Station earnings up; guidance clouded

Jul 20, 2004 4:35 AM

Station Casinos Inc. (STN) beat Wall Street estimates for its earnings in the quarter that ended on June 30 but the company’s shares still fell a bit over what some analysts described as confusing guidance for the remainder of the year.

For the period, Station posted net earnings of $29 million, or $0.43 a share, compared to last year’s $20.6 million or $0.33 per share, during the second quarter. EBITDA (earnings before interest, taxes, depreciation and amortization) reached $93.4 million, an increase of 37% compared to the prior year’s quarter.

Guidance for the full year of 2004 was given as $1.84 to $1.93 per share, varying a bit from previous company estimates of $1.81 to $1.96.

Non-recurring expenses during the period included costs to buy out certain leases relating to the spa and a restaurant at Green Valley Ranch Station for $3.6 million, which represents 50% of the total loss since Station shares ownership of the property equally with a company operated by the Greenspun Family.

Also, the company incurred a loss on the sale of real estate of $2.7 million, pre -opening costs related to Red Rock Station of $0.3 million and $2.2 million in costs to develop new gaming opportunities, primarily related to Native American casinos in California and Michigan.

Among the highlights of the quarter was the new compact that was negotiated by the United Auburn Indian Community that will permit the tribe and its casino, operated by Station Casinos, at the Thunder Valley Casino located outside of Sacramento, Calif.

But it is the so-called locals market in Las Vegas where the company continues to focus its focus.

"Our operating performance has long been a proxy for the health of the Las Vegas economy," said Glen Christenson, executive vice president and chief financial officer.

"We are seeing significant population growth, substantial investment in the community in the form of new housing as well as other development and strong consumer confidence," he added.

Following the announcement, the company’s shares fell back from the mid-$45 range to $44 and change on Friday.

During the earnings announcement, the company announced several changes in its management team. Leading the announcement was the retirement of Stephen Cavallaro from his position as executive vice president and chief operating officer, effective on Dec. 30.

Moving in to his post will be William Warner who has been with the company for the past 11 years and has been working as executive vice president chief development officer.

Scott Nielson, previously executive vice president and chief legal officer, will assume the development responsibilities for the company. His title will be executive vice president of development and government relations.

Richard Haskins, vice president and general counsel, will now become executive vice president and general counsel.