Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

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Table of Contents

UNITED STATES

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 1934

For the quarterly period ended March 31, 2011.

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number 333-87202

CIRCUS AND ELDORADO JOINT VENTURE

SILVER LEGACY CAPITAL CORP.

(Exact names of registrants as specified in their charters)


Nevada		88-0310787
Nevada		71-0868362
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

407 North Virginia Street, Reno, Nevada 89501

(Address of principal executive offices, including zip code)

(800) 687-7733

(Registrants’ telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrants (1) have 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 registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrants are large accelerated filers, accelerated filers, non-accelerated filers, or smaller reporting companies. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether either of the registrants is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Circus and Eldorado Joint Venture		Yes ¨ No x
Silver Legacy Capital Corp.		Yes x No ¨

The number of shares of Silver Legacy Capital Corp.’s common stock outstanding at May 16, 2011 was 2,500. All of these shares are owned by Circus and Eldorado Joint Venture.

CIRCUS AND ELDORADO JOINT VENTURE

SILVER LEGACY CAPITAL CORP.

FORM 10-Q

INDEX


			Page No.
PART I. FINANCIAL INFORMATION

	Item 1.	Financial Statements:

		Consolidated Balance Sheets as of March 31, 2011 (Unaudited) and December 31, 2010		1

		Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2011 and 2010		2

		Condensed Consolidated Statement of Partners’ Equity (Unaudited) for the Three Months Ended March 31, 2011		3

		Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2011 and 2010		4

		Condensed Notes to Consolidated Financial Statements (Unaudited)		5

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		8

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		15

	Item 4.	Controls and Procedures		15

PART II. OTHER INFORMATION

	Item 6.	Exhibits		15

SIGNATURES				16

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CIRCUS AND ELDORADO JOINT VENTURE

(doing business as Silver Legacy Resort Casino)

CONSOLIDATED BALANCE SHEETS

(In thousands)


	March 31,		December 31,
	2011		2010
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	26,940	$	31,654
Accounts receivable, net		3,110		2,458
Inventories		2,069		2,013
Prepaid expenses and other		3,257		2,692

Total current assets		35,376		38,817
PROPERTY AND EQUIPMENT, NET		225,849		229,119
OTHER ASSETS, NET		7,344		7,315

Total Assets	$	268,569	$	275,251

LIABILITIES AND PARTNERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	4,316	$	4,493
Accrued interest		1,205		4,819
Accrued and other liabilities		9,453		9,198
Current portion of long-term debt		142,749		—

Total current liabilities		157,723		18,510
LONG-TERM DEBT		—		142,735
OTHER LONG-TERM LIABILITIES		8,278		8,176

Total liabilities		166,001		169,421
COMMITMENTS AND CONTINGENCIES (Note 7)
PARTNERS’ EQUITY		102,568		105,830

Total Liabilities and Partners’ Equity	$	268,569	$	275,251

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

CIRCUS AND ELDORADO JOINT VENTURE

(doing business as Silver Legacy Resort Casino)

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2011			2010
OPERATING REVENUES:
Casino	$	14,914		$	14,990
Rooms		6,872			7,096
Food and beverage		7,685			7,597
Other		1,874			1,646

		31,345			31,329
Less: promotional allowances		(3,770	)		(3,522	)

Net operating revenues		27,575			27,807

OPERATING EXPENSES:
Casino		8,195			8,081
Rooms		2,332			2,228
Food and beverage		5,427			5,294
Other		1,294			1,131
Selling, general and administrative		6,856			6,859
Depreciation		3,758			4,125
Change in fair value of life insurance contracts		(177	)		(141	)
Loss on disposition of assets		38			11

Total operating expenses		27,723			27,588

OPERATING INCOME (LOSS)		(148	)		219

OTHER (INCOME) EXPENSE:
Interest expense		3,764			3,767
Interest income		(4	)		(2	)

Total other expense		3,760			3,765

NET LOSS	$	(3,908	)	$	(3,546	)

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

CIRCUS AND ELDORADO JOINT VENTURE

(doing business as Silver Legacy Resort Casino)

CONDENSED CONSOLIDATED STATEMENT OF PARTNERS’ EQUITY

(In thousands)

(Unaudited)


	Galleon, Inc.			Eldorado Resorts, LLC			Total
BALANCE, January 1, 2011 (1)	$	47,915		$	57,915		$	105,830
Cumulative effect of adoption of ASU No. 2010-16, Accrual for Casino Jackpot Liability Reserve		323			323			646
Net loss		(1,954	)		(1,954	)		(3,908	)

BALANCE, March 31, 2011 (1)	$	46,284		$	56,284		$	102,568

(1)	Balances include Accumulated Other Comprehensive Income totaling ($762,000) comprised of ($381,000) each for Galleon, Inc. and Eldorado Resorts, LLC.

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

CIRCUS AND ELDORADO JOINT VENTURE

(doing business as Silver Legacy Resort Casino)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(3,908	)	$	(3,546	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		3,758			4,125
Amortization of debt discounts and issuance costs		149			152
Loss on disposition of assets		38			11
Increase in accrued pension cost		102			168
Provision for doubtful accounts		(60	)		(78	)
Increase in cash value of insurance policies in excess of premiums paid		(177	)		(141	)
Changes in current assets and current liabilities:
Accounts receivable		(592	)		(247	)
Inventories		(56	)		(23	)
Prepaid expenses and other		(565	)		(596	)
Accounts payable		169			118
Accrued interest		(3,614	)		(3,615	)
Accrued and other liabilities (1)		901			981

Net cash used in operating activities		(3,855	)		(2,691	)


CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets		27			—
Increase in other assets		12			9
Purchase of property and equipment		(898	)		(3,266	)

Net cash used in investing activities		(859	)		(3,257	)


CASH FLOWS FROM FINANCING ACTIVITIES:

Net cash used in financing activities		—			—


CASH AND CASH EQUIVALENTS:
Net decrease for the period		(4,714	)		(5,948	)
Balance, beginning of period		31,654			35,042

Balance, end of period	$	26,940		$	29,094


SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during period for interest	$	7,229		$	7,232

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES:
Payables for purchase of property and equipment	$	478		$	566

(1)	Balance for the three months ended March 31, 2011 excludes the cumulative-effect adjustment of $646,000 related to the adoption of ASU No. 2010-16, Accrual for Casino Jackpot Liability Reserve.

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

CIRCUS AND ELDORADO JOINT VENTURE

(doing business as Silver Legacy Resort Casino)

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1. Summary of Significant Accounting Policies and Basis of Presentation

Principles of Consolidation/Operations

Effective March 1, 1994, Eldorado Limited Liability Company (a Nevada limited liability company owned and controlled by Eldorado Resorts, LLC) (“ELLC”) and Galleon, Inc. (a Nevada corporation owned and controlled by MGM Resorts International and previously owned and controlled by Mandalay Resort Group (“Mandalay”) (“Galleon” and, collectively with ELLC, the “Partners”), entered into a joint venture agreement to establish Circus and Eldorado Joint Venture (the “Partnership”), a Nevada general partnership. The Partnership owns and operates a casino and hotel located in Reno, Nevada (“Silver Legacy”), which began operations on July 28, 1995. ELLC contributed land to the Partnership with a fair value of $25.0 million and cash of $26.9 million for a total equity investment of $51.9 million. Galleon contributed cash to the Partnership of $51.9 million to comprise their total equity investment. Each partner has a 50% interest in the Partnership.

On April 25, 2005, a wholly owned subsidiary of MGM Resorts International (“MGM”) was merged with and into Mandalay as a result of which Mandalay became a wholly owned subsidiary of MGM Resorts International. With the consummation of the merger, Galleon, Inc. became an indirect wholly-owned subsidiary of MGM Resorts International.

The consolidated financial statements include the accounts of the Partnership and its wholly owned subsidiary, Silver Legacy Capital Corp. (“Capital”). Capital was established solely for the purpose of serving as a co-issuer of $160.0 million principal amount of 10¹/8% mortgage notes due 2012 co-issued by the Partnership and Capital and, as such, Capital does not have any operations, assets, or revenues. All intercompany accounts and transactions have been eliminated in consolidation. The Partnership operates as one segment.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, all of which are normal and recurring, necessary to present fairly the financial position of the Partnership as of March 31, 2011, and the results of operations for the three months ended March 31, 2011 and 2010 and cash flows for the three months ended March 31, 2011 and 2010. The results of operations for such periods are not necessarily indicative of the results to be expected for a full year.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership’s annual report on Form 10-K for the year ended December 31, 2010.

Use of Estimates

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. Those principles require the Partnership’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates incorporated into our consolidated financial statements include estimated useful lives for depreciable and amortizable assets, the estimated allowance for doubtful accounts receivable, estimated cash flows in assessing the recoverability of long-lived assets, our self-insured liability reserves, players’ club liabilities, contingencies and litigation, claims and assessments. Actual results could differ from these estimates.

Recently Issued Accounting Pronouncements

In April 2010, the FASB issued ASU No. 2010-16, Accruals for Casino Jackpot Liabilities. Specifically, the guidance clarifies that an entity should not accrue jackpot liabilities, or portions thereof, before a jackpot is won if the entity can avoid paying the jackpot. Jackpots should be accrued and charged to revenue when an entity has the obligation to pay the jackpot. The guidance applies to both base and progressive jackpots. The new guidance was effective for fiscal years beginning on or after December 15, 2010 and requires a cumulative-effect adjustment to opening retained earnings in the period of adoption. The Partnership adopted the guidance effective January 1, 2011 and recorded an adjustment to retained earnings of $0.6 million.

Note 2. Fair Value Measurements

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Accordingly, fair value is a market based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, there is a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair values as follows:

Level 1: Inputs are based upon quoted prices (unadjusted) in active markets for identical assets or liabilities which are accessible as of the measurement date.

Level 2: Inputs are based upon quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and model-derived valuations for the asset or liability that are derived principally from or corroborated by market data for which the primary inputs are observable, including forward interest rates, yield curves, credit risk and exchange rates.

Level 3: Inputs for the valuations are unobservable and are based on management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques such as option pricing models and discounted cash flow models.

The Partnership’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and debt. Management believes that the carrying value of cash and cash equivalents, accounts receivable, and accounts payable are representative of their respective fair values due to the short maturities of these instruments. We determined the fair value of the Partnership’s 10 1/8% mortgage notes using Level 1 inputs. The fair value of the Partnership’s 10 1/8% mortgage notes, based on quoted market prices, was approximately $142.4 million as of March 31, 2011.

Note 3. Debt

Current and long-term debt consisted of the following (in thousands):


	March 31,		December 31,
	2011		2010
Current Portion of Long-Term Debt:
10¹/8% Mortgage Notes due 2012 (net of unamortized discount of $51)	$	142,749	$	—

Long-Term Debt:
10¹/8% Mortgage Notes due 2012 (net of unamortized discount of $65)	$	—	$	142,735

On March 5, 2002, the Partnership and Capital (collectively, the “Issuers”) co-issued $160.0 million principal amount of senior secured mortgage notes due 2012 (the “Notes”). Concurrent with issuing the Notes, the Partnership entered into a senior secured credit facility (the “Credit Facility”) for $40.0 million. The Credit Facility originally provided for a $20.0 million senior secured revolving credit facility and a $20.0 million five-year term loan facility, each of which provided for the payment of interest at floating rates based on LIBOR plus a spread. The proceeds from the Notes, together with $26.0 million in borrowings under the Credit Facility, were used to repay $150.2 million representing all of the indebtedness outstanding under a prior bank credit facility and to fund $30.0 million of distributions to the Partners. In addition, the remaining proceeds along with operating cash flows were used to pay $6.3 million in related fees and expenses of the transactions. These fees were capitalized and are included in other assets. On November 4, 2003, the Partnership, U.S. Bank, N.A. and Bank of America, N.A., executed an amendment to the Credit Facility which reduced the revolving facility to $10.0 million. On March 28, 2008, the Partnership and Bank of America, N.A. executed an amendment reducing the revolving facility to $1.0 million. On January 28, 2009, the Partnership executed an amendment to extend the Credit Facility’s maturity date for an additional year to March 30, 2010. The Partnership had not utilized its borrowing capacity under the Credit Facility since 2003. As a result, the Credit Facility was not extended beyond its March 30, 2010 maturity date.

The Notes are senior secured obligations which rank equally with all of the Partnership’s outstanding senior debt and are senior to any subordinated debt. The Notes are secured by a security interest in the Issuers’ existing and future assets and a pledge by each of the Partners of all of its partnership interest in the Partnership. The Notes mature on March 1, 2012 and bear interest at the rate of 10¹/8% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, commencing on September 1, 2002. The entire principal amount of the Notes will become due and payable at maturity on March 31, 2012 and the Partnership will be required to borrow funds to satisfy our repayment obligations. The Partnership is exploring various alternatives for refinancing its obligations under the Notes. There can be no assurance, however, that the Partnership will be able to refinance the Notes on terms that are acceptable to the Partnership, or at all. If the Partnership is unable to refinance its obligations with respect to the Notes, the holders thereof will be entitled to exercise the remedies provided in the indenture governing the Notes, including foreclosing on the assets securing the Notes. If the Partnership is unable to refinance the Notes by March 1, 2012, it would have a material adverse effect on the Partnership’s business and its financial position.

Amounts outstanding under the Notes have been classified as “current obligations” for financial reporting purposes beginning March 31, 2011. In the event that the Partnership is unable to refinance such amounts by the time of the filing of its Annual Report on Form 10-K for the year ending December 31, 2011, it would affect the Partnership’s independent registered public accounting firm’s assessment of its ability to continue as a going concern, would have a material adverse effect on its consolidated financial position and would raise substantial doubt as to its ability to continue as a going concern.

The indenture relating to the Notes contains various restrictive covenants. The covenants require, and/or any covenants in any new credit facility we may secure may require, the maintenance of certain financial ratios and impose limitations on the ability of the Partnership, among other things, to incur additional debt or liens, engage in transactions with affiliates, dispose of property, make distributions to its partners or merge, consolidate or sell assets. As of March 31, 2011, the Partnership was in compliance with the covenants in the indenture relating to the Notes.

In February 2009, the Partnership repurchased and retired $17.2 million principal amount of the Notes. The total purchase price of the Notes was approximately $11.4 million, resulting in a gain of approximately $5.5 million, net of unamortized debt issuance costs. The repurchase of the Notes reduced the amount of Notes outstanding to $142.8 million. The transaction was funded by available invested cash reserves. The Partnership’s executive committee has authorized the Partnership to spend up to an additional $8.6 million for the repurchase of Notes. It is anticipated that any additional Notes acquired prior to maturity will be acquired through open market purchases.

Note 4. Related Parties

An affiliate of each of the Partners owns and operates a casino attached and adjacent to Silver Legacy. Our Partners may be deemed to be in a conflict of interest position with respect to decisions they make relating to the Partnership as a result of the interests their affiliates have in the Eldorado Hotel & Casino and Circus Circus Hotel & Casino-Reno, respectively.

As of March 31, 2011, the Partnership’s related parties receivable and payable were $0.1 million and $0.3 million, respectively. As of December 31, 2010, the Partnership’s related parties receivable and payable were $0.2 million and $0.1 million, respectively.

Note 5. Supplemental Executive Retirement Plan

Effective January 1, 2002, the Partnership adopted a Supplemental Executive Retirement Plan (“SERP”) for a select group of highly compensated management employees. The SERP provides for a lifetime benefit at age 65, based on a formula which takes into account a participant’s highest annual compensation, years of service, and executive level. The SERP also provides an early retirement benefit at age 55 with at least four years of service, a disability provision, and a lump sum death benefit. The obligation is being funded informally through life insurance contracts on the participants and related cash surrender value. The Partnership anticipates that its periodic pension cost for the year ending December 31, 2011 will be approximately $0.4 million, of which $0.1 million had been accrued as of March 31, 2011.

Note 6. Partnership Agreement

Concurrent with the issuance of the Notes on March 5, 2002, the Partnership’s original partnership agreement was amended and restated in its entirety and was further amended in April 2002 (the “New Partnership Agreement”). The New Partnership Agreement provides for, among other items, profits and losses to be allocated to the Partners in proportion to their percentage interests, separate capital accounts to be maintained for each Partner, provisions for management of the Partnership and payment of distributions and bankruptcy and/or dissolution of the Partnership. The April 2002 amendments were principally (i) to provide equal voting rights for ELLC and Galleon with respect to approval of the partnership’s annual business plan and the appointment and compensation of the general manager, and (ii) to give each Partner the right to terminate the general manager.

Note 7. Commitments and Contingencies

In March 2008, the Nevada Supreme Court ruled, in a case involving another casino company, that food and non-alcoholic beverages purchased for the use in providing complimentary meals to customers and to employees were exempt from sales and use tax. The Partnership had previously paid use tax on these items and has generally filed for refunds for the periods from February 2000 to February 2008 related to this matter. The aggregate amount for which a refund claim is pending is approximately $1.5 million.

The Nevada Department of Taxation (the “Department”) filed a petition for rehearing, which the Nevada Supreme Court announced in July 2008 it would not grant. Hearings before the Nevada Administrative Law Judge are currently being scheduled; however, the date of the Partnership’s hearing is uncertain at this time. Due to uncertainty surrounding the potential arguments that may be raised in the administrative process, the Partnership will not record any gain until the tax refund is realized.

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

Overview

Effective March 1, 1994, Eldorado Limited Liability Company (“ELLC”), a Nevada limited liability company owned and controlled by Eldorado Resorts LLC, and Galleon, Inc. (“Galleon”), a Nevada corporation now owned and controlled by MGM Resorts International, entered into a joint venture agreement to establish the Partnership for the purpose of constructing, owning and operating Silver Legacy. Capital, a wholly owned subsidiary of the Partnership, was incorporated for the sole purpose of serving as a co-issuer of the $160 million principal amount of 10¹/8% mortgage notes due 2012 co-issued by the Partnership and Capital, and does not have any operations, assets or revenues.

On July 28, 1995, Silver Legacy commenced operations as a hotel-casino in downtown Reno, Nevada. Silver Legacy is a leader within the Reno market, offering the largest number of table games, the second largest number of hotel rooms and the third largest number of slot machines of any property in the Reno market. Silver Legacy’s net operating revenues and income are derived largely from our gaming activities. In an effort to enhance our gaming revenues, we attempt to maximize the use of our gaming facilities at Silver Legacy by providing a well-balanced casino environment that contains a mix of games attractive to multiple market segments. Rooms, food and beverage also contribute a large portion of our net revenues.

Our operating results are highly dependent on the volume of customers visiting and staying at our resort, which in turn impacts the price we can charge for our hotel rooms and other amenities. Key volume indicators include table games drop and slot handle, which refer to amounts wagered by our customers. The amount of volume we retain, which is not fully controllable by us, is recognized as casino revenues and is referred to as our win or hold. In addition, hotel occupancy and price per room designated by average daily rate (“ADR”) are key indicators for our hotel business.

Significant Factors Affecting Results of Operations

Severe Weather

Silver Legacy’s operations are subject to seasonal variation, with the weakest results generally occurring during the winter months. During the first quarter of 2011, our region experienced severe weather conditions, including the second highest snowfall on record. On the majority of the weekends during the current quarter, travel to Reno from northern California, our main feeder market, was difficult due to poor weather or impossible due to road closures. As a result, there was an adverse effect on business levels, especially hotel occupancy, and our operating performance during the first quarter of 2011 compared to the same prior year period.

Global, National and Regional Economic Conditions

The economic recession and the slow pace of recovery continue to adversely influence consumers’ confidence, discretionary spending levels and travel patterns. We believe the weak demand, high unemployment, record number of home foreclosures, increased competition and volatility of the economy have had a significant negative impact on the gaming and tourism industries, and, as a result, our operating performance during the last three years compared to previous years. In response to the difficult economic environment, our management implemented cost savings measures and continues to review our operations to look for opportunities to further reduce expenses and maximize cash flows. While there have been some signs of improvement, we believe the current economic conditions could continue to negatively affect our operating results for some period of time. We remain uncertain as to the duration and magnitude of the impact on our operations and the length of any future recovery period.

Expansion of Native American Gaming

A significant portion of Silver Legacy’s revenues and results of operations are generated from patrons who are residents of northern California, and, as such, our results of operations have been adversely impacted by the growth in Native American gaming in northern California. Many existing Native American gaming facilities in northern California are modest compared to Silver Legacy. However, a number of Native American tribes have established large-scale gaming facilities in California and some Native American tribes have announced that they are in the process of expanding, developing, or are considering establishing, large-scale hotel and gaming facilities in northern California. As northern California Native American gaming operations have expanded, we believe the increasing competition generated by these gaming operations has negatively impacted principally drive-in, day-trip visitor traffic from our main feeder markets in northern California.

Under their current compacts, most Native American tribes in California may operate up to 2,000 slot machines, and up to two gaming facilities may be operated on any one reservation. However, under action taken by the National Indian Gaming Commission, gaming devices similar in appearance to slot machines, but which are deemed to be technological enhancements to bingo style gaming, are not subject to such limits and may be used by tribes without state permission. The number of slot machines the tribes are allowed to operate may increase as a result of any new or amended compacts the tribes may enter into with the State of California that receive the requisite approvals, such as has been the case with respect to a number of new or amended compacts which have been executed and approved.

We believe any future growth of Native American gaming establishments, including the addition of hotel rooms and other amenities, could place additional competitive pressure on our operations. While we cannot predict the extent of any future impact, it could be significant.

Bowling Tournaments Within the Reno Market

The National Bowling Stadium, located one block from Silver Legacy, is one of the largest bowling complexes in North America and has been selected to host multi-month tournaments in Reno two out of every three years through 2018, including 2010. Through one-time agreements, the National Bowling Stadium will also host the United States Bowling Congress (“USBC”) Open Tournament in Reno in 2011 and 2014, usually off-years for Reno. Historically, these multi-month bowling tournaments have attracted a significant number of visitors to the Reno market and have benefited business in the downtown area, including Silver Legacy. The USBC Open Tournament, which attracted approximately 80,000 bowlers in 2007, returned to the Reno market and attracted approximately 68,500 men and women bowlers to the Reno area during the period from late-February through the end of June 2010. The USBC Open Tournament returned to the Reno market beginning in late February and will continue through the end of June 2011, and is expected to bring approximately 64,000 bowlers to the Reno area during the 2011 tournament period.

Summary Financial Results

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

Three months
ended March 31,
2011

Three months
ended March 31,
2010

Percent
Change

Net revenues

27,575

27,807

(0.8

Operating expenses

27,723

27,588

0.5

Operating income (loss)

(148

)

219

(167.6

)

Net loss

(3,908

)

(3,546

)

10.2

Net Revenues. Net revenues increased in January and February of 2011 compared to the same months in 2010; however, this revenue growth was offset by declines in March of 2011 compared to 2010. As a result, net revenues decreased 0.8% during the current quarter compared to the same prior year period. This decline was primarily due to decreases in room revenues associated with lower hotel occupancy. We believe this decrease resulted from the previously discussed severe weather conditions which had a negative impact on drive-in visitation in the first quarter of 2011 compared to the same period of 2010. Additionally, net revenues decreased in 2011 compared to 2010 due to higher promotional allowances associated with complimentary offers provided to our casino customers.

Operating Income (Loss) and Net Loss. During the current quarter compared to the same prior year period, an increase in departmental operating expenses was partially offset by a decline in depreciation expense resulting in an overall slight increase in operating expenses. This increase in operating expenses combined with the decline in net revenues resulted in a decrease in operating income and a proportionate increase in our net loss in the first quarter of 2011 compared to the same period of 2010.

Revenues

The following table highlights the components of operating revenues (dollars in thousands):

Three months
ended March 31,
2011

Three months
ended March 31,
2010

Percent
Change

Casino

14,914

14,990

(0.5

Rooms

6,872

7,096

(3.2

)

Food and beverage

7,685

7,597

1.2

Other

1,874

1,646

13.9

Promotional allowances

(3,770

)

(3,522

)

7.0

Casino Revenues. Despite the negative impact on visitation due to severe weather conditions during the first quarter of 2011 compared to the same period of 2010, casino revenues remained flat. Table games drop declined 3.7% while slot handle increased 0.5% in the first quarter of 2011 compared to the same period of 2010. The decline in casino volume associated with the disruption in traffic flow from our feeder markets was partially offset by increases in tracked slot handle and table games credit play in the first quarter of 2011 compared to the same period of 2010. We believe these increases were driven by promotional offers, including slot free play and complimentaries, provided to customers in our casino database and growth within our locals customer demographic during the first quarter of 2011 compared to the same period of 2010. Declines in table games win resulting from a lower hold percentage in the first quarter of 2011 compared to the same period of 2010 were offset by increases in slot win which had a higher hold percentage in the first quarter of 2011 compared to the same period of 2010. Hold percentages in both years were within normal ranges.

Rooms Revenues. Our ADR and occupancy percentages were $66.46 and 59.6% respectively, in 2011 compared to $66.72 and 62.7%, respectively, in the same period of 2010. We were able to sustain our ADR and achieved incremental room revenues related to an increase in our resort fee from $3 to $6 effective in September of 2010. However, room revenues declined during the first quarter of 2011 compared to the same period of 2010 due to decreases in hotel occupancy which was negatively impacted by a decline in convention room nights in March of 2011 compared to 2010 along with the previously discussed severe weather conditions.

Food and Beverage Revenues. During the first quarter of 2011 compared to the same period of 2010, declines in beverage revenues were offset by increases in food revenues. The increase in food revenues was due to growth in restaurant customer counts in the first quarter of 2011 compared to the same quarter of 2010 together with higher ballroom catering revenues. Our average check remained flat in the first quarter of 2011 compared to the first quarter of 2010.

Other Revenues. Other revenues are comprised of revenues generated by our retail outlets, entertainment, other miscellaneous items, and our share of ballroom revenues. Other revenues increased during the current quarter compared to the same prior year period due to higher entertainment revenues associated with an increase in scheduled concert dates. Retail and other revenues were flat during the current quarter compared to the same prior year period.

Promotional Allowances. Promotional allowances, expressed as a percentage of gross revenues, increased to 12.0% in the first quarter of 2011 compared to 11.2% in the first quarter of 2010. This year over year growth was attributable to increases in rooms, food, concert tickets and retail promotional offers to our casino customers. These increases resulted from efforts to drive visitation to Silver Legacy, utilize available room inventory during slower periods, reward customer loyalty, attract new players and market our improved players’ club which was revised in August of 2010.

Operating Expenses

The following table highlights our operating expenses (dollars in thousands):

Three months
ended March 31,
2011

Three months
ended March 31,
2010

Percent
Change

Casino

8,195

8,081

1.4

Rooms

2,332

2,228

4.7

Food and beverage

5,427

5,294

2.5

Other

1,294

1,131

14.4

Selling, general and administrative

6,856

6,859

0.0

Depreciation

3,758

4,125

(8.9

)

Change in fair value of life insurance contracts

(177

)

(141

)

25.5

Loss on disposition of assets

245.5

Casino Expenses. Casino expenses increased slightly in the first quarter of 2011 compared to the same period of 2010 primarily due to increased promotional allowances related to the cost of rooms, food, concert tickets and retail complimentaries allocated to the casino department and an increase in the liability associated with unredeemed players’ club complimentaries. These increases were partially offset by savings in casino departmental payroll, supplies and special events expenses.

Rooms Expenses. Although hotel occupancy declined in the first quarter of 2011 compared to the same period of 2010, room expenses increased mainly due to higher costs resulting from increased free-to-guest internet usage and higher laundry expenditures associated with our improved room product and linens presentation implemented during our room remodel project which was completed in December of 2010.

Food and Beverage Expenses. Food and beverage expenses rose in the first quarter of 2011 compared to the same period of 2010 in conjunction with increased restaurant customer counts. Additionally, rising food and beverage costs which were not passed on to our customers via price increases in our average restaurant check also impacted the food and beverage departments’ profit margins.

Other Operating Expenses. Other operating expenses are comprised of expenses associated with the operation of our retail outlets and the ballroom along with the entertainment department’s production costs and professional fees. During the first quarter of 2011 compared to the same period of 2010, other operating expenses increased as a result of higher entertainment expenses, including equipment rental and entertainers’ fees, as a result of a more aggressive concert schedule.

Selling, General and Administrative Expenses. During the first quarter of 2011 compared to the same period of 2010, selling, general and administrative expenses remained flat. Increases in costs associated with higher advertising media expenditures were offset by lower property taxes and savings in utilities costs resulting from declines in usage and operational efficiencies.

Depreciation Expense. Depreciation expense decreased in the first quarter of 2011 compared to the same period of 2010 primarily due to assets becoming fully depreciated which was partially offset by increased depreciation of assets associated with our hotel room remodel project which were placed into service and depreciated throughout the latter half of 2010.

Change in Fair Value of Life Insurance Contracts. These amounts relate to the change in fair value of life insurance contracts that informally fund a portion of our supplemental executive retirement plan. During the first quarters of 2011 and 2010, the fair value of these life insurance contracts increased as a result of improvements in the underlying insurance investment return.

Other (Income) Expense

Other (income) expense is comprised of interest expense and interest income and remained flat in the first quarter of 2011 compared to the same period of 2010.

Liquidity and Capital Resources

During the first quarter of 2011, cash flows used in operating activities was $3.8 million compared to $2.7 million during the same prior year period. This change in cash flows used in operating activities was primarily due to the increase in our net loss combined with various changes in balance sheet accounts which occurred in the normal course of business. As of March 31, 2011, cash and cash equivalents were $26.9 million which is sufficient for normal operating requirements.

Cash used in investing activities during the first quarter of 2011 was $0.9 million compared to $3.3 million during the same prior year period, and related primarily to capital expenditures for various renovation projects and equipment purchases. The decrease during the current quarter compared to the same prior year period was primarily due to a payment of $2.5 million for the purchase of furniture and fixtures for our hotel room remodel project which was completed in December of 2010. Our executive committee has approved $2.5 million in capital expenditures for 2011.

There was no cash used in financing activities during the first quarters of 2011 and 2010.

In July 2010, we renewed our property and liability insurance policies each covering a 12-month period. Under these policies, the Partnership and the owner of the adjacent Eldorado property, Eldorado Resorts LLC (which is an affiliate of ELLC), have combined per occurrence earthquake coverage of $186 million and combined aggregate flood coverage of $250 million. In the event that an earthquake causes damage to the Partnership’s property, the

Partnership is eligible to receive up to the entire $186 million in coverage, depending on the replacement cost, regardless of the damage, if any, to the Eldorado property. In the event that a flood causes damage only to the Partnership’s property, the Partnership is eligible to receive up to $250 million in coverage, depending on the replacement cost. However, in the event that both properties are damaged, the Partnership is entitled to receive, to the extent of any replacement cost incurred, up to $141 million of the coverage amount (based on our percentage of the total reported property values) and the portion of the other $109 million, if any, remaining after satisfaction of the claim of Eldorado Resorts LLC with respect to its adjoining property.

Our insurance policy also includes combined terrorism coverage for Silver Legacy and the adjoining Eldorado property up to $800 million. In the event that an act of terrorism causes damage only to the Partnership’s property, the Partnership is eligible to receive up to $800 million in coverage, depending on the replacement cost. However, in the event that both properties are damaged, the Partnership is entitled to receive, to the extent of any replacement cost incurred, up to $450 million of the coverage amount (based on our percentage of the total reported property values) and the portion of the other $350 million, if any, remaining after satisfaction of the claim of Eldorado Resorts LLC with respect to its adjoining property. This policy also covers an additional property located in Shreveport, LA which is owned by an affiliate of Eldorado Resorts LLC. In the event that an act of terrorism causes damage to all three properties, the Partnership is entitled to receive, to the extent of any replacement cost incurred, up to $351 million of the coverage amount (based on our percentage of the total reported property values) and the portion of the other $449 million, if any, remaining after satisfaction of the claims with respect to the other two properties.

The Partnership’s partnership agreement, as currently in effect, provides that, subject to any contractual restrictions to which the Partnership is subject, including the indenture relating to the 10¹/8% mortgage notes, and prior to the occurrence of a “Liquidating Event,” the Partnership will be required to make distributions to its partners as follows:

(i) The estimated taxable income of the Partnership allocable to each partner multiplied by the greater of the maximum marginal federal income tax rate applicable to individuals for such period or the maximum marginal federal income tax rate applicable to corporations for such period (as of the date hereof both rates are 35%); provided, however, that if the State of Nevada enacts an income tax (including any franchise tax based on income), the applicable tax rate for any tax distributions subsequent to the effective date of such income tax shall be increased by the higher of the maximum marginal individual tax rate or corporate income tax rate imposed by such tax (after reduction for the federal tax benefit for the deduction of state taxes, using the maximum marginal federal individual or corporate rate, respectively).

(ii) Annual distributions of remaining “Net Cash From Operations” in proportion to the percentage interests of the partners.

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

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

The Partnership’s partnership agreement provides that the partners shall not be permitted or required to contribute additional capital to the Partnership without the consent of the partners, which consent may be given or withheld in each partner’s sole and absolute discretion.

10¹/8% Mortgage Notes

On March 5, 2002, the Partnership and Capital co-issued $160.0 million principal amount of 10¹/8% senior secured mortgage notes due 2012. The notes are senior secured obligations which rank equally with all of the Partnership’s other outstanding senior debt and senior to any subordinated debt. The notes are secured by a security interest in the Issuers’ existing and future assets, other than certain licenses which may not be pledged under applicable law. Each of the Partnership’s partners executed a pledge of all of its partnership interests in the Partnership to secure the notes. The notes mature on March 1, 2012 and bear interest at the rate of 10¹/8% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, commencing on September 1, 2002. At March 31, 2011, we were in compliance with all of the covenants in the indenture related to the notes.

In February 2009, the Partnership purchased and retired $17.2 million principal amount of its 10¹/8% mortgage notes. The total purchase price of the notes was approximately $11.4 million, resulting in a gain of approximately $5.5 million, net of unamortized debt issuance costs and discounts. The repurchase of the notes reduced the amount of notes outstanding to $142.8 million. The transaction was funded by available invested cash reserves. The Partnership’s executive committee has authorized the Partnership to spend up to an additional $8.6 million for the repurchase of notes. It is anticipated that any additional notes acquired prior to their maturity will be through open market purchases.

We believe we have sufficient capital resources to fund capital commitments and make interest payments on our 10¹/8% mortgage notes up to the March 1, 2012 maturity date. Our future sources of liquidity are anticipated to be from our operating cash flow and cash reserves. However, the entire principal amount of our notes will become due and payable at maturity on March 1, 2012 and the Partnership will be required to borrow funds to satisfy our repayment obligations.

We are exploring various alternatives for refinancing our obligations under the 10¹/8% mortgage notes. There can be no assurance, however, that we will be able to refinance the mortgage notes on terms that are acceptable to us, or at all. If we are unable to refinance our obligations with respect to the mortgage notes, the holders thereof will be entitled to exercise the remedies provided in the indenture governing the notes, including foreclosing on the assets securing the mortgage notes. If we are unable to refinance the notes by March 1, 2012, it would have a material adverse effect on our business and our financial position.

Amounts outstanding under our notes have been classified as “current obligations” for financial reporting purposes beginning March 31, 2011. In the event that we are unable to refinance such amounts by the time of the filing of our Annual Report on Form 10-K for the year ending December 31, 2011, it would affect our independent registered public accounting firm’s assessment of our ability to continue as a going concern, would have a material adverse effect on our consolidated financial position and would raise substantial doubt as to our ability to continue as a going concern.

Critical Accounting Policies

A description of our critical accounting policies can be found in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2010. There have been no material changes to these policies during the three months ended March 31, 2011.

Forward-Looking Statements

Certain information included in this report and other materials filed or to be filed by the Partnership and Capital with the Securities and Exchange Commission (as well as information included in oral statements or written statements made or to be made by them) contain or may contain statements that are forward-looking within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements can be identified by the fact that they do not relate strictly to historical or current facts. We have based these forward-looking statements on our current expectations about future events. These forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, intentions, financial condition, results of operations, future performance and business, including, current and future operations and statements that include the words “may”, “could”, “should”, “would”, “believe”, “expect”, “anticipate”, “estimate”, “intend”, “plan” or similar expressions. Such statements include information relating to capital spending, financing sources and the effects of regulation (including gaming and tax regulation) and competition. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by us or on our behalf. These risks and uncertainties include, but are not

limited to dependence on existing management, leverage and debt service (including sensitivity to fluctuations in interest rates), domestic or global economic conditions, changes in Federal or state tax laws or the administration of such laws, changes in gaming laws or regulations (including the legalization of gaming in certain jurisdictions), expansion of gaming on Native American lands (including such lands in California), risks and uncertainties relating to any applications for licenses and approvals under applicable laws and regulations (including gaming laws and regulations) and any further terrorist attacks similar to those that occurred September 11, 2001. Additional information concerning potential factors that we think could cause our actual results to differ materially from expected and historical results is included in Item 1A of our annual report on Form 10-K for the fiscal year ended December 31, 2010. If one or more of the assumptions underlying our forward-looking statements proves incorrect, then our actual results, performance or achievements could differ materially from those expressed in, or implied by, the forward-looking statements contained in this report. Therefore, we caution you not to place undue reliance on our forward-looking statements. This statement is provided as permitted by the Private Securities Litigation Reform Act of 1995.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are potentially exposed to market risk in the form of fluctuations in interest rates and their potential impact upon our variable rate debt outstanding. We evaluate our exposure to this market risk by monitoring interest rates in the marketplace and we have, on occasion, utilized derivative financial instruments to help manage this risk although we did not utilize any derivative financial instruments during the first quarter of 2011. As of March 31, 2011, we had no variable rate debt outstanding.

Item 4. Controls and Procedures

As required by Rule 15d-15(b) under the Securities Exchange Act, as amended (the “Exchange Act”), our management, including our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our principal executive officer and our principal financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and regulations and to provide that such information is accumulated and communicated to management to allow timely decisions regarding required disclosures.

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

Part II. OTHER INFORMATION

Item 6. Exhibits

(a)

Exhibits.



31.1		Certification of Gary L. Carano

31.2		Certification of Stephanie D. Lepori

32.1		Certification of Gary L. Carano pursuant to 18 U.S.C. Section 1350

32.2		Certification of Stephanie D. Lepori pursuant to 18 U.S.C. Section 1350

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.


		CIRCUS AND ELDORADO JOINT VENTURE

Date: May 16, 2011	By:	/s/ Gary L. Carano
		Gary L. Carano
		Chief Executive Officer (Principal Executive Officer)

Date: May 16, 2011	By:	/s/ Stephanie D. Lepori
		Stephanie D. Lepori
		Chief Accounting and Financial Officer (Principal
		Financial and Accounting Officer)

		SILVER LEGACY CAPITAL CORP.

Date: May 16, 2011	By:	/s/ Gary L. Carano
		Gary L. Carano
		Chief Executive Officer (Principal Executive Officer)

Date: May 16, 2011	By:	/s/ Stephanie D. Lepori
		Stephanie D. Lepori
		Treasurer (Principal Financial and Accounting Officer)

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SILVER LEGACY CAPITAL CORP 10-Q