Majestic Star Releases 2005 Financial Results

LAS VEGAS -- The Majestic Star Casino, LLC released financial results for the three- and twelve-month periods ended December 31, 2005. The Majestic Star Casino, LLC and its subsidiaries (collectively,
Majestic Star Casinos & Hotel  the "Company" or "Majestic") operate two adjacent dockside gaming facilities located in Gary, Indiana ("Majestic Star" and "Majestic Star II") and two Fitzgeralds brand casinos located in Tunica, Mississippi ("Fitzgeralds Tunica") and Black Hawk, Colorado ("Fitzgeralds Black Hawk").

On December 21, 2005, the Company completed the acquisition of the stock of Trump Indiana, Inc. ("Trump Indiana"), a casino vessel and hotel at Buffington Harbor in Gary, Indiana. The Company has subsequently re-branded the Trump Indiana casino vessel as "Majestic Star II." Trump Indiana was a joint venture partner in the Buffington Harbor gaming complex ("BHR") and a parking garage ("BHPA") located next to BHR. As part of the acquisition of Trump Indiana, the Company also acquired Trump Indiana's joint venture interests in BHR and BHPA. As such, the financial results reported herein include the income and expenses of Majestic Star II and the acquired portion of income and expenses of BHR and BHPA for the last 11 days of 2005.

Pursuant to SEC Staff Accounting Bulletin Topic 5(J), the Company's financial results, as contained in this earnings release, includes the pushdown of $63.5 million, net of original issue discount, of senior discount notes ("Discount Notes") issued by the Company's parent, Majestic Holdco, LLC ("Majestic Holdco"). On December 21, 2005, Majestic Holdco issued the Discount Notes in conjunction with the acquisition of Trump Indiana and certain redemption and re-financing transactions as discussed below. The Discount Notes are solely the obligation of Majestic Holdco and Majestic Holdco, Inc. (the co-issuer with Majestic Holdco) and are unsecured. Neither the Company nor any of its direct or indirect subsidiaries guarantees the Discount Notes nor are the equity or assets of the Company or its direct or indirect subsidiaries security for the Discount Notes. Further, the indentures governing the Company's 9 1/2% senior secured notes and the 9 3/4% senior notes and the loan and security agreement which governs the Company's $80.0 million senior secured credit facility preclude distributions by the Company to Majestic Holdco unless certain financial tests are met. In addition to the pushdown of the Discount Notes, the Company is also reflecting $2.8 million of Discount Notes issuance costs, net of amortization, in the schedule of segment assets contained in this earnings release and amortization of issuance costs of $20,000 and interest expense of $0.2 million on its consolidated statement of operations.

The Company's net revenues for the three-month period ended December 31, 2005 were $67.3 million, an increase of $5.7 million or 9.3% from the same period in 2004. Contributing to the increase in net revenues was an increase in casino revenues, the primary revenue source for the Company, by $7.0 million or 10.8% to $72.1 million. Majestic Star II contributed net revenues and casino revenues of $4.6 million and $4.7 million, respectively. Promotional allowances increased $1.6 million, or 16.1%, during the quarter. Majestic Star II contributed $0.3 million of the increase. The Company spent more in promotional allowances in order to increase customer visits and revenues and to remain competitive in its markets. Promotional allowances are deducted from consolidated gross revenue to determine net revenues.

The Company reported a net loss of $4.6 million compared to net income of $0.6 million for the same period in 2004. Contributing to our net loss is a loss on note redemption and refinancing of debt of $3.7 million, additional interest expense of $1.1 million, and $0.6 million of depreciation and amortization at Fitzgeralds Black Hawk. The loss on note redemption and refinancing of debt relates to the defeasance of $16.3 million of notes issued at Majestic Investor Holdings and the refinancing of debt associated with BHPA. The additional interest expense is associated with debt incurred to acquire Trump Indiana, and the redemption and refinancing transactions. During the fourth quarter of 2004, Fitzgeralds Black Hawk's assets were held for sale and accordingly, no depreciation and amortization was recognized (see discussion below). In addition, Majestic Star II, BHR and BHPA contributed $4.1 million of operating expenses during the last 11 days of 2005.

For the three-month period ended December 31, 2005, adjusted EBITDA was $13.7 million, compared to $12.6 million in the same period last year, an increase of $1.1 million or 8.7%. Adjusted EBITDA is defined as EBITDA (earnings before interest, taxes, depreciation, amortization, and other non-operating expenses, which is primarily non-usage fees on the credit facility), adjusted for loss on investment in BHR (which is depreciation expense) and certain non-recurring charges as identified in the table at the end of this press release, which reconciles net income (loss) to EBITDA and adjusted EBITDA. See the detailed explanation below as to the usefulness and limitations of using EBITDA and adjusted EBITDA as financial measures and a reconciliation of net income to EBITDA and adjusted EBITDA.

Mr. Don H. Barden, the Company's Chairman and Chief Executive Officer commented, "The Company finished 2005 with solid financial performance. Adjusted EBITDA at Majestic Star was up 10.0% from the fourth quarter last year. I am also pleased that we were able to complete the acquisition of Trump Indiana. The strategic acquisition of Trump Indiana, now branded Majestic Star II, was something that we had been seeking for sometime. With Majestic Star II, we will now be able to unlock the full value of the Majestic Star and Majestic Star II gaming assets and the over 300 acres of property we have at BHR. With the contribution of Majestic Star II, our casino operations at Buffington Harbor had fourth quarter adjusted EBITDA of $8.8 million, compared to $7.2 million in the same quarter last year."

The Company's net revenues were $262.0 million for the year ended December 31, 2005, compared to $260.5 million last year, an increase of $1.5 million, or 0.6%. Casino revenues increased by $6.1 million or 2.2% to $280.9 million during the year ended December 31, 2005 as compared to the same period in 2004. However, higher promotional allowances, which were incurred to increase customer visits and revenues and to remain competitive in our markets, offset much of the increase in our casino revenues. As mentioned above, Majestic Star II contributed net revenues and casino revenues of $4.6 million and $4.7 million, respectively, during the final 11 days of 2005.

The Company reported a net loss of $5.3 million during the year ended December 31, 2005 compared to net income of $5.0 million for the same period last year. Contributing to the Company's net loss was additional depreciation and amortization of $4.6 million, most of which relates to the Fitzgeralds Black Hawk assets being held for sale during the second half of 2004 with no resulting depreciation and amortization being recognized (see discussion below), increased depreciation from capital expenditures, and the addition of the Majestic Star II assets. As mentioned previously, the Company is recognizing a loss on note redemption and refinancing of debt of $3.7 million, and a $1.9 million increase in interest expense resulting from generally higher interest rates associated with the Company's $80.0 million credit facility, and $240.0 million of increased debt due to the acquisition of Trump Indiana, and the various redemption and refinancing activities. During 2005, the Company also incurred $1.1 million in preparation costs for Sarbanes-Oxley 404 compliance and took a $2.3 million charge related to the termination of the sale of Fitzgeralds Black Hawk. Included in net income in the 2004 period is a $1.9 million charge related to retroactive 2002 and 2003 real property taxes at Majestic Star.

Adjusted EBITDA was $56.0 million for the year ended December 31, 2005 as compared to $56.1 million for the year ended December 31, 2004. On a pro forma basis, incorporating the acquisition of Trump Indiana, the redemption and defeasance of Majestic Investor Holdings, LLC's notes, refinancing the debt of BHPA and refinancing certain other debt obligations, and the contribution of AMB Parking, LLC's interest in BHPA to the Company, as if all the transactions were completed in January 1, 2005, pro forma adjusted EBITDA was $92.6 million. At the end of this earnings release is a table reconciling pro forma net income to pro forma adjusted EBITDA.

"Our adjusted EBITDA at the Majestic Properties was $30.6 million. This compares to $28.6 million in the prior year when we only operated Majestic Star. At Fitzgeralds Tunica adjusted EBITDA was relatively flat over last year at $20.3 million for both years and at Fitzgeralds Black Hawk adjusted EBITDA was down $0.4 million from the prior year to $10.5 million," stated Mr. Barden. "Our financial performance has proven resilient given the events of the past twelve months, including hurricanes in the southeast, road closure to the main highway leading into Black Hawk, enhanced marketing and promotional efforts by competitors in all our markets, higher fuel prices nationally, and major construction work that caused significant back-ups and delays on main roadways to our Majestic Star property."

Total debt outstanding at December 31, 2005 was $548.6 million compared to $316.9 million at December 31, 2004. The Company issued $40.0 million of additional 9 1/2% senior secured notes and $200.0 million of 9 3/4% senior notes on December 21, 2005. These notes were issued in conjunction with the acquisition of Trump Indiana, and the redemption and refinancing transactions discussed previously. The Company had $47.2 million outstanding on its $80.0 million credit facility at December 31, 2005.

During 2005, the Company also purchased $11.8 million of property, plant and equipment. The most significant purchases were for slot machines with ticket in ticket out technology ("TITO") at all of our properties. In addition, at Fitzgeralds Black Hawk, we installed a new slot player tracking and marketing system, incurred costs in re-routing a storm sewer pipe below grade, and purchased property that is available for future development. In 2006, we anticipate spending $27.5 million for re-branding the Trump Indiana facilities to Majestic Star II, integrating our systems with Majestic Star II, purchasing TITO equipped slot machines at Fitzgeralds Tunica and Fitzgeralds Black Hawk so that these properties will be 100% TITO by year end, performing various remodeling projects at our properties and maintenance capital expenditures. In addition, we anticipate breaking ground on our $25.0 million casino expansion project at Fitzgeralds Black Hawk during the third quarter of 2006.

Net revenues for the Majestic Properties were $38.6 million for the three-month period ended December 31, 2005, an increase of $5.3 million, or 16.0%, over the same three-month period in 2004. Net revenues increased due to the addition of Majestic Star II, which contributed $4.6 million to net revenues in the final 11 days of 2005. Casino revenues were $41.4 million during the three-month period ended December 31, 2005, compared to $35.5 million during the same three-month period in 2004. Majestic Star II contributed $4.7 million of the increase in casino revenues.

Adjusted EBITDA was $8.8 million for the three-month period ended December 31, 2005, compared to $7.2 million in the same period last year. Majestic Star II, BHR and BHPA contributed $0.9 million to adjusted EBITDA. Adjusted EBITDA margin (defined as adjusted EBITDA divided by net revenues) increased to 22.7% in the fourth quarter of 2005 from 21.5% in the fourth quarter of 2004.

Net revenues were $143.6 million for the year ended December 31, 2005, an increase of $2.6 million or 1.8% over the same period in the prior year. As mentioned previously, net revenues increased due to the addition of Majestic Star II, which contributed $4.6 million to net revenues in the final 11 days of 2005. Casino revenues were $155.2 million in the year ended December 31, 2005, compared to $149.6 million in 2004. Again, Majestic Star II contributed $4.7 million of the increase in casino revenues.

Adjusted EBITDA was $30.6 million for the year ended December 31, 2005, compared to $28.6 million for the year ended December 31, 2004. Majestic Star II, BHR and BHPA contributed $0.9 million to adjusted EBITDA. The adjusted EBITDA margin for the year ended December 31, 2005 was 21.3%, compared to 20.3% in the prior year.

Net revenues increased by $0.7 million, or 3.4%, to $20.1 million for the three-month period ended December 31, 2005. Casino revenues were $21.4 million for the three-month period ended December 31, 2005, an increase of $1.3 million or 6.4% over the same quarter last year. EBITDA increased to $4.2 million during the three-months ended December 31, 2005 from $4.1 million in last year's quarter. The property's EBITDA margin declined to 21.0% in the fourth quarter 2005 from 21.3% in the fourth quarter of 2004.

Net revenues were $82.9 million for the year ended December 31, 2005, a decrease of $0.3 million or 0.3% over the same period in the prior year. Casino revenues were $87.6 million for the year ended December 31, 2005, an increase of $1.0 million or 1.2% from the same 2004 period. EBITDA was $20.3 million for both the twelve-month period ended December 31, 2005 and December 31, 2004. The property's year-to-date EBITDA margin was 24.5%, compared with 24.4% for the year ended December 31, 2004.

In the three-month period ended December 31, 2005, net revenues of $8.6 million and casino revenues of $9.3 million were down slightly compared to net revenues of $8.9 million and casino revenues of $9.4 million for the same period in 2004. EBITDA at Fitzgeralds Black Hawk was $1.9 million for the three-month period ended December 31, 2005 and $2.2 million for the same period in 2004. EBITDA margins were 22.2% in the fourth quarter of 2005, compared to 24.9% in the same quarter last year.

Net revenues were $35.4 million for the twelve-month period ended December 31, 2005 and $36.2 million for the same period in 2004. This decrease is the result of a reduction of casino revenues at Fitzgeralds Black Hawk to $38.1 million for the twelve-month period ended December 31, 2005 from $38.7 million in the same period in 2004. EBITDA was $10.5 million for the year ended December 31, 2005, a decrease from the $11.0 million recorded in the same period last year. The EBITDA margin for the year ended December 31, 2005 was 29.7% compared to 30.3% for the year ended December 31, 2004.

In April 2005, Fitzgeralds Black Hawk and Legends Gaming, LLC ("Legends"), mutually terminated the agreement in which Fitzgeralds Black Hawk was to sell substantially all of its assets to Legends for $66.0 million. Pursuant to the agreement, the Company paid Legends $2.0 million as a termination fee, reimbursed Legends for certain transaction costs and returned the $2.0 million deposit placed in escrow by Legends. The Company also recognized during the second quarter of 2005 approximately $0.3 million in charges related to the write-off of transaction costs it previously incurred. Fitzgeralds Black Hawk recognized incremental depreciation and amortization expense of $0.9 million in 2005, which is essentially the depreciation and amortization that the property would have recognized during the period July 12, 2004 through December 31, 2004, had depreciation and amortization not been suspended during that time as a result of the pending sale.