Isle of Capri Casinos 10-Q 2004 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended October 26, 2003

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 Number0-20538

ISLE OF CAPRI CASINOS, INC.

Delaware	41-1659606
(State or other jurisdiction	(I.R.S. Employer
of 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

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.

Yesx Noo

Indicate by check mark if the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yesx Noo

        As of November 18, 2003, the Company had a total of 29,520,342 shares of Common Stock outstanding (which excludes 3,351,708 shares held by us in treasury).

ISLE OF CAPRI CASINOS, INC.

FORM 10-Q

INDEX

	PAGE
PART I     FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS, OCTOBER 26, 2003 (UNAUDITED)
AND APRIL 27, 2003		2
CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND SIX
MONTHS ENDED OCTOBER 26, 2003 AND OCTOBER 27, 2002 (UNAUDITED)		3
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY FOR THE SIX
MONTHS ENDED OCTOBER 26, 2003 (UNAUDITED)		4
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS
ENDED OCTOBER 26, 2003 AND OCTOBER 27, 2002 (UNAUDITED)		5
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS		7
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION		27
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		39
ITEM 4. CONTROLS AND PROCEDURES		41
PART IIOTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS		42
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS		43
ITEM 3. DEFAULTS UPON SENIOR SECURITIES		43
ITEM 4. SUBMISSION OF MATTERS SUBJECT TO A VOTE OF SECURITY HOLDERS		44
ITEM 5. OTHER INFORMATION		44
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K		45
SIGNATURE		46
EXHIBIT LIST		47

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

All statements other than statements of historical or current facts included in this report on Form 10-Q or incorporated by reference herein, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "estimate", "anticipate", "believe" or "continue" or the negative thereof or variations thereon or similar terminology. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been corr ect. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements.

Our Internet website is http://www.islecorp.com. We make our filings available free of charge on our Internet website as soon as reasonably practical after we electronically file such reports with, or furnish them to, the SEC.

1

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
	October 26,		April 27,
	2003		2003
ASSETS		(Unaudited)
Current assets:
Cash and cash equivalents	$	105,590	$	94,626
Accounts receivable		8,877		7,786
Notes receivable		730		5,658
Income tax receivable		-		2,260
Deferred income taxes		6,397		7,433
Prepaid expenses and other assets		23,221		17,982
Total current assets		144,815		135,745
Property and equipment, net		870,267		841,332
Other assets:
Goodwill		327,829		326,309
Other intangible assets		72,244		75,344
Deferred financing costs, net of accumulated amortization of $13,651
and $11,500, respectively		21,177		22,962
Restricted cash		2,561		2,551
Other		5,377		3,961
Total assets	$	1,444,270	$	1,408,204
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt	$	16,659	$	24,757
Accounts payable trade		18,318		18,630
Accrued liabilities:
Interest		6,980		7,132
Payroll and related		47,644		45,578
Property and other taxes		26,500		17,852
Income taxes		5,781		-
Progressive jackpots and slot club awards		15,861		15,583
Other		27,125		26,639
Total current liabilities		164,868		156,171
Long-term debt, less current maturities		997,071		1,003,230
Deferred income taxes		10,074		9,700
Deferred state income taxes		7,675		7,675
Other accrued liabilities		13,061		13,347
Minority interest		18,521		14,177
Stockholders' equity:
Preferred stock, $.01 par value; 2,000 shares authorized; none issued		-		-
Common stock, $.01 par value; 45,000 shares authorized; shares issued and
outstanding: 32,859 at October 26, 2003 and 32,377 at April 27, 2003		326		322
Class B common stock, $.01 par value; 3,000 shares authorized; none issued		-		-
Additional paid-in capital		141,662		137,542
Unearned compensation		(1,973)		(1,498)
Retained earnings		124,608		100,346
Accumulated other comprehensive loss, net of income tax benefit of $1,117 and
$2,527, respectively		(1,937)		(4,284)
		262,686		232,428
Treasury stock, 3,352 shares at October 26, 2003 and 3,293 shares at April 27, 2003		(29,686)		(28,524)
Total stockholders' equity		233,000		203,904
Total liabilities and stockholders' equity	$	1,444,270	$	1,408,204

See notes to the consolidated financial statements.

2

ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands, except per share data)
	Three Months Ended				Six Months Ended
	October 26,		October 27,		October 26,		October 27,
	2003		2002		2003		2002
Revenues:
Casino	$	275,527	$	257,094	$	564,310	$	527,179
Rooms		11,209		13,898		23,069		28,635
Pari-mutuel commissions and fees		3,032		4,038		7,750		9,643
Food, beverage and other		35,011		35,847		72,668		72,940
Gross revenues		324,779		310,877		667,797		638,397
Less promotional allowances		55,113		50,764		112,380		101,621
Net revenues		269,666		260,113		555,417		536,776
Operating expenses:
Casino		47,037		47,133		96,475		97,119
Gaming taxes		60,337		56,414		122,556		115,063
Rooms		2,523		3,473		5,095		7,136
Pari-mutuel		2,361		2,948		5,842		7,008
Food, beverage and other		7,461		8,482		16,032		17,787
Marine and facilities		16,953		17,136		33,033		35,392
Marketing and administrative		75,107		72,589		150,805		144,441
Preopening		307		-		598		-
Depreciation and amortization		21,437		18,277		43,054		36,261
Total operating expenses		233,523		226,452		473,490		460,207
Operating income		36,143		33,661		81,927		76,569
Interest expense, net		(20,642)		(20,650)		(41,740)		(41,690)
Minority interest		(2,657)		(2,352)		(5,490)		(4,910)
Income before income taxes		12,844		10,659		34,697		29,969
Income taxes		2,134		3,872		10,435		11,009
Net income	$	10,710	$	6,787	$	24,262	$	18,960
Net income per common share-basic	$	0.37	$	0.24	$	0.83	$	0.66
Net income per common share-diluted	$	0.35	$	0.22	$	0.79	$	0.62
Weighted average basic shares		29,336		28,862		29,241		28,801
Weighted average diluted shares		30,827		30,637		30,591		30,680

See notes to the consolidated financial statements.

3

ISLE OF CAPRI CASINOS, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(In thousands)

						Accumulated
						Other
	Shares of		Additional	Unearned		Compre-		Total
	Common	Common	Paid-in	Compen-	Retained	hensive	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)	$ 203,904
Net income	-	-	-	-	24,262	-	-	24,262
Unrealized gain on interest
rate swap contract, net of income taxes	-	-	-	-	-	1,985	-	1,985
Foreign currency translation
adjustments, net of income taxes	-	-	-	-	-	362	-	362
Comprehensive income
net of income taxes								26,609
Exercise of stock options, net
of income taxes	482	4	3,272	-	-	-	(1,162)	2,114
Grant of nonvested stock	-	-	848	(848)	-	-	-	-
Amortization of unearned
compensation	-	-	-	373	-	-	-	373
Balance, October 26, 2003	32,859	$ 326	$ 141,662	$ (1,973)	$124,608	$ (1,937)	$(29,686)	$ 233,000

See notes to the consolidated financial statements.

4

ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
		Six Months Ended
		October 26,		October 27,
		2003		2002
Operating activities:
Net income	$	24,262	$	18,960
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		43,054		36,261
Amortization of deferred financing costs		2,151		1,879
Amortization of unearned compensation		373		279
Minority interest		5,490		4,910
Changes in current assets and liabilities:
Accounts receivable		(1,086)		321
Prepaid expenses and other assets		(5,634)		(3,579)
Accounts payable and accrued liabilities		21,273		9,824
Net cash provided by operating activities		89,883		68,855
Investing activities:
Purchase of property and equipment		(68,646)		(22,962)
Net cash paid for acquisitions		(948)		-
Proceeds from sales of assets		250		7,500
Investments in and advances to joint ventures		-		(860)
Restricted cash		(45)		450
Other		2,964		44
Net cash used in investing activities		(66,425)		(15,828)
Financing activities:
Net reduction in line of credit		(5,916)		(53,000)
Principal payments on debt		(8,342)		(10,179)
Deferred financing costs		(366)		(764)
Proceeds from exercise of stock options		3,276		2,032
Cash distribution to minority partner		(1,146)		(3,183)
Net cash used in financing activities		(12,494)		(65,094)
Net increase (decrease) in cash and cash equivalents		10,964		(12,067)
Cash and cash equivalents at beginning of period		94,626		76,597
Cash and cash equivalents at end of period	$	105,590	$	64,530

See notes to the consolidated financial statements.

5

ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(UNAUDITED)
(In thousands)
		Six Months Ended
		October 26,		October 27,
		2003		2002
Supplemental disclosure of cash flow information:
Net cash payments for:
Interest	$	40,769	$	38,025
Income taxes		2,394		3,802
Supplemental schedule of noncash investing and financing activities:
Other:
Construction costs funded through accrued liabilities		2,682		-

See notes to the consolidated financial statements.

6

ISLE OF CAPRI CASINOS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Basis of Presentation

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. The Company wholly owns and operates eleven gaming facilities located in Bossier City and Lake Charles, Louisiana; Biloxi, Lula, Natchez and Vicksburg, Mississippi; Boonville and Kansas City, Missouri; and Bettendorf, Marquette and Davenport, Iowa. The Company also owns a 57% interest in and receives a management fee for operating two gaming facilities in Black Hawk, Colorado, and a gaming facility in Cripple Creek, Colorado. All but three of these gaming facilities operate under the name "Isle of Capri" and feature our distinctive tropical island theme. In addition, the Company wholly owns and operates a pari-mutuel harness racing facility in Pompano Beach, Florida.

Fiscal Year-End

The Company’s fiscal year ends on the last Sunday in April. This fiscal year creates more comparability of the Company’s quarterly operations, by generally having an equal number of weeks (13) and weekend days (26) in each quarter. Periodically, this system necessitates a 53-week year. Fiscal 2004 commenced on April 28, 2003 and ends on April 25, 2004.

Interim Financial Information

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the three and six fiscal months ended October 26, 2003, are not necessarily indicative of the results that may be expected for the fiscal year ending April 25, 2004. For further informatio n, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended April 27, 2003.

Reclassification

The consolidated financial statements for the prior year reflect certain reclassifications to conform to the current year presentation.

7

ISLE OF CAPRI CASINOS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Summary of Significant Accounting Policies (continued)

Stock-Based Compensation

The Company has three stock-based employee compensation plans. The Company applies the recognition and measurement principles of APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations in accounting for those 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 Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), as amended b y SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure" ("SFAS 148"), to stock-based employee compensation:

		Three Months Ended				Six Months Ended
		October 26, 2003		October 27, 2002		October 26, 2003		October 27, 2002
		(In thousands, except per share data)
Net income, as reported	$	10,710	$	6,787	$	24,262	$	18,960
Deduct: Total stock-based employee
compensation expense determined under fair
value based method for all awards, net of
related tax effects		(1,163)		(643)		(1,877)		(1,260)
Pro forma net income	$	9,547	$	6,144	$	22,385	$	17,700
Earnings per common share:
Basic - as reported	$	0.37	$	0.24	$	0.83	$	0.66
Basic - pro forma	$	0.33	$	0.21	$	0.77	$	0.61
Diluted - as reported	$	0.35	$	0.22	$	0.79	$	0.62
Diluted - pro forma	$	0.31	$	0.20	$	0.73	$	0.58

The stock-based compensation included in the table above represents the after-tax amount of pro forma compensation related to stock option plans. Reported net income includes amortization of restricted stock compensation of $117,000 and $94,000, net of tax, for the three months ended October 26, 2003, and October 27, 2002, respectively, and $234,000 and $176,000, net of tax, for the six fiscal months ended October 26, 2003, and October 27, 2002, respectively.

8

ISLE OF CAPRI CASINOS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Summary of Significant Accounting Policies (continued)

Stock-Based Compensation (continued)

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

	Risk-Free	Original	Expected	Expected
Fiscal Quarter	Interest Rate	Expected Life	Volatility	Dividends
October 26, 2003	3.02%	6.05 years	57.8%	None
October 27, 2002	4.49%	5.00 years	70.0%	None

2. Acquisitions

CCSC/Blackhawk, Inc. and Colorado Grande Enterprises, Inc.

On April 22, 2003, Isle of Capri Black Hawk, L.L.C. acquired CCSC/Blackhawk, Inc., which owns and operates the Colorado Central Station casino in Black Hawk, Colorado, andColorado Grande Enterprises, Inc., which owns and operates the Colorado Grande casino in Cripple Creek, Colorado. The total purchase price was $75.7 million for CCSC/Blackhawk, Inc. and $10.2 million for Colorado Grande Enterprises, Inc. As the Company owns 57% of the Isle-Black Hawk, as of April 22, 2003, the Company accordingly acquired a 57% indirect ownership interest in the Colorado Central Station-Black Hawk and the Colorado Grande-Cripple Creek.

During the quarter ended April 27, 2003, these acquisitions were accounted for as purchase business combinations with the purchase price preliminarily allocated to the fair values of the assets and liabilities acquired resulting in preliminary goodwill of $20.5 million and other intangible assets of $16.6 millionfor the value of certain trademarks acquired with the properties. The results ofoperations of CCSC/Blackhawk, Inc. and Colorado Grande Enterprises, Inc. are included in the consolidated statements of income since the acquisition date.

During fiscal 2004, the Company obtained third party valuations of certain assets, which resulted in adjustments to the fair value of these assets, including an increase in property and equipment of $2.8 million and a decrease in other intangible assets of $3.1 million. Goodwill related to these acquisitions increased by $1.5 million, primarily as a result of the change in these fair values.

9

ISLE OF CAPRI CASINOS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Acquisitions (continued)

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition, as adjusted. The purchase price allocations have been completed on a preliminary basis, subject to adjustment should new or additional facts about the businesses become known. The Company expects to finalize the allocations during fiscal 2004.

			Colorado
		CCSC/		Grande
		Blackhawk, Inc.		Enterprises, Inc.
ASSETS		(In thousands)
Current assets	$	5,457	$	844
Property and equipment, net		47,911		1,951
Goodwill		15,011		6,968
Other intangible assets		12,200		1,300
Other		113		-
Total assets acquired	$	80,692	$	11,063
Current liabilities		4,992		808
Net assets acquired	$	75,700	$	10,255

10

ISLE OF CAPRI CASINOS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Long-Term Debt

 

		October 26,		April 27,
		2003		2003
Long-term debt consists of the following:		(In thousands)
8.75% Senior Subordinated Notes (described below)	$	390,000	$	390,000
9.00% Senior Subordinated Notes (described below)		200,000		200,000
Senior Secured Credit Facility (described below):
Variable rate term loan		246,250		247,500
Revolver		-		3,000
Isle-Black Hawk Senior Secured Credit Facility, non-recourse to Isle of Capri
Casinos, Inc. (described below):
Variable rate term loan Tranche A		22,922		27,922
Variable rate term loan Tranche B		142,007		142,732
Special Assessment BID Bonds (described below)		765		816
Variable rate TIF Bonds due to City of Bettendorf (described below)		4,973		5,306
12.5% note payable, due in monthly installments of $125, including interest,
beginning October 1997 through October 2005		2,445		3,022
Other		4,368		7,689
		1,013,730		1,027,987
Less current maturities		16,659		24,757
Long-term debt	$	997,071	$	1,003,230

Debt Compliance

The following is a brief description of the Company’s borrowing arrangements. Certain of these arrangements contain financial covenants. The Company was in compliance with all covenants as of October 26, 2003, and April 27, 2003.

 

8.75% Senior Subordinated Notes

On  April 23, 1999,  the  Company  issued $390.0 million  of  8.75% Senior Subordinated  Notes due 2009 (the "8.75% Senior Subordinated Notes"). The 8.75% Senior Subordinated Notes are guaranteed by all of the Company’s  significant subsidiaries,  excluding the subsidiaries that  own and operate  the Isle-Black Hawk,  the  Colorado Central Station-Black Hawk and the Colorado  Grande-Cripple  Creek. Interest  on the 8.75% Senior Subordinated  Notes  is payable semi-annually on each April 15 and October 15 through maturity. The 8.75% Senior Subordinated Notes are redeemable, in whole or in part, at the Company’s  option  at any  time on or  after April 15, 2004, at t he  red emption 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 April 15 of the years indicated below:

Year	Percentage
2004	104.375%
2005	102.917%
2006	101.458%
2007 and thereafter	100.000%

11

ISLE OF CAPRI CASINOS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Long-Term Debt (continued)

The Company issued the 8.75% 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 subsidiaries, excluding the subsidiaries that own and operate the Isle-Black Hawk, the  Colorado  Central Station-Black Hawk  and  the Colorado Grande-Cripple Creek.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 $390.0  million  in aggregate  principal  amount of the existing 8.75% Senior Subordinated Notes.Interest on the 9% Senior Subordinated Notes is payable semi-annually on each March 15 and September 15 through maturity. The 9% Senior Subordinated Notes are redeemable, in whole or in part, at the Company’s option at  any  time on or  after March 15, 2007, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest to the applicable redemption date, if redeemed during the 12-month period beginning on March 15 of the years indicated below:

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

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

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

12

ISLE OF CAPRI CASINOS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Long-Term Debt (continued)

Senior Secured Credit Facility

The Senior Secured Credit Facility provides for a $250.0 million revolving credit facility maturing on April 25, 2007, and a $250.0 million term loan facility maturing on April 25, 2008.The Company is required to make quarterly principal payments on the $250.0 million term loan portion of the Senior Secured Credit Facility. Such payments were initially $0.6 million per quarter, which started in June 2002, and will increase to $59.4 million per quarter beginning in June 2007.At the Company’s option, the revolving credit facility may bear interest at (1) the higher of 0.05% in excess of the federal funds effe ctive 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 at (1) the higher of 0.05% 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 1.50% or (2) a rate tied to a LIBOR rate plus an applicable margin of up to 2.25%.

The Senior Secured Credit Facility is secured by liens on substantially all of the Company’s assets and guaranteed by all of its significant restricted subsidiaries, excluding Casino America of Colorado, Inc., the Isle-Black Hawk, the Colorado Central Station-Black Hawk, the Colorado Grande-Cripple Creek and their subsidiaries.

The weighted average effective interest rate of total debt outstanding under the Senior Secured Credit Facility at October 26, 2003, was 5.75%.

Isle-Black Hawk Senior Secured Credit Facility

The Isle-Black Hawk Senior Secured Credit Facility provides for a $40.0 million revolving credit facility maturing on November 16, 2005, a $27.9 million Tranche A term loan maturing on November 16, 2005, and a $142.8 million Tranche B term loan maturing on November 16, 2006. Certain proceeds from Tranche B term loan were used to provide financing for the acquisitions of CCSC/Blackhawk, Inc. in Black Hawk, Colorado and the Colorado Grande Enterprises, Inc. in Cripple Creek, Colorado. The Isle-Black Hawk is required to make quarterly principal payments on the term loan portions of the Isle-Black Hawk Senior Secured Credit Facility that commenced in June 2003. Such payments on the Tranche A term loan initially were $2.5 million per quarter with scheduled increases to $3.0 million per q uarter commencing March 2005 with a balloon payment of $1.4 million due upon maturity. Such payments on the Tranche B term loan initially were $0.4 million per quarter with a scheduled increase to $9.9 million per quarter commencing March 2006 with a balloon payment of $109.2 million due upon maturity.

At the Isle-Black Hawk’s option, the revolving credit facility and the Tranche A term loan may bear interest at (1) the higher of 0.05% 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 3.00%, or (2) a rate tied to a LIBOR rate plus an applicable margin of up to 4.00%. At the Isle-Black Hawk’s option, the Tranche B term loan may bear interest at (1) the higher of 0.05% 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 3.00%, or (2) a rate tied to a LIBOR rate plus an applicable margin of up to 4.00%.

13

ISLE OF CAPRI CASINOS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Long-Term Debt (continued)

Isle-Black Hawk Senior Secured Credit Facility (continued)

The Isle-Black Hawk Senior Secured Credit Facility is secured by liens on the assets of the Isle-Black Hawk, the Colorado Central Station-Black Hawk and the Colorado Grande-Cripple Creek.

The weighted average effective interest rate of total debt outstanding under the Isle-Black Hawk Senior Secured Credit Facility at October 26, 2003, was 5.92%.

Isle-Black Hawk Special Assessment BID Bonds

In July 1998, the Black Hawk Business Improvement District (the "BID") issued $2.9 million in 6.00% 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. Isle-Black Hawk is responsible for 50% of this amount plus interest, and in April 2000, 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. Amortizing $1.1 million or 50% of the net bond proceeds calculates this amount, over twenty semi-annual periods at an int erest rate of 6.25%. The difference between the bond rate of 6.00% and the 6.25% assessed is to cover administrative costs of the BID related to the issuance.

Bettendorf TIF Bonds

As part of the City of Bettendorf Development Agreement dated June 17, 1997, the City of Bettendorf ("the City") issued $9.5 million in tax incremental financing bonds ("TIF Bonds"), $7.5 million of which was used by the Isle-Bettendorf to construct an overpass, parking garage, related site improvements and pay for disruption damages caused by construction of the overpass. To enable financing of the City’s obligations, the Isle-Bettendorf will pay incremental property taxes on the developed property assessed at a valuation of not less than $32.0 million until the TIF Bonds mature. Additionally, the TIF Bonds will also be repaid from the incremental taxes on the developed property within the defined "TIF District" which includes the Isle-Bettendorf and over 100 other tax paying entities. As the TIF District will repay the TIF Bonds, the Isle-Bettendorf may not be required to fully repay the $7.5 million. 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 $0.25 per person for each person entering the boat until the remaining balance has been repaid.

Lines of Credit

As of October 26, 2003, the Company had $294.0 million under its lines of credit, all of which was available. This amount consisted of $250.0 million in unused credit capacity with the revolving loan commitment on the Senior Secured Credit Facility, $40.0 million in unused credit capacity with the Isle-Black Hawk’s Senior Secured Credit Facility, and $4.0 million from other lines of credit.

14

ISLE OF CAPRI CASINOS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Long-Term Debt (continued)

Interest Rate Swaps

The Company entered into three interest rate swap agreements in fiscal 2001, four interest rate swap agreements in fiscal 2002 and four interest rate swap agreements in the first fiscal quarter of 2004 that effectively convert portions of the floating rate term loans to a fixed rate, thus reducing the impact of interest-rate changes on future interest expense. In fiscal 2003, $50.0 million of interest rate swaps terminated. The notional value of the remaining swaps, which were designated as cash flow hedges, was $230.0 million or 55.9% of the Isle of Capri’s variable rate term loans as of October 26, 2003. The remaining interest rate swaps terminate as follows: $150.0 million in fiscal 2004, $40.0 million in fiscal 2005 and $40.0 million in fiscal 2006.

The four interest rate swap agreements entered into in fiscal 2004 relate to the Isle-Black Hawk Senior Secured Credit Facility. The notional value of the swaps that were designated as cash flow hedges was $40.0 million, or 24.2% of the Isle-Black Hawk’s variable rate term debt outstanding under the Isle-Black Hawk Senior Secured Credit Facility as of October 26, 2003. The new interest rate swaps terminate in 2005. When added to the interest swaps that are already outstanding, the total notional value of the swaps that have been designated as cash flow hedges for the Isle-Black Hawk is $80.0 million, or 48.5% of the Isle-Black Hawk’s variable rate term debt outstanding under the Isle-Black Hawk Senior Secured Credit Facility.

At October 26, 2003, the Company does not expect to reclassify any net gains (losses) on derivative instruments from accumulated other comprehensive income to earnings during the next twelve months due to the payment of variable interest associated with the floating rate debt.

4. Comprehensive Income

Comprehensive income (loss) consists of the following:

		Three Months Ended				Six Months Ended
		October 26,		October 27,		October 26,		October 27,
		2003		2002		2003		2002
Net income	$	10,710	$	6,787	$	24,262	$	18,960
Unrealized gain (loss) on interest rate swap contracts,
net of income taxes		1,021		286		1,985		(1,307	)
Unrealized gain on foreign currency translation
adjustments, net of income taxes		362		-		362		-
Total comprehensive income	$	12,093	$	7,073	$	26,609	$	17,653

At October 26, 2003, accumulated other comprehensive loss on the accompanying consolidated balance sheet totaled $1.9 million. This amount is comprised of adjustments to the fair value of interest rate swaps and foreign currency translation adjustments. For the interest rate swaps, the fair value of the estimated interest differential between the applicable future variable rates and the interest rate swap contracts, expressed in present value terms, totaled $2.3 million, net of tax, of which $1.9 million is recorded as a current liability and $0.4 million as a long-term liability. There was no effect on income related to hedge ineffectiveness.

15

ISLE OF CAPRI CASINOS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Comprehensive Income (continued)

For the foreign currency translation, the Company recorded a gain of $0.4 million, net of tax, as current assets in 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.

5. Contingencies

One of the Company’s subsidiaries has been named, along with numerous manufacturers, distributors and gaming operators, including many of the country’s largest gaming operators, in a consolidated class action lawsuit pending in Las Vegas, Nevada. These gaming industry defendants are alleged to have violated the Racketeer Influenced and Corrupt Organizations Act by engaging in a course of fraudulent and misleading conduct intended to induce people to play their gaming machines based upon a false belief concerning how those gaming machines actually operate and the extent to which there is actually an opportunity to win on any given play. The suit seeks unspecified compensatory and punitive damages. The district court recently denied the Motion for Class Certification, but th is decision has been appealed. Therefore, the Company is still unable at this time to determine what effect, if any, the suit would have on its consolidated financial position or results of operations. The gaming industry defendants are committed to continuing a vigorous defense of all claims asserted in this matter.

In August 1997, a lawsuit was filed which seeks to nullify a contract to which Louisiana Riverboat Gaming Partnership is a party. Pursuant to the contract, Louisiana Riverboat Gaming Partnership pays a fixed amount plus a percentage of revenue to various local governmental entities, including the City ofBossier and the Bossier Parish School Board, in lieu of payment of a per-passenger boarding fee. Summary judgment in favor of Louisiana Riverboat Gaming Partnership was granted on June 4, 1998. That judgment was not appealed and is now final. On June 11, 1998, a similar suit was filed and the lower court rendered judgment in the Company’s favor on September 16, 1999. The case was reversed on appeal and remanded to the lower court for further proceedings; however, on October 8, 2001, the trial court dismissed the case again, thistime on the basis that the plaintiffs lack standing. The appellate court reversed. The plaintiffs have amended the petition and continue to pursue this matter. The Company intends to vigorously defend this suit, which is set for trial on April 6, 2004. In any event, the contracts that form the subject matter of the suit will expire in April 2004. In addition, a similar action was recently filed against the City of Bossier City, challenging the validity of its contracts with Louisiana Riverboat Gaming Partnership and other casinos. Exceptions have been filed requiring joinder of all interested parties, including Louisiana Riverboat Gaming Partnership. The Company believes the claims are without merit and intends to continue to vigorously defend this suit along with the other int erested parties.

Lady Luck and several joint venture partners are defendants in a lawsuit brought by the country of Greece through its Minister of Tourism (now Development) and Finance. The action alleges that the defendants failed to make specified payments in connection with the gaming license bid process for Patras, Greece. The payment the Company is alleged to have been required to make aggregates approximately 6.5 million Euros (which was approximately $7.7 million as of October 26, 2003, 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

16

ISLE OF CAPRI CASINOS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Contingencies (continued)

action. The Athens Civil Court of First Instance granted judgment in the Company’s favor and dismissed the lawsuit, but the Ministry of Tourism has appealed the matter and the appeal was heard in April 2002.

There has been no public announcement as to whether there has been a decision on the appeal. Also, the Ministry of Tourism is proceeding with an appeal from a dismissal of its action by the Athens Administrative Court of First Instance. An appeal of this matter was heard on January 22, 2003, which has been rejected. A further appeal is possible. Accordingly, the outcome of this matter is still in doubt and cannot be predicted with any degree of certainty. The Company believes the claims against it to be without merit and intends to continue a vigorous and appropriate defense to the claims asserted in this matter.

On December 6, 2002, a panel of arbitrators in St. Louis, Missouri issued an award that the Company was liable for $4.5 million in damages in connection with a lease of real estate located near Kimmswick, Jefferson County, Missouri. The Company filed a motion in the United States District Court for the Eastern District of Missouri seeking to vacate the arbitration award and established a reserve in the aggregate amount of $4.5 million. On August 22, 2003, the Company entered into a settlement agreement pursuant to which the Company settled the dispute and paid $4.5 million plus accrued interest of $0.3 million.

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, that subsidiary and guaranteed by Lady Luck Gaming Corporation (now a wholly owned subsidiary of the Company) relating to the development of a casino site near Kimmswick, Missouri. The suit alleges damages in excess of $10.0 million. The outcome of this matter cannot be predicted with any degree of certainty. The Company believes the claims against it to be without merit and intends to vigorously and appropriately defend the claims asserted in this matter.

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

The Company is subject to various contingencies and litigation matters and has a number of unresolved claims. Although the ultimate liability of 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.

17

ISLE OF CAPRI CASINOS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Earnings per Share of Common Stock

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

	Three Months Ended				Six Months Ended
		October 26,		October 27,		October 26,		October 27,
		2003		2002		2003		2002
		(In thousands, except per share data)
Numerator:
Net income	$	10,710	$	6,787	$	24,262	$	18,960
Numerator for basic earnings per share - income
available to common stockholders	$	10,710	$	6,787	$	24,262	$	18,960
Effect of diluted securities		-		-		-		-
Numerator for diluted earnings per share-
income available to common stockholders after
assumed conversions	$	10,710	$	6,787	$	24,262	$	18,960
Denominator:
Denominator for basic earnings per share -
weighted - average shares		29,336		28,862		29,241		28,801
Effect of dilutive securities
Employee stock options and
nonvested restricted stock		1,491		1,775		1,350		1,879
Denominator for diluted earnings per share -
adjusted weighted - average shares and
assumed conversions		30,827		30,637		30,591		30,680
Basic earnings per share	$	0.37	$	0.24	$	0.83	$	0.66
Diluted earnings per share	$	0.35	$	0.22	$	0.79	$	0.62

18

ISLE OF CAPRI CASINOS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Consolidating Condensed Financial Information

Certain  of  the  Company’s  subsidiaries  have  fully  and  unconditionally  guaranteed  the  payment  of  all  obligations  under  the  Company’s 8.75% Senior Subordinated Notes, 9% Senior  Subordinated  Notes  and $500.0 million  Senior  Secured  Credit  Facility. The  following  tables present  the  consolidating condensed financial information of Isle of Capri Casinos, Inc., as the parent company, its guarantor subsidiaries and its non-guarantor subsidiaries for the three and six fiscal months ended October 26, 2003, and October 27, 2002, and balance sheet as of October 26, 2003, and April 27, 2003.

ISLE OF CAPRI CASINOS, INC.
CONSOLIDATING CONDENSED GUARANTOR, NONGUARANTOR, AND PARENT COMPANY
FINANCIAL INFORMATION
AS OF OCTOBER 26, 2003 (UNAUDITED) AND APRIL 27, 2003 AND FOR
THE THREE AND SIX MONTHS ENDED OCTOBER 26, 2003 AND OCTOBER 27, 2002
(UNAUDITED)
(In thousands)
						(b)
		Isle of Capri		(a)		Non-Wholly
		Casinos, Inc.		Wholly		Owned		Consolidating
		Guarantor		Owned		Non-		and		Isle of Capri
		(Parent		Guarantor		Guarantor		Eliminating		Casinos, Inc.
		Obligor)		Subsidiaries		Subsidiaries		Entries		Consolidated
As of October 26, 2003
Balance Sheet
Current assets	$	12,113	$	93,782	$	40,918	$	(1,998)	$	144,815
Intercompany receivables		794,761		193,030		64,858		(1,052,649)		-
Investments in subsidiaries		268,191		282,083		173,692		(723,966)		-
Property and equipment, net		3,842		692,736		173,689		-		870,267
Other assets		21,474		368,714		39,000		-		429,188
Total assets	$	1,100,381	$	1,630,345	$	492,157	$	(1,778,613)	$	1,444,270
Current liabilities	$	27,133	$	98,358	$	41,373	$	(1,996)	$	164,868
Intercompany payables		14,900		936,894		100,855		(1,052,649)		-
Long-term debt,
less current maturities		833,750		5,489		157,832		-		997,071
Deferred state income taxes		-		7,557		118		-		7,675
Other accrued liabilities		(9,131)		53,377		(21,111)		-		23,135
Minority interest		-		-		-		18,521		18,521
Stockholders' equity		233,729		528,670		213,090		(742,489)		233,000
Total liabilities and stockholders' equity	$	1,100,381	$	1,630,345	$	492,157	$	(1,778,613)	$	1,444,270

19

ISLE OF CAPRI CASINOS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Consolidating Condensed Financial Information (continued) 

					(b)
	Isle of Capri		(a)		Non-Wholly
	Casinos, Inc.		Wholly		Owned		Consolidating
	Guarantor		Owned		Non-		and		Isle of Capri
	(Parent		Guarantor		Guarantor		Eliminating		Casinos, Inc.
	Obligor)		Subsidiaries		Subsidiaries		Entries		Consolidated
For the Three Months Ended October 26, 2003
Statement of Income
Revenues:
Casino	$	-	$	230,262	$	45,265	$	-	$	275,527
Rooms, food, beverage and other		40		42,178		7,034		-		49,252
Gross revenues		40		272,440		52,299		-		324,779
Less promotional allowances		-		44,377		10,736		-		55,113
Net revenues		40		228,063		41,563		-		269,666
Operating expenses:
Casino		-		40,605		6,432		-		47,037
Gaming taxes		-		51,862		8,475		-		60,337
Rooms, food, beverage and other		8,346		82,561		13,805		-		104,712
Management fee expense (revenue)		(7,615)		7,940		(325)		-		-
Depreciation and amortization		427		18,799		2,211		-		21,437
Total operating expenses		1,158		201,767		30,598		-		233,523
Operating income (loss)		(1,118)		26,296		10,965		-		36,143
Interest expense, net		7,646		(25,021)		(3,267)		-		(20,642)
Minority interest		-		-		-		(2,657)		(2,657)
Equity in income (loss) of subsidiaries		5,849		(2,288)		960		(4,521)		-
Income (loss) before income taxes		12,377		(1,013)		8,658		(7,178)		12,844
Income taxes		1,667		-		467		-		2,134
Net income (loss)	$	10,710	$	(1,013)	$	8,191	$	(7,178)	$	10,710

20

ISLE OF CAPRI CASINOS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Consolidating Condensed Financial Information (continued)

					(b)
	Isle of Capri		(a)		Non-Wholly
	Casinos, Inc.		Wholly		Owned		Consolidating
	Guarantor		Owned		Non-		and		Isle of Capri
	(Parent		Guarantor		Guarantor		Eliminating		Casinos, Inc.
	Obligor)		Subsidiaries		Subsidiaries		Entries		Consolidated
For the Six Months Ended October 26, 2003
Statement of Income
Revenues:
Casino	$	-	$	473,062	$	91,248	$	-	$	564,310
Rooms, food, beverage and other		1,162		88,177		14,148		-		103,487
Gross revenues		1,162		561,239		105,396		-		667,797
Less promotional allowances		-		90,881		21,499		-		112,380
Net revenues		1,162		470,358		83,897		-		555,417
Operating expenses:
Casino		-		83,286		13,189		-		96,475
Gaming taxes		-		105,356		17,200		-		122,556
Rooms, food, beverage and other		14,301		169,616		27,488		-		211,405
Management fee expense (revenue)		(15,977)		16,332		(355)		-		-
Depreciation and amortization		777		37,792		4,485		-		43,054
Total operating expenses		(899)		412,382		62,007		-		473,490
Operating income (loss)		2,061		57,976		21,890		-		81,927
Interest expense, net		15,099		(50,368)		(6,471)		-		(41,740)
Minority interest		-		-		-		(5,490)		(5,490)
Equity in income (loss) of subsidiaries		16,901		(817)		1,518		(17,602)		-
Income (loss) before income taxes		34,061		6,791		16,937		(23,092)		34,697
Income taxes		9,799		-		636		-		10,435
Net income (loss)	$	24,262	$	6,791	$	16,301	$	(23,092)	$	24,262

21

ISLE OF CAPRI CASINOS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Consolidating Condensed Financial Information (continued)

					(b)
	Isle of Capri		(a)		Non-Wholly
	Casinos, Inc.		Wholly		Owned		Consolidating
	Guarantor		Owned		Non-		and		Isle of Capri
	(Parent		Guarantor		Guarantor		Eliminating		Casinos, Inc.
	Obligor)		Subsidiaries		Subsidiaries		Entries		Consolidated
For the Six Months Ended October 26, 2003
Statement of Cash Flows
Net cash provided by (used in)
operating activities	$	18,940	$	63,915	$	24,660	$	(17,632)	$	89,883
Net cash provided by (used in)
investing activities		(17,292)		(55,609)		(2,849)		9,325		(66,425)
Net cash provided by (used in)
financing activities		(1,179)		(4,043)		(9,471)		2,199		(12,494)
Net increase in cash and
cash equivalents		469		4,263		12,340		(6,108)		10,964
Cash and cash equivalents at
beginning of the period		7,313		53,268		29,495		4,550		94,626
Cash and cash equivalents at
end of the period	$	7,782	$	57,531	$	41,835	$	(1,558)	$	105,590

22

ISLE OF CAPRI CASINOS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Consolidating Condensed Financial Information (continued)

					(b)
	Isle of Capri		(a)		Non-Wholly
	Casinos, Inc.		Wholly		Owned		Consolidating
	Guarantor		Owned		Non-		and		Isle of Capri
	(Parent		Guarantor		Guarantor		Eliminating		Casinos, Inc.
	Obligor)		Subsidiaries		Subsidiaries		Entries		Consolidated
For the Three Months Ended October 27, 2002
Statement of Income
Revenues:
Casino	$	-	$	230,378	$	26,716	$	-	$	257,094
Rooms, food, beverage and other		(45)		48,606		5,222		-		53,783
Gross revenues		(45)		278,984		31,938		-		310,877
Less promotional allowances		-		44,945		5,819		-		50,764
Net revenues		(45)		234,039		26,119		-		260,113
Operating expenses:
Casino		-		43,224		3,909		-		47,133
Gaming taxes		-		51,157		5,257		-		56,414
Rooms, food, beverage and other		5,145		91,675		7,808		-		104,628
Management fee expense (revenue)		(8,752)		7,617		1,135		-		-
Depreciation and amortization		271		16,716		1,290		-		18,277
Total operating expenses		(3,336)		210,389		19,399		-		226,452
Operating income (loss)		3,291		23,650		6,720		-		33,661
Interest expense, net		8,718		(27,680)		(1,688)		-		(20,650)
Minority interest		-		-		-		(2,352)		(2,352)
Equity in income (loss) of subsidiaries		(1,350)		-		1,618		(268)		-
Income (loss) before income taxes		10,659		(4,030)		6,650		(2,620)		10,659
Income taxes		3,872		-		-		-		3,872
Net income (loss)	$	6,787	$	(4,030)	$	6,650	$	(2,620)	$	6,787

23

ISLE OF CAPRI CASINOS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Consolidating Condensed Financial Information (continued)

					(b)
	Isle of Capri		(a)		Non-Wholly
	Casinos, Inc.		Wholly		Owned		Consolidating
	Guarantor		Owned		Non-		and		Isle of Capri
	(Parent		Guarantor		Guarantor		Eliminating		Casinos, Inc.
	Obligor)		Subsidiaries		Subsidiaries		Entries		Consolidated
For the Six Months Ended October 27, 2002
Statement of Income
Revenues:
Casino	$	-	$	473,164	$	54,015	$	-	$	527,179
Rooms, food, beverage and other		(33)		100,696		10,555		-		111,218
Gross revenues		(33)		573,860		64,570		-		638,397
Less promotional allowances		-		90,150		11,471		-		101,621
Net revenues		(33)		483,710		53,099		-		536,776
Operating expenses:
Casino		-		89,218		7,901		-		97,119
Gaming taxes		-		104,455		10,608		-		115,063
Rooms, food, beverage and other		9,903		186,052		15,809		-		211,764
Management fee expense (revenue)		(17,755)		15,438		2,317		-		-
Depreciation and amortization		495		33,234		2,532		-		36,261
Total operating expenses		(7,357)		428,397		39,167		-		460,207
Operating income (loss)		7,324		55,313		13,932		-		76,569
Interest expense, net		16,185		(54,395)		(3,480)		-		(41,690)
Minority interest		-		-		-		(4,910)		(4,910)
Equity in income (loss) of subsidiaries		6,460		6,040		(15)		(12,485)		-
Income (loss) before income taxes		29,969		6,958		10,437		(17,395)		29,969
Income taxes		11,009		-		-		-		11,009
Net income (loss)	$	18,960	$	6,958	$	10,437	$	(17,395)	$	18,960

24

ISLE OF CAPRI CASINOS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Consolidating Condensed Financial Information (continued)

					(b)
	Isle of Capri		(a)		Non-Wholly
	Casinos, Inc.		Wholly		Owned		Consolidating
	Guarantor		Owned		Non-		and		Isle of Capri
	(Parent		Guarantor		Guarantor		Eliminating		Casinos, Inc.
	Obligor)		Subsidiaries		Subsidiaries		Entries		Consolidated
For the Six Months Ended October 27, 2002
Statement of Cash Flows
Net cash provided by (used in)
operating activities	$	54,203	$	14,076	$	14,377	$	(13,801)	$	68,855
Net cash provided by (used in)
investing activities		(5,811)		(17,690)		(2,497)		10,170		(15,828)
Net cash provided by (used in)
financing activities		(52,431)		(1,640)		(14,655)		3,632		(65,094)
Net increase (decrease) in cash and
cash equivalents		(4,039)		(5,254)		(2,775)		1		(12,067)
Cash and cash equivalents at
beginning of the period		2,690		58,312		11,045		4,550		76,597
Cash and cash equivalents at
end of the period	$	(1,349)	$	53,058	$	8,270	$	4,551	$	64,530

					(b)
	Isle of Capri		(a)		Non-Wholly
	Casinos, Inc.		Wholly		Owned		Consolidating
	Guarantor		Owned		Non-		and		Isle of Capri
	(Parent		Guarantor		Guarantor		Eliminating		Casinos, Inc.
	Obligor)		Subsidiaries		Subsidiaries		Entries		Consolidated
As of April 27, 2003
Balance Sheet
Current assets	$	14,611	$	89,199	$	33,604	$	(1,669)	$	135,745
Intercompany receivables		777,901		206,680		66,956		(1,051,537)		-
Investments in subsidiaries		253,227		282,930		170,276		(706,433)		-
Property and equipment, net		3,760		668,683		168,889		-		841,332
Other assets		20,633		369,438		41,056		-		431,127
Total assets	$	1,070,132	$	1,616,930	$	480,781	$	(1,759,639)	$	1,408,204
Current liabilities	$	24,691	$	90,777	$	42,372	$	(1,669)	$	156,171
Intercompany payables		14,900		936,731		99,906		(1,051,537)		-
Long-term debt,
less current maturities		835,000		6,581		161,649		-		1,003,230
Deferred state income taxes		-		7,557		118		-		7,675
Other accrued liabilities		(9,503)		53,375		(20,825)		-		23,047
Minority interest		-		-		-		14,177		14,177
Stockholders' equity		205,044		521,909		197,561		(720,610)		203,904
Total liabilities and stockholders' equity	$	1,070,132	$	1,616,930	$	480,781	$	(1,759,639)	$	1,408,204

25

ISLE OF CAPRI CASINOS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Consolidating Condensed Financial Information (continued)

(a)       Certain of the Company’s wholly owned subsidiaries were guarantors of the 8.75% Senior Subordinated Notes, the 9% Senior Subordinated Notes and the Senior Secured Credit Facility including the following: the Isle-Biloxi, the Isle-Vicksburg, the Isle-Tunica, the Isle-Bossier City, the Isle-Lake Charles, PPI, Inc., IOC Holdings, L.L.C., Riverboat Services, Inc., the Isle-Natchez, the Isle-Lula, the Isle-Bettendorf, the Isle-Marquette, the Isle-Boonville, the Isle-Kansas City, the Lady Luck-Las Vegas and the Rhythm City-Davenport. Each of the subsidiaries’ guarantee s is joint and several with the guarantees of the other subsidiaries.

(b)     The following non-wholly owned subsidiaries were not guarantors on the 8.75% Senior Subordinated Notes, the 9% Senior Subordinated Notes nor the Senior Secured Credit Facility: Isle of Capri Black Hawk, L.L.C., Isle of Capri Black Hawk Capital Corp., IC Holdings Colorado, Inc., CCSC/Blackhawk, Inc., Colorado Grande Enterprises, Inc., Capri Air, Inc., Lady Luck Gaming Corp., Lady Luck Gulfport, Inc., Lady Luck Vicksburg, Inc., Lady Luck Biloxi, Inc., Lady Luck Central City, Inc., IOC-Coahoma, Inc., Pompano Park Holdings, L.L.C., Casino America of Colorado, Inc., ASMI Management, Inc., IOC Development, L.L.C., Casino America, Inc., ICC Corp., International Marco Polo Services, Inc., IOC-St. Louis County, Inc., IOC, L.L.C., Isle of Capri Casino Colorado, Inc., Isle of Capri of Michigan L.L.C., Lady Luck Bettendorf Marina Corp., Water Street Redevelopment Corporation, Casino Parking, Inc., IOC-Black Hawk Distribution Company, L.L.C., Isle of Capri of Jefferson County, Inc., Lady Luck Scott City, Inc., IOC Services, L.L.C. and Louisiana Horizons, L.L.C.

26

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

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

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States that require our management to make estimates and assumptions about the effects of matters that are inherently uncertain. We have summarized our significant accounting policies in Note 1 to our consolidated financial statements included herewith in Item 1. Of our accounting policies, we believe the following may involve a higher degree of judgment and complexity:

Goodwill and Other Intangible Assets

At October 26, 2003, we had goodwill and other intangible assets of $400.1 million, representing 28% of total assets. Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangibles" ("SFAS 142") requires that goodwill and other intangible assets be tested for impairment annually or if an event occurs or circumstances change that may reduce the fair value of the Company below its book value. Should circumstances change or events occur to indicate that the fair value of the Company has fallen below its book value, management must then compare the estimated fair value of goodwill and other intangible assets to book value. If the book value exceeds the estimated fair value, an impairment loss would be recognized in an amount equal to that excess. Such an impai rment loss would be recognized as a non-cash component of operating income. We completed our annual impairment test as required under SFAS 142 in the fourth quarter of fiscal 2003 and determined that goodwill and other indefinite lived intangible assets were not impaired. This test required comparison of the estimated fair value of each property to book value, including goodwill and other intangible assets. The estimated 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 October 26, 2003, we had net property and equipment of $870.3 million, representing 60% of total assets. We capitalize the cost of property and equipment. Maintenance and repairs that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. Costs incurred in connection with the Company’s "all properties-other capital improvements," program include individual capital expenditures related to the purchase of furniture and equipment and 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 suc h 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. In assessing the recoverability of the carrying value of property and equipment, we make assumptions regarding future cash flows and other factors. If these estimates or the related assumptions change in the future, we may be required to record impairment loss for these assets. Such an impairment loss would be recognized as a non-cash component of operating income.

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Self-Insurance Liabilities

We are self-funded up to a maximum amount per claim for our employee-related healthcare 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 also 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 healthcare costs, in our opinion, recorded reserves are adequate to cover payments on future claims.

Income Tax Assets and Liabilities

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

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

Contingencies

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

The Company routinely faces challenges from federal and other tax authorities regarding the amount of taxes due. These challenges include questions regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. The Company records reserves for loss contingencies associated with the various filing positions, which are probable and subject to reasonable estimates.

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

General

Our results of operations for the three and six fiscal months ended October 26, 2003, reflect the consolidated operations of all of our subsidiaries and includes the following properties: the Isle-Bossier City, the Isle-Lake Charles, the Isle-Biloxi, the Isle-Lula, the Isle-Natchez, the Isle-Vicksburg, the Isle-Kansas City, the Isle-Boonville, the Isle-Bettendorf, the Isle-Marquette, the Rhythm City-Davenport, the Isle-Black Hawk, the Colorado Central Station-Black Hawk, the Colorado Grande-Cripple Creek, the Lady Luck-Las Vegas, 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 Colorado Central Station-Black H awk and the Colorado Grande-Cripple Creek were acquired by Isle of Capri Black Hawk, L.L.C. on April 22, 2003.

Our results of operations for the three and six fiscal months ended October 27, 2002, reflect the consolidated operations of all of our subsidiaries and includes the following properties: the Isle-Bossier City, the Isle-Lake Charles, the Isle-Biloxi, the Isle-Lula, the Isle-Natchez, the Isle-Tunica, the Isle-Vicksburg, the Isle-Kansas City, the Isle-Boonville, the Isle-Bettendorf, the Isle-Marquette, the Rhythm City-Davenport, the Isle-Black Hawk, the Lady Luck-Las Vegas, and Pompano Park. The Isle-Tunica ceased casino operations on September 3, 2002, which was 33 days prior to the sale of assets to Boyd Casino Strip, LLC on October 7, 2002.

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 affected by the economy, seasonality and weather. Seasonality has historically caused the operating results for our first and fourth fiscal quarters ending in July and April, respectively, to be better than the operating results for the second and third fiscal quarters ending October and January, respectively.

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Results of Operation

Three Fiscal Months October 26, 2003, Compared to Three Fiscal Months Ended October 27, 2002

Gross revenue for the quarter ended October 26, 2003, was $324.8 million, which included $275.5 million of casino revenue, $11.2 million of room revenue, $3.0 million of pari-mutuel commissions and $35.0 million of food, beverage and other revenue. This compares to gross revenue for the quarter ended October 27, 2002, of $310.9 million, which included $257.1 million of casino revenue, $13.9 million of room revenue, $4.0 million of pari-mutuel commissions and $35.9 million of food, beverage and other revenue.

Casino revenue increased 7.2% versus the same period last fiscal year, or $18.4 million for the quarter. The addition of the Colorado Central Station-Black Hawk and the Colorado Grande-Cripple Creek properties added $16.7 million in casino revenue for the quarter. Additionally, casino revenue improved at our Iowa properties. Casino revenue at the Rhythm City-Davenport increased $3.3 million, or 21.0%, over the same period last year. Casino revenue grew by $2.1 million, or 8.6%, and $1.1 million, or 10.4%, at the Isle-Bettendorf and the Isle-Marquette, respectively. These increases are due in large part to a more stable local economy and the temporary closing, in May 2003, of the Meskwaki Bingo Casino and Hotel, a competitor. Additionally, the changes in the structure of Illinois
46; gaming taxes resulted in competitors in that jurisdiction operating for fewer hours and offering fewer promotions. The increases in Iowa were partially offset by the sale of the Isle-Tunica and the Lady Luck-Las Vegas, leading to a combined decrease of $5.2 million in casino revenue for the two properties. Room revenue for the quarter decreased $2.7 million, or 19.3%, primarily due to the sale of the Isle-Tunica and the Lady Luck-Las Vegas. Food and beverage revenue for the quarter declined $0.5 million, or 1.5%. The decrease was primarily due to the sale of the Isle-Tunica and the Lady Luck-Las Vegas, resulting a decrease in food and beverage revenue totaling $1.8 million. This was partially offset by the addition of the Colorado Central Station-Black Hawk and the Colorado Grande-Cripple Creek resulting in an increase in food and beverage revenue totaling $1.4 million. Other revenue for the quarter decreased $0.4 million, or 7.9%.

Pari-mutuel commissions and fees were $3.0 million for the quarter ended October 26, 2003. This compares to pari-mutuel commissions and fees of $4.0 million for the quarter ended October 27, 2003. Pari-mutuel commissions and fees decreased $1.0 million, or 25.0%, quarter over quarter. The decrease resulted primarily from fewer live racing days at Pompano Park and from a general decrease in wagering on horse races.

Promotional allowances for the quarter ended October 26, 2003, were $55.1 million, which includes complimentary revenue of $29.3 million, redeemed coupons of $13.6 million and slot club points of $12.2 million. This compares to promotional allowances for the quarter ended October 27, 2002, of $50.8 million, which includes complimentary revenue of $29.3 million, redeemed coupons of $10.5 million and slot club points of $11.0 million. Complimentary revenue remained flat when compared to the same period last year. Redeemed coupons increased $3.1 million, or 29.5%, over the same period last year. The increase is due primarily to the addition of the Colorado Central Station-Black Hawk and the Colorado Grande-Cripple Creek adding $2.0 million in redeemed coupons. Slot club points increas ed $1.2 million, or 10.9%, due primarily to the addition of the Colorado Central Station-Black Hawk and the Colorado Grande-Cripple Creek, offset by the sale of the Lady Luck-Las Vegas.

30

Casino operating expenses for the quarter ended October 26, 2003, totaled $47.0 million, or 17.1% of casino revenue, versus $47.1 million, or 18.3% of casino revenue, for the quarter ended October 27, 2002. These expenses are primarily comprised of salaries, wages and benefits and other operating expenses of the casinos and remained essentially flat compared to the same period last year. Roomexpenses of $2.5 million, or 22.5% of room revenue, from the hotels at the Isle-Bossier City, the Isle-Lake Charles, the Isle-Biloxi, the Isle-Lula, the Isle-Natchez, the Isle-Vicksburg, the Isle-Bettendorf, the Isle-Marquette, the Rhythm City-Davenport, the Isle-Black Hawk, the Colorado Central Station-Black Hawk and the Colorado Grande-Cripple Creek compared to room expenses of $3.5 m illion, or 25.0% of room revenue, for the quarter ended October 27, 2002, from the hotels at the Isle-Bossier City, the Isle-Lake Charles, the Isle-Biloxi, the Isle-Lula, the Isle-Natchez, the Isle-Tunica, the Isle-Vicksburg, the Isle-Bettendorf, the Isle-Marquette, the Rhythm City-Davenport, the Isle-Black Hawk and the Lady Luck-Las Vegas. 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. Room expenses decreased $1.0 million, or 27.4%, versus the same period last fiscal year.

For the quarter ended October 26, 2003, state and local gaming taxes in Louisiana, Mississippi, Colorado, Iowa, Missouri and Nevada totaled $60.3 million, or 21.9% of casino revenue, compared to $56.4 million, or 21.9% of casino revenues for the three fiscal months ended October 27, 2002, which is consistent with each state’s gaming tax rate for the applicable fiscal quarters. On April 1, 2002, the gaming tax rate at the Isle-Bossier City increased from 19.5% to 20.5% and increased again, from 20.5% to 21.5%, on April 1, 2003.

Food, beverage and other expenses totaled $7.5 million for the quarter ended October 26, 2003, compared to $8.5 million for the quarter ended October 27, 2002, decreasing $1.0 million, or 11.8%. Food, beverage and other operating expenses as a percentage of food, beverage and other revenues decreased to 21.3% for the quarter ended October 26, 2003, from 23.7% for the quarter ending October 27, 2002. These expenses consist primarily of the cost of goods sold, salaries, wages and benefits and other operating expenses of these departments. These expenses have decreased primarily as a result of the sale of the Isle-Tunica and the Lady Luck-Las Vegas, decreasing food, beverage and other expenses by a total of $1.0 million for the two properties.

Marine and facilities expenses remained essentially flat versus the same period last fiscal year. These expenses totaled $17.0 million for the quarter ended October 26, 2003, versus $17.1 million for the quarter ended October 27, 2002, for an increase of $0.1 million, or 0.6%. These expenses include salaries, wages and benefits, operating expenses of the marine crews, insurance, public areas, housekeeping and general maintenance of the riverboats and pavilions.

Marketing and administrative expenses totaled $75.1 million, or 27.9% of net revenues, for the quarter ended October 26, 2003, versus $72.6 million, or 27.9% of net revenues, for the quarter ended October 27, 2002, for an increase of $2.5 million, or 3.5%. Marketing expenses include salaries, wages and benefits of the marketing and sales departments, as well as promotions, advertising, special events and entertainment. Administrative expenses include administration and human resource department expenses, rent, new development activities, professional fees and property taxes. These expenses increased primarily because discretionary employee and other benefits, company-wide, have increased approximately $1.5 million, and advertising expense, company-wide, has increased approximately $1.9 million primarily due to an increase in television and radio advertising introducing new marketing initiatives. Furthermore, the addition of $4.2 million in marketing and administrative expenses from the Colorado Central Station-Black Hawk and the Colorado Grande-Cripple Creek was offset by the combined decrease of $4.3 million as a result of the sale of the Isle-Tunica and the Lady Luck-Las Vegas.

Depreciation and amortization expense was $21.4 million for the quarter ended October 26, 2003, and $18.3 million for the quarter ended October 27, 2002. Depreciation and amortization expense increased by $3.2 million compared to the same period last year and is consistent with an increase in fixed assets placed into service or acquired.

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Interest expense was $20.9 million for the quarter ended October 26, 2003, as compared to interest expense of $20.7 million for the quarter ended October 27, 2002. Interest expense primarily relates to indebtedness incurred in connection with the acquisition of property, equipment, leasehold improvements and berthing and concession rights. For the Company, excluding the Isle-Black Hawk, interest expense was $18.1 million for the quarter ended October 26, 2003, as compared to $19.3 million for the quarter ended October 27, 2002. Interest expense for the Company, excluding the Isle-Black Hawk, decreased because of generally lower interest rates, as well as a $0.5 million increase in capitalized interest for the period due to construction projects at the Isle-Biloxi and the Isle-Bossi er City. At the Isle-Black Hawk, interest expense was $2.9 million for the quarter ended October 26, 2003. This compares to interest expense of $1.4 million for the quarter ended October 27, 2002. The substantial increase in interest expense at the Isle-Black Hawk relates primarily to the financing of the purchase of the Colorado Central Station-Black Hawk and the Colorado Grande-Cripple Creek.

During the second quarter of fiscal 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 reserves and reduced income tax expense by approximately $3.0 million for the three months ended October 26, 2003, for previously accrued income tax liabilities. This had the effect of reducing our effective tax rate to 14.5% for the three months ended October 26, 2003, excluding our minority interest partner’s portion of the Colorado Central Station-Black Hawk and the Colorado Grande-Cripple Creek income taxes as compared to 36.3% for the three months ended October 27, 2002. Excluding the impact o f these developments, our fiscal 2004 effective tax rate for the three months ended October 26, 2003, would have been 37.3%, excluding our minority interest partner’s portion of the Colorado Central Station-Black Hawk and the Colorado Grande-Cripple Creek income taxes.

Six Fiscal Months Ended October 26, 2003, Compared to Six Fiscal Months Ended October 27, 2002

Gross revenue for the six fiscal months ended October 26, 2003, was $667.8 million, which included $564.3 million of casino revenue, $23.1 million of room revenue, $7.7 million of pari-mutuel commissions and $72.7 million of food, beverage and other revenue. This compares to gross revenue for the six fiscal months ended October 27, 2002, of $638.4 million, which included $527.2 million of casino revenue, $28.6 million of room revenue, $9.6 million of pari-mutuel commissions and $73.0 million of food, beverage and other revenue.

Casino revenue increased $37.1 million, or 7.0%, primarily as a result of the addition of the Colorado-Central Station and the Colorado Grande-Cripple Creek. These properties added $29.1 million and $4.4 million in casino revenue, respectively. Additionally, casino revenue at the Rhythm City-Davenport increased $5.5 million, or 14.8%, compared to the similar period last year. This increase is attributable to the development of the unique Rhythm City brand, the more stable local economy, and the temporary closing, in May of 2003, of the Meskwaki Bingo Casino and Hotel, a competitor. Additionally, the changes in the structure of Illinois’ gaming taxes resulted in competitors in that jurisdiction operating for fewer hours and offering fewer promotions. The increases in Iowa were partially offset by decreases of $9.1 million and $2.8 million in casino revenue at the Isle-Tunica and the Lady Luck-Las Vegas, respectively, resulting from the sale of those properties. The Isle-Bossier City also had a decline in casino revenue of $4.6 million, or 7.7%. The decrease is attributable to construction and increased competition. Room revenue decreased $5.6 million, or 19.4%, due to the sale of the Isle-Tunica and the Lady Luck-Las Vegas. Last year over the same period these properties contributed $1.5 million and $3.5 million, respectively. Additionally, lower occupancy levels and room inventory decreased room revenue at the Rhythm City-Davenport by $0.2 million, or 26.5%. Food and beverage revenue decreased primarily because of the sale of the Isle-Tunica and the Lady Luck-Las Vegas. The

32

Isle-Tunica and the Lady Luck-Las Vegas had food and beverage revenue of $1.1 million and $2.9 million, respectively, for the six fiscal months ended October 27, 2002. These decreases were partially offset by $1.7 million contributed by the recently acquired Colorado Central Station-Black Hawk and $1.0 million contributed by the recently acquired Colorado Grande-Cripple Creek. Other revenue increased $0.6 million, or 6.9%, primarily as the result of a litigation settlement in the first fiscal quarter of 2004.

Pari-mutuel commissions and fees were $7.8 million for the six fiscal months ended October 26, 2003. This compares to pari-mutuel commissions and fees of $9.6 million for the six fiscal months ended October 27, 2003. Pari-mutuel commissions and fees decreased $1.8 million, or 18.8%, from the same period last fiscal year. The decrease resulted primarily from fewer live racing days at Pompano Park and from a general decrease in wagering on horse races.

Promotional allowances for the six fiscal months ended October 26, 2003, were $112.4 million, which includes complimentary revenue of $59.6 million, redeemed coupons of $27.7 million and slot club points of $25.1 million. This compares to promotional allowances for the six fiscal months ended October 27, 2002, of $101.7 million, which includes complimentary revenue of $59.8 million, redeemed coupons of $20.3 million, and slot club points of $21.6 million. Complimentary revenue remained essentially flat when compared to the same period last year. Redeemed coupons increased $7.4 million, or 36.5%, over the same period last year. The increase is due primarily to the addition of the Colorado Central Station-Black Hawk and the Colorado Grande-Cripple Creek adding a total of $3.7 million in redeemed coupons. The Isle-Boonville’s redeemed coupons increased by $1.0 million, or 128.2%, due to the maturing of the property’s player database resulting in a larger pool of players to redeem coupons. Slot club points increased $3.5 million, or 16.2%, due primarily to the addition of $2.7 million at the Colorado Central Station-Black Hawk and the Colorado Grande-Cripple Creek. Additionally, a more aggressive point structure at the Rhythm City-Davenport has resulted in an increase of slot club points of $1.1 million, or 44.6%.

Casino operating expenses for the six fiscal months ended October 26, 2003, totaled $96.5 million, or 17.1% of casino revenue, versus $97.1 million, or 18.4% of casino revenue, for the six fiscal months ended October 27, 2002. These expenses are primarily comprised of salaries, wages and benefits and other operating expenses of the casinos. Casino operating expenses decreased $0.6 million, or 0.7%, resulting from the offset of the decrease in casino operating expenses caused by the sale of the Isle-Tunica and the Lady Luck-Las Vegas properties with the addition of the Colorado Central Station-Black Hawk and the Colorado Grande-Cripple Creek.

Operating expenses for the six fiscal months ended October 26, 2003, also included room expenses of $5.1 million, or 22.1% of room revenue from the hotels at the Isle-Biloxi, the Isle-Vicksburg, the Isle-Natchez, the Isle-Bossier City, the Isle-Lake Charles, the Isle-Lula, the Isle-Black Hawk, the Isle-Bettendorf, the Rhythm City-Davenport, the Isle-Marquette, the Colorado Central Station-Black Hawk and the Colorado Grande-Cripple Creek, compared to $7.1 million, or 24.9% of room revenue from the hotels at the Isle-Biloxi, the Isle-Vicksburg, the Isle-Natchez, the Isle-Bossier City, the Isle-Lake Charles, the Isle-Tunica, the Isle-Lula, the Isle-Black Hawk, the Isle-Bettendorf, the Rhythm City-Davenport, the Isle-Marquette and the Lady Luck-Las Vegas. Room expense decreased by $2.0 million, or 28.6%. The decrease in room expense was caused primarily by the sale of the Isle-Tunica and the Lady Luck-Las Vegas decreasing room expense by $1.7 million and $0.3 million, respectively. Other costs of the hotels are shared with the casinos and are presented in their respective expense categories.

For the six fiscal months ended October 26, 2003, state and local gaming taxes were paid in Louisiana, Mississippi, Colorado, Iowa, Missouri and Nevada totaled $122.6 million, or 21.7% of casino revenue, compared to $115.1 million, or 21.8% of casino revenue for the six fiscal

33

months ended October 27, 2002, which is consistent with each state’s gaming tax rate for the applicable period. On April 1, 2002, the gaming tax rate at the Isle-Bossier City increased from 19.5% to 20.5% and increased again, from 20.5% to 21.5%, on April 1, 2003.

Food, beverage and other expenses totaled $16.0 million for the six fiscal months ended October 26, 2003, compared to $17.8 million for the six fiscal months ended October 27, 2002, a decrease of $1.8 million, or 9.9%. Food and beverage and other operating expenses as a percentage of food, beverage and other revenues decreased to 22.1% for the six fiscal months ended October 26, 2003, from 24.4% for the six fiscal months ending October 27, 2002. These expenses consist primarily of the cost of goods sold, salaries, wages and benefits and other operating expenses of these departments. These expenses have decreased primarily as a result of sale of the Isle-Tunica and the Lady Luck-Las Vegas and were partially offset by the addition of the Colorado Central Station-Black Hawk and the Co lorado Grande-Cripple Creek.

Marine and facilities expenses totaled $33.0 million for the six fiscal months ended October 26, 2003, versus $35.4 million for the six fiscal months ended October 27, 2002. These expenses include salaries, wages and benefits, operating expenses of the marine crews, insurance, public areas, housekeeping and general maintenance of the riverboats and pavilions. These expenses have decreased $2.4 million, or 6.7%, primarily as a result of sale of the Isle-Tunica and the Lady Luck-Las Vegas totaling $3.6 million and were partially offset by the addition of the Colorado Central Station-Black Hawk and the Colorado Grande-Cripple Creek totaling $1.4 million.

Marketing and administrative expenses totaled $150.8 million, or 27.2% of net revenues, for the six fiscal months ended October 26, 2003, versus $144.4 million, or 26.9% of net revenues, for the six fiscal months ended October 27, 2002. Marketing expenses include salaries, wages and benefits of the marketing and sales departments, as well as promotions, advertising, special events and entertainment. Administrative expenses include administration and human resource department expenses, rent, new development activities, professional fees and property taxes. These expenses have increased $6.4 million, or 4.4%, primarily because discretionary employee and other benefits, company-wide, have increased approximately $2.4 million; advertising expense, company-wide, has increased approximat ely $1.9 million as the result of an increase in television and radio advertising introducing new marketing initiatives; and special events have increased approximately $2.5 million, due primarily to an increase in promotional awards at our properties. Furthermore, the addition of $8.5 million in marketing and administrative expense from the Colorado Central Station-Black Hawk and the Colorado Grande-Cripple Creek was offset by the combined decrease of $9.1 million as a result of the sale of the Isle-Tunica and the Lady Luck-Las Vegas.

Depreciation and amortization expense was $43.1 million for the six fiscal months ended October 26, 2003, and $36.3 million for the six fiscal months ended October 27, 2002. Depreciation and amortization increased by $6.8 million and is consistent with an increase in property and equipment placed into service or acquired.

Interest expense was $42.1 million for the six fiscal months ended October 26, 2003, versus $41.8 million for the six fiscal months ended October 27, 2002, an increase of $0.3 million, or 0.7%. Interest expense primarily relates to indebtedness incurred in connection with the acquisition of property, equipment, leasehold improvements and berthing and concession rights. Additionally, interest expense includes $5.7 million related to the Isle-Black Hawk in the six fiscal months ended October 26, 2003. This compares to interest expense of $2.9 million for the six fiscal months ended October 27, 2002. The increase in interest expense at the Isle-Black Hawk is a result of financing the purchase of the Colorado Central Station-Cripple Creek and the Colorado Grande-Cripple Creek.

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During the second quarter of fiscal 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 reserves and reduced income tax expense by approximately $3.0 million for the six fiscal months ended October 26, 2003, for previously accrued income tax liabilities. This had the effect of reducing our effective tax rate to 28.8% for the six fiscal months ended October 26, 2003, excluding our minority interest partner’s portion of the Colorado Central Station-Black Hawk and the Colorado Grande-Cripple Creek income taxes as compared to 36.7% for the six fiscal months ended October 27, 2002. Excludi ng the impact of these developments, our fiscal 2004 effective tax rate for the six fiscal months ended October 26, 2003, would have been 37.3%, excluding our minority interest partner’s portion of the Colorado Central Station-Black Hawk and the Colorado Grande-Cripple Creek income taxes.

Liquidity and Capital Resources

      At October 26, 2003, we had cash and cash equivalents of $105.6 million compared to $94.6 million in cash and cash equivalents at April 27, 2003, the end of our last fiscal year. The $11.0 million increase in cash is the net result of $89.9 million net cash provided by operating activities, $66.4 million net cash used in investing activities, and $12.5 million net cash used in financing activities. In addition, wehad $294.0 million under lines of credit, all of which was available. This amount consisted of $250.0 million in unused credit capacity with the revolving loan commitment on our Senior Secured Credit Facility, $40.0 million in unused credit capacity with the Isle-Black Hawk’s Senior Secured Credit Facility, and $4.0 million from other lines of credi t. We believe that existing cash, cash flow from operations and available borrowings under our lines of credit will be sufficient to support our working capital needs, planned capital expenditures and debt service requirements for the foreseeable future.

Cash Flow from Investing Activities

We invested $68.6 million in property and equipment during the six fiscal months ended October 26, 2003. The following table reflects expenditures for property and equipment on major projects:

		Actual		Remainder of
		Fiscal Year	Six Months	Fiscal Year
		Ended 4/27/03	Ended 10/26/03	Ending 4/25/04
		(dollars in millions)
Property	Project
Isle-Biloxi	Construct hotel & parking facility	$ 6.0	$ 10.9	$ 14.9
Isle-Bossier City	Construct hotel & entertainment center	6.4	21.8	21.8
Isle-Bossier City	Renovate casino	-	0.1	1.9
Isle-Marquette	Construct hotel	0.1	-	0.8
Isle-Lake Charles	Renovate & expand casino	-	0.5	11.6
Isle-Kansas City	Renovate & expand casino	-	6.2	3.8
Isle-Black Hawk (57% owned)	Expansion	1.4	2.7	5.7
All	Slot program	24.1	15.7	16.7
All	Other capital improvements	20.4	10.7	23.4
Total		$ 58.4	$ 68.6	$ 100.6

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

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In August 2002, we announced plans for a $135.0 million expansion at three of our casinos. Of that amount, $32.7 million was spent during the six fiscal months ended October 26, 2003. The plan will include upgraded and additional amenities at the Isle-Biloxi, the Isle-Bossier City and the Isle-Marquette. This plan, which will utilize cash flow from operations, reinforces our commitment to develop our portfolio of properties to feature a more resort-oriented product.

The Isle-Biloxi plan, estimated at $79.0 million, will include an additional 400 hotel rooms, an Isle-branded Kitt’s Kitchen restaurant, an upgraded Calypso’s Buffet, a 12,000 square-foot convention/entertainment center, an expanded pool and spa area and a 1,000-space parking facility. The parking facility is currently expected to be completed in December 2003, and will provide a podium for an additional hotel tower for future expansion. The project is expected to be completed by Spring 2005.

The Isle-Bossier City plan, estimated at $50.0 million, is expected to be complete and open by December 31, 2003. This expansion features a hotel tower with 265 rooms, a Kitt’s Kitchen restaurant, an upgraded Calypso’s Buffet, a new pool, deck and spa, and a 12,000 square-foot convention/entertainment center.

The Isle-Marquette property plan will include $6.0 million in improvements including a 60-room Inn-at-the-Isle and improved parking. The construction will commence once we have received local and regulatory permits and will last approximately 16 months.

As part of our fiscal 2004 capital improvement budget, we also approved spending to improve and expand gaming spaces at several other properties. The Isle-Kansas City will complete a $10.0 million expansion in the next fiscal quarter. New amenities include 12,000 square-feet of additional gaming space, 400 new slot machines with ticket-in/ticket-out technology, and a themed bar. Additionally, we are undertaking a $15 million improvement plan at the Isle-Lake Charles.  We expect to complete an approximately $10.0 million expansion by December 2003.  This expansion will increase gaming space on the third level of one of the gaming vessels, to accommodate approximately 400 new slot machines.  By the end of fiscal 2004, we will have spent an additional $2.0 m illion to begin improvements and renovations to the other areas of that gaming vessel.

The video lottery terminal referendum was defeated in Colorado on November 4, 2003 allowing us to proceed with its plans to invest approximately $75.0 million at our Black Hawk properties. This construction will significantly increase covered parking for both properties in Black Hawk, add approximately 15,000 square-feet of additional gaming space, hotel rooms and restaurants, and connect the properties by means of a skywalk that can service both the Isle-Black Hawk and the Colorado Central Station-Black Hawk. Construction is now expected to begin this winter with approximately $8.4 million to be spent in fiscal 2004. We expect that approximately $22.0 million of special improvement bonds will be issued by a business improvement district of the City of Black Hawk to fund public imp rovements which include extending Main Street to connect directly to Colorado Route 119, approximately one half mile closer to Denver. These bonds will be paid from increased property taxes on each of the casinos benefiting from the improvements.

During the fiscal quarter ended October 26, 2003, we announced that we became the first U.S. gaming company to receive gaming board approval to own casinos in the United Kingdom. By the end of calendar 2003, we expect to acquire the majority interest in Blue Chip Casinos PLC, which will operate a pub-style casino in Dudley, England, near Birmingham. This approval positions us to potentially expand gaming operations upon reform of UK gaming regulations.

We also completed agreements to lease and operate a casino at the Our Lucaya Beach & Golf Resort at Freeport, Grand Bahama Island. We expect the project to be open in the upcoming fiscal quarter.

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      On October 30, 2002, we completed the sale of the Lady Luck-Las Vegas and received a cash payment of $4.4 million and notes receivable of $6.8 million, which  were  paid  in  full  in  May  2003. One  of  our  subsidiaries  continued to operate the casino until September 3, 2003, the date upon which the

purchaser’s designated gaming operator received regulatory approval. As a result, the results of operations for fiscal 2004 include the gaming operations of the Lady Luck-Las Vegas through September 3, 2003. The proceeds from the sale approximated the carrying value of the assets.We have presented the sale of the Lady Luck-Las Vegas in accordance with SFAS 121 as our commitment to a plan of sale was initiated prior to the effective date of SFAS 144.

We are continuing to evaluate and pursue development and acquisition opportunities in a number of jurisdictions both domestically and abroad. All of our plans are subject to obtaining permits, licenses and approvals from appropriate regulatory and other agencies and, in certain circumstances, negotiating and executing definitive agreements, acceptable leases and appropriate financing. In addition, many of the plans are preliminary, subject to continuing refinement or otherwise subject to change.

Cash Flow from Financing Activities

Contractual Obligations and Commercial Commitments

There have been no material changes in contractual obligations and commercial commitments from what we reported in our Form 10-K for the year ended April 27, 2003.

During the six fiscal months ended October 26, 2003, we used net cash of $12.8 millionprimarilyin the following financing activities:

• We made net reductions to our Revolving Credit Facilities and lines of credit of $5.9 million.
• We made principal payments on our Senior Secured Credit Facility and other debt of $8.3 million.

     On April 26, 2002, we entered into a Senior Secured Credit Facility, which refinanced  our  prior facility. This Senior Secured Credit Facility consists of a $250.0 million  revolving credit  facility  maturing on April 25, 2007,  and  a  $250.0  million  term  loan facility maturing on April 25, 2008. We  are  required to make quarterly principal payments on the $250.0 million term  loan  portion of our Senior Secured Credit Facility. Such payments were initially $0.6 million per quarter, which started in June 2002 and will increase to $59.4 million per quarter beginning in June 2007. In addition, we are required to make substantial quarterly interest payments on the outstanding balance of our Senior Secured Credit Facility. The proceeds were used to refinance $336.8 million of the prior facility.

Our Senior Secured Credit Facility, among other things, limits our ability to borrow money, make capital expenditures, use assets as security in other transactions, make restricted payments or restricted investments, incur contingent obligations, sell assets and enter into leases and transactions with affiliates. In addition, our credit facility requires us to meet certain financial ratios and tests, including: a minimum consolidated net worth test, a maximum consolidated total leverage test, a maximum consolidated senior leverage test, and a minimum consolidated fixed charge coverage test.

As of October 26, 2003, we had $250.0 million of unused credit capacity with the revolving loan commitment on our Senior Secured Credit Facility, $40.0 million of unused credit capacity with the Isle-Black Hawk’s Senior Secured Credit Facility and $4.0 million of available credit from other lines of credit. The revolving loan commitment is a variable rate instrument based on, at our option, LIBOR or our lender’s prime rate plus the applicable interest rate spread, and is effective through April 2007. Our lines of credit are also at variable rates based on our lender’s prime rate and are subject to annual renewal. There is no assurance that these sources will in fact provide adequate funding for the expenditures described above or that planned capital investments will be sufficient to allow us to remain competitive in our existing markets.

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We are in compliance with all covenants contained in our senior and subordinated debt instruments as of October 26, 2003. If we do not maintain compliance with these covenants, the lenders under the Senior Secured Credit Facility have the option (in some cases, after the expiration of contractual grace periods), but not the obligation, to demand immediate repayment of all or any portion of the obligations outstanding under the Senior Secured Credit Facility. Any significant deterioration of earnings could affect certain of our covenants. Adverse changes in our credit rating or stock price would not impact our borrowing costs or covenant compliance under existing debt instruments. Future events, such as a significant increase in interest rates can be expected to increase our costs o f borrowing under our Senior Secured Credit Facility. The indentures governing our 8.75% notes and our 9.0% notes limit, among other things, our ability to borrow money, create liens, make restricted payments and sell assets.

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 development of new properties. We will continue to evaluate our planned capital expenditures at each of our existing locations in light of the operating performance of the facilities at such locations.

Recently Issued Accounting Standards

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity" ("SFAS 150"). This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. As we do not have financial instruments that are required to be reclassified from equity to a liability, the adoption of SFAS 150 did not have an impact on our consolidated financial statements.

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ITEM 3. 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.

Senior Secured Credit Facility

We entered into three interest rate swap agreements in the fourth quarter of fiscal 2001 and one interest rate swap agreement in the first quarter of fiscal 2002 that effectively convert portions of our variable rate debt to a fixed-rate basis until the fourth fiscal quarter of 2004, thus reducing the impact of interest rate changes on future interest expense. The notional value of the swaps that were designated as cash flow hedges was $150.0 million or 60.9% of our variable rate term debt outstanding under our Senior Secured Credit Facility as of October 26, 2003. We evaluate the effectiveness of these hedged transactions on a quarterly basis. We terminated $50.0 million of interest rate swaps in fiscal 2003. The remaining $150.0 million in interest rate swaps terminate in 2004. W e found no portion of the hedging instruments to be ineffective during the fiscal quarter ended October 26, 2003. Accordingly, no gains or losses have been recognized on these cash flow hedges.

Isle-Black Hawk Senior Secured Credit Facility

The Isle-Black Hawk entered into three interest rate swap agreements in the fourth quarter of fiscal 2002 that effectively convert portions of their variable rate debt to a fixed-rate basis until the fourth fiscal quarter of 2005, thus reducing the impact of interest rate changes on future interest expense. The notional value of the swaps that were designated as cash flow hedges was $40.0 million or 24.3% of their variable rate term debt outstanding under the Isle-Black Hawk Senior Secured Credit Facility as of October 26, 2003. The interest rate swaps terminate in 2005. We evaluate the effectiveness of these hedged transactions on a quarterly basis. We found no portion of the hedging instruments to be ineffective during the six fiscal months ended October 26, 2003. Accordingly, no gains or losses have been recognized on these cash flow hedges.

Interest Rate Sensitivity

     The following table provides information at April 27, 2003, about our financial instruments that are sensitive to changes in interest rates. The table presents principal cash flows (in millions) and related weighted average interest rates by expected maturity dates.

Principal (Notional) Amount by Expected Maturity
Average Interest (Swap) Rate
Fiscal year								Fair Value
(dollars in millions)	2004	2005	2006	2007	2008	Thereafter	Total	4/27/2003
Liabilities
Long-term debt, including current portion
Fixed rate	$ 2.8	$ 2.5	$ 1.5	$ 0.9	$ 1.0	$ 595.2	$ 603.9	$ 633.8
Average interest rate	8.8%	8.8%	8.8%	8.8%	8.8%	8.9%
Variable rate	$ 22.0	$ 14.5	$ 20.6	$ 129.6	$ 237.5	$ -	$ 424.1	$ 424.1
Average interest rate (1)	4.3%	4.7%	5.5%	6.3%	6.5%	-
Interest Rate Derivative Financial Instruments Related to Debt
Interest rate swaps
Pay fixed/receive variable	$ 150.0	$ 40.0	$ -	$ -	$ -	$ -	$ 190.0	$ (5.9)
Average pay rate	4.8%	4.2%	-	-	-	-
Average receive rate	1.2%	1.6%	-	-	-	-

(1) Represents the annual average LIBOR from the forward yield curve at April 27, 2003, plus the weighted average margin above LIBOR on all consolidated variable rate debt.

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In addition to the foregoing, the Isle-Black Hawk entered into four interest rate swap agreements during the second fiscal quarter ended October 26, 2003. The swaps effectively convert portions of its variable rate debt to a fixed-rate basis until the fourth fiscal quarter of 2005, thus reducing the impact of interest rate changes on future interest expense. The notional value of the swaps that were designated as cash flow hedges was $40.0 million or 24.3% of its variable rate term debt outstanding under the Isle-Black Hawk Senior Secured Credit Facility as of October 26, 2003. The new interest rate swaps terminate in 2005. When added to the interest rate swaps that were already outstanding, the total notional value of the swaps that have been designated as cash flow hedges is $80. 0 million or 48.5% of its variable rate term debt outstanding under the Isle-Black Hawk Senior Secured Credit Facility as of October 26, 2003. We evaluate the effectiveness of these hedged transactions on a quarterly basis. We found no portion of the hedging instruments to be ineffective during the second fiscal quarter ended October 26, 2003. Accordingly, no gains or losses have been recognized on these cash flow hedges. As of October 24, 2003, the last business day of the fiscal quarter ended October 26, 2003, the three-month LIBOR rate, the variable interest rate, was 1.1%. The interest rate swaps effectively converted $10.0 million notional value to 1.39% fixed rate, $10.0 million notional value to 1.45% fixed rate, $10.0 million notional value to 1.40% fixed rate and $10.0 million notional value to 1.65% fixed rate. Each of the rates is before the addition of the applicable spread currently 4.00%. With the addition of the applicable spread, the total interest rate for the debt related to each of the $10 .0 million notional value interest rate swaps is 4.39%, 4.45%, 4.40% and 4.65%, respectively.

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ITEM 4. 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. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of October 26, 2003, 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 concluded that the Company’s disclosure controls and procedures were effective.

CHANGES IN INTERNAL CONTROLS

There have not been any significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. There were no significant deficiencies or material weaknesses, and therefore no corrective actions were taken.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

One of our subsidiaries has been named, along with numerous manufacturers, distributors and gaming operators, including many of the country’s largest gaming operators, in a consolidated class action lawsuit pending in Las Vegas, Nevada. These gaming industry defendants are alleged to have violated the Racketeer Influenced and Corrupt Organizations Act by engaging in a course of fraudulent and misleading conduct intended to induce people to play their gaming machines based upon a false belief concerning how those gaming machines actually operate and the extent to which there is actually an opportunity to win on any given play. The suit seeks unspecified compensatory and punitive damages. This district court recently denied the Motion for Class Certification, but this decision h as been appealed. Therefore, we are still unable at this time to determine what effect, if any, the suit would have on our consolidated financial position or results of operations. The gaming industry defendants are committed to continuing a vigorous defense of all claims asserted in this matter.

In August 1997, a lawsuit was filed which seeks to nullify a contract to which Louisiana Riverboat Gaming Partnership is a party. Pursuant to the contract, Louisiana Riverboat Gaming Partnership pays a fixed amount plus a percentage of revenue to various local governmental entities, including the City of Bossier and the Bossier Parish School Board, in lieu of payment of a per-passenger boarding fee. Summary judgment in favor of Louisiana Riverboat Gaming Partnership was granted on June 4, 1998. That judgment was not appealed and is now final. On June 11, 1998, a similar suit was filed and the lower court rendered judgment in our favor on September 16, 1999. The case was reversed on appeal and remanded to the lower court for further proceedings; however, on October 8, 2001, the tria l court dismissed the case again, this time on the basis that the plaintiffs lack standing. The appellate court reversed. The plaintiffs have amended the petition and continue to pursue this matter. We intend to vigorously defend this suit, which is set for trial April 6, 2004. In any event, the contracts that form the subject matter of the suit will expire in April 2004. In addition, a similar action was recently filed against the City of Bossier City, challenging the validity of its contracts with Louisiana Riverboat Gaming Partnership and other casinos. Exceptions have been filed requiring joinder of all interested parties, including Louisiana Riverboat Gaming Partnership. We believe the claims are without merit and we intend to continue to vigorously defend this suit along with the other interested parties.

Lady Luck 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 $7.7 million as of October 26, 2003, based on published exchange rates). Although it is difficult to determine the damages being sought from the lawsuit, the action may seek damages up to that aggregate amount plus interest from the date of the action. The Athens Civil Court of First Instance granted judgment in our favor and dismissed the lawsuit, but the Ministry of Tourism has appealed the matter and the appeal was heard in April 2002. There has been no public announcement as to whether there has been a decision on the appeal. Also, the Ministry of Tourism is proceeding with an appeal from a dismissal of its action by the Athens Administrative Court of First Instance. An appeal of this matter was heard on January 22, 2003, which has been rejected. A further appeal is possible. Accordingly, the outcome of this matter is still in doubt and cannot be predicted with any degree of certainty. We believe the claims against us to be without merit and we intend to continue a vigorous and appropriate defense to the claims asserted in this matter.

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On December 6, 2002, a panel of arbitrators in St. Louis, Missouri issued an award that we were liable for $4.5 million in damages in connection with a lease of real estate located near Kimmswick, Jefferson County, Missouri. We filed a motion in the United States District Court for the Eastern District of Missouri seeking to vacate the arbitration award and established a reserve in the aggregate amount of $4.5 million. On August 22, 2003, we entered into a settlement agreement pursuant to which we settled the dispute and paid $4.5 million plus accrued interest of $0.3 million.

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

We are subject to various contingencies and litigation matters and have a number of unresolved claims. Although the ultimate liability of 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.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

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

Annual Meeting of Stockholders

The Annual Meeting of Stockholders was held October 10, 2003, at which time the following matters were submitted to a vote of the stockholders:

1. To elect six persons to the Board of Directors;
2. To approve an amendment to our 2000 Long-Term Stock Incentive Plan to increase the number of shares of our common stock available for issuance thereunder by 1,500,000 shares; and
3. To ratify the selection of Ernst & Young LLP as our independent auditors for the fiscal year ending April 25, 2004.

At the Annual Meeting of Stockholders, each of the following individuals were elected to serve as directors of the Company until his successor is elected and qualified or until his earlier death, resignation, removal or disqualification:

Name	For	Withheld	Against
Bernard Goldstein	25,252,743	3,797,407	-
Robert S. Goldstein	25,338,348	3,711,802	-
Alan J. Glazer	27,721,274	1,328,876	-
Emanuel Crystal	27,720,921	1,329,229	-
Randolph Baker	28,092,655	957,495	-
Jeffrey Goldstein	25,334,971	3,715,179	-

The voting on the other matters as ordered at the Annual Meeting of Stockholders was as follows:

Matter	For	Against	Abstained	Not Voted
Approval of amendment to the Company's
2000 Long-Term Stock Incentive Plan	20,795,638	4,079,567	35,411	4,139,534
Selection of Ernst & Young LLP	28,737,966	299,348	12,836	-

ITEM 5. OTHER INFORMATION.

None.

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a)		Documents Filed as Part of this Report .
	1.	Exhibits.
		31.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	2.	Reports on Form 8-K.
		During the quarter ended October 26, 2003, the Company filed the following reports on Form 8-K:
		Current Report on Form 8-K filed on August 14, 2003, regarding Item 12 announcing the financial results of the first fiscal quarter ended July 27, 2003.

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SIGNATURE

Pursuant to the requirements 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: November 25, 2003 /s/ Rexford A. Yeisley

   Rexford A. Yeisley, Chief Financial Officer

      (Principal Financial and Accounting Officer)

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INDEX TO EXHIBITS

EXHIBIT NUMBER	DESCRIPTION
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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