Station Casinos Results Mixed

29 Jan 2004

LAS VEGAS -- (Press Release) -- Station Casinos, Inc. (NYSE:STN) today announced the results of its operations for the fourth quarter ended December 31, 2003.

Highlights include:

-Adjusted for non-recurring items, diluted earnings were $0.42 per share compared to $0.18 in the prior year, a 133% increase.

-EBITDA (1) of $84.6 million, an increase of 40% over the prior year's quarter.

-Same-store revenues from the Las Vegas operations increased 6% over the prior year's quarter, while same-store EBITDA margins were 34.3% compared to 32.9% last year. Excluding Green Valley Ranch Station, revenues from the Major Las Vegas properties increased 4% while EBITDA margins increased to 32.9% from 32.1% in the prior year.

-Same-store EBITDA from the Las Vegas operations increased 11% over the prior year. Excluding Green Valley Ranch Station, EBITDA increased 6% year over year.

-The company initiates guidance for the first quarter of 2004 of $87 million to $91 million of EBITDA and $0.44 to $0.48 of earnings per share.

-Entering into management and development agreements with the Mechoopda Indian Tribe of Chico, California to develop and manage the tribe's casino project in Chico, California.

-The Company will pay its next quarterly dividend of $0.125 per share on March 4, 2004.

Results of Operations

The Company's net revenues for the fourth quarter ended December 31, 2003 were approximately $229.9 million, an increase of 14% compared to the prior year's quarter. EBITDA for the quarter was $84.6 million, an increase of 40% compared to the prior year's quarter. During the quarter, Adjusted Earnings (2) applicable to common stock were $27.1 million, or $0.42 per share, an increase of 133% over the prior year's $0.18 per share on a comparable basis.

For the quarter ended December 31, 2003, the Company reported earnings from its Green Valley Ranch Station joint venture of $6.6 million, which represents a combination of Station's management fee ($1.6 million) plus 50% of Green Valley Ranch Station's operating income ($5.0 million). Green Valley Ranch Station generated EBITDA before management fees of $15.7 million, an increase of 33% compared to the prior year's quarter. Included in Station's interest expense is $1.2 million of interest related to this joint venture.

The non-recurring items for the quarter consist of an $11.4 million after-tax impairment charge for the goodwill related to the acquisition of Fiesta Rancho, a $24.7 million after-tax charge for the settlement of a lawsuit, $1.5 million in costs to develop new gaming opportunities, primarily in Native American gaming, $0.6 million in costs related to the cancellation of certain insurance policies, $0.8 million for the write-off of debt issuance costs at Green Valley Ranch Station, all of which were partially offset by a $2.2 million reduction in federal income taxes. Including these items, the Company reported net loss of $8.6 million and loss applicable to common stock of $0.14 per share.

Las Vegas Market Results

Same-store (Major Las Vegas Operations and Green Valley Ranch Station) net revenues for the quarter increased to $241.0 million, a 6% increase compared to the prior year, while EBITDA at those operations increased 11% to $82.7 million. "At the beginning of the year we projected revenue would grow at approximately 4% for the year, with the second half of the year stronger than the first half and that is exactly what occurred. Our Jumbo brand product offerings and the continuing population growth in Las Vegas are driving increased revenues," stated Glenn C. Christenson, executive vice president and chief financial officer. Same-store EBITDA margins increased to 34.3% compared to 32.9% during the fourth quarter of last year.

For the quarter and year ended December 31, 2003, revenues at Fiesta Rancho were essentially flat with the prior year partially due to prolonged road construction around the property. The Company has however reduced its growth assumptions for the property and, as a result, the accounting rules mandated the company record an $11.4 million after tax charge in the fourth quarter related to the value of the goodwill.

EBITDA and Adjusted Earnings are not generally accepted accounting principles ("GAAP") measurements and are presented solely as a supplemental disclosure because the Company believes that they are widely used measures of operating performance in the gaming industry and as a principal basis for valuation of gaming companies. EBITDA and Adjusted Earnings are further defined in footnotes 1 and 2, respectively.

United Auburn Indian Community

Thunder Valley Casino, which opened on June 9, 2003 and is managed by Station for the United Auburn Indian Community, generated management fees to Station of $17.2 million during the quarter.

Lawsuit Settlement

The Company has reached an agreement in principle to settle a lawsuit brought by Fitzgerald's Sugar Creek, Inc., the City of Sugar Creek, Missouri and Phillip Griffith in December 2000 for $24.7 million, net of the related tax benefit. The lawsuit centered on allegations of improper conduct by the Company's former Missouri legal counsel, Michael Lazaroff.

The Company has asserted a claim against Mr. Lazaroff and his former law firm to recover all damages caused by Mr. Lazaroff's conduct. As part of that claim, the Company intends to seek reimbursement for, among other things, the amount it was required to pay to settle the Fitzgerald's litigation, as well as the attorney's fees and costs incurred by the Company in defending that litigation.

Balance Sheet Items and Capital Expenditures

Long-term debt was $1.16 billion as of December 31, 2003. Total capital expenditures totaled $38.1 million for the quarter ended December 31, 2003 and consisted of $10.5 million of maintenance capital expenditures, $14.1 million of expansion capital expenditures and $13.5 million for the accelerated replacement of slot machines to take advantage of ticket-in ticket-out technology. The long-term debt balance at year-end is approximately $17 million higher than our previous guidance. The difference is due primarily to entering into an agreement to purchase an additional piece of land adjacent to the Wild Wild West site for $6.3 million and advances to and consolidating MPM Enterprises LLC, our 50% owned joint venture that will manage the Gun Lake project, which resulted in approximately $11 million of additional debt as of December 31, 2003, which is offset by a receivable from the Gun Lake Tribe. See the Company's press release dated January 15, 2004 for more detail on the projected capital spending for the next three years.

As of December 31, 2003, the Company's debt to cash flow ratio as defined in its bank credit facility was 3.6 to 1, which reflects annualizing the management fees from Thunder Valley Casino.

The Company plans to issue $400 million of 6 1/2% senior subordinated notes due in 2014. The proceeds from the offering will be used to redeem $199.9 million senior subordinated notes due in December of 2008, to reduce the Company's revolving credit facility and for general corporate purposes.

Mechoopda Indian Tribe Management Agreement

The Company also announced today that it has entered into Development and Management Agreements with the Mechoopda Indian Tribe of Chico Rancheria, California (the "Tribe"), a federally recognized Indian tribe. Station will assist the Tribe in developing and operating a gaming and entertainment project to be located in Butte County, California (the "Project"), at the intersection of State Route 149 and Highway 99, approximately 10 miles southeast of Chico, California and 80 miles north of Sacramento, California.

Under the terms of the Development Agreement, Station has agreed to arrange the financing for the ongoing development costs and construction of the Project. Prior to obtaining financing for the Project, the Company expects to advance $5 million to $10 million to the Tribe for the acquisition of land and other development costs. Although no firm construction budget has been established, the Company expects the total cost of the development and construction of the Project will be less than $80 million. Funds advanced by Station are expected to be repaid from the proceeds of the project financing or from the Tribe's gaming revenues. The Management Agreement has a term of seven years and provides for a management fee of 24% of the Project's net income. The proposed Project will be located on approximately 650 acres on State Route 149, at the intersection with Highway 99. As currently contemplated, the Project will include approximately 500 slot machines, 10 table games and dining and entertainment amenities. Station anticipates the gaming and entertainment facility will be open some time during 2005. Steve C. Santos, Tribal Chairman commented, "Station's excellent reputation and extensive experience in the gaming industry will help make our dream of economic sufficiency a reality. With Station's help, we look forward to building a first-class gaming facility that will generate hundreds of jobs and spur interest in our local economy." "We are excited about the opportunity to work with the Tribe in developing a quality gaming facility. The property is in a very underserved area of the Northern California market and we look forward to adding another project to our Native American franchise," stated Christenson.

First Quarter 2004 and Year 2004 Guidance

The Company expects EBITDA of approximately $87 million to $91 million for the first quarter of 2004 (excluding development expense, costs related to the early retirement of the $199.9 million 8 7/8% senior subordinated notes and other non-recurring items). This would result in earnings per share ("EPS") of $0.44 to $0.48 for the first quarter of 2004. Our general guidance has been to grow revenues in the 4% to 5% range. To date in January, our revenue growth from our Las Vegas operations excluding Green Valley Ranch Station is approximately 7%. While it is too soon to change our guidance for the year, and there are no guarantees, we are cautiously optimistic with what we are seeing thus far in the market.

For 2004, the Company expects EBITDA of approximately $340 million to $350 million (excluding development expense and non-recurring items) and EPS of approximately $1.68 to $1.78 assuming 65 million fully diluted shares. Development costs are expected to be approximately $5 million, which does not include non-reimbursable project costs related to certain management contracts as certain milestones are met on each development project. This guidance assumes revenue growth of 4% to 5% in Las Vegas with an approximate 50% flow through and an effective tax rate of 36.5%.

Dividend

The Board of Directors has declared a quarterly cash dividend of $0.125 per share. The dividend is payable on March 4, 2004 to shareholders of record on February 12, 2004. "Our dividend policy is consistent with the balanced approach to the allocation of our free cash flow. We think it makes sense to return cash to our shareholders as part of our overall strategy to enhance shareholder value while still taking advantage of the substantial growth opportunities the Company controls," stated Christenson.

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	Station Casinos Results Mixed 29 Jan 2004 <a href='https://ad.casinocity.com/adclick.php?n=a21efcd1'><img src='https://ad.casinocity.com/adview.php?what=-site:vendors/width:250/RON&n=a21efcd1' border='0' alt='' /></a> LAS VEGAS -- (Press Release) -- Station Casinos, Inc. (NYSE:STN) today announced the results of its operations for the fourth quarter ended December 31, 2003. Highlights include: -Adjusted for non-recurring items, diluted earnings were $0.42 per share compared to $0.18 in the prior year, a 133% increase. -EBITDA (1) of $84.6 million, an increase of 40% over the prior year's quarter. -Same-store revenues from the Las Vegas operations increased 6% over the prior year's quarter, while same-store EBITDA margins were 34.3% compared to 32.9% last year. Excluding Green Valley Ranch Station, revenues from the Major Las Vegas properties increased 4% while EBITDA margins increased to 32.9% from 32.1% in the prior year. -Same-store EBITDA from the Las Vegas operations increased 11% over the prior year. Excluding Green Valley Ranch Station, EBITDA increased 6% year over year. -The company initiates guidance for the first quarter of 2004 of $87 million to $91 million of EBITDA and $0.44 to $0.48 of earnings per share. -Entering into management and development agreements with the Mechoopda Indian Tribe of Chico, California to develop and manage the tribe's casino project in Chico, California. -The Company will pay its next quarterly dividend of $0.125 per share on March 4, 2004. Results of Operations The Company's net revenues for the fourth quarter ended December 31, 2003 were approximately $229.9 million, an increase of 14% compared to the prior year's quarter. EBITDA for the quarter was $84.6 million, an increase of 40% compared to the prior year's quarter. During the quarter, Adjusted Earnings (2) applicable to common stock were $27.1 million, or $0.42 per share, an increase of 133% over the prior year's $0.18 per share on a comparable basis. For the quarter ended December 31, 2003, the Company reported earnings from its Green Valley Ranch Station joint venture of $6.6 million, which represents a combination of Station's management fee ($1.6 million) plus 50% of Green Valley Ranch Station's operating income ($5.0 million). Green Valley Ranch Station generated EBITDA before management fees of $15.7 million, an increase of 33% compared to the prior year's quarter. Included in Station's interest expense is $1.2 million of interest related to this joint venture. The non-recurring items for the quarter consist of an $11.4 million after-tax impairment charge for the goodwill related to the acquisition of Fiesta Rancho, a $24.7 million after-tax charge for the settlement of a lawsuit, $1.5 million in costs to develop new gaming opportunities, primarily in Native American gaming, $0.6 million in costs related to the cancellation of certain insurance policies, $0.8 million for the write-off of debt issuance costs at Green Valley Ranch Station, all of which were partially offset by a $2.2 million reduction in federal income taxes. Including these items, the Company reported net loss of $8.6 million and loss applicable to common stock of $0.14 per share. Las Vegas Market Results Same-store (Major Las Vegas Operations and Green Valley Ranch Station) net revenues for the quarter increased to $241.0 million, a 6% increase compared to the prior year, while EBITDA at those operations increased 11% to $82.7 million. "At the beginning of the year we projected revenue would grow at approximately 4% for the year, with the second half of the year stronger than the first half and that is exactly what occurred. Our Jumbo brand product offerings and the continuing population growth in Las Vegas are driving increased revenues," stated Glenn C. Christenson, executive vice president and chief financial officer. Same-store EBITDA margins increased to 34.3% compared to 32.9% during the fourth quarter of last year. For the quarter and year ended December 31, 2003, revenues at Fiesta Rancho were essentially flat with the prior year partially due to prolonged road construction around the property. The Company has however reduced its growth assumptions for the property and, as a result, the accounting rules mandated the company record an $11.4 million after tax charge in the fourth quarter related to the value of the goodwill. EBITDA and Adjusted Earnings are not generally accepted accounting principles ("GAAP") measurements and are presented solely as a supplemental disclosure because the Company believes that they are widely used measures of operating performance in the gaming industry and as a principal basis for valuation of gaming companies. EBITDA and Adjusted Earnings are further defined in footnotes 1 and 2, respectively. United Auburn Indian Community Thunder Valley Casino, which opened on June 9, 2003 and is managed by Station for the United Auburn Indian Community, generated management fees to Station of $17.2 million during the quarter. Lawsuit Settlement The Company has reached an agreement in principle to settle a lawsuit brought by Fitzgerald's Sugar Creek, Inc., the City of Sugar Creek, Missouri and Phillip Griffith in December 2000 for $24.7 million, net of the related tax benefit. The lawsuit centered on allegations of improper conduct by the Company's former Missouri legal counsel, Michael Lazaroff. The Company has asserted a claim against Mr. Lazaroff and his former law firm to recover all damages caused by Mr. Lazaroff's conduct. As part of that claim, the Company intends to seek reimbursement for, among other things, the amount it was required to pay to settle the Fitzgerald's litigation, as well as the attorney's fees and costs incurred by the Company in defending that litigation. Balance Sheet Items and Capital Expenditures Long-term debt was $1.16 billion as of December 31, 2003. Total capital expenditures totaled $38.1 million for the quarter ended December 31, 2003 and consisted of $10.5 million of maintenance capital expenditures, $14.1 million of expansion capital expenditures and $13.5 million for the accelerated replacement of slot machines to take advantage of ticket-in ticket-out technology. The long-term debt balance at year-end is approximately $17 million higher than our previous guidance. The difference is due primarily to entering into an agreement to purchase an additional piece of land adjacent to the Wild Wild West site for $6.3 million and advances to and consolidating MPM Enterprises LLC, our 50% owned joint venture that will manage the Gun Lake project, which resulted in approximately $11 million of additional debt as of December 31, 2003, which is offset by a receivable from the Gun Lake Tribe. See the Company's press release dated January 15, 2004 for more detail on the projected capital spending for the next three years. As of December 31, 2003, the Company's debt to cash flow ratio as defined in its bank credit facility was 3.6 to 1, which reflects annualizing the management fees from Thunder Valley Casino. The Company plans to issue $400 million of 6 1/2% senior subordinated notes due in 2014. The proceeds from the offering will be used to redeem $199.9 million senior subordinated notes due in December of 2008, to reduce the Company's revolving credit facility and for general corporate purposes. Mechoopda Indian Tribe Management Agreement The Company also announced today that it has entered into Development and Management Agreements with the Mechoopda Indian Tribe of Chico Rancheria, California (the "Tribe"), a federally recognized Indian tribe. Station will assist the Tribe in developing and operating a gaming and entertainment project to be located in Butte County, California (the "Project"), at the intersection of State Route 149 and Highway 99, approximately 10 miles southeast of Chico, California and 80 miles north of Sacramento, California. Under the terms of the Development Agreement, Station has agreed to arrange the financing for the ongoing development costs and construction of the Project. Prior to obtaining financing for the Project, the Company expects to advance $5 million to $10 million to the Tribe for the acquisition of land and other development costs. Although no firm construction budget has been established, the Company expects the total cost of the development and construction of the Project will be less than $80 million. Funds advanced by Station are expected to be repaid from the proceeds of the project financing or from the Tribe's gaming revenues. The Management Agreement has a term of seven years and provides for a management fee of 24% of the Project's net income. The proposed Project will be located on approximately 650 acres on State Route 149, at the intersection with Highway 99. As currently contemplated, the Project will include approximately 500 slot machines, 10 table games and dining and entertainment amenities. Station anticipates the gaming and entertainment facility will be open some time during 2005. Steve C. Santos, Tribal Chairman commented, "Station's excellent reputation and extensive experience in the gaming industry will help make our dream of economic sufficiency a reality. With Station's help, we look forward to building a first-class gaming facility that will generate hundreds of jobs and spur interest in our local economy." "We are excited about the opportunity to work with the Tribe in developing a quality gaming facility. The property is in a very underserved area of the Northern California market and we look forward to adding another project to our Native American franchise," stated Christenson. First Quarter 2004 and Year 2004 Guidance The Company expects EBITDA of approximately $87 million to $91 million for the first quarter of 2004 (excluding development expense, costs related to the early retirement of the $199.9 million 8 7/8% senior subordinated notes and other non-recurring items). This would result in earnings per share ("EPS") of $0.44 to $0.48 for the first quarter of 2004. Our general guidance has been to grow revenues in the 4% to 5% range. To date in January, our revenue growth from our Las Vegas operations excluding Green Valley Ranch Station is approximately 7%. While it is too soon to change our guidance for the year, and there are no guarantees, we are cautiously optimistic with what we are seeing thus far in the market. For 2004, the Company expects EBITDA of approximately $340 million to $350 million (excluding development expense and non-recurring items) and EPS of approximately $1.68 to $1.78 assuming 65 million fully diluted shares. Development costs are expected to be approximately $5 million, which does not include non-reimbursable project costs related to certain management contracts as certain milestones are met on each development project. This guidance assumes revenue growth of 4% to 5% in Las Vegas with an approximate 50% flow through and an effective tax rate of 36.5%. Dividend The Board of Directors has declared a quarterly cash dividend of $0.125 per share. The dividend is payable on March 4, 2004 to shareholders of record on February 12, 2004. "Our dividend policy is consistent with the balanced approach to the allocation of our free cash flow. We think it makes sense to return cash to our shareholders as part of our overall strategy to enhance shareholder value while still taking advantage of the substantial growth opportunities the Company controls," stated Christenson.