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Stations getting back on track

Nov 13, 2001 7:39 AM

Bettors may want to wager the “under” at Station Casinos. In a gloomy financial report, the company expects another lean quarter to finish 2001 and only modest growth for the coming year.

A bellwether of the Las Vegas economy, the neighborhood-based Stations was rocked by the fallout of Terror Tuesday. The company reported net third quarter revenues of $212 million compared with $249 million for the same period last year. Earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted for preopening expenses and the gain on the sale of Southwest Gaming, declined to $47.6 million vs. $68.6 million in the prior year.

Chief Financial Officer Glenn Christenson blamed the declines largely on the sale of barges in St. Charles and Kansas City, Mo., last December. Station’s acquisition of the Santa Fe and Fiesta casinos here could not offset that loss.

Now, even with Green Valley Ranch Station set to open next month, the company is predicting only incremental improvement. EBITDA for the fourth quarter is pegged at $48 million to $50 million, for earnings per share of $0.06 to $0.08. Included in this estimate is a decline at the company’s four core properties of 9 percent to 12 percent.

“In Las Vegas, the population and total employment figures should continue to grow, however the residents are being affected by trends in the general economy and the uncertainty resulting from the terrorist attacks,’’ Christenson explained.

“The company has faced many challenges, including the integration of three newly acquired hotel/casinos, the addition of a new competitor (Suncoast) in the northwest locals market, construction disruption at a number of our properties, and a general softening in the Las Vegas economy.’’

Though debt-heavy Station has launched an aggressive cost-cutting program, it predicts 2002 EBITDA of $210 million to $220 million ”” a marginal increase over the fourth quarter forecast. Even the much-anticipated Green Valley resort got a lukewarm reception at last week’s Gaming Control Board meeting, where Chairman Dennis Neilander suggested that the venture could end up cannibalizing nearby Sunset Station.

Speaking of Station’s three newest acquisitions, Christenson said, “We are very pleased with the operations at Santa Fe Station and The Reserve.’’ But he acknowledged that the company was “disappointed” with results at the Fiesta. He said “operational changes” at the struggling North Las Vegas property should boost the bottom line there.

“During 2002, our primary focus will be on improving operations and shrinking the company’s capital base, either through the reduction of debt or the repurchase of stock,’’ Christenson stated. “We should generate approximately $60 million of free cash flows for this purpose.’’