Station Casinos Announces Second Quarter Results

Station Casinos, Inc. (NYSE: STN; "Station” or the "Company”) today announced the results of its operations for the second quarter ended June 30, 2007 and other Company-related news. Notable events include: Second quarter EBITDA (1) of $144.0 million, an increase of 7% over the prior year’s second quarter. Net revenues from its Major Las Vegas Operations, excluding Green Valley Ranch, increased 7% from the prior year’s second quarter. Adjusted for non-recurring items and development expenses, diluted earnings per share ("EPS”) of $0.41 compared to $0.61 in the prior year’s second quarter, a decrease of 33%. Results of Operations The Company's net revenues for the second quarter ended June 30, 2007 were approximately $362.9 million, an increase of 6% compared to the prior year's second quarter. The Company reported EBITDA for the quarter of $144.0 million, an increase of 7% compared to the prior year's second quarter. This marks the twenty-second consecutive quarter of year-over-year growth of Adjusted EBITDA. For the second quarter, Adjusted Earnings (2) applicable to common stock were $23.3 million, or $0.41 per diluted share, compared to the prior year’s $0.61 per diluted share on a comparable basis. During the second quarter, the Company incurred $1.9 million in costs to develop new gaming opportunities, primarily related to Native American gaming, $6.1 million related to costs associated with the FCP transaction noted below, $1.0 million of preopening expenses, $1.7 million gain on asset sales, $3.8 million in management agreement/lease termination costs and $0.1 million of other non-recurring credits. Including these items, the Company reported net income of $15.1 million and diluted earnings applicable to common stock of $0.27 per share. The Company’s earnings from its Green Valley Ranch joint venture for the second quarter were $11.0 million, which represents a combination of the Company's management fee plus 50% of Green Valley Ranch’s operating income. For the quarter, Green Valley Ranch generated EBITDA before management fees of $28.3 million, a 7% increase compared to the prior year’s second quarter. Las Vegas Market Results For the second quarter, net revenues from the Major Las Vegas Operations, excluding Green Valley Ranch, increased to $327.1 million, a 7% increase compared to the prior year’s quarter, while EBITDA from those operations increased 4% to $118.5 million. 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. Balance Sheet Items and Capital Expenditures Long-term debt was $3.44 billion as of June 30, 2007. Total capital expenditures were $74.7 million for the second quarter. Expansion and project capital expenditures included $6.1 million for Phase III of Red Rock, $6.8 million for the expansion of Fiesta Henderson, $18.4 million for the corporate office building and $10.2 million for the purchase of land. As of June 30, 2007, the Company’s debt to cash flow ratio, as defined in its bank credit facility, was 5.7 to 1. Proposed Merger On February 23, 2007, the Company entered into a definitive merger agreement with Fertitta Colony Partners LLC ("FCP”), pursuant to which FCP agreed to acquire all of Station’s outstanding common stock for $90 per share in cash. FCP is a new company formed by Frank J. Fertitta III, Chairman and Chief Executive Officer of Station, Lorenzo J. Fertitta, Vice Chairman and President of Station and Colony Capital Acquisitions, LLC, an affiliate of Colony Capital, LLC. On July 9, 2007, Station filed a definitive proxy statement and related materials with the Securities and Exchange Commission that provides details about the pending sale of the Company. Station will hold a special meeting of its stockholders on Monday, August 13, 2007, at 2:00 p.m. local time, at Red Rock Casino Resort Spa, 11011 West Charleston Boulevard, Las Vegas, Nevada, at which holders of record at the close of business on June 14, 2007 of Station’s common stock will be asked to consider and vote upon a proposal to approve the merger agreement with FCP. IMPORTANT ADDITIONAL INFORMATION REGARDING THE MERGER HAS BEEN FILED WITH THE SEC. In connection with the proposed merger, the Company has filed a definitive proxy statement and related materials with the Securities and Exchange Commission. INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE DEFINITIVE PROXY STATEMENT BECAUSE IT CONTAINS IMPORTANT INFORMATION ABOUT THE MERGER AND THE PARTIES THERETO. Investors and security holders may obtain a free copy of the definitive proxy statement and other documents filed by the Company at the Securities and Exchange Commission's website at http://www.sec.gov. The definitive proxy statement and such other documents may also be obtained for free from the Company by directing such request to Station Casinos, Inc. Investor Relations, 2411 W. Sahara Avenue, Las Vegas, NV 89102, telephone: (800) 544-2411. Station and its directors, executive officers and certain other members of its management and employees may be deemed to be participants in the solicitation of proxies from its stockholders in connection with the proposed merger. Information regarding the interests of Station’s participants in the solicitation is included in the definitive proxy statement. Company Information and Forward Looking Statements Station Casinos, Inc. is the leading provider of gaming and entertainment to the residents of Las Vegas, Nevada. Station's properties are regional entertainment destinations and include various amenities, including numerous restaurants, entertainment venues, movie theaters, bowling and convention/banquet space, as well as traditional casino gaming offerings such as video poker, slot machines, table games, bingo and race and sports wagering. Station owns and operates Red Rock Casino Resort Spa, Palace Station Hotel & Casino, Boulder Station Hotel & Casino, Santa Fe Station Hotel & Casino, Wildfire Casino and Wild Wild West Gambling Hall & Hotel in Las Vegas, Nevada, Texas Station Gambling Hall & Hotel and Fiesta Rancho Casino Hotel in North Las Vegas, Nevada, and Sunset Station Hotel & Casino, Fiesta Henderson Casino Hotel, Magic Star Casino, Gold Rush Casino and Lake Mead Casino in Henderson, Nevada. Station also owns a 50% interest in Green Valley Ranch Station Casino, Barley's Casino & Brewing Company and The Greens in Henderson, Nevada and a 6.7% interest in the joint venture that owns the Palms Casino Resort in Las Vegas, Nevada. In addition, Station manages Thunder Valley Casino near Sacramento, California on behalf of the United Auburn Indian Community. This press release contains certain forward-looking statements with respect to the Company and its subsidiaries which involve risks and uncertainties that cannot be predicted or quantified, and consequently, actual results may differ materially from those expressed or implied herein. Such risks and uncertainties include, but are not limited to, the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement with FCP; the outcome of any legal proceedings that have been, or will be, instituted against the Company related to the merger agreement; the inability to complete the merger due to the failure to obtain stockholder approvals for the merger or the failure to satisfy other conditions to complete the merger, including the receipt of all regulatory approvals related to the merger; the failure to obtain the necessary financing arrangements set forth in the debt and equity commitment letters delivered pursuant to the merger agreement; risks that the proposed transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the merger; the ability to recognize the benefits of the merger; the amount of the costs, fees, expenses and charges related to the merger and the actual terms of certain financings that will be obtained for the merger; the impact of the substantial indebtedness to be incurred to finance the consummation of the merger; the effects of local and national economic, credit and capital market conditions on the economy in general, and on the gaming and hotel industries in particular; changes in laws, including increased tax rates, regulations or accounting standards, third-party relations and approvals, and decisions of courts, regulators and governmental bodies; litigation outcomes and judicial actions, including gaming legislative action, referenda and taxation; acts of war or terrorist incidents or natural disasters; the effects of competition, including locations of competitors and operating and market competition; and other risks described in the filings of the Company with the Securities and Exchange Commission, including, but not limited to, the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2006, and its Registration Statement on Form S-3ASR File No. 333-134936. All forward-looking statements are based on the Company’s current expectations and projections about future events. All forward-looking statements speak only as of the date hereof and the Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. Additional financial information, including presentations from recent investor conferences, is available in the "Investor Relations" section of the Company's website at www.stationcasinos.com. Construction projects such as the master-planned expansions of Red Rock and Fiesta Henderson and the development of Aliante entail significant risks, including shortages of materials or skilled labor, unforeseen regulatory problems, work stoppages, weather interference, floods and unanticipated cost increases. The anticipated costs and construction periods are based on budgets, conceptual design documents and construction schedule estimates. There can be no assurance that the budgeted costs or construction period will be met. Development of the proposed gaming and entertainment projects with the Gun Lake Tribe, the Federated Indians of Graton Rancheria, the Mechoopda Indian Tribe of Chico Rancheria and the North Fork Rancheria of Mono Indians and the operation of Class III gaming at each of the projects is subject to certain governmental and regulatory approvals, including, but not limited to, approval of state gaming compacts with the State of Michigan or the State of California, the Department of the Interior completing the process of taking land into trust for the benefit of the tribes and approval of the management agreements by the National Indian Gaming Commission. No assurances can be given as to when, or if, these governmental and regulatory approvals will be received. (1) EBITDA consists of net income plus income tax provision, interest and other expense, net, loss on early retirement of debt, loss or gain on asset disposals, net, preopening expenses, management agreement/lease termination costs, other non-recurring costs, depreciation, amortization and development expense. EBITDA is presented solely as a supplemental disclosure because the Company believes that it is a widely used measure of operating performance in the gaming industry and as a principal basis for valuation of gaming companies. The Company believes that in addition to cash flows and net income, EBITDA is a useful financial performance measurement for assessing the operating performance of the Company. Together with net income and cash flows, EBITDA provides investors with an additional basis to evaluate the ability of the Company to incur and service debt and incur capital expenditures. To evaluate EBITDA and the trends it depicts, the components should be considered. The impact of income tax provision, interest and other expense, net, loss on early retirement of debt, loss or gain on asset disposals, net, preopening expenses, management agreement/lease termination costs, other non-recurring costs, depreciation, amortization and development expense, each of which can significantly affect the Company’s results of operations and liquidity and should be considered in evaluating the Company’s operating performance, cannot be determined from EBITDA. Further, EBITDA does not represent net income or cash flows from operating, financing and investing activities as defined by generally accepted accounting principles ("GAAP”) and does not necessarily indicate cash flows will be sufficient to fund cash needs. It should not be considered as an alternative to net income, as an indicator of the Company’s operating performance or to cash flows as a measure of liquidity. In addition, it should be noted that not all gaming companies that report EBITDA or adjustments to such measures may calculate EBITDA or such adjustments in the same manner as the Company, and therefore, the Company’s measure of EBITDA may not be comparable to similarly titled measures used by other gaming companies. A reconciliation of EBITDA to net income is included in the financial schedules accompanying this release. (2) Adjusted Earnings excludes development expense, preopening expenses, management agreement/lease termination costs, loss or gain on asset disposals, net, loss on early retirement of debt and other non-recurring costs. Adjusted Earnings is presented solely as a supplemental disclosure because the Company believes that it is a widely used measure of operating performance in the gaming industry and as a principal basis for valuation of gaming companies, as this measure is considered by the Company to be a better measure on which to base expectations of future results than GAAP net income. A reconciliation of Adjusted Earnings and EPS to GAAP net income and EPS is included in the financial schedules accompanying this release. Station Casinos, Inc. Condensed Consolidated Balance Sheets (amounts in thousands) (unaudited)     June 30, December 31,   2007     2006     Assets: Cash and cash equivalents $ 105,149 $ 116,898 Receivables, net 36,313 40,762 Other current assets   53,892     43,891   Total current assets 195,354 201,551 Property and equipment, net 2,696,436 2,586,473 Other long-term assets   853,612     928,672   Total assets $ 3,745,402   $ 3,716,696         Liabilities and stockholders' deficit: Current portion of long-term debt $ 580 $ 341 Other current liabilities   256,430     251,565   Total current liabilities 257,010 251,906 Revolving credit facility 1,023,100 1,155,800 Senior and senior subordinated notes 2,304,586 2,304,737 Other debt 8,570 8,855 Interest rate swaps, mark-to-market (4,855 ) (905 ) Due to unconsolidated affiliate 100,000 - Other long-term liabilities   224,188     183,161   Total liabilities 3,912,599 3,903,554 Stockholders' deficit   (167,197 )   (186,858 ) Total liabilities and stockholders' deficit $ 3,745,402   $ 3,716,696   Station Casinos, Inc. Condensed Consolidated Statements of Operations (amounts in thousands, except per share data) (unaudited)     Three Months Ended Six Months Ended June 30, June 30,   2007     2006     2007     2006   Operating revenues: Casino $ 256,459 $ 245,137 $ 521,154 $ 461,360 Food and beverage 62,865 56,276 124,428 95,147 Room 28,556 21,619 59,304 38,640 Other 19,515 17,862 36,943 31,834 Management fees   23,614     23,984     48,442     49,884   Gross revenues 391,009 364,878 790,271 676,865 Promotional allowances   (28,113 )   (23,087 )   (54,937 )   (42,604 ) Net revenues   362,896     341,791     735,334     634,261     Operating costs and expenses: Casino 96,982 86,949 192,282 161,129 Food and beverage 43,992 41,423 87,054 67,999 Room 9,130 7,839 18,546 13,383 Other 7,493 6,820 13,720 11,403 Selling, general and administrative 60,896 58,157 122,824 102,780 Corporate 17,403 16,472 38,713 32,759 Development 1,893 2,549 4,152 4,681 Depreciation and amortization 39,975 31,363 80,197 57,027 Preopening 1,009 13,566 1,013 27,688 (Gain) loss on asset disposals, net (1,693 ) 65 (1,739 ) (778 ) Management agreement/lease termination   3,800     -     3,800     500     280,880     265,203     560,562     478,571     Operating income 82,016 76,588 174,772 155,690 Earnings from joint ventures   9,353     9,917     20,869     21,840   Operating income and earnings from joint ventures   91,369     86,505     195,641     177,530     Other expense: Interest expense, net (57,263 ) (41,345 ) (113,793 ) (65,161 ) Interest and other expense from joint ventures   (6,955 )   (1,480 )   (12,853 )   (3,048 )   (64,218 )   (42,825 )   (126,646 )   (68,209 )   Income before income taxes 27,151 43,680 68,995 109,321 Income tax provision   (12,078 )   (16,887 )   (30,872 )   (41,406 ) Net income $ 15,073   $ 26,793   $ 38,123   $ 67,915     Earnings per common share: Basic $ 0.28 $ 0.46 $ 0.70 $ 1.10 Diluted $ 0.27 $ 0.44 $ 0.68 $ 1.07   Weighted average common shares outstanding Basic 54,523 58,851 54,454 61,463 Diluted 56,543 60,921 56,419 63,458   Dividends paid per common share $ 0.29 $ 0.25 $ 0.58 $ 0.50 Station Casinos, Inc. Summary Information and Reconciliation of Net Income to EBITDA (amounts in thousands, except occupancy percentage and ADR) (unaudited)   Three Months Ended Six Months Ended June 30, June 30,     2007     2006     2007     2006   Major Las Vegas Operations (a): Net revenues $ 327,141 $ 305,256 $ 662,145 $ 559,976   Net income $ 24,327 $ 39,091 $ 62,801 $ 83,559 Income tax provision 23,410 23,148 46,991 49,489 Interest and other expense, net 28,229 22,574 57,881 37,206 Depreciation and amortization 38,012 29,806 76,318 53,707 Gain on asset disposals, net - (151 ) (32 ) (405 ) Preopening expenses 748 - 564 - Management agreement/lease termination   3,800     -     3,800   -   EBITDA $ 118,526   $ 114,468   $ 248,323   $ 223,556     Green Valley Ranch (50% owned): Net revenues $ 69,577 $ 63,001 $ 139,018 $ 130,095   Net income $ 3,989 $ 14,588 $ 14,965 $ 32,423 Interest and other expense, net 15,028 5,716 25,869 11,910 Depreciation and amortization 5,912 6,105 11,594 12,103 (Gain) loss on asset disposals, net (17 ) 2 (17 ) 25 Loss on early retirement of debt - - 1,655 - Preopening expenses 99 - 102 - Management agreement/lease termination   3,300     -     3,300     -   EBITDA $ 28,311   $ 26,411   $ 57,468   $ 56,461     Major Las Vegas Operations including Green Valley Ranch:   Net revenues $ 396,718 $ 368,257 $ 801,163 $ 690,071   Net income $ 28,316 $ 53,679 $ 77,766 $ 115,982 Income tax provision 23,410 23,148 46,991 49,489 Interest and other expense, net 43,257 28,290 83,750 49,116 Depreciation and amortization 43,924 35,911 87,912 65,810 Gain on asset disposals, net (17 ) (149 ) (49 ) (380 ) Loss on early retirement of debt - - 1,655 - Preopening expenses 847 - 666 - Management agreement/lease termination   7,100     -     7,100     -   EBITDA $ 146,837   $ 140,879   $ 305,791   $ 280,017     Total Station Casinos, Inc. (b): Net income $ 15,073 $ 26,793 $ 38,123 $ 67,915 Income tax provision 12,078 16,887 30,872 41,406 Interest and other expense, net 64,218 42,825 126,646 68,209 Depreciation and amortization 39,975 31,363 80,197 57,027 Development expense 1,893 2,549 4,152 4,681 (Gain) loss on asset disposals, net (1,693 ) 65 (1,739 ) (778 ) Preopening expenses 1,009 13,566 1,013 27,688 Management agreement/lease termination 3,800 - 3,800 500 Management agreement/lease termination at Green Valley Ranch (50%) 1,650 - 1,650 - Other non-recurring costs   6,018     -     11,619     -   EBITDA $ 144,021   $ 134,048   $ 296,333   $ 266,648     Occupancy percentage 92 % 96 % 93 % 97 % ADR $ 94 $ 75 $ 95 $ 71   (a) Includes the wholly owned properties of Red Rock (since April 18, 2006), Palace Station, Boulder Station, Texas Station, Sunset Station, Santa Fe Station, Fiesta Rancho and Fiesta Henderson.     (b) Includes the Major Las Vegas Operations, Wild Wild West, Wildfire, Magic Star Gold Rush, Lake Mead Casino (since October 2006), the Company's earnings from joint ventures, management fees and corporate expense.     Station Casinos, Inc. Reconciliation of GAAP Net Income and EPS to Adjusted Earnings and EPS (amounts in thousands, except per share data) (unaudited)   Three Months Ended Six Months Ended June 30, June 30,     2007     2006   2007     2006     Adjusted Earnings (a): Net income $ 15,073 $ 26,793 $ 38,123 $ 67,915 Development expense 1,231 1,657 2,699 3,043 Preopening expenses 655 8,818 658 17,997 Management agreement/lease termination 2,470 - 2,470 325 (Gain) loss on asset disposals (1,100 ) 42 (1,130 ) (506 ) Other non-recurring costs 3,911 - 7,552 - Management agreement/lease termination at Green Valley Ranch (50%) 1,073 - 1,073 - Preopening at Green Valley Ranch (50%) 33 - 33 - Loss on early retirement of debt at Green Valley Ranch (50%)   -     -   538     -   Adjusted Earnings $ 23,346   $ 37,310 $ 52,016   $ 88,774     Adjusted basic earnings per common share(a): Net income $ 0.28 $ 0.46 $ 0.70 $ 1.10 Development expense 0.02 0.03 0.05 0.05 Preopening expenses 0.01 0.14 0.01 0.29 Management agreement/lease termination 0.05 - 0.05 0.01 Gain on asset disposals (0.02 ) - (0.02 ) (0.01 ) Other non-recurring costs 0.07 - 0.14 - Management agreement/lease termination at Green Valley Ranch (50%) 0.02 - 0.02 - Preopening at Green Valley Ranch (50%) - - - - Loss on early retirement of debt at Green Valley Ranch (50%)   -     -   0.01     -   Adjusted basic earnings per common share $ 0.43   $ 0.63 $ 0.96   $ 1.44     Weighted average common shares outstanding - basic 54,523 58,851 54,454 61,463     Adjusted diluted earnings per common share (a): Net income $ 0.27 $ 0.44 $ 0.68 $ 1.07 Development expense 0.02 0.03 0.05 0.05 Preopening expenses 0.01 0.14 0.01 0.28 Management agreement/lease termination 0.04 - 0.04 0.01 Gain on asset disposals (0.02 ) - (0.02 ) (0.01 ) Other non-recurring costs 0.07 - 0.13 - Management agreement/lease termination at Green Valley Ranch (50%) 0.02 - 0.02 - Preopening at Green Valley Ranch (50%) - - - - Loss on early retirement of debt at Green Valley Ranch (50%)   -     -   0.01     -   Adjusted diluted earnings per common share $ 0.41   $ 0.61 $ 0.92   $ 1.40     Weighted average common shares outstanding - diluted 56,543 60,921 56,419 63,458     (a) All Dollar and per share amounts are shown net of tax.