|UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549


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

| | [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
               ACT OF 1934 | 
| | --- | ------------------------------------------------------------------------------------------------------ | 

|For the Quarterly
Period Ended March 31, 2004


OR
|--------------------------------------------------

| | [   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 | 
| | ----- | ---------------------------------------------------------------------------------------- | 

| |  | For the Transition Period from _________________ to ___________________ | 
| |  | ----------------------------------------------------------------------- | 

|Commission File #0-26922


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

|                                                                                                        |                                                          
|------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------
|Nevada
        (State or other jurisdiction ofincorporation or organization)                            | 88-0345704
        (I.R.S. employeridentification number)
|4500 West Tropicana Avenue, Las Vegas, Nevada 89103
(Address of principal executive offices) (Zip code)

|(702) 365-7000
        (Registrant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 May 13, 2004:  1,461,178



     Part I  FINANCIAL
INFORMATION


Item
1.  Financial Statements


COAST CASINOS, INC.
AND SUBSIDIARYCONDENSED CONSOLIDATED BALANCE SHEETS(dollars in thousands, except share data)(unaudited)
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                            | March 31,2004 |  | December 31, 2003 |        
|----------------------------------------------------------- | ------------- |  | ----------------- | -------
|ASSETS                                                      |               |  |                   |        
|CURRENT ASSETS:                                             |               | 
|Cash and cash equivalents                                   |               |  | $                 | 47,731 
|Accounts receivable, net                                    |               |  |                   | 7,194  
|Other current assets                                        |               |  |                   | 26,079 
|                                                            |               |  |                   |        
|TOTAL CURRENT ASSETS                                        |               |  |                   | 81,004 
|PROPERTY AND EQUIPMENT, net                                 |               |  |                   | 742,952
|OTHER ASSETS                                                |               |  |                   | 10,544 
|                                                            |               |  |                   |        
|                                                            |               |  | $                 | 834,500
|                                                            |               |  |                   |        
|LIABILITIES AND                                             |               | 
|STOCKHOLDERS' EQUITY                                        |               | 
|CURRENT LIABILITIES:                                        |               | 
|Accounts payable                                            |               |  | $                 | 11,720 
|Accrued liabilities                                         |               |  |                   | 55,710 
|Construction accounts payable                               |               |  |                   | 1,248  
|Current portion of long-term debt                           |               |  |                   | 1,443  
|                                                            |               |  |                   |        
|TOTAL CURRENT LIABILITIES                                   |               |  |                   | 70,121 
|LONG-TERM DEBT, less current portion                        |               |  |                   | 450,005
|DEFERRED INCOME TAXES                                       |               |  |                   | 43,817 
|DEFERRED RENT                                               |               |  |                   | 30,978 
|                                                            |               |  |                   |        
|TOTAL LIABILITIES                                           |               |  |                   | 594,921
|                                                            |               |  |                   |        
|COMMITMENTS AND CONTINGENCIES                               |               | 
|STOCKHOLDERS' EQUITY:                                       |               | 
|Preferred stock, $.01 par value, 10,000,000 shares          |               | 
|authorized, none issued and outstanding                     |               |  |                   | --     
|Common stock, $.01 par value, 75,000,000 shares authorized, |               | 
|1,461,178 shares issued and outstanding                     |               |  |                   | 15     
|Treasury stock (33,175 shares)                              |               |  |                   | (3,333 
|Additional paid-in capital                                  |               |  |                   | 95,398 
|Retained earnings                                           |               |  |                   | 147,499
|                                                            |               |  |                   |        
|TOTAL STOCKHOLDERS' EQUITY                                  |               |  |                   | 239,579
|                                                            |               |  |                   |        
|                                                            |               |  | $                 | 834,500
|                                                            |               |  |                   |        

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


1



COAST CASINOS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2004 and 2003(dollars in thousands, except share and per share data)
(unaudited)
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                             | Three Months EndedMarch 31, | 
|-------------------------------------------- | --------------------------- | 
|
|OPERATING REVENUES:                          |                             | 
|Casino                                       |                             | 
|Food and beverage                            |                             | 
|Hotel                                        |                             | 
|Other                                        |                             | 
|                                             |                             | 
|GROSS OPERATING REVENUES                     |                             | 
|Less:  promotional allowances                |                             | 
|                                             |                             | 
|NET OPERATING REVENUES                       |                             | 
|                                             |                             | 
|OPERATING EXPENSES:                          |                             | 
|Casino                                       |                             | 
|Food and beverage                            |                             | 
|Hotel                                        |                             | 
|Other                                        |                             | 
|General and administrative                   |                             | 
|Deferred rent                                |                             | 
|Depreciation and amortization                |                             | 
|                                             |                             | 
|TOTAL OPERATING EXPENSES                     |                             | 
|                                             |                             | 
|OPERATING INCOME                             |                             | 
|                                             |                             | 
|OTHER INCOME (EXPENSES):                     |                             | 
|Interest expense, net                        |                             | 
|Interest capitalized                         |                             | 
|Other                                        |                             | 
|                                             |                             | 
|TOTAL OTHER INCOME (EXPENSES)                |                             | 
|                                             |                             | 
|INCOME BEFORE INCOME TAXES                   |                             | 
|Income tax provision                         |                             | 
|                                             |                             | 
|NET INCOME                                   |                             | 
|                                             |                             | 
|PER SHARE INFORMATION:                       |                             | 
|Basic net income per share of common stock   |                             | 
|                                             |                             | 
|Diluted net income per share of common stock |                             | 
|                                             |                             | 
|Dividends declared per share                 |                             | 
|                                             |                             | 
|Basic weighted-average shares outstanding    |                             | 
|                                             |                             | 
|Diluted weighted-average shares outstanding  |                             | 
|                                             |                             | 

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


2


COAST CASINOS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2004 and 2003(dollars in thousands)(unaudited)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                      | Three Months EndedMarch 31, | 
|--------------------------------------------------------------------- | --------------------------- | 
|
|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 decrease in accounts receivable and other assets                  |                             | 
|Net 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                    |                             | 
|Dividends paid                                                        |                             | 
|                                                                      |                             | 
|NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES                   |                             | 
|                                                                      |                             | 
|NET (DECREASE) INCREASE 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 consolidated financial statements.


3


COAST CASINOS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1  GENERAL


Background Information


Coast
Casinos, Inc. and Subsidiaries (the Company or Coast Casinos) is a
Nevada corporation with no independent assets or operations and serves only as a holding
company for Coast Hotels and Casinos, Inc. (Coast Hotels), also a Nevada
corporation. Coast Casinos changed its name from Coast Resorts, Inc. on July 2, 2002.
Through its wholly owned subsidiary, Coast Hotels, the Company owns and operates the
following hotel-casinos in Las Vegas, Nevada:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

| | o | The Suncoast Hotel and Casino, which opened in September 2000, is located near Summerlin
in the west end of the Las Vegas valley, approximately nine miles from the Las Vegas
Strip.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|Basis of Presentation


The
accompanying condensed consolidated 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 consolidated financial statements
should be read in conjunction with the audited consolidated financial statements and
footnotes included in our annual report on Form 10-K for the year ended December 31, 2003.
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 consolidated financial statements are not
necessarily indicative of expected results for the full year.


4


COAST CASINOS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1  GENERAL
(continued)


Merger Agreement


On
February 6, 2004, Coast Casinos entered into a definitive merger agreement with Boyd
Gaming Corporation (Boyd). Under the agreement, Coast Casinos will merge into
a subsidiary of Boyd and become a wholly owned subsidiary of Boyd. Coast will be
positioned in Boyd as a separate operating unit managed by the current Coast Casinos
management. In the merger, each issued and outstanding share of Coast Casinos common stock
held by each Coast Casinos stockholder (other than Michael J. Gaughan, the Chairman and
Chief Executive Officer of Coast Casinos, Jerry Herbst, a director and the Treasurer of
Coast Casinos, and Franklin Toti, a director and the Vice President of Casino Operations
of Coast Casinos) will be converted into the right to receive $550 in cash, unless an
election is made by such Coast Casinos stockholder to receive 32.8025 shares of Boyd
Gaming common stock for such share of Coast Casinos common stock. The maximum aggregate
number of shares of Boyd Gaming common stock issuable in the merger to Coast Casinos
stockholders, other than Messrs. Gaughan and Toti, will be 1,009,194 shares, unless an
adjustment is required in order to qualify the merger as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. The amount of
stock consideration and cash consideration that each Coast Casinos stockholder, other than
Messrs. Gaughan and Toti, will be entitled to receive at the effective time of the merger
will have an aggregate value of at least $550 per share of Coast Casinos common stock
exchanged in the merger. Because the aggregate number of shares of Boyd Gaming common
stock that may be issued in the merger is limited to 1,009,194 shares, it is possible that
a substantial portion of the merger consideration received by each such Coast Casinos
stockholder will be in the form of cash consideration, regardless of the election made by
such stockholder.


At
the effective time of the merger, each issued and outstanding share of Coast Casinos
common stock held by Messrs. Gaughan and Toti will be converted into the right to receive
32.8025 shares of Boyd Gaming common stock. In addition, each issued and outstanding share
of Coast Casinos common stock held by Mr. Herbst will be converted into the right to
receive $550 in cash. The merger was approved in April 2004 by the stockholders of both
Coast Casinos and Boyd, and is subject to gaming and other government and regulatory
approvals and other customary closing conditions. Stockholders of the Company,
representing approximately 56% of the voting power of Coast Casinos shares, have agreed
for a period of two years to vote their shares in favor of the Boyd merger and against any
other combination. Should, however, the merger agreement be terminated as a result of
certain matters set forth therein and, within 30 months after the date of the merger
agreement, Coast Casinos enters into a takeover transaction with another entity, a $30.0
million termination fee will be payable to Boyd Gaming on the date of consummation of such
takeover transaction. The merger is expected to be completed immediately upon receipt of
necessary third party approvals. However, no assurance can be given that all conditions to
the consummation of the merger will be satisfied or that the merger will be consummated.


If
the merger with Boyd is consummated, holders of the senior subordinated notes will have
the right to require the surviving corporation in the merger to purchase the outstanding
senior subordinated notes at a purchase price of 101% of the principal amount plus accrued
and unpaid interest. Additionally, the consummation of the merger will result in a change
of control that will result in a default under the credit agreement. Boyd has advised the
Company that it intends to refinance the Companys bank indebtedness upon
consummation of the merger and will purchase any senior subordinated notes tendered for
purchase by the holders thereof in accordance with the terms of the indenture governing
the senior subordinated notes. However, no assurance can be given that all conditions to
the consummation of the merger will be satisfied or that the merger will be consummated.


5


COAST CASINOS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2  LONG-TERM
DEBT


Long-term
debt consists of the following as of March 31, 2004 and December 31, 2003:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                         | March 31,2004 |  | December 31, 2003 |        
|------------------------------------------------------------------------ | ------------- |  | ----------------- | -------
|
|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 $3,529 in 2004 and $3,706 in 2003              |               |  | $                 | 328,529
|Senior secured credit facility - $225.0 million revolving line of credit |               | 
|due September 2008, collateralized by substantially all of the assets    |               | 
|of Coast Hotels and Casinos, Inc.                                        |               |  |                   | 30,000 
|Senior secured credit facility - $75.0 million term loan due             |               | 
|September 2008, collateralized by substantially all of the assets of     |               | 
|Coast Hotels and Casinos, Inc.                                           |               |  |                   | 75,000 
|Variable-rate note due March 2009, collateralized by 1996 Canadair       |               | 
|Challenger aircraft                                                      |               |  |                   | 17,880 
|Other notes payable                                                      |               |  |                   | 39     
|                                                                         |               |  |                   |        
|                                                                         |               |  |                   | 451,448
|Less: current portion                                                    |               |  |                   | 1,443  
|                                                                         |               |  |                   |        
|                                                                         |               |  | $                 | 450,005
|                                                                         |               |  |                   |        

|In
March 1999, Coast Hotels issued $175.0 million principal amount of 9.5% senior
subordinated notes with interest payable on April 1 and October 1 of each year through
their maturity in March 2009. On February 2, 2001, Coast Hotels issued an additional $50.0
million 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 Coast Hotels issued an additional $100.0 million 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 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. Coast Casinos is a
full and unconditional guarantor of this indebtedness.


In
February 2003, Coast Hotels borrowed $18.0 million under a secured loan agreement,
collateralized by a Company-owned aircraft. The proceeds were used to reduce borrowings
under the then existing credit facility. The loan bears interest at a premium of 2.25%
over the 30-day London Interbank Offered Rate (LIBOR), which is adjusted
monthly. As of March 31, 2004, the interest rate was 3.34%, and for the three months ended
March 31, 2004, the weighted average interest rate was 3.36%. Commencing on March 28,
2004, Coast Hotels began making required 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.


6


COAST CASINOS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2  LONG-TERM
DEBT (continued)


In
September 2003, Coast Hotels replaced its senior secured revolving credit facility due
September 2004 with a $300.0 million senior secured credit facility due September 2008,
comprised of a $225.0 million revolving credit facility and a $75.0 million term loan.
Subject to the satisfaction of certain conditions, Coast Hotels may increase the
commitments under the senior secured credit facility by up to $50.0 million. Coast Casinos
is a full and unconditional guarantor of this indebtedness. Borrowings under the senior
secured credit facility bear interest, selected at Coast Hotels option, at a premium
over a base rate or the one-, two-, three- or six-month Eurodollar Rate
(Eurodollar). The premium varies depending on a certain financial ratio and
can vary, if determined by reference to the base rate, between 0.5% and 1.25% and, if
determined by reference to Eurodollar, between 1.75% and 2.5%. As of March 31, 2004, using
the one-month Eurodollar option, the premium over Eurodollar was 2.00% and the interest
rate was 3.09%. For the three months ended March 31, 2004, the weighted average interest
rate for the senior secured credit facility was 3.11%. Coast Hotels incurs a commitment
fee, payable quarterly in arrears, on the unused portion of the senior secured credit
facility. This fee varies depending on a certain financial ratio and can vary between
0.375% and 0.5% per annum. As of March 31, 2004, the fee was 0.375% per annum times the
average unused portion of the facility.


In
accordance with the terms of the senior secured credit facility, commencing on December
31, 2005 and each quarter thereafter, Coast Hotels is required to repay the $75.0 million
term loan in an amount equal to 8.3333% of the principal amount of the term loan then
outstanding. Advances under the senior secured credit facility may be used for working
capital, general corporate purposes, and certain improvements to existing properties. As
of March 31, 2004, all of the $75.0 million term loan was outstanding and $30.0 million
was drawn on the $225.0 million revolving line of credit with $194.9 million of
availability remaining (net of a letter of credit of $119,000).


The
credit 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 of the Company
or Coast Hotels. Additionally, the credit agreement requires that Coast Hotels maintain
certain financial ratios with respect to its leverage and fixed charge coverage. Coast
Hotels 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. As of March 31, 2004, the net
assets of Coast Hotels amounted to $239.9 million, of which $224.4 million was restricted
under the terms of the indenture governing the senior subordinated notes. Management
believes that, at March 31, 2004, Coast Hotels was in compliance with all covenants and
required ratios.


7


COAST CASINOS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED 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 ended March 31, 2004 and 2003:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        | Three Months EndedMarch 31, | 
|----------------------- | --------------------------- | 
|
|Complimentary revenues: |                             | 
|Food and beverage       |                             | 
|Hotel                   |                             | 
|Other                   |                             | 
|                        |                             | 
|Promotional allowances  |                             | 
|                        |                             | 

|The
estimated cost of providing these complimentary services is as follows for the three
months ended March 31, 2004 and 2003:
|------------------------------------------------------------------------------------------------------------------------------

|                  | Three Months EndedMarch 31, | 
|----------------- | --------------------------- | 
|
|Food and beverage |                             | 
|Hotel             |                             | 
|Other             |                             | 
|                  |                             | 
|                  |                             | 
|                  |                             | 

|The
cost of promotional allowances has been allocated to expense as follows for the three
months ended March 31, 2004 and 2003:
|-------------------------------------------------------------------------------------------------------------------------------

|                           | Three Months EndedMarch 31, | 
|-------------------------- | --------------------------- | 
|
|Casino                     |                             | 
|General and administrative |                             | 
|                           |                             | 
|                           |                             | 
|                           |                             | 

|8


COAST CASINOS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4  EARNINGS PER
SHARE


Basic
net income per common share excludes dilution and is computed by dividing income
applicable to common shareholders by the weighted-average number of common shares
outstanding. Diluted net income per common share is computed based on the weighted-average
number of common shares outstanding after consideration of the dilutive effect of stock
options.


The
computations of basic net income per common share and diluted net income per common share,
for the three months ended March 31, 2004 and 2003, are as follows (in thousands, except
share and per share data):
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                        | Three Months EndedMarch 31, | 
|------------------------------------------------------- | --------------------------- | 
|
|Net income applicable to computations                   |                             | 
|                                                        |                             | 
|Weighted-average common shares applicable to net income |                             | 
|per common share                                        |                             | 
|Effect of dilutive securities:                          |                             | 
|Stock option incremental shares                         |                             | 
|                                                        |                             | 
|Weighted-average common shares applicable to net income |                             | 
|per common share, assuming dilution                     |                             | 
|                                                        |                             | 
|Basic net income per share of common stock              |                             | 
|                                                        |                             | 
|Diluted net income per share of common stock            |                             | 
|                                                        |                             | 

|NOTE 5  DIVIDENDS


On
February 5, 2004, the Company paid a dividend of $3.50 per common share to shareholders of
record at the close of business on January 26, 2004. On January 26, 2004, there were
1,461,178 shares outstanding, and the dividend paid totaled $5,114,000.


9


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 require 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. In accordance with Emerging Issues Task Force Issue 00-22, cash discounts and
certain other cash incentives related to gaming play are 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.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10


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


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

| | o | At
March 31, 2004, we had net property and equipment of $743.0 million, representing
approximately 89.0% 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 a periodic
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 EndedMarch 31, | 
|----------------------------------------------- | --------------------------- | 
|
|
|Net operating revenues                          |                             | 
|Operating expenses                              |                             | 
|                                                |                             | 
|Operating income                                |                             | 
|                                                |                             | 
|Net income                                      |                             | 
|                                                |                             | 
|Cash provided by operating activities           |                             | 
|                                                |                             | 
|Cash used in investing activities               |                             | 
|                                                |                             | 
|Cash (used in) provided by financing activities |                             | 
|                                                |                             | 

|11


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

Three Months Ended March
31, 2004 Compared to Three Months Ended March 31, 2003


In
the three months ended March 31, 2004, we experienced increases in revenues, operating
income and net income. Revenues were $164.6 million in the quarter compared to $146.4
million in the first quarter of 2003, an increase of 12.4%. Revenues improved at all four
of our hotel-casinos, primarily in the gaming area, but food and beverage, hotel and other
revenues were also up at all four properties. The improved revenues contributed to
operating income of $36.1 million in the quarter ended March 31, 2004 compared to $29.7
million in 2003, an increase of 21.6%. Net income in the quarter was $17.3 million
compared to $13.7 million in 2003.


Casino.   Casino revenues were $118.5 million in the three months ended March 31, 2004           compared
to $107.9 million in the same period in 2003, an increase of 9.8%.           Casino
revenues at all four of our hotel-casinos increased due to higher           customer
wagering volume. Casino expenses increased 6.9%, primarily in payroll,           payroll
related costs and promotions at The Orleans and the Suncoast, in line           with the
increased customer wagering activity at those properties. The casino           operating
margin improved to 61.0% compared to 59.9% in 2003 as the increased           costs were
more than offset by the improved revenues.


Food and Beverage.   Food and beverage revenues were $31.2 million in the first quarter
of 2004 compared to $28.5 million in 2003, an increase of 9.5% as revenues improved at all
four of our hotel-casinos primarily due to increased customer visitation and slightly
higher prices. Food and beverage expenses increased by 4.8%, primarily due to January 2004
wage increases, contributing to an improved food and beverage operating margin of 29.4%
compared to 26.3% in 2003.


Hotel.   Hotel revenues were $16.1 million in the quarter ended March 31, 2004
          compared to $13.2 million in 2003, an increase of 22.0%, in line with an overall
          increase in demand for rooms in the quarter throughout Las Vegas. Gold Coast
          room occupancy increased to 94.2% in the quarter compared to 86.8% in the prior
          year and its average daily room rate increased by $5.00. The Orleans room
          occupancy increased to 95.0% compared to 85.7% in the prior year and its average
          daily room rate increased by $4.68. Room occupancy at the Suncoast was flat at
          86%, but its average daily room rate increased by $17.60. Occupancy at the
          Barbary Coast increased slightly, and its average daily room rate increased by
          $10.60. Hotel expenses increased by 10.3% in the quarter, contributing to an
          improved hotel operating margin of 64.5% compared to 60.7% in the first quarter
          of 2003.


Other.   Other revenues are derived primarily from bowling, retail, entertainment and
          leased facilities, including coffee outlets and a variety of restaurants. In the
          quarter ended March 31, 2004, other revenues were $13.1 million compared to
          $10.0 million in the first quarter of 2003, an increase of 31.0%, primarily due
          to a 59.7% increase at The Orleans. The arena at The Orleans, which opened in
          May 2003, contributed $2.8 million in revenues in the quarter from concerts and
          sporting events. Other expenses increased by $2.5 million (31.9%), primarily due
          to the arena at The Orleans.


General and Administrative.   General and administrative expenses were $30.6 million in the
first quarter of 2004 compared to $27.1 million in 2003, an increase of 12.9%, primarily
due to $1.2 million in expenses related to the merger with Boyd, approximately $1.2
million in payroll and related costs for corporate and property-level management and
approximately $400,000 in expenses related to the pursuit of possible business
opportunities outside of Nevada.


12


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

Three Months Ended March
31, 2004 Compared to Three Months Ended March 31, 2003 (continued)


Depreciation and Amortization.   Depreciation and amortization expense was $12.7 million in the first
quarter of 2004 compared to $11.4 million in 2003, an increase of 11.4% primarily due to
the depreciation of the Orleans Arena, completed in May 2003.


Other
Income (Expenses).  Net interest expense was $9.3 million in each of the quarters ended
March 31, 2004 and 2003. A lower aggregate indebtedness and lower weighted average
interest rate on our bank facility in 2004 was offset by a higher bank facility commitment
fee in 2004 due to the increase in the size of the facility in September 2003. Capitalized
interest was $28,000 in the first quarter compared to $883,000 in the first quarter of
2003. Capitalized interest in 2003 included interest on the Orleans Arena that was
completed in the second quarter of that year.
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 $39.5 million in the three
months ended March 31, 2004, compared to $35.7 million in the same period in 2003.


Cash
used in investing activities, which was primarily for capital expenditures, was $14.9
million in the first three months of 2004, compared to $48.8 million in 2003. In the first
three months of 2004, cash used for capital expenditures was $16.2 million, including $3.6
million for the hotel tower and swimming pool expansion project at The Orleans, $1.6
million for a new electronic sign at the Gold Coast, $4.7 million for design work on our
newest hotel-casino project, the South Coast, and approximately $3.2 million for
maintenance capital expenditures. In the first three months of 2003, cash used for capital
expenditures was $48.8 million which was primarily used for expansion projects at The
Orleans and the Gold Coast and the purchase of land at the Barbary Coast.


Cash
used in financing activities was $26.4 million in the three months ended March 31, 2004,
primarily to pay a net amount of $21.0 million down on borrowings under our senior secured
credit facility and to pay a dividend of $5.1 million. Cash provided by financing
activities was $16.7 million in the first quarter of 2003, primarily from $17.8 million in
net proceeds from the financing of our aircraft and $20.0 million in proceeds from
borrowings under the senior secured credit facility, offset by $21.0 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 of each year
through their maturity in March 2009. On February 2, 2001, Coast Hotels issued an
additional $50.0 million principal amount of senior subordinated notes. The net proceeds
of approximately $49.1 million were used to reduce borrowings under the then existing
credit facility. On March 19, 2002, Coast Hotels issued an additional $100.0 million
principal amount of its senior subordinated notes. The notes were issued at a premium and
the net proceeds of $103.2 million were used to reduce borrowings under the then existing
credit facility. The notes issued in 2001 and 2002 were issued under the same indenture
and have the same terms, interest rate and maturity date as the original $175.0 million
principal amount of senior subordinated notes issued in 1999.


13


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

Liquidity and Capital
Resources (continued)


In
February 2003, Coast Hotels borrowed $18.0 million under a secured loan agreement,
collateralized by our Canadair Challenger aircraft. The proceeds were used to reduce
borrowings under the then existing credit facility. The loan bears interest at a premium
of 2.25% over the 30-day London Interbank Offered Rate (LIBOR), which is
adjusted monthly. As of March 31, 2004, the interest rate was 3.34%, and for the three
months ended March 31, 2004, the weighted average interest rate was 3.36%. Payments of
interest only were required during the first twelve months. As of March 28, 2004, Coast
Hotels is 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.


In
September 2003, we replaced our existing credit facility with a $300.0 million senior
secured credit facility due September 2008, represented by a $225.0 million revolving
credit facility and a $75.0 million term loan. Subject to the satisfaction of certain
conditions, Coast Hotels may increase the commitments under the senior secured credit
facility by up to $50.0 million. Coast Casinos is a full and unconditional guarantor of
the indebtedness under both of these debt agreements. Borrowings under the senior secured
credit facility bear interest, selected monthly at Coast Hotels option, at a premium
over the base rate or the one-, two-, three- or six-month Eurodollar Rate
(Eurodollar). The premium varies depending on a certain financial ratio and
can vary, if determined by reference to the base rate, between 0.5% and 1.25% and, if
determined by reference to Eurodollar, between 1.75% and 2.5%. As of March 31, 2004, using
the one-month Eurodollar option, the premium over Eurodollar was 2.00% and the interest
rate was 3.09%. For the three months ended March 31, 2004, the weighted average interest
rate for the senior secured credit facility was 3.11%. Coast Hotels incurs a commitment
fee, payable quarterly in arrears, on the unused portion of the senior secured credit
facility. This fee varies depending on a certain financial ratio and can vary between
0.375% and 0.5% per annum. As of March 31, 2004, the fee was 0.375% per annum times the
average unused portion of the facility.


In
accordance with the terms of the senior secured credit facility, commencing on December
31, 2005 and each quarter thereafter, Coast Hotels is required to repay the $75.0 million
term loan in an amount equal to 8.3333% of the principal amount of the term loan then
outstanding. Advances under the senior secured credit facility may be used for working
capital, general corporate purposes, and certain improvements to existing properties. As
of March 31, 2004, all of the $75.0 million term loan was outstanding and $30.0 million
was drawn on the $225.0 million revolving line of credit with approximately $194.9 million
of availability remaining (net of a letter of credit of $119,000).


The
credit agreement governing the senior secured credit facility contains covenants that,
among other things, limit Coast Hotels ability 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 credit agreement requires that Coast Hotels maintain certain financial ratios with
respect to leverage and fixed charge coverage. Coast Hotels is also subject to certain
covenants associated with the indenture governing its senior subordinated notes,
including, in part, limitations on certain restricted payments, the incurrence of
additional indebtedness and asset sales. At March 31, 2004, Coast Hotels was in compliance
with all covenants and required ratios.


14


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



Construction Projects


We
own approximately 55 acres of land located in a gaming enterprise district on Las Vegas
Boulevard South, adjacent to Interstate 15 and approximately 6 miles south of Tropicana
Avenue. In April 2004, we broke ground at the site for our newest hotel-casino, the South
Coast, and expect to complete it in the fourth quarter of 2005. The South Coast is
expected to include 685 rooms and suites, 2,400 slot machines, 60 table games, 7
restaurants, 16 movie theaters, race and sports books, bingo, bowling, an equestrian
events center and 150,000 square feet of convention, exhibit and banquet space. The
preliminary budget for the construction and furnishing of the South Coast project was
approximately $350 million, but recent substantial increases in the costs of building
materials and certain changes in scope will cause the cost of the project to exceed that
amount. Construction plans are still being developed and the extent of the increase has
not yet been determined. Through March 31, 2004, we had capitalized $20.7 million on the
project, primarily for architecture and design and $11.9 million for the purchase of the
land.


In
the fourth quarter of 2003, we began construction of a new hotel tower at The Orleans. The
project includes 461 hotel rooms and a remodeled and expanded swimming pool area. The
project has a budget of $40.0 million and we expect to complete it in the fourth quarter
of 2004. Through March 31, 2004, we had capitalized $3.2 million on the project.


The
construction projects are expected to be paid for through borrowings under our senior
secured credit facility until such time as the merger with Boyd is completed. At that
time, we anticipate that the projects will be financed by Boyd. There are no assurances
that our construction projects will be completed within budget or the anticipated time
frame, or that the merger will be completed or that Boyd will be able to obtain suitable
financing to complete the projects. If the merger is not completed, it will be necessary
for us to obtain financing for the completion of the South Coast project.


In
the ordinary course of operating its hotel-casinos, it is necessary for Coast Hotels to
upgrade or replace fixtures and equipment and to make improvements that will extend the
life of its physical plants. Coast Hotels anticipates that these maintenance capital
expenditures will total approximately $20.0 million in 2004.
Dividends


On February 5, 2004, we paid a dividend of $5,114,000 ($3.50 per share of common
stock) to stockholders of record at the close of business on January 26, 2004. On January
26, 2004 there were 1,461,178 shares outstanding.
Other Matters


In
May 2003, the Financial Accounting Standards Board issued Statement No. 150, Accounting
for Certain Financial Instruments with Characteristics of Both Liabilities and Equity
(SFAS 150). SFAS 150 establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is within its
scope as a liability (or an asset in some circumstances). As the Companys equity
securities are not publicly traded, the Company is a nonpublic entity as defined by SFAS
150. This pronouncement became effective January 1, 2004. The adoption of SFAS 150 did not
have an impact on our financial position, results of operations or cash flows as the
Company does not have any such financial instruments.


15


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



Other Matters (continued)


On
February 6, 2004, we entered into an Agreement and Plan of Merger with Boyd Gaming
Corporation and BGC, Inc., a wholly-owned subsidiary of Boyd. Under the terms of the
merger agreement, the Company will merge into a subsidiary of Boyd and become a wholly
owned subsidiary of Boyd, and each outstanding share of our common stock will be converted
into the right to receive cash, Boyd common stock or a combination of cash and Boyd common
stock. The merger agreement and the merger have been approved by the stockholders of the
Company and Boyd. Consummation of the merger is subject to customary closing conditions
and receipt of regulatory approvals.


If
the merger with Boyd is consummated, holders of the senior subordinated notes will have
the right to require the surviving corporation in the merger to purchase the outstanding
senior subordinated notes at a purchase price of 101% of the principal amount plus accrued
and unpaid interest. Additionally, the consummation of the merger will result in a change
of control that will result in a default under the credit agreement. Boyd has advised the
Company that it intends to refinance the Companys bank indebtedness upon
consummation of the merger and will purchase any senior subordinated notes tendered for
purchase by the holders thereof in accordance with the terms of the indenture governing
the senior subordinated notes. However, no assurance can be given that all conditions to
the consummation of the merger will be satisfied or that the merger will be consummated.

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 heading Managements Discussion and
Analysis of Financial Condition and Results of Operations 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;
| | - | -----------------------------------------------------------------------------

| | o | uncertainties
related to the effects of international hostilities affecting the United States; and
| | - | --------------------------------------------------------------------------------------------------

| | o | uncertainties
related to the completion of the proposed merger with Boyd.
| | - | -------------------------------------------------------------------------

|All
subsequent written and oral forward-looking statements attributable to us or to 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.


16


Item 3. Quantitative and
Qualitative Disclosures about Market Risk


As
of March 31, 2004, there were no material changes to the information previously reported
under Item 7A in the Companys Annual Report on Form 10-K for the year ended December
31, 2003.
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 March 31, 2004, 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 at the reasonable
assurance level. There have not been any changes in our internal control over financial
reporting during the period covered by this report that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.


17


PART II. OTHER
INFORMATION


Item 1.  Legal
Proceedings.


The
Company is party to ordinary and routine litigation incidental to our business. We do not
expect the outcome of any pending litigation to have a material adverse effect on our
consolidated financial position or results of operations.


Item 2.  hanges in
Securities.


None.


Item 3.  Defaults Upon
Senior Securities.



None.


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


None.


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:
| |  | --------------------------------------------------------------------------

| |  | 31.1 | Certification
of the Chief Executive Officer pursuant to § 302 of the Sarbanes-Oxley Act of 2002.
| |  | ---- | -------------------------------------------------------------------------------------------------

| |  | 31.2 | Certification
of the Chief Financial Officer pursuant to § 302 of the Sarbanes-Oxley Act of 2002.
| |  | ---- | -------------------------------------------------------------------------------------------------

| |  | 32.1 | Certifications
of the Chief Executive Officer and Chief Financial Officer pursuant to § 906 of the
Sarbanes-Oxley Act of 2002.
| |  | ---- | ------------------------------------------------------------------------------------------------------------------------------

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

| | On
February 2, 2004, the Company filed a Form 8-K under Item 9, Regulation FD Disclosure,
with respect to the Board of Directors January 26, 2004 approval of a $3.50 per
share cash dividend, payable on February 5, 2004 to stockholders of record at the close
of business on January 26, 2004.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
February 10, 2004, the Company filed Form 8-K under Item 5, Other Events and Required FD
Disclosure, and Item 7, Financial Statements, Pro Forma Financial Information and
Exhibits, with respect to the Agreement and Plan of Merger among Boyd Gaming Corp., BGC,
Inc. and Coast Casinos, Inc.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|18


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: | May 13, 2004 | COAST CASINOS, INC.,a Nevada corporation
|      |              | By:                                      | /s/ Gage Parrish                                      
|      |              |                                          | Gage ParrishVice President and Chief Financial Officer

|19
|--