**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**Form 10-Q**

 
| **ý** |   | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                   |
|------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |   | **FOR THE QUARTERLY PERIOD ENDED June 30,  2003.**                                                                                                                                                                                                                                                             |
|       |   |                                                                                                                                                                                                                                                                                                           |
| **OR**     |
|       |   |                                                                                                                                                                                                                                                                                                           |
| **o**      |   | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                  |
|       |   | **FOR THE TRANSITION PERIOD  FROM                   TO                         .** |

 

**Commission file number 333-11811**

 

| **ELDORADO RESORTS LLC  ELDORADO CAPITAL CORP.**                                    |
|-------------------------------------------------------------------------------------|
| (Exact names of registrants as specified in  their charters)                        |
|                                                                                |   |   |
| **Nevada**                                                                          |   | **88-0115550** |
| **Nevada**                                                                          |   | **88-0367075** |
| (State or other jurisdiction ofincorporation or organization)                       |   | (I.R.S. Employer Identification No.) |
|                                                                                |   |   |
| **345 North Virginia Street, Reno, Nevada  89501**                             |
| (Address of principal executive offices,  including zip code)                       |
|                                                                                |   |   |
| **(775) 786-5700**                                                                  |
| (Registrants’ telephone number, including area code)                           |
|                                                                                |   |   |
| **Not  Applicable**                                                                 |
| (Former name, former address and former  fiscal year, if changed since last report) |

 

Indicateby check mark whether the registrants (1) have filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrants wererequired to file such reports), and (2) have been subject to such filingrequirements for the past 90 days.            Yes     ý    No   o

 

Indicate by check mark whether the registrants are accelerated filers(as defined in Exchange Act Rule 12b-2) Yes     o    No     ý

 

Numberof shares of common stock of Eldorado Capital Corp. outstanding at August 12,2003: 2,500 shares.

 

 

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ELDORADO RESORTS LLCELDORADO CAPITAL CORP.

 

**FORM 10-Q**

 

TABLE OF CONTENTS

 
| **PART I.**    |   | **FINANCIAL INFORMATION**                                                                        |
|----------------|--------|--------------------------------------------------------------------------------------------------|
|           |   |                                                                                             |
|           |   |                                                                                             |
| **Item 1.**    |   | **FINANCIAL STATEMENTS**                                                                         |
|           |   |                                                                                             |
|           |   | Unaudited  Condensed Consolidated Balance Sheets                                                 |
|           |   | Unaudited  Condensed Consolidated Statements of Income                                           |
|           |   | Unaudited  Condensed Consolidated Statements of Members’ Equity                             |
|           |   | Unaudited  Condensed Consolidated Statements of Cash Flows                                       |
|           |   | Notes to Unaudited  Condensed Consolidated Financial Statements                                  |
|           |   |                                                                                             |
| **Item  2.**   |   | **MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.** |
|           |   |                                                                                             |
| Item  3.       |   | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                      |
|           |   |                                                                                             |
| Item 4.        |   | CONTROLS AND  PROCEDURES                                                                         |
|           |   |                                                                                             |
| **PART II.**   |   | **OTHER INFORMATION**                                                                            |
|           |   |                                                                                             |
| Item 6.        |   | EXHIBITS AND  REPORTS ON FORM 8-K                                                                |
|           |   |                                                                                             |
| **SIGNATURES** |

 

1

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**PART I**

FINANCIAL INFORMATION

 

**Item 1. Financial Statements.**

 

ELDORADO RESORTS LLC

 

## **UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS**

(dollars in thousands)

** **
|                                             |   | **June 30,  2003** | ** ** | **December  31,  2002** | ** ** |
|--------------------------------------------------|--------|--------------------|------------|-------------------------|------------|
| **ASSETS**                                       |   |               | ** ** |                    | ** ** |
| Current assets:                                  |   |               |       |                    |       |
| Cash  and cash equivalents                       |   | $                  | 8,015      |                    | $          | 8,135 |   |
| Restricted  cash                                 |   | 152                |       | 152                     |       |
| Accounts  receivable, net                        |   | 3,028              |       | 3,148                   |       |
| Inventories                                      |   | 2,276              |       | 2,449                   |       |
| Prepaid  expenses                                |   | 1,460              |       | 2,190                   |       |
| Total  current assets                            |   | 14,931             |       | 16,074                  |       |
|                                             |   |               |       |                    |       |
| Investment  in joint ventures                    |   | 65,708             |       | 64,149                  |       |
|                                             |   |               |       |                    |       |
| Property  and equipment, net                     |   | 128,918            |       | 130,354                 |       |
|                                             |   |               |       |                    |       |
| Other  assets, net                               |   | 5,223              |       | 7,067                   |       |
| Total  assets                                    |   | $                  | 214,780    |                    | $          | 217,644 |   |
|                                             |   |               |       |                    |       |
| **LIABILITIES AND MEMBERS’ EQUITY**         |   |               |       |                    |       |
|                                             |   |               |       |                    |       |
| Current liabilities:                             |   |               |       |                    |       |
| Current  portion of long-term debt               |   | $                  | 357        |                    | $          | 344 |   |
| Current  portion of capital lease obligations    |   | 123                |       | 112                     |       |
| Accounts  payable                                |   | 3,560              |       | 4,190                   |       |
| Interest  payable                                |   | 3,275              |       | 3,372                   |       |
| Accrued  and other liabilities                   |   | 7,641              |       | 7,267                   |       |
| Due  to members and affiliates                   |   | 93                 |       | 238                     |       |
| Total  current liabilities                       |   | 15,049             |       | 15,523                  |       |
|                                             |   |               |       |                    |       |
| Long-term  debt, less current portion            |   | 78,656             |       | 84,691                  |       |
|                                             |   |               |       |                    |       |
| Capital  lease obligations, less current portion |   | 2                  |       | 63                      |       |
|                                             |   |               |       |                    |       |
| Other  liabilities                               |   | 622                |       | 634                     |       |
| Total  liabilities                               |   | 94,329             |       | 100,911                 |       |
|                                             |   |               |       |                    |       |
| Minority  interest                               |   | 5,700              |       | 5,638                   |       |
|                                             |   |               |       |                    |       |
| Members’  equity                            |   | 114,751            |       | 111,095                 |       |
| Total  liabilities and members’ equity      |   | $                  | 214,780    |                    | $          | 217,644 |   |

 

The accompanying notes are an integral part of these unaudited condensedconsolidated financial statements.

 

2

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ELDORADORESORTS LLC

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTSOF INCOME

(dollars in thousands)

 
|                                           |   | **Three  Months Ended   June 30,** |   | **Six Months  Ended   June 30,** |   |
|------------------------------------------------|--------|------------------------------------|--------|----------------------------------|--------|
|                                           |   | **2003**                           |   | **2002**                         |   | **2003** |   | **2002** |   |
|                                           |   |                               |   |                             |   |   |   |   |   |
| Operating Revenues:                            |   |                               |   |                             |   |   |   |   |   |
| Casino                                         |   | $                                  | 21,656 |                             | $      | 24,278 |   | $ | 43,960 |   | $ | 45,235 |   |
| Food, beverage and entertainment               |   | 10,219                             |   | 10,931                           |   | 20,483 |   | 21,666 |   |
| Hotel                                          |   | 4,351                              |   | 4,228                            |   | 7,987 |   | 7,666 |   |
| Other                                          |   | 1,394                              |   | 1,347                            |   | 2,661 |   | 2,570 |   |
|                                           |   | 37,620                             |   | 40,784                           |   | 75,091 |   | 77,137 |   |
| Less:   Promotional allowances            |   | (4,371                             | )      | (4,140                           | )      | (9,066 | ) | (8,288 | ) |
|                                           |   |                               |   |                             |   |   |   |   |   |
| Net operating revenues                         |   | 33,249                             |   | 36,644                           |   | 66,025 |   | 68,849 |   |
|                                           |   |                               |   |                             |   |   |   |   |   |
| Operating Expenses:                            |   |                               |   |                             |   |   |   |   |   |
| Casino                                         |   | 11,868                             |   | 12,096                           |   | 23,755 |   | 23,466 |   |
| Food, beverage and entertainment               |   | 7,141                              |   | 8,017                            |   | 13,988 |   | 15,441 |   |
| Hotel                                          |   | 1,851                              |   | 1,777                            |   | 3,408 |   | 3,459 |   |
| Other                                          |   | 375                                |   | 519                              |   | 757 |   | 893 |   |
| Selling, general and administrative            |   | 6,644                              |   | 6,553                            |   | 13,612 |   | 13,196 |   |
| Depreciation                                   |   | 2,741                              |   | 2,982                            |   | 5,558 |   | 6,065 |   |
|                                           |   |                               |   |                             |   |   |   |   |   |
| Total operating expenses                       |   | 30,620                             |   | 31,944                           |   | 61,078 |   | 62,520 |   |
|                                           |   |                               |   |                             |   |   |   |   |   |
| Equity in Income of Unconsolidated  Affiliates |   | 2,952                              |   | 2,478                            |   | 2,983 |   | 4,306 |   |
|                                           |   |                               |   |                             |   |   |   |   |   |
| Operating Income                               |   | 5,581                              |   | 7,178                            |   | 7,930 |   | 10,635 |   |
|                                           |   |                               |   |                             |   |   |   |   |   |
| Other Income (Expense):                        |   |                               |   |                             |   |   |   |   |   |
| Equity in loss of unconsolidated affiliate     |   | (75                                | )      | —                           |   | (153 | ) | — |   |
| Interest rate swap loss                        |   | —                             |   | —                           |   | (163 | ) | — |   |
| Gain (Loss) on bond repurchase                 |   | —                             |   | 35                               |   | (267 | ) | 35 |   |
| Gain on sale of land                           |   | 906                                |   | —                           |   | 906 |   | — |   |
| Interest expense, net                          |   | (2,213                             | )      | (2,579                           | )      | (4,500 | ) | (5,300 | ) |
|                                           |   |                               |   |                             |   |   |   |   |   |
| Total other income (expense)                   |   | (1,382                             | )      | (2,544                           | )      | (4,177 | ) | (5,265 | ) |
|                                           |   |                               |   |                             |   |   |   |   |   |
| Income Before Minority Interest                |   | 4,199                              |   | 4,634                            |   | 3,753 |   | 5,370 |   |
|                                           |   |                               |   |                             |   |   |   |   |   |
| Minority Interest                              |   | (104                               | )      | (90                              | )      | (97 | ) | (155 | ) |
|                                           |   |                               |   |                             |   |   |   |   |   |
| Net Income                                     |   | $                                  | 4,095  |                             | $      | 4,544 |   | $ | 3,656 |   | $ | 5,215 |   |

 

The accompanying notes are an integral partof these unaudited condensed consolidated financial statements.

 

3

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ELDORADO RESORTS LLC

 

UNAUDITEDCONDENSED CONSOLIDATED STATEMENTSOF MEMBERS’ EQUITY

(dollars in thousands)

 
| BALANCE, January 1, 2003 |   | $      | 111,095 |   |
|--------------------------|--------|--------|---------|--------|
|                     |   |   |    |
| Net Income               |   | 3,656  |    |
|                     |   |   |    |
| BALANCE, June 30, 2003   |   | $      | 114,751 |   |

 

The accompanying notes are an integral part of these unaudited condensedconsolidated financial statements.

 

4

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ELDORADO RESORTS LLC

 

UNAUDITEDCONDENSED CONSOLIDATED STATEMENTS OFCASH FLOWS

(dollars in thousands)

 
|                                                                                |   | **Six Months  Ended********June 30,** |   |
|-------------------------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                                                |   | **2003**                              |   | **2002** |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                               |   |                                  |   |   |   |
| Net income                                                                          |   | $                                     | 3,656  |   | $ | 5,215 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities:  |   |                                  |   |   |   |
| Depreciation                                                                        |   | 5,558                                 |   | 6,065 |   |
| Amortization of debt issue costs                                                    |   | 194                                   |   | 227 |   |
| Loss (Gain) on bond repurchase, net of unamortized  bond fees                       |   | 267                                   |   | (35 | ) |
| Equity in income of unconsolidated affiliates                                       |   | (2,830                                | )      | (4,306 | ) |
| Minority interest                                                                   |   | 97                                    |   | 155 |   |
| Loss on sale of property and equipment                                              |   | 14                                    |   | 4 |   |
| Gain on sale of land                                                                |   | (906                                  | )      | — |   |
| Decrease (Increase) in—                                                        |   |                                  |   |   |   |
| Restricted cash                                                                     |   | —                                |   | 206 |   |
| Accounts receivable, net                                                            |   | 120                                   |   | (105 | ) |
| Inventories                                                                         |   | 173                                   |   | 388 |   |
| Prepaid expenses                                                                    |   | 730                                   |   | 388 |   |
| Increase (Decrease) in—                                                        |   |                                  |   |   |   |
| Accounts payable                                                                    |   | (630                                  | )      | 49 |   |
| Interest payable                                                                    |   | (97                                   | )      | (7 | ) |
| Accrued and other liabilities, due to members and  affiliates and other liabilities |   | 216                                   |   | 1,045 |   |
|                                                                                |   |                                  |   |   |   |
| Net cash provided by operating activities                                           |   | 6,562                                 |   | 9,289 |   |
|                                                                                |   |                                  |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                               |   |                                  |   |   |   |
| Purchases of property and equipment                                                 |   | (4,208                                | )      | (1,952 | ) |
| Proceeds from sale of property and equipment                                        |   | 75                                    |   | 8 |   |
| Proceeds from sale of land                                                          |   | 2,463                                 |   | — |   |
| Distributions from unconsolidated affiliates                                        |   | 1,271                                 |   | 15,549 |   |
| Minority interest in distributions                                                  |   | (35                                   | )      | (589 | ) |
| Increase in joint venture investments                                               |   | —                                |   | (200 | ) |
| Increase in other assets, net                                                       |   | (30                                   | )      | — |   |
|                                                                                |   |                                  |   |   |   |
| Net cash provided by (used in) investing activities                                 |   | (464                                  | )      | 12,816 |   |
|                                                                                |   |                                  |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                               |   |                                  |   |   |   |
| Proceeds from long-term debt and capital leases                                     |   | 23,259                                |   | 14,548 |   |
| Principal payments on long-term debt and capital  leases                            |   | (21,476                               | )      | (33,452 | ) |
| Payment on bond repurchase                                                          |   | (8,001                                | )      | (1,930 | ) |
| Distributions                                                                       |   | —                                |   | (2,000 | ) |
|                                                                                |   |                                  |   |   |   |
| Net cash used in financing activities                                               |   | (6,218                                | )      | (22,834 | ) |
|                                                                                |   |                                  |   |   |   |
| DECREASE IN CASH AND CASH EQUIVALENTS                                               |   | (120                                  | )      | (729 | ) |
|                                                                                |   |                                  |   |   |   |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                    |   | 8,135                                 |   | 9,910 |   |
|                                                                                |   |                                  |   |   |   |
| CASH AND CASH EQUIVALENTS  AT END OF PERIOD                                         |   | $                                     | 8,015  |   | $ | 9,181 |   |
|                                                                                |   |                                  |   |   |   |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                   |   |                                  |   |   |   |
|                                                                                |   |                                  |   |   |   |
| Cash paid during period for interest                                                |   | $                                     | 4,577  |   | $ | 5,692 |   |

 

The accompanying notes are an integral part of theseunaudited condensed consolidated financial statements.

 

5

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ELDORADORESORTS LLC

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

**1.****             ****General**

 

Thecondensed consolidated financial statements include the accounts of EldoradoResorts, LLC (“Resorts”), a Nevada limited liability company, Eldorado CapitalCorp. (“Capital”), a Nevada Corporation and wholly-owned subsidiary of Resorts,and a majority owned subsidiary, Eldorado Limited Liability Company (“ELLC”)(together, the “Company”).  Capital wasestablished solely for the purpose of serving as a co-issuer of the 101⁄2% SeniorSubordinated Notes due 2006 issued by Resorts and Capital and, as such, Capitaldoes not have any operations, assets or revenues.  All significant intercompany accounts and transactions have beeneliminated in consolidation.

 

In the opinion of Management,the accompanying unaudited condensed consolidated financial statements containall adjustments, all of which are normal and recurring, necessary to presentfairly the financial position of the Company as of June 30, 2003, theresults of operations for the three and six month periods ended June 30, 2003and 2002 and cash flows for the six months ended June 30, 2003 and2002.  The results of operations forsuch periods are not necessarily indicative of the results to be expected for afull year.

 

Certain information andfootnote disclosures normally included in financial statements prepared inaccordance with generally accepted accounting principles have been condensed oromitted.  These condensed consolidatedfinancial statements should be read in conjunction with the consolidatedfinancial statements and notes thereto included in the Annual Report ofEldorado Resorts LLC and Eldorado Capital Corp. on Form 10-K for the year endedDecember 31, 2002.

 

***Use of Estimates***

 

The preparation of financialstatements in conformity with accounting principles generally accepted in theUnited States of America requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements andthe reported amounts of revenues and expenses during the reporting period.  Actual results could differ from theseestimates.

 

***Recently Issued Accounting Pronouncements***

 

In June 2001, the FinancialAccounting Standards Board (“FASB”) issued Statement of Financial AccountingStandards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations.”  This statement addresses financialaccounting and reporting for obligations associated with the retirement oftangible long-lived assets and the associated asset retirement costs.  This statement applies to all entities andto all legal obligations associated with the retirement of long-lived assetsthat result from the acquisition, construction, development and the normaloperation of a long-lived asset, except for certain obligations oflessees.  The Company adopted SFAS No.143 effective January 1, 2003.  Theadoption of this statement did not have a material impact on its financialcondition or results of operations.

 

In August 2001, the FASBissued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-LivedAssets.”  This statement requires oneaccounting model be used for long-lived assets to be disposed of by sale, whetherpreviously held and used or newly acquired and broadens the presentation ofdiscontinued operations to include additional disposal transactions.  This statement is effective for fiscal yearsand interim periods beginning after December 15, 2001.  The Company therefore adopted SFAS No. 144in January 2002.  The Companyperiodically evaluates its long-lived assets for impairment.  Adoption of SFAS No. 144 did not have amaterial impact on the Company’s financial condition or results of operations.

 

In April 2002, the FASBissued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64,Amendment of FASB Statement No. 13, and Technical Corrections.”  SFAS No. 145 rescinds SFAS No. 4, “ReportingGains and Losses from Extinguishment of Debt.” Under SFAS No. 4, all gains and losses from extinguishment of debt wererequired to be aggregated, if material, and classified as an extraordinaryitem, net of related income tax effect, on the statement of income.  SFAS No. 145 requires all gains and lossesfrom extinguishment of debt to be classified as extraordinary only if they meetthe criteria of Accounting Principles Board (“APB”) Opinion 30.  Any gain or loss on extinguishment of debtthat was classified as an extraordinary item in prior periods presented thatdoes not meet the criteria in APB Opinion 30 is required to bereclassified.  In May 2002, the Companyadopted this statement.  The fiscal 2003loss and 2002 gain on repurchase of bonds, net of unamortized bond fees, was$267,000 and $35,000, respectively.

 

6

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In June 2002, the FASB issuedSFAS No. 146, “Accounting for Costs Associated with Exit or DisposalActivities.”  This statement addressesfinancial accounting and reporting for costs associated with exit or disposalactivities and nullifies EITF No. 94-3, “Liability Recognition for CertainEmployee Termination Benefits and Other Costs to Exit an Activity (includingCertain Costs Incurred in a Restructuring).” This statement requires that a liability for a cost associated with anexit or disposal activity be recognized when the liability is incurred.  A fundamental conclusion reached by the FASBin SFAS No. 146 is that an entity’s commitment to a plan, by itself, doesnot create a present obligation to others that meets the definition of aliability.  This statement alsoestablishes that fair value is the objective for initial measurement of theliability.  The Company adopted SFAS No. 146effective January 1, 2003.  The adoptionof this statement did not have a material impact on its financial condition orresults of operations.

 

In November 2002, the FASB issued FASB InterpretationNo. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees,Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”).  FIN 45 expands the information disclosuresrequired by guarantors for obligations under certain types of guarantees. Italso requires initial recognition at fair value of a liability for suchguarantees.  The initial recognition andinitial measurement provisions of this Interpretation are applicable on aprospective basis to guarantees issued or modified after December 31, 2002,irrespective of the guarantor’s fiscal year-end.  The disclosure requirements in this Interpretation are effectivefor financial statements of interim or annual periods ending after December 15,2002.  Adoption of FIN 45 did not have amaterial impact on the Company’s financial condition or results of operations.

 

In January 2003, the FASB issued FASBInterpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN46”), which addresses consolidation by business enterprises where equityinvestors do not bear the residual economic risks and rewards.  These entities have been commonly referredto as “special-purpose entities”. Companies are required to apply the provisions of FIN 46 prospectivelyfor all variable interest entities created after January 31, 2003.  For public companies, all interests acquiredbefore February 1, 2003, must follow the new rules in accounting periodsbeginning after June 15, 2003.  Adoptionof FIN 46 is not expected to have a material impact on the Company’s financialcondition or results of operations.

 

In April 2003, the FASB issued SFAS 149, “Amendments of Statement 133on Derivative Instruments and Hedging Activities.”  This statement amends SFAS 133, “Accounting for DerivativeInstruments and Hedging Activities”, and clarifies financial accounting andreporting for derivative instruments, including certain derivative instrumentsembedded in other contracts and hedging activities under SFAS 133.  This statement is effective for contractsentered into or modified after June 30, 2003, except as stated below and forhedging relationships designated after June 30, 2003.  The provisions of this statement that relate to Statement 133Implementation Issues that have been effective for fiscal quarters that beganprior to June 15, 2003, should continue to be applied in accordance with theirrespective effective dates.  Theadoption of this statement is not expected to have a material impact on theCompany’s results of operations or financial position.

 

In May 2003, the FASB issued SFAS 150, “Accounting for CertainFinancial Instruments with Characteristics of both Liabilities andEquity.”  This statement establishesstandards for how an issuer classifies and measures certain financialinstruments with characteristics of both liabilities and equity.  Financial instruments that are within thescope of the statement, which previously were often classified as equity, mustnow be classified as liabilities.  Thisstatement is effective for financial instruments entered into or modified afterMay 31, 2003, and otherwise shall be effective at the beginning of the firstinterim period beginning after June 15, 2003. The adoption of this statement is not expected to have a material effecton the Company’s results of operations or financial position.

 

**2.****             ****Senior Subordinated Notes**

 

OnJuly 31, 1996, Resorts and Capital (the “Issuers”) sold $100,000,000 in aggregateprincipal amount of 101⁄2% Senior Subordinated Notes due 2006 (the “Notes”).  The Notes are joint and several obligationsof the Issuers.  The Notes mature onAugust 15, 2006 and bear interest at the rate of 101⁄2% per annum, payablesemi-annually in arrears on February 15 and August 15 of each year, commencingon February 15, 1997.  Pursuant to aRegistration Rights Agreement dated as of July 31, 1996, among the Issuers andthe Initial Purchasers party thereto, the Issuers filed a registrationstatement under the Securities Act of 1933, as amended (the “1933 Act”) withrespect to an offer to exchange the Notes, which were issued in reliance on anexemption from registration under the 1933 Act, for registered debt securitiesof the Issuers with terms identical to the Notes.  The exchange of the originally issued Notes for the registeredNotes was completed on February 26, 1997. The Company purchased $10.2 million, $2.0 million and $5.2 millionprincipal amount of the Notes on the open market in October 2001, June 2002,and August 2002, respectively.  InJanuary 2003, the Company purchased an additional $7.9 million principal amountof the Notes on the open market.

 

7

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**3.****             ****Long-Term Debt**

 
| Long-term debt consists of the following (in thousands):  |   |               |       |                    |       |
|-----------------------------------------------------------|--------|--------------------|------------|-------------------------|------------|
|                                                      |   |               |       |                    |       |
|                                                      |   | **June 30,  2003** |       | **December  31,  2002** |       |
|                                                      |   |               | ** ** |                    | ** ** |
| 101⁄2% Senior Subordinated Notes                       |   | $                  | 74,841     |                    | $          | 82,695 |   |
| Outstanding portion of reducing revolver credit  facility |   | 3,000              |       | 1,000                   |       |
| Notes payable to individuals                              |   | 1,172              |       | 1,340                   |       |
|                                                      |   | 79,013             |       | 85,035                  |       |
| Less—Current portion                                 |   | (357               | )          | (344                    | )          |
|                                                      |   | $                  | 78,656     |                    | $          | 84,691 |   |

 

The 101⁄2% Senior Subordinated Notes mature on August15, 2006 and bear interest at the rate of 101⁄2% per annum, payable semi-annuallyin arrears on February 15 and August 15 of each year.

 

The Company has a seniorsecured revolving credit facility of $40 million (the “New Credit Facility”).The amount of credit available pursuant to the New Credit Facility reduced to$36.8 million on June 30, 2003 and reduces by $1.6 million at the end of eachsubsequent quarter until March 31, 2006, when the facility terminates and anybalance then outstanding becomes due and payable.  Borrowings under the New Credit Facility bear interest, at theCompany’s option, at either (i) the greater of (a) the rate publicly announcedfrom time to time by Bank of America as its “Prime Rate” or (b) the FederalFunds Rate plus .50% (“Base Rate”) or (ii) a Eurodollar rate determined inaccordance with the New Credit Facility. As of June 30, 2003, the Eurodollar rate was 1.11% and the Base Rate was4.0%. The Eurodollar rate was 1.37% and the Base Rate was 4.25% as of December31, 2002. The effective rate of interest on borrowings under the New CreditFacility was 4.16% per annum as of June 30, 2003.

 

In January 2003, the Companypurchased $7.9 million principal amount of its 101⁄2% Notes on the openmarket.  The Company borrowed $8.0million under its New Credit Facility to facilitate the purchase.  The Notes were purchased at a premiumresulting in a loss of $267,000 after writing off unamortized fees relating tothe debt issue.

 

The notes payable toindividuals are due in monthly installments of $34,614 and $3,000, includingmonthly interest at 9% and prime plus 2% (6.0% at June 30, 2003), to August 14,2006 and May 16, 2004, respectively, when the principal balance is due. Thenotes are secured by real property.

 

The New Credit Facility andthe indenture relating to the 101⁄2% Notes contain various restrictive covenantsincluding the maintenance of certain financial ratios and limitations onadditional debt, disposition of property, mergers and similartransactions.  As of June 30, 2003, theCompany was in compliance with all of its covenants.

 

**4.****             ****Investment in JointVentures**

 

TheSilver Legacy was developed by the Circus and Eldorado Joint Venture (the“Silver Legacy Joint Venture”), which was formed pursuant to the Agreement ofJoint Venture of Circus and Eldorado Joint Venture dated as of March 1, 1994(the “Original Joint Venture Agreement”), between ELLC and Galleon, Inc.(“Mandalay Sub”).  Under the terms ofthe Original Joint Venture Agreement, ELLC and Mandalay Sub (each a “Partner”and, together, the “Partners”) each acquired a 50% interest in the Silver LegacyJoint Venture (each Partner’s “Percentage Interest”).  Each of the Partners was obligated to contribute cash or propertyto the Silver Legacy Joint Venture with a value approximating 15% of the totalbudgeted cost for developing and constructing the Silver Legacy. To satisfytheir respective contribution obligations, ELLC contributed the land on whichSilver Legacy was constructed, at an agreed value of $25 million, and $26.9million in cash, and Mandalay Sub contributed $51.9 million in cash. Inaddition, pursuant to the Original Joint Venture Agreement, Mandalay Sub’sparent corporation, Mandalay Resort Group, provided certain loans to the SilverLegacy Joint Venture relating to the development and construction of the SilverLegacy (the remaining balance of which was repaid in 1997) and also providedcredit support for a $230 million credit agreement originally entered into bythe Silver Legacy Joint Venture on May 30, 1995 (the “Original Silver LegacyCredit Agreement”) to fund the balance of the Silver Legacy’s development andconstruction costs.  In return, MandalayResort Group received from the Silver Legacy Joint Venture an annual fee equalto 1.5% of the average outstanding principal balance of such financing untilMarch 5, 2002.

 

8

 

OnMarch 5, 2002, the Partners executed a new amendment and restatement of theOriginal Joint Venture Agreement (as further amended in April 2002, the “NewJoint Venture Agreement”), certain terms of which are summarized below, and theSilver Legacy Joint Venture and its wholly-owned finance subsidiary, SilverLegacy Capital Corp., issued $160 million principal amount of 10 1/8% mortgagenotes due 2012 (the “Silver Legacy Notes”).  Concurrently with the issuance of the Silver Legacy Notes, theSilver Legacy Joint Venture (i) repaid the entire outstanding balance of theOriginal Silver Legacy Credit Agreement, (ii) entered into a new senior securedcredit facility comprised of a $20.0 million term loan facility that willamortize over a period of five years and a $20.0 million revolving facilitywith a five year maturity (the “New Silver Legacy Credit Agreement”), and (iii)made distributions of $10.0 million to ELLC and $20.0 million to Mandalay Sub,utilizing the balance of the net proceeds of the Silver Legacy Notes and $26.0million of borrowings under the New Silver Legacy Credit Agreement.  The New Silver Legacy Credit Agreement issecured by a first priority security interest in substantially all of theexisting and future assets (other than certain licenses which may not bepledged under applicable law) of the Silver Legacy Joint Venture and a firstpriority pledge of and security interest in all of the Partnership interests inthe Silver Legacy Joint Venture.  The SilverLegacy Notes are secured by a security interest in the same assets and pledgesof and security interest in the same Partnership interests which are junior tothe security interests and pledges securing the New Silver Legacy CreditAgreement.

 

Subject to any contractual restrictions to which theSilver Legacy Joint Venture is subject, including the indenture relating to theSilver Legacy Notes, and prior to the occurrence of a “Liquidating Event,” theSilver Legacy Joint Venture will be required by the New Joint Venture Agreementto make distributions to its Partners as follows:

 

(a) Tax distributions equal to the estimated taxableincome of the Silver Legacy Joint Venture allocable to each Partner multipliedby the greater of the maximum marginal federal income tax rate applicable toindividuals for such period or the maximum marginal federal income tax rateapplicable to corporations for such period (as of the date hereof both rateswere 35%); provided, however, that if the State of Nevada enacts an income tax(including any franchise tax based on income), the applicable tax rate for anytax distributions subsequent to the effective date of such income tax shall beincreased by the higher of the maximum marginal individual tax rate orcorporate income tax rate imposed by such tax (after reduction for the federaltax benefit for the deduction of state taxes, using the maximum marginalfederal, individual orcorporate rate, respectively).

 

(b)Annual distributions of remaining “Net Cash From Operations” in proportion tothe Percentage Interests of the Partners.

 

(c)Distributions of “Net Cash From Operations” in amounts or at times that differfrom those described in (a) and (b) above, provided in each case that bothPartners agree in writing to the distribution in advance thereof.

 

As defined in the New JointVenture Agreement, the term “Net Cash From Operations” means the gross cashproceeds received by the Silver Legacy Joint Venture, less the followingamounts: (i) cash operating expenses and payments of other expenses andobligations of the Silver Legacy Joint Venture, including interest andscheduled principal payments on Silver Legacy Joint Venture indebtedness,including indebtedness owed to the Partners, if any, (ii) all capitalexpenditures made by the Silver Legacy Joint Venture, and (iii) such reasonablereserves as the Partners deem necessary in good faith and in the best interestsof the Silver Legacy Joint Venture to meet anticipated future obligations andliabilities of the Silver Legacy Joint Venture (less any release of reserves previouslyestablished, as similarly determined).

 

Summarized balance sheet and results ofoperations for the Silver Legacy Joint Venture are as follows:

 

Summarizedbalance sheet information (in thousands):

 
|                                         |   | **June 30,  2003** |    | **December 31,  2002** |   |
|----------------------------------------------|--------|--------------------|---------|------------------------|--------|
|                                         |   |               |    |                   |   |
| Current  assets                              |   | $                  | 24,790  |                   | $      | 23,627 |   |
| Property and  equipment, net                 |   | 269,871            |    | 272,940                |   |
| Other  assets, net                           |   | 7,697              |    | 7,969                  |   |
| Total assets                                 |   | $                  | 302,358 |                   | $      | 304,536 |   |
|                                         |   |               |    |                   |   |
| Current  liabilities                         |   | $                  | 18,300  |                   | $      | 17,185 |   |
| Long-term  liabilities                       |   | 163,724            |    | 170,285                |   |
| Partners’  equity                       |   | 120,334            |    | 117,066                |   |
| Total  liabilities and partners’ equity |   | $                  | 302,358 |                   | $      | 304,536 |   |

 

9

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Summarizedresults of operations (in thousands):

 
|               |   | **Three  Months Ended********June 30,** |   | **Six Months  Ended********June 30,** |   |
|--------------------|--------|-----------------------------------------|--------|---------------------------------------|--------|
|               |   | **2003**                                |   | **2002**                              |   | **2003** |   | **2002** |   |
| Net revenues       |   | $                                       | 40,810 |                                  | $      | 41,337 |   | $ | 74,309 |   | $ | 77,707 |   |
| Operating expenses |   | (32,104                                 | )      | (32,288                               | )      | (61,605 | ) | (62,478 | ) |
| Operating income   |   | 8,706                                   |   | 9,049                                 |   | 12,704 |   | 15,229 |   |
| Other (expense)    |   | (3,234                                  | )      | (4,333                                | )      | (7,616 | ) | (7,101 | ) |
| Net income         |   | $                                       | 5,472  |                                  | $      | 4,716 |   | $ | 5,088 |   | $ | 8,128 |   |

 

EffectiveDecember 13, 2000, Resorts entered into an agreement to form TamarackCrossings, LLC and Tamarack Partners, LLC, each a Nevada limited liabilitycompany (collectively the “Tamarack Entities”), to develop, own and operateTamarack Junction (“Tamarack”), a small casino then being constructed in southReno, Nevada.  In May 2001, the TamarackEntities consummated a plan of merger with Tamarack Crossings, LLC being thesurviving entity, in which Resorts owns a 21.25% interest.  Resorts has a nontransferable option topurchase from Donald Carano, at a purchase price equal to his cost plus anyundistributed income attributable thereto, an additional 21.25% interest inTamarack Crossings, LLC which is exercisable until June 30, 2010. The businessand affairs of Tamarack are managed by four members of Tamarack Crossings, LLC,including Resorts, which has been designated “Chief Executive Manager” and isresponsible for overseeing the day-to-day operations of Tamarack. Resorts hasdesignated Gene Carano as its representative. Resorts’ capital contribution to Tamarack Crossings, LLC represents itsproportionate share of the total capital contributions of the members.  Additional capital contributions of themembers, including Resorts, may be required for certain purposes, including thepayment of operating costs and capital expenditures or the repayment of loans,to the extent such costs are not funded by prior capital contributions andearnings.  At June 30, 2003, Resorts’equity investment in Tamarack Crossings, LLC was $3.7 million.  The Company’s investment in Tamarack isaccounted for using the equity method of accounting.  Equity in income related to Tamarack for the six months endedJune 30, 2003 and 2002 was $439,000 and $243,000, respectively, and for thethree months ended June 30, 2003 and 2002 was $216,000 and $121,000,respectively.

 

EffectiveJuly 1, 2000, Resorts and Avereon Research LTD. (“ARL”) entered into anagreement to form MindPlay, LLC (the “MindPlay Entity”), for the purpose ofdeveloping, owning and marketing a sophisticated system which, if successfullycompleted, will permit the tracking and surveillance of pit gaming operations(“MindPlay”).  MindPlay is in thedevelopmental stage and there is no assurance that the system will ever besuccessfully developed and marketed. The MindPlay Entity, in which Resorts owns a 19% interest, is managed bya Board of Managers, which consists of three Managers designated by ARL and twoManagers designated by Resorts. At June 30, 2003, Resorts’ equity investment inthe MindPlay Entity was $0.9 million. Equity in loss related to MindPlay for the three and six months endedJune 30, 2003 was $75,000 and $153,000, respectively.  The Company’s investment in MindPlay is accounted for using theequity method of accounting.

 

TheCompany’s equity in earnings of the Silver Legacy Joint Venture and Tamarack isreported as a component of operating income since the Company operates in thesame line of business as the Silver Legacy and Tamarack, each with casinooperations.  The Company’s equity inearnings of MindPlay is reported as a component of non-operating income sinceMindPlay operates in a dissimilar line of business than the Company.

 

**5****.****             ****Certain Risks andUncertainties**

 

Asignificant portion of the Company’s revenues and operating income aregenerated from patrons who are residents of northern California.  A change in general economic conditions orthe extent and nature of casino gaming in California, Washington or Oregoncould adversely affect the Company’s operating results.  On September 10, 1999, California lawmakersapproved a constitutional amendment that would give Native American tribes theright to offer slot machines and a range of house-banked card games.  On March 7, 2000, California voters approvedthe constitutional amendment which legalized “Nevada-style” gaming on NativeAmerican reservations.

 

The United Auburn IndianCommunity (“UAIC”) has entered into a development and management agreement withan established gaming operator, Station Casinos, Inc., to develop and manage anapproximately $215 million, 200,000 square foot gaming and entertainmentfacility on a 49-acre site approximately 21 miles northeast of Sacramento.  This facility, Thunder Valley Casino, beganoperations on June 9, 2003.  ThroughJune 30, 2003, there was not a significant impact on our operating results,however, based on its size, proximity, and potential expansion capabilities, webelieve 

 

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Thunder Valley Casino could impact our operations in the future. Whilewe cannot predict the extent of the potential impact, it could be significant.

 

**6****.****             ****Subsequent Events**

 

On July 22, 2003, theGovernor of Nevada signed into law a new tax bill that provides for increasesin the taxes applicable to our operations. Based on our initial evaluation ofthe new Nevada tax law, we believe the full-year incremental impact on ouroperations will be less than $0.75 million.

 

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**Item2.  Management’s Discussion and Analysisof Financial Condition and Results of Operations.**

 

**General**

 

EldoradoResorts LLC (“Resorts”) was formed in June 1996 to be the successor to EldoradoHotel Associates Limited Partnership (the “Predecessor Partnership”) pursuantto an exchange of all the outstanding partnership interests in the PredecessorPartnership for membership interests in Resorts (the “Reorganization”).  The Reorganization was effective on July 1, 1996.  Resorts owns and operates the Eldorado Hotel& Casino (the “Eldorado”), a premier hotel/casino and entertainmentfacility in Reno, Nevada.  In additionto owning the Eldorado, Resorts’ 96% owned subsidiary, Eldorado LimitedLiability Company, a Nevada limited liability company (“ELLC”), owns a 50%interest in a joint venture (the “Silver Legacy Joint Venture”) which owns theSilver Legacy Resort Casino  (the“Silver Legacy”), a major themed hotel/casino located adjacent to the Eldorado.Resorts, ELLC and Eldorado Capital Corp. (“Capital”), a wholly-owned subsidiaryof Resorts, which holds no significant assets and conducts no businessactivity, are collectively referred to as the “Company.”

 

The Company accounts for itsinvestment in the Silver Legacy Joint Venture and two other smaller jointventures, Tamarack and MindPlay, utilizing the equity method ofaccounting.  MindPlay is currently inthe developmental stage.  The Company’sconsolidated net income includes its proportional share of the Silver LegacyJoint Venture’s, Tamarack’s, and MindPlay’s net income (loss) before taxes.

 

The following discussion ofthe Company’s operations relates to the Eldorado except as otherwise indicated.

 

# **Critical Accounting Policies**

 

Our discussion and analysis of our results ofoperations and financial condition that follows are based upon our condensedconsolidated financial statements, which have been prepared in accordance withaccounting principles generally accepted in the United States of America.  The preparation of these financialstatements requires that we apply significant judgment in defining theappropriate assumptions for calculating financial estimates.  By their nature, these judgments are subjectto an inherent degree of uncertainty. Our judgments are based on our historical experience, terms of existingcontracts, our observance of trends in the industry, information provided byour customers and information available from other outside sources, asappropriate.  Because of the uncertaintyinherent in these matters, there is no assurance that actual results will notdiffer from our estimates used in applying the following critical accountingpolicies.

 

*Property andEquipment and Other Long-Lived Assets*

 

Property and equipment is recorded at cost and is depreciatedover its estimated useful life. Judgments are made in determining estimated useful lives and salvagevalues of these assets.  The accuracy ofthese estimates affects the amount of depreciation expense recognized in ourfinancial results and whether we have a gain or loss on the disposal ofassets.  We review depreciationestimates and methods as new events occur, more experience is acquired, andadditional information is obtained that would possibly change our currentestimates.  At June 30, 2003, no eventsor changes in circumstances indicated that the carrying values of ourlong-lived assets may not be recoverable.

 

*Reserve forUncollectible Accounts Receivable*

 

We reserve an estimated amount for receivables thatmay not be collected.  Methodologies forestimating bad debt reserves range from specific reserves to variouspercentages applied to aged receivables. Historical collection rates areconsidered, as are customer relationships, in determining specific reserves.  As with many estimates, management must makejudgments about potential actions by third parties in establishing andevaluating our reserves for bad debts.

 

*Self InsuranceReserves*

 

The Eldorado is self insured for our group health andworkmens’ compensation programs.  Weutilize historical claims information provided by our third partyadministrators to make estimates for known pending claims as well as claimsthat have been incurred, but not reported as of the balance sheet date.  In order to mitigate our potential exposure,we have an individual claim stop loss policy on our group health claims and anaggregate stop loss policy on our workmens’ compensation claims.  If we become aware of significant claims ormaterial changes affecting our estimates, we would increase our reserves in theperiod in which we made such a determination and record the additional expense.

 

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# **Recent Developments**

 

A significant portion of theCompany’s revenues and operating income are generated from patrons who areresidents of northern California, and as such, our operations have beenadversely impacted by the growth in Native American gaming in northernCalifornia that has occurred to date. In addition to the existing gaming facilities, numerous Native Americantribes have announced that they are in the process of developing or areconsidering establishing large-scale hotel and gaming facilities in northernCalifornia.  The United Auburn IndianCommunity (“UAIC”) has entered into a development and management agreement withan established gaming operator, Station Casinos, Inc., to develop and manageThunder Valley Casino, an approximately $215 million, 200,000 square footgaming and entertainment facility on a 49-acre site approximately 21 milesnortheast of Sacramento.  Thunder ValleyCasino opened on June 9, 2003 and offers approximately 1,900 slot machines and100 table games, dining and entertainment amenities and parking for 3,000vehicles.  This project has been openapproximately two months, and subsequently, we cannot predict the potentialimpact on our operating results. However, based on its size and proximity, the impact could besignificant.

 

Approvals have been obtainedfor two public works projects in the downtown area of Reno.  The first project will lower the traintracks which run through Reno’s downtown district and separate the Eldorado andthe two adjoining properties from the rest of the downtown gamingfacilities.  Construction on thisproject, which commenced in early 2003, is expected to be completed in 2006 andwill be organized in such a manner that it will not prevent pedestrian orvehicular traffic from crossing the railroad tracks within the downtownarea.  The second project involves the constructionof a downtown special events center next to the National Bowling Stadium.  Construction of this project is expected tobegin in early 2004 and be completed by mid-2005.  At this time, we cannot determine the effect either of theseprojects will have on our operations.

 

On July 22, 2003, theGovernor of Nevada signed into law a new tax bill that provides for increasesin the taxes applicable to our operations. Based on our initial evaluation of the new Nevada tax law, we believethe full-year incremental impact on our operations will be less than $0.75million.

 

The following discussion ofthe Company’s operations relates to the Eldorado except as otherwise indicated.

 

**Three Months Ended June 30, 2003Compared to**

**Three Months Ended June 30, 2002**

 

# **Net Revenues**

 

Net revenues decreased by approximately $3.4 million,or 9.3%, to $33.2 million for the three months ended June 30, 2003 compared to$36.6 million for the same period in 2002. The decrease in net revenues resulted from decreases in casino, food andentertainment revenues.  Increasedcompetition from Native American gaming and a weak California economy continuedto pose a challenge for the three months ended June 30, 2003.  Our mid-week business benefited from theWomen’s International Bowling Congress (“WIBC”) tournament that was held in theReno area throughout the three months ended June 30, 2003.  The WIBC tournament ended in early July2003.  The National Bowling Stadium,located approximately one block from the Eldorado and Silver Legacy, has beenselected as the site of the Women’s International Bowling Congress and AmericanBowling Congress national championship bowling tournament through the year2009, providing Reno with a major bowling tournament two out of every threeyears through 2009.

 

Casino revenues decreased byapproximately $2.6 million, or 10.8%, to $21.7 million for the three monthsended June 30, 2003 compared to $24.3 million for the same period in 2002.  The decrease in casino revenues was due todecreases in games and slot volume and hold percentage as compared to theprevious period.

 

Food, beverage andentertainment revenues decreased by approximately $0.7 million, or 6.5%, to$10.2 million for the three months ended June 30, 2003 compared to $10.9million during the same period in 2002. The decrease was primarily due to areduction in food and entertainment revenue as a result of lower customercounts and lower showroom occupancy in the second quarter of 2003 as comparedto the same period in 2002.

 

Hotel revenues increased byapproximately $0.1 million, or 2.9%, to $4.4 million for the three months endedJune 30, 2003 compared to $4.2 million during the same period in 2002.  The increase was due primarily to anincrease in the Company’s average daily rate (“ADR”) to approximately $59 inthe second quarter of 2003 as compared to $57 in the second quarter of 2002while hotel occupancy remained at 92% for both the second quarter of 2003 and2002.  The

 

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 increase in ADR is primarilyrelated to the WIBC bowling tournament that was held at the National BowlingStadium in downtown Reno throughout the second quarter in 2003 as compared to2002 when Reno was without a major bowling tournament.  For the three months ended June 30, 2003,the hotel occupancy was affected by hotel remodeling which reduced the numberof available room nights by approximately 2,500.  Had some of these room nights been available on select weekends,the hotel would have been at capacity on these weekends.

 

Promotional allowances,expressed as a percentage of casino revenues, were 20.2% for the second quarterof 2003 compared to 17.1% for the same period in 2002.  This increase is primarily related toincreased redemption of complimentaries as a result of our customers utilizingthe enhanced “Club Eldorado” program. The Company enhanced its “Club Eldorado” program on July 1, 2002,allowing customers to view and redeem earned complimentaries throughout theproperty and offering discounts at the showroom and food outlets.  Management feels the enhanced program hasprovided additional customer loyalty and has added to its customer base.

 

**OperatingExpenses**

 

The Company’s operatingexpenses decreased by approximately $1.3 million, or 4.1%, to $30.6 million forthe three months ended June 30, 2003 from $31.9 million during the same periodin 2002. The decrease is primarily attributable to decreases in casino, foodand entertainment expenses.

 

Casino expenses decreased by$0.2 million, or 1.9%, to $11.9 million for the three months ended June 30,2003 from $12.1 million during the same period in 2002 due to decreases inpayroll expenses primarily in our slot department as a result of our use of newticket-in ticket-out slot machines. These machines were first introduced in early 2003 and as of June 30, 2003,we are utilizing approximately 350 of these machines.

 

Food, beverage andentertainment expenses decreased by $0.9 million, or 10.9%, to approximately$7.1 million for the three months ended June 30, 2003 from approximately $8.0million during the same period in 2002. The decrease is primarily due to lowerfood expenses, primarily due to lower restaurant customer counts, and lowershowroom professional services and advertising expenses.

 

Hotel expenses increased byapproximately $0.1 million, or 4.2%, to $1.9 million for the three months endedJune 30, 2003 from $1.8 million during the same period in 2002 primarily due toan increase in our internet marketing and advertising expenses.

 

## **Selling, General and Administrative Expenses**

 

Selling, general and administrativeexpenses increased by $0.1 million, or 1.4%, to approximately $6.6 million forthe three months ended June 30, 2003 as compared to the same period in 2002primarily as a result of an increase in travel, entertainment and utilityexpenses partially offset by a decrease in advertising expenses.

 

## **Depreciation**

 

Depreciation for the threemonths ended June 30, 2003 was $2.7 million compared to $3.0 million for thesame period in 2002, a decrease of 8.1%, due to some assets becoming fullydepreciated.

 

## **Equity in Income of Unconsolidated Affiliates**

 

Earnings from the Company’sunconsolidated affiliates, the Silver Legacy Joint Venture and Tamarack, forthe three months ended June 30, 2003 were $3.0 million as compared to $2.5million for the same period in 2002, an increase of approximately $0.5million.  Equity in income of the SilverLegacy Joint Venture increased approximately $364,000 for the three monthsended June 30, 2003 compared to the same period in 2002.  Equity in income of Tamarack increasedapproximately $95,000 for the three months ended June 30, 2003 compared to thesame period in 2002.

 

## **Other Income (Expense)**

 

Other income (expense) iscomprised of interest expense, equity in loss of unconsolidated affiliate, gain(loss) on repurchase of bonds and gain on sale of land.  Interest expense is net of capitalizedinterest and interest income.  For the 

 

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three months ended June 30, 2003, interest expense decreased byapproximately $0.4 million, or 14.2%, to $2.2 million for the three monthsended June 30, 2003 compared to $2.6 million for the same period in 2002primarily due to a decrease in the average outstanding borrowings and a loweraverage interest rate for the three months ended June 30, 2003 as compared tothe same period in 2002.  The decreasein average outstanding borrowings is partly due to the Company’s purchase of$2.0 million, $5.2 million and $7.9 million principal amount of its 101⁄2% Noteson the open market in June 2002, August 2002 and January 2003,respectively.  The Company recognized a$35,000 gain on the June 2002 purchase of 101⁄2% Notes, net of unamortized feesrelating to the debt issue.  The Companyalso recognized equity in loss of its unconsolidated affiliate of $75,000 forthe three months ended June 30, 2003. In June 2003, the Company sold its approximately 90 acres of landlocated in Verdi, Nevada, resulting in a gain of $906,000.

 

## **Net Income**

 

As a result of the factorsdescribed above, net income for the three months ended June 30, 2003 decreased$0.4 million, or 9.9% to $4.1 million compared to $4.5 million during the sameperiod in 2002.

 

**Six Months Ended June 30, 2003Compared to**

**Six Months Ended June 30, 2002**

 

## **Net Revenues**

 

Net revenues decreased by approximately $2.8 million,or 4.1%, to $66.0 million for the six months ended June 30, 2003 compared to$68.8 million for the same period in 2002. The decrease in net revenues duringthe 2003 period included decreases in casino, food and entertainment revenues.  Increased competition from Native American gaming and a weak Californiaeconomy continued to pose a challenge for the six months ended June 30, 2003.

 

Casino revenues decreased by approximately $1.3 million, or 2.8%, to$44.0 million for the six months ended June 30, 2003 compared to $45.2 millionfor the same period in 2002.  Thedecrease in casino revenues was primarily due to lower games and slot revenueas a result of decreased hold percentage for the first six months of 2003 ascompared to the same period in 2002.

 

Food, beverage and entertainment revenues decreased byapproximately $1.2 million, or 5.5%, to $20.5 million for the six months endedJune 30, 2003 compared to $21.7 million during the same period in 2002.  The decrease was primarily due to lowercustomer counts in the Eldorado’s restaurants and decreased showroom occupancyin the first six months of 2003 as compared to the same period in 2002.

 

Hotel revenues increased by approximately $0.3million, or 4.2%, to $8.0 million for the six months ended June 30, 2003compared to $7.7 million for the same period in 2002. The Eldorado’s averagedaily rate increased to approximately $55 for the six months ended June 30,2003 as compared to approximately $53 for the same period in 2002.  The hotel occupancy remained atapproximately 89% for both the 2003 and 2002 periods.  In each of the six month periods, hotel occupancy was impacted bya reduction in available room nights (3,400 in 2003 and 3,300 in 2002) due to ourhotel remodeling in 2003 and an energy retrofit in 2002.  The increase in ADR is primarily related to the WIBC bowlingtournament that was held at the National Bowling Stadium in downtown Renothroughout the second quarter in 2003 as compared to 2002 when Reno was withouta major bowling tournament.

 

Promotional allowances, expressed as a percentage ofcasino revenues, were 20.6% for the six months ended June 30, 2003 compared to18.3% for the same period in 2002.  Thisincrease is primarily related to increased redemption of complimentaries as aresult of our customers utilizing the enhanced “Club Eldorado” program.  The Company enhanced its “Club Eldorado” program on July 1, 2002,allowing customers to view and redeem earned complimentaries throughout theproperty and offering discounts at the showroom and food outlets.  Management feels the enhanced program hasprovided additional customer loyalty and has added to its customer base.

 

## **Operating Expenses**

 

The Company’s operating expenses decreased byapproximately $1.4 million, or 2.3%, to $61.1 million for the six months endedJune 30, 2003 from $62.5 million during the same period in 2002.  This decrease is primarily attributable to adecrease in food, entertainment and depreciation expenses.

 

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Casino expenses increased by $0.3 million, or 1.2%, to$23.8 million for the six months ended June 30, 2003 from $23.5 million duringthe same period in 2002, primarily due to increases in casino promotionspartially offset by a decrease in payroll expenses in the slot department as aresult of our new ticket-in ticket-out slot machines.

 

Food, beverage and entertainment expenses decreased byapproximately $1.5 million, or 9.4%, to $14.0 million for the six months endedJune 30, 2003 from approximately $15.4 million during the same period in2002.  The decrease is primarily due tolower food cost of sales and payroll expenditures, principally due to lowerrestaurant customer counts, and lower showroom professional services andadvertising expenses.

 

Hotel expenses decreased by approximately $0.1million, or 1.5%, to $3.4 million for the six months ended June 30, 2003compared to $3.5 million for the same period in 2002 primarily due to adecrease in payroll expenditures and hotel cost of sales.

 

**Selling, General andAdministrative Expenses**

 

Selling, general and administrative expenses increasedby $0.4 million, or 3.2%, to $13.6 million for the six months ended June 30,2003 compared to $13.2 million during the same period in 2002.  The increase was primarily due to increasesin travel, entertainment and utility expenses and general liability insurancepartially offset by a decrease in advertising expenses for the six months endedJune 30, 2003 as compared to the 2002 period.

 

## **Depreciation**

 

Depreciation for the six months ended June 30, 2003was $5.6 million compared to $6.1 million for the same period in 2002, adecrease of 8.3%, due to certain assets becoming fully depreciated.

 

## **Other Income (Expense)**

 

Other income (expense) iscomprised of interest expense, equity in loss of unconsolidated affiliate, gain(loss) on repurchase of bonds, interest rate swap loss and gain on sale ofland.  Interest expense is net ofcapitalized interest and interest income. For the six months ended June 30, 2003, interest expense decreased byapproximately $0.8 million, or 15.1%, to $4.5 million compared to $5.3 millionfor the same period in 2002 primarily due to a decrease in the averageoutstanding borrowings and a lower average interest rate for the six monthsended June 30, 2003 as compared to the same period in 2002.  The decrease in average outstandingborrowings is partly due to the Company’s purchase of $2.0 million, $5.2million and $7.9 million principal amount of its 101⁄2% Notes on the open marketin June 2002, August 2002 and January 2003, respectively.  The Company recognized a $267,000 loss and$35,000 gain on the January 2003 and June 2002 purchases, respectively, of 101⁄2%Notes, net of unamortized fees relating to the debt issue.  The Company also recognized a $0.2 millionloss from an interest rate swap agreement and equity in loss of itsunconsolidated affiliate of $153,000 in the 2003 period.  In June 2003, the Company sold itsapproximately 90 acres of land in Verdi, Nevada, resulting in a gain of$906,000.

 

**Net Income**

 

As a result of the factors described above, net incomefor the six months ended June 30, 2003 decreased by approximately $1.6 million,or 29.9%, to $3.7 million compared to $5.2 million during the same period in2002.

 

**Liquidity and Capital Resources**

 

TheCompany’s primary sources of liquidity and capital resources have been throughcash flow from operations, borrowings under various credit agreements and theissuance in July 1996 of $100 million in aggregate principal amount of the 101⁄2%Notes.  Since 1996, the Company hascompleted several expansion and remodeling projects, accounting for asignificant use of cash flow from operations and borrowed funds.  Net cash provided by operating activitieswas $6.6million for the six months ended June 30, 2003 compared to net cashprovided by operating activities of $9.3 million during the same period of theprior year.

 

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AtJune 30, 2003, the Company had $8.0 million of cash and cash equivalents and, after givingeffect to then outstanding borrowings and letter of credit, it hadapproximately $33.1million available pursuant to its New Credit Facility (as defined below) all ofwhich could be utilized under the most restrictive of our loan covenants.  The Company’s borrowing capacity under thosecovenants can fluctuate substantially from quarter to quarter depending uponour operating cash flow.  On July 17, 2001, the Company’s creditfacility was amended and restated (the “New Credit Facility”).  The New Credit Facility provides for asenior secured revolving credit facility of $40 million.  The amount of credit available pursuant tothe New Credit Facility reduced to $36.8 million on June 30, 2003 and reducesby $1.6 million at the end of each subsequent quarter until March 31, 2006,when the facility terminates and any balance then outstanding becomes due andpayable.  Borrowings under the NewCredit Facility bear interest, at the Company’s option, at either (i) the greaterof (a) the rate publicly announced from time to time by Bank of America as its“Prime Rate” or (b) the Federal Funds Rate plus .50% (“Base Rate”) or (ii) aEurodollar rate determined in accordance with the New Credit Facility.  The effective rate of interest on borrowingsunder the New Credit Facility at June 30, 2003 was 4.16% per annum.

 

The New Credit Facility issecured by substantially all of the Company’s real property.  The New Credit Facility includes variousrestrictions and other covenants including: (i) restrictions on the dispositionof property, (ii) restrictions on investments and acquisitions, (iii)restrictions on distributions to members of Resorts, (iv) restrictions on theincurrence of liens and negative pledges, (v) restrictions on the incurrence ofindebtedness and the issuance of guarantees, (vi) restrictions on transactionswith affiliates and, (vii) restrictions on annual capital expendituresincluding capital leases.  The NewCredit Facility also contains financial covenants including a maximum totaldebt to EBITDA ratio, a maximum senior debt to EBITDA ratio, a minimum fixedcharge coverage ratio and a minimum equity requirement.  As of June 30, 2003 the Company was incompliance with all provisions of the New Credit Facility.

 

As of June 30, 2003, theCompany had outstanding (i) $74.8 million in aggregate principal amount of the101⁄2% Notes, (ii) $3.0 million of borrowings and an additional $0.7 million ofletter of credit under the New Credit Facility and (iii) $0.8 million of otherlong-term debt (net of current portion).

 

Cash used in investingactivities for the six months ended June 30, 2003 was $0.5 million compared tocash provided by investing activities of $12.8 million for the six months endedJune 30, 2002.  In 2003, cash used ininvesting activities related primarily to capital expenditures relating to slotpurchases, our hotel remodeling and various equipment purchases.  In June 2003, the Company sold its 90 acresof land in Verdi, Nevada for approximately $2.5 million.  Distributions from unconsolidated affiliatesdecreased $14.3 million to $1.3 million for the six months ended June 30, 2003compared to $15.5 million for the same period in 2002 when ELLC received fromthe Silver Legacy Joint Venture a special distribution of $10.0 million at thetime of issuance of the Silver Legacy Notes and a $2.6 million prior year taxdistribution which was made on February 28, 2002.  Capital spending for the six months ended June 30, 2003 increased$2.3 million to $4.2 million compared to $2.0 million for the six months endedJune 30, 2002.

 

Cash used in financingactivities was $6.2 million for the six months ended June 30, 2003, compared to$22.8 million for the six months ended June 30, 2002.  For the six months ended June 30, 2003, the Company purchased$7.9 million principal amount of its 101⁄2% Notes facilitated by borrowing $8.0million under the New Credit Facility. For the six months ended June 30, 2002, the Company reduced theoutstanding portion of the New Credit Facility by $18.75 million primarilyutilizing the aforementioned distributions to ELLC from the Silver Legacy JointVenture in the aggregate amount of $12.6 million.

 

The Operating Agreement ofResorts dated June 28, 1996 obligates Resorts to distribute each year for aslong as it is not taxed as a corporation to each of its members an amount equal tosuch members’ allocable share of the taxable income of Resorts multiplied bythe highest marginal combined Federal, state and local income tax rateapplicable to individuals for that year. For the six months ended June 30, 2003, Resorts made no distributions toits members as compared to $2.0 million during the same period in 2002.

 

The Company’s future sourcesof liquidity are anticipated to be from its operating cash flow, fundsavailable from the New Credit Facility and capital lease financing for certainof its fixed asset purchases.  TheCompany’s anticipated uses of cash in the near term will be for capitalexpenditures and debt service.  Webelieve our capital resources are adequate to meet our obligations includingthe funding of our debt service and recurring capital expenditures.

 

## **Forward-Looking Statements**

 

Certain information includedin this report and other materials filed or to be filed by the Company with theSecurities and Exchange Commission (as well as information included in oralstatements or written statements made or 

 

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to be made by the Company) contains statements that are forward-lookingwithin the meaning of Section 27A of the Securities Act of 1933, as amended,and Section 21E of the Securities Exchange Act of 1934, as amended.  These statements can be identified by thefact that they do not relate strictly to historical or current facts.  The Company has based these forward-lookingstatements on its current expectations about future events.  These forward-looking statements includestatements with respect to the Company’s beliefs, plans, objectives, goals,expectations, anticipations, intentions, financial condition, results of operations,future performance and business, including, current and future operations andstatements that include the words “may”, “could”, “should”, “would”, “believe”,“expect”, “anticipate”, “estimate”, “intend”, “plan” or similar expressions.  Such statements include information relatingto capital spending, financing sources and the effects of regulation (includinggaming and tax regulation) and competition. Such forward-looking information involves important risks anduncertainties that could significantly affect anticipated results in the futureand, accordingly, such results may differ from those expressed in anyforward-looking statements made by or on behalf of the Company.  These risks and uncertainties include, butare not limited to dependence on existing management, leverage and debt service(including sensitivity to fluctuations in interest rates), domestic or globaleconomic conditions, changes in Federal or state tax laws or the administrationof such laws, changes in gaming laws or regulations (including the legalizationof gaming in certain jurisdictions), expansion of gaming on Native Americanlands (including such lands in California), risks and uncertainties relating toany development and construction activities and applications for licenses andapprovals under applicable laws and regulations (including gaming laws andregulations) and any further terrorist attacks similar to those that occurredSeptember 11, 2001.  Additionalinformation concerning potential factors that we think could cause our actualresults to differ materially from expected and historical results is includedunder the caption “Factors that May Affect the Company’s Future Results” inItem 1 of our annual report on Form 10-K for the year ended December 31, 2002.  This statement is provided as permitted bythe Private Securities Litigation Reform Act of 1995.

 

**Item3.  Quantitative and QualitativeDisclosures About Market Risk**

 

The Company is exposed tomarket risk in the form of fluctuations in interest rates and their potentialimpact upon its variable rate debt.  TheCompany evaluates its exposure to this market risk by monitoring interest ratesin the marketplace.  We do not utilizederivative financial instruments for trading purposes.  Other than changes in the amount of variablerate debt from time to time outstanding, there were no material quantitativechanges in the Company’s market risk exposure, or how risks were managed duringthe six months ended June 30, 2003.

 

The indebtedness outstandingunder the New Credit Facility as of June 30, 2003, representing all of theCompany’s then outstanding variable rate debt, totaled $3.0 million.  As of June 30, 2003, the interest rate onthe New Credit Facility was LIBOR plus 2.0%. Under the terms of our New Credit Facility, we may borrow up to $36.8million, subject to our compliance with applicable covenants.  To the extent we increase the amount of ourindebtedness under the New Credit Facility, we will increase our exposure tomarket risk in the form of fluctuations in interest rates.  For information concerning our New CreditFacility, see the discussion in Item 2 of this Part I under the caption“Liquidity and Capital Resources.”

 

**Item4.  Controls and Procedures**

 

## **An evaluation was performed bymanagement, with the participation of our Chief Executive Officer and ChiefFinancial Officer, of the effectiveness of the design and operation of ourdisclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and ChiefFinancial Officer have concluded that, as of June 30, 2003, our disclosurecontrols and procedures are effective to ensure that information required to bedisclosed in the reports that we file or submit under the Securities ExchangeAct of 1934 is recorded, processed, summarized and reported, within the timeperiods specified in applicable rules and forms of the Securities and ExchangeCommission.**

 

## **There have been no changes in ourinternal controls over financial reporting that occurred during the periodcovered by this report that have materially affected, or are reasonably likelyto materially affect, these internal controls over financial reporting.**

# ** **

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**PARTII.****                                                OTHERINFORMATION**

 

**Item 6.****           EXHIBITS AND REPORTS ONFORM 8-K**

 

**(a)****                     ****Exhibits**

 

The following exhibits are filed as part of thisreport.

** **
| **Exhibit Number** |   | **Description**                                                                       |
|--------------------|--------|---------------------------------------------------------------------------------------|
| 31.1               |   | Certification of Donald L.  Carano, Chief Executive Officer of Resorts and****Capital |
| 31.2               |   | **Certification  of Robert M. Jones, Chief Financial Officer of Resorts**             |
| 31.3               |   | **Certification  of Gene R. Carano, Chief Financial Officer of Capital**              |
| 32.1               |   | **Certification  of Donald L. Carano pursuant to 18 U.S.C. Section 1350**             |
| 32.2               |   | Certification of Robert M.  Jones****pursuant  to 18 U.S.C. Section 1350              |
| 32.3               |   | Certification of Gene R. Carano****pursuant to 18 U.S.C. Section 1350                 |

 

**(b)****                     ****Reports on Form 8-K**

 

No report on Form 8-K was filed during the periodcovered by this report.

 

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**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrantshave duly caused this report to be signed on their behalf by the undersignedthereunto duly authorized.

 
|                        |   | ELDORADO  RESORTS LLC                                                                           |
|-----------------------------|--------|-------------------------------------------------------------------------------------------------|
|                        |   |                                                                                            |
|                        |   |                                                                                            |
| Date:  August 12, 2003 | By:    |   /s/ Donald L. Carano                                                                     |   |
|                        |   | Donald  L. Carano                                                                               |
|                        |   | Chief  Executive Officer, President and  Presiding Manager                                      |
|                        |   |                                                                                            |
|                        |   |                                                                                            |
| Date:  August 12, 2003 | By:    |   /s/ Robert M. Jones                                                                      |   |
|                        |   | Robert  M. Jones                                                                                |
|                        |   | Chief  Financial Officer of  Eldorado Resorts LLC (Principal  Financial and Accounting Officer) |
|                        |   |                                                                                            |
|                        |   |                                                                                            |
|                        |   | ELDORADO  CAPITAL CORP.                                                                         |
|                        |   |                                                                                            |
|                        |   |                                                                                            |
| Date:  August 12, 2003 | By:    |   /s/ Donald L. Carano                                                                     |   |
|                        |   | Donald  L. Carano                                                                               |
|                        |   | President                                                                                       |
|                        |   |                                                                                            |
|                        |   |                                                                                            |
| Date:  August 12, 2003 | By:    |   /s/ Gene R. Carano                                                                       |   |
|                        |   | Gene  R. Carano                                                                                 |
|                        |   | Treasurer  (Principal Financial and  Accounting Officer)                                        |

 

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# **EXHIBIT INDEX**

 
| **Exhibit Number** |   | **Description**                                                                        |
|--------------------|--------|----------------------------------------------------------------------------------------|
|               |   |                                                                                   |
| 31.1               |   | **Certification  of Donald L. Carano, Chief Executive Officer of Resorts and Capital** |
|               |   |                                                                                   |
| 31.2               |   | **Certification  of Robert M. Jones, Chief Financial Officer of Resorts**              |
|               |   |                                                                                   |
| 31.3               |   | **Certification  of Gene R. Carano, Chief Financial Officer of Capital**               |
|               |   |                                                                                   |
| 32.1               |   | **Certification  of Donald L. Carano** pursuant to 18 U.S.C. Section 1350              |
|               |   |                                                                                   |
| 32.2               |   | Certification of Robert M. Jones****pursuant  to 18 U.S.C. Section 1350                |
|               |   |                                                                                   |
| 32.3               |   | Certification of Gene R. Carano****pursuant to 18 U.S.C. Section 1350                  |

 

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