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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended: December 31, 2002

Commission file number: 1-11853

ARGOSY GAMING COMPANY
(Exact name of Registrant as specified in its Charter)

Registrant's telephone number, including area code: (618) 474-7500

Securities registered pursuant to Section 12(b) of the Act:

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

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    Yes  ý    No  o

        Indicate by check mark if the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  ý    No  o

        The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2002, the last day of the registrant's most recently completed second fiscal quarter, was approximately $724,942,575.

        As of March 17, 2003, the number of shares outstanding of the registrant's Common Stock, par value $.01 per share, was 28,946,229.

DOCUMENTS INCORPORATED BY REFERENCE

        Part III of this 10-K incorporates information by reference from the registrant's 2003 definitive proxy statement filed March 25, 2003.

PART I

ITEM 1.    BUSINESS

        Except where otherwise noted, the words "we," "us," "our," and similar terms, as well as references to "Argosy" or the "Company" refer to Argosy Gaming Company and all of its subsidiaries.

The Company

        We are a leading owner and operator of six riverboat casinos located in the central United States. We pioneered riverboat gaming in St. Louis, Kansas City and Baton Rouge by opening the first casino in each of those markets. Our riverboat casino that serves the Cincinnati market from Lawrenceburg, Indiana is one of the largest revenue producing riverboats in the United States gaming industry. In addition, we own the Empress Casino Joliet serving the Chicago, Illinois market.

        We are a Delaware corporation. Our principal executive offices are located at 219 Piasa Street, Alton, Illinois 62002 and our telephone number is (618) 474-7500. We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, special reports and other information with the Securities and Exchange Commission (SEC) and are made available on the SEC's website at www.sec.gov and on our website at www.argosycasinos.com, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information contained on our website is not being incorporated herein.

        The following summarizes our casino properties:

        Our operating strategy emphasizes increasing revenues and profits through enhancing our customers' gaming experience by providing superior service, expanding and refining direct marketing programs utilizing an extensive customer database, investing in state-of-the-art gaming products, upgrading and renovating our properties and managing costs.

Business Strategy

        By capitalizing on the extensive gaming industry experience of our management team, we have developed a strategy to maximize the performance of our operating assets and improve financial results. We continue to implement changes at each of our properties to improve our competitive position, increase gaming revenues and enhance profitability. The key elements of our business strategy include: (1) providing our customers a superior gaming experience to foster customer loyalty; (2) focusing on our most valuable customers to encourage repeat business; (3) enhancing the gaming product at our casinos by investing in state-of-the-art gaming equipment; (4) renovating our properties to create more exciting gaming environments and (5) pursuing high-return business opportunities.

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Provide our customers with a superior entertainment experience.  We operate casinos catering to "locals" customers who generally live within an hour's drive of our casinos. Based on our surveys, our regular customers game an average of three times a month, unlike a destination gaming market, such as the Las Vegas strip, where people visit less frequently. We believe that

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exceptional customer service and an enjoyable gaming experience are critical to fostering customer loyalty. Our customers have indicated in surveys that cleanliness, a comfortable atmosphere, attentive staff, availability of games, and a feeling of fun and excitement are important factors that attract them to our casinos. We take our customers' preferences into account when implementing our operating and capital spending plans. We generally allocate approximately 70% of our maintenance capital expenditures at each property to address issues of importance to customers, with the majority spent to keep our gaming product fresh and the excitement high.

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Focus on our most valuable customers.  Our primary marketing focus is through direct and relationship marketing to encourage repeat business with our frequent customers. We use sophisticated player tracking systems to identify and reward premium players and our most loyal customers. Based on a player's gaming activity, we create promotions including targeted direct mail coin offers and "members only" concerts, parties, tournaments, sweepstakes and special entertainment events. We employ an integrated data warehouse to expand and refine our knowledge of our customers.



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Invest in new gaming equipment.  Slot machines contributed approximately 85% of our casino revenues in 2002 and are an important element of our profitability. We continually upgrade our gaming product with state-of-the-art slot machines. We believe that regularly replacing slot machines with the most popular products creates a more exciting gaming experience and increases profitability. During 2003 and 2004, subject to regulatory approvals, we plan on insuring our entire slot product has cashless ticket-in, ticket-out slot capability. In order to complete our conversion to cashless slot product, Illinois and Louisiana must first approve cashless slots.



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Renovate our riverboat and dockside entertainment facilities.  To maintain an exciting gaming experience for our customers, we have developed a capital investment plan to systematically renovate and improve our casino and entertainment facilities in response to customer preferences and market opportunities. For example, we plan to spend approximately $40 million in 2003 to maintain a quality environment for our customers. In addition, we plan on spending approximately $115 million in 2003 to expand our Kansas City, Joliet and Sioux City casinos. The Kansas City and Joliet casinos will become barge-based operations, which our customers find more desirable.

In Riverside, we are looking to replace our current three-level riverboat facility with a single level, 58,000 square-foot barge-based facility, providing for a 50% increase in gaming positions and a new high limit area. The project will also include the renovation and expansion of the current pavilion to include a new VIP club, new dining venues, an expanded buffet and dining room, and additional surface and VIP parking areas. We expect to complete this project at the end of 2003, at a total cost of approximately $105 million.

In Joliet, we will replace our two multi-level riverboat casinos that currently operate a total of five levels of gaming space with a two-level barge purchased in 2002. The barge is undergoing extensive renovations and will offer approximately 50,000 square feet of gaming space, plus an additional 15,000 square feet for a party room and player's lounge. The project is targeted to open in the second quarter 2003 at a total cost of approximately $40 million.

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Pursue strategic opportunities and acquisitions that provide superior returns.  We look to invest in growth opportunities that add shareholder value while maintaining an appropriate capital structure. Our acquisition of the Empress Casino Joliet during 2001 has increased and diversified our cash flow within the largest locals gaming market and third largest gaming market in the United States. In the future, we will continue to evaluate and pursue possible acquisitions of complementary businesses and other strategic opportunities to enhance shareholder value.

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Casino Properties

Argosy Casino Lawrenceburg

        Property:    The Lawrenceburg casino is located on the Ohio River in Lawrenceburg, Indiana approximately 15 miles west of Cincinnati and is the closest casino to the Cincinnati metropolitan area. The Lawrenceburg casino is one of the largest riverboats in the United States with 74,300 square feet of gaming space on three levels with 2,143 slot machines and 94 table games. In 2002, the Indiana gaming commission approved dockside gaming and our Lawrenceburg casino commenced dockside gaming on August 1, 2002. As such, our Lawrenceburg casino no longer cruises.

        The complex also features a 300 room hotel, a 200,000 square foot land-based entertainment pavilion and support facility offering a 350 seat buffet restaurant, two specialty restaurants, an entertainment lounge and an 1,800 space parking garage. Employee and overflow parking is provided at a 1,400 space remote lot that is accessed by shuttle bus.

        Capital Improvements:    In 2002, we spent approximately $8.3 million on capital improvements consisting entirely of maintenance capital. In 2003, we intend to spend approximately $8 million on capital improvements, including $5 million related to cashless gaming products.

        Gaming Market:    The Lawrenceburg casino draws from a population of approximately 1.6 million residents in the Cincinnati metropolitan area and an additional 5.4 million people who reside within 100 miles of Lawrenceburg, including the major metropolitan markets of Dayton and Columbus, Ohio and, to a lesser extent, Indianapolis, Indiana and Lexington, Kentucky.

        In the Cincinnati market, the Lawrenceburg casino directly competes with two other riverboat casinos. The three riverboat casinos operating in the Cincinnati market generated $626.9 million of gaming revenues in 2002, a 9.3% increase from 2001. In 2002, the Lawrenceburg casino represented 45.1% of gaming position capacity in the Cincinnati market, and captured 59.6% of the market's gaming revenues.

        The Lawrenceburg casino is the closest casino to the Cincinnati metropolitan area. Our nearest competitor is located approximately 15 miles further south of Lawrenceburg in Rising Sun, Indiana. Another competitor is located 40 miles from Lawrenceburg in Switzerland County, Indiana. Secondarily, we compete with a riverboat casino in Bridgeport, Indiana in the Louisville, Kentucky area approximately 100 miles from Lawrenceburg.

        Regulatory Update:    Indiana gaming law currently limits the number of gaming licenses to be issued in the state to a total of 11, including a maximum of 5 licenses and a limit of one license per county along the Ohio River. Indiana gaming law does not restrict the size of a licensee's gaming facility or place limits on customer losses or betting levels. Our Indiana gaming license is subject to renewal on an annual basis. Effective August 1, 2002, our casino commenced dockside gaming allowing our customers continuous unlimited ingress and egress during its hours of operation and no longer requiring cruises. At the same time, Indiana enacted legislation to increase gaming tax rates for those casinos adopting dockside gaming.

        Casino gaming is not currently permitted under the laws of either Ohio or Kentucky. The Ohio legislature has considered, at various times, legislation that would allow certain types of casino-style gaming at Ohio racetracks. Legislation has been introduced to allow Kentucky racetracks to have slot machines. The Kentucky legislation would allow any kind of electronic games, from slots to keno to video poker as well as wide area progressives. The Indiana legislature has considered, at various times, additional legislation that could apply certain provisions of tax increases enacted during 2002 on a retro-active basis and also proposed to eliminate the existing restrictions on owning more than one Indiana casino and allows each county with riverboat gaming to hold a referendum to allow dockside gaming. To date, Ohio, Kentucky and Indiana have not enacted such proposed legislation. Enactment

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of such legislation by Ohio, Kentucky or Indiana could have an adverse affect on the financial results of our Lawrenceburg casino.

Alton Belle Casino

        Property:    The Alton Belle Casino is located on the Mississippi River in Alton, Illinois approximately 20 miles northeast of downtown St. Louis. We commenced operations in Alton, Illinois in September 1991 as the first gaming facility in Illinois and the St. Louis metropolitan market. Following the success of our original Alton riverboat casino, we built and opened a larger three-deck contemporary style cruise liner. The cruise liner features 26,700 square feet of gaming space, 1,013 slot machines and 28 table games. In June 1999, Illinois passed a law permitting casinos to offer continuous dockside gaming. As a result, the Alton Belle Casino remains dockside and offers its customers unlimited ingress and egress during its hours of operation.

        The Alton property includes an approximately 60,000 square foot entertainment pavilion and features a 124 seat buffet, a restaurant and a 400 seat main showroom. Parking is available at an adjacent city-owned surface parking facility and at two sites in the city of Alton, to and from which we provide valet parking as well as free shuttle service.

        Capital Improvements:    In 2002, we spent approximately $2.8 million on capital improvements, including $2.2 million on maintenance capital. In 2003, we intend to spend approximately $3 million on capital improvements, including $2 million on cashless gaming products subject to approval of such products in Illinois.

        Gaming Market:    The Alton Belle Casino generally draws from a population of approximately 2.5 million residents within the St. Louis metropolitan area and an additional 1.2 million people within a 100-mile radius of the City of St. Louis. The target customers of the Alton Belle Casino are drawn largely from the northern and eastern regions of the greater St. Louis metropolitan area, as well as portions of central and southern Illinois.

        The Alton Belle Casino faces competition from four other riverboat casino companies currently operating in the St. Louis area, including one other Illinois licensee. As an Illinois licensee, the Alton Belle Casino is not subject to Missouri's $500 loss limit and therefore has a competitive advantage in attracting high-end customers over the three competitors operating under Missouri licenses. The riverboat casinos operating in the St. Louis market generated $804.5 million of gaming revenues in 2002, a 5.0% increase from 2001. The Alton Belle Casino represented approximately 12.3% of gaming position capacity in the St. Louis market, and captured approximately 14.8% of the market's gaming revenues. One competitor in Missouri completed a major renovation of its facility in August 2002 that increased the market capacity by 17%. Following this major renovation, the Alton Belle Casino's revenues declined approximately 5% with a corresponding decrease in market share.

        Regulatory Update:    Illinois gaming law currently limits the number of gaming licenses to be issued in the state to ten. Each license permits the operation of up to two boats as part of a single riverboat gaming operation with a combined maximum of 1,200 gaming positions as defined by the state. Our Illinois gaming license is subject to renewal in October 2003. During the second quarter 2002, Illinois enacted legislation increasing gaming and admission tax rates.

        In June 1999, Illinois passed an amendment to the Illinois Riverboat Gambling Act to permit casinos to offer continuous dockside gaming with unlimited ingress and egress. As a result of litigation challenging certain provisions of the 1999 amendment, dockside gaming could be overturned and we could be required to suspend dockside gaming activities at our Alton casino until such time as the Illinois legislature reauthorized dockside gaming. We are unable to determine what the ultimate resolution of the litigation will be; however, the loss of dockside gaming at our Alton casino would adversely affect our financial results.

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Argosy Casino Riverside

        Property:    The Argosy Casino Riverside is located on the Missouri River in Riverside, Missouri on a 55-acre site approximately five miles from downtown Kansas City. The riverboat features approximately 36,000 square feet of gaming space, 1,131 slot machines and 30 table games. The Kansas City casino began operations in Kansas City, Missouri on June 22, 1994, as the first gaming facility to open in the Kansas City market. During November 1999, Missouri adopted open boarding, allowing customers unlimited ingress and egress, eliminating the two-hour mock cruising requirements.

        The Kansas City casino is complemented by an 85,000 square foot land-based entertainment facility featuring specialty and buffet restaurants, a sports/entertainment lounge and 8,000 square feet of banquet/conference facilities. A parking garage and surface parking areas with 2,000 spaces are located adjacent to the pavilion.

        Capital Improvements:    During 2002, we spent $13.1 million on capital improvements, including $10.1 million on our major renovation project. In 2003, we intend to spend approximately $105 million on capital improvements, including completion of our major renovation and conversion to cashless gaming products. The targeted opening of our new barge-based casino is currently planned by year-end 2003. The new project will allow us to replace our existing three-level riverboat facility with a single level 58,000 square-foot barge-based facility providing for a 50% increase in gaming positions and a new high limit area. The project also includes the renovation and expansion of the existing pavilion to include a new VIP club, new dining venues, an expanded buffet and dining room, and additional surface and VIP parking.

        Gaming Market:    The Kansas City casino draws from a population of approximately 1.6 million residents in the greater Kansas City metropolitan area and an additional 900,000 people within a 100-mile radius of Kansas City. The Kansas City casino site offers convenient access from two major highways. The Kansas City casino primarily attracts customers who reside in the northern and western regions of the Kansas City metropolitan area.

        We currently face competition from three other casinos in the Kansas City area. The four riverboat casinos operating in the Kansas City market generated $614.0 million of gaming revenues in 2002, a 5.5% increase from 2001. Our Kansas City casino represented 15.5% of gaming position capacity in the Kansas City market and captured 16.0% of the market's gaming revenues.

        Regulatory Update:    Our Missouri gaming license is subject to renewal in June 2004 and again every two years thereafter. Legislation has been filed in Kansas, which, if enacted, would allow for slot machines at racetracks. Missouri has discussed possible increases in admission and gaming taxes. Should Kansas enact such legislation or Missouri increase admission or gaming taxes, our Kansas City casino's financial results would be adversely affected.

Argosy Casino Baton Rouge

        Property:    The Argosy Casino Baton Rouge is located on the Mississippi River in downtown Baton Rouge, Louisiana. The riverboat features approximately 28,000 square feet of gaming space, 877 slot machines and 31 table games. The Baton Rouge casino began operations in September 1994 as the first riverboat gaming facility in the Baton Rouge market. Louisiana adopted legislation effective April 1, 2001, that permits dockside gaming, allowing customers unlimited ingress and egress, and eliminating the three-hour cruising requirements. This legislation also increased the tax on riverboat operations from 18.5% to 21.5%. As a result, the Argosy Casino Baton Rouge remains dockside and offers its customers unlimited ingress and egress during its hours of operation.

        The riverboat casino is complemented by a 730-space parking garage, a 270-space surface parking lot and by our adjacent real estate development known as Catfish Town. Catfish Town is located next to

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Baton Rouge's convention complex, the Centroplex, which has a 12,000-seat arena and a 30,000-square foot exhibition hall. Catfish Town includes a 50,000 square foot glass-enclosed atrium, entertainment/sports lounge, buffet/coffee shop, conference facilities and approximately 150,000 square feet of leasable retail space. We own and operate the Catfish Town facility through our wholly-owned subsidiary, Jazz Enterprises, Inc., which we acquired in 1995 after Catfish Town's developer experienced financial difficulties and put in doubt its ability to satisfy certain development obligations to the City of Baton Rouge. In February 2001, we opened a $22 million, 300-room hotel.

        Capital Improvements:    During 2002, we spent approximately $3.3 million in capital improvements consisting entirely of maintenance capital. In 2003, we intend to spend approximately $3 million in maintenance capital, including $2 million on cashless gaming product subject to regulatory approval.

        Gaming Market:    The Baton Rouge casino draws from a population of approximately 0.5 million in the Baton Rouge metropolitan area. The Baton Rouge casino faces competition from one casino located in downtown Baton Rouge, a nearby Native American casino and operators of video poker machines in non-casino locations in certain Baton Rouge parishes. The two riverboat casinos operating in the Baton Rouge market generated approximately $179.3 million of gaming revenues in 2002, a 4.1% increase from 2001. The Argosy Casino Baton Rouge represented 44.4% of gaming position capacity in the Baton Rouge market and generated 43.1% of the market's gaming revenues.

        Regulatory Update:    The Louisiana Gaming Board renewed our license effective July 18, 2002, for a three-year period subject to renewal on July 18, 2005.

Argosy Casino Sioux City

        Property:    The Argosy Casino Sioux City is located on the Missouri River in downtown Sioux City, Iowa. The riverboat features 12,500 square feet of gaming space, 454 slot machines and 14 table games. The Argosy Casino Sioux City typically conducts one two-hour cruise each day for 100 days per year. At all other times the Argosy Casino Sioux City remains dockside and operates with unlimited ingress and egress. The casino is complemented by adjacent barge facilities featuring buffet dining facilities, meeting space and administrative support offices.

        Capital Improvements:    In 2002, we spent approximately $5.7 million in capital expenditures, including $3.8 million on our renovation project of a barge facility that will include a new restaurant, party/function room and promotions booth, as well as office space for employees. In 2003, we expect to spend approximately $4 million in capital improvements, including $2 million to complete the renovation project and $1 million on cashless gaming products.

        Gaming Market:    The Argosy Casino Sioux City draws from a population of approximately 80,000 residents in Sioux City and an estimated 100,000 people within a 40-mile radius of Sioux City. The Argosy Casino Sioux City competes primarily with land-based Native American casinos that are not required to report gaming revenues and other operating statistics, therefore market comparisons cannot be made. We also compete with certain providers and operators of video gaming in the neighboring state of South Dakota. Additionally, we compete with slot machines at a pari-mutuel racetrack in Council Bluffs, Iowa and with two riverboat casinos in the Council Bluffs/Omaha, Nebraska market.

        Regulatory Update:    Our Iowa gaming license is subject to annual renewal each March. In addition, Iowa law stipulates that a referendum must be held every eight years to reaffirm gaming in each county that has gaming. This referendum was approved in November 2002, thus continuing gaming in the county we operate for another eight years.

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Empress Casino Joliet

        Property:    The Empress Casino Joliet is located in Joliet, Illinois on a 300-acre site approximately 40 miles southwest of Chicago. The casino consists of two adjacent riverboat vessels providing a combined 36,066 square feet of gaming space with 1,113 slot machines and 32 table games. Both riverboats remain dockside and offer customers unlimited ingress and egress. The complex features a 150,000 square foot Egyptian themed pavilion with three restaurants, an entertainment lounge and banquet/conference facilities. The pavilion also contains an off-track pari-mutuel betting parlor. The complex also includes a 102-room hotel, surface parking areas with approximately 2,350 spaces and an 80-space recreational vehicle park. We acquired 100% of the Empress Casino Joliet as of July 31, 2001, for approximately $463.8 million.

        Capital Improvements:    In 2002, we spent approximately $23.0 million in capital expenditures, including $3.6 million in maintenance capital and $19.4 on a renovation project which will replace our existing two boats that currently operate a total of five levels of gaming space with a two-level barge facility that was purchased in 2002. When completed, the barge will offer approximately 50,000 square feet of gaming space, plus an additional 15,000 square feet for a party room and player's lounge. In 2003, we intend to spend approximately $25 million in capital expenditures, including approximately $21 million to complete this project and including $3 million on cashless gaming product subject to regulatory approval. This new facility will enhance customer appeal in this competitive market as well as deliver a number of operational efficiencies at the same time.

        Gaming Market:    The Empress Casino Joliet draws from a population of approximately 8.0 million people who reside within 50 miles of Joliet, including Chicago, which has the largest local population of any state-licensed gaming market and is the third largest gaming market in the United States. The target customers of the Empress Casino Joliet are drawn largely from the southern and western regions of the greater Chicago metropolitan area, as well as portions of north central Illinois. The eight riverboat casinos operating in the Chicago market generated approximately $2.1 billion of gaming revenues in 2002, a 5.1% increase from 2001. The Empress Casino Joliet had 10.0% of gaming position capacity in the Chicago market as of December 31, 2002, and captured 11.4% of the market's casino revenues in 2002. The competitive impact of dockside gaming in Indiana and facility renovations by two nearby casinos have resulted in a decrease in the Empress Casino Joliet's market share of approximately 1.5 percentage points from 2001 to 2002.

        Regulatory Update:    Illinois gaming law currently limits the number of gaming licenses to be issued in the state to ten. Each license permits the operation of up to two boats as part of a single riverboat gaming operation with a combined maximum of 1,200 gaming positions as defined by the state. Our Illinois license for Joliet was issued at the time of our acquisition of Empress Casino Joliet and was renewed in July 2002 for four years.

        In June 1999, Illinois passed an amendment to the Illinois Riverboat Gambling Act to permit casinos to offer continuous dockside gaming with unlimited ingress and egress. As a result of litigation challenging certain provisions of the 1999 amendment, dockside gaming could be overturned and we could be required to suspend dockside gaming activities at our Joliet casino until such time as the Illinois legislature reauthorized dockside gaming. We are unable to determine what the ultimate resolution of the litigation will be; however, the loss of dockside gaming at our Joliet casino would adversely affect our financial results.

Marketing

        We focus our marketing efforts on direct and relationship marketing to encourage repeat business and foster customer loyalty. We have designed an overall marketing strategy of utilizing direct marketing as our primary means of communicating with our customers. Although the marketing plan

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for each of our properties is tailored to the specific needs of the site, the common strategic components are:

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further refine and enhance our database marketing efforts;



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continue to enhance our full-service player development program to service our most valuable customers;



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aggressively market our gaming product and facility improvements;



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refine, enhance and expand the schedule of parties, events and entertainment; and



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utilize public relations as a tool to increase awareness, and reinforce marketing efforts by publicizing winners.

        A key tactic in implementing our overall strategy is the effective use of the information we obtain regarding our customers' playing activity. At each of our properties, we encourage patrons to join the Argosy Preferred Club. We then track the member's level of play through the use of sophisticated player tracking systems. We have placed in service during the fourth quarter 2002, our integrated data warehouse that expands and refines our knowledge of our customers. Utilizing the information from our databases, we create promotions including targeted direct mail coin offers and "members only" parties, tournaments, sweepstakes and special entertainment events. This data warehouse stores information on more than two million Argosy Preferred Club members in our marketing databases, of which active customers account for approximately 60% of our revenues.

Competition

        The U.S. gaming industry is intensely competitive and features many participants, including riverboat casinos, dockside casinos, land-based casinos, video lottery and poker machines not located in casinos, Native American gaming and other forms of gambling in the United States. Gaming competition is particularly intense in each of the markets where we operate. Historically, we have been an early entrant in each of our markets; however, as competing properties have opened, our operating results in each of these markets have been negatively affected. Many of our competitors have more gaming industry experience, are larger and have significantly greater financial and other resources. In addition, some of our direct competitors in certain markets may have superior facilities and/or operating conditions in terms of:

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amenities offered at the gaming facility and the related support and entertainment facilities;



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convenient parking facilities;



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a location more favorably situated to the population base of a market and ease of accessibility to the casino site; and



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favorable tax or regulatory factors.

        The competitive position of each of our casino properties is discussed in detail in the subsection entitled "Gaming Market" in the "Business—Casino Properties" section of this 10-K.

        There could be further competition in our markets as a result of the upgrading or expansion of facilities by existing market participants, the entrance of new gaming participants into a market or legislative changes. We expect each market, in which we participate, both current and prospective, to be highly competitive.

Employees

        As of December 31, 2002, we employed approximately 6,130 full-time and 770 part-time employees. The Seafarers Entertainment and Allied Trade Union represent approximately 2,694

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employees, located throughout our properties. Additionally, 7 employees at our Alton Property are represented by the Seafarer Union of North America. We have collective bargaining agreements with those unions that expire at various times between June 2003 and June 2004. In Alton, the International Brotherhood of Electrical Workers represents 10 of our employees and 100 employees are represented by the Security Police Fire Professionals of America Union. In addition, 35 employees located throughout our properties except Alton are represented by American Maritime Officers Union. At Joliet, 35 employees are represented by the International Union of Operating Engineers and the Hotel Employees and Restaurant Employees Union represent 360 employees. The hotel and restaurant employees of Joliet are currently working without a contract. We have not experienced any work stoppages and believe our labor relations are generally satisfactory.

Other Regulatory

        We are subject to certain federal, state and local safety and health laws, regulations and ordinances that apply to non-gaming businesses generally, such as the Clean Air Act, Clean Water Act, Occupational Safety and Health Act, Resource Conservation Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act. We have not made, and do not anticipate making, material expenditures in order to comply with applicable provisions of these laws and regulations. However, the coverage and attendant compliance costs associated with these laws, regulations and ordinances may result in future additional costs. The Department of Transportation has proposed regulations requiring owners and operators of certain vessels to establish through the U.S. Coast Guard evidence of financial responsibility in the amount of $5.5 million for clean up of oil pollution. This requirement can be satisfied by either proof of adequate insurance, including self-insurance, or the posting of a surety bond or guaranty.

        Our riverboats must comply with U.S. Coast Guard requirements as to boat design, on-board facilities, equipment, personnel and safety. Each riverboat must hold a certificate of seaworthiness or must be approved by the American Bureau of Shipping ("ABS") for stabilization and floatation, and may also be subject to local zoning and building codes. The U.S. Coast Guard requirements establish design standards, set limits on the operation of the vessels and require individual licensing of all personnel involved with the operation of the vessels. Loss of a vessel's certificate of seaworthiness or ABS approval would preclude its use as a floating casino.

        Permanently moored vessels are not required to hold certificates of documentation and inspection from the U.S. Coast Guard. However, the permanently moored vessels are inspected by a third party and certified with respect to stability and single compartment flooding integrity.

        Our marine operation employees may be subject to the Jones Act, which, among other things, exempts those employees from the state limits on workers' compensation awards.

        Regulations adopted by the Financial Crimes Enforcement Network of the U.S. Treasury Department require us to report currency transactions in excess of $10,000 by a single customer occurring within a gaming day, including identifying the customer by name and social security number. The regulation provides that substantial penalties can be imposed for each instance of a failure to report.

Insurance

        We carry property and casualty insurance on our land-based assets and our vessels, generally in the amount of their replacement costs, with a nominal deductible with respect to our land-based assets and a deductible equal to 1% of the replacement value of the vessels. Our land-based assets are covered by flood and earthquake insurance. Our general liability insurance with respect to land-based operations has a limit of $1 million per occurrence and $2 million as an annual aggregate with a $100,000 self-insured retention. Our general liability insurance with respect to our marine operations has a

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$100,000 per occurrence self-insured retention with per occurrence coverage up to a $200 million limit. With respect to worker's compensation, we have a $250,000 per occurrence deductible with a $1 million per occurrence limit. We carry business interruption insurance policies at our properties, which carry deductibles ranging from 14 to 30 days and maximum coverage up to $62 million, depending on the location.

ITEM 2.    PROPERTIES

        The following is a list of our principal properties as of December 31, 2002. Substantially all of our properties are subject to the lien of our senior lenders under our $675 million Amended and Restated Senior Secured Credit Facility Agreement dated July 31, 2001.

(1)

Renewal options available.

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ITEM 3.    LEGAL PROCEEDINGS

        We are, from time to time, a party to legal proceedings arising in the ordinary course of business. Other than as disclosed below, we are unaware of any legal proceedings, which, even if the outcome were unfavorable to us, would have a material adverse impact on either our financial condition or results of operations.

Gaming Industry Class Actions

        We have been named, along with two gaming equipment suppliers, 41 of the country's largest gaming operators and four gaming distributors (the "Gaming Industry Defendants") in three class action lawsuits pending in Las Vegas, Nevada. The suits allege that the Gaming Industry Defendants violated the Racketeer Influenced and Corrupt Organizations Act ("RICO") 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, as well as to the extent to which there is actually an opportunity to win on any given play. The suits seek unspecified compensatory and punitive damages. On January 14, 1997, the court consolidated all three actions under the case name William H. Poulos, etc. v. Caesars World, Inc., et al. On February 13, 1997, the plaintiffs filed a consolidated amended complaint. The court subsequently dismissed this complaint, in part, and on January 8, 1998, the plaintiffs filed a second amended complaint. The parties have fully briefed the plaintiff's motion for class certification. The court held a hearing on this motion on November 15, 2001. The parties are awaiting a decision from the court. Discovery has been stayed pending the court's ruling. We are unable to determine what effect, if any, the suit would have on our business or operations.

Conservancy District Lease Litigation in Dearborn County, Indiana

        On March 21, 1997, Deborah S. Whitacre filed an action in the Circuit Court of Dearborn County, Indiana as Cause No. 15CO1-9703-CP-073, challenging the validity of a lease to the City by the Conservancy District of Lawrenceburg, Indiana (the "District") of certain land owned by the District, which land has in turn been subleased by the City to our affiliate Indiana Gaming, L.P. and is being used for development and operation of the riverboat gaming facility in the City for which Indiana Gaming, L.P. has been awarded a riverboat owner's license by the Indiana Gaming Commission. Defendants are the District and its individual directors. In 1998, Indiana Gaming, L.P. was permitted to intervene and is now contesting the action. The District and its directors have advised that they are contesting the action and intend to continue to do so. An adverse ruling in this matter could have a material adverse effect on our financial condition and results of operations.

Capitol House Preservation Company, L.L.C. v. Jazz Enterprises, Inc. et. al.

        On November 26, 1997, Capitol House filed an amended petition in the Nineteenth Judicial District Court for East Baton Rouge Parish, State of Louisiana, on November 26, 1997, amending its previously filed but unserved suit against Richard Perryman, the person selected by the Louisiana Gaming Division to evaluate and rank the applicants seeking a gaming license for East Baton Rouge Parish, and now adding its state law claims against Jazz, the Former Jazz Shareholders, Argosy Gaming Company, Argosy of Louisiana, Inc. and Catfish Queen Partnership in Commendam, d/b/a the Belle of Baton Rouge Casino. This suit alleges that these parties violated the Louisiana Unfair Trade Practices Act in connection with obtaining the gaming license that was issued to us. The defendants have filed exceptions which contest the right of Capitol House to attack in this lawsuit the final decision of the Louisiana Gaming Enforcement Division in granting a gaming license to the defendants and denying the license to Capitol House. The trial court overruled the defendants' exceptions, but the defendants have applied to the Louisiana First Circuit Court of Appeal for a writ of review. The Louisiana First Circuit Court of Appeal denied defendant's writ application and therefore the defendants have now

11

again appealed to the Louisiana Supreme Court. If the First Circuit grants the writ and rules in favor of the defendants, the claims of Capitol House will be dismissed.

        We intend to seek indemnification from the Former Jazz Shareholders for any liability we, Argosy Louisiana or Jazz suffers as a result of such cause of action. As part of the consideration payable by us to the Former Jazz Shareholders for the acquisition of Jazz, we agreed at the time of such acquisition to annual deferred purchase price payments of $1,350,000 for each of the first ten years after closing and $500,000 for each of the next ten years. Payments are to be made quarterly by us. The definitive acquisition documents provide us with offset rights against such deferred purchase price payments for indemnification claims against the Former Jazz Shareholders and for liabilities that the Former Jazz Shareholders contractually agreed to retain. There can be no assurance that the Former Jazz Shareholders will have assets sufficient to satisfy any claim in excess of our offset rights, therefore, an adverse ruling in this matter could have a material adverse effect on us.

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

        None

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PART II

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

        The Company's Common Stock trades on the New York Stock Exchange under the symbol AGY. On March 7, 2003, the approximate number of stockholders of record of the Company's Common Stock was 519. The following table sets forth the high and low sales prices per share of Common Stock, as reported by the New York Stock Exchange, for the periods indicated. These quotations and sales prices do not include retail mark-ups, mark-downs or commissions.

        On March 17, 2003, the reported last sales price for the Common Stock was $17.95.

        Since our initial public offering in February 1993, we have not declared any cash dividends or distributions on our Common Stock. Although we currently intend to retain our earnings to finance future growth and therefore have no present intention of paying dividends, this policy will be reviewed quarterly by our Board of Directors in light of, among other things, our results of operations, capital requirements, any restrictions imposed by applicable gaming regulations and restrictions imposed by our indentures and loan documents. At present, our Amended and Restated Credit Agreement dated July 31, 2001, requires the consent of the lenders in order to declare a dividend.

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ITEM 6.    SELECTED FINANCIAL DATA

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ARGOSY GAMING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        Except as otherwise noted, the words "we", "us", "our" and similar terms, as well as references to "Argosy" or the "Company" refer to Argosy Gaming Company and all of its subsidiaries.

Cautionary Statements for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995

        This Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this document, the words "anticipate," "believe," "estimate" and "expect" and similar expressions are generally intended to identify forward-looking statements. Investors are cautioned that any forward-looking statements, including those regarding the intent, belief or current expectations of the Company or its management, are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward-looking statements as a result of various factors including, but not limited to, (i) construction delays related to the Company's expansion projects' (ii) competitive and general economic conditions in the markets in which the Company operates, (iii) the effect of future legislation or regulatory changes on the Company's operations, including but not limited to gaming tax increases, issuances of additional gaming licenses and the approval of cashless slots, and (iv) other risks detailed from time to time in the Company's Securities and Exchange Commission filings. The Company does not intend to update these forward-looking statements.

Overview

        We own and operate the Alton Belle Casino in Alton, Illinois; the Empress Casino Joliet in Joliet, Illinois; the Argosy Casino in Riverside, Missouri; the Argosy Casino in Baton Rouge, Louisiana; the Argosy Casino in Sioux City, Iowa; and the Argosy Casino in Lawrenceburg, Indiana.

        In 2002, many factors affected our casinos' operations. Effective August 1, 2002, our Lawrenceburg casino commenced dockside gaming. This has had a positive impact on casino revenues in the last half of 2002. During the second quarter 2002, Illinois and Indiana enacted legislation increasing gaming tax rates. Also, in late 2001 and 2002, three competitors made significant renovations, which, coupled with the increased gaming tax rates, have negatively impacted our Alton and Joliet, Illinois casino operations. In addition, dockside gaming in Indiana has negatively impacted our Joliet, Illinois casino operations.

        During the first quarter 2001, we acquired the minority interests in our Argosy Casino in Lawrenceburg, Indiana. Following the acquisition of these minority interests, we now own 100% of all our operations and are no longer required to record minority interest expense. On July 31, 2001, we acquired the Empress Casino Joliet in Joliet, Illinois. The results of our operations for 2001 include the results of Empress Casino Joliet for the five months ended December 31, 2001.

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(1)

Amounts for 2001 reflect five months of operations after our purchase of the Empress Casino Joliet on July 31, 2001.

(2)

Income from operations and EBITDA exclude (i) consideration of any management fee paid to us and the 42.5% minority interest in our Lawrenceburg casino for periods prior to our first quarter

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2001 acquisitions of these minority interests and (ii) the 30% minority interest in our Sioux City casino for the period prior to our July 2000 acquisition of this interest.

(3)

Includes operations of Jazz Enterprises, Inc., a wholly owned subsidiary that owns and operates the Catfish Town real estate development adjacent to our Baton Rouge casino.

(4)

The year ended December 31, 2001, includes a $1.9 million pretax charge related to the abandonment of a proposed casino in Kenosha, Wisconsin. The year ended December 31, 2000, includes a $6.8 million pretax charge related to the write-down of the Alton landing facility.

(5)

"EBITDA" is defined as earnings before interest, taxes, depreciation and amortization and is presented before any management fees paid to Argosy. EBITDA should not be construed as an alternative to financial measures determined in accordance with generally accepted accounting principles, such as income from operations, net income, or cash flows generated by operating, investing and financing activities. EBITDA is presented solely as a supplemental disclosure because management believes that it is a widely used measure of operating performance in the gaming industry and for companies with a significant amount of depreciation and amortization. EBITDA may not be comparable to similarly titled measures reported by other companies. We have other significant uses of cash flows, including debt service and capital expenditures, which are not reflected in EBITDA. A reconciliation from EBITDA to Income from operations is as follows:

(6)

The Lawrenceburg partnership paid a financial advisory fee equal to 5.0% of its EBITDA to a minority partner prior to our acquisition of this minority interest in February 2001.

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Year ended December 31, 2002, compared to year ended December 31, 2001

        Casino—Casino revenues for the year ended December 31, 2002, increased $161.3 million, or 20.6%, to $944.7 million from $783.4 million for the year ended December 31, 2001. Lawrenceburg casino revenues increased $27.3 million, or 7.9%, to $373.7 million for the year ended December 31, 2002, from $346.4 million for the year ended December 31, 2001. Lawrenceburg commenced dockside gaming on August 1, 2002. The Empress Casino Joliet recorded $237.6 million of casino revenue for the year ended December 31, 2002, compared to $102.1 million in casino revenue for the five months since acquisition (July 31, 2001) through December 31, 2001. The competitive impact of dockside gaming in Indiana and facility renovations by two nearby casinos have resulted in a decrease in Joliet's casino revenues of $8.9 million, from the $102.1 million for the five months ended December 31, 2001, to $93.2 million for the five months ended December 31, 2002. Alton, Riverside, Sioux City and Baton Rouge 2002 casino revenues remained relatively constant, decreasing from $334.9 million to $333.4 million. Increased competitive pressures due to an expanded facility by a competitor in August 2002 affected our Alton casino.

        Casino expenses increased $100.0 million to $432.2 million for the year ended December 31, 2002, from $332.2 million for the year ended December 31, 2001. Joliet incurred $124.4 million in casino expenses for the year ended December 31, 2002, and $48.3 million for the five months of operations from our acquisition through December 31, 2001, a $76.1 million increase. Joliet's casino expenses for the five months ended December 31, 2002, were $47.6 million, a $0.7 million decrease compared to the five months of operations from our purchase through December 31, 2001. The remaining increase is due primarily to increased gaming taxes of $23.7 million at our Lawrenceburg casino corresponding to an increase in revenue with dockside gaming and an increase in gaming tax rates. Based on 2002 casino revenues, our casino expense would have been approximately $33 million lower in 2002 without the changes in gaming tax rates.

        Admissions—Admissions revenues (net of complimentary admissions) decreased to $1.9 million for the year ended December 31, 2002, from $3.3 million for the year ended December 31, 2001. This reduction is due primarily to a reduction in the admissions price during 2002 at Lawrenceburg.

        Food, Beverage and Other—Food, beverage and other revenues increased from $82.1 million for the year ended December 31, 2001, to $97.9 million for the year ended December 31, 2002. Joliet contributed $11.9 million of this increase in food, beverage and other revenue. Food, beverage and other net profit improved $4.9 million to $25.3 million for the year ended December 31, 2002. Of the increase, Joliet and Baton Rouge (including hotel operations) contributed $3.0 million and $1.6 million, respectively, of this net profit.

        Selling, General and Administrative—Selling, general and administrative expenses increased $14.9 million from $118.7 million for the year ended December 31, 2001, to $133.6 million for the year ended December 31, 2002, due primarily to a $7.5 million increase in Joliet's expenses to $15.7 million for the year ended December 31, 2002, from $8.2 million for the five months ended December 31, 2001. The remaining increase is due primarily to an increase of $4.1 million in city development fees in Lawrenceburg due to the increase in revenues related to the commencement of dockside gaming effective August 1, 2002.

        Other Operating Expenses—Other operating expenses increased by $4.6 million to $40.9 million for the year ended December 31, 2002, as compared to $36.3 million for the year ended December 31, 2001. Joliet incurred $10.2 million for the year ended December 31, 2002 and $4.2 million for the five months ended December 31, 2001. Other operating expenses in 2001 include a charge of $1.9 million relating to the abandonment of the proposed Kenosha casino development.

        Depreciation and Amortization—Depreciation and amortization increased $0.1 million to $47.4 million for the year ended December 31, 2002, from $47.3 million in 2001. Joliet's expense

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increased $5.9 million from $4.0 million for the five months ended December 31, 2001 to $9.9 million for the year ended December 31, 2002. Depreciation expense also increased due to accelerated depreciation of $0.6 million on planned asset retirements and $0.5 million on our new data warehouse placed in service during the third quarter 2002. These increases are offset by no longer amortizing goodwill in 2002 in accordance with SFAS No. 142 "Goodwill and Other Intangible Assets," effective January 1, 2002. If SFAS 142 had been in effect January 1, 2001, pre-tax goodwill amortization of $7.8 million would not have been recorded for the year ended December 31, 2001. All goodwill is subject to impairment testing at least annually. Based on our evaluations performed during 2002, we have no impairment to record.

        Interest Expense—Net interest expense increased $14.4 million to $81.2 million for the year ended December 31, 2002, from $66.8 million for the year ended December 31, 2001. This increase is primarily attributable to additional borrowings in connection with the Lawrenceburg and Joliet acquisitions.

        Minority Interests—We had no minority interest expense for the year ended December 31, 2002, as compared to $4.1 million for the year ended December 31, 2001. This decrease is attributable to our Lawrenceburg casino minority interest acquisitions during the first quarter of 2001. As the sole owner, we no longer incur minority interest expense.

        Income Tax Expense—We recorded income tax expense of $57.4 million for the year ended December 31, 2002, compared to income tax expense of $46.2 million for the year ended December 31, 2001, due to increased pretax earnings and an increase in our effective corporate income tax rate due to an increase in Indiana tax rates.

        Net Income—Net income was $71.5 million for the year ended December 31, 2002, compared to $66.1 million for the year ended December 31, 2001, due primarily to the factors discussed above. If SFAS 142 had been in effect January 1, 2001, our net income would have increased by $4.6 million to $70.7 million and our diluted net income per share would have increased by $0.16 to $2.41 for the year ended December 31, 2001.

Year ended December 31, 2001, compared to year ended December 31, 2000

        Casino—Casino revenues for the year ended December 31, 2001, increased $124.5 million, or 18.9% to $783.4 million from $658.9 million for the year ended December 31, 2000. Alton, Riverside, Sioux City and Baton Rouge reported an aggregate 6.4% increase in casino revenues from $314.9 million to $334.9 million. Lawrenceburg casino revenues increased $2.4 million, or 0.7% to $346.4 million for the year ended December 31, 2001, from $344.0 million for the year ended December 31, 2000. The Empress Casino Joliet, acquired July 31, 2001, recorded $102.1 million in casino revenue for the five months since acquisition through December 31, 2001. Each of our casinos reported increases in average win per passenger for the year ended December 31, 2001, versus the year ended December 31, 2000.

        Casino expenses increased 22.1% to $332.2 million for the year ended December 31, 2001, from $272.1 million for the year ended December 31, 2000. Joliet incurred $48.3 million in casino expenses during the five months of operations since our acquisition. The remaining increase is due to increased gaming taxes totaling $7.5 million and increases in other casino expenses, primarily payroll related, of $4.2 million to support the overall increased revenues.

        Admissions—Admissions revenues (net of complimentary admissions) were $3.3 million for the year ended December 31, 2001, compared to $6.1 million for the year ended December 31, 2000. This reduction is due to an increase in complimentary admissions given to customers as part of Lawrenceburg's marketing program in response to increased competition.

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        Food, Beverage and Other—Food, beverage and other revenues increased from $66.1 million for the year ended December 31, 2000, to $82.1 million for the year ended December 31, 2001. Joliet contributed $9.5 million of this increase in food, beverage and other revenue. Food, beverage and other net profit improved $0.9 million to $20.4 million for the year ended December 31, 2001. Joliet contributed $1.5 million of this net profit, offset by small reductions in net profit at other properties.

        Selling, General and Administrative—Selling, general and administrative expenses increased 10.7% from $107.2 million for the year ended December 31, 2000, to $118.7 million for the year ended December 31, 2001. Joliet had $8.2 million in selling, general and administrative expenses. The remaining increase is due to increased costs associated with the overall increase in revenues at all of our other properties.

        Other Operating Expenses—Other operating expenses increased by $6.1 million to $36.3 million for the year ended December 31, 2001, as compared to $30.2 million for the year ended December 31, 2000. Joliet accounted for $4.2 million of the increase with the remaining portion of the increase due to the write-off of the proposed Kenosha casino development.

        Depreciation and Amortization—Depreciation and amortization increased $11.2 million to $47.3 million for the year ended December 31, 2001, from $36.1 million in 2000. This increase is primarily due to the $6.6 million in incremental goodwill amortization related to the Lawrenceburg acquisition during the first quarter of 2001 and depreciation and intangible amortization expense of $4.0 million resulting from the Joliet acquisition on July 31, 2001. In accordance with SFAS No. 142 "Goodwill and Other Intangible Assets," effective January 1, 2002, we will no longer amortize our goodwill. All goodwill will be subject to impairment testing at least annually. Pre-tax goodwill amortization expense for the year ended December 31, 2001 would have decreased by $7.8 million had SFAS No. 142 been effective for 2001 for goodwill acquired prior to July 1, 2001.

        Interest Expense—Net interest expense increased $33.4 million to $66.8 million for the year ended December 31, 2001. This increase is primarily attributable to additional borrowings in connection with the Lawrenceburg and Joliet acquisitions.

        Minority Interests—Our minority interest expense decreased by $36.4 million to $4.1 million for the year ended December 31, 2001. This decrease is attributable to our Lawrenceburg casino minority interest acquisitions during the first quarter of 2001. As the sole owner, we no longer incur minority interest expense.

        Income Tax Expense—We recorded income tax expense of $46.2 million for the year ended December 31, 2001, compared to income tax expense of $31.2 million for the year ended December 31, 2000, due to increased pretax earnings, net of minority interest expense.

        Extraordinary Loss—We recorded an extraordinary loss of $1.2 million for the year ended December 31, 2000, related to completion of the final phase of the 1999 refinancing. This extraordinary loss is net of a $0.8 million tax benefit.

        Net Income Attributable to Common Stockholders—Net income attributable to common stockholders was $66.1 million for the year ended December 31, 2001, compared to $45.4 million for the year ended December 31, 2000, due primarily to the factors discussed above.

Liquidity and Capital Resources

        During 2002, we generated cash flows from operating activities of $165.6 million compared to $138.5 million for 2001. This increase is attributable to our increase in operating income of $26.9 million, an increase in our cash flow from working capital of $10.4 million throughout our properties, offset by an increase in interest expense of $13.7 million.

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        During 2002, we used cash flows for investing activities of $56.3 million versus $848.3 million for 2001. During 2002, our investing activities included $56.7 million for purchases of property and equipment, a $26.5 million increase over our property and equipment purchases in 2001. This increase is due primarily to construction and expansion projects at our Joliet, Sioux City and Riverside facilities, plus renovation at our Baton Rouge casino. Capital expenditures in 2002 consisted of $23.1 million in maintenance capital and $33.6 million in project capital, primarily for the expansion projects mentioned above. 2001 includes $366.7 million and $451.6 million used for the purchase of the minority interests in Lawrenceburg and the acquisition of the Empress Casino Joliet, respectively.

        During 2002, we used $106.8 million in financing activities compared to providing $707.6 million in cash flows from financing activities in 2001. During 2002, we paid down $103.9 million on our revolving Credit Facility. During 2001, we received proceeds of $748.8 million through the issuance of Subordinated Notes and borrowings under our Credit Facility. We used these funds for the purchase of the Lawrenceburg minority interests and our acquisition of the Empress Casino Joliet. Also during 2001, we spent $20.6 million in financing fees related to the Lawrenceburg and Empress Casino Joliet acquisitions.

        At December 31, 2002, we had approximately $59.7 million of cash and cash equivalents. At December 31, 2002, we had outstanding $329.2 million on our Senior Secured Credit Facility ($58.3 million on our revolving Credit Facility and $270.9 million on our Term Loan) and $557.5 million of Subordinated Notes (due in June 2009 and September 2011), including $7.5 million of unamortized premium. As of December 31, 2002, we had outstanding letters of credit of $7.5 million. As of February 20, 2003, availability under the Credit Facility was approximately $183.8 million. We have no off balance sheet debt.

        The Subordinated Notes and Credit Facility contain certain restrictions on the payment of dividends on our common stock and the occurrence of additional indebtedness, as well as other typical debt covenants. In addition, the Credit Facility requires us to maintain certain financial ratios as follows: (1) Total Funded Debt to EBITDA Ratio of a maximum of 4.25 to 1.0; (2) Senior Leverage Ratio of a maximum of 2.50 to 1.0; (3) Fixed Charge Ratio of a minimum of 1.25 to 1.0. As of December 31, 2002, we are in compliance with these ratios.

        We have made a significant investment in property and equipment and plan to make significant additional investments at our existing properties. In 2002, we have begun construction on major projects at our Riverside, Joliet and Sioux City properties. We have spent approximately $10.1 million, $19.4 million and $3.8 million, respectively, in 2002 on these renovations. In 2003, we expect to spend approximately $115 million to complete these projects. In addition, we expect maintenance capital expenditures primarily related to the purchase of new cashless gaming product and facility enhancements to be approximately $40 million in 2003.

        Consistent with gaming industry practice, we conduct our operations with a net working capital deficit. Unlike traditional industrial companies, a gaming company's balance sheet has limited accounts receivable and inventories. In addition, casinos generate significant cash on a daily basis. We generally apply our daily cash flows to pay down indebtedness under our revolving Credit Facility and pay our current liabilities pursuant to their normal cycles. Given the significant daily cash flows generated by our operations and the financial flexibility provided by our Credit Facility, the existence of a working capital deficit has no impact on our ability to operate our business or meet our obligations as they become due. We believe that cash on hand, operating cash flows and funds available under our Credit Facility will be sufficient to fund our current operating, capital expenditure and debt service obligations for the next 12 months.

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        Contractual obligations, as of December 31, 2002, mature as follows:

Critical Accounting Estimates

        Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which requires 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 notes to consolidated financial statements. Of our accounting policies, we believe the following may involve a higher degree of judgment and complexity.

        Goodwill—We have approximately $727 million of goodwill recorded on our balance sheet at December 31, 2002, related to acquisitions. We regularly evaluate our acquired businesses for potential impairment indicators. Additionally, we adopted the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets," on January 1, 2002, that require us to perform impairment testing at least annually. Our judgments regarding the existence of impairment indicators are based on, among other things, the regulatory and market status and operational performance of each of our acquired businesses. If these estimates or related assumptions change in the future, impairment charges would be recorded that could have a material adverse impact on our financial condition and results of operations.

        Property and Equipment—Our operations are capital intensive and we have made significant capital investments in each of our properties. At December 31, 2002, we have approximately $455.9 million of net property and equipment recorded on our balance sheet. We depreciate our assets on a straight-line basis over their estimated useful lives. The estimates of the useful lives are based on the nature of the asset as well as our current operating strategy. Future events, such as property expansions, new competition and new regulations, could result in a change in the manner in which we are using certain assets requiring a change in the estimated useful lives of such assets. In assessing the recoverability of the carrying value of property and equipment, we must make assumptions regarding estimated future cash flows and other factors. If these estimates or the related assumptions change in the future, we may be required to record impairment charges for these assets.

        Insurance Accruals—Our insurance policies for employee health, workers' compensation and general patron liability have significant deductible levels on an individual claim basis. We accrue a liability for known workers' compensation and general patron liability based upon claims reserves established by the third party administrator processing our claims. Additionally, we accrue an amount for incurred but not reported claims based on our historical experience and other factors. Our employee health insurance benefit accrual is based on our historical claims experience rate including an estimated lag factor. These accruals involve complex estimates and could be significantly affected should current claims vary from historical levels. Management reviews our insurance accruals for adequacy at the end of each reporting period.

        Effective Gaming Tax Rates—We record gaming taxes based upon effective gaming tax rates for each of our casinos. These effective rates are based upon statutory gaming tax rates and estimates of annual casino revenues. Increases or decreases in our actual or estimated casino revenues or changes in statutory gaming tax rates could require changes to our effective gaming tax rates. Management reviews our effective gaming tax rates at the end of each reporting period.

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Market Risk—Interest Rate Sensitivity

        The market risk inherent in our financial instruments is the potential loss in fair value arising from adverse changes in interest rates. The following table provides information about our debt obligations that are sensitive to changes in interest rates. The following table presents principal cash flows and related weighted-average interest rates by expected maturity dates and estimated fair value of our debt obligations.

        We use interest rate swap agreements from separate financial institutions to manage our interest rate risk associated with our Term Loan as required under the Credit Facility. We have entered into three interest rate swaps that have fixed the interest rate as of October 31, 2001, for a combined original notional amount of $200 million of our variable rate Term Loan under our Credit Facility. The three separate swap agreements carry original notional amounts of $100 million, $50 million and $50 million. For each swap agreement, we agree to receive a floating rate of interest on the notional principal amount based upon a three month LIBOR rate (plus a 2.75% spread) in exchange for fixed rates ranging from 6.19% to 6.27%. All three swap agreements mature on September 30, 2004. Two of the three swap agreements have reductions in the notional amounts proportionally with the quarterly payments on the Term Loan beginning December 31, 2001. The total notional amounts are $198.8 million at December 31, 2002. As a result of all three swap agreements, we have, in effect, converted 73.4% of our Term Loan variable rate debt under our Credit Facility to fixed rate debt at December 31, 2002.

        At December 31, 2002, the fair value of our swap agreements is reported on the balance sheet in other liabilities ($6.0 million pretax) and the related change in fair value of these agreements is included in stockholders' equity as a component of accumulated other comprehensive income ($3.6 million, net of taxes of $2.4 million).

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The following consolidated financial statements of Argosy Gaming Company are included in this report:

Consolidated balance sheets at December 31, 2002 and 2001
Consolidated statement of income for each of the three years ended December 31, 2002
Consolidated statement of cash flows for each of the three years ended December 31, 2002
Consolidated statement of stockholders' equity for each of the three years
    ended December 31, 2002
Notes to consolidated financial statements
Quarterly results (unaudited)
Report of Independent Auditors

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ARGOSY GAMING COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

See accompanying notes to consolidated financial statements.

24

ARGOSY GAMING COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

See accompanying notes to consolidated financial statements.

25

ARGOSY GAMING COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share and per share data)

See accompanying notes to consolidated financial statements.

26

ARGOSY GAMING COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, except share and per share data)

See accompanying notes to consolidated financial statements.

27

ARGOSY GAMING COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands, except share and per share data)

See accompanying notes to consolidated financial statements.

28

ARGOSY GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

1.    Summary of Significant Accounting Policies

        Basis of Presentation—Argosy Gaming Company provides casino-style gaming and related entertainment to the public and, through our subsidiaries, operates riverboat casinos in Alton and Joliet, Illinois; Lawrenceburg, Indiana; Riverside, Missouri; Baton Rouge, Louisiana; and Sioux City, Iowa. Except where otherwise noted, the words "we," "us," "our" and similar terms, as well as "Argosy" or the "Company", refer to Argosy Gaming Company and all of its subsidiaries.

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The consolidated financial statements include our accounts and those of our controlled subsidiaries and partnerships. We have eliminated all significant intercompany transactions. Under certain conditions, our subsidiaries are required to obtain approval from state gaming authorities before making distributions to Argosy.

        Certain 2001, 2000 and quarterly financial information amounts have been reclassified to conform to the 2002 presentation.

        Cash and Cash Equivalents—We consider cash and all highly liquid investments with an original maturity of three months or less to be cash equivalents.

        Property and Equipment—We record property and equipment at cost. We amortize leasehold improvements over the life of the respective lease. Depreciation is computed on the straight-line method over the following estimated useful lives:

        Impairment of Long-Lived Assets—When events or circumstances indicate that the carrying amount of long-lived assets to be held and used might not be recoverable, the expected future undiscounted cash flows from the assets is estimated and compared with the carrying amount of the assets. If the sum of the estimated undiscounted cash flows were less than the carrying amount of the assets, an impairment loss would be recorded. The impairment loss would be measured on a location-by-location basis by comparing the fair value of the assets with their carrying amount. Long-lived assets that are held for disposal are reported at the lower of the assets' carrying amount or fair value less costs related to the assets' disposition.

        Deferred Finance Costs—We amortize deferred finance costs over the lives of the respective loans using the effective interest method.

        Goodwill—Goodwill represents the cost of net assets acquired in excess of their fair value. In accordance with SFAS 142, effective January 1, 2002, all goodwill is no longer regularly amortized, but is subject to impairment testing at least annually.

        Other Intangible Assets—We amortize other intangible assets over their estimated useful lives or the lives of the respective leases or development agreements including extensions.

        Revenues and Promotional Allowances—We recognize as casino revenues the net win from gaming activities, which is the difference between gaming wins and losses. We recognize admissions, hotel and other revenue at the time the related service is performed.