**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 March 31, 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  Nevada**                                                                  |   | **88-0115550  88-0367075** |
| (State or  other jurisdiction of  incorporation 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 May 13,2003: 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     |
|           |
| CERTIFICATIONS |

 

1

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**PART I******FINANCIALINFORMATION

**Item 1.  Financial Statements.**

 

ELDORADORESORTS LLC

 

UNAUDITED CONDENSED CONSOLIDATED BALANCESHEETS(dollars in thousands)

 
|                                             |   | **March 31,  2003** |       | **December 31,  2002** |       |
|--------------------------------------------------|--------|---------------------|------------|------------------------|------------|
| **ASSETS**                                       |   |                | ** ** |                   | ** ** |
| Current assets:                                  |   |                | ** ** |                   | ** ** |
| Cash and cash equivalents                        |   | $                   | 7,095      |                   | $          | 8,135 |   |
| Restricted cash                                  |   | 152                 |       | 152                    |       |
| Accounts receivable, net                         |   | 3,136               |       | 3,148                  |       |
| Inventories                                      |   | 2,196               |       | 2,449                  |       |
| Prepaid expenses                                 |   | 1,862               |       | 2,190                  |       |
| Total current assets                             |   | 14,441              |       | 16,074                 |       |
|                                             |   |                |       |                   |       |
| Investment in joint ventures                     |   | 63,826              |       | 64,149                 |       |
|                                             |   |                |       |                   |       |
| Property and equipment, net                      |   | 129,671             |       | 130,354                |       |
|                                             |   |                |       |                   |       |
| Other assets, net                                |   | 6,830               |       | 7,067                  |       |
| Total assets                                     |   | $                   | 214,768    |                   | $          | 217,644 |   |
|                                             |   |                |       |                   |       |
| **LIABILITIES AND  MEMBERS’ EQUITY**        |   |                |       |                   |       |
|                                             |   |                |       |                   |       |
| Current liabilities:                             |   |                |       |                   |       |
| Current portion of long-term  debt               |   | $                   | 352        |                   | $          | 344 |   |
| Current portion of capital  lease obligations    |   | 121                 |       | 112                    |       |
| Accounts payable                                 |   | 4,145               |       | 4,190                  |       |
| Interest payable                                 |   | 1,101               |       | 3,372                  |       |
| Accrued and other liabilities                    |   | 7,805               |       | 7,267                  |       |
| Due to members and affiliates                    |   | 48                  |       | 238                    |       |
| Total current liabilities                        |   | 13,572              |       | 15,523                 |       |
|                                             |   |                |       |                   |       |
| Long-term debt, less current  portion            |   | 84,246              |       | 84,691                 |       |
|                                             |   |                |       |                   |       |
| Capital lease obligations, less  current portion |   | 34                  |       | 63                     |       |
|                                             |   |                |       |                   |       |
| Other liabilities                                |   | 630                 |       | 634                    |       |
| Total liabilities                                |   | 98,482              |       | 100,911                |       |
|                                             |   |                |       |                   |       |
| Minority interest                                |   | 5,631               |       | 5,638                  |       |
|                                             |   |                |       |                   |       |
| Members’ equity                             |   | 110,655             |       | 111,095                |       |
| Total liabilities and members’  equity      |   | $                   | 214,768    |                   | $          | 217,644 |   |

 

The accompanying notes are an integralpart of these unaudited condensed consolidated financial statements.

 

2

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ELDORADO RESORTS LLC

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTSOF INCOME(dollars in thousands)

 
|                                           |   | **Three Months Ended********March 31,** |   |
|------------------------------------------------|--------|-----------------------------------------|--------|
|                                           |   | **2003**                                |   | **2002** |   |
| Operating Revenues:                            |   |                                    |   |   |   |
| Casino                                         |   | $                                       | 22,303 |   | $ | 20,957 |   |
| Food, beverage and  entertainment              |   | 10,264                                  |   | 10,735 |   |
| Hotel                                          |   | 3,636                                   |   | 3,438 |   |
| Other                                          |   | 1,267                                   |   | 1,223 |   |
|                                           |   | 37,470                                  |   | 36,353 |   |
| Less:  Promotional allowances             |   | (4,695                                  | )      | (4,148 | ) |
|                                           |   |                                    |   |   |   |
| Net operating revenues                         |   | 32,775                                  |   | 32,205 |   |
|                                           |   |                                    |   |   |   |
| Operating Expenses:                            |   |                                    |   |   |   |
| Casino                                         |   | 11,887                                  |   | 11,370 |   |
| Food, beverage and  entertainment              |   | 6,847                                   |   | 7,424 |   |
| Hotel                                          |   | 1,557                                   |   | 1,682 |   |
| Other                                          |   | 382                                     |   | 373 |   |
| Selling, general and  administrative           |   | 6,968                                   |   | 6,643 |   |
| Depreciation                                   |   | 2,817                                   |   | 3,083 |   |
|                                           |   |                                    |   |   |   |
| Total operating expenses                       |   | 30,458                                  |   | 30,575 |   |
|                                           |   |                                    |   |   |   |
| Equity in Income of  Unconsolidated Affiliates |   | 31                                      |   | 1,828 |   |
|                                           |   |                                    |   |   |   |
| Operating Income                               |   | 2,348                                   |   | 3,458 |   |
|                                           |   |                                    |   |   |   |
| Other Income (Expense):                        |   |                                    |   |   |   |
| Equity in loss of  unconsolidated affiliate    |   | (78                                     | )      | — |   |
| Interest rate swap loss                        |   | (163                                    | )      | — |   |
| Loss on bond repurchase                        |   | (267                                    | )      | — |   |
| Interest expense, net                          |   | (2,287                                  | )      | (2,721 | ) |
|                                           |   |                                    |   |   |   |
| Total other income (expense)                   |   | (2,795                                  | )      | (2,721 | ) |
|                                           |   |                                    |   |   |   |
| Income Before Minority Interest                |   | (447                                    | )      | 737 |   |
|                                           |   |                                    |   |   |   |
| Minority Interest                              |   | 7                                       |   | (65 | ) |
|                                           |   |                                    |   |   |   |
| Net Income (Loss)                              |   | $                                       | (440   | ) | $ | 672 |   |

 

The accompanying notes are an integralpart of 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 Loss                 |   | (440   | )       |
|                     |   |   |    |
| BALANCE, March 31, 2003  |   | $      | 110,655 |   |

 

The accompanying notes are an integralpart of these unaudited condensed consolidated financial statements.

 

4

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ELDORADO RESORTS LLC

 

UNAUDITEDCONDENSED CONSOLIDATED STATEMENTS OFCASH FLOWS(dollars in thousands)

 
|                                                                                      |   | **Three Months Ended********March 31,** |   |
|-------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                                                      |   | **2003**                                |   | **2002** |   |
| CASH FLOWS FROM OPERATING  ACTIVITIES:                                                    |   |                                    |   |   |   |
| Net Income (Loss)                                                                         |   | $                                       | (440   | ) | $ | 672 |   |
| Adjustments to reconcile net  income (loss) to net cash provided by operating activities: |   |                                    |   |   |   |
| Depreciation                                                                              |   | 2,817                                   |   | 3,083 |   |
| Amortization of debt issue  costs                                                         |   | 98                                      |   | 113 |   |
| Loss on bond repurchase                                                                   |   | 267                                     |   | — |   |
| Equity in (income) loss of  unconsolidated affiliates                                     |   | 47                                      |   | (1,828 | ) |
| Minority interest                                                                         |   | (7                                      | )      | 65 |   |
| Loss on sale of property and  equipment                                                   |   | 17                                      |   | 12 |   |
| Decrease (Increase) in—                                                              |   |                                    |   |   |   |
| Restricted cash                                                                           |   | —                                  |   | 206 |   |
| Accounts receivable, net                                                                  |   | 12                                      |   | 513 |   |
| Inventories                                                                               |   | 253                                     |   | 419 |   |
| Prepaid expenses                                                                          |   | 328                                     |   | (300 | ) |
| (Decrease) Increase in—                                                              |   |                                    |   |   |   |
| Accounts payable                                                                          |   | (45                                     | )      | 120 |   |
| Interest payable                                                                          |   | (2,271                                  | )      | (2,602 | ) |
| Accrued and other liabilities,  due to members and affiliates and other liabilities       |   | 344                                     |   | 1,471 |   |
|                                                                                      |   |                                    |   |   |   |
| Net cash provided by operating  activities                                                |   | 1,420                                   |   | 1,944 |   |
|                                                                                      |   |                                    |   |   |   |
| CASH FLOWS FROM INVESTING  ACTIVITIES:                                                    |   |                                    |   |   |   |
| Purchases of property and  equipment                                                      |   | (2,219                                  | )      | (1,154 | ) |
| Proceeds from sale of property  and equipment                                             |   | 68                                      |   | — |   |
| Distributions from  unconsolidated affiliates                                             |   | 276                                     |   | 13,842 |   |
| Minority interest in  distributions                                                       |   | —                                  |   | (526 | ) |
| Decrease in other assets, net                                                             |   | 19                                      |   | — |   |
|                                                                                      |   |                                    |   |   |   |
| Net cash provided by (used in)  investing activities                                      |   | (1,856                                  | )      | 12,162 |   |
|                                                                                      |   |                                    |   |   |   |
| CASH FLOWS FROM FINANCING  ACTIVITIES:                                                    |   |                                    |   |   |   |
| Proceeds from long-term debt  and capital leases                                          |   | 15,509                                  |   | 9,541 |   |
| Principal payments on long-term  and capital leases                                       |   | (8,112                                  | )      | (24,350 | ) |
| Payment on bond repurchase                                                                |   | (8,001                                  | )      | — |   |
|                                                                                      |   |                                    |   |   |   |
| Net cash used in financing  activities                                                    |   | (604                                    | )      | (14,809 | ) |
|                                                                                      |   |                                    |   |   |   |
| DECREASE IN CASH AND CASH  EQUIVALENTS                                                    |   | (1,040                                  | )      | (703 | ) |
|                                                                                      |   |                                    |   |   |   |
| CASH AND CASH EQUIVALENTS AT  BEGINNING OF PERIOD                                         |   | 8,135                                   |   | 9,910 |   |
|                                                                                      |   |                                    |   |   |   |
| CASH AND CASH EQUIVALENTS AT  END OF PERIOD                                               |   | $                                       | 7,095  |   | $ | 9,207 |   |
|                                                                                      |   |                                    |   |   |   |
| SUPPLEMENTAL DISCLOSURE OF CASH  FLOW INFORMATION:                                        |   |                                    |   |   |   |
|                                                                                      |   |                                    |   |   |   |
| Cash paid during period for  interest                                                     |   | $                                       | 4,458  |   | $ | 5,510 |   |

 

The accompanying notes are an integralpart of these unaudited condensed consolidated financial statements.

 

5

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ELDORADO RESORTS LLC

 

NOTES TO UNAUDITED CONDENSEDCONSOLIDATED 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 ofResorts, and a majority owned subsidiary, Eldorado Limited Liability Company(“ELLC”) (together, the “Company”). Capital was established solely for the purpose of serving as a co-issuerof the 101⁄2% Senior Subordinated Notes due 2006 issued by Resorts and Capitaland, as such, Capital does not have any operations, assets or revenues.  All significant intercompany accounts andtransactions have been eliminated in consolidation.

 

Inthe opinion of Management, the accompanying unaudited condensed consolidatedfinancial statements contain all adjustments, all of which are normal andrecurring, necessary to present fairly the financial position of the Company asof March 31, 2003 and the results of operations and cash flows for the threemonth periods ended March 31, 2003 and 2002. The results of operations for such periods are not necessarilyindicative of the results to be expected for a full year.

 

Certaininformation and footnote disclosures normally included in financial statementsprepared in accordance with generally accepted accounting principles have beencondensed or omitted.  These condensedconsolidated financial statements should be read in conjunction with theconsolidated financial statements and notes thereto included in the AnnualReport of Eldorado Resorts LLC and Eldorado Capital Corp. on Form 10-K for theyear ended December 31, 2002.

 

***Use ofEstimates***

 

Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting period.  Actualresults could differ from these estimates.

 

***Recently Issued Accounting Pronouncements***

 

InJune 2001, the Financial Accounting Standards Board (“FASB”) issued Statementof Financial Accounting Standards (“SFAS”) No. 143, “Accounting for AssetRetirement Obligations.”  This statementaddresses financial accounting and reporting for obligations associated withthe retirement of tangible long-lived assets and the associated assetretirement costs.  This statementapplies to all entities and to all legal obligations associated with theretirement of long-lived assets that result from the acquisition, construction,development and the normal operation of a long-lived asset, except for certainobligations of lessees.  The Companyadopted SFAS No. 143 effective January 1, 2003.  The adoption of this statement did not have a material impact onits financial condition or results of operations.

 

InAugust 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment orDisposal of Long-Lived Assets.”  Thisstatement requires one accounting model be used for long-lived assets to bedisposed of by sale, whether previously held and used or newly acquired andbroadens the presentation of discontinued operations to include additionaldisposal transactions.  This statementis effective for fiscal years and interim periods beginning after December 15,2001.  The Company therefore adoptedSFAS No. 144 in January 2002.  TheCompany periodically 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.

 

InApril 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4,44, and 64, Amendment of FASB Statement No. 13, and TechnicalCorrections.”  SFAS No. 145 rescindsSFAS No. 4, “Reporting Gains and Losses from Extinguishment of Debt.”  Under SFAS No. 4, all gains and losses fromextinguishment of debt were required to be aggregated, if material, andclassified as an extraordinary item, net of related income tax effect, on thestatement of income.  SFAS No. 145requires all gains and losses from extinguishment of debt to be classified asextraordinary only if they meet the criteria of Accounting Principles Board(“APB”) Opinion 30.  Any gain or loss onextinguishment of debt that was classified as an extraordinary item in priorperiods presented that does not meet the criteria in APB Opinion 30 shall bereclassified.  In May 2002, the Companyadopted this statement.  The fiscal 2003loss on repurchase of bonds, net of unamortized bond fees, was $267,000.

 

6

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InJune 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated withExit or Disposal Activities.”  Thisstatement addresses financial accounting and reporting for costs associatedwith exit or disposal activities and nullifies EITF No. 94-3, “LiabilityRecognition for Certain Employee Termination Benefits and Other Costs to Exitan Activity (including Certain Costs Incurred in a Restructuring).”  This statement requires that a liability fora cost associated with an exit or disposal activity be recognized when theliability is incurred.  A fundamentalconclusion reached by the FASB in SFAS No. 146 is that an entity’s commitmentto a plan, by itself, does not create a present obligation to others that meetsthe definition of a liability.  Thisstatement also establishes that fair value is the objective for initialmeasurement of the liability.  The Companyadopted SFAS No. 146 effective January 1, 2003.  The adoption of this statement did not have a material impact onits financial condition or results of operations.

 

In November 2002, the FASB issued FASBInterpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements forGuarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN45”).  FIN 45 expands the informationdisclosures required by guarantors for obligations under certain types ofguarantees. It also requires initial recognition at fair value of a liabilityfor such guarantees.  The initial recognitionand initial 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.

 

InJanuary 2003, the FASB issued FASB Interpretation No. 46, “Consolidation ofVariable Interest Entities” (“FIN 46”), which addresses consolidation bybusiness enterprises where equity investors do not bear the residual economicrisks and rewards.  These entities havebeen commonly referred to as “special-purpose entities”.  Companies are required to apply theprovisions of FIN 46 prospectively for all variable interest entities createdafter January 31, 2003.  For publiccompanies, all interests acquired before February 1, 2003, must follow the newrules in accounting periods beginning after June 15, 2003.  The Company has not yet evaluated the impactFIN 46 is expected to have on the Company’s financial condition or results ofoperations.

 

**2.****                                     ****Senior SubordinatedNotes**

 

OnJuly 31, 1996, Resorts and Capital (the “Issuers”) sold $100,000,000 inaggregate principal amount of 101⁄2% Senior Subordinated Notes due 2006 (the“Notes”).  The Notes are joint andseveral obligations of the Issuers.  TheNotes mature on August 15, 2006 and bear interest at the rate of 101⁄2% perannum, payable semi-annually in arrears on February 15 and August 15 of eachyear, commencing on February 15, 1997. Pursuant to a Registration Rights Agreement dated as of July 31, 1996,among the Issuers and the Initial Purchasers party thereto, the Issuers filed aregistration statement under the Securities Act of 1933, as amended (the “1933Act”) with respect to an offer to exchange the Notes, which were issued inreliance on an exemption from registration under the 1933 Act, for registereddebt securities of the Issuers with terms identical to the Notes.  The exchange of the originally issued Notesfor the registered Notes was completed on February 26, 1997.  The Company purchased $10.2 million, $2.0million and $5.2 million principal amount of the Notes on the open market inOctober 2001, June 2002, and August 2002, respectively.  In January 2003, the Company purchased anadditional $7.9 million principal amount of the Notes on the open market.

 

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

 

Long-termdebt consists of the following (in thousands):

 
|                                                      |   | **March 31,  2003** |       | **December 31,  2002** |       |
|-----------------------------------------------------------|--------|---------------------|------------|------------------------|------------|
|                                                      |   |                | ** ** |                   | ** ** |
| 101⁄2% Senior Subordinated Notes                       |   | $                   | 74,841     |                   | $          | 82,695 |   |
| Outstanding portion of reducing  revolver credit facility |   | 8,500               |       | 1,000                  |       |
| Notes payable to individuals                              |   | 1,257               |       | 1,340                  |       |
|                                                      |   | 84,598              |       | 85,035                 |       |
| Less-Current portion                                      |   | (352                | )          | (344                   | )          |
|                                                      |   | $                   | 84,246     |                   | $          | 84,691 |   |

 

7

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The101⁄2% Senior Subordinated Notes mature on August 15, 2006 and bear interest atthe rate of 101⁄2% per annum, payable semi-annually in arrears on February 15 andAugust 15 of each year.

 

TheCompany has a senior secured revolving credit facility of $40 million (the “NewCredit Facility”). The amount of credit available pursuant to the New CreditFacility reduced to $38.4 million on March 31, 2003 and reduces by $1.6 millionat the end of each subsequent quarter until March 31, 2006, when the facilityterminates and any balance then outstanding becomes due and payable.  Borrowings under the New Credit Facilitybear interest, at the Company’s option, at either (i) the greater of (a) therate publicly announced from time to time by Bank of America as its “PrimeRate” or (b) the Federal Funds Rate plus .50% (“Base Rate”) or (ii) aEurodollar rate determined in accordance with the New Credit Facility.  As of March 31, 2003, the Eurodollar ratewas 1.31% and the Base Rate was 4.25%. The Eurodollar rate was 1.37% and theBase Rate was 4.25% as of December 31, 2002. The effective rate of interest onborrowings under the New Credit Facility was 3.67% per annum as of March 31,2003.

 

InJanuary 2003, the Company purchased $7.9 million principal amount of its 101⁄2%Notes on the open market.  The Companyborrowed $8.0 million 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.

 

Thenotes payable to individuals are due in monthly installments of $34,614 and$3,000, including monthly interest at 9% and prime plus 2% (6.25% at March 31,2003), to August 14, 2006 and May 16, 2004, respectively, when the principalbalance is due. The notes are secured by real property.

 

                                                The NewCredit Facility and the indenture relating to the 101⁄2% Notes contain variousrestrictive covenants including the maintenance of certain financial ratios andlimitations on additional debt, disposition of property, mergers and similartransactions.  As of March 31, 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 SilverLegacy Joint Venture (each Partner’s “Percentage Interest”).  Each of the Partners was obligated tocontribute cash or property to the Silver Legacy Joint Venture with a valueapproximating 15% of the total budgeted cost for developing and constructingthe Silver Legacy. To satisfy their respective contribution obligations, ELLCcontributed the land on which Silver Legacy was constructed, at an agreed valueof $25 million, and $26.9 million in cash, and Mandalay Sub contributed $51.9million in cash. In addition, pursuant to the Original Joint Venture Agreement,Mandalay Sub’s parent corporation, Mandalay Resort Group, provided certainloans to the Silver Legacy Joint Venture relating to the development andconstruction of the Silver Legacy (the remaining balance of which was repaid in1997) and also provided credit support for a $230 million credit agreementoriginally entered into by the Silver Legacy Joint Venture on May 30, 1995 (the“Original Silver Legacy Credit Agreement”) to fund the balance of the SilverLegacy’s development and construction costs. In return, Mandalay Resort Group received from the Silver Legacy JointVenture an annual fee equal to 1.5% of the average outstanding principal balanceof such financing until March 5, 2002.

 

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 101/8% mortgage notes due 2012 (the “SilverLegacy Notes”).  Concurrently with theissuance of the Silver Legacy Notes, the Silver Legacy Joint Venture (i) repaidthe entire outstanding balance of the Original Silver Legacy Credit Agreement,(ii) entered into a new senior secured credit facility comprised of a $20.0million term loan facility that will amortize over a period of five years and a$20.0 million revolving facility with a five year maturity (the “New SilverLegacy Credit Agreement”), and (iii) made distributions of $10.0 million toELLC and $20.0 million to Mandalay Sub, utilizing the balance of the netproceeds of the Silver Legacy Notes and $26.0 million of borrowings under theNew Silver Legacy Credit Agreement.  TheNew Silver Legacy Credit Agreement is secured by a first priority securityinterest in substantially all of the existing and future assets (other thancertain licenses which may not be pledged under applicable law) of the SilverLegacy Joint Venture and a first priority pledge of and security interest inall of the Partnership interests in the Silver Legacy Joint Venture.  The Silver Legacy Notes are secured by asecurity interest in the same assets and pledges of and security interest inthe same Partnership interests which are junior to the security interests andpledges securing the New Silver Legacy Credit Agreement.

 

8

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Subject to any contractual restrictions towhich the Silver Legacy Joint Venture is subject, including the indenturerelating to the Silver Legacy Notes, and prior to the occurrence of a“Liquidating Event,” the Silver Legacy Joint Venture will be required by theNew Joint Venture Agreement to make distributions to its Partners as follows:

 

(a) Tax distributions equal to the estimatedtaxable income of the Silver Legacy Joint Venture allocable to each Partnermultiplied by the greater of the maximum marginal federal income tax rateapplicable to individuals for such period (as of the date hereof, 38.6%) or themaximum marginal federal income tax rate applicable to corporations for suchperiod (as of the date hereof, 35%); provided, however, that if the State ofNevada enacts an income tax (including any franchise tax based on income), theapplicable tax rate for any tax distributions subsequent to the effective dateof such income tax shall be increased by the higher of the maximum marginalindividual tax rate or corporate income tax rate imposed by such tax (afterreduction for the federal tax benefit for the deduction of state taxes, usingthe maximum marginal federal, individual or corporate 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.

 

Asdefined in the New Joint Venture Agreement, the term “Net Cash From Operations”means the gross cash proceeds received by the Silver Legacy Joint Venture, lessthe following amounts: (i) cash operating expenses and payments of otherexpenses and obligations of the Silver Legacy Joint Venture, including interestand scheduled 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 reservespreviously established, as similarly determined).

 

Summarizedbalance sheet and results of operations for the Silver Legacy Joint Venture areas follows:

 

Summarizedbalance sheet information (in thousands):

 
|                                         |   | **March 31,  2003** |    | **December 31,  2002** |   |
|----------------------------------------------|--------|---------------------|---------|------------------------|--------|
|                                         |   |                |    |                   |   |
| Current assets                               |   | $                   | 18,979  |                   | $      | 23,627 |   |
| Property and equipment, net                  |   | 270,882             |    | 272,940                |   |
| Other assets, net                            |   | 7,766               |    | 7,969                  |   |
| Total assets                                 |   | $                   | 297,627 |                   | $      | 304,536 |   |
|                                         |   |                |    |                   |   |
| Current liabilities                          |   | $                   | 12,441  |                   | $      | 17,185 |   |
| Long-term liabilities                        |   | 168,504             |    | 170,285                |   |
| Partners’ equity                        |   | 116,682             |    | 117,066                |   |
| Total liabilities and partners’  equity |   | $                   | 297,627 |                   | $      | 304,536 |   |

 

Summarizedresults of operations (in thousands):

 
|               |   | **Three Months Ended********March 31,** |   |
|--------------------|--------|-----------------------------------------|--------|
|               |   | **2003**                                |   | **2002** |   |
|               |   |                                    |   |   |   |
| Net Revenues       |   | $                                       | 33,499 |   | $ | 36,370 |   |
| Operating Expenses |   | (29,501                                 | )      | (30,190 | ) |
|               |   |                                    |   |   |   |
| Operating Income   |   | 3,998                                   |   | 6,180 |   |
| Other (Expense)    |   | (4,382                                  | )      | (2,768 | ) |
|               |   |                                    |   |   |   |
| Net Income (Loss)  |   | $                                       | (384   | ) | $ | 3,412 |   |

 

9

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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 the Tamarack are managed by four members of Tamarack Crossings,LLC, including Resorts, which has been designated “Chief Executive Manager” andis responsible for overseeing the day-to-day operations of the Tamarack.Resorts has designated Gene Carano as its representative.  Resorts’ capital contribution to TamarackCrossings, LLC represents its proportionate share of the total capitalcontributions of the members. Additional capital contributions of the members, including Resorts, maybe required for certain purposes, including the payment of operating costs andcapital expenditures or the repayment of loans, to the extent such costs arenot funded by prior capital contributions and earnings.  At March 31, 2003, Resorts’ equityinvestment in Tamarack Crossings, LLC was $3.5 million.  The Company’s investment in Tamarack isaccounted for using the equity method of accounting.  Equity in income related to Tamarack for the three months endedMarch 1, 2003 and 2002 was $223,000 and $122,000, 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 March 31, 2003, Resorts’ equity investmentin the MindPlay Entity was $1.0 million. Equity in net loss related to MindPlay for the three months ended March31, 2003 was $78,000.  The Company’sinvestment in MindPlay is accounted for using the equity 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 Native Americanreservations.

 

TheUnited Auburn Indian Community (“UAIC”) has entered into a development andmanagement agreement with an established gaming operator, Station Casinos,Inc., to develop and manage a gaming and entertainment facility on a 49-acre siteapproximately 21 miles northeast of Sacramento.  On September 17, 2002, the United States Department of Interioraccepted the 49-acre site into trust for the UAIC, and Station Casinos, Inc.has announced an approximately $215 million, 200,000 square foot gaming andentertainment facility which is anticipated to open in June 2003.  Based on its size and proximity, we believethe opening of this new facility will impact our operations.  While we cannot predict the extent of thepotential impact, it could be significant.

 

**Item 2.  Management’s Discussion and Analysis ofFinancial 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 theEldorado Hotel & Casino (the “Eldorado”), a premier hotel/casino andentertainment facility in Reno, Nevada. In addition to owning the Eldorado, Resorts’ 96% owned subsidiary,Eldorado Limited Liability Company, a Nevada limited liability company(“ELLC”), owns a 50% interest in

 

10

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a jointventure (the “Silver Legacy Joint Venture”) which owns the Silver Legacy ResortCasino (the “Silver Legacy”), a major themed hotel/casino located adjacent to theEldorado. Resorts, ELLC and Eldorado Capital Corp. (“Capital”), a wholly-ownedsubsidiary of Resorts, which holds no significant assets and conducts nobusiness activity, are collectively referred to as the “Company.”

 

TheCompany accounts for its investment in the Silver Legacy Joint Venture,Tamarack and MindPlay utilizing the equity method of accounting.  MindPlay is currently in the developmentalstage.  The Company’s consolidated netincome (loss) includes its proportional share of the Silver Legacy JointVenture’s, Tamarack’s, and MindPlay’s net income (loss) before taxes.

 

Thefollowing discussion of the Company’s operations relates to the Eldorado exceptas otherwise indicated.

 

**Critical Accounting Policies**

 

Our discussion and analysis of our results ofoperations and financial condition that follows are based upon our consolidatedfinancial statements, which have been prepared in accordance with accountingprinciples 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 costand is depreciated over its estimated useful life.  Judgments are made in determining estimated useful lives andsalvage values of these assets.  Theaccuracy of these estimates affects the amount of depreciation expenserecognized in our financial results and whether we have a gain or loss on thedisposal of assets.  We reviewdepreciation estimates and methods as new events occur, more experience isacquired, and additional information is obtained that would possibly change ourcurrent estimates.  At March 31, 2003,no events or 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 forreceivables that may not be collected. Methodologies for estimating bad debt reserves range from specificreserves to various percentages applied to aged receivables. Historicalcollection rates are considered, as are customer relationships, in determiningspecific reserves.  As with manyestimates, management must make judgments about potential actions by thirdparties in establishing and evaluating our reserves for bad debts.

 

*Self InsuranceReserves*

 

The Eldorado is self insured for our grouphealth and workmens’ compensation programs. We utilize 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.

 

# **RecentDevelopments**

 

Asignificant portion of the Company’s revenues and operating income aregenerated from patrons who are residents of northern California, and as such,our operations have been adversely impacted by the growth in Native Americangaming in northern California that has occurred to date.  In addition to the existing gamingfacilities, numerous Native American tribes have announced that they are in theprocess of developing or are considering establishing large-scale hotel andgaming facilities in northern California. The United Auburn Indian Community (“UAIC”) has entered into adevelopment and management agreement with an established gaming operator,Station Casinos, Inc., to develop and manage a gaming and entertainmentfacility on a 49-acre site approximately 21 miles northeast of Sacramento.  On September 17, 2002, the United StatesDepartment of Interior accepted the 49-acre site

 

11

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intotrust for the UAIC, and Station Casinos, Inc. has announced an approximately$215 million, 200,000 square foot gaming and entertainment facility which isanticipated to open in June 2003.  Basedon its size and proximity, we believe the opening of this new facility willimpact our operations.  While we cannotpredict the extent of the potential impact, it could be significant.

 

Approvalshave been obtained for two public works projects in the downtown area ofReno.  The first project will lower thetrain tracks which run through Reno’s downtown district and separate theEldorado and the two adjoining properties from the rest of the downtown gamingfacilities.  Construction on thisproject is expected to be completed in 2006 and will be organized in such amanner that it will not prevent pedestrian or vehicular traffic from crossingthe railroad tracks within the downtown area. The second project involves the construction of a downtown specialevents center next to the National Bowling Stadium.  This project is expected to be finished in 2005.  At this time, we cannot determine the effectof these projects on our operations, particularly during their constructionperiods.

 

Thefollowing discussion of the Company’s operations relates to the Eldorado exceptas otherwise indicated.

 

**Three Months EndedMarch 31, 2003 Compared toThree Months Ended March 31, 2002**

 

# **Net Revenues**

 

Net revenues increased by approximately $0.6million, or 1.8%, to $32.8 million for the three months ended March 31, 2003compared to $32.2 million for the same period in 2002.  The increase in net revenues resulted fromincreases in casino and hotel revenues partially offset by a decrease inentertainment revenues.  Increasedcompetition from Native American gaming and a weak California economy continuedto pose a challenge for the three months ended March 31, 2003.  The Company enhanced its “Club Eldorado”program on July 1, 2002, allowing customers to view and redeem earned complimentariesthroughout the property and offering discounts at the showroom and foodoutlets.  Management feels the enhancedprogram has provided additional customer loyalty and has added to its customerbase.

 

Casino revenues increased by approximately$1.3 million, or 6.4%, to $22.3 million for the three months ended March 31,2003 compared to $21.0 million for the same period in 2002.  The increase in casino revenues wasprimarily due to increases in games and slot volume as compared to the previousperiod.  Management feels the enhanced“Club Eldorado” program is directly related to the increase in gaming volume.

 

Food,beverage and entertainment revenues decreased by approximately $0.5 million, or4.4%, to $10.3 million for the three months ended March 31, 2003 compared to$10.7 million during the same period in 2002. The decrease was primarily due toa reduction in entertainment revenue as a result of lower showroom occupancy infirst quarter of 2003 as compared to the same period in 2002.

 

Hotelrevenues increased by approximately $0.2 million, or 5.8%, to $3.6 million forthe three months ended March 31, 2003 compared to $3.4 million during the sameperiod in 2002.  The increase was dueprimarily to increases in the Company’s average daily rate (“ADR”) and hoteloccupancy to approximately $52 and 87%, respectively, in the first quarter of2003 as compared to $49 and 86%, respectively, in the first quarter of2002.  In 2002, the hotel occupancy wasaffected by an energy conservation retrofit of our hotel rooms, completed inMarch 2002, which reduced the number of available room nights in the quarter byapproximately 3,300.  For the threemonths ended March 31, 2003, the hotel occupancy was affected by hotelremodeling which reduced the number of available room nights by approximately800.

 

Promotionalallowances, expressed as a percentage of casino revenues, were 21.1% for thefirst quarter of 2003 compared to 19.8% for the same period in 2002.  This increase is primarily related to theenhanced “Club Eldorado” program.

 

# **OperatingExpenses**

 

TheCompany’s operating expenses decreased by approximately $0.1 million, or 0.4%,to $30.5 million for the three months ended March 31, 2003 from $30.6 millionduring the same period in 2002. The decrease is primarily attributable todecreases in food, beverage and entertainment expenses, partially offset by anincrease in casino expenses.

 

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Casinoexpenses increased by $0.5 million, or 4.6%, to $11.9 million for the threemonths ended March 31, 2003 from $11.4 million during the same period in 2002due to increases in casino promotions in the first quarter of 2003.

 

Food,beverage and entertainment expenses decreased by $0.6 million, or 7.8%, toapproximately $6.8 million for the three months ended March 31, 2003 fromapproximately $7.4 million during the same period in 2002. The decrease isprimarily due to lower food expenses, partly due to lower restaurant customercounts, and lower showroom professional services and advertising expenses.

 

Hotelexpenses decreased by approximately $0.1 million, or 7.4%, to $1.6 million forthe three months ended March 31, 2003 from $1.7 million during the same periodin 2002 primarily due to decreases in overall hotel operating expenses.

 

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

 

Selling,general and administrative expenses increased by $0.3 million, or 5.0%, to $7.0million for the three months ended March 31, 2003 from $6.6 million ascompared to the same period in 2002 primarily as a result of an increase inutility expenses and general liability insurance costs for the three monthsended March 31, 2003 as compared to the same period in 2002.

 

## **Depreciation**

 

Depreciationfor the three months ended March 31, 2003 was $2.8 million compared to $3.1million for the same period in 2002, a decrease of 8.6%, due to some assetsbecoming fully depreciated.

 

## **Equity inIncome of Unconsolidated Affiliates**

 

Earningsfrom the Company’s unconsolidated affiliates, the Silver Legacy Joint Ventureand Tamarack, for the three months ended March 31, 2003 were $31,000 ascompared to $1.8 million for the same period in 2002, a decrease ofapproximately $1.8 million.  Equity inincome of the Silver Legacy Joint Venture decreased approximately $1.8 millionfor the three months ended March 31, 2003 compared to the same period in2002.  Equity in income in Tamarackincreased approximately $100,000 for the three months ended March 31, 2003compared to the same period in 2002.

 

## **Other Income(Expense)**

 

Otherincome (expense) is comprised of interest expense, equity in loss ofunconsolidated affiliate, loss on repurchase of bonds and interest rate swaploss.  Interest expense is net ofcapitalized interest and interest income. For the three months ended March 31, 2003, interest expense decreased byapproximately $0.4 million, or 16.0%, to $2.3 million for the three monthsended March 31, 2003 compared to $2.7 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 March 31, 2003 as compared tothe same period in 2002.  The decreasein average outstanding borrowings is partly due to the Company’s purchase of$10.2 million, $2.0 million and $5.2 million principal amount of its 101⁄2% Noteson the open market in October 2001, June 2002 and August 2002,respectively.  In January 2003, theCompany purchased an additional $7.9 million principal amount of its 101⁄2% Noteson the open market.  The Companyrecognized a $267,000 loss on the January 2003 purchase of 101⁄2% Notes, net ofunamortized fees relating to the debt issue. The Company also recognized a $0.2 million loss from an interest rateswap agreement and equity in loss of its unconsolidated affiliate of $78,000.

 

### **Net Income (Loss)**

 

Asa result of the factors described above, the Company incurred a loss of $0.4million compared to a gain of $0.7 million during the same period in 2002.

 

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**Liquidity and CapitalResources**

 

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 $1.4 million for the three months ended March 31, 2003 compared to net cashprovided by operating activities of $1.9 million during the same period of theprior year.

 

AtMarch 31, 2003, the Company had $7.1 million of cash and cash equivalents and,after giving effect to then outstanding borrowings and letter of credit, it hadapproximately $29.2 million available pursuant to its New Credit Facility (asdefined below) all of which could be utilized under the most restrictive of ourloan covenants.  The Company’s borrowingcapacity under those covenants can fluctuate substantially from quarter toquarter depending upon our operating cash flow.  On July 17, 2001, the Company’s credit facility was amended andrestated (the “New Credit Facility”). The New Credit Facility provides for a senior secured revolving creditfacility of $40 million.  The amount ofcredit available pursuant to the New Credit Facility reduced to $38.4 millionon March 31, 2003 and reduces by $1.6 million at the end of each subsequentquarter until March 31, 2006, when the facility terminates and any balance thenoutstanding becomes due and payable. Borrowings under the New Credit Facility bear interest, at the Company’soption, at either (i) the greater of (a) the rate publicly announced from timeto time by Bank of America as its “Prime Rate” or (b) the Federal Funds Rateplus .50% (“Base Rate”) or (ii) a Eurodollar rate determined in accordance withthe New Credit Facility.  The effectiverate of interest on borrowings under the New Credit Facility at March 31, 2003was 3.67% per annum.

 

TheNew Credit Facility is secured by substantially all of the Company’s realproperty.  The New Credit Facilityincludes various restrictions and other covenants including: (i) restrictionson the disposition of property, (ii) restrictions on investments andacquisitions, (iii) restrictions on distributions to members of Resorts, (iv)restrictions on the incurrence of liens and negative pledges, (v) restrictionson the incurrence of indebtedness and the issuance of guarantees, (vi)restrictions on transactions with affiliates and, (vii) restrictions on annualcapital expenditures including capital leases. The New Credit Facility also contains financial covenants including amaximum total debt to EBITDA ratio, a maximum senior debt to EBITDA ratio, aminimum fixed charge coverage ratio and a minimum equity requirement.  As of March 31, 2003 the Company was incompliance with all provisions of the New Credit Facility.

 

Asof March 31, 2003, the Company had outstanding (i) $74.8 million in aggregateprincipal amount of the 101⁄2% Notes, (ii) $8.5 million of borrowings and anadditional $0.7 million of letter of credit under the New Credit Facility and(iii) $0.9 million of other long term debt (net of current portion).

 

Cashused in investing activities for the three months ended March 31, 2003 was $1.9million compared to cash provided by investing activities of $12.2 million forthe three months ended March 31, 2002. In 2003, cash used in investing activities related primarily to capitalexpenditures relating to slot purchases, our hotel remodeling and variousequipment purchases.  Distributions fromunconsolidated affiliates decreased $13.6 million to $0.3 million for the threemonths ended March 31, 2003 compared to $13.9 million for the same period in 2002when ELLC received from the Silver Legacy Joint Venture a special distributionof $10.0 million at the time of issuance of the Silver Legacy Notes and a $2.6million prior year tax distribution which was made on February 28, 2002.  Capital spending for the three months endedMarch 31, 2003 increased $1.1 million to $2.2 million compared to $1.2 millionfor the three months ended March 31, 2002.

 

Cashused in financing activities was $0.6 million for the three months ended March31, 2003, compared to $14.8 million for the three months ended March 31,2002.  For the three months ended March31, 2003, the Company purchased $7.9 million principal amount of its 101⁄2% Notesfacilitated by borrowing $8.0 million under the New Credit Facility.  For the three months ended March 31, 2002,the Company reduced the outstanding portion of the New Credit Facility by$14.75 million utilizing the aforementioned distributions to ELLC from theSilver Legacy Joint Venture in the aggregate amount of $12.6 million.

 

TheOperating Agreement of Resorts dated June 28, 1996 obligates Resorts todistribute each year for as long as it is not taxed as a corporation to each ofits members an amount equal to such members’ allocable share of the taxableincome of Resorts multiplied by the highest marginal combined Federal, stateand local income tax rate applicable to individuals for that year.  For the three months ended March 31, 2003and 2002, Resorts made no distributions to its members.

 

14

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TheCompany’s future sources of liquidity are anticipated to be from its operatingcash flow, funds available from the New Credit Facility and capital leasefinancing for certain of its fixed asset purchases.  The Company’s anticipated uses of cash in the near term will befor recurring capital expenditures and debt service.  We believe our capital resources are adequate to meet ourobligations including the funding of our debt service and recurring capitalexpenditures.  The Company has placed onthe market for sale its 90 acres of land located in Verdi, Nevada.

 

## **Forward-LookingStatements**

 

Certaininformation included in this report and other materials filed or to be filed bythe Company with the Securities and Exchange Commission (as well as informationincluded in oral statements or written statements made or to be made by theCompany) contains statements that are forward-looking within the meaning ofSection 27A of the Securities Act of 1933, as amended, and Section 21E of theSecurities Exchange Act of 1934, as amended. These statements can be identified by the fact that they do not relatestrictly to historical or current facts. The Company has based these forward-looking statements on its currentexpectations about future events.  Theseforward-looking statements include statements with respect to the Company’sbeliefs, plans, objectives, goals, expectations, anticipations, intentions,financial condition, results of operations, future performance and business,including, current and future operations and statements that include the words“may”, “could”, “should”, “would”, “believe”, “expect”, “anticipate”,“estimate”, “intend”, “plan” or similar expressions.  Such statements include information relating to capital spending,financing sources and the effects of regulation (including gaming and taxregulation) and competition.  Suchforward-looking information involves important risks and uncertainties thatcould significantly affect anticipated results in the future and, accordingly,such results may differ from those expressed in any forward-looking statementsmade by or on behalf of the Company. These risks and uncertainties include, but are not limited to dependenceon existing management, leverage and debt service (including sensitivity to fluctuationsin interest rates), domestic or global economic conditions, changes in Federalor state tax laws or the administration of such laws, changes in gaming laws orregulations (including the legalization of gaming in certain jurisdictions),expansion of gaming on Native American lands (including such lands inCalifornia), risks and uncertainties relating to any development andconstruction activities and applications for licenses and approvals underapplicable laws and regulations (including gaming laws and regulations) and anyfurther terrorist attacks similar to those that occurred September 11,2001.  Additional information concerningpotential factors that we think could cause our actual results to differmaterially from expected and historical results is included under the caption“Factors that May Affect the Company’s Future Results” in Item 1 of our annualreport 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**

 

TheCompany is exposed to market risk in the form of fluctuations in interest ratesand their potential impact upon its variable rate debt.  The Company evaluates its exposure to thismarket risk by monitoring interest rates in the marketplace.  We do not utilize derivative financialinstruments for trading purposes.  Otherthan changes in the amount of variable rate debt from time to time outstanding,there were no material quantitative changes in the Company’s market riskexposure, or how risks were managed during the three months endedMarch 31, 2003.

 

Theindebtedness outstanding under the New Credit Facility as of March 31, 2003,representing all of the Company’s then outstanding variable rate debt, totaled$8.5 million.  As of March 31, 2003, theinterest rate on the New Credit Facility was LIBOR plus 2.5%.  Under the terms of our New Credit Facility,we may borrow up to $38.4 million, subject to our compliance with applicablecovenants.  To the extent we increasethe amount of our indebtedness under the New Credit Facility, we will increaseour exposure to market 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**

 

Within the 90-day period prior to the date ofthis report, the Company carried out an evaluation, under the supervision andwith the participation of the Company’s management, including Resorts’ andCapital’s Chief Executive Officer and Chief Financial Officer, of theeffectiveness of the design and operation of the Company’s disclosure controlsand procedures, as defined in Rule 15d-14(c) under the Securities Exchange Actof 1934 (the “Exchange Act”).  Basedupon that evaluation, the Chief Executive Officer and Chief Financial Officerof Resorts and Capital concluded

 

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that the Company’s disclosure controls and procedures are effective intimely making known to them by others within the Company material informationrelating to the Company (including its consolidated subsidiaries) that isrequired to be included in the Company’s Exchange Act filings.

 

There have been no significant changes in theCompany’s internal controls or in other factors which could significantlyaffect internal controls subsequent to the date of their evaluation, includingany corrective actions with regard to significant deficiencies or material weaknesses.

 

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**PART II.****                                               ****OTHER INFORMATION**

 

**Item 6.****          ****EXHIBITS AND REPORTS ON FORM 8-K**

 

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

 

The following exhibits are filed as part of thisreport.

 
| **Exhibit Number** |   | **Description**                                                         |
|--------------------|--------|-------------------------------------------------------------------------|
| **99.1**           |   | **Certification of Donald L.**Carano pursuant to 18 U.S.C. Section 1350 |
|               |   |                                                                    |
| 99.2               |   | Certification of Robert M.  Jones pursuant to 18 U.S.C. Section 1350    |
|               |   |                                                                    |
| 99.3               |   | 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:  May 13, 2003 | By:                                                                                             |   /s/  Donald L. Carano |   |
|                     | Donald  L. Carano                                                                               |
|                     | Chief  Executive Officer, President and  Presiding Manager                                      |
|                     |
|                     |
| Date:  May 13, 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:  May 13, 2003 | By:                                                                                             |   /s/  Donald L. Carano |   |
|                     | Donald  L. Carano                                                                               |
|                     | President                                                                                       |
|                     |
|                     |
| Date:  May 13, 2003 | By:                                                                                             |   /s/  Gene R. Carano |   |
|                     | Gene  R. Carano                                                                                 |
|                     | Treasurer  (Principal Financial and  Accounting Officer)                                        |

 

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**CERTIFICATIONS**

 

I,Donald L. Carano, Chief Executive Officer, President and Presiding Manager ofthe Board of Managers of Eldorado Resorts LLC and President and Chief ExecutiveOfficer of Eldorado Capital Corp., certify that:

 

(1)          I have reviewed this quarterlyreport on Form 10-Q of Eldorado Resorts LLC and Eldorado Capital Corp.(collectively, the “registrant”);

 

(2)          Based on my knowledge, thisquarterly report does not contain any untrue statement of a material fact oromit to state a material fact necessary to make the statements made, in lightof the circumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

 

(3)          Based on my knowledge, thefinancial statements, and other financial information included in thisquarterly report, fairly present in all material respects the financial conditionand results of operations and cash flows of the registrant as of, and for, theperiods presented in this quarterly report;

 

(4)          The registrant’s other certifyingofficers and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)for the registrant and we have:

 

a)              designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period inwhich this quarterly report is being prepared;

 

b)             evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)              presentedin this quarterly report our conclusions about the effectiveness of thedisclosure controls and procedures based on our evaluation as of the EvaluationDate;

 

(5)          The registrant’s other certifyingofficers and I have disclosed, based on our most recent evaluation, to theregistrant’s auditors and the audit committee of registrant’s board ofdirectors (or persons performing the equivalent function):

 

a)              allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the registrant’s ability to record, process, summarize,and report financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)             anyfraud, whether or not material, that involves management or other employees whohave a significant role in the registrant’s internal controls; and

 

(6)          The registrant’s other certifyingofficers and I have indicated in this quarterly report whether or not therewere significant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 
| Date:  | May  13, 2003                                                                                                                                           |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |
|   |
| By:    | /s/  Donald L. Carano                                                                                                                                   |   |
|   | Donald  L. Carano                                                                                                                                       |
|   | Chief  Executive Officer, President and  Presiding Manager of Eldorado Resorts LLC  and President and Chief Executive Officer of Eldorado Capital Corp. |

 

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I,Robert M. Jones, Chief Financial Officer of Eldorado Resorts LLC, certify that:

 

(1)          I have reviewed this quarterlyreport on Form 10-Q of Eldorado Resorts LLC and Eldorado Capital Corp.(collectively, the “registrant”);

 

(2)          Based on my knowledge, thisquarterly report does not contain any untrue statement of a material fact oromit to state a material fact necessary to make the statements made, in lightof the circumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

 

(3)          Based on my knowledge, thefinancial statements, and other financial information included in thisquarterly report, fairly present in all material respects the financialcondition and results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report;

 

(4)          The registrant’s other certifyingofficers and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)for the registrant and we have:

 

a)              designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period inwhich this quarterly report is being prepared;

 

b)             evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)              presentedin this quarterly report our conclusions about the effectiveness of thedisclosure controls and procedures based on our evaluation as of the EvaluationDate;

 

(5)          The registrant’s other certifyingofficers and I have disclosed, based on our most recent evaluation, to theregistrant’s auditors and the audit committee of registrant’s board ofdirectors (or persons performing the equivalent function):

 

a)              all significantdeficiencies in the design or operation of internal controls which couldadversely affect the registrant’s ability to record, process, summarize, andreport financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)             anyfraud, whether or not material, that involves management or other employees whohave a significant role in the registrant’s internal controls; and

 

(6)          The registrant’s other certifyingofficers and I have indicated in this quarterly report whether or not therewere significant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 
| Date:  | May  13, 2003                                    |
|--------|--------------------------------------------------|
|   |
|   |
| By:    | /s/  Robert M. Jones                             |   |
|   | Robert  M. Jones                                 |
|   | Chief  Financial Officer of Eldorado Resorts LLC |

 

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I,Gene R. Carano, Chief Financial Officer of Eldorado Capital Corp., certifythat:

 

(1)          I have reviewed this quarterlyreport on Form 10-Q of Eldorado Resorts LLC and Eldorado Capital Corp.(collectively, the “registrant”);

 

(2)          Based on my knowledge, thisquarterly report does not contain any untrue statement of a material fact oromit to state a material fact necessary to make the statements made, in lightof the circumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

 

(3)          Based on my knowledge, thefinancial statements, and other financial information included in thisquarterly report, fairly present in all material respects the financialcondition and results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report;

 

(4)          The registrant’s other certifyingofficers and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)for the registrant and we have:

 

a)              designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period inwhich this quarterly report is being prepared;

 

b)             evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)              presentedin this quarterly report our conclusions about the effectiveness of thedisclosure controls and procedures based on our evaluation as of the EvaluationDate;

 

(5)          The registrant’s other certifyingofficers and I have disclosed, based on our most recent evaluation, to theregistrant’s auditors and the audit committee of registrant’s board ofdirectors (or persons performing the equivalent function):

 

a)              allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the registrant’s ability to record, process, summarize,and report financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)             anyfraud, whether or not material, that involves management or other employees whohave a significant role in the registrant’s internal controls; and

 

(6)          The registrant’s other certifyingofficers and I have indicated in this quarterly report whether or not therewere significant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 
| Date:  | May  13, 2003                                      |
|--------|----------------------------------------------------|
|   |
|   |
| By:    | /s/  Gene R. Carano                                |   |
|   | Gene  R. Carano                                    |
|   | Chief  Financial Officer of Eldorado Capital Corp. |

 

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**EXHIBIT INDEX**

 

| **Exhibit Number** |   | **Description**                                                         |
|--------------------|--------|-------------------------------------------------------------------------|
| **99.1**           |   | **Certification of Donald L. Carano**pursuant to 18 U.S.C. Section 1350 |
|               |   |                                                                    |
| 99.2               |   | Certification of Robert M. Jones pursuant  to 18 U.S.C. Section 1350    |
|               |   |                                                                    |
| 99.3               |   | Certification of Gene R. Carano pursuant  to 18 U.S.C. Section 1350     |

 

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