**UNITED STATESSECURITIES****ANDEXCHANGE 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, 2004.**                                                                                                                                                                                                                                                                                                                                                          |
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                              |
| **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 ofregistrants as specified in their charters)

 

| **Nevada**                                                                          |   | **88-0115550**                       |
|-------------------------------------------------------------------------------------|--------|--------------------------------------|
| **Nevada**                                                                          |   | **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 duringthe preceding 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 12,2004: 2,500 shares.

 

 

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ELDORADO RESORTS LLC

ELDORADO 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 Statement 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 BALANCESHEETS

(dollars in thousands)

 
|                                             |   | **March 31,  2004** |    | **December 31,  2003** |   |
|--------------------------------------------------|--------|--------------------------|---------|-----------------------------|--------|
| **ASSETS**                                       |   |                     |    |                        |   |
| Current assets:                                  |   |                     |    |                        |   |
| Cash and cash equivalents                        |   | $                        | 7,533   |                        | $      | 7,362 |   |
| Restricted cash                                  |   | 210                      |    | 210                         |   |
| Accounts receivable, net                         |   | 3,214                    |    | 3,014                       |   |
| Inventories                                      |   | 1,832                    |    | 2,054                       |   |
| Prepaid expenses                                 |   | 1,854                    |    | 2,155                       |   |
| Total current assets                             |   | 14,643                   |    | 14,795                      |   |
|                                             |   |                     |    |                        |   |
| Investment in joint ventures                     |   | 67,284                   |    | 66,738                      |   |
|                                             |   |                     |    |                        |   |
| Property and equipment, net                      |   | 127,822                  |    | 128,859                     |   |
|                                             |   |                     |    |                        |   |
| Other assets, net                                |   | 5,149                    |    | 4,785                       |   |
| Total assets                                     |   | $                        | 214,898 |                        | $      | 215,177 |   |
|                                             |   |                     |    |                        |   |
| **LIABILITIES AND MEMBERS’ EQUITY**         |   |                     |    |                        |   |
|                                             |   |                     |    |                        |   |
| Current liabilities:                             |   |                     |    |                        |   |
| Current portion of long-term debt                |   | $                        | 355     |                        | $      | 355 |   |
| Current portion of capital lease  obligations    |   | 53                       |    | 84                          |   |
| Accounts payable                                 |   | 3,768                    |    | 5,996                       |   |
| Interest payable                                 |   | 813                      |    | 2,556                       |   |
| Accrued and other liabilities                    |   | 7,762                    |    | 6,488                       |   |
| Due to members and affiliates                    |   | 63                       |    | 230                         |   |
| Total current liabilities                        |   | 12,814                   |    | 15,709                      |   |
|                                             |   |                     |    |                        |   |
| Long-term debt, less current portion             |   | 77,802                   |    | 77,890                      |   |
|                                             |   |                     |    |                        |   |
| Capital lease obligations, less current  portion |   | 12                       |    | 17                          |   |
|                                             |   |                     |    |                        |   |
| Other liabilities                                |   | 1,107                    |    | 638                         |   |
| Total liabilities                                |   | 91,735                   |    | 94,254                      |   |
|                                             |   |                     |    |                        |   |
| Minority interest                                |   | 5,765                    |    | 5,742                       |   |
|                                             |   |                     |    |                        |   |
| Members’ equity                             |   | 117,398                  |    | 115,181                     |   |
| Total liabilities and members’ equity       |   | $                        | 214,898 |                        | $      | 215,177 |   |

 

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

 

2

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ELDORADO RESORTS LLC

 

UNAUDITED CONDENSEDCONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands)

 
|                                                 |   | **Three  Months Ended  March 31,** |   |
|------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                 |   | **2004**                                |   | **2003** |   |
| Operating Revenues:                                  |   |                                    |   |   |   |
| Casino                                               |   | $                                       | 20,558 |   | $ | 22,303 |   |
| Food, beverage and entertainment                     |   | 10,330                                  |   | 10,264 |   |
| Hotel                                                |   | 3,900                                   |   | 3,636 |   |
| Other                                                |   | 946                                     |   | 912 |   |
|                                                 |   | 35,734                                  |   | 37,115 |   |
| Less: Promotional allowances                         |   | (3,917                                  | )      | (4,340 | ) |
|                                                 |   |                                    |   |   |   |
| Net operating revenues                               |   | 31,817                                  |   | 32,775 |   |
|                                                 |   |                                    |   |   |   |
| Operating Expenses:                                  |   |                                    |   |   |   |
| Casino                                               |   | 10,452                                  |   | 11,531 |   |
| Food, beverage and entertainment                     |   | 7,032                                   |   | 6,847 |   |
| Hotel                                                |   | 1,659                                   |   | 1,557 |   |
| Other                                                |   | 723                                     |   | 738 |   |
| Selling, general and administrative                  |   | 6,683                                   |   | 6,968 |   |
| Depreciation                                         |   | 2,948                                   |   | 2,817 |   |
|                                                 |   |                                    |   |   |   |
| Total operating expenses                             |   | 29,497                                  |   | 30,458 |   |
|                                                 |   |                                    |   |   |   |
| Equity in Income of Unconsolidated  Affiliates       |   | 879                                     |   | 31 |   |
|                                                 |   |                                    |   |   |   |
| Operating Income                                     |   | 3,199                                   |   | 2,348 |   |
|                                                 |   |                                    |   |   |   |
| Other Income (Expense):                              |   |                                    |   |   |   |
| Equity in income (loss) of unconsolidated  affiliate |   | 922                                     |   | (78 | ) |
| Interest rate swap loss                              |   | —                                  |   | (163 | ) |
| Loss on bond repurchase                              |   | —                                  |   | (267 | ) |
| Interest expense, net                                |   | (1,881                                  | )      | (2,287 | ) |
|                                                 |   |                                    |   |   |   |
| Total other income (expense)                         |   | (959                                    | )      | (2,795 | ) |
|                                                 |   |                                    |   |   |   |
| Income (Loss) Before Minority Interest               |   | 2,240                                   |   | (447 | ) |
|                                                 |   |                                    |   |   |   |
| Minority Interest                                    |   | (23                                     | )      | 7 |   |
|                                                 |   |                                    |   |   |   |
| Net Income (Loss)                                    |   | $                                       | 2,217  |   | $ | (440 | ) |

 

The accompanying notes are an integral part of these unauditedcondensed consolidated financial statements.

 

3

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ELDORADO RESORTS LLC

 

UNAUDITED CONDENSEDCONSOLIDATED STATEMENT OF MEMBERS’ EQUITY

(dollars in thousands)

 
| BALANCE, January 1, 2004 |   | $      | 115,181 |   |
|-------------------------------|--------|--------|---------|--------|
|                          |   |   |    |
| Net Income                    |   | 2,217  |    |
|                          |   |   |    |
| BALANCE, March 31, 2004  |   | $      | 117,398 |   |

 

The accompanying notes are an integral part ofthese unaudited condensed consolidated financial statements.

 

4

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ELDORADO RESORTS LLC

 

UNAUDITEDCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

 
|                                                                                      |   | **Three  Months Ended  March 31,** |   |
|-------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                                                      |   | **2004**                                |   | **2003** |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                     |   |                                    |   |   |   |
| Net Income (Loss)                                                                         |   | $                                       | 2,217  |   | $ | (440 | ) |
| Adjustments to reconcile net income (loss)  to net cash provided by operating activities: |   |                                    |   |   |   |
| Depreciation                                                                              |   | 2,948                                   |   | 2,817 |   |
| Amortization of debt issue costs                                                          |   | 84                                      |   | 98 |   |
| Loss on bond repurchase                                                                   |   | —                                  |   | 267 |   |
| Equity in (income) loss of unconsolidated  affiliates                                     |   | (1,801                                  | )      | 47 |   |
| Minority interest                                                                         |   | 23                                      |   | (7 | ) |
| Loss on sale of property and equipment                                                    |   | —                                  |   | 17 |   |
| Interest rate swap loss                                                                   |   | —                                  |   | 163 |   |
| Decrease (Increase) in—                                                              |   |                                    |   |   |   |
| Accounts receivable, net                                                                  |   | (200                                    | )      | (151 | ) |
| Inventories                                                                               |   | 222                                     |   | 253 |   |
| Prepaid expenses                                                                          |   | 301                                     |   | 328 |   |
| (Decrease) Increase in—                                                              |   |                                    |   |   |   |
| Accounts payable                                                                          |   | (2,228                                  | )      | (45 | ) |
| Interest payable                                                                          |   | (1,743                                  | )      | (2,271 | ) |
| Accrued and other liabilities and due to  members and affiliates                          |   | 1,576                                   |   | 344 |   |
|                                                                                      |   |                                    |   |   |   |
| Net cash provided by operating activities                                                 |   | 1,399                                   |   | 1,420 |   |
|                                                                                      |   |                                    |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                     |   |                                    |   |   |   |
| Purchases of property and equipment                                                       |   | (1,911                                  | )      | (2,219 | ) |
| Proceeds from sale of property and  equipment                                             |   | —                                  |   | 68 |   |
| Distributions from unconsolidated  affiliates                                             |   | 1,255                                   |   | 276 |   |
| Decrease (Increase) in other assets, net                                                  |   | (448                                    | )      | 19 |   |
|                                                                                      |   |                                    |   |   |   |
| Net cash used in investing activities                                                     |   | (1,104                                  | )      | (1,856 | ) |
|                                                                                      |   |                                    |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                     |   |                                    |   |   |   |
| Proceeds from long-term debt and capital  leases                                          |   | 8,250                                   |   | 15,509 |   |
| Principal payments on long-term debt and  capital leases                                  |   | (8,374                                  | )      | (8,112 | ) |
| Payment on bond repurchase                                                                |   | —                                  |   | (8,001 | ) |
|                                                                                      |   |                                    |   |   |   |
| Net cash used in financing activities                                                     |   | (124                                    | )      | (604 | ) |
|                                                                                      |   |                                    |   |   |   |
| INCREASE (DECREASE) IN CASH AND CASH  EQUIVALENTS                                         |   | 171                                     |   | (1,040 | ) |
|                                                                                      |   |                                    |   |   |   |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF  PERIOD                                         |   | 7,362                                   |   | 8,135 |   |
|                                                                                      |   |                                    |   |   |   |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                |   | $                                       | 7,533  |   | $ | 7,095 |   |
|                                                                                      |   |                                    |   |   |   |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW  INFORMATION:                                        |   |                                    |   |   |   |
|                                                                                      |   |                                    |   |   |   |
| Cash paid during period for interest                                                      |   | $                                       | 3,514  |   | $ | 4,458 |   |

 

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

 

5

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ELDORADO RESORTS LLC

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

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

 

The condensed consolidated financial statements include the accounts ofEldorado Resorts, LLC (“Resorts”) a Nevada limited liability company, EldoradoCapital Corp., (“Capital”), a Nevada Corporation and wholly-owned subsidiary ofResorts, and a majority owned subsidiary, Eldorado Limited Liability Company(“ELLC”) (together, the “Company”). The Company owns and operates the Eldorado Hotel & Casino (the“Eldorado”), a premier hotel/casino and entertainment facility in Reno, Nevada. Capital was established solely for the purpose of serving as a co-issuerof the 101⁄2% Senior Subordinated Notes due 2006 issued by Resorts andCapital.  Capital does not have anyoperations, assets or revenues.  Allsignificant intercompany accounts and transactions have been eliminated inconsolidation.

 

The Company accounts for its investment in theSilver Legacy Joint Venture and two other smaller joint ventures, Tamarack andMindPlay, utilizing the equity method of accounting.  The Company’s consolidated net income (loss) includes itsproportional share of the Silver Legacy Joint Venture’s, Tamarack’s, andMindPlay’s net income (loss) before taxes.

 

In the opinion of Management, the accompanyingunaudited condensed consolidated financial statements contain all adjustments,all of which are normal and recurring, necessary to present fairly thefinancial position of the Company as of March 31, 2004 and the results ofoperations and cash flows for the three month periods ended March 31, 2004and 2003.  The results of operations forsuch periods are not necessarily indicative of the results to be expected for afull year.

 

Certain information and footnote disclosuresnormally included in financial statements prepared in accordance with generallyaccepted accounting principles have been condensed or omitted.  These condensed consolidated financialstatements should be read in conjunction with the consolidated financialstatements and notes thereto included in the Annual Report of Eldorado ResortsLLC and Eldorado Capital Corp. on Form 10-K for the year endedDecember 31, 2003.

 

***Use of Estimates***

* *

The preparation of financial statements inconformity with accounting principles generally accepted in the United Statesof America requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period.  Actual results could differ from theseestimates.

 

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

 

On July 31, 1996, Resorts and Capital(the “Issuers”) sold $100,000,000 in aggregate principal amount of 101⁄2% SeniorSubordinated Notes due 2006 (the “101⁄2% Notes”).  The 101⁄2% Notes are joint and several obligations of theIssuers.  The 101⁄2% 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,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 Issuersfiled a registration statement under the Securities Act of 1933, as amended (the“1933 Act”) with respect to an offer to exchange the 101⁄2% Notes, which wereissued in reliance on an exemption from registration under the 1933 Act, forregistered debt securities of the Issuers with terms identical to the 101⁄2%Notes.  The exchange of the originallyissued 101⁄2% Notes for the registered 101⁄2% Notes was completed onFebruary 26, 1997.  As ofMarch 31, 2004, the Company had completed the following purchases andredemption of 101⁄2% Notes:

 

| **Amount** |         | **Month** |      | **Year** |   |
|------------|--------------|-----------|-----------|----------|--------|
| $          | 10.2 million |      | October   |     | 2001   |   |
| $          | 2.0 million  |      | June      |     | 2002   |   |
| $          | 5.2 million  |      | August    |     | 2002   |   |
| $          | 7.9 million  |      | January   |     | 2003   |   |
| $          | 1.75 million |      | September |     | 2003   |   |
| $          | 8.8 million  |      | November  |     | 2003   |   |

 

6

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As a result of the aforementioned purchases and redemption, $64,249,000principal amount of the 101⁄2% Notes remained outstanding at March 31,2004.  For information concerning ourredemption of the 101⁄2% Notes on May 21, 2004, see Note 6.

 

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

 

Long-term debt consists of the following (in thousands):

 
|                                                      |   | **March 31,  2004** |   | **December 31,  2003** |   |
|-----------------------------------------------------------|--------|--------------------------|--------|-----------------------------|--------|
|                                                      |   |                     |   |                        |   |
| 101⁄2% Senior Subordinated Notes                       |   | $                        | 64,249 |                        | $      | 64,249 |   |
| Outstanding portion of reducing revolver  credit facility |   | 13,000                   |   | 13,000                      |   |
| Notes payable to individuals                              |   | 908                      |   | 996                         |   |
|                                                      |   | 78,157                   |   | 78,245                      |   |
| Less—Current portion                                 |   | (355                     | )      | (355                        | )      |
|                                                      |   | $                        | 77,802 |                        | $      | 77,890 |   |

 

The 101⁄2% Notes, which had an original maturitydate of August 15, 2006, bear interest at the rate of 101⁄2% per annum,payable semi-annually in arrears on February 15 and August 15 of eachyear.  For information concerning ourredemption of the 101⁄2% Notes on May 21, 2004, see Note 6.

 

The Company has a senior secured revolvingcredit facility which, as amended on September 10, 2003 (the “New CreditFacility”), provides for credit of up to $30 million.  The amount of credit available pursuant to the New CreditFacility reduces by $1.0 million on December 31, 2004 and at the end ofeach subsequent quarter until March 31, 2006, when the facility terminatesand 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, 2004, the Eurodollarrate was 1.07% and the Base Rate was 4.0%. The Eurodollar rate was 1.11% andthe Base Rate was 4.0% as of December 31, 2003. The effective rate ofinterest on borrowings under the New Credit Facility was 3.32% per annum as ofMarch 31, 2004.

 

The notes payable to individuals are due in monthly installments of$34,614 and $3,000, including monthly interest at 9% and prime plus 2% (6.0% atMarch 31, 2004), to August 14, 2006 and May 16, 2004, respectively,when the principal balance is due. The notes are secured by real property.

 

The New Credit Facility and the indenture relating to the 101⁄2% Notescontain various restrictive covenants including the maintenance of certainfinancial ratios and limitations on additional debt, disposition of property,mergers and similar transactions.  As ofMarch 31, 2004, the Company was in compliance with all of its covenants.

 

**4.****             ****Investment in Joint Ventures**

 

The Silver Legacy was developed by the Circus and Eldorado Joint Venture (the “Silver Legacy Joint Venture”), which was formed pursuant to the Agreement of Joint 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 of the Original Joint Venture Agreement, ELLC and Mandalay Sub (each a “Partner” and, together, the “Partners”) each acquired a 50% interest in the Silver Legacy Joint Venture (each Partner’s “Percentage Interest”).  Each of the Partners was obligated to contribute cash or property to the Silver Legacy Joint Venture with a value approximating 15% of the total budgeted cost for developing and constructing the Silver Legacy. To satisfy their respective contribution obligations, ELLC contributed the land on which Silver Legacy was constructed, at an agreed value of $25 million, and $26.9 million in cash, and Mandalay Sub contributed $51.9 million in cash. In addition, pursuant to the Original Joint Venture Agreement, Mandalay Sub’s parent corporation, Mandalay Resort Group, provided certain loans to the Silver Legacy Joint Venture relating to the development and construction of the Silver Legacy (the remaining balance of which was repaid in 1997) and also provided credit support for a $230 million credit agreement originally entered into by the Silver Legacy Joint Venture on May 30, 1995 (the “Original Silver Legacy Credit Agreement”) to fund the balance of the Silver Legacy’s development and construction costs.  In return, Mandalay Resort Group received from the Silver Legacy Joint Venture an annual fee equal to 1.5% of the average outstanding principal balance of such financing until March 5, 2002.

 

7

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On March 5, 2002, the Partnersexecuted a new amendment and restatement of the Original Joint VentureAgreement (as further amended in April 2002, the “New Joint VentureAgreement”), certain terms of which are summarized below, and the Silver LegacyJoint Venture and its wholly-owned finance subsidiary, Silver Legacy CapitalCorp., issued $160 million principal amount of 101/8%mortgage notes 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 will amortizeover a period of five years and a $20.0 million revolving facility with a fiveyear maturity (the “New Silver Legacy Credit Agreement”), and (iii) madedistributions 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.  TheSilver Legacy Notes are secured by a security interest in the same assets andpledges of and security interest in the same Partnership interests which arejunior to the security interests and pledges securing the New Silver LegacyCredit Agreement. On November 4, 2003, the Silver Legacy Joint Ventureexecuted an amendment to the New Silver Legacy Credit Agreement which reducedthe revolving facility to $10.0 million, and revised certain covenant ratioswith retroactive effect to September 30, 2003, including the maximum totaldebt to EBITDA ratio which the Silver Legacy Joint Venture had exceeded as ofSeptember 30, 2003.  AtMarch 31, 2004, there was no indebtedness outstanding under the New SilverLegacy Credit Agreement.  As of suchdate, the Silver Legacy Joint Venture was in compliance with all of thecovenants in the New Silver Legacy Credit Agreement and the Silver Legacy JointVenture had the ability to borrow all of the $10.0 million available under therevolving portion of the New Silver Legacy Credit Agreement.  The entire principal amount then outstandingunder the New Silver Legacy Credit Agreement becomes due and payable onMarch 31, 2007, unless the maturity date is extended with the consent ofthe lenders.

 

Subject to any contractual restrictions to whichthe Silver Legacy Joint Venture is subject, including the indenture relating tothe Silver Legacy Notes, and prior to the occurrence of a “Liquidating Event,”the Silver Legacy Joint Venture is required by the New Joint Venture Agreementto 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 or the maximum marginal federalincome tax rate applicable to corporations for such period (as of the datehereof both rates were 35%); provided, however, that if the State of Nevadaenacts 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 to the Percentage Interests of the Partners.

 

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

 

As defined in the New Joint Venture Agreement, the term “Net Cash From Operations” means the gross cash proceeds received by the Silver Legacy Joint Venture, less the following amounts: (i) cash operating expenses and payments of other expenses and obligations of the Silver Legacy Joint Venture, including interest and scheduled principal payments on Silver Legacy Joint Venture indebtedness, including indebtedness owed to the Partners, if any, (ii) all capital expenditures made by the Silver Legacy Joint Venture, and (iii) such reasonable reserves as the Partners deem necessary in good faith and in the best interests of the Silver Legacy Joint Venture to meet anticipated future obligations and liabilities of the Silver Legacy Joint Venture (less any release of reserves previously established, as similarly determined).

 

8

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

 

Summarized balance sheet information(in thousands):

 
|                                        |   | **March 31,  2004** |    | **December 31,  2003** |   |
|---------------------------------------------|--------|--------------------------|---------|-----------------------------|--------|
|                                        |   |                     |    |                        |   |
| Current assets                              |   | $                        | 27,607  |                        | $      | 28,358 |   |
| Property and equipment, net                 |   | 264,636                  |    | 265,852                     |   |
| Other assets, net                           |   | 7,951                    |    | 8,176                       |   |
| Total assets                                |   | $                        | 300,194 |                        | $      | 302,386 |   |
|                                        |   |                     |    |                        |   |
| Current liabilities                         |   | $                        | 14,177  |                        | $      | 17,828 |   |
| Long-term liabilities                       |   | 162,283                  |    | 162,046                     |   |
| Partners’ equity                       |   | 123,734                  |    | 122,512                     |   |
| Total liabilities and partners’ equity |   | $                        | 300,194 |                        | $      | 302,386 |   |

 

Summarized results of operations (inthousands):

 
|               |   | **Three  Months Ended  March 31,** |   |
|--------------------|--------|-----------------------------------------|--------|
|               |   | **2004**                                |   | **2003** |   |
|               |   |                                    |   |   |   |
| Net revenues       |   | $                                       | 35,603 |   | $ | 33,499 |   |
| Operating expenses |   | (30,158                                 | )      | (29,501 | ) |
| Operating income   |   | 5,445                                   |   | 3,998 |   |
| Other expense      |   | (4,223                                  | )      | (4,382 | ) |
| Net income (loss)  |   | $                                       | 1,222  |   | $ | (384 | ) |

 

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. Fourmembers of Tamarack Crossings, LLC, including Resorts, manage the business andaffairs of Tamarack.  Resorts’ capitalcontribution to Tamarack Crossings, LLC represents its proportionate share ofthe total capital contributions of the members.  Additional capital contributions of the members, includingResorts, may be required for certain purposes, including the payment ofoperating costs and capital expenditures or the repayment of loans, to theextent such costs are not funded by prior capital contributions andearnings.  At March 31, 2004 andDecember 31, 2003, Resorts’ financial investment in Tamarack Crossings,LLC was $4.2 million and $4.0 million, respectively.  The Company’s investment in Tamarack is accounted for using theequity method of accounting.  Equity inincome related to Tamarack for the three months ended March 31, 2004 and2003 was $268,000 and $223,000, 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 will permit thetracking and surveillance of pit gaming operations (“MindPlay”).  Resorts owns an approximately 18% interestin the MindPlay Entity.

 

OnFebruary 19, 2004, Alliance Gaming Corp., a New York Stock Exchangelisted company (“Alliance”), purchased substantially all of the assets of theMindPlay Entity, consisting primarily of intellectual property, and assumedcertain liabilities in the aggregate amount of $2,000,000.  The principal amount of liabilities assumedincluded a $1,250,000 working capital line, 54.28% of which had been guaranteedby Resorts.  The consideration receivedby the MindPlay Entity included $9.0 million in cash, the assumption of $2.0million of liabilities and promissory note issued by Alliance in the aggregateprincipal amount of $4,000,000 which is payable in equal installments after twoand four years, respectively, with interest at the rate of 6% per annum.  In addition, the MindPlay Entity receivedoptions to purchase 100,000 shares of Alliance common stock, which areexercisable at an exercise price of $24.69 per share.  The options, which expire on February 19, 2011, becomeexercisable as to 50,000 of the shares on February 19, 2006 and as to thebalance on February 19, 2008. Based upon an independent appraisal dated February 20, 2004, the fairmarket value of these warrants was $987,000. For a thirteen year period subsequent to the closing date, Alliance willpay the

 

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MindPlay Entity royalties, whichwill be based upon a percentage of gross profit for the first seven years and apercentage of revenue for the remaining six years, from the sale of MindPlayproducts.  Royalty payments totaling atleast $1,000,000 over the first two years are guaranteed.   The MindPlay Entity has given certainindemnifications to Alliance related to the intellectual property which couldultimately affect the amount of notes collected due to certain offsets andimpact the amount of royalties collected. The amount of royalties to be received is subject to a number of futureevents, the impact of which cannot be determined at this time, includingdevelopment of manufacturing, sales and marketing programs by Alliance and thelevel of acceptance of the relatively new MindPlay product by the gamingindustry.  On March 8, 2004, theCompany received a cash distribution of $1,191,150 from the MindPlayEntity.  On April 8, 2004, theCompany received an additional cash distribution of approximately$119,000.  Resorts is entitled toreceive $600,000 in 2006 from the note and royalty proceeds as considerationfor termination of a services agreement between Resorts and the MindPlayEntity.

 

The Companyaccounts for ELLC’s 50% joint venture interest in the Silver Legacy JointVenture and its 21.25% interest in Tamarack using the equity method ofaccounting.  Since the Company operatesin the same line of business as the Silver Legacy and Tamarack, each withcasino and/or hotel operations, the Company’s equity in the income of suchjoint ventures is included in operating income.  The Company accounts for its 18% interest in MindPlay under theequity method of accounting.  SinceMindPlay, which produces a system that permits tracking and surveillance of pitgaming activities, operates in a dissimilar line of business, the Company’sequity in the income (loss) of such joint venture is included in non-operatingincome.

 

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

 

A significant portion of the Company’srevenues and operating income are generated from patrons who are residents ofnorthern California. A change in general economic conditions or the extent andnature of casino gaming in California, Washington or Oregon could adverselyaffect the Company’s operating results. On September 10, 1999, Californialawmakers approved a constitutional amendment that would give Native Americantribes the right to offer slot machines and a range of house-banked cardgames.  On March 7, 2000,California voters approved the constitutional amendment which legalized “Nevada-style”gaming on Native American reservations. While most existing Native Americangaming facilities in northern California are modest compared to Eldorado,numerous Native American tribes have announced that they are in the process ofexpanding, developing, or are considering establishing large-scale hotel andgaming facilities in northern California. In particular, a significant new Native American casino locatedapproximately 21 miles northeast of Sacramento opened in June 2003 andoffers approximately 1,900 slot machines and 111 table games.  Subsequent to its opening date inJune through March 31, 2004, we experienced a decrease in our weekendcasino volume resulting in a negative effect on our overall operating results.Based on its size and proximity, and potential expansion capabilities, webelieve this new casino, along with the continued growth of other NativeAmerican gaming establishments, could continue to place additional competitivepressure on our operating results. While we cannot predict the extent of any future impact, it could besignificant.

 

**6.****             ****Subsequent Event**

 

On April 20, 2004, Resorts and Capitalissued $64.7 million principal amount of 9% senior notes due 2014 (the “NewNotes”).  The Company has called all ofthe outstanding 101⁄2% Notes for redemption on May 21, 2004 at a redemptionprice of 101.75% plus accrued and unpaid interest to the redemption date, inaccordance with the indenture relating to the 101⁄2% Notes.  The redemption will be funded utilizing thenet proceeds from the issuance of the New Notes, together with cash andborrowings under the Company’s revolving credit facility.  The redemption of the 101⁄2% Notes will resultin a loss of approximately $1.7 million in the second quarter of 2004 afterwriting off unamortized bond fees relating to the debt issue and the premiumrelating to the call.

 

**Item 2****.  Management’sDiscussion and Analysis of Financial Condition and Results of Operations.**

 

**General**

 

Eldorado Resorts LLC  (“Resorts”) was formed in June 1996 tobe the successor to Eldorado Hotel Associates Limited Partnership (the“Predecessor Partnership”) pursuant to an exchange of all the outstandingpartnership interests in the Predecessor Partnership for membership interestsin Resorts (the “Reorganization”).  TheReorganization was effective on July 1, 1996.  Resorts owns and operates the Eldorado Hotel & Casino (the“Eldorado”), a premier hotel/casino and entertainment facility in Reno, Nevada.  In addition to owning the Eldorado, Resorts’96% owned

 

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subsidiary, Eldorado Limited LiabilityCompany, a Nevada limited liability company (“ELLC”), owns a 50% interest in ajoint venture (the “Silver Legacy Joint Venture”) which owns the Silver LegacyResort Casino  (the “Silver Legacy”), amajor themed hotel/casino located adjacent to the Eldorado. Resorts, ELLC andEldorado Capital Corp. (“Capital”), a wholly-owned subsidiary of Resorts, whichholds no significant assets and conducts no business activity, are collectivelyreferred to as the “Company.”

 

The Company accounts for its investment in theSilver Legacy Joint Venture and two other smaller joint ventures, Tamarack andMindPlay, utilizing the equity method of accounting.  The Company’s consolidated net income (loss) includes itsproportional share of the Silver Legacy Joint Venture’s, Tamarack’s, andMindPlay’s net income (loss) before taxes.

 

The following discussion of the Company’soperations relates to the Eldorado except as otherwise indicated.

 

**Critical AccountingPolicies**

 

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 depreciated over itsestimated useful life.  Judgments aremade in determining estimated useful lives and salvage values of theseassets.  The accuracy of these estimatesaffects the amount of depreciation expense recognized in our financial resultsand whether we have a gain or loss on the disposal of assets.  We review depreciation estimates and methodsas new events occur, more experience is acquired, and additional information isobtained that would possibly change our current estimates.  In accordance with Statement of FinancialAccounting Standards No. 144, “Accounting for the Impairment or Disposal ofLong-Lived Assets”, long-lived assets are reviewed for impairment wheneverevents or changes in circumstances indicate that the carrying amount of anasset may not be recoverable.  Anestimate of undiscounted future cash flows produced by the asset is compared toits carrying value to determine whether an impairment exists.  If it is determined that the asset is impairedbased on expected future cash flows, a loss, measured by the amount by whichthe carrying amount of the asset exceeds the fair value of the asset, would berecognized.  At March 31, 2004, noevents 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 for receivables that may not becollected.  Methodologies for estimatingbad debt reserves range from specific reserves to various percentages appliedto aged receivables. Historical collection rates are considered, as arecustomer 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.

 

*SelfInsurance Reserves*

 

The Eldorado is self insured for our group health and workmens’compensation programs.  We utilizehistorical claims information provided by our third party administrators tomake estimates for known pending claims as well as claims that have beenincurred, 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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**Factors ImpactingOperating Trends**

 

A significant portion of the Company’srevenues and operating income are generated from patrons who are residents ofnorthern California, and as such, our operations have been adversely impactedby the growth in Native American gaming in northern California.  The United Auburn Indian Community (“UAIC”)has entered into a development and management agreement with an establishedgaming operator to develop and manage Thunder Valley Casino, an approximately$215 million, 200,000 square foot gaming and entertainment facility on a49-acre site approximately 21 miles northeast of Sacramento.  Thunder Valley Casino opened on June 9,2003 and offers approximately 1,900 slot machines and 111 table games, diningand entertainment amenities and parking for 4,500 vehicles.  This project has been open approximatelyeleven months, and during the quarter ended March 31, 2004, we believe itimpacted our operating results.  Basedon its size, proximity, and potential expansion capabilities, we believeThunder Valley Casino could further impact our operations in the future. Whilewe cannot predict the extent of the future impact, it could besignificant.  In addition to existinggaming facilities, numerous Native American tribes have announced that they arein the process of developing or are considering establishing large-scale gamingfacilities in northern California. Management believes the greatest impact fromThunder Valley Casino to the Eldorado’s customer base is to its day-trippers,those patrons whose visit is for one day and does not include an overnightstay.  These customers are typically nottracked players, as they tend not to be as loyal a customer as those who visitfor more than one day at a time. Day-trippers primarily visit Reno in the second and third quarters whenthe weather is more favorable.

 

Approvals have been obtained for two public works projects in thedowntown area of Reno.  The first projectwill lower the train tracks which run between Reno’s downtown district andseparate the Eldorado and the two adjoining properties from the rest of thedowntown gaming facilities. Construction on this project, which commenced in early 2003, is expectedto be completed in 2006.  The secondproject involves the construction of a downtown special events center next tothe National Bowling Stadium. Construction of this project commenced in January 2004 and isexpected to be completed by December 2004.  While we believe the construction of these projects has had aminimal impact on our operations, we cannot determine their impact during theirremaining periods of construction or after their completion.

 

OnJuly 22, 2003, the Governor of Nevada signed into law a new tax bill thatprovides for increases in the taxes applicable to our operations.  Based on our evaluation of the new Nevadatax law, we believe the annual incremental impact on our current level ofoperations will be approximately $0.75 million.

 

Our operatingresults are highly dependent on the volume of customers visiting and staying atour resort.  Key volume indicatorsinclude table games drop and slot handle, which refer to amounts wagered by ourcustomers. The amount of volume we retain, which is not fully controllable byus, is recognized as casino revenues and is referred to as our win or hold. Inaddition, hotel occupancy and price per room designated by average daily rate(“ADR”) are key performance indicators for our hotel business.

 

The following discussion of the Company’s operations relates to theEldorado except as otherwise indicated.

 

**Three Months Ended March 31,2004 Compared to**

**Three Months Ended March 31,2003**

 

**Summary Financial Results**

 

The following table highlights the results ofour operations (dollars in thousands):

 
|                                           |   | **Three  Months Ended March 31,** |   |     |   |
|------------------------------------------------|--------|----------------------------------------|--------|----------|--------|
|                                           |   | **2004**                               |   | **2003** |   | **Percent  Change** |   |
|                                           |   |                                   |   |     |   |   |   |
| Net revenues                                   |   | $                                      | 31,817 |     | $      | 32,775 |   | (2.9 | )% |
| Operating expenses                             |   | 29,497                                 |   | 30,458   |   | (3.2 | )% |
| Equity in income of unconsolidated  affiliates |   | 879                                    |   | 31       |   | 2,763.9 | % |
| Operating income                               |   | 3,199                                  |   | 2,348    |   | 36.2 | % |
| Net income (loss)                              |   | 2,217                                  |   | (440     | )      | 603.9 | % |
|                                                |        |                                        |        |          |        |  |  |  |  |

 

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*Net Revenues.*  The decline in net revenues was principally due to decreasedcasino revenues. We believe this decrease was partially associated with thepreviously discussed growth in Native American gaming in northernCalifornia.  In addition, the continuedeffect of a weak California economy, specifically in northern California,continued to pose a challenge in the first quarter of 2004.  While the United States economy appears tohave entered a recovery period in the latter half of 2003, we believe our mainfeeder markets within northern California have been slower to improve incomparison to the rest of the nation.

 

*Equity in Income of UnconsolidatedAffiliates.*  Equity in income of the Silver Legacy JointVenture increased approximately $0.8 million primarily as of a result of anincrease in net revenues in the 2004 period. Equity in income in Tamarack increased approximately $45,000.

 

*Operating Income.*  The increase in operating income is primarily related to anincrease in income from our unconsolidated affiliates.  Management feels that with its new slotproduct on the remodeled casino floor, along with our enhanced complimentaryprogram and remodeled rooms, revenues have stabilized, particularly in thecasino, as we continue to maintain our loyal customer base while weaggressively target local customers.  Wehave also reduced variable expenditures, including payroll, which is ourlargest expense, through cost control efforts and our new ticket-in ticket-outslot machines along with efficiently monitoring promotional and departmentalexpenses.

 

*Net Income.*  Aside from the aforementioned factors affecting net revenues andoperating income, other expense decreased $1.8 million due primarily to anincrease in equity in income in MindPlay of $1.0 million and a decrease ininterest expense of $0.4 million.  Theincrease in income in MindPlay is due to a $1.2 million cash distributionreceived from the sale of substantially all of the assets of MindPlay inFebruary 2004 (See Note 4.)

 

**Revenues**

 

The following table highlights our sources ofnet operating revenues (dollars in thousands):

 
|                             |   | **Three  Months Ended March 31,** |   |     |   |
|----------------------------------|--------|----------------------------------------|--------|----------|--------|
|                             |   | **2004**                               |   | **2003** |   | **Percent  Change** |   |
|                             |   |                                   |   |     |   |   |   |
| Casino                           |   | $                                      | 20,558 |     | $      | 22,303 |   | (7.8 | )% |
| Food, beverage and entertainment |   | 10,330                                 |   | 10,264   |   | 0.6 | % |
| Hotel                            |   | 3,900                                  |   | 3,636    |   | 7.3 | % |
| Other                            |   | 946                                    |   | 912      |   | 3.7 | % |
| Promotional allowances           |   | 3,917                                  |   | 4,340    |   | (9.8 | )% |
|                                  |        |                                        |        |          |        |  |  |  |  |

 

*Casino Revenues. *Casinorevenues decreased principally due to lower table games drop and slot handle,primarily in untracked play relating to the aforementioned Native Americangaming in northern California, and a lower table games hold percentage.  The table games hold percentage was lowerthan the same period in 2003 when the table games hold percentage was slightlyhigher than average.  This decrease inhold percentage, as compared to the first quarter of 2003, accounted for 48.2%of the decrease in casino revenues.

 

*Food, Beverage and Entertainment Revenues*.  Food, beverage and entertainment revenues increased primarily dueto increased entertainment revenue as a result of higher showroom occupancy inthe first quarter of 2004 compared to the same period in 2003 and a slightincrease in beverage sales.  Theseincreases were offset slightly by a decrease in complimentary food revenue inthe first quarter due to decreased casino traffic.

 

*Hotel Revenues.*  Hotel revenues increased due to increases in the ourADR and hotel occupancy percentage to approximately $55 and 87.7%,respectively, in the first quarter of 2004 compared to approximately $52 and86.5%, respectively, in the firstquarter of 2003.  This increase in ADR and occupancy can bepartially attributed to the American Bowling Congress (“ABC”) tournamentbeginning in mid-February of 2004 while the Women’s International BowlingCongress (“WIBC”) tournament began in mid-March of 2003.  Both tournaments are held at the NationalBowling Stadium in downtown Reno.  For the three months ended March 31, 2004and 2003, the hotel occupancy was affected by hotel remodeling which reducedthe number of available room nights by approximately 550 and 800, respectively.

 

*Promotional Allowances*.  Promotional allowances, expressed as a percentage of casinorevenues, were 19.1% for the three months ended March 31, 2004 compared to19.5% for the same period in 2003.

 

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**Operating Expenses**

 

The following table highlights our operatingexpenses (dollars in thousands):

 
|                                |   | **Three  Months Ended March 31,** |   |     |   |
|-------------------------------------|--------|----------------------------------------|--------|----------|--------|
|                                |   | **2004**                               |   | **2003** |   | **Percent  Change** |   |
|                                |   |                                   |   |     |   |   |   |
| Casino                              |   | $                                      | 10,452 |     | $      | 11,531 |   | (9.4 | )% |
| Food, beverage and entertainment    |   | 7,032                                  |   | 6,847    |   | 2.7 | % |
| Hotel                               |   | 1,659                                  |   | 1,557    |   | 6.6 | % |
| Other                               |   | 723                                    |   | 738      |   | (2.0 | )% |
| Selling, general and administrative |   | 6,683                                  |   | 6,968    |   | (4.1 | )% |
| Depreciation                        |   | 2,948                                  |   | 2,817    |   | 4.7 | % |
|                                     |        |                                        |        |          |        |  |  |  |  |

 

*Casino Expenses.*  Casino expenses decreased largely as a result of a decline incasino payroll expenditures primarily due to our ticket-in ticket-out slotmachines which are being utilized on the casino floor.  The decrease was also due to significantlyreducing our charter bus program.

 

*Food, Beverage and Entertainment Expenses.*  Food and beverage expenses increased as a result of a slightincrease in our show production costs and liquor costs due to higher volume inthe beverage department.

 

*Hotel Expenses.*  Hotel expenses increased primarily due to increased hotelmarketing expenses and costs associated with having more occupied rooms in thefirst quarter of 2004.

 

*Selling, General and AdministrativeExpenses.*  Selling, general and administrative expensesdecreased primarily due to decreases in payroll expenditures, advertising,utilities and travel and entertainment expenses.

 

*Depreciation Expense.*  Depreciation expense increased due to assets placed intoservice during the current period.

 

**Other Income(Expense)**

 

Other income (expense) iscomprised of interest expense, equity in income (loss) of unconsolidatedaffiliate, loss on bond repurchase and interest rate swap loss.  Interest expense is net of interestincome.  For the three months endedMarch 31, 2004, interest expense decreased by approximately $0.4 million,or 17.8%, to $1.9 million for the three months ended March 31, 2004compared to $2.3 million for the same period in 2003 primarily due to adecrease in the average outstanding borrowings and a lower average interestrate.  The decreases in averageoutstanding borrowings and lower average interest rate are primarily due to thefollowing purchases and redemption of 101⁄2% Notes:

 

| **Amount** |         | **Month** |      | **Year** |   |
|------------|--------------|-----------|-----------|----------|--------|
| $          | 7.9 million  |      | January   |     | 2003   |   |
| $          | 1.75 million |      | September |     | 2003   |   |
| $          | 8.8 million  |      | November  |     | 2003   |   |

 

The Company recognized a $267,000 losson the January 2003 purchase of 101⁄2% Notes, net of unamortized feesrelating to the debt issue.  Equity inincome of our unconsolidated affiliate was $0.9 million in the first quarter of2004 as compared to equity in loss of $78,000 in the first quarter of2003.  We received a $1.2 million cashdistribution fromthe sale of substantially all of the assets of MindPlay in February 2004 (SeeNote 4).  The Company also recognized a$0.2 million loss from an interest rate swap agreement in the 2003 period.

 

**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 the101⁄2% Notes.  Since 1996, the Company hascompleted several expansion and remodeling projects, accounting for asignificant use of cash flow from operations and borrowed funds.

 

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AtMarch 31, 2004, the Company had $7.5 million of cash and cash equivalentsand, after giving effect to then outstanding borrowings, it had approximately$17.0 million available pursuant to its New Credit Facility (as defined below)all of which could have then been 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.  OnJuly 17, 2001, the Company’s credit facility was amended and restated (the“New Credit Facility”).  The New CreditFacility, which was further amended September 10, 2003, provides for asenior secured revolving credit facility of $30 million.  The amount of credit available pursuant tothe New Credit Facility reduces $1.0 million on December 31, 2004 and atthe 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.  The effective rate of interest on borrowingsunder the New Credit Facility at March 31, 2004 was 3.32% per annum.

 

The New Credit Facility is secured bysubstantially all of the Company’s real property.  The New Credit Facility includes various restrictions and othercovenants including: (i) restrictions on the disposition of property, (ii)restrictions on investments and acquisitions, (iii) restrictions ondistributions to members of Resorts, (iv) restrictions on the incurrence ofliens and negative pledges, (v) restrictions on the incurrence of indebtednessand the issuance of guarantees, (vi) restrictions on transactions withaffiliates and, (vii) restrictions on annual capital expenditures includingcapital leases.  The New Credit Facilityalso contains financial covenants including a maximum total debt to EBITDAratio, a maximum senior secured debt to EBITDA ratio, a minimum fixed chargecoverage ratio and a minimum equity requirement.  As of March 31, 2004 the Company was in compliance with allprovisions of the New Credit Facility.

 

As of March 31, 2004, the Company hadoutstanding (i) $64.2 million in aggregate principal amount of the 101⁄2% Notes,(ii) $13.0 million of borrowings and (iii) $0.6 million of other long-term debt(net of current portion).

 

On April 20, 2004, Resorts and Capitalissued $64.7 million principal amount of their 9% unsecured senior notes dueApril 15, 2014 (the “New Notes”). Interest on the New Notes is payable semi-annually on April 15 andOctober 15, beginning on October 15, 2004.  Other than as permitted to comply with an order or otherrequirements of a gaming regulatory authority, we will not have a right toredeem the New Notes prior to April 15, 2009, except that (i) prior toApril 15, 2009, we may redeem the New Notes at a redemption price equal to100% of their principal amount of the New Notes plus a make whole premium andaccrued interest and Liquidated Damages (as defined), if any, to the redemptiondate; and (ii) we may redeem up to $5 million principal amount of the New Notesutilizing any proceeds we receive on or prior to June 30, 2005 from thesale of our interest in Tamarack Junction at a redemption price equal to 100%of the principal amount of the New Notes redeemed, plus accrued interest andLiquidated Damages (as defined), if any, to the redemption date.  Beginning on April 15, 2009, we mayredeem the New Notes, in whole or in part, upon not less than 30 days notice,at the redemption prices (expressed as percentages of principal amount) setforth below plus accrued and unpaid interest and Liquidated Damages (asdefined), if any, to the applicable redemption date if redeemed during the12-month period beginning on April 15 of the years indicated:

 

| **Year**            |   | **Percentage** |   |
|---------------------|--------|----------------|--------|
| 2009                |   | 104.50         |   |
| 2010                |   | 103.00         |   |
| 2011                |   | 101.50         |   |
| 2012 and thereafter |   | 100.00         |   |

 

Upon a change of control event, each holderof New Notes may require us to repurchase all or a portion of its New Notes ata purchase price equal to 101% of the principal amount of the New Notes, plusaccrued interest.  Upon our failure toredeem all of our outstanding 101⁄2% Notes on or prior to May 24, 2004, eachholder of New Notes may require us to repurchase all or a portion of its NewNotes at a purchase price equal to 101% of the principal amount of the NewNotes, plus accrued interest and Liquidated Damages, if any, to the date ofrepurchase. The indenture relating to the New Notes contains covenants that,among other things, limit our ability and, in certain instances, the ability ofour subsidiaries, to incur indebtedness, make distributions to the holders ofour equity, purchase our equity securities, make payments on our subordinatedindebtedness other than in accordance with the original terms thereof, incurliens, and merge, consolidate or transfer all or substantially all of ourassets.  These covenants are subject toa number of important qualifications and exceptions.

 

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We have called all of the outstanding 101⁄2%Notes for redemption on May 21, 2004 at a redemption price of 101.75% plusaccrued and unpaid interest to the redemption date in accordance with theindenture relating to the 101⁄2% Notes. The redemption will befunded utilizing the net proceeds from our issuance of the New Notes, togetherwith cash and borrowings under our revolving credit facility.

 

During the three months ended March 31,2004 and 2003, we generated cash flows from operating activities of $1.4million.  As of March 31, 2004,cash and cash equivalents were $7.5 million, sufficient for normal operatingrequirements.

 

Cash used in investing activities for thethree months ended March 31, 2004 was $1.1 million compared to cash usedin investing activities of $1.9 million for the three months endedMarch 31, 2003.  In 2004, cash usedin investing activities related primarily to capital expenditures relating toslot purchases, our hotel remodeling and various equipment purchases.  Distributions from unconsolidated affiliatesincreased $1.0 million to $1.3 million for the three months endedMarch 31, 2004 compared to $0.3 million for the same period in 2003.  In February 2004, Resorts received a$1.2 million cash distribution resulting from the sale of substantially all of theassets of MindPlay.  The Company budgeted approximately $5.0million for capital expenditures in 2004 of which $1.9 million was spent in thefirst quarter of 2004 as compared to $2.2 million for the same period in 2003.

 

Cashused in financing activities was $124,000 for the three months endedMarch 31, 2004, compared to $604,000 for the three months endedMarch 31, 2003.  For the threemonths ended March 31, 2003, the Company purchased $7.9 million principalamount of its 101⁄2% Notes facilitated by borrowing $8.0 million under the New CreditFacility.

 

The Operating Agreement of Resorts datedJune 28, 1996 obligates Resorts to distribute each year for as long as itis not taxed as a corporation to each of its members an amount equal to suchmembers’ allocable share of the taxable income of Resorts multiplied by thehighest marginal combined Federal, state and local income tax rate applicableto individuals for that year.  Duringthe three months ended March 31, 2004 and 2003, Resorts made nodistributions to its members.  Theamount Resorts will be required to distribute for the year endingDecember 31, 2004, will depend on the results for the entire year and,accordingly, cannot be determined at this time.

 

The Company’s future sources of liquidity areanticipated to be from its operating cash flow, funds available from the NewCredit Facility and capital lease financing for certain of its fixed assetpurchases.  The Company’s anticipateduses of cash in the near term will be for recurring capital expenditures anddebt service.  We believe our capitalresources are adequate to meet our obligations including the funding of ourdebt service and recurring capital expenditures.

 

**Forward-LookingStatements**

 

Certain information included in this reportand other materials filed or to be filed by the Company with the Securities andExchange Commission (as well as information included in oral statements orwritten statements made or to be made by the Company) contains statements thatare forward-looking within the meaning of Section 27A of the SecuritiesAct of 1933, as amended, and Section 21E of the Securities Exchange Act of1934, as amended.  These statements canbe identified by the fact that they do not relate strictly to historical orcurrent facts.  The Company has basedthese forward-looking statements on its current expectations about futureevents.  These forward-lookingstatements include statements with respect to the Company’s beliefs, plans,objectives, goals, expectations, anticipations, intentions, financialcondition, results of operations, future performance and business, including, currentand future operations and statements that include the words “may”, “could”,“should”, “would”, “believe”, “expect”, “anticipate”, “estimate”, “intend”,“plan” or similar expressions.  Suchstatements include information relating to capital spending, financing sourcesand the effects of regulation (including gaming and tax regulation) andcompetition.  Such forward-lookinginformation involves important risks and uncertainties that could significantlyaffect anticipated results in the future and, accordingly, such results maydiffer from those expressed in any forward-looking statements made by or onbehalf of the Company.  These risks anduncertainties include, but are not limited to dependence on existing management,leverage and debt service (including sensitivity to fluctuations in interestrates), domestic or global economic conditions, changes in Federal or state taxlaws or the administration of such laws, changes in gaming laws or regulations(including the legalization of gaming in certain jurisdictions), expansion ofgaming on Native American lands (including such lands in California), risks anduncertainties relating to 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

 

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Affect the Company’s Future Results” in Item 1 of our annual report onForm 10-K for the year ended December 31, 2003.  This statement is provided as permitted by the Private SecuritiesLitigation Reform Act of 1995.

 

**Item 3****.  Quantitative and Qualitative DisclosuresAbout Market Risk**

 

The Company is exposed to market risk in theform of fluctuations in interest rates and their potential impact upon itsvariable rate debt.  The Companyevaluates its exposure to this market risk by monitoring interest rates in themarketplace.  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 three months ended March 31, 2004.

 

The indebtedness outstanding under the NewCredit Facility as of March 31, 2004, representing all of the Company’sthen outstanding variable rate debt, totaled $13.0 million.  As of March 31, 2004, the interest rateon the New Credit Facility was LIBOR plus 2.25%.  Under the terms of our New Credit Facility, we may borrow up to$30.0 million, 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.”

 

**Item 4****.  Controls and Procedures**

 

An evaluation was performed by management, with the participation ofour Chief Executive Officer and Chief Financial Officers, of the effectivenessof the design and operation of our disclosure controls and procedures.  Based on this evaluation, the ChiefExecutive Officer and Chief Financial Officers have concluded that, as ofMarch 31, 2004, our disclosure controls and procedures are effective toensure that information required to be disclosed in the reports that we file orsubmit under the Securities Exchange Act of 1934 is recorded, processed,summarized and reported, within the time periods specified in applicable rulesand forms of the Securities and Exchange Commission.

 

There have been no changes in our internal controls over financialreporting that occurred during the period covered by this report that havematerially affected, or are reasonably likely to materially affect, theseinternal controls over financial reporting.

 

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**PART II****.****                                                OTHERINFORMATION**

 

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

 

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

 

The following exhibits are filed as part of thisreport.

 
| **Exhibit Number** |   | **Description**                                                                                                                                                                                                   |
|--------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|               |   |                                                                                                                                                                                                              |
| 4.1                |   | Indenture dated April 20,  2004, between Eldorado  Resorts LLC, Eldorado Capital Corp. and U.S. Bank National Association, as  trustee.                                                                      |
|               |   |                                                                                                                                                                                                              |
| 4.2                |   | Amendment No. 3 to Second  Amended and Restated Loan Agreement, dated as of April 16, 2004, among  Eldorado Resorts LLC, the banks referred to therein, and Bank of America,  N.A., as administrative agent. |
|               |   |                                                                                                                                                                                                              |
| 10.1               |   | Redemption Deposit Agreement  dated as of April 20, 2004, by and among Eldorado Resorts LLC, Eldorado  Capital Corp. and U.S. Bank National Association, as trustee.                                         |
|               |   |                                                                                                                                                                                                              |
| 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:  May 12, 2004 | By:    | /s/  Donald L. Carano                   |   |
|                |   | Donald  L. Carano                       |   |
|                |   | Chief  Executive Officer, President and |   |
|                |   | Presiding  Manager                      |   |
|                |   |                                    |   |
|                |   |                                    |   |
| Date:  May 12, 2004 | 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 12, 2004 | By:    | /s/  Donald L. Carano                   |   |
|                |   | Donald  L. Carano                       |   |
|                |   | President                               |   |
|                |   |                                    |   |
|                |   |                                    |   |
| Date:  May 12, 2004 | By:    | /s/  Gene R. Carano                     |   |
|                |   | Gene  R. Carano                         |   |
|                |   | Treasurer  (Principal Financial and     |   |
|                |   | Accounting  Officer)                    |   |

 

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**EXHIBIT INDEX**

 
| **Exhibit Number** |   | **Description**                                                                                                                                                                                                   |
|--------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.1                |   | Indenture dated April 20,  2004, between Eldorado  Resorts LLC, Eldorado Capital Corp. and U.S. Bank National Association, as  trustee.                                                                      |
|               |   |                                                                                                                                                                                                              |
| 4.2                |   | Amendment No. 3 to Second  Amended and Restated Loan Agreement, dated as of April 16, 2004, among  Eldorado Resorts LLC, the banks referred to therein, and Bank of America,  N.A., as administrative agent. |
|               |   |                                                                                                                                                                                                              |
| 10.1               |   | Redemption Deposit Agreement  dated as of April 20, 2004, by and among Eldorado Resorts LLC, Eldorado  Capital Corp. and U.S. Bank National Association, as trustee.                                         |
|               |   |                                                                                                                                                                                                              |
| 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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