|SECURITIES AND
EXCHANGE COMMISSION


Washington, D.C. 20549

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

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

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


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


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


APPLICABLE ONLY TO
CORPORATE ISSUERS:


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


Shares
of Common Stock outstanding as of August 12, 2003: 1,461,178


     Part I  FINANCIAL
INFORMATION


Item 1.  Financial Statements


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

|                                                            | June 30,2003 |  | December 31, 2002 |        
|----------------------------------------------------------- | ------------ |  | ----------------- | -------
|                                                            | (unaudited)  |  |                   |        
|                                                            |              |  |                   |        
|ASSETS                                                      |              | 
|CURRENT ASSETS:                                             |              |  |                   |        
|Cash and cash equivalents                                   |              |  | $                 | 37,292 
|Accounts receivable, net                                    |              |  |                   | 5,936  
|Other current assets                                        |              |  |                   | 24,165 
|                                                            |              |  |                   |        
|TOTAL CURRENT ASSETS                                        |              |  |                   | 67,393 
|PROPERTY AND EQUIPMENT, net                                 |              |  |                   | 746,199
|OTHER ASSETS                                                |              |  |                   | 7,526  
|                                                            |              |  |                   |        
|                                                            |              |  | $                 | 821,118
|                                                            |              |  |                   |        
|LIABILITIES AND                                             |              | 
|STOCKHOLDER'S EQUITY                                        |              | 
|CURRENT LIABILITIES:                                        |              | 
|Accounts payable                                            |              |  | $                 | 18,693 
|Accrued liabilities                                         |              |  |                   | 42,693 
|Construction accounts payable                               |              |  |                   | 2,366  
|Current portion of long-term debt                           |              |  |                   | 40,657 
|                                                            |              |  |                   |        
|TOTAL CURRENT LIABILITIES                                   |              |  |                   | 104,409
|LONG-TERM DEBT, less current portion                        |              |  |                   | 442,616
|DEFERRED INCOME TAXES                                       |              |  |                   | 32,615 
|DEFERRED RENT                                               |              |  |                   | 28,654 
|                                                            |              |  |                   |        
|TOTAL LIABILITIES                                           |              |  |                   | 608,294
|                                                            |              |  |                   |        
|COMMITMENTS AND CONTINGENCIES                               |              | 
|STOCKHOLDERS' EQUITY:                                       |              | 
|Preferred stock, $.01 par value, 500,000 shares authorized, |              | 
|none issued and outstanding                                 |              |  |                   | --     
|Common stock, $.01 par value, 2,000,000 shares authorized,  |              | 
|1,494,353 shares issued and 1,461,178 shares outstanding    |              |  |                   | 15     
|Treasury stock (33,175 shares)                              |              |  |                   | (3,333 
|Additional paid-in capital                                  |              |  |                   | 95,398 
|Retained earnings                                           |              |  |                   | 120,744
|                                                            |              |  |                   |        
|TOTAL STOCKHOLDERS' EQUITY                                  |              |  |                   | 212,824
|                                                            |              |  |                   |        
|                                                            |              |  | $                 | 821,118
|                                                            |              |  |                   |        

|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 and Six Months Ended June 30, 2003 and 2002
(dollars in thousands, except share and per share data)(unaudited)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                             | Three Months EndedJune 30, |  | Six Months EndedJune 30, |          
|-------------------------------------------- | -------------------------- |  | ------------------------ | ---------
|
|OPERATING REVENUES:                          |                            |  |                          |          
|Casino                                       |                            |  | $                        | 105,192  
|Food and beverage                            |                            |  |                          | 28,355   
|Hotel                                        |                            |  |                          | 12,945   
|Other                                        |                            |  |                          | 11,399   
|                                             |                            |  |                          |          
|GROSS OPERATING REVENUES                     |                            |  |                          | 157,891  
|Less:  promotional allowances                |                            |  |                          | (12,795  
|                                             |                            |  |                          |          
|NET OPERATING REVENUES                       |                            |  |                          | 145,096  
|                                             |                            |  |                          |          
|OPERATING EXPENSES:                          |                            | 
|Casino                                       |                            |  |                          | 42,319   
|Food and beverage                            |                            |  |                          | 21,267   
|Hotel                                        |                            |  |                          | 5,179    
|Other                                        |                            |  |                          | 10,157   
|General and administrative                   |                            |  |                          | 26,363   
|Land leases                                  |                            |  |                          | 1,341    
|Deferred rent                                |                            |  |                          | 780      
|Depreciation and amortization                |                            |  |                          | 12,125   
|                                             |                            |  |                          |          
|TOTAL OPERATING EXPENSES                     |                            |  |                          | 119,531  
|                                             |                            |  |                          |          
|OPERATING INCOME                             |                            |  |                          | 25,565   
|                                             |                            |  |                          |          
|OTHER INCOME (EXPENSES):                     |                            | 
|Interest expense, net                        |                            |  |                          | (9,405   
|Interest capitalized                         |                            |  |                          | 336      
|Other income (expense)                       |                            |  |                          | 130      
|                                             |                            |  |                          |          
|TOTAL OTHER INCOME (EXPENSES)                |                            |  |                          | (8,939   
|                                             |                            |  |                          |          
|INCOME BEFORE INCOME TAXES                   |                            |  |                          | 16,626   
|Income tax provision                         |                            |  |                          | 5,739    
|                                             |                            |  |                          |          
|NET INCOME                                   |                            |  | $                        | 10,887   
|                                             |                            |  |                          |          
|PER SHARE INFORMATION:                       |                            | 
|Basic net income per share of common stock   |                            |  | $                        | 7.45     
|                                             |                            |  |                          |          
|Diluted net income per share of common stock |                            |  | $                        | 7.33     
|                                             |                            |  |                          |          
|Basic weighted-average shares outstanding    |                            |  |                          | 1,461,178
|                                             |                            |  |                          |          
|Diluted weighted-average shares outstanding  |                            |  |                          | 1,485,676
|                                             |                            |  |                          |          

|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 Six Months Ended June 30, 2003 and 2002
(dollars in thousands)(unaudited)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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


3

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


NOTE 1  GENERAL


Background Information


Coast
Casinos, Inc. (Coast Casinos or the Company) 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), which is 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 four Las
Vegas hotel-casinos:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

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

|Basis of Presentation


The
accompanying condensed 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, 2002.
In the opinion of management, all adjustments and normal recurring accruals considered
necessary for a fair statement of the results for the interim periods have been
included. The interim results reflected in the unaudited 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 2  LONG-TERM
DEBT


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

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

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


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


5


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


NOTE 2  LONG-TERM
DEBT (continued)


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


The
loan agreement governing the senior secured credit facility contains covenants that, among
other things, limit the ability of 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 Coast Hotels. Additionally,
the loan agreement requires that Coast Hotels maintain certain financial ratios with
respect to its leverage and fixed charge coverage. The agreement was amended in December
2001, March 2002, January 2003, February 2003 and June 2003 to increase the limitations of
Coast Hotels to make certain capital expenditures and to allow for additional
indebtedness. 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 June 30, 2003, the net assets of Coast Hotels amounted to $217.0 million, of which
$201.5 million was restricted under the terms of the indenture governing the senior
subordinated notes. Management believes that, at June 30, 2003, Coast Hotels was in
compliance with all covenants and required ratios.


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 senior secured credit facility. The loan bears interest at a premium of 2.25%
over the 30-day LIBOR rate, which is adjusted monthly. As of June 30, 2003, the interest
rate was 3.57%, and for the six months ended June 30, 2003, the weighted average interest
rate was 3.57%. Payments of interest only are required during the first twelve months.
Commencing on March 28, 2004, Coast Hotels will be required to make monthly principal
payments of $120,000 plus interest on the unpaid balance. A balloon payment of the
remaining principal balance is due in February 2009.


On
March 28, 2003, Coast Hotels entered into an unsecured $20.0 million revolving bridge line
of credit (bridge facility) with a participant in its senior secured credit
facility. Borrowings under the bridge facility will bear interest at a premium of 3.5%
over one-, two-, three-week or one month LIBOR. The bridge facility was renewed in June
2003 and will expire on September 24, 2003.


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


6


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 and six months ended June 30, 2003 and 2002:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

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

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

|7


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 and six month ended June 30, 2003 and 2002, are as follows (in
thousands, except share and per share data):
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                  | Three Months EndedJune 30, |  | Six Months EndedJune 30, |          
|------------------------------------------------- | -------------------------- |  | ------------------------ | ---------
|
|Net income applicable to computations             |                            |  | $                        | 10,887   
|                                                  |                            |  |                          |          
|Weighted-average common shares                    |                            | 
|applicable to net income per common share         |                            |  |                          | 1,461,178
|Effect of dilutive securities:                    |                            | 
|Stock option incremental shares                   |                            |  |                          | 24,498   
|                                                  |                            |  |                          |          
|Weighted-average common shares applicable         |                            | 
|to net income per common share, assuming dilution |                            |  |                          | 1,485,676
|                                                  |                            |  |                          |          
|Basic net income per share of common stock        |                            |  | $                        | 7.45     
|                                                  |                            |  |                          |          
|Diluted net income per share of common stock      |                            |  | $                        | 7.33     
|                                                  |                            |  |                          |          

|NOTE 5  DIVIDEND
DECLARATION


On July
16, 2003, the Board of Directors of the Company approved a dividend of $3.50 per common
share, payable on August 15, 2003 to shareholders of record at the close of business on
August 1, 2003. On August 1, 2003, there were 1,461,178 shares outstanding.


8


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. Effective January 1, 2001, we adopted Emerging Issues Task Force Issue 00-22
(the Issue), which requires that cash discounts and certain other cash
incentives related to gaming play be recorded as a reduction to gross casino revenues.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

|9


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


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

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

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

|Results of Operations


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

|                                      | Three Months EndedJune 30, |  | Six Months EndedJune 30, |        
|------------------------------------- | -------------------------- |  | ------------------------ | -------
|
|
|Net operating revenues                |                            |  | $                        | 145,096
|Operating expenses                    |                            |  |                          | 119,531
|                                      |                            |  |                          |        
|Operating income                      |                            |  | $                        | 25,565 
|                                      |                            |  |                          |        
|Net income                            |                            |  | $                        | 10,887 
|                                      |                            |  |                          |        
|Cash provided by operating activities |                            |  | $                        | 14,406 
|                                      |                            |  |                          |        
|Cash used in investing activities     |                            |  | $                        | (19,153
|                                      |                            |  |                          |        
|Cash provided by financing activities |                            |  | $                        | 997    
|                                      |                            |  |                          |        

|10


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


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



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



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


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


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


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


11


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


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


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


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


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


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


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


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


12


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


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


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


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


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


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


13


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


Aggregate Indebtedness
and Fixed Payment Obligations


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

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

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

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


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


14


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


Aggregate
Indebtedness and Fixed Payment Obligations (continued)


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


Liquidity and Capital
Resources


Our
principal sources of liquidity have consisted of cash provided by operating activities and
debt financing. Cash provided by operating activities was $50.1 million in the six months
ended June 30, 2003, compared to $50.5 million in the same period in 2002.


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


Cash
provided by financing activities was $17.7 million in the six months ended June 30, 2003,
primarily from $17.8 million in net proceeds from the financing of our aircraft and $35.5
million in proceeds from borrowings under the senior secured credit facility, offset by
$35.5 million in repayments of borrowings under the credit facility. In the first half of
2002, cash provided by financing activities was $52.0 million, primarily from $103.2
million in net proceeds from the issuance of long-term debt and $56.5 million of proceeds
from borrowings under the senior secured credit facility, offset, in part, by $107.5
million in repayments of borrowings under the credit facility.


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


15


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


Liquidity and Capital
Resources (continued)


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


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


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


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


On
March 28, 2003, Coast Hotels entered into an unsecured $20.0 million revolving bridge line
of credit (bridge facility) with a participant in our senior secured credit
facility. Borrowings under the bridge facility will bear interest at a premium of 3.5%
over one-, two-, three-week or one month LIBOR. The bridge facility was renewed in June
2003 and will expire on September 24, 2003.


16


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


Liquidity and Capital
Resources (continued)


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


Capital Expenditures



In
January 2001, we commenced an expansion of The Orleans. The expansion project included a
special-events arena, a 586-room hotel tower, a 2,600-car parking garage, six additional
movie theaters, two restaurants, an Irish pub and approximately 40,000 square feet of new
gaming area and public space. Through June 30, 2003, we had completed substantially all of
the construction and had spent $164.5 million.


In
the fourth quarter of 2000, we commenced an expansion and remodel of the Gold Coast. The
project included a new, expanded buffet restaurant, a sports bar, an Asian-themed
restaurant, an Italian restaurant, 10,000 square feet of additional meeting space, an
additional approximately 20,000 square feet of slot and table games area, a new bingo
room, an expanded porte-cochere and a parking garage. At June 30, 2003, we had completed
the expansion and remodel project and had spent $72.9 million.


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


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



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


17


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


Other Matters


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


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


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


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


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


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


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


18


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



Certain Forward-Looking
Statements


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

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

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

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

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

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

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

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

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

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


19


Item 3. Quantitative and
Qualitative Disclosures about Market Risk


Market Risk


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


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

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

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

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

|20


Item 4. Controls and
Procedures


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



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


21


PART II. OTHER INFORMATION


Item 1. Legal Proceedings.


Not
applicable.


Item 2. Changes in Securities.


None.


Item 3. Defaults Upon Senior
Securities.


None.


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


Not
applicable.


Item 5. Other Information.


None.


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


(a)
Exhibits.


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

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

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

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

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

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

| | None.
| | -----

|22


SIGNATURES


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

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

|23
|--