The Majestic Star Casino, LLC Announces First Quarter 2006 Results

LAS VEGAS -- The Majestic Star Casino, LLC has released financial results for the three-month period ended March 31, 2006. The Majestic Star Casino, LLC and its subsidiaries (collectively, the "Company"
Majestic Star Casinos & Hotel  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, together with a contribution from an affiliate of the Company, ownership of 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 only the first quarter of 2006.

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 concurrent redemption and re-financing transactions. The Discount Notes are solely the obligation of Majestic Holdco and Majestic Star 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 $0.1 million and interest expense of $1.4 million on its consolidated statement of operations.

Consolidated Results: Three-Month Period Ended March 31, 2006

The Company's net revenues for the three-month period ended March 31, 2006 were $99.9 million, an increase of $33.1 million or 49.5% from the same period in 2005. Contributing to the increase in net revenues was an increase in casino revenues, the primary revenue source for the Company, of $32.8 million or 46.1% to $103.9 million. Majestic Star II contributed net revenues and casino revenues of $34.3 million and $34.7 million, respectively. Promotional allowances increased $2.2 million, or 21.2%, during the quarter primarily as a result of Majestic Star II's contribution of $2.3 million to the increase. Promotional allowances are deducted from gross revenue to determine net revenues.

The Company is expected to report net income of $3.7 million compared to net income of $3.4 million for the same period in 2005. Contributing to our net income was the $33.1 million increase in net revenues discussed above offset by increases totaling $26.1 million in almost all of our operating expenses, $26.7 million of which resulted from Majestic Star II's first full quarter of operations and fifty percent of the operating expenses of BHR and BHPA, which were not owned by the Company in the prior year.

Majestic Star's operating expenses, including fifty percent of the current quarter BHR and BHPA operating expenses, was down significantly from the first quarter of 2005. In the first quarter of 2006, inclusive of fifty percent of BHR's and BHPA's operating expenses, operating costs were $27.9 million, compared to $30.5 million in the first quarter of last year. Contributing to the reduction in operating expenses was the implementation of cost saving strategies in conjunction with our acquisition of Trump Indiana and elimination of the lease expense paid to BHPA, for the parking garage utilized by Majestic Star, during the first quarter of 2005.

Negatively impacting net income in the current quarter were higher operating costs at corporate of $0.6 million, which was comprised of payroll and professional fees. Operating expenses at Fitzgerald Tunica were down slightly from the previous year.

Positively impacting net income in the first quarter of 2005 was the cessation of depreciation and amortization at Fitzgeralds Black Hawk as a result of the assets of Fitzgeralds Black Hawk being held for sale. While no depreciation and amortization was recognized on Fitzgeralds Black Hawk's depreciable and amortizable assets during the first quarter of 2005, $0.6 million of depreciation and amortization was recognized during the first quarter of 2006 (see discussion below on the termination of the sale of Fitzgeralds Black Hawk).

Lastly, negatively impacting net income in the current quarter was additional interest expense of $7.6 million primarily due to the debt incurred to finance the acquisition of Trump Indiana (including $1.5 million attributable to the push-down of the Majestic Holdco debt, which was not paid by the Company).

For the three-month period ended March 31, 2006, adjusted EBITDA was $26.2 million, compared to $15.8 million in the same period last year, an increase of $10.4 million or 65.3%. Majestic Star II and its fifty percent interest in BHR and BHPA contributed $10.2 million to the increase. Majestic Star, including its fifty percent interest in BHR and BHPA, contributed $1.4 million of the increase. Fitzgeralds Tunica's adjusted EBITDA was flat with the prior year, while Fitzgeralds Black Hawk and Corporate contributed lower adjusted EBITDA of $0.7 million and $0.6 million, respectively. 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) in the three month period ended March 31, 2005, 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.

Total cash and cash equivalents at March 31, 2006 was $24.5 million as compared to $32.4 million at December 31, 2005. Total debt outstanding at March 31, 2006 was $575.7 million comprised of $300.0 million in 9 1/2% senior secured notes, $200.0 million in 9 3/4% senior notes, $46.7 million in 12 1/2% Discount Notes (pushed down from Majestic Holdco but not guaranteed by the Company or secured by its assets), $28.7 million drawn on our senior secured credit facility and $0.3 million in capitalized leases. The Company had $51.3 million available on its $80.0 million credit facility at March 31, 2006.

Mr. Don H. Barden, the Company's Chairman and Chief Executive Officer commented, "We were very pleased with the combined contributions of Majestic Star II, BHR and BHPA of $34.4 million to our net revenues and $10.2 million to our adjusted EBITDA in their first full quarter of operations. The most significant aspects of the integration of the Majestic Properties, including staffing, is substantially complete. The implementation of cost savings strategies is proceeding as planned, and the $14.4 million of annual cost savings that we had previously identified prior to the acquisition has been substantially attained. We will now be able to focus on improving our gaming operations at the Majestic Properties."

Majestic Star/Majestic Star II/BHR/BHPA ("Majestic Properties")

Net revenues for the Majestic Properties were $69.5 million for the three-month period ended March 31, 2006, an increase of $33.3 million, or 92.15%, over the same three-month period in 2005. Net revenues increased due to the addition of Majestic Star II's operations, which contributed $34.3 million to net revenues in the first quarter of 2006. Casino revenues were $71.1 million during the three-month period ended March 31, 2006, compared to $38.7 million during the same three-month period in 2005. Majestic Star II contributed $34.7 million of the increase in casino revenues, which was offset by a $2.2 million decline in Majestic Star's casino revenues. While operating results were strong at the Majestic Properties in January and February, March financial results were negatively impacted by the disruptions related to the implementation of cost saving strategies, the layoff of over 300 employees and changes to the layout of the casino floors. Additionally, the new casino and amenities at a competitor, along with continued construction to major roads providing access to our gaming facilities at Buffington Harbor also had a negative impact on our business. The recent introduction of improved casino facilities, along with the announcement of a significant expansion of a casino property in our market will require us to improve the amenities and experience provided to our casino customers. We also are looking at projects at our facilities that will bring a higher level of visitations to our Majestic Properties along with a more entertaining gaming experience.

Adjusted EBITDA at our Majestic Properties was $19.9 million for the three-month period ended March 31, 2006, compared to $8.3 million in the same period last year. Adjusted EBITDA margins (defined as adjusted EBITDA divided by net revenues) increased to 28.6% in the first quarter of 2006 from 23.0% in the first quarter of 2005.

Fitzgeralds Tunica

Net revenues increased by $0.2 million, or 1.0%, to $21.7 million for the three-month period ended March 31, 2006. Casino revenues were $23.4 million for the three-month period ended March 31, 2006, an increase of $0.8 million or 3.4% over the same quarter last year. Promotional allowances increased $0.9 million during the quarter, as the property spent more in order to remain competitive. However, operating expenses were down slightly during the quarter. EBITDA was flat at $5.8 million for both three-month periods ended March 31, 2006 and 2005. The property's EBITDA margin declined slightly to 26.8% in the first quarter 2006 from 26.9% in the first quarter of 2005.

Mr. Barden commented, "We are excited about the addition of Bob McQueen as our new Fitzgeralds Tunica general manager. Bob was previously the general manager of the Horseshoe in Tunica. We have additionally hired other senior executives formerly with the Horseshoe in Tunica. With their help we are looking to improve the quality of Fitzgeralds Tunica's rated players by enhancing guest development and hosting, improving existing and providing new amenities, expanding credit play, improving our food product and operations, and re-branding the existing steakhouse to Don B's Steakhouse, synonymous with high standards of quality and service."

Fitzgeralds Black Hawk

In the three-month period ended March 31, 2006, net revenues of $8.7 million and casino revenues of $9.4 million were down compared to net revenues of $9.2 million and casino revenues of $9.8 million for the same period in 2005. EBITDA at Fitzgeralds Black Hawk was $2.3 million for the three-month period ended March 31, 2006 and $3.0 million for the same period in 2005. EBITDA margins were 26.7% in the first quarter of 2006, compared to 32.4% in the same quarter last year.

The Black Hawk market showed nominal growth during the first quarter of 2006 with a 4% increase over the first quarter of 2005. However, competition has increased significantly with the completion of remodeling and expansion projects, and increased marketing and promotional activities by our competitors.

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. During the first quarter of 2005, however, the assets of Fitzgeralds Black Hawk were held for sale, and accordingly, no depreciation or amortization expense was recorded. Since the Fitzgeralds Black Hawk purchase agreement was mutually terminated during 2005, the assets are no longer held for sale, and in the first quarter of 2006, depreciation and amortization expense totaled $0.6 million.