure controls and procedures were effective as of April 30,
      2006.





**Changes
      in Internal Control Over Financial Reporting**





During
      the fiscal quarter
      and fiscal year ended April 30, 2006, there was no change in our internal
      control over financial reporting that has materially affected, or is reasonably
      likely to materially affect, our internal control over financial
      reporting.





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





Our
      management is
      responsible for establishing and maintaining adequate internal control over
      financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).
      Under the supervision and with the participation of our management, including
      our Chief Executive Officer and Chief Financial Officer, we conducted an
      evaluation of the effectiveness of our internal control over financial reporting
      based on the framework in *Internal
      Control-Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission. Based
      on our evaluation under the framework in *Internal
      Control-Integrated Framework* ,
      our
      management concluded that our internal control over financial reporting was
      effective as of April 30, 2006 to provide reasonable assurance regarding the
      reliability of financial reporting and the preparation of financial statements
      for external purposes in accordance with generally accepted accounting
      principles. Our management’s assessment of the effectiveness of our internal
      control over financial reporting as of April 30, 2006 has been audited by Ernst
      & Young LLP, an independent registered public accounting firm, as stated in
      their report which is included below, which expresses unqualified opinions
      on
      management’s assessment and on the effectiveness of our internal control over
      financial reporting as of April 30, 2006.






119




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





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





We
      have audited management’s
      assessment, included in the accompanying Management’s Annual Report on Internal
      Control over Financial Reporting, that Isle of Capri Casinos, Inc. maintained
      effective internal control over financial reporting as of April 30, 2006,
      based on criteria established in Internal Control—Integrated Framework issued by
      the Committee of Sponsoring Organizations of the Treadway Commission (the COSO
      criteria). Isle of Capri Casinos, Inc.’s management is responsible for
      maintaining effective internal control over financial reporting and for its
      assessment of the effectiveness of internal control over financial reporting.
      Our responsibility is to express an opinion on management’s assessment and an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting based on our audit.





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





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





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





In
      our opinion, management’s
      assessment that Isle of Capri Casinos, Inc. maintained effective internal
      control over financial reporting as of April 30, 2006, is fairly stated, in
      all material respects, based on the COSO criteria. Also, in our opinion, Isle
      of
      Capri Casinos, Inc. maintained, in all material respects, effective internal
      control over financial reporting as of April 30, 2006, based on **** the
      COSO
      criteria **.**




120


We
      also have audited, in
      accordance with the standards of the Public Company Accounting Oversight Board
      (United States), the consolidated balance sheets of Isle of Capri Casinos,
      Inc.
      as of April 30, 2006, and April 24, 2005, and the related consolidated
      statements of income, shareholders’ equity, and cash flows for the years ended
      April 30, 2006, April 24, 2005, and April 25, 2004, **** of
      Isle
      of Capri Casinos, Inc. and our report dated July 7, 2006, expressed an
      unqualified opinion thereon.




ERNST
&
      YOUNG LLP


New
      Orleans, Louisiana


July
      7,
      2006








**ITEM
      9B. OTHER INFORMATION**





None.





**PART
      III**





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





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





**ITEM
      11. EXECUTIVE COMPENSATION.**





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





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





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




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




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





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





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





121


**PART
      IV**





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





(a)  Documents
      Filed as Part of this Report .





1.  Financial
      Statements .





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





**Isle
      of Capri Casinos, Inc.**




Report
      of
      Independent Registered Public Accounting Firm


Consolidated
      Balance Sheets - April 30, 2006 and April 24, 2005


Consolidated
      Statements of Income - Fiscal Years ended April 30, 2006, April 24, 2005, and
      April 25, 2004


Consolidated
      Statements of Stockholders’ Equity - Fiscal Years ended


April
      30,
      2006, April 24, 2005 and April 25, 2004


Consolidated
      Statements of Cash Flows - Fiscal Years
      ended April 30, 2006,


April
      24, 2005 and April 25, 2004


Notes
      to
      Consolidated Financial Statements





2.  Financial
      Statements Schedule .





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





3.  Exhibits .





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




122


**SIGNATURES**





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




**ISLE
      OF CAPRI CASINOS, INC.**




Dated:
      July 7,
      2006 By:/s/
      Bernard Goldstein


Bernard Goldstein, Chairman of the Board,


Chief Executive Officer, and Director





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




Dated:
      July 7, 2006 /s/
      Bernard Goldstein


Bernard
      Goldstein, Chairman of the Board,


Chief
      Executive Officer and Director


(Principal
      Executive Officer)




Dated:
        July 7, 2006 /s/
        Donn R. Mitchell, II
 Donn
        R.
        Mitchell, II, Senior Vice President and
 Chief
        Financial Officer
 (Principal
        Financial and Accounting Officer)




Dated:
      July 7, 2006 /s/
      Robert S. Goldstein


Robert
      S.
      Goldstein, Director and Executive Vice


Chairman




Dated:
        July 7, 2006 /s/
        Alan J. Glazer
 Alan
        J.
        Glazer, Director
  Dated:
          July 7, 2006 /s/
          Emanuel Crystal
 Emanuel
          Crystal, Director
  Dated:
              July 7, 2006 /s/
              W. Randolph Baker
 W.
              Randolph Baker, Director
  Dated:
                  July 7, 2006 /s/
                  Jeffrey D. Goldstein
 Jeffrey
                  D. Goldstein, Director
  Dated:
                      July 7, 2006 /s/
                      John Brackenbury
 John
                      Brackenbury, Director
  Dated:
                          July 7, 2006_______________
 Shaun
                          R.
                          Hayes, Director
  123


INDEX
      TO
      EXHIBITS





**EXHIBIT
      NUMBER**  **DESCRIPTION**




3.1A
              
              
              Certificate
                  of Incorporation of Casino America, Inc. (1)3.1B
              
              
              Amendment
                  to Certificate of Incorporation of Casino America, Inc.
                  (2)3.2A
              
              
              By-laws
                  of Casino America, Inc. (1)3.2B
              
              
              Amendments
                  to By-laws of Casino America, Inc., dated February 7, 1997
                  (3)4.1
              
              
              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 (4)4.2
              
              
              Indenture,
                  dated as of March 27, 2002 among Isle of Capri Casinos, Inc., the
                  subsidiary guarantors named therein and State Street Bank and Trust
                  Company, as trustee (5)4.3
              
              
              Rights
                  Agreement, dated as of February 7, 1997, between Casino America,
                  Inc. and
                  Norwest Bank Minnesota, N.A., as rights agent (6)10.1*
              
              
              Casino
                  America, Inc. description of Employee Bonus Plan (7)10.2*
              
              
              Director’s
                  Option Plan (8)10.3
              
              
              Biloxi
                  Waterfront Project Lease dated as of April 9, 1994 by and between
                  the City
                  of Biloxi, Mississippi and Riverboat Corporation of Mississippi
                  (9)10.4
              
              
              First
                  Amendment to Biloxi Waterfront Project Lease (Hotel Lease), dated
                  as of
                  April 26, 1995, by and between Riverboat Corporation of Mississippi
                  (10)10.5
              
              
              Amended
                  and Restated Lease, dated as of April 19, 1999, among Port Resources,
                  Inc.
                  and CRU, Inc., as landlords and St. Charles Gaming Company, Inc.,
                  as
                  tenant (11)10.6*
              
              
              Amended
                  Casino America, Inc. 1992 Stock Option Plan (12)10.7*
              
              
              Amended
                  Casino America, Inc. 1993 Stock Option Plan (13)10.8
              
              
              Lease
                  of property in Coahoma, Mississippi dated as of November 16, 1993
                  by and
                  among Roger Allen Johnson, Jr., Charles Bryant Johnson and Magnolia
                  Lady,
                  Inc. (5)10.9
              
              
              Addendum
                  to Lease dated as of June 22, 1994 by and among Roger Allen Johnson,
                  Jr.,
                  Charles Bryant Johnson and Magnolia Lady, Inc. (14)10.10
              
              
              Second
                  addendum to Lease dated as of October 17, 1995 by and among Roger
                  Allen
                  Johnson, Jr., Charles Bryant Johnson and Magnolia Lady, Inc.
                  (14)10.11
              
              
              Amended
                  and Restated Operating Agreement of Isle of Capri Black Hawk, L.L.C.,
                  dated as of July 29, 1997, between Casino America of Colorado,
                  Inc. and
                  Blackhawk Gold, Ltd. as amended (5)10.12
              
              
              Development
                  Agreement dated as of June 17, 1997, between City of Bettendorf,
                  Lady Luck
                  Bettendorf, Lady Luck Quad Cities, Inc. and Bettendorf Riverboat
                  Development, LC (5)10.13
              
              
              Operator’s
                  Contract, dated as of December 28, 1989, between Riverboat Development
                  Authority and the Connelley Group, LP, as amended on February 9,
                  1990,
                  March 1, 1990, January 1, 1991, September 30, 1994 and March 1,
                  1998
                  (5)10.14*
              
              
              Isle
                  of Capri Casinos, Inc. 2000 Long-Term Stock Incentive Plan
                  (15)10.15*
              
              
              Isle
                  of Capri Casinos, Inc. Deferred Bonus Plan
                  (15)






124




**INDEX
                  TO EXHIBITS
                  (continued)**10.16*
              
              
              Employment
                  Agreement dated as of January 1, 2002 between Isle of Capri Casinos,
                  Inc.
                  and Allan B. Solomon (5)10.17*
              
              
              Employment
                  Agreement dated as of January 1, 2002 between Isle of Capri Casinos,
                  Inc.
                  and Timothy M. Hinkley (5)10.18*
              
              
              Employment
                  Agreement dated as of January 1, 2002 between Isle of Capri Casinos,
                  Inc.
                  and Bernard Goldstein (5)10.19
              
              
              Third
                  Amended and Restated Credit Agreement, dated as of February 4,
                  2005, among
                  Isle of Capri Casinos, Inc., the lenders listed therein, Canadian
                  Imperial
                  Bank of Commerce, as administrative agent and issuing lender, Deutsche
                  Bank Trust Company Americas and Wells Fargo Bank, N.A., as co-syndication
                  agents, Calyon New York Branch and the CIT/Group/Equipment Financing,
                  Inc., as co-documentation agents and CIBC World Markets Corp.,
                  as lead
                  arranger (16)10.20*
              
              
              Isle
                  of Capri Casinos, Inc.’s 2005 Deferred Compensation Plan
                  (17)10.21*
              
              
              Isle
                  of Capri Casinos, Inc.’s 1995 Deferred Compensation Plan
                  (17)10.22*
              
              
              Isle
                  of Capri Casinos, Inc.’s 2005 Non-employee Director Deferred Compensation
                  Plan (17)10.23*
              
              
              Employment
                  Agreement dated as of January 1, 2005 between Isle of Capri Casinos,
                  Inc.
                  and Robert F. Griffin (17)10.24*
              
              
              Isle
                  of Capri Casinos, Inc. Master Retirement Plan (18)10.25
              
              
              Second
                  Amended and Restated Credit Agreement, dated as of October 24,
                  2005, by
                  and among Isle of Capri Black Hawk, L.L.C., Canadian Imperial Bank
                  of
                  Commerce, as administrative agent, the credit support parties named
                  therein and certain other lenders party from time to time thereto
                  (19)10.26*
              
              
              Voluntary
                  Resignation Agreement, dated as of November 14, 2005, by and between
                  Isle
                  of Capri Casinos, Inc. and Rexford A. Yeisley (20)10.27*
              
              
              Employment
                  Agreement, dated October 7, 2005, between Isle of Capri Casinos,
                  Inc. and
                  Robert Goldstein (21)10.28*
              
              
              Employment
                  Agreement, dated January 13, 2006 between Isle of Capri Casinos,
                  Inc. and
                  Donn R. Mitchell II (22)10.29
              
              
              Purchase
                  Agreement, dated February 13, 2006, by and among Legends Gaming,
                  LLC,
                  Legends Gaming of Mississippi, LLC, Legends Gaming of Louisiana-1,
                  LLC,
                  Legends Gaming of Louisiana-2, LLC, Isle of Capri Casinos, Inc.,
                  Riverboat
                  Corporation of Mississippi - Vicksburg, Louisiana Riverboat Gaming
                  Partnership, CSNO, L.L.C., LRGP Holdings, L.L.C. and IOC Holdings,
                  L.L.C
                  (23)10.30*
              
              
              Consulting
                  Agreement, dated as of March 23, 2006, by and between John G. Brackenbury
                  and Isle of Capri Casinos, Inc. (24)10.31
              
              
              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.






125




**INDEX
                  TO EXHIBITS (continued)**10.32
              
              
              First
                  Amendment to Ground Lease, made and entered into effective June
                  14, 2006,
                  by and between Family Lands L.P. and IOC Mississippi,
                  Inc.10.33
              
              
              Ground
                  Lease, made and entered into effective May 5, 2006, by and between
                  Family
                  Lands L.P. and IOC Mississippi, Inc.12.1
              
              
              Computation
                  of ratio of earnings to fixed charges.21.1
              
              
              Subsidiaries
                  of Isle of Capri Casinos, Inc.23.1
              
              
              Consent
                  of Ernst & Young LLP31.1
              
              
              Certification
                  of Chief Executive Officer pursuant to Rule 13a - 14(a) under the
                  Securities Exchange Act of 1934, filed under Exhibit 31 of Item
                  601 of
                Regulation
                  S-K.31.2
              
              
              Certification
                  of Chief Financial Officer pursuant to Rule 13a - 14(a) under the
                  Securities Exchange Act of 1934, filed under Exhibit 31 of Item
                  601 of
                  Regulation S-K.32.1
              
              
              Certification
                  of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002 (18 U.S.C. Section 1350) filed under Exhibit 32 of
                  Item 601 of
                  Regulation S-K.32.2
              
              
              Certification
                  of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002 (18 U.S.C. Section 1350) filed under Exhibit 32 of
                  Item 601 of
                  Regulation S-K.(1)
              
              
              Filed
                  as an exhibit to Casino America, Inc.’s Registration Statement on Form S-1
                  filed September 3, 1993, as amended (Reg. No. 33-68434), and incorporated
                  herein by reference.(2)
              
              
              Filed
                  as an exhibit to Casino America, Inc.’s Proxy Statement for the fiscal
                  year ended April 26, 1998 (File No. 0-20538) and incorporated herein
                  by
                  reference.(3)
              
              
              Filed
                  as an exhibit to Isle of Capri Casinos, Inc.’s Annual Report on Form 10-K
                  for the fiscal year ended April 27, 1997 (File No. 0-20538) and
                  incorporated herein by reference.(4)
              
              
              Filed
                  as an exhibit to Isle of Capri Casinos, Inc.’s Registration Statement on
                  Form S-4 filed on May 12, 2004 (File No. 333-115419) and incorporated
                  herein by reference.(5)
              
              
              Filed
                  as an exhibit to Isle of Capri Casinos, Inc.’s Amendment No. 1 to
                  Registration Statement on Form S-4 filed on June 19, 2002 (File
                  No.
                  333-88802) and incorporated herein by reference.(6)
              
              
              Filed
                  as an exhibit to Casino America, Inc.’s Current Report on Form 8-K filed
                  on February 14, 1997 (File No. 0-20538) and incorporated herein
                  by
                  reference.(7)
              
              
              Filed
                  as an exhibit to Casino America, Inc.’s Annual Report on form 10-K for the
                  fiscal year ended April 30, 1993 (File No. 0-20538) and incorporated
                  herein by reference.(8)
              
              
              Filed
                  as an exhibit to Casino America, Inc.’s Registration Statement on Form S-8
                  filed June 30, 1994 (File No. 33-80918) and incorporated herein
                  by
                  reference.(9)
              
              
              Filed
                  as an exhibit to Casino America, Inc.’s Annual Report on Form 10-K for
                  fiscal year ended April 30, 1994 (File No. 0-20538) and incorporated
                  herein by reference.






126




**INDEX
                  TO EXHIBITS
                  (continued)**(10)
              
              
              Filed
                  as an exhibit to Casino America, Inc.’s Annual Report on Form 10-K for
                  fiscal year ended April 30, 1995 (File No. 0-20538) and incorporated
                  herein by reference.(11)
              
              
              Filed
                  as an exhibit to Isle of Capri Casinos, Inc.’s Annual Report on Form 10-K
                  for the fiscal year ended April 25, 1999 (File No. 0-20538) and
                  incorporated herein by reference.(12)
              
              
              Filed
                  as an exhibit to Casino America, Inc.’s Proxy Statement for the fiscal
                  year ended April 30, 1996 (File No. 0-20538) and incorporated herein
                  by
                  reference.(13)
              
              
              Filed
                  as an exhibit to Casino America, Inc.’s Proxy Statement for the fiscal
                  year ended April 27, 1997 (File No. 0-20538) and incorporated herein
                  by
                  reference.(14)
              
              
              Filed
                  as an exhibit to Isle of Capri Casinos, Inc.’s Annual Report on Form 10-K
                  for the fiscal year ended April 30, 2000 (File No. 0-20538) and
                  incorporated herein by reference.(15)
              
              
              Filed
                  as an exhibit to Isle of Capri Casinos, Inc.’s Proxy Statement for the
                  fiscal year ended April 30, 2000 (File No. 0-20538) and incorporated
                  herein by reference.(16)
              
              
              Filed
                  as an exhibit to Isle of Capri Casinos, Inc.’s Current Report on Form 8-K
                  filed on February 10, 2005 (File No. 0-20538) and incorporated
                  herein by
                  reference.(17)
              
              
              Filed
                  as an exhibit to Isle of Capri Casinos, Inc.’s Quarterly Report on Form
                  10-Q for the fiscal quarter ended January 23, 2005 (File No. 0-20538)
                  and
                  incorporated herein by reference.(18)
              
              
              Filed
                  as an exhibit to Isle of Capri Casinos, Inc.’s Annual Report on Form 10-K
                  for the fiscal year ended April 24, 2005 (File No. 0-20538) and
                  incorporated herein by reference(19)
              
              
              Filed
                  as an exhibit to Isle of Capri Casino, Inc.’s Current Report on Form 8-K
                  filed on October 28, 2005 (File No. 0-20538) and incorporated herein
                  by
                  reference.(20)
              
              
              Filed
                  as an exhibit to Isle of Capri Casino, Inc.’s Current Report on Form 8-K
                  filed on November 17, 2005 (File No. 0-20538) and incorporated
                  herein by
                  reference.(21)
              
              
              Filed
                  as an exhibit to Isle of Capri Casino, Inc.’s Current Report on Form 8-K
                  filed on January 6, 2006 (File No. 0-20538) and incorporated herein
                  by
                  reference.(22)
              
              
              Filed
                  as an exhibit to Isle of Capri Casino, Inc.’s Current Report on Form 8-K
                  filed on January 19, 2006 (File No. 0-20538) and incorporated herein
                  by
                  reference.(23)
              
              
              Filed
                  as an exhibit to Isle of Capri Casino, Inc.’s Current Report on Form 8-K
                  filed on February 17, 2006 (File No. 0-20538) and incorporated
                  herein by
                  reference.(24)
              
              
              Filed
                  as an exhibit to Isle of Capri Casino, Inc.’s Current Report on Form 8-K
                  filed on March 29, 2006 (File No. 0-20538) and incorporated herein
                  by
                  reference.




***** Management
        contract or compensatory plan or arrangement.




127