SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Commission file number 0-26922

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

(702) 365-7000
Registrant’s telephone number, including area code)

None
(Former name, former address and former fiscal year, if changed since last report.)

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

        Shares of Common Stock outstanding as of November 13, 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)

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 Nine months ended September 30, 2003 and 2002
(dollars in thousands, except share and per share data)
(unaudited)

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 Nine Months Ended September 30, 2003 and 2002
(dollars in thousands)
(unaudited)

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:

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 September 30, 2003 and December 31, 2002:

        In March 1999, Coast Hotels issued $175.0 million principal amount of 9.5% senior subordinated notes with interest payable on April 1 and October 1 of each year through their maturity in March 2009. On February 2, 2001, Coast Hotels issued an additional $50.0 million principal amount of senior subordinated notes. The net proceeds of approximately $49.1 million were used to reduce borrowings under its senior secured credit facility. On March 19, 2002 Coast Hotels issued an additional $100.0 million principal amount of senior subordinated notes. The notes were issued at a $5.0 million premium to par value and the net proceeds of approximately $103.2 million were used to reduce borrowings under the senior secured credit facility. The notes issued in 2001 and 2002 were issued under the same indenture and have the same terms, interest rate and maturity date as the $175.0 million principal amount of senior subordinated notes issued in 1999.

        In February 2003, Coast Hotels borrowed $18.0 million under a secured loan agreement, collateralized by a Company-owned aircraft. The proceeds were used to reduce borrowings under the then existing credit facility. The loan bears interest at a premium of 2.25% over the 30-day London Interbank Offered Rate (“LIBOR”), which is adjusted monthly. As of September 30, 2003, the interest rate was 3.36%, and for the nine months ended September 30, 2003, the weighted average interest rate was 3.48%. 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.

5

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

NOTE 2 — LONG-TERM DEBT (continued)

        In September 2003, Coast Hotels replaced its senior secured revolving credit facility due September 2004 with a $300.0 million senior secured credit facility due September 2008, comprised of a $225.0 million revolving credit facility and a $75.0 million term loan. Subject to the satisfaction of certain conditions, Coast Hotels may increase the commitments under the senior secured credit facility by up to $50.0 million. Coast Casinos is a full and unconditional guarantor of the indebtedness under the senior secured credit facility and of the senior subordinated notes. Borrowings under the senior secured credit facility bear interest, selected at Coast Hotels’ option, at a premium over a base rate or the one-, two-, three- or six-month Eurodollar Rate (“Eurodollar”). The premium varies depending on a certain financial ratio and can vary, if determined by reference to the base rate, between 0.5% and 1.25% and, if determined by reference to Eurodollar, between 1.75% and 2.5%. As of September 30, 2003, using the one-month Eurodollar option, the premium over Eurodollar was 2.25% and the interest rate was 3.37%. For the nine months ended September 30, 2003, the weighted average interest rate for the senior secured credit facility (including the indebtedness replaced thereby) was 3.44%. Coast Hotels incurs a commitment fee, payable quarterly in arrears, on the unused portion of the senior secured credit facility. This fee varies depending on a certain financial ratio and can vary between 0.375% and 0.5% per annum. As of September 30, 2003, the fee was 0.5% per annum times the average unused portion of the facility.

        In accordance with the terms of the senior secured credit facility, commencing on December 31, 2005 and each quarter thereafter, Coast Hotels is required to repay the $75.0 million term loan in an amount equal to 8.3333% of the principal amount of the term loan then outstanding. Advances under the senior secured credit facility may be used for working capital, general corporate purposes, and certain improvements to existing properties. As of September 30, 2003, all of the $75.0 million term loan was outstanding and $63.0 million was drawn on the $225.0 million revolving line of credit with $161.3 million of availability remaining (net of letters of credit of approximately $700,000).

        The credit agreement governing the senior secured credit facility contains covenants that, among other things, limit the ability of Coast Hotels to pay dividends or make advances to Coast Casinos, to make certain capital expenditures, to repay certain existing indebtedness, to incur additional indebtedness or to sell material assets of the Company or Coast Hotels. Additionally, the credit agreement requires that Coast Hotels maintain certain financial ratios with respect to its leverage and fixed charge coverage. Coast Hotels is also subject to certain covenants associated with the indenture governing the senior subordinated notes, including, in part, limitations on certain restricted payments, the incurrence of additional indebtedness and asset sales. As of September 30, 2003, the net assets of Coast Hotels amounted to $225.1 million, of which $209.6 million was restricted under the terms of the indenture governing the senior subordinated notes. Management believes that, at September 30, 2003, Coast Hotels was in compliance with all covenants and required ratios.

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 nine months ended September 30, 2003 and 2002:

        The estimated cost of providing these complimentary services is as follows for the three months and nine months ended September 30, 2003 and 2002:

        The cost of promotional allowances has been allocated to expense as follows for the three months and nine months ended September 30, 2003 and 2002:

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 nine months ended September 30, 2003 and 2002, are as follows (in thousands, except share and per share data):

NOTE 5 – DIVIDENDS

        On August 15, 2003, the Company paid a dividend of $3.50 per common share to shareholders of record at the close of business on August 1, 2003. On August 1, 2003, there were 1,461,178 shares outstanding, and the dividend paid totaled $5,114,000.

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:

9

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

Critical Accounting Policies and Estimates (continued)

Results of Operations

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

10

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

Three Months Ended September 30, 2003 Compared to Three Months Ended September 30, 2002 and Nine Months Ended September 30, 2003 Compared to Nine Months Ended September 30, 2002

        In the three months and nine months ended September 30, 2003, we experienced increases in revenues, operating income and net income. 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, additional casino space and other amenities added in the August 2002 expansion. The elimination of construction disruption also improved access for customers, contributing to the improved operating results.

        In the three months ended September 30, 2003, net revenues were $148.0 million compared to $130.9 million in the third quarter of 2002, an increase of 13.1% due primarily to a 25.6% increase at The Orleans for the reasons described above. Net revenues at the Suncoast, Gold Coast and Barbary Coast also improved in the quarter, primarily due to higher table games win percentages and increased slot machine play compared to the third quarter of 2002. In the nine months ended September 30, 2003, net revenues were $439.6 million compared to $402.4 million in 2002, an increase of 9.2%. A 21.4% increase in revenues at The Orleans contributed to most of the improvement, but revenues at the Suncoast, Gold Coast and Barbary Coast also improved in the nine months, primarily due to increased slot machine play.

        Operating income was $22.0 million in the three months ended September 30, 2003 compared to $12.6 million in the same period in 2002, an increase of 75.6%. Operating income increased at The Orleans by 78.8% in the quarter due to the increases in revenues described above and by 44.4% at the Suncoast primarily due to increased revenues and lower promotional expenses. Operating income in the quarter also improved at the Gold Coast and the Barbary Coast due to the increased revenues described above. In the nine months ended September 30, 2003, operating income was $77.3 million compared to $57.9 million in 2002, an increase of 33.5%. Most of the improvement in the nine months is attributable to the increase in revenues at The Orleans. Operating income at the Suncoast improved 18.4% year-to-date, due primarily to the higher revenues described above and reduced spending on promotions. Operating income at the Gold Coast and the Barbary Coast also improved in the nine months ended September 30, 2003 due to improved revenues.

        Casino.       Casino revenues were $106.4 million in the three months ended September 30, 2003 compared to $97.3 million in the same period in 2002, an increase of 9.3%. Casino revenues at The Orleans increased 16.6% in the third quarter of 2003 due to improved customer traffic related to the completion of the recent expansion project. Third quarter casino revenues at the Suncoast, Gold Coast and Barbary Coast also improved 6.3%, 4.5% and 6.4%, respectively, due to higher table games win percentages and increased slot machine play.

         The increase in casino revenues combined with a decrease in casino operating expenses contributed to a 58.4% casino operating margin in the quarter compared to 53.7% in the third quarter of 2002. Casino expenses increased at The Orleans in line with the increased customer traffic discussed above, but decreased at our other three hotel-casinos due to reduced spending on promotions.

11

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

Three Months Ended September 30, 2003 Compared to Three Months Ended September 30, 2002 and Nine Months Ended September 30, 2003 Compared to Nine Months Ended September 30, 2002 (continued)

        Casino (continued). In the nine months ended September 30, 2003, casino revenues were $319.5 million compared to $300.6 million in 2002, an increase of 6.3%. Casino revenues at The Orleans increased 13.7% in the first nine months of 2003 due to improved customer traffic related to the completion of the recent expansion project. Casino revenues in the nine months were up 2.0% at the Suncoast and the Gold Coast and 6.0% at the Barbary Coast due to the increased slot machine play discussed above. Casino expenses were lower at all four of our hotel-casinos, resulting in a combined decrease of 3.8% in the nine months ended September 30, 2003, contributing to an improved casino operating margin of 59.4% compared to 55.1% in the first nine months of 2002. The lower casino expenses were primarily due to a company-wide effort to reduce promotional spending.

        Food and Beverage. Food and beverage revenues were $28.7 million in the third quarter of 2003 compared to $27.7 million in 2002, an increase of 3.7%. Food and beverage revenues were higher in the quarter at all four of our hotel-casinos, but most of the increase was attributable to The Orleans and the Suncoast due to higher customer volume. Food and beverage expenses increased 3.6% in the quarter, contributing to a food and beverage operating margin of 25.4% compared to 25.3% in the third quarter of 2002.

        In the nine months ended September 30, 2003, food and beverage revenues were $85.6 million, an increase of 2.8% over revenues of $83.3 million in the first nine months of 2002. Most of the improvement was due to an increase of 8.3% at The Orleans, which was partially offset by a 3.2% decrease at the Suncoast, primarily in its buffet, which was affected by aggressive promotions by competitors. Food and beverage expenses increased 2.4% in the first nine months of 2003, primarily due to the increased customer volume at The Orleans. The food and beverage operating margin improved to 25.6% in the first nine months of 2003 compared to 25.3% in 2002.

        Hotel.        Hotel revenues were $13.1 million in the third quarter of 2003 compared to $9.8 million in 2002, an increase of 34.0%. The increase was primarily due to the opening in August 2002 of 586 new rooms at The Orleans. With the additional room nights available at The Orleans in the quarter, an increase of approximately 32,000 occupied rooms contributed to a 53.9% increase in rooms revenues. The percentage of rooms occupied at The Orleans improved to 89.6% in the quarter compared to 86.9% in the third quarter of 2002 and the average daily room rate improved by $3.00. Room revenues at the Suncoast and the Gold Coast also increased in the quarter due to a higher percentage of rooms occupied and a higher average daily room rate. Room revenues at the Barbary Coast were relatively flat in the quarter, with a slightly higher room rate offset by a slightly lower occupancy rate. Hotel expenses in the quarter were $5.5 million compared to $4.5 million in 2002, an increase of 22.2%, in line with the overall increase in hotel revenues.

        In the nine months ended September 30, 2003, hotel revenues were $39.2 million compared to $29.8 million in 2002, an increase of 31.5%, primarily due to the new hotel rooms at The Orleans. Year-to-date, hotel revenues at The Orleans were up 60.0% compared to the first nine months of 2002. Year-to-date, hotel revenues at the Suncoast, the Gold Coast and the Barbary Coast were up by 7.9%, 10.1% and 3.0%, respectively. Hotel expenses in the first nine months of 2003 were $15.9 million compared to $12.5 million in 2002, an increase of 26.4%, 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 September 30, 2003 Compared to Three Months Ended September 30, 2002 and Nine Months Ended September 30, 2003 Compared to Nine Months Ended September 30, 2002 (continued)

        Other.       Other revenues are derived primarily from bowling, retail, entertainment and leased facilities. In the quarter ended September 30, 2003, other revenues were $12.8 million compared to $9.9 million in 2002, an increase of 29.1%, primarily due to a 63.3% increase at The Orleans. The arena at The Orleans, which opened in May 2003, contributed $2.7 million in revenues in the quarter from concerts and sporting events. Other revenues at the Suncoast, the Gold Coast and the Barbary Coast were flat compared to the prior year. Other expenses in the quarter increased by $4.6 million (64.3%), primarily due to the arena at The Orleans. Year-to-date, other revenues were $34.2 million compared to $29.0 million in the first nine months of 2002, an increase of 17.8% primarily due to the arena at The Orleans. Other expenses increased year-to-date by $8.3 million (38.7%), due to costs related to the arena.

        General and Administrative. General and administrative expenses were $28.4 million in the third quarter of 2003 compared to $27.4 million in 2002, an increase of 3.7%, primarily due to increases in payroll and property taxes. Payroll and related costs were affected by increased staffing levels at The Orleans due to the recent expansion at that property. Property taxes were higher due to the expansions at The Orleans and the Gold Coast. Year-to-date, general and administrative expenses were $80.5 million compared to $75.9 million in the first nine months of 2002, an increase of 6.1%, also due primarily to the increased payroll, payroll related costs and property taxes described above, as well as to increased utilities expenses related to the expansion at The Orleans.

        Depreciation and Amortization. Depreciation and amortization expense was $12.6 million in the third quarter of 2003 compared to $11.5 million in 2002, an increase of 9.7% due to the depreciation of completed expansion and remodeling projects at The Orleans and the Gold Coast. In the nine months ended September 30, 2003, depreciation and amortization expense was $36.2 million compared to $30.9 million in 2002, an increase of 16.9%, also due to the reasons described above.

        Other Income (Expenses). Net interest expense was $9.3 million in the third quarter of 2003 compared to $8.8 million in 2002, an increase of 5.1% due primarily to higher aggregate indebtedness related to the completed expansion and remodeling projects at The Orleans and the Gold Coast. In the nine months ended September 30, 2003, net interest expense was $27.9 million compared to $23.9 million in the first nine months of 2002, an increase of 17.1% due to the higher aggregate indebtedness described above. Capitalized interest was $25,000 in the third quarter compared to $923,000 in the third quarter of 2002. The decrease was due to the completion prior to the third quarter of the expansion and remodeling projects at The Orleans and the Gold Coast. Capitalized interest was $1.2 million in the first nine months of 2003 compared to $2.4 million in the same period in 2002. Unamortized costs of $419,000 related to our bank credit facility were written off in the third quarter of 2003 due to the replacement of that facility with a new one. Year-to-date, other loss is $117,000, which represents a net loss on disposal of equipment, compared to other income of $2.4 million in 2002. The prior year income represented a gain of $2.7 million on the cancellation of an interest rate swap agreement, offset by a loss of $300,000 on the disposal of equipment.

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 September 30 are summarized by year below:

        The Orleans occupies a portion of an approximately 80-acre site located on West Tropicana Avenue, about 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 2006 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 $82.0 million in the nine months ended September 30, 2003, compared to $80.2 million in the same period in 2002.

        Cash used in investing activities was primarily for capital expenditures and was $78.6 million in the first nine months of 2003, compared to $164.7 million in 2002. In the first nine months of 2003, cash used for capital expenditures was $79.3 million, including $38.3 million for the expansion projects at The Orleans and the Gold Coast, $18.1 million for the purchase of land at the Barbary Coast, $2.2 million for the completion of luxury suites at the Suncoast, approximately $500,000 for design work on a proposed hotel-casino project, the “South Coast,” $1.2 million for capitalized interest and approximately $19.0 million for maintenance capital expenditures. In the first nine 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 $10.7 million in the nine months ended September 30, 2003, primarily from $17.8 million in net proceeds from the financing of our aircraft and $171.6 million in proceeds from borrowings under the senior secured credit facility, net of issuance costs, offset by $173.5 million in repayments of borrowings under the credit facility and $5.1 million in cash dividends. In the first nine months of 2002, cash provided by financing activities was $73.5 million, primarily from $103.2 million in net proceeds from the issuance of long-term debt and $89.0 million of proceeds from borrowings under the senior secured credit facility, offset, in part, by $118.5 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 of each year through their maturity in March 2009. On February 2, 2001, Coast Hotels issued an additional $50.0 million principal amount of senior subordinated notes. The net proceeds of approximately $49.1 million were used to reduce borrowings under the then existing credit facility. On March 19, 2002, Coast Hotels issued an additional $100.0 million principal amount of its senior subordinated notes. The notes were issued at a premium and the net proceeds of $103.2 million were used to reduce borrowings under the then existing credit facility. The notes issued in 2001 and 2002 were issued under the same indenture and have the same terms, interest rate and maturity date as the original $175.0 million principal amount of senior subordinated notes issued in 1999.

15

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

Liquidity and Capital Resources (continued)

        In February 2003, Coast Hotels borrowed $18.0 million under a secured loan agreement, collateralized by our Canadair Challenger aircraft. The proceeds were used to reduce borrowings under the then existing credit facility. The loan bears interest at a premium of 2.25% over the 30-day London Interbank Offered Rate (“LIBOR”), which is adjusted monthly. As of September 30, 2003, the interest rate was 3.36%, and for the nine months ended September 30, 2003, the weighted average interest rate was 3.48%. 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.

        In September 2003, we replaced our existing credit facility with a $300.0 million senior secured credit facility due September 2008, represented by a $225.0 million revolving credit facility and a $75.0 million term loan. Subject to the satisfaction of certain conditions, Coast Hotels may increase the commitments under the senior secured credit facility by up to $50.0 million. Coast Casinos is a full and unconditional guarantor of the indebtedness under both of these debt agreements. Borrowings under the senior secured credit facility bear interest, selected monthly at Coast Hotels’ option, at a premium over the base rate or the one-, two-, three- or six-month Eurodollar Rate (“Eurodollar”). The premium varies depending on a certain financial ratio and can vary, if determined by reference to the base rate, between 0.5% and 1.25% and, if determined by reference to Eurodollar, between 1.75% and 2.5%. As of September 30, 2003, using the one-month Eurodollar option, the premium over Eurodollar was 2.25% and the interest rate was 3.37%. For the nine months ended September 30, 2003, the weighted average interest rate for the senior secured credit facility (including the indebtedness replaced thereby was 3.44%. Coast Hotels incurs a commitment fee, payable quarterly in arrears, on the unused portion of the senior secured credit facility. This fee varies depending on a certain financial ratio and can vary between 0.375% and 0.5% per annum. As of September 30, 2003, the fee was 0.5% per annum times the average unused portion of the facility.

        In accordance with the terms of the senior secured credit facility, commencing on December 31, 2005 and each quarter thereafter, Coast Hotels is required to repay the $75.0 million term loan in an amount equal to 8.3333% of the principal amount of the term loan then outstanding. Advances under the senior secured credit facility may be used for working capital, general corporate purposes, and certain improvements to existing properties. As of September 30, 2003, all of the $75.0 million term loan was outstanding and $63.0 million was drawn on the $225.0 million revolving line of credit with $161.3 million of availability remaining (net of letters of credit of approximately $700,000).

        The credit agreement governing the senior secured credit facility contains covenants that, among other things, limit Coast Hotels’ ability to pay dividends or make advances to Coast Casinos, to make certain capital expenditures, to repay certain existing indebtedness, to incur additional indebtedness or to sell material assets. Additionally, the credit agreement requires that Coast Hotels maintain certain financial ratios with respect to leverage and fixed charge coverage. Coast Hotels is also subject to certain covenants associated with the indenture governing its senior subordinated notes, including, in part, limitations on certain restricted payments, the incurrence of additional indebtedness and asset sales. At September 30, 2003, Coast Hotels was in compliance with all covenants and required ratios.

16

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

Capital Expenditures

        In January 2001, Coast Hotels 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. The expansion project was completed in the third quarter of 2003 for a total cost of $165.8 million. In the fourth quarter of 2000, Coast Hotels 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. The expansion and remodel project was completed in the second quarter of 2003 at a total cost of $72.9 million.

        In the fourth quarter of 2001 and the first quarter of 2002, Coast Hotels 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, Coast Hotels intends to develop a hotel-casino, the “South Coast,” on the site. Coast Hotels is currently developing plans for the project and anticipates 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 the project will actually be developed 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, Coast Hotels anticipates starting construction of the hotel tower in the first quarter of 2004. There are no assurances that the project will actually be developed in the anticipated time frame or at all.

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

17

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

Other Matters

        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 September 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. 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.

        In May 2003, the Financial Accounting Standards Board issued Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity (“SFAS 150”). SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). As the Company’s equity securities are not publicly traded, the Company is a nonpublic entity as defined by SFAS 150, this pronouncement will be effective at the beginning of the first interim period beginning after December 15, 2003. The adoption of SFAS 150 will not have a material impact on our financial position, results of operations or cash flows as the Company currently does not have any such financial instruments.

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:

        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 September 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 September 30,:

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 September 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 within the reasonable assurance threshold described above. There have been no significant changes in our internal controls (including our internal controls over financial reporting) 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.

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:

22

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

        (a) Exhibits (continued)

23

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

24

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.

25