|SECURITIES AND
EXCHANGE COMMISSION


Washington, D.C. 20549

FORM 10-Q
|----------------------------------------------------------------------

|      |                                                                                            | 
|----- | ------------------------------------------------------------------------------------------ | 
|[X]   | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE                                    | 
|      | SECURITIES EXCHANGE ACT OF 1934For the Quarterly Period Ended June 30, 2003                | 
|      | OR                                                                                         | 
|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE                                   | 
|      | SECURITIES EXCHANGE ACT OF 1934For the Transition Period from ____________ to ____________ | 

|Commission file number
333-4356


COAST HOTELS AND CASINOS, INC.(Exact name of registrant as specified in its charter)
|----------------------------------------------------------------------------------------------------------------------

|                                                                                                       |                                                 
|------------------------------------------------------------------------------------------------------ | ------------------------------------------------
|Nevada(State or other jurisdiction ofincorporation or organization)                                    | 88-0345706(I.R.S. employeridentification number)
|4500 West Tropicana Avenue, Las Vegas, Nevada 89103(Address of principal executive offices) (Zip code)

|(702) 365-7000Registrants telephone number, including area code)None
(Former name, former address and former fiscal year, if changed since last report.)


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


Indicate
by check mark whether the Registrant is an Accelerated Filer (as defined in Exchange Act
rule 12b-2) Yes [   ] No [X]


APPLICABLE ONLY TO
CORPORATE ISSUERS:


Indicate
the number of shares outstanding of each of the issuers classes of common stock, as
of the latest practicable date.


Shares
of Common Stock outstanding as of August 12, 2003: 1,000


     Part I  FINANCIAL
INFORMATION


Item 1.  Financial Statements


COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
CONDENSED BALANCE SHEETS(dollars in thousands, except share data)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                         | June 30,2003 |  | December 31, 2002 |        
|-------------------------------------------------------- | ------------ |  | ----------------- | -------
|                                                         | (unaudited)  |  |                   |        
|                                                         |              |  |                   |        
|ASSETS                                                   |              | 
|CURRENT ASSETS:                                          |              |  |                   |        
|Cash and cash equivalents                                |              |  | $                 | 37,289 
|Accounts receivable, net                                 |              |  |                   | 5,936  
|Due from Coast Casinos, Inc.                             |              |  |                   | --     
|Other current assets                                     |              |  |                   | 23,005 
|                                                         |              |  |                   |        
|TOTAL CURRENT ASSETS                                     |              |  |                   | 66,230 
|PROPERTY AND EQUIPMENT, net                              |              |  |                   | 746,199
|OTHER ASSETS                                             |              |  |                   | 7,526  
|Due from Coast Casinos, Inc.                             |              |  |                   | 5,302  
|                                                         |              |  |                   |        
|                                                         |              |  | $                 | 825,257
|                                                         |              |  |                   |        
|LIABILITIES AND                                          |              | 
|STOCKHOLDER'S EQUITY                                     |              | 
|CURRENT LIABILITIES:                                     |              | 
|Accounts payable                                         |              |  | $                 | 18,693 
|Accrued liabilities                                      |              |  |                   | 42,693 
|Construction accounts payable                            |              |  |                   | 2,366  
|Current portion of long-term debt                        |              |  |                   | 40,657 
|                                                         |              |  |                   |        
|TOTAL CURRENT LIABILITIES                                |              |  |                   | 104,409
|LONG-TERM DEBT, less current portion                     |              |  |                   | 442,616
|DEFERRED INCOME TAXES                                    |              |  |                   | 32,615 
|DEFERRED RENT                                            |              |  |                   | 28,654 
|                                                         |              |  |                   |        
|TOTAL LIABILITIES                                        |              |  |                   | 608,294
|                                                         |              |  |                   |        
|COMMITMENTS AND CONTINGENCIES                            |              | 
|STOCKHOLDER'S EQUITY:                                    |              | 
|Common stock, $1.00 par value, 25,000 shares authorized, |              | 
|1,000 shares issued and outstanding                      |              |  |                   | 1      
|Additional paid-in capital                               |              |  |                   | 86,903 
|Retained earnings                                        |              |  |                   | 130,059
|                                                         |              |  |                   |        
|TOTAL STOCKHOLDER'S EQUITY                               |              |  |                   | 216,963
|                                                         |              |  |                   |        
|                                                         |              |  | $                 | 825,257
|                                                         |              |  |                   |        

|The accompanying notes are an
integral part of these condensed financial statements.



1


COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
CONDENSED STATEMENTS OF OPERATIONSFor the Three Months and Six Months Ended June 30, 2003 and 2002
(amounts in thousands)(unaudited)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              | Three Months EndedJune 30, |  | Six Months EndedJune 30, |        
|----------------------------- | -------------------------- |  | ------------------------ | -------
|
|OPERATING REVENUES:           |                            |  |                          |        
|Casino                        |                            |  | $                        | 105,192
|Food and beverage             |                            |  |                          | 28,355 
|Hotel                         |                            |  |                          | 12,945 
|Other                         |                            |  |                          | 11,399 
|                              |                            |  |                          |        
|GROSS OPERATING REVENUES      |                            |  |                          | 157,891
|Less:  promotional allowances |                            |  |                          | (12,795
|                              |                            |  |                          |        
|NET OPERATING REVENUES        |                            |  |                          | 145,096
|                              |                            |  |                          |        
|OPERATING EXPENSES:           |                            | 
|Casino                        |                            |  |                          | 42,319 
|Food and beverage             |                            |  |                          | 21,267 
|Hotel                         |                            |  |                          | 5,179  
|Other                         |                            |  |                          | 10,157 
|General and administrative    |                            |  |                          | 26,353 
|Land leases                   |                            |  |                          | 1,341  
|Deferred rent                 |                            |  |                          | 780    
|Depreciation and amortization |                            |  |                          | 12,125 
|                              |                            |  |                          |        
|TOTAL OPERATING EXPENSES      |                            |  |                          | 119,521
|                              |                            |  |                          |        
|OPERATING INCOME              |                            |  |                          | 25,575 
|                              |                            |  |                          |        
|OTHER INCOME (EXPENSES):      |                            | 
|Interest expense, net         |                            |  |                          | (9,405 
|Interest capitalized          |                            |  |                          | 336    
|Other income (expense)        |                            |  |                          | 130    
|                              |                            |  |                          |        
|TOTAL OTHER INCOME (EXPENSES) |                            |  |                          | (8,939 
|                              |                            |  |                          |        
|INCOME BEFORE INCOME TAXES    |                            |  |                          | 16,636 
|Income tax provision          |                            |  |                          | 5,739  
|                              |                            |  |                          |        
|NET INCOME                    |                            |  | $                        | 10,897 
|                              |                            |  |                          |        

|The accompanying notes are an
integral part of these condensed financial statements.



2


COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
CONDENSED STATEMENTS OF CASH FLOWSFor the Six Months Ended June 30, 2003 and 2002
(amounts in thousands)(unaudited)
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                      | Six Months EndedJune 30, | 
|--------------------------------------------------------------------- | ------------------------ | 
|
|
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                                 |                          | 
|Net income                                                            |                          | 
|                                                                      |                          | 
|ADJUSTMENTS TO RECONCILE NET INCOME TO                                |                          | 
|NET CASH PROVIDED BY OPERATING ACTIVITIES:                            |                          | 
|Depreciation and amortization                                         |                          | 
|Net amortization of debt offering costs and original issue premium    |                          | 
|Loss on disposals of assets                                           |                          | 
|Deferred income taxes                                                 |                          | 
|Deferred rent                                                         |                          | 
|Changes in assets and liabilities:                                    |                          | 
|Net increase in accounts receivable and other assets                  |                          | 
|Net (decrease) increase in accounts payable and accrued liabilities   |                          | 
|                                                                      |                          | 
|TOTAL ADJUSTMENTS                                                     |                          | 
|                                                                      |                          | 
|NET CASH PROVIDED BY OPERATING ACTIVITIES                             |                          | 
|                                                                      |                          | 
|CASH FLOWS FROM INVESTING ACTIVITIES:                                 |                          | 
|Capital expenditures, net of amounts in construction accounts payable |                          | 
|Proceeds from sale of assets                                          |                          | 
|                                                                      |                          | 
|NET CASH USED IN INVESTING ACTIVITIES                                 |                          | 
|                                                                      |                          | 
|CASH FLOWS FROM FINANCING ACTIVITIES:                                 |                          | 
|Proceeds from issuance of long-term debt, including original issue    |                          | 
|premium, net of financing costs                                       |                          | 
|Principal payments on long-term debt                                  |                          | 
|Proceeds from borrowings under bank line of credit                    |                          | 
|Repayments of borrowings under bank line of credit                    |                          | 
|Payments from Coast Casinos, Inc.                                     |                          | 
|                                                                      |                          | 
|NET CASH PROVIDED BY FINANCING ACTIVITIES                             |                          | 
|                                                                      |                          | 
|NET DECREASE IN CASH AND CASH EQUIVALENTS                             |                          | 
|CASH AND CASH EQUIVALENTS, at beginning of period                     |                          | 
|                                                                      |                          | 
|CASH AND CASH EQUIVALENTS, at end of period                           |                          | 
|                                                                      |                          | 

|The accompanying notes are an
integral part of these condensed financial statements.



3


COAST HOTELS AND CASINOS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS


NOTE 1  GENERAL


Background Information


Coast
Hotels and Casinos, Inc. (the Company or Coast Hotels) is a Nevada
corporation and a wholly owned subsidiary of Coast Casinos, Inc. (Coast
Casinos), which is also a Nevada corporation. Coast Casinos changed its name from
Coast Resorts, Inc. on July 2, 2002. Coast Hotels was formed in September 1995 and owns
and operates the following hotel-casinos in Las Vegas, Nevada:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | The
Orleans Hotel and Casino opened in 1996 and is located approximately one mile west of
the Las Vegas Strip on Tropicana Avenue.
| | - | ----------------------------------------------------------------------------------------------------------------------------------

| | o | Gold
Coast Hotel and Casino opened in 1986 and is located approximately one mile west of the
Las Vegas Strip on Flamingo Road.
| | - | ------------------------------------------------------------------------------------------------------------------------------

| | o | The
Suncoast Hotel and Casino opened in 2000 and is located in the west end of the Las Vegas
valley.
| | - | ----------------------------------------------------------------------------------------------------

| | o | Barbary
Coast Hotel and Casino opened in 1979 and is located on the Las Vegas Strip.
| | - | ------------------------------------------------------------------------------------

|Basis of Presentation


The
accompanying condensed interim financial statements are unaudited and have been prepared
in accordance with generally accepted accounting principles for interim financial
information and with Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting principles for
complete financial statements. The year-end balance sheet data was derived from audited
financial statements, but does not include all disclosures required by generally accepted
accounting principles. The unaudited financial statements should be read in conjunction
with the audited financial statements and footnotes included in our annual report on Form
10-K for the year ended December 31, 2002. In the opinion of management, all adjustments
and normal recurring accruals considered necessary for a fair statement of the results
for the interim periods have been included. The interim results reflected in the unaudited
financial statements are not necessarily indicative of expected results for the full year.



4


COAST HOTELS AND CASINOS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS


NOTE 2  LONG-TERM
DEBT


Long-term
debt consists of the following as of June 30, 2003 and December 31, 2002:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                     | June 30,2003   |  | December 31,2002 |        
|-------------------------------------------------------------------- | -------------- |  | ---------------- | -------
|
|                                                                     | (in thousands) | 
|9.5% senior subordinated notes due April 2009, with interest payable |                |  |                  |        
|semi-annually on April 1 and October 1, including  unamortized       |                | 
|original issue premium of $4,059 in 2003 and $4,412 in 2002          |                |  | $                | 329,059
|Senior secured credit facility due September 2004, collateralized    |                | 
|by substantially all of the assets of Coast Hotels and Casinos, Inc. |                |  |                  | 136,000
|Variable-rate note due March 2009, collateralized by 1996 Canadair   |                | 
|Challenger aircraft                                                  |                |  |                  | 18,000 
|Other notes payable                                                  |                |  |                  | 214    
|                                                                     |                |  |                  |        
|                                                                     |                |  |                  | 483,273
|Less: current portion                                                |                |  |                  | 40,657 
|                                                                     |                |  |                  |        
|                                                                     |                |  | $                | 442,616
|                                                                     |                |  |                  |        

|In
March 1999, the Company issued $175.0 million principal amount of 9.5% senior subordinated
notes with interest payable on April 1 and October 1 beginning October 1, 1999 and entered
into a $75.0 million senior secured credit facility due in September 2004 to facilitate a
refinancing. Availability under the credit facility was increased to $200.0 million in
September 1999. Coast Casinos is a full and unconditional guarantor of the indebtedness
under both of these debt agreements. Borrowings under the credit facility bear interest,
selected monthly at the Companys option, at a premium over the one-, two-, three- or
six-month London Interbank Offered Rate (LIBOR). The premium varies depending
on a certain financial ratio and can vary between 125 and 250 basis points. As of June 30,
2003, the premium over LIBOR was 2.25% (225 basis points) and the interest rate was 3.39%.
For the six months ended June 30, 2003, the weighted average interest rate for the senior
secured credit facility was 3.49%. The Company incurs a commitment fee, payable quarterly
in arrears, on the unused portion of the credit facility. This variable fee is currently
at the maximum rate of 0.5% per annum times the average unused portion of the facility.


In
accordance with the terms of the senior secured credit facility, the availability under
the facility has been reduced quarterly since September 30, 2001. Through June 30, 2003,
total availability has been reduced to $142.0 million with an additional quarterly
reduction in availability of $11.5 million on each of September 30, 2003, December 31,
2003, March 31, 2004 and June 30, 2004. Advances under the facility may be used for
working capital, general corporate purposes, and certain improvements to existing
properties. As of June 30, 2003, there was $136.0 million outstanding under the senior
secured credit facility with $5.3 million of availability remaining (net of letters of
credit of approximately $700,000).



5


COAST HOTELS AND CASINOS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS


NOTE 2  LONG-TERM
DEBT (continued)


On
February 2, 2001, the Company issued $50.0 million additional principal amount of senior
subordinated notes. The net proceeds of approximately $49.1 million were used to reduce
borrowings under its senior secured credit facility. On March 19, 2002 the Company issued
$100.0 million additional principal amount of senior subordinated notes. The notes were
issued at a $5.0 million premium to par value and the net proceeds of approximately $103.2
million were used to reduce borrowings under the senior secured credit facility. The notes
that were issued in 2001 and 2002 were issued under the same indenture and have the same
terms, interest rate and maturity date as the $175.0 million principal amount of senior
subordinated notes issued in 1999.


The
loan agreement governing the senior secured credit facility contains covenants that, among
other things, limit the ability of the Company to pay dividends or make advances to Coast
Casinos, to make certain capital expenditures, to repay certain existing indebtedness, to
incur additional indebtedness or to sell material assets of the Company. Additionally, the
loan agreement requires that the Company maintain certain financial ratios with respect to
its leverage and fixed charge coverage. The agreement was amended in December 2001, March
2002, January 2003, February 2003 and June 2003 to increase the limitations of the Company
to make certain capital expenditures and to allow for additional indebtedness. The Company
is also subject to certain covenants associated with the indenture governing the senior
subordinated notes, including, in part, limitations on certain restricted payments, the
incurrence of additional indebtedness and asset sales. Management believes that, at June
30, 2003, the Company was in compliance with all covenants and required ratios. Management
anticipates that it will amend or replace the senior secured credit facility in 2003.


In
February 2003, the Company borrowed $18.0 million under a secured loan agreement,
collateralized by a Company-owned aircraft. The proceeds were used to reduce borrowings
under the senior secured credit facility. The loan bears interest at a premium of 2.25%
over the 30-day LIBOR rate, which is adjusted monthly. As of June 30, 2003, the interest
rate was 3.57%, and for the six months ended June 30, 2003, the weighted average interest
rate was 3.57%. Payments of interest only are required during the first twelve months.
Commencing on March 28, 2004, the Company will be required to make monthly principal
payments of $120,000 plus interest on the unpaid balance. A balloon payment of the
remaining principal balance is due in February 2009.


On
March 28, 2003, the Company entered into an unsecured $20.0 million revolving bridge line
of credit (bridge facility) with a participant in its senior secured credit
facility. The facility was renewed in June 2003 and will expire on September 24, 2003.
Borrowings under the bridge facility will bear interest at a premium of 3.50% over one-,
two-, three-week or one month LIBOR.


As
of August 12, 2003, the Company had $134.0 million outstanding under the senior secured
credit facility and no outstanding borrowings under the bridge facility. The Company is
currently in negotiations with its bank group to amend or replace its senior secured
credit facility during 2003 so that borrowings under the facility, in conjunction with
existing cash balances and anticipated cash flow from operations, would provide sufficient
resources to meet its debt and lease payment obligations, operating needs and budgeted
capital expenditure requirements at its hotel-casino properties for at least the next
twelve months. There are no assurances that the Company will be able to amend or replace
its credit facility, in which case it will have to limit its future capital expenditures.



6


COAST HOTELS AND CASINOS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS


NOTE 3 
PROMOTIONAL ALLOWANCES


The
retail value of hotel accommodations and food and beverage items provided to customers
without charge is included in gross revenues and then deducted as promotional allowances,
to arrive at net revenues. The following is a breakdown of these complimentary revenues
for the three months and six months ended June 30, 2003 and 2002:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        | Three Months EndedJune 30, |  | Six Months EndedJune 30, |       
|----------------------- | -------------------------- |  | ------------------------ | ------
|
|Complimentary revenues: |                            |  |                          |       
|Food and beverage       |                            |  | $                        | 10,113
|Hotel                   |                            |  |                          | 1,778 
|Other                   |                            |  |                          | 904   
|                        |                            |  |                          |       
|Promotional allowances  |                            |  | $                        | 12,795
|                        |                            |  |                          |       

|The
estimated cost of providing these complimentary services is as follows for the three
months and six months ended June 30, 2003 and 2002:
|--------------------------------------------------------------------------------------------------------------------------------------------

|                  | Three Months EndedJune 30, |  | Six Months EndedJune 30, |       
|----------------- | -------------------------- |  | ------------------------ | ------
|
|Food and beverage |                            |  | $                        | 9,956 
|Hotel             |                            |  |                          | 600   
|Other             |                            |  |                          | 396   
|                  |                            |  |                          |       
|                  |                            |  | $                        | 10,952
|                  |                            |  |                          |       

|The
cost of promotional allowances has been allocated to expense as follows for the three
months and six months ended June 30, 2003 and 2002:
|---------------------------------------------------------------------------------------------------------------------------------------------

|                           | Three Months EndedJune 30, |  | Six Months EndedJune 30, |       
|-------------------------- | -------------------------- |  | ------------------------ | ------
|
|Casino                     |                            |  | $                        | 10,127
|General and administrative |                            |  |                          | 825   
|                           |                            |  |                          |       
|                           |                            |  | $                        | 10,952
|                           |                            |  |                          |       

|7


Item 2.  Management's
Discussion and Analysis of Financial Condition and Results of Operations


Critical Accounting
Policies and Estimates


We
have identified the following critical accounting policies that affect our more
significant judgments and estimates used in the preparation of our financial statements.
The preparation of our financial statements in conformity with accounting principles
generally accepted in the United States of America requires that we make estimates and
judgments that affect the reported amounts of assets and liabilities, revenues and
expenses, and related disclosures of contingent assets and liabilities. On an on-going
basis, we evaluate those estimates, including those related to asset impairment, accruals
for slot marketing points, self-insurance, compensation and related benefits, revenue
recognition, allowance for doubtful accounts, contingencies and litigation. These
estimates are based on the information that is currently available to us and on various
other assumptions that we believe to be reasonable under the circumstances. Actual results
could vary from those estimates under different assumptions or conditions.


We
believe that the following critical accounting policies affect significant judgments and
estimates used in the preparation of our financial statements:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | We
recognize revenue as net wins and losses occur in our casinos, upon the occupancy of our
hotel rooms, upon the delivery of food, beverage and other services, and upon performance
for entertainment revenue. Wagers received on all sporting events are recorded as a
liability until the final outcome of the event when the payoffs, if any, can be
determined. Effective January 1, 2001, we adopted Emerging Issues Task Force Issue 00-22
(the Issue), which requires that cash discounts and certain other cash
incentives related to gaming play be recorded as a reduction to gross casino revenues.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | We
maintain an allowance for doubtful accounts for estimated losses resulting from the
inability of our customers to make required payments, which results in bad debt expense.
We determine the adequacy of this allowance by continually evaluating individual customer
receivables, considering the customers financial condition, credit history and
current economic conditions. If the financial condition of customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional allowances may
be required.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | We
maintain accruals for health and workers compensation self-insurance and slot club point
redemption, which are classified as accrued liabilities in the balance sheets. We
determine the adequacy of these accruals by periodically evaluating the historical
experience and projected trends related to these accruals. If such information indicates
that the accruals are overstated or understated, we will adjust the assumptions utilized
in the methodologies and reduce or provide for additional accruals as appropriate.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | We
are subject to various claims and legal actions in the ordinary course of business. Some
of these matters include personal injuries to customers and damage to customerspersonal
assets. We estimate guest claims and accrue for such liability based on historical
experience in accrued liabilities in the balance sheets.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|8


Item 2.  Management's
Discussion and Analysis of Financial Condition and Results of Operations              (continued)


Critical Accounting
Policies and Estimates (continued)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | At
June 30, 2003, we had net property and equipment of $746.2 million, representing 91% of
our total assets. We depreciate the property and equipment on a straight-line basis over
their estimated useful lives. The estimated useful lives are based on the nature of the
assets as well as our current operating strategy. Future events, such as property
expansions, property developments, new competition and new regulations, could result in a
change in the manner in which we are using certain assets, requiring a change in the
estimated useful lives of such assets. In assessing the recoverability of the carrying
value of property and equipment, if events and circumstances warrant such an assessment,
we must make assumptions regarding estimated future cash flows and other factors. If
these estimates or the related assumptions change, we may be required to record an
impairment loss for these assets. Such an impairment loss would be recognized as a
non-cash component of operating income.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | We
have entered into lease agreements where the rental payments increase on an annual basis.
We recognize the related rent expense on the straight-line method over the term of the
agreements. Deferred rent is recorded to reflect the excess of rent expense over cash
payments since the inception of the leases.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Results of Operations


The
following table sets forth, for the periods indicated, certain financial information
regarding our results of operations:
|-----------------------------------------------------------------------------------------------------------------------------------------------------

|                                                | Three Months EndedJune 30, |  | Six Months EndedJune 30, |        
|----------------------------------------------- | -------------------------- |  | ------------------------ | -------
|
|
|Net operating revenues                          |                            |  | $                        | 145,096
|Operating expenses                              |                            |  |                          | 119,521
|                                                |                            |  |                          |        
|Operating income                                |                            |  | $                        | 25,575 
|                                                |                            |  |                          |        
|Net income                                      |                            |  | $                        | 10,897 
|                                                |                            |  |                          |        
|Cash provided by operating activities           |                            |  | $                        | 18,640 
|                                                |                            |  |                          |        
|Cash used in investing activities               |                            |  | $                        | (19,153
|                                                |                            |  |                          |        
|Cash provided by (used in) financing activities |                            |  | $                        | (3,237 
|                                                |                            |  |                          |        

|9


Item 2.  Management's
Discussion and Analysis of Financial Condition and Results of Operations              (continued)



Three Months Ended June
30, 2003 Compared to Three Months Ended June 30, 2002 and the Six Months Ended June 30,
2003 Compared to the Six Months Ended June 30, 2002


In
the three months and six months ended June 30, 2003, we experienced increases in revenues
and operating income. Net income was slightly lower in the three months ended June 30,
2003, primarily as a result of a gain in the second quarter of 2002 on the termination of
an interest rate swap agreement. Net income was higher for the first six months of 2003
compared to 2002. The increases were primarily due to improved revenues at The Orleans
where customer visitation was up as a result of the 586 new hotel rooms, casino space and
other amenities added in the recent expansion. The elimination of construction disruption
also improved access for customers, contributing to the improved operating results.


In
the three months ended June 30, 2003, net revenues were $145.1 million compared to $136.5
million in the second quarter of 2002, an increase of 6.3% due primarily to a 21.2%
increase at The Orleans for the reasons described above. Combined net revenues at the
Suncoast, Gold Coast and Barbary Coast were down slightly in the quarter compared to last
year, due to a reduction in promotional spending and possible effects of the sluggish
economy. In the six months ended June 30, 2003, net revenues were $291.5 million compared
to $271.5 million in 2002, an increase of 7.4%. A 19.3% increase in revenues at The
Orleans contributed most of the improvement.


Operating
income was $25.6 million in the three months ended June 30, 2003 compared to $21.1 million
in the same period in 2002, an increase of 21.1%. In the six months ended June 30, 2003,
operating income was $55.3 million compared to $45.4 million in 2002, an increase of
21.8%. Most of the improvement in 2003 is attributable to the increase in revenues at The
Orleans. Operating income at the Suncoast improved 2.4% in the quarter and 9.8%
year-to-date, due primarily to reduced spending on casino promotions. Operating income at
the Barbary Coast improved slightly in the quarter and year-to-date, but was down in the
quarter at the Gold Coast due to slightly lower revenues and slightly higher expenses.
Year-to-date, operating income at the Gold Coast was up 0.5% compared to the first six
months of 2002.


Casino.  Casino
revenues were $105.2 million in the three months ended June 30, 2003           compared
to $102.4 million in the same period in 2002, an increase of 2.7%.           Casino
revenues at The Orleans increased 12.7% in the second quarter of 2003 due           to
improved customer traffic related to the completion of the recent expansion
          project. Second quarter casino revenues at the Suncoast and the Gold Coast were
          down 3.5% and 3.0%, respectively, due to decreased customer wagering activity
          related to a reduction in promotional spending as well as to increased
          competition from nearby casinos. Barbary Coast casino revenues improved slightly in the quarter due
          to increased table games wagering activity (handle).



10


Item 2.  Management's
Discussion and Analysis of Financial Condition and Results of Operations              (continued)



Three Months Ended June
30, 2003 Compared to Three Months Ended June 30, 2002 and the Six Months Ended June 30,
2003 Compared to the Six Months Ended June 30, 2002 (continued)



Casino
(continued).  The increase in casino revenues combined with a decrease in
casino operating expenses contributed to a 59.8% casino operating margin in the quarter
compared to 55.5% in the second quarter of 2002. Despite the increase in casino revenues
at The Orleans, casino expenses decreased 5.2% due, primarily, to a reduction in spending
on casino promotions at our four hotel-casinos. The decrease in expenses contributed to a
casino operating margin of 60.6% compared to 53.1% in the second quarter of 2002.
Suncoast casino operating expenses were lower in the quarter by 11.0%, primarily due to
decreased promotional spending. The casino operating margin at the Suncoast improved to
65.5% compared to 62.6% in the second quarter of 2002. Gold Coast casino expenses
decreased 7.6%, primarily as a result of the reduction in spending on casino promotions,
contributing to a casino operating margin of 56.2% compared to 54.1% in the second
quarter of 2002. Barbary Coast expenses decreased 3.3% in the quarter, improving the
casino operating margin at that property to 43.3% from 36.9%.


In
the six months ended June 30, 2003, casino revenues were $213.1 million compared to $203.3
million in 2002, an increase of 4.8%. Casino revenues at The Orleans increased 12.4% in
the first six months of 2003 due to improved customer traffic related to the recent
expansion project. Casino revenues at the Suncoast and the Gold Coast were slightly higher
in the first half of 2003, despite the decline in the second quarter. Barbary Coast casino
revenues were up slightly in the first half.


Casino
expenses decreased 4.8% in the six months ended June 30, 2003, contributing to an improved
casino operating margin of 59.9% compared to 55.8% in the first half of 2002. Casino
expenses at the Barbary Coast were relatively flat, but were lower at the other properties
due primarily to a reduction in promotional expenses.


Food
and Beverage.  Food and beverage revenues were $28.4 million in the second
quarter of 2003 compared to $27.6 million in 2002, an increase of 2.8%. Food and beverage
revenues at The Orleans, the Gold Coast and the Barbary Coast were higher in the quarter,
but were lower by 7.6% at the Suncoast due primarily to lower customer counts in the
buffet as a result of aggressive promotions by competitors. Food and beverage expenses
increased 1.9% in the quarter, primarily due to increased customer volume at The Orleans.


In
the six months ended June 30, 2003, food and beverage revenues were $56.9 million, an
increase of 2.4% over revenues of $55.6 million in the first half of 2002. A 10.1%
increase at The Orleans was partially offset by a decrease of 6.3% at the Suncoast,
primarily in the buffet. Food and beverage expenses increased 1.8% in the first half of
2003, primarily due to the increased customer volume at The Orleans. Food and beverage
expenses were down slightly at the Suncoast and the Gold Coast but increased at the
Barbary Coast and The Orleans.


Hotel.            Hotel
revenues were $12.9 million in the second quarter of 2003 compared to           $10.0
million in 2002, an increase of 30.1%. The increase was primarily due to           the
opening in August 2002 of 586 new rooms at The Orleans. While the percentage           of
rooms occupied at The Orleans declined to 86.0% in the second quarter of 2003
          compared to 91.5% in 2002 and the average daily room rate dropped slightly, the
          total number of occupied rooms increased by approximately 43,000,
          contributing to an increase of 65.7% in its hotel revenues. Room occupancy
          improved at the Gold Coast, contributing to a 5.4% increase in hotel revenues
at           that property, but hotel revenues were relatively flat at the Suncoast and
the           Barbary Coast. The overall average daily room rate was slightly higher than
in           the second quarter of 2002. Hotel expenses in the quarter were $5.2 million
          compared to $4.1 million in 2002, an increase of 26.7%, in line with the
overall           increase in hotel revenues.



11


Item 2.  Management's
Discussion and Analysis of Financial Condition and Results of Operations              (continued)



Three Months Ended June
30, 2003 Compared to Three Months Ended June 30, 2002 and the Six Months Ended June 30,
2003 Compared to the Six Months Ended June 30, 2002 (continued)


Hotel
(continued).  In the six months ended June 30, 2003, hotel revenues were $26.1 million
compared to $20.0 million in 2002, an increase of 30.5%, primarily due to the new hotel
rooms at The Orleans. Year-to-date, hotel revenues at The Orleans were up 63.3% compared
to the first six months of 2002. Year-to-date, hotel revenues at the Suncoast, the Gold
Coast and the Barbary Coast were up by 2.6%, 6.7% and 2.9%, respectively. Hotel expenses
in the first half of 2003 were $10.4 million compared to $8.1 million in the first half of
2002, an increase of 28.3%, in line with the overall increase in hotel revenues.


Other.  Other revenues are derived primarily from bowling, retail, entertainment
and           leased facilities. In the quarter ended June 30, 2003, other revenues were
$11.4           million compared to $9.8 million in 2002, an increase of 16.7%, primarily
due to           a 44.6% increase at The Orleans. The arena at The Orleans opened in May
2003 and           contributed $1.6 million in revenues from concerts, sporting events
and family           shows. Other revenues at the Suncoast, the Gold Coast and the
Barbary Coast were           flat compared to the prior year. Year-to-date, other
revenues were $21.4 million           compared to $19.1 million in the first six months
of 2002, an increase of 11.9%           due primarily to increases at The Orleans. Other
expenses increased by 36.4% in           the quarter and by 26.1% year-to-date due to
salaries, advertising,           entertainment and other costs related to the new arena
at The Orleans.


General and Administrative.  General and administrative expenses were $26.4 million in
the second quarter of 2003 compared to $25.1 million in 2002, an increase of 5.2%,
primarily due to increases in payroll and related costs of $1.1 million (8.0%) and
property taxes of $330,000 (24.6%). Payroll and related costs were affected by increased
staffing levels at The Orleans and the Gold Coast due to the recent expansions at those
properties, as well as to third quarter pay raises. Property taxes were higher due to the
expansions at The Orleans and the Gold Coast. Year-to-date, general and administrative
expenses were $52.1 million compared to $48.5 million in the first six months of 2002, an
increase of 7.4%, also due primarily to the increases payroll, payroll related costs and
property taxes described above.


Depreciation
and Amortization.  Depreciation and amortization expense was $12.1 million in the
second quarter of 2003 compared to $10.2 million in 2002, an increase of 19.3% due to the
depreciation of completed expansion and remodeling projects at The Orleans and the Gold
Coast. In the six months ended June 30, 2003, depreciation and amortization expense was
$23.6 million compared to $19.4 million in 2002, an increase of 21.2%, also due to the
reasons described above.


Other
Income (Expenses).  Net interest expense was $9.4 million in the second quarter of 2003
compared to $7.9 million in 2002, an increase of 19.6% due primarily to higher aggregate
indebtedness related to the completed expansion and remodeling projects at The Orleans and
the Gold Coast and the secured aircraft loan. In the six months ended June 30, 2003, net
interest expense was $18.7 million compared to $15.0 million in the first six months of
2002, an increase of 24.2% due to the higher aggregate indebtedness described above.
Capitalized interest was $336,000 in the second quarter compared to $858,000 in the second
quarter of 2002. The decrease was due to the completion prior to the second quarter of
most of the expansion and remodeling projects at The Orleans and the Gold Coast.
Capitalized interest was $1.2 million in the first six months of 2003 compared to $1.4
million in the same period in 2002. Other income in the second quarter and first six
months of 2002 was primarily due to the recording of the estimated fair value of a swap
agreement that was entered into in April 2002 and terminated in July 2002.



12


Item 2.  Management's
Discussion and Analysis of Financial Condition and Results of Operations              (continued)



Aggregate Indebtedness
and Fixed Payment Obligations


Our
total long-term indebtedness (including current maturities) and fixed payment obligations
on the land leases for the twelve-month periods ending June 30 are summarized by year
below:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                           | 2004 |  | 2005 |        | 2006 |   | 2007    |  | 2008 |       | Thereafter |   | Total | 
|-------------------------- | ---- |  | ---- | ------ | ---- | - | ------- |  | ---- | ----- | ---------- | - | ----- | 
|Long-Term Indebtedness     |      |  |      |        |      |   |         |  |      |       |            |   |       | 
|Senior subordinated notes  |      |  | $    | --     |      | $ | --      |  | $    | --    |            | $ | --    | 
|Bank credit facility(1)    |      |  |      | 40,000 |      |   | 96,000  |  |      | --    |            |   | --    | 
|Secured aircraft loan      |      |  |      | 480    |      |   | 1,440   |  |      | 1,440 |            |   | 1,440 | 
|Other                      |      |  |      | 177    |      |   | 3       |  |      | 3     |            |   | 3     | 
|Fixed Payment Obligations  |      | 
|for Land Leases            |      | 
|Barbary Coast - land lease |      |  |      | 190    |      |   | 190     |  |      | 190   |            |   | 190   | 
|The Orleans - land lease   |      |  |      | 2,700  |      |   | 2,700   |  |      | 2,800 |            |   | 3,000 | 
|Suncoast - land lease      |      |  |      | 2,510  |      |   | 2,570   |  |      | 2,630 |            |   | 2,690 | 
|                           |      |  |      |        |      |   |         |  |      |       |            |   |       | 
|Total Indebtedness and     |      | 
|Fixed Payment Obligations  |      |  | $    | 46,057 |      | $ | 102,903 |  | $    | 7,063 |            | $ | 7,323 | 
|                           |      |  |      |        |      |   |         |  |      |       |            |   |       | 

| | (1) | The
terms of the senior secured credit facility provide that availability will           be
reduced on a quarterly basis. See Liquidity and Capital           Resources.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The
Orleans occupies a portion of an approximately 80-acre site located on West Tropicana
Avenue, approximately one mile south of the Gold Coast. We lease the real property under a
ground lease entered into by Coast Hotels and the Tiberti Company, a Nevada general
partnership of which J. Tito Tiberti, a director of both Coast Hotels and Coast Casinos,
is managing partner. The lease had an effective commencement date of October 1, 1995, an
initial term of 50 years, and includes an option, exercisable by us, to extend the initial
term for an additional 25 years. The lease provides for monthly rental payments of
$225,000 per month through February 2004 and $250,000 per month during the 60-month period
thereafter. In March 2011, annual rental payments will increase on a compounding basis at
a rate of 3.0% per annum. In addition, we have been granted an option to purchase the real
property during the two-year period commencing in February 2016. The lease provides that
the purchase price will be the fair market value of the real property at the time we
exercise the option, provided that the purchase price will not be less than 10 times, nor
more than 12 times, annual rent at such time.


The
Suncoast is located in the west end of the Las Vegas valley and occupies an approximately
50-acre site that we lease pursuant to a Ground Lease Agreement dated as of October 28,
1994. The initial term of the lease expires on December 31, 2055. The lease contains three
options, exercisable by us, to extend the term of the lease for 10 years each. The lease
provided for monthly rental payments of $166,667 for the year ended December 31, 1995.
Thereafter, the monthly rent increases by the amount of $5,000 in January of each year.
The landlord has the option to require us to purchase the property at the end of 2014,
2015, 2016, 2017 and 2018, at the fair market value of the real property at the time the
landlord exercises the option, provided that the purchase price will not be less than 10
times nor more than 15 times the annual rent at such time. Based on the terms of the
lease, the potential purchase price commitment ranges from approximately $31.0 million to
approximately $51.0 million in the years 2014 through 2018. We have a right of first
refusal in the event the landlord desires to sell the property at any time during the
lease term.



13


Item 2.  Management's
Discussion and Analysis of Financial Condition and Results of Operations              (continued)



Aggregate Indebtedness
and Fixed Payment Obligations (continued)


The
Barbary Coast occupies approximately 1.8 acres at the intersection of Flamingo Road and
the Strip that we lease pursuant to a lease dated May 1, 1993. The lease provides for
rental payments of $175,000 per year during the initial term of the lease that expired on
May 1, 2003. We have exercised the first of two 30-year options, with rental payments
increasing to $190,000 per year during the first ten years of the renewal period. In
January 2003, we purchased the approximately 2.5 additional acres of real property located
adjacent to the Barbary Coast, which we previously leased, for approximately $18.1 million.
We use the 2.5-acre property as a parking lot for our employees and for valet parking.


Liquidity and Capital
Resources


Our
principal sources of liquidity have consisted of cash provided by operating activities and
debt financing. Cash provided by operating activities was $49.2 million in the six months
ended June 30, 2003, compared to $45.0 million in the same period in 2002.


Cash
used in investing activities was primarily for capital expenditures and was $68.0 million
in the first six months of 2003, compared to $116.6 million in 2002. In the first six
months of 2003, cash used for capital expenditures was $68.5 million, including $35.2
million for the expansion projects at The Orleans and the Gold Coast, $18.1 million for
the purchase of land at the Barbary Coast, $1.6 million for the completion of luxury
suites at the Suncoast, $1.2 million for capitalized interest and approximately $12.4
million for maintenance capital expenditures. In the first six months of 2002, cash used
for capital expenditures was primarily for the expansion projects at The Orleans and the
Gold Coast.


Cash
provided by financing activities was $18.6 million in the six months ended June 30, 2003,
primarily from $17.8 million in net proceeds from the financing of our aircraft and $35.5
million in proceeds from borrowings under the senior secured credit facility, offset by
$35.5 million in repayments of borrowings under the credit facility. In the first half of
2002, cash provided by financing activities was $57.6 million, primarily from $103.2
million in net proceeds from the issuance of long-term debt and $56.5 million of proceeds
from borrowings under the senior secured credit facility, offset, in part, by $107.5
million in repayments of borrowings under the credit facility.


In
March 1999, Coast Hotels issued $175.0 million principal amount of 9.5% senior
subordinated notes due in 2009 with interest payable on April 1 and October 1 beginning
October 1, 1999 and entered into a $75.0 million senior secured credit facility due 2004
to facilitate a refinancing. Availability under the credit facility was increased to
$200.0 million in September 1999, subject to automatic reductions in availability from
September 2001 through June 2004, as described below. Coast Casinos is a full and
unconditional guarantor of the indebtedness under both of these debt agreements.
Borrowings under the credit facility bear interest, selected monthly at our option, at a
premium over the one-, two-, three- or six-month London Interbank Offered Rate
(LIBOR). The premium varies depending on a certain financial ratio and can
vary between 125 and 250 basis points. As of June 30, 2003, the premium over LIBOR was
2.25% (225 basis points) and the interest rate was 3.39%. For the six months ended June
30, 2003, the weighted average interest rate for the senior secured credit facility was
3.49%. We incur a commitment fee, payable quarterly in arrears, on the unused portion of
the credit facility. This variable fee is currently at the maximum rate of 0.5% per annum
times the average unused portion of the facility.



14


Item 2.  Management's
Discussion and Analysis of Financial Condition and Results of Operations              (continued)



Liquidity and Capital
Resources (continued)


On
February 2, 2001, Coast Hotels issued $50.0 million additional principal amount of senior
subordinated notes. The net proceeds of approximately $49.1 million were used to reduce
borrowings under our senior secured credit facility. On March 19, 2002, Coast Hotels
issued $100.0 million additional principal amount of our senior subordinated notes. The
notes were issued at a premium and the net proceeds of $103.2 million were used to reduce
borrowings under our senior secured credit facility. The notes that were issued in 2001
and 2002 were issued under the same indenture and have the same terms, interest rate and
maturity date as our original $175.0 million principal amount of senior subordinated notes
issued in 1999.


The
availability under the senior secured credit facility has been reduced quarterly since
September 30, 2001. On June 30, 2003, total availability was reduced to $142.0 million
with an additional quarterly reduction in availability of $11.5 million on each of
September 30, 2003, December 31, 2003, March 31, 2004 and June 30, 2004. Advances under
the facility may be used for working capital, general corporate purposes, and certain
improvements to our existing properties. As of June 30, 2003, we had $136.0 million
outstanding under the senior secured credit facility with $5.3 million of availability
remaining (net of letters of credit of approximately $700,000).


The
loan agreement governing the senior secured credit facility contains covenants that, among
other things, limit the ability of Coast Hotels to pay dividends or make advances to Coast
Casinos, to make certain capital expenditures, to repay certain existing indebtedness, to
incur additional indebtedness or to sell material assets. Additionally, the loan agreement
requires that we maintain certain financial ratios with respect to leverage and fixed
charge coverage. We are also subject to certain covenants associated with the indenture
governing our senior subordinated notes, including, in part, limitations on certain
restricted payments, the incurrence of additional indebtedness and asset sales. The senior
secured credit facility was amended in December 2001, March 2002, January 2003, February
2003 and June 2003 to increase the limitations on certain capital expenditures and to
allow for additional indebtedness. At June 30, 2003, we were in compliance with all
covenants and required ratios.


In
February 2003, we borrowed $18.0 million under a secured loan agreement, collateralized by
our Canadair Challenger aircraft. The proceeds were used to reduce borrowings under the
senior secured credit facility. The loan bears interest at a premium of 2.25% over the
30-day LIBOR rate, which is adjusted monthly. As of June 30, 2003, the interest rate was
3.57%, and for the six months ended June 30, 2003, the weighted average interest rate was
3.57%. Payments of interest only are required during the first twelve months. Commencing
on March 28, 2004, we will be required to make monthly principal payments of $120,000 plus
interest on the unpaid balance. A balloon payment of the remaining principal balance is
due in February 2009.


On
March 28, 2003, we entered into an unsecured $20.0 million revolving bridge line of credit
(bridge facility) with a participant in our senior secured credit facility.
Borrowings under the bridge facility will bear interest at a premium of 3.50% over one-,
two-, three-week or one month LIBOR. The bridge facility was renewed in June 2003 and will
expire on September 24, 2003.



15


Item 2.  Management's
Discussion and Analysis of Financial Condition and Results of Operations              (continued)


Liquidity and Capital
Resources (continued)


As
of August 12, 2003, we had $134.0 million outstanding under the senior secured credit
facility and no outstanding borrowings under the bridge facility. We are currently in
negotiations with our bank group to amend or replace our senior secured credit facility
during 2003 so that borrowings under the facility, in conjunction with existing cash
balances and anticipated cash flow from operations would provide sufficient resources to
meet our debt and lease payment obligations, operating needs and budgeted capital
expenditure requirements at our hotel-casino properties for at least the next twelve
months. There are no assurances that we will be able to amend or replace our credit
facility, in which case we will have to limit our future capital expenditures.


Capital Expenditures


In
January 2001, we commenced an expansion of The Orleans. The expansion project included a
special-events arena, a 586-room hotel tower, a 2,600-car parking garage, six additional
movie theaters, two restaurants, an Irish pub and approximately 40,000 square feet of new
gaming area and public space. Through June 30, 2003, we had completed substantially all of
the construction and had spent $164.5 million. In the fourth quarter of 2000, we commenced
an expansion and remodel of the Gold Coast. The project included a new, expanded buffet
restaurant, a sports bar, an Asian-themed restaurant, an Italian restaurant, 10,000 square
feet of additional meeting space, an additional approximately 20,000 square feet of slot
and table games area, a new bingo room, an expanded porte-cochere and a parking garage. At
June 30, 2003, we had completed the expansion and remodel project and had spent $72.9
million.


In
the fourth quarter of 2001 and the first quarter of 2002, we purchased land totaling
approximately 60 acres for possible future development. The land is located in a gaming
enterprise district on Las Vegas Boulevard South, adjacent to Interstate 15 and
approximately six miles south of Tropicana Avenue. Subject to market conditions,
availability of financing and receipt of required governmental approvals, we intend to
develop a hotel-casino, the South Coast, on the site. We are currently
developing plans for the project and anticipate beginning construction of the hotel-casino
in the first half of 2004 and opening in the second half of 2005. There are no assurances
that we will actually develop the project in the anticipated time frame or at all.


In
July 2003, the Board of Directors approved the development and construction of additional
hotel rooms at The Orleans. Preliminary plans are for 461 rooms with an estimated project
cost of $36.0 million. Subject to the completion of plans and obtaining necessary permits,
we anticipate starting construction of the rooms in the second quarter of 2004. There are
no assurances that we will actually develop the project in the anticipated time frame or
at all.


In
the ordinary course of operating our hotel-casinos, it is necessary to upgrade or replace
fixtures and equipment and to make improvements that will extend the life of our physical
plants. We anticipate that these maintenance capital expenditures will total approximately
$25.0 million in 2003.



16


Item 2.  Management's
Discussion and Analysis of Financial Condition and Results of Operations              (continued)



Other Matters


In
August 2001, the Financial Accounting Standards Board issued Statement No. 143 (SFAS
143), Accounting for Obligations Associated with the Retirement of Long-Lived
Assets. The objectives of SFAS 143 are to establish accounting standards for the
recognition and measurement of an asset retirement obligation and its associated asset
retirement cost. SFAS 143 is effective for fiscal years beginning after June 15, 2002.


In
April 2002, the Financial Accounting Standards Board issued Statement No. 145 (SFAS
145) Rescission of FASB Statements Nos. 4, 44 and 64 and Amendment of FASB
Statement No. 13. SFAS 145 addresses the presentation for losses on early
retirements of debt in the statement of operations. Upon adoption of SFAS 145, we might
not be allowed to present losses on early retirements of debt as an extraordinary item.
Additionally, prior period extraordinary losses may be required to be reclassified to
conform to this new presentation.


In
June 2002, the Financial Accounting Standards Board issued Statement No. 146 (SFAS
146) Accounting for Costs Associated with Exit or Disposal Activities.
The provisions of SFAS 146 become effective for exit or disposal activities commenced
subsequent to December 31, 2002.


The
adoptions of SFAS 143, 145, and 146 had no material impact on our financial position,
results of operations or cash flows.


In
December 2002, the Financial Accounting Standards Board issued Statement No. 148
(SFAS 148) Accounting for Stock-Based Compensation. The provisions
of SFAS 148 became effective December 15, 2002. We adopted the disclosure requirements of
SFAS 148, and there was no impact on our financial position, results of operations or cash
flows.


In
November 2002, the Financial Accounting Standards Board issued FASB Interpretation No. 45
(FIN 45), Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others. This
interpretation elaborates on the disclosures to be made by a guarantor in its interim and
annual financial statements about its obligations under certain guarantees that it has
issued. It also clarifies (for guarantees issued after January 1, 2003) that a guarantor
is required to recognize, at the inception of a guarantee, a liability for the fair value
of the obligations undertaken in issuing the guarantee. At June 30, 2003, we do not have
any outstanding guarantees and accordingly the adoption of FIN 45 did not have a material
impact on our financial position, results of operations or cash flows.


In
January 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46
(FIN 46), Consolidation of Variable Interest Entities. This
interpretation addresses the requirements for business enterprises to consolidate related
entities in which they are determined to be the primary economic beneficiary as a result
of their variable economic interests. The interpretation is intended to provide guidance
in judging multiple economic interests in an entity and in determining the primary
beneficiary. The interpretation outlines disclosure requirements for VIEs created after
January 31, 2003. We have reviewed our major relationships and our overall economic
interests with other companies consisting of related parties and other suppliers to
determine the extent of our variable economic interest in these parties. The adoption of
FIN 46 did not have a material impact on our financial position, results of operations or
cash flows.



17


Item 2.  Management's
Discussion and Analysis of Financial Condition and Results of Operations              (continued)



Certain Forward-Looking
Statements


This
Form 10-Q includes forward-looking statements within the meaning of the
securities laws. All statements regarding our expected financial position, business
strategies and financing plans under the headings Managements Discussion and
Analysis of Financial Condition and Results of Operations, Business and
elsewhere in this Form 10-Q are forward-looking statements. In addition, in those and
other portions of this Form 10-Q, the words anticipates, believes,
estimates, seeks, expects, plans,
intends and similar expressions, as they relate to Coast Hotels or its
management, are intended to identify forward-looking statements. Although we believe that
the expectations reflected in such forward-looking statements are reasonable, and have
based these expectations on our beliefs as well as assumptions we have made, such
expectations may prove to be incorrect. Important factors that could cause actual results
to differ materially from such expectations are disclosed in this Form 10-Q, including,
without limitation, the following factors:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | increased
 competition,  both in Nevada and other states,  including  increased  competition  from
California          Native American gaming;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------

| | o | dependence
on the Las Vegas area and Southern California for a majority of our customers;
| | - | -----------------------------------------------------------------------------------------

| | o | substantial
leverage and uncertainty that we will be able to service our debt;
| | - | ------------------------------------------------------------------------------

| | o | uncertainties
 associated with construction projects,  including the related disruption of operations
and the          availability of financing, if necessary;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | changes
in laws or  regulations,  third party  relations and approvals,  decisions of courts,
 regulators and          governmental bodies;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------

| | o | uncertainties
related to the economy;
| | - | -------------------------------------

| | o | uncertainties
related to the effects of possible future terrorist activities; and
| | - | ---------------------------------------------------------------------------------

| | o | uncertainties
related to the effects of international hostilities affecting the US.
| | - | -----------------------------------------------------------------------------------

|All
subsequent written and oral forward-looking statements attributable to us or persons
acting on our behalf are expressly qualified in their entirety by our cautionary
statements. The forward-looking statements included are made only as of the date of this
Form 10-Q. We do not intend, and undertake no obligation, to update these forward-looking
statements.



18


Item 3.  Quantitative
and Qualitative Disclosures about Market Risk


Market Risk


Market
risk is the risk of loss arising from adverse changes in market rates and prices, such as
interest rates, foreign currency exchange rates and commodity prices. Our primary exposure
to market risk is interest rate risk associated with our long-term debt. We attempt to
limit our exposure to interest rate risk by managing the mix of our long-term fixed-rate
borrowings and short-term borrowings under our revolving bank credit facility. Assuming
that the amount of our variable rate debt remained constant at $154.0 million during the
next twelve months, a hypothetical 1% increase in our variable interest rate would
increase our annual interest expense by $1.5 million. As of June 30, 2003, we did not have
any investments in derivative- or foreign currency-based financial instruments.


The
table below provides information about our financial instruments that are sensitive to
changes in interest rates. For debt obligations, the table presents notional amounts and
weighted average interest rates by contractual maturity dates for the twelve-month period
ended June 30,:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                         | 2004                   |  | 2005 |        | 2006 |   | 2007   |   | 2008 |       | Thereafter |   | Total |   | FairValue (1) |      
|------------------------ | ---------------------- |  | ---- | ------ | ---- | - | ------ | - | ---- | ----- | ---------- | - | ----- | - | ------------- | -----
|
|                         | (dollars in thousands) | 
|LIABILITIES              |                        |  |      |        |      |   |        |   |      |       |            |   |       |   |               |      
|Short-term debt          |                        | 
|Fixed rate               |                        |  | $    | 177    |      | $ | --     |   | $    | --    |            | $ | --    |   | $             | --   
|Average interest rate(2) |                        |  |      | 9.50   | %    |   | --     |   |      | --    |            |   | --    |   |               | --   
|Variable rate            |                        |  | $    | 40,480 |      | $ | --     |   | $    | --    |            | $ | --    |   | $             | --   
|Average interest rate(2) |                        |  |      | 3.41   | %    |   | --     |   |      | --    |            |   | --    |   |               | --   
|Long-term debt           |                        | 
|Fixed rate               |                        |  | $    | --     |      | $ | 3      |   | $    | 3     |            | $ | 3     |   | $             | 3    
|Average interest rate(2) |                        |  |      | --     |      |   | 9.50   | % |      | 9.50  | %          |   | 9.50  | % |               | 9.50 
|Variable rate            |                        |  | $    | --     |      | $ | 97,440 |   | $    | 1,440 |            | $ | 1,440 |   | $             | 1,440
|Average interest rate(2) |                        |  |      | --     |      |   | 3.41   | % |      | 3.41  | %          |   | 3.41  | % |               | 3.41 

| | (1) | The
fair values are based on the borrowing rate currently available for debt
          instruments with similar terms and maturities, and market quotes of our
publicly           traded debt.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Based
upon contractual interest rates for fixed indebtedness or the LIBOR rate           plus a
premium of 2.25% at June 30, 2003 for variable rate indebtedness.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|19


Item 4. Controls and
Procedures


We
maintain disclosure controls and procedures that are designed to ensure that information
required to be disclosed in our Exchange Act reports is recorded, processed, summarized
and reported within the time periods specified in the SECs rules and forms, and that
such information is accumulated and communicated to management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. Management necessarily applied its judgment in assessing
the costs and benefits of such controls and procedures that, by their nature, can provide
only reasonable assurance regarding managements control objectives.


As
of June 30, 2003, we carried out an evaluation, under the supervision and with the
participation of management, including our Chief Executive Officer along with our Chief
Financial Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon
the foregoing, our Chief Executive Officer along with our Chief Financial Officer
concluded that our disclosure controls and procedures are effective. There have been no
significant changes in our internal controls or in other factors, which could
significantly affect internal controls subsequent to the date we carried out our
evaluation and no significant deficiencies or material weaknesses in such internal
controls requiring corrective actions were identified. Additionally, there have been no
changes to our internal control over financial reporting that would materially affect or
would be reasonably likely to affect our internal control over financial accounting.



20


PART II. OTHER INFORMATION


Item 1. Legal Proceedings.


Not
applicable.


Item 2. Changes in Securities.


None.


Item 3. Defaults Upon Senior
Securities.


None.


Item 4.  Submission of Matters to a
Vote of Security Holders.


Not
applicable.


Item 5. Other Information.


None.


Item 6. Exhibits and Reports on Form 8-K:


(a)
Exhibits.


The
following are filed as exhibits to this Quarterly Report on Form 10-Q:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.32 | Second
Amendment to Ground Lease Agreement with 21 Stars, Ltd. dated as of May 26, 2003.
| | ----- | ----------------------------------------------------------------------------------------

| | 10.33 | Amendment
No. 5 to the Amended and Restated Loan Agreement with Bank of America,  N.A. dated as of
June 26, 2003.
| | ----- | -----------------------------------------------------------------------------------------------------------------

| | 31 | Certifications
of Chief Executive Officer and Chief Financial Officer pursuant to § 302 of the
Sarbanes-Oxley Act of 2002.
| | -- | --------------------------------------------------------------------------------------------------------------------------

| | 32 | Certification
of Chief Executive Officer and Chief Financial Officer pursuant to § 906 of the
Sarbanes-Oxley Act of 2002.
| | -- | -------------------------------------------------------------------------------------------------------------------------

| | (b) | Reports
on Form 8-K.
| | --- | --------------------

| | None.
| | -----

|21


SIGNATURES


Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned thereunto
duly authorized.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                       |                                                     |                                                       
|---------------------- | --------------------------------------------------- | ------------------------------------------------------
|Date:  August 12, 2003 | Coast Hotels and Casinos, INC.,a Nevada corporation
|                       | By:                                                 | /s/  Gage Parrish                                     
|                       |                                                     | Gage ParrishVice President and Chief Financial Officer

|22
|--